<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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COMMISSION FILE NUMBER 33-27603
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NORTH AMERICAN INTEGRATED MARKETING, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2942013
(State or other jurisdiction of incorporation or (IRS Employer
organization) Identification No.)
999 McBride Avenue, Suite 200A
West Paterson, New Jersey 07424
(Address of principal executive offices)
(201) 890-7330
(Registrant's telephone number, including area code)
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 X NO
---- ----
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
Please refer to the following pages for the financial statements of North
American Integrated Marketing, Inc. (the "Company" for the six month period
ended June 30, 1996
NORTH AMERICAN INTEGRATED MARKETING, INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
6/30/96 12/31/95
----------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 314,454 $ 520,865
Accounts receivable, less allowance for doubtful
accounts of $35,093 and $29,093 735,477 1,553,619
Prepaid and deferred expenses, and other assets 216,578 117,482
---------- ----------
Total current assets 1,266,509 2,191,966
FURNITURE AND EQUIPMENT, at cost less accumulated
depreciation 315,708 230,444
---------- ----------
TOTAL ASSETS $1,582,217 $2,422,410
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 96,282 $ 84,894
Accounts payable -- related company 145,361 1,893,205
Income taxes payable 195,310 38,503
Accrued expenses and other current liabilities 121,832 93,360
Deferred revenue -- 43,300
Current maturities of long-term debt 15,813 16,928
---------- ----------
Total current liabilities 574,598 2,170,190
LONG-TERM DEBT 500,000 7,175
SHAREHOLDERS' EQUITY
Common stock, $.00001 par value; 50,000,000
shares authorized; 16,040,073 shares issued, of
which 1,920,000 shares are held as treasury
stock 160 160
Paid-in capital 55 55
Retained earnings 512,404 249,830
---------- ----------
512,619 250,045
Less treasury stock, at cost (5,000) (5,000)
---------- ----------
507,619 245,045
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,582,217 $2,422,410
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
STATEMENTS OF INCOME
FOR THE SIX MONTH PERIOD ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ------------
<S> <C> <C>
Net revenue $4,397,086 $1,644,479
Costs and expenses
Cost of revenue
Related company 2,611,349 388,715
Other 663,117 484,339
---------- ----------
3,274,466 873,054
Selling, general and administative expense 629,166 608,453
Provision for doubtful accounts 6,000 12,000
Interest expense 853 1,507
Depreciation and amortization 44,277 23,047
---------- ----------
3,954,762 1,518,061
---------- ----------
Income before income taxes 442,324 126,418
Provision for income taxes 179,750 54,500
---------- ----------
Net income $ 262,574 $ 71,918
========== ==========
Net income per common share and common equivalent
share $ 0.0160 $ 0.0051
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTH PERIOD ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net revenue $1,167,285 $836,916
Costs and expenses
Cost of revenue
Related company 291,133 225,344
Other 247,890 244,598
---------- --------
539,023 469,942
Selling, general and administative expense 331,419 293,525
Provision for doubtful accounts 3,000 6,000
Interest expense 384 714
Depreciation and amortization 24,404 12,266
---------- --------
898,230 782,447
---------- --------
Income before income taxes 269,055 54,469
Provision for income taxes 108,750 23,800
---------- --------
Net income 160,305 $ 30,669
========== ========
Net income per common share and common equivalent share $ 0.0086 $ 0.0022
========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
COMPARATIVE STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 262,574 $ 71,918
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 44,277 23,047
(Increase) decrease in:
Accounts receivable, net 818,142 (223,944)
Prepaid and other assets (99,096) (7,502)
Increase (decrease) in:
Accounts payable 11,388 (10,504)
Accounts payable - related company (1,747,844) 230,121
Income taxes payable 156,807 (21,700)
Accrued expenses and other current liabilities 28,472 (4,405)
Deferred revenue (43,300) (37,500)
----------- ----------
Cash used in operating activities (568,580) 19,531
Cash flows from investing activities:
Purchase of furniture and equipment (129,544) (46,215)
Cash used in investing activities - discontinued
operations -- 13,073
----------- ----------
Net cash (used in) provided by investing
activities (129,544) (33,142)
----------- ----------
Cash flows from financing activities:
Debenture payable 500,000 --
Repayments of long-term debt (8,290) (7,635)
----------- ----------
Net cash used in financing activities 491,710 (7,635)
----------- ----------
Net decrease in cash (206,411) (21,246)
Cash at beginning of period 520,865 275,738
----------- ----------
Cash at end of period $ 314,454 $ 254,492
=========== ==========
</TABLE>
The accompanying notes are integral part of these financial statements.
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
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 month period ended June 30, 1996, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1996. For further information, refer to the financial statement
footnotes thereto included in North American Integrated Marketing, Inc.'s annual
report on Form 10-K for the year ended December 31, 1995.
NOTE 2 -- DISCONTINUED OPERATIONS
In September 1994, the Company announced the closing of its production services
division in Pasadena, California. The closing of the division has been accounted
for as discontinued operations and prior year financial statements have been
restated to reflect the closing of the division. The assets (liabilities) of
discontinued operations have been classified in the balance sheet as net assets
of discontinued operations.
NOTE 3 -- FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Office furniture and equipment $ 62,589 $ 41,090
Transportation equipment 135,737 135,737
Computer equipment and software 387,460 279,417
------- --------
585,786 456,244
Less accumulated depreciation 270,078 225,800
------- --------
$315,078 $230,444
======== ========
</TABLE>
NOTE 4 -- LONG-TERM DEBT
On May 17, 1996, the Company entered into a convertible debenture purchase
agreement with First Commercial and Finance Corp., Establishment, a Lichtenstein
corporation ("Purchaser"). The Company agreed to issue and sell a non-interest
bearing convertible debenture (the "Debenture") in the amount of $500,000 due
May 17, 1998.
Subject to and upon compliance with the provisions of the agreement, purchaser
has the right for a period of two (2) years or until May 17, 1998 to convert the
entire principal amount of the Debenture into common stock of the Company to
allow Purchaser to own 60% of the Company's outstanding stock on a fully diluted
basis. Such conversion would extinguish any cash payments due under the
Debenture.
<PAGE>
NOTE 5 -- EARNINGS PER SHARE
Earnings per share are calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------- -------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average shares
outstanding 14,120,073 14,120,073 14,120,073 14,120,073
Net effect of commonstock
equivilant--convertible
debenture 4,554,882 -- 2,277,441 --
----------- ----------- ----------- -----------
18,674,895 14,120,073 16,397,484 14,120,073
=========== =========== =========== ===========
Net income $ 160,305 $ 30,669 $ 262,574 $ 71,918
----------- ----------- ----------- -----------
Per share amount $ 0.0086 $ 0.0022 $ 0.0160 $ 0.0051
=========== =========== =========== ===========
</TABLE>
NOTE 6 -- SUPPLEMENTAL CASH FLOW INFORMATION
Selected cash payments were as follows:
<TABLE>
<CAPTION>
June 30
-------
1996 1995
---- ----
<S> <C> <C>
Cash payments for income taxes $21,043 $35,200
------- -------
Cash payments for interest $ 853 $ 1,507
------- -------
</TABLE>
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(A) RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO
THREE MONTHS ENDED JUNE 30, 1995
Revenue
-------
Net revenue increased $330,369 in 1996 from $836,916 to $1,167,285 or 39.4%
as compared to 1995. The increase in revenue resulted primarily from sales
to several new clients and increased sales to existing customers.
Cost of Revenue
---------------
The Company's cost of revenue, as a percentage of sales, decreased from
56.1% in 1995 to 46.1% in 1996. The decrease resulted primarily from lower
salary and benefit costs relating to the advertising and marketing response
service.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative expenses increased $37,894 in 1996. The
increase resulted primarily from operating costs associated with the
advertising and marketing service division, which commenced operations in
October 1995 and from increased advertising costs to secure new clients.
Depreciation and Amortization
-----------------------------
Depreciation and amortization increased $12,138. The increase resulted
primarily from the purchase of Company assets.
(B) RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX
MONTHS ENDED JUNE 30, 1995
Revenue
-------
Net revenue increased $2,752,607 in 1996 from $1,644,479 to $4,397,086 as
compared to 1995. The net increase in revenue was primarily due to the
growth of advertising and marketing services provided to existing customers
First USA, Marine Midland, Bank of New York (Delaware) and sales generated
from several new customers.
Cost of Revenue
---------------
The Company's cost of revenue, as a percentage of sales, was 53% and 74.4%
in 1995 and 1996, respectively. The increase in cost of revenue resulted
primarily from increased revenue and costs associated with the growth of
advertising and marketing services provided and the use of a related party
and outside vendors to fulfill this demand.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative expenses increased $20,713. The increase
resulted primarily from operating costs associated with the advertising and
marketing service division. This increase was offset in part by decreased
consulting expenses in 1996 as compared to 1995 when professional recruiting
services were used to fulfill additional staffing requirements.
Depreciation and Amortization
-----------------------------
Depreciation and amortization increased $21,230. The increase resulted
primarily from the purchase of Company assets.
<PAGE>
(C) LIQUIDITY AND CAPITAL RESOURCES
Liquidity
- ---------
As of June 30, 1996 the Company had working capital of $691,911 compared to the
working capital of $21,776 at December 31, 1995. Contributing to the 1996
increase in the Company's working capital was the net income for the period and
the proceeds from the $500,000 convertible debenture (the debenture), issued in
May 1996 which was used to reduce the related company payable. Liquidity was
enhanced in 1996 by the extended trade credit provided by a related company
which, along with the issuance of the debenture, allowed the Company to avoid
any borrowing on its line of credit. As of June 30, 1996, the amount available
under the Company's line of credit was $500,000.
Capital Resources
- -----------------
During the six months ended June 30, 1996 and 1995 the average outstanding short
term debt was $-0-. During the six months ended June 30, 1996, the Company did
not make any material commitment for capital expenditures beyond the replacement
of vehicles and computer equipment. The Company believes the same will hold true
for the remainder of the year.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
There is no material litigation or other proceeding currently pending against
the registrant.
ITEM 2. CHANGE IN SECURITIES
--------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders, through solicitation of
proxies or otherwise, during the quarter ended June 30, 1996.
ITEM 5. OTHER INFORMATION
-----------------
The Net Income per common share of $0.0160 for the six month period ended
June 30, 1996 is calculated as follows:
<TABLE>
<S> <C>
Common and common equivalent shares outstanding 16,040,073
Net Income $ 262,575
Per share -- Common and common equivalent $ 0.0160
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
None
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTH AMERICAN INTEGRATED MARKETING, INC.
(REGISTRANT)
/s/ Robert Paltrow
---------------------
(signature)
Name: Robert Paltrow
Title: Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 314,454
<SECURITIES> 0
<RECEIVABLES> 770,570
<ALLOWANCES> 35,093
<INVENTORY> 0
<CURRENT-ASSETS> 1,266,509
<PP&E> 585,786
<DEPRECIATION> 270,078
<TOTAL-ASSETS> 1,582,217
<CURRENT-LIABILITIES> 574,598
<BONDS> 0
0
0
<COMMON> 160
<OTHER-SE> 512,404
<TOTAL-LIABILITY-AND-EQUITY> 1,582,217
<SALES> 4,393,149
<TOTAL-REVENUES> 4,397,086
<CGS> 2,749,890
<TOTAL-COSTS> 3,274,466
<OTHER-EXPENSES> 629,166
<LOSS-PROVISION> 6,000
<INTEREST-EXPENSE> 853
<INCOME-PRETAX> 442,324
<INCOME-TAX> 179,750
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262,574
<EPS-PRIMARY> .016
<EPS-DILUTED> 0
</TABLE>
