<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 September 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 ............
Commission File Number 33-27603
-----------------------------
NORTH AMERICAN INTEGRATED MARKETING, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2942013
(State or other jurisdiction (IRS Employer
of incorporation or 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 nine month period
ended September 30, 1996
NORTH AMERICAN INTEGRATED MARKETING, INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
9/30/96 12/31/95
-------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 521,306 $ 520,865
Accounts receivable, less allowance for
doubtful accounts of $38,093 and $29,093 871,689 1,553,619
Prepaid and deferred expenses, and other assets 174,188 117,482
-------------- -------------
Total current assets 1,567,183 2,191,966
FURNITURE AND EQUIPMENT, at cost less
accumulated depreciation 337,120 230,444
-------------- -------------
TOTAL ASSETS $ 1,904,303 $ 2,422,410
============== =============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 110,722 $ 84,894
Accounts payable - related company 145,360 1,893,205
Income taxes payable 242,112 38,503
Accrued expenses and other current liabilities 151,838 93,360
Deferred revenue - 43,300
Current maturities of long-term debt 11,539 16,928
-------------- -------------
Total current liabilities 661,371 2,170,190
LONG-TERM DEBT - 7,175
SHAREHOLDERS' EQUITY
Common stock, $.00001 par value; 50,000,000
shares authorized; 37,220,183 and 16,040,073,
shares issued in 1996 and 1995, respectively,
of which 1,920,000 shares are held as
treasury stock 372 160
Paid-in capital 499,843 55
Retained earnings 747,717 249,830
-------------- -------------
1,247,932 250,045
Less treasury stock, at cost (5,000) (5,000)
-------------- -------------
1,242,932 245,045
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,904,303 $ 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 THREE MONTH PERIOD ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Net revenue $ 1,395,832 $ 905,627
Costs and expenses
Cost of revenue
Related company 289,488 269,374
Other 469,538 279,205
------------- ------------
759,026 548,579
Selling, general and administrative expense 310,531 251,796
Provision for doubtful accounts 3,000 6,000
Interest expense 297 634
Depreciation and amortization 29,331 17,658
------------- ------------
1,102,185 824,667
------------- ------------
Income before income taxes 293,647 80,960
Provision for income taxes 59,880 30,700
------------- ------------
Net income $ 233,767 $ 50,280
============= ============
Net income per common share and common equivalent share $ 0.0066 $ 0.0036
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
STATEMENTS OF INCOME
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Net revenue $ 5,792,918 $ 2,550,107
Costs and expenses
Cost of revenue
Related company 2,900,837 658,089
Other 1,132,655 762,020
------------- -------------
4,033,492 1,420,109
Selling, general and administative expense 938,252 861,840
Provision for doubtful accounts 9,000 18,000
Interest expense 1,150 2,142
Depreciation and amortization 73,608 40,705
------------- -------------
5,055,502 2,342,796
------------- -------------
Income before income taxes 737,416 207,311
Provision for income taxes 239,530 85,200
------------- -------------
Net income $ 497,886 $ 122,111
============= =============
Net income per common share and
common equivalent share $ 0.0201 $ 0.0086
============= =============
</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 NINE MONTH PERIOD ENDED SEPTEMBER 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 497,886 $ 122,111
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 73,608 40,705
(Increase) decrease in:
Accounts receivable, net 681,930 (444,952)
Notes receivable officer and employee - (131,035)
Prepaid and other assets (56,706) (38,462)
Increase (decrease) in:
Accounts payable 25,828 19,037
Accounts payable - related company (1,747,845) 331,030
Income taxes payable 203,609 9,000
Accrued expenses and other current liabilities 58,278 62,328
Deferred revenue (43,300) (56,250)
------------- -------------
Cash used in operating activities (306,712) (86,488)
Cash flows from investing activities:
Purchase of furniture and equipment (180,282) (107,398)
Cash used in investing activities - discontinued operations - 13,073
------------- -------------
Net cash used in investing activities (180,282) (94,325)
------------- -------------
Cash flows from financing activities:
Debenture payable 500,000 -
Repayments of long-term debt (12,565) (11,572)
------------- -------------
Net cash provided by (used in) financing activities 487,435 (11,572)
------------- -------------
Net increase (decrease) in cash 441 (192,385)
Cash at beginning of period 520,865 275,738
------------- -------------
Cash at end of period $ 521,306 $ 83,353
============= =============
</TABLE>
The accompanying notes are integral part of these financial statements.
<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
---------------------------------------------------
(a) Registrant held an annual meeting on August 9, 1996.
(b) At the annual meeting the Board of Directors previously reported to the
Commission, Robert W. Paltrow and Nicholas Robinson, were re-elected.
(c) The election of the two above directors was uncontested. There were
12,480,501 shares of common stock in favor of both nominees, Robert W.
Paltrow and Nicholas Robinson, 69 shares were withheld and 737 did not
vote. There were 1,638,766 abstentions.
(d) Not applicable.
Item 5. Other information
-----------------
The Net Income per common share of $0.0201 for the nine month period ended
September 30, 1996 is calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
Common shares outstanding 24,710,128
Net Income $ 497,886
Per share - Primary and fully diluted $ 0.0201
</TABLE>
Item 6. Exhibits and Reports on Form 8K (Section 249.308 of this chapter)
-----------------------------------------------------------------
(a) None
(b) Registrant incorporates by reference the Stock Purchase Agreement dated
September 30, 1996 attached to Registrant's Form 8-K dated September 30,
1996, file number 033-27603.
(d) Registrant filed a Form 8-K dated September 30, 1996 covering Items 2, 5
and 7 and including financial statements of a business acquired by
Registrant.
<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)
---------------------------------------------
(Signature)
Name: Robert Paltrow
Title: Treasurer
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(a) Results of Operations - Three Months Ended September 30, 1996 Compared
to Three Months Ended September 30, 1995
Revenue
-------
Net revenue increased $490,205 in 1996 from $905,627 to $1,395,832 or 54.1%
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
60.5% in 1995 to 54.3% in 1996. The decrease resulted primarily from
increased in-house database production, which was offset in part by an
increase in salary expenses due to additional staffing.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative expenses increased $58,735 in 1996. The
increase resulted primarily from: a) increase in database expenses and
supplies related to computer equipment. b) costs associated with increased
advertising to secure new customers. c) commission expenses relating to the
growth of the advertising and marketing services.
Depreciation and Amortization
-----------------------------
Depreciation and amortization increased $11,673. The increase resulted
primarily from the purchase of computer equipment and software, necessary
to fulfill the demand of the increasing customer base and to support
additional staffing.
(b) Results of Operations - Nine Months Ended September 30, 1996 Compared
to Nine Months Ended September 30, 1995
Revenue
-------
Net revenue increased $3,242,811 in 1996 from $2,550,107 to $5,792,918 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, 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 55.6% and
69.6% 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 $76,412. The
increase resulted primarily from operating costs associated with: a)
purchase of computer equipment and supplies. This increase is supported by
the additional staffing requirements necessary to maintain the increasing
customer base. b) commission expenses relating to the growth of the
advertising and marketing services. 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.
<PAGE>
Depreciation and Amortization
-----------------------------
Depreciation and amortization increased $32,903. The increase resulted
primarily from the purchase of computer equipment and software, necessary
to fulfill the demand of the increasing customer base and to support
additional staffing.
<PAGE>
(c) Liquidity and Capital Resources
Liquidity
---------
As of September 30, 1996 the Company had working capital of $905,812
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 September 30, 1996, the amount available under the Company's
line of credit was $500,000.
Capital Resources
-----------------
During the nine months ended September 30, 1996 and 1995 the average
outstanding short term debt was $-0-. During the nine months ended
September 30, 1996, the Company did not make any material commitment for
capital expenditures beyond the replacement of vehicles and computer
equipment. However, October 1, 1996 pursuant to a Stock Repurchase
Agreement dated September 30, 1996 the Company acquired 82% of the
outstanding common stock of Color Graphics, Inc. for a total consideration
of $1,000,000, which was obtained through a loan from a related company.
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 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 nine month period ended September 30, 1996, are not
necessarily indicative of the results that may me 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>
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Office furniture and equipment $ 72,669 $ 41,090
Transportation equipment 135,737 135,737
Computer equipment and software 428,123 279,417
--------- ---------
636,529 456,244
Less accumulated depreciation 299,409 225,800
--------- ---------
$ 337,120 $ 230,444
========= =========
</TABLE>
NOTE 4 - COMMON STOCK
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 if $500,000 due
May 17, 1998.
Pursuant to the Agreement, the purchaser converted the entire principal amount
of the Debenture into 21,180,110 shares of common stock of the Company on
September 25, 1996. Such conversion extinguished 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 Nine Months Ended
September 30 September 30
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <S> <C> <C> <C>
Average shares outstanding 14,120,073 14,120,073 14,120,073 14,120,073
Conversion of convertible debenture 21,180,110 - 10,590,055 -
----------- ----------- ----------- -----------
35,300,183 14,120,073 24,710,128 14,120,073
=========== =========== =========== ===========
Net income $ 233,767 $ 50,260 $ 497,786 $ 122,111
=========== =========== =========== ===========
Per share amount $ 0.0066 $ 0.0036 $ 0.0201 $ 0.0086
=========== =========== =========== ===========
</TABLE>
NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
---- ----
<S> <C> <C>
Cash paid during the period for:
Interest $1,150 $2,140
====== ======
Income taxes $35,921 $76,200
======= =======
Noncash investing and financing activities:
Issuance of common stock in exchange
for convertible debenture $500,000 $ -
======== =======
</TABLE>
NOTE 7 - ACQUISITION
Effective October 1, 1996, pursuant to a Stock Purchase Agreement dated
September 30, 1996 the Company acquired 82% of the outstanding common stock of
Color Graphics, Inc. for a total consideration of $1,000,000, which was obtained
through a loan from a related company. The loan is payable in monthly
installments of $5,000 plus interest at 8%, with payment in full due September
30, 2006.
Color Graphics is engaged in printing promotional material for mail
distribution.
The acquisition will be accounted for using the purchase method of accounting.
The operations of Color Graphics, Inc. will be included in the financial
statement of the Company from the date of acquisition.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 521,306 520,865
<SECURITIES> 0 0
<RECEIVABLES> 909,782 1,582,712
<ALLOWANCES> 38,093 29,093
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,567,183 2,191,966
<PP&E> 636,529 456,244
<DEPRECIATION> 299,409 225,800
<TOTAL-ASSETS> 1,904,303 2,422,410
<CURRENT-LIABILITIES> 661,371 2,170,190
<BONDS> 0 0
0 0
0 0
<COMMON> 372 160
<OTHER-SE> 747,717 249,830
<TOTAL-LIABILITY-AND-EQUITY> 1,904,303 2,422,410
<SALES> 5,785,118 2,542,829
<TOTAL-REVENUES> 5,792,918 2,550,107
<CGS> 3,252,653 861,267
<TOTAL-COSTS> 4,033,492 1,420,109
<OTHER-EXPENSES> 938,252 861,840
<LOSS-PROVISION> 9,000 18,000
<INTEREST-EXPENSE> 1,150 2,142
<INCOME-PRETAX> 737,416 207,311
<INCOME-TAX> 239,530 85,200
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 497,886 122,111
<EPS-PRIMARY> .020 .009
<EPS-DILUTED> 0 0
</TABLE>
