Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
NOTE: Pursuant to Rule 15d-2 under the Securities Exchange Act of
1934 this Annual Report contains only certified financial statements
for the fiscal year ended December 31, 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.
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(Exact name of small business issuer in its charter)
Delaware 13-3773537
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
2001 W. Sample Road, Suite 300
Pompano Beach, Florida 33064
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954)972-9339
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Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
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None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
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(Title of class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period as 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 [ ]
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
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Issuer's revenues for its most recent fiscal year: $3,092,278
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State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked price of such stock, as of a specified
date within 60 days.
Aggregate market value as of March 25, 1997 $1,380,430
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State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Common Stock, $.01 par value, as of March 25, 1997 3,980,053
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<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
AIM Group, Inc. (the "Company") was incorporated on March 28, 1994, in the
state of Delaware for the purpose of effecting the mergers described elsewhere
herein and had no revenues and no operations during the year ended December
31, 1994.
On March 31, 1995 the Company acquired all of the outstanding shares of
HeatShield Technologies, Inc. ("HTI") and Advanced Industrial Minerals,
Inc.,"AIM". The plan of merger was approved by the shareholders of the
Company, HTI, and AIM at the respective annual meetings of shareholders held
in 1995. The assets and liabilities of AIM were merged with those of the
Company as of March 31, 1995, the effective date of the merger.
The businesses of the Company are United Minerals Corporation
(Arkansas)("UMC(AR)"), HTI, and United Minerals Corporation
(Arizona)("UMC(AZ)"). UMC(AR), an Arkansas corporation formed in March 1993,
operates a mineral surface modification facility located in Malvern, Arkansas.
HTI, a Florida corporation formed in May 1991, owns a lease interest in a
silica/kaolinite deposit (Klannerite(R)). UMC(AZ), an Arizona corporation
formed in May 1993 and originally called Viva Luz Mining Company, mines
Klannerite(R) as needed. HTI developed and marketed a Klannerite(R) containing
coating for use in furnaces and kilns, called PDC coating. HTI also formerly
held the exclusive right to market another high temperature Klannerite(R)
containing refractory coating developed by a third party. This coating was
test marketed under the "Omega" trade name. Details are set out below.
The Company's major business, principal products, and markets are described as
follows:
UNITED MINERALS CORPORATION ARKANSAS (UMC(AR)) SURFACE MODIFICATION PLANT
UMC(AR) is the Company's core business and has completed its second full
year of operations on December 31, 1996. It operates a surface
modification facility, both as principal and as a toll processor, for
industrial minerals used as fillers in the rubber and plastics
industries. The plant commenced operations in April 1994. Since inception
UMC(AR) has carried out leasehold improvements and the engineering,
procurement, and construction of machinery and equipment. UMC(AR)
purchased the land and building in 1995.
The UMC(AR) Malvern facility has been designed to treat industrial
fillers such as silica, clay, mica, alumina trihydrate, wollastonite,
magnesium hydroxide and microspheres with silanes. The treated products
are used in the plastics and elastomer industries. Silanes or
"organosilicon chemicals" were recognized as superior coupling agents
approximately 40 years ago.
Typical customers of UMC(AR) are compounders in the plastics and
elastomer industries seeking to improve the physical properties and the
performance of their products. Through the application of small
quantities of organosilicon chemicals, UMC(AR) can, through surface
modification, appreciably improve the physical characteristics of the
filler-resin composites. Improvements in composite properties that are
desired by customers are: (i) lower oil absorption, (ii) less moisture
ingress or accumulation, (iii) increased tensile strength, and (iv)
better mixing viscosity. Composites containing surface modified fillers
are used in the electronics, communications, transportation, construction
materials, and appliance industries.
The use of surface modified fillers may require that customers change
their formula or production method in order to achieve maximum benefit
from the modified filler materials. As such, there may be a prolonged
interval of business development during which the customer undertakes
testing and evaluation prior to a change in materials source. UMC(AR) has
successfully supplied samples to a number of customers and sample
evaluation is ongoing. Additionally, UMC(AR) has successfully carried out
surface treatment of test quantities of opacifying materials. Subsequent
to the year ended December 31, 1996, UMC(AR) received orders for 600 tons
of an opacifying material and 400 tons of a flame retardant material.
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UMC(AR) operated one shift per day during 1996 and treated approximately
2,600 tons of commercial products at the Malvern plant. Management
estimates that the plant's capacity is approximately 7,000 tons per year.
The plant currently has two mixing and packaging lines. Approximately
seven full time employees currently work at the plant.
HEATSHIELD TECHNOLOGIES, INC. (HTI)
HTI is in the development stage with a limited history of operations.
HTI carried out reserve analysis, surface mining, and processing of a
silica/kaolinite rock, called "Klannerite(R) ", at a mining property
locally referred to as the "Viva Luz Mine" located in Mohave County,
Arizona. Exploitation of the Viva Luz Mine was formerly conducted on a
joint venture basis with AIM. No mining of Klannerite(R) has been carried
out since 1993.
Initial indications were that Klannerite(R) would have application as an
ingredient in PDC coating. Marketing of the PDC coating was initiated in
April 1994. Development work concentrated on securing test applications
at steel mills, aluminum, glass, and other industries operating furnaces
and kilns where the characteristics of PDC, as exhibited on a laboratory
scale, could be exploited. It is now apparent to management that the
features of PDC coating are not replicable in full scale industrial
applications. It was therefore decided to try to enter the coatings
market with a product exhibiting higher resistance to chemical (alkali)
attack, as with the Omega line of coatings.
In December of 1995, HTI signed a Technology License Agreement with Omega
Coatings Pty., Limited of Sydney, Australia "OCPL". The agreement
provided HTI exclusive North America rights to sell and distribute
furnace coatings known as Omega 1 and Omega 2. The Omega 1 coating
contains a significant portion of Klannerite(R) which was supplied to
OCPL by HTI.
HTI also signed a Technology Purchase Option Agreement with OCPL. This
agreement provided HTI the exclusive rights to purchase all worldwide
rights to the Omega line of coatings licensed by OCPL from Refract-a-Gard
Pty., Limited, also of Sydney, Australia, and certain assets of OCPL
pertinent to the Omega coatings and their manufacture.
After limited test marketing of these products, the Company abandoned its
exclusive license and has written off $93,396 of its investment in
license and royalty payments. Due to a current lack of available research
and development funds, the Company is no longer pursuing the options with
respect to Omega Coatings. Although the licensing agreements have been
cancelled, the Company maintains a dialogue with OCPL should the need
arise to renew a working relationship. Both of these products continue to
be evaluated by potential customers.
HTI is also working to develop Klannerite(R) for use as an industrial
filler. Initial tests were carried out to develop uses for latex based
paints, oil based paints, and plastics. Test results for oil based paints
and plastics have been average to sub-standard. Test results for latex
based paints have been better, with good thixotropy, flatting, and scrub
resistance compared to commonly used fillers. Although development funds
are limited, further testing and marketing efforts are underway to
develop local markets in the Phoenix / Las Vegas / Southern California
area with small independent paint manufacturers. Additionally, new uses
are under investigation, including Klannerite(R) as a pozzolan component
in grouts and white cements, as a microporous light weight insulating low
temperature aggregate, and as a lightweight roofing aggregate for polymer
roofing systems. To date there have been no commercial sales to these
markets.
UNITED MINERALS CORPORATION ARIZONA (UMC(AZ)) VIVA LUZ MINE
UMC(AZ), a wholly owned subsidiary, holds a mining lease "Lease", which
expires in March, 2004 , with New Mexico and Arizona Land Company, the
owner of the mining rights at the Viva Luz Mine in Mohave County,
Arizona. The Lease is subject to a further term in perpetuity provided
the property is in operation and is generating minimum royalties.
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The Lease permits the exploration of the property and removal of the
mineral over the remaining term. The Lease calls for the payment of a
production royalty of 5% of the gross consideration obtained for the
mineral less transportation costs, subject to a minimum royalty payment
of $5,000 per year.
In July 1992, the Atchison Topeka and Santa Fe Railway Company denied
public access across its tracks, preventing the Company access to the
mine, unless the Company posts a flagman and spotter at the crossing
site. A substantial quantity of processed Klannerite(R), sufficient for
foreseeable sales, is available from the Company's inventory.
The use of Klannerite(R) in the manufacture of refractories for the
aluminum industry was tested during the year without success.
The Company's objective in selling Klannerite(R) as a filler and for
other uses is considered by management to be dependent on the ability to
develop initial markets in the Southwest. The testing and marketing for
these applications will be performed this year.
As reported by the Company in its Form 8-K filed on February 20, 1997, the
Company's former management in early 1997 considered the recognition of a
reserve against the Company's mineral leasehold interest in the Viva Luz Mine
in view of disappointing results encountered in connection with the testing of
certain commercial applications of Klannerite. The Company's current Board of
Directors and management, which assumed their positions on March 27, 1997 ,
have concluded that the recognition of such a reserve in the Company's
financial statements for the year ended December 31, 1996 would be premature
and that efforts will be made during the current year to identify and pursue
new economically viable applications for the material other than those pursued
in the past.
Working Capital
The working capital of the Company was $38,251 at year end. To date, the
Company has continued to factor a substantial amount of its accounts
receivable. During 1996, the Company completed $300,000 of a private placement
of $1,050,000 principal amount of Convertible Notes originally undertaken late
in 1995. This placement enabled the Company to pay down all outstanding short
term borrowings and substantially reduce its factoring of receivables. The
operations of the Company produced a net loss for the 1996 fiscal year of
$415,633 after a write-off of development expenses of $93,396.
As of March 26, 1997 UMC(AR) had outstanding contracts approximating $340,000.
The Company has not undertaken any contracts directly with any level of
government.
Dependence on a Significant Single Customer
During 1996, UMC(AR) continued to be dependent on a major customer, a plastics
compounder, for approximately 83% of its consolidated sales compared to 93%
for 1995. If sales to this customer were lost, UMC(AR) would not be profitable
on a unit basis. Management has made some improvements over 1995 in
diversification of its customer base for surface treated minerals, primarily
within the plastics compounding sector, and expects continued improvement in
this area for 1997.
Dependence on a Significant Single Supplier
UMC(AR) has been dependent in the past on a single major supplier for the
majority of its raw materials. If this supplier refused to deliver or
relations with UMC(AR) were severed, UMC(AR) would be at a disadvantage until
a replacement supplier for the material was located. There are several
alternate suppliers for the raw material and UMC(AR) has evaluated their
materials and sent them to customers for further evaluation. Management does
not believe that there would be a protracted interruption of raw material
supply in the event that the major supplier refused to continue to supply. A
time delay may be experienced in the order cycle from any new supplier.
UMC(AR) has to date been able to obtain adequate supplies of organosilicon
chemicals from third parties at reasonable terms and prices. An interruption
of the delivery of these materials in the future
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could have an adverse effect on the operations of the UMC(AR) plant. Other raw
materials used or processed by UMC(AR) are available from several sources.
Patents, Trademarks and Contracts
The Company is not dependent on patents for its principal business activity.
However, management and personnel rely on know how and trade secrets of the
Company respecting the surface modification and coatings segments of its
business.
The Company was granted a patent on its Photon Diffusive Coating on November
6, 1996.
The Company's trademarks are: AIM Group(R), the Corporate entity; Uni-Kote(R),
the UMC(AR) marketing label; and Klannerite(R), the rock from UMC(AZ)'s Viva
Luz Mine.
The Company has Employment Contracts with the Manager of its UMC(AR) Malvern
plant, the Product Manager for UMC(AR) located in New Jersey, and with its
Chief Financial Officer in the Corporate Office in Florida. All Contracts are
renewable on an annual basis. In addition, UMC(AR) has agency agreements for
product sales with two individuals which are cancellable on thirty days
notice.
The Company is in dispute with two of the former Corporate Secretaries and the
former Assistant Corporate Secretary over employment contracts which they
claim are valid. The Company does not acknowledge the validity of these
purported contracts and has given notice to the employees of a need to modify
and acknowledge their understanding with the Company.
The business of the Company is not of a seasonal nature.
Consistent with its business plan, the Company does not anticipate any
significant increase in the number of employees other than direct labor
associated with increased production activity and the staff necessary to
service the technical sales requests of customers.
Status of Publicly Announced New Product
During 1996, the Company's management reviewed the results of testing to date
on Klannerite(R) filler and the potential of the PDC heat reflective coating
business and decided that these were not developing in line with original
expectations. Due to the extremely competitive nature of the filler business
and the greater margins obtainable from the Company's other business, the
Company elected to concentrate its marketing efforts on the surface
modification business. The use of Klannerite(R) in an insulating fire brick is
still being investigated along with other potential applications. During the
first six months of 1996, the Company undertook a marketing and testing
program for the Omega Coatings. Due to inconclusive results and lack of funds
available for research and development the Company has abandoned the Omega
product line. In 1996, the Company wrote off its investment in the Omega
Products.
Cost Reduction Measures - Subsequent Event Effective March 27, 1997
The company has implemented a cost reduction plan which includes but is not
limited to the following major items: reduction of significant legal expenses,
elimination of signifcant administrative overhead, and lower corporate office
lease expenses.
OTHER BUSINESS ITEMS
Research and Development
The Company carries out sufficient research and development at its UMC(AR)
facility to develop formulations of silane treatments on minerals to meet
specific service or customer requirements. These expenditures are considered
part of normal plant manufacturing expenses, and not costs to be associated
with fundamental research and development.
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HTI has previously expended funds to develop markets for PDC coating and
Klannerite(R) and continues on a limited basis to explore uses for the
Klannerite(R). In 1996, the Company carried out a six month testing and
marketing program for Omega Coatings products through a license arrangement.
Due to limited funding, the Company relinquished its rights to license these
products and wrote-off its investment in Omega of $93,396.
Specific expenditures on research and development, and market development
during the previous four years were:
<TABLE>
<CAPTION>
1996 1995 1994 1993
<S> <C> <C> <C> <C>
Expenditures $49,582 $9,311 $42,866 $77,677
R&D, testing, and Market Dev'l.
</TABLE>
Consistent with its business plan, the Company does not anticipate undertaking
any significant research and development for the remainder of 1997 or in 1998,
other than in the normal course of business to determine the concentrations of
silane chemicals to be used for surface modification production.
Competition and Markets
UMC(AR) competes with other mineral suppliers and custom or toll processors in
the surface modification industry. Many of the mineral producers are of a much
larger size in both terms of assets and sales, and are more diversified than
UMC(AR). Some mineral producers are well recognized by the industry and others
offer products at significantly lower prices.
Custom or toll processors in the surface modification industry with whom
UMC(AR) competes tend to be smaller and privately owned. Subsequent to year
end, noticeable predatory pricing developed in the surface modification
business. UMC(AR) believes it offers a high quality product at a competitive
price and has a good customer service response that will maintain its
competitive edge with its current customers and other new customers as they
are developed.
UMC(AZ) products will compete with numerous entities in the filler, cement,
and aggregate businesses. These markets are large and diverse respecting the
types of minerals mined and supplied. Producers are active in areas of
research and development. Many of these entities have significantly greater
capital resources and more research and development, marketing personnel, and
facilities than HTI. Some competitors have significant national name
recognition and distribution networks.
Management believes that price competition will be more significant in the
coming years and that the Company will have to compete with other large
mineral processors and producers on the basis of highly specialized products
tailored to customers' specific needs. The Company will do this by providing
customized products and rapid turn-around of orders. Also, larger competitors
often cannot process small custom orders, creating opportunities for toll
processors such as UMC(AR).
The Company continues to expand its technology base and is aware of the need
to create improved formulations that offer a "value added" economic
performance to existing and potential customers.
Employees and Consultants
Presently, AIM Group and its subsidiary UMC(AR) have a total of 12 employees,
of whom a total of 11 are full time. The Company intends to hire, under
contract, employees needed to operate its mining, mineral processing, and
packaging facilities as required. The Company does not anticipate any
significant increase in the number of employees other than direct labor
associated with increased production activity at its UMC(AR) facility.
AIM Group may retain one or more consultants to render advice in areas of
strategic planning, plant engineering, project evaluation, and marketing.
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Environmental Issues and Government Regulation
The mining and manufacturing operations of the Company are subject to laws and
regulations relating to exploration procedures, safety precautions, property
reclamation, employee health and safety, air quality standards, pollution, and
other environmental protection controls adopted by federal, state, and local
governments.
Federal, state, and local environmental regulations may have a material effect
on any future mining operations of UMC(AZ) at the Viva Luz mine.
The Company's UMC(AR) manufacturing facility is also subject to regulation by
the Occupational Safety and Health Administration ("OSHA") and the
Environmental Protection Agency "EPA" and to regulation under other regulatory
statutes, and may in the future be subject to other federal, state or local
regulations. OSHA or the EPA may promulgate regulations that may affect the
Company's research and product development programs.
The going concern value of the Company is dependent upon compliance with
certain environmental rules and regulations and management believes that it
has met or exceeded the requirements of these rules in the Company's
operations. However, the Company can make no representations that compliance
with current regulations will ensure protection against any future liabilities
due to claims by third parties or changes in the regulations. Should
environmental liabilities arise in the future, the Company could be materially
adversely affected as the resources of AIM Group are used for regaining
compliance in order to continue operations.
The production of materials containing silica is regulated by the EPA and OSHA
as such materials can, potentially, be hazardous if inhaled or otherwise
consumed. These potential hazards exist in two principal areas of the
Company's operations: the Viva Luz Mine site and at the UMC(AR) surface
modification facility. Operations at the Viva Luz mine have been subcontracted
out to third party suppliers as required.
The EPA/OSHA regulations concerning crystalline silica generally deal with
health effects and toxicity/exposure limits, as well as certain safe handling
rules such as specified engineering controls, procedures, and personal
protective equipment such as masks or respirators.
The Company's policy is to engineer its systems in accordance with these rules
and comply with all known safe handling procedures in order to limit exposure.
In all instances the Company believes that it is either in compliance with the
appropriate regulations or the level of operations is such that active
compliance is not required at this time.
The surface modification facility at Malvern, Arkansas has received
authorization to operate its facility under the State Implementation Plan.
Because emissions at the plant are under ten tons per year, the plant does not
need an air quality permit. Active compliance with environmental regulations
(the federal Clean Air Act) is required when the actual emissions from the
facility exceed ten tons per year. The Company anticipates that to reach this
level of operations it would have to install two additional processing lines
(i.e., more than double its existing installed production capacity) and would
have to be operating these four production lines 24 hours a day, five days a
week, 52 weeks a year. The Company does not anticipate reaching this level of
production in a single facility in the foreseeable future.
The impact of future changes to existing regulations or of new regulations
will be evaluated by the Company, and all necessary steps to achieve
compliance will be taken, as any such changes or new regulations come into
effect. In general, increases in emissions of up to 20 tons per year can be
permitted through the Minor Permit Modification process. This level of
increase would exceed the maximum possible level of operations of the existing
facility by a factor of six times. The Company believes the future impact of
any such changes in regulation on the financial condition of the Company to be
minimal.
Certain Company activities are regulated under the Code of Federal Regulations
(CFR) Title No. 40, referencing air standards and under CFR Title No. 29
relating to OSHA regulations for the workplace.
The Company is also in compliance with the relevant "Right to Know"
regulations and disclosures respecting potential health hazards of its
products and processes on its employees and customers.
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The regulations provide for, and the Company and its employees comply with,
the requirements respecting dust extraction and control processes, equipment
and accouterments, safety clothing, and equipment. Use of this equipment,
principally respiration filters to remove airborne particles, by employees
brings the Company into compliance with existing regulations.
There have been recent proposals to change the evaluation of the effects of
the various hazards associated with different forms of silica. Specifically
there is a proposal to define inhaled cristobalite, and quartz from
occupational sources as carcinogenic to humans. These forms of silica occur
naturally in Klannerite(R).
In the event that the subject regulations do change to require more stringent
limits on allowable silica exposure, the response by the Company may include
installation of additional dust control equipment to reduce particulate
emissions; using improved safety equipment to reduce personal exposure; and
employing any extant technological solutions in order to meet the new
requirements and continue operations.
The impact of any change in regulations would have the same deleterious effect
on the financial performance of AIM Group as it would have on all other
participants in the industry. These effects are not expected to make AIM Group
any more or less competitive or profitable than other corporations in the
industry other than the fact that the effects on AIM Group due to its being a
smaller, newer company with limited financial resources, may be such that it
may experience more difficulty in financing capital or operating expenditures
required by any change to existing regulations, codes, ordinances, and laws.
In addition, each state and local governmental agency may have its own series
of regulations that may differ from or be more stringent than those enacted by
the EPA. Generally, the Company must be prepared to comply with established
mandatory procedures, safety and efficacy standards which apply to its
proposed mining activities and to the manufacture, testing and operation of
its products within the United States. Compliance with such a broad range of
complex regulatory procedures may be time consuming, costly and have a
materially adverse effect on the business of the Company.
The Company is not knowingly in violation of any environmental law, rule or
regulation.
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ITEM 2. DESCRIPTION OF PROPERTY
In September 1996, AIM Group decreased the amount of office space leased at
its head office in Broward County, Florida from approximately 5,000 to 3,190
square feet. The Company anticipates sub-leasing 1,590 square feet which will
effectively reduce the office space leased by the company to approximately
1,600 square feet. As of March 28, 1997, the Company was in negotiation with a
potential tenant to sublet this space. However, there is no guarantee that the
Company will find a suitable sub-tenant. The lease expires in November 1999.
UMC(AR) owns a 9,050 square foot industrial building which includes 1,850
square feet of laboratory and office space, situated on a 3.75 acre site. The
facility is located in Malvern, Arkansas, approximately 40 miles southwest of
Little Rock, Arkansas. This property was acquired in October,1995. The Horizon
Bank of Malvern holds a collateral mortgage on the property in the principal
amount of approximately $60,300.
UMC(AZ) leases a mining property known as the Viva Luz Mine, located in Mohave
County, Arizona, situated approximately 43 miles southwest of Kingman,
Arizona. The mineral deposit is a volcanic cristobalite-kaolinite rock which
the Company markets under the trade name Klannerite(R). Cristobalite is a
polymorph, or different crystal form, of common quartz. Cristobalite is less
common than quartz and its physical properties are slightly different.
The mineral body has been previously classified by a geologist under contract
to HTI into three different quality categories, K1, K2, and K3. The highest
grade K1 rock is uniformly white in color, relatively free of impurities, and
may be suitable for use as a filler. The measured geologic reserves of K1 are
260,000 tons proved and 80,000 tons probable. The Company believes that there
are sufficient reserves of K1 for operations for the foreseeable future. The
two lower grades of mineral, K2 and K3, are less pure, off color, and may not
find ready markets. The measured geologic reserves of K2 and K3 are 1,350,000
tons.
It is estimated that mining and processing losses will be 18%, yielding 82%
recovered product.
<TABLE>
<CAPTION>
Grade of Mineral (tons) Geologic Reserve Recoverable Reserve
<S> <C> <C>
K1 (proven & probable) 340,000 278,800
K2 and K3 1,350,000 1,107,000
</TABLE>
These estimates do not include K1 material which is overlain by K2 and K3
material.
ITEM 3. LEGAL PROCEEDINGS
In September, 1995, the UMC(AR) subsidiary of the Company was named as a
defendent in an action brought in Chancery Court for Davidson County,
Tennessee by Franklin Industrial Minerals (Franklin) of Nashville, TN, a
former supplier, for an unpaid account in the amount of $37,692. The Company
contends the material received by it was not to specification and was
contaminated. The Company has counter sued Franklin for damages arising from
the delivery of the out of specification / contaminated material. In addition,
in April and May 1996, Aristech Chemical Corporation, the Company's customer,
and the ultimate customers Chemtron Systems, Inc. and Insituform respectively,
filed intervenor suits against the Company and Franklin. The Company's
management is of the belief that the suit by Franklin is groundless and that
the intervenor suits will find Franklin to be responsible and the Company will
prevail in its counter suit. The Company has filed a claim with its insurance
carrier. Management is of the opinion that the cost of resolution of the
claims will not have any material adverse effect on the financial condition of
the Company. Currently, the Company's insurance company is bearing the
majority of the cost of this litigation.
On January 31, 1997, Bernard Kossar, a former director of the company,
initiated an action against the Company in the Circuit Court of the 17th
District, Broward County, Florida, for repayment of $300,000 principal amount
of a Series A unsecured Convertible Promissory Note issued to him by the
Company which became due on December 31, 1996, plus accrued interest and
costs. The Company has entered into an agreement with Mr. Kossar amending that
note to extend its maturity to March 31, 1998, increase the annual interest
rate to 10% and decrease the conversion price to $.70 per share. The Company
expects that the lawsuit against the Company will be withdrawn by Mr. Kossar
during April, 1997.
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As reported by the Company in its Form 8-K filed on March 28, 1997,
shareholders of the Company owning 55.28% of the Company's outstanding shares
of Common Stock delivered signed copies of a shareholders' consent calling for
a change in members of the Board of Directors of the Company. Following
delivery of the consents to the Company on March 27, 1997, certain of the
newly-elected members of the Board of Directors of the Company filed an
application with the Court of Chancery of Delaware pursuant to Section 225 of
the Delaware General Corporation Law seeking to confirm the validity of their
election to the Board of Directors pursuant to the consents. It is expected
that the former directors of the Company will not contest the Section 225
proceeding.
Management is unaware of any other than normal course of business legal
proceeding against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1996, no items were submitted to the shareholders
for vote.
On March 27, 1997, shareholders of the Company owning 2,200,200 shares of the
Company's common stock, (the "Common Stock") representing 55.28% of the
Company's outstanding shares of Common Stock, delivered signed copies of a
shareholders' consent (the "Consents") calling for a change in the members of
the Board of Directors of the Company, effective immediately, to serve until
their successors are duly elected at an Annual Meeting of the Shareholders
expected to be held later this year. The Delaware General Corporation Law (the
"Delaware Law") provides that Directors may be removed and/or elected without
a shareholders' meeting, without prior notice and without a vote, if written
consents setting forth the action taken are signed by the holders of at least
a majority of the outstanding shares and are delivered to the Company in
accordance with Section 228 of the Delaware Law.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of the Company common stock have traded on the Vancouver Stock
Exchange ("VSE"), Vancouver, B.C., Canada since April, 1995. The Company has
been granted Senior Listing status by the VSE. The price of the shares are
quoted in U.S. dollars and U.S. shareholders can locate the Company's shares
under the trading symbol AGDU.V and for Canadian shareholders the trading
symbol is AGD.U.
As of March 24, 1997, there were 379 holders of record of AIM Group Common
Stock.
9
<PAGE>
MARKET PRICES FOR AIM GROUP COMMON STOCK
<TABLE>
The following table sets forth the high and low sales prices per share of AIM
Group Common Stock as reported on the VSE for 1996 and 1995.
<CAPTION>
AIM GROUP INC.
PRICES QUOTED IN US DOLLARS COMMON STOCK
PRICES
-----------------------------------------------------------------------------------------------------
YEARS ENDED, DECEMBER 31, 1996 1995
HIGH LOW HIGH LOW
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $1.85 $0.85 not listed not listed
Second Quarter $1.20 $0.50 $1.10 $1.05
Third Quarter $0.77 $0.41 $1.10 $0.87
Fourth Quarter $0.58 $0.30 $1.20 $0.87
-----------------------------------------------------------------------------------------------------
</TABLE>
To date the Company has not paid or declared dividends on AIM Group Common
Stock and does not expect to do so in the foreseeable future.
AIM Group, Inc. is a Delaware corporation, organized for the purpose of
consolidating the businesses of HeatShield Technologies and Advanced
Industrial Minerals. The latter was formerly listed on the Vancouver Stock
Exchange (VSE) from December 13, 1993 until the time of the merger with AIM
Group on March 31, 1995, and up to the merger traded under the symbol ADI. The
predecessor company, PDC Industrial Coatings Inc., traded stock under the
symbol PDC.
DESCRIPTION OF THE CAPITAL STOCK OF THE REGISTRANT
AIM Group's authorized capital stock consists of 12,000,000 shares of common
stock, $.01 par value (the " Common Stock"), 3,980,053 shares of which were
outstanding on March 25, 1997, and 1,000,000 shares of preferred stock, $1.00
par value (the "Preferred Stock"), no shares of which are outstanding.
At the Company's 1996 Annual Meeting held on July 10, 1996, the Shareholders
approved a resolution authorizing the directors to amend Article Four of the
Company's Certificate of Incorporation to increase the maximum number of
authorized shares of Capital Stock of AIM Group from 7,000,000 to 13,000,000.
This authorization called for an increase in the number of shares of Common
Stock authorized for issuance from 6,000,000 to 12,000,000, to be used for
acquisitions, financing, public offerings or other appropriate corporate
purposes.
COMMON STOCK. Holders of Common Stock have one vote for each share held, are
not entitled to cumulate their votes for the election of Directors, and do not
have preemptive rights. All shares of Common Stock have equal rights and,
subject to the rights of the holders of the Preferred Stock, are entitled to
receive such dividends, if any, as may be declared from time to time by the
AIM Group Board out of funds legally available therefore, and to share pro
rata in the net assets of AIM Group available for distribution to holders of
Common Stock upon liquidation.
PREFERRED STOCK. The AIM Group Board may without further action by AIM Group
stockholders, from time to time, direct the issuance of up to one million
(1,000,000) shares of Preferred Stock in series and may, at the time of
issuance, determine the rights, preferences, and limitations of each series.
The rights of any such series may include voting and conversion rights which
would adversely affect the voting power of the holders of Common Stock.
Satisfaction of any dividend preferences of outstanding Preferred Stock would
reduce the amount of funds available for the payment of dividends on the
Common Stock. Also, the holders of Preferred Stock would normally be entitled
to receive a preference payment in the event of any liquidation, dissolution,
or winding-up of AIM Group before any payment is made to the holders of the
Common Stock. Any such issue of preferred stock in consideration for other
than currency is subject to the prior approval of the VSE.
CONVERTIBLE PROMISSORY NOTES The Company announced on October 18, 1995 the
private placement of Series A Convertible Promissory Notes (the "Notes"),
carrying a 3 1/2%
10
<PAGE>
annual interest rate, and a maturity date of December 31, 1996, and having an
aggregate face value of $1,050,000, subject to the approval of the VSE. In
February 1996, the Company completed the private placement with three related
party investors (see Related Parties) and received the necessary approval from
the Vancouver Stock Exchange. The Notes carried a three year conversion
feature at the option of the holders to convert the face value of the notes
into common shares of the Company at a price of $1.10 if converted on or
before December 31, 1996; $1.35 on or before December 31, 1997; $1.60 on or
before December 31, 1998. In addition, the Company had the right to force
conversion of the notes into common shares upon completion of an offering of
at least 1,500,000 common shares at a minimum price of $1.50 per share. The
Company used the proceeds from the Notes to repay other indebtedness of the
Company which had become due during the period. The balance of the private
placement proceeds was used for working capital purposes.
At a meeting of the Board of Directors held on July 23, 1996, the Directors of
the Company passed a resolution ratifying a previous agreement with the Note
holders at the time the Notes were issued, that the Company would not issue
any debt which ranked senior in priority to the Notes, without the majority of
the Note holders consent.
The Notes, having an outstanding principal balance of $1,050,000, matured on
December 31, 1996. The cash flow from operations was not sufficient to pay off
the Notes. The Company is engaged in negotiations with the three holders of
the Notes to amend the Notes to extend the final maturity to March 31, 1998,
increase the interest rate to 10% per annum and change the conversion rate to
$.70 per share. Two of the holders, who own $750,000 principal amount of the
Notes, have agreed to such amended terms, contingent upon the agreement of the
third holder, who owns $300,000 principal amount of the Notes, to such amended
terms. The Notes will remain unsecured.
11
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This discussion should be read in conjunction with the information contained
in the Financial Statements and Notes thereto of the Company that are
presented elsewhere in this Report.
Incorporated in March 1994, the Company had minimal operations until it merged
with Advanced Industrial Minerals, Inc. and HeatShield Technologies, Inc. (and
its subsidiaries) effective March 31, 1995. The Actual results for the Company
include operations from this date. Prior thereto, the Company had no
operations, therefore the results are not directly comparable.
See Pro-Forma for all inclusive reporting of the results on a comparable
basis. The Pro Forma results include those results from subsequently merged
entities as if the merger had been concluded as of January 1, 1994.
RESULTS OF OPERATIONS - ACTUAL
<TABLE>
The following table sets forth for the periods indicated the percentage of net
sales of certain items included in the Company's Statement of Operations:
<CAPTION>
Actual Actual
Period ended December 31, 1996 % of sales 1995 % of sales
----------------------- -----------------------
<S> <C> <C> <C> <C>
Net Sales $ 3,092,278 100.0 $ 2,399,493 100.0
Cost of Goods Sold 2,148,191 69.4 1,692,943 70.6
Gross Margin 944,087 30.6 706,550 29.4
Selling & Marketing 270,612 8.8 132,532 5.5
Administration 791,826 25.5 673,105 28.1
Interest 131,429 4.3 162,505 6.8
Depreciation 72,487 2.3 47,249 2.0
Total G & A 1,266,354 40.9 1,015,391 42.3
Earnings (Loss) from Operations (322,267) (10.4) (308,841) (2.9)
Write off Investment 93,396 3.0 - n/a
Total Earnings (Loss) before Taxes (415,663) (13.4) (308,841) (12.9)
</TABLE>
Actual net sales for the year were $3,092,278 with a gross margin of 30.6%
compared with $2,399,493 and 29.4% the previous year. The first quarter of
operations for 1995 was prior to the consummation of the merger and therefore
could not be included for the actual operations results reported for the year.
(See pro forma results for operations for all inclusive results, as if the
merger had taken place January 1, 1995).
The Company's core business 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; approximately 3.7% of sales were
made as a toll processor of customers' materials. A small portion of sales
were production size samples for customers' evaluation.
Selling and Marketing expenses for 1996 increased to $270,612 or 8.8% of sales
compared to $132,532 or 5.5% of sales for 1995. The increase is attributable
to expansion of technical sales and marketing efforts. Administration expenses
for 1996 were $791,826 and represent 25.6% of sales compared with $673,105 or
28.1% of sales for the prior year. Management attributes this improvement to
reduction of head office costs of the merged entity and the non recurring
expenses associated with the mergers which were included in 1995.
Interest expenses were $131,429 and $162,505 for 1996 and 1995, respectively.
This represents for 1996 a decrease to 4.3% of sales, from 6.8% of sales for
the prior year, which is a reflection of the decreased use of factoring of
receivables to provide working capital.
Net Loss from operations of $322,267, at 10.4% of sales, represents a loss of
$ 0.081 per share, compared with $308,841, or $ 0.084 per share, based on the
weighted average number of shares outstanding during the respective periods.
Due to the discontinuance of the Omega licensing agreement the Company
recognized a loss of $93,396 or $ 0.024 per share, for write off of
investment. This loss coupled with the net loss from operations resulted in a
total loss of $ 415,633 which was 0.105 per share or 13.4% of sales. There was
no comparable extraordinary loss in 1995.
12
<PAGE>
Resource Property
The current Board of Directors believes it would be premature at this time to
effect a write-down of any portion of the Company's resource property in
Arizona. An effort will be made to determine new economically viable
applications for the material other than those pursued in the past.
If by the end of this calendar fiscal year the Company has not been successful
in establishing realistic market potential for Klannerite(R), then an
independent professional will be retained to evaluate the possibility of an
adjustment in the value of this resource that the Company now maintains on its
balance sheet.
PRO-FORMA RESULTS
UMC(AR) was not a subsidiary of the Company the entire prior year, hence
comparison of full year 1996 with 1995 results is not completely meaningful.
Reference is made to Note "B" of the Notes to the Financial Statements of the
Company.
On a Pro-forma basis the results for the Company are shown as if the mergers
had occurred effective January 1, 1994, and therefore include a full year in
1995 for comparison purposes.
RESULTS OF OPERATIONS - PRO FORMA
<TABLE>
The following table sets forth for the periods indicated the percentage of net
sales of certain items included in the Company's Statement of Operations:
<CAPTION>
Actual (12 Months) Pro-Forma (12 Months)
Period ended December 31, 1996 % of sales 1995 % of sales
----------------------- -----------------------
<S> <C> <C> <C> <C>
Net Sales $ 3,092,278 100.0 $ 2,820,958 100.0
Cost of Goods Sold 2,148,191 69.5 1,975,680 70.6
Gross Margin 944,087 30.5 845,278 30.0
Selling & Administration 1,062,438 33.1 933,871 33.1
Interest 131,429 4.3 171,785 6.1
Depreciation 72,487 2.3 60,140 2.1
Total G & A 1,266,354 40.9 1,165,796 41.3
Earnings (Loss) without (322,267) (10.4) (320,518) (4.4)
Write off Investment 93,396 3.0 - n/a
Earnings before Taxes (415,633) (13.4) (320,518) (11.4)
</TABLE>
Sales for 1996 increased 9.6% to $3,092,278 compared to $2,820,958 for 1995.
The gross margin in 1996 increased .5% to 30.5% compared to 30.0% for 1995.
Selling and administration expenses increased in 1996 to $1,062,438 or 33.1%
of sales compared to $933,871 or 33.1% of sales for 1995. The increase of
$128,567 is due to increased technical sales and marketing costs for 1996.
Interest charges for 1996 decreased to $131,428 or 4.3% from $171,785 or 6.1%
of sales for the comparable period in 1995. The decrease is attributable to
decrease in factoring of receivables during 1996. Depreciation increased to
$72,487 from $60,140 for the prior year. The increase is due to the capital
purchase for UMC(AR) plant during early 1996.
For the year the Company produced a net loss from operations of $322,267,
approximating -10.4% of sales. This represents a loss of $0.081per share,
based on the number of shares outstanding during the year. For 1995, the Net
Loss of $320,518 represented a loss of $0.087 per share, based on the average
number of shares outstanding as if the mergers had taken place as of January
1, 1995.
The Company incurred significant legal fees and related costs in association
with the resolution of employment disputes, litigation over defective products
received from a supplier, and the inability to resolve issues regarding the
Company's $1,050,000 liability of Convertible Notes outstanding. These costs
were fully absorbed within the year and henceforth the results of operations
should show increased efficiency without a recurrence of these expenses.
13
<PAGE>
INCOME TAXES AND NET OPERATING LOSS CARRYFORWARDS
The Company made no provision for Income Taxes for the year ended December 31,
1996, having generated an operating loss for the year and recognizing tax
benefits from the utilization of Net Operating Loss Carryforwards (NOLs) for
book purposes. For a more complete discussion on income taxes and NOLs refer
to Note N to the Financial Statements.
As of December 31, 1996, the Company's NOLs aggregated approximately
$2,317,600, expiring 2005 through 2011. These NOLs arose primarily from the
operations of the Company in the prior year and those of acquired companies
merged as of March 31, 1995. Similarly no provision was made for Income Taxes
in the corresponding period 1995. Except as more fully discussed below and
subject to the limitations of the Internal Revenue Code of 1986 as amended
("Code"), these NOLs should be available to offset future Income of the
Company. Use of NOLs to reduce future taxable income may subject the Company
to an alternative minimum tax.
Section 302 of the Code limits the amount of a corporation's taxable income
that can be offset by NOLs arising prior to an "ownership change". An
ownership change occurs when, for example, shares comprising more than 50% of
a corporation's stock are sold to different or new public shareholders. As a
result of the March, 1995 acquisition and merger of the corporations, as more
fully described herein, and the ownership changes that occurred in connection
therewith, the limitation on the utilization of the NOLs imposed by section
382 of the Code will apply. Under the limitation, the amount of the Company's
taxable income that each year can be offset by NOLs attributable to periods
before the ownership change cannot exceed the product of (i) the fair market
value of the stock of the Company immediately prior to the ownership change
and (ii) the long term tax-exempt rate prescribed by the IRS. The limitation
imposed by the change in ownership may result in the Company paying income
taxes in excess of the amount payable in the absence of the ownership change.
LIQUIDITY AND SOURCES OF CAPITAL
The operating cash flow deficit was funded by cash flow from the operations of
the United Minerals Corporation (UMC) subsidiary and Private Placement of
$300,000 of the $1,050,000 issuance of Convertible Promissory Notes completed
in February of 1996. Such Notes matured on December 31, 1996 and were not paid
off by the Company due to the unavailability of cash flow from operations. The
Company is engaged in negotiations with the three holders of the Notes to
amend the Notes to extend the final maturity to March 31, 1998, increase the
interest rate to 10% per annum and change the conversion rate to $.70 per
share. Two of the holders, who own $750,000 principal amount of the Notes,
have agreed to such amended terms, contingent upon the agreement of the third
holder, who owns $300,000 principal amount of the Notes, to such amended
terms.
Management believes that additional working capital financing will be required
to meet the Company's needs for the coming year. As of December 31, 1996, the
Company had working capital of $38,251. This compares with working capital of
$187,230 as of December 31 of the previous year. Management anticipates that
if sales do not increase the Company will need additional funding sometime
this year. The Company has applied to a local Arkansas bank for an increase in
its capital loan, secured against its land, building, and fixed assets in an
amount approximating $90,000.
To increase available cash for purchases and payroll during the early stages
of development the Company entered into, and has continued, its factoring
arrangement which provides for cash advances against invoices to customers,
during the period for which such invoices are outstanding. Customer payments
are then applied directly to advances. This factoring, while not increasing
working capital, has provided for liquidity of receivables. The Company
intends to reduce its reliance on factoring as a source of working capital
during the coming year. Further, a new factoring agreement is in place that is
expected to reduce the current costs from factoring when needed by 30% to 40%.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements of the Company and the report of the Independent
Auditors thereon are set forth elsewhere in this report.
14
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There are no disagreements with respect to disclosure.
15
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
DIRECTORS OF THE REGISTRANT
<TABLE>
The following is a list of the Directors of the Registrant, their ages and
their principal occupations, as of March 28, 1997.
<S> <C> <C>
Paul R. Arena* 38 Chairman, Director, Chief Executive Officer,
and President of AIM Group and subsidiaries
and the founder of the Companies.
James L. Austin 46 Presently the President of Austin Trading
Company. For the past 25 years, Mr. Austin has
been engaged in various positions within the
paper industry. He also serves as the sales
coordinator and minority owner of a large
paper de-inking facility. From October of 1989
to September 1994, Mr. Austin served as the
President of MoDoCell Inc. which operates
paper processing mills throughout North
America and is the a subsidiary of MoDo Inc.
of Sweden, one of the world's largest paper
processors. Prior to MoDoCell Inc., Mr. Austin
held such positions as North American Sales
Manager for Georgia-Pacific, sales manager for
Willamette Industries, Gottesman-Central
National, Brown Company and was an
International Market Research Associate for
Schering-Plough Corporation.
Dr. A. L. (Al) Braswell 67 Presently the President and owner of Vista
Pacifica Enterprises, Inc., an operator of
several health care facilities in California.
For the past 34 years, Dr. Braswell has been
engaged in various levels of health,
education, and social assistance activities.
Dr. Braswell is also a real estate developer
of residential, commercial and industrial
properties.
Dr. Braswell obtained a PhD from Oregon State
University in 1963, recieved a MS from Oregon
State University in 1959, a MA from Los
Angeles State College in 1954, and a BS from
Bethany Nazarene College in 1949.
E. W. (Sandy) Purcell 44 Presently a Vice President for the investment
banking firm of Houlihan, Lokey, Howard &
Zukin. Previously, he was a Vice President and
Senior Associate with Valuemetrics, Inc. from
October 1989 to January 1997. From May 1987 to
August of 1989, Mr. Purcell was a Vice
President/Partner of Southern Frieghtways,
Inc. Prior thereto, from January 1986 to April
1987 he was a Manager, National Products for
General Electric Credit Corporation. From July
1978 to January 1986, Mr. Purcell was an
Assistant Vice President and Manager of
National Vendor Sales for Equilease
Corporation.
Mr. Purcell obtained an MBA from the
University of Chicago in 1989 and received a
BS from the University of Florida in 1973.
Joseph L. Ranzini 66 Presently Chairman of University Bank (NASDAQ
Traded), and Chairman and President BIDCO a
Rural Development Bank for the State of
Michigan. Private law practice for over twenty
years; Municipal Judge in New Jersey;
commercial and residential real estate
developer, and Business Owner. Formerly
administrative assistant to the Vice Chairman
of the Board for Johnson & Johnson Company.
16
<PAGE>
<FN>
* Denotes executive officer; for biography see section Executive Officers of
the Registrant below.
</FN>
</TABLE>
Mr. Paul Arena and Mr. James Austin withdrew their names from nomination at
the Company's 1996 Annual Meeting. Mr. Michael McManus resigned from the Board
of Directors of AIM Group, Inc. in September 1996. On March 27, 1997, D.
Michael Hartley was removed as Chairman and Chief Executive Officer. On that
same day, John W. Johnston was removed as a Director, and Mr. Paul Arena and
Mr. James Austin were reappointed as Directors by a majority of the Company's
shareholders. Mr. Kossar resigned from the Board of Directors of AIM Group,
Inc. on April 2, 1997.
COMPENSATION OF DIRECTORS OF AIM GROUP INC.
Except as set forth below, AIM Group does not pay any compensation to its
Directors for their services as Directors. AIM Group pays a salary to Paul R.
Arena, as Chief Executive Officer and President of the Company. See Executive
Officer Compensation.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
The following is a list of the Executive Officers of the Registrant, their
ages and their positions and offices as of March 28, 1997.
<CAPTION>
Name Age Office
<S> <C> <C>
Paul R. Arena 38 Chairman, Director, Chief Executive Officer,
and President of AIM Group and subsidiaries
and the founder of the Companies. From June of
1990 to August of 1991, Mr. Arena served as
Vice President of Finance and a Director of
Saftron, Inc. of Miami, FL. From February of
1988 to January of 1990, he was a Senior Vice
President and partner of Gulfstream Financial
Associates, a subsidiary of the Kemper Group.
Previous to this (April of 1986 to June of
1988), he was the President of the Arena
Venture Group, a Boca Raton firm which engaged
in aircraft leasing operations. Concurrent
with this, from March of 1987 to February of
1988, Mr. Arena was also employed as a Vice
President by Interstate Securities, and from
March of 1985 to February of 1987 he was a
Vice President for Drexel Burnham Lambert.
Leigh S. Zoloto 42 Chief Financial Officer, Corporate Secretary
and Treasurer of AIM Group and its
subsidiaries. Mr. Zoloto has been employed by
the Company as Director of Finance since June
1996. Prior thereto, he was the Controller and
Director of Information Systems for a
subsidiary of Westinghouse Electric
Corporation from November 1988 to May 1996.
From August 1986 to July of 1988 he was a
Financial Systems Consultant for Cullinet
Software, Inc. Previously, he was the Regional
Controller from September 1981 to March of
1986 for National Medical Care, Inc., now a
subsidiary of W.R. Grace & Co.
Mr. Zoloto obtained an MBA from the University
of Connecticut in 1981 and received a BS in
Accounting from SUNY at Buffalo in 1976.
John W. Johnston 55 Vice President Sales and Marketing, AIM Group.
Formerly Chief Operating Officer and Secretary
of AIM Group since April 1995, formerly COO
for HeatShield since July 1994. President of
Eastco Capital Management from 1984 to April
1994. From 1988 to 1991, Executive Vice
President of Memry Corp. From 1982 to 1984,
Executive Vice President and Director of
Billiton Metals & Ores.
Robert E. Needham 56 Vice President of Engineering and Product
Development for AIM Group and its
subsidiaries. Mr. Needham has worked for the
Company and its subsidiaries in various
capacities since January 1993. Mr. Needham
received his Masters Degree in Geology in 1970
from the University of Georgia, and his
Masters Degree in Mining Engineering from the
University of Nevada, Makay School of Mines in
1973. Mr. Needham brings to AIM Group over 25
years experience in the areas of project
17
<PAGE>
engineering, evaluation and development of
minerals related projects.
Mr. Needham's past background involved the
design and construction, along with project
management, of multi-hundred million dollar
mineral projects in South America. His past
employers include Western Mining, BP Minerals
(British Petroleum), Rio Tinto Zinc, Brascan
and Citicorp.
</TABLE>
Mr. Paul Arena, former Vice President Business Development, resigned effective
August 15, 1996. He was reappointed Chief Executive Officer and President by
the current Board of Directors effective March 27, 1997. Ms. Jenni Yachelson
was not reappointed by the Board to serve as Assistant Secretary. On March 27,
1997, D. Michael Hartley was removed as Chairman and Chief Executive Officer.
On that same day, John W. Johnston was removed as a Director, and Iain J.
Richmond was terminated as President. On April 1 1997, Shawn P. Durand was
terminated from his positions with the Company.
There is no family relationship between any of the Executive Officers.
18
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS OF AIM GROUP
The following table sets forth information for the fiscal year ended December
31, 1996 concerning the compensation paid or awarded to Executive Officers of
AIM Group. No long term compensation was paid nor is payable to any of the
executive officers or directors.
<TABLE>
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
---------------------------------- ------------------------------------------------
Awards Payouts
------------------------ ---------------------
Securities
Other Under-
Annual Restricted lying All Other
Compen- Stock Options/ LTIP Compen-
Name and Year Salary Bonus sation Award(s) SARs Payouts sation
Principal Position ($) ($) ($) (S) (#) ($) ($)
(b) (c) (d) (e) (f) (g) (h) (i)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
D. Michael Hartley* 1996 $10,560 $0 $0 None N/A None None
Chairman & CEO 1995 $6,350 $0 $0 None N/A None None
Iain J. Richmond** 1996 $82,025 $0 $0 None N/A None None
President 1995 $57,400 $4,725 $0 None N/A None None
Paul R. Arena+ 1996 $96,000 $0 $0 None N/A None None
Vice President - 1995 $81,000 $9,150 $0 None N/A None None
Business Development
John W. Johnston 1996 $80,000 $0 $0 None N/A None None
Vice President - 1995 $77,999 $2,918 $0 None N/A None None
Marketing
Shawn P. Durand
Vice President - 1996 $75,700 $0 $0 None N/A None None
Administration,
Corporate Secretary & 1995 $69,000 $5,337 $0 None N/A None None
Treasurer
Jenni Yachelson# 1996 $37,574 $0 $0 None N/A None None
Asst. Corp. Secretary 1995 $34,269 $3,050 $0 None N/A None None
------------------------------------------------------------------------------------------------------------------------
<FN>
* Pursuant to such agreement, AIM Group paid Mr. Hartley $400 per day for
the time devoted to the business of the Company and its committees.
** Includes compensation paid under a former consulting arrangement at $400
per day.
+ Mr. Arena resigned effective August 15,1996, and was elected Director and
reappointed Officer on March 27, 1997.
# Ms. Yachelson was Asst. Secretary to July 22, 1996.
</FN>
</TABLE>
19
<PAGE>
ITEM 11. SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of March 28, 1997
regarding each person known by AIM Group to own beneficially more than 5% of
the AIM Group Common Stock outstanding and all Officers and Directors of AIM
Group as a group.
The share holdings as of March 28, 1997 of the Directors of AIM Group, and the
named executive officers are set forth below under "Officers & Directors of
AIM Group". Except as indicated in the footnotes to the table, all of such
shares of AIM Group Common Stock are owned with sole voting and investment
power.
<TABLE>
<CAPTION>
Name Shares of AIM Percent
Group Common Stock of Class
Beneficially Owned
-------------------------------- ------------------------ ---------------
<S> <C> <C>
Paul R. Arena (3)
5910 NW 63rd. Place 779,575(2) 18.59%*
Parkland, Florida, 33067 565,289 14.20%**
-------------------------------- ------------------------ ---------------
Loeb Investors Co. 118
61, Broadway, Suite 2450 245,542 6.17%**
New York, NY 10006
-------------------------------- ------------------------ ---------------
Berol Family Trust
c/o Trainer Wortham & Co. 297,000 7.46%**
845 Third Ave., 6th. Fl.
New York, NY, 10022
-------------------------------- ------------------------ ---------------
Dr. Audrey L. Braswell, Jr.
36453 Woodbriar Drive 296,422 7.44%**
Yucaipa, California 92399
-------------------------------- ------------------------ ---------------
Dr. James E. Ehrlich
299 Jackson Street 275,656 6.92%**
Denver, Colorado 80206
-------------------------------- ------------------------ ---------------
Bernard R. Kossar
3100 S. Ocean Blvd., PH #705N 453,571(1)(2) 10.23%*
Palm Beach, FL 33480
-------------------------------- ------------------------ ---------------
Joseph L. Ranzini
209 E. Portage Ave. 214,286(2) 5.11%*
Sault Ste. Marie, MI 49783
-------------------------------- ------------------------ ---------------
Shawn P. Durand
1584 NE 32nd St. 256,865(2) 6.06*
Oakland Park, FL 33334
-------------------------------- ------------------------ ---------------
<FN>
* Percentage calculation assumes the conversion of promissory notes by the
individual.
** Percentage calculation without conversion of promissory notes.
</FN>
</TABLE>
20
<PAGE>
Officers and Directors of AIM Group
<TABLE>
<CAPTION>
Name Shares of AIM Percent
Group Common Stock of Class
Beneficially Owned
-------------------------------- ------------------------ ---------------
<S> <C> <C>
Paul R. Arena (3)
5910 NW 63rd. Place 779,575(2) 18.59%*
Parkland, Florida, 33067 565,289 14.2%**
-------------------------------- ------------------------ ---------------
James L. Austin (4)
9 Green Acre Lane 45,836 +%*
Westport, CT 06880
-------------------------------- ------------------------ ---------------
Dr. Audrey L. Braswell, Jr.
36453 Woodbriar Drive 296,422 5.41%*
Yucaipa, California 92399
-------------------------------- ------------------------ ---------------
John W. Johnston
902 SW 34th. Ave. 64,374 1.17%*
Boynton Beach, FL, 33435
-------------------------------- ------------------------ ---------------
Robert E. Needham
1201 S. Hillcrest Court, #303 76,008 1.4%*
Hollywood, FL 33021
-------------------------------- ------------------------ ---------------
Ernest W. Purcell
170 Tall Trees Drive 0 +%
Barington, IL 60010
-------------------------------- ------------------------ ---------------
Joseph L. Ranzini
209 E. Portage Ave. 214,286(2) 5.11%*
Sault Ste. Marie, MI 49783
-------------------------------- ------------------------ ---------------
Leigh S. Zoloto
5241 NW 109th Lane 0 +%
Coral Springs, FL 33076
-------------------------------- ------------------------ ---------------
All Directors and Officers as a 1,476,501(2) 29.86%*
group (8 persons) 1,262,215 31.71%**
-------------------------------- ------------------------ ---------------
<FN>
* Percentage calculation assumes the conversion of promissory notes by the
individual.
** Percentage calculation without conversion of promissory notes.
+ Percentage less than one (1.0%) percent
(1) Includes 25,000 incentive options
(2) Includes shares entitled to be received through the exercise of
conversion rights. Such shares are deemed to be owned and outstanding by
such person individually, and by all Directors and officers as a group,
for purposes of calculating the number of shares owned and the percentage
of class for each such named person and the group, but are not deemed to
be outstanding for purposes of such calculations for any other named
person.
(3) Director to July 10, 1996; Officer to August 15, 1996; elected Director
and reappointed Officer March 27, 1997.
(4) Director to July 10, 1996; and elected as Director March 27, 1997.
(5) The Company has entered into agreements with the holders of its
Convertible Promissory Notes amending the Notes to extend the maturity
date to March 31, 1998, increase the annual interest rate to 10%, and
decrease the conversion price to $ 0.70 per share. The table below shows
the shareholdings per note holder.
</FN>
</TABLE>
SHAREHOLDINGS WITH CONVERSION OF THE CONVERTIBLE NOTES AT $0.70
<TABLE>
<CAPTION>
Name Shares of AIM Percent
Group Common Stock of Class
Beneficially Owned(5)
-------------------------------- ------------------------ ---------------
<S> <C> <C>
Northern Federal Minerals, LLC 642,857 13.91%
-------------------------------- ------------------------ ---------------
Bernard R. Kossar 453,571 10.23%
-------------------------------- ------------------------ ---------------
LDD Capital, LLC 428,571 9.71%
-------------------------------- ------------------------ ---------------
</TABLE>
Advisory Board of AIM Group
The Company is in the process of reconstructing the Advisory Board.
21
<PAGE>
Exercise of Warrants and Options
During the year ended December 31, 1996, no warrants or options were
exercised.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The following transactions with the Company are identified as transactions
with related parties.
NORTHERN FEDERAL MINERALS, LLC Paul R. Arena, a Director and Officer of the
Corporation, is a principal in this Michigan limited liability corporation.
Joseph L. Ranzini, Director of the Company, is a related party of Northern
Federal Minerals, LLC. On November 13, 1995, Northern Federal Minerals, LLC
purchased $450,000 principal amount of the Company's Series A Convertible
Promissory Notes.
BERNARD R. KOSSAR Mr. Kossar, was a former Director of the Company. On
December 20, 1995, Mr. Kossar purchased $300,000 principal amount of the
Company's Series A Convertible Promissory Notes.
LDD CAPITAL, LLC Shawn P. Durand, a former officer of the Company, is a
principal in LDD Capital, LLC, a Minnesota limited liability corporation. On
February 2, 1996, LDD Capital, LLC purchased $300,000 principal amount of the
Company's Series A Convertible Promissory Notes.
The Series A Convertible Promissory Notes originally bore interest at the rate
of three and a half (3.5%) percent per annum, payable quarterly and were due
for payment on December 31, 1996. At his option, the holder could convert the
face value of the notes into common shares of the Company at a price of US
$1.10 per share for the first twelve months, and at a price of $1.35 per share
for the subsequent year. In addition the Company had the right to
automatically convert the notes into common shares upon completion of a
minimum US $1.5 million of additional equity offering at a minimum share price
of US $1.50 per share. However, the Company was unable to complete the minimum
offering of US $1.5 million and the notes have not been converted by the
holders.
The Company received approval for the issuance of these convertible notes from
the Vancouver Stock Exchange on February 19, 1996, and the transactions closed
on February 20, 1996.
The Notes, having an outstanding principal balance of $1,050,000, matured on
December 31, 1996. The cash flow from operations was not sufficient to pay off
the Notes. The Company is engaged in negotiations with the three holders of
the Notes to extend the final maturity to March 31, 1998 from December 31,
1996, increase the interest rate to 10% per annum from 3.5% per annum, and
change the conversion rate to $.70 per share from $1.10 per share. Northern
Federal Minerals, LLC and Bernard Kossar have agreed to the amended terms,
contingent upon the agreement of LDD Capital, LLC to such amended terms. The
Convertible Notes will remain unsecured by the Company's assets. This
transaction is subject to the approval of the Vancouver Stock Exchange.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a). Exhibits. The following exhibits are filed herewith or incorporated by
reference:
<TABLE>
<CAPTION>
Exhibit No. Document
<S> <C>
2 - Agreement and Plan of Merger dated as of August 3,
1994, by and among Heatshield, AIM, AIM Group, Inc.,
Merger Sub-H and L. P. ( Incorporated herein by
reference to Exhibit 2 to to the Registrant's
Registration Statement on Form S-4 ( File No.
33-82468 ).)
2(b) - Amendment No. 1 dated as of November 14, 1994, to the
Agreement and Plan of Merger dated as of August 3,
1994 by and among Heatshield, AIM, AIM Group, Inc.,
Heatshield Acquisition and Heatshield Funding Group.
( Incorporated herein by reference to Exhibit 2(b) to
the Registrant's Registration Statement on Form S-4
(FIle No. 33-82468).)
22
<PAGE>
2(c) - Amendment No. 2 dated as of November 30, 1994, to the
Agreement and Plan of Merger dated as of August 3,
1994 by and among Heatshield, AIM, AIM Group, Inc.,
Heatshield Acquisition and Heatshield Funding Group.
( Incorporated herein by reference to Exhibit 2(c) to
the Registrant's Registration Statement on Form S-4
(File No. 33-82468).)
3(a) - Certificate of Incorporation of AIM Group, Inc.
(Incorporated herein by reference to Exhibit 3(a) to
the Registrant's Registration Statement on Form S-4 (
File No. 33-82468 )
3(b) - Certificate of Amendment to Certificate of
Incorporation of AIM Group, Inc. ( Incorporated
herein by reference to Exhibit 3(b) to the
Registrant's Registration Statement on Form S-4 (
File No. 33-82468 ).)
3(c) - Certificate of Amendment to Certificate of
Incorporation of AIM Group, Inc. ( Filed herewith )
3(d) - By-Laws of AIM Group, Inc. ( Incorporated herein by
reference to Exhibit 3(c) to the Registrant's
Registration Statement on Form S-4 ( File No.
33-82468 ).)
4(a) - Form of AIM Group, Inc. Warrant Certificate (
Incorporated herein by reference to Exhibit 4(b) to
the Registrant's Registration Statement on Form S-4
(File No.3382468).)
4(b) - Form of AIM, Inc. Option Certificate. ( Incorporated
herein by reference to Exhibit 4(c) to the
Registrant's Registration Statement on Form S-4 (
File No. 33-82468 ).)
10(a) - AIM Group, Inc. 1994 Stock Option Plan. (
Incorporated herein by reference to Exhibit 4(a) to
the Registrant's Registration Statement on Form S-4
(File No. 33-82468).)
10(b) - Kaolinite Mining Lease and Agreement, dated March 1,
1984, between Eterna-Tec Corp. as lessee and New
Mexico and Arizona Land Company as Lessor. (
Incorporated herein by reference to Exhibit 10(a) to
the Registrant's Registration Statement on Form S-4
(FIle No. 33-82468).)
10(c) - Assignment Agreement, dated October 26, 1989, by and
between Eterna-Tec Corp. and AIM pursuant to which
Eterna-Tec assigned to AIM Group, Inc. the Kaolinite
Lease. (Incorporated herein by reference to Exhibit
10(b) to the Registrant's Registration Statement on
Form S-4 ( File No. 33-82468 ). )
10(d) - Lease Agreement, dated October 17, 1994, by and
between Merrick Venture Capital, Inc. and AIM Group,
Inc. ( Incorporated herein by reference to Exhibit
10(pp) to the Registrant's Registration Statement on
Form S-4. ( File No. 33-82468 ).)
10(e) - Form of Series A Convertible Promissory Note, as
issued by AIM Group, Inc. on November 13, 1995,
December 20, 1995 and February 2, 1996. ( Filed
herewith ).)
10(f) - Form of letter agreement amending Series A
Convertible Promissory Note, as entered into by AIM
Group, Inc. and each of the holders of the Series A
Convertible Promissory Notes on April 10,1997. (
Filed herewith )
21 - Subsidiaries of the Registrant
23
<PAGE>
27 - Financial Data Schedule
</TABLE>
(b). Reports on Form 8K. The Registrant did not file any Current Reports on
Form 8-K during the quarter ended December 31, 1996. Forms 8-K were
filed on February 7, February 20, and March 28, 1997.
24
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
<TABLE>
<S> <C>
AIM GROUP, INC.
----------------------
Registrant
Dated: April 10, 1997 By /s/PAUL R. ARENA
----------------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer and President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capabilities and
on the dates indicated.
Dated: April 10, 1997 By /s/PAUL R. ARENA
----------------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer, President and Director
(Principal Executive Officer)
Dated: April 10, 1997 By /s/LEIGH S. ZOLOTO
----------------------
Leigh S. Zoloto
Chief Executive Officer, Secretary, and Treasurer
(Principal Financial Officer)
Dated: April 10, 1997 By /s/JAMES L. AUSTIN
----------------------
James L. Austin
Director
Dated: April 10, 1997 By /s/A.L. BRASWELL
----------------------
A.L. Braswell
Director
Dated: April 10, 1997 By /s/E.W. PURCELL
----------------------
E.W. Purcell
Director
Dated: April 10, 1997 By /s/JOSEPH RANZINI
----------------------
Joseph Ranzini
Director
</TABLE>
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
AIM GROUP, INC. AND SUBSIDIARIES
December 31, 1996 and 1995
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
AIM Group, Inc.
We have audited the accompanying consolidated balance sheet of AIM Group, Inc.
as of December 31, 1996 and 1995 and the related consolidated statements of
operations, stockholders' equity and cash flows for the period from inception
(March 28, 1994) to December 31, 1994 and the years ended December 31, 1995
and 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AIM Group,
Inc. as of December 31, 1996 and 1995 and the results of its operations and
its cash flows for the periods from inception (March 28, 1994) to December 31,
1996 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Notes A and B to the
financial statements, the Company has incurred continuing losses from
operations, has insufficient cash flow from operations, has potentially
impaired assets and is dependent on very few customers. These items raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also discussed in Notes A and
B. The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
Plantation, Florida
March 14, 1997
F-1
<PAGE>
AIM Group and Subsidiaries
<TABLE>
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<CAPTION>
1996 1995
----------- -----------
CURRENT ASSETS
<S> <C> <C>
Cash $ 70,342 $ 260,280
Accounts receivable - trade 504,864 691,457
Accounts receivable - affiliate and other 564 9,760
Inventories 160,770 153,029
Prepaid expenses 18,529 24,576
----------- -----------
Total current assets 755,069 1,139,102
RESOURCE PROPERTY 3,995,373 3,994,868
PROPERTY, PLANT AND EQUIPMENT - Net 557,059 500,416
OTHER ASSETS 46,836 68,228
----------- -----------
$5,354,337 $5,702,614
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 281,454 $ 369,924
Receivable financing liability 324,293 475,215
Current portion of long-term debt 14,960 12,201
Notes payable - -
Accrued expenses 96,111 94,532
----------- -----------
Total current liabilities 716,818 951,872
LONG-TERM DEBT, less current portion 76,073 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; 3,980,053 shares issued
and 3,978,766 outstanding in 1996 and
4,113,465 shares issued and 3,900,053
outstanding in 1995. 39,801 41,135
Additional paid in capital 4,222,809 4,150,259
Common stock held in treasury - 1,287
shares in 1996 and 213,412 shares in 1995 (1,400) (11,575)
Common stock subscription received - 80,000 share - 82,792
Accumulated deficit (749,764) (334,101)
----------- -----------
3,511,446 3,928,510
----------- -----------
$5,354,337 $5,702,614
=========== ===========
</TABLE>
Please refer to Note C for Pro forma information.
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
AIM Group and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the period from inception (March 28, 1994) to December 31, 1996
<CAPTION>
Year ended Year ended Period ended
December 31, December 31, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
SALES $ 3,092,278 $ 2,399,493 $ -
COST OF GOODS SOLD 2,148,191 1,692,943 -
------------ ------------ ------------
GROSS PROFIT 944,087 706,550 -
EXPENSES
General and administrative 791,826 673,105 12,760
Selling and marketing 270,612 132,532 -
Write-off of investment - abandoned
project 93,396 - -
Interest 131,429 162,505 12,500
Depreciation and amortization 72,487 47,249 -
------------ ------------ ------------
1,359,750 1,015,391 25,260
------------ ------------ ------------
Loss before income taxes (415,663) (308,841) (25,260)
Income taxes - - -
------------ ------------ ------------
NET LOSS $ (415,663) $ (308,841) $ (25,260)
============ ============ ============
Net loss per share $ (0.10) $ (0.08) $ (25.26)
============ ============ ============
Weighted average shares outstanding 3,960,158 3,672,894 1,000
============ ============ ============
</TABLE>
Please refer to Note C for Pro forma information.
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
AIM Group and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the period from inception (March 28, 1994) to December 31, 1995
Additional
Common Paid-in Treasury Accumulated
Shares Stock Capital Stock Deficit Total
---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sale of 1,000 shares 1,000 $ 10 $ 90 $ 0 $ 0 $ 100
Net loss for the period from inception
to December 31, 1994 0 0 0 0 (25,260) (25,260)
---------- ---------- ----------- ---------- ---------- -----------
Balances - December 31, 1994 1,000 10 90 0 (25,260) (25,160)
Issuance of 3,898,929 shares of
common stock upon merger and
cancellation of original shares issued (1,000) (10) (90) (100)
3,898,929 38,989 4,022,185 (11,575) 0 4,049,599
Issuance of stock during December
1995 relating to the exercise of options
and warrants 214,536 2,146 128,073 0 0 130,219
Net loss for the year 0 0 0 0 (308,841) (308,841)
---------- ---------- ----------- ---------- ---------- -----------
Balances - December 31, 1995 4,113,465 41,135 4,150,258 (11,575) (334,101) 3,845,717
Issuance of 80,000 shares 80,000 800 81,992 0 0 82,792
Purchase of 1,287 shares for treasury 0 0 0 (1,400) 0 (1,400)
Cancellation of 213,412 shares of
treasury stock (213,412) (2,134) (9,441) 11,575 0 0
Net loss for the year 0 0 0 0 (415,663) (415,663)
---------- ---------- ----------- ---------- ---------- -----------
3,980,053 $ 39,801 $4,222,809 $ (1,400) $(749,764) $3,511,446
========== ========== =========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AIM Group and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the period from inception (March 28, 1994) to December 31, 1996
<CAPTION>
Year ended Year ended Period ended
December 31, December 31, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $ (415,663) $ (308,841) $ (25,260)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 72,487 47,249 -
Changes in current assets and liabilities:
Decrease (Increase) in accounts receivable 195,789 (341,714) -
(Increase) in inventories (7,741) (79,007) -
Increase (decrease) in receivable (150,922) 475,215 -
Increase (decrease) in accounts payable and
accruals (86,891) 90,693 12,879
Other 9,140 (22,892) (6,380)
------------ ------------ ------------
Net cash (used) by operations (383,801) (139,297) (18,761)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (129,130) (148,751) -
(Increases) decreases in other assets 21,392 (22,564) (440)
Additions to resource property (3,599) (15,522) -
------------ ------------ ------------
Net cash (used) by investing activities (111,337) (186,837) (440)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock - 141,894 100
Stock subscription received - 82,792
Proceeds from convertible note 300,000 750,000 -
Cash balances of merged entities - 92,759 -
Receivables from affiliates eliminated upon
merger - (241,583) -
Reductions of notes payable - (325,000) -
Long-term debt financing 21,070 84,433 -
Repayment of long-term debt (14,470) - -
Purchase of stock for treasury (1,400) - -
Loans received - net - - 250,000
Advances to affiliated company, net of
repayments - - (229,780)
------------ ------------ ------------
Net cash provided by financing activities 305,200 585,295 20,320
------------ ------------ ------------
NET INCREASE IN CASH (189,938) 259,161 1,119
Cash, beginning of period 260,280 1,119 -
------------ ------------ ------------
Cash, end of period $ 70,342 $ 260,280 $ 1,119
============ ============ ============
</TABLE>
F-5
<PAGE>
AIM Group and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
For the period from inception (March 28, 1994) to December 31, 1996
<CAPTION>
Year ended Year ended Period ended
December 31, December 31, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Interest paid $ 129,395 $ 167,851 -
============ ============ ============
Net 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, plant and equipment 398,914
Resource property 3,979,345
Other assets 45,666
Accounts payable (368,500)
Accrued expenses (77,500)
Other (2,764)
-----------
4,198,323
Add cash balances of merged companies 92,759
Less receivables from merged entities -
eliminated in merger (241,583)
-----------
$4,049,499
===========
Value attributed to common stock upon merger $4,046,074
Less cost of treasury stock - assumed in merger (11,575)
-----------
$4,034,499
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements are presented assuming the Company will continue
as a going concern which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company
has incurred losses since its inception and there is no guarantee that
the Company will generate sufficient revenues from its proposed products
and operations to generate a profit. The financial statements do not
include any adjustments that might be necessary if the Company is unable
to continue as a going concern. Also see Note B.
The financial statements are reported in (USD) in accordance with
generally accepted accounting principles under the jurisdiction of the
United States and there are no material differences with Canadian
generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements contain the accounts of the Company
and its subsidiaries, HeatShield Technologies, Inc. ("HTI"), United
Minerals Corp. of Arkansas ("UMC(AR)"), United Minerals Corp. of Arizona
("UMC(AZ)"), and HST Capital Corporation ("HST"). All subsidiaries are
wholly-owned. All significant intercompany transactions and balances have
been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash and/or cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method. Inventories at December 31, 1996
and 1995 consist of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Finished Goods $ 28,513 $ 49,282
Raw materials 76,421 48,761
Klannerite(R) Ore 48,645 48,645
Spare parts and supplies 7,191 6,341
-------- --------
$160,770 $153,029
======== ========
</TABLE>
F-7
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE A - CONTINUED
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost for financial reporting
purposes and are depreciated utilizing the straight-line method over
their estimated economic lives. Significant additions and betterments are
capitalized. Expenditures for maintenance, repairs and minor renewals are
charged to operations as incurred. The lives utilized for depreciation
are summarized as follows:
<TABLE>
<CAPTION>
Years
<S> <C>
Building 39
Plant equipment 10
Engineering and start up 5
Laboratory equipment 7
Furniture and office equipment 5-7
</TABLE>
TRADEMARKS AND PATENTS
The Company has received the trademark registration for the product name
Klannerite(R) in 1993. The Company was granted a patent on the Photon
Diffusive Coating November 6, 1996. Trademarks and patents will be
amortized over 10 years. The Company's trademarks are: AIM Group(R), the
Corporate entity, Uni-KoteR, the UMC(AR) marketing label; and
Klannerite(R), the rock from UMC (AZ)'s Viva Luz Mine.
DEFERRED START-UP
Deferred start-up costs associated with the surface modification business
in Arkansas are being amortized over sixty months.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share are based on the weighted average shares
outstanding during the year. The preferred stock, stock options and
warrants have not been factored into the computation of loss per share
because their effect is anti-dilutive.
MAJOR CUSTOMERS
The Company sold products from its surface modifications facility
representing more the 10% of its revenues for the years ended December
31, 1996 and 1995, to Alpha Gary, Inc. (83%) and (93%) respectively.
F-8
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE A - CONTINUED
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period
NOTE B - GOING CONCERN
As shown in the accompanying financial statements, the Company has recurring
losses from operations. In addition, the Company has not been successful in
the development of its resource property. Consequently, Management believes
that the property may be impaired but is not able to determine the level of
impairment, if any, at this time. Consequently, Management has determined that
a reserve is not appropriate until such time as more information is available
concerning the economic viability of the mineral deposit. Due to the lack of
cash flow the Company was unable to continue to invest in and exploit the
property and there is uncertainty in the potential market for the deposit.
There is no assurance that the resource property will be fully recoverable at
these levels. Although the Company's surface modification business in Arkansas
has been profitable, it is reliant on very few customers. Unless the Company
is successful in diversifying and expanding its customer base, the prospects
for this line of business remains uncertain. These factors raise substantial
doubt about the Company's ability to continue as a going concern.
Management is seeking alternative sources of private placement equity
financing that would allow the marketing and diversification effort for the
surface modification business as well as the continued research and
development effort for the resource property. There can be no assurance that
the Company will be successful in its efforts to obtain additional financing.
If the Company is not successful in its efforts, it may be necessary to
undertake such other actions as may be appropriate to preserve asset value.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE C - MERGER
On March 23, 1995, the shareholders of the Company (AIM Group) and Advanced
Industrial Minerals, Inc. (AIM), HeatShield Technologies (HTI) and AIM Funding
Group, L.P. (HFG), approved the amalgamation of the entities into AIM Group
effective March 31, 1995.
Pursuant to shareholder approvals and the merger agreement, the Company
completed the purchase of the assets and liabilities of AIM, and the
shareholders of AIM received .426825 shares of AIM Group in exchange for each
common share of AIM held.
F-9
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE C - CONTINUED
HTI was merged with a subsidiary of the Company and the HTI shareholders
received 0.919632 shares of AIM Group in exchange for each common share of HTI
held. The conversion ratio was calculated by giving consideration to the
ownership of HST Capital Corp., a wholly-owned subsidiary of HTI, of 500,000
shares of AIM which were held in escrow. The conversion ratio before giving
consideration to such ownership was 0.808902.
HFG distributed the preferred shares of HTI owned by it to its partners who
then exchanged each preferred share for 1,000 shares of AIM Group.
After the consummation of the merger transactions, AIM Group became the parent
company with 4 operating subsidiaries; HTI, UMC(AR), UMC(AZ) and HST Capital.
As a result of these mergers the former shareholders of the Company and HTI
and the partners of HFG all became shareholders of AIM Group.
At the Corporation's 1996 Annual Meeting of the Shareholders it was approved
to authorize the directors to amend Article Four of the Corporation's Articles
of Incorporation to increase the maximum number of authorized share of Capital
Stock of AIM Group from 7,000,000 to 13,000,000, including an increase in the
number of Common Stock authorized for issuance from 6,000,000 to 12,000,000
for acquisitions, financing, public offerings and or other appropriate
corporate purposes.
AIM Group has 12,000,000 common shares authorized and the merger resulted in
the issuance of 3,898,930 shares of AIM Group stock in exchange for all the
outstanding common stock of AIM and HTI and 1,000 shares of HTI preferred
stock held by HFG. AIM Group received approval on January 3, 1995 for
registration of its shares in the U. S. under the Securities Act of 1933.
The following are the condensed pro forma statements of operations of AIM
Group and Subsidiaries assuming the merger had taken place on January 1, 1994;
the pro forma results of operations for 1995 reflect a full twelve months of
operations.
F-10
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE C - CONTINUED
<TABLE>
STATEMENTS OF OPERATIONS:
<CAPTION>
Year ended December 31,
1995 1994
---- ----
(Pro Forma) (Pro Forma)
----------- -----------
<S> <C> <C>
SALES $2,820,958 $ 406,378
COST OF GOODS SOLD 1,975,680 232,279
----------- -----------
GROSS PROFIT 845,278 174,099
EXPENSES
General and administrative $ 933,871 $ 632,344
Interest 171,785 27,778
Depreciation and amortization 60,140 41,142
----------- -----------
1,165,796 701,264
----------- -----------
Loss before income taxes (320,518) (527,165)
Income taxes - -
----------- -----------
NET LOSS $ (320,518) $ (527,165)
=========== ===========
Net loss per share $ (0.09) $ (0.15)
=========== ===========
Weighted average shares outstanding 3,672,894 3,472,103
=========== ===========
</TABLE>
NOTE D - OPERATIONS/NATURE OF BUSINESS
AIM Group is the parent company that provides centralized management, finance,
long range planning, accounting and administration to three principal
operating entities. These operations are a surface modification facility, a
mining lease, and the manufacture and marketing of specialty high temperature
coatings. The Company has discontinued manufacture of the coatings and did not
actively market these coatings during 1996.
AIM Group shares are listed on the Vancouver Stock Exchange. The Company's
common stock is currently quoted under the symbol AGDU.V.
F-11
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE D - CONTINUED
UNITED MINERALS ARKANSAS (UMC(AR)) SURFACE MODIFICATION PLANT
UMC(AR) is the Company's core business and has completed its second full
year of operations as of December 31, 1996. It operates a surface
modification facility, both as principal and as a toll processor, for
industrial minerals used as fillers in the rubber and plastics
industries. The plant commenced operations in April, 1994. Since
inception UMC(AR) has carried out leasehold improvements and the
engineering, procurement, and construction of machinery and equipment.
UMC(AR) purchased the land and building in 1995.
The UMC(AR) Malvern facility has been designed to treat industrial
fillers such as silica, clay, mica, alumina trihydrate, wollastonite,
magnesium hydroxide and microspheres with silanes. The treated products
are used in the plastics and elastomer industries. Silanes or
"organosilicon chemicals" were recognized as superior coupling agents
approximately 40 years ago.
Typical customers of UMC(AR) are compounders in the plastics and
elastomer industries seeking to improve the physical properties and the
performance of their products. Through the application of small
quantities of organosilicon chemicals, UMC(AR) can, through surface
modification, appreciably improve the physical characteristics of the
filler resin composites. Improvements in composite properties that are
desired by customers are: (i) lower oil absorption, (ii) less moisture
ingress or accumulation, (iii) increased tensile strength, and (iv)
better mixing viscosity. Composites containing surface modified fillers
are used in the electronics, communications, transportation, construction
materials, and appliance industries.
The use of surface modified fillers may require that customers change
their formula or production method in order to achieve maximum benefit
from the modified filler materials. As such, there may be a prolonged
interval of business development during which the customer undertakes
testing and evaluation prior to a change in materials source. UMC(AR) has
successfully supplied samples to a number of customers and sample
evaluation is ongoing. Additionally, UMC(AR) has successfully carried out
surface treatment of test quantities of opacifying materials.
UMC(AR) operated one shift per day during 1996 and treated approximately
2,600 tons of commercial products at the Malvern plant. Management
estimates that the plant's capacity is approximately 7,000 tons per year.
The plant currently has two mixing and packaging lines, and effective
doubling of capacity providing for treatment of a diverse product mix, is
under consideration. Approximately seven full time employees currently
work at the plant.
F-12
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE D - CONTINUED
HEATSHIELD TECHNOLOGIES, INC. (HTI)
HTI is in the development stage with a limited history of operations.
HTI carried our reserve analysis, surface mining, and processing of a
silica/kaolinite rock, called "Klannerite(R)", at a mining property
locally referred to as the "Viva Luz Mine" located in Mohave County,
Arizona. Exploitation of the Viva Luz Mine was formerly conducted on a
joint venture basis with AIM. No mining of Klannerite(R) has been carried
out since 1993.
Initial indications were that Klannerite(R) would have application as an
ingredient in PDC coating. Marketing of the PDC coating was initiated in
April, 1994. Development work concentrated on securing test applications
at steel mills, aluminum, glass, and other industries operating furnaces
and kilns where the characteristics of PDC, as exhibited on a laboratory
scale, could be exploited. It is now apparent to management that the
features of PDC are not replicable in full scale industrial applications.
It was therefore decided to try to enter the coatings market with a
product exhibiting higher resistance to chemical (alkali) attack, as with
the Omega line of coatings.
In December of 1995, HTI signed a technology License Agreement with Omega
Coating Pty., Limited of Sydney, Australia (OCPL). The agreement provided
HTI exclusive North American rights to sell and distribute furnace
coatings known as Omega 1 and Omega 2. The Omega 1 coating contains a
significant portion of Klannerite(R) which was supplied to OCPL by HTI.
HTI also signed a Technology Purchase Option Agreement with OCPL. This
agreement provided HTI the exclusive rights to purchase all worldwide
rights to the Omega line of coatings licensed by OCPL from Refract-a-Gard
Pty., Limited, also of Sydney, Australia, and certain assets of OCPL
pertinent to the Omega coatings and their manufacture.
After limited test marketing of these products, the Company abandoned its
exclusive license and has written off $93,396 of its investment in
license and royalty payments. Due to a current lack of available research
and development funds, the Company is no longer pursuing the options with
respect to Omega coatings. Although the licensing agreements have been
canceled, the Company maintains a dialogue with OCPL should the need
arise to renew a working relationship. Both of these products continue to
be evaluated by potential customers.
F-13
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE D - CONTINUED
HTI is also working to develop Klannerite(R) for use as an industrial
filler. Initial tests were carried out to develop uses for latex based
paints, oil based paints, and plastics. Test results for oil based paints
and plastics have been average to substandard. Test results for latex
based paints have been better, with good thixotropy, flatting, and scrub
resistance compared to commonly used fillers. Although development funds
are limited, further testing and marketing efforts are underway to
develop local markets in the Phoenix - Las Vegas - Southern California
area with small independent paint manufacturers. Additionally, new uses
are under investigation, including Klannerite(R) as a pozzolan component
in grouts and white cements, as a microporous light weight insulating low
temperature aggregate, and as a lightweight roofing aggregate for polymer
roofing systems. To date there have been no commercial sales to these
markets.
UNITED MINERALS CORPORATION ARIZONA - VIVA LUZ MINE
UMC(AZ), a wholly owned subsidiary, holds a mining lease (Lease) which
expires March, 2004 with New Mexico and Arizona Land Company, the owner
of the mining rights. The Lease is subject to a further term in
perpetuity provided the property is in operation and is generating
minimum royalties.
The Lease permits the exploration of the property and removal of the
mineral over the remaining term. The Lease calls for the payment of
production royalty of 5% of the gross consideration obtained for the
mineral less transportation costs, subject to minimum royalty payment of
$5,000 per year.
In July, 1992, the Atchison Topeka and Santa Fe Railway Company denied
public access across its tracks, preventing the company access to the
mine, unless the company posts a flagman and spotter at the crossing
site. A substantial quantity of processed KlanneriteR, sufficient for
foreseeable sales, is available from the Company's inventory.
The use of Klannerite(R) in the manufacture of refractories for the
aluminum industry was tested during the year without success.
The Company's objective in selling Klannerite(R) as a filler and for
other uses is considered by management to be dependent on the ability to
develop initial markets in the Southwest. The testing and marketing for
these applications will be performed this year.
NOTE E - ACCOUNTS RECEIVABLE
As of December 31, 1996 the Corporation had net accounts receivable from trade
sales of $170,810 compared to $216,242 as at December 31, 1995. This results
from outstanding accounts receivable in the amount of $495,103 as shown in the
current asset section less $324,293 in receivables factored as stated in the
liability section.
F-14
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE F - PROPERTY AND EQUIPMENT
Property plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Plant $108,000 $108,000
Building improvements 98,442 63,165
Plant and lab equipment 306,781 282,084
Engineering costs 66,412 42,423
Vehicles 37,044 14,318
Furniture and Equipment 93,920 78,591
--------- ---------
710,599 588,581
Less accumulated depreciation (163,540) (98,165)
--------- ---------
547,059 $490,416
Land 10,000 10,000
--------- ---------
$557,059 $500,416
========= =========
</TABLE>
NOTE G - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Patents and Trademarks $ 28,392 $ 24,249
Unamortized portion of deferred start up costs 15,197 21,828
Deferred costs associated with proposed
new venture - 16,006
Deposits and other 3,247 6,145
---------- ----------
$ 46,836 $ 68,228
========== ==========
</TABLE>
NOTE H - RESOURCE PROPERTY
The Company's resource property, located in Arizona, consists of mineral
leases and deposits. This property was valued based on appraisal as part of
the merger described in Note C. The following describes the property and
related reserves of rock containing crystobalite, quartz and kaolinite.
F-15
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE H - CONTINUED
MINERAL LEASE - VIVA LUZ DEPOSIT
The Viva Luz Mine, located in Mohave County in Arizona, is a
crystobalite, quartz and kaolinite deposit with proven drilled reserves.
The deposit has been classified into three different grades. The whitest
grade is denoted as K1, the off white grade is denoted as K2 and the
third, lowest grade as K3.
The following is a table showing the grade and applicable estimated tons
of the material deposit: Grade Tons K1 (proven and probable) 340,000 K2
and K3 1,350,000 Total Tons 1,690,000
The average estimated process recovery of the material is 82%, and the
recovery loss has not been reflected in the tonnage shown above.
The carrying value of the resource property including the prepaid
royalties is as follows:
<TABLE>
<S> <C>
Resource property purchase price $3,935,798
Pre-paid royalties 59,575
-----------
Resource property $3,995,373
-----------
</TABLE>
OTHER MINERAL PROPERTY
The company has discontinued its annual payment to maintain 14 small
unpatented mining claims. The Company is evaluating the benefits of
restaking three claims adjacent to its resource property.
MINERAL MINED, PRODUCED AND SOLD IN 1992, 1993, 1994, 1995 AND 1996
In 1992 the 222.5 tons of K1 processed during the year 1992 was
considered to be a trial production run. 7.5 tons of the 222.5 tons
produced was distributed as samples and 2.5 tons were sold. During 1996 a
nominal number of samples aggregating approximately 250 pounds were sent
to prospective customers with no positive response. The remaining 212.5
tons are being held in inventory.
F-16
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE H - CONTINUED
No sales of Klannerite(R) have been reported for 1994, 1995 or 1996.
NOTE I - LONG-TERM DEBT
<TABLE>
The following is a summary of long-term debt at December 31, 1996 and 1995:
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Mortgage payable, secured by Arkansas
manufacturing facility, payable in monthly
installments of approximately $900 including
interest at 10.25%. $ 60,309 $ 66,956
Equipment loans payable, secured by vehicle
and equipment, payable in monthly installments
of approximately $1,061 including interest
at 10.2 % to 14.2%. 30,724 17,476
---------- ----------
91,033 84,432
Less amounts due within one year 14,960 12,201
---------- ----------
$ 76,073 $ 72,232
========== ==========
</TABLE>
<TABLE>
Maturities of long-term debt over the next five years are as follows:
<CAPTION>
Year ended
December 31,
-----------------
<S> <C>
1997 $ 14,960
1998 59,799
1999 7,678
2000 8,596
---------
$ 91,033
=========
</TABLE>
The Company also has a factoring arrangement for its receivables arising from
its sale of products from its Arkansas toll facility. The factor has a
security interest in all factored accounts receivable. The total interest and
factoring costs for 1996 and 1995 were $85,741 and $111,785 respectively.
F-17
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE J - CONVERTIBLE NOTES PAYABLE
On November 15, 1995 the Company announced a private placement in the form of
Convertible Promissory Notes, having an aggregate face value of $1,050,000,
with three related party placees (see "Related Parties") and subject to
approval by the Vancouver Stock Exchange. The notes carry a three year
conversion feature at the option of the holders to convert the face value of
the notes into common shares of the Company at a price of $1.10 if converted
on or before December 31, 1996; $1.35 on or before December 31, 1997; $1.60 on
or before December 31, 1998. In addition, the Company has the right to convert
the notes into common shares upon completion of an offering of 1,500,000
common shares at a minimum price of $1.50 per share.
As of December 31, 1995 the Company received $1,050,000 in subscriptions and
the placees had advanced $750,000 in proceeds towards the private placement.
On February 16, 1996 the Company received the approval from the Vancouver
Stock Exchange and on February 20, 1996 closed the private placement with all
proceeds received. The Stockholders approved the private placement at the
annual meeting of shareholders held July 10, 1996.
At a meeting of the Board of Directors held on July 23, 1996 the Directors of
the Corporation passed a resolution confirming that the Corporation would not
issue any debt which ranks senior in priority to the Convertible Notes without
the consent of the Convertible Note holders.
The Notes, having an outstanding principal balance of $1,050,000 matured on
December 31, 1996. The cash flow from operations was not sufficient to pay off
the Notes. The Corporation is negotiating with the holders of the Notes, each
of which are related parties, to amend the Notes to extend the final maturity
to March 31, 1998, to increase the interest rate to 10% per annum and to
change the conversion rate to $.70 per share. The convertible notes will
remain unsecured to the Company's assets.
NOTE K - STOCK OPTIONS AND WARRANTS
The Company had various non-qualified incentive stock options and warrants
that had been issued to employees, directors and investors. Most of these
options and warrants were issued prior to the merger and were converted to
Company options and warrants as a result of the merger. The following is a
summary of activity during 1996 and 1995:
F-18
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE K - CONTINUED
<TABLE>
<CAPTION>
Number of Price Per
Shares Share
----------- -----------
<S> <C> <C>
INCENTIVE STOCK OPTIONS:
Balances outstanding on merger date:
Expiring:
December 31, 1995 154,037 $.54 - $1.63
April 14, 1996 110,190 $1.34
May 8, 1998 7,909 $.54
----------
Balance - March 31, 1995 272,136
Exercised for the period ended
December 31, 1995 (91,962) $.54
Issued July 10, 1996 25,000 $1.15
Expired on December 31, 1996* (62,075) $1.63
Expired on December 31, 1996* (110,190) $1.34
Canceled December 31, 1996 (7,909) $.54
----------
Balance - December 31, 1996 -
==========
Comprised of options expiring:
December 31, 1997 25,000 $1.15
==========
WARRANTS:
Balances outstanding on merger date:
Expiring
December 31, 1995 409,575 $.01 - $2.00
Exercised for the period ended
December 31, 1995 (122,573) $.01 - $1.22
Expired on December 31, 1996*
(see note below) (287,002) $1.50 - $2.00
----------
Balance outstanding at December 31, 1996 -
==========
<FN>
On July 10, 1996 the Company issued to Bernard Kossar, a newly appointed
director, 25,000 of incentive stock options exercisable at $1.15 through
December 31, 1997. In addition, the Company canceled 7,909 options granted to
a former employee. There were no options or warrants exercised during 1996 and
all options and warrants extended December 31, 1996 expired.
* The Company's Board of Directors approved an extension of the expiration
dates for 445,586 options and warrants set to expire on December 31, 1995 and
April 14, 1996 to December 31, 1996. On May 17, 1996 the Vancouver Stock
Exchange approved the extension of these options and warrants subject to
Shareholder approval. The extension of the options and warrants were approved
by the Shareholders at the Annual Meeting of the Shareholders held on July 10,
1996.
</FN>
</TABLE>
F-19
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE L - LEASE COMMITMENTS
The Company's corporate headquarters are leased pursuant to an operating lease
expiring October 31, 1998. Currently, there is a contingent contract to sublet
some space that would reduce the lease obligations by approximately $18,000
per year. Future lease payments at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year ended
December 31, Amount
-----------------
<S> <C>
1997 $ 42,549
1998 36,632
---------
$ 79,181
=========
</TABLE>
NOTE M - WRITE OFF INVESTMENT - ABANDON PROJECT
During the year due to lack of funding and slow response from the market place
the Company discontinued its exclusive license and royalty agreement with
Omega Coatings Pty. Limited of Sydney, Australia. The licensing rights for the
Omega products were acquired in late 1995. The Company wrote off $93,396
invested in the Omega project.
NOTE N - RELATED PARTY TRANSACTIONS
The following transactions with the Corporation are identified as transactions
with related parties.
PRIVATE PLACEMENT OF CONVERTIBLE 3 1/2% PROMISSORY NOTES
The Company announced on November 15, 1995 under a prospectus exemption a
private placement in the form of 3 year convertible 3 1/2% Promissory
Notes having a face value of $1,050,000 subject to the approval of the
Vancouver Stock Exchange. (See Note J). The following related individuals
and affiliated concerns have subscribed to the private placement as
follows:
NORTHERN FEDERAL MINERALS LLC Paul R. Arena, an officer and director
of the Corporation, is a principal in this Michigan limited liability
corporation. Joseph L. Ranizini, a director of the Corporation, is a
related party to Northern Federal Minerals, LLC. On November 13, 1995
Northern Federal Minerals LLC subscribed for $450,000 of the private
placement of $1,050,000 convertible promissory notes issued by the
Corporation.
BERNARD R. KOSSAR Mr. Kossar, on December 20, 1995, purchased $300,000
of the private placement of $1,050,000 convertible promissory notes
issued by the Corporation.
LDD CAPITAL LLC Shawn P. Durand, a former officer of the Corporation,
is a principal in LDD Capital LLC, a Minnesota limited liability
corporation, which corporation on February 2, 1996 purchased $300,000 of
the private placement of $1,050,000 convertible promissory notes issued
by the Corporation.
F-20
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods from Inception (March 28, 1994) to December 31, 1996
NOTE N - CONTINUED
The Corporation received approval for the issuance of these convertible
notes from the Vancouver Stock Exchange on February 19, 1996 and the
transactions closed on February 20, 1996.
CONSULTING FEES
During the period the Corporation paid the following fees for services to
directors and advisors and other insiders not considered employees.
D. M. Hartley a director, elected Chairman and Chief Executive Officer
(CEO) of the Corporation in August, 1995 was compensated on a per diem
basis of $400 per day. Mr. Hartley was paid $6,350 in connection with
services rendered as the CEO during 1995 and $10,560 in 1996; Iain
Richmond has served as President of the Corporation since April, 1995 and
was paid $400 per day on a per diem basis. Mr. Richmond was paid $62,125
for services rendered during 1995 and $66,000 in 1996; Michael McManus a
director was paid consulting fees in the amount of $12,500 during 1995;
Mr. Wright an advisory board member was paid consulting fees in the
amount of $25,000 during 1995. No compensation was paid to either Mr.
McManus or Mr. Wright for 1996.
EXERCISE OF INCENTIVE OPTIONS AND WARRANTS
No incentive options and warrants were exercised during 1996. During 1995
the following incentive options and warrants were exercised.
In September Paul R. Arena, a director and officer exercised 60,242
incentive stock options at a price of $.54 each; Shawn P. Durand, an
officer exercised 17,926 incentive stock options at a price of $.54 each;
Jenni Yachelson, an officer exercised 13,794 incentive stock options at a
price of $.54 each; D. M. Hartley, Chairman and CEO exercised 552
warrants at a price of $.54 each; Joseph Wright, an advisory board member
exercised 32,000 warrants at a price of $1.22 each; Michael McManus a
director exercised 10,245 warrants at a price of $1.22 each; E. Avery
Williams, an advisory board member exercised 920 warrants at a price of
$.54 each; Lewis Foy an advisory board member exercised 184 warrants at a
price of $.54 each.
NOTE O - INCOME TAXES - NET OPERATING LOSSES
The Companies have net operating loss carryforwards available to offset future
taxable income approximating $2,317,600 expiring through the year 2010. Due to
the merger described in Note B the net operating losses are subject to certain
limitations, computed on an annual basis.
F-21
EXHIBIT 3(c)
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
AIM GROUP, INC.
AIM GROUP, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), hereby certifies
that the amendment set forth below to the Corporation's Certificate of
Incorporation was duly adopted in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware:
FIRST: ARTICLE FOURTH is hereby amended by deleting the first paragraph
thereof and substituting therefor the following new first paragraph:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 1,000,000 shares of
Preferred Stock, $1.00 par value (the "Preferred Stock"), and
12,000,000 shares of Common Stock, $.01 par value (the "Common
Stock"). The powers, designations, preferences and relative,
participating, optional or other special rights, qualifications,
limitations or restrictions of the Preferred Stock shall be as
follows:"
All of the rest and remainder of the Corporation's Certificate of
Incorporation shall remain in full force and effect.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed by an officer thereunto duly authorized as of this
10th day of April, 1997.
AIM GROUP, INC.
By:_________________________
Leigh Zoloto, Secretary
Convertible Note EXHIBIT 10(e)
THIS NOTE HAS NOT BEEN, AND THE COMMON STOCK TO BE ISSUED UPON CONVERSION
HEREOF WILL NOT HAVE BEEN, REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR QUALIFIED UNDER STATE SECURITIES LAWS AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS, OR (B) THE COMPANY HAS BEEN
FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY TO THE EFFECT
THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY REQUIRED FOR SUCH TRANSFER.
SERIES A 3.5%
CONVERTIBLE NOTE
$ November 13, 1995
--------- -----------------
AIM Group, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay on or prior to December 31, 1996 (the
"Maturity Date") to _____________________ "Holder" or order, the principal
amount of _____________________ Dollars ($__________). The Company also
promises to pay to the Holder interest on the outstanding principal amount
hereof quarterly, in arrears, at the rate of 3.5% per annum. Any past due
payment of principal or interest shall be payable on demand with interest from
the due date to the date of payment at the rate of 10% per annum. The payments
of principal and interest hereunder shall be made in coin or currency of the
United States of America as at the time of payment shall be legal tender
therein for the payment of public and private debts. The Holder shall have the
right, by written notice to the Company given at least 10 business days prior
to the then effective Maturity Date, to extend the Maturity Date hereof for
any period of up to two years.
This Note shall be subject to the following additional terms and
conditions:
1. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Company represents and
warrants to and covenants with the Holder as follows:
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company has
all the
<PAGE>
requisite power and authority to carry on its business as now conducted, and
the Company is duly qualified to do business and in good standing in each
jurisdiction wherein the failure so to qualify would have a material adverse
effect on its business, properties or ability to perform its obligations
hereunder. The Company has all requisite power and authority to issue and to
carry out the provisions of this Note.
(b) The issuance, execution and delivery of this Note and the
execution have been duly authorized by all necessary corporate action, and
this Note constitutes a valid and legally binding instrument of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws
affecting generally the enforceability of creditors' rights and by limitations
on the availability of equitable remedies.
(c) Neither the execution or delivery of this Note by the Company,
nor compliance by the Company with the provisions hereof, violates any
provision of any applicable law or of the certificate of incorporation or
by-laws of the Company, or conflicts with or will result in any breach of the
terms of or constitute a default under or result in the creation of any lien
pursuant to the terms of any agreement or instrument to which the Company is a
party or by which it or any of its properties is bound.
(d) There are no actions, suits or proceedings pending or, to the
best knowledge of the Company, threatened against or affecting the Company in
any court or before or by any governmental instrumentality which, in the
reasonable opinion of the Company, involve the possibility of any judgment or
liability not fully covered by insurance or which may result in any material
adverse change in the business, assets, condition (financial or otherwise) or
results of operations of the Company, and the Company is not in default with
respect to any order, writ, injunction, decree or demand of any court or any
governmental instrumentality.
(e) The Company is not obligated under any contract or agreement or
subject to any other restriction which materially and adversely affects the
business, assets or condition (financial or otherwise) of the Company.
(f) So long as the Note remains outstanding, the following
provisions shall apply:
(i) The Company agrees to maintain its accounting records and
to present the financial information set forth therein in accordance with
generally
2
<PAGE>
accepted accounting principles, consistently applied.
(ii) The Company shall punctually pay or cause to be paid the
principal of this Note and interest thereon according to the terms hereof.
(iii) The Company shall pay and discharge promptly, or cause to
be paid and discharged promptly, all taxes, assessments and governmental
charges or levies imposed upon its income or upon any of its property, real,
personal or mixed, or any part thereof, as well as all claims of any kind
(including claims for labor, materials and supplies which, if unpaid, might by
law become a lien or charge upon its property); provided, however, that the
Company shall not be required to pay any such tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall
have set aside on its books reserves (segregated to the extent required by
sound accounting practice) adequate with respect thereto, and provided further
that the Company shall not be required to pay any such taxes assessments or
charges, and shall not be required to observe or conform to any requirement of
any governmental authority if, in the judgment of the Board of Directors or
the Company, such payment or such observance, as applicable, shall not be in
the best interest of the Company in the conduct of its business.
(iv) The Company shall, except as otherwise specifically
permitted in this Note, do or cause to be done all things necessary or
appropriate to preserve and keep in full force and effect its existence as a
corporation under the laws of the State of Delaware, and all of its rights and
franchises; provided, however, that the Company may, in accordance with
applicable law, liquidate, dissolve, merge into, consolidate with or otherwise
enter into any other reorganization transactions, and any such transactions
shall not be deemed to constitute or result in an Event of Default (as
hereinafter defined) hereunder, and provided, further that nothing herein
shall be construed to prevent the Company from ceasing or omitting to exercise
any rights, powers, privileges and franchises the continuing exercise of which
in the judgment of the Board of Directors of the Company is no longer in the
best interests of the Company.
2. DEFAULTS AND REMEDIES. If any one or more of the following events
("Events of Default") shall happen, that is to say:
(a) The Company shall default in the payment of the principal of
this Note or any installment of such
3
<PAGE>
principal, when and as the same shall become due and payable, whether at
maturity or at a date fixed for prepayment by acceleration or otherwise and
such default shall continue for a period of ten business days;
(b) The Company shall default in the payment of any installment of
interest on this Note when and as the same shall become due and payable and
such default shall continue for a period of ten business days; or
(c) The Company shall default in the due performance or observation
of any other covenant, agreement or provision contained in this Note to be
performed or observed by the Company, and such default shall have continued
for a period of 30 days after notice; or
(d) The Company shall:
(i) admit in writing its inability to pay its debts generally
as they become due;
(ii) file a petition in bankruptcy or for reorganization or for
the adoption of any arrangement under the United States Bankruptcy Code (as
now or in the future amended) or any admission seeking the relief therein
provided;
(iii) make an assignment for the benefit of creditors;
(iv) consent to the appointment of a receiver or trustee for
all or a substantial part of its property or to the filing of a petition
against it under said Bankruptcy Code;
(v) be adjudicated a bankrupt; or
(vi) make a bulk sale or take any action which contemplates the
making of a bulk sale; or
(e) A court order shall be entered appointing a receiver or trustee
for all or a substantial part of the property of the Company or approving a
petition filed against the Company under said Bankruptcy Code, which order
shall not have been vacated or set aside or otherwise terminated within 60
days from the date of entry or shall have been unstayed for a period
4
<PAGE>
of 60 days; or
(f) A court of competent jurisdiction shall assume custody of, or
sequester all or substantially all of the property of the Company, which
custody or sequestration shall not have been terminated within 60 days from
its commencement or shall have been unsuspended for a period of 60 days;
(g) An attachment shall be made on any substantial part of the
property or assets of the Company, the lien of which shall not be discharged
within 60 days from the making thereof; or
(h) The Company shall default in the payment of interest or
principal on any loans from banks or any other institutional lenders and such
default shall continue beyond any applicable cure or grace periods;
then in each and every such case the Holder may (unless every such Event of
Default shall have been made good and cured) declare the unpaid balance of
this Note to be forthwith due and payable and thereupon such balance shall
become so due and payable without presentation, protest or further demand or
notice of any kind, all of which are hereby expressly waived.
The Company covenants that if default be made in any payment of principal
of this Note or interest thereon, it will pay to the Holder such further
amounts as shall be sufficient to cover the cost and expense of collection,
including the fees and disbursements of counsel to the Holder for all services
rendered in that connection.
3. OPTIONAL AND MANDATORY CONVERSION.
(a) (i) Subject to and upon compliance with the provisions
hereof, at the option of the Holder the Note may, at any time prior to
maturity (or if the Note is to be prepaid pursuant to a notice of prepayment
pursuant to Section 4, then at any time during the 10-day period after receipt
of such prepayment notice), by written notice to the Company, be converted in
whole or in any part of the unpaid principal amount hereof which is $1,000 or
an integral multiple thereof into fully paid and non-assessable shares of
common stock, $.01 par value (the "Common Stock"), of the Company at the
Conversion Price (as hereinafter defined).
(ii) This Note shall at any time prior to the Maturity Date or
the earlier repayment hereof, be converted, at the option of the Company, in
whole or in part of the unpaid principal amount hereof which is $1,000 or an
integral multiple thereof into fully paid and non-assessable shares of the
Common Stock, at the Conversion Price, provided that in no event shall the
Company have the right to exercise such option unless and until the Company
has received New Equity Proceeds (as defined below) of at least $1,500,000.
The Company shall exercise its option by written notice to the Holder,
specifying the effective date of the conversion and certifying that the
foregoing pre-
5
<PAGE>
condition thereto has been satisfied. For purposes hereof, "New
Equity Proceeds" shall mean gross proceeds from the sale of Common Stock with
a minimum price of $1.50 per share or the gross proceeds from the sale of
convertible preferred stock of the Company with a conversion price of at least
$1.50 per share of Common Stock.
(b) Upon the conversion, the Holder shall surrender the Note at the
office of the Company. If the shares of Common Stock are to be issued in the
name other than the Holder, the Holder shall give written notice to the
Company of the name or names (with address) in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued. The Note shall, unless the shares issuable on
conversion are to be issued in the name of the Holder, be accompanied by
instruments of transfer, in form satisfactory to the Company, duly executed by
the Holder. As promptly as practicable after the receipt of such notice and
the surrender of the Note as aforesaid, or upon the effective date of the
conversion pursuant to Section 3(a)(ii) above, the Company shall issue and
shall deliver at such office to the Holder, or on his written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of the Note in accordance with the provisions
hereof and any fractional interest in respect of a share of Common Stock
arising upon such conversion shall be settled as provided in Section (c)
below. Each conversion shall be deemed to have been effected on the date on
which such notice shall have been received by the Company and the Note shall
have been surrendered as aforesaid, on the date specified by the Company in
this notice of conversion, as the case may be, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become on said
date the holder or holders of record of the shares represented thereby. Upon
conversion of only a portion of the unpaid principal amount of the Note, the
Company shall execute and deliver to or on the order of the Holder at the
office of the Holder, at the expense of the Company, a new Note in principal
amount equal to the unconverted portion of the unpaid principal amount of the
Note, which new Note shall be dated and bear interest from the date to which
interest shall have been paid on such unconverted portion. Upon the issuance
of a conversion notice by the Company pursuant to Section 3(a)(ii) above, the
Note shall be deemed paid (to the extent of such conversion) and the Holder
shall surrender it to the Company as aforesaid. Accrued interest shall be paid
through the effective date of the conversion of the Note.
(c) No fractional shares of Common Stock
6
<PAGE>
shall be issued upon conversion of the Note. Instead of any fractional share
of Common Stock which would otherwise be issuable upon conversion of any Note,
the Company shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the market value of such fractional interest computed on
the basis of the closing price of the Common Stock on the business day
immediately preceding the date upon which the Note is surrendered for
conversion. Such closing price shall be the last reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, the average bid and asked prices as quoted on the
National Association of Securities Dealers Automatic Quotation ("NASDAQ")
System or a similar organization or if not so quoted, then as quoted by a
dealer, all as selected from time to time by the Company for the purpose, or
if not so available, the fair market price as determined by the Board of
Directors (whose determination shall be conclusive).
(d) The Conversion Price at which Common Stock shall be issuable
upon conversion of this Note shall be initially $1.10 per share until December
31, 1996, and if the Maturity Date is extended, $1.35 per share during the
period from January 1, 1997 through December 31, 1997, and $1.60 per share
thereafter until final maturity; provided, however, that the Conversion Price
shall be adjusted from time to time as follows:
(A) In case the Company shall (i) pay a dividend in shares of Common
Stock, (ii) subdivide its outstanding shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares, the conversion privilege and the Conversion Price
in effect immediately prior to such action shall be adjusted so that
the Holder of the Note thereafter surrendered for conversion shall
be entitled to receive the number of shares of capital stock of the
Company which he would have owned immediately following such action
had the Note been converted immediately prior thereto.
An adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a
dividend and shall become effective immediately after the effective
date in the case of a subdivision or combination.
(B) In case the Company shall hereafter issue rights or warrants to
all holders of its Common Stock entitling them (for a period
expiring within 45 days after the record date mentioned below) to
7
<PAGE>
subscribe for or purchase shares of Common Stock at a price per
share less than the current market price per share of the Common
Stock (as defined in subsection (D)) in effect on the record date
mentioned below, the Conversion Price, shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding on the date of issuance
of such rights or warrants, the number of shares of Common Stock
which the aggregate exercise price of the shares of Common Stock
called for by all such rights or warrants, would purchase at such
current market price per share of Common Stock, and of which the
denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus
the number of additional shares of Common Stock offered for the
subscription or purchase. Such adjustment shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants.
(C) In case the Company shall distribute to all holders of its
Common Stock shares of its capital stock (other than the Common
Stock), evidences of its indebtedness or assets (excluding any cash
dividend) or rights to subscribe (excluding those referred to in
subsection (B) above), then in each case the Conversion Price shall
be adjusted so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
date of such distribution by a fraction of which the numerator shall
be the current market price per share determined as provided in
subsection (D) below) of the Common Stock on the record date
mentioned below less the then current fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive), of the capital stock, the portion of the assets or
evidences of indebtedness so distributed or of such subscription
rights applicable to one share of Common Stock, and the denominator
shall be such current market price per share of the Common Stock.
Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(D) For the purpose of any computation under
8
<PAGE>
subsection (B) or (C) above, the current market price (or value) per
share of Common Stock on any date shall be deemed to be the average
of the daily closing prices for the 30 consecutive trading days
selected by the Company commencing not more than 45 trading days
before the day in question. The closing price for each day shall be
the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is
listed or admitted to trading, or, if not listed or admitted to
trading on any national securities exchange, the average bid and
asked prices as quoted on the NASDAQ System or a similar
organization or if not so quoted, then as quoted by a dealer, all as
selected from time to time by the Company for the purpose, or if not
so available, the fair market price as determined by the Board of
Directors (whose determination shall be conclusive). For purposes of
this subsection the term "trading day" shall not include any day on
which securities are not traded on such exchange or in such market.
(E) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 2%
in such price; provided, however, that any adjustments which by
reason of this subsection (E) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 3(d) shall be made to the
nearest cent or the nearest one-hundredth of a share, as the case
may be.
(F) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly mail or cause to be mailed a notice by
first class mail postage prepaid of such adjustment to the Holder of
the Note, which notice shall state the Conversion Price resulting
from such adjustment, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
(e) If either of the following shall occur, namely: (a) any
consolidation or merger to which the Company is a party, other than a
consolidation or a merger in which the Company is the continuing corporation
and which does not result in any reclassification of, or change (other than a
change in par value or from par value to no par value
9
<PAGE>
or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of the Common Stock, or (b) any sale or
conveyance to another corporation of the property of the Company as an
entirety or substantially as an entirety; then the Company, or such successor
or purchasing corporation, as the case may be, shall execute and deliver to
the Holder of this Note a written instrument providing that the Holder shall
have the right to convert the Note into the kind and amount of shares of stock
and other securities and property receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock issuable upon conversion of the Note immediately prior
to such reclassification, change, consolidation, merger, sale or conveyance.
(f) The issuance of stock certificates on conversions of the Note
shall be made without charge to the Holder for any issue tax in respect of
such issuance. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of stock in a name other than that of the Holder, and the Company
shall not be required to issue or deliver any such stock certificate unless
and until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(g) The Company shall at all times reserve and keep available out of
the aggregate of its authorized but unissued stock or its issued stock held in
its treasury, or both, for the purpose of effecting the conversion of the
Note, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of the Note; and if at any
time such number of shares of Common Stock shall not be sufficient to effect
the conversion of the Note, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized
but unissued Common Stock or otherwise acquire such number of shares as shall
be sufficient for such purpose.
(h) In case, at any time while the Note is outstanding:
a) the Company shall declare a dividend (or any other distribution)
on its Common Stock, other than in cash; or
b) the Company shall authorize the issuance to all holders of its
Common Stock of rights or warrants to subscribe for or purchase
10
<PAGE>
shares of its Common Stock or of any other subscription rights or
warrants; or
c) the Company shall reclassify the Common Stock of the Company
(other than a subdivision or combination thereof) or enter into an
agreement for the consolidation or merger of the Company for which
approval of any stockholders of the Company is required, or enter
into an agreement for the sale or conveyance of all or substantially
all of the assets of the Company; or
d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the Holder, at least ten days
prior to the applicable record date hereinafter specified, a notice stating
(i) the date on which a record is to be taken for the purposes of such
dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution, rights or warrants are to be
determined, or (ii) the date on which any such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation or winding
up is expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up. The failure to give or receive the notice required
by this Section 3(h) or any defect therein shall not affect the legality or
validity of any such dividend, distribution, right or warrant or other action.
(i) In the event that the Company shall at any time during the term
of this Note offer to all of the holders of Common Stock of the Company the
right to subscribe for any stock or securities of the Company, the Company
shall extend such offer to the Holder of this Note to subscribe for such
Holder's pro rata share of such stock or securities based on the number of
shares of Common Stock into which this Note shall be convertible at such time.
4. PREPAYMENT. The Company shall have the right at any time to prepay the
principal hereof in whole or in part, without premium or penalty, upon giving
at least 20 days' prior written notice of such prepayment to the Holder,
provided that interest on the principal hereof to be so prepaid accrued to the
date of such prepayment shall be paid
11
<PAGE>
concurrently therewith. In case this Note is to be prepaid in part only, the
notice of prepayment shall specify the principal amount hereof to be prepaid.
5. OFFSETS. If at any time the Holder is in default with respect to any
payment due and payable to the Company, the Company may, in addition to and
not in derogation of any other remedies which the Company may have, credit, at
any time and from time to time, against the outstanding principal of this Note
and accrued interest thereon any amounts due from the Holder to the Company.
6. ASSIGNABILITY AND BINDING EFFECT. This Note may be assigned by the
Holder in whole or in part. The provisions of this Note shall be binding upon
and inure to the benefit of the successors, assigns and legal representatives
of the Holder and of the Company.
7. NO WAIVER. No failure or delay by the Holder in exercising any right,
power or privilege under this Note shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights
or remedies provided by law. No course of dealing between the Company and the
Holder shall operate as a waiver of any rights by the Holder.
8. PLACE OF PAYMENT. All payments and prepayments of principal of this
Note and all payments of interest thereon shall be made at or such other place
as the Holder may from time to time designate in writing.
9. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State; provided, however, that
such choice of law is not intended to limit the maximum rate of interest which
may be charged, taken or received by the Holder with respect to the loan
evidenced hereby if the Holder may, under law applicable to it, charge, take
or receive interest at a higher rate.
AIM GROUP, INC.
By_____________________________
Name:
Title:
[CORPORATE SEAL]
12
<PAGE>
CONVERSION NOTICE
The undersigned owner of this Note hereby irrevocably exercises the
option to convert this Convertible Promissory Note, or portion hereof (which
is $1,000 or an integral multiple thereof) below designated, into shares of
Common Stock of AIM Group, Inc. in accordance with the terms of this Note, and
directs that the shares issuable and deliverable upon the conversion, together
with any check in payment for fractional shares and a new Note, if applicable,
representing any unconverted principal amount hereof, be issued and delivered
to the Holder hereof unless a different name has been indicated below. If
shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect hereto.
Dated ____________________
________________________________
Signature
Fill in for registration of shares of Common Stock and the new Note if to
be issued otherwise than to the Holder.
______________________________ Social Security or other
(Name) Taxpayer Identifying
Number _________
______________________________ Principal Amount to be
(Address) Converted (in an integral
multiple of $1,000, if
less than all): $_______
______________________________
Please print Name and Address
(including zip code number)
EXHIBIT 10(f)
AIM GROUP, INC.
2001 West Sample Road, Suite 300
Pompano Beach, FL 33064
April 10, 1997
[Name of Note Holder]
Re: Amendment to Series A 3.5% Convertible
Note of AIM Group, Inc.
--------------------------------------
Dear _____________________:
This letter agreement provides for an amendment to the Series A 3.5%
Convertible Note (the "Note") issued on December 20, 1995 to you by AIM Group,
Inc. (the "Company") in the principal amount of $______________. The Board of
Directors of the Company has approved the changes in the terms of the Note set
forth below and, upon acceptance by you in the space set forth below, the Note
will be deemed to be amended to give effect to such changes, subject to the
approval of the Vancouver Stock Exchange. Defined terms set forth below have
the same meaning as prescribed in the Note unless the context otherwise
requires.
The Note is amended as follows:
1. MATURITY. The Maturity Date of the Note is extended to be March 31,
1998.
2. INTEREST RATE. The annual interest rate of the Note is increased to
10%, effective January 1, 1997, payable quarterly in arrears at the
beginning of each calendar quarter.
3. THE CONVERSION PRICE. The conversion provisions of the Note are
amended to provide that the Note will be convertible prior to the
Maturity Date at a Conversion Price of $.70 per share (which amount
is more than 500% higher than the current bid price per share for the
common stock on the Vancouver Stock Exchange). The provisions in
Section 3(d) of the Note relating to conversion subsequent to the
Maturity Date are deleted.
<PAGE>
4. SENIOR DEBT LIMITATION. Amending the letter dated December 22, 1995
to you from the undersigned, the Company will not, without the prior
approval of the holders of at least 80% of the principal amount of
the Series A 3.5% Convertible Notes outstanding, incur any
indebtedness which ranks senior in priority to payment of the
indebtedness under the outstanding Series A 3.5% Convertible Notes.
Sincerely yours,
AIM GROUP, INC.
By:_________________________
Paul R. Arena
Chairman of the Board and
Chief Executive Officer
Accepted on this
______ day of April, 1997
[Name of Note Holder]
By:______________________
EXHIBIT 21
<TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<CAPTION>
SUBSIDIARY NAME STATE of INCORPORATION COMPANY'S OWNERSHIP %
<S> <C> <C>
United Minerals Corp.-Arkansas Arkansas 100
United Minerals Corp.-Arizona Arizona 100
HeatShield Technologies, Inc. Florida 100
HST Capital Corp. Florida 100
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000928032
<NAME> AIM GROUP INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 70,342
<SECURITIES> 0
<RECEIVABLES> 505,428
<ALLOWANCES> 0
<INVENTORY> 160,770
<CURRENT-ASSETS> 755,069
<PP&E> 0
<DEPRECIATION> 163,540
<TOTAL-ASSETS> 5,354,337
<CURRENT-LIABILITIES> 716,818
<BONDS> 1,126,073
0
0
<COMMON> 39,801
<OTHER-SE> 3,471,645
<TOTAL-LIABILITY-AND-EQUITY> 5,354,337
<SALES> 3,092,278
<TOTAL-REVENUES> 3,092,278
<CGS> 2,148,191
<TOTAL-COSTS> 2,148,191
<OTHER-EXPENSES> 1,228,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131,429
<INCOME-PRETAX> (415,663)
<INCOME-TAX> 0
<INCOME-CONTINUING> (415,663)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (415,663)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> 0
</TABLE>
