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, 1998
[ ] TRANSITION REPORT UNDER
SECTION 13 OR 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 15, 1998, the issuer had outstanding 6,999,676 shares of
Class A Common Stock, 1,900,324 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.
TABLE OF CONTENTS
ITEM
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Results of Operations
PART II. OTHER INFORMATION
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Advanced Aerodynamics & Structures, Inc.
(A Development Stage Enterprise)
Balance Sheet
(unaudited)
<TABLE>
March 31, 1998
--------------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents $4,916,000
Certificate of deposit 1,061,000
Short term investments 3,288,000
Prepaid expenses and other current assets 336,000
--------------------
Total current assets 9,601,000
Restricted cash 16,862,000
Property and equipment, net 1,679,000
Construction in progress 489,000
Other assets 604,000
====================
Total assets $29,235,000
====================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Advanced Aerodynamics & Structures, Inc.
(A Development Stage Enterprise)
Balance Sheet (continued)
(unaudited)
<TABLE>
March 31, 1998
-------------------------
<S> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $322,000
Accrued liabilities 610,000
-------------------------
Total current liabilities 932,000
Long term debt 8,500,000
Deferred revenue 950,000
-------------------------
Total liabilities 10,382,000
-------------------------
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; 6,999,676 shares
issued and outstanding 1,000
Class B Common Stock, par value $.0001 per share;
10,000,000 shares authorized; 1,900,324 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 35,652,000
Deficit accumulated during the development stage (33,195,000)
-------------------------
Total stockholders' equity 18,853,000
=========================
Total liabilities and stockholders' equity $29,235,000
=========================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Advanced Aerodynamics & Structures, Inc.
(A Development Stage Enterprise)
Statement of Operations
(unaudited)
<TABLE>
Three Months Ended Period from
March 31, January 26,
1990 (inception)
To March 31,
1997 1998 1998
------------------ ------------------ ---------------------
<S> <C> <C> <C>
Interest income $289,000 $305,000 $1,748,000
Other income 1,000 30,000 845,000
------------------ ------------------ ---------------------
290,000 335,000 2,593,000
Costs and expenses
Research and development costs 326,000 1,621,000 20,070,000
Preoperating costs -- -- 282,000
General and administrative expenses 481,000 877,000 10,911,000
Loss on disposal of assets 2,000 -- 742,000
Interest expenses -- 79,000 2,080,000
In-process research and development
acquired -- -- 761,000
------------------ ------------------ ---------------------
809,000 2,577,000 34,846,000
------------------ ------------------ ---------------------
Loss before extraordinary item (519,000) (2,242,000) (32,253,000)
Extraordinary loss on retirement of
Bridge Notes -- -- (942,000)
------------------ ------------------ ---------------------
Net loss (519,000) (2,242,000) (33,195,000)
================== ================== =====================
Net loss per share (0.06) (0.25)
================== ================== =====================
Weighted average number of shares
outstanding 8,900,000 8,900,000
================== ================== =====================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Advanced Aerodynamics & Structure, Inc.
(A Development Stage Enterprise)
Statement of Stockholders' Equity
(unaudited)
<TABLE>
Common Stock
Preferred Stock Class A Class B Class E-1 Class E-2
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
---------- ---------- ---------- ---------- ---------- --------- ------------ -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued 418,094 $ -- 836,189 $ -- 836,189 $ --
Common stock issued in
exchange for in-
process research and
development 201,494 -- 402,988 -- 402,988 --
Imputed interest on
advances from
stockholder
Net loss from inception
to December 31,1994
---------- ---------- ---------- ---------- ---------- --------- ------------ -------- ---------- ------
Balance at December 31,
1994 619,588 -- 1,239,177 -- 1,239,177 --
Imputed interest on
advances from
stockholder
Net loss
---------- ---------- ---------- ---------- ---------- --------- ------------ -------- ---------- ------
Balance at December 31,
1995 619,588 -- 1,239,177 -- 1,239,177 --
Conversion of
stockholder advances 598,011 -- 1,196,021 -- 1,196,021 --
Conversion of officer
loans 187,118 -- 374,236 -- 374,236 --
Stock issued in
consideration for
services in 1994,
1995 and 1996 595,283 -- 1,190,566 -- 1,190,566 --
Imputed interest on
advances from
stockholder
Net proceeds from initial
public offering of Units 6,000,000 $1,000
Net proceeds from
exercise of over-
allotment option 900,000 --
Warrants issued in
connection with
issuance of Bridge
Notes
Net loss
---------- ---------- ---------- ---------- ---------- --------- ------------ -------- ---------- ------
Balance at December
31, 1996 6,900,000 $1,000 2,000,000 -- 4,000,000 -- 4,000,000 --
Adjustment to proceeds
from initial public
offering and exercise
of over-allotment option
Net loss
---------- ---------- ---------- ---------- ---------- --------- ------------ -------- ---------- ------
Balance at December 31,
1997 6,900,000 $1,000 2,000,000 -- 4,000,000 -- 4,000,000 --
Conversion of Class B to
Class A Common Stock 99,676 (99,676)
Net loss
---------- ---------- ---------- ---------- ---------- --------- ------------ -------- ---------- ------
Balance at March 31, 1998 6,999,676 $1,000 1,900,324 -- 4,000,000 -- 4,000,000 --
</TABLE>
See accompanying notes to financial statements
<PAGE>
Advanced Aerodynamics & Structure, Inc.
(A Development Stage Enterprise)
Statement of Stockholders' Equity (continued)
(unaudited)
<TABLE>
Warrants
Deficit
Bridge Accumulated
Warrants to During the
Purchase Additional Development
Common Stock Class A Class B Paid-in Capital Stage Total
---------------- ------------ ----------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Common stock issued $7,500,000 $7,500,000
Common stock issued in
exchange for in-
process research and
development 361,000 361,000
Imputed interest on
advances from
stockholder 776,000 776,000
Net loss from inception
to December 31,1994 $(19,252,000) $(19,252,000)
---------------- ------------ ----------- ---------------- -------------- --------------
Balance at December 31,
1994 8,637,000 (19,252,000) (10,615,000)
Imputed interest on
advances from
stockholder 23,000 23,000
Net loss (1,688,000) (1,688,000)
---------------- ------------ ----------- ---------------- -------------- --------------
Balance at December 31,
1995 8,660,000 (20,940,000) (12,280,000)
Conversion of
stockholder advances 10,728,000 10,728,000
Conversion of officer
loans 336,000 336,000
Stock issued in
consideration for
services in 1994,
1995 and 1996 1,507,000 1,507,000
Imputed interest on
advances from
stockholder 11,000 11,000
Net proceeds from initial
public offering of Units $9,583,000 $4,166,000 12,566,000 26,316,000
Net proceeds from
exercise of over-
allotment option 1,707,000 466,000 1,922,000 4,095,000
Warrants issued in
connection with
issuance of Bridge Notes $473,000 473,000
Net loss (3,388,000) (3,388,000)
---------------- ------------ ----------- ---------------- -------------- --------------
Balance at December
31, 1996 $473,000 $11,290,000 $4,632,000 $35,730,000 $(24,328,000) $27,798,000
Adjustment to proceeds
from initial public
offering and exercise
of over-allotment option (78,000) (78,000)
Net loss (6,625,000) (6,625,000)
---------------- ------------ ----------- ---------------- -------------- --------------
Balance at December 31,
1997 $473,000 $11,290,000 $4,632,000 $35,652,000 $(30,953,000) $21,095,000
Conversion of Class B to
Class A Common Stock --
Net loss (2,242,000) (2,242,000)
---------------- ------------ ----------- ---------------- -------------- --------------
Balance at March 31, 1998 $473,000 $11,290,000 $4,632,000 $35,652,000 $(33,195,000) 18,853,000
</TABLE>
See accompanying notes to financial statements
<PAGE>
Advanced Aerodynamics & Structures, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows
(unaudited)
<TABLE>
Period from
January 26,
Three Months Ended 1990 (inception) to
March 31, March 31,
1997 1998 1998
------------------- -------------------- --------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(519,000) (2,242,000) (33,195,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Noncash stock compensation expense 1,207,000
Noncash interest expense 336,000
Cost of in-process research and development acquired 761,000
Imputed interest on advances from stockholder 810,000
Interest income from restricted cash invested (107,000) (243,000)
Extraordinary loss on retirement of Bridge Notes 942,000
Depreciation and amortization 79,000 100,000 2,300,000
Loss on disposal of assets 2,000 742,000
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses and
other current assets (5,000) 304,000 45,000
(Increase) decrease in other assets (187,000) (604,000)
Increase (decrease) in accounts payable (69,000) (213,000) 322,000
Increase (decrease) in accrued liabilities 65,000 345,000 510,000
Increase in deferred revenue 10,000 520,000 950,000
------------------- -------------------- --------------------
Net cash used in operating activities (437,000) (1,480,000) (25,117,000)
------------------- -------------------- --------------------
Cash flows from investing activities:
Restricted cash from long term debt (8,500,000)
Increase in construction in progress (43,000) (489,000)
Proceeds from insurance claims upon loss of aircraft 30,000
Proceeds from disposal of assets 3,000 3,000
Capital expenditures (265,000) (63,000) (4,714,000)
Purchase of certificate of deposit (1,000,000) (1,061,000)
Purchase of marketable securities (8,637,000)
Proceeds from sale of marketable securities 1,525,000 1,225,000 5,349,000
------------------- -------------------- --------------------
Net cash provided by (used in) investing activities 263,000 1,119,000 (18,019,000)
------------------- -------------------- --------------------
Cash flows from financing activities:
Adjustment to net proceeds from initial public
offering and exercise of over-allotment option (78,000)
Proceeds from long term debt 8,500,000
Restricted cash collateral for long term debt (8,500,000)
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 (40,000)
Proceeds from loans from officer 336,000
------------------- -------------------- --------------------
Net cash provided by financing activities -- -- 48,052,000
------------------- -------------------- --------------------
Net increase (decrease) in cash and cash equivalents (174,000) (361,000) 4,916,000
Cash and cash equivalents at beginning of period 24,222,000 5,277,000 --
=================== ==================== ====================
Cash and cash equivalents at end of period 24,048,000 4,916,000 4,916,000
=================== ==================== ====================
</TABLE>
<PAGE>
Advanced Aerodynamics & Structures, Inc.
(A Development Stage Enterprise)
Statement of Cash Flows (continued)
(unaudited)
<TABLE>
Period from
January 26,
Three Months Ended 1990 (inception) to
March 31, March 31,
1997 1998 1998
------------------- -------------------- --------------------
<S> <C> <C> <C>
Supplemental cash flow information:
Cash paid for interest $79,000 $ 934,000
Supplemental disclosure of noncash investing and
financing activities:
Stockholder advances converted to common stock $ 10,728,000
Loans from officer 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
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
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, 1998 and the results of
operations and cash flows for the three months ended March 31, 1998 and
1997. 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, 1997 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
month period ended March 31, 1997 and 1998 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.
There is no difference between the loss per share amounts computed for
basic and dilutive purposes because the impact of options and warrants
outstanding are anti-dilutive.
<PAGE>
3. Industrial Development Bonds
On August 5, 1997, the Company entered into a loan agreement in
connection with industrial development bonds issued by the California
Economic Development Financing Authority. The Company has established
in the trustee's favor a bank letter of credit for the principle amount
of $8,500,000, plus 45 days accrued interest on the bonds, which is
secured by $8,500,000 of Company restricted cash. The bonds mature
August 1, 2027 at which time all outstanding amounts become due and
payable. The Company will use the proceeds from the IDBs to finance the
construction and installation of a 200,000 square foot manufacturing
facility and related manufacturing equipment.
4. Land Lease for Manufacturing and Headquarters Facility
On October 17, 1997 the Company entered into an agreement with the City
of Long Beach for approximately 10 acres of land located on the Long
Beach Airport. The purpose of the lease is to effectuate the
construction of an approximately 200,000 square foot manufacturing and
headquarters facility. The Lease term commenced on January 14, 1998 and
has a term of 30 years with an option to renew for an additional 10
years. The lease also contains options to lease other airport
properties. The monthly rent under the lease is $4,500, which escalates
to $15,600 after 5 years.
5. Contract to Construct a Manufacturing and Headquarters Facility
The Company entered into an agreement with Commercial Developments
International/West (Design/Builder) whereby Design/Builder shall design
and build an approximately 200,000 square foot manufacturing and
headquarters facility. The contract sum for this project is "Cost plus
Fixed Fees" with a Guaranteed Maximum Price of $6,300,000, subject to
the cost of change orders, if any. Any savings realized upon completion
and acceptance of the project will be shared by the Design/Builder and
the Company. The Company believes that the project will be completed in
the third quarter of 1998.
6. Conversion of Shares
In February of 1998 a shareholder of the Company converted 99,676
shares of Class B Common Stock to 99,676 shares of Class A Common
Stock. The conversion resulted in an increase in Class A Common Stock
to 6,999,676 and a decrease in the number of outstanding shares of
Class B Common Stock to 1,900,324. This transaction had no impact on
earnings per share as both classes of shares are included in
the calculation of weighted average number of common stock outstanding.
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
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."
The Company is a development stage enterprise organized to design, develop,
manufacture and market propjet and jet aircraft intended primarily for business
use. Since its inception, the Company has been engaged principally in research
and development of its proposed aircraft. In March 1990, the Company made
application to the FAA for a Type Certificate for the JETCRUZER 450, which
Certificate was ultimately granted in June 1994. As a result, the Company has
not generated any operating revenues to date and has incurred losses from such
activities. The Company believes it will continue to experience losses until
such time as it commences the sale of aircraft on a commercial scale.
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 $5,000,000. This amount includes the cost of
equipment and tooling, static and flight testing of the aircraft and the
employment of the necessary personnel to build and test 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.
Through the end of the third quarter of 1998, 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, as well as
lengthening its fuselage.
* 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 ("New Faciliy")
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 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 increase its engineering, manufacturing and administrative staff in
anticipation of increased development and production activities.
The Company believes that the net proceeds from the Company's initial
public offering ("IPO") of stock in December 1996 will be sufficient to finance
its plan of operations through approximately the first quarter of 1999, 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.
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Liquidity and Capital Resources
At March 31, 1998, the Company had working capital of $8,669,000 and
stockholders' equity of $18,853,000. Since its inception in January 1990, the
Company has experienced continuing negative cash flow from operations, which,
prior to its IPO in December of 1996, resulted in the Company's inability to pay
certain existing liabilities in a timely manner. The Company has financed its
operations through private funding of equity and debt and its IPO in December of
1996.
The Company also expects to continue to incure losses until such time, if
ever, as it obtains regulatory approval for the JETCRUZER 500 and related
production processes and market acceptance for its proposed aircraft at selling
prices and volumes which provide adequate gross profit to cover operating costs
and generate positive cash flow. The Company's working capital requirements will
depend upon numerous factors, including the level of resources devoted by the
Company to the scale-up of manufacturing and the establishment of sales and
marketing capabilities and the progress of the Company's research and
development program for the JETCRUZER 500 and other proposed aircraft.
The Company expects that the net proceeds of the IPO in December 1996 will
enable it to meet its liquidity and capital requirements at least through the
first quarter of 1999, by which time the Company expects to have received a type
certificate and a production certificate for the JETCRUZER 500 and commenced
commercial production and sale of the JETCRUZER 500. Such proceeds are being,
and will be used primarily for amendment of the Type Certificate, the purchase
of equipment and tooling, the establishment of a manufacturing facility, and
sales and marketing. The Company's capital requirements are subject to numerous
contingencies associated with development stage companies. Specifically if
delays are encountered in amending the current Type Certificate, the time and
cost of obtaining such certification may be substantial, may render it
impossible for the Company to complete such new or amended certification and may
therefore have a material and adverse effect on the Company's operations.
Further, if the Company has not completed the development of the JETCRUZER 500
or received the required regulatory approvals and successfully commenced
commercial sales of its aircraft by the first quarter of 1999, the Company may
require additional funding to fully implement its proposed business plan. The
Company has no commitments from any third parties for any future funding, and
there can be no assurance that the Company will be able to obtain financing in
the future from bank borrowings, debt or equity financing or other sources on
terms acceptable to the Company or at all. In the event necessary financing were
not obtained, the Company would be materially and adversely affected and might
have to cease or substantially reduce operations.
The Company had no other material capital commitments at March 31, 1998
other than as discussed in this report. The Company intends to hire a number of
additional employees and complete the New Facility, both of which will require
substantial capital resources. The Company anticipates that it will hire
approximately 50 employees over the next six months and 150 employees over the
next twelve months, including engineers and manufacturing technicians necessary
to produce its aircraft.
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
Charge to Income in the Event of Conversion of Performance Shares
In the event the Company attains certain earnings thresholds or the
Company's Class A Common Stock meets certain minimum bid price levels, the Class
E Common Stock will be converted into Class B Common Stock. In the event any
such converted Class E Common Stock is held by officers, directors, employees or
consultants, the maximum compensation expense recorded for financial reporting
purposes will be an amount equal to the fair value of the shares converted at
the time of such conversion which value cannot be predicted at this time.
Therefore, in the event the Company attains such earnings thresholds or stock
price levels, the Company will recognize a substantial charge to earnings during
the period in which such conversion occurs, which would have the effect of
increasing the Company's loss or reducing or eliminating its earnings, if any,
at that time. In the event the Company does not attain these earnings thresholds
or minimum bid price levels, and no conversion occurs, no compensation expense
will be recorded for financial reporting purposes.
Financing of Manufacturing and Headquarters Facility
The Company is in the process of construcing an approximately 200,000
square foot manufacturing and headquarters facility (the "New Facility"). The
primary financing for this project is the Company's obligation under a loan
agreement related to proceeds recieved from $8,500,000 in the issuance of
industrial development bonds ("IDBs") by the California Economic Development
Financing Authority. The Company was required to provide cash collateral to The
Sumitomo Bank, Limited (the "Bank") in the amount of $8,500,000 for a stand by
letter of credit in favor of the holders of the IBDs which expire on August 5,
2002, if not terminated by the Company or the Bank.
Item 2. Changes in Securities
In February of 1998, a shareholder of the Company converted 99,676
shares of Class B Common Stock to 99,676 shares of Class A Common Stock. The
conversion resulted in an increase in the number of outstanding shares of Class
A Common Stock from 6,900,000 to 6,999,676 and a decrease in the number of
outstanding shares of Class B Common Stock from 2,000,000 to 1,900,324 shares.
Item 5. Other Information
Stock Option Plan
On March 2, 1998, the Board of Directors authorized the adoption of the
1998 Stock Option Plan the ratification of which will be subject to a
shareholder vote at the Company's annual meeting to be held on July 20, 1998.
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits:
Exhibit No. Description
- -------------------------------------------------------------------------------
* 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
*** 10.6 Standard Sublease dated June 27, 1997 with Budget
Rent-a-Car of Southern California
*** 10.7 Standard Sublease dated July 16, 1997 with Budget
Rent-a-Car of Southern California
*** 10.8 Standard Industrial/Commercial Multi-Tenant Lease-Gross
dated March 12, 1997 with the Golgolab Family Trust
*****10.9 Loan Agreement dated as of August 1, 1997 between the
Company and the California Economic Development Authoroity
*****10.10 Indenture of Trust dated as of August 1, 1997 between
the California Economic Development Authority and
First Trust of California, National Association
**** 10.11 Official Statement dated August 5, 1997
*****10.12 Letter of Credit issued by The Sumitomo Bank, Limited
*****10.13 Reimbursement Agreement dated as of August 1, 1997
between the Company and The Sumitomo Bank, Limited
*****10.14 Purchase Contract dated August 1, 1997 by and among
Rauscher Pierce Refnes, Inc., the California Economic
Development Authority and the Treasurer of the State
of California, and approved by the Company
*****10.15 Remarketing Agreement dated as of August 1,1997
between the Company and Rauscher Pierce Refnes, Inc.
*****10.16 Blanket Letters of Representations of the California
Economic Development Authority and First Trust of
California, National Association
*****10.17 Tax Regulatory Agreement dated as of August 1, 1997
by and among the California Economic Development
Authority, the Company and First Trust of California,
National Association
*****10.18 Custody, Pledge and Security Agreement dated as of August 1,
1997 between the Company and The Sumitomo Bank, Limited
*****10.19 Investment Agreement dated August 5, 1997 by and
between the Company and The Sumitomo Bank, Limited
*****10.20 Specimen Direct Obligation Note between the Company
and The Sumitomo Bank, Limited
**** 10.21 Lease Agreement dated October 17, 1997 between the
Company and the City of Long Beach
**** 10.22 Construction Agreement dated October 29,1997 between the
Company and Commercial Developments International/West
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.
*** Incorporated by reference by the Company's Post-Effective Amendment No. 1
to Form SB-2 Registration Statement filed with the Securities and Exchange
Commission on August 5, 1997.
**** Filed by paper pursuant to the Company's request for a temporary
hardship exemption relating to its report on Form 10-QSB filed with the
Securities and Exchange Commission on November 14, 1997.
***** Incorporated by reference to the Company's Report on Form 10-QSB
filed with the Securities and Exchange Commission on November 14, 1997.
Reports on Form 8-K:
None
<PAGE>
ADVANCED AERODYNAMICS & STRUCTURES, INC.
(A Development Stage Enterprise)
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 15, 1998 ADVANCED AERODYNAMICS & STRUCTURES, INC.
By: /s/ Carl L. Chen
------------------------------------
Carl L. Chen, President
By: /s/ Dave Turner
------------------------------------
Dave Turner, Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 4,916,000
<SECURITIES> 3,288,000
<RECEIVABLES> 0
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<CURRENT-ASSETS> 9,601,000
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