SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24795
AVIATION GENERAL, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 73-1547645
(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) 440-2255
(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 6,279,330 Shares of Common Stock Outstanding
as of July 31, 2001
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2001 2000
-------------------- --------------------
ASSETS
Current Assets
Cash and cash equivalents $545,428 $135,016
Accounts receivable 46,711 551,425
Current portion of note receivable 29,625 25,628
Inventories 8,705,980 7,992,171
Prepaid expenses and other assets 210,449 153,490
-------------------- --------------------
Total current assets 9,538,193 8,857,730
-------------------- --------------------
Property and equipment
Office equipment and furniture 372,162 363,388
Vehicles and aircraft 95,115 95,115
Manufacturing equipment 385,179 382,124
Tooling 676,747 654,619
Leasehold improvements 315,051 311,764
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1,844,254 1,807,010
Less accumulated depreciation (1,136,088) (1,085,037)
-------------------- --------------------
708,166 721,973
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Other assets
Notes receivable, less current maturities 85,665 95,921
Available-for-sale equity securities - related party 294,800 603,000
Note receivable from related party 1,529,889 1,529,889
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1,910,354 2,228,810
-------------------- --------------------
$12,156,713 $11,808,513
==================== ====================
The accompanying notes are an integral part of these financial statements.
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2001 2000
-------------------- --------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $1,690,113 $1,226,414
Accrued expenses 516,725 561,398
Refundable deposits 132,873 115,814
Notes payable 4,309,310 3,035,000
-------------------- --------------------
Total current liabilities 6,649,021 4,938,626
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DEFERRED TAX LIABILITY - 58,568
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Stockholders' Equity
Preferred stock, $.01 par value, 5,000,000
shares authorized; no shares outstanding - -
Common stock, $.50 par value, 20,000,000
shares authorized; 7,051,519 shares issued
At June 30, 2001 and December 31, 2000 3,525,759 3,525,759
Additional paid-in capital 36,889,799 36,889,799
Less: Treasury stock at cost, 772,189 shares at
June 30, 2001 and December 31, 2000 (1,294,193) (1,294,193)
Accumulated other comprehensive income (loss) (135,941) 113,691
Accumulated deficit (33,477,732) (32,423,737)
-------------------- --------------------
Total stockholders' equity
5,507,692 6,811,319
-------------------- --------------------
$12,156,713 $11,808,513
==================== ====================
The accompanying notes are an integral part of these financial statements.
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30,
2001 2000
----------------------- -----------------------
Net sales - aircraft $2,729,783 $3,746,651
Net sales - service 489,225 509,436
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Total net sales 3,219,008 4,256,087
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Cost of sales - aircraft 2,324,580 2,886,393
Cost of sales - service 370,645 420,139
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Total cost of sales 2,695,225 3,306,532
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Gross margin 523,783 949,555
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Other operating expenses
Product development and engineering costs 86,870 97,179
Selling, general and administrative expenses 817,161 742,225
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Total other operating expenses 904,031 839,404
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Operating income (loss) (380,248) 110,151
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Other income (expenses)
Other income 56,254 58,144
Interest expense (125,315) (55,039)
Other expense (6,099) (207)
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Total other income (75,160) 2,898
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Net income (loss) ($455,408) $113,049
======================= =======================
Net Income per share
Weighted average common shares
Outstanding, basic 6,279,330 6,377,412
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Net Income (loss) per share, basic ($0.07) $0.02
======================= =======================
Weighted average common shares
Outstanding, diluted 6,279,330 6,901,422
----------------------- -----------------------
Net Income (loss) per share, diluted ($0.07) $0.02
======================= =======================
The accompanying notes are an integral part of these financial statements.
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended June 30,
2001 2000
----------------------- -----------------------
Net sales - aircraft $4,863,995 $7,222,401
Net sales - service 994,773 976,261
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Total net sales 5,858,768 8,198,662
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Cost of sales - aircraft 4,138,079 5,666,356
Cost of sales - service 805,231 738,135
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Total cost of sales 4,943,310 6,404,491
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Gross margin 915,458 1,794,171
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Other operating expenses
Product development and engineering costs 182,177 193,486
Selling, general and administrative expenses 1,635,520 1,476,090
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Total other operating expenses 1,817,697 1,669,576
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Operating income (loss) (902,239) 124,595
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Other income (expenses)
Other income 100,303 112,603
Interest expense (245,960) (85,571)
Other expense (6,099) (395)
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Total other income (expenses) (151,756) 26,637
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Net income (loss) ($1,053,995) $151,232
======================= =======================
Net Income (loss) per share
Weighted average common shares
Outstanding, basic 6,279,330 6,413,566
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Net Income (loss) per share, basic ($0.17) $0.02
======================= =======================
Weighted average common shares
Outstanding, diluted 6,279,330 6,769,467
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Net Income (loss) per share, diluted ($0.17) $0.02
======================= =======================
The accompanying notes are an integral part of these financial statements.
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2001 2000
-------------------- --------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($1,053,995) $151,232
Adjustments to reconcile net income (loss) to
net cash used by operating activities
Depreciation and amortization 51,108 64,293
Non-cash interest earnings (68,149) (70,442)
Receipts on notes receivable - related party - 41,045
Changes in assets and liabilities
(Increase) decrease in
Accounts receivable 504,714 (603,459)
Notes receivable 6,259 11,498
Notes receivable - related party - (142)
Inventories (713,809) (646,013)
Prepaid expense and other assets (56,959) 23,697
Increase (decrease) in
Accounts payable 463,699 339,176
Accrued expenses (44,673) 173,720
Refundable deposits 17,059 (90,937)
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Net cash used by operating activities (894,746) (606,332)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities of related party - (113,590)
Capital expenditures (37,244) (27,784)
Payment on related party note receivable - -
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Net cash (used) provided by investing activities (37,244) (141,374)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 3,986,943 3,088,670
Payments on borrowings (2,644,541) (2,070,118)
Purchase of treasury stock - (325,000)
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Net cash provided by financing activities 1,342,402 693,552
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Net decrease in cash 410,412 (54,154)
Cash and cash equivalents at beginning of period 135,016 281,138
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Cash and cash equivalents at end of period $545,428 $226,984
==================== ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $256,001 $69,711
Income taxes - -
The accompanying notes are an integral part of these financial statements.
NOTES TO CONDENSED CONSOLIDATED 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 Aviation
General, Incorporated as of June 30, 2001 and December 31, 2000, and the results
of operations and cash flows for the three and six month periods ended June 30,
2001 and 2000 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 2000 Annual Report on Form
10-K.
2. Basic income (loss) per share of common stock has been computed by using the
weighted average number of shares of common stock outstanding during the period.
Diluted income (loss) per share has been computed based on the assumption that
all dilutive options are exercised.
Six months ending
June 30, 2001 June 30, 2000
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Numerator
Net income (loss) ($1,053,995) $151,232
Denominator
Weighted average shares outstanding,
basic 6,279,330 6,413,566
Effect of dilutive securities
Stock options 0 355,896
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Denominator for income (loss) per share
assuming dilution 6,279,330 6,769,462
========== ==========
Income (loss) per share, basic ($ 0.17) $ 0.02
=============== ============
Income (loss) per share, assuming dilution ($ 0.17) $ 0.02
=============== ============
Three months ending
June 30, 2001 June 30, 2000
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Numerator
Net income (loss) ($455,408) $113,049
Denominator
Weighted average shares outstanding,
basic 6,279,330 6,377,412
Effect of dilutive securities
Stock options 0 524,010
----- -----------
Denominator for income (loss) per share,
assuming dilution 6,279,330 6,901,422
========== ==========
Income (loss) per share, basic ($ 0.07) $ 0.02
=============== ============
Income (loss) per share, assuming dilution ($ 0.07) $ 0.02
=============== ============
3. Total comprehensive income (loss) for the periods presented is as follows:
For the six months ending June 30
2001 2000
---- ----
Net income (loss) ($1,053,995) $151,232
Other comprehensive income (loss) (135,941) 339,759
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Comprehensive income (loss) ($1,189,936) $490,991
============= ==========
For the three months ending June 30
2001 2000
---- ----
Net income (loss) ($455,408) $113,049
Other comprehensive income (loss) (107,200) (251,384)
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Comprehensive income (loss) ($562,608) ($138,335)
=========== ===========
4. Inventories consist primarily of finished goods and parts for manufacturing
and servicing aircraft. Inventory costs include all direct manufacturing costs
and applied overhead. These inventories, other than used aircraft, are stated at
the lower of cost or market, and cost is determined by the average-cost method.
Used aircraft are valued on a specific-identification basis at the lower of cost
or current estimated realizable wholesale price. Inventory components at the
balance sheet dates were as follows:
June 30, 2001 December 31, 2000
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Raw materials $2,099,620 $2,522,930
Work in process 2,177,947 1,710,363
New and pre-owned aircraft 4,371,057 3,663,866
Other 57,356 95,012
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Total inventories $8,705,980 $7,992,171
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5. No income tax provision has been necessary due to the generation or
utilization of net operating loss carryforwards and the related change in the
valuation allowance for deferred income tax assets.
6. The Company is subject to regulation by the FAA. The Company is subject to
inspections by the FAA and may be subjected to fines and other penalties
(including orders to cease production) for noncompliance with FAA regulations.
The Company has a Production Certificate from the FAA, which delegates to the
Company the inspection of each aircraft. The sale of the Company's product
internationally is subject to regulation by comparable agencies in foreign
countries.
The Company faces the inherent business risk of exposure to product
liability claims. In 1988, the Company agreed to indemnify a former manufacturer
of the Commander single engine aircraft against claims asserted against the
manufacturer with respect to aircraft built from 1972 to 1979. In 1994, Congress
enacted the General Aviation Revitalization Act, which established an
eighteen-year statute of repose for general aviation manufacturers. This
legislation prohibits product liability suits against manufacturers when the
aircraft involved in an accident is more than 18 years old. This action
effectively eliminated all potential liability for the Company with respect to
aircraft produced in the 1970s as of December 31, 1997. The Company's product
liability insurance policy with coverage of $10 million per occurrence and $10
million annually in the aggregate with a deductible of $200,000 per occurrence
and annually in the aggregate expired March 1, 1995. Subsequent to March 1,
1995, the Company is not insured for product liability claims. Management
believes that the interest of shareholders is better served by vigorously
defending claims through the services of highly qualified specialists and
attorneys rather than retaining product liability insurance to settle exorbitant
claims.
The Company is routinely involved in various legal matters arising in
the normal course of business, including product liability claims. Management
intends to vigorously defend against these claims and currently believes that
legal matters will not result in any material adverse effect on the Company's
financial position or results of operations. Accordingly, no provision for any
liabilities that may result have been recorded in the financial statements. Due
to the uncertainty of these matters, it is at least reasonably possible that
management's view of the outcome will change in the near term.
7. 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. In addition,
Commander aircraft have a significantly better safety record and higher resale
value than all other aircraft in their class. The Company believes the domestic
and international market for its aircraft includes individuals and corporations
that will purchase the Company's aircraft for business and personal 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.
Recognizing that the size of the pre-owned aircraft market is
significantly larger than new aircraft sales, the Company has structured a
separate aviation services division within the Company to purchase, refurbish
and sell pre-owned piston aircraft at reasonable profit margins. The Aviation
Services Division also acts as broker for pre-owned piston aircraft and serves
as advisor to potential aircraft buyers and sellers.
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 Service
Centers (ASCs). 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,
ongoing direct mail programs to owners and pilots, and internet marketing
communications.
The Company has one of the most comprehensive worldwide service and
support networks in its class. The Company grants domestic Commander ASCs the
non-exclusive right to refer prospects for new Commander aircraft. Commander
ASCs receive a referral fee 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 ASCs from among experienced independent aviation
sales and service organizations that it believes to have excellent facilities,
service capabilities, reputation and financial strength. Through its ASCs,
Commander Aircraft Company offers a turn-key aircraft ownership program designed
to stimulate ownership of Commander aircraft by companies that have not
previously owned or operated aircraft. This flexible program can be tailored to
meet each customer's specific requirements.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS FROM OPERATIONS
Revenues from the sale of aircraft for the second quarter of 2001
totaled $2,729,783 compared to $3,746,651 for the comparable period of 2000. For
the second quarter of 2001, eight new and pre-owned aircraft were sold and one
jet aircraft was brokered, compared with thirteen new and pre-owned aircraft
sold and one twin turbine aircraft brokered in the same period for 2000.
For the six month period ended June 30, 2001, revenues were $4,863,995
compared to $7,222,401 for the six month period ending June 30, 2000. The
revenues for the first six months of this year have been adversely impacted by
the uncertainty of the economy, causing customer cancellation or postponement of
new and pre-owned aircraft purchases. The Company has made and will continue to
make adjustments in its cost and overhead structure.
Service revenues totaled $489,225 for the quarter ended June 30, 2001
compared to $509,436 for the comparable quarter in 2000. The decrease was due to
a decrease in spare parts shipments and aircraft repair and refurbishment
activity. Service revenues were $994,723 for the six month period ending June
30, 2001 compared to $976,261 for the six month period ending June 30, 2000. The
slight increase was due to the larger volume of work in the first quarter of
2001.
Cost of aircraft sales for the three month period ended June 30, 2001
decreased to $2,324,580 compared to $2,886,393 for the three month period ended
June 30, 2000. The decrease in cost was due to lower new and pre-owned aircraft
sales during the period. Cost of aircraft sales for the six month period ended
June 30, 2001 decreased to $4,138,079 compared to $5,666,356 for the six month
period ended June 30, 2000. The decrease in cost was due to lower new and
pre-owned aircraft sales during the period.
Cost of sales for service and parts for the quarter ended June 30, 2001
decreased to $370,645 compared to $420,139 for the quarter ended June 30, 2000.
The decrease was due primarily to the decrease in revenues from service activity
and parts shipments and steps taken by management to reduce overall costs. Cost
of sales for service and parts for the six month period ended June 30, 2001 were
$805,231 compared to $738,135 for the six month period ended June 30, 2000. The
increase was due to the higher volume service and parts activity in the first
quarter of 2001.
Product development and engineering costs decreased to $86,870 for the
second quarter of 2001, from $97,179 for the comparable period in 2000. For the
six month period ended June 30, 2001 product development and engineering costs
were $182,177 compared to $193,486 for the six month period ended June 30, 2000.
Sales, general and administrative expense increased for the three-month
period ended June 30, 2001, to $817,161 from $742,225 for the comparable period
ended June 30, 2000. Sales, general and administrative expense for the six-month
period ended June 30, 2001 were $1,635,520 compared to $1,476,090 for the six
month period ended June 30, 2000. The increase is due to increased legal costs.
Interest expense increased to $125,315 for the second quarter of 2001
from $55,039 for the comparable period in 2000 due to higher borrowings at banks
to finance aircraft manufactured or purchased for resale.
LIQUIDITY AND CAPITAL RESOURCES
Cash balances increased to $545,428 at June 30, 2001 from $135,016 at
December 31, 2000. Accounts receivable decreased by $504,714 at June 30, 2001
due to a payment received in the first quarter for an aircraft in accounts
receivable at December 31, 2000.
Notes receivable decreased to $115,290 at June 30, 2001 from $121,549
at December 31, 2000 due to regular quarterly payments from the debtor. Notes
receivable from related parties remained unchanged from December 31, 2000 to
June 30, 2001. Accrued interest due on the note receivable from the related
party at June 30, 2000 was $68,149. The note is secured by Aviation General,
Incorporated stock pledged, as well as a personal guarantee from the principal
shareholder of the debtor. The note is classified as non-current due to the
probability that payment in full will not occur within the next year.
The Company's investment in equity securities is classified as
available for sale with unrealized gains or losses excluded from income and
reported as other comprehensive income. Declines in the fair value of securities
that are other than temporary result in write-downs are included in earnings.
This investment is in the common stock of a related party.
Inventories increased to $8,705,980 at June 30, 2001 from $7,992,171 at
December 31, 2000. Raw materials, parts and work in process increased
approximately $44,274, while new and pre-owned aircraft inventory increased by
$707,191.
During the first six months of 2001, expenditures for fixed assets
totaled $37,243, which included replacement of fabrication tooling and an
upgrade to the Company's business software.
Accounts payable increased to $1,690,113 at June 30, 2001 from
$1,226,414 at December 31, 2000, as the anticipated increase in production of
new aircraft in 2001 resulted in higher material and parts inventory purchased
on open account. Accrued expenses decreased to $516,725 at June 30, 2001 from
$561,398 at December 31, 2000.
Refundable deposits increased to $132,873 at June 30, 2001 from
$115,814 at December 31, 2000. Borrowings from bank lines increased to
$4,309,310 at June 30, 2001 from $3,035,000 at December 31, 2000.
COMPANY OVERVIEW
Aviation General, Incorporated is a publicly traded holding company
with two wholly owned subsidaries, Commander Aircraft Company and Strategic Jet
Services, Inc. Commander Aircraft Company (www.commanderair.com) manufactures,
markets and provides support services for its line of single engine, high
performance Commander aircraft, and consulting, brokerage and refurbishment
services for all types of piston aircraft. Strategic Jet Services, Inc.
(www.strategicjet.com) provides consulting, sales, brokerage, acquisition and
refurbishment services for jet aircraft.
The Company formed Strategic Jet Services, Inc. (SJS), a wholly owned
subsidiary, to provide brokerage, sale, consulting and refurbishment work for
jet aircraft. This line of business generated first activity in 1999,
contributed revenue in 2000 and during the first six months of 2001, and is
expected to contribute additional revenue in 2001.
The Company continues to certify new state-of-the-art avionics systems
that offer the customer the latest technology in navigational and communication
equipment. The Company introduced a new de-icing option and received
certification from the Federal Aviation Administration, allowing equipped
aircraft to operate in known icing conditions similar to larger, more expensive
aircraft. Sales of this equipment not only provide additional revenues and
earnings, but also increase the value of the aircraft relative to its
competition.
During 2000 the Company introduced the 115 series of high performance,
single engine aircraft. The Commander 115 represents the culmination of a
multitude of improvements to the Commander line, and features numerous airframe,
engine and systems refinements, as well as significantly increased range
capability and an upgraded standard avionics package which includes dual Garmin
430 global navigation, communication and moving map displays. The Commander 115
series is the latest of a thoroughbred line of aircraft that offer the ultimate
combination of performance, comfort, safety, and utility, and has become
recognized as the Mercedes of the single engine fleet.
In addition to the above actions by the Company to increase revenue,
management has made efforts to reduce costs and cash requirements by optimizing
its production schedule using just-in-time scheduling. Management has reduced
the costs incurred to advertise new aircraft by focusing marketing efforts at a
specific customer profile.
The Company continues to advertise in industry and trade publications
at a significantly reduced level, while directly contacting potential customers
whose demographic characteristics closely match the typical customer, especially
in the areas of income, pilot experience, and types of businesses with
demonstrated regional travel requirements. Further reducing selling expenses,
the Company has organized its service center, paint, interior and avionics shops
into a completion center to focus on the growing after-market refurbishment
business.
The Company has expanded its operations to include SJS, enhanced the
Commander brand with the introduction of the Commander 115, and more effectively
targeted sales and marketing expenditures. With continued activity in the parts,
service and pre-owned aircraft sales, the Company has lowered its break even
sales to only 14 new aircraft per year. With the large investment complete,
management believes it has made significant progress towards the building of a
world class aviation company. Due to numerous factors beyond the control of the
Company, there can be no assurances that these results will be achieved.
Forward Looking Statements
This Form 10-Q includes certain statements that may be deemed to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Act. All statements, other than statements of historical fact, included in this
Form 10-Q that addresses activities, events or developments that the Company
expects, projects, believes, or anticipates will or may occur in the future,
including matters having to do with expected and future aircraft sales and
service revenues, the Company's ability to fund its operations and repay debt,
business strategies, expansion and growth of operations and other such matters,
are forward-looking statements. These statements are based on certain
assumptions and analyses made by our management in light of its experience and
its perception of historical trends, current conditions, expected future
developments, and other factors it believes are appropriate in the
circumstances. These statements are subject to a number of assumptions, risks
and uncertainties, including general economic and business conditions, the
business opportunities (or lack thereof) that may be presented to and pursued by
the Company, the Company's performance on its current contracts and its success
in obtaining new contracts, the Company's ability to attract and retain
qualified employees, and other factors, many of which are beyond the Company's
control. You are cautioned that these forward-looking statements are not
guarantees of future performance and that actual results or developments may
differ materially from those projected in such statements.
PART I. FINANCIAL INFORMATION
ITEM 3. QUANITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The registrant has no material market risk associated with interest
rates, foreign currency exchange rates or commodity prices.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Commander Aircraft Company is a defendant in a lawsuit resulting from a crash of
one of its manufactured aircraft. Management does not believe the Company bears
any responsibility and will vigorusly defend against this claim and currently
believes that this action will not have a material impact on the Company's
operations. The National Transportation and Safety Board accident investigation
has found the probable cause of this crash was pilot error.
ITEM 5. OTHER DISCLOSURES
The Company has received a NASDAQ Staff Determination that the Company fails to
comply with the minimum bid price requirements for continued listing on the
NASDAQ SmallCap Market, Rule 4310 (c)(4). The Company's common shares will
continue to trade on the NASDAQ Stock Market, pending the outcome of the appeal
the Company has filed in accordance with NASDAQ procedures, although there can
be no assurance NASDAQ will grant the Company's appeal for continued listing.
Aviation General believes its stock is significantly undervalued, and is
considering various alternatives, such as restructuring of the Company's
capitalization, ownership structure and reactivation of the Company's Stock
Repurchase Program, the effect of which would most probably result in regaining
minimum bid compliance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on June 5, 2001.
At the meeting, shareholders elected the following individuals as members of the
Board of Directors:
Wirt D. Walker, III
N. Gene Criss
Stephen R. Buren
John H. deHavilland
Robert B. Smith, Jr.
There were 4,389,603 votes for each of the directors and 71,423 votes were
withheld.
The shareholders approved an Amendment of the 1993 Stock Option Plan. There were
1,791,360 votes for and 145,026 votes against and 1,000 votes withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None.
(b) Reports on Form 8-K - None.
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.
AVIATION GENERAL INCORPORATED
-----------------------------
(Registrant)
By: /s/ Wirt D. Walker
Wirt D. Walker
Chairman of the Board of Directors
(Chief ExecutiveOfficer and
Authorized Signatory)
Date: August 14, 2001