-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AxwNeQI6FWsYRmf1DJGTyjfxIuww9+GpFKYGmGc9d65Z08HI1k4mvqgAW0u99vhs LwoCUGa0LEKas/PRF9pLxg== 0000904456-98-000136.txt : 19980504 0000904456-98-000136.hdr.sgml : 19980504 ACCESSION NUMBER: 0000904456-98-000136 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980501 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIM GROUP INC CENTRAL INDEX KEY: 0000928032 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 133773537 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 033-82468 FILM NUMBER: 98607645 BUSINESS ADDRESS: STREET 1: 2001 WEST SAMPLE ROAD STREET 2: SUITE 300 CITY: POMPANO BEACH STATE: FL ZIP: 33064 BUSINESS PHONE: 3059729339 MAIL ADDRESS: STREET 1: 2001 WEST SAMPLE ROAD STREET 2: SUITE 300 CITY: POMPANO BEACH STATE: FL ZIP: 33064 10-K/A 1 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 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. FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT AIM GROUP, INC. AND SUBSIDIARIES December 31, 1997 and 1996 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 AIM Group and Subsidiaries CONSOLIDATED BALANCE SHEETS "December 31, 1997 and 1996"
1997 1996 ----------- ----------- CURRENT ASSETS 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 =========== ===========
The accompanying notes are an integral part of these statements. F-2 AIM Group and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS "For the years ended December 31, 1997 , 1996 and 1995"
1997 1996 1995 ----------- ----------- ----------- 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 =========== =========== ===========
The accompanying notes are an integral part of these statements. F-3 AIM Group and Subsidiaries CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY "For the years ended December 31, 1997 , 1996 and 1995"
Additional Common Paid-in Treasury Accumulated Shares Stock Capital Stock Deficit Total ------------ ------------ ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============ ============ ============
The accompanying notes are an integral part of these statements. F-4 AIM Group and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS "For the years ended December 31, 1997 , 1996 and 1995"
1997 1996 1995 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: 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 =========== =========== ===========
F-5 AIM Group and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED "For the years ended December 31, 1997 , 1996 and 1995"
1997 1996 1995 ----------- ----------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 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 ===========
The accompanying notes are an integral part of these statements. F-6 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:
1997 1996 ---- ---- 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 ======== ========
F-7 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:
Years Building 39 Plant equipment 10 Engineering and start up 5 Laboratory equipment 7 Furniture and office equipment 5-7
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 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 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 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 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:
1997 1996 --------- -------- 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 ========= =========
NOTE E - OTHER ASSETS Other assets consist of the following:
1997 1996 --------- -------- 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 ========= =========
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 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.
The following is a table showing the grade and applicable estimated tons of the material deposit: Grade Tons K1 (proven and probable) 340,000 K2 and K3 1,350,000 Total Tons 1,690,000
The average estimated process recovery of the material is 82%, and the recovery loss has not been reflected in the tonnage shown above.
The carrying value of the resource property including the prepaid royalties is as follows: Resource property purchase price $3,935,798 Pre-paid royalties 64,575 ---------- Resource property $4,000,373 ==========
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 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:
1997 1996 --------- --------- 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 ========= =========
Maturities of long-term debt over the next five years are as follows:
Year ended December 31, 1998 $ 80,954 1999 31,861 2000 34,271 2001 26,959 --------- $174,095 =========
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 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 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:
Year ending December 31, Amount ------------ -------- 1998 $ 17,333 ========
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 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 -----END PRIVACY-ENHANCED MESSAGE-----