<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, 1998 Number 0-26150
MILEMARKER INTERNATIONAL, INC.
------------------------------
(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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
On March 31, 1998, the Registrant had outstanding 10,684,354 shares of
common stock, $.001 par value.
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MILEMARKER INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheet, March 31, 1998 and
December 31, 1997................................................ 3
Consolidated Statement of Operations, Three months ended
March 31, 1998 and March 31, 1997................................ 4
Consolidated Statement of Cash Flows, Three months ended
March 31, 1998 and March 31, 1997................................ 5
Notes to 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 .................................................... 9
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 1998 1997
-------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 62,421 $ 102,568
Accounts Receivable, net of
allowance for doubtful
accounts of $7,000 669,375 867,578
Inventory 1,952,096 1,869,806
Other Receivables 100,000 114,685
Prepaid Expenses 33,170 8,299
-------------------------------
Total Current Assets 2,817,062 2,962,936
PROPERTY AND EQUIPMENT, NET 128,808 139,947
OTHER ASSETS
Deferred Financing Costs, net 85,560 78,090
Unamortized Patent Costs, net 82,180 85,180
Other 44,188 31,017
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Total Other Assets 211,928 194,287
TOTAL ASSETS
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$ 3,157,798 $ 3,297,170
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Line of Credit $ 1,236,167 $ 1,459,745
Current Maturities of Notes Payable 58,508 57,264
Accounts Payable 397,321 354,776
Accrued Liabilities 27,477 85,982
-------------------------------
Total Current Liabilities 1,719,473 1,957,767
LONG-TERM NOTES PAYABLE
Notes Payable - Shareholders 77,883 124,043
Term Loan 138,272 147,212
Other Notes Payable 28,869 37,782
-------------------------------
Total Long-Term Notes Payable 245,024 309,037
-------------------------------
TOTAL LIABILITIES 1,964,497 2,266,804
===============================
SHAREHOLDERS' EQUITY
Common Stock, $.001 par value; 20,000,000
shares authorized, 10,684,354 shares
and 10,284,354 shares issued and
outstanding in 1998 and 1997, respectively
Paid-in Capital 10,684 10,284
Accumulated Deficit 1,546,165 1,406,565
TOTAL SHAREHOLDERS' EQUITY (363,548) (386,483)
-------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,193,301 1,030,366
-------------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 3,157,798 $ 3,297,170
===============================
</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, 1998 AND 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
---------------------------------
<S> <C> <C>
SALES $ 1,012,153 $ 1,056,783
COST OF SALES 618,203 664,486
---------------------------------
GROSS PROFIT 393,950 392,297
SELLING EXPENSES 102,842 62,509
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 73,197 132,525
Professional Fees 34,956 61,730
Interest 44,688 33,298
Rent 18,438 18,438
Depreciation and Amortization 31,743 16,999
Insurance (2,281) 10,936
Vehicle Expenses 9,569 11,766
Research & Development 2,518 2,506
Other 36,574 20,635
---------------------------------
Total General and Administrative Expenses 249,402 308,833
---------------------------------
Total Expenses 352,244 371,342
---------------------------------
INCOME FROM OPERATIONS 41,706 20,955
OTHER INCOME (EXPENSE) (18,771) (5,949)
Income before Provision for Income Taxes 22,935 15,006
Provision for Income Taxes (Benefit) -- --
---------------------------------
NET INCOME $ 22,935 $ 15,006
=================================
PER SHARE DATA:
Weighted Average Shares Outstanding 10,384,354 9,984,357
INCOME (LOSS) PER COMMON SHARE $ 0.00 $ 0.00
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
UNAUDITED
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 22,935 $ 15,006
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 31,743 16,999
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 198,203 (20,829)
Inventories (82,290) (35,006)
Prepaid expenses (24,871) 1,423
Other receivables 14,685 (36,725)
Other assets (13,171) (810)
(Decrease) increase in:
Accounts payable 42,545 203,551
Accrued liabilities (58,505) (2,454)
---------------------------
Net cash provided by operating activities 131,274 141,155
INVESTING ACTIVITIES
Capital equipment acquisitions (1,986) (26,232)
Patent costs -- (6,656)
---------------------------
Net cash used in investing activities (1,986) (32,888)
FINANCING ACTIVITIES
Proceeds from sale of common stock 140,000 --
Repayment of short term borrowing (223,578) (126,974)
Proceeds from long-term debt -- 200,000
Deferred financing costs (23,088) (122,000)
Repayment of shareholder loans (46,160) --
Principal payments on long-term debt (16,609) (47,272)
---------------------------
Net cash used by financing activities (169,435) (96,246)
(Decrease) Increase in Cash (40,147) 12,022
Cash at Beginning of Period 102,568 31,882
---------------------------
Cash at End of Period $ 62,421 $ 43,904
===========================
Supplementary Disclosure of Cash Flow Information:
Cash paid during the period for Interest $ 48,850 $ 33,298
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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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 necessary adjustments to the financial
statements have been made, and significant inter-company 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, 1997 of Mile-Marker International, Inc.,
as filed with the Securities and Exchange Commission. The summary December 31,
1997 balance sheet was derived from audited consolidated financial statements,
but does not include all disclosures required by generally accepted accounting
principles at December 31, 1997.
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
The following table summarizes the results of operations, stated as a
percentage of sales, for the three months ended March 31, 1998, and 1997:
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Sales 100.0% 100.0%
Cost of Sales 61.1% 62.9%
--------------------
Gross Profit 38.9% 37.1%
Selling, General and
Administrative Expenses 30.4% 32.0%
--------------------
Income from Operations 8.5% 5.1%
Other Income (Expense) (1.8)% (.5)%
Interest Expense 4.4% 3.2%
--------------------
Net Income 2.2% 1.4%
</TABLE>
Sales of $1,012,153 for the three months ended March 31, 1998, were
$44,630, or approximately 4% less than comparable 1997 sales of $1,056,783. This
decrease in sales was attributable to the warm winter resulting from the El Nino
weather effects. The Company's product mix between winches and hubs/conversion
kits continued to shift more towards winches, which accounted for approximately
35% of sales in the March 1998 quarter compared to approximately 30% in the 1997
period. The quarterly gross profit margin improved by approximately 2% in the
March 1998 quarter from the same period in 1997, reflecting lower product costs.
Selling 9costs, however, increased by approximately $40,000 in the first three
months of 1998 to $102,842 from $62,509 - an increase of about 65% when compared
to the same period in 1997 due to more sales commissions.
General and administrative expenses for the three months ended March
31, 1998 decreased by $59,431, or about 19%, from $308,833 in 1997 to $249,402
in 1998. The most significant decreases in general and administrative expenses
from the first three months of 1998 related primarily to salaries and
professional fees. 1998 officer salaries were significantly less than the prior
year's period, partially due to salary refunds by the executive officers.
Significant non-recurring legal costs were incurred by the Company during 1997
for the successful defense of its Kronberger legal action.
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<PAGE> 8
Interest and loan amortization costs were higher in the first three months of
1998 than in 1997. Relative to sales, the 1998 first quarter's general and
administrative costs decreased by about 5% of sales from the comparable period
in 1997. During the quarter ended March 31, 1998, the President of the Company,
Richard E. Aho, waived approximately $42,000, consisting of officer compensation
and interest on his shareholder loan.
The Company's income from operations for the first three months of 1998
was approximately double that of the same period in 1997 - $41,706 versus
$20,955 due primarily to expense reductions. Other income and expense items in
the first three months of 1998 reflected the cessation of royalty income from
one source and the delayed start of royalties from another source. Nevertheless,
the net income of $22,935 for the quarter ended March 31, 1998 was approximately
50% greater than the $15,006 of net income earned in the same period in 1997.
The Company's earnings per share were negligible in the first three months of
both 1998 and 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current assets decreased by $145,874 to $2,817,082 at
March 31, 1998, compared to $2,962,936 at December 31, 1997. Most of this
decrease is reflected in a $198,203 lower level of accounts receivable at March
31, 1998, partially offset by an $82,290 increase in inventory. Net working
capital increased by $93,664 from $1,005,169 on December 31, 1997, to $1,098,833
on March 31, 1998, and the. the Company's current ratio increased to 1.64 at
March 31, 1998, compared to 1.51 at December 31, 1997. Borrowings under the
Company's line of credit decreased by $223,578 from December 31, 1997 levels as
the Company received the proceeds of $140,000 from the sale of its common stock
at $.35 per share and increased its use of accounts payable by $42,545.
The Company funds its operations principally through the daily collection of its
trade receivables, supplemented with asset-based borrowings. On March 31, 1997,
the Company committed to 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 inventory and accounts
receivable, as well as the pledge of all of the stock held by MileMarker
International, Inc. in MileMarker, Inc. and the key man life insurance on the
Company's President/Chairman.
The Company has no material commitments outstanding for major capital
expenditures during 1998.
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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.
ITEM 2 CHANGES IN SECURITIES
On March 31, 1998, the Company issued 400,000 common shares to several
new shareholders at $.35 per share under SEC Regulation S.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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)
5/11/98 /s/ Richard E. Aho
- ------------------------- -----------------------------------
(Date) Richard E. Aho, President and
Principal Accounting Officer
5/11/98 /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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 62,421
<SECURITIES> 0
<RECEIVABLES> 676,426
<ALLOWANCES> 7,051
<INVENTORY> 1,952,096
<CURRENT-ASSETS> 133,170
<PP&E> 776,313
<DEPRECIATION> 647,505
<TOTAL-ASSETS> 3,157,798
<CURRENT-LIABILITIES> 1,719,473
<BONDS> 245,024
0
0
<COMMON> 10,684
<OTHER-SE> 1,182,617
<TOTAL-LIABILITY-AND-EQUITY> 3,157,798
<SALES> 1,012,153
<TOTAL-REVENUES> 1,012,153
<CGS> 618,203
<TOTAL-COSTS> 721,045
<OTHER-EXPENSES> 223,485
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,688
<INCOME-PRETAX> 22,935
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,935
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,935
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
