UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Mark One
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from ____ to _____
Commission file Number 000-21749
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 95-4257380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3501 Lakewood Boulevard
Long Beach, California 90808
(Address of principal executive offices)
(562) 938-8618
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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 [ ]
As of May 12, 1997, the issuer had outstanding 6,900,000 shares of Class A
Common Stock, 2,000,000 shares of Class B Common Stock, 4,000,000 shares of
Class E-1 Common Stock and 4,000,000 shares of Class E-2 Common Stock.
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Balance Sheet
(unaudited)
<TABLE>
March 31, 1997
---------------
<S> <C>
Assets
Current Assets:
Cash and cash equivalents $24,048,000
Marketable securities 501,000
Certificate of deposit 1,012,000
Prepaid expenses and other current assets 160,000
---------------
Total current assets 25,721,000
Property and equipment, net 1,867,000
---------------
Total assets $27,588,000
---------------
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Balance Sheet
(unaudited)
<TABLE>
March 31, 1997
--------------
<S> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $76,000
Accrued liabilities 223,000
---------------
Total current liabilities 299,000
Advance deposit 10,000
---------------
Total liabilities 309,000
---------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.0001 per share;
5,000,000 shares authorized; no shares
issued and outstanding
Class A Common Stock, par value $.0001 per share;
60,000,000 shares authorized; 6,900,000 shares
issued and outstanding 1,000
Class B Common Stock, par value $.0001 per share;
10,000,000 shares authorized; 2,000,000 shares
issued and outstanding
Class E-1 Common Stock, par value $.0001 per share;
4,000,000 shares authorized; 4,000,000 shares
issued and outstanding
Class E-2 Common Stock, par value $.0001 per share;
4,000,000 shares authorized, 4,000,000 shares
issued and outstanding
Warrants to purchase common stock:
Public Warrants 473,000
Class A Warrants 11,290,000
Class B Warrants 4,632,000
Additional paid-in capital 35,730,000
Deficit accumulated during the development stage (24,847,000)
-------------
Total stockholders' equity 27,279,000
-------------
Total liabilities and stockholders' equity $27,588,000
-------------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement of Operations
(unaudited)
<TABLE>
Period from
Three Months Ended January 26, 1990
March 31, (inception) to
------------------- March 31,
1996 1997 1997
------------------- -----------------
<S> <C> <C> <C>
Other income $ $ 1,000 $711,000
Interest income 289,000 459,000
------------------- -----------------
290,000 1,170,000
Costs and expenses:
Research and development costs 326,000 13,962,000
Preoperating costs 282,000
General and administrative expenses 268,000 481,000 7,871,000
Loss on disposal of assets 2,000 359,000
Interest expense 73,000 1,840,000
In-process research and development acquired 761,000
------------------- -----------------
341,000 809,000 25,075,000
------------------- -----------------
Loss before extraordinary item (341,000) (519,000) (23,905,000)
Extraordinary loss on retirement of Bridge Notes (942,000)
------------------- -----------------
Net loss ($341,000) $519,000) ($24,847,000)
------------------- -----------------
Net loss per share ($.10) ($.06)
-------------------
Weighted average number of shares outstanding 3,400,000 8,900,000
-------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement of Cash Flows
(unaudited)
<TABLE>
Period from
January 26,
Three Months Ended 1990 (inception)
March 31, to March 31,
1996 1997 1997
------------------------ ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(341,000) $(519,000) $(24,847,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 82,000 79,000 1,893,000
Extraordinary loss on retirement of Bridge Notes 942,000
Noncash stock compensation expense 1,207,000
Noncash interest expense 336,000
Loss on disposal of assets 2,000 359,000
Cost of in-process research and development
acquired 761,000
Imputed interest on advances from stockholder 5,000 810,000
Changes in assets and liabilities:
Increase in prepaid expenses and other current
assets (5,000) (160,000)
Increase (decrease) in accounts payable 12,000 (69,000) 76,000
Increase in accrued liabilities 91,000 65,000 123,000
Increase in interest payable 29,000
Increase in advance deposit 10,000 10,000
--------------------------- ---------------
Net cash used in operating activities (122,000) (437,000) (18,490,000)
--------------------------- ---------------
Cash flows from investing activities:
Capital expenditures (265,000) (4,112,000)
Proceeds from disposal of assets 3,000 3,000
Proceeds from insurance claims upon loss of aircraft 30,000
Proceeds from sale of marketable securities 1,525,000 1,525,000
Purchase of marketable securities (2,026,000)
Purchase of certificate of deposit (1,000,000) (1,012,000)
------------------------- ---------------
Net cash proceeds provided by (used in)
investing activities 263,000 (5,592,000)
------------------------- ---------------
Cash flows from financing activities:
Advances from stockholder 10,728,000
Proceeds from issuance of common stock prior to
initial public offering 7,500,000
Net proceeds from initial public offering and exercise
of over-allotment option 30,411,000
Net proceeds from bridge financing 6,195,000
Repayment of bridge financing (7,000,000)
Repayment of obligation under capital leases (3,000) (40,000)
Net proceeds from loans from officer 125,000 336,000
------------------------- ---------------
Net cash provided by financing activities 122,000 48,130,000
------------------------- ---------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
<TABLE>
Period from
January 26,
Three Months Ended 1990 (inception)
March 31, to March 31,
1996 1997 1997
------------------------ ----------------
<S> <C> <C> <C>
Net (decrease) increase in cash and cash equivalents -- (174,000) 24,048,000
Cash and cash equivalents at beginning of period -- 24,222,000 --
------------------------- ---------------
Cash and cash equivalents at end of period $ -- $24,048,000 $24,048,000
------------------------- ---------------
Supplemental cash flow information:
Cash paid for interest $694,000
--------------
Supplemental disclosure of noncash investing and
financing activities:
Stockholder advances converted to common stock $10,728,000
--------------
Loans from officers converted to common stock $336,000
--------------
Common stock issued for noncash consideration
and compensation $1,507,000
--------------
Liabilities assumed from ASI $400,000
--------------
Common stock issued for in-process research and
development acquired $361,000
--------------
Equipment acquired under capital leases $40,000
---------------
Deposit surrendered as payment for rents due $80,000
---------------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
1. General
In the opinion of the Company's management, the accompanying unaudited
financial statements include all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the financial
position of the Company at March 31, 1997 and the results of operations and
cash flows for the three months ended March 31, 1997 and 1996. Although the
Company believes that the disclosures in these financial statements are
adequate to make the information presented not misleading, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Results of
operations for interim periods are not necessarily indicative of results of
operations to be expected for any other interim period or the full year.
The financial information in this quarterly report should be read in
conjunction with the audited December 31, 1996 financial statements and
notes thereto included in the Company's annual report filed on Form 10-KSB.
The Company is a development stage enterprise. On December 3, 1996, the
Company successfully completed an initial public offering to finance the
continued development, manufacture and marketing of its product to achieve
commercial viability. The net proceeds of the offering were and will be
used to amend its Federal Aviation Administration ("FAA") Type Certificate
for technical revisions to its product, to obtain a FAA Production
Certificate for its product, to repay borrowings under a bridge loan, to
expand the Company's sales and marketing efforts, to establish a new
manufacturing facility, and to acquire production materials and additional
tooling and equipment.
2. Net Loss Per Share
The Company's net loss per share was computed based on the weighted average
number of shares of common stock outstanding during the three months ended
March 31, 1996 and 1997 and excludes all outstanding shares of Class E-1
and Class E-2 Common Stock because the conditions for the lapse of
restrictions on such shares have not been satisfied.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, certain common stock equivalents issued by the Company have been
included as outstanding in net loss per share computations for the quarter
ended March 31, 1996. Common stock equivalents were not included in the net
loss per share computation for the quarter ended March 31, 1997 as their
effect on net loss per share is antidilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." SFAS No. 128 establishes standards for computing and presenting
earnings per share ("EPS") and supersedes APB Opinion No. 15, "Earnings per
Share." It replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS No. 128 will become effective for the Company
for the year ending December 31, 1997. The impact of the adoption of SFAS
No. 128 on the Company's financial statements is not expected to be
material.
3. Stock Option Plan
On March 4, 1997, options to purchase 210,000 shares of Class A Common
Stock were granted at an exercise price of $5 per share, by the Company's
Board of Directors to certain employees, officers, consultants and agents
of the Company.
6
<PAGE>
Item 2. Plan of Operations
Certain statements contained in this report, including statements
concerning the Company's future cash and financing requirements, the Company's
ability to obtain market acceptance of its aircraft, the Company's ability to
obtain regulatory approval for its aircraft, and the competitive market for
sales of small business aircraft and other statements contained herein regarding
matters that are not historical facts, are forward looking statements; actual
results may differ materially from those set forth in the forward looking
statements, which statements involve risks and uncertainties, including without
limitation those risks and uncertainties set forth in the Company's Registration
Statement on Form SB-2 (No. 333-12273) under the heading "Risk Factors."
Prior to commencing commercial sales of the JETCRUZER 500, the Company will
need to, among other things, complete the development of the aircraft, obtain
the requisite regulatory approvals, establish an appropriate manufacturing
facility, hire additional engineering and manufacturing personnel and expand its
sales and marketing efforts. The Company estimates that the cost to complete
development of the JETCRUZER 500 and obtain an amendment of its FAA Type
Certificate will be approximately $8,000,000. This amount includes the cost of
equipment and tooling (estimated at approximately $1,500,000), static and flight
testing of the aircraft (estimated at approximately $2,500,000) and the
employment of the necessary personnel to build and test the aircraft (estimated
at approximately $4,000,000). The Company estimates that the cost of
establishing an appropriate manufacturing facility will be approximately
$7,000,000. The Company intends to use $1,100,000 of the proceeds from its
recent initial public offering ("IPO") for this purpose and to finance the
remaining portion through Industrial Development Bonds, mortgage financing
and/or other similar means. The Company also intends to use approximately
$900,000 of the proceeds of the IPO for sale and marketing of the aircraft.
The Company expects to receive progress payments during the construction of
aircraft and final payments upon the delivery of aircraft. However, the Company
believes it will continue to experience losses until such time as it commences
the sale of aircraft on a commercial scale.
During the next 12 to 18 months, the Company intends to focus its efforts
in the following areas:
* To complete the development of the JETCRUZER 500, including, among
other things, adding a larger engine, pressurization, environmental
systems, de-icing capability and autopilot certification.
* To obtain an amendment to its Type Certificate to include the
JETCRUZER 500, including the manufacture of FAA conformed models of
the JETCRUZER 500 and static and flight testing.
* To establish an appropriate manufacturing facility capable of
producing the JETCRUZER 500 on a commercial scale, including the
establishment of a production line in such facility and the
acquisition of production inventory and additional items of equipment,
tooling and computer hardware and software systems.
* To obtain a production certificate from the FAA and commence
commercial production of the JETCRUZER 500.
* To expand its sales and marketing staff and increase its marketing
efforts with respect to the JETCRUZER 500.
* To increase its engineering, manufacturing and administrative staff in
anticipation of increased development and production activities.
The Company believes that the net proceeds from its recent IPO will be
sufficient to finance its plan of operations for at least the 12 to 18 months
following the date of this report, based upon the current status of its business
operations, its current plans and current economic and industry conditions. If
the Company's estimates prove to be incorrect, however, then during such period
the Company may have to seek additional sources of financing, reduce operating
costs and/or curtail growth plans.
7
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits:
Exhibit No. Description Page No.
----------- ----------------------------------------------- --------
*3.1 Certificate of Incorporation...................
**3.2 Bylaws.........................................
*3.3 Amendment to Certificate of Incorporation......
*4.1 Specimen Certificate of Class A Common Stock...
*4.2 Warrant Agreement (including form of Class A
and Class B Warrant Certificates.............
*4.3 Form of Underwriter's Unit Purchase Option.....
*10.1 Form of Indemnification Agreement..............
**10.2 Amended 1996 Stock Option Plan.................
*10.3 Employment Agreement dated as of May 1, 1996
between the Company and Dr. Carl L. Chen.....
*10.4 Agreement of Merger dated July 16, 1996 between
Advanced Aerodynamics and Structures, Inc.,
California corporation, and Advanced
Aerodynamics & Structures, Inc., a
Delaware corporation.........................
**10.5 Lease dated December 19, 1996 between Olen
Properties Corp., a Florida corporation,
and the Company...............................
11.1 Statement re: Computation of Per Share Earnings.
27 Financial Data Schedule.........................
* Incorporated by reference to the Company's Registration Statement on Form
SB-2 (333-12273) declared effective by the Securities and Exchange Commission on
December 3, 1996.
** Incorporated by reference to the Company's Report on Form 10-KSB filed
with the Securities and Exchange Commission on March 31, 1997.
Reports on Form 8-K:
During the quarter ended March 31, 1997, the Company did not file any
reports on Form 8-K.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: May 14, 1997 ADVANCED AERODYNAMICS &
STRUCTURES, INC.
/s/ Carl L. Chen
---------------------------------------
Carl L. Chen, President
/s/ Dave Turner
----------------------------------------
Dave Turner, Chief Financial Officer
9
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Statement Re: Computation of Per Share Earnings
<TABLE>
For the For the
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1977
------------------ ------------------
<S> <C> <C>
Net loss $ 341,000) $ (519,000)
------------ ---------
Weighted average number
of Class B Common Stock
shares outstanding 2,000,000 2,000,000
Common stock equivalents
from the issuance of
Bridge Warrants computed
using the treasury stock
method 1,400,000
Weighted average number of
Class A Common Stock
shares outstanding 6,900,000
------------ ---------
3,400,000 8,900,000
------------ ---------
Net loss per share ($.10) ($.06)
------------ ---------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 24,048,000
<SECURITIES> 1,513,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,721,000
<PP&E> 3,442,000
<DEPRECIATION> (1,575,000)
<TOTAL-ASSETS> 27,588,000
<CURRENT-LIABILITIES> 299,000
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 27,278,000
<TOTAL-LIABILITY-AND-EQUITY> 27,588,000
<SALES> 0
<TOTAL-REVENUES> 290,000
<CGS> 0
<TOTAL-COSTS> 809,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (519,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (519,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (519,000)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
