rotormatic
29th Nov 2003, 08:35
Net Earnings
During the three months ended September 30, 2003, the Company continued to record losses as it continued the transition toward full marketing and manufacturing of the Hawk Gyroplane series, and as it manufactured and sold AAI modification kits and continued designing of the SparrowHawk Gyroplane.
For the three months ended September 30, 2003, the net loss from operations was $841,000, the net loss was $4,320,000, and the net loss applicable to common stockholders was $4,320,000. Comparatively, for the three months ended September 30, 2002, the net loss from operations was $955,000, the net loss was $1,245,000, and the net loss applicable to common stockholders was $3,882,000.
In FY 2002, the additional net loss applicable to common stockholders is due to accretion in the value of the Series B 15% Cumulative Redeemable Non-Voting Preferred Stock and dividends on that stock. The increase in the net loss in FY 2003 over FY 2002 is due primarily to the reclassification of the Series B 15% Cumulative Redeemable Non-Voting Preferred Stock as a long-term liability, which resulted in the classification of associated dividends and accretion as interest cost.
Liquidity and Capital Resources
The Company's subsidiary, AAI, set up in FY 2003, has entered the market for both modification kits to improve the stability of small gyroplanes produced by other manufacturers, and the home built market with its own SparrowHawk two-seat gyroplane.
These markets typically make substantial advance down payments on orders, which will accelerate AAI's ability to become cash flow positive. Furthermore, AAI is continuing the process of setting up an extensive dealer network for the sale and product support of these modification kits and of its own SparrowHawk Gyroplane kit. Fees from dealership sales and advance customer deposits for future deliveries of modification kits and SparrowHawk Gyroplane kits are contributing significantly to AAI's initial cash flow.
At September 30, 2003, advance deposits from customers of AAI amounted to $485,000, which are included in the balance sheet under the caption "Deferred revenue".
Meanwhile, as previously reported, following the economic downturn and its impact on the aerospace industry of 9/11, the Company's fund-raising activities in the venture capital market were seriously impaired, resulting in active development of its Hawk 4 Gyroplane for commercial certification being deferred. The Company, however, continues actively to seek sales and funding for Public Use applications of the Hawk 4 as well as the SparrowHawk.
In the face of continuing fund-raising difficulties, in FY 2002 and FY 2003, the Company successfully approached many of its principal vendors requesting that they accept a stretching out of payments beyond their normal terms.
As a result, the Company is servicing much of its pre-November 2001, obligations to vendors utilizing a combination of repayment plans which include monthly payments for smaller vendor liabilities and promissory notes for larger vendor liabilities.
Certain of the promissory notes have expired and are thus technically in default. The Company is, however, in negotiation with those vendors and is seeking to reach agreement with each vendor either to extend the existing note or to a payment plan satisfactory to the parties.
During the first quarter of FY 2004, $202,000 was raised through the sale of equity. The Company also has raised $126,000 (net of reduction) in Notes Payable. Increases in accrued expenses also reduced cash requirements by $726,000, and of this amount $150,000 was the deferral of officer salaries.
This funding was, however, insufficient to offset a further deterioration in the Company's working capital deficit (net of amounts owed to current and former officers) from $10.9 million at June 30, 2003, to $11.6 million at September 30, 2003.
As a result the Company has continued to fall behind in payments to its creditors, including tax obligations to the Federal and State governments. Discussions with potential investors, each of which would enable these obligations to be met, are ongoing and the Company is working toward an early resolution.
The Company is seeking to raise sufficient funds during fiscal year 2004 to enact its new business plan that relies heavily on sales of the American Autogyro SparrowHawk and sales of the Hawk 4 Gyroplane to Public Use government entities.
The Company is currently in the process of concluding an agreement that provides to the Company additional funding through the issuance of Series B preferred stock in an amount that the Company expects will enable it to satisfy essentially all of its obligations in default at the end of the quarter. In addition, this funding will enable work to be recommenced to complete the testing of the Hawk 4 for Public Use applications and to pursue sales and funding of its gyrodyne applications.
There can be no guarantee or assurance that the Company will be successful in its ability to generate revenue or to raise capital at favorable rates or at all.
Management does not anticipate that revenues or expenses will be materially affected by inflation during fiscal year 2004.
During the three months ended September 30, 2003, the Company continued to record losses as it continued the transition toward full marketing and manufacturing of the Hawk Gyroplane series, and as it manufactured and sold AAI modification kits and continued designing of the SparrowHawk Gyroplane.
For the three months ended September 30, 2003, the net loss from operations was $841,000, the net loss was $4,320,000, and the net loss applicable to common stockholders was $4,320,000. Comparatively, for the three months ended September 30, 2002, the net loss from operations was $955,000, the net loss was $1,245,000, and the net loss applicable to common stockholders was $3,882,000.
In FY 2002, the additional net loss applicable to common stockholders is due to accretion in the value of the Series B 15% Cumulative Redeemable Non-Voting Preferred Stock and dividends on that stock. The increase in the net loss in FY 2003 over FY 2002 is due primarily to the reclassification of the Series B 15% Cumulative Redeemable Non-Voting Preferred Stock as a long-term liability, which resulted in the classification of associated dividends and accretion as interest cost.
Liquidity and Capital Resources
The Company's subsidiary, AAI, set up in FY 2003, has entered the market for both modification kits to improve the stability of small gyroplanes produced by other manufacturers, and the home built market with its own SparrowHawk two-seat gyroplane.
These markets typically make substantial advance down payments on orders, which will accelerate AAI's ability to become cash flow positive. Furthermore, AAI is continuing the process of setting up an extensive dealer network for the sale and product support of these modification kits and of its own SparrowHawk Gyroplane kit. Fees from dealership sales and advance customer deposits for future deliveries of modification kits and SparrowHawk Gyroplane kits are contributing significantly to AAI's initial cash flow.
At September 30, 2003, advance deposits from customers of AAI amounted to $485,000, which are included in the balance sheet under the caption "Deferred revenue".
Meanwhile, as previously reported, following the economic downturn and its impact on the aerospace industry of 9/11, the Company's fund-raising activities in the venture capital market were seriously impaired, resulting in active development of its Hawk 4 Gyroplane for commercial certification being deferred. The Company, however, continues actively to seek sales and funding for Public Use applications of the Hawk 4 as well as the SparrowHawk.
In the face of continuing fund-raising difficulties, in FY 2002 and FY 2003, the Company successfully approached many of its principal vendors requesting that they accept a stretching out of payments beyond their normal terms.
As a result, the Company is servicing much of its pre-November 2001, obligations to vendors utilizing a combination of repayment plans which include monthly payments for smaller vendor liabilities and promissory notes for larger vendor liabilities.
Certain of the promissory notes have expired and are thus technically in default. The Company is, however, in negotiation with those vendors and is seeking to reach agreement with each vendor either to extend the existing note or to a payment plan satisfactory to the parties.
During the first quarter of FY 2004, $202,000 was raised through the sale of equity. The Company also has raised $126,000 (net of reduction) in Notes Payable. Increases in accrued expenses also reduced cash requirements by $726,000, and of this amount $150,000 was the deferral of officer salaries.
This funding was, however, insufficient to offset a further deterioration in the Company's working capital deficit (net of amounts owed to current and former officers) from $10.9 million at June 30, 2003, to $11.6 million at September 30, 2003.
As a result the Company has continued to fall behind in payments to its creditors, including tax obligations to the Federal and State governments. Discussions with potential investors, each of which would enable these obligations to be met, are ongoing and the Company is working toward an early resolution.
The Company is seeking to raise sufficient funds during fiscal year 2004 to enact its new business plan that relies heavily on sales of the American Autogyro SparrowHawk and sales of the Hawk 4 Gyroplane to Public Use government entities.
The Company is currently in the process of concluding an agreement that provides to the Company additional funding through the issuance of Series B preferred stock in an amount that the Company expects will enable it to satisfy essentially all of its obligations in default at the end of the quarter. In addition, this funding will enable work to be recommenced to complete the testing of the Hawk 4 for Public Use applications and to pursue sales and funding of its gyrodyne applications.
There can be no guarantee or assurance that the Company will be successful in its ability to generate revenue or to raise capital at favorable rates or at all.
Management does not anticipate that revenues or expenses will be materially affected by inflation during fiscal year 2004.