-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PQuoBb5p5ffQGQzHZOVFlk/STgABib8lLndkl2ynLdRZmLwBxR9g5jNFFXkpxDSF mLkM0hRVHjyav57Ski7ghA== 0000912057-96-026981.txt : 19961121 0000912057-96-026981.hdr.sgml : 19961121 ACCESSION NUMBER: 0000912057-96-026981 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961119 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AVIC GROUP INTERNATIONAL INC/ CENTRAL INDEX KEY: 0000912890 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 840873124 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22520 FILM NUMBER: 96668969 BUSINESS ADDRESS: STREET 1: 599 LEXINGTON AVE STREET 2: 44TH FL CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2123199160 MAIL ADDRESS: STREET 1: 599 LEXINGTON AVENUE STREET 2: 44TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: YAAK RIVER MINES LTD DATE OF NAME CHANGE: 19931001 10QSB 1 FORM 10-QSB 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 PART ONE FINANCIAL INFORMATION Item 1. Financial Statements 2 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 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 AVIC GROUP INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS A Development Stage Company (Unaudited)
SEPTEMBER 30 MARCH 31 1996 1996 ---- ---- 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 -------------- ------------- -------------- -------------
The accompanying notes are an integral part of these financial statements 5 AVIC GROUP INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS A Development Stage Company (unaudited)
March 27, 1992 (inception) to Six months ended Sept 30 Quarter ended Sept 30 Sept 30, 1996 1995 1996 1995 1996 ---- ---- ---- ---- ---- 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 -------------- ------------- ------------ ------------ ------------- -------------- ------------- ------------ ------------ -------------
The accompanying notes are an integral part of these financial statements 6 AVIC GROUP INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS A Development Stage Company (Unaudited)
March 27, 1992 (inception) to Six months ended Sept. 30, Sept. 30, 1996 1996 1995 ---- ---- ---- 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 ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these financials 7 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 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 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 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 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 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 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 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 EX-27 2 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 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. 6-MOS 12-MOS MAR-31-1996 MAR-31-1996 JUN-01-1996 APR-01-1996 SEP-30-1996 MAR-31-1997 8,867,524 185,889 0 0 4,524,135 0 0 0 0 0 14,974,383 246,567 1,582,724 95,789 12,283 19,558 20,112,720 6,232,536 17,107,141 4,081,606 0 0 0 0 1,525 1,524 28,558 28,437 2,973,121 2,120,969 20,112,720 6,232,636 0 683,733 0 683,733 0 637,065 1,862,603 5,132,264 68,773 591,343 0 0 32,170 241,856 (1,764,925) (5,281,730) 1,829 0 (1,764,925) (5,281,730) 0 0 0 0 0 0 (1,764,925) (5,281,730) (0.07) (0.21) (0.07) (0.21)
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