<PAGE> 1
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended Commission file
March 31, 1997 Number 0-26150
MILEMARKER INTERNATIONAL, INC.
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(Exact Name Of Small Business Registrant As Specified In Its Charter)
New York 11-2128469
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(State or other (IRS Employer
jurisdiction of Identification
incorporation) Number)
1450 S.W. 13th Court, Pompano Beach, Florida 33069
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(Address of principal executive offices)
Registrant's Telephone Number: (954) 782-0604
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Indicate by check mark whether the Registrant (1) has filed all documents
and reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
On March 31, 1997, the Registrant had outstanding 9,984,357 shares of
common stock, $.001 par value.
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MILEMARKER INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet, March 31, 1997 and
December 31, 1996 ........................................................... 3
Consolidated Statement of Operations, Three months ended
March 31, 1997 and March 31, 1996 .......................................... 4
Consolidated Statement of Cash Flows, Three months ended
March 31, 1997 and March 31, 1996 ........................................... 5
Notes to Condensed Consolidated Financial Statements ......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 7-8
PART II OTHER INFORMATION
Item 1. Legal Proceedings ............................................................ 8
Item 2. Changes in Securities ........................................................ 9
Item 3. Defaults Upon Senior Securities .............................................. 9
Item 4. Submission of Matters to a Vote of Security Holders .......................... 9
Item 5. Other Information ............................................................ 9
Item 6. Exhibits and Reports on Form 8-K ............................................. 9
SIGNATURES .............................................................................. 10
</TABLE>
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MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
UNAUDITED
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
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<S> <C> <C>
CURRENT ASSETS
Cash $ 43,904 $ 31,882
Accounts Receivable, net of allowance for doubtful
accounts of $7,000 568,885 548,056
Inventory 1,627,358 1,592,352
Other Receivables 40,280 3,555
Prepaid Expenses 7,335 8,758
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Total Current Assets 2,287,762 2,184,603
PROPERTY AND EQUIPMENT, NET 166,807 155,474
OTHER ASSETS
Deferred Financing Costs 122,000 --
Unamortized Patent Costs, net 92,680 88,126
Other 27,103 26,293
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Total Other Assets 241,783 114,419
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Total Assets 2,696,352 2,454,496
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of Credit 682,910 809,884
Current Maturities Notes Payable 63,600 66,095
Accounts Payable 411,968 208,417
Accrued Liabilities 100,334 102,788
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Total Current Liabilities 1,258,812 1,187,184
LONG-TERM NOTES PAYABLE
Notes Payable - Shareholders 195,793 195,793
Other Notes Payable 216,210 60,988
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Total Long-Term Notes Payable 412,003 256,781
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Total Liabilities 1,670,815 1,443,965
=========== ===========
SHAREHOLDERS' EQUITY
Common Stock, $.001 par value; 10,000,000 shares
authorized, 9,984,357 shares issued and outstanding 9,984 9,984
Paid-in Capital 1,381,865 1,381,865
Accumulated Deficit (366,312) (381,318)
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Total Shareholders' Equity 1,025,537 1,010,531
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Total Liabilities & Shareholders' Equity $ 2,696,352 $ 2,454,496
=========== ===========
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
SALES $ 1,056,783 $ 1,127,798
COST OF SALES 664,486 709,963
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GROSS PROFIT 392,297 417,835
SELLING EXPENSES 62,509 139,851
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 132,525 109,556
Professional Fees 61,730 8,500
Interest 33,298 25,171
Rent 18,438 21,185
Depreciation and Amortization 16,999 19,952
Insurance 10,936 5,100
Vehicle Expenses 11,766 5,838
Research & Development 2,506 2,510
Other 20,635 41,447
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Total General and Administrative Expenses 308,833 239,259
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Total Expenses 371,34 379,110
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INCOME FROM OPERATIONS 20,955 38,725
OTHER INCOME (EXPENSE)
Royalty Income 11,617 17,770
Licensing Costs (17,566) (18,793)
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Total Other Income (Expense) (5,949) (1,023)
Income before Provision for Income Taxes 15,006 37,702
Provision for Income Taxes (Benefit) -- --
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NET INCOME $ 15,006 $ 37,702
=========== ===========
PER SHARE DATA:
Weighted average shares outstanding 9,984,357 9,534,357
INCOME PER COMMON SHARE $ 0.00 $ 0.00
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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<PAGE> 5
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 15,006 $ 37,702
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 16,999 19,952
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (20,829) (153,727)
Inventories (35,006) 164,538
Prepaid expenses 1,424 (32,479)
Other receivables (36,725) --
Other assets (810) --
(Decrease) increase in:
Accounts payable 203,551 89,693
Accrued liabilities (2,454) 28,267
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Net cash used by operating activities 141,156 153,946
INVESTING ACTIVITIES
Capital equipment acquisitions (26,232) (10,509)
Patent costs (6,656) (13,960)
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Net cash used in investing activities (32,888) (24,469)
FINANCING ACTIVITIES
682,910 --
Repayment of bank line of credit (809,884) --
Proceeds from long-term debt 200,000 --
Deferred financing costs (122,000) --
Proceeds from shareholder loans -- 734
Principal payments on long-term debt (47,272) (98,388)
--------- ---------
Net cash provided by financing activites (96,246) (97,654)
Increase (decrease) in Cash 12,022 31,823
Cash at Beginning of Year 31,882 14,338
--------- ---------
Cash at End of Year $ 43,904 $ 46,161
========= =========
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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<PAGE> 6
MILEMARKER INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of
MileMarker International, Inc. and its wholly-owned subsidiary, MileMarker, Inc.
(collectively "the Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the Annual Report on Form
10-KSB for the year ended December 31, 1996 of MileMarker International, Inc.,
as filed with the Securities and Exchange Commission. The December 31, 1996
balance sheet was derived from audited consolidated financial statements, but
does not include all disclosures required by generally accepted accounting
principles.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results for interim periods are not necessarily indicative of results to be
expected for the complete fiscal year.
Per share data was computed by dividing net income by the weighted
average number of shares outstanding during the period.
NOTE 2: RECLASSIFICATION
Certain amounts in prior periods have been reclassified for comparative
purposes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Financial Statements appearing elsewhere in this quarterly report on
Form 10-QSB.
RESULTS OF OPERATIONS
Sales for the three months ended March 31, 1997, of $1,056,783 reflect
a 6% decrease from 1996 sales of $1,127,798 for the same period because the 1996
sales included the results of a one-time mail order campaign to generate
recognition and sales volume at reduced prices for winches. The Company's
product mix between winches and hubs/conversion kits remained the same for both
periods, and the gross margin was approximately the same for both periods.
Selling costs, however, decreased to approximately 6% of sales in 1997 from
approximately 12% in 1996 due to different marketing methods used in 1997 to
sell the winch product line. In 1997, the Company expanded its distribution
network to sell its winches while in 1996 mail order advertising was used
extensively to promote this product directly at the retail level.
General and administrative expenses for the three months ended March
31, 1997 increased by $69,574, or about 29%, from $239,259 in 1996 to $308,833
in 1997. The most significant increases pertained to salaries, professional fees
and interest costs. Professional fees were adversely affected by the legal costs
of the Kronberger legal action (see Legal Proceedings). Relative to sales, total
general and administrative expenses increased from approximately 21% in 1996 to
29% in 1997. Consequently, the Company's income from operations decreased from
$38,725 in 1996 to $20,955 in 1997. During the three months of 1997, other
expense was $5,949 compared to $1,023 during the prior year's similar period
because royalty income decreased while licensing costs remained about the same.
The three month net income for 1997 was $15,006 compared to a net income of
$37,702 for the first quarter of 1996, and the income per common share was
reduced to less than $.01 per share from $.01 per share in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The company's current assets increased by $103,159 to $2,287,762 at
March 31, 1997, compared to $2,184,603 at December 31, 1995, resulting in a
current ratio of 1.82 on March 31, 1997, compared to 1.84 at December 31, 1996.
Working capital increased by $31,531 from $997,419 on December 31,
1996, to $1,028,950 on March 31, 1997. Most of this increase is reflected in
slightly higher levels of receivables and inventory. Decreased short-term
borrowings were offset by significantly higher trade payables. The working
capital increase during the three months ended March 31, 1997 was funded
principally by a $200,000 two year term loan.
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<PAGE> 8
The Company has no material commitments for major capital expenditures
during 1997. However, during the quarter ending March 31, 1997, the Company paid
approximately $25,000 for remaining 1996 tooling costs for the enhancements to
its hydraulic winch product line.
The Company funds its operations primarily through the collection of
its receivables, with asset-based borrowings used primarily for seasonal needs.
In order to meet the Company's need for significantly increased working capital
to achieve its projected increased sales potential, Company's bank line of
credit was replaced on March 31, 1997, with a $1,700,000 credit facility
consisting of a two year term loan of $200,000 and a two year revolving line of
credit of $1,500,000. This credit facility includes an interest rate of 3.5%
above prime in addition to substantial banking fees and requires as collateral a
security interest in all of the assets of MileMarker, Inc., including its
accounts receivable and inventory.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company is a party to business disputes arising in the
normal course of its business operations. The Company's management believes that
none of these actions, standing alone, or in the aggregate, currently are
material to the Company's operations or finances.
The Company is a party in a dispute being arbitrated by the American Arbitration
Association: MileMarker v. Gale A. Kronberger v. MileMarker, Case No.
77-133-0198-96. On May 8, 1996, Gale Kronberger filed a complaint against the
Company's subsidiary, MileMarker, Inc., in the First Judicial District Court of
Wyoming alleging a breach of certain royalty and confidentiality agreements and
demanding an accounting, an injunction and damages of approximately $48,000. On
May 31, 1996, the Company filed a complaint against Gale Kronberger in the
Seventeenth Judicial Circuit Court in Broward County, Florida, for an order
compelling arbitration. The Company's suit was abated on July 31, 1996, and
Kronberger's suit was stayed on August 28, 1996, pending resolution via
arbitration. The arbitration hearing is set for May 7, 1997, in Denver,
Colorado. The Company believes that it has meritorious defenses against the
action and intends to defend itself vigorously. The potential outcome of this
matter cannot be determined at this time, and the accompanying financial
statements do not reflect any adjustments that may result from this uncertainty.
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<PAGE> 9
Item 2 Changes in Securities
The holder of the 250,000 warrants issued on December 31, 1996, has
agreed to the Company deferring issuance of the 250,000 common shares until
April 24, 1997, when the Company's authorized shares will be increased from
10,000,000 shares to 20,000,000 shares.
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year ended December 31, 1996.
Proxies were solicited in connection with the Company's Annual
Stockholders Meeting on April 24, 1997, to increase the number of the Company's
authorized common shares to 20,000,000 shares, to elect two directors and to
appoint the Company's independent public accountants for the 1997 fiscal year.
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8K
None
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<PAGE> 10
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, duly authorized.
MILEMARKER INTERNATIONAL, INC.
(Registrant)
4-25-97 /s/ Richard E. Aho
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(Date) Richard E. Aho, President and
Principal Accounting Officer
4-25-97 /s/ Leslie J. Aho
- ------------------------- ----------------------------------
(Date) Leslie J. Aho, Secretary/Treasurer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 43,904
<SECURITIES> 0
<RECEIVABLES> 575,936
<ALLOWANCES> 7,061
<INVENTORY> 1,627,358
<CURRENT-ASSETS> 2,287,762
<PP&E> 760,115
<DEPRECIATION> 593,308
<TOTAL-ASSETS> 2,696,352
<CURRENT-LIABILITIES> 1,258,812
<BONDS> 412,003
0
0
<COMMON> 9,984
<OTHER-SE> 1,015,553
<TOTAL-LIABILITY-AND-EQUITY> 2,696,352
<SALES> 1,056,783
<TOTAL-REVENUES> 1,056,783
<CGS> 664,486
<TOTAL-COSTS> 726,995
<OTHER-EXPENSES> 281,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,298
<INCOME-PRETAX> 15,006
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,006
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
