Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
YEAR ENDED DECEMBER 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From _____ to _____
Commission file number 33-82468
AIM GROUP, INC.
-----------------------------------------------------------------------------
(Exact name of small business issuer in its charter)
Delaware 13-3773537
--------------------------------- -------------------
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
2001 W. Sample Road, Suite 300
Pompano Beach, Florida 33064
--------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954)972-9339
-------------
The undersigned registrant hereby amends the following item of its
Annual Report on Form 10-KSB for the year ended December 31, 1997, as
set forth in the pages attached hereto:
Part I - Item 7 - Financial Statements - name and conformed
signature of independent auditor on page F-1
Signatures - Signature page with conformed signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
AIM GROUP, INC.
By: /s/ PAUL R. ARENA
---------------------
Paul R. Arena
Chairman of the Board, Chief Executive
Officer and President
Date: April 30, 1998
<PAGE>
Amendment No. 1 to AIM Group, Inc. Annual Report
on Form 10-KSB for the year ended December 31, 1997
---------------------------------------------------
The Annual Report on Form 10-KSB of AIM Group, Inc. (the "Company") for
the year ended December 31, 1997, as filed with the Securities and Exchange
Commission on March 31, 1998, inadvertently did not include the name and
conformed signature of the independent auditor of the Company in the
Independent Auditor's Report set forth as page F-1 of the audited financial
statements filed pursuant to Item 7 of Part II of the Form 10-KSB and attached
thereto. Furthermore, the Form 10-KSB inadvertently did not include the
signature page with conformed signatures required by the form. Accordingly,
set forth below is the amended Item 7 of the Form 10-KSB and set forth on the
attached pages are the related financial statements and the Form 10-KSB
signature page.
PART II
Item 7. FINANCIAL STATEMENTS
The financial statements of the Company and the Report of Independent Auditors
thereon are set forth elsewhere in this report.
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
AIM GROUP, INC. AND SUBSIDIARIES
December 31, 1997 and 1996
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
AIM Group, Inc.
We have audited the accompanying consolidated balance sheets of AIM Group,
Inc. as of December 31, 1997 and 1996 and the related consolidated statements
of operations, stockholders' equity and cash flows for the years ended
December 31, 1997, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AIM Group,
Inc. as of December 31, 1997 and 1996 and the results of its operations and
its cash flows for the years ended December 31, 1997, 1996 and 1995 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Notes A and B to the
financial statements, the Company has incurred continuing losses from
operations, has insufficient cash flow from operations, has substantial
non-earning assets and is dependent on very few customers. These items raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters are also discussed in Notes A and
B. The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
/s/ M. A. CABERA & COMPANY PA
-----------------------------
M.A. Cabera & Company PA
Plantation, Florida
March 13, 1998
F-1
<PAGE>
AIM Group and Subsidiaries
CONSOLIDATED BALANCE SHEETS
"December 31, 1997 and 1996"
<TABLE>
<CAPTION>
1997 1996
----------- -----------
CURRENT ASSETS
<S> <C> <C>
Cash $ 9,898 $ 70,342
Accounts receivable - trade 368,832 504,864
Accounts receivable - affiliate and other - 564
Inventories 202,155 160,770
Prepaid expenses 6,967 18,529
----------- -----------
Total current assets 587,852 755,069
RESOURCE PROPERTY 4,000,373 3,995,373
PROPERTY, PLANT AND EQUIPMENT - Net 572,711 557,059
OTHER ASSETS 40,511 46,836
----------- -----------
$5,201,447 $5,354,337
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 630,692 $ 281,454
Receivable financing liability 277,441 324,293
Current portion of long-term debt 80,954 14,960
Accrued expenses 46,062 96,111
----------- -----------
Total current liabilities 1,035,149 716,818
LONG-TERM DEBT, less current portion 93,091 76,073
CONVERTIBLE NOTES PAYABLE 1,050,000 1,050,000
COMMITMENTS - -
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 3,971,107 outstanding in 1997
and 3,978,766 in 1996. 39,801 39,801
Additional paid in capital 4,222,809 4,222,809
Common stock held in treasury - 8,946 shares in 1997 and
1,287 shares in 1996 (6,876) (1,400)
Accumulated deficit (1,232,527) (749,764)
----------- -----------
3,023,207 3,511,446
----------- -----------
$5,201,447 $5,354,337
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
AIM Group and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
"For the years ended December 31, 1997 , 1996 and 1995"
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
SALES $2,316,472 $3,092,278 $2,399,493
COST OF GOODS SOLD 1,795,780 2,148,191 1,692,943
----------- ----------- -----------
GROSS PROFIT 520,692 944,087 706,550
EXPENSES
General and administrative 575,973 791,826 673,105
Selling and marketing 157,781 270,612 132,532
Write-off of investment - abandoned project - 93,396 -
Interest 189,872 131,429 162,505
Depreciation and amortization 79,829 72,487 47,249
----------- ----------- -----------
1,003,455 1,359,750 1,015,391
----------- ----------- -----------
Loss before income taxes (482,763) (415,663) (308,841)
Income taxes - - -
----------- ----------- -----------
NET LOSS $ (482,763) $ (415,663) $ (308,841)
=========== =========== ===========
Net loss per share $ (0.12) $ (0.10) $ (0.08)
=========== =========== ===========
Weighted average shares outstanding 3,958,243 3,960,158 3,672,894
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
AIM Group and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
"For the years ended December 31, 1997 , 1996 and 1995"
<TABLE>
<CAPTION>
Additional
Common Paid-in Treasury Accumulated
Shares Stock Capital Stock Deficit Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances - December 31, 1994 1,000 $ 10 $ 90 $ - $ (25,260) $ (25,160)
Issuance of 3,898,929 shares of
common stock upon merger and
cancellation of original shares issued (1,000) (10) (90) (100)
3,898,929 38,989 4,022,185 (11,575) - 4,049,599
Issuance of stock during December
1995 relating to the exercise of options
and warrants 214,536 2,146 128,073 - - 130,219
Net loss for the year - - - - (308,841) (308,841)
------------ ------------ ------------ ------------ ------------ ------------
Balances - December 31, 1995 4,113,465 41,135 4,150,258 (11,575) (334,101) 3,845,717
Issuance of 80,000 shares 80,000 800 81,992 - - 82,792
Purchase of 1,287 shares for treasury - - - (1,400) - (1,400)
Cancellation of 213,412 shares of
treasury stock (213,412) (2,134) (9,441) 11,575 - -
Net loss for the year - - - - (415,663) (415,663)
------------ ------------ ------------ ------------ ------------ ------------
Balances - December 31, 1996 3,980,053 39,801 4,222,809 (1,400) (749,764) 3,511,446
Purchase of 79,088 shares for treasury - - - (30,476) - (30,476)
Sale of 71,429 shares held in treasury - - - 25,000 - 25,000
Net loss for the year - - - - (482,763) (482,763)
------------ ------------ ------------ ------------ ------------ ------------
Balances - December 31, 1997 3,980,053 $ 39,801 $ 4,222,809 $ (6,876) $(1,232,527) $ 3,023,207
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AIM Group and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
"For the years ended December 31, 1997 , 1996 and 1995"
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
NET LOSS $ (482,763) $ (415,663) $ (308,841)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 79,829 72,487 47,249
Changes in current assets and liabilities:
Decrease (Increase) in accounts receivable 136,596 195,789 (341,714)
(Increase) in inventories (41,385) (7,741) (79,007)
Increase (decrease) in receivable financing liability (46,852) (150,922) 475,215
Increase in short term loan 96,152 - -
Increase (decrease) in accounts payable
and accruals 299,189 (86,891) 90,693
Other 7,171 9,140 (22,892)
----------- ----------- -----------
Net cash provided (used) by operations 47,937 (383,801) (139,297)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (95,481) (129,130) (148,751)
(Increases) decreases in other assets 6,325 21,392 (22,564)
Additions to resource property (5,000) (3,599) (15,522)
----------- ----------- -----------
Net cash (used) by investing activities (94,156) (111,337) (186,837)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock - - 141,894
Stock subscription received - - 82,792
Proceeds from convertible note - 300,000 750,000
Cash balances of merged entities - - 92,759
Receivables from affiliates eliminated upon merger - - (241,583)
Reductions of notes payable - - (325,000)
Long-term debt financing - 21,070 84,433
Repayment of long-term debt (8,749) (14,470) -
Purchase of stock for treasury - net (5,476) (1,400) -
Loans received - net - - -
Advances to affiliated company, net of repayments - - -
----------- ----------- -----------
Net cash provided (used) by financing activities (14,225) 305,200 585,295
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (60,444) (189,938) 259,161
Cash, beginning of period 70,342 260,280 1,119
----------- ----------- -----------
Cash, end of period $ 9,898 $ 70,342 $ 260,280
=========== =========== ===========
</TABLE>
F-5
<PAGE>
AIM Group and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
"For the years ended December 31, 1997 , 1996 and 1995"
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
<S> <C> <C> <C>
Interest paid $ 172,968 $ 129,395 167,851
=========== =========== ===========
Net cash effects of merger as of March 31, 1995:
Increases in assets and liabilities
Trade accounts receivable $ 129,723
Inventories 74,022
Prepaid expenses 19,417
Property, plant and equipment 398,914
Resource property 3,979,345
Other assets 45,666
Accounts payable (368,500)
Accrued expenses (77,500)
Other (2,764)
-----------
4,198,323
Add cash balances of merged companies 92,759
Less receivables from merged entities - eliminated in merger (241,583)
-----------
$4,049,499
===========
Value attributed to common stock upon merger $4,046,074
Less cost of treasury stock - assumed in merger (11,575)
-----------
$4,034,499
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements are presented assuming the Company will
continue as a going concern which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. The
Company has incurred losses since its inception and there is no
guarantee that the Company will generate sufficient revenues from its
proposed products and operations to generate a profit. The financial
statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern. Also see Note B.
The financial statements are reported in (U.S. Dollars) in accordance
with generally accepted accounting principles under the jurisdiction of
the United States and there are no material differences with Canadian
generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements contain the accounts of the
Company and its subsidiaries, HeatShield Technologies, Inc. ("HTI"),
United Minerals Corp. of Arkansas ("UMC(AR)"), United Minerals Corp. of
Arizona ("UMC(AZ)"), and HST Capital Corporation ("HST"). All
subsidiaries are wholly-owned. All significant intercompany transactions
and balances have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash and/or cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventories at December
31, 1997 and 1996 consist of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Finished Goods $ - $ 28,513
Raw materials 141,926 76,421
Klannerite(R) Ore 48,645 48,645
Spare parts and supplies 11,584 7,191
-------- --------
$202,155 $160,770
======== ========
</TABLE>
F-7
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE A - CONTINUED
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost for financial reporting
purposes and are depreciated utilizing the straight-line method over
their estimated economic lives. Significant additions and betterments
are capitalized. Expenditures for maintenance, repairs and minor
renewals are charged to operations as incurred. The lives utilized for
depreciation are summarized as follows:
<TABLE>
<CAPTION>
Years
<S> <C>
Building 39
Plant equipment 10
Engineering and start up 5
Laboratory equipment 7
Furniture and office equipment 5-7
</TABLE>
TRADEMARKS AND PATENTS
The Company has received the trademark registration for the product name
Klannerite(R) in 1993. The Company was granted a patent on the Photon
Diffusive Coating November 6, 1996. Trademarks and patents will be
amortized over 10 years. The Company's trademarks are: AIM GroupR, the
Corporate entity Uni-KoteR, the UMC(AR) marketing label; and
Klannerite(R), the rock from UMC (AZ)'s Viva Luz Mine.
DEFERRED START-UP
Deferred start-up costs associated with the surface modification
business in Arkansas are being amortized over sixty months.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share are based on the weighted average shares
outstanding during the year. The preferred stock, stock options and
warrants have not been factored into the computation of loss per share
because their effect is anti-dilutive.
MAJOR CUSTOMERS
The Company sold products from its surface modifications facility
representing more than 10% of its revenues for the years ended December
31, 1997 and 1996, to a single customer in the amount of 67% and 83%
respectively. In addition, the sales to the three largest customers
accounted for 92% of total sales in 1997.
F-8
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE A - CONTINUED
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
NOTE B - GOING CONCERN
As shown in the accompanying financial statements, the Company has recurring
losses from operations. In addition, the Company has not been successful in
the development of its resource property. Due to the lack of cash flow the
Company was unable to continue to invest in and exploit the property and there
is uncertainty in the potential market for the deposit. There is no assurance
that the resource property will be fully recoverable at these levels.
Management believes that alternative applications have been identified and it
is the recommendation of the Board of Directors that further investigation of
these alternatives is warranted. Although the Company's surface modification
business in Arkansas has been profitable, it is reliant on very few customers.
Unless the Company is successful in diversifying and expanding its customer
base, the prospects for this line of business remains uncertain. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
Management is seeking alternative sources of equity financing that would allow
the marketing and diversification effort for the surface modification business
as well as the continued research and development effort for the resource
property. There can be no assurance that the Company will be successful in its
efforts to obtain additional financing. If the Company is not successful in
its efforts, it may be necessary to undertake such other actions as may be
appropriate to preserve asset value. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
NOTE C - OPERATIONS/NATURE OF BUSINESS
AIM Group is the parent company that provides centralized management, finance,
long range planning, accounting and administration to two principal operating
entities. These operations are a surface modification facility and a mining
lease. The Company has discontinued manufacture of the coatings and did not
actively market these coatings during 1997.
AIM Group shares are listed on the Vancouver Stock Exchange and Over the
Counter - Bulletin Board (OTC-BB). The Company's common stock is currently
quoted under the symbols AGDU.V and AIMG, respectively.
F-9
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE C - CONTINUED
UNITED MINERALS ARKANSAS (UMC(AR)) SURFACE MODIFICATION PLANT
UMC(AR) is the Company's core business and has completed its third full
year of operations as of December 31, 1997. It operates a surface
modification facility, both as principal and as a toll processor, for
industrial minerals used as fillers in the rubber and plastics
industries. The plant commenced operations in April 1994. Since
inception UMC(AR) has carried out leasehold improvements and the
engineering, procurement, and construction of machinery and equipment.
UMC(AR) purchased the land and building in 1995.
The UMC(AR) Malvern facility has been designed to treat industrial
fillers such as silica, clay, mica, alumina trihydrate, wollastonite,
magnesium hydroxide and microspheres with silanes. The treated products
are used in the plastics and elastomer industries. Silanes or
"organosilicon chemicals" were recognized as superior coupling agents
approximately 40 years ago.
Typical customers of UMC(AR) are compounders in the plastics and
elastomer industries seeking to improve the physical mechanical and
electrical properties and the performance of their products. Through the
application of small quantities of organosilicon chemicals, UMC(AR) can,
through surface modification, appreciably improve the physical
characteristics of the filler resin composites. Improvements in
composite properties that are desired by customers are: (i) lower oil
absorption, (ii) less moisture ingress or accumulation, (iii) increased
tensile strength, and (iv) better mixing viscosity. Composites
containing surface modified fillers are used in the electronics,
communications, transportation, construction materials, and appliance
industries.
The use of surface modified fillers may require that customers change
their formula or production method in order to achieve maximum benefit
from the modified filler materials. As such, there may be a prolonged
interval of business development during which the customer undertakes
testing and evaluation prior to a change in materials source. UMC(AR)
has successfully supplied samples to a number of customers and sample
evaluation is ongoing. Additionally, UMC(AR) has successfully carried
out surface treatment of test quantities of opacifying materials.
UMC(AR) operated one shift per day during 1997 and treated approximately
1,900 tons of commercial products at the Malvern plant. Management
estimates that the plant's capacity is approximately 7,000 tons per
year. The plant currently has two mixing and packaging lines, and
effective doubling of capacity providing for treatment of a diverse
product mix, is under consideration. Approximately seven full time
employees currently work at the plant.
F-10
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE C - CONTINUED
HEATSHIELD TECHNOLOGIES, INC. (HTI)
HTI is in the development stage with a limited history of operations.
HTI carried our reserve analysis, surface mining, and processing of a
silica/kaolinite rock, called "Klannerite(R)", at a mining property
locally referred to as the "Viva Luz Mine" located in Mohave County,
Arizona.
UNITED MINERALS CORPORATION ARIZONA - VIVA LUZ MINE
UMC(AZ), a wholly owned subsidiary, holds a mining lease (Lease) which
expires March, 2004 with New Mexico and Arizona Land Company, the owner
of the mining rights. The Lease is subject to a further term in
perpetuity provided the property is in operation and is generating
minimum royalties.
The Lease permits the exploration of the property and removal of the
mineral over the remaining term. The Lease calls for the payment of
production royalty of 5% of the gross consideration obtained for the
mineral less transportation costs, subject to minimum royalty payment of
$5,000 per year.
The Company has achieved its objective of identifying alternative
applications for "Klannerite(R)". Written, qualified and independent
reports have been generated under acceptable American Society for
Testing and Materials ("ASTM") standards and verified that calcined
"Klannerite(R)" is an excellent white pozzolan. Pozzolan materials are
used as an aggregate additive in concrete to increase compressive
strength in concrete and to stop alkali reactivity. Further testing and
marketing of pozzolan applications will be performed this year.
To date there have been no commercial sales to these markets.
F-11
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE D - PROPERTY AND EQUIPMENT
Property plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Plant $108,000 $108,000
Building improvements 177,328 98,442
Plant and lab equipment 310,233 306,781
Engineering costs 66,412 66,412
Vehicles 37,044 37,044
Furniture and Equipment 100,379 93,920
--------- ---------
799,396 710,599
Less accumulated depreciation (236,685) (163,540)
--------- ---------
562,711 547,059
Land 10,000 10,000
--------- ---------
$572,711 $557,059
========= =========
</TABLE>
NOTE E - OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Patents and Trademarks $ 28,392 $ 28,392
Unamortized portion of deferred start up costs 8,566 15,197
Deposits and other 3,553 3,247
--------- ---------
$ 40,511 $ 46,836
========= =========
</TABLE>
NOTE F - RESOURCE PROPERTY
The Company's resource property, located in Arizona, consists of mineral
leases and deposits. This property was valued based on appraisal as part of
the merger which occurred March 31, 1995. The following describes the property
and related reserves of rock containing crystobalite, quartz and kaolinite.
F-12
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE F - CONTINUED
MINERAL LEASE - VIVA LUZ DEPOSIT
The Viva Luz Mine, located in Mohave County in Arizona, is a
crystobalite, quartz and kaolinite deposit with proven drilled reserves.
The deposit has been classified into three different grades. The whitest
grade is denoted as K1, the off white grade is denoted as K2 and the
third, lowest grade as K3.
<TABLE>
<CAPTION>
The following is a table showing the grade and applicable estimated tons
of the material deposit:
Grade Tons
<S> <C>
K1 (proven and probable) 340,000
K2 and K3 1,350,000
Total Tons 1,690,000
</TABLE>
The average estimated process recovery of the material is 82%, and the
recovery loss has not been reflected in the tonnage shown above.
<TABLE>
<CAPTION>
The carrying value of the resource property including the prepaid
royalties is as follows:
<S> <C>
Resource property purchase price $3,935,798
Pre-paid royalties 64,575
----------
Resource property $4,000,373
==========
</TABLE>
MINERAL MINED, PRODUCED AND SOLD IN 1992 THROUGH 1997
In 1992 the 222.5 tons of K1 processed during the year 1992 was
considered to be a trial production run. 7.5 tons of the 222.5 tons
produced was distributed as samples and 2.5 tons were sold. During 1997
a nominal number of samples aggregating approximately 250 pounds were
sent to prospective customers from whom the Company received a positive
response. The remaining 212.5 tons are being held in inventory.
No sales of Klannerite(R) have been reported for 1995, 1996 or 1997.
F-13
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE G - LONG-TERM DEBT
The following is a summary of long-term debt at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Mortgage payable, secured by Arkansas
manufacturing facility, payable in
monthly installments of approximately
$900 including interest at 10.25%. $ 54,546 $ 60,309
Loan payable - City of Malvern,
Arkansas Revolving Loan Fund secured by
equipment and second mortgage on real
estate; payable in monthly installments
of $2,921.72 including interest at 6%. 96,152 -
Equipment loans payable, secured by
vehicle and equipment, payable in
monthly installments of approximately
$1,061 including interest at 10.2 % to
14.2%. 23,347 30,724
--------- ---------
174,045 91,033
Less amounts due within one year 80,954 14,960
--------- ---------
$ 93,091 $ 76,073
========= =========
</TABLE>
Maturities of long-term debt over the next five years are as follows:
<TABLE>
<CAPTION>
Year ended
December 31,
<S> <C>
1998 $ 80,954
1999 31,861
2000 34,271
2001 26,959
---------
$174,095
=========
</TABLE>
The Company also has a factoring arrangement for its receivables arising from
its sale of products from its Arkansas toll facility. The factor has a
security interest in all factored accounts receivable. The total interest and
factoring costs for 1997 and 1996 were $71,183 and $85,741, respectively.
F-14
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE H - CONVERTIBLE NOTES PAYABLE
On April 11, 1997 and May 20, 1997 the Company executed an Amendment (the
"First Amendment") with three related parties (see "Related Parties") who are
note holders of the Company's Series A - 3.5% Convertible Promissory Notes
(the "Notes") having an aggregate face value of $1,050,000 subject to approval
of the Vancouver Stock Exchange which was received on June 18, 1997. The first
Amendment included provisions which: a) extended the maturity date of the
notes to March 31, 1998; b) increased the annual interest rate to 10%,
effective January 1, 1997; c) changed the conversion price to $.70 per share;
and d) agreed that the Company will not, without the prior approval of the
holders of at least 80% of the principal amount of Notes outstanding, incur
any indebtedness which ranks senior in priority to payment to the note
holders. The Notes remain unsecured.
On March 23, 1998, the Company executed an Amendment (the "Second Amendment")
with the three related parties who are note holders of the Notes having an
aggregate face value of $1,050,000 subject to approval by the Vancouver Stock
Exchange. The Second Amendment includes provisions which: a) extends the
maturity date of the Notes to December 31, 1998; b) maintain the annual
interest rate at 10%; c) maintain the conversion price at $.70 per share; and
d) provides that the note holders may not convert their notes prior to August
1, 1998. If the Company is successful in closing a proposed equity offering in
mid-1998, there will be a mandatory conversion if the closing bid price of the
Company's common stock on the Vancouver Stock Exchange averages in excess of
$1.50 for a ninety day period after the closing. In addition, the note holders
have agreed to be bound by certain provisions restricting the sale of any
shares issued upon conversion. The Notes remain unsecured.
NOTE I - STOCK OPTIONS AND WARRANTS
The Company had various non-qualified incentive stock options and warrants
that had been issued to employees, directors and investors. Most of these
options and warrants were issued prior to the merger and were converted to
Company options and warrants as a result of the merger. All of these options
and warrants have expired. There were no exercises of options or warrants
during 1996 and 1997.
In 1997, the Company established a new non-statutory stock option plan for
employees, officers and directors. During 1997, the Board of Directors
approved the issuance of options to purchase 220,000 shares of the Company's
stock at $.30 per share to certain directors, officers and employees. The
options expire ten years from the date of grant and have a four year vesting
period at 25% per year.
F-15
<PAGE>
AIM Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE J - LEASE COMMITMENTS
The Company's corporate headquarters are leased pursuant to an operating lease
expiring October 31, 1998. Future lease payments at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Year ending
December 31, Amount
------------ --------
<S> <C>
1998 $ 17,333
========
</TABLE>
NOTE K - RELATED PARTY TRANSACTIONS
The following transactions with the Corporation are identified as transactions
with related parties.
PRIVATE PLACEMENT OF CONVERTIBLE 3 1/2% PROMISSORY NOTES
The Company announced on November 15, 1995 a private placement in the
form of 3 year convertible 3 1/2% Promissory Notes ("Convertible Notes")
having a face value of $1,050,000 subject to the approval of the
Vancouver Stock Exchange. (See Note H). The following related
individuals and affiliated concerns acquired the Convertible Notes as
follows:
NORTHERN FEDERAL MINERALS LLC Paul R. Arena, an officer and director of
the Company is a principal in this Michigan limited liability
corporation. On November 13, 1995 Northern Federal Minerals LLC
purchased $450,000 principal amount of the Convertible Promissory Notes.
BERNARD R. KOSSAR Mr. Kossar, on December 20, 1995 purchased $300,000
principal amount of the Convertible Promissory Notes.
DR. AUDREY L. BRASSWELL A director of the Company, on May 20, 1997
purchased $300,000 principal amount of Convertible Promissory Notes
issued by the Corporation.
NOTE M - INCOME TAXES - NET OPERATING LOSSES
The Company has net operating loss carryforwards available to offset future
taxable income approximating $2,800,000 expiring through the year 2011. Due to
the merger described in Note B, the net operating losses are subject to
certain limitations, computed on an annual basis.
F-16
<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.
Registrant
Dated: March 31, 1998 By: /s/ PAUL R. ARENA
---------------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Dated: March 31, 1998 By: /s/ PAUL R. ARENA
---------------------
Paul R. Arena,
Chairman of the Board,
Chief Executive Officer,
President and Director
(Principal Executive
Officer)
Dated: March 31, 1998 By: /s/ LEIGH S. ZOLOTO
-----------------------
Leigh S. Zoloto
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial
Officer)
Dated: March 31, 1998 By: /s/ JAMES L. AUSTIN
-----------------------
James L. Austin
Director
Dated: March 31, 1998 By: /s/ A. L. BRASWELL
----------------------
A.L. Braswell
Director
Dated: March 31, 1998 By: /s/ E. W. PURCELL
---------------------
E.W. Purcell
Director
