U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-82468
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AIM GROUP, INC.
(Exact name of small business issuer as specified in its charter)
2001 W. Sample Road (Suite 300), Pompano Beach, Florida 33064
(Address of registrant's principal executive office)
954-972-9339
(Registrant's telephone number)
Delaware 13-3773537
(State of Incorporation) (I.R.S. Employer Identification No.)
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Check whether the issuer (1) filed all reports to be filed by Section 13 or
(15(d) of the Exchange Act during the past 12 months and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of common stock outstanding as of May 13, 1997 was
3,965,339
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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AIM GROUP, INC.AND SUBSIDIARIES
<TABLE>
INDEX
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Page(s)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Operations - Three Months Ended March
31, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows - Three Months Ended March
31, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 3. Defaults Upon Senior Securities 9-10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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2
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PART I. FINANCIAL INFORMATION
AIM Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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ASSETS (Unaudited) (Note)
CURRENT ASSETS
<S> <C> <C>
Cash $ 40,157 $ 70,342
Accounts receivable
Trade 384,314 504,864
Other 0 564
Inventories 174,188 160,770
Prepaid expenses 28,489 18,529
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Total current assets 627,148 755,069
PROPERTY, PLANT AND EQUIPMENT 720,599 720,599
Less allowances for depreciation (181,270) (163,540)
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539,329 557,059
RESOURCE PROPERTY 4,000,373 3,995,373
OTHER ASSETS 47,664 46,836
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$5,214,514 $5,354,337
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 436,624 $ 281,454
Receivable financing liability 221,979 324,293
Current portion of long-term debt 14,960 14,960
Accrued expenses 69,915 96,111
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Total current liabilities 743,478 716,818
LONG-TERM DEBT, less current portion 71,956 76,073
CONVERTIBLE NOTES PAYABLE 1,050,000 1,050,000
STOCKHOLDERS' EQUITY
Preferred Stock; 1,000,000 shares authorized;
$1 par value; no shares issued or outstanding. - -
Common stock; 12,000,000 shares authorized;
$.01 par value; 3,980,053 shares issued and
3,978,766 shares outstanding at December 31,
1996 and March 31, 1997. 39,801 39,801
Additional paid in capital 4,222,809 4,222,809
Common stock held in treasury - 1,287 shares (1,400) (1,400)
Accumulated deficit (912,130) (749,764)
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3,349,080 3,511,446
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$5,214,514 $5,354,337
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</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
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AIM Group, Inc. and Subsidiaries
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
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1997 1996
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<S> <C> <C>
Net sales $ 572,092 $1,069,231
Costs and expenses
Cost of products sold 428,538 647,347
Selling and administrative expenses 226,976 273,601
Interest 49,782 63,091
Depreciation and amortization 19,401 18,508
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724,697 1,002,547
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Earnings (loss) before taxes (152,605) 66,684
Income taxes - -
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Net earnings (loss) $ (152,605) $ 66,684
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Net earnings per share $ (0.038) $ 0.017
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Weighted average shares outstanding 3,978,766 3,944,888
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</TABLE>
See notes to condensed consolidated financial statements.
4
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AIM Group, Inc. and Subsidiaries
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31
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1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATIONS $ (21,741) $ (212,520)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (39,968)
Increases in other assets and resource property (4,327) (42,083)
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Net cash provided by investing activities (4,327) (82,051)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of proceeds from convertible note payable - 300,000
Payment of long-term debt (4,117) (3,067)
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Net cash provided by financing activities (4,117) 296,933
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NET INCREASE (DECREASE) IN CASH $ (30,185) $ 2,362
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</TABLE>
See notes to condensed consolidated financial statements.
5
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AIM GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. For further information, refer
to the refer to the financial statements and footnotes thereto included in the
AIM Group, Inc. annual report on FORM 10-KSB for the period ended December 31,
1996.
NOTE B - INVENTORIES
<TABLE>
The components of inventory consist of the following:
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Finished goods $ 35,303 $ 28,513
Raw materials 84,497 76,421
Klannerite Ore 48,645 48,645
Spare parts and supplies 5,743 7,191
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$174,188 $160,770
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</TABLE>
NOTE C - CONVERTIBLE NOTES PAYABLE
The notes, having an outstanding principle 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 has amended $750,000 of the total issue of $1,050,000
of 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. Terms have been reached to replace the balance of $300,000 of Notes
with a new investor under the same terms and conditions along with the other
Note holders. This transaction is anticipated to be completed during the
Company's second quarter. The convertible notes will remain unsecured to the
Company's assets. The terms of the Note Amendments are subject to the approval
of the Vancouver Stock Exchange.
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Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales of AIM Group, Inc. (the "Company") for the first quarter of
1997 amounted to $572,092, a decrease of $497,139 from net sales of $1,069,231
in the prior year's comparable quarter. The decline in net sales was primarily
attributable to a significant decline in a major customer's product line. Cost
of products sold amounted to $428,538 and $647,347 in the first quarters of
1997 and 1996, respectively, resulting in a gross margin of 25% in the first
quarter of 1997 compared to a 39% gross margin in the first quarter of 1996.
The reduction in the gross margin was primarily attributable to the decline in
net sales. Subsequent to the change in management of the Company effective
March 27, 1996, new management has commenced efforts to increase net sales by
offering improved and/or new industrial filler products and applications to
existing and potential new customers.
The Company is beginning to receive orders from a number of customers on
a "toll" basis. The Company does not incur any substantial amount of cost of
products sold for this toll business. Since the customer usually provides the
materials, the net sales amounts typically invoiced by the Company are less
while preserving a profit amount on a per truckload basis which is similar to
other business. The Company has recently shipped several production size
samples to customers which is usually the last step in a process to receive
ongoing business.
Selling and administrative expenses during the first quarter were
$226,976, or 40% of net sales, compared to $273,601, or 26% of net sales, in
the first quarter of 1996. The decrease in selling and administrative expenses
is primarily attributable to the reduction in net sales. In early April 1997,
new management of the Company commenced steps designed to reduce corporate
overhead and the Company believes that selling and administrative expenses in
the second quarter of 1997 will decline from the level experienced in the
first quarter.
7
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Interest expenses were $49,782, or 9% of net sales, in the first quarter
of 1997 compared to $63,091, or 6% of net sales, in the first quarter of 1996.
The increase in interest expenses as a percent of net sales was attributable
both to the reduction in net sales as well as the Company's increased use of
the factoring of receivables to provide working capital. A new receivables
financing agreement is in place which should effectively reduce interest
expenses by 30% to 40% for this financing when needed.
Primarily as a result of the above, the Company incurred a net loss of
$152,605, or $.038 per share, in the quarter ended March 31, 1997, compared to
net earnings of $66,684, or $.017 per share, in the quarter ended March 31,
1996.
LIQUIDITY AND SOURCES OF CAPITAL
The Company incurred a negative cash flow from operations of $21,741 in
the first quarter of 1997, compared to a negative cash flow from operations of
$212,520 in the first quarter of 1996. As of March 31, 1997, the Company had a
working capital deficit of $116,330.
In order to increase available cash to meet expenses in the short term,
the Company continued its factoring arrangement which provides for cash
advances against invoices to customers during the period in which such
invoices are outstanding. Generally, the cost of factoring, similar to
interest rates on short term borrowings, is payable on the amounts outstanding
and customer payments are then applied directly to advances. Factoring, while
not increasing working capital, does provide liquidity of receivables. It is
the intention of management to discontinue the use of factoring as soon as
practicable. In that regard, the Company is applying for a $200,000 loan from
a local development fund for plant improvements and working capital purposes.
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The above discussion contains forward-looking statements relating to the
Company's revenues and expenses. Actual results of operations may differ
materially from projected or expected results of operations due to changes
8
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in the demand for the Company's products, unanticipated ore grade and
geological problems, metallurgical and other processing problems, availability
of materials and equipment, the timing of receipt of necessary governmental
permits, the occurrence of unusual weather or operating conditions, force
mejeure events, the failure of equipment or processees to operate in
accordance with specifications or expectations, accidents, environmental
risks, uncertainties relating to the feasibility of certain proposed product
applications, the Company's dependence upon a limited number of customers and
suppliers, competition from other mineral suppliers and custom or toll
processors in the surface modification industry and the availability of
financing. Many of such factors are beyond the Company's ability to control or
predict. Readers are cautioned not to put undue reliance on forward-looking
statements. The Company disclaims any intent or obligation to update publicly
these forward-looking statements, whether as a result of new information,
future events or otherwise.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Two legal actions that were initiated during the first quarter of 1997
have been dismissed. On May 1, 1997, Mr. Bernard Kossar, a former director of
the Company, withdrew his action filed against the Company on January 31, 1997
for nonpayment of a Convertible Promissory Note. Secondly, in early May 1997,
the current directors of the Company dismissed an action that had been filed
by them against two former directors of the Company on April 24, 1997,
pursuant to Section 225 of the Delaware General Corporation Law.
Item 3. DEFAULTS UPON SENIOR SECURITIES
On December 31, 1996, Convertible Promissory Notes previously issued by
the Company in the total principal amount of $1,050,000 and held by three
holders (the "Notes") matured but were not paid as cash flow from operations
was not sufficient to pay the principal and accrued interest due. During April
1997, two holders owning $750,000 principal amount of Notes agreed to amended
terms providing
9
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for the extension of the final maturity date to March 31, 1998, increase of
the interest rate from 3.5% to 10% per annum, and decrease in the conversion
price to $.70 per share. The Company believes that during the second quarter
of 1997, a new investor will replace the third holder that owns the $300,000
principal balance of the Notes and will agree to such amended terms.
Effectiveness of the amended terms of the Notes is subject to the approval of
the Vancouver Stock Exchange.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF THE
SECURITY HOLDERS
On March 27, 1997, in accordance with Section 228 of the Delaware General
Corporation Law, the holders of a majority of the Company's outstanding
shares, by shareholders' consents in lieu of a shareholders' meeting,
authorized a change in the members of the Board of Directors. For more
detailed information relating to the change in the Board and subsequent
appointment of new executive officers of the Company, reference is made to the
Form 8-K filed by the Company on March 28, 1997.
Item 5. OTHER INFORMATION
Effective April 29, 1997, Joseph L. Ranzini resigned as a director of the
Company.
The Company's shares trade on the Vancouver Stock Exchange, Vancouver,
B.C., Canada. The price of the shares is quoted in U.S. dollars and U.S.
shareholders can locate the Company's common stock under the symbol AGDU.V.
The symbol for Canadian shareholders is AGD.U.
10
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibit is filed herewith:
Exhibit No. Document
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27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. Forms 8-K were filed by the Company on February 7,
February 20, and March 28, 1997.
11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AIM GROUP, INC.
May 15, 1997 By: /s/PAUL R. ARENA
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Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
May 15, 1997 By: /s/LEIGH S. ZOLOTO
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Leigh S. Zoloto
Chief Financial Officer,
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000928032
<NAME> AIM GROUP, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 40,157
<SECURITIES> 0
<RECEIVABLES> 384,314
<ALLOWANCES> 0
<INVENTORY> 174,188
<CURRENT-ASSETS> 627,148
<PP&E> 720,599
<DEPRECIATION> 181,270
<TOTAL-ASSETS> 5,212,514
<CURRENT-LIABILITIES> 743,478
<BONDS> 1,121,956
0
0
<COMMON> 39,801
<OTHER-SE> 3,309,279
<TOTAL-LIABILITY-AND-EQUITY> 5,212,514
<SALES> 572,092
<TOTAL-REVENUES> 572,092
<CGS> 428,538
<TOTAL-COSTS> 724,697
<OTHER-EXPENSES> 246,377
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,782
<INCOME-PRETAX> (152,605)
<INCOME-TAX> 0
<INCOME-CONTINUING> (152,605)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (152,605)
<EPS-PRIMARY> (.038)
<EPS-DILUTED> 0
</TABLE>
