SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
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X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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) 495-8080
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common stock; $.50 par value
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 requirements for the past 90 days. Yes X No
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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 31, 2002 the aggregate market
value of the voting stock held by non-affiliates of the registrant was
$1,400,000.
The number of shares outstanding of the registrant's common stock, $.50
par value, was 7,009,330 at March 31, 2002.
Total number of pages including cover page 9.
PART III
Item 10. Directors and Executive Officers
The following sets forth certain information regarding each of the
Company's directors and executive officers:
Wirt D. Walker, III, age 56, has served as a director of the Company
from September 1989 to February 1991, as Chairman of the Board of Directors
since May 1991 and as Chief Executive Officer since June 1998. Mr. Walker
previously served as the Company's Chief Executive Officer from May 1991 to
August 1991 and from December 1992 to May 1995. Since 1982, Mr. Walker has
served as a director and the Managing Director of KuwAm Corporation, a private
investment firm. He is the Chairman and Chief Executive Officer of STRATESEC
Incorporated, a publicly traded company that provides technology-based security
solutions for medium and large commercial and government facilities.
N. Gene Criss, age 59, served as President and Chief Executive Officer
of the Company from May 1995 to June 1998. Mr. Criss served as President and
Chief Operating Officer from December 1994 to May 1995, as Executive Vice
President and Chief Operating Officer from November 1992 to December 1994 and as
a director since August 1993. He served as Vice President, Manufacturing at
American General Aircraft Company, a manufacturer of light single engine general
aviation aircraft, from July 1992 to November 1992. Prior to July 1992, Mr.
Criss held a variety of positions of increasing responsibility during a
twenty-two year career at Piper Aircraft Corporation, including service as
Director of Materials and Manufacturing Support from 1982 to June 1992. During
his tenure with Piper Aircraft Corporation, Mr. Criss was responsible for
corporate scheduling, production and material control, inventory control and
engineering administration.
Steve Buren, age 58, served as Chief Financial Officer of the Company
from May 1991 to March 2000, and served as Vice-President, Finance and Treasurer
of the Company from 1990 to 1991. Mr. Buren has served as a director of the
Company since April 2000. He was Vice-President, Finance and Treasurer of
Mycro-Tek, Inc. from 1986 to 1987. From 1974 to 1986, he held division and
corporate controllership positions at Cessna Aircraft Company.
John H. deHavilland, age 51, has served as a director of the Company as
well as President/CEO of its wholly owned subsidiary, Strategic Jet Services,
since September 2000. He has twenty-two years of industry experience, most
recently as President of deHavilland Aircraft, Incorporated from 1996 to 2000.
DeHavilland Aircraft specialized in the purchase, refurbishment and brokerage of
jet aircraft. From 1980 to 1996, he held several positions with British
Aerospace, including Director of Sales and Marketing for the Turbo Prop Asset
Management Division, Program Director and Market Development Director for the
Corporate Jets Division, and Regional Marketing Manager for British Aerospace
PLC Corporate Jets Division. His tenure at British Aerospace was interrupted
from 1984 to 1987, during which Mr. deHavilland held the position of Managing
Director/Head of Marketing at A.R.A.V.C.O Ltd in London.
Director Compensation
Directors are normally paid an annual fee of $20,000, payable in equal
quarterly installments, for services as a director. Such fees are prorated when
a director does not serve for a full year. Directors receive no additional
compensation for committee participation or attendance at committee meetings,
other than reimbursement of travel and lodging expenses. In 2001, Directors were
issued common stock in lieu of their compensation, in the amount of 45,152
shares each.
The 1993 Stock Option Plan provides for the automatic annual grant of a
stock option to purchase 20,000 shares of Common Stock to each eligible
non-employee and employee director of the Company; non-employee directors will
automatically receive a non-statutory stock option and employee directors will
automatically receive an incentive stock option. The 2001 annual automatic
options were granted to each of the four directors on December 18, 2001.
Board Meetings and Committees
The Board of Directors held a total of six meetings during the fiscal
year ended December 31, 2001. The Board has two committees: the Audit Committee
and the Compensation Committee.
The Audit Committee, comprised of Messrs. Criss and Buren, recommends
the selection of the Company's independent accountants and approves the scope of
the audit to be conducted. The Committee is primarily responsible for reviewing
and evaluating the Company's accounting practices and its systems of internal
accounting controls. The Audit Committee held one meeting during fiscal 2001.
The Compensation Committee recommends the amount and type of
compensation to be paid to the Company's executive officers, reviews the
performance of the Company's key employees, and administers and determines
distributions under the Company's Profit Sharing Plan. The Compensation
Committee will also determine the number of shares, if any, to be granted each
employee under such plan and the terms of such grants. The Compensation
Committee held one meeting during fiscal 2001.
No director attended fewer than 75% of all meetings of the Board of
Directors held during fiscal 2001 or of all meetings of any committee upon which
such director served during fiscal 2001.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. Buren and Criss.
Neither Messrs. Criss nor Buren is currently an officer or employee of
the Company. They are not eligible to participate in the Company's Profit
Sharing Plan. Both receive compensation for services as a director (See
"Director Compensation"), and Mr. Criss receives compensation under a consulting
agreement with the Company. Mr. Criss served as President and Chief Executive
Officer of the Company from May 1995 to June 1998. Mr. Buren served as Chief
Financial Officer from 1991 to 2000.
Other Officers
Jeffrey Henderson, age 53, succeeded Mr. Whitten as Chief Financial
Officer and Vice-President, Finance of the Company on February 20, 2002. Mr.
Henderson is a Certified Public Accountant who graduated from Fort Hays State
University in 1976. He was the President of Gas Jack, Inc., a natural gas
compressor manufacturer for seven years prior to joining the Company, serving
three years before that as the Vice-President of Finance. Prior to that he was a
Divisional Controller for the School Division of McGraw-Hill and Controller and
Assistant Treasurer for the Economy Company.
Carl R. Gull, age 49, has served as Vice-President of Product Support
since July 2000. He joined Commander in November 1998 as Vice President of
Customer Relations and Training. He was manager of Support Services of Oklahoma
State University from 1995 to 1998. From 1975 to 1995 he served in the U.S. Navy
as Naval Aviator, where he achieved the rank of Commander. An F-14 Top-Gun
Instructor Pilot, he held various positions including Staff Officer, Squadron
Safety Officer, Squadron Maintenance Officer, Squadron Administrative Officer,
and Assistant Air Operations Officer.
Matthew J. Goodman, age 50, has served as Senior Vice-President
Marketing and Sales of Commander Aircraft Company since December 2000. Mr.
Goodman joined Commander Aircraft Company in 1989 as Aircraft Sales Manager. He
subsequently was promoted to the position of Vice-President Marketing, and later
to Vice-President, Marketing and Sales of the company's General Aviation
Services Division. Prior to joining Commander Aircraft Company, he was
Vice-President Sales of Kenosha Aero Service, a full line Cessna dealership and
FBO, and served in various aircraft sales management positions since 1978.
Item 11. Executive Compensation
Summary Compensation Table
The following table shows certain information concerning the
compensation of each of the Company's executive officers for services rendered
in all capacities to the Company for the fiscal years ended 2001, 2000, and
1999.
Annual Compensation Long-term Compensation
Securities
Underlying
Options All Other
Awarded Compensation
Year Salary (1) Bonus (in shares) (2)
Wirt D. Walker, III . . . . . . . . . . . .2001 $ 128,077 120,000 $ -
Chairman and Chief Executive 2000 $ 129,807 $ - 85,000 $ 20,000
Officer 1999 $ 80,000 $ - 145,000 $ 20,000
John H. deHavilland. . . . . . . . . . . . 2001 $ 89,231 $ 65,385 180,000 $ -
President/CEO 2000 $ 34,615 $ 30,769 120,000 $ 5,000
Strategic Jet Services, Inc.
Mathew J. Goodman. . . . . . . . . . . . . .2001 $ 59,000 $ 70,072 53,133 $ -
Senior Vice President, Marketing & 2000 $ 50,000 $ 96,927 27,700 $ -
Sales 1999 $ 40,000 $ 157,296 45,500 $ -
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(1) Salary and bonus payments include voluntary salary reduction contributions
to the Company's 401(k) Savings Plan.
(2) Amounts paid as director fees unless otherwise indicated.
Option Grants in Last Fiscal Year
The Committee approved the following stock option grants for the
executive officers during fiscal year 2001.
Potential Realizable
Value of Assumed
Number of Percent of Annual Rates of
Securities Total Options Stock Price
Underlying Granted to Appreciation for
Options Employees in Exercise Expiration Option Term
Name Granted (1) Fiscal Year Price Date 5% 10%
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Wirt D. Walker, III . . . . . . . 100,000 9% $ 0.50 7/27/2004 $ 7,881 $ 16,500
20,000 2% $ 0.25 1/18/2007 $ 1,381 $ 3,053
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120,000 11%
John deHavilland. . . . . . . . . 160,000 14% $ 0.50 7/27/2004 $ 12,610 $ 26,400
20,000 2% $ 0.25 1/18/2007 $ 1,381 $ 3,053
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180,000 16%
Mathew J. Goodman. . . . . . . . 53,133 5% $ 0.50 7/27/2004 $ 4,188 $ 8,794
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(1) Each option is non-transferable; vests as to 33% of the shares covered
by such option over three to five years, commencing on the first
anniversary of the date of issuance; is canceled prior to vesting in
the event the holder either resigns from the Company or is terminated
for justifiable cause; and is void after the date listed under the
heading "Expiration Date." The exercise price of the stock subject to
options was equal to the market value on the date of grant. The number
of shares to be issued upon exercise of each option is subject to
adjustment subsequent to any stock dividend, split-up,
re-capitalization or certain other transactions.
During 2001, Messrs. Walker, Buren, deHavilland, and Criss, directors
of the Company were each granted an option to purchase 20,000 shares of
Common Stock pursuant to the 1993 Stock Option Plan. Such options
expire in five years.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and holders of more than ten percent
of the Company's Common Stock to file reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
The Company believes that during the fiscal year ended December 31, 2001, its
officers, directors and holders of more than 10% of the Company's Common Stock
complied with all Section 16 (a) filing requirements, except as follows: on
October 8, 2001, Messrs. Walker, Criss, Buren and deHavilland were issued 30,000
shares in lieu of Directors compensation for the first three quarters of 2001,
for which Forms 4 were filed in April 2002. They are still due 15,152 shares in
lieu of their fourth quarter Directors compensation, which are in the process of
being issued.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table shows the number of shares of Common Stock acquired
by the executive officers upon the exercise of stock options during fiscal 2001,
the net value realized at exercise, the number of shares of Common Stock
represented by outstanding stock options held by each executive officer as of
December 31, 2001 and the value of such options based on the closing price of
the Company's Common Stock on December 31, 2001, which was $0.30.
Value of Unexercised
Number of Securities In-the-Money
Number of Underlying Unexercised Options
Shares Acquired Value Options at FY End (#)(1) at FY End(2)
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Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
Wirt D. Walker, III............... - - 230,001 / 189,999 $ - / $ -
John H. deHavilland............ - - 40,000 / 260,000 $ - / $ -
Mathew J. Goodman........... - - 35,201/79,932 $ - / $ -
(1) Represents the total number of shares subject to stock options held by
each executive officer. These options were granted on various dates
during fiscal years 1997 through 2001 and are exercisable on various
dates beginning in 2001 and expiring in 2007.
(2) Represents the difference between the exercise price and $0.30, which
was the December 31, 2001 closing price. Stock option exercise prices
range from $1.38 to $2.75.
Employment Agreement
In July 2001 the Company entered into an employment agreement with Wirt
D. Walker III to serve as its Chief Executive Officer. Under the agreement,
which has a five-year term expiring in July 2006, Mr. Walker receives a base
salary of $150,000 and may receive a bonus in an amount and based on criteria as
determined by the Board of Directors. If Mr. Walker is terminated for reasons
other than cause within two years following a change in control of the Company,
he is entitled to receive an additional payment equal to 2.99 times his salary
then in effect.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of April 25, 2002 certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
any person known by the Company to be the beneficial owner of more than 5% of
the Company's voting securities, (ii) each director and each nominee for
director to the Company, (iii) each of the executive officers named in the
Summary Compensation Table appearing herein, and (iv) all executive officers and
directors of the Company as a group.
Name Number of Percent
Shares of Total
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KuwAm Corporation(1) 461,714 6.1%
Wirt D. Walker, III (2)(3) 871,616 11.4%
N. Gene Criss (3) 326,970 4.3%
Stephen R. Buren (3) 150,905 2.0%
John deHavilland(3) 100,303 1.3%
Matthew J. Goodman (3) 59,045 *
Carl R. Gull, III (3) 16,000 *
All Officers and Directors 1,524,839 20%
as a Group (6 persons) (4)
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* Less than one percent
(1) KuwAm Corporation is a Washington, DC based private investment firm. The
shareholders of KuwAm include Wirt D. Walker, III, the Chairman of the
Board of Directors of the Company. Mr. Walker is also the Managing Director
of KuwAm.
(2) Includes 68,500 shares held by Mr. Walker's son, 30,000 shares owned by a
trust for the benefit of Mr. Walker's son and 130,000 shares owned by a
trust for the benefit of Mr. Walker's mother, both of which Mr. Walker is
the trustee. Does not include shares owned by KuwAm Corporation Mr. Walker
may be deemed to own beneficially by virtue of his position as Managing
Director of KuwAm Group.
(3) Includes shares issuable upon exercise of options that are exercisable
within 60 days, as follows: Mr. Walker, 233,334 shares; Mr. Criss, 266,667
shares; Mr. Buren, 85,000 shares; Mr. deHavilland, 40,000 shares: Mr. Gull,
16,000 shares; and Mr. Goodman, 38,245 shares.
(4) At April 25, 2002, executive officers and directors of the Company as a
group (6 persons) held options to purchase an aggregate of 1,857,883 shares
of Common Stock, representing approximately 60% of outstanding options at
that date. The numbers set forth in this table include an aggregate of
679,246 shares underlying options, which are exercisable within 60 days of
such date.
Item 13. Related Party Transactions
On May 9, 2001, the Company borrowed $200,000 in the form of an
unsecured note payable bearing interest at 9% and due on demand from an entity
affiliated with the Company's Chairman of the Board of Directors. On August 3,
2001, the Company issued 200,000 shares of common stock having a fair value at
the date of issue of $120,000 in exchange for a $100,000 reduction in the note
payable and interest expense of $20,000. On October 18, 2001, the affiliate
assigned the note payable with an outstanding balance of $85,000 to a
stockholder.
At December 31, 2001, amounts payable for brochures and publications to a
company affiliated with the Chairman of the Board of Directors were
approximately $33,000. Purchases from this entity were approximately $38,000,
$15,000 and $200,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.
In prior years, the Company extended financing for aircraft and spare parts sold
to an international dealer, Authorized Sales and Service Representative (ASSR),
owned by a former director and major shareholder of the Company, under a line of
credit of up to $5,000,000. At December 31, 2001, the unpaid balance on this
credit line was $1,529,889. The Company has made efforts to collect the amount
owed under this line, including repeated requests for payment, attempts to
obtain or cancel approximately 800,000 shares of common stock of the Company
collateralizing the line and attempts to block ownership transfers of said
shares. However, during 2001, the ASSR went out of business and the individual
suffered other business reversals. In addition, the individual resigned from the
Company's Board of Directors in 2001 and all of his stock options were
cancelled. Due to the uncertainties relating to ultimate collectibility, during
the fourth quarter of 2001, the Company recorded bad debt expense relating to
this line of credit for the outstanding balance of $1,529,889. In addition, the
Company wrote off accrued, unpaid interest of $115,977. Bad debt expense of
$1,529,889 is recorded in other operating expenses and the write-off of interest
of $115,977 is recorded as an offset to interest income in the 2001 statement of
operations. Management intends to continue to attempt to collect on amounts owed
and continue to attempt to take possession of the common stock collateralizing
the line.
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 30th day of April 2002.
AVIATION GENERAL INCORPORATED
/s/ WIRT D. WALKER, III
By: Wirt D. Walker, III
Chairman of the Board