================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- ------
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
- ------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ------
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24795
AVIATION GENERAL, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 73-1547645
(State of Incorporation) (IRS Employer
Identification No.)
7200 NW 63rd Street
Hangar 8, Wiley Post Airport
Bethany, Oklahoma 73008
(Address of principal executive offices) (Zip Code)
(405) 440-2255
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days.
Yes__X__ No_____
-
There were 6,373,786 Shares of Common Stock Outstanding
As of April 28, 2000
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $397,515 $281,138
Accounts receivable 304,568 111,403
Current portion of note receivable 19,920 19,535
Inventories 5,170,118 5,143,720
Prepaid expenses and other assets 164,998 172,273
-------------------- --------------------
Total current assets 6,057,119 5,728,069
-------------------- --------------------
Property and equipment
Office equipment and furniture 357,105 355,492
Vehicles and aircraft 84,021 84,021
Manufacturing equipment 364,726 362,205
Tooling 564,393 563,193
Leasehold improvements 311,764 311,764
-------------------- --------------------
1,682,009 1,676,675
Less accumulated depreciation (981,936) (951,791)
-------------------- --------------------
700,073 724,884
-------------------- --------------------
Other assets
Notes receivable, less current maturities 119,323 125,331
Available-for-sale equity securities - related party 1,021,884 317,151
Note receivable from related party 1,695,507 1,736,552
-------------------- --------------------
2,836,714 2,179,034
-------------------- --------------------
$9,593,906 $8,631,987
==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $555,057 $451,645
Accrued expenses 470,849 344,525
Refundable deposits 158,650 233,363
Notes payable 1,129,350 731,780
-------------------- --------------------
Total current liabilities 2,313,906 1,761,313
-------------------- --------------------
Stockholders' Equity
Preferred stock, $.01 par value, 5,000,000
Shares authorized; no shares outstanding - -
Common stock, $.50 par value, 20,000,000
Shares authorized; 7,043,186 shares issued
at March 31, 2000 and December 31, 1999 3,521,593 3,521,593
Additional paid-in capital 36,881,466 36,881,466
Less: Treasury stock at cost (639,400 shares at
March 31, 2000 and 529,400 shares at
December 31, 1999) (878,615) (658,615)
Accumulated other comprehensive income 591,143 -
Accumulated Deficit (32,244,444) (32,873,770)
-------------------- --------------------
Total stockholders' equity 7,280,000 6,870,674
-------------------- --------------------
$9,593,906 $8,631,987
==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AVIATION GENERAL, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------------------- -----------------------
<S> <C> <C>
Net sales - aircraft $3,475,750 $1,644,653
Net sales - service 466,825 613,639
----------------------- -----------------------
Total net sales 3,942,575 2,258,292
----------------------- -----------------------
Cost of sales - aircraft 2,779,963 1,741,241
Cost of sales - service 317,996 370,752
----------------------- -----------------------
Total cost of sales 3,097,959 2,111,993
----------------------- -----------------------
Gross margin 844,616 146,299
----------------------- -----------------------
Other operating expenses
Product development and engineering costs 96,307 79,038
Selling, general and administrative expenses 733,865 489,972
----------------------- -----------------------
Total other operating expenses 830,172 569,010
----------------------- -----------------------
Operating income (loss) 14,444 (422,711)
----------------------- -----------------------
Other income (expenses)
Other income 54,459 56,867
Interest expense (30,532) (13,024)
Other expense (188) (697)
----------------------- -----------------------
Total other income (expenses) 23,739 43,146
----------------------- -----------------------
Net income (loss) $38,183 ($379,565)
======================= =======================
Net Income (loss) per share
Weighted average common shares
outstanding, basic 6,449,720 7,269,437
----------------------- -----------------------
Net Income (loss) per share, basic $0.01 ($0.05)
======================= =======================
Weighted average common shares
outstanding, diluted 6,713,720 7,269,437
----------------------- -----------------------
Net Income (loss) per share, diluted $0.01 ($0.05)
======================= =======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
AVIATION GENERAL, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $38,183 ($379,565)
Adjustments to reconcile net income (loss) to
net cash provided (used) in operating activities
Depreciation and amortization 30,145 27,730
Non-cash interest earnings (32,122) (32,532)
Receipts on aircraft notes receivable 41,045 -
Changes in assets and liabilities
(Increase) decrease in
Accounts receivable (193,165) (14,170)
Notes receivable 5,623 8,666
Inventories (26,398) (106,968)
Prepaid expense and other assets 39,397 23,800
Increase (Decrease) in
Accounts payable 103,412 (194,904)
Accrued expenses 126,324 39,809
Refundable deposits (74,713) (90,071)
-------------------- --------------------
Net cash provided (used) by operating activities 57,731 (718,205)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities of related party (113,590) -
Capital expenditures (5,334) (2,718)
Payment on related party note receivable - 800,000
-------------------- --------------------
Net cash used (provided) by investing activities (118,924) 797,282
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 1,407,380 385,050
Payments on borrowings (1,009,810) (404,600)
Purchase of treasury stock (220,000) (100,000)
-------------------- --------------------
Net cash provided (used) by financing activities 177,570 (119,550)
-------------------- --------------------
Net increase (decrease) in cash 116,377 (40,473)
Cash and cash equivalents at beginning of period 281,138 645,706
-------------------- --------------------
Cash and cash equivalents at end of period $397,515 $605,233
==================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $32,824 $4,983
Income taxes - -
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of the Company,
all adjustments necessary to present fairly the financial position of Aviation
General, Incorporated as of March 31, 2000 and December 31, 1999, and the
results of operations and cash flows for the three month periods ended March 31,
2000 and 1999 have been included and are of a normal, recurring nature. The
results of operations for such interim periods are not necessarily indicative of
the results for the full year. It is suggested that these condensed financial
statements be read in conjunction with the Company's 1999 Annual Report on Form
10-K.
2. Basic income (loss) per share of common stock has been computed by using the
weighted average number of shares of common stock outstanding during the period.
Diluted income (loss) per share has been computed based on the assumption that
all dilutive options are exercised.
Three months ending
March 31, 2000 March 31, 1999
-------------- --------------
Numerator
Net income (loss) $38,183 ($379,565)
Denominator
Weighted average shares outstanding,
basic 6,449,720 7,269,437
Effect of dilutive securities
Stock options 264,000 -
--------- --------------
Denominator for income (loss) per share
assuming dilution 6,713,720 7,269,437
========= ==========
Income (loss) per share, basic $ 0.01 ($ 0.05)
========= ==============
Income (loss) per share, assuming dilution $ 0.01 ($ 0.05)
========= ==============
3. The Company purchased 80,000 shares of its common stock at an aggregate
purchase price of $100,000, or $1.25 per share from its majority shareholder on
January 21, 2000. On March 27, 2000, the Company purchased 30,000 shares of its
common stock at an aggregate purchase price of $120,000, or $4.00 per share from
its majority shareholder. This price was consistent with shares trading freely
on the NASDAQ SmallCap Market on that date. Some of the shares will be issued to
employees under the Company's 401(k) plan and the balance will be retained in
treasury or cancelled.
4. Total comprehensive income (loss) for the periods presented is as follows:
2000 1999
---- ----
Quarter ended March 31 $629,326 ($379,565)
5. Inventories consist primarily of finished goods and parts for manufacturing
and servicing aircraft. Inventory costs include all direct manufacturing costs
and applied overhead. These inventories, other than used aircraft, are stated at
the lower of cost or market, and cost is determined by the average-cost method.
Used aircraft are valued on a specific-identification basis at the lower of cost
or current estimated realizable wholesale price. Inventory components at the
balance sheet dates were as follows:
March 31, 2000 December 31, 1999
Raw materials $3,227,475 $2,867,102
Work in process 697,358 595,593
New aircraft 744,870 964,324
Pre-owned aircraft 500,415 716,701
------------ ------------
Total inventories $5,170,118 $5,143,720
---------- ----------
6. The Company is subject to regulation by the FAA. The Company is subject to
inspections by the FAA and may be subjected to fines and other penalties
(including orders to cease production) for noncompliance with FAA regulations.
The Company has a Production Certificate from the FAA, which delegates to the
Company the inspection of each aircraft. The sale of the Company's product
internationally is subject to regulation by comparable agencies in foreign
countries.
The Company faces the inherent business risk of exposure to product
liability claims. In 1988, the Company agreed to indemnify a former manufacturer
of the Commander single engine aircraft against claims asserted against the
manufacturer with respect to aircraft built from 1972 to 1979. In 1994, Congress
enacted the General Aviation Revitalization Act, which established an
eighteen-year statute of repose for general aviation manufacturers. This
legislation prohibits product liability suits against manufacturers when the
aircraft involved in an accident is more than eighteen years old. This action
effectively eliminated all potential liability for the Company with respect to
aircraft produced in the 1970s as of December 31, 1997. The Company's product
liability insurance policy with coverage of $10 million per occurrence and $10
million annually in the aggregate with a deductible of $200,000 per occurrence
and annually in the aggregate expired March 1, 1995. Subsequent to March 1,
1995, the Company is not insured for product liability claims. Management
believes that the interest of shareholders is better served by vigorously
defending claims through the services of highly qualified specialists and
attorneys rather than retaining product liability insurance to settle exorbitant
claims.
The Company is routinely involved in various legal matters arising in
the normal course of business, including product liability claims. Management
intends to vigorously defend against these claims and currently believes that
legal matters will not result in any material adverse effect on the Company's
financial position or results of operations. Accordingly, no provision for any
liabilities that may result have been recorded in the financial statements. Due
to the uncertainty of these matters, it is at least reasonably possible that
management's view of the outcome will change in the near term.
7. The Company's business strategy is to capture a significant share of the
existing domestic and international market for the single engine, high
performance aircraft by offering a premium updated version of an established
aircraft design. Commander aircraft have an airframe design decades newer than
the competition and are certified to more stringent standards. The Company
believes the domestic and international market for its aircraft includes
individuals and corporations that will purchase the Company's aircraft for
business and personal travel, and governments, commercial and military
organizations that will use the aircraft for training and other purposes.
<PAGE>
The Company believes the market for its products will improve as a
result of attrition of the existing fleet of aging single engine high
performance aircraft, development of new international markets for general
aviation aircraft, increased use of single engine aircraft as a corporate tool
for small and medium-sized businesses, and demand for advanced single engine
trainers.
Recognizing that the size of the used aircraft market is significantly
larger than new aircraft sales, the Company has structured a separate aviation
services division within the Company to purchase, refurbish and sell pre-owned
aircraft at reasonable profit margins. The Aviation Services Division also acts
as broker for pre-owned aircraft and serves as advisor to potential aircraft
buyers and sellers.
The Company markets its aircraft through a factory direct sales and
marketing organization comprised of regional sales personnel who are managed and
supported from the Company's headquarters in Oklahoma. The marketing
organization is augmented by a worldwide network of Commander Authorized Service
Centers (ASCs). The Company's marketing program utilizes a highly focused
domestic and international advertising and public relations program that
includes product advertising in leading business and aviation publications,
ongoing direct mail programs to owners and pilots, and internet marketing
communications.
The Company's CFI Referral Program actively engages certified flight
instructors (CFIs) in the evaluation and acquisition process with their
students. CFIs play an important role in advising potential owners. To date,
more than 1800 CFIs have enrolled in this program.
The Company has one of the most comprehensive worldwide service and
support networks in its class. The Company grants domestic Commander ASCs the
non-exclusive right to refer prospects for new Commander aircraft. Commander
ASCs receive a referral fee for identifying purchasers, and provide a full
complement of service and support services, including financing, insurance,
service and support, hangar/storage, flight instruction, and professional pilot
service. The Company selects ASCs from among experienced independent aviation
sales and service organizations that it believes to have excellent facilities,
service capabilities, reputation and financial strength. Through its ASCs,
Commander Aircraft Company offers a turn-key aircraft ownership program designed
to stimulate ownership of Commander aircraft by companies that have not
previously owned or operated aircraft. This flexible program can be tailored to
meet each customer's specific requirements.
Revenues generated by The Aviation Services Division grew significantly
in 1998, 1999 and the first quarter of 2000 and are expected to remain strong in
2000. In addition, the Company's new subsidiary, Strategic Jet Services, Inc.
generated its first revenues in 1999 and is expected to contribute additional
earnings in 2000.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
Aviation General, Incorporated announced on March 22, 2000 that the
Board of Directors authorized the purchase of up to 2,000,000 shares of the
Company's outstanding common stock. Purchases of shares will be made from time
to time, in either open market or negotiated transactions, subject to market
conditions. The previous stock repurchase of 1,000,000 shares announced on April
7, 1999 was completed during the first quarter of 2000. The Company purchased
110,000 shares of its common stock during the first quarter of 2000 at prices
consistent with shares trading freely on the NASDAQ SmallCap Market on the
respective purchase dates.
RESULTS FROM OPERATIONS
Revenues from the sale of aircraft for the first quarter of 2000
totaled $3,475,750 compared to $1,644,653 for the comparable period of 1999. The
increase in revenue for the first quarter of 2000 was the result of delivering
15 new and pre-owned aircraft compared to 7 for the first quarter of 1999.
Service revenues totaled $466,825 for the quarter ended March 31, 2000
compared to $613,639 for the comparable quarter in 1999. The decrease in
revenues was due to a single large aircraft rebuild job in 1999 for over
$240,000. Excluding this large rebuild, service revenues were up 25% for the
first quarter of 2000 over the same period in the prior year.
Cost of aircraft sales for the three month period ended March 31, 2000
increased to $2,779,963 compared to $1,741,241 for the three month period ended
March 31, 1999. The additional cost was due to higher new and pre-owned aircraft
sales during the period. Gross margins on aircraft sales were 20% in the first
quarter of 2000 compared to a loss of 6% in the first quarter of 1999.
Cost of sales for service and parts for the quarter ended March 31,
2000 decreased to $317,996 from $370,752 for the quarter ended March 31, 1999.
The reduction was due primarily to the decrease in revenues from service and
parts as explained above.
Product development and engineering costs increased to $96,307 for the
first quarter of 2000, from $79,038 for the comparable period in 1999. The
increase was for higher salary and technical consulting to support various
product improvement initiatives currently underway.
Sales, general and administrative expense increased for the three-month
period ended March 31, 2000, to $733,865 from $489,972 for the comparable period
ended March 31, 1999. Consistent with the increase in sales volume, commissions
were $141,340 in 2000 compared to $29,053 in 1999. Salaries, payroll burden,
advertising, legal and travel costs were higher, partially offset by lower costs
for administration of Strategic Jet Services.
Interest expense increased to $30,532 for the first quarter of 2000
from $13,024 for the comparable period in 1999 due to higher borrowings at
banks.
LIQUIDITY AND CAPITAL RESOURCES
Cash balances increased to $397,515 at March 31, 2000 from $281,138 at
December 31, 1999. Accounts receivable increased by $193,165 at March 31, 2000
due to a trade balance from the sale of a pre-owned aircraft and a $72,000 parts
order secured by an irrevocable letter of credit. Notes receivable decreased to
$139,243 at March 31, 2000 from $144,866 at December 31, 1999 due to regular
quarterly payments received from the debtor. Notes receivable from related
parties decreased by $41,045 from December 31, 1999 to March 31, 2000 based on a
principal payment. Accrued interest due on the note receivable from the related
party at March 31, 2000 was $32,122. The note is secured by Aviation General,
Incorporated stock pledged, as well as a personal guarantee from the principal
shareholder of the debtor. The note is classified as non-current due to the
probability that payment in full will not occur within the next year.
The Company's investment in equity securities is classified as
available for sale with unrealized gains or losses excluded from income and
reported as other comprehensive income. Declines in the fair value of securities
that are other than temporary result in write-downs are included in earnings.
This investment is in the common stock of a related party. Subsequent to March
31, 2000 a decrease in the share price of the underlying common stock has
resulted in a decrease in the unrealized gain.
Inventories increased to $5,170,118 at March 31, 2000 from $5,143,720
at December 31, 1999. Raw materials, parts and work in process increased
approximately $462,138 as the Company increased production of new aircraft to
meet higher market demand. New aircraft inventory decreased from $964,324 at
December 31, 1999 to $744,870 at March 31, 2000. Inventory of pre-owned aircraft
decreased to $500,415 at March 31, 2000 from $716,701 at December 31, 1999.
During the first three months of 2000, expenditures for fixed assets
totaled $5,334. The Company does not plan to spend significant funds for new
property, plant and equipment for the balance of fiscal 2000. Most capital
expenditures will be for repairs or replacements of plant equipment, and for
computer hardware and software improvements which are not expected to exceed
$50,000 for the balance of the fiscal year.
Accounts payable increased to $555,057 at March 31, 2000 from $451,645
at December 31, 1999. Increased production of new aircraft in the first quarter
of 2000 resulted in higher material and parts inventory purchases on open
account. Accrued expenses increased to $470,849 at March 31, 2000 from $344,525
at December 31, 1999. The increase in accrued expenses is attributable to
amounts accrued for payroll taxes, employee benefits, and miscellaneous
expenses.
Refundable deposits decreased to $158,650 at March 31, 2000 from
$233,363 at December 31, 1999 reflecting sales of new and pre-owned aircraft
that were deposited prior to year-end. Borrowings from bank lines increased to
$1,129,350 at March 31, 2000 from $731,780 at December 31, 1999.
Since commencement of production in 1992, annual revenues have
increased significantly and annual losses have substantially declined concurrent
with ongoing investment in the Company's future. Cash needs have been financed
with debt, private investor capital, proceeds from an initial public offering,
and proceeds from subsequent stock issuances. The Company continues to broaden
its general aviation capabilities by increasing its business in the pre-owned
piston and jet markets. These markets are much larger than the market for new
high performance, single engine aircraft. Furthermore, this diversifies the
Company's business and revenue base and is synergistic with the manufacturing,
marketing and support services of our high performance, single engine Commander
aircraft.
Management believes the reduction in net loss from operations is
attributable to plans implemented in late 1996 and 1997 to provide new revenues
for the Company. During 1999, the Company continued to expand the Aviation
Services Division ("ASD"), which sells pre-owned aircraft and markets
refurbishment services. In the first quarter of 2000, this division continued
expanding efforts to purchase and accept trade-in of pre-owned aircraft,
refurbish these aircraft and sell them at a reasonable profit. The Company
continues to take advantage of its factory facilities to market upgrades to
existing aircraft owners for new paint, interior and equipment. Management
expects growth to continue in 2000 for refurbishment and pre-owned aircraft
sales.
In October 1998, the Company announced the formation of Strategic Jet
Services, Inc. (SJS), a wholly owned subsidiary established to provide
brokerage, sale, consulting and refurbishment work for jet aircraft. This line
of business generated first activity in 1999 and is expected to contribute
earnings in 2000.
During 1999, the Company began certification of new state-of-the-art
avionics systems that offer the customer the latest technology in navigational
and communication equipment. The Company introduced a new de-icing option and
received certification from the Federal Aviation Administration in 1998,
allowing equipped aircraft to operate in known icing conditions similar to
larger, more expensive aircraft. Sales of this equipment not only provide
additional revenues and earnings, but also increase the value of the aircraft
relative to its competition.
During the first quarter of 2000, the Company introduced the 115 series
of high performance, single engine aircraft. The Commander 115 represents the
culmination of a multitude of improvements to the Commander line, and features
numerous airframe, engine and systems refinements, as well as significantly
increased range capability and an upgraded standard avionics package which
includes dual Garmin 430 global navigation, communication and moving map
displays. The Commander 115 series is the latest of a thoroughbred line of
aircraft that offer the ultimate combination of performance, comfort, safety,
and utility, and has become recognized as the Mercedes of the single engine
fleet.
In addition to the above actions by the Company to increase revenue,
management has made efforts to reduce costs and cash requirements by optimizing
its production schedule using just-in-time scheduling, thereby systematically
decreasing inventories and payables since production commenced in 1992.
Management has reduced the costs incurred to advertise new aircraft by focusing
marketing efforts at a specific customer profile.
The Company continues to advertise in industry and trade publications
at a significantly reduced level, while directly contacting potential customers
whose demographic characteristics closely match the typical customer, especially
in the areas of income, pilot experience, and types of businesses with
demonstrated regional travel requirements. Further reducing selling expenses,
the Company has organized its service center, paint and interior shops into a
completion center to focus on the growing after-market refurbishment business.
The Company has expanded its operations to include ASD and SJS,
enhanced the Commander brand with the introduction of the Commander 115, and
more effectively targeted sales and marketing expenditures. With continued
activity in the parts, service and pre-owned aircraft sales, the Company has
lowered its break even sales to only 13 new aircraft per year. With the large
investment complete, management believes it has made significant progress
towards the building of a world class aviation company and is poised to break
into profitability. Based on performance in the first quarter of 2000, the
Company believes that annual results for the year ending December 31, 2000
should exceed the prior year. Due to numerous factors beyond the control of the
Company, there can be no assurances that these results will be achieved.
Forward Looking Statements
This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act. All statements, other than statements of historical fact, included in this
Form 10-Q that addresses activities, events or developments that the Company
expects, projects, believes, or anticipates will or may occur in the future,
including matters having to do with expected and future aircraft sales and
services revenues, the Company's ability to fund its operations and repay debt,
business strategies, expansion and growth of operations and other such matters,
are forward-looking statements. These statements are based on certain
assumptions and analyses made by our management in light of its experience and
its perception of historical trends, current conditions, expected future
developments, and other factors it believes are appropriate in the
circumstances. These statements are subject to a number of assumptions, risks
and uncertainties, including general economic and business conditions, the
business opportunities (or lack thereof) that may be presented to and pursued by
the Company, the Company's performance on its current contracts and its success
in obtaining new contracts, the Company's ability to attract and retain
qualified employees, and other factors, many of which are beyond the Company's
control. You are cautioned that these forward-looking statements are not
guarantees of future performance and that actual results or developments may
differ materially from those projected in such statements.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 3. QUANITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The registrant has no material market risk associated with interest
rates, foreign currency exchange rates or commodity prices.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 18, 2000, a lawsuit was filed in the Third Judicial
District Court in Salt Lake City, Utah on behalf of the estate of Frank Earl
against Aeroquip-Vickers, Inc., Commander Aircraft Company, and Textron
Lycoming, Inc. The plaintiff alleges that Mr. Earl was killed in the crash of a
Commander 114TC July 18, 1998 due to the failure of a clamp manufactured by
Aeroquip-Vickers, Inc. that secured the turbocharger to the exhaust pipe, which
ultimately caused the aircraft to crash. Amounts of damages are not specified in
the complaint. Although it is too early for the ultimate outcome of this claim
to be determined, management does not believe the Company bears any
responsibility and will vigorously defend against this claim and currently
believes that this action will not have a material impact on the Company's
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVIATION GENERAL INCORPORATED
(Registrant)
By: /s/ Ronald F. Thomason
Ronald F. Thomason
Vice President Finance
(Chief Financial Officer and
Authorized Signatory)
Date: May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 397,515
<SECURITIES> 1,021,884
<RECEIVABLES> 304,568
<ALLOWANCES> 0
<INVENTORY> 5,170,118
<CURRENT-ASSETS> 6,057,119
<PP&E> 1,682,009
<DEPRECIATION> (981,936)
<TOTAL-ASSETS> 9,593,906
<CURRENT-LIABILITIES> 5,728,069
<BONDS> 0
0
0
<COMMON> 3,521,593
<OTHER-SE> 878,615
<TOTAL-LIABILITY-AND-EQUITY> 9,593,906
<SALES> 3,942,575
<TOTAL-REVENUES> 3,942,575
<CGS> 3,097,959
<TOTAL-COSTS> 3,097,959
<OTHER-EXPENSES> 830,172
<LOSS-PROVISION> 0
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