U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 26, 2002
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( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from...............to....................
Commission file number........................................
Jupiter Marine International Holdings, Inc.
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(Exact name of small business issuer as specified in its charter)
Florida 65-0794113
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3391 S. E. 14th Avenue, Port Everglades, FL 33316
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(Address of principal executive offices)
954-523-8985
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since
last report)
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 [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of June 30, 2003:
6,681,408 shares of Common Stock; 315,000 Series A Preferred Shares; 401,000
Series B Preferred Shares; and 848,757 Series C Preferred Shares.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
Page
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Part I. Financial Information 3
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Item 1. Consolidated Financial Statements 3
Balance Sheets as of October 26, 2002 and July 27, 2002 3-4
Statements of Operations for the three months ended October 26, 2002
and October 27, 2001 5
Statements of Cash Flows for the three months ended October
26, 2002 and October 27, 2001 6
Notes to consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
Item 3. Controls and Procedures 10
Part II. Other Information 11
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Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submissions of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
2
PART I FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
Jupiter Marine International Holdings, Inc
Consolidated Balance Sheets
Assets October 26, July 27,
2002 2002
(unaudited) (audited)
--------------------------------------
Current assets:
Cash and cash equivalents $ 17,406 $ 139,072
Accounts receivable, net 30,043 35,760
Inventory 1,110,513 1,016,490
Prepaid expenses 33,884 2,209
--------------------------------------
Total current assets 1,191,846 1,193,531
Property and equipment:
Boat Molds 1,435,190 1,421,802
Machinery and equipment 171,786 170,043
Leasehold improvements 251,851 249,898
Office equipment 54,277 52,514
--------------------------------------
1,913,104 1,894,257
Less accumulated depreciation and amortization 1,156,185 1,064,246
Property and equipment, net 756,919 830,011
Other assets 48,194 48,194
--------------------------------------
Total assets $ 1,996,959 $ 2,071,736
======================================
See accompanying notes to consolidated financial statements
3
Jupiter Marine International Holdings, Inc
Consolidated Balance Sheets
Liabilities and Shareholder's Equity October 26, July 27,
2002 2002
(unaudited) (audited)
--------------------------------------
Current liabilities:
Accounts payable 454,180 616,039
Accrued expenses 345,404 351,853
Customer deposits 173,714 206,355
Warranty reserve 96,223 97,997
Capital lease obligation 4,113 4,113
Current portion of long-term debt 375,000 375,000
--------------------------------------
Total current liabilities 1,448,634 1,651,357
--------------------------------------
Long-term liabilities:
Accrued interest payable 96,960 88,959
Capital lease obligation 6,854 8,056
Long-term debt shareholder 350,000 350,000
--------------------------------------
453,814 447,015
--------------------------------------
Total liabilities 1,902,448 2,098,372
Stockholders' equity:
Convertible preferred stock, $0.01 par value, 5,000,000
shares authorized ($1,568,277 aggregate liquidation preference)
Series A, 315,000 shares issued and outstanding 315 315
Series B, 401,000 shares issued and outstanding 401 401
Series C, 852,277 shares issued and outstanding 852 852
Common stock, $0.01 par vale, 50,000,000 shares
authorized, 4,340,170 issued and outstanding 4,341 4,341
Additional paid-in capital 2,445,477 2,418,366
Accumulated deficit (2,356,875) (2,450,911)
--------------------------------------
Total stockholder's equity 94,511 (26,636)
--------------------------------------
Total liabilities and stockholder's equity $ 1,996,959 $ 2,071,736
======================================
See accompanying notes to consolidated financial statements
4
Jupiter Marine International Holdings, Inc
Consolidated Statements of Operations
(Unaudited)
Three Months Three Months
Ended Ended
October 26, 2002 October 27, 2001
----------------------------------------
Net Sales $ 2,145,927 $ 1,925,381
Cost of Sales 1,646,889 1,456,030
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Gross Profit 499,038 469,351
Operating Expenses:
Selling, general & administrative 270,128 264,754
Depreciation & amortization 91,940 70,073
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Total Operating Expenses 362,068 334,827
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Other income/(expense)
Interest expense (15,711) (8,791)
Other (112) 140
----------------------------------------
Total other income/(expense) (15,823) (8,651)
Net income 121,147 125,873
Dividends on preferred stock (27,111) (33,179)
----------------------------------------
Net income applicable to common shareholders $ 94,036 $ 92,694
========================================
Net income per common share - basic $ 0.02 $ 0.02
Weighted average of number of common shares outstanding 4,366,270 4,143,300
========================================
See accompanying notes to consolidated financial statements
5
Jupiter Marine International Holdings, Inc
Consolidated Statements of Cash Flows
Unaudited
Three Months Ended
October 26, October 27,
2002 2001
-----------------------------------
Operating Activities:
Net income $ 121,147 $ 125,873
Adjustments to reconcile net income to
net cash (used in) provided by operating activities:
Depreciation and amortization 91,940 70,073
Decrease (increase) in:
Accounts receivable 5,717 (2,644)
Inventory (94,023) (15,533)
Prepaid expenses (31,675) (296)
Other assets -- (5,673)
Increase (decrease) in:
Accounts payable (161,860) 149,126
Accrued expenses (6,449) 544
Customer deposits (32,641) (102,541)
Warranty reserve (1,774) 447
Accrued interest payable 8,001 8,751
-----------------------------------
Net cash (used in) provided by operating activities (101,617) 228,127
-----------------------------------
Investing Activities:
Purchase of property and equipment (18,847) (98,312)
Net cash used in investing activities (18,847) (98,312)
-----------------------------------
Financing activities:
Payments on capital lease obligations (1,202)
Net cash provided by (used in) financing activities: (1,202) --
-----------------------------------
Net increase (decrease) in cash (121,666) 129,815
Cash - Beginning of the period 139,072 73,068
-----------------------------------
Cash - End of the period $ 17,406 $ 202,883
===================================
See accompanying notes to consolidated financial statements
6
Jupiter Marine International Holdings, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying unaudited consolidated 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, consisting of normal recurring
accruals considered necessary for a fair presentation have been included.
Operating results for the three months ended October 26, 2002, are not
necessarily indicative of the results that may be expected for the year ending
July 26, 2003. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended July 27, 2002.
In order to maintain consistency and comparability between periods
presented certain amounts have been reclassified from the previously reported
financial statements in order to conform to the financial statement presentation
of the current period.
The consolidated financial statements include Jupiter Marine
International Holdings, Inc. and its wholly-owned subsidiaries, Jupiter Marine
International, Inc. and Phoenix Yacht Corporation. All inter-company balances
and transactions have been eliminated.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
Jupiter Marine International Holdings, Inc. (JMIH), a Florida
corporation, was incorporated on May 19, 1998. On May 26, 1998, JMIH acquired
all of the outstanding shares of common stock of Jupiter Marine International,
Inc. (JMI), a boat manufacturing company, which was incorporated under the laws
of the State of Florida on November 7, 1997. On February 17, 2000 JMIH purchased
certain of the assets of Phoenix Marine International, Inc. consisting of some
molds for inboard powered sportfishing boats. JMIH formed a new wholly owned
subsidiary, Phoenix Yacht Corporation (Phoenix) to hold these assets. JMIH, JMI
and Phoenix will sometimes be collectively referred to as the "Company". The
Company's principal offices and manufacturing facilities are located in Port
Everglades, Florida. The Company's Web site address is www.jupitermarine.com.
The Company designs, manufactures and markets a diverse mix of high
quality sportfishing boats under the Jupiter brand name. The outboard powered
product line currently consists of four models:
31' Open Center Console
31' Cuddy Cabin
27' Open center Console
27' Console-berth model
The inboard powered models include a completely redesigned 35'
Flybridge Convertible as well as a 38' Flybridge Convertible. These models were
initially marketed under the Phoenix name. However, effective February 2002 the
Company markets its products only under the Jupiter brand name.
Management's discussion and analysis contains various "forward-looking
statements" within the meaning of the Securities and Exchange Act of 1934. Such
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"expect," "anticipate," "estimate" or "continue" or use of negative or other
variations or comparable terminology.
The Company cautions that these statements are further qualified by
important factors that could cause actual results to differ materially from
those contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.
Net Sales
The Company's net sales were $2,145,927 for the quarter ended October
26, 2002 an increase of $220,546 (or 11.5%) as compared to $1,925,381 for the
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quarter ended October 27, 2001. Sales activity has recovered nicely from the
aftermath of 9/11. Although the economy is still very sluggish the products
manufactured by the Company are still in demand. Management attributes this
demand to the Company's reputation for building high quality, very seaworthy
boats. Management cautions that there can be no assurances that retail demand
for its product will continue to go against the economic trend. The Company's
advertising campaign, boating magazine articles and boat show participation has
increased the awareness of the Jupiter brand name to the retail customer. Our
order backlog as of October 26, 2002 is about equal to last year at about eight
weeks.
Cost of Sales and Gross Profit
Cost of sales for the quarter ended October 26, 2002 was $1,646,889
resulting in $499,038 of gross profit or 23.5% of net sales. For the quarter
ended October 27, 2001 cost of sales was $1,456,030 and gross margin was
$469,351 or 24.4% of net sales. The slight decline in gross profit percent is
due to greater sales of boats during the quarter ended October 26, 2002 with
less gross profit margin than during the quarter ended October 27, 2001.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $270,128 an increase
of $5,374 (2.0%) for the quarter ended October 27, 2001, or 12.6% of net sales,
as compared to $264,754, or 13.8% of net sales for the quarter ended October 27,
2001. Management has instituted budgetary constraints to maintain spending at
acceptable levels. No new employees were added during this quarter.
Depreciation and amortization expense increased by $21,867 to $91,940
for the quarter ended October 26, 2002 as compared to $70,073 for the same
quarter last year. New boat molds account for this increase.
Interest expense increased by $6,920 to $15,711 for the quarter ended
October 26, 2002 primarily due to the revolving line of credit disclosed below
and outstanding notes.
Liquidity and Capital Resources
The Company, from its inception, has experienced poor cash flows and
has met its cash requirements by borrowings and by issuing, through private
placements, its common and preferred stock and through third party loans. The
Company anticipates that funds received from these sources and cash generated
from operations should be sufficient to satisfy the Company's contemplated cash
requirements for at least the next twelve months. After such time, the Company
anticipates that cash generated from operations will be sufficient to fund its
operations, although there can be no assurances that this be the case.
During November 2001 the Company negotiated a $250,000 revolving line
of credit with a financial institution which expired November 2002. The line of
credit was subsequently extended through November 2003 and increased to
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$500,000. The note on the line of credit bears interest at the financial
institution's index rate plus 2%. The note is collateralized by all of the
Company's assets and is personally guaranteed by Carl Herndon.
Inventories increased by $94,023 to $1,110,513 at October 26, 2002
compared to $1,016,490 at July 27, 2002 resulting primarily from maintaining a
supply of outboard engine on hand as opposed to buying them from a distributor
on an as needed basis. The change in prepaid expenses relates solely to the
timing of expenditures made. Expenditures for property and equipment was kept at
a minimum for the quarter ended October 26, 2002. Accounts payable decreased by
$161,859 during this same time period as vendors accounts were brought closer to
their terms. Customer deposits decreased during the three months ended October
26, 2002 as boats relating to these deposits were delivered and new orders did
not require deposits.
The Company does not anticipate any significant purchase of equipment
in the near future. The number and level of employees at October 26, 2002 should
be adequate to fulfill the production schedule.
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures
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Within the 90 days prior to the filing date of this report, the
Company carried out an evaluation of the effectiveness of the design and
operation of its disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. This evaluation was done under the supervision and with the
participation of the Company's Principal Executive Officer and Principal
Accounting Officer. Based upon that evaluation, they concluded that the
Company's disclosure controls and procedures are effective in gathering,
analyzing and disclosing information needed to satisfy the Company's disclosure
obligations under the Exchange Act.
Changes in internal controls
- ----------------------------
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect those controls since the most
recent evaluation of such controls.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports On Form 8-K
(a) Exhibits required by Item 601 of Requlation S-B
16.1 Letter from former Auditor (previously filed on Form 8-K
dated August 14, 2003)
99.1 Certification of Principal Executive Officer
99.2 Certification of Principal Accounting Officer
(b) Reports on Form 8-K
On August 14, 2002, the Company filed a Current Report on Form 8-K to
disclose that on July 26, 2002, the Board of Directors of the Company approved
the engagement of Spicer, Jeffries & Co. as independent auditors of the Company
for the fiscal year ended July 27, 2002, to replace the firm of BDO Seidman,
LLP, who were dismissed as the Company's auditors, effective July 26, 2002.
On November 26, 2002 the Company filed a Current Report on Form 8-K to
disclose that on November 21, 2002 Triton Holdings International Corp.,
("Triton") the holder of a $350,000 secured promissory note due on January 14,
2003 (the "Senior Note") issued by the Company sold the Senior Note to Carl
Herndon and Lawrence Tierney, whom are officers and directors of the Company.
11
The Senior Note was only sold to Messrs. Herndon and Tierney after the Company
was unable to satisfy payment of the Senior Note, despite seeking financing from
unrelated third parties on the same or similar terms. In connection with the
purchase of the Senior Note, Herndon and Tierney have extended the term of the
Senior Note through February 14, 2004. Further, and pursuant to the terms of the
Senior Note, Herndon and Tierney received an aggregate of 1,808,098 shares of
the Company's common stock which would otherwise have been issued to Triton
pursuant to the Senior Note and 500,000 shares of the Company common stock held
by Triton.
Herndon and Tierney paid Triton $400,000 (the "Purchase Price") payable
in the amount of $150,000 cash and a Secured Promissory Note in the principal
amount of $250,000. The Secured Promissory Note is secured by a first mortgage
on real estate owned by Mr. Herndon and leased to the Company.
In consideration for delivery of the Purchase Price, Triton transferred
and assigned to Herndon (1) all right, title and interest under a Security
Agreement dated as of January 14, 1999, by and between the Company and Triton;
(2) and all right, title and interest under the Management Agreement dated
January 14, 1999, by and between the Company and Triton. Mr. Herndon has
cancelled the Management Agreement and forgiven all outstanding fees and
obligations due under the Management Agreement.
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
Date: July 17, 2003 By: /s/Carl Herndon
-----------------------------------------------
Carl Herndon, Director, Chief Executive Officer
(Principal Executive Officer) and President
Date: July 17, 2003 By: /s/Lawrence Tierney
-----------------------------------------------
Lawrence Tierney, Director and Chief
Financial Officer (Principal Accounting Officer)
13
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carl Herndon, the Principal Executive Officer of Jupiter Marine
International Holdings, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Jupiter
Marine International Holdings, Inc.
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Quarterly Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) [and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))] for the
registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries is made known to us by others within those
entities, particularly during the period in which this Quarterly Report
is being prepared;
b) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this Quarterly Report (the "Evaluation Date"); and
d) presented in this Quarterly Report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent function):
14
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's ability
to record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls.
6. The Registrant's other certifying officer and I have indicated in
this Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
DATE: July 17, 2003 /s/ Carl Herndon
-----------------------------------------
Carl Herndon, Principal Executive Officer
15
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lawrence Tierney, the Principal Accounting Officer of Jupiter Marine
International Holdings, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Jupiter
Marine International Holdings, Inc.
2. Based on my knowledge, this Quarterly Report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
Quarterly Report;
3. Based on my knowledge, the financial statements and other financial
information included in this Quarterly Report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this Quarterly Report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) [and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))] for the
registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries is made known to us by others within those
entities, particularly during the period in which this Quarterly Report
is being prepared;
b) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
c) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this Quarterly Report (the "Evaluation Date"); and
d) presented in this Quarterly Report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date.
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent function):
16
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's ability
to record, process, summarize and report financial data and have
identified for the Registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Registrant's internal controls.
6. The Registrant's other certifying officer and I have indicated in
this Quarterly Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
DATE: July 17, 2003 /s/ Lawrence Tierney
----------------------------------------------
Lawrence Tierney, Principal Accounting Officer
17