Come Feb. 1, will Englewood, Colo.-based Adam Aircraft Inc. be forced to liquidate? That kind of announcement could set the general aviation industry back, especially for companies that are trying to obtain financing for new aircraft products. Yet, on Jan. 22, the Wichita Eagle obtained a letter addressed to Adam stockholders, sent by the company´s chairman and CEO John Wolf, who declared if the company didn´t raise $ 25 million by Jan. 31 it could face liquidation. The total amount Adam needs by the end of the month is $ 30.5 million; however, $ 5.5 million was secured in December.
The letter said two successful financing transactions must occur or Adam will be forced to liquidate the company. First, $30.5 million needs to be accounted for by Jan. 31, which will afford the company to continue operating until Citibank secures $100 million in equity financing by May 31. The letter was dated Jan. 15.
As senior lenders are demanding payment of $ 30.5 million by Jan. 31, Adam is under the gun. If this first round of immediate funding can´t be raised, the letter said the company would have to immediately liquidate. There would be "little possibility of a recovery" to previous investors, if that scenario plays out, the letter stated.
Adam´s financial woes led to the company´s 49.9 percent equity interest in a newly formed subsidiary. The offer is good for those who invest in January, according to the letter. Details of the funding scheme weren´t disclosed. The letter stated: "I believe that AAI is offering its stockholders a unique investment opportunity today. I believe the company is on the verge of a major upturn in revenue." Adam is banking on speed-like production of its A500, a twin-engine piston plane. Waiting in the wings is the company´s A700, a seven-place, twin-engine very light jet, which is currently undergoing flight test data. If the company can survive, a ramp up in production of its VLJ will take shape, after it obtains full certification from the Federal Aviation Administration.
On Jan. 18, three days after Wolf sent a letter to company shareholders, Headline Industry News reported that Adam laid off more than a third of its workforce. Nine days earlier on Jan. 9, the company said it was focusing its resources on its VLJ, to obtain type certification. The company insisted it was on "target for certification of the A700 in 2008." The company never let on how dismal its financial situation was.