<PAGE>
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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 March 31, 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
April 20, 1998.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMMANDER AIRCRAFT COMPANY
BALANCE SHEET
<TABLE>
(Unaudited)
March 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 542,995 $ 1,022,024
Certificates of deposits 2,229,053 1,224,845
Accounts receivable 16,180 342,917
Notes receivable from related party 1,007,361 996,971
Notes receivable 39,916 55,269
Inventories 5,321,295 5,610,129
Prepaid expenses and other assets 222,180 203,815
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Total current assets 9,378,980 9,455,970
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Property and equipment:
Office equipment and furniture 338,052 296,729
Vehicles and aircraft 84,021 84,021
Manufacturing equipment 355,623 354,837
Tooling 520,618 518,648
Leasehold improvements 254,257 237,161
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1,552,571 1,491,396
Less: Accumulated depreciation (803,623) (777,940)
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Net property and equipment 748,948 713,456
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Other assets:
Notes receivable from related party, less current maturities 500,000 500,000
Notes receivable - less current maturities 258,924 270,105
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Total other assets 758,924 770,105
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$10,886,852 $10,939,531
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 346,741 $270,254
Accrued expenses 483,848 312,945
Refundable deposits 116,608 75,180
Current portion of long-term debt 2,000 102,000
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Total current liabilities 949,197 760,379
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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 March 31, 1998
and December 31, 1997 3,640,274 3,640,274
Additional paid-in capital 37,178,230 37,178,230
Retained earnings (deficit) (30,880,849) (30,639,352)
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Total shareholders' investment 9,937,655 10,179,152
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$10,886,852 $10,939,531
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</TABLE>
The accompanying notes are an integral part of these financial statements.
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COMMANDER AIRCRAFT COMPANY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended March 31,
1998 1997
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<S> <C> <C>
Net sales - aircraft $2,638,683 $ 754,000
Net sales - service 284,546 320,409
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Total net sales 2,923,229 1,074,409
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Cost of sales - aircraft 2,353,714 999,618
Cost of sales - service 241,844 267,936
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Total cost of sales 2,595,558 1,267,554
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Gross margin (deficit) 327,671 (193,145)
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Other operating expenses:
Product development and engineering costs 78,152 82,318
Selling, general and administrative expenses 639,011 548,239
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Total other operating expenses 717,163 630,557
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Operating income (loss) (389,492) (823,702)
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Other income (expenses):
Other income 152,865 90,500
Interest expense (2,761) (56,750)
Other expense (2,108) -
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Total other income (expenses) 147,996 33,750
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Net loss $ (241,496) $ (789,952)
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Net loss per share:
Weighted average common shares
outstanding 7,280,548 6,851,659
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Loss per share $ (0.03) $ (0.12)
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</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended March 31,
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (241,496) $(789,952)
Adjustments to reconcile net loss to
net cash used in operating activities---
Depreciation and amortization 25,683 26,230
Loss on disposal of property and equipment - 5,958
Changes in operating assets and liabilities,
excluding cash:
Accounts receivable 326,737 (374,991)
Notes receivable - related parties (10,390) 250,658
Notes receivable 26,533 19,487
Inventories 288,834 (76,040)
Prepaid expense and other assets (18,365) (5,111)
Accounts payable 76,487 176,094
Accrued expenses 170,903 217,854
Refundable deposits 41,428 32,020
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Net cash used in operating activities 686,354 (517,793)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short-term investments (1,004,208) -
Capital expenditures (61,175) (392)
Proceeds from sale of property and equipment - 317,700
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Net cash used in investing activities (1,065,383) 317,308
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings from related parties - 100,000
Proceeds from borrowings on bank line - 67,950
Payments on borrowings on bank line (100,000) -
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Net cash provided by financing activities (100,000) 167,950
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Net increase (decrease) in cash (479,029) (32,535)
Cash and cash equivalents at beginning of period 1,022,024 197,303
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Cash and cash equivalents at end of period $ 542,995 $ 164,768
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 3,682 $ 20,274
Income taxes - -
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
1997:
Exchange of $2,000,000 in debentures 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
March 31, 1998 and December 31, 1997, and the results of operations for the
three month period ended March 31, 1998 and 1997, and the cash flows for the
three month period ended March 31, 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, as incorporated by
reference in the Company's filing of this Form 10-Q.
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.
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.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL:
The Company reported sales for the first quarter of 1998 of $2,923,229 and a
net loss of $241,496, or $.03 per share, compared to sales for the quarter
ended March 31, 1997 of $1,074,409 and a net loss of $789,952, or $.12 per
share.
First quarter 1998 results from operations improved 279% from the previous
year and the net loss was the smallest in the Company's history. The Company
is expecting further improvement in revenues and operating margins, and has
initiated an increase in the production of new aircraft for the balance of
the year. 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 five new, three pre-owned and two consigned aircraft
during the first quarter of 1998. The aircraft backlog at the beginning of
the second quarter of 1998 stood at over $3 million.
Cash and short term investments totaled nearly $2.8 million at March 31,
1998, while borrowings were reduced to near zero. The Company is continuing
to identify opportunities to expand its growing aviation services division,
which conducts aviation consulting, brokerage and refurbishment services for
general aviation aircraft.
RESULTS FROM OPERATIONS:
Revenues from the sale of aircraft for the first quarter of 1998 totaled
$2,638,683 compared to $754,000 for the comparable period of 1997. The
increase in the first quarter of 1998 was the result of delivering a total of
10 new, used or consigned aircraft, compared to only 5 total aircraft
delivered in the comparable quarter of 1997.
Service revenues of $284,546 for the quarter ended March 31, 1998 decreased
11% from the comparable quarter in 1997. Revenues for the first quarter 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 March 31, 1998 increased to $2,353,714 compared to $999,618 for
the three month period ended March 31, 1997. With the higher sales volume the
margin on aircraft sales improved by over $500,000 for the first quarter of
1998 from the first quarter of 1997.
Cost of sales for service and parts for the quarter ended March 31, 1998
decreased to $241,844 from $267,936 for the quarter ended March 31, 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 $78,152 for the first
quarter of 1998, down 5% from $82,318 for the comparable period in 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 March
31, 1998, to $435,259 from $309,079 for the comparable period ended March 31,
1997. Advertising expenses increased to $136,953 from $85,216. Most of the
increase in sales and marketing costs resulted from the increase in aircraft
sales generating higher sales commissions and bonuses.
<PAGE>
General and administrative expenses decreased approximately 15% to $203,752
for the first quarter of 1998 from $239,160 for the comparable period in
1997. The reduction was due to a decrease in legal fees in 1998 as virtually
no litigation costs were incurred. All other administrative costs for the
first quarter of 1998 increased slightly from the first quarter of 1997.
Other income increased to $152,865 for the quarter ended March 31, 1998 from
$90,500 for the quarter ended March 31, 1997. The increase was due to a
refund of prior years' property taxes, totaling approximately $78,000.
Interest income from notes receivable - related parties was lower due to
reductions made in the outstanding balance over the past year. However, this
decrease in interest income in the first quarter of 1998 from notes
receivable was offset by the interest earned on short-term cash investments.
Interest expense decreased to $2,761 in the first quarter of 1998 from
$56,750 for the comparable period in 1997. The decrease was a result of the
Company maintaining very little outstanding debt during the first quarter of
1998.
LIQUIDITY AND CAPITAL RESOURCES:
Cash balances decreased to $542,995 at March 31, 1998 from $1,022,024 at
December 31, 1997 due to increasing the short-term investment in certificates
of deposit by over $1 million to $2,229,053 at March 31, 1998. The
certificates of deposit mature in April 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. Accounts receivable
balances decreased $326,737 during the first quarter of 1998 due to the
payment in January for an aircraft sold and delivered in the prior quarter.
Total notes receivable decreased slightly to $1,805,901 at March 31, 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 slightly from $1,496,971 at December 31, 1997 to
$1,507,361 at March 31, 1998.
Inventories decreased to $5,321,295 at March 31, 1998 from $5,610,129 at
December 31, 1997. Raw materials, parts, and work in process decreased
approximately $450,000 while completed aircraft inventories increased about
$162,000. Prepaid expenses and other current assets increased to $222,180 at
March 31, 1998 compared to $203,815 at December 31, 1996, reflecting
prepayments for parts and material.
Total fixed assets increased by $61,175 during the first quarter 1998. The
increase was primarily due to the upgrade of the Company's computer hardware
and software systems, which will be year 2000 compliant by June 30, 1998.
Accounts payable increased to $346,741 at March 31, 1998 from $270,254 at
December 31, 1997. The increase was due primarily to purchases of new parts
and equipment, which are scheduled for payment in April 1998. Accrued
expenses increased to $483,848 at March 31, 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 $41,128 to $116,608 at March 31, 1998
reflecting the increase in backlog for new and pre-owned aircraft. Bank
lines, providing the Company with borrowing capacity to $600,000, were
reduced to the minimum $2,000 at March 31, 1998 from $102,000 at December 31,
1997, representing the Company's only borrowings.
<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: May 12, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 542,995
<SECURITIES> 2,229,053
<RECEIVABLES> 1,063,457
<ALLOWANCES> 0
<INVENTORY> 5,321,295
<CURRENT-ASSETS> 9,378,980
<PP&E> 1,552,571
<DEPRECIATION> (803,623)
<TOTAL-ASSETS> 10,886,852
<CURRENT-LIABILITIES> 949,197
<BONDS> 0
0
0
<COMMON> 3,640,274
<OTHER-SE> 6,297,381
<TOTAL-LIABILITY-AND-EQUITY> 10,886,852
<SALES> 2,923,229
<TOTAL-REVENUES> 2,923,229
<CGS> 2,595,558
<TOTAL-COSTS> 2,595,558
<OTHER-EXPENSES> 717,163
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,761
<INCOME-PRETAX> (241,496)
<INCOME-TAX> 0
<INCOME-CONTINUING> (241,496)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (241,496)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
