<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, 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 March 31, 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," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. 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 and national 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> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet, March 31, 1999 and
December 31, 1998 ................................................. 4
Consolidated Statement of Operations, Three months ended
March 31, 1999 and March 31, 1998 ................................ 5
Consolidated Statement of Cash Flows, Three months ended
March 31, 1999 and March 31, 1998 ................................. 6
Notes to Consolidated Financial Statements ......................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 8-9
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> 4
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1999 1998
=============================
<S> <C> <C>
CURRENT ASSETS
Cash $ 174,809 $ 62,726
Accounts Receivable, net of allowance for doubtful
accounts of $11,000 and $7,000, respectively 977,610 834,660
Inventory 1,765,172 1,885,530
Prepaid Expenses 11,118 23,806
-----------------------------
Total Current Assets 2,928,709 2,806,722
PROPERTY AND EQUIPMENT, NET 128,935 140,456
OTHER ASSETS
Unamortized Patent Costs, net 70,805 73,805
Deferred Financing Costs, net - 23,254
Other 37,258 36,510
-----------------------------
Total Other Assets 108,063 133,569
-----------------------------
$ 3,165,707 $ 3,080,747
TOTAL ASSETS =============================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Line of Credit $ 1,459,590 $ 1,413,814
Term Loan - Current 103,108 128,239
Current Maturities of Notes Payable 23,990 25,061
Accounts Payable 311,695 315,674
Accrued Liabilities 51,137 38,588
-----------------------------
Total Current Liabilities 1,949,520 1,921,376
LONG-TERM NOTES PAYABLE
Notes Payable - Shareholder 45,000 45,000
Other Notes Payable 7,511 12,712
-----------------------------
Total Long-Term Notes Payable 52,511 57,712
-----------------------------
TOTAL LIABILITIES 2,002,031 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
Paid-in Capital 10,684 10,684
Accumulated Deficit 1,546,165 1,546,165
TOTAL SHAREHOLDERS' EQUITY (393,173) (455,190)
-----------------------------
TOTAL SHAREHOLDERS' EQUITY 1,163,676 1,101,659
-----------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 3,165,707 $ 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 MARCH 31, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
1999 1998
===============================
<S> <C> <C>
SALES $ 1,173,911 $ 1,012,153
COST OF SALES 658,712 618,203
-------------------------------
GROSS PROFIT 515,199 393,950
SELLING EXPENSES 115,920 102,842
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 120,898 73,197
Professional Fees 34,183 34,956
Rent 19,349 18,438
Depreciation and Amortization 37,775 31,743
Insurance 12,111 (2,281)
Vehicle Expenses 6,567 9,569
Research & Development 1,330 2,518
Other 38,226 36,574
-------------------------------
Total General and Administrative Expenses 270,439 204,714
-------------------------------
Total Expenses 386,359 307,556
-------------------------------
INCOME FROM OPERATIONS 128,840 86,394
OTHER (EXPENSE)/INCOME
Interest Expense (48,195) (44,688)
Licensing Costs (18,628) (18,771)
-------------------------------
Total Other (Expense)/Income (66,823) (63,459)
Income before Provision for Income Taxes 62,017 22,935
Provision for Income Taxes (Benefit) - -
-------------------------------
NET INCOME $ 62,017 $ 22,935
===============================
PER SHARE DATA:
Weighted Average Shares Outstanding 10,684,354 10,384,354
NET INCOME PER COMMON SHARE - BASIC $ 0.01 $ 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 CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
UNAUDITED
<TABLE>
<CAPTION>
1999 1998
=========================
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 62,017 $ 22,935
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 37,775 31,743
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (142,950) 198,203
Inventories 120,358 (82,290)
Prepaid expenses 12,688 (24,871)
Other receivables - 14,685
Other assets (748) (13,171)
(Decrease) increase in:
Accounts payable (3,979) 42,545
Accrued liabilities 12,549 (58,505)
-------------------------
Net cash provided by operating activities 97,710 131,274
INVESTING ACTIVITIES
Capital equipment acquisitions - (1,986)
-------------------------
Net cash used in investing activities - (1,986)
FINANCING ACTIVITIES
Proceeds from sale of common stock - 140,000
Proceeds from (repayment of) short term borrowing 45,776 (223,578)
Deferred financing costs - (23,088)
Repayment of shareholder loans - (46,160)
Principal payments on long-term debt (31,403) (16,609)
-------------------------
Net cash provided (used) by financing activities 14,373 (169,435)
Increase (Decrease) in Cash 112,083 (40,147)
Cash at Beginning of Period 62,726 102,568
-------------------------
Cash at End of Period $ 174,809 $ 62,421
=========================
Supplementary Disclosure of Cash Flow Information:
Cash paid during the period for Interest $ 46,520 $ 48,850
</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, 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 quarters ended March
31, 1999 and 1998.
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 three months ended March 31, 1999, and 1998:
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Sales 100.0% 100.0%
Cost of Sales 56.1% 61.1%
--------------------
Gross Profit 43.9% 38.9%
Selling, General and
Administrative Expenses 32.9% 30.4%
--------------------
Income from Operations 11.0% 8.5%
Other Income (Expense) (1.6)% (1.9)%
Interest Expense (4.1)% (4.4)%
--------------------
Net Income 5.3% 2.2%
</TABLE>
Sales of $1,173,911 for the three months ended March 31, 1999, were
$161,758, or approximately 16% more than comparable 1998 sales of $1,012,153.
Approximately 75% of this increase in sales was attributable to the Company's
building special order products that were neither hubs nor winches. Hub sales
also increased over the same period in 1998 due to different weather conditions.
However, winch sales were less than in 1998, and the Company believes that this
was due in large part to unfair competition in the U.S. market (see Part II
"Legal Proceedings"), causing winches to account for only 24% of total sales
during the March 1999 quarter.
The Company's quarterly gross profit margin improved by approximately
5% of sales in the March 1999 quarter from the same period in 1998, reflecting
lower product costs. Selling costs, however, increased by approximately $13,000
in the first three months of 1999 to $115,920 from $102,842 - an increase of
about 13% when compared to the same period in 1998.
General and administrative expenses for the three months ended
March 31, 1999 increased by $65,725, or about 32%, from $204,714 in 1998 to
$270,439 in 1999. The most significant increase in general and administrative
expenses from the first three months of 1998 related primarily to salaries.
1998 officer salaries were significantly less due to the 1998 salary refunds
made by the executive officers to meet loan covenants. Interest and loan
amortization costs were higher in absolute terms in the first quarter of
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<PAGE> 9
1999 than in 1998 due to greater borrowings. Relative to sales, the 1999 first
quarter's total general and administrative costs increased by about 3% of sales
from the comparable period in 1998.
The Company's income from operations for the first three months of 1999
was approximately 50% more than in the same period in 1998 - $128,840 versus
$86,394 due improved profit margins. Other income and expense other than
interest expense in the first three months was approximately the same in both
1999 and 1998. Net income of $62,017 for the quarter ended March 31, 1999 was
almost triple the $22,935 of net income earned in the same period in 1998. The
Company's earnings per share in the first quarter of 1999 were $.01 compared to
an immaterial amount in the first three months of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current assets increased by $121,987 to $2,928,709 at
March 31, 1999, compared to $2,806,722 at December 31, 1998. Most of this
increase is reflected in increased cash of $112,083 and increased accounts
receivable of $142, 950 at March 31, 1999, partially offset by an $120,358
decrease in inventory. Net working capital increased by $93,843 from $885,346 on
December 31, 1998, to $979,189 on March 31, 1999, and the Company's current
ratio increased to 1.50 at March 31, 1999, compared to 1.46 at December 31,
1998. Borrowings under the Company's line of credit increased by $45,776 from
December 31, 1998. At the same time, the Company's term loan was reduced by
$25,131 during the March 1999 quarter.
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 renewed and increased its asset-based line of
credit from $1,500,000 to $1,750,000 and extended the maturity of both its
line of credit and term loan until March 31, 2000. The entire credit facility
includes an interest rate of 3.5% above 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. New computer hardware and
software was installed during 1998 to achieve Year 2000 compliance
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<PAGE> 10
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 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 its potential consumers, thereby adversely affecting its sales and profits.
The Company seeks significant damages in an amount not yet determined, and the
Company's management is therefore unable at this time to quantify the effects of
this action upon the Company's finances or 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
ITEM 5 OTHER INFORMATION
On April 15, 1999, the Company received notice from the United States
Army Tank-Automotive and Armaments Command of the Department of the Army that
its wholly-owned subsidiary, MileMarker, Inc. had been awarded an initial
contract for the delivery of approximately 289 hydraulic winch/bumper assemblies
within 180 days. The value of this order is $557,230. The Company anticipates
that MileMarker, Inc. will be receiving substantial additional military orders
for its patented hydraulic winches for use on Humvee vehicles.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
SEC Form 8K filed on April 20, 1999 by the Company announcing
receipt of the initial military order for the Company's hydraulic winch.
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<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)
4/30/99 /s/ Richard E. Aho
- ------------------------- ------------------------------------
(Date) Richard E. Aho, President and
Principal Accounting Officer
4/30/99 /s/ Leslie J. Aho
- ------------------------- ------------------------------------
(Date) Leslie J. Aho, Secretary/Treasurer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 174,809
<SECURITIES> 0
<RECEIVABLES> 988,661
<ALLOWANCES> 11,051
<INVENTORY> 1,765,172
<CURRENT-ASSETS> 11,118
<PP&E> 829,560
<DEPRECIATION> 700,625
<TOTAL-ASSETS> 3,165,707
<CURRENT-LIABILITIES> 1,949,520
<BONDS> 52,511
0
0
<COMMON> 10,684
<OTHER-SE> 1,152,992
<TOTAL-LIABILITY-AND-EQUITY> 3,165,707
<SALES> 1,173,911
<TOTAL-REVENUES> 1,173,911
<CGS> 658,712
<TOTAL-COSTS> 774,632
<OTHER-EXPENSES> 285,067
<LOSS-PROVISION> 4,000
<INTEREST-EXPENSE> 48,195
<INCOME-PRETAX> 62,017
<INCOME-TAX> 0
<INCOME-CONTINUING> 62,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,017
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
