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 January 31, 2004
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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: 0-26617
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 [X] No [ ]
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 March 3, 2004:
8,309,718 shares of Common Stock; 315,000 Series A Preferred Shares; 452,500
Series B Preferred Shares; and 925,003 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 January 31, 2004 and July 26, 2003 3
Statements of Operations for the three months and six months
ended January 31, 2004 and January 27, 2003 5
Statements of Cash Flows for the six months ended January 31, 2004
and January 27, 2003 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 11
Part II. Other Information 12
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Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submissions of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
2
PART I FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
JUPITER MARINE INTERNATIONAL
HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
January 31, July 26,
2004 2003
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ASSETS (unaudited) (audited)
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CURRENT ASSETS:
Cash and cash equivalents $ 355,721 $ 384,636
Accounts receivable, net 167,038 154,259
Inventory 1,279,989 887,785
Prepaid expenses 48,465 13,138
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Total current assets 1,851,213 1,439,818
PROPERTY AND EQUIPMENT:
Boat molds 1,639,180 1,678,134
Machinery and equipment 182,916 178,409
Leasehold improvements 256,594 254,142
Office furniture and equipment 79,066 55,231
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2,157,756 2,165,916
Less accumulated depreciation and amortization 1,480,476 1,381,876
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Property and equipment, net 677,280 784,040
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OTHER ASSETS 18,660 42,660
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Total assets $ 2,547,153 $ 2,266,518
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See accompanying notes to consolidated financial statements
3
JUPITER MARINE INTERNATIONAL
HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
January 31, July 26,
2004 2003
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LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited)
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 291,695 $ 423,036
Accrued expenses 175,394 107,506
Accrued interest 114,001 100,963
Customer deposits 54,524 31,729
Warranty reserve 93,941 96,140
Capital lease obligation 4,674 4,369
Current portion of long term debt 905,000 845,000
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Total current liabilities 1,639,229 1,608,743
LONG-TERM LIABILITIES:
Capital lease obligation 1,270 3,687
TOTAL LIABILITIES 1,640,499 1,612,430
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SHAREHOLDER'S EQUITY:
Convertible preferred stock, $.001 par value, 5,000,000
shares authorized ($1,692,503 liquidation preference)
Series A: 315,000 shares issued and outstanding 315 315
Series B: 452,500 shares issued and outstanding 453 453
Series C; 925,003 shares issued and outstanding 925 925
Common stock, $.001 par value, 50,000,000 shares authorized,
8,309,718 issued and outstanding 8,310 8,310
Additional paid-in capital 2,990,124 2,935,902
Deficit (2,093,473) (2,291,817)
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TOTAL SHAREHOLDER'S EQUITY 906,654 654,088
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,547,153 $ 2,266,518
================ ================
See accompanying notes to consolidated financial statements
4
JUPITER MARINE INTERNATIONAL
HOLDINGS, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
January 31, January 27, January 31, January 27,
2004 2003 2004 2003
--------------------------------- --------------------------------
NET SALES $ 2,270,262 $ 2,152,361 $ 4,455,215 $ 4,298,288
COST OF SALES 1,705,754 1,696,416 3,334,502 3,343,306
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GROSS PROFIT 564,508 455,945 1,120,713 954,982
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OPERATING EXPENSES:
Selling and marketing 96,713 47,916 174,381 102,640
General and administrative 291,746 202,402 539,790 419,651
Depreciation and amortization 59,769 93,784 118,600 183,879
--------------------------------- --------------------------------
Total operating expenses 448,228 344,102 832,771 706,170
--------------------------------- --------------------------------
OTHER INCOME (EXPENSE):
Interest expense (18,958) (25,722) (39,635) (41,432)
Other income (expense) 564 4,259 (112)
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Total other income (expense) (18,394) (25,722) (35,376) (41,544)
NET INCOME BEFORE INCOME TAXES 97,886 86,121 252,566 207,268
INCOME TAX EXPENSE - - - -
NET INCOME 97,886 86,121 252,566 207,268
Dividends on preferred stock (27,111) (27,111) (54,222) (54,222)
Interest on Triton stock (36,162) (36,162)
NET INCOME APPLICABLE TO
COMMON SHAREHOLDERS $ 70,775 $ 22,848 $ 198,344 $ 116,884
================================= ================================
Basic and diluted net income per
common share
Basic $ 0.01 $ 0.00 $ 0.02 $ 0.02
================================= ================================
Diluted $ 0.01 $ 0.00 $ 0.02 $ 0.01
================================= ================================
Weighted average number of shares
of common stock outstanding
Basic 8,309,718 6,676,715 8,309,718 5,521,492
Diluted 12,151,717 10,518,714 12,151,717 9,363,491
See accompanying notes to consolidated financial statements
5
JUPITER MARINE INTERNATIONAL
HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
January 31 January 27
2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 252,566 $ 121,147
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 118,600 91,940
Gain on sale of property (4,500)
Decrease (increase) in:
Accounts receivable (12,779) 5,717
Inventory (392,204) (94,023)
Prepaid expenses (35,327) (31,675)
Other assets 24,000 -
Increase (decrease) in:
Accounts payable (131,341) (161,860)
Accrued expenses 67,888 (6,449)
Customer deposits 22,795 (32,641)
Warranty reserve (2,199) (1,774)
Accrued interest payable 13,038 8,001
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Net cash used in operating activities (79,463) (101,617)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 34,500
Purchase of property and equipment (41,840) (18,847)
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Net provided by cash (used in) investing
activities (7,340) (18,847)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from line of credit 60,000 -
Payments on capital lease obligations (2,112) (1,202)
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Net cash used in financing activities 57,888 (1,202)
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NET DECREASE IN CASH (28,915) (121,666)
CASH - Beginning of the period 384,636 139,072
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CASH - End of the period $ 355,721 $ 17,406
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 39,635 $ 7,710
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SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Preferred stock dividends declared and payable in
shares of Series B and Series C preferred stock $ 27,111 $ 27,111
============ ===============
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 six months ended January 31, 2004, are not necessarily
indicative of the results that may be expected for the year ending July 31,
2004. 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 26, 2003.
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.
7
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 six models:
31' Open Center Console
31' Cuddy Cabin
31' Forward Seating Center Console
27' Open center Console
27' Console-berth model
27' Forward Seating Center Console
The inboard powered models include a completely redesigned 35'
Flybridge Convertible. The molds for the 38' Flybridge Convertible were sold
during the first quarter of this year as the Company determined that it would
not be economically feasible to redesign this model to meet current consumer
expectations.
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.
8
Net Sales
The Company's net sales were $2,270,262 for the three months ended
January 31, 2004 an increase of $117,901 (or 5.5%) as compared to $2,152,361 for
the same quarter of last year. The Company's net sales were $4,455,215 for the
six months ended January 31, 2004, an increase of $156,927 (or 3.7%) as compared
to $4,298,288 for the same six month period of last year. The increase in net
sales is due to the continued success of our Jupiter outboard line. Demand for
our outboard product line continues to remain very strong. The new models
introduced at the end of last fiscal year, with great success, have continued to
sell very well. We did not sell nor produce any 35' Inboard Flybridge
Convertibles during the six months ended January 31, 2004. We sold one 35'
Flybridge at $328,000 during the first quarter of last year and one 35'
Flybridge at $327,000 during the second quarter of last year. Consumer demand
for this inboard model is very slow at this time. Comparing outboard sales only
for the three months ended January 31, 2004 and for the six months ended January
31, 2004, sales were up 24.5% and 18.9% respectively. Our order backlog for the
outboard line has increased to approximately five months from approximately two
months at the same time last year.
Cost of Sales and Gross Profit
Cost of sales for the three months ended January 31, 2004 was
$1,705,754 resulting in $564,508 of gross profit or 24.9% of net sales. For the
same quarter of last year cost of sales was $1,696,416 and gross margin was
$455,945 or 21.2% of net sales. Cost of sales for the six months ended January
31, 2004 was $3,334,502. For the six months ended January 27, 2003, cost of
sales was $3,334,306. For the six months ended January 31, 2004 gross profit was
$1,120,713 or 25.2% of net sales. For the six months ended January 27, 2003
gross profit was $954,982 or 22.2% of net sales. The improved gross profit is
due to sales entirely within the outboard product line, where gross margins are
the highest. Lower overall manufacturing variances also contributed to the
improved gross margins.
Selling, General and Administrative Expenses
Selling and marketing expenses were $96,713, or 4.3% of net sales for
the three months ended January 31, 2004 as compared to $47,916, or 2.2% of net
sales for the same quarter of last year. For the six months ended January 31,
2004 selling and marketing expenses were $174,381, or 3.9% of net sales as
compared to $102,640, or 2.4% of net sales for the six months ended January 27,
2003. In order to support our new models and to stimulate interest across our
entire product line, advertising expenditures increased by approximately $12,000
for the three months ended January 31, 2004 as compared to the three months
ended January 27, 2003 and $31,000 for the six months ended January 31, 2004 as
compared to the six months ended January 27, 2003. Our dealers displayed our
products in more boat shows this year thereby increasing boat show co-op
expenses by approximately $9,000 during the three months ended January 31, 2004
as compared to the three months ended January 27, 2003 and $13,000 for the six
months ended January 31, 2004 as compared to the six months ended January 27,
9
2003. During the three months ended January 31, 2004 we also printed new sales
brochures costing approximately $19,000.
General and administrative expenses were $291,746, or 12.8 % of net
sale for the three months ended January 31, 2004 compared to $202,402, or 9.4%
of net sale for the same quarter of last year. For the six months ended January
31, 2004 general and administrative expenses were $539,790, or 12.1% of net
sales as compared to $419,651, or 9.8% of net sales. Employee benefit costs,
primarily health insurance and workers compensation increased by approximately
$42,000 during the three months ended January 31, 2004 as compared to the three
months ended January 27, 2003 and by $57,000 for the six months ended January
31, 2004 as compared to the six months ended January 27, 2003. The increase is
primarily due to higher insurance rates. In order to more quickly develop new
products the Company engaged the services of a Naval Architect resulting higher
professional fees of approximately $9,000 for the three months ended January 31,
2004 as compared to the three months ended January 27, 2003 and $19,000 for the
six months ended January 31, 2004 as compared to the six months ended January
27, 2003. The remaining cost increases are attributable to normal increases. No
new employees were added during this quarter.
Depreciation and amortization expense decreased by $34,015 for the
three months ended January 31, 2004 and by $65,279 for the year to date as molds
acquired at the time the Company was acquired became fully depreciated.
Liquidity and Capital Resources
Cash and cash equivalents at January 31, 2004 were $355,721. Working
capital at January 31, 2004 was $211,984.
Inventories increased by $759,787 at January 31, 2004 compared to July
26, 2003 primarily from increased outboard engine inventory and higher work in
process to support the sales growth.
Accounts payable decreased by $131,341 during this same time period in
an effort to keep vendors accounts within their terms. Approximately $42,000 of
equipment was purchased during the first six months consisting primarily of
computer equipment and new boat molds.
The molds for the 38' Inboard Flybridge were sold during the first
quarter of fiscal year 2004 for $34,500. These molds were originally purchased
during February 2000 and had a net book value of $30,000.
The Company does not anticipate any significant purchase of equipment
in the near future. The number and level of employees at January 31, 2004 should
be adequate to fulfill the production schedule.
10
The Company negotiated an extension of its $500,000 line of credit with
a financial institution, originally due November 30, 2003, to February 29, 2004.
The Company is currently negotiating an additional extension through December
31, 2004.
The Company, from its inception, has experienced poor cash flows and
has historically met its cash requirements by borrowings and by issuing, through
private placements, its common and preferred stock and though third party loans.
However, the Company believes that cash generated from operations and its line
of credit will be sufficient to fund its current operations.
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures
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As of the end of the period covered by 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 Financial 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.
11
PART II OTHER INFORMATION
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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
31.1 Rule 13a-14(a)/15d-4(a) Certification of Principal
Executive Officer
31.2 Rule 13a-14(a)/15d-4(a) Certification of Principal
Financial Officer
32.1 Section 1350 Certification of Principal Executive Officer
32.2 Section 1350 Certification of Principal Financial Officer
(b) Reports on Form 8-K
None.
12
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: March 15, 2004 By: /s/Carl Herndon
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Carl Herndon, Chief Executive Officer
(Principal Executive Officer)
Date: March 15, 2004 By: /s/Lawrence Tierney
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Lawrence Tierney, Chief
Financial Officer (Principal Financial Officer)
13