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 December 28, 1996
| | 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 (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 February 11, 1997, there were 9,055,000 shares of common stock, $0.01 par
value per share, outstanding.
1
<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 ................... 8-11
Part II. Other Information
Item 2. Changes in Securities ................................. 12
Item 4. Submission of Matters to a Vote of Security Holders.... 12
Item 5. Other Information ..................................... 12
Item 6. Exhibits and Reports on Form 8-K ...................... 13
Signatures ..................................................... 14
2
<PAGE>
Mako Marine International, Inc.
Balance Sheet
(unaudited)
================================================================================
December 28, 1996
- --------------------------------------------------------------------------------
Assets
Current assets
Cash $ 162,118
Accounts receivable, less allowance for
doubtful accounts of $100,074 340,072
Inventories 2,361,496
Prepaid and other assets 362,894
- --------------------------------------------------------------------------------
Total current assets 3,226,580
Property and equipment, net 2,849,416
Other assets 137,866
- --------------------------------------------------------------------------------
$ 6,213,862
================================================================================
Liabilities and Stockholders' Equity (Deficit)
Liabilities
Current liabilities
Accounts payable $ 2,701,223
Accrued expenses 1,110,655
Accrued interest payable 238,105
Advance - Credit America, Inc., an affiliate 300,906
Current portion of note payable, CreditAmerica
Venture Capital, Inc., an affiliate 75,000
Current portion of indemnities 86,895
Current portion of long-term debt 573,508
- --------------------------------------------------------------------------------
Total current liabilities 5,086,292
Note payable, CreditAmerica Venture
Capital, Inc., an affiliate 825,000
Indemnities, less current portion 183,261
Long-term debt, less current portion 1,239,798
- --------------------------------------------------------------------------------
Total liabilities 7,334,351
- --------------------------------------------------------------------------------
Stockholders' equity (deficit)
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
Accumulated deficit (7,464,912)
- --------------------------------------------------------------------------------
Total stockholders' equity (1,120,489)
- --------------------------------------------------------------------------------
$ 6,213,862
================================================================================
See accompanying notes to financial statements.
3
<PAGE>
Mako Marine International, Inc.
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
============================================================================================================
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
December December December December
28, 1996 30, 1995 28, 1996 30, 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 4,156,846 $ 5,549,726 $ 9,287,076 $ 9,416,419
Cost of products sold 4,043,149 4,627,036 8,469,674 8,312,625
- ------------------------------------------------------------------------------------------------------------
Gross profit 113,697 922,690 817,402 1,103,794
- ------------------------------------------------------------------------------------------------------------
Operating and other expenses:
Selling, general and administrative 1,318,280 1,149,351 2,544,895 2,084,513
Interest 105,380 79,459 185,661 171,347
Other 39,000 24,317 48,158 200,837
- ------------------------------------------------------------------------------------------------------------
Total expenses 1,462,660 1,253,127 2,778,714 2,456,697
- ------------------------------------------------------------------------------------------------------------
Loss before other income (1,348,963) (330,437) (1,961,312) (1,352,903)
Other income (expense) (95,286) 31,513 (90,466) 59,739
- ------------------------------------------------------------------------------------------------------------
Net loss $ (1,444,249) $ (298,924) $ (2,051,778) $ (1,293,164)
============================================================================================================
Net loss per common share $ (.53) $ (.11) $ (.75) $ (.58)
============================================================================================================
Average number of common shares 2,724,048 2,730,600 2,724,048 2,220,512
============================================================================================================
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
Mako Marine International, Inc.
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
====================================================================================================
December December
Six months ended 28, 1996 30, 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net loss $ (2,051,778) $ (1,293,164)
Adjustment to reconcile net loss to net cash
(used in) provided by operating activities:
Provision for depreciation 337,453 269,261
Provision for doubtful accounts 48,000 9,000
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 865,091 (638,818)
Increase in inventories (83,501) (321,755)
Decrease (increase) in prepaids and assets (182,831) 236,852
Increase in accounts payable, accrued
expenses and accrued interest payable 1,068,620 (265,605)
- ----------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities 1,054 (2,004,229)
- ----------------------------------------------------------------------------------------------------
Investing activities:
Purchase of property and equipment (122,754) (207,894)
Purchase of marketable securities - (192,274)
- ----------------------------------------------------------------------------------------------------
Net cash used in investing activities (122,754) (400,168)
- ----------------------------------------------------------------------------------------------------
Financing activities:
Principal payments on debt and indemnities (246,305) (1,969,956)
Issuance of common stock, net - 5,309,815
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (246,305) 3,339,859
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents (368,005) 935,462
Cash and cash equivalents, beginning of
period 530,123 91,961
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 162,118 $ 1,027,423
====================================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
Mako Marine International, Inc.
Notes to Financial Statements
================================================================================
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
six months ended December 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 six
months ended December 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>
Mako Marine International, Inc.
Notes to Financial Statements
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
financial statement presentation.
Subsequent Event
On January 16, 1997, the Company sold to Tracker Marine, L.P., a Missouri
limited partnership ("Tracker") 6,400,000 newly issued shares (the "Mako
Shares") of the Company's common stock, having a par value of $.01 per share
(the "Mako Common Stock"), for a purchase price consisting of cash in the amount
of $4,140,000 and assets relating to Tracker's saltwater boat business. The Mako
Shares, together with Tracker's contemporaneous purchase of 930,000 shares (the
"CAVC Shares") of Mako Common Stock from CreditAmerica Venture Capital, Inc.
("CAVC") resulted in Tracker's acquisition of a total of 7,330,000 shares of
Mako Common Stock, representing approximately 80.9% of the then outstanding
shares of Mako Common Stock. The results of the three and six month periods
ended December 28, 1996 do not reflect the Company's acquisition of Tracker's
Saltwater Boat Business.
7
<PAGE>
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 materially 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 six
months of fiscal 1997, 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 and Six Months Ended December 28, 1996
Versus Three Months and Six Months Ended December 30, 1995
Overview
On January 16, 1997, the Company sold to Tracker 6,400,000 newly issued Mako
Shares for a purchase price consisting of cash in the amount of $4,140,000 and
assets relating to Tracker's saltwater boat business, including Tracker's
manufacturing facility located in Punta Gorda, Florida, its "Seacraft" and
"Silver King" brands of off-shore fishing boats and the exclusive right over a
five-year period to advertise at preferred rates the Company's saltwater boat
products in a catalog published by an affiliate of Tracker that distributes
annually more than 40 million catalogs worldwide. The Mako Shares, together with
Tracker's contemporaneous purchase of the 930,000 CAVC Shares from CAVC resulted
in Tracker's acquisition of a total of 7,330,000 shares of Mako Common Stock,
representing approximately 80.9% of the then outstanding shares of Mako Common
Stock.
The Stock Purchase Agreement provides, among other things, that in addition to
the Mako Shares, during the period beginning on the Closing Date (January 16,
1997) and ending 90 business days following the exercise, redemption or
expiration of the Company's publicly-traded Redeemable Common Stock Purchase
Warrants, the Company will issue to Tracker (i) 1,800,000 shares, if the market
price of the Mako Common Stock is $5.00 or more during a period of ten
consecutive trading days, (ii) an additional 1,800,000 shares, if the price of
the Mako Common Stock is $6.00 or more during a period of ten consecutive
trading days, and (iii) an additional 3,629,000 shares, if the market price of
the Mako Common Stock is $7.00 or more during a period of ten
8
<PAGE>
consecutive trading days. The expiration date of the aforementioned public
warrants is August 23, 2000.
The Stock Purchase Agreement also provides Tracker with an option to acquire
additional shares of Mako Common Stock at $1.50 per share. The option is
designed to permit Tracker to maintain an 80% interest in the Company to the
extent that options and warrants to acquire shares of Mako Common Stock which
were outstanding on the Closing Date are exercised in the future. There are
currently outstanding options and warrants to purchase 3,622,900 shares of Mako
Common Stock, which expire at varying dates through 2001.
As indicated below, the currently low sales level of the Company's products is
not sufficient to support the Company's current fixed cost levels. Additionally,
certain variable costs incurred by the Company in connection with the
manufacture of its products are high. Management believes that the additional
boat brands and the Company's exclusive catalog rights discussed above should
result in increased sales. Management further believes that through its
affiliation with Tracker, certain efficiencies can be achieved and that the
Company could be able to obtain certain materials and components used in the
manufacture of its products from outside sources at lower prices.
Net Sales
The Company's net sales for the quarter ended December 28, 1996 (the second
quarter of the fiscal year ending June 28, 1997) decreased by $1,392,880 (or
25%) to $4,156,846 from $5,549,726 for the corresponding quarter of the prior
fiscal year. This decrease was primarily attributable to: (i) industry wide
slower retail sales; and (ii) manufacturing delays in producing two new models
(a 25 foot center console which replaced an older model and a 33 foot center
console).
The Company's net sales for the six months ended December 28, 1996, decreased by
$129,343 or (1.4%) to $9,287,076 from $9,416,419 for the corresponding period of
the prior year, which decrease is attributable to the decreased sales occuring
during the second quarter of fiscal 1997, discussed above.
Cost of Products Sold and Gross Profit
Gross profit for the quarter ended December 28, 1996 decreased by $808,993 to
$113,697 (2.7% of net sales) from $922,690 (16.6% of net sales) for the
corresponding quarter of the prior fiscal year. This decrease is a result of:
(i) the reduced sales volume referred to above; (ii) the spreading of fixed
overhead costs over decreased production volumes; (iii) labor inefficiencies due
in part to the unavailability of certain components and parts; and (iv) the sale
of boats with a lower gross profit margin.
9
<PAGE>
Gross profit for the six months ended December 28, 1996, decreased
by $286,392 to $817,402 from $1,103,794 for the corresponding period of the
prior year, which decrease is attributable to the decreased gross profit
occuring during the second quarter of fiscal 1997, discussed above.
Operating Expenses
Selling, general and administrative expenses for the quarter ended December 28,
1996 increased by $168,929 (or 14.7%) to $1,318,280 from $1,149,351 for the
corresponding quarter of the prior fiscal year. The increase was primarily
attributable to: (i) increased sales incentive programs of $70,000 in the
quarter ended December 28, 1996 compared to the quarter ended December 30, 1995;
(ii) increased warranty costs of approximately $185,000; and (iii) an offsetting
decrease in miscellaneous general costs of approximately $85,000.
Selling, general and administrative expenses for the six months ended December
28, 1996, increased $460,382 (or 22.1%) to $2,544,895 from $2,084,513 for the
corresponding period of the prior year. The increase is a result of: (i)
increased sales incentive programs of $170,000 in the six months ended December
28, 1996 compared to the six months ended December 30, 1995; (ii) higher selling
and administrative salaries of approximately $65,000; (iii) approximately
$260,000 in increased warranty costs; (iv) increased professional fees amounting
to approximately $60,000; and (v) an offsetting decrease in advertising costs of
approximately $100,000.
Pursuant to the amendatory Letter Agreement, CAVC is obligated to satisfy
approximately $94,000 of selling, general and administrative expenses accrued as
of December 28, 1996.
Other expenses for the six months ended December 28, 1996 decreased by $152,679
to $48,158 from $200,837 for the corresponding period of the prior year when the
Company expensed loan costs of approximately $170,000 associated with a bridge
loan.
Other Income and Expenses
During the quarter ended December 28, 1996, the Company recorded a $100,000
provision relating to potential environmental issues discovered at the Company's
plant during the due diligence review in conjunction with the Stock Purchase
Agreement. By amendatory Letter Agreement dated January 16, 1997 among the
Company, CAVC and Tracker, it was agreed among the parties that CAVC would
deposit in escrow the sum of $1,310,000 to secure CAVC's obligations with
respect to any costs and expenses incurred in connection with remedial, clean-up
and other costs associated with the removal of any contamination in, on or under
the "Property" (hereinafter defined) to the extent required to meet regulatory
requirements (the "Remedial Costs"). Under the terms of such amendatory Letter
Agreement, the Company is obligated to pay the first $100,000 of Remedial Costs.
Thereafter, such costs are paid in consecutive increments of $200,000 and
$50,000 by CAVC and the Company, respectively, until the Remedial Costs reach
$1,710,000. As a result of the foregoing, the Company is responsible for
payments of up to $400,000 in respect of the first $1,710,000 of Remedial Costs,
and for such amounts, if any, in excess of $1,710,000. While the final report of
the environmental engineers has not yet been completed, management believes,
based upon preliminary information received to date, that a majority of the
potential contamination on, in or under the Property comes from off-site
sources, and that the Company will not incur material losses as a result of its
limited obligations with respect to the Remedial Costs.
10
<PAGE>
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 six months ended December 28, 1996, the Company had cash flows from
operating activities of $1,054. The Company used $246,305 for principal
repayments of debt (financing activities) and $122,754 for capital expenditures
(investing activities).
The cash provided by operating activities resulted from an increase in accounts
payableand accrued expenses of $1,068,620, a decrease in accounts receivable of
$865,091 (also an increase in the allowance for doubtful accounts of $48,000)
and depreciation and amortization totaling $337,453. Uses of cash included the
Company's net loss of $2,051,778, and an increase in inventories and prepaid
assets (such as insurance and boat show costs) of $83,501 and $182,831,
respectively.
As indicated in the "Overview" above, the Company received a cash infusion of
$4,140,000 as part of the purchase price for the sale of the Mako Shares to
Tracker. Management believes that this cash infusion should be sufficient to
satisfy the anticipated cash requirements of the Company for 12 to 18 months,
thereby affording the Company sufficient time to increase sales levels and
reduce expenses in order to operate profitably. No assurance can be given,
however, that the Company will be able to increase its sales and/or reduce its
costs to the extent necessary to operate profitably.
Income Taxes
At December 28, 1996, the Company had a net tax operating loss carryforward of
approximately $7,600,000 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.
11
<PAGE>
Part II. Other Information
Item 2. Changes in Securities
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 constituting its Saltwater Boat Business. Reference is made to the
"Overview" section above for a more complete description of the transaction.
The sale by the Company of the Mako Shares to Tracker was exempt from
registration under the Securities Act of 1933, as amended, pursuant to Section
4(2) thereof and Regulation D promulgated thereunder.
Item 4. Submission of Matters to a vote of Security Holders
(a) The Annual Meeting of the Stockholders of the Company was held on November
14, 1996. Of the 2,655,000 shares entitled to vote at such meeting,
2,655,000 shares were present at the meeting in person or by proxy.
(b) The individuals listed below were elected as Directors of the Company, and,
with respect to each director, the number of shares voted for and withheld
were as follows:
No. of Shares Voted
-------------------
Name of Nominee For Withheld
--------------- --- --------
Douglas W. Baena 2,594,192 60,808
Jeffrey Bleustein 2,594,192 60,808
Bruce S. Foerster 2,591,192 63,808
Joseph J. Messina 2,590,692 64,308
(c) There were no brokers' non-votes.
Pursuant to the Stock Purchase Agreement, effective as of the closing of the
transaction with Tracker, January 16, 1997, the Board of Directors of the
Company was increased from 4 to 7 persons, and Kenneth Burroughs, Joe C. Greene,
Susie Henry and Larry Mueller, each a designee of Tracker, was appointed a
director of the Company. Messrs. Baena, Foerster and Messina continue to serve
as Directors of the Company, and Jeffrey Bleustein resigned effective on such
closing date.
Item 5. Other Information
On January 16, 1997, the Company entered into an Amendment of Lease with Robert
C. Schwebke ("Schwebke"), as Landlord amending the Amended Triple Net Lease
dated April 18, 1995 between the Company and Schwebke covering the Company's
principal headquarters and manufacturing facility (the "Property") to provide
for (i) an option on the part of the Company to terminate the lease on January
16, 1999 upon the giving of appropriate notice of the exercise of such option
and the payment of a lease termination fee in the amount of $330,000, and (ii) a
one-year option on the part of the Company to purchase the Property from the
Landlord at a purchase price of $5,000,000.
12
<PAGE>
In connection with its due diligence review, certain potential environmental
issues related to the Property were discovered and additional testing and
analysis is currently ongoing to determine the extent of such contamination and
whether or not such contamination arises from on-site or off-site sources. By
amendatory Letter Agreement dated January 16, 1997 among the Company, CAVC and
Tracker, it was agreed among the parties that CAVC would deposit in escrow the
sum of $1,310,000 to secure CAVC's obligations with respect to Remedial Costs.
Under the terms of such amendatory Letter Agreement, the Company is obligated to
pay the first $100,000 of Remedial Costs. Thereafter, such costs are paid in
consecutive increments of $200,000 and $50,000 by CAVC and the Company,
respectively, until the Remedial Costs reach $1,710,000. As a result of the
foregoing, the Company is responsible for payments of up to $400,000 in respect
of the frist $1,710,000 of Remedial Costs, and for such amounts, if any, in
excess of $1,710,000. While the final report of the environmental engineers has
not yet been completed, management believes, based upon preliminary information
received to date, that a majority of the potential contamination on, in or under
the Property comes from off-site sources, and that the Company will not incur
material losses as a result of its limited obligation with respect to the
Remedial Costs.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index. Exhibits are submitted as a separate section of this
report immediately following the Exhibit Index
(b) Reports on Form 8-K
Form 8-K dated December 13, 1996 regarding the execution of definitive
agreements each dated December 4, 1996, one between the Company and Tracker
providing for the sale of the Mako Shares and the other between CAVC and
Tracker providing for the sale of the CAVC Shares.
13
<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: February 11, 1996
By: Lawrence Tierney
---------------------------------
Lawrence Tierney
Chief Financial Officer (signing as
Principal Financial Officer and
Principal Accounting Officer
Date: February 11, 1996
14
<PAGE>
INDEX TO EXHIBITS
Exhibits No. Description Page*
10.1 Amendment to Lease dated January 16, 1997 between
the Company and Robert C. Schwebke.
* Filed herewith.
15
EXHIBIT NO. 10.1
AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE ("Amendment") is made this 16 day of January, 1997
by and between Robert C. Schwebke, an individual and Mako Marine International,
Inc., a Florida corporation, as Landlord and Tenant, respectively, under Amended
Triple Net Lease dated April 18, 1995 (the "Lease") for the purpose of amending
the Lease as provided herein. A legal description of the Property leased by
Landlord to Tenant under the Lease is attached hereto as Exhibit A.
Terms not otherwise defined herein shall have the same meaning as ascribed
to them under the Lease.
For good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged by Landlord and Tenant, it is agreed by the parties hereto
that effective upon the acquisition by Tracker Marine, L.P. of 6.4 million
shares of the common stock of Tenant from Tenant (expected to occur on or about
January 17, 1997) (the "Acquisition"), the Lease is hereby amended as follows:
1. Early Termination Option. Notwithstanding Section 2 or any other
provision under the Lease, Tenant may, upon written notice to Landlord ("Early
Termination Notice") given in accordance with Section 40 of the Lease on or
before July 17, 1998, together with the payment of a lease termination fee in
the amount of $330,000 (the "Lease Termination Fee"), terminate the Lease
effective as of the close of business on the day immediately prior to the second
anniversary of this Amendment, and upon the giving of such Early Termination
Notice accompanied by the payment of the Lease Termination Fee, the Lease shall
automatically, and without further action on the part of Landlord or Tenant,
terminate on such date. If the Notice and Lease Termination Fee is not given and
paid on or before July 17, 1998, the option of Tenant set forth in this Section
1 shall automatically terminate.
2. Purchase Option. (a) From and after the date of this Amendment and
though the close of business on the day immediately preceding the first
anniversary of the date of this Amendment (the "Term"), Tenant shall have the
right to purchase the entire interest of Landlord in the Property, at a purchase
price of Five Million Dollars ($5,000,000) net to Landlord and on the other
terms and conditions set for below (the "Option").
(b) Tenant shall exercise the Option by delivering written notice
thereof (the "Notice") to Landlord at any time during the Term of the Option in
accordance with Section 40 of the Lease. If Tenant exercises the Option, the
closing of the purchase and sale of the Property will occur at a time and place
specified in the
<PAGE>
Notice; provided, however, that such closing shall occur within 30 days of the
giving of the Notice by Tenant and shall be within Dade County, Florida.
(c) At closing, Landlord shall convey to Tenant by special warranty
deed fee simple title to the Property, free and clear of all mortgages, liens
and encumbrances of any kind, except for (i) liens for taxes not yet due and
payable, and (ii) such easements, imperfections or irregularities which are
minor in nature and will not, either individually or collectively, adversely
affect the value of the Property or the use thereof (such permitted encumbrances
specified in the foregoing clause (i) and (ii) being collectively called the
"Permitted Encumbrances"). Moreover, Landlord shall execute and deliver all
other customary closing documents reasonably requested by Tenant or the title
company.
(d) At closing, Tenant shall pay the purchase price to Landlord by
cashier's check, certified check or other readily available funds. Tenant shall
also pay (i) all unpaid rent or other charges due and owing under the Lease, and
(ii) all expenses and costs incurred in connection with the exercise of the
Option, including, without limitation, title insurance premiums, transfer or
stamp taxes, closing fees and recording fees. Landlord shall furnish to Tenant,
at Tenant's expense, an ALTA Owner's Policy, dated as of the closing date, from
a title company licensed to do business in Florida, with standard non-survey
exceptions deleted showing Tenant as having good and marketable fee simple title
in the Property, subject only to the Permitted Encumbrances, and, at the request
of Tenant given at least 10 business days prior to closing, provide, at Tenant's
expense, a survey of the Property as required to delete all standard survey
exceptions from such Owner's Policy.
(e) Landlord shall not, without the prior written consent of Tenant,
cause or permit any lien or encumbrance (other than current liens and
encumbrances) to be created upon or attach to the Property or increase the
amount of indebtedness secured by current mortgages against the Property until
in either case the Option shall have expired without being exercised. Attached
as Exhibit B hereto is a list of currently outstanding mortgages, liens and
other encumbrances against the Property and, where applicable the currently
outstanding indebtedness secured thereby.
3. Notice of Acquisition. Tenant shall give Landlord prompt written notice
(in accordance with Section 40 of the Lease) of the completion of the
Acquisition, specifying the date thereof, which date shall constitute the
commencement of this Amendment. If the Acquisition does not occur on or before
February 28, 1997, then this Amendment shall not go into effect and shall
automatically terminate.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed the day and year first above written.
"LANDLORD"
/s/ Robert C. Schwebke
- ------------- --------------------------------
WITNESS ROBERT C. SCHWEBKE
"TENANT"
MAKO MARINE INTERNATIONAL,
INC., a Florida corporation
Attest:
By: /s/ Douglas W. Baena
--------------------------------
Print Name: Douglas W. Baena
Title: President and Chief
Executive Officer
/s/ Hugh L. Russ, Jr.
- ---------------------------
Name: Hugh L. Russ, Jr.
Title: V.P., Secretary
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Statement of Financial Condition at December 28, 1996 (Unaudited) and the
Statement of Operations for the Six Months Ended December 28, 1996 (Unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> DEC-28-1996
<CASH> 162,118
<SECURITIES> 0
<RECEIVABLES> 440,146
<ALLOWANCES> 100,074
<INVENTORY> 2,361,496
<CURRENT-ASSETS> 3,226,580
<PP&E> 4,223,328
<DEPRECIATION> 1,373,912
<TOTAL-ASSETS> 6,213,862
<CURRENT-LIABILITIES> 5,086,292
<BONDS> 2,248,059
26,550
0
<COMMON> 0
<OTHER-SE> (1,147,039)
<TOTAL-LIABILITY-AND-EQUITY> 6,213,862
<SALES> 9,287,076
<TOTAL-REVENUES> 9,287,076
<CGS> 8,469,674
<TOTAL-COSTS> 8,469,674
<OTHER-EXPENSES> 2,635,519
<LOSS-PROVISION> 48,000
<INTEREST-EXPENSE> 185,661
<INCOME-PRETAX> (2,051,778)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,051,778)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,051,778)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> (.75)
</TABLE>
