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 28, 1997
[ ] 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) camera, which has declined due to the
popularity of auto focus cameras and compact cameras. In fiscal 1996 and 1997,
the Company experienced increasing demand of interchangeable lenses for its SLR
cameras. In fiscal 1997, the Company's sales of all types of Soligor lenses
represented approximately 60% of the Company's total Soligor products sales.
Since 1989, the Company's domestic activities were comprised of maintaining
a small administrative office with 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 brand 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 85% of the
Company's overall consolidated sales for the fiscal year 1997 and 76.7% for
fiscal year 1996. 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 products, formerly a manufacturer of film cameras and projectors, who now
produces AV equipment and CCD surveillance cameras in Japan. Elmo sales
represented 14.9% and 22.4%, respectively, of the Company's overall consolidated
sales for the fiscal years ended 1997 and 1996.
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"), 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 1997 and 1996, sales of Maxwell products represented
approximately 3.4% and 4.5%, 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 28, 1997, was owed an
aggregate of $1,341,101 by the Company, including accrued interest of $667,827.
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 1997 and 1996 of $96,124 and $93,674, respectively.
Competitive Conditions
Despite the decline of photographic consumers' spending power in Europe in
fiscal 1997, the Company's total sales volume increased by 18.9% in Deutsche
Mark (representing a 7.9% increase in the German domestic sales and 39.6% on
international sales) compared to the prior year. The sales volume increased by
8.8% in U.S. dollars when combined with effects of changes in exchange rates.
This increase was primarily due to the Company's German subsidiary's, Soligor
GmbH, effective marketing program and successful introduction of new products,
such as viewfinder cameras, AF zoom lenses and binoculars, which have been well
received by European consumers. The Company's competitors are not able to offer
lines as various and complete as Soligor.
Sales of Soligor and Elmo products comprised 85.1% and 14.9%, respectively,
of the Company's total sales for fiscal 1997. 62.1% of the Company's sale of
Soligor product were made in the German domestic market and 37.9% were sales
made internationally. Of the 37.9% of sales made internationally, 41.8% of total
exports were to countries of the European Common Market, 48.6% to European
countries which are not members of the Common Market and 9.6% to countries
outside of Europe.
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 28, 1997, the Company employed one person in the United
States and Soligor GmbH employed 36 persons in Germany.
<PAGE>
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 for the Company's German offices expires
in the year 2000. On August 14, 1997, the Company's German subsidiary, Soligor
GmbH, purchased this building located at Schulze-Delitzsch Str. 7, D-70711,
Leinfelder, Echterdingen, Germany for DM 1,560,000. 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
The Company is currently having discussions with the New York State Tax
Department in connection with fiscal years 1980, 1981 and 1982. The inquiry by
New York State arose in connection with the Company's payment of deficiencies
assessed by the Internal Revenue Service in February 1995, for the tax years
1980 through 1984.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<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 15, 1997 is
927.
No cash or stock dividends were paid during fiscal 1996 and 1997. 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.
<TABLE>
Item 6. Selected Financial Data
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Ended
Feb. 28 Feb. 29 Feb. 28 Feb. 28 Feb. 28
1997 1996 1995 1994 1993
(Thousands of dollars, except per share amounts)
Income Statement Data
Net Sales $15,523 $14,274 $10,703 $9,916 $11,398
Net Income (Loss) 67 (36) (592) (125) (4)
Average Number of
Outstanding Shares 4,207 4,207 4,207 4,207 4,207
Net Loss Per Share of Common Stock
.02 (.01) (.14) (.03) -
Cash Dividends None None None None None
Balance Sheet Data
- ------------------
Total Assets 5,408 5,735 6,377 6,312 5,722
Working Capital 1,611 2,040 2,121 2,181 2,426
Long Term Obligations 107 127 133 105 113
Stockholders' Equity 1,613 1,993 2,073 2,147 2,407
</TABLE>
<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. The Company has no intention to operate sales other than of the
German subsidiary, which has managed worldwide sales successfully in the past
years.
Results of Operations
Despite the spending power of customers stagnating in Europe, the Company's
net sales increased in fiscal 1997 by $1,249,324 to $15,523,257 from sales of
$14,273,933 in fiscal 1996. In fiscal year 1997, sales by the Company's German
subsidiary, Soligor GmbH, increased by 8.75% from the prior year, by effective
promotion and adding more new products and accessories to existing lines.
Cost of Sales
As a percentage of sales, the Company's cost of sales increased to 69.1% in
fiscal 1997 from 66.5% in 1996. The main reason for the increase was the higher
cost of imported products due to fluctuation of exchange rates of Japanese Yen
and German Deutsche Mark.
Operating Expenses
The Company's total selling, general and administrative expenses decreased
to $3,701,408 from $3,765,245 the previous year, as a result of increased
Soligor GmbH operating expenses offset by changes in exchange rate.
In fiscal 1997, operating expenses of Soligor GmbH increased by DM711,900
(U.S. $421,940) compared to the prior year, due to an increase in sales.
The Company incurred expenses of $112,000 in fiscal 1997 and $111,000 in
fiscal 1996 in connection with maintaining a New York office.
Taxes on Income
After reconciling for the difference between the reported tax expenses and
the amounts computed by using the statutory federal income tax rate, the total
income tax payable for fiscal year 1997 is $278,000.
Summary
In fiscal 1997, the higher sales volume resulted in a net income of $67,000
compared to a net loss of $36,000 for fiscal 1996.
<PAGE>
Liquidity
The Company's working capital at February 28, 1997 was $1,610,952 and was
$2,039,783 at February 29, 1996. The ratio of current assets to current
liabilities was 1.44 to 1 at February 28, 1997, and 1.54 to 1 at February 29,
1996.
Net cash provided by operating activities was $736,508 in fiscal 1997
compared to net cash provided in operating activities of $596,350 in fiscal
1996.
Net cash of $59,997 for capital expenditures in fiscal 1997 compared to
$3,494 which was received by sale of equipment in fiscal 1996.
Net cash of $247,313 was used in financing activities in fiscal 1997
compared to net cash of $653,035 in fiscal 1996. 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.
<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 28, 1997.
Position with the Company
Business Experience During
the Past Five Years and
Name Age Other Public Directorships Director Since
Daniel C.K. Yu 61 Chairman and Director of the 1986
Company, Managing Director
of Maxwell Electronics, Ltd.
James B. Wong 65 Director and President of the 1987
Company
Stephen P.Y. Chow 69 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 49 President of Stratheden 1988
Investment Ltd. of Monrovia,
Liberia, Solicitor & Notary
Public qualified in England &
Wales, Hong Kong and Australia
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 28, 1997, together
with their ages are:
Name Age Office
James B. Wong 65 President
Stephen Lai 43 Secretary, Chief Financial Officer
and Vice President
Item 11. Executive Compensation
The following table sets forth the compensation paid or accrued by the
Company during the three fiscal years ended February 28, 1997, February 29, 1996
and February 28, 1995 to the Company's President. For the fiscal years ended
February 28, 1997, February 29, 1996, and February 28, 1995, no executive
officer received cash compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
Name and Principal Position Year Salary
--------------------------- ---- ------
James B. Wong.............................. 1997 $36,000
President................................. 1996 $36,000
1995 $36,000
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 28, 1997
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.
Name Shares Percent of Class
AIC Investment Ltd., Hong Kong 3,267,361 77.6%
Estate of Rose Silverman,
Forest Hills, New York 424,851 10.1%
All Directors and Officers as
a group(five persons) 01 01
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. 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 28,
1997, 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 1997 and 1996, sales of Maxwell products
represented approximately 3.4% and 4.5%, 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 28, 1997, was owed
an aggregate of $1,341,101 by the Company, including accrued interest of
$667,827.
Item 14. Exhibits and reports on Form 8-K
(a) 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.
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.
-------- 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.
<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:/s/---------------------
James B. Wong, President
Dated: December __. 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.
Signature Title Date
/s/---------------- President and Director December __, 1997
James B. Wong
/s/---------------- Vice President, Secretary December __, 1997
Stephen Lai and Chief Financial Officer
/s/---------------- Director and Chairman December __, 1997
Daniel C.K. Yu of the Board
/s/---------------- Director December __, 1997
Stephen P.Y. Chow
/s/---------------- Director December __, 1997
Robert I. Campbell
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000002880
<NAME> AIC INTERNATIONAL, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> FEB-28-1997
<CASH> 453,805
<SECURITIES> 0
<RECEIVABLES> 1,584,795
<ALLOWANCES> (77,940)
<INVENTORY> 3,242,789
<CURRENT-ASSETS> 5,299,020
<PP&E> 385,750
<DEPRECIATION> (294,307)
<TOTAL-ASSETS> 5,408,284
<CURRENT-LIABILITIES> 3,688,068
<BONDS> 0
0
0
<COMMON> 424,488
<OTHER-SE> 1,188,747
<TOTAL-LIABILITY-AND-EQUITY> 5,408,284
<SALES> 15,523,257
<TOTAL-REVENUES> 15,523,257
<CGS> 10,719,519
<TOTAL-COSTS> 15,115,963
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 227,290
<INCOME-PRETAX> 345,069
<INCOME-TAX> 278,279
<INCOME-CONTINUING> 66,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,790
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0
</TABLE>
