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, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-82468
-------------------------------
AIM GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Jones Mills Industrial Park, Highway 270, P. O. Box 208, Jones Mills, AR 72105
(Address of registrant's principal executive office)
501-844-2600
(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 6,1998 was
1,323,702.
Transitional Small Business Disclosure Format: ___ Yes _X_ No
<PAGE>
AIM GROUP, INC.AND SUBSIDIARIES
INDEX
NINE MONTHS ENDED Sept.30, 1998
PAGE
PART 1. FINANCIAL INFORMATION
Item 1 Condensed Consolidated Balance Sheets -
Sept. 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of
Operations - Three Months and Nine
Months Ended Sept. 30,1998 and 1997 4
Condensed Consolidated Statements of
Cash Flows - Three Months and Nine
Months Ended Sept. 30, 1998 and 1997 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2 Management's Discussion and Analysis of 7-10
Financial Condition and Results of
Operations
PART II OTHER INFORMATION
Item 5 Other Events 11-12
Item 6 Exhibits and Reports on Form 8-K 11
Signature Page 13
2
<PAGE>
PART 1. FINANCIAL INFORMATION
AIM GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 16,933 $ 9,898
Accounts receivable
Trade 233,961 368,832
Inventories 162,909 202,155
Prepaid expenses 11,559 6,967
------------ ------------
Total current assets 425,362 587,852
PROPERTY, PLANT AND EQUIPMENT 865,172 809,396
Less allowances for depreciation (282,262) (236,685)
------------ ------------
582,910 572,711
RESOURCE PROPERTY 4,031,536 4,000,373
OTHER ASSETS 65,917 40,511
------------ ------------
$ 5,105,725 $ 5,201,447
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 643,107 $ 630,692
Receivable financing liability 160,840 277,441
Note payable 150,000 0
Current portion of long-term debt 149,068 80,954
Accrued expenses 38,119 46,062
------------ ------------
Total current liabilities 1,141,134 1,035,149
LONG-TERM DEBT, less current portion 59,038 93,091
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; 1,326,684 shares issued
and 1,323,702 shares outstanding at
December 31, 1997 and September 30, 1998. 39,801 39,801
Additional paid in capital 4,222,809 4,222,809
Common stock held in treasury - 2,982 shares (6,876) (6,876)
Accumulated deficit (1,400,181) (1,232,527)
------------ ------------
2,855,553 3,023,207
------------ ------------
$ 5,105,725 $ 5,201,447
============ ============
</TABLE>
Note: The balance sheet at December 31, 1997 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. The common shares listed reflect the one for three
reverse stock split effected on August 21, 1998.
See notes to condensed consolidated financial statements.
3
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 306,075 $ 573,898 $ 1,632,686 $ 1,761,468
Costs and expenses
Cost of products sold 205,315 463,932 1,169,433 1,379,409
Selling and administrative
expenses 147,001 186,987 417,603 582,094
Interest 44,515 43,711 150,388 142,354
Depreciation and amortization 19,400 19,401 58,201 58,202
------------ ------------ ------------ ------------
416,231 714,031 1,795,625 2,162,059
------------ ------------ ------------ ------------
Earnings (loss) before taxes (110,156) (140,133) (162,939) (400,591)
Income taxes - - - -
------------ ------------ ------------ ------------
Net earnings (loss) $ (110,156) $ (140,133) $ (162,939) $ (400,591)
============ ============ ============ ============
Net earnings per share $ (0.083) $ (0.106) $ (0.123) $ (0.303)
============ ============ ============ ============
Weighted average shares
outstanding 1,323,702 1,322,577 1,323,702 1,323,803
============ ============ ============ ============
</TABLE>
The earnings per share and weighted average shares outstanding reflect the one
for three reverse stock split effected on August 21, 1998.
See notes to condensed consolidated financial statements.
4
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS $ (17,209) $ (14,459) $ (64,681) $ (31,415)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment 16,434 (36,570) (55,776) (43,620)
Increases in other assets and
resource property (7,882) (673) (56,569) (5,000)
Other - (3,140) - (3,140)
------------ ------------ ------------ ------------
Net cash provided by investing
activities 8,552 (40,383) (112,345) (51,760)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in debt (12,781) 84,091 184,061 46,552
------------ ------------ ------------ ------------
Net cash provided by (used in)
Financing activities (12,781) 84,091 184,061 46,552
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH $ (21,438) $ 29,249 $ 7,035 $ (36,623)
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Sept. 30, 1998
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, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. For further information, refer
to the financial statements and footnotes thereto included in the AIM Group,
Inc. annual report on FORM 10-KSB for the year ended December 31, 1997.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
Finished Goods $ -0- $ -0-
Raw Materials 102,278 141,926
Klannerite Ore 48,645 48,645
Spare Parts and Supplies 11,986 11,584
Totals $ 162,909 $ 202,155
========== ==========
</TABLE>
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30, 1998 COMPARED TO QUARTER ENDED
SEPTEMBER 30, 1997
Net sales of AIM Group, Inc. (the "Company") for the third quarter of
1998 amounted to $306,075, a decrease of $267,823 from net sales of $573,898
in the prior year's comparable quarter. The decline in net sales was primarily
attributable to a significant decrease in sales associated with the surface
treatment of fire retardant materials resulting from a decline in a major
customer's product line. Cost of products sold amounted to $205,315 and
$463,932 in the third quarters of 1998 and 1997, respectively, resulting in a
gross margin of 33% in the third quarter of 1998 compared to a 19% gross
margin in the third quarter of 1997. The improvement in the gross margin was
primarily attributable to significant expense savings in direct material costs
and better utilization and efficiency of manufacturing resources.
Selling and administrative expenses during the third quarter of 1998
were $147,001, or 48% of net sales, compared to $186,987, or 33% of net sales,
in the third quarter of 1997. The increase of these expenses as a per cent of
sales is mainly due to the large percentage decline in net sales during the
current quarter. These expenses in dollar terms were down $39,986 compared the
third quarter of 1997 reflecting positive cost containment efforts in the past
year.
Interest expenses were $44,515, or 15% of net sales, in the third
quarter of 1998 compared to $43,711, or 8% of net sales, in the third quarter
of 1997. The increase in interest expenses as a percent of net sales was
attributable to the decline in net sales experienced during the third quarter
of 1998 compared to the comparable 1997 quarter. This expense was basically
unchanged when comparing actual amounts.
Primarily as a result of the above, the Company incurred a net loss of
$110,156, or $.083 per share, in the quarter ended September 30, 1998,
compared to a net loss of $140,133, or $.106 per share, in the quarter ended
September 30, 1997. The per share figures reflect the one for three stock
split that occurred during the third quarter of 1998.
7
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1997
Net sales of the Company for the nine months ended September 30, 1998
amounted to $1,632,686, a decrease of $128,782 from net sales of $1,761,468
for the nine months ended September 30, 1997. The majority of the decline was
due to the decline in a major customer's product line that occurred in the
third quarter ended September 30, 1998. Cost of products sold amounted to
$1,169,433 and $1,379,409 for the nine months ended September 30, 1998 and
September 30, 1997, respectively, resulting in a gross margin of 28% for the
first nine months of 1998 compared to 22% for the comparable period in 1997.
The increase in gross margin is primarily the result of negotiated price
reductions for certain direct material costs and improved operating
efficiencies.
Selling and administrative expenses for the nine months ended September
30, 1998 were $417,603, or 26% of net sales, compared to $582,094, or 33% of
net sales, for the nine months ended September 30, 1997. The decrease is a
result of significant cost reduction in several expense areas within this
category over the past year.
Interest expenses were $150,388, or 9% of net sales, in the nine months
ended September 30, 1998 compared to $142,354, or 8% of net sales, for the
comparable period in 1997. The slight increase is primarily due to additional
financing required for working capital purposes during the nine months ended
September 30, 1998.
Primarily as a result of the above, the Company incurred a net loss of
$162,939, or $.123 per share, in the nine months ended September 30, 1998
compared to a net loss of $400,591, or $.303 per share, in the nine months
ended September 30, 1997. The per share figures reflect the one for three
stock split that occurred during the third quarter of 1998.
8
<PAGE>
LIQUIDITY and SOURCES of CAPITAL
The Company incurred a negative cash flow from operations of $17,209 in
the third quarter of 1998, compared to a negative cash flow from operations of
$14,459 in the third quarter of 1997. As of September 30,1998 the Company had
a working capital deficit of $715,772.
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.
Accounts payable increased slightly from $630,692 at December 31, 1997, to
$643,107 at September 30, 1998. The larger current liability increases that
occurred in the nine months ended September 30, 1998 were the following: Notes
payable increased $150,000 which was required for working capital and a loan
for plant improvements increased $69,000 reflecting the installation of
various equipment designed to improve manufacturing efficiencies.
9
<PAGE>
YEAR 2000 ISSUE
The Company is in the process of developing a formal program to ensure that
all significant computer systems are substantially Year 2000 compliant by the
year ending December 31, 1999. When completed the program will encompass: (1)
identification of all information technology systems ("IT Systems") and
non-information technology systems ("Non-IT Systems") that are not Year 2000
compliant; (2) repair or replacement of the identified non-compliant systems,
and (3) testing of the repaired or replaced systems.
Efforts to date on the program have been mainly in review of the Company's
accounting and financial reporting systems. The primary computer software
applications in this area are vendor supplied and the Company will be
contacting these vendors over the next three months to obtain how these
vendors will be Year 2000 on such applications. For example, when appropriate
software updates will be sent to address any Year 2000 issues. Other efforts
on the Year 2000 issue will include the establishment of a committee by the
Board of Directors during the fourth quarter of 1998 to carry out the Year
2000 program.
Thirdly, there has been correspondence with some key suppliers and customers
regarding each other's plans to handle key Year 2000 issues and this is
continuing.
At this point, the Company expects to establish a formal plan with detailed
action items and targeted completion times during the fourth quarter of 1998.
During this time communication with software vendors and business partners
will be on-going along with further effort in the identification phase of the
program. Presently, it is difficult to assess the implementation costs of this
program without the formal plan, however, such an assessment will be provided
by the end of the Company's fiscal year, Dec. 31, 1998.
The company will continue to monitor and evaluate the impact of the Year 2000
issue on its operations. Until the Company is into the final testing part of
the program the risks from potential Year 2000 failures cannot be fully
assessed. Due to this situation, the Company cannot begin any contingency
plans. Such plans will be developed as any potential Year 2000 failures are
identified in the final testing stages.
10
<PAGE>
PART II. OTHER INFORMATION
Item 5. OTHER EVENTS
The previously announced one-for-three reverse stock split of the
Company's Common Stock(the "Reverse Split") was effective on August 21, 1998.
On that date, each certificate representing shares of Common Stock outstanding
immediately prior to the Reverse Split (the "Old Shares") was deemed, without
any action on the part of the shareholders, automatically to represent
one-third the number of shares of Common Stock after the Reverse Split (the
"New Shares"). No fractional New Shares are being issued as a result of the
Reverse Split. In lieu thereof, the number of New Shares issuable to each
shareholder whose Old Shares are not evenly devisable by three is being
rounded up to the nearest whole share. (For example, a holder of 1,000 Old
Shares is entitled to receive 334 New Shares in exchange for his Old Shares.)
Shareholders of record were recently requested to surrender certificates
representing the Old Shares in accordance with the procedures set forth in a
letter of transmittal sent to the shareholders. Upon such surrender, a
certificate representing New Shares will be issued and forwarded to the
shareholder. Until surrender, each stock certificate representing Old Shares
will continue to be valid and represent New Shares equal to one-third the
number of Old Shares, subject to the above-referenced rounding up in lieu of
fractional shares. The CUSIP number assigned to the New Shares is 008881203.
On October 16, 1998, the Company announced that it had suspended its
negotiations to acquire by merger United Granite Corporation, which would have
operated the Company's proposed granite processing facility in Hot Spring
County, Arkansas. The Company is in discussions with other potential operators
of a granite processing facility. The previously announced municipal financing
of $4 million to fund construction of the previously proposed facility will
require a new application accompanied by a revised business plan and
acceptance by the municipality of the final terms and conditions of the
proposed operation.
The Company is considering the raising of additional equity capital
through a private offering of common stock in order to finance the purchase of
equipment for the proposed granite processing facility and for working capital
purposes.
11
<PAGE>
During September, 1998, the Company completed the relocation of its
corporate headquarters to the Jones Mills Industrial Park located in Hot
Spring County, Arkansas. The Company's new address and telephone number at
that location is AIM Group, Inc., Jones Mills Industrial Park, Highway 270,
P.O. Box 208, Jones Mills, Arkansas 72105; telephone (501) 844-2600.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibit is filed herewith:
EXHIBIT NO. DOCUMENT
3 Amendment to Articles
of Incorporation
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. The Company filed a Form 8-K on September 25, 1998
reporting the Company's engagement of Moore, Stephens, Frost as the
Company's new certifying accountant effective September 17, 1998.
12
<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.
November 9, 1998 By: /s/PAUL R. ARENA
----------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
November 9, 1998 By: /s/LEIGH S. ZOLOTO
------------------
Leigh S. Zoloto
Chief Financial Officer,
Secretary and Treasurer
EXHIBIT 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AIM GROUP, INC.
The undersigned, being the President and Secretary, respectively, of AIM
Group, Inc. (the "Corporation") DO HEREBY CERTIFY as follows:
1. The name of the Corporation is AIM Group, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended to
effect a one (1) for three (3) reverse split of all of the Corporation's
issued common stock, par value $.01 per share (the "Common Stock"), whereby,
automatically upon the filing of this Amendment with the Secretary of State of
the State of Delaware, each three (3) issued shares of Common Stock shall be
changed into one (1) share of Common Stock, and, in that connection, to reduce
the stated capital of the Corporation.
3. In order to effectuate the amendment set forth in Paragraph 2 above:
(a) All of the Corporation's issued Common Stock, having a par value of
$.01 per share, is hereby changed into new Common Stock, having a par
value of $.01 per share, on the basis of one (1) new share of Common
Stock for each three (3) shares of Common Stock issued as of the date of
filing of the Amendment with the Secretary of State of the State of
Delaware; provided, however, that no fractional shares of Common Stock
shall be issued pursuant to such change. The number of new shares of
Common Stock issued to each shareholder who would otherwise be entitled
to a fractional share as a result of such change shall be rounded up to
the nearest whole new share in lieu of a fractional share;
<PAGE>
(b) The Corporation's 12,000,000 authorized shares of Common Stock,
having a par value of $.01 per share, shall not be changed;
(c) The Corporation's 1,000,000 authorized shares of preferred stock,
having a par value of $1.00 per share, shall not be changed; and
(d) The Corporation's stated capital shall be reduced by an amount equal
to the aggregate par value of the shares of Common Stock issued prior to
the effectiveness of this Amendment which, as a result of the reverse
split provided for herein, are no longer issued shares of Common Stock.
4. The foregoing Amendment of the Certificate of Incorporation of the
Corporation has been duly adopted by Corporation's Board of Directors and
stockholders in accordance with the provisions of Section 242 of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, the undersigned have subscribed this document on the date
set forth below.
Dated: August 19, 1998 AIM GROUP, INC.
By: /s/PAUL R. ARENA
----------------
Paul R. Arena
President
By: /s/LEIGH S. ZOLOTO
-------------------
Leigh S. Zoloto
Secretary
2
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000928032
<NAME> AIM GROUP, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 16,933
<SECURITIES> 0
<RECEIVABLES> 223,961
<ALLOWANCES> 0
<INVENTORY> 162,909
<CURRENT-ASSETS> 425,362
<PP&E> 4,896,708
<DEPRECIATION> 282,262
<TOTAL-ASSETS> 5,105,725
<CURRENT-LIABILITIES> 1,141,134
<BONDS> 1,109,038
0
0
<COMMON> 39,801
<OTHER-SE> 2,815,752
<TOTAL-LIABILITY-AND-EQUITY> 5,105,725
<SALES> 306,075
<TOTAL-REVENUES> 306,075
<CGS> 205,315
<TOTAL-COSTS> 416,231
<OTHER-EXPENSES> 166,401
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,515
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (110,156)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110,156)
<EPS-PRIMARY> (0.083)
<EPS-DILUTED> 0
</TABLE>
