U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 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 May 12,1999 was
1,396,684.
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 -
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of
Operations - Three Months Ended
March 31,1999 and 1998
4
Condensed Consolidated Statements of
Cash Flows - Three Months Ended
March 31,1999 and 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-10
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
PART 1. FINANCIAL INFORMATION
AIM GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS (Unaudited) (Auditied)
CURRENT ASSETS
Cash $ 31,883 $ 324,841
Accounts receivable
Trade 147,285 67,473
Inventories 117,270 135,198
Prepaid expenses 5,341 7,752
------------ ------------
Total current assets 301,779 535,264
PROPERTY, PLANT AND EQUIPMENT 880,161 877,830
Less Accumulated Depreciation (308,050) (293,740)
------------ ------------
Net Property Plant and Equipment 572,111 584,090
RESOURCE PROPERTY 4,010,998 4,005,373
OTHER ASSETS 242,811 29,917
------------ ------------
$ 5,127,699 $ 5,154,644
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 627,533 $ 621,511
Note Payable 250,000 150,000
Current portion of long-term debt 31,195 34,277
Accrued expenses 62,556 73,048
------------ ------------
Total current liabilities 971,284 878,836
LONG-TERM DEBT, less current maturities 174,032 179,207
CONVERTIBLE NOTES PAYABLE 1,050,000 1,050,000
STOCKHOLDERS' EQUITY
Preferred Stock; 1,000,000 shares authorized; $1 par value;
150,000 issued and outstanding 150,000 150,000
Common stock; 12,000,000 shares authorized; $.01 par value;
1,396,684 and 1,330,018 shares issued and outstanding 13,967 13,300
at March 31, 1999 and December 31, 1998
Additional paid in capital 4,739,381 4,544,810
Common stock held in treasury - 3,150 shares at cost (9,876) (9,876)
Retained Earnings (deficit) (1,961,089) (1,651,633)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,932,383 3,046,601
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,127,699 $ 5,154,644
============ ============
</TABLE>
3
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 490,326 $ 778,189
Costs and expenses
Cost of products sold 353,232 546,355
Selling and administrative expenses 388,422 123,355
Interest 44,418 54,689
Depreciation and amortization 13,710 19,400
------------ ------------
799,782 743,799
------------ ------------
Earnings (loss) before taxes (309,456) 34,390
Income taxes 0 0
------------ ------------
Net earnings (loss) $ (309,456) $ 34,390
============ ============
Net earnings (loss) per share $ (0.222) $ 0.026 **
============ ============
Weighted average shares outstanding 1,396,684 1,323,702 **
============ ============
</TABLE>
** Shares and earnings per share shown are adjusted for one for three reverse
stock split.
4
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS (DEFICIT) FROM OPERATIONS $ (166,933) $ 47,385
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (2,331) (24,894)
Increases in other assets and resource property (218,519) (14,495)
------------ ------------
Net cash used by investing activities (220,850) (39,389)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt financing 100,000 15,101
Payment of long-term debt (5,175) (2,973)
------------ ------------
Net cash provided by financing activities 94,825 12,128
------------ ------------
NET INCREASE (DECREASE) IN CASH $ (292,958) $ 20,124
============ ============
</TABLE>
5
<PAGE>
AIM GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)-March 31, 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 months ended
March 31, 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 period ended December 31, 1998.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
<S> <C> <C>
Finished goods 27,049 30,909
Raw materials 31,279 47,134
Klannerite ore 48,645 48,645
Spare parts and supplies 10,297 8,510
------- -------
Totals 117,270 135,198
======== =======
</TABLE>
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31,1999 COMPARED TO QUARTER ENDED MARCH 31,1998
Net sales of AIM Group, Inc. (the "Company") for the first quarter of
1999 amounted to $490,326, a decrease of $287,863, or 37%, from net sales of
$778,189 in the prior year's comparable quarter. The decline in net sales was
primarily attributable to a decline in demand for the surface treatment of
fire retardant materials. This was due to an above average demand from one of
the company's main customers in the first quarter of 1998. Cost of products
sold amounted to $353,232 and $546,355 in the first quarters of 1999 and 1998,
respectively, resulting in a gross margin of 28% in the first quarter of 1999
compared to a 30% gross margin in the first quarter of 1998. The slight
decrease in the gross margin was primarily attributable to lower net sales
which was partially offset by savings achieved on the Company's main material
costs.
Selling and administrative expenses during the first quarter of 1999
were $388,422, or 79% of net sales, compared to $123,355, or 16% of net sales,
in the first quarter of 1998. The increase of $265,067 is primarily
attributable to the issuance of 66,666 shares of common stock in connection
with the hiring of Mr. Ted Lamb, the Company's new Chief Operating Officer, in
February 1999. The value of these shares on the date of hire were the
equivalent of $200,000 based on the Company's stock price of $3.00 per share.
Mr. Lamb received a signing bonus of 33,333 shares and the personnel placement
firm, Atlantis Technology Partners, LLC, used in hiring Mr. Lamb received
33,333 shares as well. Other reasons for the selling and administrative
expense increase was additional staffing and other necessary expenses incurred
in the first quarter of 1999 in 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.
7
<PAGE>
Interest expenses were $44,418, or 9% of net sales, in the first quarter
of 1999 compared to $54,689, or 7% of net sales, in the first quarter of 1998.
The increase in interest expenses as a percent of net sales was attributable
to the decline in net sales in the first quarter of 1999.
Due primarily to the net sales decline and increased expenses related to
potential acquisitions described previously, the Company incurred a net loss
of $109,456, or $.222 per share, in the quarter ended March 31, 1999, compared
to net earnings of $34,390, or $.026 per share, in the quarter ended March 31,
1998.
LIQUIDITY AND SOURCES OF CAPITAL
The Company incurred a negative cash flow from operations of $166,933 in
the first quarter of 1999, compared to a positive cash flow from operations of
$47,385 in the first quarter of 1998. The negative cash flow for the current
period was primarily attributable to the net loss of 309,456, paydown of an
inventory loan, and an increase in accounts receivable. As of March 31, 1999,
the Company had a working capital deficit of $669,505.
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 March 3, 1999 the Company borrowed $100,000 from Dr. Audrey L.
Braswell, a Company director. The promissory note issued by the Company to Dr.
Braswell matures on May 15, 1999 and at this time the full principal and
interest of $6,000 is due.
As fully described in the Company's 1998 Form 10-KSB report the Company
intends to acquire established high technology oriented businesses involved in
8
<PAGE>
activities relating to Internet and business solution software services.
During January, 1999, the Company acquired a minority equity interest in
Netsurfer, Inc., a private company headquartered in Atlanta, Georgia that
currently markets a product utilizing Internet access software for sale to
ISPs. This investment of $203,984 is the major part of the increase noted in
Other Assets on the Statement of Cash Flows.
On April 30, 1999 the Company entered into a definitive agreement to
acquire The Reddy Group, Inc. and subsidiary Cereus Bandwidth ("Cereus"), an
Internet application technology company headquartered in Atlanta, Georgia.
This company has developed and currently markets a variety of new media (
Internet, Intranet, and E-Commerce ) products in addition to high-speed
communications capabilities. The acquisition of Cereus is expected to close
during the second quarter of 1999.
On May 5, 1999 the Company entered into definitive agreements to acquire
Client Server Solutions, Inc. ("CSS") of Atlanta, GA and Enterprise Solutions
Group, Inc. ("ESG") of West Palm Beach, FL. These organizations provide
business solutions software and consulting services to clients with specific
focus on financial and human resource applications. The market focus of these
organizations in their Value Added Reseller's ("VARs") role is to provide
software to small to medium sized companies whose annual revenues range from
$50 million to $500 million. It is believed that these types of companies will
generate recurring revenues from their hosting services and software
maintenance they provide to customers.
The definitive agreements to acquire Cereus, CSS and ESG provide for a
total purchase price of $9,300,000, of which $3,300,000 will be required to be
paid in cash. On May 7, 1999, the Company commenced a private offering of
Common Stock at a price of $4.00 per share (the "Offering") seeking $2,080,000
of net proceeds in connection with the minimum offering of 600,000 shares and
$5,320,000 in the case of the maximum offering of 1,500,000 shares. The
Offering, which is being extended only to accredited investors, will expire on
or before July 31, 1999 unless extended for up to an additional 45 days.
9
<PAGE>
If the Company receives less than $3,320,000 of net proceeds from the
Offering, it plans to use $1,550,000 of the net proceeds to acquire ESG and
Cereus and to defer acquisition of CSS until the necessary additional funds
can be raised. In the event the Company does not consummate the acquisition of
ESG, Cereus and/or CSS, the Company intends to use the net proceeds of the
Offering to finance the acquisition of other Internet businesses and business
solution software service companies. The Company believes that if the maximum
offering is completed and the three above-referenced acquisitions are
consummated, it will possess sufficient funds to satisfy anticipated capital
needs through the end of the fourth quarter of 1999. To the extent that the
maximum offering is not completed, the Company may be required to raise
additional funds, through borrowings or the sale of additional shares of
Common Stock or securities convertible into Common Stock, prior to the end of
the year in order to meet capital needs. Because the Company is in the
formative stages of pursuing its acquisition strategy in the Internet and
information technology-related industry, it cannot at this time predict the
extent and timing of its future need for additional capital to meet working
capital or capital expenditure requirements.
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. The Company filed a Form 8-K on January 5, 1999
reporting the issuance of 150,000 shares of Series A Convertible Preferred
Stock on December 30,1998. The Company also filed a Form 8-K on April 19, 1999
reporting the inclusion on March 22, 1999 of the Company's common stock on the
OTC Bulletin Board by the National Association of Securities Dealers, Inc. and
the delisting of the common stock from the Vancouver Stock Exchange on April
23, 1999.
10
<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.
May 14, 1999 By: /s/PAUL R. ARENA
----------------
Paul R. Arena
Chairman of the Board,
Chief Executive Officer
and President
May 14, 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> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 31,883
<SECURITIES> 0
<RECEIVABLES> 147,285
<ALLOWANCES> 0
<INVENTORY> 117,270
<CURRENT-ASSETS> 301,779
<PP&E> 880,116
<DEPRECIATION> 308,050
<TOTAL-ASSETS> 5,127,699
<CURRENT-LIABILITIES> 971,284
<BONDS> 1,224,032
0
150,000
<COMMON> 13,967
<OTHER-SE> 2,768,416
<TOTAL-LIABILITY-AND-EQUITY> 5,127,699
<SALES> 490,326
<TOTAL-REVENUES> 490,326
<CGS> 353,232
<TOTAL-COSTS> 799,782
<OTHER-EXPENSES> 432,840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,418
<INCOME-PRETAX> (309,456)
<INCOME-TAX> 0
<INCOME-CONTINUING> (309,456)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (309,456)
<EPS-PRIMARY> (.222)
<EPS-DILUTED> 0
</TABLE>
