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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, 2000 Number 0-26150
MILEMARKER INTERNATIONAL, INC.
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(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
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, 2000, the Registrant had outstanding 10,684,357 shares of
common stock, $.001 par value.
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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." 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
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Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet, June 30, 2000 and
December 31, 1999........................................................... 4
Consolidated Statement of Operations, Three months ended
June 30, 2000 and June 30, 1999............................................. 5
Consolidated Statements of Operations, Six months ended
June 30, 2000 and June 30, 1999............................................. 6
Consolidated Statement of Cash Flows, Six months ended
June 30, 2000 and June 30, 1999............................................. 7
Notes to Consolidated Financial Statements................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................................. 9-10
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 .................................................................... 11
Item 6. Exhibits and Reports on Form 8-K ..................................................... 11
SIGNATURES ...................................................................................... 12
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MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Balance Sheets
UNAUDITED
June 30 December 31
2000 1999
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ASSETS
CURRENT ASSETS
Cash $ 42,576 $ 187,830
Accounts Receivable, net of allowance for doubtful
accounts of $11,000 and $14,000, respectively. 747,552 943,510
Inventory 1,813,292 1,749,865
Other Receivables 11,893 13,293
Deferred Tax Asset 24,140 94,010
Prepaid Expenses 17,591 16,289
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Total Current Assets 2,657,044 3,004,797
PROPERTY AND EQUIPMENT, NET 201,465 131,596
OTHER ASSETS 189,153 161,813
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Total Assets $3,047,662 $3,298,206
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Line of Credit $ 897,925 $1,369,845
Current Maturities of Notes Payable -- 31,726
Note Payable - Shareholder -- 45,000
Accounts Payable 197,547 216,076
Income Taxes Payable 12,166 --
Accrued Liabilities 34,045 51,344
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Total Current Liabilities 1,141,684 1,713,991
DEFERRED TAX CREDIT 32,610 16,010
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TOTAL LIABILITIES 1,174,294 1,730,001
========== ==========
SHAREHOLDERS' EQUITY
Common Stock, $.001 par value; 20,000,000 shares
authorized, 10,684,357 shares issued and
outstanding in 2000 and 1999, respectively. 10,684 10,684
Paid-in Capital 1,546,165 1,546,165
Retained Earnings 316,519 11,356
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TOTAL SHAREHOLDERS' EQUITY 1,873,368 1,568,205
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,047,662 $3,298,206
========== ==========
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 June 30, 2000 and 1999
UNAUDITED
2000 1999
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SALES $1,285,718 $935,314
COST OF SALES 726,557 536,105
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GROSS PROFIT 559,161 399,209
SELLING EXPENSES 124,073 83,269
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 120,808 126,299
Professional Fees 31,936 16,614
Rent 19,646 19,349
Depreciation and Amortization 27,441 20,954
Insurance 15,761 8,243
Vehicle Expenses 10,523 8,889
Research & Development 2,701 778
Other 34,384 41,542
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Total General and Administrative Expenses 263,200 242,668
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Total Expenses 387,273 325,937
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INCOME FROM OPERATIONS 171,888 73,272
OTHER EXPENSES
Interest Expense (27,038) (43,760)
Licensing Costs -- (11,180)
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Total Other Expenses (27,038) (54,940)
Income before Provision for Income Taxes 144,850 18,332
Provision for Income Taxes (40,159) --
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NET INCOME $ 104,691 $ 18,332
========== ========
PER SHARE DATA:
Weighted Average Shares Outstanding: 10,684,357 10,684,357
INCOME PER COMMON SHARE - BASIC $ 0.01 $ 0.00
The accompanying Notes are an integral part of these financial statements.
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MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Six Months Ended June 30, 2000 and 1999
UNAUDITED
2000 1999
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SALES $3,064,631 $2,109,226
COST OF SALES 1,667,413 1,194,818
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GROSS PROFIT 1,397,218 914,408
SELLING EXPENSES 269,912 199,189
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 264,409 247,197
Professional Fees 96,650 50,797
Rent 38,995 38,697
Depreciation and Amortization 52,922 58,729
Insurance 26,466 20,354
Vehicle Expenses 17,276 15,456
Research & Development 4,542 2,108
Other 77,554 79,769
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Total General and Administrative Expenses 578,814 513,107
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Total Expenses 848,726 712,296
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INCOME FROM OPERATIONS 548,492 202,112
OTHER EXPENSES
Interest Expense (68,582) (91,955)
Licensing Costs (10,985) (29,808)
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Total Other Expenses (79,567) (121,763)
Income before Provision for Income Taxes 468,925 80,349
Provision for Income Taxes (163,761) --
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NET INCOME $ 305,164 $ 80,349
========== ==========
PER SHARE DATA:
Weighted Average Shares Outstanding: 10,684,357 10,512,925
INCOME PER COMMON SHARE - BASIC $ 0.03 $ 0.01
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
Six Months Ended June 30, 2000 and 1999
UNAUDITED
2000 1999
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OPERATING ACTIVITIES:
Net income $ 305,164 $ 80,349
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 53,725 58,729
Deferred income taxes 86,470 --
Bad debt provisions 5,227 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 190,731 12,249
Inventories (63,427) 30,861
Prepaid expenses (1,302) 7,383
Other receivables 1,400 (21,296)
Other assets (47,253) (2,781)
(Decrease) increase in:
Accounts payable (18,530) 130,966
Income taxes payable 12,166 --
Accrued liabilities (17,299) 14,886
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Net cash provided by operating activities 507,072 311,346
INVESTING ACTIVITIES:
Capital equipment acquisitions (103,680) --
Patent costs -- (21,000)
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Net cash used in investing activities (103,680) (21,000)
FINANCING ACTIVITIES:
Repayment of short term borrowing (503,646) (163,070)
Deferred financing costs -- (15,654)
Repayment of shareholder loans (45,000) --
Principal payments on long-term debt -- (61,537)
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Net cash used by financing activities (548,646) (240,261)
INCREASE (DECREASE) IN CASH (145,254) 50,085
CASH AT BEGINNING OF PERIOD 187,830 62,726
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CASH AT END OF PERIOD $ 42,576 $ 112,811
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SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 85,340 $ 92,892
Cash paid during the period for Income Taxes $ 65,125 $ 0
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, 1999 of MileMarker International, Inc.,
as filed with the Securities and Exchange Commission. The summary December 31,
1999 balance sheet was derived from audited consolidated financial statements,
but does not include all disclosures required by generally accepted accounting
principles at December 31, 1999.
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 diluted share base
for the periods ended June 30, 2000 and June 30, 1999 excludes incremental
shares related to stock options and warrants since their effect was
anti-dilutive.
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 six months and three months ended June 30, 2000,
and 1999:
Six Months Three Months
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2000 1999 2000 1999
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Sales 100.0 % 100.0% 100.0% 100.0%
Cost of Sales 54.4% 56.6% 56.5% 57.3%
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Gross Profit 45.6% 43.4% 43.5% 42.7%
Selling, General and
Administrative Expenses 27.7% 33.8% 30.1% 34.9%
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Income from Operations 17.9% 9.6% 13.4% 7.8%
Other Expenses (0.4)% (1.4)% (0.0)% (1.2)%
Interest Expense (2.2)% (4.4)% (2.1)% (4.7)%
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Pre-Tax Income 15.3% 3.8% 11.3% 1.9%
Income Taxes (5.3)% 0.0% (3.1)% (0.0)%
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Net Income 10.0% 3.8% 8.2% 1.9%
Sales of $3,064,631 for the six months ended June 30, 2000, were
$955,405, or approximately 45% more than comparable 1999 sales of $2,109,226.
Most of this increase was due to approximately $1,245,000 of military winch
sales, which were
$1,112,000 higher than in 1999. This increase in military winch sales was offset
by a decrease of approximately $413,000 in hub sales and approximately $71,000
in non- military winch sales. The Company believes that its non-military winch
sales continue to be adversely affected in large part by unfair competition in
the U.S. market from a major competitor (see Part II - "Legal Proceedings"). The
Company's sales in the first six months of 2000 also included approximately
$335,000 of sales of special orders. The Company's total sales for the three
months ended June 30, 2000 were approximately $350,000 more than in 1999 mostly
due to increased military winch sales.
The Company's gross profit margin in the six months ended June 30, 2000
increased to 45.6% of sales compared to 43.4% in the same period in 1999,
reflecting an increase in profit margins on the sale of military winches.
Selling costs were about the same in the first six months of 2000 compared to
the same period in 1999.
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General and administrative expenses for the six months ended June 30,
2000 increased by $65,707, or about 13%, from $513,107 in 1999 to $578,814 in
2000. The most significant increase in general and administrative expenses from
the first six months of 1999 related primarily to professional fees and
salaries, which increased by $45,853 and $17,212, respectively, over 1999
levels. Professional fees were higher in 2000 primarily due to the legal costs
of the Company's pending litigation against a competitor (see Part II - "Legal
Proceedings"). Relative to sales, however, the first six months' general and
administrative expenses in 2000 decreased by about 5% of sales from the
comparable period in 1999.
The Company's income from operations for the first six months of 2000
was about 170% higher than that earned in the same period in 1999 - $548,492
versus $202,112 due to higher sales, improved profit margins and expense
control. Other expenses, consisting primarily of interest, were approximately
35% less than in the first six months of 1999 due to substantially reduced
borrowing costs and the cessation of licensing costs in the first quarter of
2000. Net income before taxes of $468,925 for the six months ended June 30, 2000
was more than five times the $80,349 income before tax earned in the same period
in 1999. The Company earned net income of $305,164 after taxes in the first half
of 2000, compared to $80,349 in the same period in 1999. This represents
earnings per share of $.03 for the first half of 2000 compared to earnings per
share of $0.01 for the first six months of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital increased by $224,554 to $1,515,360 on June 30,
2000 from $1,290,806 on December 31, 1999, and the Company's current ratio
increased to 2.33 at June 30, 2000, compared to 1.75 at December 31, 1999. The
Company's current assets decreased by $347,753 to $2,657,044 at June 30, 2000,
compared to $3,004,797 at December 31, 1999. Most of this decrease was due to
reduced cash balances resulting from more efficient cash management relating to
the Company's new credit facility and the reduction of trade accounts receivable
by $195,958, principally on military orders. Thus, borrowings under the
Company's line of credit decreased by $471,920 from the December 31, 1999 level
of $1,369,845 to $897,925 at June 30, 2000. At the same time, the Company's
remaining term loan balance of $31,726 and its shareholder loan of $45,000 were
both repaid in the first half of 2000.
The Company funds its operations chiefly through the collection of its trade
receivables, supplemented with periodic short-term borrowings. On March 7, 2000,
the Company replaced its $1,750,000 asset-based line of credit with a $1,750,000
working capital line of credit from another lender on substantially more
favorable terms. This credit facility has a maturity of one year, is secured by
substantially all of the Company's assets and bears interest at a rate
approximating the prime interest rate.
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The Company has no material commitments outstanding for major capital
expenditures during 2000.
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 potential consumers, thereby adversely affecting the Com- pany's sales and
profits. The Company is seeking considerable, yet undetermined damages, both of
a compensatory and a punitive nature. Considerable discovery has been completed
and is continuing. In response to the Company's legal action, Peterson Pub-
lishing has filed a counterclaim for alleged defamation by the Company and the
Company's Chief Executive Officer. The Company's attorney fees for this action
are limited by con- tingency agreements. The Company's management is unable at
this time to quantify the effects of this action and the counter-claim 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
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
None
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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)
August 7, 2000 /s/ Richard E. Aho
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(Date) Richard E. Aho, President and
Principal Accounting Officer
August 7, 2000 /s/ Leslie J. Aho
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(Date) Leslie J. Aho, Secretary/Treasurer
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