<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
September 30, 1999 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 September 30, 1999, the Registrant had outstanding 10,684,354 shares
of common stock, $.001 par value.
<PAGE> 2
MILEMARKER INTERNATIONAL, INC.
FORWARD-LOOKING STATEMENTS
When used in this Quarterly Report on Form 10-QSB or in future filings by the
Company (as hereinafter defined) with the Securities and Exchange Commission, in
the Company's press releases or other public or shareholder communications, or
in oral statements made with the approval of an authorized executive officer,
the words or phrases "will likely result," "are expected to," "will continue,"
"is anticipated," "plan," "estimate," "project," or similar expressions are
intended to identify "forward-looking statements." The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak as of the date made, and to advise readers that various factors,
including regional, national and international economic conditions, substantial
changes in levels of market interest rates, credit and other risks of
manufacturing, distributing or marketing activities, and competitive and
regulatory factors could affect the Company's financial performance and could
cause the Company's actual results for future periods to differ materially from
those anticipated by any forward-looking statements.
The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.
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MILEMARKER INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets, September 30, 1999 and
December 31, 1998 ................................................. 4
Consolidated Statements of Operations, Three months ended
September 30, 1999 and September 30, 1998 ......................... 5
Consolidated Statements of Operations, Nine months ended
September 30, 1999 and September 30, 1998 ......................... 6
Consolidated Statements of Cash Flows, Nine months ended
September 30, 1999 and September 30, 1998 ......................... 7
Notes to Consolidated Financial Statements ........................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ....................................... 9-11
PART II OTHER INFORMATION
Item 1. Legal Proceedings ................................................. 11
Item 2. Changes in Securities ............................................. 11
Item 3. Defaults Upon Senior Securities ................................... 11
Item 4. Submission of Matters to a Vote of Security Holders ............... 11
Item 5. Other Information ................................................. 12
Item 6. Exhibits and Reports on Form 8-K .................................. 12
SIGNATURES ................................................................ 13
</TABLE>
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<PAGE> 4
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 63,283 $ 62,726
Accounts Receivable, net of allowance for doubtful
accounts of $7,000 1,003,469 834,660
Inventory 1,844,803 1,885,530
Other Receivables 13,293 --
Prepaid Expenses 13,360 23,806
----------- -----------
Total Current Assets 2,938,208 2,806,722
PROPERTY AND EQUIPMENT, NET 101,293 140,456
OTHER ASSETS
Deferred Financing Costs, net 99,305 73,805
Unamortized Patent Costs, net 7,827 23,254
Other 40,397 36,510
----------- -----------
Total Other Assets 147,529 133,569
----------- -----------
Total Assets 3,187,030 $ 3,080,747
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Line of Credit 1,426,724 $ 1,413,814
Term Loan - Current 55,520 128,239
Current Maturities of Notes Payable -- 25,061
Accounts Payable 232,643 315,674
Accrued Liabilities 53,140 38,588
----------- -----------
Total Current Liabilities 1,768,027 1,921,376
LONG-TERM NOTES PAYABLE
Notes Payable - Shareholders 45,000 45,000
Other Notes Payable -- 12,712
----------- -----------
Total Long-Term Notes Payable 45,000 57,712
----------- -----------
Total Liabilities 1,813,027 1,979,088
=========== ===========
SHAREHOLDERS' EQUITY
Common Stock, $.001 par value; 20,000,000 shares
authorized, 10,684,354 shares issued and outstanding
in 1999 and 1998, respectively 10,684 10,684
Paid-in Capital 1,546,165 1,546,165
Accumulated Deficit (182,846) (455,190)
----------- -----------
Total Shareholders' Equity 1,374,003 1,101,659
----------- -----------
Total Liabilities & Shareholders' Equity $ 3,187,030 $ 3,080,747
=========== ===========
</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
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Sales $ 1,373,038 $ 800,379
Cost of Sales 725,658 425,786
------------ ------------
Gross Profit 647,380 374,593
------------ ------------
Selling Expenses 132,259 118,443
------------ ------------
General and Administrative Expenses
Salaries and Wages 133,467 114,325
Professional Fees 28,756 10,748
Rent 19,349 19,329
Depreciation and Amortization 20,515 38,262
Insurance 11,370 13,440
Vehicle Expenses 12,027 7,993
Research & Development 1,853 1,244
Other 33,119 31,273
------------ ------------
Total General and Administrative Expenses 260,456 236,614
------------ ------------
Total Expenses 392,715 355,057
------------ ------------
Income from Operations 254,665 19,536
Other Expenses
Interest Expense (47,260) (44,552)
Other (Expense)/Income (15,411) (13,795)
------------ ------------
Total Other Expenses (62,671) (58,347)
Income/(Loss) before Provision for Income Taxes 191,994 (38,811)
Provision for Income Taxes (Benefit) -- --
------------ ------------
Net Income/(Loss) $ 191,994 $ (38,811)
============ ============
Per Share Data:
Weighted Average Shares Outstanding 10,684,354 10,684,354
Income/(Loss) per Common Share - Basic $0.02 $(0.00)
</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 OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Sales $ 3,482,264 $ 2,664,660
Cost of Sales 1,920,476 1,580,355
------------ ------------
Gross Profit 1,561,788 1,084,305
------------ ------------
Selling Expenses 331,448 325,697
------------ ------------
General and Administrative Expenses
Salaries and Wages 380,664 268,516
Professional Fees 79,553 56,565
Rent 58,046 56,488
Depreciation and Amortization 79,244 108,027
Insurance 31,724 23,384
Vehicle Expenses 27,483 30,619
Research & Development 3,961 5,869
Other 112,887 89,045
------------ ------------
Total General and Administrative Expenses 773,562 638,513
------------ ------------
Total Expenses 1,105,010 964,210
------------ ------------
Income from Operations 456,778 120,095
Other Expenses
Interest Expense (139,215) (137,443)
Other (Expense)/Income (45,219) (47,502)
------------ ------------
Total Other Expenses (184,434) (184,945)
------------ ------------
------------ ------------
Income/(Loss) before Provision for Income Taxes 272,344 (64,850)
Provision for Income Taxes (Benefit) -- --
------------ ------------
Net Income/(Loss) $ 272,344 $ (64,850)
============ ============
Per Share Data:
Weighted Average Shares Outstanding 10,564,354 10,564,354
Income/(Loss) per Common Share - Basic $0.03 $(0.01)
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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<PAGE> 7
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income/(loss) $ 272,344 $ (64,850)
Adjustments to reconcile net (loss)/income to net cash
provided(used) by operating activities:
Depreciation and amortization 79,244 108,027
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (168,809) 346,786
Inventories 40,727 (148,692)
Prepaid expenses 10,446 (22,066)
Other receivables (13,293) 39,685
Other assets (3,887) (23,125)
(Decrease) increase in:
Accounts payable (83,031) 203,223
Accrued liabilities 14,552 (54,838)
--------- ---------
Net cash provided by operating activities 148,293 384,150
INVESTING ACTIVITIES
Capital equipment acquisitions -- (6,317)
Patent costs (34,500) (623)
--------- ---------
Net cash used in investing activities (34,500) (6,940)
FINANCING ACTIVITIES
Proceeds from sale of common stock -- 140,000
Proceeds from (repayment of) short term borrowing 12,910 (435,827)
Deferred financing costs (15,654) (26,407)
Repayment of shareholder loans -- (79,043)
Principal payments on long-term debt (110,492) (45,937)
--------- ---------
Net cash (used) by financing activities (113,236) (447,214)
Increase/(decrease) in Cash 557 (70,004)
Cash at Beginning of Period 62,726 102,568
--------- ---------
Cash at End of Period $ 63,283 $ 32,564
========= =========
Supplementary Disclosure of Cash Flow Information:
Cash paid during the period for Interest $ 139,054 $ 137,443
</TABLE>
The accompanying Notes are an integral part of these financial statements.
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<PAGE> 8
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, 1998 of Mile-Marker International, Inc.,
as filed with the Securities and Exchange Commission. The summary December 31,
1998 balance sheet was derived from audited consolidated financial statements,
but does not include all disclosures required by generally accepted accounting
principles at December 31, 1998.
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. The difference between
basic and diluted earnings per share is immaterial for the periods ended
September 30, 1999 and 1998.
NOTE 2: PROVISION FOR INCOME TAXES (BENEFIT)
As of September 30, 1999, the Company has not provided for income
taxes due to the tax benefits of the Company's net operating loss
carry-forwards.
NOTE 3: RECLASSIFICATION
Certain amounts in prior periods have been reclassified for comparative
purposes.
-8-
<PAGE> 9
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 nine months and three months ended September 30,
1999 and 1998:
NINE MONTHS THREE MONTHS
------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
Sales ................... 100.0% 100.0% 100.0% 100.0%
Cost of Sales ........... 55.1% 59.3% 52.9% 53.2%
------ ------ ------ ------
Gross Profit ......... 44.9% 40.7% 47.1% 46.8%
Selling, General and
Administrative Expenses 31.8% 36.2% 28.6% 44.4%
------ ------ ------ ------
Income from Operations .. 13.1% 4.5% 18.5% 2.4%
Other Expenses .......... (1.3)% (1.8)% (1.1)% (1.7)%
Interest Expense ....... (4.0)% (5.1)% (3.4)% (5.6)%
------ ------ ------ ------
Net Income ........... 7.8% (2.4)% 14.0% (4.9)%
Sales of $3,482,264 for the nine months ended September 30, 1999, were
$817,604, or approximately 31%, more than comparable 1998 sales of $2,664,660.
Most of this increase in sales was attributable to sales of the Company's
hydraulic winches to the U.S. military, which amounted to $633,858 during this
period. The Company also gained sales of $389,217 from special order products
that were neither hubs nor winches. Hub sales during the first nine months of
1999 were $158,956 less than in the same period in 1998. Non-military winch
sales during the first nine months of 1999 were $70,663 less than in the same
period in 1998. The Company believes that non-military winch sales were
adversely affected in large part due to unfair competition in the U.S. market
(see Part II - "Legal Proceedings").
The Company's gross profit margin improved by over 4% in the first nine
months of 1999 compared to the same period in 1998, reflecting lower product
costs. Also, selling costs decreased from approximately 12% of sales in the
first nine months of 1998 to approximately 9.5% of sales during the nine months
ended September 30, 1999, chiefly due to changes in the Company's product mix.
-9-
<PAGE> 10
General and administrative expenses for the nine months ended
September 30, 1999, increased by $135,049, or about 21%, from $638,513 in 1998
to $773,562 in 1999; $112,148 of this increase related to salaries, which were
significantly less in 1998 due to refunds made by executive officers to meet
certain loan covenants. Other areas of significant expense increases over the
first nine months of 1998 were professional fees and insurance expense. However,
offsetting these expense increases, loan amortization costs were much lower in
1999 than in 1998 due to reduced financing and loan reset costs. The Company's
general and administrative expenses represented 22.2% of sales in the first nine
months of 1999, compared to approximately 24% in the same period in 1998.
The Company's income from operations for the first nine months ended
September 30, 1999 increased to $456,778 compared to $120,095 for the same
period in 1998, an increase of approximately 380%, due primarily to the improved
profit margins. Net income totaled $272,344 for the nine months ended September
30, 1999, compared to a net loss of $64,850 during the same period in 1998. Net
income during the three months ending September 30, 1999, was $191,994, compared
to a net loss of $38,811 during the same period in 1998. The Company's earnings
per share in the first nine months of 1999 were $.03 compared to a loss of $.01
in the same period of 1998, and $.02 in the three months ending September 30,
1999, compared to an immaterial amount in the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current assets increased by $131,486 to $2,938,208 at
September 30, 1999, compared to $2,806,722 at December 31, 1998. Most of this
increase was reflected in a $168,809 increase in trade accounts receivable,
principally from the U.S. military. This increase in receivables was partially
offset by a decrease in inventory levels of $40,727. Net working capital
increased by $284,835 from $885,346 on December 31, 1998, to $1,170,181 on
September 30, 1999, and the Company's current ratio increased to 1.66 at
September 30, 1999, compared to 1.46 at December 31, 1998. Borrowings under the
Company's line of credit increased by $12,910 from December 31, 1998, but this
increase was offset by a $72,719 decrease in the Company's term loan during
1999, representing continuing scheduled principal payments. Cash generated from
operating activities enabled the Company to reduce its
accounts payable balance from $315,674 on December 31, 1998 to $232,643 on
September 30, 1999 and to repay other debt totaling $37,773 during the first
nine months of 1999. Most of these decreases occurred in the third quarter ended
September 30, 1999.
The Company funds its operations principally through the daily collection of its
trade receivables, supplemented with asset-based borrowings. On March 31, 1999,
the Company increased its asset-based line of credit to $1,750,000 with a
maturity of March 31, 2000. The entire credit facility includes an interest rate
of 3.5% above
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<PAGE> 11
prime in addition to certain 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 1999. The Company has converted its computer system to be
Year 2000 compliant at a cost of approximately $16,000, which was allocated to
the purchase of new computer hardware and software.
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 is material to the Company's operations or finances.
On March 4, 1999, the Company filed suit against Peterson Publishing and
Warn Industries, Inc. in Broward Circuit Court for defamation, civil conspiracy
and interference with business practices in connection with a November 1997
published test of its hydraulic winch and power source. The Company alleges that
Peterson Publishing conspired with its advertiser, Warn Industries, to
deliberately misrepresent the quality and performance of the Company's product
to potential consumers, thereby adversely affecting sales and profits. The
Company is seeking considerable, yet undetermined damages, both of a
compensatory and a punitive nature. Considerable discovery has been complete.
The Company's attorney fees for this action are limited by a contingency
agreement with the Company's attorneys. The Company's management is unable at
this time to quantify the effects of this action upon the Company's finances or
its operations.
ITEM 2 CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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<PAGE> 12
ITEM 5 OTHER INFORMATION
On April 15, 1999, the Company received notice from the United States
Army that it had been awarded an initial contract for the purchase of 289
hydraulic winch/bumper assemblies, valued at $557,230. On July 25, 1999, the
Company received notice that it had been awarded an additional contract for 454
hydraulic winch/bumper assemblies valued at $867,839. On July 30, 1999, the
Company received notice that options for an additional 464 units valued at
$1,087,119 were being exercised. The Company anticipates that it will be
receiving substantial additional military orders for its patented hydraulic
winch as the U.S. military replaces electric winches on its existing Humvee
vehicles and equips its new Humvee vehicles with the MileMarker winch.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
SEC Form 8K filed on July 28, 1999 by the Company announcing receipt of
an additional military order for 454 of the Company's hydraulic winch/bumper
assemblies valued at $867,839.
SEC Form 8K filed on August 2, 1999 by the Company announcing receipt
of an additional military order for 464 of the Company's hydraulic winch/bumper
assemblies valued at $1,087,119.
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<PAGE> 13
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)
Nov. 5, 1999 /s/ Richard E. Aho
- ------------------------- -----------------------------------
(Date) Richard E. Aho, President and
Principal Accounting Officer
11/5/99 /s/ Leslie J. Aho
- ------------------------- -----------------------------------
(Date) Leslie J. Aho, Secretary/Treasurer
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 63,283
<SECURITIES> 0
<RECEIVABLES> 1,010,338
<ALLOWANCES> 6,869
<INVENTORY> 1,844,803
<CURRENT-ASSETS> 2,938,208
<PP&E> 829,560
<DEPRECIATION> 728,268
<TOTAL-ASSETS> 3,187,030
<CURRENT-LIABILITIES> 1,768,027
<BONDS> 45,000
0
0
<COMMON> 10,684
<OTHER-SE> 1,363,319
<TOTAL-LIABILITY-AND-EQUITY> 3,187,030
<SALES> 3,482,264
<TOTAL-REVENUES> 3,482,264
<CGS> 1,920,476
<TOTAL-COSTS> 2,251,924
<OTHER-EXPENSES> 818,781
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139,215
<INCOME-PRETAX> 272,344
<INCOME-TAX> 0
<INCOME-CONTINUING> 272,344
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 272,344
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
