<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, 1998 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, 1998, the Registrant had outstanding 10,684,354 shares of
common stock, $.001 par value.
<PAGE> 2
MILEMARKER INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets, June 30, 1998 and
December 31, 1997 .................................................. 3
Consolidated Statements of Operations, Three months ended
June 30, 1998 and June 30, 1997 .................................... 4
Consolidated Statements of Operations, Six months ended
June 30, 1998 and June 30, 1997 .................................... 5
Consolidated Statements of Cash Flows, Six months ended
June 30, 1998 and June 30, 1997 .................................... 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 ................. 10
Item 5. Other Information ................................................... 10
Item 6. Exhibits and Reports on Form 8-K .................................... 10
SIGNATURES .................................................................. 11
</TABLE>
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<PAGE> 3
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 79,465 $ 102,568
Accounts Receivable, net of allowance for doubtful
accounts of $7,000 522,108 867,578
Inventory 2,064,150 1,869,806
Other Receivables 75,000 114,685
Prepaid Expenses 27,519 8,299
----------- -----------
Total Current Assets 2,768,242 2,962,936
PROPERTY AND EQUIPMENT, NET 119,871 139,947
OTHER ASSETS
Deferred Financing Costs, net 67,125 78,090
Unamortized Patent Costs, net 79,805 85,180
Other 45,205 31,017
----------- -----------
Total Other Assets 192,135 194,287
----------- -----------
TOTAL ASSETS $ 3,080,248 $ 3,297,170
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Line of Credit $ 1,231,134 $ 1,459,745
Term Loan - Current 164,167 32,968
Current Maturities of Notes Payable 24,791 24,296
Accounts Payable 371,860 354,776
Accrued Liabilities 29,159 85,982
----------- -----------
Total Current Liabilities 1,821,111 1,957,767
LONG-TERM NOTES PAYABLE
Notes Payable - Shareholders 45,000 124,043
Term Loan 0 147,212
Other Notes Payable 25,337 37,782
----------- -----------
Total Long-Term Notes Payable 70,337 309,037
----------- -----------
TOTAL LIABILITIES 1,891,448 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 10,684 10,284
Paid-in Capital 1,546,165 1,406,565
Accumulated Deficit (368,049) (386,483)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 1,188,800 1,030,366
----------- -----------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 3,080,248 $ 3,297,170
=========== ===========
</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, 1998 AND 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
SALES $ 852,128 $ 838,628
COST OF SALES 491,894 504,238
------------ ------------
GROSS PROFIT 360,234 334,390
SELLING EXPENSES 104,412 103,252
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 80,993 125,629
Professional Fees 10,862 57,839
Interest 48,203 35,210
Rent 18,721 18,438
Depreciation and Amortization 38,021 33,890
Insurance 12,224 11,196
Vehicle Expenses 13,057 10,702
Research & Development 2,107 2,674
Other 21,199 22,695
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Total General and Administrative Expenses 245,387 318,273
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Total Expenses 349,799 421,525
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INCOME (LOSS) FROM OPERATIONS 10,435 (87,135)
OTHER (EXPENSE) INCOME (14,936) 5,744
------------ ------------
Income before Provision for Income Taxes (4,501) (81,391)
Provision for Income Taxes (Benefit) -- --
------------ ------------
NET LOSS $ (4,501) $ (81,391)
PER SHARE DATA:
Weighted Average Shares Outstanding 10,684,354 9,984,357
LOSS PER COMMON SHARE $ (0.00) $ (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, 1998 AND 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
SALES $ 1,864,281 $ 1,895,411
COST OF SALES 1,110,097 1,168,724
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GROSS PROFIT 754,184 726,687
SELLING EXPENSES 207,254 165,761
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 154,191 258,154
Professional Fees 45,818 119,569
Interest 92,892 68,508
Rent 37,159 36,876
Depreciation and Amortization 69,764 50,889
Insurance 9,944 22,132
Vehicle Expenses 22,626 22,468
Research & Development 4,625 5,180
Other 57,771 43,331
------------ ------------
Total General and Administrative Expenses 494,790 627,107
------------ ------------
Total Expenses 702,044 792,868
------------ ------------
INCOME (LOSS) FROM OPERATIONS 52,140 (66,181)
OTHER EXPENSE (33,707) (204)
------------ ------------
Income (Loss) before Provision for Income Taxes 18,433 (66,385)
Provision for Income Taxes (Benefit) -- --
------------ ------------
NET INCOME (LOSS) $ 18,433 $ (66,385)
PER SHARE DATA:
Weighted Average Shares Outstanding 10,512,925 9,984,357
INCOME (LOSS) PER COMMON SHARE $ 0.00 $ (0.01)
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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<PAGE> 6
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
UNAUDITED
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 18,433 $ (66,385)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 69,764 50,889
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 345,470 81,093
Inventories (194,344) (211,454)
Prepaid expenses (19,220) (8,716)
Other receivables 39,685 (8,145)
Other assets (14,188) (2,751)
(Decrease) increase in:
Accounts payable 17,084 95,482
Accrued liabilities (56,823) (26,418)
--------- ---------
Net cash provided by operating activities 205,861 (96,405)
INVESTING ACTIVITIES
Capital equipment acquisitions (6,317) (35,591)
Patent costs (623) (6,654)
--------- ---------
Net cash used in investing activities (6,940) (42,245)
FINANCING ACTIVITIES
Proceeds from sale of common stock 140,000 --
(Repayment of) proceeds from short term borrowing (228,611) 127,621
Proceeds from long-term debt -- 200,000
Deferred financing costs (26,407) (124,944)
Repayment of shareholder loans (79,043) --
Principal payments on long-term debt (27,963) (57,934)
--------- ---------
Net cash used by financing activities (222,024) 144,743
(Decrease) Increase in Cash (23,103) 6,093
Cash at Beginning of Period 102,568 31,882
--------- ---------
Cash at End of Period $ 79,465 $ 37,975
========= =========
Supplementary Disclosure of Cash Flow Information:
Cash paid during the period for Interest $ 92,892 $ 68,508
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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<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 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 MileMarker 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. Potential common stock,
when included in the computation of earnings per share, was anti-dilutive.
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, 1998 and
1997:
<TABLE>
<CAPTION>
Six Months Three Months
---------------------- ----------------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 59.5 61.7 57.7 60.1
----- ----- ----- -----
Gross Profit 40.5 38.3 42.3 39.9
Selling, General and
Administrative Expenses 32.7 38.2 38.9 46.1
----- ----- ----- -----
Income (Loss) from Operations 7.8 .1 3.4 (6.2)
Other Income (Expense) (1.8) -- (1.7) .7
Interest Expense 5.0 3.6 2.2 4.2
----- ----- ----- -----
Income (Loss) 1.0 (3.5) (0.5) (9.7)
</TABLE>
Sales of $1,864,281 for the six months ended June 30, 1998, are
approximately 2% less than the 1997 sales of $1,895,411 for the same comparable
period. 1998 sales are less than 1997 sales because the warm winter resulting
from the El Nino weather effects had an adverse impact. However, sales for the
most recent three month period ended June 30, 1998 are approximately 2% greater
than the same period in 1997, reflecting an improving trend.
The Company's product mix between winches and hubs/conversion kits
during the six months ended June 30, 1998 shifted back to hubs/conversion kits,
which accounted for approximately 69% of sales in 1998 compared to approximately
65% in 1997. The gross profit margin improved by approximately 2% in the 1998
period from the six month period in 1997, reflecting lower product costs.
Selling costs, however, increased by approximately $40,000 in the first six
months of 1998 to $207,254 from $165,761 -- an increase of about 25% when
compared to the same period in 1997 due to more sales commissions in the first
three months of 1998.
-8-
<PAGE> 9
General and administrative expenses for the six months ended June 30,
1998 decreased by $132,317, or about 21%, from $627,107 in 1997 to $494,790 in
1998. The most significant decreases in general and administrative expenses
during the first six months of 1998 related primarily to officer salaries and
professional fees. During the first six months of 1998, about $79,000 of officer
salaries were waived. About $70,000 of non-recurring legal costs were incurred
by the Company during 1997 for the successful defense of its Kronberger legal
action, compared to none in 1998. Higher interest and loan amortization expenses
in the first six months of 1998 were offset by lower salary, professional fees
and insurance expenses. As a percentage of sales, the Company's general and
administrative costs decreased from about 33% during the first six months of
1997 to approximately 27% in 1998.
The Company earned income of $52,140 from operations in the first six
months of 1998 compared to an operating loss of $66,181 in 1997. This
improvement resulted from lower operating expenses and improved profit margins
on 2% less sales in 1998. During the three months ended June 30, 1997, the
Company's income from operations was $10,435 compared to an operating loss of
$87,135 during the prior year's similar period. Other income and expense items
during the three months and six months ended June 30, 1998 reflected net
expenses of $14,936 and $33,707, respectively, because of the cessation of
certain royalty income which had previously offset licensing costs. The
Company's net income for the six months ended June 30, 1998 was $18,433 compared
to a net loss of $66,385 for the first six months of 1997. The Company's net
loss for the three months ended June 30, 1998 was $4,501 compared to a net loss
of $81,391 for the same period in 1997. The Company's income and loss per common
share were both less than $.01 during the 1998 periods.
The Company has begun converting its computer system to be Year 2000
compliant. New computer hardware has been installed which is Year 2000
compliant, and a computer software company has been engaged recently to upgrade
the Company's computer system by December 31, 1998 to be Year 2000 compliant.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current assets decreased by $194,694 to $2,768,242 at
June 30, 1998, compared to $2,962,936 at December 31, 1997. Most of this
decrease is reflected in a $345,470 reduction in accounts receivable at June 30,
1998, partially offset by an $194,344 increase in inventory. Net working capital
decreased $58,039 from $1,005,169 on December 31, 1997, to $947,130 on June 30,
1998, and the Company's current ratio increased to 1.52 at June 30, 1998,
compared to 1.51 at December 31, 1997. Borrowings under the Company's line of
credit decreased by $228,611 from December 31, 1997 levels, and the Company
received the proceeds of $140,000 from the sale of its common stock at $.35 per
share during the first six months of 1998.
-9-
<PAGE> 10
The Company has no material commitments outstanding for major capital
expenditures during 1998.
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.
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
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, 1998, the Company was not in default in the payment of
interest and principal.
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
Exhibit 27 Financial Data Schedule (for SEC use only).
-10-
<PAGE> 11
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)
8/10/98 /s/ Richard E. Aho
- ------------------------- ---------------------------------------
(Date) Richard E. Aho, President and
Principal Accounting Officer
8/10/98 /s/ Leslie J. Aho
- ------------------------- ---------------------------------------
(Date) Leslie J. Aho, Secretary/Treasurer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 79,465
<SECURITIES> 0
<RECEIVABLES> 529,159
<ALLOWANCES> 7,051
<INVENTORY> 2,064,150
<CURRENT-ASSETS> 2,768,242
<PP&E> 780,644
<DEPRECIATION> 660,773
<TOTAL-ASSETS> 3,080,248
<CURRENT-LIABILITIES> 1,821,111
<BONDS> 70,337
0
0
<COMMON> 10,684
<OTHER-SE> 1,178,116
<TOTAL-LIABILITY-AND-EQUITY> 3,080,248
<SALES> 1,864,281
<TOTAL-REVENUES> 1,864,281
<CGS> 1,110,097
<TOTAL-COSTS> 1,317,351
<OTHER-EXPENSES> 435,605
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,892
<INCOME-PRETAX> 18,433
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,433
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,433
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
