UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934.
For the fiscal year ended June 28, 1997 .
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934. For the transition period from ______________ to _________________.
Commission file number 0-26618 .
MAKO MARINE INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0501535
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4355 N.W. 128TH STREET MIAMI, FLORIDA 33054
(Address of principal executive offices)
(305) 685 - 6591
(Issuers telephone number)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock , $.01 par value
Redeemable Common Stock Purchase Warrants
(Title of each class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrants' knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [ X ]
Issuer's revenues for the most recent fiscal year $19,060,911.
As of September 24, 1997 the aggregate market value of the issuer's voting stock
held by non-affiliates of the issuer (1,725,000 shares of common stock) was
approximately $2,156,250.
As of November 5, 1997, the number of shares outstanding of the issuer's common
stock was 9,055,000.
<PAGE>
Item 7. FINANCIAL STATEMENTS
See the financial statements and supplementary data listed in the accompanying
Index to the Financial Statements on Page F-1 herein.
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
FINANCIAL STATEMENTS AS OF JUNE 28, 1997 AND JUNE 29, 1996
TOGETHER WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
INDEX
Index to Financial Statements F-1
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance Sheets F-3
Statements of Operations F-5
Statements of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-9
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Mako Marine International, Inc.:
We have audited the accompanying balance sheet of Mako Marine International,
Inc. as of June 28, 1997 and the related statements of operations, stockholders'
equity and cash flows for the period from June 30, 1996 to January 16, 1997 and
the period from January 17, 1997 to June 28, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
financial statements of Mako Marine International, Inc. as of and for the year
ended June 29, 1996, were audited by other auditors whose report dated August
21, 1996, included an explanatory paragraph with respect to the Company's
ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mako Marine International, Inc.
as of June 28, 1997 and the results of its operations and its cash flows for the
period from June 30, 1996 to January 16, 1997 and the period from January 17,
1997 to June 28, 1997 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses and negative
cash flows from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
Miami, Florida,
August 27, 1997.
F-2
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
BALANCE SHEETS
AS OF JUNE 28, 1997 AND JUNE 29, 1996
<TABLE>
<CAPTION>
New Basis Old Basis
ASSETS 1997 1996
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,763,918 $ 530,123
Accounts receivable, less allowance for doubtful
accounts of $119,556 and $58,279, respectively 1,038,437 1,253,163
Inventories 3,752,181 2,277,995
Prepaids and other assets 415,691 178,902
------------ ------------
Total current assets 6,970,227 4,240,183
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED 3,802,783 -
PROPERTY AND EQUIPMENT, net 4,270,155 3,064,115
OTHER ASSETS 534,596 139,027
------------ ------------
Total assets $ 15,577,761 $ 7,443,325
============ ============
</TABLE>
F-3
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
BALANCE SHEETS
AS OF JUNE 28, 1997 AND JUNE 29, 1996
(Continued)
<TABLE>
<CAPTION>
New Basis Old Basis
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 2,311,259 $ 2,256,428
Accrued expenses 1,740,010 541,199
Accrued interest payable 33,695 183,736
Due to affiliate 45,987 -
Note payable - CreditAmerica, Inc. 300,906 385,906
Note payable - CreditAmerica Venture Capital, Inc., 300,000 -
current portion
Indemnities - current portion 88,647 85,178
Long-term debt - current portion 409,386 500,550
------------ ------------
Total current liabilities 5,229,890 3,952,997
NOTE PAYABLE - CreditAmerica Venture Capital, Inc., 600,000 900,000
net of current portion
INDEMNITIES, net of current portion 138,495 227,142
LONG-TERM DEBT, net of current portion 1,297,232 1,431,897
------------ ------------
Total liabilities 7,265,617 6,512,036
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Preferred stock, 2,000,000 shares authorized; none issued - -
Common stock, $.01 par value, 15,000,000 shares
authorized; 9,055,000 and 2,655,000 shares issued 90,550 26,550
and outstanding, respectively
Additional paid-in capital 9,726,985 6,317,873
Accumulated deficit (1,505,391) (5,413,134)
------------ ------------
Total stockholder's equity 8,312,144 931,289
------------ ------------
Total liabilities and stockholders' equity $ 15,577,761 $ 7,443,325
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-4
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JUNE 30, 1996 TO JANUARY 16, 1997 AND
FOR THE PERIOD FROM JANUARY 17, 1997 TO JUNE 28, 1997 AND
FOR THE YEAR ENDED JUNE 29, 1996
<TABLE>
<CAPTION>
Old Basis New Basis Old Basis
June 30, 1996 January 17, Year Ended
to 1997 June 29, 1996
January 16, to June 28,
1997 1997
<S> <C> <C> <C>
NET SALES $ 9,767,501 $ 9,293,410 $ 19,141,970
COST OF SALES 9,121,285 8,623,935 17,817,667
------------- ------------- -------------
Gross profit 646,216 669,475 1,324,303
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,882,054 2,104,123 3,863,342
------------- ------------- -------------
Loss from operations (2,235,838) (1,434,648) (2,539,039)
------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest income - 51,791 68,495
Interest expense (205,427) (107,846) (312,175)
Other, net (91,165) (14,867) (173,056)
------------- ------------- -------------
Total other income (expense) (296,592) (70,922) (416,736)
------------- ------------- -------------
Net loss $ (2,532,430) $ (1,505,570) $ (2,955,775)
============= ============= =============
NET LOSS PER COMMON SHARE $(0.93) $(0.17) $(1.19)
====== ====== ======
WEIGHTED AVERAGE SHARES OF
2,724,049 9,055,000 2,484,662
========= ========= =========
COMMON STOCK OUTSTANDING
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JULY 1, 1995 TO JUNE 28, 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
BALANCE, July 1, 1995 930,000 $9,300 $1,027,700 $(2,457,359) $(1,420,359)
Net proceeds from
initial public offering 1,725,000 17,250 5,290,173 - 5,307,423
Net loss, year ended
June 29, 1996 - - - (2,955,775) (2,955,775)
BALANCE, June 29, 1996 2,655,000 26,550 6,317,873 (5,413,134) 931,289
(old basis)
Net loss, period ended
January 16, 1997 - - - (2,532,430) (2,532,430)
--------- ------ --------- ----------- -----------
BALANCE, January 16, 1997
(old basis) 2,655,000 26,550 6,317,873 (7,945,564) (1,601,141)
Compensation cost -
Stock options granted - - 63,600 - 63,600
Effect of acquisition by
Tracker Marine, L.P. 6,400,000 64,000 3,345,512 7,945,743 11,355,255
Net loss, period ended
June 28, 1997 - - - (1,505,570) (1,505,570)
--------- ------- ---------- ----------- ----------
BALANCE, June 28, 1997 9,055,000 $90,550 $9,726,985 $(1,505,391) $8,312,144
(new basis) ========= ======= ========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD JUNE 30, 1996 TO JANUARY 16, 1997 AND
FOR THE PERIOD JANUARY 17, 1997 TO JUNE 28, 1997 AND
FOR THE YEAR ENDED JUNE 29, 1996
<TABLE>
<CAPTION>
Old Basis New Basis Old Basis
June 30, 1996 to January 17, 1997 Year Ended
January 16, 1997 to June 28, 1997 June 29, 1996
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (2,532,430) $ (1,505,570) $(2,955,775)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation 382,613 413,278 562,359
Amortization of deferred loan cost - - 164,054
Amortization of excess of cost over
value of net assets acquired - 69,589 36,000
Provision for doubtful accounts 61,000 52,000 -
Compensation cost - stock options granted - 63,600 -
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 1,019,918 (772,198) (634,514)
Decrease (increase) in inventories 142,355 (748,237) (505,517)
Decrease (increase) in prepaids and
other assets (196,632) 62,434 262,676
Increase in accounts payable, accrued
expenses and accrued interest payable 1,043,702 179,167 592,798
------------- -------------- -----------
Net cash used in operating activities (79,474) (2,185,937) (2,477,919)
------------- -------------- ----------
INVESTING ACTIVITIES:
Purchases of property and equipment (125,809) (80,674) (645,117)
------------- -------------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings - - 280,000
Principal payments on debt and indemnities (320,098) (160,200) (2,226,225)
Issuance of common stock - 4,140,000 5,307,423
Increase in due to affiliate - 45,987 -
Decrease in restricted cash - - 200,000
------------- -------------- -------
Net cash provided by
financing activities (320,098) 4,025,787 3,561,198
-------------- -------------- ---------
F-7
<PAGE>
Net increase (decrease) in cash
and cash equivalents (525,381) 1,759,176 438,162
CASH AND CASH EQUIVALENTS,
beginning of period 530,123 4,742 91,961
------------- -------------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 4,742 $ 1,763,918 $530,123
============= ============== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid $ 167,028 $ 296,286 $270,000
============= ============== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-8
<PAGE>
MAKO MARINE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 28, 1997 AND JUNE 29, 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
On August 2, 1994, Mako Marine International, Inc., a Florida corporation (the
"Company") acquired the boat manufacturing assets of Mako Marine, Inc. ("Old
Mako") and assumed and incurred certain liabilities and indemnities from
CreditAmerica Venture Capital, Inc. ("CAVC"), an affiliate of Old Mako, in a
transaction accounted for as a purchase.
On January 16, 1997, Tracker Marine, L.P., a Missouri limited partnership
("Tracker"), acquired 930,000 shares of the Company's $.01 par value common
stock (the "Mako Common Stock") from CAVC (the "CAVC Shares"), which shares then
constituted 35% of the outstanding Mako Common Stock.
On January 16, 1997, the Company sold to Tracker 6,400,000 newly issued shares
(the "Mako Shares") of Mako Common Stock for a purchase price consisting of cash
in the amount of $4,140,000 and assets relating to the manufacture of saltwater
boats (the "Tracker Transaction").
Mako Marine International, Inc. is engaged in the manufacture and sale of
offshore fishing and pleasure boats under the brand names "Mako," "Seacraft" and
"Silver King." Sales are concentrated on the eastern coast of the United States,
with a particular emphasis on Florida. The balance of the Company's sales are
made in the Gulf Coast, Great Lakes Regions, West Coast and foreign markets.
Basis of Presentation
The Company has chosen the Saturday closest to June 30 as its year-end.
Cash and Cash Equivalents
The Company considers all highly liquid investments with purchase maturities of
three months or less to be cash equivalents. Interest-bearing cash balances as
of June 28, 1997 and June 29, 1996 were $1,761,918 and $526,105, respectively.
Inventories
Inventories are stated at the lower of cost or market, with cost being
determined using the first-in, first-out ("FIFO") method.
Excess of Cost Over Fair Value of Net Assets Acquired
The excess of cost over fair value of net assets acquired ("goodwill") is being
amortized on a straight line basis over 30 years. Amortization expense was
$69,589 for the period from January 17, 1997 to June 28, 1997.
F-9
<PAGE>
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets to be Disposed Of". SFAS 121 establishes accounting
standards for recording the impairment of long-lived assets, certain
identifiable intangibles and goodwill. The Company adopted the provisions of
SFAS No. 121 in fiscal 1997. Accordingly, Mako management will evaluate the
recoverability of the carrying value of goodwill on a periodic basis. Management
will evaluate the results of operations and the cash flows from operations when
assessing the recoverability of the carrying value of goodwill. Accordingly,
when events or circumstances indicate that the recoverability of the goodwill
could be impaired, management will prepare estimates and projections of the cash
flows to be produced by operations. If the sum of the expected future
undiscounted cash flows from operations is less than the carrying value of the
goodwill, an impairment loss will be recognized in that period. The impairment
loss recognized will be the goodwill over the discounted anticipated future
operations cash flows. Adoption of SFAS No. 121 did not impact the Company's
results of operations or its financial position.
Property and Equipment, net
Property and equipment is stated on the cost basis. Depreciation is computed on
the straight-line method over the estimated useful lives of the respective
assets.
Revenue Recognition
Revenue from the sale of boats is recognized upon shipment.
Net Loss per Common Share
Loss per common share and common share equivalent is computed on the basis of
the weighted average number of common shares outstanding less preferred stock
dividends. As the Company is currently in a loss position, the effect of
convertible preferred stock and stock options are not considered in computing
loss per common share as the effect would be anti-dilutive.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes
pursuant SFAS No. 109, "Accounting for Income Taxes". Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using enacted rates that will be in effect when the differences are expected to
reverse. (See Note 8).
Warranty Reserves
The Company furnishes warranties on its manufactured products for periods
ranging from one to twelve years and provides for warranty related expenses and
accruals as a percentage of net sales based on historical experience. Accrued
expenses in the accompanying balance sheets includes $500,000 and $240,000 of
accrued warranty expense at June 28, 1997 and June 29, 1996, respectively.
Advertising
Advertising expenses are charged to operations during the year in which they are
incurred. Advertising expenses for the period from June 30, 1996 to January 16,
1997 was $331,900, for the period from January 17, 1997 to June 28, 1997 was
$993,100 and for the year ended June 29, 1996 was $1,036,000.
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
F-10
<PAGE>
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
financial statement presentation.
Fair Value of Financial Instruments
SFAS No. 107, "Disclosure About Fair Value of Financial Instruments" requires
companies to disclose the fair value of financial instruments. Management
believes that the carrying values of its financial instruments approximates
their fair values and any differences which may exist between the carrying
values and fair values are not material.
Stock-Based Compensation
Beginning in fiscal 1997, the Company implemented the provisions of SFAS 123
"Accounting for Stock-Based Compensation" in accounting for stock-based
transactions with nonemployees and, accordingly, records compensation expense in
the statement of operations for such transactions. The Company continues to
apply the provisions of Accounting Principal Board ("APB") Opinion No. 25 for
transactions with employees, as permitted by SFAS 123.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share" effective for fiscal years ending after December 15, 1997.
SFAS No. 128 simplifies the calculation of earnings per share to measure the
performance of an entity over a reporting period for both basic earnings per
share and diluted earnings per share. Due to the reported net losses, SFAS No.
128 would have no impact on the Company's reported loss per share for the years
ended June 28, 1997 and June 29, 1996.
2. GOING CONCERN AND MANAGEMENT'S PLANS
The Company's financial statements as of and for the period ended June 28, 1997
have been prepared on a going concern basis which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company sustained net losses of $2,532,430 for the period from
June 30, 1996 to January 16, 1997, $1,505,570 for the period from January 17,
1997 to June 28, 1997 and $2,955,775 for the year ended June 29, 1996, and
negative cash flows from operations of $79,474 for the period from June 30, 1996
to January 16, 1997, $2,185,937 for the period from January 17, 1997 to June 28,
1997 and $2,477,919 for the year ended June 29, 1996. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
Management recognizes the potential risk associated with continued losses and
continued negative cash flows from operations.
Although management has implemented certain actions designed to increase
operating cash flow (such as, for example, the achievement of reduced engine
costs from its principal vendor), the magnitude of the losses incurred during
fiscal years 1997 and 1996, the resulting operational cash flow deficiencies and
the expected continuation thereof raise substantial doubt as to the Company's
ability to generate sufficient cash from operations and fund its operational
cash requirements for fiscal 1998.
F-11
<PAGE>
It is expected that Mako will continue to generate negative cash flows from
operations throughout fiscal 1998, and that substantial infusions of working
capital will be required during fiscal 1998. In view of its current financial
condition, it is unlikely that the Company will be able to obtain such working
capital from traditional third party sources. The logical and perhaps only
source for such funding will be Tracker.
Tracker has indicated that it currently has no intention of providing such
funding to the Company so long as there remain outstanding shares of Mako Common
Stock held by persons or entities other than Tracker and warrants and options to
purchase shares of Mako Common Stock. Tracker has announced a merger transaction
with the Company pursuant to which Tracker would acquire the entire equity
interest in the Company not already owned by Tracker (the "Merger Transaction").
Upon completion of the Merger Transaction, the Company would become a wholly
owned subsidiary of Tracker.
If the proposed Merger Transaction is successfully consummated, management
believes that Tracker possess the means to implement improvements needed to
return the Company to profitability within a reasonable time-frame. If the
proposed Merger Transaction is not consummated, the Company may be unable to
continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
3. STOCKHOLDERS' EQUITY
On January 16, 1997, Tracker acquired control of the Company through its
purchase of 930,000 shares of Mako Common Stock from CAVC for a net purchase
price of $1,310,000 in cash and the payment of certain obligations of the
Company amounting to $550,000. As a result of this purchase, Tracker became the
owner of 35% of the then outstanding shares of Mako. Tracker then acquired the
6,400,000 newly issued Mako Shares. As a result of the purchase of these shares,
Tracker acquired an additional 45.9% of the outstanding shares of the Company.
Upon acquisition of the newly issued Mako Shares, Tracker obtained ownership
control of 80.9% of the outstanding shares of the Company. The purchase price
for the Mako Shares was approximately $7,640,000, which consisted of the
contribution to the Company of cash in the amount of $4,140,000, the
contribution of assets relating to the manufacture of saltwater boats, and the
satisfaction of certain of the Company's payables in the amount of $550,000. The
total value ascribed to the assets was $2,194,000. Included in the assets
contributed by Tracker were its Punta Gorda, Florida, manufacturing facility and
the equipment and other physical property used therein for the manufacture of
saltwater fishing boats. Also included in the assets contributed to Mako were
Tracker's "SeaCraft" and "Silver King" brand names and Tracker's exclusive
rights over a five-year period to advertise off-shore boats in a catalog
published by an affiliate of Tracker. The Tracker Transaction was accounted for
as a purchase. The total purchase of $8,194,000 has been pushed down and
allocated to the assets and liabilities of the Company based upon the fair
values on the date of the Tracker Transaction. As a result of the Tracker
Transaction, a new basis of accounting has been established. The allocation of
the purchase price as of January 17, 1997 is as follows:
Current assets $ 7,980,539
Property, plant and equipment 5,100,781
Other assets 960
Goodwill 3,872,371
Current liabilities (4,871,812)
Noncurrent liabilities (2,328,850)
F-12
<PAGE>
All manufacturing activities have been consolidated in the Company's Miami,
Florida facility. Accordingly, the carrying value of the Punta Gorda, Florida
facility of $496,861 is included in other assets in the accompanying balance
sheet as of June 28, 1997 as such facilities are no longer used in operations
and are being held for sale.
Under the terms of the Agreement pursuant to which the Company sold the Mako
Shares to Tracker (the "Stock Purchase Agreement"), the Company is required to
issue to Tracker additional shares of Mako Common Stock if, at any time prior to
the expiration of the ninetieth day following August 23, 2000, the market price
of the Mako Common Stock reaches certain levels during a period of ten
consecutive trading days.
Also, the Stock Purchase Agreement provides for an option (the "Anti-Dilution
Option") on the part of Tracker to acquire additional shares of Mako Common
Stock at $1.50 per share, if and to the extent that options and warrants to
acquire shares of Mako Common Stock, which were outstanding on the closing date
of the sale of the Mako Shares to Tracker, are exercised in the future.
The following unaudited pro forma information presents a summary of operations
as if the Tracker Transaction had occurred on July 1, 1995:
For the Year Ended
June 28, 1997 June 29, 1996
------------- -------------
Net sales $20,059,778 $ 20,413,657
Net loss $(4,595,635) $ (3,751,938)
Loss per share $(0.51) $(0.41)
The unaudited pro forma results have been prepared for comparative purposes only
and include certain adjustments, such as amortization of goodwill. They do not
purport to be indicative of the results of operations which actually would have
resulted had the Tracker Transaction occurred on July 1, 1995.
On August 23, 1995, the Company successfully completed its Initial Public
Offering ("IPO") for 1,725,000 units (consisting of one share of common stock
and one stock warrant) which generated net proceeds of $5,307,423, net of
expenses of $1,592,577.
4. INVENTORIES
As of June 28, 1997 and June 29, 1996 inventories by major classification are as
follows:
1997 1996
---- ----
Finished products $ 389,078 $ 607,986
Work-in-process 1,177,233 560,973
Raw materials and supplies 2,185,870 1,109,036
$ 3,752,181 $ 2,277,995
============= ============
F-13
<PAGE>
5. PROPERTY AND EQUIPMENT, net
<TABLE>
As of June 28, 1997 and June 29, 1996, property and equipment by major
classification is as follows:
<CAPTION>
Useful Life
in Years 1997 1996
-------- ---- ----
<S> <C> <C> <C>
Leasehold improvements 5 $ 19,509 $ -
Furniture and fixtures 5 290,828 264,606
Machinery and equipment 5 896,980 732,085
Molds 5-7 3,722,095 3,055,669
Vehicles and trailers 5 94,455 48,214
------------- -------------
5,023,867 4,100,574
Less- Accumulated depreciation 753,712 1,036,459
------------- -------------
$ 4,270,155 $ 3,064,115
============= =============
</TABLE>
6. DEBT
The Company's $900,000 note payable to CAVC bears interest at an annual rate of
9% and is payable in 24 equal monthly installments, commencing November 1997.
The obligation is collateralized by accounts receivable, inventory, property and
equipment and intangibles and is partially subordinate to the note payable to
CreditAmerica, Inc., note payable to bank and to supplier discussed below.
The note payable to CreditAmerica, Inc. (an entity controlled by an individual
who was an officer of the Company and a stockholder of CAVC) amounting to
$300,906 bears interest at an annual rate of 9% and is payable on demand.
Accrued interest is due on demand. The obligation is collateralized by accounts
receivable and inventories.
As of June 28, 1997 and June 29, 1996, long-term debt consists of the following:
1997 1996
---- ----
Note payable to bank bearing interest
at 9% $ 1,053,090 $1,315,744
Non-interest bearing note payable to
supplier, interest imputed at 9.5% 653,528 616,703
----------- ----------
1,706,618 1,932,447
Less- Current portion 409,386 500,550
----------- ----------
$ 1,297,232 $1,431,897
=========== ==========
The note payable to bank is payable in quarterly installments of $93,413
consisting of principal and interest with a balloon payment due in June 1999.
The note is collateralized by substantially all assets, and is partially
subordinated to the note payable to Credit America, Inc. and partially
subordinated to the note payable to CAVC.
The noninterest bearing note payable to supplier is payable from rebates on
purchases of marine engines from the supplier through 2008 or by a combination
of rebates and cash payments through 2008 in the event that certain minimum
engine purchase requirements are not met. The note is collateralized by the
marine engine inventory and patents and trademarks.
F-14
<PAGE>
As of June 28, 1997, maturities of long-term debt are as follows:
Year Ending
1998 $ 409,386
1999 455,726
2000 580,094
2001 130,706
2002 130,706
------------
$ 1,706,618
7. INDEMNITIES
In connection with the acquisition of substantially all of the business assets
of Old Mako by the Company and the Company's assumption of certain liabilities
as discussed in Note 1, the Company indemnified the former principal stockholder
of Old Mako against a Small Business Administration ("SBA") loan in the amount
of $387,488 and certain payroll tax liabilities limited to $342,759. The SBA
loan bears interest at an annual rate of 4% and is payable in monthly
installments of $8,010 including interest through November 1999. The payroll tax
liability was paid during the year ended June 29, 1996. The balance due on the
indemnity was $227,142 and $312,320 at June 28, 1997 and June 29, 1996,
respectively.
8. INCOME TAXES
As of June 28, 1997 and June 29, 1996, the tax effects of temporary differences
that give rise to deferred tax assets and liabilities are as follows:
1997 1996
---- ----
Allowance for doubtful accounts $ 45,000 $ 22,000
Inventory reserves 75,000 -
Accrued expenses 156,000 30,000
Prepaid expenses (156,000) -
------------- --------
Current deferred tax asset, net 120,000 52,000
------------- --------
Net operating loss carryforwards 3,585,000 2,155,000
Stock options 24,000 -
Warranty reserves 188,000 90,000
Depreciation (313,000) (272,000)
Goodwill (27,000) -
------------- --------
Noncurrent deferred tax asset, net 3,457,000 1,973,000
------------- ---------
Valuation allowance (3,577,000) (2,025,000)
------------- ----------
Net deferred taxes $ - $ -
============= ==========
F-15
<PAGE>
At June 28, 1997, the Company has net tax operating loss carryforwards of
approximately $9,530,000 to offset future taxable income. The net operating loss
carryforwards will expire as follows:
Fiscal Year Ending
2010 $ 2,500,000
2011 3,300,000
2012 3,730,000
Under Section 382 of the Internal Revenue Code, ownership changes caused by the
IPO and the Tracker Stock Purchase, limit the utilization of net operating loss
carryforwards originating prior to the Tracker Stock Purchase. The amount of net
operating loss carryforwards which may be utilized in any one year, is limited
to approximately $800,000 plus the carryforward of any unused net operating loss
limitations from prior years.
9. COMMITMENTS AND CONTINGENCIES
The Company leases its plant and office facilities from the former principal
stockholder of Old Mako under an operating lease, requiring monthly payments
aggregating $542,400 annually and taxes associated with the property. The lease,
which expires in July 2001, provides for two seven-year renewal options. Rental
expense under the operating lease aggregated $328,800 for the period from June
30, 1996 to January 16, 1997, $278,200 for the period from January 17, 1997 to
June 28, 1997 and $578,000, for the year ended June 29, 1996.
The Company sells its boats to independent dealers who typically finance the
purchases through "floor plan" financing arrangements with lenders. In
connection with the floor plan financing with certain dealers, the Company
guarantees directly to lenders that they will repurchase boats with unencumbered
titles which are in unused condition if the dealer defaults on its obligation to
repay the loan. As of June 28, 1997, the Company was contingently liable for
approximately $5,700,000 under the terms of these agreements. During the years
ended June 28, 1997 and June 29, 1996, returns were insignificant. The Company
pays certain floor plan fees as part of this arrangement. Floor plan fees
totaled $306,000 for the period from June 30, 1996 to January 16, 1997, $65,000
for the period from January 17 to June 28, 1997 and $246,000 for the year ended
June 29, 1996.
The Company has been named as a defendant in several lawsuits involving the
operations of Old Mako. They are as follows: (i) On or about September 14, 1994,
an action was commenced in St. Lucie County, Florida seeking recovery of
$209,541 for legal services performed on behalf of Old Mako, plus costs and
prejudgment interest. The amended complaint initially served on the Company
seeks the successor liability of the Company for the debt and an avoidance of
the transfer of assets from Old Mako to the Company. A second amended complaint
filed on or about October 30, 1996 and a third amended complaint filed on or
about April 17, 1997 restate essentially the same claims against the Company.
The litigation is in the discovery stage. (ii) On or about December 8, 1994, an
action was commenced in Dade County, Florida seeking recovery of the sum of
$166,603, plus interest and costs. The Complaint alleged that the Company
wrongfully and intentionally exercised dominion and control, and diverted to its
own use, the raw materials sold to Old Mako and subject to plaintiff's security
interest. The Company filed a motion to dismiss the complaint, and the complaint
was dismissed. An amended complaint was filed and the Company has filed a motion
to dismiss the amended complaint. The amended complaint alleges essentially the
same claims against the Company as the initial complaint. The Court has not yet
ruled on the motion to dismiss which has been pending since July 1995.
Litigation is in the discovery stage. (iii) On or about August 2, 1995, an
amended impleader complaint was filed in Dade County, Florida, seeking an
aggregated recovery of foreign judgments "in excess" of $400,000, attorney fees
and costs ("First Suit"). At the same time an independent action was also filed
in Dade County, Florida, with a virtually identical complaint ("Second Suit").
It is expected that these lawsuits will be consolidated or the Second Suit
F-16
<PAGE>
dismissed. The six count complaints allege that the manner in which the Company
acquired the assets of Old Mako resulted in a de facto merger or in a fraudulent
transfer by Old Mako. The plaintiffs alternatively seek to void the transfer of
the assets of Old Mako to the Company or the successor liability of the Company
for the plaintiffs' foreign judgments against Old Mako. The Company has filed a
motion for summary judgment in the First Suit asserting that no de facto merger
occurred and that the assets were rightfully transferred. The Court entered
summary judgment in favor of the Company with respect to the de facto merger
liability claim, and deferred ruling upon the fraudulent transfer claims until a
future hearing. Litigation is in the discovery stage. No significant activity
has taken place since September 1996. (iv) In June 1996, the Company was named
as a defendant in a suit alleging that the Company breached a sales
representation agreement between the plaintiffs and Old Mako which was expressly
or impliedly assumed by the Company. The complaint seeks relief of $501,800. The
Company filed a motion for summary judgment in April 1997 which was denied by
the Court in July 1997. Litigation is in the discovery stage. The Company has
denied liability in all of the aforementioned actions and believes that they are
defensible. CAVC has agreed to indemnify the Company for any losses and expenses
in excess of $150,000 arising out of claims against the Company for liabilities
of Old Mako that were not assumed in August 1994, except legal fees and expenses
incurred in the lawsuits described in items (i) and (ii) above. CAVC
acknowledges that the lawsuits described in (i) , (ii) and (iii) above are
within the scope of the indemnity and the Company has no reason to believe the
CAVC will not fulfill its obligations under such indemnity. While there can be
no assurance as to the ultimate outcome of these actions, the Company believes
that such actions will not have a material adverse effect on the Company's
financial position or operations.
In July 1996, an action was commenced in Palm Beach County, Florida against the
Company seeking an unspecified amount in damages. The Plaintiff alleges that the
Company breached the 1996 model year dealer agreement by appointing another
dealer within its territory, seeks declaratory judgment that the Florida
Deceptive and Unfair Trade Practices Act was violated by the appointment of a
new dealer in its territory, that the appointment of a new dealer in its
territory interfered with its business relationship with its customers, and that
the new dealer and Mako conspired to tortiuously interfere with its business
relationship with its customers and to unfairly compete. A first amended
complaint filed in September 1996 restates essentially the same allegations.
Litigation is in the discovery stage.
In August 1997, a purported class action lawsuit was commenced in the United
States District Court, Southern District of Florida against the Company and
other defendants seeking an injunction to prevent the Merger Transaction.
Alternatively, the plaintiff seeks to rescind the transaction if consummated, or
an accounting and damages due to the Merger Transaction. The Plaintiff class
generally alleges that the defendants have violated fiduciary obligations owed
to the plaintiff class in pursuing the Merger Transaction. The Company and
certain other defendants in this lawsuit have filed a Motion to Dismiss for,
among other things, the failure to state a cause of action
On May 27, 1997, the Company entered into an employment agreement with its
President. The agreement expires three years from the date of the agreement.
Pursuant to the employment agreement, the President is entitled to receive a
salary totaling $175,000 annually. In addition, the President is entitled to
receive an annual performance bonus of up to 60% of his base salary annually.
Pursuant to this employment agreement, the Company granted its President a five
year option (the "Additional Option") to acquire up to 35,000 shares of Mako
Common Stock at an option price of $2.125 per share (being equal to the value of
the Mako Common Stock at the close of business on the day preceding the grant).
F-17
<PAGE>
10. WARRANTS AND STOCK OPTION PLANS
Warrants and Options Issued to Nonemployees
In connection with the Company's IPO, 1,725,000 redeemable common stock purchase
warrants were issued to the public. Each warrant entitles the holder to purchase
one share of common stock for $4.00 per share during the four-year period
commencing August 23, 1996. Additionally, 1,375,000 redeemable common stock
purchase warrants were issued to certain persons upon exchange of warrants
received in connection with prior financing. These warrants are exercisable at
$4.00 per share commencing on August 23, 1996. With the IPO underwriter's prior
consent, the Company may redeem the foregoing warrants at a price of $.01 per
warrant, at any time once they become exercisable upon not less than 30 days
prior written notice if the last sale price of the Common Stock has been at
least 175% of the exercise price of the warrants on 20 of the 30 consecutive
trading days ending on the third day prior to the date on which the notice is
given.
In connection with the IPO, the Company sold to its underwriter for a nominal
consideration a unit purchase option, consisting of the right to purchase
150,000 of the IPO units. The unit purchase option is exercisable at a per unit
price of $5.76 for a period of four years commencing August 23, 1996.
On November 10, 1995, 5,000 warrants were granted to consultants exercisable at
$4.00 per share commencing on November 10, 1996 for a period of five years.
In connection with the acquisition of the Company, warrants to purchase 70,000
shares of the Company's common stock were issued to a bank. The warrants are
exercisable at prices ranging from $.43 to $.71 per share over the period
commencing August 31, 1997 and ending six months after the Company has satisfied
all requirements of the $1,500,000 note payable to the bank.
In connection with the Tracker Transaction, the Company issued the Anti-Dilution
option to Tracker. In connection with the hiring of its President, the Company
granted the Additional Option.
In fiscal 1997, the Company recorded compensation expense of $63,600 related to
41,500 stock options granted to nonemployees of the Company.
Fixed Stock Option Plans
Pursuant to the Company's 1995 Stock Option Plan, a total of 225,000 shares of
common stock have been reserved for issuance at prices to be determined by the
Stock Option Committee at the date of issuance.
F-18
<PAGE>
The following is a summary of activity under the 1995 Stock Option Plan:
Number of Weighted Average
Shares Price Per Share
------ ---------------
Outstanding at July 1, 1995 40,000 $ 3.06
Granted 121,000 3.68
Exercised - -
Canceled (9,600) 4.00
---------
Outstanding at June 29, 1996 151,400 3.50
Granted -
Exercised -
Canceled (6,000)
Outstanding at January 16, 1997 146,400
Granted 35,000 2.10
Exercised - -
Canceled - 4.00
---------
Outstanding at June 28, 1997 180,400 3.21
=========
Options exercisable at June 28, 1997 136,400 3.31
=========
Shares of common stock available for
future grants at June 28, 1997 44,600
=========
The following table summarizes information about fixed stock options outstanding
at June 28, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Number Number
Outstanding Remaining Weighted Exercisable Weighted
as of Contractual Average as of Average
Exercise Prices June 28, 1997 Life (Years) Exercise Price June 28, 1997 Exercise Price
- --------------- ------------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1.00 - 2.50 75,000 3.82 $2.01 54,667 $ 2.16
4.00 - 4.25 105,400 3.53 4.06 81,733 4.08
</TABLE>
The Company applies APB Opinion 25 and related interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for its fixed
stock option plans. Had compensation cost for the Company's stock been based on
fair value at the grant dates for awards under those plans consistent with FASB
Statement 123, the Company's net loss and net loss per share for the years ended
June 28, 1997 and June 29, 1996, on a pro forma basis, would have been as
follows:
F-19
<PAGE>
1997 1996
---- ----
Net loss As reported $4,038,001 $ 2,955,775
Proforma 4,081,927 3,056,803
Loss per share As reported $0.73 $1.19
Proforma $0.74 $1.23
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: expected volatility 44%, risk-free interest rates ranging from
5.34% to 6.63%, expected dividends of $0 and expected lives of 5 years.
F-20
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MAKO MARINE INTERNATIONAL, INC.
(Registrant)
By: /s/ Kenneth Burroughs
Kenneth Burroughs
Chief Executive Officer, Chairman of the Board
Date: November 6, 1997
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Kenneth Burroughs
Kenneth Burroughs
Chief Executive Officer, Chairman
of the Board (Signing as Principal
Executive Officer and Director)
Date: November 6, 1997
By: /s/ Stephen W. Smith*
Stephen W. Smith
Chief Financial Officer (signing as
Principal Financial Officer and
Principal Accounting Officer
Date: November 6, 1997
By:
Joseph Messina, Director
Date:
<PAGE>
By: /s/ Joe C. Greene*
Joe C. Greene, Director
Date: November 6, 1997
By: /s/ Bruce S. Foerster*
Bruce S. Foerster, Director
Date: November 6, 1997
By: /s/ Larry Mueller*
Larry Mueller, Director
Date: November 6, 1997
By: /s/ Susie Henry*
Susie Henry, Director
Date: November 6, 1997
By:
Doug Baena, Director
Date:
*By: /s/ Kenneth Burroughs
Kenneth Burroughs, attorney-in-fact
