U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-82468
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AIM GROUP, INC.
(Exact name of small business issuer as specified in its charter)
2001 W. Sample Road (Suite 300), Pompano Beach, Florida 33064
(Address of registrant's principal executive office)
954-972-9339
(Registrant's telephone number)
Delaware 13-3773537
(State of Incorporation) (I.R.S. Employer
Identification No.)
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Check whether the issuer (1) filed all reports to be filed by Section 13 or
(15(d) of the Exchange Act during the past 12 months and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of common stock outstanding as of July 22,1997 was
3,965,339
Transitional Small Business Disclosure Format: [ ] Yes [X] No
<PAGE>
AIM GROUP, INC.AND SUBSIDIARIES
<TABLE>
INDEX
Page(s)
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Operations - Three Months and Six
Months Ended June 30,1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows - Three Months and Six Months
Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Defaults Upon Senior Securities 10
Item 3. Other Information 10
Item 4. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
2
<PAGE>
Part 1. Financial Information
AIM Group, Inc. and Subsidiaries
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash $ 4,470 $ 70,342
Accounts receivable
Trade 437,164 504,864
Other - 564
Inventories 176,121 160,770
Prepaid expenses 18,063 18,529
----------- -----------
Total current assets 635,818 755,069
PROPERTY, PLANT AND EQUIPMENT 727,649 720,599
Less allowances for depreciation (198,999) (163,540)
----------- -----------
528,650 557,059
RESOURCE PROPERTY 4,000,373 3,995,373
OTHER ASSETS 49,233 46,836
----------- -----------
$5,214,074 $5,354,337
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 519,290 $ 281,454
Receivable financing liability 290,076 324,293
Current portion of long-term debt 14,960 14,960
Accrued expenses 43,483 96,111
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Total current liabilities 867,809 716,818
LONG-TERM DEBT, less current portion 68,634 76,073
CONVERTIBLE NOTES PAYABLE 1,050,000 1,050,000
STOCKHOLDERS' EQUITY
Preferred Stock; 1,000,000 shares authorized;
$1 par value; no shares issued or outstanding. - -
Common stock; 12,000,000 shares authorized;
$.01 par value; 3,980,053 shares issued and
3,978,766 shares outstanding at December 31,
1996 and 3,964,052 outstanding at June 30,
1997. 39,801 39,801
Additional paid in capital 4,222,809 4,222,809
Common stock held in treasury - 1,287 shares at
December 31, 1996 and 16,001 shares at June
30, 1997. (14,996) (1,400)
Accumulated deficit (1,019,983) (749,764)
----------- -----------
3,227,631 3,511,446
----------- -----------
$5,214,074 $5,354,337
=========== ===========
<FN>
Note: The balance sheet at December 31, 1996 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.
</FN>
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
AIM Group, Inc. and Subsidiaries
<TABLE>
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 615,478 $ 784,899 $1,187,570 $1,854,130
Costs and expenses
Cost of products sold 486,939 554,778 915,477 1,247,520
Selling and administrative expenses 168,131 248,063 395,107 476,269
Interest 48,861 36,002 98,643 99,093
Depreciation and amortization 19,400 19,847 38,801 38,355
----------- ----------- ----------- -----------
723,331 858,690 1,448,028 1,861,237
----------- ----------- ----------- -----------
Earnings (loss) before taxes (107,853) (73,791) (260,458) (7,107)
Income taxes - - - -
----------- ----------- ----------- -----------
Net earnings (loss) $ (107,853) $ (73,791) $ (260,458) $ (7,107)
=========== =========== =========== ===========
Net earnings per share $ (0.027) $ (0.019) $ (0.066) $ (0.002)
=========== =========== =========== ===========
Weighted average shares outstanding 3,964,052 3,980,053 3,971,408 3,962,471
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
AIM Group, Inc. and Subsidiaries
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS $ 8,902 $ (142,643) $ (12,839) $ (355,163)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,050) (67,200) (7,050) (107,168)
Increases in other assets and
resource property - (36,038) (4,327) (78,121)
----------- ----------- ----------- -----------
Net cash provided by investing
activities (7,050) (103,238) (11,377) (185,289)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of proceeds from convertible
note payable - - - 300,000
Net change in debt (37,539) 30,558 (41,656) 27,491
----------- ----------- ----------- -----------
Net cash provided by financing
activities (37,539) 30,558 (41,656) 327,491
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $ (35,687) $ (215,323) $ (65,872) $ (212,961)
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 30, 1997
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, 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 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,
1996.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Finished goods $ 22,809 $ 28,513
Raw materials 102,065 76,421
Klannerite Ore 48,645 48,645
Spare parts and supplies 2,602 7,191
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$ 176,121 $ 160,770
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</TABLE>
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30,1996
Net sales of AIM Group, Inc. (the "Company") for the second quarter of
1997 amounted to $615,478, a decrease of $169,421 from net sales of $784,899
in the prior year's comparable quarter. The decline in net sales was primarily
attributable to a decline in a major customer's product line. Cost of products
sold amounted to $486,939 and $554,778 in the second quarters of 1997 and
1996, respectively, resulting in a gross margin of 21% in the second quarter
of 1997 compared to a 29% gross margin in the second quarter of 1996. The
reduction in the gross margin was primarily attributable to the decline in net
sales and competitive pricing pressures. Subsequent to the change in
management of the Company effective March 27, 1997, new management continued
its efforts to increase net sales by offering improved and/or new industrial
filler products and applications to existing and potential new customers.
Selling and administrative expenses during the second quarter were
$168,131, or 27% of net sales, compared to $248,063, or 32% of net sales, in
the second quarter of 1996. The decrease in selling and administrative
expenses is attributable to new management's cost containment efforts
implemented in April, 1997 and the reduction in net sales in the current
quarter.
Interest expenses were $48,861, or 8% of net sales, in the second quarter
of 1997 compared to $36,002, or 5% of net sales, in the second quarter of
1996. The increase in interest expenses as a percent of net sales was
attributable to both an increase in the interest rate of 3.5% to 10% for the
Series A convertible notes and the Company's increased use of the factoring of
receivables to provide working capital. A new receivables financing agreement
implemented in the current quarter has resulted in cost reductions for this
type of financing.
Primarily as a result of the above, the Company incurred a net loss of
$107,853, or $.027 per share, in the quarter ended June 30, 1997, compared to
a net loss of $73,791, or $.019 per share, in the quarter ended June 30, 1996.
7
<PAGE>
The net loss in the quarter ended June 30, 1997 compares favorably with
the net loss of $152,605, or $.038 per share, in the quarter ended March 31,
1997 and reflects the commencement of new management's cost containment
efforts in April, 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net sales of the company for the six months ended June 30, 1997 amounted
to $1,187,570, a decrease of $666,560 from the net sales of $ 1,854,130 for
the six months ended June 30, 1996. The majority of the decline was due to a
decline in a major customer's product line. Cost of products sold amounted to
$915,477 and $1,247,520 for the six months ended June 30, 1997 and 1996
respectively resulting in a gross margin of 23% for the first six months of
1997 compared to 33% for the comparable period in 1996. The reduction in gross
margin is primarily attributable to the overall decline in net sales.
Selling and administrative expenses for the six months ended June 30,
1997 were $395,107, or 33% of net sales, compared to $476,269, or 26% of net
sales, in the six months ended June 30, 1996. The increase in the 1997 period
is the result of additional sales personnel expense added to the company late
in the second quarter of 1996 and in the third quarter of 1996.
Interest expenses were $98,643, or 8% of net sales, in the six months
ended June 30, 1997 compared to $99,093, or 5% of net sales for the comparable
period in 1996. The increase in interest expense as a percent of net sales is
largely attributable to the increase in the interest rate of 3.5% to 10% for
the Series A convertible notes and the Company's increased use of the
factoring of receivables to provide working capital.
Primarily as a result of the above, the Company incurred a net loss of
$260,458, or $.066 per share, in the six months ended June 30, 1997, compared
to a net loss of $7,107, or $.002 per share, in the six months ended June 30,
1996.
8
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
The Company incurred a negative cash flow from operations of $35,687 in
the second quarter of 1997, compared to a negative cash flow from operations
of $215,323 in the second quarter of 1996. As a percent of sales, negative
cash flow improved to 6% in the current quarter compared to 27% for the second
quarter of 1996. As of June 30, 1997, the Company had a working capital
deficit of $231,991.
In order to increase available cash to meet expenses in the short term,
the Company continued its factoring arrangement which provides for cash
advances against invoices to customers during the period in which such
invoices are outstanding. Generally, the cost of factoring, similar to
interest rates on short term borrowings, is payable on the amounts outstanding
and customer payments are then applied directly to advances. Factoring, while
not increasing working capital, does provide liquidity of receivables. It is
the intention of management to discontinue the use of factoring as soon as
practicable. In that regard, the Company has been approved for a seven year,
$200,000 loan with a 6% interest rate from a local development fund for plant
improvements and working capital purposes. Management expects to close on this
loan in July, 1997
----------------
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Two legal actions that were initiated during the first quarter of 1997
were dismissed in the second quarter. On May 1, 1997, Mr. Bernard Kossar, a
former director of the Company, withdrew his action filed against the Company
on January 31, 1997 for nonpayment of a Convertible Promissory Note. Secondly,
in early May 1997, the current directors of the Company dismissed an action
that had been filed by them against two former directors of the Company on
April 24, 1997, pursuant to Section 225 of the Delaware General Corporation
Law.
9
<PAGE>
Item 2. DEFAULTS UPON SENIOR SECURITIES
On December 31, 1996, Convertible Promissory Notes previously issued by
the Company in the total principal amount of $1,050,000 and held by three
holders (the "Notes") matured but were not paid as cash flow from operations
was not sufficient to pay the principal and accrued interest due. During April
1997, two holders owning $750,000 principal amount of Notes agreed to amended
terms providing for the extension of the final maturity date to March 31,
1998, increase of the interest rate from 3.5% to 10% per annum, and decrease
in the conversion price to $.70 per share. During the second quarter of 1997,
a new investor replaced the third holder that owns the $300,000 principal
balance of the Notes and agreed to such amended terms. The amended terms of
the Notes were accepted by the Vancouver Stock Exchange on June 18, 1997.
Item 3. OTHER INFORMATION
Effective April 29, 1997, Joseph L. Ranzini resigned as a director of the
Company.
The Company's shares trade on the Vancouver Stock Exchange, Vancouver,
B.C., Canada. The price of the shares is quoted in U.S. dollars and U.S.
shareholders can locate the Company's common stock under the symbol AGDU.V.
The symbol for Canadian shareholders is AGD.U.
Item 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibit is filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K. There were no Forms 8-K filed by the Company during
the second quarter ended June 30, 1997.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Aug 8, 1997 By: /s/PAUL R. ARENA
----------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
Aug 8, 1997 By: /s/ LEIGH S. ZOLOTO
-------------------
Leigh S. Zoloto
Chief Financial Officer,
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000928032
<NAME> AIM GROUP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,470
<SECURITIES> 0
<RECEIVABLES> 437,164
<ALLOWANCES> 0
<INVENTORY> 176,121
<CURRENT-ASSETS> 635,818
<PP&E> 727,649
<DEPRECIATION> 198,999
<TOTAL-ASSETS> 5,214,074
<CURRENT-LIABILITIES> 867,809
<BONDS> 1,118,634
0
0
<COMMON> 39,801
<OTHER-SE> 3,187,830
<TOTAL-LIABILITY-AND-EQUITY> 5,214,074
<SALES> 615,478
<TOTAL-REVENUES> 615,478
<CGS> 486,938
<TOTAL-COSTS> 723,331
<OTHER-EXPENSES> 187,531
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,861
<INCOME-PRETAX> (107,853)
<INCOME-TAX> 0
<INCOME-CONTINUING> (107,853)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,853)
<EPS-PRIMARY> (0.027)
<EPS-DILUTED> 0
</TABLE>
