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

                      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, 1998

                                OR

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


      Commission File Number:                0-21540

                   COMMANDER AIRCRAFT COMPANY
                   (Exact name of registrant as specified in its charter)


      Virginia                                            62-1363505
      (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)

         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 7,280,548 Shares of Common Stock  Outstanding as of July 31,
         1998.


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



<PAGE>




PART I. FINANCIAL INFORMATION
ITEM  I. FINANCIAL STATEMENTS

                                        COMMANDER AIRCRAFT COMPANY
                                               BALANCE SHEET
<TABLE>
<CAPTION>

                                                                     (Unaudited)
                                                                      June 30,              December 31,
                                                                        1998                    1997
                                                                  ------------------     -------------------
                              ASSETS
<S>                                                               <C>                    <C>
Current Assets:
  Cash and cash equivalents                                                $216,876              $1,022,024
  Certificates of deposits                                                1,849,690               1,224,845
  Accounts receivable                                                        16,528                 342,917
  Notes receivable from related party                                     1,008,051                 996,971
  Notes receivable                                                           40,893                  55,269
  Inventories                                                             5,034,115               5,610,129
  Prepaid expenses and other assets                                         246,145                 203,815
                                                                  ------------------     -------------------
     Total current assets                                                 8,412,298               9,455,970
                                                                  ------------------     -------------------

Property and equipment:
  Office equipment and furniture                                            340,046                 296,729
  Vehicles and aircraft                                                      84,021                  84,021
  Manufacturing equipment                                                   358,332                 354,837
  Tooling                                                                   520,618                 518,648
  Leasehold improvements                                                    255,163                 237,161
                                                                  ------------------     -------------------
                                                                          1,558,180               1,491,396
  Less: Accumulated depreciation                                          (830,188)               (777,940)
                                                                  ------------------     -------------------
     Net property and equipment                                             727,992                 713,456
                                                                  ------------------     -------------------

Other assets:
  Notes receivable from related party, less current maturities            1,100,000                 500,000
  Notes receivable - less current maturities                                247,468                 270,105
                                                                  ==================     ===================
     Total other assets                                                   1,347,468                 770,105
                                                                  ==================     ===================
                                                                        $10,487,758             $10,939,531
                                                                  ==================     ===================

             LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
  Accounts payable                                                         $375,481                $270,254
  Accrued expenses                                                          371,897                 312,945
  Refundable deposits                                                       236,077                  75,180
  Current portion of long-term debt                                           2,000                 102,000
                                                                  ------------------     -------------------
     Total current liabilities                                              985,455                 760,379
                                                                  ------------------     -------------------

  Long-term debt                                                                  -                       -

Shareholders' investment (deficit):
  Preferred stock, $100 par value, 20,000
     shares authorized; no shares outstanding                                     -                       -
  Common stock, $.50 par value,  10,000,000 shares 
     authorized;  7,280,548 shares
     issued and outstanding at June 30, 1998
     and December 31, 1997                                                3,640,274               3,640,274
  Additional paid-in capital                                             37,178,230              37,178,230
  Retained earnings (deficit)                                          (31,316,201)            (30,639,352)
                                                                  ------------------     -------------------
     Total shareholders' investment                                       9,502,303              10,179,152
                                                                  ------------------     -------------------
                                                                        $10,487,758             $10,939,531
                                                                  ==================     ===================
</TABLE>

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



<PAGE>




                                        COMMANDER AIRCRAFT COMPANY
                                         STATEMENT OF OPERATIONS
                                               (Unaudited)

<TABLE>
<CAPTION>

                                                                  Three Months Ended June 30,
                                                               1998                          1997
                                                      -----------------------       -----------------------
<S>                                                   <C>                           <C>
Net sales - aircraft                                              $2,402,010                    $1,684,802
Net sales - service                                                  231,888                       299,974
                                                      -----------------------       -----------------------
   Total net sales                                                 2,633,898                     1,984,776
                                                      -----------------------       -----------------------

Cost of sales - aircraft                                           2,162,718                     1,657,301
Cost of sales - service                                              245,360                       274,068
                                                      -----------------------       -----------------------
   Total cost of sales                                             2,408,078                     1,931,369
                                                      -----------------------       -----------------------

Gross margin (deficit)                                               225,820                        53,407
                                                      -----------------------       -----------------------

Other operating expenses:
   Product development and engineering costs                          75,258                        82,383
   Selling, general and administrative expenses                      670,091                       571,742
                                                      -----------------------       -----------------------
     Total other operating expenses                                  745,349                       654,125
                                                      -----------------------       -----------------------

Operating income (loss)                                            (519,529)                     (600,718)
                                                      -----------------------       -----------------------

Other income (expenses):
   Other income                                                       86,783                        78,185
   Interest expense                                                    (471)                      (37,334)
   Other expense                                                     (2,135)                             -
                                                      -----------------------       -----------------------
   Total other income (expenses)                                      84,177                        40,851
                                                      -----------------------       -----------------------

Net loss                                                          ($435,352)                    ($559,867)
                                                      =======================       =======================

Net loss per share:
   Weighted average common shares
      outstanding, basic and diluted                               7,280,548                     6,920,548
                                                      -----------------------       -----------------------

   Loss per share, basic and diluted                                 ($0.06)                       ($0.08)
                                                      =======================       =======================
</TABLE>




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



<PAGE>




                                          COMMANDER AIRCRAFT COMPANY
                                            STATEMENT OF OPERATIONS
                                                  (Unaudited)

<TABLE>
<CAPTION>

                                                                        Six Months Ended June 30,
                                                                    1998                          1997
                                                           -----------------------       -----------------------
<S>                                                        <C>                           <C>
Net sales - aircraft                                                   $5,040,693                    $2,438,802
Net sales - service                                                       516,434                       620,383
                                                           -----------------------       -----------------------
   Total net sales                                                      5,557,127                     3,059,185
                                                           -----------------------       -----------------------

Cost of sales - aircraft                                                4,516,432                     2,656,919
Cost of sales - service                                                   487,204                       542,004
                                                           -----------------------       -----------------------
   Total cost of sales                                                  5,003,636                     3,198,923
                                                           -----------------------       -----------------------

Gross margin (deficit)                                                    553,491                     (139,738)
                                                           -----------------------       -----------------------

Other operating expenses:
   Product development and engineering costs                              153,410                       164,701
   Selling, general and administrative expenses                         1,309,102                     1,119,981
                                                           -----------------------       -----------------------
     Total other operating expenses                                     1,462,512                     1,284,682
                                                           -----------------------       -----------------------

Operating income (loss)                                                 (909,021)                   (1,424,420)
                                                           -----------------------       -----------------------

Other income (expenses):
   Other income                                                           239,648                       168,685
   Interest expense                                                       (3,232)                      (94,084)
   Other expense                                                          (4,243)                             -
                                                           -----------------------       -----------------------
   Total other income (expenses)                                          232,173                        74,601
                                                           -----------------------       -----------------------

Net loss                                                               ($676,848)                  ($1,349,819)
                                                           =======================       =======================

Net loss per share:
   Weighted average common shares
      outstanding, basic and diluted                                    7,280,548                     6,886,482
                                                           -----------------------       -----------------------

   Loss per share, basic and diluted                                      ($0.09)                       ($0.20)
                                                           =======================       =======================
</TABLE>



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



<PAGE>




                                            COMMANDER AIRCRAFT COMPANY
                                             STATEMENT OF CASH FLOWS
                                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                              Six Months Ended June 30,
                                                                           1998                       1997
                                                                    --------------------       --------------------
<S>                                                                 <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                                  ($676,848)               ($1,349,819)
   Adjustments to reconcile net loss to
      net cash provided by (used in) operating activities---
      Depreciation and amortization                                              52,248                     75,641
      Write-off of fixed assets (net)
                                                                                      -                   (35,043)
      Changes in operating assets and liabilities, excluding cash:
         Accounts receivable                                                    326,389                  (119,993)
         Notes receivable - related parties                                      11,557                    689,047
         Notes receivable                                                        14,375                     28,061
         Inventories                                                            576,014                    537,040
         Prepaid expense and other assets                                      (42,330)                   (46,500)
         Accounts payable                                                       105,227                  (102,982)
         Accrued expenses                                                        58,952                  (200,332)
         Refundable deposits                                                    160,897                    135,331
                                                                    --------------------       --------------------
            Net cash provided by (used in) operating activities                 586,481                  (389,549)
                                                                    --------------------       --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                        (66,784)                    (7,399)
   Investment in Notes - related party                                        (600,000)                          -
   Investment in certificates of deposit                                      (624,845)                          -
   Proceeds from sale of property and equipment                                       -                    317,700
                                                                    --------------------       --------------------
      Net cash provided by (used in) investing activities                   (1,291,629)                    310,301
                                                                    --------------------       --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from short-term borrowings from related parties                           -                    100,000
   Repayments of borrowings from bank line                                    (100,000)                   (34,842)
                                                                    --------------------       --------------------
      Net cash provided by (used in) financing activities                     (100,000)                     65,158
                                                                    --------------------       --------------------
Net increase (decrease) in cash                                               (805,148)                   (14,090)
Cash and cash equivalents at beginning of period                              1,022,024                    197,303
                                                                    --------------------       --------------------
Cash and cash equivalents at end of period                                     $216,876                   $183,213
                                                                    ====================       ====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:
      Cash paid during the period for:
         Interest                                                                  $471                    $31,471
         Income taxes                                                                 -                          -

</TABLE>

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
   AND FINANCING ACTIVITIES:
1997:
   Exchange of $2,000,000  in debentures by related party for 200,000  shares of
   common stock. Repayment of accrued interest of $87,369 was waived.

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



<PAGE>



                          NOTES TO 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 Commander
Aircraft  Company as of June 30, 1998 and December 31, 1997,  and the results of
operations  for the three  month and six month  periods  ended June 30, 1998 and
1997,  and the cash flows for the six month  period ended June 30, 1998 and 1997
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 1997 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. Through January 8, 1997, an affiliate of the company's  majority  shareholder
provided  $100,000  of  unsecured  debt in the  form of a 10%  demand  note.  On
February 1, 1997,  the company  accepted the offer of its majority  shareholder,
and affiliates of the  shareholder,  to exchange  $2,000,000 of demand notes due
June 30, 1997 for 200,000  shares of newly issued common  stock.  The payment of
accrued  interest of $70,382  due for the fourth  quarter of 1996 for all demand
notes, and $16,986 accrued on the notes exchanged February 1, 1997 was waived at
the time of the exchange for common stock.  The maturity  dates of the remaining
balance of notes  totaling  $900,000 was  extended to December  31,  1997,  with
interest due and payable June 30, 1997 and December 31, 1997.


4. On October 15, 1997,  the Board of Directors  of the company  authorized  the
issuance and sale of 360,000 shares of Common Stock to KuwAm Corporation and its
partners, the company's majority shareholder,  at a purchase price of $10.00 per
share. The investment allowed the company to redeem $900,000 in 10% demand notes
and accrued interest. The company's bank lines were also reduced to the minimum,
leaving  the  company  virtually  debt  free  with  approximately  $2.1  million
available for expansion of the aviation services division and other investments.


5. 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:




<PAGE>


                                   June 30, 1998            December 31, 1997

  Raw materials                         $2,592,117                  $2,901,798
  Work in process                          714,410                     819,442
  Demonstration aircraft                   896,676                   1,132,713
  Used aircraft                            830,912                     756,176
                                 ------------------          ------------------
         Total inventories              $5,034,115                  $5,610,129


6. The company is subject to  regulation  by the FAA.  The company is subject to
inspections  by the  FAA and may be  subjected  to  fines  and  other  penalties
(including orders to cease  production) for noncompliance  with FAA regulations.
The company has a  Production  Certificate  from the FAA which  delegates to the
company the  inspection  of each  aircraft.  The sale of the  company's  product
internationally  is subject to  regulation  by  comparable  agencies  in foreign
countries.

         The company  faces the  inherent  business  risk of exposure to product
liability claims. In 1988, the company agreed to indemnify a former manufacturer
of the Commander  single engine  aircraft  against claims  asserted  against the
manufacturer with respect to aircraft built from 1972 to 1979. In 1994, Congress
enacted  the  General  Aviation   Revitalization   Act,  which   established  an
eighteen-year  statute  of  repose  for  general  aviation  manufacturers.  This
legislation  prohibits  product liability suits against  manufacturers  when the
aircraft  involved in an accident is more than  eighteen  years old. This action
effectively  eliminated all potential  liability for the company with respect to
aircraft  produced in the 1970s as of December 31, 1997.  The company's  product
liability  insurance  policy with coverage of $10 million per occurrence and $10
million  annually in the aggregate  with a deductible of $200,000 per occurrence
and annually in the  aggregate  expired  March 1, 1995.  Subsequent  to March 1,
1995,  the  company is not  insured for  product  liability  claims.  Management
believes there is no litigation  outstanding which would have a material adverse
effect on the financial position or operations of the company.

7. The company  has  experienced  recurring  losses and net cash  outflows  from
operations since its inception.  Since  inception,  the company has financed its
cash needs with debt, private investor capital,  proceeds from an initial public
offering, and proceeds from subsequent stock issuances. During 1997, the company
implemented  plans to improve its  liquidity  and  capital  and its  operational
performance.

         Management  believes  the  reduction  in net  loss  and  the  net  cash
generated  from  operating  activities  during  the first six  months of 1998 is
attributable  to the  plans  implemented  in late 1996 and 1997 to  provide  new
operating  revenues for the company.  The company created the Aviation  Services
Division ("ASD") to sell pre-owned  aircraft,  provide commissions from aircraft
brokerage  services,  and market  refurbishment  capabilities.  During 1997, the
company expanded its efforts to purchase pre-owned aircraft,  accept aircraft on
trade for new units, and, in most cases,  refurbish and resell the aircraft at a
reasonable profit. Revenues from sales of pre-owned aircraft increased by 38% in
1997 and revenues from refurbishment and service increased over 12%.  Management
expects  this trend to  continue  in 1998 as the  revenue  from sales of new and
pre-owned  aircraft  for the first six  months of 1998  increased  107% from the
first six months of 1997. The company will pursue  additional  opportunities  to
take advantage of its factory  facilities to offer upgrades to existing aircraft
owners for new paint, interior, and equipment.

         The  company  introduced  a new  de-icing  option for which it received
certification in May 1998 from the FAA, allowing aircraft so equipped 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. A number of
other improvements and new options are available on 1998 models.




<PAGE>



         In addition to the above actions to increase  revenue,  the company has
made efforts to reduce costs and cash  requirements by optimizing its production
schedule using just-in-time scheduling,  thereby decreasing inventories to their
lowest levels since  production  commenced in 1991.  Management  has reduced the
costs incurred to advertise new aircraft by focusing the advertising  efforts at
a specific  customer  profile.  Further reducing selling  expenses,  the company
completed a consolidation of sales territories which  significantly  lowered the
fixed  costs of sales  and  marketing  without  reducing  the  number  of direct
contacts with qualified customers.

         The company's liquidity was improved with the sale of 360,000 shares of
common stock to its majority  shareholder  and affiliates for $3,600,000  during
October  1997.  The company  used  approximately  $1,500,000  of the  $3,600,000
proceeds to repay 10% demand notes and other debt.  On May 1, 1998,  the company
invested $600,000 in a 10% convertible note issued by Stratesec, Incorporated, a
related  party.  The note is due  December  31, 1999 and  provides  the right to
exchange  the debt for common stock at $8.50 per share.  The note also  includes
warrants to purchase  100 shares at $2.50 per share of  Stratesec,  Incorporated
Common  Stock for each  $1,000 in debt.  The  balance of the  proceeds  from the
October 1997 equity sale is invested in short-term certificates of deposit to be
used to continue  expansion of the ASD and for other  investment  opportunities.
The company also  believes  the note  receivable  from  related  party which was
reduced by approximately  $1,100,000 in 1997 will also provide  significant cash
sources during 1998. Because of the increase in liquidity and other improvements
to operations,  management believes that the company will not require additional
borrowings  during 1998 to fund operations.  Although the majority  shareholder,
who has invested over $26 million in the company, will probably continue to fund
cash  needs of the  company if  required,  there can be no  assurance  that this
funding will continue.

         The company's ability to continue as a going concern is contingent upon
its ability to maintain adequate financing and attain profitable operations. The
financial   statements   do  not  include  any   adjustments   relating  to  the
recoverability   or   classification   of  asset   amounts  or  the  amount  and
classification  of  liabilities  that might be  necessary  should the company be
unable to continue as a going concern.  Although management believes that it has
made  significant  progress in 1997 and the first half of 1998 by  widening  its
product  line to  include  the ASD,  improving  products,  decreasing  sales and
marketing  expenses,  and reducing debt and related  interest  expense and it is
reasonable to expect the company to improve revenues,  reduce costs, and improve
operating  results and cash flow in 1998,  there can be no assurance  that these
results can be achieved.


<PAGE>



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


GENERAL:

The company  reported  sales for the second  quarter of 1998 of $2,633,898 and a
net loss of $435,352, or $.06 per share, compared to sales for the quarter ended
June 30, 1997 of $1,984,776 and a net loss of $559,867,  or $.08 per share.  For
the six  month  period  ended  June 30,  1998  the  company's  revenues  totaled
$5,557,127 and a net loss of $676,848,  or $.09 per share,  compared to revenues
of $3,059,185 and a net loss of $1,349,819, or $.20 per share for the six months
ended June 30, 1997.

Demand for both new and pre-owned  aircraft  continues to be very strong and the
company is expecting further improvement in revenues and operating margins.  The
production  schedule  for new  aircraft  has  been  increased  once in 1998  and
management  is reviewing  the  production  schedule  again to meet the increased
demand.  The  increase in revenues  was due largely to an industry  wide renewed
interest  in  general  aviation  products,  and to  increased  awareness  of the
Commander product line in the market.

The company delivered three new, six pre-owned and one consigned aircraft during
the second quarter of 1998. Aircraft deliveries through June 30, 1998 totaled 20
units  compared to 15 aircraft in the  comparable  period of 1997.  The aircraft
backlog at the  beginning  of the third  quarter of 1998 stood at  approximately
$2.5 million, with several sales added to the backlog early in July.

Cash and certificates of deposit totaled over $2,000,000 at June 30, 1998, while
borrowings   remained  at  $2,000.  The  company  invested  $600,000  in  a  10%
convertible  note  receivable due December 31, 1999, from a related party on May
1, 1998.

Management  continues to identify  opportunities  to expand its growing aviation
services   division,   which  conducts   aviation   consulting,   brokerage  and
refurbishment services for general aviation aircraft.

Subsequent to the end of the second quarter, the company's president and CEO, N.
Gene  Criss,   resigned  his  position  with  the  company,  but  continues  his
involvement  with the company  under a  consulting  contract  and remains on the
board of directors.  Wirt Walker,  III has assumed the position of President and
CEO of the company.

The company upgraded its computer hardware and software during the first quarter
of 1998 at a cost of  approximately  $50,000,  and believes that its information
system is Year 2000  compliant.  The  company  currently  is in the  process  of
assessing  the effects of the Year 2000 problem on its suppliers and other third
parties with which it has business  relationships to determine  whether they are
Year 2000 compliant and whether the problem will adversely  affect the company's
operations  or the operation of  components  used in its aircraft.  Although the
company  does  not  believe  that the key  systems  in its  aircraft,  including
instrumentation and avionics, are date-sensitive, there can be no assurance that
these systems will not require remediation.  As with all businesses, the company
is unable to predict whether there will be any disruption in service provided by
third parties,  such as utilities,  that might affect the company's  operations.
Although  the company  currently  does not  believe  that its costs of Year 2000
compliance will be material,  unforseen problems could cause costs to be greater
than anticipated.

RESULTS FROM OPERATIONS:

Revenues  from the sale of  aircraft  for the  second  quarter  of 1998  totaled
$2,402,010  compared  to  $1,684,802  for the  comparable  period  of 1997.  The
increase in revenue for the second  quarter of 1998 was the result of delivering
more pre-owned  aircraft at higher prices than the  comparable  quarter of 1997.
For the first six months of 1998 revenue from  aircraft  sales more than doubled
to  $5,040,693  compared to $2,438,802  for the six-month  period ended June 30,
1997.


<PAGE>



Service  revenues of $231,888 for the quarter ended June 30, 1998  decreased 23%
from the  comparable  quarter in 1997.  For the six months  ended June 30, 1998,
service  revenues were down by  approximately  17% from the prior year.  Several
refurbishment jobs were in process at the end of the period and will be invoiced
during the third quarter of 1998. Revenues for the first six months of 1997 were
exceptionally high due to the completion of several large  refurbishment jobs in
the Service Center.

Due to an increase in sales,  cost of aircraft  sales for the three month period
ended June 30, 1998 increased to $2,162,718 compared to $1,657,301 for the three
month period ended June 30, 1997. As a result of the increase in revenues,  cost
of aircraft  sales for the six month  period  ended June 30, 1998  increased  to
$4,516,432 from $2,656,919 for the comparable period in 1997.

Cost of sales  for  service  and  parts  for the  quarter  ended  June 30,  1998
decreased to $245,360  from  $274,068 for the quarter  ended June 30, 1997.  The
decrease was due  primarily to the  reduction in revenues from service and parts
as explained above.

Product  development and  engineering  costs decreased to $75,258 for the second
quarter of 1998, down 9% from $82,383 for the comparable period in 1997. For the
six  months  ended June 30,  1998  product  development  and  engineering  costs
decreased to $153,410,  down 7% from  $164,701 for the first six months of 1997.
Most of the cost reduction was due to the completion of the de-icing project and
less spending for outside technical assistance.

Sales and marketing expense increased for the three-month  period ended June 30,
1998, to $448,467 from  $378,461for  the comparable  period ended June 30, 1997.
For the six month period ended June 30, 1998 sales and  marketing  costs totaled
$883,727  compared to $687,540 for the comparable period in 1997. For the second
quarter of 1998, advertising and promotional expenses increased to $292,183 from
$98,250 in the second  quarter  of 1997.  Travel,  printing,  and  salaries  and
related  benefits  were lower in the first  quarter and first six months of 1998
due to fewer sales offices.

General and administrative  expenses increased approximately 15% to $221,624 for
the second quarter of 1998 from  $193,281for the comparable  period in 1997. The
increase was due to an increase in legal fees in 1998  pertaining to SEC filings
and to the  reorganization,  and to  professional  fees paid for  conversion and
upgrading of the company's  computer systems to be compliant with year 2000. All
other  administrative  costs for the second quarter of 1998  increased  slightly
from the second  quarter of 1997. For the six months ended June 30, 1998 general
and administrative expenses decreased slightly to $425,375 from $432,441 for the
six months ended June 30, 1997.

Other  income  increased  to $86,783  for the  quarter  ended June 30, 1998 from
$78,185 for the quarter  ended June 30,  1997.  The  increase was due to accrued
interest on the  $600,000  note  receivable  dated May 1, 1998 and the  interest
earned on  certificates  of deposit.  A refund of prior years'  property  taxes,
totaling  approximately  $78,000  accounted  for  most of the  increase  for the
six-month period ended June 30, 1998.  Interest expense decreased to $471 in the
second  quarter of 1998 from  $37,334  for the  comparable  period in 1997.  The
decrease was a result of the company  maintaining  very little  outstanding debt
during 1998.


<PAGE>




LIQUIDITY AND CAPITAL RESOURCES:

Cash balances decreased to $216,876 at June 30, 1998 from $1,022,024 at December
31, 1997 due to increasing the short-term  investment in certificates of deposit
by over  $600,000 to $1,849,690 at June 30, 1998.  The  certificates  of deposit
mature in August  1998 and are  expected  to be  renewed  in 30-day  increments.
Management  plans to  eventually  invest  these  funds in the  expansion  of the
Aviation Services Division.  The company used $600,000 in cash to acquire a note
from Stratesec,  Incorporated,  a related party.  Accounts  receivable  balances
decreased  to $16,528  at June 30,  1998 due to the  payment  in January  for an
aircraft  sold and  delivered  in the  prior  quarter.  Other  notes  receivable
decreased to $1,794,612 at June 30, 1998 from  $1,822,345 from December 31, 1997
due to regular monthly payments received from debtors and payment in full of one
note. The balance due from related parties increased from $1,496,971 at December
31,  1997  to  $2,108,051  at June  30,  1998,  due  primarily  to the  $600,000
convertible  note from  Stratesec,  Incorporated.  This note is due December 31,
1999,  accrues  interest at 10%,  payable  June 30 and  December 31. The note is
convertible  at $8.50 per share into common stock of  Stractesec,  Incorporated,
and includes  warrants to purchase 100 shares of common stock at $2.50 per share
for each $1,000 in debt.

Inventories decreased to $5,034,115 at June 30, 1998 from $5,610,129 at December
31, 1997.  Raw materials,  parts,  and work in process  decreased  approximately
$415,000 while completed aircraft inventories decreased about $161,000.  Prepaid
expenses  and other  current  assets  increased  to  $246,145  at June 30,  1998
compared to $203,815 at December 31, 1997, reflecting  prepayments for parts and
material.

Total fixed assets increased by $66,784 during the first six months of 1998. The
increase was primarily due to the upgrade of the Company's computer hardware and
software systems, which are year 2000 compliant as of June 30, 1998. In addition
to the above  fixed  assets  expenditures,  the  Company  does not plan to spend
significant  funds for new  property,  plant and  equipment  for the  balance of
fiscal  1998.  Most  expenditures  will be for repairs or  replacements  and for
leasehold  improvements which are not expected to exceed $50,000 for the balance
of the fiscal year.

Accounts  payable  increased  to  $375,481  at June 30,  1998 from  $270,254  at
December 31, 1997.  The increase was due primarily to purchases of new parts and
equipment to support increased  production of new aircraft and for refurbishment
parts and  material,  which were  purchased on open  account.  Accrued  expenses
increased to $371,897 at June 30, 1998 from  $312,945 at December 31, 1997.  The
increase in accrued expenses is attributable to amounts owed for the acquisition
of pre-owned  aircraft  and  increases in accrued  warranty,  payroll  taxes and
miscellaneous expenses.

Refundable  deposits  increased $160,897 to $236,077 at June 30, 1998 reflecting
the increase in backlog for new and pre-owned  aircraft.  Bank lines,  providing
the Company with borrowing capacity to $600,000,  were maintained at the minimum
$2,000 at June 30, 1998 from  $102,000 at December  31, 1997,  representing  the
Company's only borrowings.

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.  The lease  between  Commander  Aircraft  Company and the Oklahoma  City
Airport  Trust expires in October 1998.  Although  management  fully expects the
lease to be extended  for another  five years at  favorable  terms,  there is no
assurance that the lease will be negotiated.


<PAGE>



The Company has had losses and net cash outflows  since its  inception,  and its
independent  public  accountants  have  indicated  that there is doubt about its
ability to continue as a going concern. In 1997, management implemented plans to
improve  the  Company's  operational   performance  and  liquidity  and  capital
resources.  The principal elements of these plans are (i) to expand its Aviation
Services Division, which purchases,  refurbishes,  and sells pre-owned aircraft;
(ii) offer additional options on its new aircraft;  (iii) reduce inventory costs
through just-in-time  production scheduling;  and (iv) reduce marketing expenses
through  more  focused  advertising  and  implementation  of  a  more  efficient
marketing  organization.  In addition,  in October 1997, the Company's  majority
shareholder and affiliates purchased 360,000 newly issued shares of common stock
for  $3,600,000.  The Company used  approximately  $1,500,000 of the proceeds to
repay debt, leaving it virtually debt free by the end of 1997. At June 30, 1998,
over $1.8  million was  available  for  working  capital  requirements,  for the
expansion of the Aviation Services Division and other investment opportunities.





<PAGE>






PART II.  OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits - None

         (b)      Reports on Form 8-K - None






<PAGE>



                                    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.



                           COMMANDER AIRCRAFT COMPANY
                                  (Registrant)




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




Date:  August 4, 1998