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 27, 1997 .
[ ] Transition report under Section 13 or 15(d) of the Securities 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 (IRS Employer
of incorporation or organization) Identification No.)
4355 NW 128TH STREET MIAMI, FLORIDA 33054
(Address of principal executive offices)
(305) 685-6591
(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, 1997, there were 9,055,000 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 (unaudited)
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.................... 8-9
Part II. Other Information
Item 5. Other Information...................................... 10
Item 6. Exhibits and Reports on Form 8-K....................... 10
Signatures...................................................... 11
2
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<TABLE>
Mako Marine International, Inc.
Balance Sheet
(unaudited)
<CAPTION>
September 27, 1997
- -------------------------------------------------------------------------------------------------
<S> <C>
Assets
Current assets
Cash $ 438,461
Accounts receivable, less allowance for
doubtful accounts of $134,840 1,303,864
Inventories 3,165,855
Prepaid and other assets 698,776
- -------------------------------------------------------------------------------------------------
Total current assets 5,606,956
Property and equipment, net 4,146,942
Goodwill 3,771,070
Other assets 535,396
- -------------------------------------------------------------------------------------------------
Total assets $14,060,364
=================================================================================================
Liabilities and Stockholders' Equity
Liabilities
Current liabilities
Accounts payable $ 1,929,597
Accrued expenses 1,530,686
Accrued interest payable 37,575
Due to Tracker Marine, an affiliate 223,691
Advance - Credit America, Inc., an affiliate 300,906
Current portion of note payable, CreditAmerica
Venture Capital, Inc., an affiliate 412,500
Current portion of indemnities 88,647
Current portion of long-term debt 409,386
- -------------------------------------------------------------------------------------------------
Total current liabilities 4,932,988
Note payable, CreditAmerica Venture
Capital, Inc., an affiliate, less current portion 487,500
Indemnities, less current portion 109,339
Long-term debt, less current portion 1,119,427
- -------------------------------------------------------------------------------------------------
Total liabilities 6,649,254
- -------------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock; 2,000,000 shares -
authorized; none issued
Common stock, $.01 par value, 15,000,000
shares authorized; 9,055,000
shares issued and outstanding 90,550
Additional paid-in capital 9,726,985
Accumulated deficit (2,406,425)
- -------------------------------------------------------------------------------------------------
Total stockholders' equity 7,411,110
- -------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $14,060,364
=================================================================================================
</TABLE>
See accompanying notes to financial statements.
3
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<TABLE>
Mako Marine International, Inc.
Statements of Operations
(unaudited)
<CAPTION>
September September
Three Months Ended 27, 1997 28, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 5,613,663 $ 4,829,853
Cost of products sold 5,429,703 4,426,525
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 183,960 403,328
Selling, general and administrative expenses 1,020,069 926,238
- ----------------------------------------------------------------------------------------------------------------------
Loss from operations (836,109) (522,910)
Interest income 13,749 2,986
Interest expense (54,568) (80,282)
Other, net (24,106) (7,323)
- ----------------------------------------------------------------------------------------------------------------------
Total other income (expense) (64,925) (84,619)
- ----------------------------------------------------------------------------------------------------------------------
Net loss $ (901,034) $ (607,529)
======================================================================================================================
Net loss per common share $ (.10) $ (.22)
======================================================================================================================
Average number of common shares 9,055,000 2,724,048
======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
4
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<TABLE>
Mako Marine International, Inc.
Statements of Operations
(unaudited)
<CAPTION>
September September
Three Months Ended 29, 1997 28, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net loss $ (901,034) $ (607,529)
Adjustment to reconcile net loss to net cash
used in operating activities:
Provision for depreciation 250,982 165,879
Provision for amortization 31,713 -
Provision for doubtful accounts 15,000 9,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (280,427) 472,130
Decrease (increase) in inventories 586,326 (264,765)
Increase in prepaids and assets (283,885) (228,525)
Increase (decrease) in accounts payable
and accrued expenses (587,106) 398,409
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (1,168,431) (55,401)
======================================================================================================================
Investing activities:
Purchase of property and equipment (127,769) (106,651)
======================================================================================================================
Net cash used in investing activities (127,769) (106,651)
- ----------------------------------------------------------------------------------------------------------------------
Financing activities:
Increase in due to affiliate 177,704 -
Principal payments on debt and indemnities (206,961) (183,968)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (29,257) (183,968)
- ----------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1,325,457) (346,020)
Cash and cash equivalents, beginning of
period 1,763,918 530,123
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 438,461 $ 184,103
======================================================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Mako Marine International, Inc.
Notes to Financial Statements
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. 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, which shares then constituted 35% of
the outstanding Mako Common stock, followed by Tracker's acquisition from the
company of 6,400,000 newly issued shares of Mako Common Stock for purchase price
consisting of cash in the amount of $4,140,000 and certain assets relating to
the manufacture of saltwater boats.
Mako Marine International, Inc. is engaged in the manufacture and sale of
offshore fishing and pleasure boats under the names "Mako," "Seacraft" and
"SilverKing." Sales are concentrated on the eastern coast of the United States,
with 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.
Merger Transaction
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 or any of its subsidiaries (the "Merger Transaction"). Upon
completion of the Merger Transaction, the Company would become a wholly owned
subsidiary of Tracker. The Merger Transaction will be accounted for under the
purchase method.
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 requires by generally accepted
accounting principles for complete financial statements. In the opinion of
6
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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
28, 1997 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 27, 1997 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 27, 1997.
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.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
financial statement presentation.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report contains certain forward-looking statements within the meaning of
Federal securities laws which, while reflective of management's beliefs or
expectations, involve certain risks and uncertainties, many of which are beyond
the control of the Company. Accordingly, the Company's actual results and the
timing of certain events could differ material from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, the significant losses incurred by the Company during the first
three months of fiscal 1998, those factors discussed in the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" below and the "Risk Factors" contained in the Company's prospectus
dated August 23, 1995.
Results of Operations for Three Months Ended September 27, 1997
Versus Three Months Ended September 28, 1996
Net Sales
The Company's net sales for the quarter ended September 27, 1997 (the first
quarter of the fiscal year ending June 27, 1998) increased by $783,810 (or
16.2%) to $5,613,663 from $4,829,853 for the corresponding quarter of the prior
fiscal year. This increase was attributable to the addition of Seacraft and
SilverKing sales amounting to approximately $936,000.
Cost of Products Sold and Gross Profit
Gross profit for the quarter ended September 27, 1997 decreased by $219,368 to
$183,960 (3.3% of sales) from $403,328 (8.6% of sales) for the corresponding
quarter of the prior fiscal year. This decrease was primarily due to a smaller
standard gross profit model mix, to a lesser extent continuing labor
inefficiencies due in part from the start-up of the Seacraft and SilverKing
lines, and offset in part by a reduced cost of engines and certain materials.
Operating Expenses
Selling, general and administrative expenses for the quarter ended March 29,
1997 increased by $93,831 (or 10.1%) to $1,020,069 from $926,238 for the
corresponding quarter of the prior fiscal year. This increase is due primarily
to increased advertising costs, primarily for the Seacraft and SilverKing lines.
8
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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.
On January 16, 1997, the Company sold the Mako Shares to Tracker for a purchase
price consisting of cash, in the amount of $4,140,000 and certain assets of
Tracker relating to the manufacture and sale of saltwater boats.
During the three months ended September 27, 1997, the Company used $1,168,431
for operating activities, $127,769 for investing activities, and $29,257 for
financing activities.
The cash used by operating activities resulted from the Company's net loss of
$901,034, and an increase in accounts receivable and prepaid assets (such as
insurance and boat show costs) of $280,427 and $283,885, respectively, and a
decrease in accounts payable of $587,106. Cash was provided by a decrease in
inventory of $586,326 (also an increase in the allowance for doubtful accounts
of $15,000) and depreciation and amortization totaling $282,695.
The cash used by financing activities resulted from the purchase of fixed assets
of $127,769.
The cash used by financing activities resulted from principal payments on debt
and indemnities totaling $206,961, offset by an increase in a due to affiliate
of $177,704.
It is expected that the Company will continue to generate negative operating
cash flow throughout 1998 and that substantial infusions of working capital will
be required during the remainder of fiscal 1998. In view of its current
financial condition, the Company believes that it is unlikely that the Company
will be able to obtain such working capital from traditional third party
sources, and that the logical and perhaps only source of such funding will be
Tracker. Tracker has indicated to the Company (and in an Schedule 13E-3 filed
with the SEC in connection with the Merger Transaction) that Tracker would be
unwilling to provide such funding so long as any securities of the Company is
owned by persons other than Tracker or its affiliates. The Company believes that
unless it is able to obtain additional funding of its operations, substantial
curtailment or suspension of certain of the Company's operations will be
required. The Company believes that such curtailment and/or suspension would
have a material impact upon the ability of the Company to compete in the
9
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marketplace, thereby negatively and materially impacting its current low sales
levels. In such event, it is likely that the Company would continue to incur
losses and generate negative cash flow from operations for the foreseeable
future, and as a result thereof, the Company's ability to continue as a going
concern would be in doubt.
10
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Part II. Other Information
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index. Exhibits are submitted as a separate section of this
report immediately following the Exhibit Index.
(b) Reports on Form 8-K.
A Report on Form 8-K dated August 14, 1997 was filed with the
Commission disclosing the announcement by Tracker of the Merger
Transaction.
A Report on Form 8-K/A (Amendment No. 3) was filed with the Commission
on August 18, 1997 further amending a Report on Form 8-K dated January
16, 1997.
11
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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: /s/ Kenneth Burroughs
Kenneth Burroughs
President (Signing as Principal
Executive Officer and Director)
Date: November 12, 1997
By: /s/ Stephen W. Smith
Stephen W. Smith
Chief Financial Officer (signing as
Principal Financial Officer and
Principal Accounting Officer
Date: November 12, 1997
12
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
27.1 Financial Disclosure Schedule 14
(Filed in EDGAR version only)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
statement of financial condition at September 27, 1997 (unaudited) and the
statement of operations for the three months ended September 27, 1997
(unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 438,461
<SECURITIES> 0
<RECEIVABLES> 1,438,704
<ALLOWANCES> 134,840
<INVENTORY> 3,165,855
<CURRENT-ASSETS> 5,606,956
<PP&E> 5,144,603
<DEPRECIATION> 997,661
<TOTAL-ASSETS> 14,060,364
<CURRENT-LIABILITIES> 4,932,988
<BONDS> 1,716,266
0
0
<COMMON> 90,550
<OTHER-SE> 7,320,560
<TOTAL-LIABILITY-AND-EQUITY> 14,060,364
<SALES> 5,613,663
<TOTAL-REVENUES> 5,627,412
<CGS> 5,429,703
<TOTAL-COSTS> 5,429,703
<OTHER-EXPENSES> 1,029,175
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 54,568
<INCOME-PRETAX> (901,034)
<INCOME-TAX> 0
<INCOME-CONTINUING> (901,034)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (901,034)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
