Jupiter Marine International Holdings Inc/Fl - Quarterly Report of Financial Condition (10QSB)

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 October 27, 2007

( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ..........................to....................

Commission file number ........................................................

Jupiter Marine International Holdings, Inc.

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(Exact name of small business issuer as specified in its charter)

Florida 65-0794113 ------- ---------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.)

1103 12TH Avenue East, Palmetto, FL 34221

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(Address of principal executive offices)

941-729-5000

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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 December 3, 2007:
18,863,861 shares of common stock.

Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]

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Page ---- Part I. Financial Information 3 ------- --------------------- Item 1. Consolidated Financial Statements 3 Balance Sheets as of October 27, 2007 and July 28, 2007 3 Statements of Operations for the three months ended October 27, 2007 and October 28, 2006 4 Statements of Cash Flows for the three months ended October 27, 2007 and October 28, 2006 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 11 Part II. Other Information 12 -------- ----------------- Item 1. Legal Proceedings 12 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submissions of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits 12

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PART I. FINANCIAL INFORMATION ------- --------------------- Item 1. Financial information JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS October 27, July 28, ASSETS 2007 2007 ------ ----------------- --------------- (unaudited) (audited) CURRENT ASSETS: Cash and cash equivalents $ 341,031 $ 80,135 Accounts receivable, net 50,801 47,980 Employee receivables - - Inventory: Raw materials 1,174,497 773,671 Work in process 807,407 1,001,387 Prepaid expenses 46,320 67,515 --------------------------------------- Total current assets 2,420,056 1,970,688 PROPERTY AND EQUIPMENT: Boat molds 2,480,769 2,098,180 Machinery and equipment 437,181 409,780 Leasehold improvements 527,836 448,736 Office furniture and equipment 36,802 36,801 --------------------------------------- 3,482,588 2,993,497 Less accumulated depreciation and amortization 1,050,819 927,914 --------------------------------------- Property and equipment, net 2,431,769 2,065,583 --------------------------------------- OTHER ASSETS 57,912 57,912 --------------------------------------- TOTAL ASSETS $ 4,909,737 $ 4,094,183 ======================================= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 1,479,418 $ 807,110 Accrued expenses 679,754 542,423 Accrued interest due to shareholders 155,496 143,067 Customer deposits 227,204 66,489 Warranty reserve 153,400 192,967 Current portion of capital lease obligation 26,200 26,200 Notes payable to shareholders 350,000 350,000 Notes payable 225,000 425,000 --------------------------------------- Total current liabilities 3,296,472 2,553,256 LONG-TERM LIABILITIES: Capital lease obligation, less current maturities 10,079 16,114 --------------------------------------- 10,079 16,114 --------------------------------------- TOTAL LIABILITIES 3,306,551 2,569,370 --------------------------------------- SHAREHOLDERS' EQUITY: Common stock, $.001 par value, 50,000,000 shares authorized, 18,863,861 and 18,863,861 issued and outstanding 18,864 18,864 Additional paid-in capital 4,206,014 4,206,014 Deficit (2,621,692) (2,700,065) --------------------------------------- TOTAL SHAREHOLDERS' EQUITY 1,603,186 1,524,813 --------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,909,737 $ 4,094,183 =======================================

See accompanying notes to consolidated financial statements

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JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED (unaudited) October 27, October 28, 2007 2006 -------------------- ------------------------- NET SALES $ 3,857,821 $ 3,892,224 COST OF SALES (exclusive of depreciation) 2,990,472 3,098,918 -------------------- ------------------------- GROSS PROFIT 867,349 793,306 -------------------- ------------------------- 22.5% 20.4% OPERATING EXPENSES: Selling and marketing 166,088 143,332 General and administrative 480,643 488,165 Depreciation and amortization 122,905 110,209 -------------------- ------------------------- Total operating expenses 769,636 741,706 -------------------- ------------------------- OTHER INCOME (EXPENSE): Interest expense (28,258) (42,600) Other income (expense) 8,919 3,320 -------------------- ------------------------- Total other income (expense) (19,339) (39,280) -------------------- ------------------------- NET INCOME BEFORE INCOME TAXES 78,374 12,320 INCOME TAX EXPENSE - - -------------------- ------------------------- NET INCOME 78,374 12,320 Dividends on preferred stock - - -------------------- ------------------------- NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 78,374 $ 12,320 ==================== ========================= Basic and diluted net income per common share Basic $ 0.00 $ - ==================== ========================= Diluted $ 0.00 $ - ==================== ========================= Weighted average number of shares of common stock outstanding Basic 18,863,861 18,863,861 Diluted 21,893,989 21,893,989

See accompanying notes to consolidated financial statements

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JUPITER MARINE INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED October 27, October 27, 2007 2006 ------------------ ---------------------- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 78,373 $ 12,320 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 122,905 110,209 Options issued as compensation - 38,590 Decrease (increase) in: Accounts receivable (2,821) (33,634) Inventory (206,846) (357,030) Prepaid expenses 21,195 (72,156) Other assets - (8,797) Increase (decrease) in: Accounts payable 672,308 106,736 Accrued expenses 137,331 (46,855) Customer deposits 160,715 (48,444) Warranty reserve (39,567) 462 Accrued interest payable 12,429 (11,714) ------------------ ---------------------- Net cash provided by (used in) operating activities 956,022 (310,313) ------------------ ---------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (489,091) (48,344) ------------------ ---------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings on notes payable and long term debt - 150,000 Payment on notes payable and long term debt (200,000) - Payments on capital lease obligations (6,035) (6,036) ------------------ ---------------------- Net cash (used in) provided by financing activities (206,035) 143,964 ------------------ ---------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 260,896 (214,693) CASH AND CASH EQUIVALENTS, beginning of period 80,135 315,235 ------------------ ---------------------- CASH AND CASH EQUIVALENTS, end of period $ 341,031 $ 100,542 ================== ====================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 28,258 $ 54,314 ================== ======================

See accompanying notes to consolidated financial statements

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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 three months ended October 27, 2007, are not necessarily indicative of the results that may be expected for the year ending July 26,2008. 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 28, 2007.

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 subsidiary, Jupiter Marine International, Inc. 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. JMIH and JMI will sometimes be collectively referred to as the "Company". The Company's principal offices and manufacturing facilities are located in Palmetto, Florida. The Company's Web site address is www.jupitermarine.com.

The Company designs, manufactures and markets a diverse mix of high quality sportfishing boats under the Jupiter brand name. The outboard powered product line currently consists of seven models:

38' Forward Seating Center Console 38' Open Center Console
34' Forward Seating Center Console 31' Cuddy Cabin
31' Forward Seating Center Console 31' Open Center Console
29' Forward Seating Center Console

The Jupiter 34' Forward Seating Center Console was introduced at the October 2007 Ft. Lauderdale Boat Show. The 34' is a new design and fills the gap between the 31' Forward Seating Center Console and the 38' Forward Seating Center Console. It was specifically engineered to accommodate the new Yamaha 350HP V-8 four stroke outboard engines. Deliveries of the 34' will commence during the later part of the quarter ending January 26, 2008.

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.

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 facility. The Company would consider an acquisition candidate if their products

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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 of the Company believes that economic pressures such as higher fuel prices, higher interest rates, a weak housing market's effect on the buying public, concerns with the credit markets, and increases in costs of other essential items have negatively effected our business. These factors have already contributed to an overall slow down in the marine industry. Based on published reports the marine industry has experienced double digit sales declines. Some retail boat sales outlets have announced that due to high inventory levels they plan on increasing promotions to move product. These retail outlets have also expressed concern over their high inventory levels and have indicated that they will be reducing purchases in the future. In addition, as a public company we are constantly faced with increasing costs and expenses to comply with SEC reporting obligations. We believe we will be required in fiscal 2008 to comply with the 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. See "Other Events" below.

Net Sales

The Company's net sales were $3,857,821, for the quarter ended October 27, 2007 an increase of $34,403 as compared to $3,892,224 for the quarter ended October 28, 2006. We have been able to maintain our sales levels at a rate consistent with last year primarily due to enlisting new dealers who contributed approximately $1.6 million or 42% to our first quarter sales. There is no assurance that additional new dealers can absorb any potential sales decline in the future as we have filled most of the open sales territories.

Promotional sales discounts, given to stimulate retail sales, increased to $86,069 or 2.2% of sales for the quarter ended October 27, 2007 as compared to $27,650 or 0.7% of sales for the quarter ended October 28, 2006.

Dealer inventory at October 27, 2007 increased to approximately four and one-half months supply compared to an approximate two and one-half months supply at the same time last year. Order backlog remained at approximately one month at October 27, 2007 compared to the same time last year. We continually monitor activity at our dealerships and will, if necessary, adjust production to consumer demand.

Cost of Sales and Gross Profit

Cost of sales for the quarter ended October 27, 2007 was $2,990,472 resulting in $867,349 of gross profit or 22.5% of net sales. For the quarter ended October 28, 2006 cost of sales was $3,098,918 and gross profit was $793,306 or 20.4% of net sales.

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During the quarter ended October 28, 2006 the Company was operating two manufacturing facilities, both operating below capacity, the cost of which adversely affected gross margins.

The benefits of merging the Company's manufacturing operations into one facility have started to pay off in the way of reduced operation cost and improved efficiencies. The full benefit of this consolidation will not be realized until additional improvements are made to the Palmetto facility. The timing of completing these improvements is dependent on improved cash flow.

The improvement in gross margin percentage was also the result of a sales mix shift to the larger higher gross margin 38' Forward Seating model. Higher promotional discounts, as mentioned previously, reduced gross margins by approximately 1.5%. The increase in selling price at the start of fiscal year 2008 (August 1, 2007) helped offset increases in raw material, labor and other operating expenses. Management is very concerned about the consumers' acceptance of rising selling prices now and in the future.

Selling, General and Administrative Expenses

Selling and marketing expenses were $166,088, or 4.3% of net sales, for the quarter ended October 27, 2007 as compared to $143,332 or 3.7% of net sales for the same quarter of last year. This increase is primarily attributable to an increase in salaries for certain sales personnel.

General and administrative expenses for the quarter ended October 27, 2007 remained about the same at $480,643 or 12.5% of net sales for the quarter ended October 27, 2007 compared to $488,165 or 12.5% of net sales for the same quarter of last year.

Depreciation and amortization expense increased by $12,696 to $122,905 for the quarter ended October 27, 2007 resulting from addition of boat molds and equipment.

Interest expense for the quarter ended October 27, 2007 of $28,258 was $14,342 less than the same quarter of last year due to lower average borrowings on the line of credit.

Liquidity and Capital Resources

At October 27, 2007 the Company had cash and cash equivalents of $341,031 and working capital deficit of $876,416. At October 28, 2006, the Company had cash and cash equivalents of $100,542 and working capital of $1,425,693.

The Company anticipates that cash generated from operations and the availability under the Company's credit line should be sufficient to satisfy the Company's contemplated cash requirements for its current operations, other than for capital expenditures and the repayment of the Note Payable to shareholders, as discussed below, for at least the next twelve months.

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The Note Payable to Shareholders in the amount of $350,000 plus accrued interest in the amount of $155,496 is due on February 14, 2008. The Company does not currently have available funds to satisfy the note. If the Company is unable to repay the note, the note may be converted into common stock. Conversion of the note would result in substantial dilution to current shareholders.

Property and equipment purchases during the quarter ended October 27, 2007 were $489,091 consisting primarily of new boat molds. Its is estimated that between $750,000 and $1,000,000 will be needed to complete the initial Palmetto build-out that will allow us to more efficiently meet the current production schedule. Additionally, it is estimated that $400,000 will be required to complete the new boat development project schedule. The actual timing of these expenditures and, consequently, the products completion date is predicated on the Company's ability to generate cash or secure alternative financing.

Net cash provided by operating activities was $956,022 for the three months ended October 27, 2007 compared to $310,313 used by operating activities for the three months ended October 28, 2006.

Inventories at October 27, 2007 increased by $206,846 compared to July 28, 2007 due to increased work in process.

Accounts payable at October 27, 2007 increased by $672,308 due to the increase in inventory and delaying vendor payments.

The number and level of employees at October 27, 2007 should be adequate to fulfill the production schedule.

Other Events

As discussed above, we believe that the economy and other factors have had a negative effect on the Company's operations and stock quotation price. In July 2007, in an attempt to maximize shareholder value, the Company entered into a merger agreement with Diamond Information Institute, Inc., a jewelry designer and manufacturer company. Under the merger the Company will issue an aggregate of 7,400,000 shares of common stock and 1,025,000 shares of Series A Voting Convertible Preferred Stock to the shareholders of Diamond Information Institute, Inc. in exchange for a wholly owned interest in Diamond Information Institute, Inc. Simultaneously with the merger, the Company will dispose of all of its boat manufacturing business assets and liabilities, which will be purchased by Carl Herndon, Lawrence Tierney and certain other shareholders of the Company in consideration for the return of 9,987,833 shares of the Company common stock. These affiliates and others will own 100% of the boat manufacturing business following the completion of the reverse merger. Diamond Information Institute, Inc. will be the accounting survivor and surviving business operations; however, the Company is the surviving legal entity. Diamond Information Institute, Inc. is a New Jersey corporation organized in 1988 that has been engaged in the design and manufacture of upscale jewelry since 1995. Diamond Information Institute, Inc. sells its jewelry to approximately 150 independent jewelry stores across the United States. The completion of these

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transactions is subject to several conditions, including but not limited to SEC review and delivery of an information statement to the Company's shareholders. As of the date of this report the Company cannot provide any assurances that the transactions will be completed.

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.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits

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 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: December 21, 2007 By: /s/Carl Herndon ----------------------------------------------- Carl Herndon, Director, Chief Executive Officer (Principal Executive Officer) and President Date: December 21, 2007 By: /s/Lawrence Tierney ----------------------------------------------- Lawrence Tierney, Director and Chief Financial Officer (Principal Executive Officer)

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