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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
Securities Exchange Act of 1934
for Quarterly Period Ended March 31, 1997
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities And Exchange Act of 1934
for the transaction period from _________ to________
Commission File Number 0-14646
Airship International Ltd.
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(Exact name of registrant as specified in its charter)
New York 06-1113228
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(State of other jurisdiction of (I.R.S. Employer *Identificatiion Number)
incorporation or organization)
7380 Sand Lake Road, Suite 350, Orlando, FL 32819
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(Address of principal executive offices, Zip Code)
(407) 351-0011
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 No X
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PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
AIRSHIP INTERNATIONAL LTD.
CONDENSED BALANCE SHEETS
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MARCH 31, DECEMBER 31,
1997 1996
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(NOTE 1) (NOTE 1)
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<S> <C> <C>
ASSETS
AIRSHIPS AND RELATED EQUIPMENT, NET............................................... $ 2,025,000 $ 2,100,000
CASH AND CASH EQUIVALENTS......................................................... 0 2,000
DUE FROM AFFILIATED ENTITIES...................................................... 302,000 275,000
PREPAID INSURANCE................................................................. 11,000 22,000
DEFERRED FINANCING COSTS, LESS ACCUMULATED AMORTIZATION........................... 102,000 107,000
OTHER ASSETS...................................................................... 4,000 12,000
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$ 2,444,000 $ 2,518,000
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LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES:
Settlement on WDL contract................................................... $ 992,000 $ 992,000
Accounts payable............................................................. 616,000 623,000
Customer payments on future services......................................... 620,000 700,000
Accrued expenses and other liabilities....................................... 48,000 86,000
Note payable................................................................. 0 2,937,000
Capital leases and loans payable............................................. 7,623,000 3,227,000
Loans payable to related parties............................................. 3,979,000 4,608,000
Accrued dividends payable.................................................... 4,080,000 3,709,000
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Total Liabilities....................................................... $ 17,958,000 $ 16,882,000
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STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value:
Authorized -- 10,000,000 shares,
Issued and outstanding -- 2,594,000 & 2,712,000 shares 26,000 27,000
Common stock, $.01 par value:
Authorized -- 80,000,000 shares
Issued and outstanding -- 41,708,000 and 41,002,000 shares.............. 417,000 410,000
Capital in excess of par value-Preferred Stock............................... 14,444,000 14,444,000
Capital in excess of par value -- Common Stock............................... 21,941,000 21,941,000
Accumulated deficit.......................................................... (52,342,000) (51,186,000)
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Total Stockholders' Deficit............................................. (15,514,000) (14,364,000)
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$ 2,444,000 $ 2,518,000
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Unaudited -- See accompanying notes to condensed financial statements.
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AIRSHIP INTERNATIONAL LTD.
CONDENSED STATEMENT OF OPERATIONS
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THREE MONTHS ENDED
MARCH 31,
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1997 1996
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<S> <C> <C>
AIRSHIP REVENUES:................................................................... $ 0 $ 0
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COSTS AND EXPENSES:
Operating costs................................................................ 0 258,000
Selling, general & administrative.............................................. 497,000 297,000
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497,000 555,000
OPERATING INCOME (LOSS)............................................................. (497,000) (555,000)
OTHER INCOME (EXPENSE):
Interest expense............................................................... (282,000) (150,000)
Other income................................................................... 0 22,000
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(282,000) (128,000)
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NET INCOME (LOSS)................................................................... $ (779,000) $ (683,000)
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING....................................... 41,483,000 40,510,000
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NET LOSS APPLICABLE TO COMMON STOCK:
NET LOSS....................................................................... $ (779,000) $ (683,000)
PREFERRED STOCK DIVIDEND....................................................... (371,000) (420,000)
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NET LOSS APPLICABLE TO COMMON STOCK................................................. $(1,150,000) $(1,103,000)
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NET LOSS PER SHARE.................................................................. $ (0.03) $ (0.03)
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Unaudited -- See accompanying notes to condensed financial statements.
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AIRSHIP INTERNATIONAL LTD.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
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<CAPTION>
CAPITAL EXCESS
PREFERRED STOCK COMMON STOCK OF PAR VALUE
-------------------- ---------------------- -------------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PREFERRED COMMON DEFICIT
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<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31,
1996........... 2,712,000 $27,000 41,002,000 $410,000 $14,444,000 $21,941,000 $(51,186,000)
THREE MONTHS
ENDED MARCH 31,
1997:
Dividends accrued
on preferred
stock.......... -- -- -- -- -- -- (371,000)
Common stock
issued in
connection with
conversion
of
preferred
stock..... (118,000) (1,000) 706,000 7,000 -- -- (6,000)
Net Loss......... -- -- -- -- -- -- (779,000)
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BALANCES AT MARCH
31, 1997....... 2,594,000 $26,000 41,708,000 $417,000 $14,444,000 $21,941,000 $(52,342,000)
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Unaudited--See accompanying notes to condensed financial statements.
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AIRSHIP INTERNATIONAL LTD.
CONDENSED STATEMENTS OF CASH FLOWS
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Three Months Ended
March 31,
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (779,000) $(683,000)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Changes in operating assets and liabilities (101,000) 63,000
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Net cash flows from operating activities (880,000) (620,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of airship components and
vehicles 75,000 14,000
Net advances to affiliates (27,000) (16,000)
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Net cash flows from investing activities 48,000 (2,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale leaseback financing 4,709,000 0
Principal payments on capital leases and
loans payable (313,000) (102,000)
Net payments to related parties (629,000) 866,000
Payment of note payable (2,937,000) (112,000)
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Net cash flows from financing activities 830,000 652,000
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NET CHANGE IN CASH AND CASH EQUIVALENTS (2,000) 30,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,000 26,000
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 0 $56,000
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SUPPLEMENTAL INFORMATION:
Interest Paid $ 155,000 $78,000
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Unaudited-See accompanying notes to condensed financial statements.
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AIRSHIP INTERNATIONAL LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1-BASIS OF PRESENTATION:
The Company's last audited financial statement was December 31, 1994. The
Company is in the process of finalizing its audits for the years ended December
31, 1994, 1995, and 1996. The financial information presented as of any date
other than December 31, 1993 has been prepared from the books and records
without audit. The accompanying consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete statements. Management believes that all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such financial statements, have been included. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. If such differences prove significant and
material, the Company will file an amendment to this report on Form 10-Q.
NOTE 2-TRANSACTIONS WITH RELATED PARTIES:
LOANS FROM TRANS CONTINENTAL. During the three months ended March, 1997 Trans
Continental Airlines, Inc. ("Trans Continental"), an affiliated company, loaned
the Company an additional $746,000. While the Company has repaid $1,476,000 to
Trans Continental from the proceeds of the Company's sale leaseback financing,
there can be no assurance that Trans Continental will continue to make such
loans to the Company.
500.04 AGREEMENT WITH TRANS CONTINENTAL LEASING. On January 15, 1997 the Company
entered into a sale agreement with Trans Continental Leasing (TCL), an
affiliated company, with respect to the Company's 500.04 airship (formerly the
"Bud One" airship) whereby the Company sold to TCL the airship and related
equipment. In consideration for said assets, TCL retired the Company's debt to
Senstar Capital Corp. in the amount of $3,014,000. Additionally, TCL procured a
new envelope from a third party and agreed to lease back the entire assembled
and operational airship to the Company. Pursuant to the agreement, the Company
further agreed that it would sell certain idle airship components to TCL
provided that TCL would undertake to pay the operational costs of the 500.04
airship for a minimum of eight months.
NOTE 3. CUMULATIVE PREFERRED DIVIDENDS IN ARREARS:
The Company has accrued quarterly dividend payments with respect to its Class A
Cumulative Convertible Preferred Voting Stock (the "Preferred Stock") since
August 15, 1994 until a later payment date. Dividends on the Preferred Stock
accrue at the annual rate of $.60 per share payable in Common Stock. As of March
30, 1997, the Company had 2,594,203 shares of Preferred Stock outstanding.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERALL FINANCIAL CONDITION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. For the first three months of 1997, the Company
incurred a loss of $779,000 and had negative cash flows of $880,000 from
operations. The accompanying financial statements do not include any adjustments
that might result from the Company's current liquidity shortage.
The company experienced a net loss of $779,000 for the three month period ended
March 31, 1997, compared to a net loss of $683,000 for the same period during
the prior year. The change was due to an increase in interest expense and
commissions paid on a financing which were offset by a reduction in payroll and
maintenance costs associated with the 500.04 airship. The Company is also
experiencing a liquidity shortage (See Liquidity and Capital Resources).
The Company had a stockholder's deficit of $15,514,000 at March 31, 1997 as
compared to the stockholder's deficit of $14,364,000 at December 31, 1996
representing an increase of $1,150,000. The increase was partially due to the
accrual of common stock dividends in the amount of $371,000 for the three months
ended March 31, 1997. In addition, the Company sustained a loss in the amount of
$779,000 for the three months ended March 31, 1997.
RESULTS OF OPERATIONS
The Company had no revenue from operation of its airships during the first
three months of 1997 and 1996.
Operating costs for the three months ended March 31, 1997 decreased $258,000 (or
100%) from the comparable period in 1996. Cost decreases resulted from reduced
payroll and maintenance costs related to the 500.04 airship.
Selling, general, and administrative costs for the three months ended March 31,
1997 were $497,000 compared to $297,000 for the comparable period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to experience negative cash flows from operating
activities. Due to the continued negative cash flow and existing encumbrances on
its assets, the Company has relied on loans, cash advances, and guarantees from
Louis Pearlman, the Company's president and principal stockholder, and Trans
Continental. There can be no assurance that Mr. Pearlman and Trans Continental
will make additional loans, cash advances, and guarantees on an ongoing basis.
At March 31, 1997, the Company owed Mr. Pearlman $1,163,000, net of unamortized
discounts, and owed Trans Continental $2,816,000 (see Note 2). Mr. Pearlman and
Trans Continental have deferred repayment of such amounts for an indefinite
period.
Quarterly dividends on the Preferred Stock accrue at the annual rate of $0.60
per share payable in shares of Common Stock. The Company has accrued dividends
on the Preferred Stock since August 15, 1994 (see Note 3).
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
AIRSHIP INTERNATIONAL LTD.
Dated: September 8, 1997 By: /s/ Louis J. Pearlman
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Louis J. Pearlman
Chairman of the Board of
Directors, President and
Treasurer (Principal Executive
and Financial Officer)
Dated: September 8, 1997 By: /s/ Alan A. Siegel
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Alan A. Siegel
Secretary & Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Dated: September 8, 1997
By: /s/ Marvin Palmquist
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Marvin Palmquist
Director
Dated: September 8, 1997 By: /s/ James J. Ryan
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James J. Ryan
Director
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