SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
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 6,859,330 Shares of Common Stock Outstanding as of May 7, 2002.
1
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2002 2001
----------- ------------
ASSETS
Current Assets
Cash and cash equivalents $ 5,719 $ 211,356
Accounts receivable 98,553 -
Current portion of note receivable 27,909 36,673
Inventories 6,346,984 6,139,232
Prepaid expenses and other assets 70,863 70,155
------------ ------------
Total current assets 6,550,028 6,457,416
------------ ------------
Property and equipment
Office equipment and furniture 372,162 372,162
Vehicles and aircraft 95,115 95,115
Manufacturing equipment 385,179 385,179
Tooling 676,747 676,747
Leasehold improvements 315,049 315,050
------------ ------------
1,844,252 1,844,253
Less accumulated depreciation (1,238,576) (1,205,135)
------------ ------------
605,676 639,118
------------- ------------
Other assets
Notes receivable, less current maturities 42,012 65,223
Available-for-sale equity securities -
related party 110,250 142,100
Note receivable from related party - -
------------ ------------
152,262 207,323
------------ ------------
$ 7,307,966 $ 7,303,857
============ ============
The accompanying notes are an integral part of these financial statements.
2
AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2002 2001
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,506,409 $ 2,309,450
Accrued expenses 418,505 614,116
Refundable deposits 1,379,218 745,549
Notes payable 1,851,206 2,160,079
------------ ------------
Total current liabilities 6,155,338 5,829,194
------------ ------------
REDEEMABLE COMMON STOCK - $.01 par value;
Issued, 150,000 shares in 2001; stated at
redemption value 150,000 150,000
------------ ------------
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; 7,631,519 shares issued
at March 31, 2002 and December 31, 2001 3,815,759 3,815,759
Additional paid-in capital 37,000,299 37,000,299
Less: Treasury stock at cost, 772,189
shares at March 31, 2002 and December 31,
2001 (1,294,193) (1,294,193)
Accumulated other comprehensive loss (285,723) (253,873)
Accumulated deficit (38,233,514) (37,943,329)
------------ ------------
Total stockholders' equity 1,002,628 1,324,663
------------ ------------
$ 7,307,966 $ 7,303,857
============ ============
The accompanying notes are an integral part of these financial statements.
3
AVIATION GENERAL, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2002 2001
-------------- ------------
Net sales - aircraft $1,378,250 $2,134,212
Net sales - service 126,571 505,548
---------- ----------
Total net sales 1,504,821 2,639,760
---------- ----------
Cost of sales - aircraft 1,165,886 1,813,500
Cost of sales - service 66,703 434,586
Total cost of sales 1,232,589 2,248,086
---------- ----------
Gross margin 272,232 391,674
---------- ----------
Other operating expenses
Product development and engineering costs 31,955 95,307
Selling, general and administrative expenses 461,328 818,359
---------- ----------
Total other operating expenses 493,283 913,666
---------- ----------
Operating loss (221,051) (521,992)
---------- ----------
Other income (expenses)
Other income 1,636 44,049
Interest expense (68,442) (120,644)
Other expense (2,328) -
---------- ----------
Total other income (expense) (69,134) (76,595)
---------- ----------
Net loss $ (290,185) $ (598,587)
========== ==========
Net loss per share
Weighted average common shares
Outstanding, basic 6,859,330 6,279,330
---------- ----------
Net loss per share, basic ($0.04) ($0.10)
========== ==========
Weighted average common shares
Outstanding, diluted 6,859,330 6,279,330
========== ==========
Net loss per share, diluted $ ($0.04) $ (0.10)
========== ==========
The accompanying notes are an integral part of these financial statements.
4
AVIATION GENERAL, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
2002 2001
-------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (290,185) $ (598,587)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 33,442 16,425
Non-cash interest earnings - (36,343)
Receipts on aircraft notes receivable 31,975 -
Changes in assets and liabilities
(Increase) decrease in Accounts receivable (98,553) 535,722
Notes receivable - 6,401
Inventories (207,752) (1,027,109)
Prepaid expense and other assets (708) 13,094
Increase (decrease) in
Accounts payable 196,959 275,559
Accrued expenses (195,611) (88,736)
Refundable deposits 633,669 (26,648
---------- ----------
Net cash provided (used) by operating activities 103,236 (930,222)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures - (28,387)
---------- ----------
Net cash (used) provided by investing activities - (23,387)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 340,000 1,988,013
Payments on borrowings (648,873) (1,055,013)
---------- ----------
Net cash (used) provided by financing activities (308,873) 933,000
---------- ----------
Net decrease in cash (205,637) (25,609)
Cash and cash equivalents at beginning of period 211,356 135,016
---------- ----------
Cash and cash equivalents at end of period $ 5,719 $ 109,407
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 68,442 $ 126,060
The accompanying notes are an integral part of these financial statements.
5
AVIATION GENERAL, INCORPORATED
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 March 31, 2002, and
the results of operations and cash flows for the three month periods ended March
31, 2002 and 2001 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 2001 Annual Report on Form
10-K.
2. Basic 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 loss per share has been computed based on the assumption that all
dilutive options are exercised.
Three months ending
March 31, 2002 March 31, 2001
---------------- ----------------
Numerator
Net loss $ (290,185) $ (598,587)
Denominator
Weighted average shares
outstanding, basic 6,859,330 6,279,330
Effect of dilutive securities
stock options 0 0
---------- ----------
Denominator for loss per share
assuming dilution 6,859,330 6,279,330
========== ==========
Loss per share, basic $ (0.04) $ (0.10)
========== ==========
Loss per share, assuming dilution $ (0.04) $ (0.10)
========== ==========
Outstanding options of 2,655,050 and 2,345,167 for the periods ended
March 31, 2002 and 2001 have been excluded from the calculations above as they
would be antidilutive.
3. Total comprehensive loss for the periods presented is as follows:
For the three months ending March 31,
2002 2001
---- ----
Net loss $(290,185) $(598,587)
Other comprehensive loss (31,850) (142,432)
--------- ---------
Comprehensive loss $(322,035) $(741,019)
========= =========
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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:
March 31, 2002 December 31, 2001
---------------- -------------------
Raw materials $1,847,699 $1,983,979
Work in process 1,882,213 1,402,252
New and pre-owned aircraft 2,597,822 2,733,751
Other 19,250 19,250
---------- ----------
Total inventories $6,346,984 $6,139,232
========== ==========
5. The Company is subject to regulation by the FAA. The Company is subject
to inspections by the FAA and may be subjected to fines and other penalties
(including orders to cease production) for noncompliance with FAA regulations.
The Company has a Production Certificate from the FAA, which delegates to the
Company the inspection of each aircraft. The sale of the Company's product
internationally is subject to regulation by comparable agencies in foreign
countries.
The Company faces the inherent business risk of exposure to product
liability claims. In 1988, the Company agreed to indemnify a former manufacturer
of the Commander single engine aircraft against claims asserted against the
manufacturer with respect to aircraft built from 1972 to 1979. In 1994, Congress
enacted the General Aviation Revitalization Act, which established an
eighteen-year statute of repose for general aviation manufacturers. This
legislation prohibits product liability suits against manufacturers when the
aircraft involved in an accident is more than eighteen years old. This action
effectively eliminated all potential liability for the Company with respect to
aircraft produced in the 1970s as of December 31, 1997. The Company's product
liability insurance policy with coverage of $10 million per occurrence and $10
million annually in the aggregate with a deductible of $200,000 per occurrence
and annually in the aggregate expired March 1, 1995. Subsequent to March 1,
1995, the Company is not insured for product liability claims. Management
believes 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.
6. SFAS No. 143 requires entities to record the fair value of a liability
for an asset retirement obligation in the period in which it is incurred and a
corresponding increase in the carrying amount of the related long-lived asset.
SFAS No. 143 is effective for fiscal years beginning after June 15, 2002.
SFAS No. 144 is effective for the Company for the fiscal year beginning
January 1, 2002 and addresses accounting and reporting for the impairment or
disposal of long-lived assets.
Adoption of SFAS No. 144 has not had and management believes that adoption
of SFAS No. 143 will not have any significant effect on the Company's financial
condition or results of operations.
7. The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the company as a going concern. However, the
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Company has sustained substantial losses from operations in 2001, and such
losses have continued through the unaudited quarter ended March 31, 2002.
In view of the matters described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the company, which in
turn is dependent upon the Company's ability to meet its financing requirements
on a continuing basis, to maintain present financing, and to succeed in its
future operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
company be unable to continue in existence.
As we go forward in 2002, management believes that economic conditions and
financial markets appear to have stabilized and that the Company could benefit
from increased interest in general aviation, due to the inconvenience and safety
factors attendant with commercial airline travel. The Company could also
benefit from low interest rates, which significantly lower the financing cost of
aircraft purchases. Management also believes it is eligible and will apply for
federal grants and loans, pursuant to a general aviation relief bill pending in
Congress.
Furthermore, management has effected a number of initiatives, which, it
believes, will increase revenue and profitability. They include:
1. Reduction of the Company's cost structure
2. Adjustment of the Company's production schedule
3. Increased prices of new aircraft, parts, and services
4. Seeking additional financing for general working capital purposes
5. Increase in marketing and advertising activities
6. Enhancement of the Company's service and refurbishment capabilities and
business
7. Increase of Strategic Jet Services, Inc. capabilities and business
8. Exploring merger and acquisitions possibilities with other general
aviation concerns
So far in the year 2002, the Company has experienced a significant increase
in its business. Through April of this year, the company has booked orders for 6
new aircraft (versus a total of 8 for all of 2001) and 9 pre-owned aircraft
(versus a total of 22 for all of 2001). The company is currently structured to
achieve break-even financial results at between 10 to 15 new aircraft deliveries
annually, with the precise number dependent upon the contribution from the
Company's parts, service, refurbishment and brokerage business activities. The
company expects improved results for the second quarter of 2002.
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 first quarter of 2002 totaled
$1,378,250 compared to $2,134,212 for the comparable period of 2001. For the
first quarter of 2002, four new and pre-owned aircraft were sold, compared with
eight new and pre-owned aircraft sold in the same period for 2001. The revenues
for the first quarter of 2002 continue to be affected by the events of 2001 that
affected the aviation industry in general. As a result, the Company has
continued to make appropriate adjustments in its cost and overhead structure.
The Company believes business will begin to pick up as economic and stock market
conditions stabilize, the Public's confidence in air safety returns and as the
effect of lower interest rates, which significantly lowers aircraft purchase
finance costs, continues. With deposits for 4 new aircraft that are expected to
be delivered in the second quarter, the Company expects to return to
profitability.
Service revenues totaled $126,571 for the quarter ended March 31, 2002
compared to $505,548 for the comparable quarter in 2001. The decrease was due to
decreased repair and refurbishment activity.
Cost of aircraft sales for the three months ended March 31, 2002 decreased
to $1,165,886 compared to $1,813,500 for the three months ended March 31, 2001.
The decrease in cost was due to lower new and pre-owned aircraft sales during
the period.
8
Cost of sales for service and parts for the quarter ended March 31, 2002
decreased to $66,703 compared to $434,586 for the quarter ended March 31, 2001.
The decrease was due to the decrease in service and repair activity.
Aircraft sales margins were lower for the three months ended March 31, 2002
compared to the prior period due to the decrease in sales volume of new and
pre-owned aircraft. Service margins were higher for the three months ended March
31, 2002 compared to the prior period because of price increases instituted, and
sales of higher margin after-market parts.
Product development and engineering costs decreased to $31,955 for the
first quarter of 2002, from $95,307 for the comparable period in 2001 reflecting
the Company's cost reduction efforts.
Sales, general and administrative expense decreased for the three months
ended March 31, 2002, to $461,328 from $818,359 for the comparable period ended
March 31, 2001, as a result of reduced legal expenses and continuing efforts to
reduce expenses.
Interest expense decreased to $68,442 for the first quarter of 2002 from
$120,644 for the comparable period in 2001 due to a reduction of bank lines of
credit
LIQUIDITY AND CAPITAL RESOURCES
Cash balances decreased to $5,719 at March 31, 2002 from $211,356 at
December 31, 2001. Accounts receivable increased to $98,553 at March 31, 2002
due to sales activity.
Notes receivable decreased to $59,921 at March 31, 2002 from $101,896 at
December 31, 2001 due to regular quarterly payments from the debtor.
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 or loss. Declines in the fair value of securities
that are other than temporary would result in write-downs which would be
included in earnings. This investment is in the common stock of a related party.
Inventories increased slightly to $6,346,984 at March 31, 2002 from
$6,139,232 at December 31, 2001. Raw materials and finished inventory decreased
by $272,209 and work in process increased by $479,971 as the Company continues
production of new aircraft.
Accounts payable increased slightly to $2,506,409 at March 31, 2002 from
$2,309,450 at December 31, 2001. Accrued expenses decreased to $418,505 at March
31, 2002 from $614,116 at December 31, 2001. The decrease in accrued expenses
is attributable to reclassification of accrued payroll taxes to accounts payable
and payment of accrued payrolls.
Refundable deposits increased to $1,379,218 at March 31, 2002 from $745,549
at December 31, 2001 due to the deposits for new aircraft mentioned above.
Short term notes payable decreased to $1,851,206 at March 31, 2002 from
$2,160,079 at December 31, 2001 due to net activity which reduced the amount
owed by $303,873.
In 1999, the Company formed Strategic Jet Services, Inc. (SJS), a wholly
owned subsidiary, to provide brokerage, sales, consulting and refurbishment work
for jet aircraft.
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
9
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.
Aviation General Incorporated has two wholly owned subsidiaries, Commander
Aircraft Company and Strategic Jet Services, Incorporated. Commander Aircraft
Company manufactures, markets, and provides support services for its line of
single engine, high performance Commander aircraft, and consulting, sales,
brokerage, acquisition, and refurbishment services for all types of piston
powered aircraft. Strategic Jet Services, Inc., provides consulting, sales,
brokerage, acquisition, and refurbishment services for jet aircraft.
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. 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 the market for new aircraft sales, the Company has also established
capabilities to provide consulting, sales, brokerage, acquisition and
refurbishment services for pre-owned piston and jet aircraft.
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.
The Company anticipates that its primary cash requirement will relate to working
capital associated with ongoing operations and an increase in sales activity.
The Company anticipates funding these requirements by cash generated from
operations, borrowings under the Company's existing lines of credit and new
funding sources.
CRITICAL ACCOUNTING POLICIES
Aircraft Sale and Marketing
------------------------------
10.
The Company recognizes the sale of new aircraft when a purchase agreement
is funded and title is transferred to the buyer, which occurs after the Company
receives an airworthiness certificate from the Federal Aviation Administration.
Sales of pre-owned aircraft are recognized upon execution and the funding of a
purchase agreement. Service revenues are recognized when services are
performed.
Inventories
-----------
Our inventories, other than pre-owned aircraft, are stated at lower of cost
or market, and cost is determined by the average-cost method. The inventory
costs include all direct manufacturing costs and overhead. The inventories
consist of parts for manufacturing and servicing of aircraft, parts for resale
and work in process, as well as new and pre-owned aircraft. Pre-owned aircraft
are valued on a specific-identification basis at the lower of cost or current
estimated realizable wholesale price.
Overhead and indirect costs are capitalized as incurred and allocated to
aircraft produced based on the number of direct labor hours required to complete
the aircraft.
CONTRACTUAL OBLIGATIONS
We finance our inventory of new and pre-owned aircraft to provide working
capital for the Company. These loans require monthly interest payments during
the term of the loan and partial principal repayments or renewal fees if the
notes are renewed. The table below summarizes the Company's obligations.
2002 Obligation
----------------
Total Interest Principal
----- -------- ---------
Revolving credit facilities $1,775,969 $113,218 $233,620
Note payable to an individual, payable 75,237 2,547 75,237
in monthly installments of $8,699,
including interest at 8%
The Company plans to seek additional capital through the private placement
of an ownership interest and/or merger with a strategic partner, as well as
explore merger and acquisition opportunities that could broaden the Company's
business base and create synergies. During 2001 the Company made significant
reductions in its cost and overhead structure, and will continue to evaluate
such changes if and when they are needed.
Forward Looking Statements
----------------------------
This Form 10-QSB 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-QSB 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 services 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.
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PART I. FINANCIAL INFORMATION
ITEM 3. QUANITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's market risk is impacted by changes in interest rates, foreign
currency exchange rates and certain equity security prices. The note receivable
held by the Company includes a quarterly adjustment clause, which permits the
Company to increase or decrease, the amount of interest charged based on bank
prime rates. All transactions with international customers are made in U.S.
dollars, thereby minimizing the risk associated with foreign currency exchange
rates. 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. The Company has no significant risk
associated with commodity prices.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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 Executive Officer and
Authorized Signatory)
Date: May 15, 2002
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