Opinion ID: 783758
Heading Depth: 2
Heading Rank: 1

Heading: The License Designs

Text: 7 In February 1988, AAC purchased from Moody Design Bureau, a sole proprietorship of William J. Moody (Moody), all rights and an exclusive license to manufacture certain aircraft, patent application files, copyrights, and design patents for aircraft and helicopters (hereinafter the License Designs), for 2.5 million shares of restricted AAC stock. 8 In March 1988, AAC acquired the assets and operations of Phalanx Organization, Inc. (Phalanx). This transaction is termed a reverse acquisition, because AAC purchased all of Phalanx's assets, valued by AAC at $124,742. In exchange, AAC issued 28,673,440 shares of its common stock for the assets, the equivalent of $.0044 a share. Prior to the merger, Moody was Phalanx's president and controlling shareholder; after the transaction, he became the president and CEO of AAC. 9 In his 1988 audit of AAC's financial statements, Ponce valued the License Designs as an asset worth $4,687,500. After discussions with AAC's management, Ponce arrived at this valuation by taking AAC's share bid quoted on NASDAQ on the day AAC issued the 2.5 million restricted shares in exchange for the License Designs, $3.75, and discounting it by fifty percent.