<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 1996 .
-------------------------------------------
Commission File Number: 0-22520 .
--------------------------------
AVIC GROUP INTERNATIONAL, INC. .
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 84-0873124 .
- ---------------------------------- -----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
599 Lexington Avenue, 44th Floor
New York, New York 10022 .
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(212) 319-9160
---------------
(Registrant's telephone number)
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
------- -------
Class Outstanding as of November 18, 1996
- ---------------------------- ------------------------------------
Common Stock, par value $.001 per share 29,373,747
Transitional Small Business Format (Check one): Yes No x .
----- -----
1 OF 16
<PAGE>
PART ONE
FINANCIAL INFORMATION
Item 1. Financial Statements
2
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements at September 30, 1996 and
for the six months then ended are unaudited and reflect all adjustments
which are, in the opinion of management, necessary for a fair presentation
of the financial position and operating results for the interim period.
All of the adjustments are of a normal recurring nature. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto together with
management's discussion and analysis of financial condition and results of
operations, contained in the Form 10-KSB filed by the Company on July 15,
1996. The results of operations for the six months ended September 30,
1996 are not necessarily indicative of the results for the entire year
ending March 31, 1997.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined in Statement of
Financial Accounting Standards No.7. The Company is devoting substantially
all of its present efforts to establish a new business and its planned
principal operations have not commenced yet. All losses accumulated since
inception have been considered as part of the Company's development stage
activities.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
general accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, during the six months ended
September 30, 1996, the Company experienced a net loss of $1,587,794. In
view of this matter, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon the Company's ability to meet
its financing requirements, and the success of its plans to establish Sino-
foreign joint ventures to develop telecommunications networks in the
People's Republic of China.
In January 1996, the Company sold substantially all of the assets and
liabilities of ITV Communications, Inc. (the "ITV Asset Sale") associated
with ITV Communications, Inc.'s operations, and ITV's operations ceased
after the ITV Asset Sale. Since January 1996, the Company has focused its
business solely on establishing Sino-foreign joint ventures ("SFJVs") to
develop telecommunications networks in the People's Republic of China
("PRC"). The Company does not currently generate sales or market any
products
NOTE 2 - SUMMARY OF CONSOLIDATION OF SINO-FOREIGN JOINT VENTURE INTEREST
3
<PAGE>
On or about September 24, 1996 the Company received all applicable PRC
regulatory approvals to acquire a 60.8% interest in a Sino-foreign joint
venture (the "GSM JV") that is involved in developing a digital cellular
telephone network in Hebei Province, PRC. The GSM JV was established to
hold a 51% interest in a Sino-foreign joint venture (the "NTT JV") with NTT
International that is developing a GSM network in Hebei Province, PRC. As
a result, the attached financial statements of the Company for the period
ending September 30, 1996 reflect the consolidation of the Company's
interests in the GSM JV. The Company's investment was previously accounted
for as a joint venture deposit. The table below summarizes the effect of
consolidating the entities previously accounted for as a deposit:
INCREASE/(DECREASE)
Accounts receivable $4,499,175
Prepaid expenses 1,574,644
Fixed assets, net 122,563
Construction in progress 137,285
Joint venture deposits (1,170,000)
Deferred expenses 65,265
--------------
5,228,932
--------------
Accounts and other payables $15,983
Long term loans 11,017,864
Minority interest 1,912,413
Foreign currency translation 2,375
--------------
12,948,635
--------------
Cash balance acquired $7,719,703
--------------
--------------
4
<PAGE>
AVIC GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
A Development Stage Company
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30 MARCH 31
1996 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $8,867,524 $185,889
Accounts receivable 4,524,135
Prepaid expenses and other current assets 1,582,724 60,678
-------------- -------------
Total Current assets 14,974,383 246,567
Equipment, net of accumulated depreciation 192,671 76,233
Construction in progress 137,285
Joint venture deposit 0 1,170,000
Non-refundable equipment purchase deposit 4,572,536 4,572,536
Deferred expenses 65,265
Other assets 170,580 167,200
-------------- -------------
TOTAL ASSETS $20,112,720 $6,232,536
-------------- -------------
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $831,481 $866,990
Other accrued expenses 15,847
Accrued interest 715,982 651,063
Loans payable - stockholders (unsecured, interest
at 8.5% per annum) 2,613,553 2,563,553
Long term loans 11,017,864
Minority interest 1,912,414
-------------- -------------
Total current liabilities 17,107,141 4,081,606
STOCKHOLDERS' EQUITY
Preferred stock: $.001 par value, authorized 10,000,000
shares; issued and outstanding 1,524,178 1,524 1,524
Preferred stock: $.001 par value, authorized 10,000,000
shares; issued and outstanding 100 1
Common stock: $.001 par value, authorized 100,000,000
shares; issued and outstanding 28,451,982
and 28,558,234 Sept. 30 and March 31, 1996 28,558 28,437
Additional paid-in capital 21,266,275 18,648,620
Deficit accumulated during the development stage (18,293,154) (16,527,651)
Foreign currency translation 2,375
-------------- -------------
Total stockholders' equity 3,005,579 2,150,930
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,112,720 $6,232,536
-------------- -------------
-------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
AVIC GROUP INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
A Development Stage Company
(unaudited)
<TABLE>
<CAPTION>
March 27, 1992
(inception) to
Six months ended Sept 30 Quarter ended Sept 30 Sept 30,
1996 1995 1996 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUE
Net sales 648,286 $434,672 $1,223,894
EXPENSES
Cost of sales 333,347 214,619 1,061,435
Selling, general, and administrative 1,863,181 1,992,892 $1,112,072 1,018,234 11,525,795
Research and development 939,357 415,695 5,731,612
----------------------------- ------------ ------------ ------------
Total expenses 1,863,181 3,265,598 1,112,072 1,648,548 18,418,842
----------------------------- ------------ ------------ ------------
Loss from operations (1,863,181) (2,617,310) (1,112,072) (1,213,876) (17,194,948)
-------------- ------------- ------------ ------------ -------------
OTHER INCOME (EXPENSE)
Consulting income 150,000
Gain from sale of assets 31,860
Loss from abandoned assets (130,840)
Interest expense (32,170) (123,577) 289 (63,222) (796,756)
Equity in losses of unconsolidated
subsidiary (500,000)
Other (32,774) 1,819 (23,085) 391 (15,112)
Income taxes (1,829) (1,600) (1,829)
-------------- ------------- ------------ ------------ -------------
------------
LOSS BEFORE MINORITY INTEREST (1,929,954) (2,740,666) (1,134,668) (1,276,707) (18,457,605)
-------------- ------------- ------------ ------------ -------------
MINORITY INTEREST IN LOSS OF SUBSIDIARIES 164,451 164,451 164,451
-------------- ------------- ------------ ------------ -------------
NET LOSS ($1,765,503) ($2,740,668) ($970,417) ($1,276,707) ($18,293,154)
-------------- ------------- ------------ ------------ -------------
-------------- ------------- ------------ ------------ -------------
NET LOSS PER SHARE ($0.06) ($0.11) ($0.04) ($0.05) ($1.45)
-------------- ------------- ------------ ------------ -------------
-------------- ------------- ------------ ------------ -------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 28,450,896 25,250,950 28,464,659 23,256,409 12,755,405
-------------- ------------- ------------ ------------ -------------
-------------- ------------- ------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
AVIC GROUP INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
A Development Stage Company
(Unaudited)
<TABLE>
<CAPTION>
March 27,
1992
(inception) to Six months ended
Sept. 30, Sept. 30,
1996 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITITES:
Net loss ($18,293,154) ($1,765,503) ($1,463,961)
Adjustments to reconcile net loss to net cash
used in operation activities:
Issuance of common stock for services 117,775 117,775
Amortization of capitalized software development costs 450,000 84,375
Depreciation 874,290 12,283 97,371
Loss from abandoned assets 130,840
Gain from sale of assets (31,880)
Equity in losses of unconsolidated subsidiary 500,000
(Increase) decrease in:
Accounts receivable (26,679) (24,960) (91,772)
Inventories (564,451) 0 (32,632)
Prepaid expenses and other current assets (54,538) 52,598 (33,545)
Other assets (170,580) (3,380) (169,372)
Increase (decrease) in:
Accounts payable and accrued expenses 1,784,647 (35,643) 201,656
Accrued interest 715,982 64,919 60,355
Deposit 850,000 0 0
------------ ------------ ------------
Net cash used in operating activities (13,729,858) (1,581,911) (1,347,525)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of machinery and equipment (1,591,755) (6,157) (102,332)
Subsidiary cash acquired (Note 2) 7,719,703 7,710,703
Joint venture deposit (1,170,000)
Proceeds from sale of assets 250,000
Increase in capitalized computer software development costs (675,000)
------------ ------------ ------------
Net cash Provided by/(used in) investing activities 4,532,945 7,713,546 (102,332)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable stockholders, net 9,228,801 50,000 361,101
Receipt of common stock subscription receivable 1,536,303 (50,000)
Sale of preferred stock 2,500,000 2,500,000
Sale of common stock 4,799,333
------------ ------------ ------------
Net cash provided by financing activities 18,064,437 2,550,000 311,104
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,867,524 8,861,635 (1,138,753)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 0 165,669 1,178,898
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $6,867,524 $6,867,524 $40,145
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financials
7
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO
THE SIX MONTHS ENDED SEPTEMBER 30, 1995.
Following the ITV Asset Sale in January 1996, the Company has focused its
business solely on establishing Sino-foreign joint ventures ("SFJVs") to develop
telecommunications networks in the People's Republic of China ("PRC"). As a
result of the ITV Asset Sale, the Company does not currently generate sales or
market any products. In light of this change in operations, net sales decreased
from $648,286 during the six months ended September 30, 1995 to $0 during the
six months ended September 30, 1996. Net sales decreased from $648,286 during
the six months ended September 30, 1995 to $0 during the six months ended
September 30, 1996. Net sales during the six months ended September 30, 1995
reflect the former operations of the Company's subsidiary, ITV Communications,
Inc. ("ITV").
Selling, general and administrative expenses decreased approximately 7% from
$1,992,892 during the six months ended September 30, 1995 to $1,863,181 during
the six months ended September 30, 1996. The decrease primarily related to a
decrease in operations related to the ITV Asset Sale, a reduction in
professional fees paid out during the period, and an increase due to operations
related to the consolidation of the Company's interest in a joint venture in
Hebei Province, PRC.
Net research and development expenses decreased by 100% from $939,357 during the
six months ended September 30, 1995 to $0 during the six months ended September
30, 1996. The decrease in research and development expenses related to the
cessation of the Company's ITV operations.
The Company's net loss decreased from $2,740,668 during the six months ended
September 30, 1995 to $1,765,503 during the six months ended September 30, 1996.
The decrease in net loss was due to the ITV Asset Sale, as ITV generated losses
during the six months ended September 30, 1995, and the Company's reduction in
professional fees paid out during the period. Further, the Company's interest
expense decreased due to a conversion of $1,891,553 of debt to 1,891,553 shares
of the Company's common stock in December 1995.
LIQUIDITY AND CAPITAL RESOURCES.
The Company generated sales of $1,223,894 from March 1992 (inception) through
September 30, 1996. All of these sales occurred from March 31, 1993 through
March 31, 1996. However, the Company has generated losses of $17,194,948 from
operations from
8
<PAGE>
March 1992 through September 30, 1996 and net losses of $18,293,154 since
inception. There can be no assurances that the Company will ever achieve
profitable operations.
Upon the completion of the ITV Asset Sale in January 1996, the Company ceased
research and development, marketing, and sales of products from its ITV
subsidiary and devoted substantially all of its efforts to developing Sino-
foreign joint ventures to establish telecommunications networks in the PRC.
From its inception in March, 1992 through September 30, 1996, the Company has
used $13,671,693 of cash from its operating activities. This use of cash was
primarily the result of the net loss of $18,293,154 since inception.
Further, the Company used approximately $3,187,000 (net of subsidiary cash
acquired, see Note 2) of cash from investing activities during this period.
This amount resulted from approximately $1,592,000 used for the purchase of
machinery and equipment, $675,000 expended for capitalized computer software
development costs used in research and development in the Company's former
business operations, and $1,170,000 used to acquire a 60.8% interest in a Sino-
foreign joint venture that is involved in developing a cellular telephone
network utilizing the Global System for Mobile Teleommunications ("GSM")
standard in Hebei Province, PRC.
The Company's current cash flow from operations is not capable of supporting
existing business operations in its present form. Since inception in March
1992, the Company has financed its development stage activities through equity
investments and loans from its founding stockholders.
On July 11, 1996 the Company entered into an agreement with Wasserstein Perella
& Company ("Wasserstein") in which Wasserstein will act as a financial advisor
to the Company with respect to strategic investors in the Company's paging and
GSM cellular projects in the PRC. The terms of the engagement call for an
annual retainer fee of $150,000 payable in three monthly installments, with
$50,000 payable upon the signing of the engagement, and $50,000 payable the
ninth day of the two following months. In addition, Wasserstein will receive
four percent (4%) of the gross proceeds from any debt or equity financing or
investment arising from this agreement.
On July 17, 1996 the Company entered into an agreement with Barington Capital
Group, L.P. ("Barington") in which Barington will act as a financial consultant
to the Company relating to corporate finance and other financial matters though
July 31, 1999. As compensation for this engagement, Barington will receive a
five-year warrant to purchase 400,000 shares of the Company's common stock at an
exercise price equal to $4.17 per share. Further, Barington will receive four
percent (4%) of the gross proceeds of any equity or debt financing provided to
the Company from sources introduced to the Company by Barington.
9
<PAGE>
On July 31, 1996, the Company entered into an agreement with Merrill Lynch (Asia
Pacific) Limited ("Merrill Lynch") in which Merrill Lynch will act as financial
advisor to the Company and will assist the Company with strategic financing
alternatives with respect to the Company's PRC projects. The Company is
required to pay Merrill Lynch a retainer of $500,000, of which $50,000 was
payable upon execution of the agreement, and an additional three installments of
$150,000 will be payable every 120 days following the execution of the
agreement. Additional fees may be paid to Merrill Lynch if Merrill Lynch
successfully assists the Company in raising funding for the Company and the
Company's Sino-foreign joint ventures.
On July 30, 1996, the Company, Beijing CATCH, and Hebei United
Telecommunications Development Corporation ("Hebei United") obtained approval
from the Commission of Foreign Trade and Economic Cooperation of Hebei Province,
PRC to establish a Sino-foreign joint venture to develop a paging network in the
PRC (the "PRC Paging Joint Venture"). The Company, Beijing CATCH, and Hebei
United have a seventy percent (70%), twenty-five percent (25%), and five percent
(5%) interest in this Sino-foreign joint venture, respectively.
On August 8, 1996 the Company fulfilled certain obligations relating to the sale
of $2.5 million of its Series B Preferred Shares and the closing of a related
post-closing escrow, in which $1.75 million had been held pending such
fulfillment. On August 14, 1996, the Company received the remaining gross
proceeds of $1,750,000 from the sale of Series B Preferred Shares which were
held in escrow. These funds will be used for operating capital, and for the
capital contribution to the PRC Paging joint venture company. The Company paid
$230,000 in advisory fees in connection with the transaction.
On September 6, 1996 the Board of Directors of the Company approved certain
revisions to the contract of Joseph R. Wright, Jr., Chairman and Chief Executive
Officer of the Company. The revisions approved included the issuance of stock
in lieu of cash compensation as payment for the salary that Mr. Wright had
accrued between June 1995 and August 1996 (See "Subsequent Events"). The Board
of Directors of the Company also approved revising his salary for the first year
to $150,000, revising his salary for the second year to $300,000, and increasing
his salary in each year thereafter by $100,000 commencing on April 15, 1997.
Further the vesting schedule for options issuable to Mr. Wright was revised so
that 25% of all such 6 million options will vest on each anniversary beginning
on April 16, 1996.
On September 6, 1996, The Board of Directors of the Company elected R. T.
McNamar as Vice-Chairman of the Company and a member of the Board of Directors
of the Company. In his capacity as Vice-Chairman, Mr. McNamar will devote fifty
percent of his time in assisting the Company to obtain financing for its secured
telephony projects in the PRC. Mr. McNamar will be paid $100,000 per year, with
50% of such compensation to be accrued until such time as the Company has met
certain liquidity objectives. Mr. McNamar will be issued an option to purchase
250,000 shares of the Company's common stock at $1.50 per share, with an
additional option to purchase 250,000 shares if
10
<PAGE>
Mr. McNamar becomes a full-time employee of the Company. Further, Mr. McNamar
will be awarded 25,000 shares of the Company's Common Stock. Mr. McNamar will
be awarded success fees for his financing efforts on behalf of the Company based
on the amount of funding obtained; these fees will be 5% for funds raised up to
ten million dollars, four percent for funds raised between ten and fifteen
million dollars, three percent for funds raised between fifteen and twenty
million dollars, 2.5% for funds raised between twenty and twenty five million
dollars and two percent of all funds raised in excess of twenty-five million
dollars.
On or about September 24, 1996 the Company received all applicable PRC
regulatory approvals to acquire a 60.8% interest in a Sino-foreign joint venture
(the "GSM JV") that is involved in developing a GSM cellular telephone network
in Hebei Province, PRC. The GSM JV was established to hold a 51% interest in a
Sino-foreign joint venture (the "NTT JV") with NTT International that is
developing a GSM network in Hebei Province, PRC. The first phase of the project
will consist of developing a 70,000-subscriber GSM network in seven of the
eleven major cities in Hebei Province, PRC.
In September 1996, Chen Li, Vice-Chairman of the Company and Chairman of Beijing
CATCH Communication Group, Co. and American CATCH, resigned from all of these
positions.
Since the Company does not currently have the technical capability, personnel or
resources to build, service or maintain a telecommunications network, the
successful development of the Company's current telecommunications business in
the PRC may require the cooperation and participation of third parties, other
than PRC governmental agencies, who may be parties to or independent contractors
with the Company's Sino-foreign joint ventures. There can be no assurances that
the Company will be able to obtain the requisite cooperation or participation of
any such third parties with respect to the Company's proposed business
operations.
In addition, the Company's proposed business operations in the PRC are subject
to significant risks. These risks include, but are not limited to, the limited
precedent for the establishment of Sino-foreign ventures for the purpose of
engaging in the telecommunications industry in the PRC, governmental
restrictions on foreign business ventures in the PRC, PRC regulation of it's
economy and foreign currency exchange and general political environment in the
PRC.
The Company's successful transition from a development stage company to
profitable operations is dependent upon obtaining adequate financing to fund
current operations and the development of a market for the Company's products.
The Company will continue to seek funds in the form of lines of credit and /or
equity and debt securities from third party resources as well as from its
existing stockholders.
The Company's auditors have included an explanatory paragraph in their Report of
Independent Certified Public Accountants to the effect that recovery of the
Company's
11
<PAGE>
assets are dependent upon future events, the outcome of which is undeterminable,
and that the successful completion of the Company's development program and it's
transition, ultimately, to the attainment of profitable operations is dependent
upon obtaining adequate financing to fulfill its development activities and
achieving a level of sales adequate to support the Company's cost structure.
There can be no assurances that such a financing can be completed on terms
favorable to the Company or at all, or that the business of the Company will
ever achieve profitable operations.
In the event the Company fails to raise additional funds from such financing,
and fails to generate any additional revenues from operations, the Company may
not be able to meet all of its obligations past September, 1997, based on its
current operating expenditures. There can be no assurances that any additional
sources of financing will be available from existing stockholders or external
sources on terms favorable to the Company or at all or that the business of the
Company will ever achieve profitable operations. In the event the Company does
not receive any such additional financing or generate profitable operations,
management's options will be to suspend or discontinue its business activity in
its present form.
SUBSEQUENT EVENTS
In October 1996 the Company issued 162,500 shares of the Company's common stock
to Joseph R. Wright, Jr., Chairman and Chief Executive Officer of the Company,
in lieu of cash compensation that Mr. Wright had been accruing since June, 1995.
The amount of salary accrued through August 31, 1996 and subsequently converted
to stock was $243,750. The Company agreed to issue this compensation in stock
at $1.50 per share, which was the market value of the Company's stock at that
time.
In October 1996, the Company entered into an agreement with two of its legal
firms, Matthias & Berg, L.L.P. and Troy & Gould Professional Corporation
("Matthias & Berg" and "Troy & Gould" respectively), to settle a portion of
their accrued fees with the issuance of stock options. Therefore, the Company
has converted $60,153 of Matthias & Berg's accrued fees and $37,443 of Troy &
Gould's accrued fees into 40,102 and 24,962 options to purchase and shares of
the Company's common stock at $1.50 per share. The Company also has agreed to
register the underlying shares with the Securities and Exchange Commission (the
"SEC" or the "Commission") on Form S-8. The registration statement related to
these shares was filed with the Commission on or about November 11, 1996.
On October 15, 1996 the Company agreed to issue warrants to David Rubenstein to
purchase 200,000 shares of the Company's Common Stock. These warrants were
issued for Mr. Rubenstein's services in advising the Company with respect to its
Sino-foreign joint ventures. The warrants issued have a three-year term and an
exercise price of $1.50, which was the market value of the Company's common
stock at that time.
12
<PAGE>
On or about November 4, 1996, the Company entered into a twelve (12) month
financial advisory services agreement with Patricof & Company Capital
Corporation ("Patricof"). The services provided by Patricof under this
agreement relate to financial advisory services, including, but not limited to,
the development of a financing strategy for the Company and the Company's
projects in the PRC. The agreement calls for a $50,000 retainer and the payment
of success fees for raising capital for the Company and its projects. These
fees are: six percent (6%) of the funds raised up to five million dollars (such
fee will not to be less than $200,000); five percent (5%) of the funds raised
between five and ten million dollars; and four percent (4%) of the funds in
excess of ten million dollars. In addition, the Company has agreed to issue a
warrant to purchase up to 600,000 shares of the Company's common stock to
Patricoff. This warrant has an exercise price of $2.00 per share. 300,000 of
the warrants vest immediately, and the additional 300,000 warrants will vest
only when Patricoff has raised a minimum of ten million dollars in any form of
financing for the Company.
On November 18, 1996 the Company entered into a subscription agreement with
private investors to sell 1,000,000 shares of the Company's Common Stock at
$2.00 per share, the price of the Company's Common stock at the time the
subscription was negotiated. The sale is expected to be completed during the
three months ending December 31, 1996. The proceeds will be used to further
fund the Company's development efforts.
13
<PAGE>
PART TWO
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS.
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the
quarterly period ended September 30, 1996.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 18, 1996 AVIC Group International, Inc.
By: /s/ Joseph R. Wright, Jr.
-----------------------------------
Joseph R. Wright, Jr.
Chief Executive Officer
By: /s/ Michael J. Lim
-----------------------------------
Michael J. Lim
Chief Financial Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVIC GROUP
INTERNATIONAL, INC'S FORM 10-QSB AND 10-KSB FOR THE PERIODS ENDING SEPTEMBER 30,
1996 AND MARCH 31, 1996 RESPECTIVELY. IT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996
<PERIOD-START> JUN-01-1996 APR-01-1996
<PERIOD-END> SEP-30-1996 MAR-31-1997
<CASH> 8,867,524 185,889
<SECURITIES> 0 0
<RECEIVABLES> 4,524,135 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 14,974,383 246,567
<PP&E> 1,582,724 95,789
<DEPRECIATION> 12,283 19,558
<TOTAL-ASSETS> 20,112,720 6,232,536
<CURRENT-LIABILITIES> 17,107,141 4,081,606
<BONDS> 0 0
0 0
1,525 1,524
<COMMON> 28,558 28,437
<OTHER-SE> 2,973,121 2,120,969
<TOTAL-LIABILITY-AND-EQUITY> 20,112,720 6,232,636
<SALES> 0 683,733
<TOTAL-REVENUES> 0 683,733
<CGS> 0 637,065
<TOTAL-COSTS> 1,862,603 5,132,264
<OTHER-EXPENSES> 68,773 591,343
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 32,170 241,856
<INCOME-PRETAX> (1,764,925) (5,281,730)
<INCOME-TAX> 1,829 0
<INCOME-CONTINUING> (1,764,925) (5,281,730)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,764,925) (5,281,730)
<EPS-PRIMARY> (0.07) (0.21)
<EPS-DILUTED> (0.07) (0.21)
</TABLE>
