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, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-82468
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AIM GROUP, INC.
(Exact name of small business issuer as specified in its charter)
400 Perimeter Center, N.E. Suite 900, Atlanta, GA 30346
(Address of registrant's principal executive office)
770-804-6419
(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 August 9, 1999 was
3,002,637.
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, 1999 and December 31, 1998 3
Condensed Consolidated Statements of
Operations - Three Months and Six
Months Ended June 30,1999 and 1998 4
Condensed Consolidated Statements of
Cash Flows - Three Months and Six
Months Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-11
PART II. OTHER INFORMATION
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,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS (Unaudited) (Auditied)
CURRENT ASSETS
Cash $ 52,465 $ 324,841
Accounts receivable
Trade 99,553 67,473
Inventories 115,634 135,198
Prepaid expenses 3,820 7,752
------------ ------------
Total current assets 271,472 535,264
PROPERTY, PLANT AND EQUIPMENT 884,591 877,830
Less Accumulated Depreciation (322,630) (293,740)
------------ ------------
Net Property Plant and Equipment 561,961 584,090
RESOURCE PROPERTY 4,010,998 4,005,373
OTHER ASSETS 265,183 29,917
------------ ------------
TOTAL ASSETS $ 5,109,614 $ 5,154,644
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 695,091 $ 621,511
Note Payable 285,000 150,000
Current portion of long-term debt 27,710 34,277
Accrued expenses 34,380 73,048
------------ ------------
Total current liabilities 1,042,181 878,836
LONG-TERM DEBT, less current maturities 165,425 179,207
CONVERTIBLE NOTES PAYABLE 600,000 1,050,000
STOCKHOLDERS' EQUITY
Preferred Stock;$1 par value; 1,000,000 shares authorized;
150,000 issued and outstanding 150,000 150,000
Common stock;$.01 par value; 12,000,000 shares authorized;
1,610,970 and 1,330,018 shares issued and outstanding 16,110 13,300
at June 30, 1999 and December 31, 1998
Additional paid in capital 5,195,702 4,544,810
Common stock held in treasury - 3,150 shares at cost (9,876) (9,876)
Retained Earnings (deficit) (2,049,928) (1,651,633)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,302,008 3,046,601
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,109,614 $ 5,154,644
============ ============
</TABLE>
3
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 697,355 $ 548,422 $ 1,187,681 $ 1,326,611
Costs and expenses
Cost of products sold 486,690 417,763 846,264 964,118
Selling and administrative expenses 239,311 147,247 616,934 270,602
Interest 45,742 51,184 90,160 105,873
Depreciation and amortization 14,450 19,401 32,617 38,801
------------ ------------ ------------ ------------
786,193 635,595 1,585,975 1,379,394
------------ ------------ ------------ ------------
Loss before taxes $ (88,838) $ (87,173) $ (398,294) $ (52,783)
Income taxes 0 0 0 0
------------ ------------ ------------ ------------
Net loss $ (88,838) $ (87,173) $ (398,294) $ (52,783)
============ ============ ============ ============
Net loss per share $ (0.061) $ (0.066) $ (0.284) $ (0.040)
============ ============ ============ ============
Weighted average shares outstanding 1,446,135 1,323,702 1,404,603 1,323,702
============ ============ ============ ============
</TABLE>
** Shares and earnings per share shown are adjusted for one for three reverse
stock split effective on August 21, 1998.
4
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS (DEFICIT) FROM OPERATIONS $ (20,991) $ (94,857) $ (145,942) $ (47,472)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,430) (47,316) (6,761) (72,210)
Increases in other assets and resource property (22,372) (34,192) (240,891) (48,687)
------------ ------------ ------------ ------------
Net cash used by investing activities (26,802) (81,508) (247,652) (120,897)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Change in Debt 26,393 184,714 121,218 196,842
------------ ------------ ------------ ------------
Net cash provided by financing activities 26,393 184,714 121,218 196,842
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH $ 20,582 $ 8,349 $ (272,376) $ 28,473
============ ============ ============ ============
</TABLE>
5
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)-June 30, 1999
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six
months ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. 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, 1998.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- --------
<S> <C> <C>
Finished goods $ 34,188 $ 30,909
Raw materials 24,109 47,134
Klannerite ore 48,645 48,645
Spare parts and supplies 8,692 8,510
-------- --------
Total $115,634 $135,198
======== ========
</TABLE>
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30,1998
Net sales of AIM Group, Inc. (the "Company") for the second quarter of
1999 amounted to $697,355, an increase of $148,933 over net sales of $548,422
in the prior year's comparable quarter. The increase in net sales was
primarily attributable to an increase in demand for the surface treatment of
fire retardant materials. Cost of products sold amounted to $486,690 and
$417,763 in the second quarters of 1999 and 1998, respectively, resulting in a
gross margin of 30% in the second quarter of 1999 compared to a 24% gross
margin in the second quarter of 1998. The increase in the gross margin was
primarily attributable to greater cost efficiencies achieved at the higher
sales volume achieved during the second quarter.
Selling and administrative expenses during the second quarter of 1999
were $239,311, or 34% of net sales, compared to $147,247, or 27% of net sales,
in the second quarter of 1998. This increase of $92,064 was primarily due to
expenses incurred in the connection with the Company's efforts to acquire
three companies engaged in activities relating to the Internet and business
solution software services, as more fully discussed below. Some of these
expenses included personnel costs for the Chief Operating Officer hired during
the first quarter of 1999, travel, and relocation expenses in connection with
the move of the corporate offices to Atlanta, GA during the second quarter.
Interest expenses were $45,742, or 7% of net sales, in the second
quarter of 1999 compared to $51,184, or 9% of net sales, in the second quarter
of 1998. The small amount decrease in interest expenses was attributable to
less financing required on accounts receivable during the second quarter of
1999.
Primarily as a result of the above, the Company incurred a net loss of
$88,838, or $.061 per share, in the quarter ended June 30, 1999, compared to a
net loss of $87,173, or $.066 per share, in the quarter ended June 30, 1998.
The net loss in the quarter ended June 30, 1999 of $88,838 compares
favorably with the net loss of $309,456, or $.222 per share, in the quarter
7
<PAGE>
ended March 31, 1999. The primary reasons for the performance improvement was
a $207,029 increase in sales from $490,326 in the first quarter of 1999 to
$697,355 in the second quarter of 1999 and the recognition in the first
quarter of 1999 of $200,000 in stock option expenses related to the hiring of
the Company's Chief Operating Officer.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net sales of the Company for the six months ended June 30, 1999 amounted
to $1,187,681, a decrease of $138,930 from the net sales of $1,326,611 for the
six months ended June 30, 1998. The majority of the decrease was due to a
decline in demand for surface treatment of fire retardant materials during the
first quarter of 1999. Cost of products sold amounted to $846,264 and $964,118
for the six months ended June 30, 1999 and 1998, respectively, resulting in a
gross margin of 29% for the first six months of 1999 compared to 27% for the
comparable period in 1998. The increase in gross margin is primarily
attributable to a decline in certain major material costs used in a main
product line along with production cost efficiencies.
Selling and administrative expenses for the six months ended June 30,
1999 were $616,934, or 52% of net sales, compared to $270,602, or 20% of net
sales, in the six months ended June 30, 1998. The $346,332 increase in the
1999 period is primarily due to major expenses related to the proposed
acquisition of three companies in the technology industry. Two of these
acquisitions were consummated on July 30, 1999 as discussed below. Of this
increase, $200,000 was attributable to the stock compensation expense
recognized in the first quarter of 1999 for the Company's Chief Operating
Officer. Other acquisition related expenses contributing to this increase
include travel and corporate office relocation to Atlanta, GA.
Interest expenses were $90,160, or 8% of net sales, in the six months
ended June 30, 1999 compared to $105,873, or 8% of net sales, for the
comparable period in 1998. While interest expense was relatively flat, the
Company did reduce some of its higher receivable financing costs.
Primarily as a result of the above, the Company incurred a net loss of
$398,294, or $.284 per share, in the six months ended June 30, 1999, compared
to a net loss of $52,783, or $.04 per share, in the six months ended June 30,
1998.
8
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
The Company had a positive cash flow from operations of $20,991 in the
second quarter of 1999, compared to a negative cash flow from operations of
$94,857 in the second quarter of 1998. As a percent of sales, positive cash
flow was 3% in the current quarter compared to a negative 17% for the second
quarter of 1998. The positive cash flow for the current period was primarily
attributable to improvements in sales and customer collections and increases
in short term liabilities. As of June 30, 1999, the Company had a working
capital deficit of $770,709.
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.
On May 7, 1999 the Company commenced a private offering of a minimum of
600,000 shares and a maximum of 1,500,000 shares of common stock at a price of
$4.00 per share. On July 30, 1999, the Company consummated its sale of the
minimum amount of the offering for total proceeds of $2,400,000. Giving effect
to the placement agent's 8% selling commission and 2% non-accountable expense
allowance paid by the Company, the Company received net proceeds of $2,160,000
in connection with the sale of the minimum number of shares on July 30, 1999.
The private offering will continue until the earlier of the termination of the
offering or the sale of the 1,500,000 maximum number of shares.
On June 7, 1999 the Company borrowed $25,000 from Mr. Ernest Purcell, a
Company director, and issued to him a promissory note in that principal amount
bearing a total interest amount of $750 and maturing 30 days after issuance.
Upon maturity of the note, Mr. Purcell directed the Company to apply the
principal payment to the purchase of 6,250 shares of common stock in
connection with the above-referenced private offering.
9
<PAGE>
During the second quarter of 1999, each of the three convertible note holders
exercised an option to convert some of their notes to common stock at a
conversion price of $2.10 per share. On May 18,1999, Northern Federal Minerals
LLC converted $150,000 principal amount of its note to stock resulting in the
issuance by the Company of 71,429 common shares and a reduction in the
convertible note due from $450,000 to $300,000. On June 21, 1999, Mr. Bernard
Kossar converted $150,000 of his note to stock resulting in the issuance by
the Company of 71,429 common shares and a reduction in this convertible note
due from $300,000 to $150,000. On June 22, 1999, Dr. Audrey L. Braswell
converted $150,000 of his note to stock resulting in the issuance by the
Company of 71,429 common shares and a reduction in this convertible note due
from $300,000 to $150,000. The cumulative effect of these transactions was to
reduce the convertible notes due from $1,050,000 to $600,000.
On July 30, 1999 AIM Solutions, Inc., a wholly-owned subsidiary of the Company
acquired 100% of the issued and outstanding capital stock of Enterprise
Solutions Group, Inc., a Florida corporation, for a total purchase price of
$1,950,000, consisting of the payment of $550,000 in cash at closing, the
issuance of a promissory note in the amount of $250,000 which bears interest
at 3% per annum and the issuance of 383,333 shares of the Company's common
stock, par value $.01 per share, based on a $3.00 share price, with 191,666 of
those shares being held in escrow and distributed on the following schedule:
50% on July 30, 2000 and 50% on July 30, 2001.
On July 30, 1999, American Internet Media, Inc., a wholly- owned subsidiary of
the Company, acquired 100% of the issued and outstanding capital stock of The
Reddy Group, Inc., a Georgia corporation and owner of 100% of the membership
interests of Cereus Bandwith, L.L.C., a Georgia limited liability company. The
total purchase price was $2,000,000 consisting of the payment of $1,000,000 in
cash at closing and the issuance of 333,333 shares of common stock, based on a
$3.00 share price, with such shares being held in escrow and distributed on
the following schedule: 50% on July 30, 2000 and 50% on July 30, 2001.
10
<PAGE>
Cash paid by the Company in connection with the two acquisitions mentioned
above was raised in the consummation on July 30, 1999 of the minimum amount of
the Company's private offering of common stock discussed above.
The Company is continuing its efforts to acquire Client Server Solutions, Inc.
of Atlanta, GA with whom it entered into a definitive agreement on May 5,
1999. The agreement calls for a purchase price of $5,350,000 to be comprised
of $1,750,000 in cash, and 1,033,333 shares of common stock and a promissory
note in the amount of $500,000 bearing interest at 3% per annum and payable
50% in 12 months and the remaining balance in 24 months. Cash for this
acquisition is planned to be raised in the Company's private offering of
common stock.
PART II. OTHER INFORMATION
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. On April 19, 1999 the Company filed a Form 8-K
reporting the Company's delisting of its common stock on the Vancouver
Stock Exchange on April 13, 1999, and the inclusion of its common stock
on the OTC Bulletin Board on March 22, 1999. The Company filed a Form
8-K on August 10, 1999 reporting the acquisitions of Enterprise
Solutions Group, Inc. and the Reddy Group, Inc. including its
subsidiary, Cereus Bandwith L.L.C. on July 30, 1999.
11
<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 11, 1999 By: /s/PAUL R. ARENA
----------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
Aug 11, 1999 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-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 52,465
<SECURITIES> 0
<RECEIVABLES> 99,553
<ALLOWANCES> 0
<INVENTORY> 115,634
<CURRENT-ASSETS> 271,472
<PP&E> 884,591
<DEPRECIATION> 265,183
<TOTAL-ASSETS> 5,109,614
<CURRENT-LIABILITIES> 1,042,181
<BONDS> 765,425
0
0
<COMMON> 16,110
<OTHER-SE> 2,925,908
<TOTAL-LIABILITY-AND-EQUITY> 5,109,614
<SALES> 697,355
<TOTAL-REVENUES> 697,355
<CGS> 486,690
<TOTAL-COSTS> 786,193
<OTHER-EXPENSES> 253,761
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,742
<INCOME-PRETAX> (88,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (88,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,838)
<EPS-BASIC> (.061)
<EPS-DILUTED> 0
</TABLE>
