<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, 2000 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
--------------
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, 2000, the Registrant had outstanding 10,634,357 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
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet, September 30, 2000 and
December 31, 1999 ....................................................... 4
Consolidated Statements of Operations, Three months ended
September 30, 2000 and September 30, 1999 .............................. 5
Consolidated Statements of Operations, Nine months ended
September 30, 2000 and September 30, 1999 .............................. 6
Consolidated Statements of Cash Flows, Nine months ended
September 30, 2000 and September 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
</TABLE>
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<PAGE> 4
MILEMARKER INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30 DECEMBER 31
2000 1999
--------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 16,367 $ 187,830
Accounts Receivable, net of allowance for doubtful
accounts of $18,000 and $14,000, respectively 1,157,431 943,510
Inventory 2,301,470 1,749,865
Other Receivables 11,893 13,293
Deferred Tax Asset 24,140 94,010
Prepaid Expenses 23,806 16,289
--------------------------------
Total Current Assets 3,535,107 3,004,797
PROPERTY AND EQUIPMENT, NET 226,686 131,596
OTHER ASSETS 165,833 161,813
--------------------------------
TOTAL ASSETS $3,927,626 $3,298,206
================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Line of Credit $1,552,447 $1,369,845
Current Maturities of Notes Payable -- 31,726
Note Payable - Shareholder -- 45,000
Accounts Payable 353,670 216,076
Income Taxes Payable 82,558 --
Accrued Liabilities 35,096 51,344
--------------------------------
Total Current Liabilities 2,023,771 1,713,991
DEFERRED TAX CREDIT 32,610 16,010
--------------------------------
TOTAL LIABILITIES 2,056,381 1,730,001
--------------------------------
SHAREHOLDERS' EQUITY
Common Stock, $.001 par value; 20,000,000 shares
authorized, 10,634,357 and 10,684,357 shares issued
and outstanding in 2000 and 1999, respectively 10,634 10,684
Paid-in Capital 1,521,215 1,546,165
Retained Earnings 339,396 11,356
--------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,871,245 1,568,205
--------------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,927,626 $3,298,206
================================
</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, 2000 AND 1999
UNAUDITED
<TABLE>
<CAPTION>
2000 1999
--------------------------------
<S> <C> <C>
SALES $ 1,275,855 $ 1,373,038
COST OF SALES 748,036 725,658
--------------------------------
GROSS PROFIT 527,819 647,380
SELLING EXPENSES 116,462 132,259
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 121,162 133,467
Professional Fees 37,390 28,756
Rent 27,019 19,349
Depreciation and Amortization 27,709 20,515
Insurance 13,999 11,370
Vehicle Expenses 7,743 12,027
Research & Development 2,910 1,853
Other 38,025 33,119
--------------------------------
Total General and Administrative Expenses 275,957 260,456
--------------------------------
Total Expenses 392,419 392,715
--------------------------------
INCOME FROM OPERATIONS 135,400 254,665
OTHER EXPENSES
Interest Expense (30,131) (47,260)
Licensing Costs 0 (15,411)
--------------------------------
Total Other Expenses (30,131) (62,671)
Income before Provision for Income Taxes 105,269 191,994
Provision for Income Taxes (82,393) --
--------------------------------
NET INCOME $ 22,876 $ 191,994
================================
PER SHARE DATA:
Weighted Average Shares Outstanding: 10,634,357 10,684,357
INCOME PER COMMON SHARE - BASIC $ 0.00 $ 0.02
</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, 2000 AND 1999
UNAUDITED
<TABLE>
<CAPTION>
2000 1999
--------------------------------
<S> <C> <C>
SALES $ 4,340,486 $ 3,482,264
COST OF SALES 2,415,450 1,920,476
--------------------------------
GROSS PROFIT 1,925,036 1,561,788
SELLING EXPENSES 386,374 331,448
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Wages 385,571 380,664
Professional Fees 134,040 79,553
Rent 66,014 58,046
Depreciation and Amortization 80,632 79,244
Insurance 40,465 31,724
Vehicle Expenses 25,019 27,483
Research & Development 7,453 3,961
Other 115,577 112,887
--------------------------------
Total General and Administrative Expenses 854,771 773,562
--------------------------------
Total Expenses 1,241,145 1,105,010
--------------------------------
INCOME FROM OPERATIONS 683,891 456,778
OTHER EXPENSES
Interest Expense (98,713) (139,215)
Licensing Costs (10,985) (45,219)
--------------------------------
Total Other Expenses (109,698) (184,434)
Income before Provision for Income Taxes 574,193 272,344
Provision for Income Taxes (246,153) --
--------------------------------
NET INCOME $ 328,040 $ 272,344
================================
PER SHARE DATA:
Weighted Average Shares Outstanding: 10,669,357 10,564,357
INCOME PER COMMON SHARE - BASIC $ 0.03 $ 0.03
</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
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
UNAUDITED
<TABLE>
<CAPTION>
2000 1999
------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 328,040 $ 272,344
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 84,151 79,244
Deferred income taxes 86,470 --
Bad debt provisions 13,227 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (227,148) (168,809)
Inventories (551,605) 40,727
Prepaid expenses (7,517) 10,446
Other receivables 1,400 (13,293)
Other assets (34,434) (3,887)
(Decrease) increase in:
Accounts payable 137,594 (83,031)
Income taxes payable 82,558 --
Accrued liabilities (16,247) 14,552
------------------------------
Net cash provided by operating activities (103,511) 148,293
INVESTING ACTIVITIES:
Capital equipment acquisitions (148,828) --
Patent costs -- (34,500)
------------------------------
Net cash used in investing activities (148,828) (34,500)
FINANCING ACTIVITIES:
Repayment of short term borrowing 150,876 12,910
Deferred financing costs -- (15,654)
Purchase and retirement of treasury shares (25,000) --
Repayment of shareholder loans (45,000) --
Principal payments on long-term debt -- (110,492)
------------------------------
Net cash used by financing activities 80,876 (113,236)
INCREASE (DECREASE) IN CASH (171,463) 557
CASH AT BEGINNING OF PERIOD 187,830 62,726
------------------------------
CASH AT END OF PERIOD $ 16,367 $ 63,283
==============================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 115,471 $ 139,054
Cash paid during the period for Income Taxes $ 77,125 $ 0
</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, 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 September 30, 2000 and September 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 nine months and three months ended September 30,
2000, and 1999:
<TABLE>
<CAPTION>
Nine Months Three Months
----------------------- -----------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 55.6% 55.1% 58.6% 52.9%
Gross Profit 44.4% 44.9% 41.4% 47.1%
Selling, General and
Administrative Expenses 28.6% 31.8% 30.8% 28.6%
Income from Operations 15.8% 13.1% 10.6% 18.5%
Other Expenses (0.3)% (1.3)% (0.0)% (1.1)%
Interest Expense (2.3)% (4.0)% (2.4)% (3.4)%
Pre-Tax Income 13.2% 7.8% 8.2% 14.0%
Income Taxes (5.6)% 0.0% (6.4)% (0.0)%
Net Income 7.6% 7.8% 1.8% 14.0%
</TABLE>
Sales of $4,340,486 for the nine months ended September 30, 2000, were
$858,220, or approximately 25% more than comparable 1999 sales of $3,482,264.
Most of this increase was due to approximately $873,491 in higher military winch
sales in the first nine months of 2000. The Company's total sales in the first
nine months of 2000 also included approximately $598,042 of special order sales,
which were $210,522 greater than sales of special orders during 1999. Sales of
hubs and conversions were $224,129 less than during the same period during 1999.
The Company's total sales for the three months ended September 30, 2000 were
approximately $97,000 less than in the same quarter in 1999 due to the timing of
military winch sales in 2000 compared to the same period in 1999.
The Company's gross profit margin in the nine months ended September
30, 2000 decreased to 44.4% of sales compared to 44.9% in the same period in
1999 due to a decrease in the gross profit margin to 41.4% during the three
months ending September 30, 2000. This reduction in the September 2000 quarter
is due to the change in the Company's product mix during this quarter from
higher-margin military sales to lower- margin special order sales. Selling costs
in the first nine months of 2000 were $54,926 more than the same period in 1999
chiefly due to sales commissions on military sales.
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<PAGE> 10
General and administrative expenses for the nine months ended September
30, 2000 increased by $81,209, or about 10%, from $773,562 in 1999 to $854,771
in 2000. The most significant increase in general and administrative expenses
from the first nine months of 1999 related primarily to professional fees, which
increased by $54,487 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"). Other expense increases over
1999 levels occurred in salaries, rent and insurance expenses. Relative to
sales, however, the first nine months' general and administrative expenses in
2000, excluding selling costs, decreased to approximately 19.7% of sales from
approximately 22.2% of sales for the comparable nine month period in 1999.
The Company's income from operations for the first nine months of 2000
was about 50% higher than that earned in the same period in 1999 - $683,892
versus $456,776 due primarily to higher sales. Other expenses, consisting
primarily of interest, were about 40% less than in the first nine 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 $574,193 for the
nine months ended September 30, 2000 was more than double the $272,344 income
before tax earned in the same period in 1999. In the first nine months of 2000,
the Company earned net income of $328,040 after taxes compared to $272,344 in
the same nine month period in 1999. This represents earnings per share of $.03
for the first nine months of 2000 compared to $0.03 per share for the first nine
months of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital increased by $220,530 to $1,511,336 on September
30, 2000 from $1,290,806 on December 31, 1999, and the Company's current ratio
was 1.75 at September 30, 2000, the same as at December 31, 1999. The Company's
current assets increased by $530,310 to $3,535,107 at September 30, 2000,
compared to $3,004,797 at December 31, 1999. Most of this change was due to a
$551,605 increase in inventory levels in anticipation of fourth quarter sales.
Also, higher accounts receivable levels on September 30, 2000 were offset by
lower cash balances resulting from more efficient cash management relating to
the Company's new credit facility. The increase in inventory levels at September
30, 2000 was funded mostly by a $182,602 increase in borrowings under the
Company's line of credit from the December 31, 1999 level of $1,369,845 to
$1,552,447 and a $137,594 increase in the level of the Company's accounts
payable.
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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<PAGE> 11
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 Company'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
Publishing 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 contingency 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.
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(Registrant)
11/11/00 /s/ Richard E. Aho
------------------------ -----------------------------------------
(Date) Richard E. Aho, President and
Principal Accounting Officer
11/11/00 /s/ Leslie Aho
------------------------ -----------------------------------------
(Date) Leslie J. Aho, Secretary/Treasurer
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