U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Sept. 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-82468
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AIM GROUP, INC.
(Exact name of small business issuer as specified in its charter)
2001 W. Sample Road (Suite 300), Pompano Beach, Florida 33064
(Address of registrant's principal executive office)
954-972-9339
(Registrant's telephone number)
Delaware 13-3773537
(State of Incorporation) (I.R.S. Employer
Identification No.)
-------------------
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 November 7, 1997 was
3,965,339
Transitional Small Business Disclosure Format: [ ] Yes [X] No
<PAGE>
AIM GROUP, INC.AND SUBSIDIARIES
INDEX
NINE MONTHS ENDED Sept.30, 1997
Page
----
PART 1. FINANCIAL INFORMATION
Item 1 Condensed Consolidated Balance Sheets -
Sept. 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Operations - Three Months and Nine
Months Ended Sept. 30,1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows - Three Months and Nine
Months Ended Sept. 30, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2 Management's Discussion and Analysis of 7-9
Financial Condition and Results of
Operations
PART II OTHER INFORMATION
Item 4 Submission of Matters for a Vote of 10
Security Holders
Item 6 Exhibits and Reports on Form 8-K 10
2
<PAGE>
Part 1. Financial Information
<TABLE>
<CAPTION>
AIM Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
September 30, December 31,
1997 1996
------------- -------------
ASSETS (Unaudited) (Note)
CURRENT ASSETS
Cash $ 33,719 $ 70,342
Accounts receivable
Trade 432,738 504,864
Other - 564
Inventories 166,075 160,770
Prepaid expenses 9,314 18,529
------------- -------------
Total current assets 641,846 755,069
PROPERTY, PLANT AND EQUIPMENT 764,219 720,599
Less allowances for depreciation (216,729) (163,540)
------------- -------------
547,490 557,059
RESOURCE PROPERTY 4,000,373 3,995,373
OTHER ASSETS 49,976 46,836
------------- -------------
$ 5,239,685 $ 5,354,337
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 500,912 $ 281,454
Receivable financing liability 407,759 324,293
Current portion of long-term debt 38,786 14,960
Accrued expenses 55,931 96,111
------------- -------------
Total current liabilities 1,003,388 716,818
LONG-TERM DEBT, less current portion 98,799 76,073
CONVERTIBLE NOTES PAYABLE 1,050,000 1,050,000
STOCKHOLDERS' EQUITY
Preferred Stock; 1,000,000 shares authorized;
$1 par value; no shares issued or outstanding. - -
Common stock; 12,000,000 shares authorized;
$.01 par value; 3,980,053 shares issued and
3,978,766 shares outstanding at December 31,
1996 and 3,964,052 outstanding at September 30
1997. 39,801 39,801
Additional paid in capital 4,222,809 4,222,809
Common stock held in treasury - 1,287 shares
at December 31, 1996 and 16,001 shares at
September 30, 1997. (14,996) (1,400)
Accumulated deficit (1,160,116) (749,764)
------------- -------------
3,087,498 3,511,446
------------- -------------
$ 5,239,685 $ 5,354,337
============= =============
</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
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
<TABLE>
STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 573,898 $ 645,871 $ 1,761,468 $ 2,500,001
Costs and expenses
Cost of products sold 463,932 437,888 1,379,409 1,685,408
Selling and administrative expenses 186,987 277,301 582,094 753,570
Interest 43,711 13,100 142,354 112,193
Depreciation and amortization 19,401 19,618 58,202 57,973
------------ ------------ ------------ ------------
714,031 747,907 2,162,059 2,609,144
------------ ------------ ------------ ------------
Earnings (loss) before taxes (140,133) (102,036) (400,591) (109,143)
Income taxes - - - -
------------ ------------ ------------ ------------
Net earnings (loss) $ (140,133) $ (102,036) $ (400,591) $ (109,143)
============ ============ ============ ============
Net earnings (loss) per share $ (0.035) $ (0.026) $ (0.101) $ (0.027)
============ ============ ============ ============
Weighted average shares outstanding 3,967,730 3,980,053 3,971,408 3,971,262
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
AIM Group, Inc. and Subsidiaries
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS $ (14,459) $ 64,123 $ (31,415) $ (291,040)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (36,570) (2,235) (43,620) (109,403)
Increases in other assets and resource property (673) 541 (5,000) (77,580)
Other (3,140) 0 (3,140) 0
------------ ------------ ------------ ------------
Net cash provided by investing activities (40,383) (1,694) (51,760) (186,983)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of proceeds from convertible note payable 0 (10,905) 0 300,000
Net change in debt 84,091 0 46,552 16,586
------------ ------------ ------------ ------------
Net cash provided by financing activities 84,091 (10,905) 46,552 316,586
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH $ 29,249 $ 51,524 $ (36,623) $ (161,437)
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. For further information, refer
to the refer to the financial statements and footnotes thereto included in the
AIM Group, Inc. annual report on FORM 10-KSB for the period ended December 31,
1996.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
September30, December 31,
1997 1996
<S> <C> <C>
Finished goods $ 21,589 $ 28,513
Raw materials 94,418 76,421
Klannerite Ore 48,645 48,645
Spare parts and supplies 1,423 7,191
--------- ---------
$ 166,075 $ 160,770
--------- ---------
</TABLE>
6
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
QUARTER ENDED SEPT. 30, 1997 COMPARED TO QUARTER ENDED SEPT. 30, 1996
Net sales of AIM Group, Inc. (the "Company") for the third quarter of
1997 amounted to $573,898, a decrease of $71,973 from net sales of $645,871 in
the prior year's comparable quarter. The decline in net sales was primarily
attributable to a decline in a major customer's product line that has occurred
over the past nine months. Cost of products sold amounted to $463,932 and
$437,888 in the third quarters of 1997 and 1996, respectively, resulting in a
gross margin of 19% in the third quarter of 1997 compared to a 32% gross
margin in the third quarter of 1996. The reduction in the gross margin was
primarily attributable to the decline in net sales and continued competitive
pricing pressures. Subsequent to the change in management of the Company
effective March 27, 1997, 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.
Selling and administrative expenses during the third quarter of 1997
were $186,987, or 33% of net sales, compared to $277,301, or 43% of net sales,
in the third quarter of 1996. The decrease in selling and administrative
expenses is attributable to new management's cost containment efforts
implemented in 1997 and the reduction in net sales in the quarter ended
September 30, 1997. Offsetting some of the decrease was increased marketing
and travel expenses incurred to promote other business applications to
numerous potential customers and development efforts to expand and diversify
the Company's products.
Interest expenses were $43,711, or 8% of net sales, in the third quarter
of 1997 compared to $13,100, or 2% of net sales, in the third quarter of 1996.
The increase in interest expenses as a percent of net sales was attributable
to both an increase in the interest rate of 3.5% to 10% for the Company's
outstanding Series A Convertible Notes and the Company's increased use of the
factoring of receivables to provide working capital. A new receivables
financing agreement implemented in the second quarter of 1997 has resulted in
cost reductions for this type of financing. Also contributing to the increase
was the low cost development loan the Company received in the quarter ended
7
<PAGE>
September 30, 1997 to upgrade and expand capacity at the Malvern, AR
manufacturing facility.
Primarily as a result of the above, the Company incurred a net loss of
$140,133, or $.035 per share, in the quarter ended Sept. 30, 1997, compared to
a net loss of $102,036, or $.026 per share, in the quarter ended Sept. 30,
1996.
NINE MONTHS ENDED SEPT. 30, 1997 COMPARED TO NINE MONTHS ENDED SEPT. 30, 1996
Net sales of the company for the nine months ended Sept. 30, 1997
amounted to $1,761,468, a decrease of $738,533 from net sales of $2,500,001
for the nine months ended Sept. 30, 1996. The majority of the decline was due
to the decline in a major customer's product line. Cost of products sold
amounted to $1,379,409 and $1,685,408 for the nine months ended Sept. 30, 1997
and Sept. 30, 1996, respectively, resulting in a gross margin of 22% for the
first nine months of 1997 compared to 33% for the comparable period in 1996.
The reduction in gross margin is primarily the result of the net sales decline
and increased price competitiveness for industrial minerals used as fillers in
the rubber and plastics industries.
Selling and administrative expenses for the nine months ended Sept. 30,
1997 were $ 582,094, or 33% of net sales, compared to $753,570, or 30% of net
sales, for the nine months ended Sept. 30, 1996. The increase as a per cent of
net sales was due to an increase in marketing travel to promote other Company
products to potentially new customers.
Interest expenses were $142,354, or 8% of net sales, in the nine months
ended Sept. 30, 1997 compared to $112,193, or 4% of net sales for the
comparable period in 1996. The increase is primarily due to the increase in
the interest rate of 3.5% to 10% for the Company's outstanding Series A
Convertible Notes and loan costs related to a development loan received by the
Company in third quarter of 1997.
Primarily as a result of the above, the Company incurred a net loss of
$400,591, or $.101 per share, in the nine months ended Sept. 30, 1997 compared
to a net loss of $109,143, or $.027 per share, in the nine months ended Sept.
30, 1996.
8
<PAGE>
Liquidity and Sources of Capital
The Company incurred a negative cash flow from operations of $14,459 in
the third quarter of 1997, compared to a positive cash flow from operations of
$64,123 in the third quarter of 1996. As of Sept.30,1997 the Company had a
working capital deficit of $361,542.
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, during the third quarter of 1997, the Company was
granted a $200,000 loan from a local development fund at an annual interest
rate of 6% for plant improvements and working capital purposes. Accounts
payable increased from $281,454 at December 31, 1996, to $500,912 at September
30, 1997. The increase is attributable to a decline in working capital in the
nine months ended Sept. 30, 1997. This decline was caused by the decrease in
net sales during the nine months ended Sept. 30, 1997 which has not yet been
offset by a similar decline in operating costs. New management has made cost
reductions in personnel, rental space, supply costs, and other expenses since
April, 1997.
9
<PAGE>
Part II. Other Information
Item 4. Submission of Matters for a Vote of Security Holders.
During the quarter ended Sept. 30, 1997, several items were voted upon by
shareholders at the Company's annual shareholder meeting. These items and the
vote results are shown below:
<TABLE>
<CAPTION>
PROPOSAL RESULT FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
Adoption of 1997 Approved 1,796,631 522,971 135,676
Stock Option Plan
Appointment of M.A Approved 2,965,811 3,982 426
Cabrera & Company
P. A. as Auditor
Director Elections:
Paul Arena Elected 2,509,729 76,203 384,187
James Austin Elected 2,509,729 76,203 384,187
Dr. Audrey Braswell Elected 2,509,729 76,203 384,222
Jerry Cape Elected 2,509,729 76,203 384,324
Ernest Purcell Elected 2,509,729 76,203 384,254
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibit is filed herewith:
Exhibit No. Document
10 1997 Stock Option Plan
27 Financial Data Schedule
(b) Reports on Form 8-K. There were no Forms 8-K filed by the Company during
the second quarter ended Sept. 30, 1997.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AIM GROUP, INC.
Nov 14, 1997 By: /s/PAUL R. ARENA
-----------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
Nov 14, 1997 By: /s/LEIGH S. ZOLOTO
-------------------
Leigh S. Zoloto
Chief Financial Officer,
Secretary and Treasurer
11
EXHIBIT 10
AIM GROUP, INC.
1997 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN: The purposes of this Plan are:
* to attract and retain competent executives with outstanding
ability for positions of substantial responsibility;
* to provide additional incentive to corporate officers, key
employees, and members of the corporate Board of Directors, and;
* to promote the success of the Corporation's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Board at the time of grant.
2. DEFINITIONS: As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board in accordance with Section 4 of
the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, the Vancouver Stock Exchange and
any other stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or
jurisdiction where options are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Code" means the U.S. Internal Revenue Code of 1986, as amended.
(e) "Common Stock" means the Common Stock of the Corporation.
(f) "Corporation" means AIM Group, INC.
(g) "Director" means a member of the Board.
(h) "Employee" means any key employee, including, without limitation,
Officers employed by the Corporation or any Subsidiary of the Corporation.
Neither service as a Director nor payment of the director's fee by the
Corporation shall be sufficient to constitute "employment" by the Corporation.
An employee may serve as a Director of the Company and maintain his status as
an employee.
(i) "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on the Vancouver Stock
Exchange, its fair
<PAGE>
market value shall be not less than the average closing market price of the
Common Stock on the Vancouver Stock Exchange for the 10 trading days
immediately preceding the day on which the Vancouver Stock Exchange receives
notice regarding the granting of such options, with market price being defined
for this purpose as the average closing price of the Corporation's shares as
traded on the Vancouver Stock Exchange during this 10-day period, or such
other price as may be agreed to by the Corporation and accepted by the
Vancouver Stock Exchange;
(ii) If the Common Stock is listed on any other established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(iii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a Share of Common Stock shall be the mean between the high bid and low
asked prices for the Common Stock on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or
(iv) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(k) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(l) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(m) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option grant. The Notice of
Grant is part of the Option Agreement.
(n) "Officer" means a person who is an officer of the Corporation
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Option Agreement" means an agreement between the Corporation and
an Optionee evidencing the terms and conditions of an individual option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(q) "Optioned Stock" means the Common Stock subject to an Option.
(r) "Optionee" means the holder of an outstanding Option granted under
the Plan.
(s) "Plan" means this 1997 Stock Option Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect
to the Plan.
2
<PAGE>
(u) "Service Provider" means an Officer, Employee or non-employee
member of the Board.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN: Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 750,000 Shares.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to a method of payment under
Section 9(c), the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued
under the Plan shall not be returned to the Plan and shall not become
available for future distribution under the Plan.
4. ADMINISTRATION OF THE PLAN:
(a) PROCEDURE:
(i) RULE 16b-3. If the Common Stock is registered under Section
12 of the Exchange Act and to the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule
16b-3.
(ii) ADMINISTRATION: The Plan shall be administered by the Board.
(b) POWERS OF THE ADMINISTRATOR: Subject to the provisions of the Plan
the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value in accordance with the
Plan;
(ii) to select the Service Providers to whom Options may be
granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(iv) to approve forms of Option Agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common
Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
3
<PAGE>
(vi) to construe and interpret the terms of the Plan and Options
granted pursuant to the Plan;
(vii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(viii)to modify or amend each Option (subject to Section 14(c) of
the Plan);
(ix) to allow Optionees to satisfy withholding tax obligations by
electing to have the Corporation withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal
to the amount required to be withheld. The Fair Market Value of the Shares to
be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(x) to authorize any person to execute on behalf of the
Corporation any instrument required to effect the grant of an Option
previously granted by the Administrator;
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION: The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options.
5. ELIGIBILITY: Nonstatutory Stock Options may be granted to Service
Providers. Incentive Stock Options may be granted only to Service Providers
who are Employees.
6. LIMITATIONS:
(a) Each Option shall be designated in the attended Option Agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Corporation and any Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the option with respect to such shares is granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's relationship as an Officer, an
Employee or a Director of the Corporation, nor shall they interfere in any way
with the Optionee's right or the Corporation's right to terminate such
relationship at any time, with or without cause.
(c) The aggregate number of Shares reserved for issuance to Officers
and Directors of the Corporation under the Plan, together with all Shares
reserved for issuance to Officers and
4
<PAGE>
directors under all of the Corporation's other previously established or
proposed share compensation arrangements, will not exceed 10% of the
Corporation's issued and outstanding Shares from time to time.
(d) The aggregate number of Shares issued to Officers and Directors of
the Corporation as a result of the exercise of options granted under the Plan,
together with all Shares issued to Officers and Directors under all of the
Corporation's other previously established or proposed share compensation
arrangements, will not exceed 10% of the Corporation's issued and outstanding
Shares during any one-year period.
(e) The number of Shares issued to any one Officer or Director of the
Corporaiton and such person's associates as a result of the exercise of
options granted under the Plan, together with all Shares issued to that
Officer or Director and such person's associates under all of the
Corporation's other previously established or proposed share compensation
arrangements, will not exceed 5% of the Corporation's issued and outstanding
Shares during any one-year period.
7. TERM OF PLAN: The Plan shall be effective on the date it is
approved by the shareholders of the Company and shall continue in effect for a
term of 10 years from such date, unless terminated earlier under Section 14 of
the Plan.
8. TERM OF OPTION: The term of each Option shall be stated in the
Option Agreement and shall be 10 years from the date of grant or such shorter
term as may be provided in the Option Agreement. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns Common Stock representing more than 10% of the
voting power of all classes of stock of the Corporation or any Subsidiary, the
term of the Incentive Stock Option shall be 5 years from the date of grant or
such shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION:
(a) EXERCISE PRICE: The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than 10% of the voting
power of all classes of stock of the Corporation or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator, but shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
5
<PAGE>
(b) WAITING PERIOD AND EXERCISE DATES: At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before
the Option may be exercised.
(c) FORM OF CONSIDERATION: The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant.
Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) previously acquired Shares having an aggregate Fair Market
Value on the date of exercise (determined in accordance with Section 2(k)
equal to the aggregate exercise price of all Options being exercised;
(iv) in the case of a Nonstatutory Stock Option, other Shares
which (A) in the case of Shares acquired upon exercise of an Option, have been
owned by the Optionee for more than six months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised;
(v) Shares as to which this Option is then being exercised, in
which case the Corporation is to retain so many shares that would otherwise
have been delivered by the Corporation upon that exercise of this Option as
equals the number of shares that would have been surrendered to the
Corporation if the purchase price had been paid with previously issued stock;
or
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION:
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and
at such times and under such conditions as determined by the Administrator and
set forth in the Option Agreement. Options shall vest cumulatively to the
extent of 25% of the Shares covered thereby at the end of each of the first 4
years following the date of grant. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Corporation has received:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by
the Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the Optionee
or, if requested by the Optionee, in the name of the Optionee and his or her
spouse. Until the Shares are issued (as evidenced by the appropriate
6
<PAGE>
entry on the books of the Corporation or of a duly authorized transfer agent
of the Corporation), no right to vote or receive dividends or any other rights
as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Corporation shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as provided in Section
12 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for exercise under the
Option, meaning by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER: If an Optionee
ceases to be a Service Provider for cause, his or her Option shall immediately
become terminated and lapse and the Shares covered thereby shall revert to the
Plan. If an Optionee ceases to be a Service Provider, other than as a result
of having been dismissed for cause or upon the Optionee's death, the Optionee
may exercise his or her Option within 30 days or such shorter period of time
as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(c) DEATH OF OPTIONEE: If an Optionee dies while a
Service Provider, the Option may be exercised within one year after the death
of Optionee, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date Optionee ceased to be a Service Provider. If, at
the time Optionee ceased to be a Service Provider, the Optionee is not vested
as to his or her entire Option, the shares covered by the unvested portion of
the Option shall immediately revert to the Plan. The Option may be exercised
by the executor or administrator of the Optionee's estate or, if none, by the
person(s) entitled to exercise the Option under the Optionee's will or laws of
descent or distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(d) BUYOUT PROVISIONS: The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. NON-TRANSFERABILITY OF OPTIONS: Unless determined
otherwise by the Administrator, an Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed or in any manner other than by will or
by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE:
(a) CHANGES IN CAPITALIZATION: Subject to any required action by the
shareholders of the Corporation, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which
have been authorized for
7
<PAGE>
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Corporation; provided, however, that conversion of any convertible securities
of the Corporation shall not be deemed to have been "effected without receipt
of consideration". Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Corporation of Shares of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION: In the event of the proposed
dissolution or liquidation of the Corporation, the Administrator shall notify
each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until 10 days prior
to such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. To the
extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE: In the event of a merger of the Corporation
with or into another corporation, or the sale of substantially all of the
assets of the Corporation, each outstanding Option shall be assumed or an
equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option, the
Optionee shall fully vest in and have the right to exercise the Option as to
all of the Optioned Stock, including Shares as to which it would not otherwise
be vested or exercisable. If an Option becomes fully vested and exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Administrator shall notify the Optionee in writing or electronically that
the Option shall be fully vested and exercisable for a period of 15 days from
the date of such notice, and the Option shall terminate upon the expiration of
such period. For the purposes of this paragraph, the Option shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option immediately prior to the merger or sale of assets,
the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator
may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or sale
of assets.
13. DATE OF GRANT: The date of grant of an Option shall be, for all
purposes, the date of which the Administrator make the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each
8
<PAGE>
Optionee within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN:
(a) AMENDMENT AND TERMINATION: The Board shall amend the Plan from
time to time as required to comply with the requirements of Applicable Laws.
Additionally, in its sole discretion the Board may at any time amend, alter,
suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL: If necessary to comply with Applicable Laws,
the Corporation shall obtain shareholder approval of any Plan amendment.
(c) EFFECT OF AMENDMENT OR TERMINATION: No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the
Corporation. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to options
granted under the Plan prior to the date of such termination.
15. CONDITIONS UPON ISSUANCE OF SHARES:
(a) LEGAL COMPLIANCE: Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Corporation with respect to such
compliance.
(b) INVESTMENT REPRESENTATIONS: As a condition to the exercise of an
Option, the Corporation may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell
or distribute such Shares if, in the opinion of counsel for the Corporation,
such a representation is required.
16. INABILITY TO OBTAIN AUTHORITY: The inability of the Corporation to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Corporation's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder, shall relieve the Corporation of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. RESERVATION OF SHARES: The Corporation, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
9
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<ARTICLE> 5
<CIK> 0000928032
<NAME> AIM GROUP INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
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