UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For Quarter Ended August 31, 1996 Commission file number 1-7948 AIC INTERNATIONAL, INC, (Exact name of small business issuer as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 11-2192898 (I.R.S. Employer Identification No.) 117 East 57th Street, Room 21-H New York, NY 10022 (Address of principal executive offices - Zip code) Issuer's telephone number, including area code (212) 838-3220 Former name, former address and former fiscal year, if changed since last report. Check whether the issuer (1) filed all reports required to be filed by section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of each class of common stock outstanding as of: August 31, 1996 - 4,207,379 AIC International, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (000 omitted except share data) August 31, February 29, 1996 1996 ___________ ____________ (Unaudited) Assets Current: Cash $ 572 $ 471 Trade receivables, less allowances of $95 and $83 for possible losses 1,731 1,480 Merchandise inventories 3,615 3,529 Prepaid expenses and other current assets 684 318 ______ ______ Total current assets 6,602 5,798 Property and equipment, at cost less accumulated depreciation and amortization 72 62 Other assets 18 18 ______ ______ $ 6,692 $ 5,878 ====== ====== Liabilities and Stockholders' Equity Current: Notes and loans payable - banks $ 1,285 $ 1,566 Accounts payable - trade 98 109 Due to related party 1,484 1,399 Income taxes payable 167 83 Other taxes 382 213 Liability for product warranties 63 94 Accrued expenses and other liabilities 1,207 293 ______ ______ Total current liabilities 4,686 3,757 Accrued pension costs 126 127 ______ ______ Total liabilities 4,812 3,884 ______ ______ Commitments and Contingencies Stockholders' equity: Common stock, $.10 par - shares authorized, 10,000,000; issued, 4,244,879 424 424 Additional paid-in capital 6,720 6,720 Deficit (6,228) (6,315) Accumulated translation adjustment 1,076 1,277 Treasury stock, at cost - 37,500 shares (112) (112) ______ ______ Total stockholders' equity 1,880 1,994 ______ ______ $ 6,692 $ 5,878 ====== ====== See accompanying notes to condensed consolidated financial statements. 2 AIC International, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (000 omitted except per share data) Six months ended August 31, Three months ended August 31, ___________________________ _____________________________ 1996 1995 1996 1995 _______ ______ ______ ______ Net sales $7,481 $6,879 $3,694 $3,716 _______ ______ ______ ______ Cost of goods sold 5,280 4,834 2,596 2,848 Selling, general and administrative expenses 2,114 2,128 1,078 1,129 _______ ______ ______ ______ Total costs and expenses 7,394 6,962 3,674 3,977 _______ ______ ______ ______ Net income (loss) 87 (83) 20 (261) _______ ______ ______ ______ Net income (loss) per share $ .02 $ (.02) $ - $ (.06) ======= ====== ====== ====== Weighted average number of shares 4,207 4,207 4,207 4,207 ====== ====== ====== ====== See accompanying notes to condensed consolidated financial statements. 3 AIC International, Inc. and Subsidiaries Condensed Consolidated Statement of Stockholders' Equity (Unaudited) (000 omitted) Accumulated Additional Paid- Translation Treasury Stock, Total Common Stock In Capital Deficit Adjustment at Cost ______ ____________ ________________ _______ ___________ _______________ Balance, March 1, 1996 $1,994 $424 $6,720 $(6,315) $1,277 $(112) Net income for the six months ended August 31, 1996 87 87 Aggregate adjustment for the six months ended August 31, 1996 resulting from the translation of foreign currency statements (201) (201) ______ ______ ______ _______ ______ ______ Balance, August 31, 1996 $1,880 $424 $6,720 $(6,228) $1,076 $(112) ====== ====== ====== ======= ====== ====== See accompanying notes to condensed consolidated financial statements. 4 AIC International, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (000 omitted) Six months ended August 31, 1996 1995 ______ ______ Cash flows from operating activities: Net income (loss) $ 87 $ (83) ______ ______ Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation, amortization 13 10 Increase in provision for possible losses on accounts receiv- able 12 32 Other (201) (23) Decrease (increase) in: Trade receivable (263) (287) Merchandise inventories (86) (619) Due from related party - 47 Prepaid expenses and other current assets (366) (67) Increase (decrease) in: Accounts payable - trade (11) 16 Due to related party 85 52 Taxes 253 (25) Accrued expenses and other liabilities 882 295 ______ ______ Total adjustments 318 (569) ______ ______ Net cash provided by (used in) operating activities 405 (652) Cash flows from investing activities: Capital expenditures, net of proceeds from sale of equipment (23) (15) Cash flows from financing activities Net borrowings from (repayments to) bank (281) 421 ______ ______ Net increase (decreased) in cash 101 (246) Cash, beginning of period 471 569 ______ ______ Cash, end of period $ 572 $ 323 ====== ====== See accompanying notes to condensed consolidated financial statements. 5 AIC International, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Results for the periods shown are not necessarily indicative of results for the full year. Note 2. The data herein reflects all the adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods. Note 3. There were no sales of unregistered securities during the quarter ended August 31, 1996. Note 4. The financial data are subject to year-end audit. Note disclosures required under generally accepted accounting principles are included in the Company's annual report (Form 10-KSB) for the fiscal year ended February 29, 1996. Form 10-QSB should be read in conjunction with such annual report (Form 10-KSB). 6 AIC International, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations All statements contained herein that are not historical facts, including, but not limited to, statements regarding the Company's current business strategy, the Company's projected sources and uses of cash, and the Company's plans for future development and operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: the availability of sufficient capital to finance the Company's business plans on terms satisfactory to the Company; competitive factors; changes in labor, equipment and capital costs; changes in regulations affecting the Company's business and economic conditions; and factors described from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any such forward looking statements, which statements are made pursuant to the Private Litigation Reform Act of 1995 and, as a result, speak only as of the date made. Results of Operations: Six months ended August 31, 1996 compared with six months ended August 31, 1995: Net Sales For the six months ended August 31, 1996, the Company's net sales increased by $602,000 to $7,481,000 from sales of $6,879,000 for the six months ended August 31, 1995. Sales by the Company's German subsidiary, Soligor GmbH, Foto Optik Video Electronik ("Soligor GmbH"), increased by DM 1,463,000 which, when combined with changes in the exchange rate, resulted in an increase in sales of $602,000 after translation. The Company's sales increased due to efforts of Soligor GmbH in promoting the sale of new products groups, such as electronic products and video equipment, an increasing number of accessories, as well as video surveillance equipment. Cost of Goods Sold As a percentage of sales cost of goods sold was 70.6% for the six months ended August 31, 1996 as compared to 70.3% for the six months ended August 31, 1995. Selling, General and Administrative Expenses For the six months ended August 31, 1996 and 1995, selling, general and administrative expenses ("SG & A") were 28.3% and 30.9% of sales, respectively. The decrease in S G & A expenses as a percentage of sales was the result of increased net sales. 7 AIC International, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations: Three months ended August 31, 1996 compared with three months ended August 31, 1995: Net Sales Net sales for the three months ended August 31, 1996, were $3,694,000 as compared to $3,716,000 for the three months ended August 31, 1995, a decrease of $22,000, or 0.6%. Sales by Soligor GmbH for the three months ended August 31, 1996 increased by DM 274,000 which, when combined with changes in the exchange rate, resulted in a decrease in sales of $22,000 after translation. The Company's sales increased due to efforts of Soligor GmbH in promoting the sale of new products groups, such as electronic products and video equipment, an increasing number of accessories, as well as video surveillance equipment. Cost of Goods Sold For the three months ended August 31, 1996 and 1995, cost of goods sold as a percentage of sales was 70.3% and 76.6% of sales, respectively. The decrease in cost of goods sold as a percentage of sales was caused by changes of exchange rates on Japanese Yen, Dutch Mark and U.S. Dollar. Selling, General and Administrative Expenses For the three months ended August 31, 1996 and 1995 SG & A expenses were 29.2% and 30.4% of sales, respectively. The decrease in S G & A expenses as a percentage of sales was the result of increased net sales. 8 Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AIC INTERNATIONAL, INC. Registrant By:/s/Stephen Lai ______________________________ Stephen Lai Chief Financial Officer and Chief Accounting Officer 9