U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended February 29, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No.: 1-7948
AIC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2192898
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
117 East 57th Street, Room 21-H, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 838-3220
Securities registered pursuant to Section 12(b) of the Exchange Act: None.
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.10 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [ ] No [x]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
The aggregate market value of the shares of Common Stock held by
non-affiliates of the Company is unavailable.
Indicate the number of shares outstanding of each of the registrant's
classes of common equity, as of the latest practicable date:
Class of Number of
Common Equity Shares
Common Stock 4,207,379
par value $.10
<PAGE>
PART I
Item 1. Business
The Company
AIC International, Inc., and its subsidiaries (collectively the "Company")
are engaged in the importation, merchandising and wholesale distribution of high
quality photographic equipment. Currently, the Company's operations are
conducted exclusively in Germany, through Soligor GmbH, Foto Optik Video
Elektronik (f/k/a A.I.C. Fototechnik GmbH), a wholly-owned German subsidiary of
the Company's wholly owned subsidiary, Allied Impex Corporation, a New York
corporation. The Company does not presently conduct any business activities
other than Soligor GmbH.
Historically, the Company's primary business has been the sale of lenses
for 35mm single lens reflex (SLR) cameras which has declined in past years due
to the popularity of auto focus cameras and compact cameras. In fiscal 1996, the
Company experienced a significant increase in demand for its SLR camera lenses.
During fiscal 1996, the Company's domestic activities were comprised of
maintaining a small administrative office and a minimal staff. The Company has
no present plans to expand its business activities in the U.S., however, Soligor
GmbH continues to remain active in the photographic industry. U.S. operating
expenses are funded through dividends from Soligor GmbH.
Products
The Company, through Soligor GmbH, markets Soligor photographic lenses,
autofocus (shutter) cameras, electronic flash equipment and accessories in
Germany and other European countries on an exclusive distributorship basis, a
common practice in the industry. Most of the Company's photographic equipment is
intended for sophisticated amateur users, as well as professional photographers.
Equipment sold by the Company is manufactured exclusively for the Company by
various manufacturers in Japan, Hong Kong, Taiwan, Korea, and China. All Soligor
lenses, as well as the other equipment, are warranted by the Company. The
periods of such warranties vary from one to five years depending on the type of
equipment.
The Company has been marketing and distributing Soligor lenses, exposure
meters and accessories since 1956. Accessories available under the Soligor name
include tripods, electronic flash units, camera bags, binoculars and optical
devices. Soligor sales represented approximately 76.7% of the Company's overall
consolidated sales for the fiscal year 1996 and 78.5% for the fiscal year 1995.
The Company owns the Soligor trademark and has registered it in many countries
around the world.
Since 1972, Soligor GmbH has been the exclusive distributor in Germany for
Elmo, formerly a manufacturer of film cameras and projectors who now produces AV
equipment and CCD surveillance cameras in Japan. Elmo sales represented 22.4%
and 20.6% of the Company's overall consolidated sales for fiscal year ended 1996
and 1995, respectively.
In 1986, the Company began purchasing flashes and winders for cameras to be
marketed by the Company and Soligor GmbH under the name of Soligor from Maxwell
Electronics, Ltd. ("Maxwell"). Maxwell, a Hong Kong corporation all of whose
shares are owned by Daniel C.K. Yu, Chairman of the
2
<PAGE>
Board, principal shareholder and a Director of the Company. Mr. Yu is also
the sole shareholder of AIC Investment Ltd., a Hong Kong corporation which owns
77.6% of the Company's Common Stock. For fiscal years 1996 and 1995, sales of
Maxwell products represented approximately 4.5% and 6.5%, respectively, of
consolidated net sales of Soligor products. In connection with these sales, from
1986 to March 1989, Maxwell extended financing to the Company and, as of
February 29, 1996, was owed an aggregate of $1,232,186 by the Company, including
accrued interest of $558,912. See Note 8 to Financial Statements.
Distribution and Repair Operation
The Company distributes its merchandise by utilizing its warehouse located
in Leinfelden- Echterdingen near Stuttgart, Germany. Warranty repairs and
service operations for the U.S. are now being performed on behalf of the Company
by a third party repairer. Customers are billed for repairs made after
expiration of the applicable warranty period.The Company had liability for
product warranties for fiscal 1996 and 1995 of $93,674 and $82,745,
respectively.
Competitive Conditions
Despite the weak economic conditions in Europe in fiscal 1996, the
Company's sales increased significantly. This was mainly due to the Company's
successful introduction of several new product lines which have been well
received by European consumers. In particular, the demand for Soligor
interchangeable lenses for SLR cameras increased by 91.7% and Elmo AV-Equipment
increased by 41.2% from the previous year's sales. Sales in the German domestic
market also increased by 26% compared to the previous year. The positive
business trend is expected to continue in fiscal year 1996/7 with an expected
average increase in sales of approximately 7%.
Material Licenses
The Company has an exclusive distribution agreement with Elmo Co. Ltd. (for
an unstated period of time) for the distribution of Elmo AV equipment and CCD
surveillance cameras in Germany.
Employees
As of February 29, 1996, the Company employed one person in the United
States and Soligor GmbH employed 35 persons in Germany.
Foreign Operations
Soligor equipment is manufactured exclusively for the Company by
manufacturers in Japan, Hong Kong, Taiwan, Korea and China (including Maxwell)
usually under verbal agreement, terminable at will. Soligor GmbH imports and
sells Soligor equipment in Germany as well as to importers and distributors in
other countries. Sales from operations conducted by Soligor GmbH constituted all
of the Company's total consolidated sales during the last fiscal year.
Item 2. Properties
The Company leases its regional offices in New York and Germany. These
leases cover an aggregate of approximately 14,000 square feet of floor space and
$122,000 in annual rentals. The lease
3
<PAGE>
for the Company's German offices expires in the year 2000. The Company's
executive offices are located at 117 East 57th Street, Suite 21H, New York, New
York 10022, in a condominium owned by the Chairman of the Board and principal
shareholder of the Company and are occupied on a month to month basis pursuant
to which the Company pays building maintenance fees and property taxes.
Item 3. Legal Proceedings
On February 1, 1995, the U.S. Tax Court issued a decision (the "Decision")
with respect to a Notice of Deficiency of the Internal Revenue Service for the
Company's tax years 1980 through 1984. Under the Decision, the Company was
required to pay an aggregate of $195,509.86 (including interest) for the tax
years 1980 through 1982. No penalties were assessed and no taxes were required
to be paid for 1983 and 1984.
On December 8, 1995, all amounts were paid including additional penalties
and interest of $7,531.66 for the late payment of the assessed amount referred
to above.
Item 4. Submission of Matters to a Vote of Security Holders
None.
4
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock, par value $.10 per share (the "Common Stock"),
was traded on the American Stock Exchange (APH) until March 9, 1985 at which
time it was delisted. To the best of the Company's knowledge, there is no active
trading market in the Common Stock. Accordingly, the Company is unable to obtain
price information for the Common Stock.
The number of recordholders of the Common Stock as of October 31, 1996 is
934.
No cash or stock dividends were paid during fiscal 1995 and 1996. The
future payment by the Company of dividends, if any, is discretionary with the
Board of Directors and will depend upon the Company's earnings, capital
requirements and financial condition, as well as other relevant factors. The
Company is not contractually restricted in its ability to pay dividends.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended
Feb. 29 Feb. 28 Feb. 28 Feb. 28 Feb. 29
1996 1995 1994 1993 1992
(Thousands of dollars, except per share amounts)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net Sales $14,274 $10,703 $9,916 $11,398 $11,145
Net Loss (36) (592) (125) (4) (193)
Average Number of
Outstanding Shares 4,207 4,207 4,207 4,207 4,207
Net Loss Per Share of
Common Stock (.01) (.14) (.03) - ($0.05)
Cash Dividends None None None None None
Balance Sheet Data
Total Assets 5,878 6,377 6,312 5,722 5,831
Working Capital 2,040 2,121 2,181 2,426 2,261
Long Term Obligations 127 133 105 113 116
Stockholders' Equity 1,993 2,073 2,147 2,407 2,415
</TABLE>
5
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Financial Condition of Discontinued Operations
Maintaining the Company's presence in New York, which has been reduced to
minimal operations, is funded by dividends generated from the Company's German
subsidiary.
Results of Operations
Net sales increased in fiscal 1996 by $3,571,215 to $14,273,933 from sales
of $10,702,718 in fiscal 1995. In fiscal year 1996, the Company's german
subsidiary, Soligor GmbH, successfully introduced several new product lines
including video surveillance equipment and various electronic goods. In
addition, there was a significant increase in sales of Soligor lenses by adding
4 new lenses to the line in fiscal year 1996.
Cost of Sales
As a percentage of sales, the Company's cost of sales decreased to 66.5% in
fiscal 1996 from 68.5% in 1995. The main reason for the decrease was the lower
cost of imported products due to fluctuation of exchanges rates of Japanese Yen
and German Deutsche Mark.
Operating Expenses
Total selling, general and administrative expenses increased to $3,765,245
from $3,419,195.
In fiscal 1996, operating expenses of Soligor GmbH increased by DM404,500
(US $283,676) compared to the prior year, due to an increase in sales.
The Company incurred expenses of $111,000 in fiscal 1996 and $120,000 in
fiscal 1995 in connection with maintaining a New York office.
Taxes on Income
In fiscal 1996, taxes recovery on the income of the Company's German
subsidiary, Soligor GmbH, were approximately $25,000 on net income. This amount
is subject to adjustment following completion of a German government tax audit
which took place in June 1996.
Summary
In fiscal 1996, the higher sales volume and lower cost of products due to
fluctuations and translation of exchange rates, combined with increased
operating expenses, resulted in a net loss of $36,000 compared to a net loss of
$592,000 for fiscal 1995.
Liquidity
The Company's working capital at February 29, 1996 was $2,039,783 and was
$2,121,028 at February 28, 1995. The ratio of current assets to current
liabilities was 1.54 to 1 at February 29, 1996, and 1.51 to 1 at February 28,
1995.
6
<PAGE>
Net cash provided by operating activities was $596,350 in fiscal 1996
compared to net cash used in operating activities of $445,461 in fiscal 1995. In
fiscal 1996, the effect of exchange rate changes on cash was an increase of cash
of $44,464 as compared to a decrease of cash of $517,543 for fiscal 1995.
Net cash of $3,494 was received by sale of equipment in fiscal 1996
compared to $74,229 which was used in investing activities in fiscal 1995.
Net cash of $653,035 was used in financing activities in fiscal 1996
compared to net cash of $145,194 fiscal 1995. The Company believes its cash
flow, working capital, internally generated funds and the funds available under
its line of credit is sufficient to meet its current working capital needs.
Item 8. Financial Statements
This information is contained on Pages F-1 through F-15 hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
7
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Each of the following individuals was a director of the Company as of
February 29, 1996.
<TABLE>
<CAPTION>
Position with the Company
Business Experience During
the Past Five Years and
Name Age Other Public Directorships Director Since
<S> <C> <C> <C>
Daniel C.K. Yu 60 Director of the Company, 1986
Managing Director of
Maxwell Electronics, Ltd.
James B. Wong 64 Director and President of the 1987
Company
Stephen P.Y. Chow 68 Director of the Company, 1987
Director of Top-Q-A
Development Ltd., Top-Q-S
Investment Ltd., P.Y. Chow
(Secretaries) Ltd., P.Y. Chow
(Consultants) Ltd. and
Kiangsu and Chekiang
Residents (H.K.) Association
Robert I. Campbell 48 President of Stratheden 1988
Investment Ltd. of Monrovia,
Liberia, Solicitor & Notary
Public qualified in England &
Wales, Hong Kong and
Australia
</TABLE>
The term of office of each director will continue until the next annual
meeting of stockholders or until his earlier death, resignation or removal.
The executive officers of the Company as of February 29, 1999, together
with their ages are:
Name Age Office
James B. Wong 64 President
Stephen Lai 42 Secretary, Chief Financial
Officer and Vice President
8
<PAGE>
Item 11. Executive Compensation
The following table sets forth the compensation paid or accrued by the
Company during the three fiscal years ended February 29, 1996, February 28, 1995
and February 28, 1994 to the Company's chief executive officer. For the fiscal
years ended February 29, 1996, February 28, 1995, and February 28, 1994, no
executive officer received cash compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Principal Position Year Salary
<S> <C> <C>
James B. Wong.............................. 1996 $36,000
President................................. 1995 $36,000
1994 $36,000
</TABLE>
The Company also pays an annual service fee of DM10,000 to members of the
Advisory Council of Soligor GmbH and a service fee of $3,000 to directors of the
Company.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of February 29, 1996
based on information obtained from the persons named below, with respect to the
beneficial ownership of shares of Common Stock by (i) each person known to the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each executive officer and director of the Company, and (iii) all
officers and directors of the Company as a group. Except as otherwise indicated
each beneficial owner has sole voting and investment power over such owner's
shares.
<TABLE>
<CAPTION>
Name Shares Percent of Class
<S> <C> <C> <C>
AIC Investment Ltd., Hong Kong 3,267,361 77.6%
Estate of Rose Silverman, Forest 424,851 10.1%
Hills, New York
All Directors and Officers as a group 01 01
(five persons)
</TABLE>
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, the "Reporting Persons")
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish the Company with copies of these reports.
--------
1 Does not include 3,267,361 shares owned by AIC Investment Ltd., Hong Kong
which is indirectly controlled by Daniel C.K. Yu, chairman of the Board and a
Director of the Company.
9
<PAGE>
New rules governing these reports were adopted in February 1991 and
generally became effective in May 1991. Based solely on the Company's review of
the copies of such forms received by it during the Company's fiscal year ended
February 29, 1996, the Company believes that all filing requirements applicable
to the Reporting Persons were complied with.
Item 13. Certain Relationships and Related Transactions
In 1986, the Company began purchasing flashes and winders for cameras to be
marketed by the Company and Soligor GmbH under the name of Soligor from Maxwell
Electronics, Ltd. ("Maxwell"). Maxwell, a Hong Kong corporation all of whose
shares are owned by Daniel C.K. Yu, Chairman of the Board, principal shareholder
and a Director of the Company. Mr. Yu is also the sole shareholder of AIC
Investment Ltd., a Hong Kong corporation which owns 77.6% of the Company's
Common Stock. For fiscal years 1996 and 1995, sales of Maxwell products
represented approximately 4.5% and 6.5%, respectively, of consolidated net sales
of Soligor products. In connection with these sales, from 1986 to March 1989,
Maxwell extended financing to the Company and, as of February 29, 1996, was owed
an aggregate of $1,232,187 by the Company, including accrued interest of
$558,912.
Item 14. Exhibits, Financial Statements and reports on Form 8-K
(a)(1) CONSOLIDATED FINANCIAL STATEMENTS PAGE(S)
<TABLE>
<CAPTION>
<S> <C>
Index to Consolidated Financial Statements......................................................................F-2
Report of Independent Certified Public Accountants..............................................................F-3
Consolidated Balance Sheets as of February 29, 1996 and February 28, 1995.......................................F-4
Consolidated Statements of Operations for the years ended
February 29, 1996 and February 28, 1995........................................................................F-5
Consolidated Statements of Stockholder's Equity for the years
ended February 29, 1996 and February 28, 1995..................................................................F-6
Consolidated Statements of Cash Flows for the years ended
February 29, 1996 and February 28, 1995........................................................................F-7
Summary of Accounting Policies............................................................................F-8 - F-9
Notes to Consolidated Financial Statements..............................................................F-10 - F-15
</TABLE>
(a)(3) EXHIBITS
3(i) Certificate of Incorporation of the Company, incorporated by reference
to Exhibit 3(a) to the Company's Registration Statement No. 2-29168.
3(ii) Certificate of Amendment to Certificate of Incorporation of the
Company incorporated by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended February 28, 1988.
10
<PAGE>
3(iii) By-Laws of the Company, incorporated by reference to Exhibit 3(b) to
the Company's Registration Statement No. 2-29168.
22 Subsidiaries of the Company.
(b)(1) REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AIC INTERNATIONAL, INC.
Registrant
By:
James B. Wong, President
Dated: January 22, 1997
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/James B. Wong
- ---------------------------------- President, Chief Executive Officer January 24, 1997
James B. Wong and Director
/s/Stephen Lai
- ---------------------------------- Vice President, Secretary and Chief January 24, 1997
Stephen Lai Financial Officer
/s/Daniel C.K. Yu
- ---------------------------------- Director and Chairman of the Board January 24, 1997
Daniel C.K. Yu
/s/Stephen P.Y. Chow
- ---------------------------------- Director January 24, 1997
Stephen P.Y. Chow
/s/Robert I. Campbell
- ---------------------------------- Director January 24, 1997
Robert I. Campbell
</TABLE>
12
<PAGE>
AIC International, Inc.
and Subsidiaries
Contents
Report of independent certified public accountants F-3
Consolidated balance sheets:
February 29, 1996 and February 28, 1995 F-4
Consolidated financial statements for the years
ended February 29, 1996 and February 28, 1995:
Statements of operations F-5
Statement of stockholders' equity F-6
Statements of cash flows F-7
Summary of accounting policies F-8 - F-9
Notes to consolidated financial statements F-10 - F-15
F-1
<PAGE>
Report of Independent Certified Public Accountants
AIC International, Inc. and Subsidiaries
New York, New York
We have audited the accompanying consolidated balance sheets of AIC
International, Inc. and subsidiaries as of February 29, 1996 and February 28,
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the two years in the period ended February 29,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AIC
International, Inc. and its subsidiaries at February 29, 1996 and February 28,
1995, and the results of their operations and their cash flows for each of the
two years in the period ended February 29, 1996 in conformity with generally
accepted accounting principles.
BDO Seidman, LLP
Mitchel Field, New York
May 9, 1996
F-2
<PAGE>
AIC International, Inc.
and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
<S> <C> <C>
Assets
Current:
Cash $ 471,008 $ 568,663
Trade receivables, less allowances of $82,925 and $66,865
for possible losses (Note 5) 1,479,840 1,632,745
Merchandise inventories (Note 5) 3,529,399 3,669,960
Prepaid expenses and other current assets 317,786 322,365
Due from related party (Note 8) - 98,264
___________ ___________
Total current assets 5,798,033 6,291,997
Property and equipment, at cost less accumulated
depreciation and amortization (Note 2) 62,074 66,871
Other assets 17,821 17,821
___________ ___________
$5,877,928 $6,376,689
=========== ===========
Liabilities and Stockholders' Equity
Current:
Bank loans (Note 5) $1,565,641 $2,218,676
Accounts payable - trade 109,578 63,010
Due to related party (Note 8) 1,399,550 1,126,697
Income taxes payable 83,478 195,510
Other taxes payable 213,105 204,255
Liability for product warranties 93,674 82,735
Accrued payrolls, commissions and other liabilities 293,224 280,086
Total current liabilities 3,758,250 4,170,969
Accrued pension costs (Note 7) 126,832 132,700
___________ ___________
Total liabilities 3,885,082 4,303,669
Commitments and Contingencies (Notes 6 and 7)
Stockholders' equity:
Common stock, $.10 par - shares authorized, 10,000,000;
issued, 4,244,879 424,488 424,488
Additional paid-in capital 6,719,500 6,719,500
Deficit (6,315,265) (6,279,555)
Accumulated translation adjustment 1,276,623 1,321,087
Treasury stock, at cost - 37,500 shares (112,500) (112,500)
___________ __________
Total stockholders' equity 1,992,846 2,073,020
___________ __________
$5,877,928 $6,376,689
=========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE>
AIC International, Inc.
and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
February 29, February 28,
Year ended 1996 1995
__________ _____________ _____________
<S> <C> <C>
Net sales (Note 3) $14,273,933 $10,702,718
Cost of sales 9,487,677 7,328,994
_____________ _____________
Gross profit 4,786,256 3,373,724
_____________ _____________
Operating expenses:
Selling, general and administrative 3,765,245 3,419,195
Advertising 738,007 493,341
Interest 264,216 267,371
_____________ _____________
Total operating expenses 4,767,468 4,179,907
_____________ _____________
Loss from operations 18,788 (806,183)
_____________ _____________
Other income (expense):
Net foreign exchange gain (loss) (82,710) 99,805
Other 7,319 24,966
_____________ ______________
Other income (expense) - net (75,391) 124,771
_____________ ______________
Loss from operations before income tax expenses
(recovery) (Note 3) (56,603) (681,412)
Income tax expenses (recovery) (Note 4) (20,893) (89,577)
_____________ ______________
Net loss $ (35,710) $ (591,835)
============= ==============
Net loss per share $ (.01) $ (.14)
_____________ ______________
Average number of shares used in computation of net
loss per share 4,207,379 4,207,379
============= ===============
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
AIC International, Inc.
and Subsidiaries
Consolidated Statement of
Stockholders' Equity
For the two years ended February 29, 1996
<TABLE>
<CAPTION>
Common Stock
Authorized 10,000,000
Shares $.10 Par
------------------------------------------------
Additional Accumulated Treasury
Paid-in Translation Stock,
Shares Issued Amount Capital Deficit Adjustment At Cost
<S> <C> <C> <C> <C> <C> <C>
Year ended February 28, 1995:
Net loss - - - (591,835) - -
Foreign currency translation adjustment - - - - 517,543 -
_________ ________ __________ ___________ __________ __________
Balance, February 28, 1995 4,244,879 424,488 6,719,500 (6,279,555) 1,321,087 (112,500)
Year ended February 29, 1996:
Net loss - - - (35,710) - -
Foreign currency translation adjustment - - - - (44,464) -
_________ ________ __________ ___________ ___________ __________
Balance, February 29, 1996 4,244,879 $424,488 $6,719,500 $(6,315,265) $1,276,623 $(112,500)
========= ======== ========== ============ =========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
AIC International, Inc.
and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
February 29, February 28,
Year ended 1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (35,710) $(591,835)
Items in net loss not affecting cash:
Depreciation and amortization 1,303 60,656
Increase (decrease) in provision for possible losses
on accounts receivable 16,060 3,968
Increase (decrease) in cash flows from changes in
operating assets and liabilities:
Accounts receivable 136,845 (480,432)
Inventories 140,561 217,479
Prepaid expenses and other current assets 4,579 113,362
Due from related party 98,264 (53,137)
Accounts payable 46,568 (48,522)
Due to related parties 272,853 82,375
Income taxes payable (112,032) 65,951
Other liabilities 27,059 184,674
__________ _________
Net cash provided by (used in) operating activities 596,350 (445,461)
Cash flows from investing activities:
Capital expenditures, net of proceeds from sale of
equipment 3,494 (74,229)
Cash flows from financing activities:
Net borrowings from (repayments to) banks (653,035) (145,194)
Effect of exchange rate changes on cash (44,464) 517,543
_________ _________
Net increase (decrease) in cash (97,655) (147,341)
Cash, at beginning of year 568,663 716,004
_________ _________
Cash, at end of year $471,008 $568,663
========= =========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
AIC International, Inc.
and Subsidiaries
Summary of Accounting Policies
Organization and Business
The Company is a 77.6% owned subsidiary of AIC Investments, Ltd. which
Business is a wholly-owned subsidiary of Maxwell Electronics, Ltd. Its principal
business is the importation, merchandising and wholesale distribution of
photographic equipment. The principal portion of its operations are in Germany.
Consolidation
The consolidated financial statements include the accounts of AIC
International, Inc. and its subsidiaries (all wholly-owned), with the exception
of its immaterial Hong Kong and Japanese subsidiaries.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities. Actual results could differ from those
estimates.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable. The
Company engages in the sale of photographic equipment to customers, the majority
of whom are in the retail industry. Concentration of credit risk with respect to
accounts receivable from one industry is limited due to the diverse group of
distributors to whom the Company sells. Also, the Company attempts to minimize
credit risk by reviewing all customers' credit history before extending credit,
and by monitoring customers' credit exposure on a regular basis. The Company
established an allowance for accounts receivable based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
Merchandise Inventory
Inventories, which consist only of finished goods, are valued at the lower
of cost or market. Cost is determined by the first-in, first-out (FIFO) method.
Property, Equipment and Depreciation
Depreciation and amortization are computed principally by the straight-line
method over the estimated useful lives of the assets.
F-7
<PAGE>
AIC International, Inc.
and Subsidiaries
Summary of Accounting Policies
Translation of Foreign Currency Financial Statements
Substantially all assets and liabilities of the Company's German subsidiary
are translated at year-end exchange rates, while income and expenses are
translated at average exchange rates for the year. Gains and losses resulting
from translation of foreign currency financial statements are deferred and
classified as a separate component of stockholders' equity.
Product Warranties
The Company sells its products with warranties ranging from one to seven
years. The estimated cost of repairs under existing warranties has been provided
for in the consolidated financial statements.
Advertising Costs
The Company expenses advertising costs when they are incurred.
Per Share Data
Per share loss is based on the weighted average number of shares of common
stock.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
Prospective Accounting Changes
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
long-lived assets and for long-lived assets to be disposed of ("SFAS No. 121").
SFAS No. 121 is effective for fiscal year beginning after December 15, 1995.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity to be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The impact of adopting SFAS No. 121 is not
expected to be material.
F-8
<PAGE>
AIC International, Inc.
and Subsidiaries
Notes to Consolidated
Financial Statements
1. Business
Since 1988, the Company's domestic business activities have been
substantially curtailed in order to reduce operating losses and the level of
operating funds needed from the German subsidiary. During 1996, the Company's
domestic activities were comprised of maintaining a small administrative office
and a minimum staff.
At present there are no plans to expand the United States operations to
prior levels. As a result, Soligar GmbH, Fotoo Optiko Videoo Elektronik, Germany
(formerly A.I.C. Fototechnik GmbH) became autonomous, developed its own supplier
relationships and imports merchandise directly. The Germany subsidiary continues
to account for substantially all of the consolidated 1996 assets and revenues.
Management plans to continue operating the Company in this manner and is funding
the operating expenses in the United States with dividends from Germany.
2. Property and Equipment
Major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
February 29, February 28, Estimated
1996 1995 useful lives
<S> <C> <C> <C>
Office furniture and equipment $313,273 $316,170 4 -10 years
Leasehold improvements 58,561 59,157 Term of lease
_________ ________ _____________
371,834 375,327
Less accumulated depreciation
and amortization (309,760) (308,456)
_________ _________
$ 62,074 $ 66,871
========== =========
</TABLE>
F-9
<PAGE>
AIC International, Inc.
and Subsidiaries
Notes to Consolidated
Financial Statements
3. Information about the Company's Operations in Different Geographic Areas
The Company operates in one business segment - the importation and
wholesale distribution of photographic equipment. Operations in different
geographic areas are summarized on this page for 1996 and on the following page
for 1995.
<TABLE>
<CAPTION>
1996
____
United Adjustments and
Germany States Eliminations Consolidated
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Sales to unaffiliated
customers $14,274 $ - $ - $14,274
======== ======== ============ ==========
Income (loss) from
operations before
income tax expenses
(recovery) 218 (275) - (57)
======== ======== ============ ===========
Identifiable assets:
Current assets 5,809 (11) - 5,798
Property and
equipment 61 1 - 62
Investment in
subsidiary - 3,479 (3,479) -
Other assets - 18 - 18
________ ________ ____________ __________
$5,870 $3,487 $(3,479) $ 5,878
</TABLE>
F-10
<PAGE>
AIC International, Inc.
and Subsidiaries
Notes to Consolidated
Financial Statements
3. Information about the Company's Operations in Different Geographic Areas
(concluded)
<TABLE>
<CAPTION>
1995
_____
United Adjustments and
Germany States Eliminations Consolidated
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Sales to unaffiliated
customers $10,703 $ - $ - $10,703
======= ======== ========== =======
Income (loss) from
operations before
income tax expenses
(recovery) (313) (368) - (681)
________ ________ __________ ________
Identifiable assets:
Current assets 6,118 174 - 6,292
Property and
equipment 66 1 - 67
Investment in
subsidiary - 3,335 (3,335) -
Other assets - 18 - 18
________ ________ ________ _________
$ 6,184 $3,528 $(3,335) $ 6,377
======== ======== ======== =========
4. Income Tax Expenses (Recovery)
(a) Income tax expenses (recovery) consists of the following: Expenses
(Recovery)
1996 1995
____ ____
Current:
Federal $ - $ -
State 4,001 4,028
Foreign (24,894) (93,605)
________ _________
$(20,893) $(89,577)
======== =========
</TABLE>
F-11
<PAGE>
AIC International, Inc.
and Subsidiaries
Notes to Consolidated
Financial Statements
(b) The reasons for the difference between the reported tax expenses
(recovery) and the amounts computed by using the statutory Federal income tax
rate are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Federal income tax (recovery) at
statutory rate based on pretax
income (loss) $(19,245) $(231,680)
Domestic losses which did not
result in tax benefit (net
operating loss carryforwards) 93,499 129,323
Foreign tax at rates higher
(lower) than U.S. statutory
rate (39,757) 106,385
Prior year overaccrual (55,390) (93,605)
_________ _________
$(20,893) $ (89,577)
========= =========
</TABLE>
(c) The Company and its domestic subsidiaries have net operating loss
carryforwards of approximately $6,205,000, which are available to offset future
domestic income through 2011. The deferred tax assets resulting from possible
utilization of the net operating loss carryforwards have been offset by a
valuation reserve of the same amount.
5. Notes and Loans Payable- Banks
The Company has $1,565,641 of outstanding notes to its banks as of February
29, 1996. The note is payable on demand with an average interest rate of 4.44%.
The maximum amount and average amount outstanding during the period was
$3,679,787 and $2,288,057.
As of February 29, 1996, the Company's lines of credit with its German
lending banks were as follows:
The Company has access to several lines of credit which aggregate to
approximately DM 7,200,000 ($4,886,000). The credit lines are also available for
discounted notes receivable and for letters of credit. The credit lines of DM
3,200,000 ($2,172,000) and DM 2,500,000 ($1,697,000) are collateralized by
inventory and accounts receivable, respectively, of the German subsidiary.
F-12
<PAGE>
AIC International, Inc.
and Subsidiaries
Notes to Consolidated
Financial Statements
6. Commitments and Contingencies
Rent expense for the years ended February 29, 1996 and February 28, 1995
totalled $122,031 and $107,639, respectively.
The principal leases are the Company's offices and warehouses in Germany.
The minimum annual rental commitments under all noncancellable leases,
exclusive of taxes and other charges, as of February 29, 1996 are as follows:
Year ending February 28,
________________________
1997 $194,446
1998 124,179
1999 102,684
2000 102,684
2001 32,974
________
$556,967
========
7. Retirement Plan
The Company's unfunded foreign retirement plan provides benefits to the
foreign subsidiary's director based on length of service and compensation.
The actuarial present value of vested plan benefits at February 29, 1996
and February 28, 1995 aggregated $127,000 and $132,700, respectively. Plan costs
charged to expense for the years ended February 29, 1996 and February 28, 1995,
were approximately $12,000 and $24,000, respectively. Payments are currently
being made to the director.
F-13
<PAGE>
AIC International, Inc.
and Subsidiaries
Notes to Consolidated
Financial Statements
8. Related Party Transactions
At February 29, 1996 and February 28, 1995, the Company owed $1,232,186 and
$1,126,697 to Maxwell Electronics, Ltd. arising from the purchase of merchandise
before March 1989. Interest on this indebtedness is accrued at the prime rate of
Hong Kong & Shanghai Banking Corp. Accrued interest thereon at February 28, 1996
of $558,912 is included in the $1,232,186. Purchases from Maxwell Electronics,
Ltd. for the years ended February 29, 1996 and February 28, 1995, totalled
$250,805 and $258,742, respectively. Interest expenses accrued to Maxwell
Electronics, Ltd. for the years ended February 29, 1996 and February 28, 1995,
were $105,491 and $82,374.
The Company had a payable of $20,344 at February 29, 1996 and a receivable
of $98,264 at February 28, 1995 from its unconsolidated Hong Kong subsidiary,
Soligor (AIC) Ltd. This amount was advances to the subsidiary to pay for foreign
purchases and expenses on behalf of the Company. The Company also had a payable
of $147,020 at February 29, 1996 to another affiliate.
9. Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
1996 1995
____ ____
Interest $89,250 $97,703
======= =======
Taxes $ - $ -
======= =======
F-14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000002880
<NAME> AIC INTERNATIONAL INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-1-1995
<PERIOD-END> FEB-29-1996
<CASH> 471,008
<SECURITIES> 0
<RECEIVABLES> 1,562,765
<ALLOWANCES> (82,925)
<INVENTORY> 3,529,399
<CURRENT-ASSETS> 5,798,033
<PP&E> 371,834
<DEPRECIATION> (309,760)
<TOTAL-ASSETS> 5,877,928
<CURRENT-LIABILITIES> 3,758,250
<BONDS> 0
0
0
<COMMON> 424,488
<OTHER-SE> 1,568,358
<TOTAL-LIABILITY-AND-EQUITY> 5,877,928
<SALES> 14,273,933
<TOTAL-REVENUES> 14,273,933
<CGS> 9,487,677
<TOTAL-COSTS> 13,990,929
<OTHER-EXPENSES> 75,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164,216
<INCOME-PRETAX> (56,603)
<INCOME-TAX> (20,893)
<INCOME-CONTINUING> (35,710)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,710)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
