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 27, 2007
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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 12b-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 March 6, 2007:
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 January 27, 2007 and July 29, 2006 3
Statements of Operations for the three months and six months
ended January 27, 2007 and January 28, 2006 4
Statements of Cash Flows for the six months ended January 27,
2007 and January 28, 2006 5
Notes to consolidated financial statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
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
Item 1. Consolidated Financial Statements
JUPITER MARINE INTERNATIONAL HOLDINGS, INC
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 27, July 29,
2007 2006
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ASSETS (unaudited) (audited)
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CURRENT ASSETS:
Cash and cash equivalents $ 209,655 $ 315,235
Accounts receivable 39,230 175,992
Employee receivables, net 134,570 134,570
Inventory 2,916,593 2,775,674
Prepaid expenses 159,232 82,960
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Total current assets 3,459,280 3,484,431
PROPERTY AND EQUIPMENT:
Boat molds 2,546,799 2,432,762
Machinery and equipment 617,160 605,576
Leasehold improvements 738,020 683,270
Office furniture and equipment 103,950 103,950
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4,005,929 3,825,558
Less accumulated depreciation and amortization 2,121,499 1,874,274
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Property and equipment, net 1,884,430 1,951,284
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OTHER ASSETS 63,726 34,957
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TOTAL ASSETS $ 5,407,436 $ 5,470,672
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,461,718 $ 1,164,070
Accrued expenses 160,081 209,625
Customer deposits 28,022 96,466
Warranty reserve 102,765 100,118
Capital lease obligation 24,687 24,687
Notes payable 325,000 550,000
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Total current liabilities 2,102,273 2,144,966
LONG-TERM LIABILITIES:
Accrued interest due shareholders 144,066 143,351
Notes payable to shareholders 350,000 350,000
Capital lease obligation, less current portion 30,153 42,315
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524,219 535,666
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TOTAL LIABILITIES 2,626,492 2,680,632
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SHAREHOLDER'S EQUITY:
Common stock, $.001 par value, 50,000,000 shares authorized,
18,863,861 issued and outstanding 18,864 18,864
Additional paid-in capital 4,178,259 4,105,197
Deficit (1,416,179) (1,334,021)
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TOTAL SHAREHOLDER'S EQUITY 2,780,944 2,790,040
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,407,436 $ 5,470,672
=============== ==============
See accompanying notes to consolidated financial statements
3
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
January 27, January 28, January 27, January 28,
2007 2006 2007 2006
---- ---- ---- ----
NET SALES $ 3,688,933 $ 3,439,337 $ 7,581,157 $ 6,573,637
COST OF SALES (exclusive of depreciation) 3,056,180 2,613,919 6,162,608 4,968,712
------------- -------------- -------------- -------------
GROSS PROFIT 632,753 825,418 1,418,549 1,604,925
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OPERATING EXPENSES:
Selling and marketing 126,581 161,313 269,913 272,667
General and administrative 402,999 412,062 891,064 772,813
Depreciation and amortization 136,505 57,014 246,713 139,684
------------- -------------- -------------- -------------
Total operating expenses 666,085 630,389 1,407,690 1,185,164
------------- -------------- -------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (55,910) (14,933) (98,510) (30,817)
Impairment of assets - (73,844) - (73,844)
Other income 2,273 10,158 5,593 22,072
------------- -------------- -------------- -------------
Total other income (expense) (53,637) (78,619) (92,917) (82,589)
NET INCOME BEFORE INCOME TAXES (86,969) 116,410 (82,058) 337,172
INCOME TAX EXPENSE - - - -
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NET INCOME (86,969) 116,410 (82,058) 337,172
Dividends on preferred stock - - - -
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ (86,969) $ 116,410 (82,058) 337,172
============= ============== ============== =============
Basic and diluted net income per
common share
Basic $ (0.00) $ 0.01 $ (0.00) $ 0.02
============= ============== ============== =============
Diluted $ (0.00) $ 0.01 $ (0.00) $ 0.02
============= ============== ============== =============
Weighted average number of shares
of common stock outstanding
Basic 18,863,861 16,372,493 18,863,861 15,964,009
============= ============== ============== =============
Diluted 19,863,861 18,372,493 19,863,861 17,964,009
============= ============== ============== =============
See accompanying notes to consolidated financial statements
4
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
(UNAUDITED)
January 27, January 28,
2007 2006
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (82,158) $ 337,172
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 246,713 139,684
Options issued as compensation 73,062 -
Impairment of assets - 78,844
Issuance of common shares to pay expenses - 150,000
Decrease (increase) in:
Accounts receivable 136,762 24,703
Inventory (140,919) (474,924)
Prepaid expenses (76,272) 48,440
Other assets (28,769) 440
Increase (decrease) in:
Accounts payable 297,648 400,472
Accrued expenses (49,544) (1,497)
Accrued interest payable 13,046
Customer deposits (68,444) (20,179)
Warranty reserve 2,647 2,478
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Net cash provided by operating activities 310,726 698,679
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (179,856) (749,074)
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Net cash used in investing activities (179,856) (749,074)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing on notes payable and long term debt 150,000 160,000
Payment on notes payable and long term debt (375,000) (270,000)
Payments on capital lease obligations (12,165) -
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Net cash used in financing activities (237,165) (110,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (106,295) (160,395)
CASH AND CASH EQUIVALENTS - Beginning of the period 315,235 356,361
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CASH AND CASH EQUIVALENTS - End of the period $ 208,940 $ 195,966
============ ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 20,000 $ 7,771
============ ===============
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 six months ended January 27, 2007, are not necessarily
indicative of the results that may be expected for the year ending July 28,
2007. 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 29, 2006.
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 subsidiary, Jupiter Marine
International, Inc. All inter-company balances and transactions have been
eliminated.
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. JMIH and JMI will sometimes be
collectively referred to as the "Company". The Company's principal offices and
manufacturing facilities are located in Ft. Lauderdale, 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:
6
38' Forward Seating Center Console
38' Open Center Console
31' Open Center Console
31' Cuddy Cabin
31' Forward Seating Center Console
29' Forward Seating Center Console
Our new 38' Open Center Console was adapted from our very popular 38'
Forward Seating Center Console and is targeted for the serious offshore
fisherman. It was received very well by both our dealers and retail customers
when it was shown at several winter boat shows.
The Company plans to grow the business by the addition of new features
on present models, the introduction of new models and expansion of its Palmetto,
Florida facility. The Company would consider an acquisition candidate if their
products would complement those offered by the Company and the result would
enhance the service level provided by the Company. There are no discussions with
any potential candidates at this time, nor has the Company identified any
acquisition candidates.
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 $3,688,933 for the three months ended
January 27, 2007, an increase of $249,596 (or 7.3%) as compared to $3,439,337
for the same quarter of last year. For the six months ended January 27, 2007,
the Company's net sales were $7,581,157, an increase of $1,007,520 (or 15.3%) as
compared to $6,573,637 for the same six-month period of last year. Our new
Palmetto facility, which was not manufacturing boats until the fourth quarter of
fiscal year 2006, and manufactures only the new 29' Forward Seating Center
Console, contributed $1,370,008 and $2,717,284, respectively, for the quarter
and six months ended January 27, 2007. The effects of higher fuel prices, higher
interest rates, increases in cost of raw materials and lower consumer confidence
has contributed to a slow down in the marine industry, which has tempered our
sales growth. As such, demand for our products has materially decreased. Dealer
inventory at January 27, 2007 was approximately four months supply compared to
an approximate three months supply at the same time last year. Our order backlog
has been reduced to approximately six weeks compared to six months at the same
7
time last year. The Company anticipates this slow down to continue throughout
the remainder of calendar year 2007. We continually monitor activity at our
dealerships and have and will continue to adjust production to meet consumer
demand.
Cost of Sales and Gross Profit
Cost of sales for the three months ended January 27, 2007 was
$3,056,180 resulting in $632,753 of gross profit or 17.2% of net sales. For the
same quarter of last year cost of sales was $2,613,919 and gross margin was
$825,418 or 24.0% of net sales. Cost of sales for the six months ended January
27, 2007 was $6,162,608 and gross profit was $1,418,549 or 18.7% of net sales.
For the six months ended January 28, 2006, cost of sales was $4,968,712 and
gross profit was $1,604,925 or 24.4% of net sales. A shift in sales mix to the
smaller lower gross margin 29' Forward Seating Center Console has significantly
contributed to the lower gross margin. The increased cost of raw materials has
also negatively affected gross margins. Management believes that any increase in
the selling prices of our models at this time will have an adverse affect on
sales. Cost associated with running two manufacturing facilities, both operating
below capacity, has also adversely affected gross margins.
Selling, General and Administrative Expenses
Selling and marketing expenses were $126,581, or 3.4% of net sales for
the three months ended January 27, 2007 as compared to $161,313,or 4.7% of net
sales for the same quarter of last year. For the six months ended January 27,
2007 selling and marketing expenses were $269,913, or 3.6% of net sales as
compared to $272,667, or 4.1% of net sales for the same six months of last year.
Boat show expenditures exceeded last year for the quarter and six months by
approximately $19,000 and $24,500 respectively. Advertising and brochure cost
were down compared to last year for the quarter and six months by approximately
$36,000 and $26,000 respectively.
General and administrative expenses were $402,999, or 10.9 % of net
sales for the three months ended January 27, 2007 compared to $412,062 or 12.0%
of net sales for the same quarter of last year. For the six months ended January
27, 2007 general and administrative expenses were $891,064, or 11.8% of net
sales as compared to $772,813 or 11.8% of net sales for the same six months of
last year. The Company recorded compensation cost of $34,472 and $73,062 for the
quarter and six months ended January 27, 2007 as a result of adopting the
provisions of Financial Accounting Standards No. 123R, Share-Based Payments. No
such cost was required to be recorded during the same period of last year
because prior to January 29, 2006, the Company accounted for its share-based
compensation plan under the measurement and recognition provisions of Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
related Interpretations, as permitted by the Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123).
Accordingly, share-based compensation was included as a pro forma disclosure in
the financial statement footnotes. Professional fees for the quarter and six
months ended January 27, 2007 were approximately $48,000 and $45,000 less than
the same periods of last year.
8
Depreciation and amortization expense increased for the quarter and six
months ended January 27, 2007 by approximately $79,000 and $107,000
respectively, as compared to the prior year periods, due to the purchase of
equipment and leasehold improvements needed to bring the Palmetto facility
online. Tooling cost associated with the new 29' Forward Seating Center Console
also increased depreciation expense.
Interest expense
Interest expense increased for the quarter and six months ended January
27, 2007 by approximately $41,000 and $68,000 due to higher borrowings on the
line of credit and financing outboard engine inventories.
Liquidity and Capital Resources
Cash and cash equivalents at January 27, 2007 were $209,655 as compared
to $315,235 at July 29, 2006. Working capital at January 27, 2007 was $1,357,007
compared to $1,339,465 at July 29, 2006.
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. Approximately $200,000 of
additional equipment, primarily consisting of ventilation equipment and overhead
lifting cranes, will be needed to complete the initial phase of development of
the Company's Palmetto facility. It is anticipated that funds for this equipment
will be provided from operations and an increase in the Company's credit
facilities.
Net cash provided by operating activities for the six months ended
January 27, 2007 was $310,726 compared to $698,679 of cash provided by operating
activities during the six months ended January 28, 2006.
Inventories increased by $140,919 at January 27, 2007 compared to July
29, 2006 from higher work in process primarily related to the 29' Forward
Seating Center Console model. The increase in inventory was more than offset by
a $297,647 increase in accounts payable.
Approximately $180,000 of equipment was purchased during the six months
ended January 27, 2007 primarily consisting of new molds. Expenditures for new
molds should increase during the next twelve months as the Company continues to
develop new products. Expenditures for equipment and leasehold improvements will
increase as the new Palmetto facility is completed.
The number and level of employees at January 27, 2007 should be
adequate to fulfill the production schedule.
As disclosed above, the effects of higher fuel prices, higher interest
rates, increases in cost of other raw material and lower consumer confidence has
contributed to a slow down of the marine industry which has tempered 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
9
basis, as a public company we are constantly faced with increasing costs and
expenses to comply with SEC reporting obligations. We may 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
No changes in the Company's internal control over financial reporting
occurred during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the Company's internal controls
over financial reporting.
10
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2.
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
(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
11
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JUPITER MARINE INTERNATIONAL HOLDINGS, INC.
Date: March 9, 2007 By: /s/Carl Herndon
-----------------------------------------
Carl Herndon, Chief Executive Officer
(Principal Executive Officer)
Date: March 9, 2007 By: /s/Lawrence Tierney
-----------------------------------------
Lawrence Tierney, Chief Financial Officer
(Principal Financial Officer)
12