SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM 8-K/A No. 1
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 30, 1999
AIM GROUP, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-82468 13-3773537
---------------------------- ------------ ----------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
1000 Abernathy Road
Suite 1000
Atlanta, GA 30328
---------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (770) 668-0900
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K,
dated July 30, 1999, as set forth in the pages attached hereto:
Items 7(a) and 7(b) - Historical and Pro Forma
Financial Information
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/LEIGH S. ZOLOTO
------------------
Leigh S. Zoloto
Chief Financial Officer and
Secretary
Date: October 11, 1999
<PAGE>
The Current Report on Form 8-K of AIM Group, Inc (the "Company"), dated
July 30, 1999, and filed on August 11, 1999, reported the acquisition by the
Company on July 30, 1999, of (i) Enterprise Solutions Group, Inc., a Florida
corporation ("ESG"); and (ii) The Reddy Group, Inc., a Georgia corporation
("Reddy"). Items 7(a) and 7(b) of the report stated that the historical
financial statements of ESG and Reddy required under Rule 3-05 of Regulation
S-X, and the pro forma financial information required under Article 11 of
Regulation S-X would be filed no later than 60 days after the date by which
the Form 8-K was required to be filed. The purpose of this amendment is to
file such financial statements and information.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The following lists the historical financial statements of ESG attached
hereto: PAGE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Melamed Handy & Karp, LLP.......................... F-1
Balance sheets as of December 31, 1998
and 1997 ............................................... F-2
Statements of income and retained earnings for
the years ended December 31, 1998 and 1997 ............. F-3
Statements of retained earnings and cash flows
for the years ended December 31, 1998 and 1997 ......... F-4
Notes to financial statements ............................... F-5
Balance sheet as of June 30, 1999
(unaudited) ............................................ F-7
Statement of operations for the six months
ended June 30, 1999 (unaudited) ........................ F-8
Statement of cash flow for the six months
ended June 30, 1999 (unaudited) ........................ F-9
The following lists the historical financial statements of Reddy
attached hereto:
Report of Moore Stephens Tiller LLC ......................... F-10
Balance sheet as of December 31, 1998....................... F-11
Statements of income and retained earnings for
the years ending December 31, 1998 and 1997 ............ F-12
2
<PAGE>
Statements of cash flows for the years ended
December 31, 1998 and 1997 ............................. F-13
Notes to financial statements ............................... F-14
Balance sheet as of June 30, 1999
(unaudited) ............................................ F-18
Statement of operations for the six months
ended June 30, 1999 (unaudited) ........................ F-19
Statement of cash flows for the six month
ended June 30, 1999 (unaudited) ........................ F-20
(b) PRO FORMA FINANCIAL INFORMATION.
The following lists the pro forma financial information attached hereto:
Introduction................................................. F-21
Pro forma balance sheet dated June 30, 1999 ................. F-22
Pro forma statement of operations for the
year ended December 31, 1998 ........................... F-25
Pro forma statement of operations for the
six months ended June 30, 1999.......................... F-27
</TABLE>
3
<PAGE>
MELAMED HANDY & KARP, LLP.
CERTIFIED PUBLIC ACCOUNTANTS
12000 BISCAYNE BOULEVARD - SUITE 405
NORTH MIAMI, FLORIDA 33181-2725
AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS DADE: (305)895-9939
FLORIDA INSTITUTE OF BROWARD: (954)462-2452
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (305)891-5012
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Enterprise Solutions Group, Inc.
We have audited the accompanying balance sheets of Enterprise Solutions Group,
Inc. as of December 31, 1998 and 1997, and the related statements of income
and retained earnings, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
upon our audits.
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 that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Enterprise Solutions Group,
Inc. as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/MELAMED HANDY & KARP, LLP.
-----------------------------
MELAMED HANDY & KARP, LLP.
April 15, 1999
F-1
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
Current assets: 1998 1997
---------- -----------
<S> <C> <C>
Cash and cash equivalents $ 260,581 $ 88,582
Accounts receivable 29,080 25,639
Due from related parties - 4,261
---------- -----------
Total current assets 289,661 118,482
---------- -----------
Property and equipment, at cost:
Office furniture and equipment 16,880 16,880
Computer equipment and software 72,568 44,220
---------- -----------
89,448 61,100
Less accumulated depreciation (34,206) (15,166)
---------- -----------
55,242 45,934
---------- -----------
Other assets 1,420 1,420
---------- -----------
$ 346,323 $ 165,836
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 159,475 $ 54,002
Accrued expenses 24,756 8,102
Deferred revenue 28,019 -
Customer deposit 19,642 19,642
Due to related parties 4,412 19,969
---------- -----------
Total current liabilities 236,304 101,715
---------- -----------
Shareholders' Equity:
Common stock, no par value, $1 stated value;
10,000shares authorized; 200 shares
issued and outstanding 200 200
Retained earnings 109,819 63,921
---------- -----------
Total shareholders' equity 110,019 64,121
---------- -----------
$ 346,323 $ 165,836
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 1,305,405 $ 603,242
Cost of goods sold 937,380 406,794
------------ ------------
Gross profit 368,025 196,448
------------ ------------
Selling, general and administrative expenses:
Salaries and commissions 59,504 34,667
Rent 28,798 24,542
Travel and entertainment 28,375 6,947
Employee benefits 16,929 -
Telephone and communications 15,728 12,883
Consulting fees 23,850 -
Depreciation 19,040 11,583
Supplies and reference materials 15,194 14,979
Training 9,106 8,528
Other expenses 34,290 37,437
------------ ------------
250,814 151,566
------------ ------------
Income from operations 117,211 44,882
------------ ------------
Other income (expense):
Interest income 1,102 -
Interest expense (415) (320)
------------ ------------
687 (320)
------------ ------------
Net income 117,898 44,562
Retained earnings, at beginning of the year 63,921 19,359
Dividends to shareholders (72,000) -
------------ ------------
Retained earnings, at end of year $ 109,819 $ 63,921
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash provided by operating activities:
Cash received from customers $ 1,319,432 $ 615,336
Cash paid to employees and suppliers (1,036,476) (511,204)
Interest paid (415) (320)
Interest received 1,102 -
------------ ------------
Net cash provided by operating activities 283,643 103,812
------------ ------------
Cash used by investing activities:
Additions to property and equipment (28,348) (23,367)
Payments to related parties (11,296) (2,287)
------------ ------------
Cash used by investing activities (39,644) (25,654)
------------ ------------
Cash used by financing activities:
Dividends paid (72,000) -
------------ ------------
Cash used by investing activities (72,000) -
------------ ------------
Net increase in cash and cash equivalents 171,999 78,156
Cash and cash equivalents, at beginning of year 88,582 10,426
------------ ------------
Cash and cash equivalents, at end of year $ 260,581 $ 88,582
============ ============
Reconciliation of net income to net cash provided by operating activities:
Net income $ 117,898 $ 44,562
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 19,040 11,583
Provision for losses on accounts receivable 10,551 1,254
Increase in accounts receivable (13,992) (7,548)
Increase in accounts payable 105,473 26,678
Increase in accrued expenses 16,654 7,641
Increase in deferred revenue 28,019 -
Increase in customer deposit - 19,642
------------ ------------
Net cash provided by operating activities $ 283,643 $ 103,812
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
COMPANY ACTIVITIES- Enterprise Solutions Group, Inc. ("Company") a corporation
organized under the laws of the State of Florida provides implementation,
training and project management of computer software systems. The computer
software resold is purchased from vendors and is not customized.
CASH EQUIVALENTS- Included in the balance sheet as cash and cash equivalents
is $150,852 that is in an interest-bearing account. The balance is highly
liquid and readily convertible into cash.
REVENUE AND COST RECOGNITION- Revenues from the sale of computer software are
recognized when the product is delivered. Additionally, the Company also sells
blocks of time for client training. The revenue from such blocks of time is
deferred and recognized as income during the period in which the training
services are provided. The cost providing such training services is charged to
operations as incurred.
PROPERTY AND EQUIPMENT- Depreciation is provided on the straight-line method
over the estimated useful lives of the assets which range from three to seven
years.
MANAGEMENT ESTIMATES- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates, including estimates relating to assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
INCOME TAXES- The Company has elected to be taxed as a S-Corporation. Under
the provisions of Subchapter S all items of income and expense are included in
the income tax returns of the shareholders. As a result, there is no income
tax liability in the accompanying Balance Sheets and no provision for income
tax in the accompanying Statements of Income and Retained Earnings. It is the
policy of the Company to pay dividends to the shareholders in an amount
necessary to fund their Federal income tax liabilities related to the pass
through of income from the Company.
(Continued)
F-5
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
TRANSACTIONS WITH RELATED PARTIES:
At December 31, 1998, the Company owed $3,549 to a shareholder and $863 to a
corporation that is owned by the shareholder. At December 31, 1997, the
Company was owed $100 and $4,161 from its two shareholders, and owed $19,969
to a corporation that is owned by one of the Company's shareholders. These
balances are non-interest bearing and have no stated repayment terms.
The Company leased equipment from a corporation owned by one of the Company's
shareholders. The rental expense related to this lease aggregated $4,467 and
$2,680 for the years ended December 31, 1998 and 1997, respectively. The
Company also incurred $9,000 in consulting fees to one of the Company's
shareholders during the year ended December 31, 1997
COMMITMENTS AND CONTINGENCIES:
The Company leases its corporate offices under an operating lease that expires
in September 30,1999 and leases equipment under an operating lease with an
expiration date of February 28, 2001. Rent expense under these leases
aggregated $23,990 and $21,823 for the years ended December 31, 1998 and 1997,
respectively.
The remaining minimum future annual rental commitments under non-cancelable
operating leases through the end of existing leases in effect at December 31,
1998 are $15,485, $3,015 and $502 for the years ended December 31, 1999, 2000
and 2001, respectively.
ACCRUAL OF VACATION PAY:
In 1998, the Company adopted a policy of vesting the vacation earned by
employees as of the end of the year. The vacation can be taken in the
following year and any unused time will be paid upon the departure of the
employee. The total of $15,745 is included in accrued expenses in the
accompanying balance sheet as of December 31, 1998, and in employee benefits
in the accompanying statement of income for the year ended December 31, 1998.
SUBSEQUENT EVENT:
Subsequent to December 31, 1998, the Company and its' shareholders were in
negotiations to merge the Company into another company.
F-6
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Cash & Cash Equivalents $ 140,303
Accounts Receivable 246,950
Inventories 180
Prepaid Expenses 5,871
------------
Total Current Assets 393,304
Property and Equipment 117,541
Less: Accum Depreciation 47,476
------------
Net Property and Equipment 70,065
Other Assets 3,192
TOTAL ASSETS $ 466,561
============
LIABILITIES AND EQUITY:
Accounts Payable $ 81,908
Other Current Liabilites 59,204
------------
Total Current Liabilities 141,112
Shareholders' Equity:
Common Stock 200
Retained Earnings 325,249
------------
Total Shareholders' Equity 325,449
TOTAL LIABILITIES AND EQUITY $ 466,561
============
</TABLE>
F-7
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
SALES $ 1,032,936
COST OF SALES 596,893
------------
GROSS PROFIT 436,043
OPERATING EXPENSES
Selling and Administrative 170,265
Depreciation and Amortization 13,270
TOTAL OPERATING EXPENSES 183,535
------------
OPERATING INCOME 252,508
OTHER INCOME 2,922
------------
INCOME BEFORE INCOME TAXES 255,430
INCOME TAXES
NET INCOME $ 255,430
============
</TABLE>
F-8
<PAGE>
ENTERPRISE SOLUTIONS GROUP, INC.
STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
CASH FLOW (DEFICIT) FROM OPERATIONS $ (46,895)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and furniture (30,285)
Security deposit and loan payment (5,321)
------------
NET CASH USED BY INVESTING ACTIVITIES (35,606)
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder distributions (40,000)
NET CASH USED BY FINANCING ACTIVITIES (40,000)
NET INCREASE (DECREASE) IN CASH $ (122,501)
============
</TABLE>
F-9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
The Reddy Group, Inc. and Subsidiary
Atlanta, Georgia
We have audited the consolidated balance sheet of The Reddy Group, Inc. and
subsidiary as of December 31, 1998, and the related consolidated statements of
income, retained earnings, and cash flows for the years ended December 31,
1998 and 1997. 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 audits.
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 that 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 The Reddy
Group, Inc. and subsidiary as of December 31, 1998, and the results of its
operations and cash flows for the years ended December 31, 1998 and 1997, in
conformity with generally accepted accounting principles.
As more fully discussed in Note 8, shareholders of The Reddy Group, Inc. have
entered a definitive agreement to sell 100% of their shares to AIM Group, Inc.
/s/MOORE STEPHENS TILLER, LLC
-----------------------------
Moore Stephens Tiller, LLC
Atlanta, Georgia
April 30, 1999
F-10
<PAGE>
THE REDDY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 13,324
Accounts receivable, net of allowance for doubtful
accounts of $22,707 29,024
----------
Total current assets 42,348
----------
PROPERTY AND EQUIPMENT, Net of accumulated
depreciation of $17,124 51,760
----------
OTHER ASSETS
Intangible assets 10,000
Deposits 850
----------
10,850
----------
TOTAL $ 104,958
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,822
Accrued expenses 25,465
Notes payable 6,795
----------
Total current liabilities 42,082
----------
STOCKHOLDERS' EQUITY
Common stock, no par value, 1,000,000 shares authorized,
1,000 shares issued and outstanding 40,301
Retained earnings 22,575
----------
Total stockholders' equity 62,876
----------
TOTAL $ 104,958
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
THE REDDY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
NET SALES $ 337,283 $ 43,873
---------- ----------
OPERATING EXPENSES:
Salaries and wages 74,585 -
Internet service costs 47,990 12,715
Rents 31,098 9,374
Cost of equipment resold 29,277 -
Provision for bad debts 22,707 2,000
Supplies 21,242 6,169
Consulting and outside service fees 17,331 3,111
Travel, parking, meals, and entertainment 15,356 9,899
Telephone 9,842 5,720
Office expenses 9,201 3,839
Depreciation 8,751 5,949
Miscellaneous 7,208 3,154
---------- ----------
Total operating expenses 294,588 61,930
---------- ----------
Income (loss) before other income (expense) 42,695 (18,057)
---------- ----------
OTHER INCOME (EXPENSE)
Other income - 3,898
Interest expense (627) -
---------- ----------
Total other income (expense) (627) 3,898
---------- ----------
Income (loss) before minority interest 42,068 (14,159)
MINORITY INTEREST IN (INCOME) LOSS
OF SUBSIDIARY (8,444) 3,110
---------- ----------
NET INCOME 33,624 (11,049)
RETAINED EARNINGS, Beginning (11,049) -
---------- ----------
RETAINED EARNINGS, Ending $ 22,575 $ (11,049)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
THE REDDY GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 33,624 $ (11,049)
Minority interest in net income (loss) of subsidiary 8,444 (3,110)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 8,751 5,949
Provision for bad debts 22,707 2,000
(Increase)decrease in:
Accounts receivable (51,731) (2,000)
Other assets (10,000) (850)
Increase(decrease) in:
Accounts payable and accrued expenses 7,674 59,564
---------- ----------
Net cash provided by (used in) operating activities 19,469 50,504
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (18,941) (34,503)
---------- ----------
Net cash provided by (used in) investing activities (18,941) (34,503)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 14,000 -
Payments on debt (13,705) -
Payment for acquisition of minority interest (3,500) -
---------- ----------
Net cash provided by (used in) financing activities (3,205) -
---------- ----------
NET INCREASE IN CASH (2,677) 16,001
CASH AND CASH EQUIVALENTS, Beginning 16,001 -
---------- ----------
CASH AND CASH EQUIVALENTS, Ending $ 13,324 $ 16,001
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE>
THE REDDY GROUP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
1998 1997
----- ----
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest $ 627 $ -
========== ==========
The following schedule describes the Company's
noncash investing and financing activities:
Common stock issued for forgiveness of stockholder advances $ 36,451 $ -
========== ==========
Common stock issued for equipment acquisitions $ - $ 7,090
========== ==========
Note payable issued in exchange for minority
interest redemption $ 6,500 $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
THE REDDY GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1998 and 1997
1. Nature of Business
The Reddy Group, Inc. and subsidiary ("the Company") is an international
consulting company headquartered in Atlanta, Georgia. The company
specializes in business process integration, database development,
network design and implementation, secure internet integration, and
provides internet service connections.
2. Summary of Significant Accounting Policies
a. Consolidation
The accompanying consolidated financial statements include the
accounts of The Reddy Group, Inc. and its wholly owned subsidiary,
Cereus Bandwidth, LLC. Intercompany transactions and balances have
been eliminated in consolidation. During 1998, The Reddy Group,
Inc. acquired 100% of the minority interest of Cereus Bandwidth,
LLC. The cost of the acquisition was below the minority interest's
allocation of net assets at the date of acquisition. The entire
excess of net asset interest over cost of $2,424 was applied to
reduce noncurrent assets at the purchase date and was fully
amortized during 1998.
b. Accrual Basis
The financial statements of the Company have been prepared on the
accrual basis.
c. Property and Equipment
Property and equipment are stated at cost at the date of
acquisition. The Company's policy is to capitalize assets with a
useful life greater than one year. Depreciation is provided over
the estimated useful lives of the respective assets using the
straight line method. A summary of property and equipment as of
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
Life in
Description Years Cost
----------- ------- ----
<S> <C> <C>
Office furniture 5-10 $ 4,967
Machinery and equipment 5-10 57,265
Software 3 6,652
---------
68,884
Less accumulated depreciation (17,124)
Total $ 51,760
=========
</TABLE>
Depreciation expense charged to operations for the years ended
December 31, 1998 and 1997 was $8,751 and $5,949, respectively.
F-15
<PAGE>
THE REDDY GROUP, INC. AND SUBSIDIARY
d. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
and disclosed in these financial statements. Actual results could
differ from those estimates.
e. Advertising Cost
The Company expenses advertising costs as incurred.
f. Income Taxes
The parent company has elected to be taxed as an "S Corporation"
under the provisions of Section 1361 of the Internal Revenue Code.
Generally, "S Corporation" profits or losses are taxed at the
shareholder level and no provision for income taxes is required by
the company. The subsidiary company was formed on October 8, 1997
as a Georgia limited liability company, and is taxed as a
partnership. Profits or losses from the partnership are taxed at
the shareholder level and no provision for income taxes is
required by the subsidiary.
3. Intangible Assets
In November 1998 the Company purchased the contract rights to service
the clients of Cooper Development. The purchase price was $10,000
payable in three monthly installments of $3,333 with the final
installment due in January 1999. The purchase price has been recorded as
an intangible asset to be amortized over five years. No amortization
expense was recognized in 1998.
4. Notes Payable
Notes payable at December 31, 1998 consisted of the following:
<TABLE>
<S> <C>
$7,000 note payable to shareholder
relative, principal and interest of $607
due monthly, interest rate of 7.50%,
due March 1999 $ 1,800
$5,000 note payable to bank, principal and
interest of $446 due monthly, interest rate of
12.80%, due July 1999, guaranteed by shareholder 2,995
$6,500 note payable to former owner, $500 due
monthly, interest rate of 5.00%, due May 1999 2,000
--------
Total current debt $ 6,795
========
</TABLE>
5. Lease Commitments
The Company leases office space and equipment under noncancelable
operating leases. Rent expense under all operating lease agreements
amounted to approximately $31,000 and $9,400 for the years ended
December 31, 1998 and 1997, respectively.
F-16
<PAGE>
THE REDDY GROUP, INC. AND SUBSIDIARY
Future minimum lease payments under operating leases with noncancelable
terms in excess of one year at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31 Amount
----------- ------
<S> <C>
1999 $ 24,836
2000 12,397
2001 5,788
2002 414
---------
$ 43,435
=========
</TABLE>
6. Related Party Transactions
Since inception of the Company, the stockholders of the Company
personally incurred expenses on behalf of the Company. These expenses
were charged against operations during 1997 and 1998 and the cumulative
balances reflected as amounts owed to the shareholders. At December 31,
1998 the amounts owed to the shareholders were converted to capital
contributions aggregating $36,451.
During the years ended December 31, 1998 and 1997, the stockholders of
the Company performed services for the Company without compensation
and/or for compensation below the fair value of the services rendered.
7. Contingencies
The Company is in dispute with a former customer regarding approximately
$17,000 of accounts receivable due from the former customer. As a result
of the dispute, the former customer has alleged breach of contract and
has put the Company on notice that it holds the Company responsible for
direct or consequential losses resulting from the alleged breach. The
Company believes the allegations are without merit and intends to
vigorously defend its position should the former customer proceed with
legal action. The Company has fully reserved the outstanding accounts
receivable owed by the customer.
8. Impact of Year 2000
As has been widely reported, many computer systems process dates based
on two digits for the year of transaction and are unable to properly
process dates in the year 2000 and beyond. The Company has assessed the
potential impact of year 2000 on its computer operations and believes
that there will be no significant affect on its internal operations or
those of third parties with whom it deals. Because of the complexity of
the year 2000 issue the Company can give no guarantee that its
operations will not be materially affected by year 2000.
9. Subsequent Event
During April 1999, the Company's shareholders entered into an agreement
with AIM Group, Inc. ("AIM") to sell 100% of their shares to AIM. The
agreement states that AIM intends to merge the Company with AIM promptly
after the purchase and AIM will be the surviving corporation.
F-17
<PAGE>
THE REDDY GROUP, INC.
BALANCE SHEET
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Cash & Cash Equivalents $ 27,549
Accounts Receivable 4,955
------------
Total Current Assets 32,504
Property and Equipment 55,709
Less: Accum Depreciation 19,225
------------
Net Property and Equipment 36,484
Other Assets 23,675
TOTAL ASSETS $ 92,663
============
LIABILITIES AND EQUITY:
Accounts Payable $ 2,162
Other Current Liabilites 31,127
------------
Total Current Liabilities 33,289
Shareholders' Equity:
Common Stock 42,951
Retained Earnings 16,423
------------
Total Shareholders' Equity 59,374
TOTAL LIABILITIES AND EQUITY $ 92,663
============
</TABLE>
F-18
<PAGE>
THE REDDY GROUP, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
SALES $ 289,646
COST OF SALES 8,974
------------
GROSS PROFIT 280,672
OPERATING EXPENSES
Selling and Administrative 274,262
Depreciation and Amortization 4,854
------------
TOTAL OPERATING EXPENSES 279,116
OPERATING INCOME 1,556
INCOME BEFORE INCOME TAXES 1,556
INCOME TAXES
NET INCOME $ 1,556
============
</TABLE>
F-19
<PAGE>
THE REDDY GROUP, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
June 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
CASH FLOW FROM OPERATIONS $ 18,174
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of Equipment (3,949)
------------
NET INCREASE IN CASH 14,225
============
</TABLE>
F-20
<PAGE>
PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
UNAUDITED
The following proforma condensed combined balance sheet as of June 30,
1999 and condensed combined statement of operations for the year ended
December 31, 1998 and the six months ended June 30, 1999, give effect to AIM
Group, Inc. (the "Company") acquiring all the outstanding stock of Enterprise
Solutions Group, Inc. ("ESG") and The Reddy Group, Inc. ("Reddy"). The
effective date of these acquisitions is July 30, 1999.
The proforma information is based on the historical financial statements
of the Company, ESC and Reddy, giving effect to the transactions under the
purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the proforma financial statements. The proforma
adjustments include the private placement of the Company's stock necessary to
complete these acquisitions.
The proforma balance sheet gives effect to the transactions as if they
occurred on the balance sheet date. The proforma statements of operations for
the year ended December 31, 1998 and the six months ended June 30, 1999 give
effect to these transactions as if they occurred at the beginning of each of
the periods presented. The historical statement of operations of the Company
will reflect the effects of these transactions from the date of acquisition.
The proforma combined statements have been prepared by the Companys'
managements based upon the historical financial statements of the Company, ESG
and Reddy. These proforma statements may not be indicative of the results that
actually would have occurred if the combination had been in effect on the date
indicated or which may be obtained in the future.
F-21
<PAGE>
AIM GROUP, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
AIM ENTERPRISE THE
GROUP SOLUTIONS REDDY PROFORMA
INC. GROUP, INC. GROUP, INC. ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 52,465 $ 140,303 $ 27,549 $(1,607,000)(1) $ 391,047
2,152,730 (2)
(375,000)(3)
Accounts receivable 99,553 246,950 4,955 351,458
Inventories 115,634 180 115,814
Prepaid expenses 3,820 5,871 9,691
------------ ------------ ------------ ------------ ------------
Total current assets 271,472 393,304 32,504 170,730 868,010
------------ ------------ ------------ ------------ ------------
Resource property 4,010,998 4,010,998
------------ ------------ ------------ ------------ ------------
Property, plant and equipment 884,591 117,541 55,709 1,057,841
less accumulated depreciation 322,630 47,476 19,225 389,331
------------ ------------ ------------ ------------ ------------
Net property, plant and equipment 561,961 70,065 36,484 668,510
------------ ------------ ------------ ------------ ------------
Other assets 265,183 3,192 23,675 292,050
------------ ------------ ------------ ------------ ------------
4,063,998 (1)
Investment in subsidiaries (4,063,998)(4) -
------------ ------------ ------------ ------------ ------------
Goodwill 3,679,175 (4) 3,679,175
------------ ------------ ------------ ------------ ------------
Total assets $ 5,109,614 $ 466,561 $ 92,663 $ 3,849,905 $ 9,518,743
============ ============ ============ ============ ============
</TABLE>
F-22
<PAGE>
AIM GROUP, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
AIM ENTERPRISE THE
GROUP SOLUTIONS REDDY PROFORMA
INC. GROUP, INC. GROUP, INC. ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND EQUITY
Current liabilities
Note payable $ 285,000 $ 285,000
Accounts payable 695,091 $ 81,908 $ 2,162 779,161
Other current liabilities 34,380 59,204 31,127 124,711
Current portion of long-term debt 27,710 27,710
------------ ------------ ------------ ------------ ------------
Total current liabilities 1,042,181 141,112 33,289 1,216,582
------------ ------------ ------------ ------------ ------------
Long-term debt less current portion 165,425 $ 250,000 (1) 415,425
------------ ------------ ------------ ------------ ------------
Convertible debentures 600,000 600,000
------------ ------------ ------------ ------------ ------------
Stockholders' equity
Preferred stock 150,000 (150,000)(3) -
Common Stock 16,110 200 42,951 7,357 (1) 30,284
6,068 (2)
750 (3)
(43,151)(4)
Additional paid in capital 5,195,702 2,199,641 (1) 9,316,256
2,146,663 (2)
(225,750)(3)
Retained earnings (deficit) (2,049,928) 325,249 16,423 (341,672)(4) (2,049,928)
------------ ------------ ------------ ------------ ------------
3,311,884 325,449 59,374 3,599,905 7,296,612
Treasury stock (9,876) (9,876)
------------ ------------ ------------ ------------ ------------
Total stockholders' equity 3,302,008 325,449 59,374 3,599,905 7,286,736
------------ ------------ ------------ ------------ ------------
Total liabilities and equity $ 5,109,614 $ 466,561 $ 92,663 $ 3,849,905 $ 9,518,743
============ ============ ============ ============ ============
</TABLE>
F-23
<PAGE>
(1) Represents the purchases of Enterprise Solutions Group, Inc. (ESG) and
The Reddy Group, Inc. (Reddy) as follows:
<TABLE>
<CAPTION>
Finders
ESG Reddy Fee Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Purchase price
Shares of stock issued 383,333 333,333 19,000 735,666
Issue price $ 3.00 $ 3.00 $ 3.00
------------ ------------ ------------
Total shares price 1,149,999 999,999 57,000 2,206,998
------------ ------------ ------------
Cash paid 550,000 1,000,000 57,000 1,607,000
Debt issued 250,000 250,000
------------ ------------ ------------ ------------
Total purchase price $ 1,949,999 $ 1,999,999 $ 114,000 $ 4,063,998
============ ============ ============ ============
</TABLE>
The issue price of $3.00 per share is stated in the purchase agreements.
This is considered fair value at the date the purchases were announced based
on the market price for the stock at that time and the restrictions on the
stock.
The debt issued at 3% interest rate is not discounted since this rate
approximates the U. S. Treasury rate which is considered a reasonable rate for
this type debt.
In connection with the finders fee, certain warrants were issued at a
price above the market price at that time. These warrants have been assigned
no value at this time since any ultimate value is considered immaterial.
These purchase prices are subject to adjustment based on final
resolution of agreed working capital at the purchase date. The adjustments, if
any, are not expected to be material based on the information currently
available.
Goodwill of $3,679,175 will be amortized over 15 years under the
straight line method.
(2) Represents private placement stock issuance which was necessary to
complete the acquisitions. These acquisitions were contingent on the
completion of this private placement as follows:
Total shares 606,750
Issue price $ 4.00
------------
Gross proceeds 2,427,000
Less commissions and costs (274,270)
============
Cash generated $ 2,152,730
============
Common stock 6,068
Additional paid in capital 2,146,663
(3) In connection with the private placement, the convertible preferred
stock outstanding was redeemed as required under this issue The
redemption price was a total of $375,000 cash plus 75,000 shares of
common stock. The common stock issuance is considered a capital
transaction and reflected at par value with an offset to additional paid
in capital.
(4) Represents purchase accounting adjustments and eliminations of
investments in companies acquired. The acquired assets and liabilities
are considered to approximate fair value, pending further evaluation,
and all excess purchase price over book value acquired is considered to
be goodwill.
F-24
<PAGE>
AIM GROUP, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
UNAUDITED
<TABLE>
<CAPTION>
AIM ENTERPRISE THE
GROUP SOLUTIONS REDDY PROFORMA
INC. GROUP, INC. GROUP, INC. ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 2,085,398 $ 1,305,405 $ 337,283 $ 3,728,086
Cost of sales 1,546,904 937,380 29,277 2,513,561
------------ ------------ ------------ ------------ ------------
Gross profit 538,494 368,025 308,006 1,214,525
------------ ------------ ------------ ------------ ------------
Operating expenses
General and administrative 503,816 231,774 256,560 $ 120,000 (1) 1,112,150
Selling and marketing 109,016 109,016
Interest 204,009 415 627 7,500 (2) 212,551
Depreciation and amortization 73,259 19,040 8,751 245,278 (3) 346,328
------------ ------------ ------------ ------------ ------------
Total operating expenses 890,100 251,229 265,938 372,778 1,780,045
------------ ------------ ------------ ------------ ------------
Operating income (351,606) 116,796 42,068 (372,778) (565,520)
Other income (expense) 1,102 (8,444) (7,342)
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes (351,606) 117,898 33,624 (372,778) (572,862)
Income taxes (4)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (351,606) $ 117,898 $ 33,624 $ (372,778) $ (572,862)
============ ============ ============ ============ ============
Basic and diluted earnings per share
Net loss available to common
shareholders $ (351,606) $ (572,862)
Imputed non-cash preferred stock
dividend (67,500) (67,500)
------------ ------------
loss available to common shares $ (419,106) $ (640,362)
============ ============
Weighted average common shares
outstanding (5) 1,325,016 2,742,432
Basic and diluted earnings per
common share $ (0.32) $ (0.23)
============ ============
</TABLE>
F-25
<PAGE>
(1) Represents provision for annual salary for new company officer.
(2) Represents provision for interest on acquisition debt at 3% stated rate.
(3) Represents provision for amortization of goodwill using 15 year life.
(4) Due to net loss and no deferred taxes, no tax benefit is provided.
(5) Includes all new shares issued as if outstanding for the full period.
F-26
<PAGE>
AIM GROUP, INC.
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
UNAUDITED
<TABLE>
<CAPTION>
AIM ENTERPRISE THE
GROUP SOLUTIONS REDDY PROFORMA
INC. GROUP, INC. GROUP, INC. ADJUSTMENTS COMBINED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 1,187,681 $ 1,032,936 $ 289,646 $ 2,510,263
Cost of sales 846,264 596,893 8,974 1,452,131
------------ ------------ ------------ ------------ ------------
Gross profit 341,417 436,043 280,672 1,058,132
------------ ------------ ------------ ------------ ------------
Operating expenses
Selling and administrative 616,934 170,265 274,262 $ 15,000 (1) 1,076,461
Interest 90,160 3,750 (2) 93,910
Depreciation and amortization 32,617 13,270 4,854 122,639 (3) 173,380
------------ ------------ ------------ ------------ ------------
Total operating expenses 739,711 183,535 279,116 141,389 1,343,751
------------ ------------ ------------ ------------ ------------
Operating income (398,294) 252,508 1,556 (141,389) (285,619)
Other income (expense) 2,922 2,922
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes (398,294) 255,430 1,556 (141,389) (282,697)
Income taxes (4)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (398,294) $ 255,430 $ 1,556 $ (141,389) $ (282,697)
============ ============ ============ ============ ============
Basic and diluted earnings per share
Net loss available to common
shareholders $ (398,294) $ (282,697)
Weighted average common shares
outstanding (5) 1,404,603 2,822,019
Basic and diluted earnings per
common share $ (0.28) $ (0.10)
============ ============
</TABLE>
F-27
<PAGE>
(1) Represents provision for annual salary for new company officer.
(2) Represents provision for interest on acquisition debt at 3% stated rate.
(3) Represents provision for amortization of goodwill using 15 year life.
(4) Due to net loss and no deferred taxes, no tax benefit is provided.
(5) Includes all new shares issued as if outstanding for the full period.
F-28
