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 April 30, 2005
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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 June 3, 2005:
14,496,911 shares of Common Stock and 258,088 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 April 30, 2005 and July 31, 2004 3
Statements of Income for the three months and nine months ended April
30, 2005 and May 1, 2004 5
Statements of Cash Flows for the nine months ended April 30, 2005 and
May 1, 2004 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 12
Part II. Other Information 13
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Item 1. Legal Proceedings 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submissions of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits 13
2
PART I FINANCIAL INFORMATION
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Item 1. Consolidated Financial Statements
JUPITER MARINE INTERNATIONAL HOLDINGS, INC
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, July 31,
2005 2004
ASSETS (unaudited) (audited)
------ ----------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 295,275 $ 602,936
Accounts receivable 156,670 16,622
Inventory 1,593,042 1,133,681
Prepaid expenses 85,779 42,916
---------- ----------
Total current assets 2,130,766 1,796,155
PROPERTY AND EQUIPMENT:
Boat molds 2,410,695 1,933,375
Machinery and equipment 307,160 225,813
Leasehold improvements 310,219 259,419
Office furniture and equipment 100,393 89,614
---------- ----------
3,128,467 2,508,221
Less accumulated depreciation and amortization 1,824,327 1,604,550
---------- ----------
Property and equipment, net 1,304,140 903,671
---------- ----------
OTHER ASSETS 19,160 18,660
---------- ----------
TOTAL ASSETS $3,454,066 $2,718,486
========== ==========
See accompanying notes to consolidated financial statements
3
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 30, July 31,
2005 2004
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited) (audited)
------------------------------------ ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 381,075 $ 229,156
Accrued expenses 177,190 333,912
Accrued interest -- 5,096
Customer deposits 48,201 28,002
Warranty reserve 93,721 89,586
Capital lease obligation -- 3,687
Notes payable 380,000 363,750
----------- -----------
Total current liabilities 1,080,187 1,053,189
LONG-TERM LIABILITIES:
Accrued interest due to shareholders 115,736 106,059
Notes payable to shareholders 350,000 350,000
----------- -----------
465,736 456,059
TOTAL LIABILITIES 1,545,923 1,509,248
----------- -----------
SHAREHOLDER'S EQUITY:
Convertible preferred stock, $.001 par value, 5,000,000
shares authorized ($258,088 liquidation preference)
Series C; 258,088 and 998,722 shares issued and outstanding 258 999
Common stock, $.001 par value, 50,000,000 shares authorized,
14,496,911 and 11,825,563 issued and outstanding 14,497 11,826
Additional paid-in capital 3,381,739 3,153,400
Deficit (1,488,351) (1,956,987)
----------- -----------
TOTAL SHAREHOLDER'S EQUITY 1,908,143 1,209,238
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,454,066 $ 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 Nine Months Ended
April 30, May 1, April 30, May 1,
2005 2004 2005 2004
------------------------------ ----------------------------
NET SALES $ 2,963,254 $ 2,790,337 $ 8,334,435 $ 7,245,552
COST OF SALES (exclusive of depreciation) 2,199,905 2,116,967 6,160,185 5,433,982
------------------------------ ----------------------------
GROSS PROFIT 763,349 673,370 2,174,250 1,811,570
------------------------------ ----------------------------
25.8% 24.1% 26.1% 25.0%
OPERATING EXPENSES:
Selling and marketing 155,592 84,585 335,598 258,965
General and administrative 314,827 297,113 992,997 836,903
Depreciation and amortization 75,353 78,664 219,777 197,265
------------------------------ ----------------------------
Total operating expenses 545,772 460,362 1,548,372 1,293,133
------------------------------ ----------------------------
OTHER INCOME (EXPENSE):
Interest expense (17,199) (20,886) (50,547) (60,521)
Other expense - loan guarantee (91,000)
Other income 6,953 6,132 18,027 10,391
------------------------------ ----------------------------
Total other income (expense) (10,246) (14,754) (123,520) (50,130)
NET INCOME BEFORE INCOME TAXES 207,331 198,254 502,358 468,307
INCOME TAX EXPENSE (744) -- (744) --
------------------------------ ----------------------------
NET INCOME 206,587 198,254 501,614 468,307
Dividends on preferred stock (4,870) (19,497) (32,978) (73,719)
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 201,717 $ 178,757 $ 468,636 $ 394,588
============================== ============================
Basic and diluted net income per
common share
Basic $ 0.01 $ 0.02 $ 0.03 $ 0.04
============================== ============================
Diluted $ 0.01 $ 0.01 $ 0.03 $ 0.03
============================== ============================
Weighted average number of shares
of common stock outstanding
Basic 14,496,911 9,460,718 14,092,921 8,885,218
Diluted 16,013,087 12,461,974 15,609,097 11,886,474
See accompanying notes to consolidated financial statements
5
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(UNAUDITED)
April 30, May 1,
2005 2004
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 501,614 $ 468,307
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 219,777 197,265
Gain on asset disposition (4,500)
Issuance of common shares to pay expenses 197,291
Decrease (increase) in:
Accounts receivable (140,048) 117,706
Inventory (459,361) (365,039)
Prepaid expenses (42,863) (68,670)
Other assets (500) 24,000
Increase (decrease) in:
Accounts payable 151,919 (167,560)
Accrued expenses (156,722) 93,228
Customer deposits 20,199 (3,727)
Warranty reserve 4,135 (5,733)
Accrued interest payable 4,581 (5,439)
--------- ---------
Net cash provided by (used in) operating activities 300,022 279,838
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property -- 34,500
Purchase of property and equipment (620,246) (258,051)
--------- ---------
Net provided by cash (used in) investing activities (620,246) (223,551)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (93,750) (120,000)
Net payments from line of credit
Net borrowings from line of credit 110,000
Payments on capital lease obligations (3,687) (3,419)
--------- ---------
Net cash used in financing activities 12,563 (123,419)
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NET DECREASE IN CASH (307,661) (67,132)
CASH - Beginning of the period 602,936 384,636
--------- ---------
CASH - End of the period $ 295,275 $ 317,504
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 45,966 $ 60,521
========= =========
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 $ 32,978 $ 73,719
========= =========
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 nine months ended April 30, 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), designs,
manufactures and markets a diverse mix of high quality sport fishing boats under
the Jupiter brand name. On May 26, 1998, JMIH acquired all of the outstanding
shares of common stock of Jupiter Marine International, Inc. (JMI), a boat
manufacturing company. 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's product line, all powered with outboard engines,
currently consists of six models:
38' Forward Seating Center Console
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.
Net Sales
The Company's net sales were $2,963,254 for the three months ended
April 30, 2005 an increase of $172,917 (or 6.2%) as compared to $2,790,337 for
the same quarter of last year. For the nine months ended April 30, 2005 the
Company's net sales were $8,334,435, an increase of $1,088,883 (or 15.0%) as
compared to $7,245,552 for the same nine month period of last year. Demand for
our products continues to remain very strong. At April 30, 2005 14 boats were
available for sale at dealer locations, compared to 12 boats in dealer inventory
at the same time last year. This modest increase in dealer inventory is
8
attributable to boats at new dealer locations. Our order backlog has remained
steady at about six months. The first of our new 38'Forward Seating model was
delivered to its retail owner during April 2005. Effective early June 2005, we
are at full production on this model. The initial response to this model has
been very positive.
Cost of Sales and Gross Profit
Cost of sales for the three months ended April 30, 2005 was $2,199,905
resulting in $763,349 of gross profit or 25.8% of net sales. For the same
quarter of last year, cost of sales was $2,116,967 and gross margin was $673,370
or 24.1% of net sales. Cost of sales for the nine months ended April 30, 2005
was $6,160,185 and gross profit was $2,174,250 or 26.1% of net sales. For the
nine months ended May 1, 2004, cost of sales was $5,433,982 and gross profit was
$1,811,570 or 25.0% of net sales. We were able to offset increased cost of raw
materials, such as petroleum-based resin, by (1) selling price increases
effective January 2005, (2) seeking out less expensive alternative materials and
raw material sources without sacrificing quality, (3) improved manufacturing
efficiencies and (4) better utilization of overhead. Although we have been able
to offset the increased cost of raw materials in the past, there can not be any
assurance that we will be able to do so in the future.
Selling, General and Administrative Expenses
Selling and marketing expenses were $155,591, or 5.3% of net sales for
the three months ended April 30, 2005 as compared to $84,585, or 3.0% of net
sales for the same quarter of last year. For the nine months ended April 30,
2005 selling and marketing expenses were $335,598, or 4.0% of net sales as
compared to $258,965, or 3.6% of net sales for the same nine months of last
year. For the third quarter ended April 30, 2005 boat show costs were up almost
$48,000 compared to the third quarter of last year due to higher expenditures
related to the Miami show and participating at more shows. For the nine months
ended April 30, 2005, boat show costs were up $38,000. Expenditures for media
advertising and brochures, during the third quarter ended April 30, 2005, exceed
last year by approximately $24,000, as a result of promoting the new 38' Forward
Seating Model. For the nine months advertising and brochure expenditures were
about even with last year. For the three months ended April 30, 2005 travel and
related expenses were below the same quarter of last year by approximately
$6,000 but still exceeded the nine month balance by approximately $15,000 due to
increased travel to dealer locations during the beginning of fiscal year ending
July 30, 2005.
General and administrative expenses were $314,827, or 10.6 % of net
sales for the three months ended April 30, 2005 compared to $297,113, or 10.6%
of net sales for the same quarter of last year. For the nine months ended April
30, 2005, general and administrative expenses were $992,997, or 11.9% of net
sales as compared to $836,903, or 11.6% of net sales for the same nine months of
last year. Salaries and employee benefit costs increased by approximately
$31,000, consulting costs increased by approximately $16,000 and other office
related expenses decreased by approximately $30,000 during the third quarter
ended April 30, 2005 compared to the same quarter of last year. For the nine
9
months ended April 30, 2005, salaries and payroll expenses were up approximately
$71,000, consulting costs increased by approximately $112,000 and other office
related expenses decreased by approximately $30,000 as compared to the same nine
month period of last year. The increase in salaries and employee benefits was
primarily due to annual salary increases and higher medical insurance premiums.
During August of 2004, the Company engaged the services of two investor
relations consulting firms. Previously the Company did all investor relations in
house. Consulting fees to these firms were approximately $16,000 and $112,000
for the three and nine months ended April 30, 2005.
During the nine months ended April 30, 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 of
$91,000.
Depreciation and amortization expense decreased by $3,311 for the three
months ended April 30, 2005, and increased by $22,512 for the nine months as a
result of new tooling acquired.
Liquidity and Capital Resources
Cash and cash equivalents at April 30, 2005 were $295,275 as compared
to $602,936 at July 31, 2004. Working capital at April 30, 2005 was $1,050,579
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 nine months ended
April 30, 2005 was $300,022. During the nine months ended April 30, 2005 the
Company used $307,661 of cash.
Inventories increased by $459,361 at April 30, 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 $151,919 at
April 30, 2005 compared to July 31, 2004 because of the increase in inventory.
Vendor accounts have remained within terms.
Accounts receivables increased by $140,048 due to a sale of a boat at
the end of the period covered by this report. The invoice was subsequently paid.
Approximately $620,000 of equipment was purchased during the nine
months ended April 30, 2005 consisting of new molds ($477,000) machinery and
equipment ($81,000), leasehold improvements ($51,000) and office equipment
($11,000). The Company anticipates a reduced rate of capital expenditures during
the remainder of this fiscal year.
The Company negotiated an extension of its $500,000 line of credit with
a financial institution, originally due December 31, 2004, to December 31, 2005.
10
On January 13, 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. To date, the Company has
contributed approximately $32,000. During the term of the lease the Company has
a right an 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. If the Company declines to exercise the
option or is unable to secure acceptable financing, Carl Herndon will have a
similar option to purchase the facility. As of June 1, 2005 no events have
occurred that would trigger the commencement of the lease.
In conjunction with opening the above mentioned additional facility,
the Company will require certain employees to relocate. Effective January 13,
2005, as an incentive for relocating and remaining with the Company, six
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 $0.30. The options are exercisable for a
period of five years, but will only vest in the event that the Company opens the
additional facility and the employee relocates to the new facility.
The Company's Series C Convertible Preferred Stock automatically
converts into two shares of common stock of the Company five years from date of
issue. During the nine months ended April 30, 2005 773,612 shares of Series C
Convertible Preferred Stock were converted into 1,547,224 shares of Common Stock
pursuant to the mandatory conversion.
The number and level of employees at April 30, 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-15(e)
and 15d-15(e). 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
- ----------------------------
No change in the Company's internal controls over financial reporting
occurred during the period covered by this report that has materially affected,
or is likely to materially affect, the Company's internal controls over
financial reporting.
12
PART II OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three month period ended April 30, 2005, 541,698 shares of
the Company's Series C Preferred Stock converted into an aggregate of 1,083,396
shares of its common stock pursuant to the mandatory conversion provisions of
the Company's Series C Preferred Stock. The shares of common stock will be
issued to an aggregate of 11 shareholders upon such shareholders' tender of
their preferred stock certificates to the Company. The issuance of the common
stock will be made pursuant to exemption from registration provided by Section
4(2) of the Securities Act.
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
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: June 8, 2005 By: /s/ Carl Herndon
-----------------------------------------
Carl Herndon, Chief Executive Officer
(Principal Executive Officer)
Date: June 8, 2005 By: /s/ Lawrence Tierney
-----------------------------------------
Lawrence Tierney, Chief Financial
Officer (Principal Financial Officer)
14