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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) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21540
COMMANDER AIRCRAFT COMPANY
(Exact name of registrant as specified in its charter)
Virginia 62-1363505
(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) 495-8080
(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 months (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 7,280,548 Shares of Common Stock Outstanding as of July 31,
1998.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
COMMANDER AIRCRAFT COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1998 1997
------------------ -------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $216,876 $1,022,024
Certificates of deposits 1,849,690 1,224,845
Accounts receivable 16,528 342,917
Notes receivable from related party 1,008,051 996,971
Notes receivable 40,893 55,269
Inventories 5,034,115 5,610,129
Prepaid expenses and other assets 246,145 203,815
------------------ -------------------
Total current assets 8,412,298 9,455,970
------------------ -------------------
Property and equipment:
Office equipment and furniture 340,046 296,729
Vehicles and aircraft 84,021 84,021
Manufacturing equipment 358,332 354,837
Tooling 520,618 518,648
Leasehold improvements 255,163 237,161
------------------ -------------------
1,558,180 1,491,396
Less: Accumulated depreciation (830,188) (777,940)
------------------ -------------------
Net property and equipment 727,992 713,456
------------------ -------------------
Other assets:
Notes receivable from related party, less current maturities 1,100,000 500,000
Notes receivable - less current maturities 247,468 270,105
================== ===================
Total other assets 1,347,468 770,105
================== ===================
$10,487,758 $10,939,531
================== ===================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $375,481 $270,254
Accrued expenses 371,897 312,945
Refundable deposits 236,077 75,180
Current portion of long-term debt 2,000 102,000
------------------ -------------------
Total current liabilities 985,455 760,379
------------------ -------------------
Long-term debt - -
Shareholders' investment (deficit):
Preferred stock, $100 par value, 20,000
shares authorized; no shares outstanding - -
Common stock, $.50 par value, 10,000,000 shares
authorized; 7,280,548 shares
issued and outstanding at June 30, 1998
and December 31, 1997 3,640,274 3,640,274
Additional paid-in capital 37,178,230 37,178,230
Retained earnings (deficit) (31,316,201) (30,639,352)
------------------ -------------------
Total shareholders' investment 9,502,303 10,179,152
------------------ -------------------
$10,487,758 $10,939,531
================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1998 1997
----------------------- -----------------------
<S> <C> <C>
Net sales - aircraft $2,402,010 $1,684,802
Net sales - service 231,888 299,974
----------------------- -----------------------
Total net sales 2,633,898 1,984,776
----------------------- -----------------------
Cost of sales - aircraft 2,162,718 1,657,301
Cost of sales - service 245,360 274,068
----------------------- -----------------------
Total cost of sales 2,408,078 1,931,369
----------------------- -----------------------
Gross margin (deficit) 225,820 53,407
----------------------- -----------------------
Other operating expenses:
Product development and engineering costs 75,258 82,383
Selling, general and administrative expenses 670,091 571,742
----------------------- -----------------------
Total other operating expenses 745,349 654,125
----------------------- -----------------------
Operating income (loss) (519,529) (600,718)
----------------------- -----------------------
Other income (expenses):
Other income 86,783 78,185
Interest expense (471) (37,334)
Other expense (2,135) -
----------------------- -----------------------
Total other income (expenses) 84,177 40,851
----------------------- -----------------------
Net loss ($435,352) ($559,867)
======================= =======================
Net loss per share:
Weighted average common shares
outstanding, basic and diluted 7,280,548 6,920,548
----------------------- -----------------------
Loss per share, basic and diluted ($0.06) ($0.08)
======================= =======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
----------------------- -----------------------
<S> <C> <C>
Net sales - aircraft $5,040,693 $2,438,802
Net sales - service 516,434 620,383
----------------------- -----------------------
Total net sales 5,557,127 3,059,185
----------------------- -----------------------
Cost of sales - aircraft 4,516,432 2,656,919
Cost of sales - service 487,204 542,004
----------------------- -----------------------
Total cost of sales 5,003,636 3,198,923
----------------------- -----------------------
Gross margin (deficit) 553,491 (139,738)
----------------------- -----------------------
Other operating expenses:
Product development and engineering costs 153,410 164,701
Selling, general and administrative expenses 1,309,102 1,119,981
----------------------- -----------------------
Total other operating expenses 1,462,512 1,284,682
----------------------- -----------------------
Operating income (loss) (909,021) (1,424,420)
----------------------- -----------------------
Other income (expenses):
Other income 239,648 168,685
Interest expense (3,232) (94,084)
Other expense (4,243) -
----------------------- -----------------------
Total other income (expenses) 232,173 74,601
----------------------- -----------------------
Net loss ($676,848) ($1,349,819)
======================= =======================
Net loss per share:
Weighted average common shares
outstanding, basic and diluted 7,280,548 6,886,482
----------------------- -----------------------
Loss per share, basic and diluted ($0.09) ($0.20)
======================= =======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($676,848) ($1,349,819)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities---
Depreciation and amortization 52,248 75,641
Write-off of fixed assets (net)
- (35,043)
Changes in operating assets and liabilities, excluding cash:
Accounts receivable 326,389 (119,993)
Notes receivable - related parties 11,557 689,047
Notes receivable 14,375 28,061
Inventories 576,014 537,040
Prepaid expense and other assets (42,330) (46,500)
Accounts payable 105,227 (102,982)
Accrued expenses 58,952 (200,332)
Refundable deposits 160,897 135,331
-------------------- --------------------
Net cash provided by (used in) operating activities 586,481 (389,549)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (66,784) (7,399)
Investment in Notes - related party (600,000) -
Investment in certificates of deposit (624,845) -
Proceeds from sale of property and equipment - 317,700
-------------------- --------------------
Net cash provided by (used in) investing activities (1,291,629) 310,301
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings from related parties - 100,000
Repayments of borrowings from bank line (100,000) (34,842)
-------------------- --------------------
Net cash provided by (used in) financing activities (100,000) 65,158
-------------------- --------------------
Net increase (decrease) in cash (805,148) (14,090)
Cash and cash equivalents at beginning of period 1,022,024 197,303
-------------------- --------------------
Cash and cash equivalents at end of period $216,876 $183,213
==================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $471 $31,471
Income taxes - -
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
1997:
Exchange of $2,000,000 in debentures by related party for 200,000 shares of
common stock. Repayment of accrued interest of $87,369 was waived.
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO 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 Commander
Aircraft Company as of June 30, 1998 and December 31, 1997, and the results of
operations for the three month and six month periods ended June 30, 1998 and
1997, and the cash flows for the six month period ended June 30, 1998 and 1997
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 1997 Annual Report on Form
10-K.
2. The earnings per share of common stock were computed by using the weighted
average number of shares of common stock outstanding during the period. Basic
and diluted amounts are the same for all periods presented.
3. Through January 8, 1997, an affiliate of the company's majority shareholder
provided $100,000 of unsecured debt in the form of a 10% demand note. On
February 1, 1997, the company accepted the offer of its majority shareholder,
and affiliates of the shareholder, to exchange $2,000,000 of demand notes due
June 30, 1997 for 200,000 shares of newly issued common stock. The payment of
accrued interest of $70,382 due for the fourth quarter of 1996 for all demand
notes, and $16,986 accrued on the notes exchanged February 1, 1997 was waived at
the time of the exchange for common stock. The maturity dates of the remaining
balance of notes totaling $900,000 was extended to December 31, 1997, with
interest due and payable June 30, 1997 and December 31, 1997.
4. On October 15, 1997, the Board of Directors of the company authorized the
issuance and sale of 360,000 shares of Common Stock to KuwAm Corporation and its
partners, the company's majority shareholder, at a purchase price of $10.00 per
share. The investment allowed the company to redeem $900,000 in 10% demand notes
and accrued interest. The company's bank lines were also reduced to the minimum,
leaving the company virtually debt free with approximately $2.1 million
available for expansion of the aviation services division and other investments.
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:
<PAGE>
June 30, 1998 December 31, 1997
Raw materials $2,592,117 $2,901,798
Work in process 714,410 819,442
Demonstration aircraft 896,676 1,132,713
Used aircraft 830,912 756,176
------------------ ------------------
Total inventories $5,034,115 $5,610,129
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 there is no litigation outstanding which would have a material adverse
effect on the financial position or operations of the company.
7. The company has experienced recurring losses and net cash outflows from
operations since its inception. Since inception, the company has financed its
cash needs with debt, private investor capital, proceeds from an initial public
offering, and proceeds from subsequent stock issuances. During 1997, the company
implemented plans to improve its liquidity and capital and its operational
performance.
Management believes the reduction in net loss and the net cash
generated from operating activities during the first six months of 1998 is
attributable to the plans implemented in late 1996 and 1997 to provide new
operating revenues for the company. The company created the Aviation Services
Division ("ASD") to sell pre-owned aircraft, provide commissions from aircraft
brokerage services, and market refurbishment capabilities. During 1997, the
company expanded its efforts to purchase pre-owned aircraft, accept aircraft on
trade for new units, and, in most cases, refurbish and resell the aircraft at a
reasonable profit. Revenues from sales of pre-owned aircraft increased by 38% in
1997 and revenues from refurbishment and service increased over 12%. Management
expects this trend to continue in 1998 as the revenue from sales of new and
pre-owned aircraft for the first six months of 1998 increased 107% from the
first six months of 1997. The company will pursue additional opportunities to
take advantage of its factory facilities to offer upgrades to existing aircraft
owners for new paint, interior, and equipment.
The company introduced a new de-icing option for which it received
certification in May 1998 from the FAA, allowing aircraft so equipped to operate
in known icing conditions similar to larger, more expensive aircraft. Sales of
this optional equipment not only provide additional revenues and earnings, but
also increase the value of the aircraft relative to its competition. A number of
other improvements and new options are available on 1998 models.
<PAGE>
In addition to the above actions to increase revenue, the company has
made efforts to reduce costs and cash requirements by optimizing its production
schedule using just-in-time scheduling, thereby decreasing inventories to their
lowest levels since production commenced in 1991. Management has reduced the
costs incurred to advertise new aircraft by focusing the advertising efforts at
a specific customer profile. Further reducing selling expenses, the company
completed a consolidation of sales territories which significantly lowered the
fixed costs of sales and marketing without reducing the number of direct
contacts with qualified customers.
The company's liquidity was improved with the sale of 360,000 shares of
common stock to its majority shareholder and affiliates for $3,600,000 during
October 1997. The company used approximately $1,500,000 of the $3,600,000
proceeds to repay 10% demand notes and other debt. On May 1, 1998, the company
invested $600,000 in a 10% convertible note issued by Stratesec, Incorporated, a
related party. The note is due December 31, 1999 and provides the right to
exchange the debt for common stock at $8.50 per share. The note also includes
warrants to purchase 100 shares at $2.50 per share of Stratesec, Incorporated
Common Stock for each $1,000 in debt. The balance of the proceeds from the
October 1997 equity sale is invested in short-term certificates of deposit to be
used to continue expansion of the ASD and for other investment opportunities.
The company also believes the note receivable from related party which was
reduced by approximately $1,100,000 in 1997 will also provide significant cash
sources during 1998. Because of the increase in liquidity and other improvements
to operations, management believes that the company will not require additional
borrowings during 1998 to fund operations. Although the majority shareholder,
who has invested over $26 million in the company, will probably continue to fund
cash needs of the company if required, there can be no assurance that this
funding will continue.
The company's ability to continue as a going concern is contingent upon
its ability to maintain adequate financing and attain profitable operations. The
financial statements do not include any adjustments relating to the
recoverability or classification of asset amounts or the amount and
classification of liabilities that might be necessary should the company be
unable to continue as a going concern. Although management believes that it has
made significant progress in 1997 and the first half of 1998 by widening its
product line to include the ASD, improving products, decreasing sales and
marketing expenses, and reducing debt and related interest expense and it is
reasonable to expect the company to improve revenues, reduce costs, and improve
operating results and cash flow in 1998, there can be no assurance that these
results can be achieved.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL:
The company reported sales for the second quarter of 1998 of $2,633,898 and a
net loss of $435,352, or $.06 per share, compared to sales for the quarter ended
June 30, 1997 of $1,984,776 and a net loss of $559,867, or $.08 per share. For
the six month period ended June 30, 1998 the company's revenues totaled
$5,557,127 and a net loss of $676,848, or $.09 per share, compared to revenues
of $3,059,185 and a net loss of $1,349,819, or $.20 per share for the six months
ended June 30, 1997.
Demand for both new and pre-owned aircraft continues to be very strong and the
company is expecting further improvement in revenues and operating margins. The
production schedule for new aircraft has been increased once in 1998 and
management is reviewing the production schedule again to meet the increased
demand. The increase in revenues was due largely to an industry wide renewed
interest in general aviation products, and to increased awareness of the
Commander product line in the market.
The company delivered three new, six pre-owned and one consigned aircraft during
the second quarter of 1998. Aircraft deliveries through June 30, 1998 totaled 20
units compared to 15 aircraft in the comparable period of 1997. The aircraft
backlog at the beginning of the third quarter of 1998 stood at approximately
$2.5 million, with several sales added to the backlog early in July.
Cash and certificates of deposit totaled over $2,000,000 at June 30, 1998, while
borrowings remained at $2,000. The company invested $600,000 in a 10%
convertible note receivable due December 31, 1999, from a related party on May
1, 1998.
Management continues to identify opportunities to expand its growing aviation
services division, which conducts aviation consulting, brokerage and
refurbishment services for general aviation aircraft.
Subsequent to the end of the second quarter, the company's president and CEO, N.
Gene Criss, resigned his position with the company, but continues his
involvement with the company under a consulting contract and remains on the
board of directors. Wirt Walker, III has assumed the position of President and
CEO of the company.
The company upgraded its computer hardware and software during the first quarter
of 1998 at a cost of approximately $50,000, and believes that its information
system is Year 2000 compliant. The company currently is in the process of
assessing the effects of the Year 2000 problem on its suppliers and other third
parties with which it has business relationships to determine whether they are
Year 2000 compliant and whether the problem will adversely affect the company's
operations or the operation of components used in its aircraft. Although the
company does not believe that the key systems in its aircraft, including
instrumentation and avionics, are date-sensitive, there can be no assurance that
these systems will not require remediation. As with all businesses, the company
is unable to predict whether there will be any disruption in service provided by
third parties, such as utilities, that might affect the company's operations.
Although the company currently does not believe that its costs of Year 2000
compliance will be material, unforseen problems could cause costs to be greater
than anticipated.
RESULTS FROM OPERATIONS:
Revenues from the sale of aircraft for the second quarter of 1998 totaled
$2,402,010 compared to $1,684,802 for the comparable period of 1997. The
increase in revenue for the second quarter of 1998 was the result of delivering
more pre-owned aircraft at higher prices than the comparable quarter of 1997.
For the first six months of 1998 revenue from aircraft sales more than doubled
to $5,040,693 compared to $2,438,802 for the six-month period ended June 30,
1997.
<PAGE>
Service revenues of $231,888 for the quarter ended June 30, 1998 decreased 23%
from the comparable quarter in 1997. For the six months ended June 30, 1998,
service revenues were down by approximately 17% from the prior year. Several
refurbishment jobs were in process at the end of the period and will be invoiced
during the third quarter of 1998. Revenues for the first six months of 1997 were
exceptionally high due to the completion of several large refurbishment jobs in
the Service Center.
Due to an increase in sales, cost of aircraft sales for the three month period
ended June 30, 1998 increased to $2,162,718 compared to $1,657,301 for the three
month period ended June 30, 1997. As a result of the increase in revenues, cost
of aircraft sales for the six month period ended June 30, 1998 increased to
$4,516,432 from $2,656,919 for the comparable period in 1997.
Cost of sales for service and parts for the quarter ended June 30, 1998
decreased to $245,360 from $274,068 for the quarter ended June 30, 1997. The
decrease was due primarily to the reduction in revenues from service and parts
as explained above.
Product development and engineering costs decreased to $75,258 for the second
quarter of 1998, down 9% from $82,383 for the comparable period in 1997. For the
six months ended June 30, 1998 product development and engineering costs
decreased to $153,410, down 7% from $164,701 for the first six months of 1997.
Most of the cost reduction was due to the completion of the de-icing project and
less spending for outside technical assistance.
Sales and marketing expense increased for the three-month period ended June 30,
1998, to $448,467 from $378,461for the comparable period ended June 30, 1997.
For the six month period ended June 30, 1998 sales and marketing costs totaled
$883,727 compared to $687,540 for the comparable period in 1997. For the second
quarter of 1998, advertising and promotional expenses increased to $292,183 from
$98,250 in the second quarter of 1997. Travel, printing, and salaries and
related benefits were lower in the first quarter and first six months of 1998
due to fewer sales offices.
General and administrative expenses increased approximately 15% to $221,624 for
the second quarter of 1998 from $193,281for the comparable period in 1997. The
increase was due to an increase in legal fees in 1998 pertaining to SEC filings
and to the reorganization, and to professional fees paid for conversion and
upgrading of the company's computer systems to be compliant with year 2000. All
other administrative costs for the second quarter of 1998 increased slightly
from the second quarter of 1997. For the six months ended June 30, 1998 general
and administrative expenses decreased slightly to $425,375 from $432,441 for the
six months ended June 30, 1997.
Other income increased to $86,783 for the quarter ended June 30, 1998 from
$78,185 for the quarter ended June 30, 1997. The increase was due to accrued
interest on the $600,000 note receivable dated May 1, 1998 and the interest
earned on certificates of deposit. A refund of prior years' property taxes,
totaling approximately $78,000 accounted for most of the increase for the
six-month period ended June 30, 1998. Interest expense decreased to $471 in the
second quarter of 1998 from $37,334 for the comparable period in 1997. The
decrease was a result of the company maintaining very little outstanding debt
during 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Cash balances decreased to $216,876 at June 30, 1998 from $1,022,024 at December
31, 1997 due to increasing the short-term investment in certificates of deposit
by over $600,000 to $1,849,690 at June 30, 1998. The certificates of deposit
mature in August 1998 and are expected to be renewed in 30-day increments.
Management plans to eventually invest these funds in the expansion of the
Aviation Services Division. The company used $600,000 in cash to acquire a note
from Stratesec, Incorporated, a related party. Accounts receivable balances
decreased to $16,528 at June 30, 1998 due to the payment in January for an
aircraft sold and delivered in the prior quarter. Other notes receivable
decreased to $1,794,612 at June 30, 1998 from $1,822,345 from December 31, 1997
due to regular monthly payments received from debtors and payment in full of one
note. The balance due from related parties increased from $1,496,971 at December
31, 1997 to $2,108,051 at June 30, 1998, due primarily to the $600,000
convertible note from Stratesec, Incorporated. This note is due December 31,
1999, accrues interest at 10%, payable June 30 and December 31. The note is
convertible at $8.50 per share into common stock of Stractesec, Incorporated,
and includes warrants to purchase 100 shares of common stock at $2.50 per share
for each $1,000 in debt.
Inventories decreased to $5,034,115 at June 30, 1998 from $5,610,129 at December
31, 1997. Raw materials, parts, and work in process decreased approximately
$415,000 while completed aircraft inventories decreased about $161,000. Prepaid
expenses and other current assets increased to $246,145 at June 30, 1998
compared to $203,815 at December 31, 1997, reflecting prepayments for parts and
material.
Total fixed assets increased by $66,784 during the first six months of 1998. The
increase was primarily due to the upgrade of the Company's computer hardware and
software systems, which are year 2000 compliant as of June 30, 1998. In addition
to the above fixed assets expenditures, the Company does not plan to spend
significant funds for new property, plant and equipment for the balance of
fiscal 1998. Most expenditures will be for repairs or replacements and for
leasehold improvements which are not expected to exceed $50,000 for the balance
of the fiscal year.
Accounts payable increased to $375,481 at June 30, 1998 from $270,254 at
December 31, 1997. The increase was due primarily to purchases of new parts and
equipment to support increased production of new aircraft and for refurbishment
parts and material, which were purchased on open account. Accrued expenses
increased to $371,897 at June 30, 1998 from $312,945 at December 31, 1997. The
increase in accrued expenses is attributable to amounts owed for the acquisition
of pre-owned aircraft and increases in accrued warranty, payroll taxes and
miscellaneous expenses.
Refundable deposits increased $160,897 to $236,077 at June 30, 1998 reflecting
the increase in backlog for new and pre-owned aircraft. Bank lines, providing
the Company with borrowing capacity to $600,000, were maintained at the minimum
$2,000 at June 30, 1998 from $102,000 at December 31, 1997, representing the
Company's only borrowings.
The Company does not carry insurance for product liability and could be subject
to substantial financial risk in the event of an unfavorable judgement arising
from litigation involving its products. Although the Company is not aware of any
pending claims, there is no guarantee that claims will not be asserted in the
future. The lease between Commander Aircraft Company and the Oklahoma City
Airport Trust expires in October 1998. Although management fully expects the
lease to be extended for another five years at favorable terms, there is no
assurance that the lease will be negotiated.
<PAGE>
The Company has had losses and net cash outflows since its inception, and its
independent public accountants have indicated that there is doubt about its
ability to continue as a going concern. In 1997, management implemented plans to
improve the Company's operational performance and liquidity and capital
resources. The principal elements of these plans are (i) to expand its Aviation
Services Division, which purchases, refurbishes, and sells pre-owned aircraft;
(ii) offer additional options on its new aircraft; (iii) reduce inventory costs
through just-in-time production scheduling; and (iv) reduce marketing expenses
through more focused advertising and implementation of a more efficient
marketing organization. In addition, in October 1997, the Company's majority
shareholder and affiliates purchased 360,000 newly issued shares of common stock
for $3,600,000. The Company used approximately $1,500,000 of the proceeds to
repay debt, leaving it virtually debt free by the end of 1997. At June 30, 1998,
over $1.8 million was available for working capital requirements, for the
expansion of the Aviation Services Division and other investment opportunities.
<PAGE>
PART II. OTHER INFORMATION
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.
COMMANDER AIRCRAFT COMPANY
(Registrant)
By: /s/ Stephen R. Buren
Stephen R. Buren
Vice President Finance
(Chief Financial Officer and
Authorized Signatory)
Date: August 4, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 216,876
<SECURITIES> 1,849,690
<RECEIVABLES> 1,048,944
<ALLOWANCES> 0
<INVENTORY> 5,034,115
<CURRENT-ASSETS> 8,412,298
<PP&E> 1,558,180
<DEPRECIATION> 830,188
<TOTAL-ASSETS> 10,487,758
<CURRENT-LIABILITIES> 985,455
<BONDS> 0
0
0
<COMMON> 3,640,274
<OTHER-SE> 5,862,029
<TOTAL-LIABILITY-AND-EQUITY> 10,487,758
<SALES> 5,557,127
<TOTAL-REVENUES> 5,557,127
<CGS> 5,003,636
<TOTAL-COSTS> 5,003,636
<OTHER-EXPENSES> 1,462,512
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,232
<INCOME-PRETAX> (676,848)
<INCOME-TAX> 0
<INCOME-CONTINUING> (676,848)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (676,848)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> 0
</TABLE>
