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Flight International Group Inc – ‘10QSB’ for 1/31/98

As of:  Tuesday, 3/17/98   ·   For:  1/31/98   ·   Accession #:  890163-98-48   ·   File #:  0-17066

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/17/98  Flight International Group Inc    10QSB       1/31/98    3:131K                                   Starkey & Henricks/FA

Quarterly Report — Small Business   —   Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                    16     51K 
 2: EX-10       Material Contract                                     30    143K 
 3: EX-27       Financial Data Schedule                                1      6K 


10QSB   —   Quarterly Report — Small Business
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 1. Condensed Financial Statements
14Item 2. Changes in Securities. None
"Item 3. Defaults Upon Senior Securities. None
"Item 4. Submission of Matters to a Vote of Security Holders
"Item 5. Other Information. None
"Item 6. (a). Exhibits
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U.S. Securities and Exchange Commission, Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 2-87778A THE FLIGHT INTERNATIONAL GROUP, INC. ------------------------------------ (Exact name of small business issuer as specified in its charter) Georgia 58-1476225 -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Newport News/Williamsburg International Airport, Newport News, VA 23602 -------------------------------------------------------------------------------- (Address of principal executive offices) (757) 886-5500 -------------------------------------------------------------------------------- Issuer's telephone number -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 No X . APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No X APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's class of common equity, as of the latest practicable date: As of March 10, 1998, there were 1,013,976 shares of the issuer's New Common Stock, par value $.01 per share, issued and outstanding. Transitional Small Business Disclosure Format [check one]: Yes No X
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PART 1 FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS The Flight International Group, Inc. (the "Company") files herewith condensed consolidated balance sheets of the Company and its subsidiaries as of January 31, 1998 (unaudited) and April 30, 1997 (the Company's most recent fiscal year), unaudited condensed consolidated statements of operations for the three months and nine months ended January 31, 1998 and 1997, and unaudited condensed consolidated statements of cash flows for the nine months ended January 31, 1998 and 1997, together with unaudited condensed notes thereto. In the opinion of management of the Company, the financial statements reflect all adjustments, all of which are normal recurring adjustments, necessary to fairly present the financial condition of the Company for the interim periods presented. Operating results for any quarter are not necessarily indicative of results for any future period. The financial statements included in this report on Form 10-QSB should be read in conjunction with the audited financial statements of the Company and the notes thereto included in the annual report of the Company on Form 10-KSB for the year ended April 30, 1997. 2
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The Flight International Group, Inc. Condensed Consolidated Balance Sheets Assets [Enlarge/Download Table] January 31, 1998 April 30, 1997 (Unaudited) --------------------- ---------------------- Current Assets Cash $347,298 $231,111 Accounts Receivable, net 1,999,534 2,230,370 Inventories 2,102,655 1,790,890 Prepaid expenses, deposits and other 1,676,588 1,416,076 --------------------- ---------------------- Total current assets 6,126,075 5,668,447 Property and equipment, net 4,226,976 4,266,598 Other assets 24,778 28,323 --------------------- ---------------------- $10,377,829 $9,963,368 ===================== ====================== The accompanying notes are an integral part of these financial statements. 3
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The Flight International Group, Inc. Condensed Consolidated Balance Sheets Liabilities and Stockholders' Equity [Enlarge/Download Table] January 31, 1998 April 30, 1997 (Unaudited) ---------------------- ---------------------- Current Liabilities Accounts payable $531,987 $326,406 Deferred revenue 1,037,913 769,547 Accrued expenses and other liabilities 1,517,686 1,775,972 Notes Payable 0 0 Long-term debt due currently 569,757 640,351 ---------------------- ---------------------- Total current liabilities 3,657,343 3,512,276 Other non-current liabilities 684,746 400,543 Deferred revenue 691,942 1,090,191 Long-term debt, less current maturities 3,255,827 3,282,068 ---------------------- ---------------------- Total liabilities 8,289,858 8,285,078 ---------------------- ---------------------- Stockholders' equity Common stock, $.01 par value, 10,000,000 shares authorized, 1,013,976 issued and outstanding 10,140 10,140 Additional paid in capital 1,009,386 1,009,386 Treasury stock (1,769) (1,769) Retained Earnings 1,070,214 660,533 ---------------------- ---------------------- Total stockholders' equity 2,087,971 1,678,290 $10,377,829 $9,963,368 ====================== ====================== The accompanying notes are an integral part of these financial statements. 4
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The Flight International Group, Inc. Unaudited Condensed Consolidated Statements of Operations [Enlarge/Download Table] For the Three Months Ended For the Nine Months Ended January 31, 1998 January 31, 1997 January 31, 1998 January 31, 1997 -------------------------------------- ----------------------------------------- Revenues $4,155,102 $4,214,062 $15,835,253 $13,280,519 Operating costs and expenses Costs of services 3,647,974 3,773,253 13,152,697 10,667,694 Gain on disposal of assets (19,647) (18,657) (55,981) (54,991) Depreciation and amortization 137,584 143,128 416,005 443,912 General, corporate and administrative 537,584 523,132 1,628,279 1,503,831 -------------------------------------- ----------------------------------------- Total operating costs and expenses 4,303,495 4,420,856 15,141,000 12,560,446 Income (loss) before other (148,393) (206,794) 694,253 720,073 expenses Other expenses Interest expense 95,210 118,978 271,526 313,765 Income tax (1,879) 3,338 13,046 3,605 -------------------------------------- ----------------------------------------- Total other expenses 93,331 122,316 284,572 317,370 Net income (loss) $(241,724) $(329,110) $409,681 $402,703 ======================================= ======================================== Net income (loss) per common $(0.24) $(0.33) $0.40 $0.40 ======================================= ======================================== share - basic Weighted average number of shares 1,013,976 998,976 1,013,976 998,976 ======================================= ======================================== The accompanying notes are an integral part of these financial statements. 5
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The Flight International Group, Inc. Unaudited Condensed Consolidated Statements of Cash Flows [Enlarge/Download Table] For the Nine Months Ended January 31, 1998 January 31, 1997 --------------------------------------------------- Operating Activities Net income $409,681 $402,703 Adjustments to reconcile net income to net cash provided by (used in) operating activities Depreciation and amortization 416,005 443,912 Changes in operating assets and liabilities Accounts receivable 230,836 (908,342) Inventories (311,765) 19,449 Prepaid expenses, deposits, and other (260,512) (845,832) Accounts payable 205,581 291,658 Accrued expenses and other liabilities (258,286) 396,230 Other non-current liabilities (engine reserves) 284,203 87,582 Deferred revenue (129,883) (198,837) --------------------------------------------------- Net cash provided by (used in) operating activities 585,860 (311,477) Investing activities Sale (Purchase) of property and equipment (376,383) (304,369) Net (increase) decrease in other assets 3,545 (19,016) --------------------------------------------------- Net cash provided by (used in) investing activities (372,838) (323,385) Financing activities Short term borrowing 0 71,461 Long term borrowing 1,338,750 0 Repayment of long-term debt (1,435,585) (507,893) --------------------------------------------------- Net cash provided by (used in) financing activities (96,835) (436,432) Net (decrease) increase in cash and 116,187 (1,071,294) cash equivalents Cash and cash equivalents, beginning of period 231,111 1,178,779 Cash and cash equivalents, end of period $347,298 $107,485 =================================================== Supplemental disclosures of cash flow information Interest paid 155,266 191,723 Income taxes paid 0 3,605 The accompanying notes are an integral part of these financial statements. 6
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THE FLIGHT INTERNATIONAL GROUP, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Flight International Group, Inc. (the "Company") is an aviation services company that performs military training services using specially modified commercial aircraft, principally under contracts with the United States Department of Defense, other government agencies and foreign countries. In addition, the Company has established a market for training and testing in the aerospace industry. The Company also operates a fixed base operation ("FBO") and FAA licensed repair station at the Newport News/Williamsburg International Airport. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. In 1997, the Company adopted Statement of Accounting Standard #128 "Earnings Per Share", which revises disclosure requirements and simplifies existing computational guidelines. The Statement became effective for periods ended after December 15, 1997. Net income/loss per common share is computed by dividing the income/loss by the weighted average number of shares of common stock outstanding during the year. 2. NOTES PAYABLE On October 16, 1996, the Company entered into a Factoring Agreement (the "Agreement") with Heller Small Business Finance, a division of Heller Financial, Inc. ("Heller"). The Agreement granted Heller an assignment of the CAS-MOS contract (see Item 2) accounts receivable and proceeds thereon as collateral for a line of credit not to exceed $2,000,000. The term of the Agreement was two years, with an option for the Company to terminate the Agreement after one year, if the Company was able to obtain traditional bank financing. Heller charged a discount fee of .8% of the invoice amount purchased and an interest rate of prime plus 1% until the invoice was paid. The Heller Agreement included a minimum fee to Heller, inclusive of all interest charges, of $60,000 per annum. 7
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On August 28, 1997, Heller exited the small business factoring market and sold, transferred and assigned the Agreement to Metro Factors, Inc. ("Metro"). All terms and conditions under the Agreement remained the same until October 1, 1997, when Metro and the Company agreed to amend the terms. The discount fee was lowered to .4% for funding periods of 1-30 days, with an additional .1% for each 15 day period thereafter. The minimum fee was reduced to $12,000 per annum. The term of the Agreement remained the same and the Company still had a right to exit early, if it was able to obtain traditional bank financing. No amounts were outstanding on this line as of January 31, 1998. This Agreement was terminated subsequent to the end of the Quarter (See Note 5). 3. LONG TERM DEBT On January 15, 1998 the Company refinanced a loan secured by two aircraft. The new loan, which is now secured by only one aircraft, is in the amount of $1,338,750 payable over 84 months at a fixed rate of 9.25%. Payments will be $15,937.50 in principal per month plus interest in arrears. Proceeds were used to payoff the existing loan ($956,690) with the remaining balance used to meet working capital requirements. The loan is guaranteed by an officer of the Company. 4. INCOME TAXES The Company has substantial net operating loss carry forwards available to offset against current income. However, the Company will be responsible for certain taxes payable as a result of the alternative minimum tax, and has made provisions for such taxes. 5. SUBSEQUENT EVENT On February 25, 1998, the Company entered into a line of credit with Crestar Bank ("Crestar") for all short term financing needs. The new agreement, which replaces the agreement with Metro, which has now been terminated, provides for up to $2,000,000 in credit. The loan is represented by a demand note which may be payable at any time upon demand of Crestar. The Company will be obligated to pay Crestar interest at prime rate plus one-half percent of the average balance outstanding. The line is secured by the Company's accounts receivable and an assignment of the CAS-MOS contract. 8
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BACKGROUND AND GENERAL INFORMATION The Company is an aviation services company that performs military training services using modified commercial aircraft, principally under contract with the United States Department of Defense and other government agencies and foreign countries. In addition, with the use of these aircraft, the Company has established a market for training and testing in the aerospace industry. The Company also operates a fixed base operation and FAA licensed repair station at the Newport News/Williamsburg International Airport. The Company and several of its affiliates emerged from bankruptcy protection in December 1994. In its first two full fiscal years since emerging from bankruptcy, and in the period subsequent thereto, the Company has increased revenue, obtained a major long-term contract described in the next paragraph, and has generated positive net income (after extraordinary item in 1996) for the years ended April 30, 1997 and 1996 and for the nine months ended January 31, 1998. In August 1996, the Company was awarded a major new contract. The Commercial Air Services - Military Operations Support (CAS-MOS) contract is a derivative of the original government contract won by the Company in 1980 and operated until September 1993. The new contract began on October 1, 1996 and runs for one base year with four option years. The Navy has exercised the first option year of the contract (Oct. 1, 1997 - Sept. 30, 1998). Total revenue recognized from the CAS-MOS contract for the quarter ended January 31, 1998 was approximately $2.5 million. RESULTS OF OPERATIONS REVENUE Total revenues for the three months ended January 31, 1998 and 1997 were $4,155,102 and $4,214,062, respectively. The 1% decrease in revenue is primarily due to exceptionally poor weather conditions on both the east and west coasts, forcing cancellation 9
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of numerous training flights on the CAS-MOS contract. These flights will be rescheduled into later quarters and should have a positive effect on revenue before September 30, 1998. Maintenance and FBO revenues increased by 3% and 6%, respectively. 9
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Revenue increased 19% for the nine months ended January 31, 1998, principally due to the CAS-MOS contract. Maintenance operations, which accounted for 8% of total Company revenues, dropped 44% from the prior year due to customer aircraft modifications completed in the first quarter of the fiscal year ended April 30, 1997. FBO revenue, which accounted for 8% of total revenue, increased by 11% for the nine month period. COSTS OF SERVICES Costs of services for the three months ended January 31, 1998 and 1997 were $3,647,974 and $3,773,253, respectively. The 3% decrease in costs of services was due to cancellation of training services due to poor weather conditions. For the nine months ended January 31, 1998 and 1997, the costs of services were $13,152,697 and $10,667,694, respectively. The 23% increase for the nine months is principally due to the increased costs associated with aircraft operations on the CAS-MOS contract. GENERAL CORPORATE AND ADMINISTRATIVE General corporate and administrative expenses for the three months ended January 31, 1998 and 1997 were $537,584 and $523,132, respectively. For the nine months ended January 31, 1998 and 1997, general corporate and administrative expenses were $1,628,279 and $1,503,831, respectively. The 3% increase in the three month and 8% increase in the nine month periods are principally due to staffing changes needed to handle the increased revenues, along with an increase in property taxes on the increased number of aircraft in operation. Marketing expenses also increased by 23% as a result of increased activity in that area. INTEREST Interest expense for the three months ended January 31, 1998 and 1997 was $95,210 and $118,978, respectively. For the nine months ended January 31, 1998 and 1997, interest expense was $271,526 and $313,765, respectively. The 20% and 13% decreases in interest expense for the three month and nine month periods ended January 31, 1998 over the comparable prior year periods is principally due to the scheduled pay off of long term debt. NET INCOME(LOSS) 10
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As a result of the foregoing, the Company's net loss for the three months ended January 31, 1998 was $241,724, or $.24 per share of the Company's common stock, compared with net loss of $329,110, or $.33 per share for the three months ended January 31, 1997. For the nine months ended January 1998, the Company's net income was $409,681, or $.40 per share, compared to $402,703, or $.40 per share for the nine months ended January 31, 1997. The weighted average number of shares used in computing per share earnings for all periods was 1,013,976 for the current year and 998,976 for the prior year. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its operations primarily through cash flows from operations and short term borrowing from the factoring agreement discussed below. The Company's operating activities provided cash of $585,860 for the nine months ended January 31, 1998, while using $311,477 in the comparable prior year period. In addition, on January 15, 1998 the Company refinanced a loan secured by two aircraft. The new loan is for $1,338,750 payable over 84 months at a fixed rate of 9.25%. Payments will be $15,937.50 in principal plus interest in arrears. Proceeds were used to pay off the existing loan ($956,690) with the remaining balance used to meet working capital requirements. On October 16, 1996, the Company entered into a Factoring Agreement (the "Agreement") with Heller Small Business Finance, a division of Heller Financial, Inc. ("Heller"). The Agreement granted Heller an assignment of the CAS-MOS contract accounts receivable and proceeds thereon as collateral for a line of credit which is expected not to exceed $2,000,000. The term of the Agreement is two years, with an option for the Company to terminate the Agreement after one year, if the Company is able to obtain traditional bank financing. Heller charged a discount fee of .8% of the invoice amount purchased and an interest rate of prime plus 1% until the invoice was paid. The Agreement included a minimum fee to Heller, inclusive of all interest charges, of $60,000 per annum. On August 28, 1997, Heller exited the small business factoring market and sold, transferred and assigned the Agreement to Metro 11
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Factors, Inc. ("Metro"). All terms and conditions under the Agreement remained the same until October 1, 1997, when Metro and the Company agreed to amend the terms. The discount fee was lowered to .4% for funding periods of 1-30 days, with an additional .1% for each 15 day period thereafter. The minimum fee was reduced to $12,000 per annum. Other terms of the Agreement remained the same. No balance was due Metro as of January 31, 1998. On February 25, 1998, the Company entered into a line of credit with Crestar Bank ("Crestar") for all short term financing needs. The new agreement, which replaces the agreement with Metro, which has now been terminated, provides for up to $2,000,000 in credit. The loan is represented by a demand note which may be payable at any time upon demand of Crestar. The Company will be obligated to pay Crestar interest at prime rate plus one-half percent of the average balance outstanding. The line is secured by the Company's accounts receivable and an assignment of the CAS-MOS contract. 12
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PART II - OTHER INFORMATION Item 1. Legal Proceedings. To the best knowledge of the Company, it is not a party to any legal proceedings or litigation. The Company knows of no such litigation being threatened or contemplated. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None Item 6. (a) Exhibits. 10.1 Documents Relating to Crestar Bank Loan 10.2 Documents Relating to Wachovia Bank Refinancing 27.1 Financial Data Schedule (b) Reports on Form 8-K. None 13
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SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 16, 1998 THE FLIGHT INTERNATIONAL GROUP, INC. By: /s/ David E. Sandlin ----------------------------------- David E. Sandlin Principal Executive Officer By: /s/ Wayne M. Richmon ----------------------------------- Wayne M. Richmon Principal Financial Officer 14
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EXHIBIT INDEX 10.1 Documents Relating to Crestar Bank Loan 10.2 Documents Relating to Wachovia Bank Refinancing 27.1 Financial Data Schedule 15

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘10QSB’ Filing    Date First  Last      Other Filings
9/30/98910
Filed on:3/17/98
3/16/9815
3/10/981
2/25/98813
For Period End:1/31/98113
1/15/98812
12/15/977
10/1/97813
8/28/97812
4/30/9721110KSB40,  10KSB40/A
1/31/9721210QSB
10/16/96712
10/1/969
4/30/96910KSB40,  10KSB40/A
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Filing Submission 0000890163-98-000048   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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