SNA has taken a lot of criticism from AMS supporters in the past. This write up is definitely not one of their finest. Shows some real chinks in the armour so to speak
A surprise speaker at AeroMechanical’s May 21st annual meeting summed up the company’s future prospects best.
Hugh Cleland,a co-founder and portfolio manager at Northern Rivers Funds – whichowns about 10% of AMA stock – asked one question of the roughly 30shareholders present: Must be extremely concerned of his investment
“What airline wouldn’t look at the chance to save $100,000 to $200,000 per aircraft (in annual fuel bills) when they don’t have to spend significant capital?”
I asked this question about a year ago somewhere around the heading every cloud has a silver lining and was poo pooed by AMS supporters
Mr. Cleland wasn’t on the roster to speak at the annual meeting.
Buthe’d arrived in Calgary the day before and wanted to tell investors howhis faith in AMA had hit new heights after peppering AMA executives andAMA’s latest partner – Sierra Nevada Corporation, the U.S. privatecompany with rumoured annual sales of $1 billion through sales ofstate-of-the-art avionics equipment to the military – about the nearand far-term future of AMA. If he was so wasnt so concerned why was he peppering AMA executives with all kinds of questions. SNC has never had 1 billion in annual sales. Nice rumour. Hype again
Mr. Cleland’squestion revolved around AMA’s fuel management initiative, which cansave airlines roughly 3% of the fuel a typical jet aircraft burns everyyear.
When dealing with hundreds ofaircraft in a typical large airline’s fleet, that 3% quickly soars intothe multi millions of savings every year. Although important is not the major function of what TerraStar is capabable of.
Andall an airline needs to do to start the fuel-management program is layout a relatively small sum for consulting and acquiring AMA’stechnology – the afirs box , or bluebox as it is informally called. Again proof in writing approx a year ago was poopood by AMS supporters when written. Don't think you will find as writer was banned from Agoracom
Thefuel
management software and expertise that AMA offers is a “gamechanger” AMA President Richard Hayden told the annual meeting.
Not that expertise in comparison to SNA's product“This (fuel-management system) moves the sales prospect from a nice-to-have technology to a must have,” Mr. Hayden said.
However, here’s the irony: Totally agree with the irony part
At no time before in AeroMechanical’s history have the financials – recurring revenue, cash coming in the door and costs of sales – looked so good. Good Sales Force. No Doubt. Sometimes looking good means just that looks good on the surface. Whats underneath?
Butthe one dominant question on the minds of shareholders was how thecompany was going to bring in some extra cash to work on someinteresting improvements to its technology without issuing more shares. Very hard to do!!!
Investors heard more funding is needed to further develop and get regulatory approval for the next generation technology or bluebox that AMA has been working on for two years. SNA already has the technology and no longer needs a budget for further development although funding will be necessary in all likelyhood to promote what has been accomplished to the aviation world.
Some of the compelling reasons for building this next afirs box are two new standards being imposed on the airline industry by the European Economic Community (EEC). Compelling yes! Thats why SNA has spent considerable amounts of money developing over the last couple of years to accomplish with great success.
Firstis the Emissions
Trading Scheme that will soon tax airlines for all ofan aircraft’s carbon emissions while flying in EEC airspace.
Without a system like SNA will be hard to moniter and police. Second are a suite of requirements that automate the communication between an aircraft and air traffic control as well as other aircraft. The European rules are captured under a set of proposed regulations called Link 200+ and implementation requirements are only a couple of years away. SNA better get real busy showing the aviation world what has already been accomplished
The corresponding activity in North America is called NextGen that has a different timetable but the same end result. The timetable is actually longer and I wonder why.
On the first issue, AMA’s blueboxand the fuel management system gives airline executives the ability tomonitor each of their aircraft’s fuel burn in real time in an effort totrim fuel usage and thus minimize any taxes on that aircraft’s carbonemissions. It is actually impossible for AMS to be able to give real time information unless they are not complying with their own patent as their vehicle for information is e-mail The best description possible would be near realtime and as parameters increase in volume become even less real time.
A constant electronic signal that identifies aircraft can also easily be built into an AMA bluebox.But it costs a lot to complete the research and development and garnerinternational aviation regulatory approvals to put this next generationbluebox– formally called the afirs 228 – on an aircraft. Again a constant electronic signal cannot be maintained by e-mail as described in AMS's patent and if it did would be in contravention of SNA's patent
Neither AMA Chairman and CEO, Bill Tempany,or Mr. Hayden, told the annual meeting what the cash requirement is. Because they would scare the crap out of them and they probably don't know.
Butboth repeatedly said rather than dilute shares any further with apublic financing, the focus is first and foremost on living withinAMA’s budget and raising any extra funding by way of loan instrumentsand/or federal government grants. Good Luck
AMA only has payable loans of $257 thousand as of the first quarter in 2009.
Mr. Cleland said he was especially encouraged on the financing front after spending a lot of time with some Sierra Nevada Corporation (SNC) executives. Somehow SNC is going to support AMS? Interesting! perhaps they could hire one of their executives and make them the new CEO
Investors heard that SNC executives are spending about 30% of their time promoting AMA’s technology to the U.S. Air Force and other military concerns. Have no idea, How do you prove that.
Cleland said that and the fact that funding negotiations are going on with SNC covers off one of four reasons why he is sticking with his AMA shareholdings. Maybe he knows something no one else does. 25% part of his decision to stay with AMS. Precarious decision making process.
“I’m either going down with this ship or taking off with it,” Mr. Cleland jokingly told investors. Mr. Cleland said he didn’tcome to his conclusion to stick with AMA lightly. He told the annualmeeting he asked AMA executives and AMA’s current and prospectiveclients a lot of probing questions before reaching his conclusion. Not something I would joke about, means he is worried.
His listed three other reasons for gaining renewed confidence:
1. The appointment this year of Mr. Hayden, a former vice-president of Meggitt PLC, a multi-billion dollar, U.K.-based aviation firm, as AMA’s President;Maybe they can hire someone from SNC too!
2. The appointment of Jack Olcott,an aeronautical engineer and former head of the National BusinessAviation Association as an active member of AMA’s Board of Directors; Sounds like a very good reason, sounds like he never met him before if he was peppering them with questions
3.The appointment of Matt Bradley, a former Canadian Air Force pilot andcommercial pilot as AMA’s Vice President of Operations. Are there any other qualifications other than being a pilot? Does number 2 or 3 carry more or less weight in his decision making process
Mr. Cleland said the extraordinary skills of all three will be critical to bringing AMA to profitability. Did he test them?
The other topic investors repeatedly raised was China.
Mr. Hayden said while he doesn’tfully understand the politics of that vast and complex country, he isencouraged by the continuing interest Chinese aviation officials havein fulfilling AMA’s contract to put its blueboxes on board 515 aircraft there. Yeah Right!!! How long ago was that?
To date, only Shanghai Airlines has installed two blueboxes and Mr. Hayden said the airline is pleased with the technology’s performance. I didnt think Shanghai Airlines represented Chinese aviation officials
“In my view, we are seeing enough legitimate activity (from China) to hang in there,” Mr. Hayden concluded. Thats very encouraging news considering that China has signed MOU's with SNA
Despite that assurance, another
investor asked if it
wasn’t time to stop spending any more money in China.
But Mr. Tempany said he, too, was encouraged by the steady progress that Michael Fang, AMA’s Vice President of China, is making there.
“I’m nowhere close to throwing the baby out with the bathwater,” Mr.Tempany said. I think that bath water was thrown out a long time ago. Poor Baby
AMA also filed its first quarter results on SEDAR that highlights the accomplishments and challenges the company faces.
Onthe one hand, cash coming in the front door is steadily anddramatically rising, moving from $608 thousand in Q1/08 to stand at$2.8 million in Q1/09.
The all-important recurring revenue increased from $270 thousand in Q1/08 to $904 thousand in Q1/09.
All revenue, including recurring revenue, increased from $398 thousand in Q1/08 to $1.2 million in Q1/09.
Salaries and benefits dropped, not something you often see.
Generaland administration costs rose only slightly, research and developmentfor the first quarter of ’09 was up sharply due to the next-generation bluebox but marketing costs for the quarter compared to last year’s quarter dropped by over one half.
Thenet loss also dropped sharply for the quarter. It stood at $1.2 million– nearly half of the $2 million net loss in the same quarter in 2008.
Unearnedrevenue – monies paid to AMA but not eligible under accounting rules tobe brought into revenue yet – sharply increased in Q1/09 rising to $1.8million from $812 thousand in the same quarter last year.
At the same time, though, working capital dropped to $934 thousand in Q1/09 from $7.2 million in Q1/08. This is the most interesting part. A difference of 6.3 million dollars. Tsk Tsk I wonder what that means. The more revenue you make the less money you have? Does that mean it costs more to do than what they can make. Someone explain that to me. Accounting is not my strong suit
