SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended April 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to _______________
Commission File No. 1-5926
MILLER INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
FLORIDA 59-0996356
- ------------------------------- -----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
16295 N.W. 13TH AVE., MIAMI, FLORIDA 33169
------------------------------------------
(Address of Principal Executive Offices)
(305) 621-0501
--------------
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b)
of the Exchange Act: None
Securities registered under Section 12(g) of the
Exchange Act:
COMMON STOCK, $.05 PAR VALUE
----------------------------
(Title of Class)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days.
Yes _______ No ___X___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in the definitive proxy or information
statement incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $233,050.
As of September 11, 1998, the registrant had 2,982,662 outstanding shares of
common stock $.05 par value. The aggregate market value of the common stock of
the registrant held by non-affiliates (based on the average of the closing bid
and asked prices of the common stock in the over-the-counter market as of
September 11, 1998) was approximately $18,500.
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
MILLER INDUSTRIES, INC. (the "Company") was incorporated under the laws
of the State of Florida on January 21, 1963. The administrative offices of the
Company are located at 16295 N.W. 13th Avenue, Miami, Florida 33169, and its
telephone number is (305) 621-0501.
The Company's principal business is the ownership and management of a
98,000 square feet warehouse located in Miami, Florida. See Item 2. Properties.
As of the date of this report, the Company had not yet leased enough of its
warehouse to generate positive cash flow from operations. The Company also
intends to acquire other income-generating properties to add to the Company's
portfolio. The Company's current President, Angelo Napolitano, has extensive
experience in the real estate industry, and believes that he can provide the
Company with the expertise to locate, acquire and manage attractive properties.
The Company hopes to finance the acquisition of properties through a combination
of debt from third parties (including outside lenders and seller financing) and
issuance of equity securities.
EMPLOYEES
The Company had no employees during the 1998 and 1997 fiscal years.
The Company's President provides services to the Company as an
independent contractor. The Company also utilizes an independent contractor to
perform administrative and bookkeeping services.
ITEM 2. PROPERTIES
DESCRIPTION OF WAREHOUSE
The Company owns a one-story concrete block building located at 16295
N.W. 13th Avenue, Miami, Florida. This facility consists of 97,813 square feet,
7,000 of which is air-conditioned. The building is zoned for use as a warehouse
or light manufacturing facility. The building has a relatively low ceiling,
which has adversely affected leasing efforts.
FINANCING
At April 30, 1998, the building was subject to an outstanding first
mortgage in favor of NationsBank with a balance of approximately $1,430,000.
Under the current terms of the loan, the Company is obligated to make monthly
payments of principal and interest of $13,285 (based on a 19-year amortization
schedule). The loan is due in full on September 16, 1999.
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<PAGE>
Angelo Napolitano, the Company's Chairman of the Board, has currently
guaranteed $800,000 of the new loan balance. The guaranty will be reduced to
$400,000 once the Company stabilizes its tenant occupancy for ninety (90)
consecutive days, which has not yet occurred.
LEASING ACTIVITIES
The Company continues to seek long term commercial tenants for its
building. The building is located in an industrial park which contains many
similar facilities. Current rents for such facilities range from approximately
$3.75 per square foot to approximately $5.00 per square foot and the occupancy
rate in the area is approximately 90%.
The Company has leased approximately 44% of the building to their
tenants as follows:
The Company has leased 24,000 square feet of the building under a
5-year lease which commenced in January 1995. This lease provides for rent of
$10,000 per month, plus increases based on changes in the consumer price index.
The Company has leased 18,500 square feet under a three year lease
commencing in 1997. This lease provides for rent of $6,550 per month.
Total rental income for fiscal 1998 was approximately $187,000.
INSURANCE, DEPRECIATION AND TAXES
The Company believes that the building is adequately insured.
Depreciation is determined using the straight-line method over five to 31.5
years for tax purposes and 5 to 30 years for accounting purposes. Real estate
taxes paid for calendar year 1997 were approximately $31,500.
BUSINESS PLAN
The Company's current business plan is to make strategic investments in
commercial real estate. At the present time, the Company has not developed any
specific investment policy with regard to its proposed real estate activities.
Accordingly, the Company has not established any limitations in the percentage
of assets which may be invested in any one investment or type of investments.
The Company generally intends to seek real estate assets for income-generation
purposes rather than capital gains. The Company has not developed any particular
criteria for the types of real estate in which it may invest. Accordingly, the
Company may invest in office and apartment buildings, shopping centers,
industrial and commercial properties, special purpose buildings and undeveloped
acreage. The Company believes that any such acquisitions will occur in South
Florida. The Company hopes to finance the acquisition of properties through a
combination of financing from third parties, financing from the seller and
issuance of equity securities of the Company. The Company may also invest in
real estate through partnerships or other similar vehicles. There can be no
assurance that any of these plans will be realized
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
SEABOARD CHEMICAL CORPORATION
In late 1991, the Company was identified by the North Carolina
Department of Environment, Health, and Natural Resources ("DEHNR") as a member
of a large group of companies who had shipped hazardous waste to a disposal site
owner and operated by Seaboard Chemical Corporation ("Seaboard"). Accordingly,
DEHNR issued a Notice of Responsibility to advise the Company of its liability
as a potentially responsible party ("PRP") with respect to the site.
Seaboard had operated the site in Jamestown, North Carolina for the
storage, treatment and disposal of hazardous waste materials for the period from
1976 to 1989. Operations at the site ceased in 1989 when Seaboard declared
bankruptcy. Beginning in 1990, the bankruptcy trustee for Seaboard attempted to
close the site in accordance with the terms of the Resource Conservation and
Recovery Act ("RCRA"). However, insufficient funds were available to allow the
trustee to complete this work. As a result, the Federal Environmental Protection
Agency (the "EPA") and the DEHNR advised the trustee that if the clean up work
were not completed, either one or both of the agencies would complete the work
and would sue the responsible parties to recover the costs involved. To avoid
the possibility of this lawsuit, in October 1991, the Company entered into an
agreement with other responsible parties to form a group to complete the site
clean up work. Over the next two years, the necessary steps were taken to
complete the clean up of the surface contamination of the site. In 1994, the
Company joined a group to complete the groundwater clean up ("Phase II"). Phase
II was to begin as soon as a satisfactory plan was approved by the concerned
authorities. To date, the Company has been required to expend only a minimal
amount on this operation. Therefore, no accrual has been made for further costs
to this point. No determination of the estimated additional expenditures has
been furnished to the group members.
GOLD COAST OIL
In 1981, the Company was named by the U.S. Environmental Protection
Agency ("EPA") as one of many potential PRPs with respect to chemical pollution
discovered at a site known as "Gold Coast Oil."
In 1988, a settlement was negotiated between the EPA and certain PRPs
including the Company which resulted in a settlement of the EPA claim. The PRPs
subsequently negotiated a settlement among themselves in which the Company
agreed to pay $50,000 of the anticipated clean up costs. The Company's insurance
carrier at the time of the alleged violations agreed to pay $45,000 of this
amount in return for a release from any future additional claims.
In January 1993, it was determined that additional funds would be
required to complete the clean up of the Gold Coast Oil site. The Company
received an assessment of $10,000 for this obligation and has included such
amount in accrued expenses in the accompanying balance sheets.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is currently traded on the over-the-counter
market.
The range of the high and low bid quotations for each quarter of the past two
(2) fiscal years is as follows:
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
1997 HIGH LOW HIGH LOW
- ---- ---- --- ---- ---
<S> <C> <C> <C> <C>
MAY 1
THRU .02 .02 .06 .06
JULY 31
AUG. 1
THRU .02 .01 .06 .05
OCT. 31
NOV. 3
THRU .01 .01 .05 .05
JAN. 30, 1998
1998
- ----
FEB. 2
THRU .01 .01 .05 .05
APR. 30
MAY 1996 - APRIL 1997(1) HIGH LOW
- ----------------------- ------ ------
First Quarter $ .060 $ .020
Second Quarter $ .060 $ .020
Third Quarter $ .060 $ .020
Fourth Quarter $ .060 $ .020
- -----------------------
(1) Over-the-counter prices do not reflect retail mark-ups, mark-downs, or
commissions and may not necessarily represent actual transactions.
Prices for fiscal years 1997 and 1998 were provided by National
Quotation Bureau, Inc.
</TABLE>
As of September 21, 1998, there were 490 holders of record of the
Company's common stock.
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<PAGE>
The Company has not paid any cash dividends during the last three
fiscal years.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATION
For fiscal year 1998, the Company had rental income of $187,000,
compared with rental income of $180,000 in 1997. During 1997 and 1998, less than
half of the Company's warehouse was leased except for the last fiscal quarter of
1998. The Company needs to lease the balance of this space in order to achieve
positive cash flow from operations. Rental income was offset by rental expense
of $126,000 in 1998 compared to $125,000 in 1997.
During 1998, the Company continued to operate a hardware sales
business, in which it sells replacement parts for the sliding glass door and
window products formerly manufactured by the Company. Net sales in 1998 were
$42,000 (with cost of goods sold of $16,000), compared to sales of $42,000 in
1997 (and cost of goods sold of $15,000).
During 1997, the Company liquidated the remaining product lines for the
Company's former business. It also continues to sell equipment for which there
was no longer any use.
The Company's administration expenses were $90,000 in 1998, compared to
$69,000 in 1997. The increase was due to building repairs and maintenance and
associated costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash decreased by $46,700 during fiscal year 1998
compared with a decrease of approximately $49,000 during fiscal year 1997. The
decrease in 1998 in cash was primarily due to the loss from operations and
expenditures for completion of roofing replacement and building repairs on the
Company's warehouse. The decrease in cash was partially offset by $150,000 in
additional borrowing in 1998, consisting of a $100,000 increase in the Company's
mortgage loan and $50,000 received from the Company's principal shareholder. As
of April 30, 1998, the Company's cash position was approximately $34,000.
The Company's working capital remains extremely limited. The Company
believes that its working capital needs over the next twelve months will consist
of funding operating losses, routine maintenance of its building, and
alterations to the interior of the building to accommodate new tenants. The
Company believes that its existing cash reserves, and funds available from third
parties, will allow the Company to continue operations at their current level
for at least 12 more months. However, the Company's long term prospects
ultimately depend on the Company's ability to lease the remainder of its
building at attractive rates.
-7-
<PAGE>
CURRENT OPERATIONS
The Company operates as a real estate investment and management
company. The Company currently has two tenants for its existing building and is
seeking to obtain additional commercial tenants.
The Company's principal operating expenses consist of management and
professional fees associated with the administration of the Company, interest
expense on the Company's mortgage loan, real estate taxes and insurance. The
Company believes that it can generate positive cash flow from operations if it
is able to find additional tenants for the building. However, at the present
time, the Company does not receive enough in lease payments to cover its
expenses.
The Company's business plan also contemplates the acquisition of
additional income-producing properties. The Company hopes to acquire such
properties through a combination of financing from third parties, seller
financing and issuance of the Company's equity securities.
The Company's business plan is subject to considerable uncertainty.
There can be no assurance that the Company will be able to obtain a sufficient
number of additional tenants in order to fully lease its existing building and
to meet its debt service requirements and operating expenses. Furthermore, there
can be no assurance that the Company will be able to locate or acquire suitable
properties in order to expand its holdings of real property.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, if not corrected, many computer
applications could fail or create erroneous results by or at the year 2000. The
Company relies on certain vendors to provide it with the requisite computer
support, and such vendors expect to resolve their Year 2000 issues before the
fourth quarter of 1999. Therefore, the financial impact to the Company to ensure
Year 2000 compliance has not been and is not anticipated to be material to the
Company.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements and supplementary financial
schedules are attached as an exhibit to this report. See Items 14(a) and 14(b).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
OFFICER DIRECTOR
NAME POSITION SINCE SINCE
- ---- -------- ------- --------
<S> <C> <C> <C>
Angelo Napolitano President, Chief 1992 1988
Executive Officer,
and Chairman of the
Board of Directors
</TABLE>
Each director is elected for a period of one (1) year, or until his
successor is duly elected by the shareholders. Officers serve at the will of the
Board of Directors.
ANGELO NAPOLITANO, age 62, has been President and Chief Executive
Officer of the Company since 1992. He has been a Director of the Company since
1988 and Chairman since July 1989. Mr. Napolitano is the Chairman and Chief
Executive Officer of Harnap Corp., a commercial real estate management company
which he founded in 1971. Since 1975, Mr. Napolitano has served as a director of
Sunshine State Industrial Park Authority, the property owners' association for
the industrial park in which the Company's building is located.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon a review of Forms 3, 4 and 5 furnished to the
Company, all of the Company's directors have filed reports on a timely basis.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation
paid by the Company to the Company's chief executive officer. None of the
Company's officers in 1998 received compensation in excess of $100,000.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL STOCK
NAME AND POSITION YEAR SALARY(1) OPTIONS
- ----------------- ------ --------- --------
<S> <C> <C> <C>
Angelo Napolitano, 1998 $ 36,000 -
Chief Executive Officer 1997 $ 37,500 -
1996 $ 36,250 -
- ----------
(1) Includes management fees paid to Harnap Corp., a company controlled by Mr.
Napolitano, and director fees paid to Mr. Napolitano.
</TABLE>
MANAGEMENT AGREEMENT
In October 1992, the Company agreed to pay Harnap Corp. a monthly
management fee of $3,000. Harnap Corp. is owned and controlled by Angelo
Napolitano, the Company's Chief Executive Officer and Chairman of the Board. At
the close of the current fiscal year, accrued management fees totaled $101,000.
No fees have been paid since June 1995.
COMPENSATION OF DIRECTORS
Each director receives a fee of $250 for attendance at each meeting of
the Board of Directors. Directors also receive $450 per day for any special
assignments which they undertake at the Board's request. Directors are also
reimbursed for out-of-pocket expenses which they incur while performing
activities on behalf of the Company.
The total amount paid to directors during the 1998 fiscal year was $0.
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<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
To the knowledge of management, as of August 1, 1998, the only person who
beneficially owned 5% or more of the common stock of the Company was as follows:
<TABLE>
<CAPTION>
AMOUNT
NAME AND ADDRESS OF BENEFICIALLY OWNED PERCENT OF
BENEFICIAL OWNER AS OF AUGUST 1, 1998 CLASS
- ------------------- -------------------- ----------
<S> <C> <C>
Angelo Napolitano 1,131,256(1) 37.9%
1521 N.W. 165th Street
Miami, FL 33169
(1) Mr. Napolitano has sole voting and investment power with respect to
1,121,256 shares which he holds of record. Mr. Napolitano has shared
voting and investment power with respect to 10,000 shares which he owns
jointly with his wife, Mrs. Helen Napolitano.
</TABLE>
The shares of common stock beneficially owned by each director and by
all the executive officers and directors of the Company as a group as of August
1, 1998 were as follows:
<TABLE>
<CAPTION>
NAME OF AMOUNT BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED (1) CLASS
- ------------------ ------------------- ----------
<S> <C> <C>
Directors and Officers 1,131,256 38.8%
as a Group (consisting
of one person)
Angelo Napolitano 1,131,256(2) 37.9%(2)
(1) Except as otherwise indicated, each person has sole voting and investment
power as to the listed shares.
(2) With respect to Mr. Napolitano's shares, see Note (1) to the preceding
table.
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a brokerage agreement with Napolitano
Realty Corporation ("NRC") with respect to the lease of the Company's building.
The President of NRC is the son of Mr. Angelo Napolitano, the Company's
President and Chairman of the Board. The agreement provides for a 6% commission
to be paid to NRC on sales or lease proceeds received by the
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<PAGE>
Company. During fiscal 1998, commissions in the amount of $3,800 were paid to
NRC for rental income generated by the short term leases of portions of the
building. In addition, NRC will receive commissions of $18,000, payable at the
rate of $3,600 per year, for a 5-year lease which commenced in January 1995.
Payment of these commissions has been delayed by mutual agreement until the
Company's cash position improves. Accordingly, the Company's accrued expenses
include $14,400 representing the unpaid balance.
In March 1998, Mr. Angelo Napolitano, the Company's President and
Chairman, loaned the Company $50,000, payable on demand. The note bears interest
at the rate of prime plus 1%, payable quarterly.
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<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 10-KSB
PAGE NO.
(a) Financial Statements
Report of Independent Certified Public
Accountants.......................................................
Balance Sheets As of April 30, 1998 and 1997......................
Statements of Operations and (Deficit) for
Years ended April 30, 1998 and 1997...............................
Statements of Changes in Shareholders (Deficiency)
for Years ended April 30, 1998 and 1997...........................
Statements of Cash Flows for Years ended
April 30, 1998 and 1997...........................................
Notes to Financial Statements.....................................
(b) Financial Statement Schedules
(Years ended April 30, 1998 and 1997)
Schedule V. Property, Plant and Equipment.........................
Schedule VI. Reserves for Depreciation of
Property, Plant, and Equipment....................................
Schedule VIII. Valuation and Qualifying
Accounts and Reserves.............................................
Schedule X. Supplementary Income
Statement Information.............................................
All other schedules have been omitted because they are
inapplicable, not required or the information is included
elsewhere in the financial statements or notes thereto.
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<PAGE>
(c) Exhibits SEQUENTIAL
PAGE NUMBER
------------
3. (A) Articles of Incorporation (Note 1)
(B) Articles of Amendment (Note 2)
(C) By-laws (Note 1)
(D) Amendment to By-laws --
Indemnification (Note 1)
(E) Amendment to By-laws --
Control Share Acquisitions (Note 5)
10. Material Contracts
(A) Profit Sharing Plan (Note 3)
(B) Stock Option Plan (Note 3)
(C) Incentive Bonus Plan (Note 3)
(D) Indemnification Agreement
with Directors (Note 4)
(E) Option Agreement with
Angelo Napolitano (Note 5)
(F) Settlement Agreement with
Granite (Note 6)
(G) Promissory Note to
InterContinental Bank (Note 6)
(H) Amended and Restated Promissory
Note to NationsBank, N.A. (South) (Note 7)
(I) Promissory Note to Angelo Napolitano 30
27. Financial Data Schedule 33
Note 1. Incorporated by reference from the Form 10-K filed with the
Commission for the year ended April 30, 1981.
Note 2. Incorporated by reference from Form 10-K filed with the
Commission for the year ended April 30, 1985.
Note 3. Incorporated by reference from Form 10-K filed with the
Commission for the year ended April 30, 1988.
Note 4. Incorporated by reference from the Form 10-K filed with the
Commission for the year ended April 30, 1990.
Note 5. Incorporated by reference from the Form 10-K filed with the
Commission for the year ended April 30, 1993.
Note 6. Incorporated by reference from the Form 10-K with the
Commission for the fiscal year ended April 30, 1994.
Note 7. Incorporated by reference from the Form 10-K with the
Commission for the fiscal year ended April 30, 1997.
(d) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended April 30,
1998.
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<PAGE>
MILLER INDUSTRIES, INC.
FINANCIAL STATEMENTS
APRIL 30, 1998 AND 1997
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<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Miller Industries, Inc.
Miami, Florida
We have audited the accompanying balance sheets of Miller Industries, Inc. as of
April 30, 1998 and 1997, and the related statements of operations, shareholders'
deficiency, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Miller Industries, Inc. as of
April 30, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Miami, Florida
June 23, 1998
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<PAGE>
<TABLE>
<CAPTION>
MILLER INDUSTRIES, INC.
Balance Sheets
April 30, 1998 and 1997
A S S E T S
1998 1997
--------- --------
<S> <C> <C>
Investment Property:
Land $ 161,443 $ 161,443
Building and improvements 894,501 749,118
Machinery and equipment 11,106 22,211
Furniture and fixtures 10,251 10,451
----------- ----------
1,077,301 943,223
Less: Accumulated depreciation (716,965) (710,471)
----------- ----------
360,336 232,752
Other Assets:
Cash 33,634 80,334
Inventories 16,000 27,000
Prepaid expenses and other ass 9,956 11,000
Deferred lease incentive 24,854 39,475
Loan costs, less accumulated
amortization of $22,245 and $16,178
in 1998 and 1997, respectively 9,226 14,155
----------- ----------
93,670 71,964
----------- ----------
$ 454,006 $ 404,716
----------- ----------
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Liabilities:
Mortgage note payable $1,429,475 $ 1,348,851
Shareholder loan payable 50,000 -
Accounts payable and accrued expenses 208,578 177,726
Tenant security deposits 48,951 33,247
---------- -----------
Total Liabilities 1,737,004 1,559,824
---------- -----------
Shareholders' Deficiency:
Common stock - $.05 par, 5,000,000 shares
authorized; 2,982,662 shares issued
and outstanding 149,133 149,133
Paid-in capital 1,126,507 1,126,507
Deficit (2,558,638) (2,430,748)
---------- ----------
Total Shareholders' Deficiency (1,282,998) (1,155,108)
---------- -----------
$ 454,006 $ 404,716
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
MILLER INDUSTRIES, INC.
Statements of Operations
Years Ended April 30, 1998 and 1997
1998 1997
---------- ----------
Revenues:
<S> <C> <C>
Rental $ 186,998 $ 179,653
Net hardware sales 41,826 42,341
Sale of product lines - 20,000
Gain on sale of equipment and other income 4,226 13,496
Settlement of environmental clean-up
contingent liability 38,010
--------- ---------
Total Revenues 233,050 293,500
--------- ---------
Expenses:
Rental 126,229 125,014
Cost of hardware sales 16,133 14,598
Administrative 90,334 69,095
Interest 128,244 130,833
--------- ---------
Total Expenses 360,940 339,540
--------- ---------
Net Loss $(127,890) $ (46,040)
========= =========
Net Loss per Share $ (.04) $ (.02)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-18-
<PAGE>
<TABLE>
<CAPTION>
MILLER INDUSTRIES, INC.
Statements of Shareholders' Deficiency
Years Ended April 30, 1998 and 1997
COMMON STOCK
-------------
Additional
SHARES PAID-IN
ISSUED AMOUNT CAPITAL (DEFICIT)
-------- ------- ---------- ---------
<S> <C> <C> <C> <C>
Balance at April 30, 1996 2,982,662 $149,133 $1,126,507 $(2,384,708)
Net Loss - 1977 - - - (46,040)
--------- -------- ---------- -----------
Balance at April 30, 1997 2,982,662 $149,133 1,126,507 (2,430,748)
Net Loss - 1998 _ _ - (127,890)
--------- -------- ---------- -----------
Balance at April 30, 1998 2,982,662 $149,133 $1,126,507 $(2,558,638)
========= ======== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
<TABLE>
<CAPTION>
MILLER INDUSTRIES, INC.
Statements of Cash Flows
Years Ended April 30, 1998 and 1997
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(127,890) $(46,040)
Adjustments to reconcile net loss to net cash
used by operating activities -
Gain on sale of product lines - (20,000)
Gain on sale of equipment (2,400) (7,500)
Depreciation 17,800 14,112
Amortization 20,687 20,687
Changes in operating assets and liabilities -
Decrease (increase) in:
Inventories 11,000 11,224
Prepaid expenses 1,044 (1,714)
Increase (decrease) in:
Accounts payable and accrued 30,852 10,229
Tenant security deposits 15,704 155
--------- --------
Net Cash Used by Operating Activities (33,203) (18,847)
--------- --------
Cash Flows from Investing Activities:
Acquisition of property and equipment (145,383) (40,631)
Proceeds on sale of product lines - 20,000
Proceeds on sale of equipment 2,400 7,500
--------- --------
Net Cash Used by Investing Activities (142,983) (13,131)
--------- --------
Cash Flows from Financing Activities:
Payments on mortgage note payable (19,376) (17,236)
Proceeds from additional mortgage 100,000 -
Proceeds from shareholder loan 50,000 -
Closing costs (1,138) -
--------- --------
Net Cash Provided (Used) by Financing Activities 129,486 (17,236)
--------- --------
Decrease in Cash (46,700) (49,214)
Cash at Beginning of Year 80,334 129,548
--------- --------
Cash at End of Year $ 33,634 $ 80,334
========= ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $ 127,944 $130,833
</TABLE>
The accompanying notes are an integral part of these financial statements.
-20-
<PAGE>
MILLER INDUSTRIES, INC.
Notes to Financial Statements
Years Ended April 30, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - In August of 1991, Miller Industries, Inc. (the
"Company") discontinued its primary operations, manufacturing of
aluminum windows and doors. Pursuant to a plan of reorganization, the
Company currently operates as a rental real estate company.
(See Note 2)
CREDIT RISK - Financial instruments, which potentially subject the
Company to concentrations of credit risk, consist principally of cash.
The Company places its cash with high credit quality financial
institutions. At certain times during the year the Company had amounts
on deposit with financial institutions in excess of the F.D.I.C.
insured limits.
INVESTMENT PROPERTY - Investment property is recorded at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets ranging from 5 to 30 years.
INVENTORIES - Inventories consist primarily of miscellaneous hardware
items and are stated at the lower of cost (first-in, first-out) or
market.
DEFERRED LEASE INCENTIVE - The deferred lease incentive is amortized on
a straight-line basis over the term of the lease which is five years.
LOAN COSTS - Loan costs are amortized on a straight-line basis over the
term of the loan which is five years.
INCOME TAXES - Deferred tax liabilities and assets are determined based
on the difference between the financial statement carrying amounts and
tax bases of assets and liabilities, primarily depreciation, using
enacted tax rates in effect. Deferred tax assets are reduced by a
valuation allowance if, based on the weight of available evidence, it
is more likely than not that some portion or all of the deferred tax
assets will not be realized.
ESTIMATES - The preparation of financial statements 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
-21-
<PAGE>
and expenses during the reporting period. Actual results could differ
from those estimates.
NET LOSS PER SHARE - The net loss per share is calculated using the
weighted average number of common shares and dilutive potential common
stock outstanding during the year. The number of shares used in the per
share computations were 2,982,662 at April 30, 1998 and 1997. The
Company did not have any potential common stock at April 30, 1998 and
1997.
RECENT PRONOUNCEMENTS IN ACCOUNTING STANDARDS - In February 1997, the
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128 "Earnings Per Share" and Statement of
Financial Accounting Standards No. 129 "Disclosure of Information About
Capital Structure" which are both effective for fiscal years beginning
after December 15, 1997. SFAS No. 128 simplifies the current required
calculation of earnings per share ("EPS") under APB No. 15, "Earnings
per Share", by replacing the existing calculation of primary EPS with a
basic EPS calculation. It requires a dual presentation for complex
capital structures of basic and diluted EPS on the face of the income
statement and requires a reconciliation of basic EPS factors to diluted
EPS factors. SFAS No. 129 requires disclosure of the Company's capital
structure.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income," which is effective for fiscal years beginning after December
15, 1997. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements which requires the Company to (i)
classify items of other comprehensive income by their nature in a
financial statement and (ii) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of the balance sheet.
Also in June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 "Disclosures About
Segments of an Enterprise and Related Information," which is effective
for fiscal years beginning after December 15, 1997. SFAS No. 131
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise", and amends SFAS No. 94, "Consolidation of All
Majority-Owned Subsidiaries". SFAS No. 131 requires annual financial
statements to disclose information about products and services,
geographic areas, and major customers based on a management approach,
along with interim reports. The management approach requires disclosing
financial and descriptive information about an enterprise's reportable
operating segments based on reporting information the way management
organizes the segments for making business decisions and assessing
performance. It also eliminates the requirement to disclose additional
information about subsidiaries that were not consolidated. This new
management approach may result in more information being disclosed than
presently practiced and require new interim information not previously
presented.
-22-
<PAGE>
To the extent practicable the Company plans to adopt the above SFAS's
and expects no material impact to the Company's financial reporting or
presentation.
YEAR 2000 - As of April 30, 1998, the management of the Company
believes their system to be year 2000 compliant.
NOTE 2 - OPERATIONS
The Company's principal asset is a building and the related real
property. The Company's current business plan is to lease its building
to one or more parties and use the cash flows generated to purchase
additional investment real estate as selected by the Company's Board of
Directors.
During June 1996, the Company sold its Executive and Patrician single
hung window lines, including trade names, trademark registration and
rights, for $20,000.
NOTE 3 - INCOME TAXES
The Company has net operating loss carryforwards of approximately
$2,559,000 which may provide future income tax benefits that expire
through 2012.
The deferred tax asset at April 30, 1998, consists of the following:
Net operating loss carryforwards 870,000
Valuation allowance (870,000)
---------
$ -
=========
Since any tax benefit is dependent on future taxable earnings, the
Company has not recognized such benefits for financial reporting
purposes.
A reconciliation of income tax at the statutory rate to the Company's
effective rate for the year ended April 30, 1998, is as follows:
Federal income tax at statutory rate 34.0%
State income tax, net of Federal tax benefit 3.6
Benefit of net operating loss carryforward (37.6)
---------
Income tax expense - %
=========
-23-
<PAGE>
NOTE 4 - MORTGAGE NOTE PAYABLE
The Company has a $1,400,000 loan from a bank which bears interest at
the Citibank prime rate plus 1/2% (9.00% at April 30, 1998) and may be
adjusted annually. During fiscal year 1998, the Company borrowed an
additional $100,000. Principal and interest are payable monthly based
on a nineteen year amortization schedule. The remaining outstanding
balance is payable in full in September 1999. The loan is secured by a
first lien on the Company's building. At April 30, 1998, $1,429,425 was
outstanding under this loan agreement.
The Company's Chairman of the Board, Angelo Napolitano, guaranteed
$800,000 of the loan. The guaranty will be reduced to $400,000 once the
Company stabilizes its tenant occupancy for ninety consecutive days.
This stabilization has not yet been achieved.
Future maturities of the mortgage note payable are as follows:
YEAR ENDING
APRIL 30,
---------
1999 $ 35,768
Thereafter 1,393,707
-----------
$ 1,429,475
-----------
NOTE 5 - NOTE PAYABLE - CHAIRMAN OF THE BOARD
During March 1998, the Company executed a $50,000 demand promissory
note with the Company's Chairman of the Board. Interest on the unpaid
principal balance is payable quarterly at prime plus 1% (9 1/2% at
April 30, 1998).
NOTE 6 - RENTAL INCOME
The Company leases portions of its warehouse space to unrelated third
parties for various short-term lease periods. Total rental income under
these leases for fiscal 1998 and 1997 was approximately $187,000 and
$180,000, respectively. Two of the Company's tenants accounted for
approximately 94% and 97% of total rental income in 1998 and 1997,
respectively.
-24-
<PAGE>
Future minimum rental income under these non-cancelable leases,
excluding cost of living adjustments, is summarized as follows:
YEAR ENDING
APRIL 30,
-----------
1999 $ 207,000
2000 109,000
2001 65,000
---------
$ 381,000
NOTE 7 - RELATED PARTY TRANSACTIONS
MANAGEMENT FEES - The Company pays a monthly management fee of $3,000
to Harnap Corp., a corporation related to the Company's Chairman of the
Board. Total management fees under this agreement were $33,500 and
$37,500 for 1998 and 1997, respectively of which approximately $101,000
and $65,000 is included in accounts payable in the accompanying balance
sheet in 1998 and 1997, respectively.
COMMISSION CONTRACT - On November 1, 1990, the Company entered into a
real estate listing agreement with Napolitano Realty Corporation
("NRC") for the purpose of marketing the Company's former manufacturing
facility for lease or sale. The President of NRC is the son of the
Company's Chairman of the Board. The agreement provides for the payment
of a commission to NRC in the event that the building is leased or sold
as the result of services rendered by NRC. During fiscal years 1998 and
1997, $9,000 and $5,800, respectively, of fees were paid under this
agreement. In January 1995, NRC executed a five year lease on a portion
of the building and became entitled to commissions of $3,600 per year
for a period of five years. Commissions in the amount of $14,400 have
not been paid as of April 30, 1998. Consequently, this amount is
included in accrued expenses on the 1998 balance sheet. The contract is
on-going on a month-to-month basis.
NOTE 8 - CONTINGENCIES
ENVIRONMENTAL MATTERS
Since fiscal 1990, the Company has conducted various environmental
evaluations of its land and building. In February 1993, the Company
entered into a consent order with the State of Florida Department of
Environmental Regulation (the "Department") agreeing to perform various
tests to determine the extent, if any, of soil and ground water
contamination. In prior years, based on the results of these tests, the
Company accrued
-25-
<PAGE>
$48,620 for the estimated additional costs to complete the clean-up
which was included in accrued expenses.
During March 1997, the Department determined that the Company
satisfactorily completed the tasks and objectives pursuant to the
contamination assessment report and that no further action by the
Company was required. Consequently, the Company reversed approximately
$38,000, of the balance previously accrued, which is included in the
accompanying statements of operations.
During 1991, the Company was named by the North Carolina Department of
Environmental, Health and Natural Resources as one of many Potentially
Responsible Parties ("PRPs") for the closure and clean-up of a bankrupt
Environmental Protection Agency ("EPA") approved hazardous waste
processing facility in Jamestown, North Carolina. Over 1,000 of the
PRPs, including the Company, have formed the Seaboard Group II for the
purpose of limiting their exposure with respect to the site. To date,
the Company has incurred approximately $200 in costs with respect to
this site. However, the Company is unable to determine what its total
costs might be, and no accruals have been made for future clean-up
liability at this site.
In 1981, the Company was named by the EPA as one of many PRPs with
respect to chemical pollution discovered at a site known as "Gold Coast
Oil". In 1988, a settlement was negotiated between the EPA and certain
PRPs including the Company which resulted in a consent order in
settlement of the EPA claim. The PRPs subsequently negotiated a
settlement among themselves to raise the funds necessary to perform
specified cleanup activities. To date, all but $15,000 of the Company's
commitment has been covered by its insurance carrier, and clean-up
operations are progressing at the site. The Company has accrued $10,000
for the estimated additional costs to complete the clean-up which is
included in accrued expenses in the accompanying balance sheets.
TENANT MATTER
In June 1996, the principal tenant of the Company's building indicated
that it would seek to recover an unspecified amount of damages to its
inventory and other property caused by roof leaks and the work
performed by a contractor to repair those leaks. During fiscal year
1997, the matter was settled, without the Company's involvement,
between the roofer's insurance company and the tenant.
-26-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereto duly authorized on the 28 day of October, 1998.
MILLER INDUSTRIES, INC.
/s/ ANGELO NAPOLITANO
---------------------
By: Angelo Napolitano, President
and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
indicated on the 28 day of October, 1998.
SIGNATURE TITLE
/s/ ANGELO NAPOLITANO President, Chief Executive
- ---------------------- Officer, and Director
Angelo Napolitano (Principal Executive Officer)
(Principal Financial Officer)
(Principal Accounting Officer)
-27-
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.I - Promissory Note to Angelo Napolitano
27 - Financial Data Schedule
EXHIBIT 10.I
DEMAND PROMISSORY NOTE
LENDER: ANGELO NAPOLITANO
DATE: MARCH 30, 1998
PRINCIPAL AMOUNT: $50,000.00
BORROWER: MILLER INDUSTRIES, INC.
FOR VALUE RECEIVED, Miller Industries, Inc., a Florida corporation
("Borrower"), hereby unconditionally promises to pay to the order of ANGELO
NAPOLITANO ("Lender"), the principal amount of $50,000.00 with interest on the
unpaid principal balance, as provided below. Borrower further agrees as follows:
1. PRINCIPAL. The principal amount under this Note shall be payable
three days after written demand by Lender.
2. INTEREST.
(a) Interest shall accrue on the unpaid principal balance of this
Note from time to time outstanding at a per annum rate equal to the Prime Rate
(as defined) plus 1%. The initial interest rate for this Note shall be based on
the Prime Rate in effect on the date of this Note, and shall be adjusted
annually, based on the Prime Rate in effect on each anniversary date of this
Note. As used herein, "Prime Rate" means the per annum rate of interest
published or quoted in the Money Rates (or other comparable) section of THE WALL
STREET JOURNAL and, if THE WALL STREET JOURNAL ceases to publish or quote a
Prime Rate, shall mean a substantially comparable index selected by Lender.
(b) Borrower shall pay the amount of all accrued interest on a
quarterly basis, with the initial installment due on June 30, 1998, and
subsequent installments due on each subsequent September 30th, December 31st,
March 31st and June 30th. Additionally, upon the written demand for the payment
of principal under Section 1, all accrued but unpaid interest shall become
immediately due and payable.
(c) After this Note becomes due and payable in full, interest shall
accrue on any principal amount remaining unpaid until its payment in full at a
per annum rate equal to eighteen percent (18%) per annum.
(d) In no event shall interest be charged at a rate exceeding the
maximum rate permitted by applicable law and, to the extent that any payment by
Borrower results in Lender's receipt of interest at a rate in excess of the
maximum rate allowed by applicable law, such excess shall be credited as a
payment of principal or, if requested by Borrower, refunded to Borrower.
3. PREPAYMENTS. This Note may be prepaid at any time without penalty.
<PAGE>
4. MANNER AND APPLICATION OF PAYMENT. All payments hereunder shall be
made in the U.S. Dollars and immediately available funds at such other place as
Lender may designate from time to time. Payments hereunder shall be applied
first against interest and the remainder, if any, against outstanding principal.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to
Lender (and, while this Note remains outstanding, shall be deemed continually to
represent and warrant to Lender) that: (a) Borrower, is duly organized, validly
existing and in good standing under the laws of the State of Florida; (b)
Borrower has full power, authority and legal right to execute, deliver and
perform this Note, and there have occurred all corporate, shareholder or other
legal actions (and there have been made or obtained any filings and
authorizations by governmental or regulatory authorities) that are necessary to
authorize the execution, delivery and performance hereof; (c) this Note is valid
and binding upon Borrower and enforceable against it in accordance with its
terms; and (d) the execution, delivery and performance hereof by Borrower do not
violate any law or regulation, any judgment, order or decree of any court,
arbitrator or governmental authority, or any agreement of any nature whatsoever
that is binding upon Borrower.
6. DEFAULT; ACCELERATION; COLLECTION COSTS. This Note shall, at
Lender's option, become immediately due and payable in full without notice or
demand (which are hereby waived by Borrower) upon the occurrence of any of the
following events ("Events of Default"): (a) Borrower's failure to pay the
principal amount of this Note and accrued but unpaid interest within three (3)
days of any written demand for payment; (b) Borrower's failure to pay any
installment of interest when due under this Note; (c) Lender's discovery that
any representation or warranty made to it by Borrower is materially misleading;
(d) any dissolution of Borrower; (e) the institution of a bankruptcy,
insolvency, reorganization or similar proceeding by or against Borrower in any
jurisdiction; (f) the making by Borrower of an assignment for the benefit of
creditors or the taking advantage by Borrower of any insolvency law; or (g) any
seizure, vesting or intervention by or under authority of a government by which
the management of Borrower is displaced or its authority is curtailed or the
taking possession of any substantial part of Borrower's assets at the instance
of any governmental authority. Borrower shall pay to Lender on demand all costs
and expenses incurred by Lender in collecting or securing or attempting to
collect or secure this Note, including attorneys' fees (at all levels of
litigation and whether or not involving litigation).
7. CERTAIN WAIVERS. Borrower hereby irrevocably waives presentment for
payment, demand, notice of dishonor and protest hereof and, to the extent
permitted by applicable law, all other notices.
8. NOTICES. Any notice, confirmation or other communication given in
connection herewith by Lender may be sent to Borrower by hand delivery, by mail
(postage prepaid) or by telefax, as follows: if by mail, to the address
specified for Borrower next to its signature line herein (or, if no such address
is specified, the address shown on Lender's records); and, if by telefax, to the
telefax number next to its signature line herein (any such communication or
notice becoming effective immediately, when sent by telefax or hand-delivered,
or 5 days after being placed in the mail, when sent by mail).
-2-
<PAGE>
9. BINDING EFFECT. This Note shall be binding upon any successor or
assign of Borrower. Lender's rights hereunder shall inure to the benefit of any
successor or assign of Lender.
10. MISCELLANEOUS. The invalidity or unenforceability of any provision
hereof shall not affect the validity or enforceability of any other provision
hereof. If any provision hereof is capable of more than one interpretation, it
shall be interpreted, if possible, so as to render it enforceable. In order to
be effective, any addition hereto or any modification or waiver of any provision
or provisions hereof must be expressly consented to by Lender in writing. No
delay or omission by Lender in exercising any right or remedy hereunder shall
operate as a waiver thereof or of any other right or remedy, nor shall any
single or partial exercise thereof preclude any further exercise thereof or the
exercise of any other right or remedy. No waiver by Lender of any right shall
operate as a waiver of any other right or of the same right on a future
occasion. Lender's rights and remedies hereunder shall be cumulative with and
not exclusive of any of its rights and remedies provided in other documents or
by law.
11. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA, U.S.A.
12. WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVE ANY RIGHT THEY
MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
HEREUNDER OR RELATING HERETO.
IN WITNESS WHEREOF, Borrower has executed this Note as of the date set
forth at the head of this Note.
MILLER INDUSTRIES, INC.
By:
--------------------------------------
Its: President
Name: Angelo Napolitano
ADDRESS:
16295 N.W. 13th Avenue
Miami, Florida 33169
Fax No.: 620-7259
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<CASH> 33,634
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 16,000
<CURRENT-ASSETS> 49,634
<PP&E> 1,077,301
<DEPRECIATION> 716,965
<TOTAL-ASSETS> 454,006
<CURRENT-LIABILITIES> 293,297
<BONDS> 0
0
0
<COMMON> 149,133
<OTHER-SE> (1,432,131)
<TOTAL-LIABILITY-AND-EQUITY> 454,006
<SALES> 41,826
<TOTAL-REVENUES> 233,050
<CGS> 16,133
<TOTAL-COSTS> 16,133
<OTHER-EXPENSES> 344,807
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,244
<INCOME-PRETAX> (127,890)
<INCOME-TAX> 0
<INCOME-CONTINUING> (127,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (127,890)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
