<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, 1998
------------------------------------
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 24,862,263 shares of Common Stock outstanding as of July 31, 1998.
<PAGE> 2
AER ENERGY RESOURCES, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
<TABLE>
<CAPTION>
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- - ------- --------------------------------
<S> <C>
Condensed Balance Sheets - June 30, 1998 and December 31, 1997. 3
Condensed Statements of Operations - Three Months Ended June 30, 4
1998 and 1997, Six Months Ended June 30, 1998 and 1997, and
Period From July 17, 1989 (Date of Inception) to
June 30, 1998.
Condensed Statements of Cash Flows - Six Months Ended June 30, 5
1998 and 1997 and Period From July 17, 1989 (Date of
Inception) to June 30, 1998.
Notes to Condensed Financial Statements - June 30, 1998. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 8
- - ------- ---------------------------------------------------------------
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,
1998 1997
------------ --------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................. $ 6,749,818 $ 10,206,870
Trade accounts receivable ............................................. 788 116
Inventories ........................................................... 245,510 291,278
Prepaid expenses ...................................................... 85,597 149,474
------------ ------------
Total current assets ..................................................... 7,081,713 10,647,738
Equipment and improvements:
Machinery and equipment ............................................... 3,228,772 3,207,603
Office equipment ...................................................... 469,537 469,537
Leasehold improvements ................................................ 257,286 254,766
------------ ------------
3,955,595 3,931,906
Less accumulated depreciation ......................................... 2,774,813 2,539,020
------------ ------------
1,180,782 1,392,886
Other assets ............................................................. 16,841 16,841
------------ ------------
Total assets ............................................................. $ 8,279,336 $ 12,057,465
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................................... $ 93,150 $ 219,230
Accrued royalties - related party ..................................... 40,000 30,000
Other accrued expenses ................................................ 185,334 243,046
------------ ------------
Total current liabilities ................................................ 318,484 492,276
Deferred rental expense .................................................. 2,442 2,112
Stockholders' equity:
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 - 24,862,263
shares at June 30, 1998 and 24,802,263 shares at
December 31, 1997 ................................................ 66,593,140 66,519,348
Notes receivable from common stock sales .............................. (33,938) (35,938)
Unearned stock compensation ........................................... (134,909) (124,882)
Deficit accumulated during the development stage ...................... (58,465,883) (54,795,451)
------------ ------------
Total stockholders' equity ............................................... 7,958,410 11,563,077
------------ ------------
Total liabilities and stockholders' equity ............................... $ 8,279,336 $ 12,057,465
============ ============
</TABLE>
Note: The condensed balance sheet at December 31, 1997 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,
1998 1997 1998 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ................. $ 1,636 $ 11,403 $ 1,636 $ 23,718 $ 339,810
Cost of sales ............ 1,405 679,292 1,405 973,117 6,760,390
------------ ------------ ------------ ------------ ------------
Gross margin ............. 231 (667,889) 231 (949,399) (6,420,580)
Costs and expenses:
Research and development
- related party ........ -- -- -- -- 1,145,913
- other ................ 1,156,053 1,030,082 2,659,967 2,224,474 32,230,710
Marketing, general and
administrative
- related party ........ 24,933 24,543 49,933 49,050 1,288,697
- other ................ 492,337 705,992 1,198,819 1,455,186 20,526,856
------------ ------------ ------------ ------------ ------------
Total costs and expenses . 1,673,323 1,760,617 3,908,719 3,728,710 55,192,176
------------ ------------ ------------ ------------ ------------
Operating loss ........... (1,673,092) (2,428,506) (3,908,488) (4,678,109) (61,612,756)
Interest income .......... 110,192 224,258 238,056 468,607 3,747,876
Interest expense
- related parties ....... -- -- -- -- (264,445)
------------ ------------ ------------ ------------
Net loss ................. $ (1,562,900) $ (2,204,248) $ (3,670,432) $ (4,209,502) $(58,129,325)
============ ============ ============ ============ ============
Net loss per share (basic
and diluted) ........... (0.06) $ (0.09) $ (0.15) $ (0.17) $ (3.96)
============ ============ ============ ============ ============
Weighted average shares
outstanding (basic and
diluted) ............... 24,833,252 24,566,898 24,816,165 24,445,575 14,693,252
</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,
1998 1997 1998
------------------ ------------- --------------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss ................................................ $ (3,670,432) (4,209,502) (58,129,325)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ......................... 235,793 264,540 3,184,404
Amortization of unearned stock compensation ........... 53,753 56,483 681,763
Forgiveness of promissory notes ....................... -- -- 35,937
Grant of compensatory stock options ................... -- -- 14,063
Loss on disposal of equipment ......................... -- -- 67,270
Deferred rental expense ............................... 330 65 2,442
Accretion of discount on marketable securities ........ -- -- (187,407)
Changes in operating assets and liabilities:
Trade accounts receivable ........................... (672) 1,136 (788)
Inventories ......................................... 45,768 (154,306) (245,510)
Prepaid expenses and other current assets ........... 63,877 24,248 (85,907)
Accounts payable .................................... (126,080) 95,557 93,150
Accrued royalties payable-related party ............. 10,000 10,000 40,000
Other current liabilities ........................... (57,712) 29,072 344,268
------------ ------------ ------------
Net cash used in operating activities ................... (3,445,375) (3,882,707) (54,185,640)
INVESTING ACTIVITIES:
Purchases of equipment and improvements ................. (23,689) (210,692) (4,058,783)
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 ................... (23,689) (210,692) (4,261,580)
FINANCING ACTIVITIES:
Proceeds from revolving credit note to related parties .. -- -- 5,430,000
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 ................... 2,000 -- 59,425
Issuance of common stock, exercise of stock options ..... 10,012 -- 143,558
Issuance of common stock, net of issuance costs ......... -- -- 50,879,555
------------ ------------ ------------
Net cash provided by financing activities ............... 12,012 -- 65,197,038
------------ ------------ ------------
(Decrease) increase in cash and cash equivalents ........ (3,457,052) (4,093,399) 6,749,818
Cash and cash equivalents at beginning of period ........ 10,206,870 18,728,427 --
------------ ------------ ------------
Cash and cash equivalents at end of period .............. $ 6,749,818 $ 14,635,028 $ 6,749,818
============ ============ ============
</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, 1998
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, 1997. Operating results for the three and six month periods
ended June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998 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, zinc-air batteries. The Company's operations to date have primarily
been focused on developing rechargeable zinc-air technology, establishing the
manufacturing process, and defining and developing market opportunities.
However, during the first half of 1998, the Company started to shift much of its
development effort into primary zinc-air technology in order to capitalize on
the capability of its patented Diffusion Air Manager technology and
opportunities in hand-held electronic products like camcorders and cellular
telephones. The Company began selling its first product in August 1994. Sales
from August 1994 through June 30, 1998 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.
Page 6
<PAGE> 7
Inventories
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.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------------- -----------------
<S> <C> <C>
Raw material $ 237,430 $ 233,997
Work in process 8,080 34,818
Finished products -- 22,463
---------------- ------------------
Total $ 245,510 $ 291,278
================ ==================
</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. No write-offs of obsolete equipment were
recorded in either of the six-month periods ended June 30, 1997 or 1998.
Impact of Recently Issued Accounting Standards
In 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.
Page 7
<PAGE> 8
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, and defining and developing market
opportunities. Recently the Company started to shift much of its development
efforts into primary (nonrechargeable) zinc-air technology in order to
capitalize on the capability of its patented Diffusion Air Manager technology
and possible opportunities in hand-held electronic products like camcorders and
cellular telephones. The Diffusion Air Manager is a simplified method of
isolating the cells in zinc-air batteries from exposure to air during periods
when the battery is in storage or not in use. The Company believes the Diffusion
Air Manager has potential uses in both primary and rechargeable zinc-air
batteries. The Company is developing prototype primary zinc-air batteries for
certain hand-held portable electronic products in order to demonstrate the
performance of the Diffusion Air Manager to potential customers and development
partners. These prototype batteries use a primary zinc-air cell that is 70%
smaller than the Company's latest rechargeable zinc-air cells. The Company has
ceased marketing its rechargeable battery product, and for the remainder of
1998, the Company plans to focus on the development of prototype primary
zinc-air batteries while maintaining a smaller research and development effort
in rechargeable zinc-air technology.
As of June 30, 1998, the Company has developed a portfolio of 28 U.S.
and seven foreign patents. During 1998, the Company began concentrating its
marketing efforts on potential opportunities arising from this patent portfolio
including the licensing or sublicensing of certain aspects of its zinc-air
technology to battery manufacturers and original equipment manufacturers (OEMs).
In particular, the Company is exploring licensing options pertaining to its
patented Diffusion Air Manager.
The Company was formed to develop and commercialize 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. Through DEMI (the "DEMI License"),
the Company has licensed the rights to use certain DEMI technology including
zinc-air, in non-motor vehicle applications. DEMI has retained the rights to
zinc-air technology for motor vehicle applications and to its other battery
technologies for motor vehicle applications and batteries producing over 500
watts continuous power output. In 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.
The Company has incurred cumulative losses of $58.1 million since
inception to June 30, 1998 and expects to continue to incur operating losses
beyond the end of 1998.
Page 8
<PAGE> 9
RESULTS OF OPERATIONS
Three Months Ended June 30, 1998 and 1997
The Company generated net revenues of $2,000 for the three months ended
June 30, 1998, compared to $11,000 for the three months ended June 30, 1997.
During the three months ended June 30, 1998, most of the manufacturing
effort was spent on the production of various prototype cells. For this reason,
a significant portion of manufacturing costs were allocated to research and
development for the three-month period ended June 30, 1998. Cost of sales for
the three months ended June 30, 1998 was $1,000 compared to $679,000 for the
same period in 1997. The high cost of sales in 1997 was primarily due to
manufacturing inefficiencies and high material costs resulting from low
production volumes.
Research and development expenses increased to $1,156,000 for the three
months ended June 30, 1998 from $1,030,000 for the same period in 1997. This
increase resulted primarily from a $365,000 increase in the allocation of
manufacturing costs to research and development. This allocation is based on the
level of manufacturing effort spent on the production and testing of prototype
or experimental zinc-air cells versus the production of commercial batteries.
The Company also experienced an $80,000 increase in legal costs related to
patent activity. These increases were partially offset by a $163,000 decrease in
personnel-related costs and a $126,000 decrease in material, design and tooling
costs.
Marketing, general, and administrative expenses decreased to $517,000
for the quarter ended June 30, 1998 from $731,000 for the same period in 1997.
The Company experienced a $62,000 decrease in professional fees, a $45,000
decrease in advertising and marketing costs, a $37,000 decrease in the write-off
of inventory, and an $27,000 decrease in personnel-related costs.
Six Months Ended June 30, 1998 and 1997
The Company generated net revenues of $2,000 for the six months ended
June 30, 1998 as compared to $24,000 for the six months ended June 30, 1997.
During the six months ended June 30, 1998, most of the manufacturing
effort was spent on the production of various prototype cells. For this reason,
a significant portion of manufacturing costs were allocated to research and
development for the six months ended June 30, 1998. Cost of sales for the six
months ended June 30, 1998 was $1,000 compared to $973,000 for the same period
in 1997. The high cost of sales in 1997 was primarily due to manufacturing
inefficiencies and high material costs resulting from low production volumes.
Research and development expenses increased to $2,660,000 for the six
months ended June 30, 1998 from $2,224,000 for the same period in 1997. This
increase resulted primarily
Page 9
<PAGE> 10
from a $620,000 increase in the allocation of manufacturing costs to research
and development. The Company also experienced a $170,000 increase in legal costs
related to patent activity. These increases were partially offset by a $181,000
decrease in material, design and tooling costs and a $172,000 decrease in
personnel-related costs.
Marketing, general and administrative expenses decreased to $1,249,000
for the six months ended June 30, 1998 from $1,504,000 for the same period in
1997. The Company experienced a $99,000 decrease in personnel-related costs, a
$78,000 decrease in professional fees and a $22,000 decrease in write-off of
inventory. The Company also experienced a $15,000 decrease in advertising and
marketing costs and a $15,000 decrease in warranty expense.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
As of June 30, 1998, the Company had cash and cash equivalents of $6.7
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 relationships with potential customers and development partners,
working capital and 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 $3.4 million for the
six months ended June 30, 1998 from $3.9 million for the same period in 1997,
primarily due to the decreases in costs and expenses discussed above in "Results
of Operations".
For the six months ended June 30, 1998, the Company used net cash of
$24,000 for equipment purchases as compared to $211,000 for equipment purchases
for the same period in 1997.
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. The applicable percentage of royalties is currently 4% of net
sales. The Company recorded royalty expense for the six months ended June 30,
1998 and 1997 of $50,000. Minimum royalty expenses are included in marketing,
general and administrative expenses in the statements of operations. Actual
royalties due as a percentage of sales under the DEMI License are recorded in
cost of sales. As of June 30, 1998 and December 31, 1997, $40,000 and $30,000,
respectively, of these royalty payments remained unpaid. The Company's
obligation to pay royalties to DEMI expires as of July 19, 2004. The future
minimum royalty payments specified by the DEMI License consist of the following:
Year Ending December 31,
<TABLE>
<S> <C>
1998..................................$100,000
1999..................................$ 50,000
</TABLE>
Page 10
<PAGE> 11
As a result of some computer programs being written using two digits
instead of four digits to define an applicable year, time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000 which
could potentially result in miscalculations or system failure. The Company has
been assessing its exposure to this "Year 2000 Issue" and has determined that
all of its operational programs controlling its purchasing, inventory, billing
and accounting systems have been designed to be year 2000 compliant. In addition
to its operational programs, the Company has several programs that test product
performance and quality. These programs are currently being reviewed for year
2000 compliance. The Company does not anticipate that required modifications to
these test programs, if any, would be material in cost or time. Currently the
Company has no critical interfacing systems to third parties. However, there is
no guarantee that systems of other companies with which the Company has business
transactions will be timely converted and would not have an adverse effect on
the Company.
The Company currently anticipates that its existing cash balances will
fund operations and continue technology development at the current level of
activity through the first quarter of 1999. However, it may be necessary for the
Company to increase its research and development expenses as it continues to
work to improve its zinc-air technology and to explore markets for its zinc-air
batteries. It may also be necessary for the Company to expend greater than
anticipated funds on its manufacturing facilities or otherwise. The Company will
continue to need working capital beyond its current levels, 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. The Company has also encountered greater difficulty in
commercializing its technology than originally expected. 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, inability of the Company to reach agreements with
battery manufacturers and OEMs, fluctuation in the Company's operating results,
changes in earning estimates by analysts, the addition or deletion of analyst
coverage, 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 battery manufacturers and 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 11
<PAGE> 12
The Nasdaq Stock Market has requirements for continued listing on the
National Market, including a requirement that the minimum bid price per share of
the stock of each listed company not fall below $1.00 for any 30-consecutive
business day period. The minimum bid price per share of the Company's common
stock recently has been below $1.00. If the minimum bid price per share of the
Company's common stock were to continue below $1.00, no assurance can be given
that the Company will be able to continue to list its common stock on the Nasdaq
Stock Market's National Market.
This report contains statements which to the extent that they are not
recitations of historical fact, may constitute "forward looking statements"
within the meaning of applicable federal securities laws and are based on the
Company's current expectations and assumptions. These expectations and
assumptions are subject to a number of risks and uncertainties which could cause
actual results to differ materially from those anticipated, which include but
are not limited to the following: ability of the Company to achieve development
goals, ability of the Company to commercialize its battery technology,
development of competing battery technologies, ability of the Company to protect
its proprietary rights to its technology, improvements in conventional battery
technologies, demand for and acceptance of the Company's products in the
marketplace, ability to obtain commitments from battery manufacturers and OEMs,
ability of the Company to ramp up production to meet anticipated sales, impact
of any future governmental regulations, impact of pricing or material costs,
ability of the Company to raise additional funds and other factors affecting the
Company's business that are beyond the Company's control.
AER Energy is a trademark of AER Energy Resources, Inc.
Page 12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1998 Annual Meeting of Shareholders was held on May 14,
1998. 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>
David G. Brown 23,332,090 170,279
James W. Dixon 23,332,090 170,279
David W. Dorheim 23,290,865 211,504
William L. Jackson 23,287,590 214,779
H. Douglas Johns 23,107,362 395,007
Jon A. Lindseth 23,289,290 213,079
John L. Wilkes 23,288,665 213,704
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ------- --------------------------------
(A) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- - ------ -----------------------
27 Financial Data Schedule (for SEC use only).
(B) REPORTS ON FORM 8-K:
The registrant did not file any reports on Form 8-K during the three
months ended June 30, 1998.
13
<PAGE> 14
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, 1998 By: /s/ David W. Dorheim
------------------------------
David W. Dorheim, President and
Chief Executive Officer
Date: August 12, 1998 By: /s/ David W. Dorheim
------------------------------
David W. Dorheim, Interim
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEETS AND SUMMARY OF OPERATION OF AER ENERGY RESOURCES, INC.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FOR 10-Q FOR THE SIX
MONTHS PERIOD ENDED JUNE 30, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 6,749,818
<SECURITIES> 0
<RECEIVABLES> 788
<ALLOWANCES> 0
<INVENTORY> 245,510
<CURRENT-ASSETS> 7,081,713
<PP&E> 3,955,595
<DEPRECIATION> 2,774,813
<TOTAL-ASSETS> 8,279,336
<CURRENT-LIABILITIES> 318,484
<BONDS> 0
0
0
<COMMON> 66,593,140
<OTHER-SE> (58,634,730)
<TOTAL-LIABILITY-AND-EQUITY> 8,279,336
<SALES> 1,636
<TOTAL-REVENUES> 1,636
<CGS> 1,405
<TOTAL-COSTS> 1,405
<OTHER-EXPENSES> 3,908,719
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,670,432)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,670,432)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,670,432)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
