================================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                             FORM 10-Q


------
X     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
------
      SECURITIES EXCHANGE ACT OF 1934

      For the quarterly period ended June 30, 1999

                                 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 7,078,520 Shares of Common Stock Outstanding as of July 15, 1999.


================================================================================
<PAGE>



PART I. FINANCIAL INFORMATION
ITEM  I. FINANCIAL STATEMENTS

                     AVIATION GENERAL, INCORPORATED
                  CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                     (Unaudited)
                                                                       June 30,             December 31,
                                                                         1999                   1998
                                                                  -------------------     ------------------
<S>                                                               <C>                     <C>
                               ASSETS
Current Assets:
   Cash and cash equivalents                                                $364,516               $645,706
   Investment in debt securities - related party                             200,000              1,000,000
   Accounts receivable                                                       213,152                  6,941
   Notes receivable from related party                                     1,508,320              1,507,843
   Notes receivable                                                           21,501                 21,286
   Inventories                                                             5,818,234              5,783,398
   Prepaid expenses and other assets                                         324,555                259,860
                                                                  -------------------     ------------------
      Total current assets                                                 8,450,278              9,225,034
                                                                  -------------------     ------------------

Property and equipment:
   Office equipment and furniture                                            348,323                347,565
   Vehicles and aircraft                                                      84,021                 84,021
   Manufacturing equipment                                                   358,332                358,332
   Tooling                                                                   527,496                525,536
   Leasehold improvements                                                    311,764                309,144
                                                                  -------------------     ------------------
                                                                           1,629,936              1,624,598
   Less: Accumulated depreciation                                           (905,302)              (850,313)
                                                                  -------------------     ------------------
      Net property and equipment                                             724,634                774,285
                                                                  -------------------     ------------------

Other assets:
   Notes receivable - less current maturities                                135,388                148,649
                                                                  ===================     ==================
      Total other assets                                                     135,388                148,649
                                                                  ===================     ==================
                                                                          $9,310,300            $10,147,968
                                                                  ===================     ==================

              LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
   Accounts payable                                                         $388,491               $622,618
   Accrued expenses                                                          357,068                343,100
   Refundable deposits                                                       146,855                252,498
   Notes payable                                                             781,150                600,000
                                                                  -------------------     ------------------
      Total current liabilities                                            1,673,564              1,818,216
                                                                  -------------------     ------------------

   Long-term debt                                                                  -                      -

Shareholders' investment (deficit):
   Preferred stock, $.01 par value, 5,000,000
      shares authorized; no shares outstanding                                     -                      -
   Common stock, $.50 par value, 20,000,000
      shares authorized; 7,078,520 shares
      issued and outstanding at June 30, 1999
      and 7,280,548 shares issued and outstanding
      at December 31, 1998                                                 3,539,259              3,640,274
   Additional paid-in capital                                             36,917,551             37,178,230
   Retained earnings (deficit)                                           (32,820,074)           (32,488,752)
                                                                  -------------------     ------------------
      Total shareholders' investment                                       7,636,736              8,329,752
                                                                  -------------------     ------------------
                                                                                          ==================
                                                                          $9,310,300            $10,147,968
                                                                  ===================     ==================
</TABLE>

The accompanying notes are an integral part of these financial statements.



<PAGE>


                     AVIATION GENERAL, INCORPORATED
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
                               (Unaudited)

<TABLE>
<CAPTION>

                                                                   Three Months Ended June 30,
                                                               1999                          1998
                                                       ----------------------       -----------------------
<S>                                                    <C>                          <C>
Net sales - aircraft                                              $2,660,398                    $2,402,010
Net sales - service                                                  394,712                       231,888
                                                       ----------------------       -----------------------
   Total net sales                                                 3,055,110                     2,633,898
                                                       ----------------------       -----------------------

Cost of sales - aircraft                                           2,119,402                     2,162,718
Cost of sales - service                                              275,985                       245,360
                                                       ----------------------       -----------------------
   Total cost of sales                                             2,395,387                     2,408,078
                                                       ----------------------       -----------------------

Gross margin (deficit)                                               659,723                       225,820
                                                       ----------------------       -----------------------

Other operating expenses:
   Product development and engineering costs                          75,233                        75,258
   Selling, general and administrative expenses                      573,417                       670,091
                                                       ----------------------       -----------------------
     Total other operating expenses                                  648,650                       745,349
                                                       ----------------------       -----------------------

Operating income (loss)                                               11,073                      (519,529)
                                                       ----------------------       -----------------------

Other income (expenses):
   Other income                                                       54,534                        86,783
   Interest expense                                                  (17,144)                         (471)
   Other expense                                                        (219)                       (2,135)
                                                       ----------------------       -----------------------
   Total other income (expenses)                                      37,171                        84,177
                                                       ----------------------       -----------------------

Net income (loss)                                                    $48,244                     ($435,352)
                                                       ======================       =======================

Net income (loss) per share:
   Weighted average common shares
      outstanding, basic and diluted                               7,171,108                     7,280,548
                                                       ----------------------       -----------------------

   Income (loss) per share, basic and diluted                          $0.01                        ($0.06)
                                                       ======================       =======================

</TABLE>



The accompanying notes are an integral part of these financial statements.



<PAGE>



                      AVIATION GENERAL, INCORPORATED
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)

<TABLE>
<CAPTION>

                                                                         Six Months Ended June 30,
                                                                     1999                         1998
                                                            -----------------------      -----------------------
<S>                                                         <C>                          <C>
Net sales - aircraft                                                    $4,305,051                   $5,040,693
Net sales - service                                                      1,008,351                      516,434
                                                            -----------------------      -----------------------
   Total net sales                                                       5,313,402                    5,557,127
                                                            -----------------------      -----------------------

Cost of sales - aircraft                                                 3,860,643                    4,516,432
Cost of sales - service                                                    646,737                      487,204
                                                            -----------------------      -----------------------
   Total cost of sales                                                   4,507,380                    5,003,636
                                                            -----------------------      -----------------------

Gross margin (deficit)                                                     806,022                      553,491
                                                            -----------------------      -----------------------

Other operating expenses:
   Product development and engineering costs                               154,271                      153,410
   Selling, general and administrative expenses                          1,063,389                    1,309,102
                                                            -----------------------      -----------------------
     Total other operating expenses                                      1,217,660                    1,462,512
                                                            -----------------------      -----------------------

Operating income (loss)                                                   (411,638)                    (909,021)
                                                            -----------------------      -----------------------

Other income (expenses):
   Other income                                                            111,401                      239,648
   Interest expense                                                        (30,168)                      (3,232)
   Other expense                                                              (916)                      (4,243)
                                                            -----------------------      -----------------------
   Total other income (expenses)                                            80,317                      232,173
                                                            -----------------------      -----------------------

Net loss                                                                 ($331,321)                   ($676,848)
                                                            =======================      =======================

Net loss per share:
   Weighted average common shares
      outstanding, basic and diluted                                     7,220,001                    7,280,548
                                                            -----------------------      -----------------------

   Loss per share, basic and diluted                                        ($0.05)                      ($0.09)
                                                            =======================      =======================
</TABLE>



The accompanying notes are an integral part of these financial statements.



<PAGE>


                        AVIATION GENERAL, INCORPORATED
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)

<TABLE>
<CAPTION>

                                                                              Six Months Ended June 30,
                                                                            1999                      1998
                                                                    ---------------------      --------------------
<S>                                                                 <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                    ($331,321)                ($676,848)
   Adjustments to reconcile net loss to
      net cash provided by (used in) operating activities---
      Depreciation and amortization                                               54,989                    52,248
      Write-off of fixed assets (net)                                                  -                         -
      Changes in operating assets and liabilities,
         excluding cash:
         Accounts receivable                                                    (206,211)                  326,389
         Notes receivable - related parties                                         (477)                   11,557
         Notes receivable                                                         13,046                    14,375
         Inventories                                                             (34,836)                  576,014
         Prepaid expense and other assets                                        (64,696)                  (42,330)
         Accounts payable                                                       (234,127)                  105,227
         Accrued expenses                                                         13,968                    58,952
         Refundable deposits                                                    (105,643)                  160,897
                                                                    ---------------------      --------------------
            Net cash provided by (used in) operating activities                 (895,308)                  586,481
                                                                    ---------------------      --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                           (5,338)                  (66,784)
   Investment in Notes - related party                                                 -                  (600,000)
   Proceeds from note repayment - related party                               800,000.00
   Investment in certificates of deposit                                               -                  (624,845)
   Proceeds from sale of property and equipment                                        -                         -
                                                                    ---------------------      --------------------
      Net cash provided by (used in) investing activities                        794,662                (1,291,629)
                                                                    ---------------------      --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from short-term borrowings from related parties                      181,150                         -
   Purchase of treasury stock                                                   (361,694)                        -
   Repayments of borrowings from bank line                                             -                  (100,000)
                                                                    ---------------------      --------------------
      Net cash provided by (used in) financing activities                       (180,544)                 (100,000)
                                                                    ---------------------      --------------------
Net increase (decrease) in cash                                                 (281,190)                 (805,148)
Cash and cash equivalents at beginning of period                                 645,706                 1,022,024
                                                                    ---------------------      --------------------
Cash and cash equivalents at end of period                                      $364,516                  $216,876
                                                                    =====================      ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
      Cash paid during the period for:
         Interest                                                               $ 28,796                     $ 471
         Income taxes                                                                  -                         -
</TABLE>




The accompanying notes are an integral part of these financial statements.


<PAGE>


              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, 1999 and December 31, 1998, and the results
of operations  for the three month and six month periods ended June 30, 1999 and
1998,  and the cash flows for the six month periods ended June 30, 1999 and 1998
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 1998 Annual Report on Form
10-K.


2. The earnings  per share of common  stock were  computed by using the weighted
average number of shares of common stock  outstanding  during the period.  Basic
and diluted amounts are the same for all periods presented.


3. The Company  purchased  219,450  shares of its common  stock at an  aggregate
purchase price of $396,537.50  from its majority  shareholder  during the period
beginning  March 11, 1999 through June 29, 1999.  This price was consistent with
shares  trading  freely on the Nasdaq  SmallCap  Market on that date. A total of
17,422  shares were  issued to the  accounts of  qualified  participants  in the
employees' 401(k) program.  The balance of the common stock purchased,  totaling
202,028, shares was cancelled.

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, 1999          December 31, 1998

  Raw materials                          $3,295,737               $3,112,257
  Work in process                           640,952                  602,457
  Demonstration aircraft                 1 ,241,323                  987,325
  Used aircraft                             640,222                1,081,359

         Total inventories               $5,818,234               $5,783,398


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. 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  and  unjustified
claims.  The Company is not insured for  product  liability  claims.  Management
believes there is no litigation  outstanding which would have a material adverse
effect on the financial position or operations of the Company.

6. Since  commencement  of production in 1992,  annual  revenues have  increased
significantly  and annual losses have  substantially  declined,  concurrent with
ongoing  investment in the Company's future.  Cash needs have been financed with
debt,  private investor capital,  proceeds from an initial public offering,  and
proceeds from subsequent stock issuances.  The Company  continues to broaden its
general aviation capabilities by increasing its business in the pre-owned piston
and jet  markets.  These  markets  are much  larger than the market for new high
performance, single engine aircraft. Furthermore, this diversifies the Company's
business and revenue base and is synergistic with the  manufacturing,  marketing
and support services of our high performance, single engine Commander aircraft.

         Management  believes the reduction for 1998 in net loss from operations
and the  continued  improvements  in margins for 1999 is  attributable  to plans
implemented  in late 1996 and 1997 to  provide  new  revenues  for the  Company.
During 1998 the Company  continued  to expand the  Aviation  Services  Division,
which sells pre-owned aircraft and markets refurbishment services. Also in 1998,
the Company expanded its efforts to purchase pre-owned aircraft, accept aircraft
on trade for new units, and refurbish and sell the aircraft.  Revenue from sales
of pre-owned  aircraft  increased by 69% in 1998 and revenues from refurbishment
and service  increased  over 11%.  For the first six months of 1999 revenue from
pre-owned  aircraft  sales  increased  37% over the first six months of 1998 and
revenues from services and parts  increased 95% for the same period.  Management
expects  growth  to  continue  for both  refurbishment  services  and  pre-owned
aircraft  sales in the future.  The Company  continues to take  advantage of its
factory facilities to market upgrades to existing aircraft owners for new paint,
interior and equipment.

         In October 1998 the Company  announced  the  formation of Strategic Jet
Services,  Inc., a wholly owned  subsidiary  established  to provide  brokerage,
sale, consulting and refurbishment work for jet aircraft.  Income from this line
of business is expected to begin improving the Company's  profitability in 1999.
During the second  quarter of 1999,  a brokerage  commission  was earned for the
sale of a pre-owned  Boeing 727 jet. The Company is continuing to expand efforts
in this market.

         The Company introduced a new de-icing option and received certification
from the Federal Aviation  Administration in 1998, allowing equipped aircraft to
operate in known icing conditions  similar to larger,  more expensive  aircraft.
Sales of this  optional  equipment  not only  provide  additional  revenues  and
earnings,  but  also  increase  the  value  of  the  aircraft  relative  to  its
competition.

         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,  thereby  systematically
decreasing   inventories  and  payables  since  production  commenced  in  1992.
Management  has reduced the costs incurred to advertise new aircraft by focusing
its 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 completed a reorganization of its service center, paint and interior
shops  into  a   completion   center  to  focus  on  the  growing   after-market
refurbishment business.

         The  Company  has  expanded  its  operations  to include  the  Aviation
Services  Division and  Strategic  Jet  Services,  Inc.,  improved its products,
dramatically  decreased  sales  and  marketing  expenses  and  reduced  debt and
interest  expense.  Management  believes that it has made  significant  progress
since 1998 and it is  reasonable  to expect the  Company to  continue to improve
revenues,  reduce costs,  improve  operating  results and stabilize cash flow in
1999. Due to numerous factors beyond the control of the Company, there can be no
assurances that these results will be achieved.

7. On August 5,  1998,  Commander  Aircraft  Company  was merged  with  Aviation
General,  Incorporated,  a Delaware  holding  company.  Each share of  Commander
Aircraft  Company common stock was converted  into a share of Aviation  General,
Incorporated  common stock.  The merger had no direct affect upon the operations
or  management  of the  company.  The  stock  continued  to trade on the  NASDAQ
SmallCap Market under the name of Aviation General,  Incorporated and the ticker
symbol "AVGE".


<PAGE>


ITEM 2            MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
                           OPERATIONS AND FINANCIAL CONDITION

GENERAL:

For the  three  months  ended  June 30,  1999,  Aviation  General,  Incorporated
reported  revenues of $3,055,110  and net income of $48,244,  or $.01 per share,
compared to revenues for the second quarter of 1998 of $2,633,898 and a net loss
of $435,352, or $.06 per share.

For the six months ended June 30, 1999,  revenues  were  $5,313,402  compared to
$5,557,127  for the  first six  months  of 1998.  The net loss for the six month
period ended June 30, 1999 was  $331,321,  or $.05 per share,  compared to a net
loss of $676,848, or $.09 per share for the six months ended June 30, 1998.

RESULTS FROM OPERATIONS:

Revenues  from the sale of  aircraft  for the  second  quarter  of 1999  totaled
$2,660,398  compared  to  $2,402,010  for the  comparable  period  of 1998.  The
increase in revenue for the second  quarter of 1999 was the result of delivering
11 new and pre-owned aircraft plus a commission for one jet aircraft compared to
10  aircraft  sold for the second  quarter of 1998.  For the first six months of
1999 revenues  from aircraft  sales and broker  commissions  totaled  $4,305,051
compared to $5,040,693 for the  comparable  period in 1998. The decrease was due
to slower sales in the first quarter of 1999 compared to 1998. Through the first
six months of 1999, the Company  delivered 19 new,  pre-owned or brokered piston
aircraft, compared to 20 for the first six months of 1998.

Service  revenues of $394,712 for the quarter ended June 30, 1999  increased 70%
from $231,888 for the comparable  quarter in 1998. For the six months ended June
30, 1999 service revenues totaled  $1,008,351;  an increase of 95% from $516,434
for the six months  ended June 30,  1998.  The  increase in revenues  was due to
additional billings for refurbishment of pre-owned aircraft and service billings
to customers,  including one large rebuild job totaling over $240,000 during the
first quarter of 1999.

Cost of aircraft  sales for the three month period ended June 30, 1999 decreased
to $2,119,402  from  $2,162,718  for the three month period ended June 30, 1998.
The  decrease  was due  primarily  to the  change  in mix of new  and  pre-owned
aircraft  sold  during  the  period.  For the first  six  months of 1999 cost of
aircraft sales decreased to $3,860,643 from $4,516,432 for the comparable period
in 1998. The decrease was due to the mix between new and pre-owned  piston sales
and fewer total units delivered during the period.

Cost of sales  for  service  and  parts  for the  quarter  ended  June 30,  1999
increased to $275,985  from  $245,360 for the quarter  ended June 30, 1998.  The
increase was due entirely to the increase in volume. Costs increased only 12% as
sales increased 70%, due to lower  operating  costs and increased  billings from
service and parts as  explained  above.  For the six months  ended June 30, 1999
cost of sales for service  increased  33% to $646,737  from $487,204 for the six
months  ended June 30,  1998.  The  increase  was due to the large  increase  in
revenues (up 95%).

Product  development and engineering costs remained virtually  unchanged for the
three months ended June 30, 1999  totaling  $75,233  compared to $75,258 for the
comparable  period in 1998.  For the six  months  ended  June 30,  1999  product
development and engineering  expenses totaled $154,271  compared to $153,410 for
the six months ended June 30, 1998.

Sales and marketing expense decreased over 19% for the three-month  period ended
June 30, 1999 to $361,866 from $448,467 for the comparable period ended June 30,
1998.  Included  in the  second  quarter  of 1999 are  costs  totaling  $51,421,
consisting  primarily of salaries,  travel and office expenses for the Company's
subsidiary,  Strategic Jet  Services,  Inc.  Advertising  and show expenses were
reduced during the second quarter of 1999 by $124,000 from the second quarter of
1998,  due to fewer  media ads and show  expenses.  All other  areas of  expense
decreased   slightly  due  to  the  reduction  in  advertising,   personnel  and
demonstrator aircraft usage.

For the six months ended June 30, 1999, sales and marketing  expenses  decreased
27% to $643,924 from $883,727 for the same period in 1998. Included in the first
six months of 1999 are costs  relating to Strategic Jet Services of $99,715.  As
well as a $141,185 reduction in advertising and show expense in 1999,  printing,
travel and salary and commission expenses were also reduced.

General and administrative  expenses decreased  approximately 5% to $211,551 for
the second quarter of 1999 from $221,624 for the second quarter of 1998. For the
six months ended June 30, 1999 general and administrative  expenses decreased to
$419,465 from $425,375 from the six months ended June 30, 1998. The decrease was
due to a number of small changes in various areas of expense, including payroll,
insurance and tax expenses.

Other  income  decreased  to $54,534  for the  quarter  ended June 30, 1999 from
$86,783 for the quarter  ended June 30, 1998.  For the six months ended June 30,
1999,  other income decreased to $111,401 from $239,648 for the six months ended
June 30,  1998.  The  decrease  was due to interest  earned on  certificates  of
deposit  held by the Company that were  converted to cash during 1998.  Interest
expense  increased  to $17,144 for the second  quarter of 1999 from $471 for the
comparable  period in 1998.  For the first six months of 1999  interest  expense
totaled  $30,168  compared  to $3,232  for the first  six  months of 1998.  This
increase was due to borrowings on the Company's line of credit with banks.

LIQUIDITY AND CAPITAL RESOURCES:

Cash  balances  decreased to $364,516 at June 30, 1999 from $645,706 at December
31, 1998. Accounts receivable increased to $213,152 at June 30, 1999 from $6,941
at December 31, 1998 due to one  pre-owned  aircraft  that was sold and awaiting
pick up by the customer. Notes receivable decreased to $156,189 at June 30, 1999
from $169,935 at December 31, 1998 due to regular monthly payments received from
the debtors.  The balance due from the note  receivable from related parties was
$1,508,320  at June 30, 1999 and  $1,507,843  at  December  31,  1998.  The note
receivable  from the related party was due June 30, 1999 and was extended  until
June 30, 2000. The note is personally  guaranteed by Mishal Al Sabah, a director
and major  shareholder of the Company,  and is collateralized by common stock of
Aviation  General,  Incorporated.  During the first quarter of 1999,  Stratesec,
Incorporated redeemed $800,000 of the $1,000,000 notes receivable.  The $200,000
of note  receivable  from  Stratesec,  Incorporated is due December 31, 1999 and
accrues  interest  at  10%,  payable  June  30 and  December  31.  The  note  is
convertible  into common stock of Stractesec,  Incorporated  at $8.50 per share,
and includes  warrants to purchase 100 shares of common stock at $2.50 per share
for each $1,000 in debt.

Inventories increased to $5,818,234 at June 30, 1999 from $5,783,398 at December
31, 1998.  Raw materials,  parts,  and work in process  increased  approximately
$222,000 while completed  aircraft  inventories  increased about $254,000 as the
company  maintained  four  demonstration  aircraft  on hand at June 30, 1999 and
three at December  31,  1998.  Inventory  of  pre-owned  aircraft  decreased  by
$441,000 at June 30, 1999 from  December  31, 1998.  Prepaid  expenses and other
current  assets  increased to $324,555 at June 30, 1999  compared to $259,860 at
December  31,  1998,  reflecting  prepayments  for parts,  material  and tooling
services.

During the first three  months of 1999  expenditures  for fixed  assets  totaled
$5,338,   which  were  primarily  for  tooling,   leasehold   improvements   and
miscellaneous  office equipment.  The Company does not plan to spend significant
funds for new property, plant and equipment for the balance of fiscal 1999. Most
expenditures  will be for repairs or  replacements of plant  equipment,  and for
computer  hardware  and software  improvements  which are not expected to exceed
$25,000 for the balance of the fiscal year.

Accounts  payable  decreased  to  $388,491  at June 30,  1999 from  $622,618  at
December 31, 1998. The decrease was due primarily to a reduction of purchases of
new  parts  and  equipment  to  support  production  of  new  aircraft  and  for
refurbishment parts and material,  which were purchased on open account. Accrued
expenses  increased  to $357,068 at June 30, 1999 from  $343,100 at December 31,
1998.  The  increase in accrued  expenses is  attributable  to amounts  owed for
payroll taxes, accrued employee benefits, and miscellaneous expenses.

Refundable  deposits  decreased  to $146,855 at March 31, 1999 from  $252,498 at
December  31, 1998  reflecting  a large  deposit for service  work  applied to a
payment to restore a customer's  damaged  aircraft  which was completed and paid
during the first quarter of 1999.

Borrowings  from bank lines increased to $781,150 at June 30, 1999 from $600,000
at December 31,  1998.  The Company has two credit  facilities  in place to fund
aircraft held for sale. In addition,  a working capital revolving credit line is
expected to be in place by September 30, 1999. The note for the $600,000  credit
line at a local  bank was not  renewed  and the  balance  will be paid  from the
proceeds of the new credit facility or whenever  aircraft held as collateral are
sold.

The Company does not carry insurance for product  liability and could be subject
to substantial  financial risk in the event of an unfavorable  judgement arising
from litigation involving its products. Although the Company is not aware of any
pending  claims,  there is no guarantee  that claims will not be asserted in the
future.

Since  commencement  of  production  in 1992,  annual  revenues  have  increased
significantly  and annual losses have  substantially  declined,  concurrent with
ongoing  investment in the Company's future.  Cash needs have been financed with
debt,  private investor capital,  proceeds from an initial public offering,  and
proceeds from subsequent stock issuances.  The Company  continues to broaden its
general aviation capabilities by increasing its business in the pre-owned piston
and jet  markets.  These  markets  are much  larger than the market for new high
performance, single engine aircraft. Furthermore, this diversifies the Company's
business and revenue base and is synergistic with the  manufacturing,  marketing
and support services of our high performance, single engine Commander aircraft.

Management believes the reduction in net loss from operations is attributable to
plans implemented in late 1996 and 1997 to provide new revenues for the Company.
During 1998 the Company  continued  to expand the  Aviation  Services  Division,
which sells pre-owned aircraft and markets refurbishment services. Also in 1998,
the Company expanded its efforts to purchase pre-owned aircraft, accept aircraft
on trade for new units,  and  refurbish  and sell the  aircraft at a  reasonable
profit.  Revenue from sales of pre-owned  aircraft  increased by 69% in 1998 and
revenues from  refurbishment  and service  increased over 11%. For the first six
months of 1999,  revenues from  pre-owned  aircraft sales have increased 37% and
revenues from refurbishment and service increased 95%. Management expects growth
to continue  in 1999 for both  refurbishment  services  and  pre-owned  aircraft
sales.  The Company  continues to take  advantage of its factory  facilities  to
market  upgrades  to  existing  aircraft  owners  for new  paint,  interior  and
equipment.

In October 1998 the Company  announced  the formation of Strategic Jet Services,
Inc. (SJS), a wholly owned subsidiary  established to provide  brokerage,  sale,
consulting  and  refurbishment  work for jet aircraft.  Income from this line of
business is expected to begin  improving  the Company's  profitability  in 1999.
During  the  second  quarter  of 1999,  one jet  aircraft  was sold by SJS and a
commission of $107,750 was earned.

The Company introduced a new de-icing option and received certification from the
Federal Aviation  Administration in 1998,  allowing equipped aircraft to operate
in known icing conditions similar to larger, more expensive  aircraft.  Sales of
this optional equipment not only provide additional  revenues and earnings,  but
also increase the value of the aircraft relative to its competition.

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,   thereby  systematically
decreasing   inventories  and  payables  since  production  commenced  in  1992.
Management  has reduced the costs incurred to advertise new aircraft by focusing
its 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
completed a reorganization of its service center,  paint and interior shops into
a completion center to focus on the growing after-market refurbishment business.

The  Company has  expanded  its  operations  to include  the  Aviation  Services
Division and Strategic Jet Services,  Inc., improved its products,  dramatically
decreased  sales and marketing  expenses and reduced debt and interest  expense.
Management  believes  that it has made  significant  progress  in 1998 and it is
reasonable  to expect the Company to improve  revenues,  reduce  costs,  improve
operating  results and  stabilize  cash flow in 1999.  Due to  numerous  factors
beyond the control of the Company, there can be no assurances that these results
will be achieved.

Year 2000 Compliance

The Y2K problem, or millennium bug, refers to the possibility that computers may
not perform properly on or after January 1, 2000,  because their programming may
recognize dates ending with 00 as the year 1900,  rather than the year 2000. The
problem  is  worldwide  in scope and  affects  computers  both  large and small,
including  virtually  any machine or  electronic  equipment  that uses  computer
chips.

During 1998 the Company  spent over  $45,000 to upgrade  its  internal  computer
systems to be Y2K compliant.  The Information Systems Manager, along with senior
management,  has  continued  to review key  suppliers  of parts,  materials  and
services,  as well as its banks, 401(k) provider,  and insurance  companies,  to
insure that each has a readiness plan for Y2K.  Virtually all surveyed have made
assurances  that their  systems are  compliant  or they have a specific  plan to
insure compliance in the near future.

During the second quarter of 1999, the Company  purchased a new software program
for tracking property, plant and equipment, as well as depreciation of its fixed
assets for accounting and valuation purposes. A new file server will be acquired
during  the  third  quarter  of 1999  with a total  cost for this  hardware  not
expected to exceed $10,000.

A  contingency  plan will be prepared  and  approved by October 31,  1999,  even
though  management  believes  that  they  have  successfully  addressed  the Y2K
challenge. Due to the complexity of the year 2000 issues and the interdependence
between companies,  government agencies,  utilities,  financial institutions and
other  entities,  it is  impossible to guarantee  that the  Company's  year 2000
readiness program will be completely successful.

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
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.

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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its annual  meeting of  shareholders  on June 11, 1999.  At the
meeting,  the shareholders  elected the following  individuals as members of the
Board of Directors:  Wirt D. Walker,  III, N. Gene Criss, and Mishal Yousef Saud
Al Sabah.

The voting results of the election of directors and the other matters voted upon
at the meeting are as follows:

Election of Directors:
                                                       Votes           Votes
                                                         For           Withheld
         Nominee:

Wirt D. Walker, III                                  6,507,096           2,000
N. Gene Criss                                        6,507,096           2,000
Mishal Yousef Saud Al Sabah                          6,507,096           2,000



Other Matters:
                                                                     Abstentions
         Description of                      Votes        Votes       and Broker
               Matter:                       For         Against      Non-Votes

Approval of amendment to the Company's
   1993 Stock Option Plan                  5,786,868    176,958        505,551




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/ Stephen R. Buren
                                Stephen R. Buren
                             Vice President Finance
                          (Chief Financial Officer and
                              Authorized Signatory)




Date:  August 12, 1999