<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-21926
-------------------------------------------------------
AER Energy Resources, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 34-1621925
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 Highlands Parkway, Suite G, Smyrna, Georgia 30082
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(770) 433-2127
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
There were 24,047,089 shares of Common Stock outstanding as of August 7, 1996.
<PAGE> 2
AER ENERGY RESOURCES, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Balance Sheets - June 30, 1996 and December 31, 1995. 3
Condensed Statements of Operations - Three Months Ended June 30, 4
1996 and 1995, Six Months Ended June 30, 1996 and 1995, and
Period From July 17, 1989 (Date of Inception) to June 30, 1996.
Condensed Statements of Cash Flows - Six Months Ended June 30, 5
1996 and 1995 and Period From July 17, 1989 (Date of Inception)
to June 30, 1996.
Notes to Condensed Financial Statements - June 30, 1996. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 9
RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
</TABLE>
Page 2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
AER ENERGY RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
--------------- ---------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 22,550,077 $ 16,417,152
Trade accounts receivable (less allowances of $407 at June 30,
1996 and $19,790 at December 31, 1995) . . . . . . . . . . . . . 7,280 8,025
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,898 254,008
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 184,772 141,132
--------------- ---------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 22,986,027 16,820,317
Equipment and improvements:
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . 2,932,033 2,874,394
Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . 427,318 427,905
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 253,474 252,299
--------------- ---------------
3,612,825 3,554,598
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . 1,772,256 1,496,406
--------------- ---------------
1,840,569 2,058,192
Other long term assets . . . . . . . . . . . . . . . . . . . . . . . 16,841 16,841
--------------- ---------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,843,437 $ 18,895,350
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 225,154 $ 331,435
Accrued royalties - related party . . . . . . . . . . . . . . . . 80,000 60,000
Accrued compensation . . . . . . . . . . . . . . . . . . . . . . . 30,916 18,550
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 565,943 285,765
--------------- ---------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 695,750
902,013
Deferred rental expense . . . . . . . . . . . . . . . . . . . . . . . 3,609 7,056
Stockholders' equity:
Convertible debentures . . . . . . . . . . . . . . . . . . . . . . 627,664 9,924,073
Preferred stock, no par value:
Authorized - 10,000,000 shares; no shares issued and outstanding .
Common Stock, no par value:
Authorized - 100,000,000 shares; issued and outstanding -
24,047,089 shares at June 30, 1996 and 17,269,180 shares at
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . 65,891,061 46,905,677
Notes receivable from Common Stock sales . . . . . . . . . . . . . (71,875) (71,875)
Unearned stock compensation . . . . . . . . . . . . . . . . . . . (407,049) (342,000)
Deficit accumulated during the development stage . . . . . . . . . (42,101,986) (38,223,331)
--------------- ---------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . 23,937,815 18,192,544
--------------- ---------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . $ 24,843,437 $ 18,895,350
=============== ===============
</TABLE>
Note: The condensed balance sheet at December 31, 1995 has been derived from
the audited financial statements of AER Energy Resources, Inc. at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See notes to condensed financial statements.
Page 3
<PAGE> 4
AER ENERGY RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17, 1989
(DATE OF
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, INCEPTION) TO
------------------------------ ---------------------------- JUNE 30,
1996 1995 1996 1995 1996
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . $ 5,363 $ 4,985 $ 20,091 $ 34,318 $ 227,233
Cost of sales . . . . . . . 378,709 355,780 932,381 897,786 3,705,908
------------ ------------ ----------- ----------- ------------
Gross margin . . . . . . . (373,346) (350,795) (912,290) (863,468) (3,478,675)
Costs and expenses:
Research and development
- related party . . . . . -- -- -- -- 1,145,913
- other . . . . . . . . . 1,048,224 1,269,797 1,704,661 3,068,795 23,043,977
Marketing, general and
administrative
- related party . . . . . 49,840 74,850 99,397 148,970 1,093,181
- other . . . . . . . . . 737,195 833,316 1,478,734 1,992,815 14,929,874
------------ ------------ ----------- ----------- ------------
Total costs and expenses . 1,835,259 2,177,963 3,282,792 5,210,580 40,212,945
------------ ------------ ----------- ----------- ------------
Operating loss . . . . . . (2,208,605) (2,528,758) (4,195,082) (6,074,048) (43,691,620)
Interest income . . . . . . 254,450 177,747 489,824 392,167 2,117,049
Interest expense
- related parties . . . . -- -- -- -- (264,445)
------------ ------------ ----------- ----------- ------------
Net loss . . . . . . . . . $ (1,954,155) $ (2,351,011) $(3,705,258) $(5,681,881) $(41,839,016)
============ ============ =========== =========== ============
Net loss per share . . . . $ (0.08) $ (0.14) $ (0.17) $ (0.33) $ (3.53)
============ ============ =========== =========== ============
Weighted average shares
outstanding . . . . . . . 23,153,314 17,242,877 21,232,044 17,237,384 11,858,343
</TABLE>
See notes to condensed financial statements.
Page 4
<PAGE> 5
AER ENERGY RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17, 1989
(DATE OF
SIX MONTHS ENDED JUNE 30, INCEPTION) TO
-------------------------------- JUNE 30,
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . $ (3,705,258) $ (5,681,881) $(41,839,016)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization . . . . . . . . . . . 288,310 345,316 2,170,179
Amortization of unearned stock compensation . . . . 72,872 72,000 432,872
Loss on disposal of assets . . . . . . . . . . . . 7,890 14,936 39,091
Deferred rental expense . . . . . . . . . . . . . . (3,447) (5,192) 3,609
Accretion of discount on marketable securities . . -- -- (187,407)
Changes in operating assets and liabilities:
Trade accounts receivable . . . . . . . . . . . . 745 1,063 (7,280)
Inventories . . . . . . . . . . . . . . . . . . . 10,110 (13,481) (243,898)
Prepaid expenses and other current assets . . . . (43,640) 34,549 (185,082)
Accounts payable . . . . . . . . . . . . . . . . (106,281) (133,735) 225,154
Accrued royalties payable - related party . . . . 20,000 29,657 80,000
Other current liabilities . . . . . . . . . . . . 292,544 (57,608) 755,793
------------ ------------ ------------
Net cash used in operating activities . . . . . . . . (3,166,155) (5,394,376) (38,755,985)
INVESTING ACTIVITIES:
Purchases of equipment and improvements . . . . . . . (78,577) (172,241) (3,676,166)
Purchase of marketable securities . . . . . . . . . . -- -- (11,512,296)
Purchase of license agreement . . . . . . . . . . . . -- -- (250,000)
Proceeds from marketable securities . . . . . . . . . -- -- 11,700,000
Changes in other assets . . . . . . . . . . . . . . . -- -- (140,501)
------------ ------------ ------------
Net cash used in investing activities . . . . . . . . (78,577) (172,241) (3,878,963)
FINANCING ACTIVITIES:
Proceeds from revolving credit note to related -- -- 5,430,000
parties . . . . . . . . . . . . . . . . . . . . . .
Issuance of convertible debentures, net of issuance
costs -- -- 9,834,500
Payments on notes payable to related parties . . . . -- -- (1,150,000)
Payments received on promissory notes . . . . . . . -- 4,000 57,425
Issuance of Common Stock, exercise of stock options . 12,440 39,600 133,545
Issuance of Common Stock, net of issuance costs . . . 9,365,217 -- 50,879,555
------------ ------------ ------------
Net cash provided by financing activities . . . . . . 9,377,657 43,600 65,185,025
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents . . 6,132,925 (5,523,017) 22,550,077
Cash and cash equivalents at beginning of period . . 16,417,152 16,029,787 --
------------ ------------ ------------
Cash and cash equivalents at end of period . . . . . $ 22,550,077 $ 10,506,770 $ 22,550,077
============ ============ ============
</TABLE>
See notes to condensed financial statements.
Page 5
<PAGE> 6
AER ENERGY RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. These financial statements should be
read in conjunction with the Company's audited financial statements included in
the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1995. Operating results for the
three and six month periods ended June 30, 1996 are not necessarily indicative
of the results that may be expected for the year ended December 31, 1996 or any
interim period.
2. SIGNIFICANT ACCOUNTING POLICIES
Description of Business
AER Energy Resources, Inc. was incorporated on July 17, 1989 and since
inception has engaged in the development and commercialization of high energy
density, rechargeable zinc-air batteries. The Company's operations to date
have primarily been focused on developing and updating the technology, setting
up the manufacturing process, testing and selling zinc-air batteries,
recruiting personnel and similar activities. The Company began selling its
first product in August 1994. Sales from August 1994 through June 30, 1996
have been minimal. Until significant product sales occur, the Company is
considered to be a development stage company for financial reporting purposes.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash, bank deposits and highly
liquid investments with maturities of three months or less when purchased and
are stated at cost, which approximates market.
Inventory
The Company's inventory has been valued at the lower of cost or
market, using the first in, first out method. The components of inventory are
listed below.
Page 6
<PAGE> 7
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- -------------
<S> <C> <C>
Raw material $ 208,592 $ 238,101
Work in process 35,306 13,893
Finished products -- 2,014
------------- -------------
Total $ 243,898 $ 254,008
============= =============
</TABLE>
Net Loss Per Share
Net loss per share is based on the weighted average number of common
shares outstanding during the period, including, for all periods presented,
shares and Common Stock equivalents issued during the twelve months immediately
preceding the effective date (June 30, 1993) of the Company's initial public
offering of its Common Stock. Common Stock equivalents issued and outstanding
prior or subsequent to such twelve month period have not been included since
their effect would be anti-dilutive.
In accordance with APB Opinion No. 15, supplemental loss per share
data is presented for comparability purposes. The following loss per share is
calculated excluding the effects of Common Stock equivalents issued during the
twelve months immediately preceding the effective date of the Company's initial
public offering of its Common Stock:
<TABLE>
<CAPTION>
PERIOD FROM JULY 17,
THREE MONTHS ENDED JUNE 30, 1989 (DATE OF
------------------------------ INCEPTION) TO JUNE 30,
1996 1995 1996
---------- --------- ----------------------
<S> <C> <C> <C>
Net loss per share $ (0.08) $ (0.14) $ (4.07)
========== ========= ==========
</TABLE>
Use of Estimates
In accordance with FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
the Company records impairment losses on long-lived assets used in operations
when events and circumstances indicate that the assets might be impaired and
the undiscounted cash flows estimated to be generated by those assets are less
than the carrying amounts of those assets. Based on the Company's estimate of
future undiscounted cash flows, the Company expects to recover the carrying
amounts of its fixed assets. Nonetheless, it is reasonably possible that the
estimate of undiscounted cash flows may change in the near term resulting in
the need to write-down those assets to fair value. During the three and six
months ended June 30, 1996, the Company recorded a write-off of obsolete
equipment with a net book value of $0 and $7,890, respectively, which was
included in marketing, general and administrative expenses.
Page 7
<PAGE> 8
3. STOCKHOLDERS' EQUITY
On May 20, 1996, the Company issued 1,584,158 shares of its Common
Stock, and warrants to purchase an additional 835,000 shares, in a private
placement at an aggregate purchase price of $10,000,000. The transaction
generated proceeds of $9,365,217, net of expenses. The warrants have an
exercise price of $6.3125 per share and expire in five years. The value of the
warrants is included in Common Stock on the balance sheet.
Page 8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Since its inception, the Company has been a development stage company
primarily engaged in developing rechargeable zinc-air battery technology,
establishing the manufacturing process, defining and developing market
opportunities, testing and selling rechargeable zinc-air batteries and
recruiting and training personnel. During 1995, the Company began shipping two
customized zinc-air accessory batteries designed for computer original
equipment manufacturers ("OEMs"); the AER Energy PowerProTM, a zinc-air
accessory battery designed for certain 1995 models of Toshiba portable
computers, and the AER Energy PowerSlice LXTM, a zinc-air battery designed for
the Hewlett-Packard OmniBook 600 portable computer. The Company has recorded
limited revenue from the sales of these products for the three and six month
periods ended June 30, 1996. The Company has incurred cumulative losses of
$41.8 million since inception to June 30, 1996. The Company expects to
continue to incur operating losses through at least the end of 1996.
The Company was formed to develop and commercialize rechargeable
zinc-air batteries for portable electronic products using technology licensed
from Dreisbach Electromotive, Inc. ("DEMI"). DEMI was formed in 1982 to
conduct research and development on electric vehicles and battery systems
utilizing, among others, zinc-air technology. DEMI's zinc-air development
programs included applications for electric vehicles and portable products.
The Company has licensed, through DEMI (the "DEMI License"), the rights to use
certain DEMI technology including zinc-air, in non-motor vehicle applications,
while DEMI has retained the rights to zinc-air technology for motor vehicle
applications and to its other technologies for motor vehicle applications and
batteries producing over 500 watts continuous power output. Effective October
15, 1993, the DEMI License was amended so that, under certain circumstances,
some or all of the royalties due under the DEMI License are payable to the
shareholders of DEMI rather than to DEMI.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 and 1995
The Company generated net revenues of $5,000 for each of the three
month periods ended June 30, 1996 and 1995.
The Company's cost of sales for the three months ended June 30, 1996
was $379,000 as compared to $356,000 for the three months ended June 30, 1995.
The high cost of sales relative to revenues is primarily due to the
manufacturing inefficiencies and high material costs resulting from low
production volumes.
Page 9
<PAGE> 10
Research and development expenses decreased to $1,048,000 for the
three months ended June 30, 1996 from $1,270,000 for the same period in 1995.
This decrease was primarily due to a $188,000 reduction in material, design and
tooling costs. These costs were higher in the three month period ended June
30, 1995, due to the development in 1995 of the AER Energy PowerPro and AER
Energy PowerSlice LX batteries. The Company also experienced a $43,000
reduction in personnel costs for the three months ended June 30, 1996 as
compared to the same period in 1995. These decreases were partially offset by
a $15,000 increase in travel expenses for the three months ended June 30, 1996
as compared to the three months ended June 30, 1995.
Marketing, general and administrative expenses decreased to $787,000
for the three months ended June 30, 1996 from $908,000 for the same period in
1995. This decrease was largely due to a $58,000 reduction in marketing,
advertising and public relations costs, a $55,000 reduction in consulting fees,
a $32,000 reduction in the write-off of obsolete inventory, a $22,000 reduction
in warranty expense and an $11,000 reduction in amortization expense. The
Company also experienced a $25,000 reduction in minimum royalty expense
pursuant to the DEMI License. These reductions were partially offset by a
$59,000 increase in personnel related costs and a $24,000 increase in travel
related costs.
Six Months Ended June 30, 1996 and 1995
The Company generated net revenues of $20,000 for the six months ended
June 30, 1996 as compared to $34,000 for the six month period ended June 30,
1995.
The Company's cost of sales for the six months ended June 30, 1996 was
$932,000 as compared to $898,000 for the same period in 1995. The high cost of
sales relative to revenues is primarily due to low production volumes.
Research and development expenses decreased to $1,705,000 for the six
months ended June 30, 1996 from $3,069,000 for the same period in 1995. This
decrease was primarily due to a reduction of $1,212,000 in material, design and
tooling costs. These costs were higher in the six month period ended June 30,
1995 due to the development in 1995 of the AER Energy PowerPro and AER Energy
PowerSlice LX batteries. The Company also experienced a $126,000 reduction in
personnel costs and a $22,000 reduction in legal costs for the six months ended
June 20, 1996 as compared to the same period in 1995.
Marketing, general and administrative expenses decreased to $1,578,000
for the six months ended June 30, 1996 from $2,142,000 for the same period in
1995. This decrease was largely due to a $232,000 reduction in marketing,
advertising and public relations costs, a $137,000 reduction in professional
fees and investor relations expenses, a $111,000 reduction in consulting fees,
a $42,000 reduction in amortization expense, a $31,000 reduction in bad debt
expense and a $50,000 reduction in the minimum royalty expense pursuant to the
DEMI License. The Company also experienced a $16,000 reduction in the
write-off of obsolete inventory and a $35,000 reduction in warranty expense.
These reductions in marketing, general and administrative expenses were
partially offset by a $76,000 increase in personnel related costs and
Page 10
<PAGE> 11
an $18,000 filing fee for the listing of additional shares on the Nasdaq Stock
Market in connection with the Company's convertible debentures.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
As of June 30, 1996, the Company had cash and cash equivalents of
$22.6 million. The Company anticipates using these funds as needed to fund
capital equipment purchases, research and development efforts, sales and
marketing activities, production of commercial and prototype zinc-air battery
products, development of OEM relationships, working capital and other general
corporate purposes as determined by management. In the interim, the Company
invests any excess funds in government securities and other short-term,
investment grade, interest-bearing instruments.
Net cash used in operating activities decreased to $3.2 million for
the six months ended June 30, 1996 from $5.4 million for the same period in
1995, primarily due to the decreases in costs and expenses discussed above in
"Results of Operations".
For the six months ended June 30, 1996, the Company used $79,000 in
net cash for equipment purchases. For the same period in 1995, the Company
used $172,000 for equipment purchases and leasehold improvements.
In January 1996, the restricted period expired for the conversion of
the $10,675,000 in principal 8% convertible debentures issued by the Company in
November 1995. During the six months ended June 30, 1996, $9,275,000 in
principal of these debentures plus accrued interest was converted into
5,166,001 shares of the Company's common stock at an average conversion price
of $1.83 per share.
In May 1996, the Company received $9,365,217 from the sale of common
stock and warrants, net of expenses.
Pursuant to the DEMI License, the Company has agreed to pay DEMI
royalties of 4% of net sales, subject to certain minimum amounts and to
possible increases or decreases to a maximum of 4% and a minimum of 2%, as
specified in the DEMI License. Starting in July 1994, the percentage of
royalties dropped to 3% of net sales but may return to 4% in the event certain
patents are obtained by DEMI. The Company recorded royalty expense for the six
month periods ended June 30, 1996 and 1995 of $100,000 and $150,000,
respectively. As of June 30, 1996 and December 31, 1995, $80,000 and $60,000,
respectively, of these royalty payments remained unpaid. The future minimum
royalty payments specified by the DEMI License consist of the following:
<TABLE>
<CAPTION>
Year Ending December 31,
<S> <C>
1996................................................150,000
1997................................................100,000
1998................................................100,000
1999.................................................50,000
</TABLE>
Page 11
<PAGE> 12
The Company currently anticipates that its existing cash balances will
fund operations and continue technology development at the current level of
activity into 1998. However, it may be necessary for the Company to increase
its research and development and marketing expenses as it continues to work to
improve its zinc-air technology and to expand its relationships with portable
computer OEMs. It may also be necessary for the Company to expand its
manufacturing capacity in late 1996 in order to meet anticipated 1997 sales
requirements. The Company anticipates that it will continue to need working
capital beyond that generated by its recent private placement, and depending on
the Company's results of operations, the Company may find it necessary to
obtain additional working capital on an accelerated basis or in amounts greater
than currently anticipated. There can be no assurance that additional equity
or debt financing will be available when needed or on terms acceptable to the
Company. To date, both costs and development times have substantially exceeded
the Company's forecasts. In addition, the battery business is a chemical
processing business and, as such, the Company will require specialized
equipment to manufacture its zinc-air batteries. Future equipment additions
could exceed current Company estimates in cost, complexity and development
time.
The market price of the Company's common stock has fluctuated
significantly since it began to be publicly traded on July 1, 1993 and may
continue to be highly volatile. Factors such as delays by the Company in
achieving development goals, inability of the Company to commercialize or
manufacture its products, fluctuation in the Company's operating results,
changes in earning estimates by analysts, announcements of technological
innovations or new products by the Company or its competitors, perceived
changes in the markets for various OEM applications incorporating the
Company's products, the announcement or termination of relationships with OEMs,
and general market conditions may cause significant fluctuations in the market
price of the Company's common stock. The market prices of the stock of many
high technology companies have fluctuated substantially, often unrelated to the
operating or research and development performance of the specific companies.
Such market fluctuations could adversely affect the market price for the
Company's common stock.
Page 12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1996 Annual Meeting of Shareholders was held on May 9,
1996. The Company's shareholders voted to elect all seven of the Company's
nominees to the Company's Board of Directors. The following table shows the
number of votes cast for each nominee and the number of votes withheld as to
each nominee. There were no abstentions or broker non-votes as to any nominee,
and there were no nominees other than those named in the Company's proxy
statement (who are set forth below).
<TABLE>
<CAPTION>
Name of Nominee Affirmative Votes Votes Withheld
--------------- ----------------- --------------
<S> <C> <C>
Charles M. Boesenberg 18,044,613 22,530
David W. Dorheim 18,044,613 22,530
William L. Jackson 18,041,113 26,030
H. Douglas Johns 18,044,613 22,530
Jon A. Lindseth 18,044,613 22,530
Alain Oberrotman 18,044,113 23,030
John L. Wilkes 18,040,613 26,530
</TABLE>
In addition to the election of directors, the following matter was
voted upon and approved by a vote of 17,980,427 for, 57,696 against and 29,020
abstentions or broker non-votes as to the proposal:
Approval to amend the Company's 1992 Stock Option Plan to increase
the number of shares available for issuance under the Plan from 1,000,000
shares to 1,500,000 shares.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
10.1 Securities Purchase Agreement, dated as of May 13, 1996, by
and between FW AER Partners, L.P. and AER Energy Resources, Inc.*
10.2 Warrant to Purchase Shares of Common Stock.*
11 Statement of Computation of Earnings per Share.
27 Financial Data Schedule (for SEC use only).
</TABLE>
*Incorporated herein by reference to the Exhibit with the same
description to the Company's report on Form 8-K (File No. 0-21926), as
filed with the Securities and Exchange Commission on May 23, 1996.
Page 13
<PAGE> 14
(B) REPORTS ON FORM 8-K FILED DURING THE THREE MONTHS ENDED JUNE
30, 1996:
The Company filed a Form 8-K dated May 20, 1996. The
following item was reported:
Item 5. Other Events - Private placement of 1,584,158
shares of Common Stock and warrants to
purchase an additional 835,000 shares at an
aggregate purchase price of $10,000,000.
No financial statements were filed with this
Form 8-K.
Page 14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AER ENERGY RESOURCES, INC.
Date: August 12, 1996 By: /s/ David W. Dorheim
----------------------------------------------
David W. Dorheim, President and
Chief Executive Officer
Date: August 12, 1996 By: /s/ M. Beth Donley
---------------------------------------------
M. Beth Donley, Vice President, Chief
Financial Officer, Secretary and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Page 15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ------ ----------- -------------
<S> <C>
10.1 Securities Purchase Agreement, dated as of May 13, 1996, by and between
FW AER Partners, L.P. and AER Energy Resources, Inc.*
10.2 Warrant to Purchase Shares of Common Stock.*
11 Statement of Computation of Earnings per Share.
27 Financial Data Schedule (for SEC use only).
- -------------------------------------------------------------
* Incorporated herein by reference to the Exhibit with the same description to the Company's report on
Form 8-K (File No. 0-21926), as filed with the Securities and Exchange Commission on May 23, 1996.
</TABLE>
Page 16
<PAGE> 1
EXHIBIT 11
AER ENERGY RESOURCES, INC.
(A DEVELOPMENT STAGE COMPANY)
COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 17, 1989
THREE MONTHS ENDED SIX MONTHS ENDED (DATE OF
JUNE 30, JUNE 30, INCEPTION) TO
------------------------------ ------------------------------ JUNE 30,
1996 1995 1996 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Weighted average Common
Stock outstanding . . . 23,153,314 17,242,877 21,232,881 17,237,384 10,281,292
Common Stock issued and
stock options granted in
accordance with SAB
No. 83 . . . . . . . . -- -- -- -- 1,577,051
------------- ------------- ------------- ------------- -------------
Total . . . . . . . . . . 23,153,314 17,242,877 21,232,044 17,237,384 11,858,343
============= ============= ============= ============= =============
Net loss . . . . . . . . $ (1,954,155) $ (2,351,011) $ (3,705,258) $ (5,681,881) $ (41,839,016)
============= ============= ============= ============= =============
Per share amount . . . . $ (0.08) $ (0.14) $ (0.17) $ (0.33) $ (3.53)
============= ============= ============= ============= =============
</TABLE>
Page 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 22,550,077
<SECURITIES> 0
<RECEIVABLES> 7,687
<ALLOWANCES> 407
<INVENTORY> 243,898
<CURRENT-ASSETS> 22,986,027
<PP&E> 3,612,825
<DEPRECIATION> 1,772,256
<TOTAL-ASSETS> 24,843,437
<CURRENT-LIABILITIES> 902,013
<BONDS> 0
0
0
<COMMON> 65,891,061
<OTHER-SE> (41,953,246)
<TOTAL-LIABILITY-AND-EQUITY> 24,843,437
<SALES> 5,363
<TOTAL-REVENUES> 5,363
<CGS> 378,709
<TOTAL-COSTS> 378,709
<OTHER-EXPENSES> 1,835,259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,954,155)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,954,155)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,954,155)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
