<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, 1997
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 6,920,548 Shares of Common Stock Outstanding
as of April 30, 1997.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
COMMANDER AIRCRAFT COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1997 1996
------------ ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 164,768 $ 197,303
Accounts receivable 398,429 23,438
Notes receivable from related party 1,560,000 1,560,000
Notes receivable 55,291 60,077
Inventories 6,655,360 6,579,320
Prepaid expenses and other assets 74,268 69,157
------------ ------------
Total current assets 8,908,116 8,489,295
------------ ------------
Property and equipment:
Office equipment and furniture 282,203 284,054
Vehicles and aircraft 84,021 422,099
Manufacturing equipment 354,837 354,837
Tooling 509,049 515,299
Leasehold improvements 232,073 232,073
------------ ------------
1,462,183 1,808,362
Less: Accumulated depreciation (702,318) (803,356)
------------ ------------
Net property and equipment 759,865 1,005,006
------------ ------------
Other assets:
Notes receivable from related party, less current maturities 837,523 1,088,181
Notes receivable - less current maturities 462,946 477,647
------------ ------------
Total other assets 1,300,469 1,565,828
============ ============
$ 10,968,450 $ 11,060,129
============ ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $ 683,738 $ 507,644
Accrued expenses 899,424 664,584
Refundable deposits 42,000 9,980
Notes payable - related parties 900,000 800,000
------------ ------------
Total current liabilities 2,525,162 1,982,208
------------ ------------
Long-term debt:
Notes payable 513,450 445,500
Notes payable - related parties - 2,000,000
------------ ------------
Total long-term debt 513,450 2,445,500
------------ ------------
Total liabilities 3,038,612 4,427,708
------------ ------------
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; 6,920,548 shares
issued and outstanding at March 31, 1997
and 6,720,548 at December 31, 1996 3,460,274 3,360,274
Additional paid-in capital 33,758,231 31,770,862
Retained earnings (deficit) (29,288,667) (28,498,715)
------------ ------------
Total shareholders' investment 7,929,838 6,632,421
------------ ------------
$ 10,968,450 $ 11,060,129
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
----------- -----------
<S> <C> <C>
Net sales - aircraft $ 754,000 $ 1,277,987
Net sales - service 320,409 184,943
----------- -----------
Total net sales 1,074,409 1,462,930
----------- -----------
Cost of sales - aircraft 999,618 1,304,952
Cost of sales - service 267,936 220,550
----------- -----------
Total cost of sales 1,267,554 1,525,502
----------- -----------
Gross margin (deficit) (193,145) (62,572)
----------- -----------
Other operating expenses:
Product development and engineering costs 82,318 86,708
Selling, general and administrative expenses 548,239 890,810
----------- -----------
Total other operating expenses 630,557 977,518
----------- -----------
Operating income (loss) (823,702) (1,040,090)
----------- -----------
Other income (expenses):
Other income 90,500 121,635
Interest expense (56,750) (66,181)
Other expense -- (9,813)
----------- -----------
Total other income (expenses) 33,750 45,641
----------- -----------
Net loss ($ 789,952) ($ 994,449)
=========== ===========
Net loss per share:
Weighted average common shares
outstanding 6,851,659 6,720,548
----------- -----------
Loss per share ($0.12) ($0.15)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($789,952) ($994,449)
Adjustments to reconcile net loss to
net cash used in operating activities---
Depreciation and amortization 26,230 43,069
Loss on disposal of property and equipment 5,958 3,540
Changes in operating assets and liabilities, excluding cash:
Accounts receivable (374,991) 229,757
Notes receivable - related parties 250,658 808,002
Notes receivable 19,487 498,214
Inventories (76,040) (57,302)
Prepaid expense and other assets (5,111) 79,541
Accounts payable 176,094 (773,687)
Accrued expenses 217,854 (210,678)
Refundable deposits 32,020 (3,163)
--------- ---------
Net cash used in operating activities (517,793) (377,156)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (392) (9,939)
Proceeds from sale of property and equipment 317,700 8,000
--------- ---------
Net cash used in investing activities 317,308 (1,939)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings from related parties 100,000 150,000
Proceeds from borrowings from bank line 67,950 247,000
--------- ---------
Net cash provided by financing activities 167,950 397,000
--------- ---------
Net increase (decrease) in cash (32,535) 17,905
Cash and cash equivalents at beginning of period 197,303 138,591
--------- ---------
Cash and cash equivalents at end of period $ 164,768 $ 156,496
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 20,274 $ 43,704
Income taxes - -
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.
</TABLE>
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, 1997 and December 31, 1996, and the results of operations for the
three month period ended March 31, 1997 and 1996, and the cash flows for the
three month periods ended March 31, 1997 and 1996 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 1996 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 was computed by using the weighted
average number of shares of common stock outstanding during the period.
3. Through January 5, 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.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL:
The Company reported sales for the quarter ended March 31, 1997 of $1,074,409
compared to sales of $1,462,930 for the quarter ended March 31, 1996. The net
loss for the quarter was $789,952, or $.12 per share, compared to a net loss of
$994,449, or $.15 per share in the comparable period of 1996. Typically, the
first quarter is relatively slow due to inclement weather and other
uncontrollable factors. The Company expects results to improve for the second
quarter 1997 as sales of new and used aircraft, as well as service and
refurbishment billings have shown growth through the month of April 1997.
On February 1, 1997, the Company's majority shareholder, the KuwAm group,
exchanged $2,000,000 of 10% demand notes due June 30, 1997 for 200,000 shares of
newly issued common shares of the Company stock. Accrued interest due December
31, 1996 on the entire $2,800,000 of demand notes outstanding was waived and the
interest accrued on the $2,000,000 in notes exchanged for equity was also waived
through February 1, 1997. The maturity date of the balance of notes remaining
after February 1, 1997 was extended to December 31, 1997.
RESULTS FROM OPERATIONS:
Revenues from the sale of aircraft for the first quarters of 1997 and 1996
totaled $735,900 and $1,277,987 respectively. A total of three aircraft were
delivered in the quarter ended March 31, 1997 and four for the comparable period
of 1996. The Company earned a commission of $18,100 for brokerage services
related to the sale of an aircraft in the first quarter of 1997.
Service revenues increased 73% during the first quarter of 1997, to $320,409
from $184,943 for the first quarter of 1996. This increase was due to several
large refurbishment jobs completed by the Service Center for Commander 112 and
114 aircraft.
Cost of aircraft sales for the three month period ended March 31, 1997 totaled
$999,618 compared to $1,304,952 for the three month period ended March 31, 1996.
Production inefficiencies, due to lower volumes, were recognized as cost during
the periods ended March 31, 1997 and 1996.
Cost of sales for service and parts for the quarter ended March 31, 1997,
increased only 21% over the quarter ended March 31, 1996. Margins for service
work were unusually low for the first quarter of 1996 due to unbilled work in
process during that period.
Product development and engineering costs decreased to $82,318 for the first
quarter of 1997, down 5% from $86,708 for the comparable period in 1996. Most
of the cost reduction was due to a decrease in personnel in 1997.
Sales and marketing expense decreased 53% for the three month period ended March
31, 1997, to $309,079 from $661,978 for the three month period ended March 31,
1996. Advertising expenses were reduced to $85,216 from $338,992 as the
placement of certain magazine ads were strategically scheduled for summer
issues. Salaries and related benefits were reduced to $128,646 for the first
quarter of 1997 compared to $180,887 for the first quarter of 1996. This was
due to a reduction in field sales personnel and a consolidation of territories.
Virtually all other areas of cost were reduced during the first quarter of 1997.
<PAGE>
General and administrative expenses increased approximately 5% to $239,160 for
the first quarter of 1997 from $228,832 for the comparable period in 1996. This
increase was due primarily to an increase in legal fees as some cases were
closed, or nearly completed during the first quarter of 1997. All other
administrative costs were approximately the same as the first quarter of 1996.
Other income decreased to $90,500 for the quarter ended March 31, 1997 from
$121,635 for the quarter ended March 31, 1996. The decrease was due to lower
interest income in the first quarter of 1997 from notes receivable which had
significant principal reductions since the first quarter of 1996. Interest
expense decreased to $56,750 for the first quarter of 1997 from $66,181 for the
first quarter of 1996. The decrease in interest expense was due to a lower
outstanding balance in notes payable during the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES:
Accounts receivable increased to $398,429 at March 31, 1997 from $23,438 at
December 31, 1996. The increase was due to two aircraft that were deposited and
sold in March with the balances paid in early April. Notes receivable decreased
$19,487 for the first quarter of 1997, due to regular monthly payments received
from debtors. Notes receivable from related parties decreased $250,658 for the
first quarter, reflecting payments made by Commander International which reduced
the balance owed to the Company to $2,397,523 at March 31, 1997.
Inventories increased slightly to $6,655,360 at March 31, 1997 from $6,579,320
at December 31, 1996. Prepaid expenses and other current assets remained
relatively constant at $74,268 at March 31, 1997 compared to $69,157 at December
31, 1996.
Total fixed assets decreased by $346,179 during the first quarter of 1997. The
decrease was due to the sale of an aircraft that was carried as a fixed asset
through December 31, 1996, and the sale of the Company's recreational vehicle
that had been used for shows and Indy car races.
Accounts payable increased to $683,738 at March 31, 1997 from $507,644 at
December 31, 1996. The increase was primarily due to a check disbursement made
in April rather than late March that temporarily inflated the accounts payable
balance.
Notes payable decreased to $900,000 at March 31, 1997 from $2,800,000 at
December 31, 1996. This was the result of an exchange of $2,000,000 in demand
notes for 200,000 shares of newly issued common stock. This transaction is
explained in more detail in the "Notes to Financial Statements" and above in the
"General" section of Item 2.
<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 9, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 164,768
<SECURITIES> 0
<RECEIVABLES> 3,314,189
<ALLOWANCES> 0
<INVENTORY> 6,655,360
<CURRENT-ASSETS> 8,908,116
<PP&E> 1,462,183
<DEPRECIATION> 702,318
<TOTAL-ASSETS> 10,968,450
<CURRENT-LIABILITIES> 2,525,162
<BONDS> 0
0
0
<COMMON> 3,460,274
<OTHER-SE> 4,469,564
<TOTAL-LIABILITY-AND-EQUITY> 10,968,450
<SALES> 1,074,409
<TOTAL-REVENUES> 1,074,409
<CGS> 1,267,554
<TOTAL-COSTS> 1,267,554
<OTHER-EXPENSES> 630,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,750
<INCOME-PRETAX> (789,952)
<INCOME-TAX> 0
<INCOME-CONTINUING> (789,952)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (789,952)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
