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 29, 2006
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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 [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12-b-2 of the Exchange Act).
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 12, 2006:
18,863,861 shares of common stock.
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 29, 2006 and July 30, 2005 3
Statements of Operations for the three months and nine months
ended April 29, 2006 and April 30, 2005 4
Statements of Cash Flows for the nine months ended April 29,
2006 and April 30, 2005 5
Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Item 3. Controls and Procedures 10
Part II. Other Information 11
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Item 1. Legal Proceedings 11
Item 2. Unregistered Sales of Equity 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 11
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 29, July 30,
2006 2005
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ASSETS (unaudited) (audited)
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CURRENT ASSETS:
Cash and cash equivalents $ 334,541 $ 356,361
Accounts receivable 168,296 172,309
Inventory 2,192,411 1,443,737
Prepaid expenses 90,417 119,861
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Total current assets 2,785,665 2,092,268
PROPERTY AND EQUIPMENT:
Boat molds 2,432,762 1,919,763
Machinery and equipment 360,798 307,160
Leasehold improvements 614,716 322,254
Office furniture and equipment 103,950 100,393
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3,512,226 2,649,570
Less accumulated depreciation and amortization 1,772,078 1,580,329
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Property and equipment, net 1,740,148 1,069,241
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OTHER ASSETS 21,758 19,160
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TOTAL ASSETS $ 4,547,571 $ 3,180,669
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 637,213 $ 146,271
Accrued expenses 290,397 269,929
Accrued interest due shareholders - 117,259
Customer deposits 28,022 48,201
Warranty reserve 79,165 73,937
Capital lease obligation - -
Notes payable 350,000 590,000
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Total current liabilities 1,384,797 1,245,597
LONG-TERM LIABILITIES:
Accrued interest due to shareholders 141,828 -
Notes payable to shareholders 350,000 -
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491,828 -
TOTAL LIABILITIES 1,876,625 1,245,597
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SHAREHOLDER'S EQUITY:
Common stock, $.001 par value, 50,000,000 shares authorized,
18,863,861 and 15,555,525 issued and outstanding 18,864 15,556
Additional paid-in capital 4,066,606 3,490,157
Deficit (1,414,524) (1,570,641)
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TOTAL SHAREHOLDER'S EQUITY 2,670,946 1,935,072
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,547,571 $ 3,180,669
=============== ===============
See accompanying notes to consolidated financial statements
3
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
April 29, April 30, April 29, April 30,
2006 2005 2006 2005
------------------------------- -------------------------------
NET SALES $ 4,066,757 $ 2,963,254 $ 10,640,394 $ 8,334,435
COST OF SALES (exclusive of depreciation) 3,178,447 2,199,905 8,147,158 6,160,185
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GROSS PROFIT 888,310 763,349 2,493,236 2,174,250
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21.8% 25.8% 23.4% 26.1%
OPERATING EXPENSES:
Selling and marketing 129,099 155,592 401,765 335,598
General and administrative 523,395 314,827 1,296,210 992,997
Depreciation and amortization 88,059 75,353 227,742 219,777
------------------------------- -------------------------------
Total operating expenses 740,553 545,772 1,925,717 1,548,372
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OTHER INCOME (EXPENSE):
Interest expense (13,710) (17,199) (44,527) (50,547)
Impairment of assets (78,844)
Other expense - loan guarantee (97,500) (97,500) (91,000)
Other income (expense) (217,602) 6,953 (190,531) 18,027
------------------------------- -------------------------------
Total other income (expense) (328,812) (10,246) (411,402) (123,520)
NET INCOME BEFORE INCOME TAXES (181,055) 207,331 156,117 502,358
INCOME TAX EXPENSE (744) (744)
------------------------------- -------------------------------
NET INCOME (181,055) 206,587 156,117 501,614
Dividends on preferred stock (4,870) (32,978)
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ (181,055) $ 201,717 $ 156,117 $ 468,636
=============================== ===============================
Basic and diluted net income per
common share
Basic $ (0.01) $ 0.01 $ 0.01 $ 0.03
=============================== ===============================
Diluted $ (0.01) $ 0.01 $ 0.01 $ 0.03
=============================== ===============================
Weighted average number of shares
of common stock outstanding
Basic 16,958,243 14,496,911 16,295,420 14,092,921
Diluted 17,958,243 16,013,087 16,962,087 15,609,097
See accompanying notes to consolidated financial statements
4
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(UNAUDITED)
April 29, April 30,
2006 2005
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 156,117 $ 501,614
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 227,742 219,777
Impairment of assets 78,844
Gain on asset disposition (35,000)
Issuance of common shares to pay expenses 499,535 197,291
Options issued as compensation 80,222
Decrease (increase) in:
Accounts receivable 4,013 (140,048)
Inventory (748,674) (459,361)
Prepaid expenses 29,444 (42,863)
Other assets (2,598) (500)
Increase (decrease) in:
Accounts payable 490,942 151,919
Accrued expenses 20,468 (156,722)
Customer deposits (20,179) 20,199
Warranty reserve 5,228 4,135
Accrued interest payable 24,569 4,581
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Net cash provided by (used in) operating activities 810,673 300,022
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 35,000 -
Purchase of property and equipment (977,493) (620,246)
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Net provided by cash (used in) investing activities (942,493) (620,246)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (93,750)
Net payments from line of credit
Net borrowings from line of credit 110,000 110,000
Payments on capital lease obligations (3,687)
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Net cash used in financing activities 110,000 12,563
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NET DECREASE IN CASH (21,820) (307,661)
CASH - Beginning of the period 356,361 602,936
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CASH - End of the period $ 334,541 $ 295,275
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 44,527 $ 45,966
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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 $ - $ 32,978
=========== ==============
See accompanying notes to consolidated financial statements
5
Jupiter Marine International Holdings, Inc.
Notes to Consolidated Financial Statements
(UNAUDITED)
Item 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 and nine months ended April 29,
2006, are not necessarily indicative of the results that may be expected for the
year ending July 29, 2006. 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 30, 2005.
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. (the "Company") 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 product line, all
powered with outboard engines, currently consists of five models:
38' Forward Seating Center Console
31' Open Center Console
31' Cuddy Cabin
31' Forward Seating Center Console
29' Forward Seating Center Console
Our new 29' Forward Seating Center Console was received very well by
both our dealers and retail customers when it was introduced at the February
2006 Miami International Boat Show. The 29' was developed for boaters who desire
the performance, features and comforts for which the Jupiter models are known,
but in a mid size package. This new model will be produced at our Palmetto,
Florida facility, which became fully operational on February 6, 2006.
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 $4,066,757 for the three months ended
April 29, 2006, an increase of $1,103,503 (or 37.2%) as compared to $2,963,254
for the same quarter of last year. For the nine months ended April 29, 2006, the
Company's net sales were $10,640,394, an increase of $2,305,959 (or 27.7%) as
compared to $8,334,435 for the same nine month period of last year. The 38'
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Forward Seating Center Console model, which commenced production during the
fourth quarter of last year, accounts for the sales increase. Demand for our
other products continues to remain very strong. The first of our new 29' Center
Console models was sold during the third quarter as we continue to ramp up our
production of this model at our new Palmetto Florida facility. At April 30,
2006, 17 boats were available for sale at dealer locations, compared to 14 boats
in dealer inventory at the same time last year. This three-boat increase is
attributable to our dealers keeping the new 38' Forward Seating Center Console
in inventory. Our order backlog has remained steady at about six months.
The effects of higher fuel prices, higher interest rates, increases in
cost of other raw material and lower consumer confidence may contribute to a
slow down of the economy, which may temper our sales growth.
Cost of Sales and Gross Profit
Cost of sales for the three months ended April 30, 2006 was $3,178,447
resulting in $888,310 of gross profit or 21.8% of net sales. For the same
quarter of last year cost of sales was $2,199,905 and gross margin was $763,349
or 25.8% of net sales. Cost of sales for the nine months ended April 29, 2006
was $8,147,158 and gross profit was $2,493,235 or 23.4% of net sales. For the
nine months ended April 30, 2005, cost of sales was $6,160,185 and gross profit
was $2,174,250 or 26.1% of net sales. In the past, we have been able to offset
increased cost of raw materials through improved efficiencies and increases in
selling price. However, we have not been able to so do during this quarter, and
we cannot predict that we will be able to do so in the future. Management
believes that any increase in the selling prices of our models at this time will
have an adverse affect on sales. The Company incurred expenses of approximately
$168,000 and $378,000 during the three and nine months ended April 29, 2006 due
to normal start up costs and expenses associated with the Palmetto facility.
Selling, General and Administrative Expenses
Selling and marketing expenses were $129,099, or 3.2% of net sales for
the three months ended April 29, 2006 as compared to $155,592, or 5.3% of net
sales for the same quarter of last year. For the nine months ended April 29,
2006 selling and marketing expenses were $401,765, or 3.8% of net sales as
compared to $335,598, or 4.0% of net sales for the same nine months of last
year. For the quarter ended April 29, 2006 advertising expenditures and boat
show payments were below the same quarter of last year. However, these
categories were up for the nine months ended April 29, 2006 due to the timing of
expenditures. During the third quarter of last year we placed more
advertisements promoting the introduction of the 38' then we did during the same
quarter of this year. General and administrative expenses were $523,396, or
12.9% of net sales for the three months ended April 29, 2006 compared to
$314,211 or 10.6% of net sales for the same quarter of last year. For the nine
months ended April 29, 2006 general and administrative expenses were $1,296,209,
or 12.2% of net sales as compared to $992,997 or 11.9% of net sales for the same
nine month period of last year. As of April 30, 2006 $100,000 of management
incentive bonuses were accrued. Last year bonuses were not accrued until the
fourth quarter of the year. Additionally, insurance cost have increased as a
result of higher sales, more covered assets and an overall increase in premiums.
For the quarter ended April 29, 2006, the Company has adopted the provision of
Financial Accounting Standards No. 123 (SFAS No. 123R), Share-Based Payment. As
a result of adopting this accounting pronouncement the Company recorded $80,222
of compensation costs from employee stock options that vested this quarter. The
8
increase in depreciation and amortization expense for the three and nine months
ended April 29, 2006 by $12,090 and $5,690 respectively was due to new additions
for the Palmetto facility and new molds for the 29' Center Console.
Other Income (Expense)
On March 14,2006 the Company issued its chief executive officer an
aggregate of 562,219 restricted shares of its common stock in consideration for
its chief executive officer providing personnel guarantees for the Company. Such
guarantees were required to secure a line of credit from a financial institution
up to $750,000. This transaction was recorded as Other Expense - Loan Guarantees
in the amount of $97,500.
One March 14, 2006 the Company issued to its chief executive officer
and its chief financial officer 360,049 restricted shares of its common stock in
consideration for these officers extending the due date of their note payable to
February 28, 2008. This transaction was recorded as Other Income (Expense) in
the amount of $62,440.
In addition, on March 31, 2006 the Company entered into 5-year
employment agreements with its chief executive office and chief financial
officer. Under the agreements the Company issued an aggregate of 800,000 shares
of its common stock as an inducement for the officers entering into new
employment agreements. Under the agreements the Company also issued incentive
stock options to purchase an aggregate of 1,500,000 shares of its common stock,
exercisable at $.32 per share and such option vesting in equal installments over
a 5-year period from the date of the employment agreements. Also on March 31,
2006, the Company issued its independent director 200,000 shares of common stock
in consideration for his service on the board of directors. These transactions
were recorded as Other Income (Expense) in the amount of $190,000.
Interest expense decreased slightly for the three and nine months ended
April 29, 2006 due to lower average borrowings on the line of credit.
During the nine months ended April 29, 2006, the Company decided that
it would temporarily discontinue the 27' Forward Seating model. Consequently, a
provision for loss on disposition of assets in the amount of $78,844 was
recorded as of January 28, 2006.
Liquidity and Capital Resources
Cash and cash equivalents at April 29, 2006 were $334,541 as compared
to $356,361 at July 30, 2005. Working capital at April 29, 2006 was $1,400,868
compared to $846,671 at July 30, 2005.
The Company anticipates that cash generated from operations should be
sufficient to satisfy its contemplated cash requirements for its current
operations for at least the next twelve months. The Company does not anticipate
any significant purchases of equipment during the remainder of fiscal year 2006
at its current manufacturing facility. However, it is anticipated that up to
$500,000 will still be needed to bring the Company's Palmetto facility up to
full production capability. These costs are associated with inventory and
equipment purchases. It is anticipated that funds for these activities will be
provided from operations and an increase in the Company's credit facilities.
Net cash provided by operating activities for the nine months ended
April 29, 2006 was $810,673 compared to $300,022 of cash provided by operating
activities during the nine months ended April 30, 2005.
Inventories increased by $748,674 at April 29, 2006 compared to July
30, 2005 from higher work in process primarily related to building inventory at
the new Palmetto facility.
9
Accounts payable increased by $490,942 at April 29, 2006 compared to
July 30, 2005 because of the increase in inventory. Vendor accounts have
remained within terms.
Approximately $977,000 of equipment for the Palmetto facility was
purchased during the nine months ended April 29, 2006 consisting of new molds
($477,000), machinery and equipment ($74,000), leasehold improvements ($415,000)
and office equipment ($11,000).
The number and level of employees at April 29, 2006 should be adequate
to fulfill the production schedule at the Company's Fort Lauderdale
manufacturing facility. Approximately 30 additional employees will need to be
hired at the Company's Palmetto, Florida manufacturing facility over the next
nine months.
As disclosed above, the effects of higher fuel prices, higher interest
rates, increases in cost of other raw material and lower consumer confidence may
contribute to a slow down of the economy, which may temper our sales growth.
While we have had limited success in controlling our operational expenses and we
continue to examine ways to reduce costs on a going-forward basis, as a public
company we are constantly faced with increasing costs and expenses to comply
with SEC reporting obligations. We will be required in fiscal 2007 to comply
with the new annual internal control certification pursuant to Section 404 of
the Sarbanes-Oxley Act of 2002 and the related SEC rules. We expect that these
and other compliance costs of a public company will increase significantly. In
addition, our stock has historically been, and continues to be, relatively
thinly traded, providing little liquidity for our shareholders. As a result of
the foregoing, we have, from time-to-time considered, and expect from
time-to-time to continue to consider strategic alternatives to maximize
shareholder value.
Item 3. Controls and Procedures
Evaluation of disclosure controls and procedures
The management of the Company, under the supervision and with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934) as of the end of the period covered by this
Quarterly Report on Form 10-QSB. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by a company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company's
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving their
objectives and management necessarily applies its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of the period covered by this report, the
Company's disclosure controls and procedures were effective.
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
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Item 1. Legal Proceedings
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
No unregistered sales of equity securities were made during the period
covered by this report, except as previously disclosed under the Company's Form
8-K Current Report filed on April 3, 2006 and Form 10-QSB Quarterly Report for
the period ended January 28, 2006.
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
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
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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: June 9, 2006 By: /s/ Carl Herndon
------------------------------------------
Carl Herndon, Chief Executive Officer
(Principal Executive Officer)
Date: June 9, 2006 By: /s/ Lawrence Tierney
------------------------------------------
Lawrence Tierney, Chief
Financial Officer (Principal Financial
Officer)
12