<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class: which registered:
Common stock; $.50 par value NASDAQ STOCK MARKET
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 [ ]
Indicate by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Based on the closing sales price of March 18, 1997 the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$2,629,715.
The number of shares outstanding of the registrant's common stock, $.50 par
value, was 6,920,548 at March 18, 1997.
Total number of pages, including cover page 42
===============================================================================
<PAGE>
PART 1
Item 1. Business
Commander Aircraft Company (the "Company") manufactures, markets, and provides
support services for single engine, high performance Commander aircraft.
Incorporated in 1988, the Company is one of the few manufacturers in the world
that produces single engine high performance aircraft certified by the Federal
Aviation Administration (FAA).
Commander aircraft are derived from a line of single engine high performance
aircraft designed, certified and produced by the General Aviation Division of
Rockwell International in the 1970's. Rockwell later sold its General Aviation
Division to Gulfstream Aerospace Corporation, from whom Commander Aircraft
Company acquired the rights to the single engine high performance Commander
line. Subsequently, the Company designed, engineered and implemented
improvements to the Commander line. With an airframe design decades newer than
the competition, Commander aircraft are certified to FAR 23 through Amendment 7,
meeting more stringent standards for single engine high performance aircraft.
The Company's first production model, the Commander 114B, was certified by the
FAA in 1992. The Commander 114B offers substantially improved performance,
state-of-the-art instrumentation and avionics, and a luxuriously appointed,
spacious cabin, while retaining the proven airframe and other features of the
original Rockwell International design. The Commander 114B features an
extensive range of standard equipment, retractable landing gear, 260 horsepower
fuel injected engine, and a constant speed propeller. The aircraft has received
favorable reviews in the aviation press worldwide and is recognized for its
beautiful design and its excellent flight, landing and handling characteristics.
The Commander 114B, with a range of 725 nautical miles (833 statute miles),
1,216 pound useful load, maximum cruise speed of 164 knots (188 miles per hour),
large luxurious four place cabin and low operating and maintenance costs, offers
an optimum combination of performance, comfort, style, luxury, utility and
safety. The Commander 114B is an ideal airplane for pleasure, business and
flight training.
In 1994, the Company added the Commander 114AT All-Purpose Trainer to its line
of single engine, high performance aircraft. The Commander 114AT is a four
place high performance trainer designed for military, professional and civilian
flight training. An all-in-one aircraft, the Commander 114AT All-Purpose
Trainer is ideal for primary through instrument flight training. The Commander
114AT shares the same design heritage as the luxurious Commander 114B, with a
modified instrument panel and utilitarian interior.
In 1995, the Company received certification from the FAA for the Commander
114TC, a turbocharged version of the Commander 114B. The Commander 114TC is
equipped with
2
<PAGE>
the same beautiful, expansive interior and state-of-the-art systems as the
Commander 114B, but utilizes a 270 horsepower turbocharged Lycoming engine which
provides speeds up to 197 knots (227 miles per hour). The Commander 114TC is
certified to an altitude of 25,000 feet, which makes it an excellent aircraft
for mountainous regions, as well as high density altitude environments. Reviews
of the Commander 114TC by the aviation press have been extremely positive.
Business Strategy
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
training, pleasure and business travel, and governments, commercial and military
organizations that will use the aircraft for training and other purposes.
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.
Marketing and Sales
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 Sales and Service
Representatives (ASSRs). 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.
During 1996, the Company increased the number of Commander ASSRs from 141 to
167, giving the Company one of the most comprehensive worldwide service and
support networks in its class. The Company grants domestic Commander Authorized
Sales and Service Representatives the non-exclusive right to sell Commander
aircraft. Commander ASSRs receive a sales commission 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 ASSRs from
among experienced independent aviation sales and service organizations that it
believes to have excellent facilities, service capabilities, reputation and
financial strength. Through its ASSRs, Commander Aircraft Company offers a
turn-key aircraft ownership program designed to stimulate ownership of Commander
aircraft by
3
<PAGE>
companies that have not previously owned or operated aircraft. This flexible
program can be tailored to meet each customer's specific requirements.
Forty percent of the aircraft sold by the Company in 1996 were exported to two
customers in Germany and Egypt. Information regarding the Company's export
sales and major customers is incorporated herein by reference to Note K -
Significant Customers, of the Notes to Financial Statements. The Company
anticipates that domestic sales will account for a significant portion of its
market in the future, however there can be no assurance that international
markets will continue to account for a significant portion of the Company's
sales.
The Company's success is dependent upon its ability to sell a single product
line for which a small market exists, and sales being in sufficient quantities
and at prices that will allow it to recover operating costs and earn a profit.
Although the Company believes that the market will grow and its share will
increase, there can be no assurances that economic conditions will not have an
adverse effect on future sales.
Parts and Materials Availability
Commander Aircraft Company purchases parts and materials from over 100 different
suppliers. Though some of these vendors are key to the manufacture of the
Company's aircraft, there are no long term commitments or contracts with any
suppliers. The Company considers its relationship with its suppliers to be
satisfactory and does not anticipate any shortages or interruption to production
due to lack of available components on a timely basis.
Competition
Purchasers of high performance aircraft choose among competitive models on the
basis of numerous factors, including performance, reliability, price,
appearance, quality of service and reputation of the aircraft and the
manufacturer. Commander Aircraft Company believes that it can favorably compete
with its competitors on the basis of the quality, comfort, and performance of
its aircraft, and the quality and scope of the support services the Company
provides to its customers. The Company further believes its aircraft are
competitively priced and have a number of features, including certification to
stricter standards, newer, more attractive design and larger cabin size, which
make them competitive with or superior to the single engine, high performance
aircraft produced by its three principal competitors: Beech Aircraft
Corporation, which suspended production of its F33A Bonanzas in 1994; Mooney
Aircraft Corporation, which produces a single engine aircraft that is
significantly smaller than the 114B; and Socata whose marketing efforts are, for
the most part, focused in Europe and Asia. Each of these competitors has been
well established in the general aviation industry for many years and may have
access to greater resources than are available to the Company. There is
additional potential competition from a number of manufacturers which were
previously active in the industry.
4
<PAGE>
Insurance
The Company carries the types of insurance customary for a manufacturer of
general aviation aircraft, including coverage for liability, property damage,
aircraft loss or damage and worker's compensation. There is no assurance that
the amount of insurance carried by the Company would be sufficient to protect it
fully in the event of a serious accident or liability claim, but the Company
believes that the amounts and coverage of its insurance protection are
reasonable and appropriate for the Company's business operations. Although
highly probable, there is no assurance that such insurance will continue to be
available on commercially reasonable terms.
In mid-1994, Congress enacted the General Aviation Revitalization Act, S. 1458,
which establishes an 18-year statute of repose for general aviation aircraft and
component manufacturers. This legislation prohibits product liability suits
against aircraft manufacturers when the aircraft involved in an accident is more
than 18 years old when the accident occurs. This action effectively eliminated
from the Company's liability tail the vast majority of the old Rockwell
manufactured Commanders produced in the 1970's.
Through March 1, 1995, the Company maintained product liability insurance with
coverage of $10 million per occurrence and $10 million in the aggregate, with
deductible of $200,000 for aircraft built through March 1, 1995. To date, there
has been only one claim filed against the Company with respect to any of the
aircraft manufactured by Rockwell International or any of the new aircraft
manufactured by the Company. Management expects this action to be dismissed
under the statute of repose included in the General Aviation Revitalization Act.
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 the product liability insurance to settle
exorbitant claims. As such, the Company elected not to retain product liability
insurance coverage commencing March 1, 1995.
The Company does not carry business interruption or key man insurance.
Governmental Regulation
In order for an aircraft model to be manufactured for sale, the FAA must issue a
Type Certificate for the aircraft model and, in order for a particular aircraft
to be operated, an Airworthiness Certificate for that aircraft must be issued.
The Company was issued a Type Certificate for the Commander 114B in 1992 and a
Type Certificate for the Commander 114TC in 1995. The Company owns Type
Certificates for all predecessor single engine Commander models. The Company
received a Production Certificate from The FAA in 1993, which allows the Company
to issue Airworthiness Certificates under authority delegated by the FAA. An
Airworthiness Certificate is issued for a particular aircraft when it is
certified to have been built in accordance with specifications approved under
the Type Certificate for that particular model aircraft.
5
<PAGE>
Employees
The Company has a total of 84 full-time employees. Commander Aircraft Company
believes that its future success will depend, in part, upon its continued
ability to recruit and retain highly skilled employees. Although competition
for qualified personnel is strong, the Company has been successful in attracting
and retaining skilled employees. None of the Company's employees are covered by
a collective bargaining agreement, and Commander considers its employee
relations to be good.
Item 2. Properties
The Company's 103,650 square foot facility, which consists of three buildings
constructed in 1981, is located at the Wiley Post Airport in Bethany, Oklahoma.
The facility is leased from the Oklahoma City Airport Trust Authority under a
lease that expires in 1998 and is renewable upon mutual agreement. The Company
performs all of its operations and services from this facility. During the past
eight years, the Company has improved its facility to assure safety and
compliance with environmental laws and regulations.
A summary of lease payments are presented in Note J - Leases, of the Notes to
Financial Statements for 1996, which is hereby incorporated by reference.
Item 3. Legal Proceedings
There are several lawsuits or disputes with third parties involving allegations
of breach of contracts, among other things, against the Company incident to the
operations of the business. The liability, if any, associated with these
matters was not determinable at March 19, 1997. It is the opinion of
management, after consultation with legal counsel, that the ultimate resolution
of these matters will not have a materially adverse effect on the Company's
financial position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
6
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Holder Matters
The common stock of Commander Aircraft Company, $.50 par value, is traded on the
NASDAQ Small Cap Market System (symbol CMDR). The tables present its high and
low market prices during the past two years. The Company has never paid
dividends in the past, and does not intend to pay dividends in 1997.
<TABLE>
<CAPTION>
Quarterly Common Stock Price Ranges
-----------------------------------
1996 1995
------------- ---------------
Quarter High Low High Low
- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
1st 4 1/4 3 7 3 3/4
2nd 4 3/4 2 6 3/4 5
3rd 4 1/2 2 1/2 5 3/4 4
4th 3 1/4 1 3/4 4 1/2 2 5/8
</TABLE>
There were 315 holders of the Company's common stock as of March 21, 1997,
including shareholders whose shares are held in "street" name.
7
<PAGE>
Item 6. Selected Financial Data
The selected financial data presented below for each year in the five year
period ended December 31, 1996 have been derived from the Company's audited
financial statements. This data should be read in conjunction with the
Financial Statements and related notes thereto and other financial information
appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------
(Amounts in thousands, except per share data)
1996 1995 1994 1993 1992
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operation Data:
Net sales $ 7,958 $ 9,398 $ 7,619 $ 8,120 $ 5,916
Loss from continuing
operations and before
extraordinary item $(3,408) $(2,559) $(4,976) $(4,422) $(7,724)
Extraordinary gain - - - $ 601 -
Net loss $(3,408) $(2,559) $(4,976) $(3,821) $(7,724)
Loss per share before
extraordinary gain $ (.51) $ (.39) $ (.84) $ (.85) $ (2.10)
Loss per share $ (.51) $ (.39) $ (.84) $ (.74) $ (2.10)
Balance Sheet Data:
Total assets $11,060 $14,715 $12,790 $11,712 $ 7,845
Convertible subordinated
debt $ 3,000
Other long-term debt $ 2,446 - $ 5,325 $ 4,800 $ 2,371
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations:
1996 VS. 1995
Revenues decreased 15% in 1996 to $7,958,138 from $9,398,077 in 1995, and the
net loss from operations increased to $3,408,200 in 1996 from $2,559,289 in
1995. Net loss per share increased to $.51 in 1996 from $.39 in 1995. A total
of 15 new aircraft, 8 used aircraft, and 5 consigned aircraft were delivered
in 1996 compared to 25 new aircraft and no used aircraft delivered in 1995.
Revenues from aircraft sales fell to $6,893,896 in
8
<PAGE>
1996 from $8,398,093 in 1995 as the added sales of used aircraft were not
sufficient to offset the decrease in revenues from new aircraft sold.
Revenues from service and parts increased over 6% to $1,064,242 in 1996 from
$999,984 in 1995. The increase was attributable, in part, to used aircraft that
were refurbished at the Company's factory service center prior to resale.
Aircraft cost of sales decreased 10% in 1996 from 1995 due mainly to the
decrease in new aircraft sold. Total aircraft cost of sales for 1996 was
$6,814,750 and $7,587,756 for 1995. Due to lower production volume in 1996
fixed overhead costs increased the average cost of sales per aircraft. Cost of
sales for service and parts increased about 9% in 1996 from 1995 due to a 6%
increase in revenues and slightly higher operating costs. Service and parts
cost of sales increased to $921,089 in 1996 from $848,046 in 1995.
Engineering and product development costs decreased 30% in 1996 to $363,215 from
$519,777 in 1995. In 1995 the Company invested a substantial amount of
engineering and product development in the certification process for the
Commander 114TC.
Sales and marketing expenses increased approximately 9% to $2,482,025 in 1996
from $2,274,263 in 1995. The increase was due to the expansion of field sales
offices in 1996.
General and administrative expenses decreased 2% to $862,788 in 1996 from
$880,849 in 1995. This reduction was a result of decreased expenses for
salaries, benefits and accounting services.
Interest expense totaled $316,913 for 1996 compared to $164,488 for 1995.
Interest expense of $275,998 related to debentures is included although payment
of $70,382 was waived when the debentures were exchanged for equity February 1,
1997. An additional $40,915 of interest expense was incurred in 1996 on
borrowings under the Company's line of credit at Will Rogers Bank. Other
expenses totaled $24,298 for 1996 compared to $191,793 in 1995. Other costs for
1995 included costs and reserves for litigation expenses.
Interest income decreased to $377,157 in 1996 from $399,170 in 1995. Income
from the note receivable from Commander International totaled $309,195 in 1996
compared to $281,972 in 1995. Interest income from notes receivable on aircraft
decreased to $59,614 in 1996 from $101,026 in 1995 because two of the five
aircraft financed by the Company were paid in full in January 1996. Interest
earned on bank balances and other deposits totaled $8,708 in 1996 compared to
$16,172 in 1995. Other income from miscellaneous sales in 1996 totaled $41,223
compared to $110,436 in 1995. A one time credit for a prior year expense
increased the amount of other income in 1995.
9
<PAGE>
1995 VS 1994
Revenues increased 23% in 1995 to $9,398,077 from $7,619,146 in 1994, and the
net loss from operations decreased by 49% in 1995 to $2,559,289 from $4,975,910
in 1994. Net loss per share declined from $.84 in 1994 to $.39 in 1995. New
aircraft revenues increased to $8,398,093 from $6,516,334 as deliveries of new
aircraft increased to 25 units in 1995 from 22 aircraft in 1994. The average
price per aircraft sold increased over 13% as a result of higher prices for the
Commander 114TC turbocharged aircraft, along with higher prices at which
Commander 114B and 114AT aircraft were sold. No previously owned aircraft were
sold in 1995 compared to sales of $425,000 in 1994.
Spare parts and service revenues increased to $999,984 in 1995 from $677,812 in
1994. Most of this 48% increase was due to after-market sales of the new air
conditioning system certified in late 1994.
Although aircraft revenues increased 21% for 1995, aircraft cost of sales
increased only 4% to $7,587,756 in 1995 from $7,303,900 in 1994, as a result of
stringent cost management and the elimination of product liability insurance
expense in March 1995. Cost of sales related to spare parts and service
increased with sales volume to $848,046 from $638,520 in 1994, and the gross
margin improved to 18% from 6% in the comparable periods for parts and service
operations.
Engineering and product development costs increased approximately 5% to $519,777
in 1995 from $496,846 in 1994 due to certification expenses for the new
Commander 114TC.
Sales and marketing expenses were reduced to $2,274,263 in 1995 from $3,105,008
in 1994. The 27% reduction was due to a decrease in advertising expense, lower
travel costs, and lower expense related to show and convention expenses. General
and administrative expenses decreased 6% to $880,849 from $936,505 in 1994.
This reduction was a result of overall lower expenses in all areas of general
and administration, including salaries, insurance, legal and accounting.
Interest expense totaled $164,488 for 1995 compared to $313,395 for 1994.
Interest expense of $106,764 related to debentures is included in the total
although payment was waived when the debentures were exchanged for equity March
6, 1995. An additional $52,197 was paid or accrued in 1995 pertaining to short-
term notes payable. Other expenses totaled $191,793 for 1995 compared to $590
for 1994. Other expenses for 1995 included actual costs and reserves for
litigation expenses.
Interest income increased to $399,170 in 1995 from $120,968 in 1994 due to the
interest earned on the note receivable from Commander International totaling
$281,972, notes for aircraft sold which accounted for $101,026, and interest
earned on bank balances and other deposits totaling $16,172. In 1994, interest
earned on the note from Commander International totaled $65,984, interest earned
on other notes receivable totaled $34,216,
10
<PAGE>
and bank and miscellaneous interest earned totaled $20,768. Other income for
1995 totaled $110,346 compared to $78,740 for 1994. The increase in other income
for 1995 was due to a credit received for a prior year's expense, which was
contested, and sales of miscellaneous items.
Liquidity and Financial Resources
Total assets decreased $3,654,994 to $11,060,129 at December 31, 1996 from
$14,715,123 at December 31, 1995. Working capital decreased $1,408,564 during
the same period due primarily to a reclassification in current notes receivable
from related parties to a long-term asset in the amount of $1,088,181. Total
notes receivable decreased $1,878,680 reflecting the payments made by Commander
International during 1996 and the payoff of two of the five aircraft that the
Company had financed. Inventories decreased $851,524 from December 31, 1995 to
December 31, 1996 due mainly to reductions in raw material and purchased parts.
Accounts payable were reduced by $850,016 in 1996 to $507,644 at December 31,
1996. Accrued expenses and deposits decreased in 1996 by $192,278 due primarily
to a reduction in accrued litigation costs and lower property tax accrual.
Finished aircraft inventory at December 31, 1996 consisted of five new
demonstrator aircraft compared to six on hand at December 31, 1995. Five used
aircraft were on hand at December 31, 1996, one of which was being used as a
demonstrator aircraft. At December 31, 1995 four used aircraft were held in
inventory for resale.
Capital expenditures totaled $43,572 in 1996 for several computers and various
tooling purchased or manufactured during the year. Disposals or sales of
capital equipment totaled $13,100 in 1996.
During 1996 and 1995 the Company entered into various note agreements with the
majority shareholder and affiliates of this shareholder. The initial maturity
date of these notes was extended from June 30, 1996 to June 30, 1997. At
December 31, 1996 the Company owed $2,800,000 to the majority shareholder and
affiliates for these 10% interest, unsecured notes. Effective February 1, 1997
the Company accepted an offer from the majority shareholder and affiliates to
exchange $2,000,000 of these notes, along with accrued interest, for 200,000
shares of common stock. Subordinated debt transactions are more fully discussed
in Note D - Subordinated Debt, to the financial statements.
The Company maintains a line of credit with a local bank in the amount of
$600,000. At December 31, 1996 borrowings under this line totaled $445,500.
The revolving notes bear interest at 9.25% and are secured by aircraft. The
notes mature February 5, 1998, and have been classified as long-term debt at
December 31, 1996.
11
<PAGE>
Inflation
Overall, the effects of inflation on the Company's costs of materials and
supplies has been minimal. For each of the past five years, cost of sales was
virtually the same or slightly lower than it would have been on a current cost
basis. The Company uses a moving average cost for inventory valuation and cost
changes are not readily recognized in the short-term. Also, Commander Aircraft
Company was able to utilize certain parts that were acquired from Gulfstream
prior to start-up, thereby reducing costs. Several of the Company's suppliers
of large and expensive components increased prices during the past five years,
but some of these costs were offset by negotiation of prices with other
suppliers, changing vendors, and fabricating rather than purchasing certain
parts.
Charges to operations for depreciation, which represents the allocation of
historical costs incurred over the past years, were virtually the same as if
based on current cost of property, plant and equipment, including tooling and
fixtures acquired in the original purchase of assets from Gulfstream that were
assigned no value. This is due to the relatively short period of time that the
Company has been in business and the acquisition of most of the assets during
the past five years.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements and Supplementary Data:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountant 14
Financial Statements:
Balance Sheets December 31, 1996 and 1995 15
Statements of Operations for the years ended 17
December 31, 1996, 1995 and 1994
Statement of Changes in Stockholder's Equity for the 18
years ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended 19
December 31, 1996, 1995 and 1994
Notes to Financial Statements 20
Supplementary Financial Data:
Selected Quarterly Financial Data for the years ended
December 31, 1996 and 1995 (unaudited) 32
</TABLE>
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
Commander Aircraft Company
We have audited the accompanying balance sheets of Commander Aircraft Company (a
Virginia corporation), as of December 31, 1996 and 1995, and the related
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commander Aircraft Company, as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note P to the
financial statements, the Company has suffered recurring losses and net cash
outflows from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note P. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ GRANT THORNTON
---------------------------
GRANT THORNTON LLP
Oklahoma City, Oklahoma
February 7, 1997
14
<PAGE>
COMMANDER AIRCRAFT COMPANY
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 78,911 $ 114,740
Certificates of deposit 118,392 23,851
Accounts receivable 23,438 267,232
Current portion of notes receivable from related party 1,560,000 4,223,743
Current portion of notes receivable 60,077 363,195
Inventories 6,579,320 7,430,844
Prepaid expenses and other assets 69,157 166,548
----------- -----------
Total current assets 8,489,295 12,590,153
PROPERTY AND EQUIPMENT - AT COST
Office equipment and furniture 284,054 277,011
Vehicles and aircraft 422,099 435,198
Manufacturing equipment 354,837 354,837
Tooling 515,299 478,771
Leasehold improvements 232,073 232,073
----------- -----------
1,808,362 1,777,890
Less accumulated depreciation 803,356 639,391
----------- -----------
1,005,006 1,138,499
OTHER ASSETS
Notes receivable from related party, less current
maturities 1,088,181 -
Notes receivable, less current maturities 477,647 986,471
----------- -----------
1,565,828 986,471
----------- -----------
$11,060,129 $14,715,123
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
---------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 507,644 $ 1,357,660
Accrued expenses 664,584 839,042
Refundable deposits 9,980 27,800
Notes payable - related parties 800,000 2,450,000
------------ ------------
Total current liabilities 1,982,208 4,674,502
LONG-TERM DEBT 445,500 -
NOTES PAYABLE - RELATED PARTIES 2,000,000 -
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock - $.50 par value; authorized, 10,000,000 shares;
issued and outstanding, 6,720,548 shares 3,360,274 3,360,274
Additional paid-in capital 31,770,862 31,770,862
Accumulated deficit (28,498,715) (25,090,515)
------------ ------------
6,632,421 10,040,621
------------ ------------
$ 11,060,129 $ 14,715,123
============ ============
</TABLE>
16
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENTS OF OPERATIONS
Year ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES
Aircraft $ 6,893,896 $ 5,554,766 $ 4,327,994
Related parties - aircraft - 2,843,327 2,613,340
Service 1,064,242 999,984 677,812
----------- ----------- -----------
7,958,138 9,398,077 7,619,146
COST OF SALES
Aircraft 6,814,750 7,587,756 7,303,900
Service 921,089 848,046 638,520
----------- ----------- -----------
7,735,839 8,435,802 7,942,420
----------- ----------- -----------
Gross margin (deficit) 222,299 962,275 (323,274)
OTHER OPERATING EXPENSES
Product development and engineering costs 363,215 519,777 496,846
Selling, general, and administrative expenses 3,344,813 3,155,112 4,041,513
----------- ----------- -----------
3,708,028 3,674,889 4,538,359
----------- ----------- -----------
Operating loss (3,485,729) (2,712,614) (4,861,633)
OTHER INCOME (EXPENSES)
Interest income 377,517 399,170 120,968
Other income 41,223 110,436 78,740
Interest expense (316,913) (164,488) (313,395)
Other expense (24,298) (191,793) (590)
----------- ----------- -----------
77,529 153,325 (114,277)
----------- ----------- -----------
NET LOSS $(3,408,200) $(2,559,289) $(4,975,910)
=========== =========== ===========
NET LOSS PER SHARE
Weighted average common shares outstanding 6,720,548 6,580,037 5,943,550
=========== =========== ===========
Loss per share $(.51) $(.39) $(.84)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Common stock Additional Treasury Total
-------------------------- paid-in Accumulated stock at stockholders'
Shares Amount capital deficit cost equity
------------- ----------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 5,504,882 $2,752,441 $20,574,575 $(17,555,316) $ 62,505 $ 5,709,195
Exchange of subordinated debt
for common stock 500,000 250,000 4,812,357 - - 5,062,357
Exercise of warrants 5,333 2,667 10,666 - - 13,333
Issuance of treasury stock - - - - (57,505) 57,505
Retirement of common stock
in treasury (1,000) (500) (4,500) - (5,000) -
Net loss - - - (4,975,910) - (4,975,910)
--------- ---------- ----------- ------------ ------------- -----------
Balance at December 31, 1994 6,009,215 3,004,608 25,393,098 (22,531,226) - 5,866,480
Exchange of subordinated debt
for common stock 640,000 320,000 6,186,764 - - 6,506,764
Exercise of warrants 71,333 35,666 191,000 - - 226,666
Net loss - - - (2,559,289) - (2,559,289)
--------- ---------- ----------- ------------ ------------- -----------
Balance at December 31, 1995 6,720,548 3,360,274 31,770,862 (25,090,515) - 10,040,621
Net loss - - - (3,408,200) - (3,408,200)
--------- ---------- ----------- ------------ ------------- -----------
Balance at December 31, 1996 6,720,548 $3,360,274 $31,770,862 $(28,498,715) $ - $ 6,632,421
========= ========== =========== ============ ============= ===========
</TABLE>
The accompanying notes are an integral part of this statement.
18
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Net loss $(3,408,200) $(2,559,289) $(4,975,910)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 165,523 190,603 173,975
Sale of aircraft and parts on notes receivable (97,820) (3,816,636) (3,411,482)
Receipts on aircraft notes receivable 2,485,324 1,595,666 1,805,523
Gain on completion of modification program - - (18,200)
Loss on retirement of property and equipment 3,542 22,034 -
Changes in assets and liabilities
(Increase) decrease in
Accounts receivable 243,794 (159,163) (2,922)
Inventories 851,524 290,054 896,698
Prepaid expenses and other assets 97,391 139,480 (88,598)
Increase (decrease) in
Accounts payable (850,016) 345,445 242,687
Accrued expenses (174,458) 426,323 251,163
Refundable deposits (17,820) (38,900) 39,700
----------- ----------- -----------
Net cash used in operating activities (701,216) (3,564,383) (5,087,366)
Cash flows from investing activities
Change in short-term investments (94,541) (23,851) -
Capital expenditures (43,572) (63,490) (549,566)
Proceeds on sales of property and equipment 8,000 - -
----------- ----------- -----------
Net cash used in investing activities (130,113) (87,341) (549,566)
Cash flows from financing activities
Proceeds from borrowings 1,645,600 3,865,000 5,525,000
Payments on borrowings (850,100) (340,000) -
Proceeds from exercise of warrants - 226,666 13,333
----------- ----------- -----------
Net cash provided by financing activities 795,500 3,751,666 5,538,333
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (35,829) 99,942 (98,599)
Cash and cash equivalents at beginning of year 114,740 14,798 113,397
----------- ----------- -----------
Cash and cash equivalents at end of year $ 78,911 $ 114,740 $ 14,798
=========== =========== ===========
Cash paid during the year for:
Interest $ 277,690 $ 133,145 $ 224,000
Income taxes $ - $ - $ -
</TABLE>
Noncash investing and financing activities:
1995
Exchange of $6,400,000 in subordinated debentures and $106,764 in accrued
interest for 640,000 shares of common stock
1994
Exchange of $5,000,000 in subordinated debentures and $62,357 in accrued
interest for 500,000 shares of common stock
The accompanying notes are an integralpart of these statements.
19
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - ORGANIZATION AND OPERATIONS
Commander Aircraft Company (the "Company") was incorporated June 22, 1988
under the laws of the Commonwealth of Virginia. The Company manufactures,
markets, and provides support services for single engine, high performance
Commander aircraft.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less and money market funds to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses in
such accounts and believes it is not exposed to any significant credit risks on
cash and cash equivalents.
2. Revenue Recognition
Sales of aircraft are recognized upon execution and funding of the purchase
agreement by the buyer which occurs after the Company receives the
airworthiness certificate from the Federal Aviation Administration ("FAA") and
for financed aircraft sales when it has been determined that the buyer's
initial and continuing investments in the aircraft are adequate to demonstrate
a commitment to pay. Sales of used aircraft are recognized upon execution and
funding of the purchase agreement. Service revenue is recognized when the
services are performed and billable.
3. Inventories
Inventories consist primarily of finished goods and parts for manufacturing and
servicing of 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 December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials $3,119,766 $3,823,465
Work in process 1,307,505 1,172,433
Demonstration aircraft 1,342,941 1,501,071
Used aircraft 809,108 933,875
---------- ----------
$6,579,320 $7,430,844
========== ==========
</TABLE>
20
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE B - SUMMARY OF ACCOUNTING POLICIES - CONTINUED
4. Property and Equipment
Depreciation is computed using the straight-line method for financial reporting
purposes and accelerated methods for tax purposes over estimated useful lives
ranging from three to fifteen years.
5. Income Taxes
Deferred income taxes are provided on carryforwards and on temporary
differences between the tax basis of an asset or liability and its reported
amount in the financial statements that will result in taxable or deductible
amounts in future years. Deferred income tax assets and liabilities are
determined by applying the presently enacted tax rates and laws.
The Company provides for a valuation allowance on deferred tax assets if, based
on the weight of available evidence, it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
6. Refundable Deposits
Refundable deposits consist of payments made by customers prior to having
repairs performed on their aircraft and deposits on aircraft sold. These
deposits are recognized as revenue in the period the services are completed or
the aircraft sale is recognized.
7. Loss Per Share
Loss per share has been computed on the basis of the weighted average shares
outstanding during each period. Fully diluted loss per share has not been
presented since the amounts would be antidilutive.
8. Use of Estimates
In preparing the Company's financial statements, management makes estimates and
assumptions that affect certain reported amounts and disclosures; accordingly,
actual results could differ from those estimates.
9. Long-Lived Assets
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 121
requires that long-lived assets and certain identifiable intangibles to be held
and used or disposed of by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. During 1996, upon applying the provisions of SFAS No. 121,
the Company determined that no impairment loss need be recognized for
applicable assets of continuing operations.
21
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE B - SUMMARY OF ACCOUNTING POLICIES - CONTINUED
10. Reclassifications
Certain reclassifications have been made to the 1995 financial statements to
conform with the 1996 presentation.
NOTE C - NOTES RECEIVABLE
From time to time, the Company finances the sale of new aircraft with notes
receivable from customers which are collateralized by the aircraft. The notes
range in length up to ten years with the average being approximately eight
years and bear interest at rates up to 10.5%.
A summary of such notes receivable as of December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- ----------
<S> <C> <C>
Amounts due within one year $ 60,077 $ 363,195
Amounts due after one year 477,647 986,471
-------- ----------
Total notes receivable $537,724 $1,349,666
======== ==========
</TABLE>
NOTE D - SUBORDINATED DEBT
In the period from August 1993 through December 1993, the Company issued to its
majority stockholder subordinated debt totaling $4,800,000 at an interest rate
of 10%. During 1994, the Company issued subordinated debt totaling $4,225,000
and $1,300,000 to its majority stockholder and an affiliate of this
stockholder, respectively. In February 1994, the Board of Directors of the
Company voted to accept the stockholders' offers to exchange $4,800,000 of
subordinated debt outstanding at December 31, 1993 and $200,000 of subordinated
debt issued in January 1994 for common stock at approximately $10 per share.
The repayment of accrued interest of approximately $62,000 was waived.
Effective February 15, 1994, the stockholder and its affiliate exchanged
$5,000,000 of subordinated debt for 500,000 shares of common stock.
During 1995, the Company issued subordinated debt totaling $675,000 and
$400,000 to its majority stockholder and an affiliate of this stockholder,
respectively. In March 1995, the Board of Directors of the Company voted to
accept the stockholders' offers to exchange $5,325,000 of subordinated debt
outstanding at December 31, 1994 and $1,075,000 of subordinated debt issued
from January 1, 1995 through March 6, 1995 for common stock at approximately
$10 per share. The repayment of accrued interest of approximately $107,000 was
waived. Effective March 7, 1995, the stockholder and its affiliate exchanged
$4,900,000 and $1,500,000, respectively, of subordinated debt for a total of
640,000 shares of common stock at $10 per share.
22
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE E - NOTES PAYABLE - RELATED PARTIES
During 1996 and 1995, the Company entered into various note agreements with its
majority stockholder and affiliates of this stockholder. These
uncollateralized notes bear interest at 10%, payable quarterly, in arrears,
with all unpaid principal and interest due at maturity. Effective June 21,
1996, the stockholder and its affiliates extended the maturity date of the
unpaid portion of these notes from June 30, 1996 to June 30, 1997. Accrued
interest payable on these notes totaled $70,383 and $43,704 at December 31,
1996 and 1995, respectively. As described more fully in Note Q, on January 6,
1997, the Company accepted an offer to exchange $2,000,000 of notes payable and
accrued interest thereon for 200,000 shares of common stock. Accordingly, the
amount subsequently converted to common stock has been classified as long-term
at December 31, 1996.
NOTE F - LONG-TERM DEBT
At December 31, 1996, the Company had outstanding revolving notes payable to
bank bearing interest at 9.25% with interest payable monthly and principal due
in full on February 5, 1997. The notes are secured by aircraft. On February 5,
1997, the Company extended the due dates of these notes to February 5, 1998
and, accordingly, the outstanding draws under these agreements have been
classified as long-term debt at December 31, 1996.
Following is a summary of long-term debt at December 31, 1996:
Short-term debt subsequently refinanced $445,500
Less current maturities -
--------
$445,500
========
NOTE G - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and Cash Equivalents and Certificates of Deposit. The balance sheet
carrying amounts of cash and cash equivalents and certificates of deposit
approximate fair values of such assets.
Notes Receivable. The fair values of notes receivable are estimated by
discounting the future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings and for the
same remaining maturities.
Notes Receivable From Related Party. Because of the related party nature of
these receivables and the uncertainty of the timing of ultimate collection,
it is not practicable to estimate the fair value.
23
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE G - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
Notes Payable - Related Parties. Because of the related party nature, it is
not practicable to estimate the fair value.
Long-Term Debt. The fair value of long-term debt is the discounted amount
of future cash flows using the Company's incremental rate of borrowing for
similar liabilities.
All of the Company's financial instruments are for purposes other than trading.
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 78,911 $ 78,911 $ 114,740 $ 114,740
Certificates of deposit 118,392 118,392 23,851 23,851
Notes receivable 537,724 535,583 1,349,666 1,331,825
Notes receivable from related party 2,648,181 - 4,223,743 -
Notes payable - related parties (2,800,000) - (2,450,000) -
Long-term debt (445,500) (404,546) - -
</TABLE>
NOTE H - STOCKHOLDERS' EQUITY
During 1993, the Board of Directors of the Company authorized the purchase of
up to 500,000 shares of the Company's currently outstanding common stock.
Pursuant to this authorization, in 1993, the Company purchased 126,100 shares
of its outstanding common stock at a total cost of $536,777. The Company
retired 113,600 of these shares in 1993. In 1994, 11,500 of these shares were
re-issued to Company employees as a stock bonus, which was accrued in 1993, and
1,000 shares were retired.
NOTE I - STOCK OPTION PLANS
The Company has issued various warrants to key employees and directors to
purchase Company stock at prices ranging from $2.25 to $5.25 per share. In
December 1993, the Company approved a stock option plan for issuance of up to
300,000 shares of stock to employees at the discretion of the committee
appointed by the Board of Directors. The number of shares authorized for
issuance under this plan was increased to 500,000 during 1995 and 800,000
during 1996. The stock option plan also provides for automatic grants of
options to purchase 20,000 shares of common stock to each director on an annual
basis. At December 31, 1996, approximately 171,000 shares remain to be granted
under the plan. The stock warrants and options generally vest ratably over a
three-year period.
24
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE I - STOCK OPTION PLANS - CONTINUED
The Company uses the intrinsic value method to account for its warrants and
stock option plan in which compensation is recognized only when the fair value
of each option exceeds its exercise price at the date of grant. Accordingly,
no compensation cost has been recognized for the warrants and options issued.
Had compensation cost been determined based on the fair value of the warrants
and options at the grant dates, the Company's net loss and loss per share would
have been increased to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net loss
As reported $(3,408,200) $(2,559,289)
Pro forma $(3,569,838) $(2,626,320)
Loss per share
As reported $ (.51) $ (.39)
Pro forma $ (.53) $ (.40)
</TABLE>
These pro forma amounts may not be representative of future disclosures because
they do not take into effect pro forma compensation expense related to grants
made before 1995. The fair value of each grant is estimated on the date of
grant using the Black-Scholes options-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995, respectively:
no expected dividends; expected volatility of 60% and 68%; risk-free interest
rate of 6.2% and 5.9%; and expected lives of five years. The exercise price of
all options exceeded market price of the stock at the date of grant.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
25
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE I - STOCK OPTION PLANS - CONTINUED
A summary of the status of the Company's warrants and stock option plan as of
December 31, 1996, 1995, and 1994, and changes during the years ending on those
dates is presented below.
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ---------------- -----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 463,833 $4.40 491,000 $4.12 486,667 $4.07
Granted 190,000 $3.78 246,500 $4.62 125,000 $4.39
Exercised - - (71,333) $3.18 (5,333) $2.50
Forfeited (143,333) $4.09 (202,334) $4.30 (115,334) $2.50
------- ----- -------- ----- -------- -----
Outstanding at end of year 510,500 $4.21 463,833 $4.40 491,000 $4.12
======== ======== ========
Options exercisable at year end 165,504 $4.56 138,668 $4.40 227,111 $4.12
Weighted average fair value of
options granted during the year $1.91 $2.34 -
</TABLE>
The following table summarizes information about fixed-price warrants and
stock options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
----------------------------------- --------------------------------
Weighted-
average Weighted- Weighted-
Number remaining average Number average
outstanding contractual exercise exercisable exercise
at 12/31/96 life price at 12/31/96 price
----------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Range of exercise prices
$2.25 to $3.25 120,000 4.47 years 2.75 20,001 3.25
$3.26 to $4.75 253,333 2.34 years 4.47 96,665 4.52
$4.76 to $5.25 137,167 3.94 years 5.18 48,838 5.18
------- -------
$3.25 TO $5.25 510,500 165,504
======= =======
</TABLE>
26
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE J - LEASES
The Company leases office space, hangar space, its manufacturing and service
facility, and certain office equipment under agreements classified as operating
leases that expire at various dates through 1999. Rental expense under these
leases was approximately $243,000, $230,000, and $214,000 for the years ended
December 31, 1996, 1995, and 1994, respectively. The future annual minimum
lease payments under these leases at december 31, 1996 are as follows:
<TABLE>
<S> <C>
Year ending December 31
1997 $256,121
1998 221,680
1999 11,715
--------
Total future minimum lease payments $489,516
========
</TABLE>
The lease for office space, hangar space, and its manufacturing and service
facility is renewable subject to mutually agreeable terms.
NOTE K - SIGNIFICANT CUSTOMERS
The Company's 1996 new aircraft sold in the United States, Europe, the Middle
East, and Asia were 9, 3, 3, and 0, respectively, as compared to 14, 2, 8, and
1, respectively, for 1995 and 9, 5, 8, and 0, respectively, for 1994.
All eight of the Company's 1996 used aircraft sales were in the United States.
During 1996, 12% and 11% of the Company's revenues represented sales to two
international customers. During 1995 and 1994, 32% and 33%, respectively, of
the Company's revenues represented sales to a related party (see Note L).
NOTE L - RELATED PARTY TRANSACTIONS
The following is a summary of sales and cost of sales, either directly to a
director of the corporate general partner of the Company's majority stockholder
or to an Authorized Sales and Service Representative owned by the director for
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Sales proceeds $ - $2,843,327 $2,613,340
Cost of sales - 2,095,520 1,969,517
----- ---------- ----------
Gross margin $ - $ 747,807 $ 643,823
===== ========== ==========
Number of aircraft sold - 8 8
===== ========== ==========
</TABLE>
27
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE L - RELATED PARTY TRANSACTIONS - CONTINUED
During 1994, the Company received cash payments of approximately $200,000 and
extended financing of approximately $2,413,000 on planes sold to related
parties under a $3,000,000 line of credit. During 1995, the Company received
cash payments of approximately $1,215,000 and extended financing of
approximately $3,045,000 on planes and spare parts sold to related parties
under this line of credit. During 1995, the amount of the line of credit was
increased to $5,000,000 and the due date extended to June 30, 1996. During
1996, the Company received cash payments of approximately $1,663,000 and
extended financing of approximately $88,000 on spare parts sold to related
parties under this line of credit. During 1996, the due date was extended to
June 30, 1997. The line of credit bears interest at 1% over the Morgan
Guaranty of New York prime rate (9.25% at December 31, 1996), payable
quarterly, in arrears. Accrued interest receivable under this line of credit
agreement totaled $2,684 and $86,874 as of December 31, 1996 and 1995,
respectively. The outstanding balance under this line of credit was
approximately $2,648,000 and $4,224,000 at December 31, 1996 and 1995,
respectively. Interest income under this line of credit was approximately
$309,000 and $282,000 for 1996 and 1995, respectively.
The chairman of the Board of Directors of the Company is also a stockholder,
director, and the Managing Director of the corporate general partner of the
Company's majority stockholder.
NOTE M - INCOME TAXES
No current tax provisions have been recognized in the accompanying statements
of operations given the operating losses incurred.
Components of the net deferred tax assets at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred tax assets (liabilities)
Inventories $ 226,000 $ 234,000
Depreciation and amortization (170,000) (162,000)
Accrued liabilities 113,000 209,000
Net operating loss carryforwards 9,661,000 8,302,000
----------- -----------
9,830,000 8,583,000
Valuation allowance (9,830,000) (8,583,000)
----------- -----------
Total deferred tax assets $ - $ -
=========== ===========
</TABLE>
28
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE M - INCOME TAXES - CONTINUED
The Company's net operating loss carryforwards will expire as follows:
<TABLE>
<S> <C>
December 31
2004 $ 220,657
2005 3,196,640
2006 17,434
2007 6,466,819
2008 3,982,473
2009 4,523,401
2010 2,279,486
2011 3,466,087
-----------
Total net operating loss carryforwards $24,152,997
===========
</TABLE>
NOTE N - COMMITMENTS AND CONTINGENCIES
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 addition to exposure as a manufacturer of new aircraft, the Company
in 1988 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. There have been no claims asserted
against the Company, but any such claim could have an adverse effect on the
Company. 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.
There are various lawsuits or disputes with third parties involving
allegations of breach of contracts, among other things, against the Company
incident to the operation of the business. The liability, if any, associated
with these matters was not determinable at February 7, 1997. It is the opinion
of management, after consultation with legal counsel, that the ultimate
resolution of these matters will not have a materially adverse effect on the
Company's financial position or results of operations; nevertheless, due to
such uncertainty of the matters, it is at least reasonably possible that
management's view of the outcome will change in the near term.
29
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE O - EMPLOYEE BENEFIT PLANS
During 1994, the Company adopted a profit sharing 401(k) plan covering
substantially all employees. Eligible employees may contribute up to 15% of
their compensation. The Company contributes an amount equal to at least 25% of
each employee's contributions not in excess of 10% of compensation. However,
additional contributions may be made at the Company's discretion. Expense
under the plan was $45,304, $40,210, and $27,139 for 1996, 1995, and 1994,
respectively.
The Company has a contributory health care benefit plan covering
substantially all employees and eligible dependents. The plan provides for
covered major medical expense benefits subject to certain deductibles,
coinsurance provisions, and lifetime maximums. Employee and Company
contributions are determined by the Company from time to time based on the
amounts of claims and other expenses incurred. The plan has certain stop-loss
coverage under an insurance policy that provides for payments of covered
benefits in excess of $25,000 per year per covered person. The policy also
provides an aggregate monthly stop-loss for the plan based on number of covered
persons. Expense under the plan was approximately $125,000, $161,000, and
$190,000 for 1996, 1995, and 1994, respectively.
NOTE P - MANAGEMENT PLANS
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, and proceeds from an initial
public offering. The Company's majority stockholder, Special Situation
Investment Holdings Ltd., a limited partnership, has invested $22,363,000 in
the Company from inception through December 31, 1996. The Company believes
that the majority stockholder and its affiliates will continue to fund the cash
needs of the Company. However, there can be no assurance that this funding will
continue.
The Company's success is dependent upon its ability to sell a limited product
line for which a small market exists, and sales being in sufficient quantities
and at prices that will allow it to earn a reasonable profit. Although the
Company must compete with companies that have greater financial resources,
management believes that the Company is able to effectively compete with these
companies through its factory direct sales program, which is augmented by its
domestic and international network of approximately 150 Authorized Sales and
Service Representatives. The Company has implemented a focused advertising and
public relations effort that has targeted business travelers, training schools,
and personal transportation needs. During 1994, the Company introduced the
Commander 114AT all purpose trainer, and during 1995 offered its new Commander
114TC, a turbocharged version of the 114B, which has provided additional sales
and increased profit margins.
30
<PAGE>
COMMANDER AIRCRAFT COMPANY
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE P - MANAGEMENT PLANS - CONTINUED
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 of the Company
believes it is now in a position to generate sales at a profitable level, there
can be no assurance that the Company will be able to achieve or maintain
profitability. Further, management believes that the Company has the proven
support from the majority stockholder who has invested over $22,363,000 through
December 31, 1996.
NOTE Q - SUBSEQUENT EVENT
On January 6, 1997, the Board of Directors of the Company voted to accept the
offers by the majority stockholder and its affiliates to exchange $2,000,000 of
notes payable for a total of 200,000 shares of common stock at $10 per share.
The repayment of accrued interest outstanding at December 31, 1996 and at
February 1, 1997 was waived. In addition, the maturity date of the remaining
notes payable was extended to December 31, 1997 with interest to be paid on
June 30, 1997 and December 31, 1997.
31
<PAGE>
COMMANDER AIRCRAFT COMPANY
SELECTED QUARTERLY FINANCIAL DATA
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996
---------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Net Sales $1,462,930 $ 2,854,804 $2,131,648 $1,508,756
Net loss ($994,449) ($899,650) ($698,280) ($815,821)
Loss per share ($0.15) ($0.13) ($0.10) ($0.12)
Weighted average shares outstanding 6,720,548 6,720,548 6,720,548 6,720,548
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995
---------- ---------- ------------- -----------
Net Sales $3,322,971 $ 2,492,517 $2,095,758 $1,486,831
Net loss ($396,075) ($445,994) ($336,133) ($1,381,087)
Loss per share ($0.06) ($0.07) ($0.05) ($0.21)
Weighted average shares outstanding 6,185,275 6,700,259 6,707,070 6,720,548
</TABLE>
Quarterly and year to date computation of per share amounts are made
independently. Therefore, the sum of quarterly per amounts may not agree with
per share amounts for the year.
32
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no Form 8-K filings in fiscal year ended December 31, 1996 and there
were no changes in or disagreements with accountants on accounting and financial
disclosure in 1996.
PART III
Certain information required by Part III is omitted from this report in that
registrant will file a definitive proxy statement pursuant to Regulation 14A for
its 1997 Annual Meeting of Shareholders, and the information included therein is
incorporated by reference.
Item 10. Directors and Executive Officers of the Registrant
Information regarding directors of the Registrant required by this item is
incorporated herein by reference form the Company's 1997 Proxy Statement under
the caption "Election of Directors - Nominees".
The information regarding executive officers of the Company required by this
item appearing in the Company's 1997 Proxy Statement under the caption "Election
of Directors - Other Officers" is hereby incorporated by reference.
Item 11. Executive Compensation
The information required by this item appearing in the Company's 1997 Proxy
Statement under the captions "Election of Directors - Director Compensation" and
"Executive Compensation" is hereby incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item appearing in the Company's 1997 Proxy
Statement under the caption "Information Concerning Solicitation and Voting -
Security Ownership of Certain Beneficial Owners and Management" is hereby
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Note E - Notes Payable Related Parties and Note L - Related Party Transactions,
of the Notes to Financial Statements for 1996 are hereby incorporated by
reference.
33
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports of Form 8-K:
Page
----
(a) (1) The following financial statements are
included in Part II Item 8:
Report of Independent Public Accountant 14
Financial Statements:
Balance Sheets December 31, 1996 and 1995 15
Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 17
Statement of Stockholders' Equity for the years ended
1996, 1995 and 1994 18
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 19
Notes to Financial Statements 20
(2) The following financial schedule for the years
1996, 1995 and 1994 is submitted herewith:
Selected Quarterly Financial Data for the years
ended December 31, 1996 and 1995 (unaudited) 32
All other schedules are omitted because they are
not applicable or the required information has
been presented in the financial statements or
notes thereto.
(3) Exhibits included are hereby incorporated by
reference to the Exhibit Index, page 35 of this
report.
34
<PAGE>
INDEX OF EXHIBITS
Exhibit No Description
- ---------- ------------
3.1 Amended and Restated Articles of Incorporation of Commander
Aircraft Company and all amendments to date. This exhibit is
incorporated by reference to Exhibit 3.1 of the Registrant's
Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
3.2 Bylaws of Commander Aircraft Company. This exhibit is incorporated
by reference to Exhibit 3.2 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-591280).
4.1(a) Articles of Amended and Restated Articles of Incorporation, as
amended describing the Common Stock (included in Exhibit 3.1). This
exhibit is incorporated by reference to Exhibit 4.1(a) of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
(b) Form of Commander Aircraft Company Common Stock Certificate. This
exhibit is incorporated by reference to Exhibit 4.1(b) of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.1 Federal Aviation Administration ("FAA") Type Certificates issued to
Commander Aircraft Company (the "Company") for models 112, 114,
112TC, 112B, 112TCA, 114A, and 114B. This exhibit is incorporated
by reference to Exhibit 10.1 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-59128).
10.2 FAA Repair Station Air Agency Certificate issued to the Company.
This exhibit is incorporated by reference to Exhibit 10.2 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.3 Agreement between Gulfstream Aerospace Corporation ("Gulfstream")
and Commander Aircraft Company (the "Company") dated June 30, 1988.
This exhibit is incorporated by reference to Exhibit 10.3 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.4 FAA Production Certificate Number PC7SW, issued to Commander
Aircraft Company. This exhibit is incorporated by reference to
Exhibit 10.4 of the Registrant's Form 10-K filed March 30, 1994.
10.5 Indemnity Agreement between Gulfstream and the Company dated
November 17, 1988. This exhibit is incorporated by reference to
Exhibit 10.5 of the Registrant's Form S-1 filed March 4, 1993 (Reg.
No. 33-59128).
35
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
10.6 Commander Flying Association Settlement Agreement between
Gulfstream, the Company, and Rockwell International Corporation
("Rockwell"), and the parties plaintiff and representatives of
the plaintiffs' classes in Commander Flying Association v.
Gulfstream Aerospace Corporation in the Supreme Court of
California, County of Santa Clara, Case No. 609618, and John I.
Crawford v. Rockwell International Corporation in the U.S.
District Court in the Northern District of California, Case No.
C8720835RPA, dated April 25, 1989. This exhibit is incorporated
by reference to Exhibit 10.6 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-59128).
10.7 Order and Judgment in the Superior Court of California County of
Santa Clara in Commander Flying Association v. Gulfstream
Aerospace Corporation, Case No. 609618 (filed August 29, 1989).
This exhibit is incorporated by reference to Exhibit 10.7 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.8 Promissory Note in the principle amount of $1,000,000 from the
Company payable to Gulfstream dated December 17, 1992. This
exhibit is incorporated by reference to Exhibit 10.15 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.9 Promissory Note in the principle amount of $455,000 from the
Company payable to Gulfstream dated August 31, 1992. This exhibit
is incorporated by reference to Exhibit 10.16 of the Registrant's
Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.10 Promissory Note in the principle amount of $1,378,200 from the
Company payable to Gulfstream dated December 17, 1992. This
exhibit is incorporated by reference to Exhibit 10.17 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.11 Letter Agreement dated February 25, 1993 with Gulfstream
regarding prepayment of indebtedness. This exhibit is
incorporated by reference to Exhibit 10.18 of the Registrant's
Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.12 Lease and operations Agreement between the Company and the
Trustees of the Oklahoma City Airport Trust dated August 9, 1988,
as amended by the Supplemental Agreement No. 1 dated December 18,
1991, and the Supplemental Agreement No. 2 dated April 2, 1992.
This exhibit is incorporated by reference to Exhibit 10.19 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
36
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
10.13 Project Loan Agreement between the Company and the Oklahoma City
Industrial and Cultural Facilities Trust date as April 1, 1992.
This exhibit is incorporated by reference to Exhibit 10.20 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.14 Company Note in the principle amount of $1,000,000 dated as of
April 6, 1992. This exhibit is incorporated by reference to
Exhibit 10.21 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.15 Mortgage of Tenant's Interest in Lease between the Company and
The Oklahoma City Industrial and Cultural Facilities Trust dated
as of April 1, 1992. This exhibit is incorporated by reference to
Exhibit 10.22 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.16 Security Agreement by the Company and The Oklahoma City
Industrial and Cultural Facilities Trust dated as of April 1,
1992. This exhibit is incorporated by reference to Exhibit 10.23
of the Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-
59128).
10.17 Note Repurchase Agreement among Mishal Y.S. Al Sabah, Wirt D.
Walker, J. Richard Cordsen, and William A. Boettger dated as of
April 1, 1992. This exhibit is incorporated by reference to
Exhibit 10.24 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.18 Agreement between the Oklahoma City Airport Trust, the Company,
and the Oklahoma Industrial Finance Authority dated April 1,
1992. This exhibit is incorporated by reference to Exhibit 10.25
of the Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-
59128).
10.19 Loan Agreement and Local Note Purchase Agreement between the
Oklahoma Industrial Finance Authority and the Oklahoma City
Industrial and Cultural Facilities Trust dated as of April 1,
1992. This exhibit is incorporated by reference to Exhibit 10.26
of the Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-
59128).
10.20 Textron Lycoming Finance Plan No. 1 between Textron Financial
Corporation and the Company dated June 26, 1991, as amended to
the Finance Plan No. 1 dated as of May 28, 1992, the Second
Amendment dated as of September 29, 1992, and the Third Amendment
dated as of December 10, 1992. This exhibit is incorporated by
reference to Exhibit 10.29 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-59128).
37
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
10.21 International Distributorship Agreement between the Company and
Com-Air Flugzeughandel Gmbh. This exhibit is incorporated by
reference to Exhibit 10.31 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-59128).
10.22 International Distributorship Agreement between the Company and
Aero Service b.v. This exhibit is incorporated by reference to
Exhibit 10.32 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.23 International Dealership Agreement between the Company and
Commander Khaleej Trading Establishment. This exhibit is
incorporated by reference to Exhibit 10.28 of the Registrant's
Form 10-K filed March 30, 1994.
10.24 Form of the Company's Authorized Sales and Service Representative
Policy and Procedures Manual. This exhibit is incorporated by
reference to Exhibit 10.37 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-59128).
10.25 Form of the Company's Authorized Sales and Service Representative
Agreement. This exhibit is incorporated by reference to Exhibit
10.38 of the Registrant's Form S-1 filed March 4, 1993 (Reg. No.
33-59128).
10.26 Form of the Company's Service Center Agreement. This exhibit is
incorporated by reference to Exhibit 10.39 of the Registrant's
Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.27 The Commander Aircraft Company Profit Sharing Plan. This exhibit
is incorporated by reference to Exhibit 10.40 of the Registrant's
Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.28 The Commander Aircraft Company Statement of Compensation
Philosophy of the Compensation Committee of the Board of
Directors. This exhibit is incorporated by reference to Exhibit
10.41 of the Registrant's Form S-1 filed March 4, 1993 (Reg. No.
33-59128).
10.29 Resolution of the Board of Directors establishing the
compensation of the members of the Board of Directors adopted
February 23, 1993. This exhibit is incorporated by reference to
Exhibit 10.42 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.30 Form of warrant issued by the Company to Stephen R. Buren on
April 2, 1992. This exhibit is incorporated by reference to
Exhibit 10.45 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
38
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
10.31 Form of warrant issued by the Company to Richard M. Smiley on
April 2, 1992. This exhibit is incorporated by reference to
Exhibit 10.46 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.32 Form of warrant issued by the Company to each of the Company's
Directors as of December 2, 1992. This exhibit is incorporated by
reference to Exhibit 10.47 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-59128).
10.33 Form of warrant issued by the Company to N. Gene Criss on
December 2, 1992. This exhibit is incorporated by reference to
Exhibit 10.48 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.34 Form of warrant issued by the Company to N. Gene Criss on August
18, 1993. This exhibit is incorporated by reference to Exhibit
10.41 of the Registrant's Form 10-K filed March 30, 1994.
10.35 Form of warrant issued by the Company to Stephen R. Buren on
August 18, 1993. This exhibit is incorporated by reference to
Exhibit 10.42 of the Registrant's Form 10-K filed March 30, 1994.
10.36 Form of warrant issued by the Company to Donald F. Becker on
August 18, 1993. This exhibit is incorporated by reference to
Exhibit 10.43 of the Registrant's Form 10-K filed March 30, 1994.
10.37 Form of warrant issued by the Company to Maurice Hynett on August
18, 1993. This exhibit is incorporated by reference to Exhibit
10.44 of the Registrant's Form 10-K filed March 30, 1994.
10.38 Form of warrant issued by the Company to Michael Strauss on
August 18, 1993. This exhibit is incorporated by reference to
Exhibit 10.45 of the Registrant's Form 10-K filed March 30, 1994.
10.39 Nonstatutory Stock Option Agreement between the Company and Wirt
D. Walker, III dated January 31, 1994. This exhibit is
incorporated by reference to Exhibit 10.48 of the Registrant's
Form 10-K filed March 30, 1994.
10.40 Nonstatutory Stock Option Agreement between the Company and
Mishal Y.S. Al Sabah dated January 31, 1994. This exhibit is
incorporated by reference to Exhibit 10.49 of the Registrant's
Form 10-K filed March 30, 1994.
39
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
10.41 Nonstatutory Stock Option Agreement between the Company and
Randall A. Greene dated January 31, 1994. This exhibit is
incorporated by reference to Exhibit 10.50 of the Registrant's
Form 10-K filed March 30, 1994.
10.42 Incentive Stock Option Agreement between the Company and Herbert
B. Franck dated January 31, 1994. This exhibit is incorporated by
reference to Exhibit 10.51 of the Registrant's Form 10-K filed
March 30, 1994.
10.43 Incentive Stock Option Agreement between the Company and N. Gene
Criss dated January 31, 1994. This exhibit is incorporated by
reference to Exhibit 10.52 of the Registrant's Form 10-K filed
March 30, 1994.
10.44 Common Stock Purchase Agreement dated September 15, 1989 among
the Company, KuwAm Corporation and certain other persons, as
amended by the Addendum to Common Stock Purchase Agreement dated
as of November 20, 1989 and the First Amendment to 1989 Common
Stock Agreement dated December 7, 1992 and the Second Amendment
to 1991 Common Stock Purchase Agreement dated as of February 23,
1992. This exhibit is incorporated by reference to Exhibit 10.50
of the Registrant's Form S-1 filed March 4, 1993 (Reg. No.33-
59128).
10.45 Common Stock Purchase Agreement dated as of May 3, 1991 among the
Company, Special Situations Investment Holdings, Ltd., KuwAm
Corporation and certain other persons, as amended by the First
Amendment to 1991 Common Stock Purchase Agreement dated as of
December 7, 1992 and the Second Amendment to 1991 Common Stock
Purchase Agreement dated as of February 23, 1992. This exhibit is
incorporated by reference to Exhibit 10.50 of the Registrant's
Form S-1 filed March 4, 1993 (Reg. No. 59128).
10.46 Common Stock Purchase Agreement dated as of November 24, 1992
among the Company, Special Situation Investment Holdings, Ltd.
and KuwAm Corporation. This exhibit is incorporated by reference
to Exhibit 10.51 of the Registrant's Form S-1 filed March 4, 1993
(Reg. No. 33-59128).
10.47 Letter dated February 17, 1993 to the Board of Directors for the
Company from KuwAm Corporation. This exhibit is incorporated by
reference to Exhibit 10.60 of the Registrant's Form S-1 filed
March 4, 1993 (Reg. No. 33-59128).
40
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
10.48 Letter dated February 26, 1993 to the Company, KuwAm Corporation
and Special Situation Holdings, Ltd. from Randall A. Greene. This
exhibit is incorporated by reference to Exhibit 10.61 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.49 Form of Convertible Subordinated Debenture issued by the Company.
This exhibit is incorporated by reference to Exhibit 10.62 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.50 Form of Subordinated Debenture issued by the Company. This
exhibit is incorporated by reference to Exhibit 10.67 of the
Registrant's Form 10-K filed March 30, 1994.
10.51 Form of Company's Aircraft Delivery and Acceptance Agreement.
This exhibit is incorporated by reference to Exhibit 10.63 of the
Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.52 Form of the Company's Aircraft Retail Warranty. This exhibit is
incorporated by reference to Exhibit 10.64 of the Registrant's
Form S-1 filed March 4, 1993 (Reg. No. 33-59128).
10.53 Commander Aircraft Company 1993 Stock Option Plan. This exhibit
is incorporated by reference to Exhibit 10.53 of the Registrant's
Form 10-K filed March 28, 1996.
24 Power of Attorney--Included on signature page.
41
<PAGE>
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 authorized on the 28th day of March, 1997.
COMMANDER AIRCRAFT COMPANY
By: /s/ Wirt D. Walker, III
-----------------------------
Chairman of the Board
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
PRINCIPAL EXECUTIVE OFFICER:
President and
N. Gene Criss Chief Executive Officer March 28, 1997
- -------------
PRINCIPAL FINANCIAL OFFICER AND ACCOUNTING OFFICER:
Stephen R. Buren Chief Financial Officer March 28, 1997
- ----------------
DIRECTORS:
Wirt D. Walker, III Director March 28, 1997
- -------------------
Mishal Y.S. Al Sabah Director March 28, 1997
- --------------------
42
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 78,911
<SECURITIES> 118,392
<RECEIVABLES> 1,643,515
<ALLOWANCES> 0
<INVENTORY> 6,579,320
<CURRENT-ASSETS> 8,489,295
<PP&E> 0
<DEPRECIATION> 803,356
<TOTAL-ASSETS> 11,060,129
<CURRENT-LIABILITIES> 1,982,208
<BONDS> 0
0
0
<COMMON> 3,360,274
<OTHER-SE> 3,272,147
<TOTAL-LIABILITY-AND-EQUITY> 11,060,129
<SALES> 7,958,138
<TOTAL-REVENUES> 7,958,138
<CGS> 7,735,839
<TOTAL-COSTS> 7,735,839
<OTHER-EXPENSES> 3,708,028
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 316,913
<INCOME-PRETAX> (3,408,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,408,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,408,200)
<EPS-PRIMARY> (.51)
<EPS-DILUTED> 0
</TABLE>
