<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 March 31, 1997
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 of (IRS Employer
incorporation or organization) Identification No.)
3 Garret Mountain Plaza
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>
NORTH AMERICAN INTEGRATED MARKETING, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
3/31/97 12/31/97
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,272,653 $ 1,080,630
Accounts receivable, less allowance for
doubtful accounts of $70,999 in 1997 and $53,093 in 1996 5,466,210 4,236,638
Inventories 728,648 466,117
Prepaid and other current assets 329,390 422,259
------------- -------------
Total current assets 7,796,901 6,205,644
PROPERTY, PLANT AND EQUIPMENT, Net 3,931,242 3,849,063
OTHER ASSETS 211,918 179,101
------------- -------------
TOTAL ASSETS $ 11,940,061 $ 10,233,808
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable $ - $ 466,593
Current maturities of long-term debt 270,732 275,175
Accounts payable 1,032,514 764,913
Accounts payable - related company 1,145,542 371,315
Income taxes payable 925,992 703,482
Accrued expenses and other current liabilities 1,121,224 818,776
Deferred revenue - 99,475
------------- -------------
Total current liabilities 4,496,004 3,499,729
LONG-TERM DEBT 2,902,808 2,952,713
LONG-TERM DEBT - RELATED COMPANY 865,000 925,000
DEFERRED INCOME TAXES 381,400 542,200
OTHER LONG-TERM LIABILITIES 165,621 284,096
MINORITY INTEREST 683,316 571,816
SHAREHOLDERS' EQUITY
Common stock, $.00001 par value - authorized, 50,000,000
shares; issued and outstanding: 40,100,091 shares, of which
3,840,000 shares are held as treasury stock. 212 212
Preferred stock $.00001 par value - authorized 10,000,000;
issued and outstanding -0-. - -
Paid-in capital 500,003 500,003
Retained earnings 2,250,697 1,263,039
------------- -------------
2,750,912 1,763,254
Less treasury stock, at cost (305,000) (305,000)
------------- --------------
2,445,912 1,458,254
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,940,061 $ 10,233,808
============= =============
</TABLE>
See notes to consolidated financial statements
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTH PERIOD ENDED MARCH 31
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 987,658 $ 102,270
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 219,836 19,873
Minority interest 111,500 -
(Increase) decrease in net of effects of acquisition
Accounts receivable, net (1,229,572) (2,282,152)
Inventory (262,531) -
Prepaid and other current assets 92,869 (40,800)
Other assets (32,817) -
Increase (decrease) in:
Accounts payable 267,601 26,974
Accounts payable - related company 774,227 1,877,288
Income taxes payable 222,510 46,357
Accrued expenses and other current liabilities 302,448 12,867
Deferred revenue (99,475) (43,000)
----------- -----------
Cash provided by (used in) operating activities 1,354,254 (280,323)
Cash flows from investing activities:
Purchase of furniture and equipment (302,015) (77,154)
----------- -----------
Net cash (used in) provided by investing activities (302,015) (77,154)
----------- -----------
Cash flows from financing activities:
Net borrowings under (repayments of) notes payable (471,036) -
Repayments of long-term debt (109,905) (4,106)
Decrease in long term liabilities (279,275) -
----------- -----------
Net cash used in financing activities (860,216) (4,106)
----------- -----------
Net increase (decrease) in cash 192,023 (361,583)
Cash at beginning of year 1,080,630 520,865
----------- -----------
Cash at end of year $ 1,272,653 $ 159,282
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTH PERIOD ENDED MARCH 31
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
REVENUES
Database $ 2,891,543 $ 3,229,802
Printing 4,253,244 -
------------- -------------
Total revenues 7,144,787 3,229,802
COST OF REVENUE
Database - related company 1,145,542 2,320,217
Database - other 629,335 415,226
Printing 2,355,499 -
------------- -------------
Total cost of revenue 4,130,376 2,735,443
Selling, general and
administrative expense 779,817 300,747
Interest expense 98,681 469
Depreciation and amortization 219,837 19,873
------------- -------------
Total costs and expenses 5,228,711 3,056,532
------------- -------------
Income before income taxes and minority interest 1,916,076 173,270
Provision for income taxes 816,918 71,000
------------- -------------
Income before minority interest 1,099,158 102,270
Minority interest in income of subsidiary 111,500 -
------------- -------------
Net income $ 987,658 $ 102,270
============= =============
EARNINGS PER SHARE $ 0.33 $ 0.09
============= =============
WEIGHTED AVERAGE COMMON SHARES
USED IN COMPUTING EARNINGS PER SHARE
ASSUMING RETROACTIVE APPLICATION OF
REVERSE STOCK SPLIT 3,021,674 1,176,673
============= =============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORTH AMERICAN INTEGRATED MARKETING
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
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 three month period ended March 31,1997, are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. 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, 1996.
NOTE 2 - ACQUISITIONS
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 $1,909,283. The consideration
consisted of $1,000,000 in cash paid by the Company, $286,000 in cash paid by
Color Graphics, Inc., the assumption of liabilities totaling $250,000 and the
transfer of a life insurance policy valued at $210,806 by Color Graphics, Inc.
In addition, Color Graphics, Inc. assigned an accounts receivable of $464,000
which Color Graphics, Inc. had previously written off. The Company has assigned
a value of $162,477 to this receivable for purchase accounting. The Company
obtained the $1,000,000 from North American Communications, Inc. (NAC), a
related party (see Note 9). In addition, the Company granted to a consultant an
option to acquire 10 % of the Color Graphics, Inc. stock at an exercise price of
$1,058.82 per share or $30,000 in the aggregate through September 30, 2001 for
his role in consummating the acquisition. The acquisition was accounted for as a
purchase and property, plant and equipment was reduced by the excess of the fair
value of the net assets acquired over the cost using the purchase method of
accounting. The operations of Color Graphics, Inc. are included in the
accompanying consolidated financial statement from the date of acquisition.
<PAGE>
NOTE 3 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1997
---- ----
<S> <C> <C>
Paper $ 319,754 $ 321,623
Other raw materials 97,311 81,628
Work-in-process 311,583 62,866
--------- ---------
$ 728,648 $ 466,117
========= =========
</TABLE>
NOTE 4 - FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1995
---- ----
<S> <C> <C>
Machinery and equipment $ 3,561,995 $ 3,561,995
Office furniture and equipment 88,405 105,742
Transportation equipment 135,737 135,737
Computer equipment and software 484,344 432,185
Leasehold improvements 61,703 61,703
Construction in progress 330,689 63,496
----------- -----------
4,662,873 4,360,858
Accumulated depreciation and
amortization (731,631) (511,795)
----------- -----------
$ 3,931,242 $ 3,849,063
=========== ===========
</TABLE>
NOTE 5 - COMMON STOCK
On May 17, 1996, the Company entered into a Convertible Debenture Purchase
Agreement with First Commercial and Finance Corp., Establishment, a
Liechtenstein 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.
<PAGE>
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.
On April 16, 1997 the Certificate of Incorporation of North American Integrated
Marketing, Inc. was restated. In the restatement the total number of shares
which the Corporation shall have authority to issue is 70,000,000 shares,
consisting of 60,000,000 shares of Common Stock, having a par value of $.00001
per share, and 10,000,000 shares of Preferred Stock having a par value of
$.00001 per share.
NOTE 6 - EARNINGS PER SHARE
Earnings per share are calculated as follows assuming retroactive application of
reserve stock split:
<TABLE>
<CAPTION>
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Average shares outstanding 3,021,674 1,176,673
Net income $ 987,658 $ 102,270
Per share amount $ .33 $ .09
</TABLE>
NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Cash paid during the period for:
Interest $ 98,681 $ 469
========== ==========
Income taxes $ 702,988 $ 21,043
========== ==========
</TABLE>
<PAGE>
NOTE 8 - SUBSEQUENT EVENTS
Effective April 15, 1997, the Company authorized a twelve-for-one reverse stock
split whereby every twelve shares of common stock issued and outstanding
immediately prior to the effectuation of such stock split shall be exchanged for
one new share of common stock, and each new share of common stock to have the
rights and preferences of the former shares of common stock. The reverse stock
split was retroactively applied in determining earnings per share.
<PAGE>
Item 7: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Three Months Ended March 31, 1997 and March 31, 1996
General
The Company has focused its growth strategy on acquiring complementary database
and direct mail marketing companies. The Company intends to build a vertically
integrated company that provides turnkey database marketing products and
services to direct marketers. These services will include database management
and data warehousing, predictive modeling, marketing strategy consulting, agency
creative, production management, direct mail production and fulfillment. In
October 1996, the Company entered the printing business with the purchase of 82%
of the stock of Color Graphics, Inc. Due to this acquisition the results of
operations for 1997 are not comparable to prior years. See Note 2 of Notes to
Financial Statements for additional information concerning this acquisition.
(a) Results of Operations
<TABLE>
<CAPTION>
Three Months Ended March 31
1997 1996
---- ----
Database Printing Database Printing
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 2,891,543 $ 4,253,244 $ 3,229,802 --
Gross profit $ 1,116,666 $ 1,897,745 $ 494,359 --
Operating income $ 777,412 $ 1,138,664 $ 173,270 --
</TABLE>
Consolidated net revenues of $7,144,787 in 1997 represent an increase of
$3,914,985 over 1996. Operating income of $1,916,076 in 1997 represents an
increase of $1,742,806 over 1996. The increase in the net revenues and operating
income of the Company resulted from the acquisition of Color Graphics, Inc. on
October 1, 1996 and a reduction in cost of revenues of database for the three
month period ended March 31, 1997.
<PAGE>
Revenues
- --------
Net revenues increased $3,914,985 from $3,229,802 to $7,144,787 as compared to
1996. The net revenue increase for the three month period ended March 1997 was
primarily attributable to increased sales to existing customers, including Bank
of New York (Delaware) and Fleet Corporation and sales to several new clients
including Citibank, MBNA and Corestates. The acquisition of Color Graphics, Inc.
on October 1, 1996 provided an increase in revenue of $4,253,244 through direct
mail printing services provided to customers in the financial services industry.
The increase was offset by a decrease in revenue of the database services.
Cost of Revenue
- ---------------
The Company's cost of revenue, as a percentage of sales was 58%, for the three
month period ended March 31, 1997 as compared to 85% for the prior period. The
decrease in the cost of revenue of 27% can be attributed to a decrease in
database cost revenue as a percentage of total revenue of 60%, offset by an
increase in printing cost of revenue as a percentage of total revenue of 33%.
The cost of revenue as a percentage of total revenue for database decreased from
85% in 1996 to 61% in 1997. The decrease resulted primarily from: a) increased
in-house database production and b) a decrease in database net revenue.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses increased $479,070 in 1997 as
compared to the prior period. The increase in 1997 expenses resulted primarily
from: a) increase in database expenses and supplies related to computer
equipment. b) costs associated with the relocation, in March, of the corporate
office. and c) the acquisition of Color Graphics, Inc.. A significant increase
in selling, general and administrative expenses for the current period is
attributed to the acquisition of Color Graphics, Inc.
Interest Expense
- ----------------
Interest expense increased $98,212 in 1997 as compared to the prior period. A
significant portion of the increase in 1997 resulted from the acquisition of
Color Graphics, Inc. The increase resulted primarily from: a) $1,000,000 loan
acquired from a related party to purchase Color Graphics, Inc. and b) Color
Graphics, Inc.'s borrowings on both their revolving line of credit and equipment
loans.
<PAGE>
Depreciation and Amortization
- -----------------------------
Depreciation and amortization increased $199,964 in 1997 as compared to prior
periods. The increase resulted primarily from the purchase of computer equipment
and software necessary to fulfill the demand by database customers and to
support additional staffing. The acquisition of Color Graphics, Inc. accounted
for approximately 96% of the increase for 1997.
Provision for Income Taxes
- --------------------------
Provision for income taxes increased $745,918 in 1997, as compared to the prior
period. The increase in 1997 was due to the increase in taxable income.
Inflation
- ---------
Inflation and price increases do not materially affect the Company's gross
profit margin as contract prices are adjusted at the same time increases are
implemented by outside vendors.
<PAGE>
b) Liquidity and Capital Resources
-------------------------------
<TABLE>
<CAPTION>
3/31/97 12/31/96
------- --------
<S> <C> <C>
Working capital $ 3,300,897 $ 2,705,915
Cash 1,272,653 1,080,630
<CAPTION>
3/31/97 3/31/96
------- -------
<S> <C> <C>
Cash provided by (used in) operating
activities 1,354,254 (280,323)
Cash used in investing activities 302,015 77,154
Cash used in financing activities 748,716 4,106
</TABLE>
Working capital increased as of March 31, 1997 by $594,982 over working capital
as of December 31, 1996.
The increase in cash flows from operations in 1997 resulted primarily from
improved profitability and strong cash collections.
The increase in cash used in investing activities is a result of primarily
higher capital expenditures to support the Company's growth.
The increase of cash used in financing activities resulted primarily from the
repayments of notes payable.
At March 31, 1997, the Company had an outstanding debt of $4,038,540 primarily
in the form of notes payable.
At March 31, 1997 the amount available under the Company's lines of credit was
approximately $3,500,000.
The Company anticipates that current cash balances as well as anticipated cash
flows from operations will be sufficient to meet its working capital and capital
expenditure needs at least through December 31, 1997.
<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
---------------------------------------------------
None
Item 6. Exhibits and Reports on Form 8K
-------------------------------
(a) Exhibit Index
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
(b) 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)
-----------------------------------------
(signature)
Name: Robert Paltrow
Title: Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 1,272,653 1,080,630
<SECURITIES> 0 0
<RECEIVABLES> 5,537,209 4,289,731
<ALLOWANCES> 70,999 53,093
<INVENTORY> 728,648 466,117
<CURRENT-ASSETS> 7,796,901 6,205,644
<PP&E> 4,662,873 4,360,858
<DEPRECIATION> 219,837 327,600
<TOTAL-ASSETS> 11,940,061 10,233,808
<CURRENT-LIABILITIES> 4,496,004 3,499,729
<BONDS> 0 0
0 0
212 212
<COMMON> 0 0
<OTHER-SE> 500,003 500,003
<TOTAL-LIABILITY-AND-EQUITY> 11,940,061 10,233,808
<SALES> 7,054,593 3,228,128
<TOTAL-REVENUES> 7,144,787 3,229,802
<CGS> 4,130,376 2,735,443
<TOTAL-COSTS> 4,130,376 2,735,443
<OTHER-EXPENSES> 762,817 297,747
<LOSS-PROVISION> 17,000 3,000
<INTEREST-EXPENSE> 98,681 469
<INCOME-PRETAX> 1,916,076 173,270
<INCOME-TAX> 861,918 71,000
<INCOME-CONTINUING> 1,099,158 102,270
<DISCONTINUED> 0 0
<EXTRAORDINARY> 111,500 0
<CHANGES> 0 0
<NET-INCOME> 987,658 102,270
<EPS-PRIMARY> .32 .09
<EPS-DILUTED> 0 0
</TABLE>
