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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, 1998
-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
- -------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer Identification 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 [X] No [ ]
The number of outstanding shares of the registrant's common stock,
par value $.01, as of March 31, 1998 is 42,584,000.
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PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
AIRSHIP INTERNATIONAL LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(NOTE 1) (NOTE 1)
<S> <C> <C>
ASSETS
Airships and related equipment, net $ 3,874,000 $ 3,910,000
Cash and cash equivalents 80,000 2,000
Due from related parties 397,000 434,000
Prepaid insurance 11,000 22,000
Other assets 4,000 6,000
------------ ------------
$ 4,366,000 $ 4,374,000
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES:
Accounts payable - trade 1,440,000 1,525,000
Customer payments on
future services 514,000 514,000
Insurance financing 33,000 45,000
Accrued expenses and other
liabilities 6,373,000 5,983,000
Notes payable 3,939,000 4,080,000
Obligations under capital lease 2,286,000 2,477,000
Deferred gain on sale of airship 755,000 766,000
Due to stockholders 7,562,000 6,667,000
------------ ------------
Total Liabilities 22,902,000 22,057,000
------------ ------------
STOCKHOLDERS' DEFICIT:
Preferred stock, $.01 par value:
Authorized -- 10,000,000 shares,
Issued and outstanding --
2,448,000 and 2,459,000 shares 24,000 24,000
Common stock, $.01 par value:
Authorized -- 80,000,000 shares
Issued and outstanding -- 42,584,000
and 42,523,000 shares 426,000 425,000
Capital in excess of par
value-Preferred Stock 14,447,000 14,447,000
Capital in excess of par value
-- Common Stock 22,043,000 22,066,000
Accumulated deficit (55,476,000) (54,645,000)
------------ ------------
Total Stockholders' Deficit (18,536,000) (17,683,000)
------------ ------------
$ 4,366,000 $ 4,374,000
============ ============
</TABLE>
Unaudited -- See accompanying notes to condensed financial statements.
2
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AIRSHIP INTERNATIONAL LTD.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------
1998 1997
---- ----
<S> <C> <C>
AIRSHIP REVENUES: $ 0 $ 0
COSTS AND EXPENSES:
Selling, general & administrative 178,000 458,000
----------- ----------
178,000 458,000
----------- ----------
OPERATING INCOME (LOSS) (178,000) (458,000)
OTHER INCOME (EXPENSE):
Interest expense (295,000) (255,000)
Other income 11,000 51,000
----------- ----------
(284,000) (204,000)
----------- ----------
NET INCOME (LOSS) $ (462,000) $ (662,000)
=========== ==========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 42,548,000 41,483,000
=========== ==========
NET LOSS APPLICABLE TO COMMON STOCK:
NET LOSS $ (462,000) $ (662,000)
PREFERRED STOCK DIVIDEND (369,000) (431,000)
----------- ----------
NET LOSS APPLICABLE TO COMMON STOCK $ (831,000) $ (1,093,000)
=========== ==========
NET LOSS PER SHARE $ (0.02) $ (0.03)
=========== ==========
</TABLE>
Unaudited -- See accompanying notes to condensed financial statements
3
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AIRSHIP INTERNATIONAL LTD.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL EXCESS
PREFERRED STOCK COMMON STOCK OF PAR VALUE
------------------ ---------------- ----------------------- ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PREFERRED COMMON DEFICIT
------ ------ ------ ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1997 2,459,000 $24,000 42,523,000 $ 425,000 $ 14,447,000 $ 22,066,000 $(54,645,000)
THREE MONTHS
ENDED MARCH 31,
1998:
Dividends accrued
on preferred
stock 0 0 0 0 0 0 (369,000)
Common stock
issued in
connection with
conversion
of preferred
stock (11,000) 0 61,000 1,000 0 (1,000) 0
Reimbursement of 1993
stock subscriptions (22,000)
Net Loss 0 0 0 0 0 0 (462,000)
------------------------------------------------------------------------------------------
BALANCES AT
MARCH 31, 1998 2,448,000 $24,000 42,584,000 $ 426,000 $ 14,447,000 $ 22,043,000 $(55,476,000)
==========================================================================================
</TABLE>
Unaudited--See accompanying notes to condensed financial statements.
4
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AIRSHIP INTERNATIONAL LTD.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (462,000) $ (662,000)
Adjustments to reconcile net loss to
net cash flows used in operating activities:
Depreciation and Amortization 36,000 0
Realized gain on sale leaseback (11,000) (11,000)
Gain on sale of equipment 0 (39,000)
Changes in operating assets and liabilities (63,000) (168,000)
----------- -----------
Net cash flows used in operating activities (500,000) (880,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of airship components and vehicles 0 75,000
Net change in due from Trans Continental 37,000 (29,000)
----------- -----------
Net cash flows provided by investing activities 37,000 46,000
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 0 4,709,000
Principal payments on capital leases and loans payable (332,000) (3,248,000)
Reimbursement of 1993 stock subscriptions (22,000)
Change in loans from stockholder 895,000 (629,000)
----------- -----------
Net cash flows from financing activities 541,000 832,000
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 78,000 (2,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,000 2,000
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 80,000 $ 0
=========== ===========
SUPPLEMENTAL INFORMATION:
Interest Paid $ 109,000 $ 155,000
=========== ===========
Non-cash accrual of common stock dividend on preferred stock $ 369,000 $ 431,000
=========== ===========
</TABLE>
Unaudited-See accompanying notes to condensed financial statements.
5
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AIRSHIP INTERNATIONAL LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1-BASIS OF PRESENTATION:
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
estimated. 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 31, 1998,
Trans Continental Airlines, Inc. ("Trans Continental"), an affiliated company,
loaned the Company an additional $738,000. However, there can be no assurance
that Trans Continental will continue to make such loans to the Company.
NOTE 3. CUMULATIVE PREFERRED DIVIDENDS IN ARREARS:
The Company has accrued quarterly dividend payments with respect to its Class A
8% 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
31, 1998, the Company had 2,448,000 shares of Preferred Stock outstanding.
6
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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 1998, the Company
incurred a loss of $462,000 and had negative cash flows of $500,000 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 $462,000 for the three month period ended March 31,
1998, compared to a net loss of $662,000 for the same period during the prior
year. The change was due to commissions paid on a financing in 1997. The Company
is also experiencing a liquidity shortage (See Liquidity and Capital Resources).
The Company had a stockholder's deficit of $18,536,000 at March 31, 1998 as
compared to the stockholder's deficit of $17,683,000 at December 31, 1997
representing an increase of $853,000. The increase was partially due to the
accrual of common stock dividends in the amount of $369,000 for the three months
ended March 31, 1998. In addition, the Company sustained a loss in the amount of
$462,000 for the three months ended March 31, 1998.
RESULTS OF OPERATIONS
The Company had no revenue from operation of its airships during the first three
months of 1998 and 1997.
Selling, general, and administrative costs for the three months ended March
31,1998 were $178,000 compared to $458,000 for the comparable period in 1997.
This decrease is due primarily to commissions paid on refinancing of the
Company's debt in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Management's Plans
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, also a stockholder. 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, 1998, the Company owed Mr. Pearlman $1,264,000,
net of unamortized discounts, and owed Trans Continental $6,298,000 (see Note
2). Mr. Pearlman and Trans Continental have deferred repayment of such amounts
for an indefinite period. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
Quarterly dividends on the Preferred Stock accrue at the annual rate of $0.60
per share and are payable in shares of Common Stock. The Company has accrued
dividends on the Preferred Stock since August 15, 1994 (see Note 3).
Management's plans to improve the financial position and operations with the
goal of sustaining the Company's operations for the current year and beyond
include:
Arranging with Trans Continental, a company related through common directorship
and ownership, to provide funds on a monthly basis as a loan, and
Acquiring assets and operations of one or more entities for which the Company
has been in negotiation with the expectation that such business combination, if
completed, would provide additional cash flow and net income.
7
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ITEM 3 - Not applicable.
Part II
ITEMS 1 and 2 - Not applicable.
ITEM 3 - Defaults upon senior securities - not applicable.
ITEMS 4 and 5 - Not applicable.
ITEM 6 - Exhibits and Reports on Form 8-K.
(a.) Exhibits
27. Financial Data Schedule
8
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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: May 20, 1998 By: /s/ Louis J. Pearlman
_______________________
Louis J. Pearlman
Chairman of the Board of
Directors, President and
Treasurer (Principal Executive
and Financial Officer)
Dated: May 20, 1998 By: /s/ Alan A. Siegel
_______________________
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: May 20, 1998 By: /s/ James J. Ryan
_______________________
James J. Ryan
Director
9
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 80,000
<SECURITIES> 0
<RECEIVABLES> 397,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 492,000
<PP&E> 5,395,000
<DEPRECIATION> 1,521,000
<TOTAL-ASSETS> 4,366,000
<CURRENT-LIABILITIES> 10,205,000
<BONDS> 0
<COMMON> 426,000
24,000
24,000
<OTHER-SE> (18,986,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,366,000
<SALES> 0
<TOTAL-REVENUES> 11,000
<CGS> 0
<TOTAL-COSTS> 178,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 295,000
<INCOME-PRETAX> (462,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (462,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (462,000)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
