SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2013
Commission File No. 1-5926
MILLER INDUSTRIES, INC. (Exact Name Registrant as specified in its charter) |
| Florida | | 59-0996356 |
| (State or Other Jurisdiction of | | (I.R.S. Employer |
| (incorporation or organization) | | Identification No.) |
| 16295 N.W. 13th Avenue, Miami, Florida 33169 |
| (Address of Principal Executive Offices) |
| |
| (305) 621-0501 |
| (Registrant’s Telephone Number, Including Area Code) |
Securities registered under Section 12(b)
of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
| | Common Stock, $.05 Par Value | |
| | (Title of Class) | |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ Nox
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨ Nox
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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¨ Nox
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨ Accelerated filer¨ Non-accelerated filer¨ Smaller reporting companyx
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes¨ Nox
The aggregate market value of the common stock held by non-affiliates of the registrant at April 30, 2013 was $314,739.
As of April 30, 2013, there were 5,000,000 shares of the registrant’s common stock outstanding.
PART I
FORWARD LOOKING STATEMENTS
This Form 10-K contains “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements represent the Company’s expectations and beliefs including, but not limited to, statements concerning the Company’s operations, performance, financial condition, growth or strategies. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact may be deemed to be forward looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward looking statements. The statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company’s control, and actual results may differ materially depending on a variety of important factors, including but not limited to the potential impact of changes in interest rates, competition, credit risks and collateral, changes in local or regional economic conditions, the ability of the Company to continue its growth strategy, dependence on management and key personnel, and regulatory supervision.
ITEM 1. BUSINESS
General
Miller Industries, Inc. (the “Company”) was incorporated under the laws of the State of Florida on January 21, 1963. The administrative offices of the Company are located at 16295 N.W. 13th Avenue, Miami, Florida 33169, and its telephone number is (305) 621-0501.
The Company’s business is the ownership and management of a 98,000 square feet warehouse located in Miami, Florida.
Employees
The Company had no employees during the 2013 and 2012 fiscal years.
The Company utilizes an independent contractor to perform administrative and bookkeeping services.
ITEM 2. PROPERTIES
Description of Warehouse
The Company owns a one-story concrete block building located at 16295 N.W. 13th Avenue, Miami, Florida. This facility consists of 97,813 square feet, 7,000 of which are air-conditioned. The building is zoned for use as a warehouse or light manufacturing facility. The building has a relatively low ceiling, which has adversely affected leasing efforts.
Financing
At April 30, 2013, the building was subject to an outstanding first mortgage in favor of a commercial bank with a principal balance of approximately $1,205,000. The loan accrues interest at ½% under the lender’s base rate per annum and is payable in monthly installments of $3,715, with a balloon payment of $911,000 due November 2019. The loan is secured by the Company’s land and building and a partial guarantee of the Company’s president.
Leasing Activities
The Company continues to seek long term commercial tenants for its building. The building is located in an industrial park which contains many similar facilities. Current rents for such facilities range from approximately $4.00 per square foot to approximately $7.50 per square foot and the occupancy rate in the area is approximately 80%.
During 2013, the Company leased its building to three tenants. As of April 30, 2013, the future minimum rental income under these leases, excluding cost of living adjustments, was as follows:
| 2014 | | $ | 228,506 | |
| 2015 | | $ | 57,051 | |
Insurance, Depreciation and Taxes
The Company believes that the building is adequately insured. Depreciation is determined using the straight-line method over five to 31.5 years for tax purposes and 5 to 30 years for accounting purposes. Real estate taxes paid for calendar year 2012 were approximately $61,000.
ITEM 3. LEGAL PROCEEDINGS
Gold Coast Oil
In 1981, the Company was named by the U.S. Environmental Protection Agency (“EPA”) as one of many potential PRPs with respect to chemical pollution discovered at a site known as “Gold Coast Oil.”
In 1988, a settlement was negotiated between the EPA and certain PRPs including the Company, which resulted in a settlement of the EPA claim. The PRPs subsequently negotiated a settlement among themselves in which the Company agreed to pay $50,000 of the anticipated clean up costs. The Company’s insurance carrier at the time of the alleged violations agreed to pay $45,000 of this amount in return for a release from any future additional claims.
In January 1993, it was determined that additional funds would be required to complete the clean up of the Gold Coast Oil site. The Company received an assessment of $10,000 for this obligation and has included such amount in accrued expenses in the accompanying balance sheets.
State of California Claim
In December 2010, the State of California State Controller filed a complaint against the Company in the Superior Court of California. In the Complaint, the State asserts that the Company had failed to report the alleged abandonment of certain shares of the Company’s common stock in a timely manner and, as a result, the Company was obligated to pay the State the amount of $102,230. The State and the Company have entered into a Tolling Agreement in order to allow the Company to investigate this matter. During 2012, the Company submitted evidence to the State of California that our shares were not owned by a resident of California and therefore, the share were not subject to escheat in California. The State of California subsequently agreed to dismiss the complaint against the Company.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company’s common stock is currently traded on the over-the-counter market under the symbol “MLLS”.
The range of the high and low bid quotations for each quarter of the past two (2) fiscal years is as follows:
| | | CLOSING BID | |
| 2013 Fiscal Year | | HIGH | | | LOW | |
| 05/1/12 - 07/31/12 | | $ | .17 | | | $ | .14 | |
| 08/1/12 - 10/31/12 | | $ | .17 | | | $ | .14 | |
| 11/1/12 - 01/31/13 | | $ | .18 | | | $ | .14 | |
| 02/01/13 - 04/30/13 | | $ | .19 | | | $ | .17 | |
| | | CLOSING BID | |
| 2012 Fiscal Year | | HIGH | | | LOW | |
| 05/1/11 - 07/31/11 | | $ | .12 | | | $ | .05 | |
| 08/1/11 - 10/31/11 | | $ | .14 | | | $ | .06 | |
| 11/1/11 - 01/31/12 | | $ | .25 | | | $ | .07 | |
| 02/01/12 - 04/30/12 | | $ | .19 | | | $ | .11 | |
As of April 30, 2013, there were approximately 475 holders of record of the Company’s common stock.
The Company has not paid any cash dividends during the last three fiscal years.
Equity Compensation Plan Information
On April 30, 2013, the Company had no equity compensation plans.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations (2013 compared to 2012)
Rental Income
The Company’s results of operations are primarily dependant upon the rental income which it receives from leasing space in its building. Rental income is a function of the percentage of the building which is occupied, and the level of rental rates. Rental income during 2013 was $332,000, compared with $400,000 in 2012. The decrease in rental income was due to lower rental rates.
Hardware Sales
The Company receives revenue from the sale of replacement parts for the sliding glass doors and windows formerly manufactured by the Company. These sales (net of cost of goods sold) were immaterial in 2013 and 2012.
Other Income
The Company generated other income of $6,000 in 2013 and 2012. Other income principally consisted of interest income. The decrease was due to lower interest rates in the Company’s deposits.
Rental Expense (Excluding Interest)
The Company incurs rental expense in connection with the leasing of its building. These expenses consist of management fees, insurance, real estate taxes, depreciation and amortization, insurance, maintenance and repairs, utility costs and outside services. Rental expenses were $166,000 in 2013 and $246,000 in 2012. The principal components were management fees ($36,000 in 2013 and in 2012), taxes ($64,000 in 2013 and $82,000 in 2012), depreciation and amortization ($18,000 in 2013 and $20,000 in 2012), repairs and maintenance ($16,000 in 2013 and $36,000 in 2012), insurance ($31,000 in 2011 and $31,000 in 2012), and replacements of $30,000 in 2012.
Cost of Hardware Sales
The Company records the cost of its hardware sales in connection with the sale of replacement parts to customers of its former window and sliding glass door business. These costs are tied to the level of hardware sales. These costs were not material in 2013 and 2012.
Administrative Expenses
The Company’s administrative expenses were $62,000 in 2013, compared to $57,000 in 2012.
Interest Expense
The Company pays interest on the mortgage loan on its building. Interest expense on the loan was $35,000 in 2013 compared to $45,000 in 2012.
Provision for Income Taxes
The provision for taxes (before realization of prior years’ tax benefits) was $16,000 in 2013 and $14,000 in 2012. The Company also recorded a change in its valuation allowance in 2013 related to its net operation loss carryforwards due to the decrease in the Company’s profitability. See Note C to the Company’s financial statements.
Net Income
As a result of the foregoing factors, the Company had a net income of $53,000 in 2013, compared to a net income of $37,000 in 2012.
Liquidity and Capital Resources
The Company’s cash decreased by $3,000 during fiscal year 2013 compared with an increase of $15,000 during fiscal year 2012. The increase in 2012 was primarily due to the receipt of $121,000 from the exercise of stock options, which offset negative cash flow from operations. As of April 30, 2013, the Company’s cash position was approximately $1,606,000.
At April 30, 2013, the Company’s principal financing consisted of a loan with a principal balance of approximately $1,205,000 from a third party lender, secured by a lien on the Company’s building. The loan bears interest at 50 basis points below the Lender’s base rate. The loan is payable $3,715 per month (plus accrued interest), with a balloon payment due November 2019 in the approximate amount of $911,000. The note is collateralized by the Company’s land and building,along with the personal guaranty of the Company’s Chairman of the Board in the amount of 50% of the mortgage balance.
The Company believes that its working capital needs over the next twelve months will principally consist of funding routine maintenance of its building and alterations to the interior of the building to accommodate new tenants. The Company believes that its existing cash reserves will allow the Company to continue operations at their current level for at least 12 more months. However, the Company’s long term prospects ultimately depend on the Company’s ability to lease the space in its building at attractive rates.
The Company’s obligations to make payments under existing, material contracts consist of the following:
| · | The Company is obligated to make payments under its existing mortgage loan. At April 30, 2012, the outstanding balance of the loan was $1,205,000. The loan bears interest 50 basis points below the Lender’s base rate. The loan is repayable in monthly installments of approximately $3,715, with a balloon payment of approximately $911,000 due in November 2019. |
| · | The Company has agreed to pay Harnap Corp., a corporation controlled by the Company’s president and principal shareholder, $3,000 per month for management fees. Accrued fees as of April 30, 2013 were $151,000, all of which are payable upon the demand of Harnap. |
Current Plans
The Company operates as a real estate investment and management company. Subsequent to April 30, 2013, the Company lost atenant for its building and currently has only two tenants. The Company currently is seeking to obtain additional commercial tenants.
The Company’s principal operating expenses consist of management and professional fees associated with the administration of the Company, interest expense on the Company’s mortgage loan, real estate taxes and insurance.
Critical Accounting Policies
The Securities and Exchange Commission (“SEC”) has issued disclosure guidance for “Critical Accounting Policies.” The SEC defines critical accounting policies as those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The discussion and analysis of the Company’s financial condition and results of operations are based upon its financial statements, the preparation of which takes into account estimates based on judgments and assumptions that affect certain amounts and disclosures. Accordingly, actual results could differ from these estimates. The accounting policies and estimates used and outlined in Note 1 to the Company’s financial statements, which are presented elsewhere in this Form 10-K, have been applied consistently as at April 30, 2013 and 2012, and for the years ended April 30, 2013 and 2012. The Company’s representatives who are involved in the preparation of its financial statements and this report believe that the following accounting policies represent the Company’s critical accounting policies:
Valuation of Long-Lived Assets: The Company periodically assesses the carrying value of long-lived assets whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When the Company determines that the carrying value of long-lived assets may be impaired, the measurement of any impairment is based on a projected discounted cash flows method. While the Company believes that this method is reasonable, different assumptions regarding such cash flows may significantly affect the measurement of impairment.
Revenue Recognition: Rental income is recognized when it becomes receivable under the terms of each lease. Hardware sales are recognized upon receipt of payment from customers.
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
The Company is not a party to any material off-balance sheet arrangements.
The following is a summary of the Company’s contractual obligations, including certain on-balance sheet obligations, at April 30, 2013:
| | | | | | Payments Due by Period | |
| Contractual Obligations | | Total | | | Less Than
1 Year | | | 1-3
Years | | | 4-5
Years | | | More Than
5 Years | |
| Long Term Debt | | $ | 1,204,660 | | | $ | 44,580 | | | $ | 89,160 | | | $ | 89,160 | | | $ | 981,760 | |
| Capital Lease Obligations | | | - | | | | - | | | | - | | | | - | | | | - | |
| Operating Leases | | | - | | | | - | | | | - | | | | - | | | | - | |
| Purchase Obligations | | | - | | | | - | | | | - | | | | - | | | | - | |
| Other Long Term Debt | | | | | | | | | | | | | | | | | | | | |
| TOTAL | | $ | 1,204,660 | | | $ | 44,580 | | | $ | 89,160 | | | $ | 89,160 | | | $ | 981,760 | |
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company’s financial statements and supplementary financial schedules are attached as an exhibit to this report. See Items 14(a) and 14(b).
Management’s Report on the Consolidated Financial Statements
Our management is responsible for the preparation of the consolidated financial statements and related information that are presented in this report. The consolidated financial statements, which include amounts based on management’s estimates and judgments, have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company designs and maintains accounting and internal control systems to provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing financial statements and maintaining accountability for assets. These systems are augmented by written policies, an organizational structure providing division of responsibilities and careful selection and training of qualified personnel.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
In connection with the filing of this Form 10-K, the Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of April 30, 2012. The Company’s Chief Executive Officer and Chief Executive Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of April 30, 2013.
Management's Report on Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company designs and maintains accounting and internal control systems to provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing financial statements and maintaining accountability for assets. These systems are augmented by written policies, an organizational structure providing division of responsibilities and careful selection and training of qualified personnel.
Management (with the participation of the Company's principal executive officer and principal financial officer) has evaluated the Company's internal control over financial reporting as of April 30, 2013, based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.
There are limitations inherent in any internal control, such as the possibility of human error and the circumvention or overriding of controls. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met, and may not prevent or detect misstatements. As conditions change over time, so too may the effectiveness of internal controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of a Company's financial reporting.
Based on its assessment, management has concluded that our internal control over financial reporting was effective as of April 30, 2013.
There were no changes in the Company’s internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting during the fiscal quarter ended April 30, 2013.
ITEM 9B. OTHER INFORMATION
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company are as follows:
| | | | | Officer | | Director |
| Name | | Position | | Since | | Since |
| | | | | | | |
| Angelo Napolitano | | President, Chief Executive Officer, and Chairman of the Board of Directors | | 1992 | | 1988 |
Each director is elected for a period of one year, or until his successor is duly elected by the shareholders. Officers serve at the will of the Board of Directors.
Angelo Napolitano, age 78 has been President and Chief Executive Officer of the Company since 1992. He has been a Director of the Company since 1988 and Chairman since July 1989. Mr. Napolitano is the Chairman and Chief Executive Officer of Harnap Corp., a commercial real estate management company which he founded in 1971. Since 1975, Mr. Napolitano has served as a director and President of Sunshine State Industrial Park Authority, the property owners’ association for the industrial park in which the Company’s building is located.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, Mr. Napolitano failed to file one report on a timely basis.
Audit Committee Financial Expert
The Company has determined that it does not have an audit committee financial expert. The Company has not been able to identify an individual willing to serve as an audit committee financial expert for the Company.
Code of Ethics
The Company has adopted a code of ethics that applies to the Company’s officers and persons performing similar functions.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation paid by the Company to the Company’s chief executive officer. None of the Company’s officers in fiscal 2013 received compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
| Name and Position | | Fiscal Year | | | Salary (1) | | | Shares
Underlying
Stock Options
Grant | |
| | | | | | | | | | |
| Angelo Napolitano, Chief Executive Officer | | | 2013 | | | $ | 36,000 | | | | | |
| | | | 2012 | | | $ | 36,000 | | | | - | |
| | | | 2011 | | | $ | 36,000 | | | | - | |
(1) Includes management fees paid to Harnap Corp., a company controlled by Mr. Napolitano, and director fees paid to Mr. Napolitano.
Stock Options
No stock options were granted, outstanding, or exercised during the 2013 fiscal year.
Management Agreement
The Company has agreed to pay Harnap Corp. a monthly management fee, which is currently $3,000 per month. Harnap Corp. is owned and controlled by Angelo Napolitano, the Company’s Chief Executive Officer and Chairman of the Board. As of April 30, 2013, accrued management fees totaled $151,000.
Compensation of Directors
No amounts were paid to directors during the 2013 fiscal year for services as directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of management, as of April 30, 2013, the following persons beneficially owned 5% or more of the common stock of the Company:
Name and Address of
Beneficial Owner | | Amount Beneficially Owned | | | Percent
Of Class | |
| | | | | | | | | |
Angelo Napolitano 1521 N.W. 165th Street Miami, FL 33169 | | | 3,148,594 | (1) | | | 63.0 | % |
(1) Mr. Napolitano has sole voting and investment power with respect to 1,121,256 shares which he holds of record, and 500,000 shares which are held in trusts controlled by Mr. Napolitano as the trustee. Mr. Napolitano has shared voting and investment power with respect to 10,000 shares which he owns jointly with his wife, Mrs. Helen Napolitano.
The shares of common stock beneficially owned by the Company’s sole director and executive officer as of April 30, 2013 were as follows:
| | | Amount | | | | |
| Name and Address of | | Beneficially | | | Percent | |
| Beneficial Owner | | Owned (1) | | | Of Class | |
| | | | | | | | | |
Angelo Napolitano 1521 N.W. 165th Street Miami, FL 33169 | | | 3,148,594 | (2) | | | 63.0 | %(2) |
(1) Except as otherwise indicated, each person has sole voting and investment power as to the listed shares.
(2) With respect to Mr. Napolitano’s shares, see Note (1) to the preceding table.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a brokerage agreement with Napolitano Realty Corporation (“NRC”) with respect to the lease of the Company’s building. The President of NRC is the son of Mr. Angelo Napolitano, the Company’s President and Chairman of the Board. The agreement provides for a 6% commission to be paid to NRC on sales or lease proceeds received by the Company. No commissions were paid under this agreement for the 2013 fiscal year.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Larry Wolfe, CPA performed the review of each of the Company’s quarterly reports for the 2013 fiscal year and the audit of the Company’s financial statements for the year ended April 30, 2013.
The following table presents fees billed for professional audit and other services rendered by Larry Wolfe, CPA for the periods presented.
| | | Fiscal 2013 | | | Fiscal 2012 | |
| Fees billed by Larry Wolfe, CPA | | | | | | | | |
| Audit Fees | | $ | — | | | $ | 17,300 | |
| Audit Related Fees | | | — | | | | — | |
| Tax Fees | | | — | | | | 800 |
| All Other Fees | | | — | | | | — | |
| | | | | | | | | |
| Total | | $ | — | | | $ | 18,100 | |
(1) Audit Fees consist of fees billed for professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports and services normally provided in connection with statutory and regulatory filings or engagements.
(2) Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under “Audit Fees,” including registration statement filings.
(3) Tax Fees consist of fees billed for professional services rendered for tax compliance, tax consultation and tax planning (domestic and international). These services include assistance regarding federal, state and international tax compliance and international tax planning.
(4) All Other Fees consist of fees for products and services other than the services reported above.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 10-K
(a) Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets as of April 30, 2013 and 2012
Statements of Operations for Years ended April 30, 2013 and 2012.
Statements of Changes in Shareholders’ Equity (Deficiency) for Years ended April 30, 2013 and 2012
Statements of Cash Flows for Years ended April 30, 2013 and 2012
Notes to Financial Statements
(b) All schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the financial statements or notes thereto.
(c) Exhibits
| 3.1 | | Articles of Incorporation | | (Note 1) |
| 3.2 | | Articles of Amendment | | (Note 2) |
| 3.3 | | By-laws | | (Note 1) |
| 3.4 | | Amendment to By-laws – Indemnification | | (Note 1) |
| 3.5 | | Amendment to By-laws —Control Share Acquisitions | | (Note 3) |
| 10.1 | | Indemnification Agreement with Directors | | (Note 4) |
| 10.2 | | Amended and Restated Stock Option Agreement dated February 22, 2010 | | (Note 5) |
| 14.1 | | Code of Ethics | | (Note 6) |
| 31.1* | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) | | |
| 31.2* | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) | | |
| 32.1* | | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of Sarbanes-Oxley Act of 2002 | | |
| | | | | |
| Note 1 | | Incorporated by reference from the Form 10-K filed with the Commission for the year ended April 30, 1981. |
| Note 2 | | Incorporated by reference from Form 10-K filed with the Commission for the year ended April 30, 1985. |
| Note 3 | | Incorporated by reference from the Form 10-K filed with the Commission for the year ended April 30, 1993. |
| Note 4 | | Incorporated by reference from the Form 10-K filed with the Commission for the year ended April 30, 1990. |
| Note 5 | | Incorporated by reference from the Form 10-K filed with the Commission for the fiscal year ended April 30, 2010. |
| Note 6 | | Incorporated by reference from the Form 10-KSB filed with the Commission for the fiscal year ended April 30, 2004. |
| | | |
| (*) | | Filed as part of this report |
(d) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended April 30, 2013.
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, thereto duly authorized on May 26, 2015.
| | MILLER INDUSTRIES, INC. |
| | |
| | /s/ Angelo Napolitano |
| | By: | Angelo Napolitano, President |
| | | And Chief Executive Officer |
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 indicated on May 26, 2015.
| Signature | | Title |
| | | |
| /s/ Angelo Napolitano | | President, Chief Executive |
| Angelo Napolitano | | Officer, and Director (Principal Executive Officer) (Principal Financial Officer) (Principal Accounting Officer) |
INDEPENDENT AUDITOR’S REPORT
Shareholders and Board of Directors
Miller Industries, Inc.
Miami, Florida
I have audited the accompanying balance sheets of Miller Industries, Inc. as of April 30, 2013 and 2012, and the related statements of operations, shareholders’ deficiency, and cash flows for each of the two years in the period ended April 30, 2013. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. My audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, I express no such opinion. 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. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Miller Industries, Inc. as of April 30, 2013 and 2012 and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
| | /s/ Larry Wolfe |
| | LARRY WOLFE |
| | Certified Public Accountant |
Miami, Florida
August 20, 2013
MILLER INDUSTRIES, INC.
BALANCE SHEET
APRIL 30, 2013 AND 2012
| | | 2013 | | | 2012 | |
| | | | | | | |
| ASSETS | | | | | | | | |
| Investment Property: | | | | | | | | |
| Land | | $ | 161,443 | | | $ | 161,443 | |
| Building and Improvements | | | 1,049,908 | | | | 1,049,908 | |
| Machinery and Equipment | | | 11,106 | | | | 11,106 | |
| Furniture and Fixtures | | | 10,251 | | | | 10,251 | |
| Total Cost | | $ | 1,232,708 | | | $ | 1,232,708 | |
| Less: Accumulated Depreciation | | | 918,279 | | | | 906,394 | |
| Net Book Value | | $ | 314,429 | | | $ | 326,314 | |
| Other Assets: | | | | | | | | |
| Cash and Cash Equivalents | | $ | 1,606,404 | | | $ | 1,609,457 | |
| Accounts Receivable ( Less Allowance for Doubtful Accounts of $0 in 2013 and $ 3,192 in 2012) | | | 855 | | | | 1,205 | |
| Prepaid Expenses and Other Assets | | | 13,005 | | | | 12,204 | |
| Deferred Lease Incentive (Net of Accumulated Amortization - $ 16,504 in 2013 and $11,243 in 2012.) | | | 6,577 | | | | 11,838 | |
| Loan Costs, (Less Accumulated Amortization of $ 3,668 and $2,594 in 2013 and 2012, respectively | | | 7,067 | | | | 8,141 | |
| Deferred Tax Assets | | | 39,993 | | | | 45,298 | |
| Total Other Assets | | $ | 1,673,901 | | | $ | 1,688,143 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 1,988,330 | | | $ | 2,014,457 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
| Liabilities: | | | | | | | | |
| Mortgage and Notes Payable | | | 1,204,660 | | | | 1,249,240 | |
| Accounts Payable and Accrued Expenses | | | 242,060 | | | | 260,546 | |
| Tenant's Deposits and Advance Rent | | | 24,054 | | | | 49,450 | |
| Income Taxes Payable | | | 16,072 | | | | 6,321 | |
| | | | | | | | | |
| Total Liabilities | | $ | 1,486,846 | | | $ | 1,565,557 | |
| | | | | | | | | |
| Shareholders’ Equity: | | | | | | | | |
| Common Stock - $.05 par, 5,000,000 shares Authorized; 5,000,000 shares in 2013 and 2012 | | $ | 250,000 | | | $ | 250,000 | |
| Paid-In Capital | | | 1,212,102 | | | | 1,212,102 | |
| Deficit | | | (960,618 | ) | | | (1,013,202 | ) |
| | | | | | | | | |
| Total Shareholders’ Equity | | $ | 501,484 | | | $ | 448,900 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 1,988,330 | | | $ | 2,014,457 | |
See Accompanying Notes to Financial Statements.
MILLER INDUSTRIES, INC.
STATEMENT OF OPERATIONS
YEARS ENDED APRIL 30, 2013 AND 2012
| | | 2013 | | | 2013 | |
| Revenues: | | | | | | | | |
| Rental Income | | $ | 331,686 | | | $ | 400,367 | |
| Hardware Sales (Net) | | | - | | | | 138 | |
| Other Income | | | 5,607 | | | | 6,084 | |
| | | | | | | | | |
| Total Revenues | | $ | 337,293 | | | $ | 406,589 | |
| | | | | | | | | |
| Expenses: | | | | | | | | |
| Rental Expenses (Except Interest) | | $ | 166,827 | | | $ | 245,993 | |
| Cost of Hardware Sales | | | - | | | | - | |
| Administrative | | | 61,991 | | | | 57,330 | |
| Interest | | | 34,515 | | | | 36,042 | |
| | | | | | | | | |
| Total Expenses | | $ | 263,333 | | | $ | 339,365 | |
| | | | | | | | | |
| Income Before Tax Provision | | $ | 73,960 | | | $ | 67,224 | |
| | | | | | | | | |
| Provision (Benefit) for Income Tax: | | | | | | | | |
| Federal Income Tax | | $ | 12,585 | | | $ | 10,800 | |
| State Income Tax | | | 3,803 | | | | 3,422 | |
| Provision for Income Tax Before Realization of Prior Years' Tax Benefit, Adjustments and Change in valuation allowance | | $ | 16,388 | | | $ | 14,222 | |
| Tax Benefits of Net Operating Loss Carryforward, Adjustments and Change in Valuation Allowance | | | 4,988 | | | | 16,029 | |
| Total Provision for Income Tax (Net of Tax Benefits), Adjustments and Change in Valuation Allowance | | $ | 21,376 | | | $ | 30,251 | |
| | | | | | | | | |
| Net Income | | $ | 52,584 | | | $ | 36,973 | |
| | | | | | | | | |
| Income per Common Share (Basic) | | $ | .01 | | | $ | .01 | |
| | | | | | | | | |
| Weighted Average Shares of Common Stock Outstanding (Basic) | | | 5,000,000 | | | | 4,784,449 | |
See Accompanying Notes to Financial Statements.
MILLER INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED APRIL 30, 2013 AND 2012
| | | 2013 | | | 2012 | |
| Cash Flows from Operating Activities: | | | | | | | | |
| | | | | | | | | |
| Net Income | | $ | 52,584 | | | $ | 36,973 | |
| Adjustments to Reconcile Net Income to Net Cash | | | | | | | | |
| Provided by (used for) Operating Activities: | | | | | | | | |
| Depreciation | | | 11,885 | | | | 13,910 | |
| Amortization | | | 6,335 | | | | 6,335 | |
| Deferred Tax Asset Valuation Adjustment | | | 5,305 | | | | 23,930 | |
| Bad Debt Provision | | | | | | | (950 | ) |
| Changes in Operating Assets and Liabilities | | | | | | | | |
| (Increase) Decrease in Accounts Receivable | | | 350 | | | | (255 | ) |
| (Increase) Decrease in Prepaid Expenses and Other | | | (800 | ) | | | 544 | |
| Increase (Decrease) in Accounts Payable and Accruals and Income Taxes | | | (8,736 | ) | | | (119,608 | ) |
| Increase (Decrease in Tenants Deposits And Advances | | | (25,396 | ) | | | (22,583 | ) |
| | | | | | | | | |
| Net Cash Provided by (used by) Operating Activities | | $ | 41,527 | | | $ | (61,704 | ) |
| | | | | | | | | |
| Cash Flows from Investing Activities: | | | | | | | | |
| Acquisition of Property, Equipment, and Intangible | | $ | | | | $ | | |
| | | | | | | | | |
| Net Cash (used by) Investing Activities | | $ | | | | $ | | |
| | | | | | | | | |
| Cash Flows from Financing Activities: | | | | | | | | |
| Principal Payments Under Borrowings | | $ | (44,580 | ) | | $ | (44,579 | ) |
| Proceeds from Stock option purchase | | | | | | | 121,040 | |
| | | | | | | | | |
| Net Cash Provided by (used by) Financing Activities | | $ | (44,580 | ) | | $ | 76,461 | |
| | | | | | | | | |
| Net Increase (Decrease) in Cash and Cash Equivalents | | $ | (3,053 | ) | | $ | (14,757 | ) |
| | | | | | | | | |
| Cash and Cash Equivalents at the Beginning of Year | | | 1,609,457 | | | | 1,594,700 | |
| Cash and Cash Equivalents at the End of Quarter | | $ | 1,606,404 | | | $ | 1,609,457 | |
| | | | | | | | | |
| Additional Cash Flow Information: | | | | | | | | |
| Cash Payments During the Year | | | | | | | | |
| Interest | | $ | 34,577 | | | $ | 36,004 | |
| Income Taxes | | $ | 6,321 | | | $ | - | |
See Accompanying Notes to Financial Statements.
MILLER INDUSTRIES, INC.
STATEMENT OF SHAREHOLDERS’ EQUITY
YEARS ENDED APRIL 30, 2013 AND 2012
COMMON STOCK
| | | Shares
Issued | | | Amount | | | Additional
Paid-in
Capital | | | (Deficit) | | | (Total) | |
| | | | | | | | | | | | | | | | |
| Balance at April 30, 2010 | | | 2,982,662 | | | $ | 149,133 | | | $ | 1,191,929 | | | $ | (1,124,327 | ) | | $ | 216,735 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Income – 2011 | | | - | | | | - | | | | - | | | | 74,152 | | | | 74,152 | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at April 30, 2011 | | | 2,982,662 | | | $ | 149,133 | | | $ | 1,191,929 | | | $ | (1,050,175 | ) | | $ | 290,887 | |
| | | | | | | | | | | | | | | | | | | | | |
| Stock Option Exercised June 8, 2011 | | | 2,017,338 | | | | 100,867 | | | | 20,173 | | | | | | | | 121,040 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Income – 2012 | | | - | | | | - | | | | - | | | | 36,973 | | | | 36,973 | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at April 30, 2012 | | | 5,000,000 | | | $ | 250,000 | | | $ | 1,212,102 | | | $ | (1,013,202 | ) | | $ | 448,900 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Income – 2013 | | | - | | | | - | | | | - | | | | 52,584 | | | | 52,584 | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at April 30, 2013 | | | 5,000,000 | | | $ | 250,000 | | | $ | 1,212,102 | | | $ | (960,618 | ) | | $ | 501,484 | |
See Accompanying Notes to Financial Statements.
Miller Industries, Inc.
Notes to Financial Statements
MILLER INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013 AND 2012
NOTE A - Summary of Significant Accounting Policies
This summary of accounting policies for Miller Industries Inc. is presented to assist in understanding the Company’s financial statements. The accounting policies conform to U.S. generally accepted accounting principles and have been consistently applied in preparation of the financial statements.
Miller Industries, Inc., a Florida corporation, currently and since August 1991, has been engaged in the ownership and management of 98,000 square feet of offices and warehouse located in Miami, Florida. The Company also distributes hardware parts for aluminum windows and doors previously manufactured by Miller. During August 1991, the Company discontinued its operations of manufacturing of aluminum windows and doors pursuant to a plan of reorganization.
Property is carried at cost. The Company calculates depreciation under the straight-line method at annual rates based upon the estimated service lives of each type of asset. These service lives are generally as follows:
| Building and Improvements | 10 to 30 years |
| Machinery and Equipment | 7 years |
| Furniture and Fixtures | 7 years |
Real property and equipment, with an original cost of approximately $750,000, have been fully depreciated at April 30, 2013.
Deferred lease incentive and loan costs are carried at cost. The Company amortizes these assets on a straight-line basis up to 10 years.
The Company accounts for income taxes under the liability method. Deferred income tax assets and liabilities are determined based on differences between the financial reporting and tax base of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to be reversed.
Miller Industries, Inc.
Notes to Financial Statements
The Company uses a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% (fifty percent) likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments. At April 30, 2012 and 2013, respectively, the Company did not record any liabilities for uncertain tax positions.
Basic earnings per share (“EPS”) is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants). Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.
| 6. | Cash and Cash Equivalents – |
The Company considers all short-term investments with an original maturity of three months or less to be cash equivalents.
The balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At April 30, 2013, and 2012, the Company’s uninsured bank balances approximated $1,356,000 and $1,360,000 respectively.
| 7. | Financial Instruments – |
The carrying amounts of cash and cash equivalents, other assets, accounts payable, and debt approximate fair value.
The Company is subject to certain risk arising from the concentration of its tenant income from entities that comprise 10% or more of the Company’s revenue. Tenant “A” 76% of Revenue. Tenant “B” 21% of Revenue.
The Company recognizes rental income on a straight-line basis over the respective lease terms. The Company recognizes hardware sales upon shipment of goods to customers.
| 10. | Environmental Cleanup Matters - |
The Company expenses environmental expenditures related to existing conditions resulting from past or current operations and from which no current or future benefit is discernable. The Company determines its liability on a site-by-site basis and records a liability at the time when it is probable and can be reasonably estimated.
Miller Industries, Inc.
Notes to Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes Actual results could differ from those estimates. The most significant estimates included in the preparation of the financial statements are related to income taxes, asset lives, accruals and valuation allowances.
| 12. | Comprehensive Income - |
ASC 220, Comprehensive Income established standards for reporting and displaying comprehensive income and its components in the financial statements. The company does not have any comprehensive income for fiscal 2013 and 2012.
Under ASC 360, Property, Plant and Equipment, The Company evaluates the carrying value of long-lived assets (including property, equipment and intangible assets) when events or circumstances warrant such a review. If the carrying value of the long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the asset. The respective fair values of the Company’s long-lived assets exceeded their carrying amounts at April 30, 2013 and April 30, 2012.
The Company operates in one segment and therefore segment information is not presented.
| 15. | Derivative Instruments - |
Under ASC 815, Derivative and Hedging, the Company will be required to recognize all derivative instruments, including certain derivative instruments embedded in other contracts on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.
Miller Industries, Inc.
Notes to Financial Statements
| 16. | Stock-Based Compensation - |
In accordance with ASC 718, Compensation- Stock Based Compensation, the Company accounts for share-based payments using the fair value method. Common shares issued to third parties for non-cash consideration are valued based on the fair market value of the service provided or the fair market value of the common stock on the measurement date, whichever is more readily determinable.
| 17. | Pensions and Other Post-Retirement Benefits - |
ASC 715, Compensation – Retirement benefits, requires additional disclosures relating to how investment allocation decisions are made, the major categories of plan assets and the inputs and valuation techniques used to measure the fair value of plan assets. The overall objective of ASC 715 is to improve and standardize disclosures about pensions and other post-retirement benefits and to make the required information more understandable.
The Company has not initiated benefit plans to date which would require disclosure under the statement.
Advertising costs are charged to operations in the period incurred. The Company has not incurred any advertising costs for fiscal 2013 and 2012.
| 19. | Business Concentrations - |
Rental income of the Company’s office and warehouse building is subject to the economic conditions of the industrial real estate market place. Changes in this industry may significantly affect management’s estimates and the Company’s performance
| 20. | Accounting Changes and Error Corrections - |
The Company follows ASC 250, Accounting Changes and Error Corrections. Changes in accounting principle are reported through retrospective application of the new accounting principle to all prior periods. Errors in the financial statements of a prior period discovered subsequent to their issuance shall be reported as a prior period adjustment by restating the prior period.
| 21. | Tenant’s Security Deposits – |
The Company requires security deposits from lessees for the duration of the lease. The security deposits are refunded when the tenant vacates, provided the tenant has not damaged the space and is current on rental payments.
| 22. | Fair Value Measurements and Disclosures – |
ASC 820, Fair Value Measurements and Disclosures, applies whenever other standards require assets or liabilities to be measured at fair value and does not expand the use of fair value in any new circumstances. ASC 820 established a hierarchy that prioritizes the information used in developing fair value estimates.
Miller Industries, Inc.
Notes to Financial Statements
The levels of fair value hierarchy are as follows:
| · | Level 1 inputs utilize unadjusted quoted prices in active markets for identical assets or liabilities that the company has the ability to access; |
| · | Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals; and |
| · | Level 3 inputs are unobservable and are typically based on our own assumptions, including situations where there is little, if any, market activity. |
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company categorizes such financial asset or liability based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input too the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the Level 3 category. As a result, the unrealized gains and losses for assets within the Level 3 category can include changes in fair value that were attributable to both observable and unobservable inputs. The Company has no instruments that require additional disclosure.
| 23. | Fair Value Option for Financial Instruments - |
The Company’s financial instruments consist principally of cash, receivables, accounts payable and mortgage payable. Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, the fair value of the Company’s financial instruments are determined based upon Level “1” and Level “2” inputs.
Miller Industries, Inc.
Notes to Financial Statements
NOTE B - Mortgage Payable
Principal balances outstanding and details of notes payable are summarized as follows:
| | | 2013 | | | 2012 | |
| 10-year note payable, collateralized by mortgage on land and building, improvements, personal property collateral assignment of all rents and leases, along with the personal guaranty of the Company’s Chairman of the Board to 50% of all sums due under the loan. In addition, the guarantor shall indemnify lender from any and all liability which may result from the environmental condition of the property. The note bears interest at ½ of 1% (.050%) rate under the lenders prime rate per annum. The Rate of interest is adjustable annually based on the current prime at the anniversary date. The Company’s annual interest rate at April 30, 2012 is 2.75%. The note is payable in monthly installments of $3,715, plus accrued interest, with a final payment of approximately $911,000 due November 2019. | | | | | | | | |
| | | $ | 1,204,660 | | | $ | 1,249,240 | |
Payments of principal required on the foregoing debt are as follows:
| Fiscal Year Ending |
| 2014 | | | 44,580 | |
| 2015 | | | 44,580 | |
| 2016 | | | 44,580 | |
| 2017 | | | 44,580 | |
| | | | | |
| Thereafter | | | 1,026,340 | |
| Total | | $ | 1,204,660 | |
Land, buildings and improvements, with an approximate cost of $1,222,000 and an approximate net book value of $340,000 are pledged as collateral for these obligations.
Miller Industries, Inc.
Notes to Financial Statements
NOTE C - Income Taxes
The provision (benefit) for income taxes consists of the following:
| | | 2013 | | | 2012 | |
| | | | | | | |
| Current | | $ | 16,072 | | | $ | 14,891 | |
| Deferred | | | - | | | | (669 | ) |
| Tax Benefit of Net Operating Loss Carryforward | | | 316 | | | | - | |
| Deferred Tax Adjustment and Changes to Valuation Allowance | | | 4,988 | | | | 16,029 | |
| | | | | | | | | |
| Total | | $ | 21,376 | | | $ | 30,251 | |
Deferred income taxes arise primarily due to temporary differences in recognizing certain revenues and expenses for tax purposes, the required use of extended lives for calculation of depreciation for tax purposes, and the expected use of tax loss carryforwards in future periods. The deferred tax adjustment relates to the June 30, 2005 stock option the Company granted to Angelo Napolitano (See Note H). The Company booked approximately $65,400 in fiscal 2006 for “financial statement” purposes as the fair value of the options granted. For “tax purposes,” this expense was not deducted on any income tax return, resulting in a deferred tax asset of approximately $25,000 for this timing difference. On June 7, 2011, Angelo Napolitano exercised the option. The market value of the Company’s shares on June 3, 2011 (closest date to June 7, 2011 that shares were traded) was $.08 per share. Since the option shares are restricted as to trading, a 20% valuation discount was applied. The value per share net of the discount amounted to $.06 per share. The option price paid by Angelo Napolitano was $.06 per share (strike price). Therefore, an adjustment is required to the deferred tax account in the approximate amount of $25,000 as the market value of the option shares (net of the valuation discount) does not exceed the strike price.
The components of the net deferred tax asset at April 30, 2013 and 2012 are as follows:
| | | 2013 | | | 2012 | |
| Properties and Equipment principally due to depreciation | | $ | 39,993 | | | $ | 44,098 | |
| | | | | | | | | |
| Provision for Bad Debts | | | | | | | 1,200 | |
| | | | | | | | | |
| Total gross deferred tax assets | | $ | 39,993 | | | $ | 45,298 | |
| Less: Valuation allowance | | | — | | | | — | |
| Net Deferred Tax Asset | | $ | 39,993 | | | $ | 45,298 | |
Miller Industries, Inc.
Notes to Financial Statements
A valuation allowance is provided to reduce the deferred tax assets to a level which, more likely than not, will be realized. The net deferred assets reflect management’s assessment of the amount which will be realized from future taxable earnings or alternative tax strategies.
Total Federal tax expense for years ended April 30, 2013 and 2012 differed from the amount computed by applying the U.S. federal income tax rate of 34% to income (loss) from continuing operations before income tax for the following reasons:
| | | 2013 | | | 2012 | |
| | | | | | Percent
Of Pre-
Tax | | | | | | Percent
Of Pre-
Tax | |
| | | Amount | | | Income | | | Amount | | | Income | |
| Income before provision for income taxes | | $ | 73,960 | | | | 100 | % | | $ | 67,224 | | | | 100 | % |
| | | | | | | | | | | | | | | | | |
| Computed expected tax expense | | $ | 25,146 | | | | 34 | % | | $ | 22,856 | | | | 34 | % |
| Federal tax (benefit) of State Income Tax | | | (1,293 | ) | | | (2 | ) | | | (1,163 | ) | | | (2 | ) |
| Sur Tax Exemption | | | (11,268 | ) | | | (15 | ) | | | (10,893 | ) | | | (16 | ) |
| | | | | | | | | | | | | | | | | |
| Federal Tax Before Tax Benefits | | $ | 12,585 | | | | 17 | % | | $ | 10,800 | | | | 16 | % |
| Tax Benefits of Net Operating | | | | | | | | | | | | | | | | |
| Loss Carryforwards, Deferred Tax Adjustments And Change in Valuation Allowance | | | 4,190 | | | | 6 | | | | 14,314 | | | | 21 | |
| | | | | | | | | | | | | | | | | |
| Actual Federal Tax | | $ | 16,775 | | | | 23 | % | | $ | 25,114 | | | | 37 | % |
NOTE D - Rental Income
During 2013 the Company leased warehouse and manufacturing space to three unrelated third parties under leases that expire at various dates thru fiscal 2015. Rental income approximated $332,000 and $401,000 for fiscal 2013 and 2012, respectively. Rental income from these leases amounted to 100% of the total 2013 rental income and 100% of the total 2012 rental income.
Future minimum rental income under non-cancelable leases, excluding cost of living adjustments are as follows:
| 2014 | | $ | 228,506 | |
| 2015 | | $ | 57,051 | |
Miller Industries, Inc.
Notes to Financial Statements
NOTE E - Rental Expenses (Except for Interest)
| Rental expenses consisted of: | | | | | | |
| | | 2013 | | | 2012 | |
| Bad Debt- Provision | | $ | — | | | $ | (950 | ) |
| Commissions and Consulting | | | 3,243 | | | | 2,394 | |
| Depreciation and Amortization | | | 18,220 | | | | 20,245 | |
| Insurance | | | 31,192 | | | | 31,322 | |
| Management Fees | | | 36,000 | | | | 36,000 | |
| Outside Services | | | 3,446 | | | | 2,879 | |
| Repairs and Maintenance | | | 5,636 | | | | 36,435 | |
| Utilities | | | 5,436 | | | | 5,352 | |
| Replacements | | | | | | | 30,000 | |
| Taxes and permits | | | 63,654 | | | | 82,316 | |
| | | | | | | | | |
| Totals | | $ | 166,827 | | | $ | 245,993 | |
NOTE F - Administrative Expenses
| Administrative expenses consisted of: | | | | | | |
| | | 2013 | | | 2012 | |
| Accounting and Legal | | $ | 35,712 | | | $ | 30,577 | |
| Office Supplies/Postage/Other | | | 1,133 | | | | 1,085 | |
| Stockholders’ Expenses | | | 24,025 | | | | 24,611 | |
| Telephone | | | 1,121 | | | | 1,057 | |
| | | | | | | | | |
| Totals | | $ | 61,991 | | | $ | 57,330 | |
NOTE G - Related Party Transactions
Management fees in the amount of $36,000 for 2013 and 2012 were incurred by the Company to Harnap Corp., which is controlled by the Chairman of the Board of Miller Industries, Inc. Harnap Corp. was reimbursed for bookkeeping services, tenant improvements, repairs, and office supplies during fiscal 2013 and 2012 for approximately $19,500. Included in accounts payable is approximately $100,000 and $115,000 for 2013 and 2012 that is owned to Harnap Corp.
Miller Industries, Inc.
Notes to Financial Statements
NOTE H – Stock Option Agreement
On June 30, 2005 the Company issued stock options to Angelo Napolitano in exchange for the benefits he has provided to the Company through his personal guarantee of the company’s bank loan, and the services rendered by Mr. Napolitano in his capacity as the company’s sole officer and director. The options vest 100% at the grant date and expire in 10 years from the grant date. The company granted options to Mr. Napolitano to purchase up to 2,017,338 shares of the Company’s Common Stock during the term of the Options at a price equal to $ .18 per share (Exercise Price).
The average fair values of the options granted during fiscal 2006 were estimated at $.0324, using the Black-Scholes options-pricing model, which included the following assumptions:
| | | 2006 | |
| Stock Price | | $ | .05 | |
| Strike Price | | | .18 | |
| Expected Life | | | 9.17years | |
| Risk-Free Interest Rate | | | 3.80 | % |
| Volatility | | | 79.23 | % |
Approximately $65,400 was recorded as compensation expense for fiscal 2006 related to this grant.
On February 22, 2010, the Company modified the option previously granted to Angelo Napolitano that entitled him to acquire 2,017,338 shares of the Company’s common stock. Under the terms of the modification, the exercise price for the options were reduced from $0.18 per share to $0.06 per share. The Company reduced the exercise price of the option in consideration of Mr. Napolitano’s guarantee of the Company’s bank loan and his services as the Company’s president. The average fair values of the options modified during fiscal year 2010 were estimated at $.0130 using the Black-Scholes options-pricing model, which included the following assumptions:
| | | 2010 | |
| Stock Price | | $ | .04 | |
| Strike Price | | | .06 | |
| Expected Life | | | 5.17years | |
| Risk-Free Interest Rate | | | 3.78 | % |
| Volatility | | | 44.6 | % |
The approximate compensation value of the modified option at February 22, 2010 is $26,000 which is less than the $65,000 compensation cost of the original option. Under FASB Statement 123R, the accounting for a modification, total compensation cost for the award should generally not be less than the awards original fair value. Therefore, if fair value of the modified award is less than fair value of the original award on the modification date, the grant date value is not reduced.
Miller Industries, Inc.
Notes to Financial Statements
A summary of the status of the company’s stock option agreement as of April 30, 2013 and 2012, and changes during the years then ended were as follows:
| | | 2013 | | | 2012 | |
| | | Shares
Subject
To Option | | | Exercise
Price Per
Share | | | Shares
Subject
To Option | | | Exercise
Price Per
Share | |
| Outstanding, May 1 | | | | | | $ | | | | | 2,017,338 | | | $ | .06 | |
| Granted | | | - | | | | - | | | | - | | | | - | |
| Exercised | | | - | | | | - | | | | 2,017,338 | | | $ | .06 | |
| Cancelled | | | - | | | | - | | | | - | | | | - | |
| Outstanding/Exercisable | | | | | | | | | | | | | | | | |
| April 30 | | | - | | | | - | | | | | | | | | |
NOTE I – Commitments, Contingent Liabilities, Other Matters, and Subsequent Events
A Company tenant of approximately 20,000 square feet did not renew its lease that expired September 30, 2012. Rental income of approximately $13,000 per month ($155,000 per annum) ceased during September 2012.
