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 29, 2005
----------------
( ) 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 11, 2005:
13,423,515 shares of Common Stock and 761,808 Series C Preferred Shares.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
Part I. Financial Information
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Item 1. Consolidated Financial Statements
Balance Sheets as of January 29, 2005 and July 31, 2004
Statements of Operations for the three months and six months
ended January 29, 2005 and January 31, 2004
Statements of Cash Flows for the six months ended January 29, 2005
and January 31, 2004
Notes to consolidated financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Controls and Procedures
Part II. Other Information
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Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submissions of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
2
PART I FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
JUPITER MARINE INTERNATIONAL HOLDINGS, INC
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 29, July 31,
2005 2004
--------------- ---------------
ASSETS (unaudited) (audited)
------
CURRENT ASSETS:
Cash and cash equivalents $ 470,636 $ 602,936
Accounts receivable 25,503 16,622
Inventory 1,594,560 1,133,681
Prepaid expenses 60,239 42,916
--------------- ---------------
Total current assets 2,150,938 1,796,155
PROPERTY AND EQUIPMENT:
Boat molds 2,263,375 1,933,375
Machinery and equipment 249,767 225,813
Leasehold improvements 303,919 259,419
Office furniture and equipment 94,686 89,614
--------------- ---------------
2,911,747 2,508,221
Less accumulated depreciation and amortization 1,748,974 1,604,550
--------------- ---------------
Property and equipment, net 1,162,773 903,671
--------------- ---------------
OTHER ASSETS 19,160 18,660
--------------- ---------------
TOTAL ASSETS $ 3,332,871 $ 2,718,486
=============== ===============
See accompanying notes to consolidated financial statements
3
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 29, July 31,
2005 2004
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited)
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 441,202 $ 229,156
Accrued expenses 220,236 333,912
Accrued interest - 5,096
Customer deposits 133,002 28,002
Warranty reserve 80,140 89,586
Capital lease obligation 1,270 3,687
Notes payable 291,250 363,750
--------------- ---------------
Total current liabilities 1,167,100 1,053,189
LONG-TERM LIABILITIES:
Accrued interest due to shareholders 114,215 106,059
Notes payable to shareholders 350,000 350,000
--------------- ---------------
464,215 456,059
TOTAL LIABILITIES 1,631,315 1,509,248
--------------- ---------------
SHAREHOLDER'S EQUITY:
Convertible preferred stock, $.001 par value, 5,000,000
shares authorized ($1,692,503 liquidation preference)
Series C; 761,808 and 998,722 shares issued and outstanding 762 999
Common stock, $.001 par value, 50,000,000 shares authorized,
13,423,515 and 11,825,563 issued and outstanding 13,424 11,826
Additional paid-in capital 3,377,438 3,153,400
Deficit (1,690,068) (1,956,987)
--------------- ---------------
TOTAL SHAREHOLDER'S EQUITY 1,701,556 1,209,238
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,332,871 $ 2,718,486
=============== ===============
See accompanying notes to consolidated financial statements
4
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
January 29, January 31, January 29, January 31,
2005 2004 2005 2004
------------- --------------- ------------- ------------
NET SALES $ 2,614,651 $ 2,270,262 $ 5,371,181 $ 4,455,215
COST OF SALES (exclusive of depreciation) 1,900,546 1,705,754 3,961,939 3,334,502
------------- --------------- ------------- ------------
GROSS PROFIT 714,105 564,508 1,409,242 1,120,713
------------- --------------- ------------- ------------
OPERATING EXPENSES:
Selling and marketing 85,603 96,713 180,006 174,381
General and administrative 341,137 291,746 676,511 539,790
Depreciation and amortization 70,387 59,769 144,424 118,600
------------- --------------- ------------- ------------
Total operating expenses 497,127 448,228 1,000,941 832,771
------------- --------------- ------------- ------------
OTHER INCOME (EXPENSE):
Interest expense (16,439) (18,958) (33,348) (39,635)
Other expense - loan guarantee (91,000) (91,000)
Other income 4,787 564 11,074 4,259
------------- --------------- ------------- ------------
Total other income (expense) (102,652) (18,394) (113,274) (35,376)
NET INCOME BEFORE INCOME TAXES 114,326 97,886 295,027 252,566
INCOME TAX EXPENSE - - - -
------------- --------------- ------------- ------------
NET INCOME 114,326 97,886 295,027 252,566
Dividends on preferred stock (9,679) (27,111) (28,108) (54,222)
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 104,647 $ 70,775 $ 266,919 $ 198,344
============= =============== ============= ============
Basic and diluted net income per
common share
Basic $ 0.01 $ 0.01 $ 0.02 $ 0.02
============= =============== ============= ============
Diluted $ 0.01 $ 0.01 $ 0.02 $ 0.02
============= =============== ============= ============
Weighted average number of shares
of common stock outstanding
Basic 12,830,490 8,309,718 12,552,340 8,309,718
Diluted 15,354,106 12,151,717 15,075,956 12,151,717
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 29, January 31
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 266,919 $ 252,566
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 144,424 118,600
Gain on asset disposition (4,500)
Issuance of common shares to pay expenses 225,399
Decrease (increase) in:
Accounts receivable (8,881) (12,779)
Inventory (460,879) (392,204)
Prepaid expenses (17,323) (35,327)
Other assets (500) 24,000
Increase (decrease) in:
Accounts payable 212,046 (131,341)
Accrued expenses (113,676) 67,888
Customer deposits 105,000 22,795
Warranty reserve (9,446) (2,199)
Accrued interest payable 3,060 13,038
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Net cash provided by (used in) operating activities 346,143 (79,463)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 34,500
Purchase of property and equipment (403,526) (41,840)
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Net provided by cash (used in) investing activities (403,526) (7,340)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (62,500)
Net payments from line of credit (10,000)
Net borrowings from line of credit 60,000
Payments on capital lease obligations (2,417) (2,112)
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Net cash used in financing activities (74,917) 57,888
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NET DECREASE IN CASH (132,300) (28,915)
CASH - Beginning of the period 602,936 384,636
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CASH - End of the period $ 470,636 $ 355,721
=========== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 23,125 $ 39,635
=========== =============
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 $ 9,679 $ 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 29, 2005, are not necessarily
indicative of the results that may be expected for the year ending July 30,
2005. 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 31, 2004.
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 product line, all
powered with outboard engines, currently consists of six models:
38' Forward Seating Center Console (introduced February 2005)
31' Open Center Console
31' Cuddy Cabin
31' Forward Seating Center Console
27' Open Center Console
27' Forward Seating Center Console
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 $2,614,651 for the three months ended
January 29, 2005 an increase of $344,389 (or 15.2%) as compared to $2,270,262
for the same quarter of last year. For the six months ended January 29, 2005,
the Company's net sales were $5,371,181, an increase of $915,966 (or 20.6%) as
compared to $4,455,215 for the same six month period of last year. Demand for
our products continues to remain very strong. At January 29, 2005, only 13 boats
were available for sale at dealer locations (an average of less than one boat
per dealer), compared to 14 boats in dealer inventory at the same time last
year. Our order backlog has remained steady at about six months.
Cost of Sales and Gross Profit
Cost of sales for the three months ended January 29, 2005, was
$1,900,546 resulting in $714,105 of gross profit or 27.3% of net sales. For the
same quarter of last year cost of sales was $1,705,754 and gross margin was
$564,508 or 24.9% of net sales. Cost of sales for the six months ended January
29, 2005 was $3,961,939 and gross profit was $1,409,242 or 26.2% of net sales.
For the six months ended January 31, 2004, cost of sales was $3,334,502 and
gross profit was $1,120,713 or 25.2% of net sales. The percentage increase in
cost of sales was primarily due to an increased cost of raw materials, such as
petroleum-based resin. We were able to partially offset the increased cost of
raw materials by improved manufacturing efficiencies and better utilization of
overhead.
Selling, General and Administrative Expenses
Selling and marketing expenses were $85,603, or 3.3% of net sales for
the three months ended January 29, 2005 as compared to $96,713 or 4.3% of net
sales for the same quarter of last year. For the six months ended January 29,
2005 selling and marketing expenses were $180,006, or 3.4% of net sales as
compared to $174,381, or 3.9% of net sales for the same six months of last year.
Expenditures for media advertising during the second quarter of approximately
$18,000 equaled what was incurred during the same quarter of last year. For the
six months ended January 29, 2005 media advertising expenditures is
approximately $8,000 less than what was spent in the first half of last year.
Brochure printing costs were reduced by approximately $16,500 for the three and
six months ended January 29, 2005. This year our dealers displayed our products
in one less boat show, decreasing boat show co-op expenses by approximately
$9,000 during the three and six months ended January 29, 2005. Offsetting these
reductions for the six months ended January 29, 2005, were increased salaries of
approximately $16,000 and additional travel and related expenses of
approximately $24,000.
General and administrative expenses were $341,137, or 13.0 % of net
sales for the three months ended January 29, 2005 compared to $291,746, or 12.9%
of net sales for the same quarter of last year. For the six months ended January
29, 2005, general and administrative expenses increased by $136,721 to $676,511,
or 12.6% of net sales as compared to $539,790, or 12.1% of net sales for the
same six months of last year. Salaries and employee benefit costs increased by
$10,281 during the quarter ended January 29, 2005 compared to the same quarter
9
of last year. For the six months ended January 29, 2005, salaries and payroll
expenses were up $25,850 as compared to the same six month period of last year.
These increases are attributable to normal salary increases and, to some degree,
a reduction in service fees paid for processing payroll and lower workers
compensation expense. During August of 2004 the company engaged the services of
two investor relations firms. Previously the Company did all investor relations
in house. Fees to these firms were approximately $13,000 and $25,000 for the
three and six months ended January 29, 2005. The company renewed and to some
extent increased its insurance coverage during the quarter ended January 29,
2005 at an increased cost of approximately $9,000 during the quarter ended
January 29, 2005.
During the three months ended January 29, 2005 the Company issued its
chief executive officer an aggregate of 454,773 shares its common stock in
consideration of its chief executive officer providing personnel guarantees for
the Company. Such guarantees were required to secure lines of credit up to
$700,000. This transaction was recorded as an Other Expense - Loan Guarantee at
$91,000.
Depreciation and amortization expense increased by $10,618 for the
three months ended January 29, 2005 and by $25,824 for the year to date as a
result of new tooling acquired.
Liquidity and Capital Resources
Cash and cash equivalents at January 29, 2005 were $470,636 as compared
to $602,936 at July 31, 2004. Working capital at January 29, 2005 was $983,838
compared to $742,966 at July 31, 2004. The company anticipates that cash
generated from operations should be sufficient to satisfy its contemplated cash
requirements for at least the next twelve months.
Net cash provided by operating activities for the six months ended
January 29, 2005 was $346,143. During the six months ended January 31, 2004 the
Company used $79,463 of cash.
Inventories increased by $460,879 at January 29, 2005 compared to July
31, 2004 primarily from increased outboard engine inventory and higher work in
process to support the sales growth.
Accounts payable increased by $212,046 at January 29, 2005 compared to
July 31, 2004 because of the increase in inventory. Vendor accounts have
remained within terms.
Approximately $403,000 of equipment was purchased during the six months
ended January 29, 2005 consisting of new molds ($273,000), machinery and
equipment ($67,000), leasehold improvements ($47,000) and office equipment
($16,000). The Company anticipates a similar rate of capital expenditures during
the remainder of this fiscal year.
During the three months ended January 29, 2005, the Company negotiated
an extension of its $500,000 line of credit with a financial institution,
10
originally due December 31, 2004, to December 31, 2005 and negotiated an
extension of an additional $200,000 line of credit with a financial institution
to November 2005. The Company issued its chief executive officer an aggregate of
454,773 shares its common stock in consideration of its chief executive officer
providing personnel guarantees for the Company which were required to secure the
lines of credit.
During the three months ended January 29, 2005, the Company issued an
aggregate of 209,351 shares of its common stock, in lieu of cash, to its chief
executive officer and chief financial officer as payment of bonuses earned
pursuant to their respective employment contracts during fiscal year ended July
31, 2004. Such bonuses had been accrued at July 31, 2004. The bonuses payable to
the Company's chief executive officer was $27,927 and the bonus payable to the
Company's chief financial officer was $13,963.
During December 2004 the Company entered into a Commercial Lease and
Purchase Option with a third party for the lease and potential purchase of an
additional operating facility in an effort to expand its manufacturing and
production capacity. The facility will provide the Company with approximately
50,000 square feet of additional manufacturing and production space. Under the
agreement the company has agreed to lease certain property and facilities in
Florida for a term of one year at $14,500 per month. The lease shall commence on
the earlier of the date the: (1) facilities are determined to meet all
applicable environmental and building code requirements (" Code Requirements")
or (2) Company takes possession of the facilities. The Company has agreed to
contribute one-third of the funds necessary to satisfy Code Requirements, which
are anticipated to be approximately $300,000. During the term of the lease the
Company has a right and option to purchase the facility. If the Company
exercises such option, all funds contributed by the Company to satisfy Code
Requirements will be deducted from the purchase price.
In conjunction with opening the above mentioned additional facility,
the Company will require certain employees to relocate. As an incentive for
relocating and remaining with the Company certain non-executive employees were
granted options to purchase, at
$.30 per share, an aggregate of 1,000,000 shares of common stock of the Company
pursuant to the Company's 2004 Management and Director Equity Incentive
Compensation Plan. The trading price of the company's Common Stock, as reported
on the Over the Counter Bulletin Board, on January 13, 2005 was $.30.
The Company's shares of Series C Convertible Preferred Stock
automatically convert into two shares of common stock of the Company five years
from date of issue. During the quarter ended January 29, 2005, 231,914 shares of
Series C Convertible Preferred Stock were converted into 463,828 shares of
Common Stock.
The number and level of employees at January 29, 2005 should be
adequate to fulfill the production schedule.
11
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures
- ------------------------------------------------
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.
12
PART II OTHER INFORMATION
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Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The information required under this item has been previously included
in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On November 19, 2004, the Board of Directors of the Company and a
majority of the Company's stockholders approved by written consent the following
proposals:
1. To elect Carl Herndon, Sr., Lawrence Tierney and Kerry Clemmons to
the Company's Board of Directors to hold office until the Company's annual
meeting of stockholders to be held in 2005;
2. To ratify the appointment of Spicer Jeffries LLP, as independent
auditors of the Company for the fiscal year ending July 31, 2005; and
3. To increase the number of shares of common stock available under the
2004 Management and Director Equity Incentive and Compensation Plan to 5,300,000
shares.
The proposals were unanimously approved by the Company's Board of
Directors. Shareholders beneficially owning an aggregate of 6,671,002 shares of
common stock of the Company, representing approximately 52.1% of the voting
power of the Company, gave their written consent to the proposals. The actions
were taken in lieu of an annual meeting and the proposals were mailed to
shareholders of record as of November 19, 2004 under an Information Statement
filed with the Securities and Exchange Commission. The Information Statement was
sent in lieu of an annual meeting.
Item 5. Other Information
None.
Item 6. Exhibits and Reports On Form 8-K
Exhibits required by Item 601 of Regulation 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
13
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 11, 2005 By: /s/ Carl Herndon
--------------------------------------
Carl Herndon, Chief Executive Officer
(Principal Executive Officer)
Date: March 11, 2005 By: /s/ Lawrence Tierney
--------------------------------------
Lawrence Tierney, Chief
Financial Officer (Principal Financial
Officer)
14