<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
June 30, 1997 Number 0-26150
MILEMARKER INTERNATIONAL, INC.
------------------------------
(Exact Name Of Small Business Registrant As Specified In Its Charter)
New York 11-2128469
- --------------- --------------
(State or other (IRS Employer
jurisdiction of Identification
incorporation) Number)
1450 S.W. 13th Court, Pompano Beach, Florida 33069
--------------------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number: (954) 782-0604
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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
On June 30, 1997, the Registrant had outstanding 9,984,357 shares of common
stock, $.001 par value.
<PAGE> 2
MILEMARKER INTERNATIONAL, INC.
INDEX
Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets, June 30, 1997 and
December 31, 1996 ........................................... 3
Consolidated Statements of Operations, Three months ended
June 30, 1997 and June 30, 1996 ............................. 4
Consolidated Statements of Operations, Six months ended
June 30, 1997 and June 30, 1996 ............................. 5
Consolidated Statements of Cash Flows, Six months ended
June 30, 1997 and June 30, 1996 ...... ...................... 6
Notes to Condensed Consolidated Financial Statements ......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8-10
PART II OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 10
Item 2. Changes in Securities ........................................ 10
Item 3. Defaults Upon Senior Securities .............................. 10
Item 4. Submission of Matters to a Vote of Security Holders .......... 11
Item 5. Other Information ............................................ 11
Item 6. Exhibits and Reports on Form 8-K ............................. 11
SIGNATURES ............................................................ 12
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<PAGE> 3
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
UNAUDITED
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
----------------------------------
CURRENT ASSETS
<S> <C> <C>
Cash $37,975 $31,882
Accounts Receivable, net of allowance for doubtful
accounts of $7,000 466,963 548,056
Inventory 1,803,806 1,592,352
Other Receivables 11,700 3,555
Prepaid Expenses 17,474 8,758
--------------------------------
Total Current Assets 2,337,918 2,184,603
PROPERTY AND EQUIPMENT, NET 159,994 155,474
OTHER ASSETS
Deferred Financing Costs, net 109,326 -
Unamortized Patent Costs, net 90,580 88,126
Other 29,044 26,293
---------------------------------
Total Other Assets 228,950 114,419
---------------------------------
TOTAL ASSETS $2,726,862 $2,454,496
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Line of Credit $937,505 $809,884
Current Maturities of Notes Payable 54,853 66,095
Accounts Payable 303,899 208,417
Accrued Liabilities 76,370 102,788
---------------------------------
Total Current Liabilities 1,372,627 1,187,184
LONG-TERM NOTES PAYABLE
Notes Payable - Shareholders 195,793 195,793
Other Notes Payable 214,296 60,988
---------------------------------
Total Long-Term Notes Payable 410,089 256,781
---------------------------------
TOTAL LIABILITIES 1,782,716 1,443,965
=================================
SHAREHOLDERS' EQUITY
Common Stock, $.001 par value; 20,000,000 shares
and 10,000,000 shares authorized in 1997 and 1996,
respectively; 9,984,357 shares issued and outstanding 9,984 9,984
Paid-in Capital 1,381,865 1,381,865
Accumulated Deficit (447,703) (381,318)
---------------------------------
TOTAL SHAREHOLDERS' EQUITY 944,146 1,010,531
---------------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $2,726,862 $2,454,496
=================================
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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<PAGE> 4
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three Months Ended June 30, 1997 and 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
------------------------------
<S> <C> <C>
SALES $838,628 $872,341
COST OF SALES 504,238 561,305
------------------------------
GROSS PROFIT 334,390 311,036
SELLING EXPENSES 103,252 105,192
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 125,629 173,678
Professional Fees 57,839 27,500
Interest 35,210 32,006
Rent 18,438 20,654
Depreciation and Amortization 33,890 19,628
Insurance 11,196 9,900
Vehicle Expenses 10,702 9,227
Research & Development 2,674 9,905
Other 22,696 46,930
------------------------------
Total General and Administrative Expenses 318,273 349,428
------------------------------
Total Expenses 421,525 454,620
------------------------------
INCOME (LOSS) FROM OPERATIONS (87,135) (143,584)
OTHER INCOME (EXPENSE)
Royalty Income 18,340 12,230
Licensing Costs (12,596) (11,207)
------------------------------
Total Other Income (Expense) 5,744 1,023
Income (Loss) before Provision for Income Taxes (81,391) (142,561)
Provision for Income Taxes (Benefit) - -
-------------------------------
NET INCOME (LOSS) ($81,391) ($142,561)
===============================
PER SHARE DATA:
Weighted Average Shares Outstanding 9,984,357 9,634,357
INCOME (LOSS) PER COMMON SHARE ($0.01) ($0.01)
</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 OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
-------------------------------
<S> <C> <C>
SALES $1,895,411 $2,000,139
COST OF SALES 1,168,724 1,271,268
-------------------------------
GROSS PROFIT 726,687 728,871
SELLING EXPENSES 165,761 245,043
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 258,154 283,234
Professional Fees 119,569 36,000
Interest 68,508 57,177
Rent 36,876 41,839
Depreciation and Amortization 50,889 39,580
Insurance 22,132 15,000
Vehicle Expenses 22,468 15,065
Research & Development 5,180 12,415
Other 43,331 88,377
-------------------------------
Total General and Administrative Expenses 627,107 588,687
-------------------------------
Total Expenses 792,868 833,730
-------------------------------
INCOME (LOSS) FROM OPERATIONS (66,181) (104,859)
OTHER INCOME (EXPENSE)
Royalty Income 29,957 30,000
Licensing Costs (30,161) (30,000)
-------------------------------
Total Other Income (Expense) (204) -
-------------------------------
Income (Loss) before Provision for Income Taxes (66,385) (104,859)
Provision for Income Taxes (Benefit) - -
-------------------------------
NET INCOME (LOSS) ($66,385) ($104,859)
===============================
PER SHARE DATA:
Weighted Average Shares Outstanding 9,984,357 9,534,357
INCOME (LOSS) PER COMMON SHARE ($0.01) ($0.01)
</TABLE>
The accompanying Notes are an integral part of these financial statements.
- 5 -
<PAGE> 6
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
-------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss ($66,385) ($104,859)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 50,889 39,580
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 81,093 24,465
Inventories (211,454) 201,362
Prepaid expenses (8,716) (42,867)
Other receivables (8,145) -
Other assets (2,751) -
(Decrease) increase in:
Accounts payable 95,482 72,636
Accrued liabilities (26,418) 36,496
------------------------------
Net cash (used) provided by operating activities (96,405) 226,813
INVESTING ACTIVITIES
Capital equipment acquisitions (35,591) (4,401)
Patent costs (6,654) (14,514)
------------------------------
Net cash used in investing activities (42,245) (18,915)
FINANCING ACTIVITIES
Proceeds of private placement of common stock - 200,000
Proceeds from (repayment of) short term borrowing 127,621 (319,787)
Proceeds from long-term debt 200,000 -
Deferred financing costs (124,944) -
Proceeds from shareholder loans - 734
Principal payments on long-term debt (57,934) (18,808)
-------------------------------
Net cash provided (used) by financing activites 144,743 (137,861)
Increase in Cash 6,093 70,037
Cash at Beginning of Period 31,882 14,338
------------------------------
Cash at End of Period $37,975 $84,375
==============================
</TABLE>
The accompanying Notes are an integral part of these financial statements.
- 6 -
<PAGE> 7
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
10KSB for the year ended December 31, 1996 of Mile-Marker International, Inc.,
as filed with the Securities and Exchange Commission. The summary December 31,
1996 balance sheet was derived from audited consolidated financial statements,
but does not include all disclosures required by generally accepted accounting
principles at December 31, 1996.
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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<PAGE> 8
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
The following table summarizes the results of operations, stated as a
percentage of sales, for the six months and three months ended June 30, 1997 and
1996:
Six Months Three Months
----------------- -------------------
1997 1996 1997 1996
----- ----- ----- -----
Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 61.7 63.6 60.1 64.3
----------------- -------------------
Gross Profit 38.3 36.4 39.9 35.7
Selling, General and
Administrative Expenses 38.2 38.8 46.1 48.4
----------------- -------------------
Income (Loss) from Operations .1 (2.4) (6.2) (12.7)
Other Income - - .7 .1
Interest Expense 3.6 2.8 4.2 3.7
----------------- -------------------
Income (Loss) (3.5) (5.2) (9.7) (16.4)
Sales of $1,895,411 for the six months ended June 30, 1997, are
approximately 5% less than the 1996 sales of $2,000,139 for the same comparable
period. Sales for the three months ended June 30, 1997 are only 3.9% less than
the same period in 1996, reflecting an improving trend. 1997 sales are less than
1996 sales because 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, but the gross margin improved by approximately 2% for
the six months of 1997 over the comparable 1996 period and by approximately 4%
in the three months ended June 30, 1997 over the 1996 similar period. Selling
costs decreased substantially in the first six months of 1997 to $165,761 from
$245,043 - a reduction of about 32% when compared to the same period 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.
- 8 -
<PAGE> 9
General and administrative expenses for the six months ended June 30, 1997
increased by $38,420, or about 7%, from $588,687 in 1996 to $627,107 in 1997.
However, general and administrative expenses decreased by $31,155, or about 9%,
for the three months ended June 30, 1997 from the comparable period in 1996. The
most significant increase in general and administrative expenses during the
first six months of 1997 related primarily to professional fees. Approximately
$70,000 of non-recurring legal costs were incurred by the Company during the six
months ended June 30, 1997 for the successful defense of its Kronberger legal
action (see "Legal Proceedings"). Higher interest, vehicle expenses,
amortization and insurance expenses in the first six months of 1997 were offset
by lower salary, rent, research and other expenses. Relative to sales, the
Company's general and administrative costs decreased by about 2% during the
first six months of 1997 compared to 1996.
The Company's loss from operations for the first six months of 1997
decreased to $66,181 in 1997 from $104,859 in 1996, or about 37% less, primarily
due to the substantial reduction in selling costs. During the three months ended
June 30, 1997, the Company's loss from operations was $87,135 compared to
$143,584 during the prior year's similar period. Other income and expense items
offset each other during the six month periods of both years, resulting in net
losses of $66,385 and $104,859 for the first six months of 1997 and 1996,
respectively. Net loss per common share was approximately $.01 during both
periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current assets increased by $153,315 to $2,337,918 at June
30, 1997, compared to $2,184,603 at December 31, 1996. Most of this increase is
reflected in a $211,454 higher level of inventory (primarily winches) at June
30, 1997 compared to December 31, 1996. Working capital, however, decreased by
$32,128 from $997,419 on December 31, 1996, to $965,291 on June 30, 1997,
resulting in a current ratio of 1.70 on June 30, 1997, compared to 1.84 at
December 31, 1996. Borrowings under the line of credit and trade payables
increased by $127,621 and $95,482, respectively from December 31, 1996 levels,
and the Company received the proceeds of a $200,000 term loan on March 31, 1997.
Approximately $125,000 of these borrowings were expended for deferred financing
costs.
The Company has no material commitments outstanding for major capital
expenditures during 1997.
- 9 -
<PAGE> 10
The Company funds its operations principally through the collection of its
trade 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, the 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.
On June 20, 1997, the American Arbitration Association issued a Final Award
to the Company in Case No. 77-133-0198-96, MileMarker, Inc. v. Gale A.
Kronberger in which the arbitrator ruled that "Kronberger is not entitled to
damages, including punitive damages, or other remedy from Milemarker."
Item 2. Changes in Securities
April 24, 1997, the shareholders of the Company authorized an increase in
the number of common shares from 10,000,000 shares to 20,000,000 shares.
Item 3. Defaults Upon Senior Securities
The Company's credit agreement with its lender contains certain
affirmative, negative and financial covenants which, among others, specify
minimum net worth requirements, minimum earnings before interest, taxes,
depreciation and amortization, and the maintenance of minimum interest
coverage. As of June 30, 1997, the Company was in technical default on several
of these ratios and has requested the lender's waiver and/or forbearance for
these events of default. The Company is not in default in the payment of
interest and principal.
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<PAGE> 11
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
- 11 -
<PAGE> 12
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)
7/25/97 /s/ Richard E. Aho
- ------------------------- ----------------------------------
(Date) Richard E. Aho, President and
Principal Accounting Officer
7/25/97 /s/ Leslie J. Aho
- ------------------------- ----------------------------------
(Date) Leslie J. Aho, Secretary/Treasurer
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 37,975
<SECURITIES> 0
<RECEIVABLES> 474,014
<ALLOWANCES> 7,051
<INVENTORY> 1,803,806
<CURRENT-ASSETS> 2,337,918
<PP&E> 769,475
<DEPRECIATION> 609,480
<TOTAL-ASSETS> 2,726,862
<CURRENT-LIABILITIES> 1,372,627
<BONDS> 410,089
0
0
<COMMON> 9,984
<OTHER-SE> 934,162
<TOTAL-LIABILITY-AND-EQUITY> 2,726,862
<SALES> 1,895,411
<TOTAL-REVENUES> 1,895,411
<CGS> 1,168,724
<TOTAL-COSTS> 1,334,485
<OTHER-EXPENSES> 558,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,508
<INCOME-PRETAX> (66,385)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,385)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,385)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
