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 June 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)
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 July 31, 1998 was
3,980,053
Transitional Small Business Disclosure Format: [ ] Yes [X] No
<PAGE>
AIM GROUP, INC.AND SUBSIDIARIES
INDEX
Page(s)
-------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of
Operations - Three Months and Six
Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows - Three Months and Six
Months Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of 10
Security Holders
Item 5 Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
2
<PAGE>
PART 1. FINANCIAL INFORMATION
AIM GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 38,371 $ 9,898
Accounts receivable
Trade 424,595 368,832
Inventories 134,694 202,155
Prepaid expenses 12,068 6,967
------------ ------------
Total current assets 609,728 587,852
PROPERTY, PLANT AND EQUIPMENT 881,606 809,396
Less allowances for depreciation (275,486) (236,685)
------------ ------------
606,120 572,711
RESOURCE PROPERTY 4,021,523 4,000,373
OTHER ASSETS 68,048 40,511
------------ ------------
$ 5,305,419 $ 5,201,447
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 615,820 $ 630,692
Receivable financing liability 267,222 277,441
Note payable 150,000 0
Current portion of long-term debt 149,068 80,954
Accrued expenses 35,781 46,062
------------ ------------
Total current liabilities 1,217,891 1,035,149
LONG-TERM DEBT, less current portion 71,819 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 0 0
Common stock; 12,000,000 shares authorized;
$.01 par value; 3,980,053 shares issued and
3,971,107 shares outstanding at December 31, 1997
and June 30, 1998. 39,801 39,801
Additional paid in capital 4,222,809 4,222,809
Common stock held in treasury - 8,946 shares (6,876) (6,876)
Accumulated deficit (1,290,025) (1,232,527)
------------ ------------
2,965,709 3,023,207
------------ ------------
$ 5,305,419 $ 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.
See notes to condensed consolidated financial statements.
3
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 548,422 $ 615,478 $ 1,326,611 $1,187,570
Costs and expenses
Cost of products sold 417,763 486,939 964,118 915,477
Selling and administrative expenses 147,247 168,131 270,602 395,107
Interest 51,184 48,861 105,873 98,643
Depreciation and amortization 19,401 19,400 38,801 38,801
------------ ------------ ------------ -----------
635,595 723,331 1,379,394 1,448,028
------------ ------------ ------------ -----------
Earnings (loss) before taxes (87,173) (107,853) (52,783) (260,458)
Income taxes 0 0 0 0
------------ ------------ ------------ -----------
Net earnings (loss) $ (87,173) $ (107,853) $ (52,783) $ (260,458)
============ ============ ============ ===========
Net earnings per share $ (0.022) $ (0.027) $ (0.013) $ (0.066)
============ ============ ============ ===========
Weighted average shares outstanding 3,971,107 3,964,052 3,971,107 3,971,408
============ ============ ============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS $ (94,857) $ 8,902 $ (47,472) $ (12,839)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (47,316) (7,050) (72,210) (7,050)
Increases in other assets and
resource property (34,192) 0 (48,687) (4,327)
------------ ------------ ------------ -----------
Net cash provided by investing
activities (81,508) (7,050) (120,897) (11,377)
------------ ------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in debt 184,714 (37,539) 196,842 (41,656)
------------ ------------ ------------ -----------
Net cash provided by financing
activities 184,714 (37,539) 196,842 (41,656)
------------ ------------ ------------ -----------
NET INCREASE (DECREASE) $ 8,349 $ (35,687) $ 28,473 $ (65,872)
============ ============ ============ ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
June 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-QSB and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 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>
June 30, December 31,
1998 1997
--------- ---------
<S> <C> <C>
Finished Goods $ - 0 - $ - 0 -
Raw material 79,719 141,926
Klannerite Ore 48,645 48,645
Spare parts and supplies 6,330 11,584
--------- ---------
$ 134,694 $ 202,155
--------- ---------
</TABLE>
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 COMPARED TO QUARTER ENDED JUNE 30,1997
Net sales of AIM Group, Inc. (the "Company") for the second quarter of
1998 amounted to $548,422, a decrease of $67,056 from net sales of $615,478 in
the prior year's comparable quarter. The decline in net sales was primarily
attributable to a decline in demand for the surface treatment of fire
retardant materials. Cost of products sold amounted to $417,763 and $486,939
in the second quarters of 1998 and 1997, respectively, resulting in a gross
margin of 24% in the second quarter of 1998 compared to a 21% gross margin in
the second quarter of 1997. The increase in the gross margin was primarily
attributable to lower product material costs and an increase in higher margin
toll business.
Selling and administrative expenses during the second quarter were
$147,247, or 27% of net sales, compared to $168,131, or 27% of net sales, in
the second quarter of 1997. Though these expenses were flat as a per cent of
sales, there were approximately $ 20,000 in seasonal and non-recurring
expenses in the current quarter that were not in the 1997 quarter. Such
seasonal and non-recurring expenses included expenses relating to the Annual
Meeting of Shareholders, executive officer relocation and a plant quality
improvement project.
Interest expenses were $51,184, or 9% of net sales, in the second
quarter of 1998 compared to $48,861, or 8% of net sales, in the second quarter
of 1997. The increase in interest expenses as a percent of net sales was
attributable to additional financing required during the current quarter.
Primarily as a result of the above, the Company incurred a net loss of
$87,173, or $.022 per share, in the quarter ended June 30, 1998, compared to a
net loss of $107,853, or $.027 per share, in the quarter ended June 30, 1997.
7
<PAGE>
The net loss in the quarter ended June 30, 1998 compares unfavorably
with the net profit of $34,390, or $.009 per share, in the quarter ended March
31, 1998. The primary reasons for the performance decline was a decline in
sales of $ 229,767 from $778,189 to $ 548,422 and incurrence of approximately
$ 20,000 in seasonal and non-recurring items not incurred in the quarter ended
March 31, 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net sales of the Company for the six months ended June 30, 1998 amounted
to $1,326,611 an increase of $139,041 from the net sales of $ 1,187,570 for
the six months ended June 30, 1997. The majority of the increase was due to
strong sales performance in the first quarter of 1998 attributable to a large
increase in demand for surface treatment of fire retardant materials. Sales in
the first quarter of 1998 were $778,189, an increase of $ 206,097 compared to
sales of $572,092 for the first quarter of 1997. Cost of products sold
amounted to $964,118 and $915,477 for the six months ended June 30, 1998 and
1997, respectively, resulting in a gross margin of 27% for the first six
months of 1998 compared to 23% for the comparable period in 1997. The increase
in gross margin is primarily attributable to greater manufacturing
efficiencies achieved at higher sales levels and a decline in certain major
material costs used in a main product line.
Selling and administrative expenses for the six months ended June 30,
1998 were $270,602, or 20% of net sales, compared to $395,107, or 33% of net
sales, in the six months ended June 30, 1997. The significant decline in the
1998 period is primarily due to major cost reductions in the areas of
personnel and rental space implemented in the last half of 1997.
Interest expenses were $105,873, or 8% of net sales, in the six months
ended June 30, 1998 compared to $98,643, or 8% of net sales for the comparable
period in 1997. While interest expense remained relatively flat the Company
did obtain additional financing during the six months ended June 30,1998 not
present in the same period of 1997. This cost was offset by lower interest
8
<PAGE>
charges on existing debt such as factoring of receivables resulting in little
change for this expense category.
Primarily as a result of the above, the Company incurred a net loss of
$52,783, or $.013 per share, in the six months ended June 30, 1998, compared
to a net loss of $260,458, or $.066 per share, in the six months ended June
30, 1997.
LIQUIDITY AND SOURCES OF CAPITAL
The Company incurred a negative cash flow from operations of $94,857 in
the second quarter of 1998, compared to a positive cash flow from operations
of $8,902 in the second quarter of 1997. As a percent of sales, negative cash
flow was 17% in the current quarter compared to 1% for the second quarter of
1997. The negative cash flow for the current period was primarily attributable
to the net loss of 87,173 and larger payments to a primary supplier. As of
June 30, 1998, the Company had a working capital deficit of $608,163.
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. During the current quarter the Company obtained additional
financing from Dr. Audrey L. Braswell, a Company director, for $150,000 as
well as an inventory line of credit from an external lender which had a
balance of $83,442 at June 30, 1998. The terms of the $ 150,000 loan are
interest only at the prime rate payable monthly, and the term of the loan is
for one year with the entire principal due on May 12, 1999. The inventory
credit line terms are an interest rate of 2% monthly with a credit line that
will fluctuate based on monthly inventory valuations. These actions enabled
9
<PAGE>
the Company to meet its current expenses and pursue research and development
work related to its mining operation in Arizona.
----------------
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
The Company conducted its Annual Meeting of Shareholders on June 15,
1998.
Paul R. Arena, James L. Austin, Dr. Audrey L. Braswell, Jr. and Ernest
W. Purcell were elected to serve as members of the Board of Directors of the
Company for one year or until their successors are elected. Mr. Arena was
elected by a vote of 2,763,485 shares for, no shares against, with 228 shares
abstaining. Mr. Austin was elected by a vote of 2,683,415 shares for, none
against and 2,527 shares abstaining. Mr. Purcell was elected by a vote of
2,684,914 for, none against and 2,299 shares abstaining. Dr. Braswell was
elected by a vote of 2,760,980 shares for, none against and 2,527 abstaining.
The proposed ratification of the selection of M. A. Cabrera & Company,
P. A., as the Company's independent accountants for the current fiscal year
was approved by a vote of 3,081,252 shares for, no shares against, with 86
shares abstaining. However, on June 24, 1998, as reported in the Company's
Form 8-K filed on July 23, 1998, that firm resigned as the Company's
certifying accounting firm. The Company is now in the process of selecting a
new certifying accountant.
The proposed amendment to the Company's Certificate of Incorporation
providing for a one-for-three reverse stock split of the Company's outstanding
shares of Common Stock was approved by a vote of 2,668,644 shares for, 412,722
shares against, with 142 shares abstaining. The proposed reverse stock split
will become effective upon the close of business on the date of filing of an
Amendment to the Company's Certificate of Incorporation with the Delaware
Secretary of State. As of the date of the filing of this Quarterly Report and
10
<PAGE>
Form 10-QSB, the Company has not yet filed the Amendment with the Delaware
Secretary of State. The Company plans to file the Amendment during the quarter
ended September 30, 1998.
Item 5. OTHER INFORMATION
At the Company's Annual Meeting of Shareholders held on June 15, 1998,
shareholders approved a proposed amendment to the Company's Certificate of
Incorporation (the "Amendment") which will provide for a one-for-three reverse
stock split (the "reverse split") of the issued and outstanding shares of
Common Stock of the Company. The Reverse Split, which was subject to the
approval of the Vancouver Stock Exchange, will be effective upon the close of
business on the date of filing of the Amendment with the Delaware Secretary of
State and each certificate representing shares of Common Stock outstanding
immediately prior to the Reverse Split (the "Old Shares") will be deemed,
without any action on the part of shareholders, automatically to represent
one-third the number of shares of Common Stock after the Reverse Split (the
"New Shares"). The Company expects that the Reverse Split will be approved by
the Vancouver Stock Exchange and that the Company will file the Amendment with
the Delaware Secretary of State during the quarter ended September 30, 1998.
No fractional new shares will be issued as a result of the Reverse Split. In
lieu thereof, the number of shares issuable to each stockholder whose Old
Shares are not evenly divisible by three will be rounded up to the nearest
whole share. After the Reverse Split becomes effective, stockholders of record
will be requested to surrender certificates representing the Old Shares in
accordance with the procedures to be set forth in a letter of transmittal to
be sent by the Company to stockholders.
As discussed in the Company's Proxy Statement, dated May 13, 1998 and
used in connection with its Annual Meeting of Stockholders held on June 15,
1998, the Company was planning to conduct a public offering of its Common
Stock in connection with the proposed acquisition of another corporation
during the late summer or fall of 1998. Although the Company is engaged in
discussions regarding a possible acquisition of another corporation, the
Company presently does not plan to pursue a public offering transaction, but
11
<PAGE>
rather is exploring a possible private offering of its Common Stock designed
to raise capital to fund the possible acquisition and the Company's growth. No
assurance can be given that the Company will be able to successfully conduct
any such private offering.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibit is filed herewith:
EXHIBIT NO. DOCUMENT
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K. The Company filed a Form 8-K on July 23, 1998
reporting the resignation on June 24, 1998 of the Company's certifying
accountant.
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.
Aug 7, 1998 By: /s/PAUL R. ARENA
----------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
Aug 7, 1998 By: /s/LEIGH S. ZOLOTO
-------------------
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-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 38,371
<SECURITIES> 0
<RECEIVABLES> 424,595
<ALLOWANCES> 0
<INVENTORY> 134,694
<CURRENT-ASSETS> 609,729
<PP&E> 881,606
<DEPRECIATION> 275,486
<TOTAL-ASSETS> 5,305,419
<CURRENT-LIABILITIES> 1,217,891
<BONDS> 1,121,819
0
0
<COMMON> 39,801
<OTHER-SE> 2,925,908
<TOTAL-LIABILITY-AND-EQUITY> 5,305,419
<SALES> 548,422
<TOTAL-REVENUES> 548,422
<CGS> 417,763
<TOTAL-COSTS> 635,595
<OTHER-EXPENSES> 166,648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,184
<INCOME-PRETAX> (87,173)
<INCOME-TAX> 0
<INCOME-CONTINUING> (87,173)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87,173)
<EPS-PRIMARY> (0.022)
<EPS-DILUTED> 0
</TABLE>
