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  NOTE:  Pursuant  to  Rule  15d-2  under  the
          Securities  Exchange Act of 1934 this Annual  Report  contains  only
          certified  financial  statements  for the fiscal year ended December
          31, 1996.

                                      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,  1996,  as set forth in
pages attached hereto:

         Part I - Item 7         -        Financial Statements - name and
                                          signature of independent auditor on
                                          page F-1

     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 16, 1997

<PAGE>

 Amendment No. 1 to AIM Group, Inc. Annual Report
 on Form 10-KSB for the year ended December 31, 1996
 ----------------------------------------------------

     The Annual Report on Form 10-KSB of AIM Group,  Inc. (the  "Company") for
the year ended  December 31, 1996, as filed with the  Securities  and Exchange
Commission  on April 15,  1997,  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. Accordingly, set forth below is the amended Item 7 of the Form 10-KSB
and related financial statements:


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.

<PAGE>


                           FINANCIAL STATEMENTS AND
                         INDEPENDENT AUDITORS' REPORT

                       AIM GROUP, INC. AND SUBSIDIARIES

                          December 31, 1996 and 1995


<PAGE>

                         INDEPENDENT AUDITOR'S REPORT


Board of Directors
AIM Group, Inc.


We have audited the accompanying consolidated balance sheet of AIM Group, Inc.
as of December 31, 1996 and 1995 and the related  consolidated  statements  of
operations,  stockholders' equity and cash flows for the period from inception
(March 28,  1994) to December  31, 1994 and the years ended  December 31, 1995
and 1996. 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, 1996 and 1995 and the results of its  operations  and
its cash flows for the periods from inception (March 28, 1994) to December 31,
1996 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  potentially
impaired  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. CABRERA & COMPANY, P.A.
                                             -------------------------------
                                             M.A. Cabrera & Company, P.A.
Plantation, Florida
March 14, 1997


                                     F-1

<PAGE>

                          AIM Group and Subsidiaries

<TABLE>
                          CONSOLIDATED BALANCE SHEETS

                          December 31, 1996 and 1995

<CAPTION>
                                                      1996         1995
                                                   -----------  -----------
CURRENT ASSETS
<S>                                                <C>          <C>      
  Cash                                             $   70,342   $  260,280
  Accounts receivable - trade                         504,864      691,457
  Accounts receivable - affiliate and other               564        9,760
  Inventories                                         160,770      153,029
  Prepaid expenses                                     18,529       24,576
                                                   -----------  -----------
          Total current assets                        755,069    1,139,102

 RESOURCE PROPERTY                                  3,995,373    3,994,868

 PROPERTY, PLANT AND EQUIPMENT - Net                  557,059      500,416

 OTHER ASSETS                                          46,836       68,228
                                                   -----------  -----------
                                                   $5,354,337   $5,702,614
                                                   ===========  ===========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                 $  281,454   $  369,924
  Receivable financing liability                      324,293      475,215
  Current portion of long-term debt                    14,960       12,201
  Notes payable                                             -            -
  Accrued expenses                                     96,111       94,532
                                                   -----------  -----------
         Total current liabilities                    716,818      951,872

LONG-TERM DEBT, less current portion                   76,073       72,232

CONVERTIBLE NOTES PAYABLE                           1,050,000      750,000

STOCKHOLDERS' EQUITY
  Preferred stock; 1,000,000 shares authorized;
    $1 par value; no shares issued or
    outstanding.                                            -            -

  Common stock; 6,000,000 shares authorized;
    $.01 par value; 3,980,053 shares issued
    and 3,978,766 outstanding in 1996 and
    4,113,465 shares issued and 3,900,053
    outstanding in 1995.                               39,801       41,135
  Additional paid in capital                        4,222,809    4,150,259
  Common stock held in treasury - 1,287
    shares in 1996 and 213,412 shares in 1995          (1,400)     (11,575)
  Common stock subscription received - 80,000 share         -       82,792
  Accumulated deficit                                (749,764)    (334,101)
                                                   -----------  -----------
                                                    3,511,446    3,928,510
                                                   -----------  -----------
                                                   $5,354,337   $5,702,614
                                                   ===========  ===========
</TABLE>


Please refer to Note C for Pro forma information.

The accompanying notes are an integral part of these statements.


                                      F-2

<PAGE>

                          AIM Group and Subsidiaries

<TABLE>
                     CONSOLIDATED STATEMENTS OF OPERATIONS

      For the period from inception (March 28, 1994) to December 31, 1996


<CAPTION>
                                        Year ended    Year ended    Period ended
                                        December 31,  December 31,  December 31,
                                           1996          1995          1994
                                        ------------  ------------  ------------
<S>                                     <C>           <C>           <C>
SALES                                   $ 3,092,278   $ 2,399,493 $           -

COST OF GOODS SOLD                        2,148,191     1,692,943             -
                                        ------------  ------------  ------------
       GROSS PROFIT                         944,087       706,550             -

EXPENSES
  General and administrative                791,826       673,105        12,760
  Selling and marketing                     270,612       132,532             -
  Write-off of investment - abandoned
   project                                   93,396             -             -
  Interest                                  131,429       162,505        12,500
  Depreciation and amortization              72,487        47,249             -
                                        ------------  ------------  ------------
                                          1,359,750     1,015,391        25,260
                                        ------------  ------------  ------------
       Loss before income taxes            (415,663)     (308,841)      (25,260)

Income taxes                                      -             -             -
                                        ------------  ------------  ------------
       NET LOSS                         $  (415,663)  $  (308,841)  $   (25,260)
                                        ============  ============  ============


Net loss per share                      $     (0.10)  $     (0.08)  $    (25.26)
                                        ============  ============  ============

Weighted average shares outstanding       3,960,158     3,672,894         1,000
                                        ============  ============  ============
</TABLE>


Please refer to Note C for Pro forma information.

The accompanying notes are an integral part of these statements.


                                      F-3

<PAGE>
                          AIM Group and Subsidiaries

<TABLE>
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

      For the period from inception (March 28, 1994) to December 31, 1995


                                                                       Additional
                                                            Common       Paid-in       Treasury     Accumulated
                                              Shares        Stock        Capital        Stock        Deficit        Total
                                            ----------    ----------   -----------    ----------    ----------   -----------
<S>                                         <C>           <C>          <C>            <C>           <C>          <C>
Sale of 1,000 shares                            1,000     $      10    $       90     $       0     $       0    $      100

Net loss for the period from inception
  to December 31, 1994                              0             0             0             0       (25,260)      (25,260)
                                            ----------    ----------   -----------    ----------    ----------   -----------
Balances - December 31, 1994                    1,000            10            90             0       (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)            0     4,049,599

Issuance of stock during December
1995 relating to the exercise of options
and warrants                                  214,536         2,146       128,073             0             0       130,219

Net loss for the year                               0             0             0             0      (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             0             0        82,792

Purchase of 1,287 shares for treasury               0             0             0        (1,400)            0        (1,400)

Cancellation of 213,412 shares of
  treasury stock                             (213,412)       (2,134)       (9,441)       11,575             0             0

Net loss for the year                               0             0             0             0      (415,663)     (415,663)
                                            ----------    ----------   -----------    ----------    ----------   -----------
                                            3,980,053     $  39,801    $4,222,809     $  (1,400)    $(749,764)   $3,511,446
                                            ==========    ==========   ===========    ==========    ==========   ===========
</TABLE>


The accompanying notes are an integral part of these statements.


                                      F-4

<PAGE>

                          AIM Group and Subsidiaries

<TABLE>
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

      For the period from inception (March 28, 1994) to December 31, 1996

<CAPTION>
                                                  Year ended    Year ended    Period ended
                                                  December 31,  December 31,  December 31,
                                                     1996          1995          1994
                                                  ------------  ------------  ------------
<S>                                               <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET LOSS                                        $  (415,663)  $  (308,841)   $  (25,260)
  Adjustments to reconcile net loss to net cash
   provided (used) by operating activities:
    Depreciation and amortization                      72,487        47,249             -
    Changes in current assets and liabilities:
      Decrease (Increase) in accounts receivable      195,789      (341,714)            -
      (Increase) in inventories                        (7,741)      (79,007)            -
      Increase (decrease) in receivable              (150,922)      475,215             -
      Increase (decrease) in accounts payable and
       accruals                                       (86,891)       90,693        12,879
      Other                                             9,140       (22,892)       (6,380)
                                                  ------------  ------------  ------------
       Net cash (used) by operations                 (383,801)     (139,297)      (18,761)
                                                  ------------  ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment         (129,130)     (148,751)            -
  (Increases) decreases in other assets                21,392       (22,564)         (440)
  Additions to resource property                       (3,599)      (15,522)            -
                                                  ------------  ------------  ------------
       Net cash (used) by investing activities       (111,337)     (186,837)         (440)
                                                  ------------  ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from sale of stock                               -       141,894           100
  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                         (14,470)            -             -
  Purchase of stock for treasury                       (1,400)            -             -
  Loans received - net                                      -             -       250,000
  Advances to affiliated company, net of 
   repayments                                               -             -      (229,780)
                                                  ------------  ------------  ------------
       Net cash provided by financing activities      305,200       585,295        20,320
                                                  ------------  ------------  ------------

       NET INCREASE IN CASH                          (189,938)      259,161         1,119

Cash, beginning of period                             260,280         1,119             -
                                                  ------------  ------------  ------------
Cash, end of period                               $    70,342   $   260,280   $     1,119
                                                  ============  ============  ============
</TABLE>


                                      F-5

<PAGE>

                          AIM Group and Subsidiaries

<TABLE>
               CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

      For the period from inception (March 28, 1994) to December 31, 1996


<CAPTION>
                                                  Year ended    Year ended    Period ended
                                                  December 31,  December 31,  December 31,
                                                     1996          1995          1994
                                                  ------------  ------------  ------------
<S>                                               <C>           <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH
  FLOW INFORMATION:

  Interest paid                                   $   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
                                                  ===========
</TABLE>


The accompanying notes are an integral part of these statements.


                                      F-6

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Periods from Inception (March 28, 1994) to December 31, 1996


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  (USD) 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, 1996
     and 1995 consist of:

<TABLE>
<CAPTION>
                                           1996               1995
                                           ----               ----
<S>                                      <C>               <C>     
     Finished Goods                      $ 28,513          $ 49,282
     Raw materials                         76,421            48,761
     Klannerite(R) Ore                     48,645            48,645
     Spare parts and supplies               7,191             6,341
                                         --------          --------
                                         $160,770          $153,029
                                         ========          ========
</TABLE>


                                      F-7

<PAGE>


                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


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:

<TABLE>
<CAPTION>
                                                         Years
<S>                                                      <C>
         Building                                          39
         Plant equipment                                   10
         Engineering and start up                           5
         Laboratory equipment                               7
         Furniture and office equipment                   5-7
</TABLE>

     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 Group(R),  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 the 10% of its revenues  for the years ended  December
     31, 1996 and 1995, to Alpha Gary, Inc. (83%) and (93%) respectively.


                                      F-8

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


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.  Consequently,  Management  believes
that the property  may be impaired  but is not able to determine  the level of
impairment, if any, at this time. Consequently, Management has determined that
a reserve is not appropriate  until such time as more information is available
concerning the economic  viability of the mineral deposit.  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. 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  private  placement  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 - MERGER

On March 23, 1995,  the  shareholders  of the Company (AIM Group) and Advanced
Industrial Minerals, Inc. (AIM), HeatShield Technologies (HTI) and AIM Funding
Group,  L.P. (HFG),  approved the  amalgamation of the entities into AIM Group
effective March 31, 1995.

Pursuant  to  shareholder  approvals  and the merger  agreement,  the  Company
completed  the  purchase  of the  assets  and  liabilities  of  AIM,  and  the
shareholders of AIM received  .426825 shares of AIM Group in exchange for each
common share of AIM held.


                                      F-9

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE C - CONTINUED

HTI was merged  with a  subsidiary  of the  Company  and the HTI  shareholders
received 0.919632 shares of AIM Group in exchange for each common share of HTI
held.  The  conversion  ratio was  calculated by giving  consideration  to the
ownership of HST Capital Corp.,  a wholly-owned  subsidiary of HTI, of 500,000
shares of AIM which were held in escrow.  The  conversion  ratio before giving
consideration to such ownership was 0.808902.

HFG  distributed  the preferred  shares of HTI owned by it to its partners who
then exchanged each preferred share for 1,000 shares of AIM Group.

After the consummation of the merger transactions, AIM Group became the parent
company with 4 operating subsidiaries;  HTI, UMC(AR), UMC(AZ) and HST Capital.
As a result of these  mergers the former  shareholders  of the Company and HTI
and the partners of HFG all became shareholders of AIM Group.

At the  Corporation's  1996 Annual Meeting of the Shareholders it was approved
to authorize the directors to amend Article Four of the Corporation's Articles
of Incorporation to increase the maximum number of authorized share of Capital
Stock of AIM Group from 7,000,000 to 13,000,000,  including an increase in the
number of Common Stock  authorized  for issuance from  6,000,000 to 12,000,000
for  acquisitions,  financing,  public  offerings  and  or  other  appropriate
corporate purposes.

AIM Group has 12,000,000  common shares  authorized and the merger resulted in
the  issuance of  3,898,930  shares of AIM Group stock in exchange for all the
outstanding  common  stock of AIM and HTI and 1,000  shares  of HTI  preferred
stock  held by HFG.  AIM  Group  received  approval  on  January  3,  1995 for
registration of its shares in the U. S. under the Securities Act of 1933.

The  following  are the  condensed  pro forma  statements of operations of AIM
Group and Subsidiaries assuming the merger had taken place on January 1, 1994;
the pro forma results of  operations  for 1995 reflect a full twelve months of
operations.


                                     F-10

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE C - CONTINUED

<TABLE>
STATEMENTS OF OPERATIONS:
<CAPTION>
                                                      Year ended December 31,
                                                   1995                     1994
                                                   ----                     ----
                                                (Pro Forma)              (Pro Forma)
                                                -----------              -----------
<S>                                             <C>                      <C>       
SALES                                           $2,820,958               $  406,378
COST OF GOODS SOLD                               1,975,680                  232,279
                                                -----------              -----------
         GROSS PROFIT                              845,278                  174,099

EXPENSES
         General and administrative             $  933,871               $  632,344
         Interest                                  171,785                   27,778
         Depreciation and amortization              60,140                   41,142
                                                -----------              -----------
                                                 1,165,796                  701,264
                                                -----------              -----------
         Loss before income taxes                 (320,518)                (527,165)
Income taxes                                          -                        -
                                                -----------              -----------
         NET LOSS                               $ (320,518)              $ (527,165)
                                                ===========              ===========

Net loss per share                              $    (0.09)              $    (0.15)
                                                ===========              ===========


Weighted average shares outstanding              3,672,894                3,472,103
                                                ===========              ===========
</TABLE>



NOTE D - OPERATIONS/NATURE OF BUSINESS

AIM Group is the parent company that provides centralized management, finance,
long  range  planning,   accounting  and  administration  to  three  principal
operating entities.  These operations are a surface  modification  facility, a
mining lease,  and the manufacture and marketing of specialty high temperature
coatings. The Company has discontinued manufacture of the coatings and did not
actively market these coatings during 1996.

AIM Group shares are listed on the  Vancouver  Stock  Exchange.  The Company's
common stock is currently quoted under the symbol AGDU.V.


                                     F-11

<PAGE>

AIM Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE D - CONTINUED

     UNITED MINERALS ARKANSAS (UMC(AR)) SURFACE MODIFICATION PLANT

     UMC(AR) is the Company's  core business and has completed its second full
     year of  operations  as of  December  31,  1996.  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  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 1996 and treated  approximately
     2,600  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-12

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE D - 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.  Exploitation  of the Viva Luz Mine was formerly  conducted on a
     joint venture basis with AIM. No mining of Klannerite(R) has been carried
     out since 1993.

     Initial  indications were that Klannerite(R) would have application as an
     ingredient in PDC coating.  Marketing of the PDC coating was initiated in
     April, 1994.  Development work concentrated on securing test applications
     at steel mills, aluminum,  glass, and other industries operating furnaces
     and kilns where the  characteristics of PDC, as exhibited on a laboratory
     scale,  could be  exploited.  It is now apparent to  management  that the
     features of PDC are not replicable in full scale industrial applications.
     It was  therefore  decided  to try to enter the  coatings  market  with a
     product exhibiting higher resistance to chemical (alkali) attack, as with
     the Omega line of coatings.

     In December of 1995, HTI signed a technology License Agreement with Omega
     Coating Pty., Limited of Sydney, Australia (OCPL). The agreement provided
     HTI  exclusive  North  American  rights  to sell and  distribute  furnace
     coatings  known as Omega 1 and Omega 2. The Omega 1  coating  contains  a
     significant portion of Klannerite(R) which was supplied to OCPL by HTI.

     HTI also signed a Technology  Purchase  Option  Agreement with OCPL. This
     agreement  provided HTI the  exclusive  rights to purchase all  worldwide
     rights to the Omega line of coatings licensed by OCPL from Refract-a-Gard
     Pty.,  Limited,  also of Sydney,  Australia,  and certain  assets of OCPL
     pertinent to the Omega coatings and their manufacture.

     After limited test marketing of these products, the Company abandoned its
     exclusive  license  and has  written  off  $93,396 of its  investment  in
     license and royalty payments. Due to a current lack of available research
     and development funds, the Company is no longer pursuing the options with
     respect to Omega  coatings.  Although the licensing  agreements have been
     canceled,  the  Company  maintains  a dialogue  with OCPL should the need
     arise to renew a working relationship. Both of these products continue to
     be evaluated by potential customers.


                                     F-13

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE D - CONTINUED

     HTI is also  working to develop  Klannerite(R)  for use as an  industrial
     filler.  Initial  tests were  carried out to develop uses for latex based
     paints, oil based paints, and plastics. Test results for oil based paints
     and  plastics  have been average to  substandard.  Test results for latex
     based paints have been better, with good thixotropy,  flatting, and scrub
     resistance compared to commonly used fillers.  Although development funds
     are  limited,  further  testing and  marketing  efforts  are  underway to
     develop  local  markets in the Phoenix - Las Vegas - Southern  California
     area with small independent paint manufacturers.  Additionally,  new uses
     are under investigation,  including Klannerite(R) as a pozzolan component
     in grouts and white cements, as a microporous light weight insulating low
     temperature aggregate, and as a lightweight roofing aggregate for polymer
     roofing  systems.  To date there have been no  commercial  sales to these
     markets.

     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.

     In July,  1992, the Atchison  Topeka and Santa Fe Railway  Company denied
     public access  across its tracks,  preventing  the company  access to the
     mine,  unless the company  posts a flagman  and  spotter at the  crossing
     site. A substantial  quantity of processed  KlanneriteR,  sufficient  for
     foreseeable sales, is available from the Company's inventory.

     The use of  Klannerite(R)  in the  manufacture  of  refractories  for the
     aluminum industry was tested during the year without success.

     The  Company's  objective  in selling  Klannerite(R)  as a filler and for
     other uses is  considered by management to be dependent on the ability to
     develop initial  markets in the Southwest.  The testing and marketing for
     these applications will be performed this year.


NOTE E - ACCOUNTS RECEIVABLE

As of December 31, 1996 the Corporation had net accounts receivable from trade
sales of $170,810  compared to $216,242 as at December 31, 1995.  This results
from outstanding accounts receivable in the amount of $495,103 as shown in the
current asset section less $324,293 in  receivables  factored as stated in the
liability section.


                                     F-14

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE F - PROPERTY AND EQUIPMENT

Property plant and equipment is summarized as follows:

<TABLE>
<CAPTION>
                                           1996               1995
                                           ----               ----
<S>                                      <C>                <C>

     Plant                               $108,000           $108,000
         Building improvements             98,442             63,165
         Plant and lab equipment          306,781            282,084
         Engineering costs                 66,412             42,423
         Vehicles                          37,044             14,318
         Furniture and Equipment           93,920             78,591
                                         ---------          ---------
                                          710,599            588,581
         Less accumulated depreciation   (163,540)           (98,165)
                                         ---------          ---------
                                          547,059           $490,416
         Land                              10,000             10,000
                                         ---------          ---------
                                         $557,059           $500,416
                                         =========          =========
</TABLE>


NOTE G - OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
                                                             1996               1995
                                                             ----               ----
<S>                                                       <C>                <C>

         Patents and Trademarks                           $  28,392          $  24,249
         Unamortized portion of deferred start up costs      15,197             21,828
         Deferred costs associated with proposed
           new venture                                         -                16,006
         Deposits and other                                   3,247              6,145
                                                          ----------         ----------
                                                          $  46,836          $  68,228
                                                          ==========         ==========
</TABLE>


NOTE H - 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  described  in Note C. The  following  describes  the  property and
related reserves of rock containing crystobalite, quartz and kaolinite.


                                     F-15

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE H - 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:

<TABLE>
<S>                                                   <C>       
     Resource property purchase price                 $3,935,798
     Pre-paid royalties                                   59,575
                                                      -----------
                  Resource property                   $3,995,373
                                                      -----------
</TABLE>


     OTHER MINERAL PROPERTY

     The  company  has  discontinued  its annual  payment to maintain 14 small
     unpatented  mining  claims.  The Company is  evaluating  the  benefits of
     restaking three claims adjacent to its resource property.

     MINERAL MINED, PRODUCED AND SOLD IN 1992, 1993, 1994, 1995 AND 1996

     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 1996 a
     nominal number of samples aggregating  approximately 250 pounds were sent
     to prospective  customers with no positive response.  The remaining 212.5
     tons are being  held in  inventory.


                                     F-16

<PAGE>


                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE H - CONTINUED

     No sales of Klannerite(R) have been reported for 1994, 1995 or 1996.


NOTE I - LONG-TERM DEBT

<TABLE>
The following is a summary of long-term debt at December 31, 1996 and 1995:

<CAPTION>
                                                                           1996                    1995
                                                                       ------------            ------------
<S>                                                                    <C>                     <C>
         Mortgage payable, secured by Arkansas
          manufacturing facility, payable in monthly
          installments of approximately $900 including
          interest at 10.25%.                                          $  60,309               $  66,956

         Equipment loans payable, secured by vehicle
          and equipment, payable in monthly installments
          of approximately $1,061 including interest
          at 10.2 % to 14.2%.                                             30,724                  17,476
                                                                       ----------              ----------
                                                                          91,033                  84,432
         Less amounts due within one year                                 14,960                  12,201
                                                                       ----------              ----------
                                                                       $  76,073               $  72,232
                                                                       ==========              ==========
</TABLE>


<TABLE>
Maturities of long-term debt over the next five years are as follows:

<CAPTION>
          Year ended
         December 31,
      -----------------
<S>                                                                     <C>     
            1997                                                        $ 14,960
            1998                                                          59,799
            1999                                                           7,678
            2000                                                           8,596
                                                                        ---------
                                                                        $ 91,033
                                                                        =========
</TABLE>


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 1996 and 1995 were $85,741 and $111,785 respectively.


                                     F-17

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE J - CONVERTIBLE NOTES PAYABLE

On November 15, 1995 the Company  announced a private placement in the form of
Convertible  Promissory  Notes,  having an aggregate face value of $1,050,000,
with three  related  party  placees  (see  "Related  Parties")  and subject to
approval  by the  Vancouver  Stock  Exchange.  The  notes  carry a three  year
conversion  feature at the option of the  holders to convert the face value of
the notes into common  shares of the Company at a price of $1.10 if  converted
on or before December 31, 1996; $1.35 on or before December 31, 1997; $1.60 on
or before December 31, 1998. In addition, the Company has the right to convert
the notes into common  shares  upon  completion  of an  offering of  1,500,000
common shares at a minimum price of $1.50 per share.

As of December 31, 1995 the Company received  $1,050,000 in subscriptions  and
the placees had advanced  $750,000 in proceeds towards the private  placement.
On February  16, 1996 the Company  received the  approval  from the  Vancouver
Stock Exchange and on February 20, 1996 closed the private  placement with all
proceeds  received.  The  Stockholders  approved the private  placement at the
annual meeting of shareholders held July 10, 1996.

At a meeting of the Board of Directors  held on July 23, 1996 the Directors of
the Corporation passed a resolution  confirming that the Corporation would not
issue any debt which ranks senior in priority to the Convertible Notes without
the consent of the Convertible Note holders.

The Notes,  having an outstanding  principal balance of $1,050,000  matured on
December 31, 1996. The cash flow from operations was not sufficient to pay off
the Notes. The Corporation is negotiating with the holders of the Notes,  each
of which are related parties,  to amend the Notes to extend the final maturity
to March 31,  1998,  to  increase  the  interest  rate to 10% per annum and to
change the  conversion  rate to $.70 per  share.  The  convertible  notes will
remain unsecured to the Company's assets.


NOTE K - 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.  The  following is a
summary of activity during 1996 and 1995:


                                     F-18

<PAGE>

                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE K - CONTINUED
<TABLE>
<CAPTION>
                                                                       Number of                 Price Per
                                                                        Shares                     Share
                                                                      -----------               -----------
<S>                                                                   <C>                     <C>
INCENTIVE STOCK OPTIONS:
         Balances outstanding on merger date:
                  Expiring:
                  December 31, 1995                                     154,037                $.54 - $1.63
                  April 14, 1996                                        110,190                    $1.34
                  May 8, 1998                                             7,909                     $.54
                                                                      ----------
                  Balance - March 31, 1995                              272,136
         Exercised for the period ended
           December 31, 1995                                            (91,962)                    $.54
         Issued July 10, 1996                                            25,000                    $1.15
         Expired on December 31, 1996*                                  (62,075)                   $1.63
         Expired on December 31, 1996*                                 (110,190)                   $1.34
         Canceled December 31, 1996                                      (7,909)                    $.54
                                                                      ----------
                  Balance - December 31, 1996                              -
                                                                      ==========

                  Comprised of options expiring:
                  December 31, 1997                                      25,000                    $1.15
                                                                      ==========

WARRANTS:
         Balances outstanding on merger date:
                  Expiring
                  December 31, 1995                                     409,575                $.01 - $2.00

         Exercised for the period ended
           December 31, 1995                                           (122,573)               $.01 - $1.22

         Expired on December 31, 1996*
           (see note below)                                            (287,002)              $1.50 - $2.00
                                                                      ----------
         Balance outstanding at December 31, 1996                          -
                                                                      ==========
<FN>

On July 10,  1996 the  Company  issued to Bernard  Kossar,  a newly  appointed
director,  25,000 of incentive  stock  options  exercisable  at $1.15  through
December 31, 1997. In addition,  the Company canceled 7,909 options granted to
a former employee. There were no options or warrants exercised during 1996 and
all options and warrants extended December 31, 1996 expired.

* The  Company's  Board of Directors  approved an  extension of the expiration
dates for 445,586  options and warrants set to expire on December 31, 1995 and
April 14, 1996 to December  31,  1996.  On May 17,  1996 the  Vancouver  Stock
Exchange  approved  the  extension of these  options and  warrants  subject to
Shareholder approval.  The extension of the options and warrants were approved
by the Shareholders at the Annual Meeting of the Shareholders held on July 10,
1996.
</FN>
</TABLE>


                                     F-19

<PAGE>


                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE L - LEASE COMMITMENTS

The Company's corporate headquarters are leased pursuant to an operating lease
expiring October 31, 1998. Currently, there is a contingent contract to sublet
some space that would reduce the lease  obligations by  approximately  $18,000
per year. Future lease payments at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
          Year ended
         December 31,                                     Amount
      -----------------
<S>                                                       <C>     
            1997                                          $ 42,549
            1998                                            36,632
                                                          ---------
                                                          $ 79,181
                                                          =========
</TABLE>


NOTE M - WRITE OFF INVESTMENT - ABANDON PROJECT

During the year due to lack of funding and slow response from the market place
the Company  discontinued  its exclusive  license and royalty  agreement  with
Omega Coatings Pty. Limited of Sydney, Australia. The licensing rights for the
Omega  products  were  acquired in late 1995.  The  Company  wrote off $93,396
invested in the Omega project.


NOTE N - 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 under a prospectus exemption a
     private  placement in the form of 3 year  convertible  3 1/2%  Promissory
     Notes  having a face value of  $1,050,000  subject to the approval of the
     Vancouver Stock Exchange. (See Note J). The following related individuals
     and  affiliated  concerns  have  subscribed  to the private  placement as
     follows:

     NORTHERN  FEDERAL  MINERALS LLC    Paul R. Arena, an officer and director
     of the  Corporation,  is a principal in this Michigan  limited  liability
     corporation.  Joseph L.  Ranizini,  a director of the  Corporation,  is a
     related  party to Northern  Federal  Minerals,  LLC. On November 13, 1995
     Northern  Federal  Minerals  LLC  subscribed  for $450,000 of the private
     placement  of  $1,050,000  convertible  promissory  notes  issued  by the
     Corporation.

     BERNARD R. KOSSAR    Mr. Kossar, on December 20, 1995, purchased $300,000
     of the private  placement  of  $1,050,000  convertible  promissory  notes
     issued by the Corporation.

     LDD CAPITAL LLC     Shawn P. Durand, a former officer of the Corporation,
     is a  principal  in  LDD  Capital  LLC,  a  Minnesota  limited  liability
     corporation,  which corporation on February 2, 1996 purchased $300,000 of
     the private placement of $1,050,000  convertible  promissory notes issued
     by the Corporation.


                                     F-20

<PAGE>


                       AIM Group, Inc. and Subsidiaries

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     For the Periods from Inception (March 28, 1994) to December 31, 1996


NOTE N - CONTINUED

     The Corporation  received  approval for the issuance of these convertible
     notes from the  Vancouver  Stock  Exchange on  February  19, 1996 and the
     transactions closed on February 20, 1996.

     CONSULTING FEES

     During the period the Corporation paid the following fees for services to
     directors and advisors and other insiders not considered employees.

     D. M. Hartley a director,  elected  Chairman and Chief Executive  Officer
     (CEO) of the  Corporation in August,  1995 was  compensated on a per diem
     basis of $400 per day.  Mr.  Hartley was paid $6,350 in  connection  with
     services  rendered  as the CEO  during  1995 and  $10,560  in 1996;  Iain
     Richmond has served as President of the Corporation since April, 1995 and
     was paid $400 per day on a per diem basis.  Mr. Richmond was paid $62,125
     for services rendered during 1995 and $66,000 in 1996;  Michael McManus a
     director was paid  consulting  fees in the amount of $12,500 during 1995;
     Mr.  Wright an  advisory  board  member was paid  consulting  fees in the
     amount of $25,000  during 1995.  No  compensation  was paid to either Mr.
     McManus or Mr. Wright for 1996.

     EXERCISE OF INCENTIVE OPTIONS AND WARRANTS

     No incentive options and warrants were exercised during 1996. During 1995
     the following incentive options and warrants were exercised.

     In  September  Paul R. Arena,  a director  and officer  exercised  60,242
     incentive  stock  options at a price of $.54 each;  Shawn P.  Durand,  an
     officer exercised 17,926 incentive stock options at a price of $.54 each;
     Jenni Yachelson, an officer exercised 13,794 incentive stock options at a
     price  of $.54  each;  D. M.  Hartley,  Chairman  and CEO  exercised  552
     warrants at a price of $.54 each; Joseph Wright, an advisory board member
     exercised  32,000  warrants at a price of $1.22 each;  Michael  McManus a
     director  exercised  10,245  warrants at a price of $1.22 each;  E. Avery
     Williams,  an advisory board member  exercised 920 warrants at a price of
     $.54 each; Lewis Foy an advisory board member exercised 184 warrants at a
     price of $.54 each.

NOTE O - INCOME TAXES - NET OPERATING LOSSES

The Companies have net operating loss carryforwards available to offset future
taxable income approximating $2,317,600 expiring through the year 2010. Due to
the merger described in Note B the net operating losses are subject to certain
limitations, computed on an annual basis.


                                     F-21