<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 28, 1996.
-----------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
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Commission file number 0-26618
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MAKO MARINE INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0501535
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(State of other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
4355 NW 128TH STREET MIAMI, FLORIDA 33054
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(Address of principal executive offices)
(305) 685-6591
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(Issuers telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
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
---- ----
As of November 11, 1996, there were 2,655,000 shares of common stock, $0.01
par value per share, outstanding.
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements
Balance Sheet . . . . . . . . . . . . . . . . 3
Statements of Operations . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 8-11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . 13
2
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
BALANCE SHEET
(unaudited)
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September 28, 1996
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ASSETS
Current assets
Cash $ 184,103
Accounts receivable, less allowance for possible
losses of $61,095 772,033
Inventories 2,542,760
Prepaid and other assets 413,673
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Total current assets 3,912,569
Property and equipment, net 3,004,887
Other assets 132,781
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$7,050,237
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- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Current liabilities
Accounts payable $2,381,127
Accrued expenses 796,886
Accrued interest payable 201,759
Advance - Credit America, Inc., an affiliate 300,906
Current portion of indemnities 85,178
Current portion of long term debt 500,550
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Total current liabilities 4,266,406
Note payable, CreditAmerica Venture
Capital, Inc., an affiliate 900,000
Indemnities, less current portion 206,714
Long term debt, less current portion 1,353,357
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Total liabilities 6,726,477
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Contingencies -
Stockholders' equity
Preferred stock; 2,000,000 shares authorized; none issued -
Common stock, $.01 par value, 15,000,000 shares authorized;
2,655,000 shares issued and outstanding 26,550
Additional paid-in capital 6,317,873
Deficit (6,020,663)
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Total stockholders' equity 323,760
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$7,050,237
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See accompanying notes to financial statements.
3
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(unaudited)
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September September
Three months ended 28, 1996 30, 1995
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Net sales $5,130,230 $ 3,866,693
Cost of products sold 4,426,525 3,761,001
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Gross profit 703,705 105,692
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Operating and other expenses:
Selling, general and administrative 1,226,615 859,750
Interest 80,281 91,888
Other 9,158 176,250
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Total expenses 1,316,054 1,128,158
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Loss before other income (612,349) (1,022,466)
Other Income 4,820 28,226
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Net loss $ (607,529) $ (994,240)
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Net loss per common share $ (.22) $ (.58)
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Average number of common shares 2,724,048 1,715,449
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See accompanying notes to financial statements.
4
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MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(unaudited)
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September September
Three months ended 28, 1996 30, 1995
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Operating activities
Net loss $(607,529) $ (994,240)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Provision for depreciation 165,879 129,300
Provision for doubtful accounts 9,000 6,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 472,130 (562,544)
Increase in inventories (264,765) (416,467)
Decrease (increase) in prepaid and assets (228,525) 172,666
Increase in accounts payable, accrued
expenses and accrued interest payable 398,409 430,351
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Net cash used in provided by operating activities (55,401) (1,234,934)
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Investing activities:
Purchase of property and equipment (106,651) (23,600)
Purchase of marketable securities -- (2,109,218)
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Net cash used in investing activities (106,651) (2,132,818)
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Financing activities:
Net proceeds from borrowings -- 50,000
Principal payments on debt and indemnities (183,968) (1,371,492)
Issuance of common stock, net -- 5,325,947
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Net cash provided by (used in) financing activities (183,968) 4,004,455
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Net increase (decrease) in cash and cash equivalents (346,020) 636,703
Cash and cash equivalents, beginning of period 530,123 91,961
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Cash and cash equivalents, end of period $ 184,103 $ 728,664
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See accompanying notes to financial statements.
5
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Mako Marine International, Inc. (the Company) is engaged in the manufacture
and sale of offshore fishing and pleasure boats.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-QSB and Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (which include
only the normal recurring adjustments) considered necessary for a fair
presentation have been included. For further information, refer to the
audited financial statements as of June 29, 1996 and footnotes thereto filed
on form 10-KSB (SEC File No. 0-26618) filed with the Securities and Exchange
Commission. The results of operations for the three months ended September
28, 1996 are not necessarily indicative of the results of operations for the
full year.
NET LOSS PER COMMON SHARE
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Topic
4-D, stock issued and stock options granted have been included in the
calculation of weighted average shares of common stock outstanding for the
three months ended September 28, 1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
6
<PAGE>
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the current
financial statement presentation.
SUBSEQUENT EVENT
The Company has recently entered into a non-binding letter of intent with
Tracker Marine, L.P., a privately owned Springfield, Missouri based
manufacturer of fishing boats. The letter of intent contemplates the sale of
a controlling block of equity securities of the Company in exchange for a
significant infusion of cash and the contribution by Tracker Marine of
certain assets related to its saltwater fishing boat manufacturing business.
The proposed transaction is subject to certain conditions, including a due
diligence review by both parties and the execution and delivery of a
definitive agreement containing finalized terms.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED SEPTEMBER 28, 1996
VERSUS THREE MONTHS ENDED SEPTEMBER 30, 1995
NET SALES
The Company's net sales for the quarter ended September 28, 1996 (the first
quarter of the fiscal year ending June 28, 1997) increased by $1,263,537 (or
33%) to $5,130,230 from $3,866,693 for the corresponding quarter of the prior
fiscal year. This increase was primarily attributable to increased sales of
larger more expensive boats in the current quarter as compared to the
corresponding quarter of the prior year. Most importantly was a sale of
sixteen 26 foot commercial boats to a foreign country and the sale of the
first three Attack 333's, Mako's new flagship 33 foot center console with a
cuddy cabin. Sales were also improved by a revised sales program designed to
encourage early fall dealer buying and a general sales price increase
effective July 1, 1996.
COST OF PRODUCTS SOLD AND GROSS PROFIT
Gross profit for the quarter ended September 28, 1996 increased by $598,013
to $703,705 (13.7% of net sales) from $105,692 (2.7% of net sales) for the
corresponding quarter of the prior fiscal year. This increase is a result of:
(i) the spreading of fixed overhead costs over increased volumes; (ii)
efficiencies attained through the reduction of Mako's product line from 20 to
15 models; (iii) a newly implemented inventory control system (begun in May
1996); (iv) improved labor efficiencies through the introduction of Quality
Teams, whereby groups of employees are assigned certain models of boats to
build as a team; and (v) the sale of boats with a higher achieved average
gross margin than during the same quarter last year (such as the sixteen 26
foot commercial boats and the three Attack 333's). Management realizes that
in order to further reduce losses, gross margin must continue to increase.
OPERATING AND OTHER EXPENSES
Operating expenses for the quarter ended September 28, 1996 increased by
$366,865 (or 43%) to $1,226,615 from $859,750 for the corresponding quarter
of the prior fiscal year. Included among the reasons for the increase were:
(i) increased sales incentive programs of approximately $100,000 in the
current quarter as compared to the corresponding quarter of the prior year;
(ii) higher selling and administrative salaries of approximately $65,000 this
quarter as compared to the corresponding quarter of last year; (iii)
approximately $74,000 in increased warranty costs; (iv) increased
professional fees amounting to approximately $45,000 more this quarter than
the corresponding quarter in the prior year; and (v) approximately $25,000
higher freight costs relating to the sixteen 26 foot commercial boats that
were sold.
8
<PAGE>
Other expenses for the quarter ended September 28, 1996 decreased by $167,362
to $9,158 from $176,520 for the corresponding quarter of the prior year when
the Company expensed loan costs of approximately $170,000 associated with a
bridge loan.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's internally generated cash flow has not been
sufficient to finance its operations. During August 1995, the Company
completed an initial public offering (IPO) which generated net proceeds of
$5,307,423. The Company initially anticipated that the IPO proceeds, together
with existing resources and cash generated from future operations would be
sufficient to satisfy the anticipated cash requirements of the Company for 18
to 24 months from the date of the IPO.
During the quarter ended September 28, 1996, the Company sustained losses of
$607,529 and negative cash flow from operations of $55,401. In addition, the
Company used $183,968 for principal repayments of debt and $106,651 for
capital expenditures.
The use of cash to fund operating activities was a result of the Company's
net loss of $607,529, and an increase in inventories and prepaid assets (such
as insurance and boat show costs) of $264,765 and $228,525, respectively.
These uses of cash were offset by an increase in accounts payable of
$398,409, a decrease in accounts receivable of $472,130 and depreciation and
amortization totaling $165,879.
The Company's Independent Certified Public Accountant's Report for the year
ended June 29, 1996 states that the Company's continued losses and negative
cash flows "raise substantial doubt about the Company's ability to continue
as a going concern".
The Company continues to experience severe negative cash flow which, if not
remedied, will significantly restrict its ability to continue operations as
anticipated. The Company has recently entered into a non-binding letter of
intent with Tracker Marine, L.P., a privately owned Springfield, Missouri
based manufacturer of fishing boats. The letter of intent contemplates the
sale of a controlling block of equity securities of the Company in exchange
for a significant infusion of cash and the contribution by Tracker Marine of
certain assets related to its saltwater fishing boats manufacturing business.
9
<PAGE>
The proposed transaction is subject to certain conditions, including a due
diligence review by both parties and the execution and delivery of a
definitive agreement containing finalized terms.
Tracker Marine, with a dealer network of over 200 in the United States and
Canada, is one of the world's largest manufacturers of freshwater fishing and
pontoon boats. Tracker Marine is recognized as the innovator of the packaged
boat concept.
Management believes that if the transaction with Tracker Marine is completed,
the Company will have sufficient cash resources and capital to facilitate its
continued efforts to achieve profitable operations. The Company anticipates
reaching a definitive agreement with Tracker Marine by the end of November,
1996. There can be no assurances that the sale to Tracker Marine will be
concluded. If it is not, management would continue to seek either a business
combination or debt and equity financing. If all of the foregoing efforts
are unsuccessful, the Company would be required to sharply curtail or suspend
certain of its operations.
INCOME TAXES
At September 28, 1996, the Company has a net tax operating loss carryforward
of approximately $6,400,000 to offset future taxable income. Due to the
ownership change caused by the IPO, under Section 382 of the Internal Revenue
Code, the amount of net operating loss carryforwards originating prior to the
date of the IPO (approximately $2,500,000) which may be utilized in any one
year, is limited to approximately $219,000.
INFLATION
The Company does not believe that inflation has had a significant impact on
the results of operations for the periods presented. In previous years, the
Company believes it has been able to minimize the effects of inflation by
improving its purchasing efficiency, and to a lesser degree, increasing
selling prices of its products.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of"(SFAS 121). SFAS 121 requires losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the asset's carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
Based on current circumstances, the Statement has not had a material impact
on the financial condition, operations or cash flows of the Company.
10
<PAGE>
The Company has adopted SFAS No. 123 "Accounting for Stock-Based
Compensation". SFAS 123 allows companies to continue to account for their
stock option plans in accordance with APB Opinion 25 but encourages the
adoption of a new accounting method which requires the recognition of
compensation expense based on the estimated fair value of employee stock
options. Companies electing not to follow the new fair value based method
are required to provide expanded footnote disclosures, including pro forma
net income and earnings per share. Management has opted to continue to
account for its stock option plans in accordance with APB Opinion 25 and
provide supplemental disclosures as required by the SFAS 123 beginning in
fiscal 1997. SFAS 123 does not require these disclosures for interim periods
when complete financial statements are not presented.
11
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
12
<PAGE>
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
authorized.
Mako Marine International, Inc.
By: Douglas Baena
-------------------------------
Douglas Baena
Chief Executive Officer, Chairman
of the Board and President (Signing
as Principal Executive Officer and
Director)
Date: November 11, 1996
------------------------------
By : Lawrence Tierney
-------------------------------
Lawrence Tierney
Chief Financial Officer (signing as
Principal Financial Officer and
Principal Accounting Officer
Date: November 11, 1996
-------------------------------
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF FINANCIAL CONDITION AT SEPTEMBER 28, 1996 (UNAUDITED) AND
THE STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 28, 1996
(UNAUDITED) AND IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> SEP-28-1996
<CASH> 184103
<SECURITIES> 0
<RECEIVABLES> 833128
<ALLOWANCES> 61095
<INVENTORY> 2542760
<CURRENT-ASSETS> 3912569
<PP&E> 4207225
<DEPRECIATION> 1202338
<TOTAL-ASSETS> 7050237
<CURRENT-LIABILITIES> 4266406
<BONDS> 2460071
0
0
<COMMON> 26550
<OTHER-SE> 297210
<TOTAL-LIABILITY-AND-EQUITY> 7050237
<SALES> 5130230
<TOTAL-REVENUES> 5135050
<CGS> 4426525
<TOTAL-COSTS> 4426525
<OTHER-EXPENSES> 1226773
<LOSS-PROVISION> 9000
<INTEREST-EXPENSE> 80281
<INCOME-PRETAX> 607529
<INCOME-TAX> 0
<INCOME-CONTINUING> 607529
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 607529
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
