<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the 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
---------------- -----------------
Commission file number 33-82468
AIM GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3773537
- ----------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 W. Sample Road, Suite 300
Pompano Beach, Florida 33064
- -------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
(305)972-9339
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year, if changed since
last report)
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 periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes X No
--- ---
Applicable only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court. Yes No
--- ---
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value 3,980,053 shares as of July 30, 1996.
<PAGE>
Index
Registrant Company and Subsidiaries
Part 1. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheet - June 30, 1996 and December 31,
1995
Condensed consolidated statements of income - Three months ended June
30, 1996 and 1995
Condensed consolidated statements of cash flows - Three months ended
June 30, 1996 and 1995
Notes to condensed consolidated financial statements - June 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part 11. Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part 1. Financial Information
AIM Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ----------
<S> <C> <C>
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash $ 47,319 $ 260,280
Accounts receivable
Trade 435,782 691,457
Affiliate 9,760 9,760
Inventories 170,054 153,029
Prepaid expenses 35,716 24,576
---------- ----------
Total current assets 698,631 1,139,102
PROPERTY, PLANT AND EQUIPMENT 705,747 598,579
Less allowances for depreciation (132,628) (98,163)
---------- ----------
573,119 500,416
RESOURCE PROPERTY 3,999,567 3,994,868
OTHER ASSETS 141,650 68,228
---------- ----------
$5,412,967 $5,702,614
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 146,064 $ 369,924
Receivable financing liability 117,997 475,215
Current portion of long-term debt 29,102 12,201
Accrued expenses 65,409 94,532
---------- ----------
Total current liabilities 358,572 951,872
LONG-TERM DEBT, less current portion 82,993 72,232
CONVERTIBLE NOTES PAYABLE 1,050,000 750,000
STOCKHOLDERS' EQUITY
Preferred Stock; 1,000,000 shares authorized; $1 par value;
no shares issued or outstanding. - -
Common stock; 6,000,000 shares authorized; $.01 par value;
4,113,465 shares issued and 3,900,053 shares outstanding in 1995 and
4,183,465 shares issued and 3,980,053 shares outstanding June 30, 1996 41,935 41,135
Additional paid in capital 4,232,250 4,150,259
Common stock held in treasury - 213,413 shares (11,575) (11,575)
Common stock subscription received - 80,000 shares - 82,792
Accumulated deficit (341,208) (334,101)
---------- ----------
3,921,402 3,928,510
---------- ----------
$5,412,967 $5,702,614
========== ==========
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
<PAGE>
AIM Group, Inc. and Subsidiaries
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------- ----------- ---------- - --------- - ---------
1996 1995 1996 1995 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(Actual) (Actual) (Actual) (Actual) (Pro forma)
Net sales $ 784,899 $ 787,483 $ 1,854,130 $ 787,483 $ 1,208,948
Costs and expenses
Cost of products sold 554,778 525,189 1,247,520 525,189 807,926
Selling and administrative expenses 248,063 273,342 476,269 291,104 397,406
Interest 36,002 21,466 99,093 27,716 34,017
Depreciation and amortization 19,847 15,874 38,355 15,874 29,664
---------- ---------- ---------- ---------- ----------
858,690 835,871 1,861,237 859,883 1,269,013
---------- ---------- ---------- ---------- ----------
Earnings (loss) before taxes (73,791) (48,388) (7,107) (72,400) (60,065)
Income taxes -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings (loss) $ (73,791)$ (48,388)$ (7,107)$ (72,400)$ (60,065)
========== ========== ========== ========== ==========
Net earnings per share $ (0.019)$ (0.013)$ (0.002)$ (0.039)$ (0.032)
========== ========== ========== ========== ==========
Weighted average shares outstanding 3,980,053 3,685,516 3,962,471 1,853,989 1,853,989
========== ========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AIM Group, Inc. and Subsidiaries
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(Actual) (Actual) (Actual) (Actual)
CASH FLOWS FROM OPERATIONS $ (142,643)$ (38,573)$ (355,163)$ (56,526)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash balances of merged entities - - - 92,759
Purchases of property and equipment (67,200) - (107,168) (9,790)
Increases in other assets and resource property (36,038) (9,790) (78,121) (23,025)
Payment of deposits - (20,525) - -
---------- ---------- ---------- ----------
Net cash provided by investing activities (103,238) (30,315) (185,289) 59,944
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of proceeds from convertible note payable - - 300,000 -
Net change in debt 30,558 - 27,491 -
Repayment of advances by affiliated company - - - 19,750
---------- ---------- ---------- ----------
Net cash provided by financing activities 30,558 - 327,491 19,750
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH $ (215,323)$ (68,888)$ (212,961)$ 23,168
========== ========== ========== ==========
<CAPTION>
<S> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non cash effects of merger as of March 31, 1995
Increases in assets and liabilities
Trade accounts receivable $ 129,723
Inventories 74,022
Prepaid expenses 19,417
Property and equipment 398,914
Resource property 3,947,792
Other assets 45,666
Accounts payable (368,500)
Loans payable (77,500)
Accrued expenses (2,764)
----------
Subtotal 4,166,770
Add cash assumed with merger (see above) -
Receivables from affiliates - eliminated upon merger (210,030)
----------
$3,956,740
==========
Issuance of common stock $4,061,074
Cost of treasury stock (11,575)
----------
$4,049,499
==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
AIM Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed 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 months 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 statements
and footnotes thereto included in the AIM Group, Inc. annual report on FORM 10-
KSB for the period ended December 31, 1995.
NOTE B - MERGER AND PRO FORMA FINANCIAL INFORMATION
On March 23, 1995, the shareholders of Advanced Industrial Minerals, Inc. (AIM),
HeatShield Technologies, Inc. (HTI), and HeatShield Funding Group, L.P. (HFG),
approved the merger of the entities into AIM Group, Inc. (the Company) effective
March 31, 1995.
Pursuant to the merger agreement, AIM was merged with the Company, which became
the surviving corporation. HTI became a wholly-owned subsidiary of the Company.
The combination of these companies was treated as a purchase. For accounting
purposes the Company and HTI were treated as acquirers and AIM was treated as
the target company. The purchase price of AIM, based on its appraised value by
independent appraisal was $3,710,000.
The merger resulted in the issuance of 3,898,930 shares of AIM Group, Inc.
common stock in exchange for all of the outstanding common stock of AIM, HTI,
and the $1,000,000 of preferred stock controlled by HFG.
The pro forma financial information for the six months ended June 30, 1995,
presented for information and analysis purposes, assumes that the Companies were
merged effective January 1, 1995 for comparative purposes.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The Corporation had no revenues from operations for the first quarter of the
prior year before the mergers took place hence the comparison with 1995 (prior
year period) including first quarter results is not meaningful. The 1995 Actual
results reflect the fact that the mergers were not consummated until March 31,
1995. The Pro-forma basis for the results for the Corporation are shown as if
the mergers had occurred effective January 1, 1995.
Results of Operations - Actual
Sales for the second quarter 1996 decreased slightly to $784,899 from $787,483
for the corresponding period in 1995. Net Sales for the six months to June 30,
1996 increased 135% to $1,854,130 compared with $787,483 Actual sales for the
comparable period in 1995 (see pro-forma results for six month comparison).
Management attributes the stagnant growth during the second quarter to seasonal
slowdown in deliveries to a major customer in comparison to the strong first
quarter. All of the Corporation's products are sold to customers for use as
fillers in resin matrices. The majority of sales were of surface modified
minerals sold to the plastics compounding industry. Only a nominal portion of
sales were production size samples for customers still evaluating the
Corporation's products.
The Corporation continues to expand the customer base for its products and
provide technical solutions and samples to prospective sales leads. Management
continues to investigate possibilities for integration with mineral suppliers
and to expand the range of surface modified products offered.
The gross margin for the second quarter declined from 33% for the corresponding
quarter in 1995 to 29% in the second quarter 1996. This is attributed to a lower
operating rate. For the year to date, gross margin is maintained at 33%, as for
the same period in the prior year.
Selling and administrative expenses for the second quarter were $248,063 or 32%
of sales, compared to $273,342 or 35% of sales, this represents a 3% reduction
over the comparable period in 1995. For the year to date, selling and
administration expenses of $476,269 represented 26% of sales compared with
$291,104 or 37% of sales for the prior year period. Management attributes this
improvement to the fact that continuing operations, post merger, do not include
many of the one time, merger related, expenses of the prior year.
Interest expenses were $36,002 and $21,466 respectively for the three months
ended June 30, 1996 and 1995. This represents for 1996 an increase to 5% of
sales, from 3% of sales the prior year, which is a reflection of the
Corporation's increased use of factoring of receivables to provide working
capital. For the six months, year to date, comparing 1995 with 1996, Interest
expenses increased from 4% of sales to 5% of sales. Depreciation for the second
quarter increased nominally from $15,874 to $19,847 reflecting equipment
additions. For the six months year to date, depreciation continues to represent
2% of sales.
The Net Loss of $73,791 for the three months ended June 30, 1996 represents a
loss of two cents ($.019) per share based on the weighted average number of
shares outstanding during the period. For the comparable period in the prior
year the Net Loss was $48,388 and represented a loss of one and three tenths of
a cent ($0.013) per share.
For the six months ended June 30, 1996 the Net Loss was $7,107, two tenths of a
cent ($0.002) per share, compared with $72,400, four cents ($0.04) per share for
the six months ended June 30, 1995 based on the weighted average number of
shares outstanding during the respective periods.
<PAGE>
Pro-Forma Results
Results of Operations
On a Pro-Forma basis Sales for the six months to June 30, 1996 increased 53%
from $1.21 million to $1.85 million. Gross margin remained constant at 33% for
the period. Management attributes the increase to a strong first quarter and the
stagnant growth during the second quarter due to normal seasonal slowdown in
deliveries to a major customer.
Selling and administrative expenses were $476,269 and $397,406 for the six
months ended June 30, 1996 and 1995 respectively. This represents a decrease, as
measured as a percentage of sales, to 26% from 33%.
Interest charges for the first six months of 1996 at $99,093 or 5% of sales
showed an increase from $34,017 or 3% of sales for the prior year period.
Depreciation was $38,355 for the period or 2% of sales; for the comparable
period in 1995 depreciation was $29,664.
The Corporation showed a loss before tax of $7,107, approximating a loss of 0.2
cents per share outstanding. The loss per share for the comparable period in
1995 was $60,065 or 3.2 cents per share, based on the number of shares
outstanding during the period.
Liquidity and Sources of Capital
Cash flow from operations was a negative $142,643 for the three months ended
June 30, 1996 and a negative $355,163 for the six month period ended June 30,
1996 compared with negative $38,573 for the second quarter and negative $56,526
for the corresponding period in the previous year. The operations of the United
Minerals Corporation (UMC) subsidiary are profitable and have produced
sufficient pre-tax income to absorb the expenses of the company's head office
over the first six months of 1996. As of June 30, 1996 the Corporation had
working capital of $340,059 compared with working capital of $182,230 as at
December 31, 1995. During the period the Corporation paid down a substantial
portion of the factored receivables. The balance factored at the end of the
period was $117,997 compared with $475,215 as at December 31, 1995. Working
capital is considered by management to be sufficient to meet the Corporation's
needs for the balance of the year. The Corporation's ability to repay the
convertible notes as they become due at year end is not assured based on current
cash flow from operations. The Corporation is conducting discussions leading to
renegotiation of the terms of the Convertible Notes Payable with the Note
holders.
The Corporation has continued its factoring arrangement which provides for cash
advances against invoices to customers, during the period during which such
invoices are outstanding. Generally the costs of factoring, analogous to
interest rates, is payable on the amounts outstanding. Customer payments are
then applied directly to advances. Factoring, while not increasing working
capital, does provide liquidity of receivables. Management has worked to reduce
the use of factoring, however, the recent seasonal slowdown has necessitated a
renegotiation of the factoring contract which has reduced the effective interest
payable by 0.25% per month. The Corporation continues to negotiate a loan for
plant improvements and working capital purposes and intends to use the UMC
facility, which is substantially free of encumbrance, as security.
Due to the seasonal slowdown the Corporation has decided to defer the
expenditures necessary to increase process efficiency. Additional capacity from
plant upgrades will be considered as order volume returns to previous levels.
Contingent Matters
During the second quarter 1996 the Corporation dismissed the former plant
manager of the UMC facility.
<PAGE>
Part 11 Other Information
Item 1. Legal Proceedings
The Corporation is being sued in the Tennessee Chancery Court for non-payment of
invoices relating to supply of materials. The Corporation contends the material
supplied was contaminated and not to specification. The Corporation is
vigorously defending its action and is counter claiming for damages. Subsequent
to this claim the Corporation's customer and the ultimate customer have filed
intervenor suits against the Corporation and the material supplier. Management
is of the opinion that the cost of resolution of the problem will not have any
material adverse effect on the financial condition of the Corporation.
Subsequent to period end the Corporation was sued on July 8, 1996, in the
Chancery Court of Hot Spring County, Arkansas by the former plant manager of
its Malvern, Arkansas facility. The plaintiff has alleged breach of employment
contract and wrongful termination. The Corporation's management is of the
opinion the suit is without merit and has defenses for the actions it has taken.
Item 2. Changes in Securities
Subsequent to period end the Corporation received shareholder approval to extend
the expiration date of options and warrants that had expired on December 31,
1995 and April 14, 1996 until December 31, 1996. The extension of the expiration
date of these options and warrants was approved at the annual meeting of
shareholders adjourned from June 20, 1996 to July 10, 1996.
The total issued common share balance as of June 30, 1996 was 4,113,465 common
shares of which 213,412 are held in treasury leaving a net outstanding of
3,980,053.
In addition, 954,000 and 445,586 common shares respectively, are reserved for
issuance upon conversion of the Convertible Notes and upon the exercise of
warrants and options created prior to or as a result of the mergers, and now
extended to expire on December 31, 1996.
Item 3. Defaults upon Senior Securities
The Corporation is not in default of any senior securities.
Item 4. Submission of Matters to a Vote of the Security Holders
The following items were submitted to the shareholders for vote at the Annual
Meeting of Shareholders adjourned from June 20, 1996 to July 10, 1996.
1. To elect the Directors for the ensuing year.
================================================================================
NAME Votes FOR Votes AGAINST ABSTAIN
================================================================================
D. M. Hartley 2,812,241 111,926 213,427
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J Johnston 3,014,651 111,926 10,819
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B Kossar 1,590,742 1,535,764 11,017
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M McManus 3,014,651 111,855 10,819
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Note: Two nominees P. Arena and J. Austin withdrew their names from nomination
as Directors prior to the Annual Meeting of Shareholders. The Corporation
filed a Form 8-K with respect to such voluntary withdrawals from
nomination and resignations as Directors on July 17, 1996, which Form is
incorporated herein by reference. (See item 6 "Exhibits and Reports on
Form 8-K")
2. To appoint Auditors for the ensuing year and to authorize the Directors to
fix the remuneration of the Auditors.
3. To approve the amendment to the Certificate of Incorporation to increase the
maximum number of authorized shares of common stock for issuance from
6,000,000 to 12,000,000 shares.
4. To consider and approve the extension from December 31, 1995 and April 14,
1996 to December 31, 1996 of the expiry date of 445,586 warrants and options,
subject to the approval of the Vancouver Stock Exchange.
5. To consider and approve the issuance to a newly appointed director 25,000
incentive options.
6. To consider and approve a private placement or other issuance(s) of an amount
of shares or other securities that is equal to or greater than 20% of the
issued share capital of the Company, at such price or prices and on such
terms as are acceptable to the Vancouver Stock Exchange.
7. To consider and approve, by ordinary resolution, with or without amendment,
the stock option plan substantially in the form attached to the Proxy
Statement as Schedule "A".
Voting on items 2 through 7 was as follows:
================================================================================
Item Number Votes FOR Votes AGAINST ABSTAIN
================================================================================
2 3,020,737 116,710 147
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3 2,663,104 473,866 604
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4 1,487,022 446,096 318,154
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5 2,238,899 570,956 327,739
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6 2,027,171 775,847 334,576
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7 634,089 1,461,546 318,396
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<PAGE>
All of the above items except for item 7 were ratified by the Shareholders.
Prior to the meeting two directors withdrew their names from the nomination due
to personal reasons. The shareholders did not approve the stock option plan.
Item 5. Other Information
The Corporation's shares trade on the Vancouver Stock Exchange, Vancouver, B.C.,
Canada The price of the shares is quoted in U.S. dollars and US Shareholders
can locate the Corporation's common stock under the symbol AGDU.V and for
Canadian shareholders the symbol would be AGD.U.
Item 6. Exhibits and Reports on Form 8-K
"The Corporation filed, on July 17, 1996, a Form 8-K with respect to the
voluntary withdrawal from nomination for re-election of two former directors,
which is incorporated herein by reference."
<PAGE>
Signatures
Pursuant to the requirement 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.
AIM GROUP, INC.
------------------------------------------
(Registrant)
Date August 7, 1996 /s/ Iain J. Richmond
--------------------- ------------------------------------------
Iain J. Richmond
President
Date August 7, 1996 /s/ Shawn P. Durand
--------------------- ------------------------------------------
Shawn P. Durand
Principal Financial Officer
<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> 47,319
<SECURITIES> 0
<RECEIVABLES> 445,542
<ALLOWANCES> 0
<INVENTORY> 170,054
<CURRENT-ASSETS> 698,631
<PP&E> 4,705,314
<DEPRECIATION> 132,628
<TOTAL-ASSETS> 5,412,967
<CURRENT-LIABILITIES> 358,572
<BONDS> 82,993
0
0
<COMMON> 41,935
<OTHER-SE> 3,879,467
<TOTAL-LIABILITY-AND-EQUITY> 5,412,967
<SALES> 1,854,130
<TOTAL-REVENUES> 1,854,130
<CGS> 1,247,520
<TOTAL-COSTS> 1,338,047
<OTHER-EXPENSES> 424,097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99,093
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,107)
<EPS-PRIMARY> (.002)
<EPS-DILUTED> (.001)
</TABLE>
