SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-K

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

        For the fiscal year ended December 31, 1999

                                       OR

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

        Commission File Number:                        0-24795

                         AVIATION GENERAL, INCORPORATED

               (Exact name of registrant as specified in its charter)

      Delaware                                 73-1547645
      (State of Incorporation)                 (IRS Employer Identification No.)

      7200 NW 63rd Street
      Hangar 8, Wiley Post Airport

      Bethany, Oklahoma                                     73008
      (Address of principal executive offices)            (Zip Code)

      (405) 440-2255

      (Registrant's telephone number, including area code)

      Securities registered pursuant to Section 12(b) of the Act:

           None

      Securities registered pursuant to Section 12(g) of the Act:
           Common stock; $.50 par value

Indicate by check mark  whether the  registrant  (1) has filed all reports to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

                       Yes X No

Indicate by check mark if the disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this form 10-K. (X)

Based on the closing sales price of March 15, 2000 the aggregate market value of
the voting stock held by non-affiliates of the registrant was $2,271,481.

The number of shares  outstanding  of the  registrant's  common stock,  $.50 par
value, was 6,513,786 at March 15, 2000.

Total number of pages including cover page 43.


<PAGE>




                                     PART 1

Item 1. Business

Aviation  General  Incorporated  (the  "company")  manufactures,   markets,  and
provides  support  services  for  single  engine,  high  performance   Commander
aircraft, as well as providing sales, brokerage,  and refurbishment services for
pre-owned jet and piston-powered  aircraft.  Originally  incorporated in 1988 as
Commander  Aircraft Company,  the company is one of the few manufacturers in the
world that produces single engine,  high performance  aircraft  certified by the
Federal Aviation Administration (FAA).

Incorporated  under the laws of the  State of  Delaware  as a  holding  company,
Aviation General  Incorporated  succeeded  Commander  Aircraft Company effective
August  4,  1998.  The  company  does  business  through  its two  wholly  owned
subsidiaries:  Commander Aircraft Company and Strategic Jet Services, Inc., both
located in Bethany, Oklahoma.

Commander  aircraft are derived from a line of single engine,  high  performance
aircraft  designed,  certified and produced by the General Aviation  Division of
Rockwell  International  in the 1970s.  Rockwell later sold its General Aviation
Division to Gulfstream  Aerospace  Corporation,  from which  Commander  Aircraft
Company  acquired the rights to the single engine,  high  performance  Commander
line.   Subsequently,   the  company   designed,   engineered  and   implemented
improvements  to the Commander  line. With an airframe design decades newer than
the competition, Commander aircraft are certified to Federal Aviation Regulation
(FAR) 23 through  Amendment  7,  meeting  more  stringent  standards  for single
engine, high performance  aircraft than aircraft certified under the older Civil
Air  Regulation  (CAR) 3. The  Commander  line has the best safety record in its
class, according to an independent study of FAA and National  Transportation and
Safety  Board  (NTSB)  statistics  conducted by R.E.  Breiling  Associates,  the
leading accident analysis firm in general aviation.  The following chart depicts
the results of this study.

Total accident rate per 100,000 flight hours (1977-1998)

Commander 112/114 Series                     2.633
Beech Bonanza Series                         5.908
Mooney M20 Series                            6.342
Piper Saratoga Series                        9.298

The company's first  production  model, the Commander 114B, was certified by the
FAA in 1992.  The  Commander  114B offers  substantially  improved  performance,
state-of-the-art  instrumentation  and avionics,  and a  luxuriously  appointed,
spacious  cabin,  while  retaining the proven airframe and other features of the
original Rockwell International design. The Commander 114B features an extensive
range of standard  equipment,  retractable  landing gear,  260  horsepower  fuel
injected  engine,  and a constant  speed  propeller.  The  aircraft has received
favorable  reviews in the aviation  press  worldwide and is  recognized  for its
beautiful  design,  safety  features,  and its  excellent  flight,  landing  and
handling characteristics.

The Commander  114B,  with a standard  range of 725 nautical  miles (833 statute
miles),  1,216 pound useful load,  maximum  cruise speed of 164 knots (188 miles
per hour),  large  luxurious four place cabin and low operating and  maintenance
costs, offers an optimum  combination of performance,  comfort,  style,  luxury,
utility  and safety.  The  Commander  114B is an ideal  airplane  for  pleasure,
business and flight training.

In 1994, the company added the Commander 114AT  All-Purpose  Trainer to its line
of single engine, high performance aircraft. The Commander 114AT is a four place
high performance trainer designed for military, professional and civilian flight
training.  An all-in-one  aircraft,  the Commander 114AT All-Purpose  Trainer is
ideal for primary through instrument flight training. The Commander 114AT shares
the same  design  heritage  as the  luxurious  Commander  114B,  with a modified
instrument panel and utilitarian interior.

The company received certification from the FAA in 1995 for the Commander 114TC,
a turbocharged  version of the Commander  114B. The Commander  114TC is equipped
with the same beautiful,  expansive interior and state-of-the-art systems as the
Commander 114B, but utilizes a 270 horsepower turbocharged Lycoming engine which
provides  speeds up to 197 knots (227 miles per hour).  The  Commander  114TC is
certified  to an altitude of 25,000 feet,  which makes it an excellent  aircraft
for mountainous regions, as well as high density altitude environments. Like its
predecessor,  the 114B,  the Commander  114TC has received  extensive  favorable
reviews by the aviation press.

In early 2000,  the company  introduced  the Commander 115 and Commander  115TC.
These new  aircraft are the  culmination  of eight years of  continuous  product
development  following  the  certification  of the 114B in 1992.  They offer new
levels of refinement,  comfort,  utility and longer range, as well as the latest
advancements in avionics and instrumentation.

The statements in this report that relate to future plans, events or performance
are forward  looking  statements  that involve risks and  uncertainties.  Actual
results,  events and performance may differ materially due to overall changes in
the economy as well as other factors.  For example,  the company may not achieve
anticipated  results  if demand for its  aircraft  subsides  or if its  Aviation
Services Division does not continue to grow.  Readers are cautioned not to place
undue reliance on these forward looking  statements,  which speak only as of the
date hereof.


<PAGE>





Business Strategy

The  company's  business  strategy  is to  capture  a  significant  share of the
existing  domestic  and  international   market  for  the  single  engine,  high
performance  aircraft by offering a premium  updated  version of an  established
aircraft design.  Commander  aircraft have an airframe design decades newer than
the  competition  and are  certified to more  stringent  standards.  The company
believes  the  domestic  and  international  market  for its  aircraft  includes
individuals  and  corporations  that will  purchase the  company's  aircraft for
business  and  personal  travel,   and  governments,   commercial  and  military
organizations that will use the aircraft for training and other purposes.

The company  believes  the market for its  products  will improve as a result of
attrition  of the  existing  fleet  of aging  single  engine,  high  performance
aircraft,   development  of  new  international  markets  for  general  aviation
aircraft,  increased use of single engine aircraft as a corporate tool for small
and medium-sized businesses, and demand for advanced single engine trainers.

Recognizing  that the size of the used aircraft market is  significantly  larger
than new aircraft sales, the company has structured a separate aviation services
division within the company to purchase,  refurbish and sell pre-owned  aircraft
at reasonable profit margins. The Aviation Services Division also acts as broker
for pre-owned  aircraft and serves as advisor to potential  aircraft  buyers and
sellers.

Marketing and Sales

The company  markets its aircraft  through a factory  direct sales and marketing
organization comprised of regional sales personnel who are managed and supported
from the  company's  headquarters  in Oklahoma.  The marketing  organization  is
augmented by a worldwide network of Commander Authorized Service Centers (ASCs).
The  company's   marketing  program  utilizes  a  highly  focused  domestic  and
international  advertising and public  relations  program that includes  product
advertising in leading  business and aviation  publications,  and ongoing direct
mail programs to owners and pilots.

The company's CFI Referral Program actively engages certified flight instructors
(CFIs) in the evaluation and acquisition process with their students.  These key
influencers play an important role in advising  potential  owners. To date, more
than 1,800 CFIs have enrolled in this program.

The  company  has one of the most  comprehensive  worldwide  service and support
networks in its class. The company grants domestic Commander  Authorized Service
Centers the  non-exclusive  right to sell  Commander  aircraft.  Commander  ASCs
receive a referral fee for identifying purchasers, and provide a full complement
of service and support services,  including  financing,  insurance,  service and
support, hangar/storage, flight instruction, and professional pilot service. The
company  selects  ASCs from among  experienced  independent  aviation  sales and
service  organizations  that it believes to have excellent  facilities,  service
capabilities,  reputation and financial  strength.  Through its ASCs,  Commander
Aircraft  Company  offers a turn-key  aircraft  ownership  program  designed  to
stimulate  ownership of Commander aircraft by companies that have not previously
owned or operated  aircraft.  This flexible program can be tailored to meet each
customer's specific requirements.

One new  aircraft  and two  pre-owned  aircraft  sold in 1999 were  delivered to
foreign customers accounting for $1,158,170 or 10% of the revenues from aircraft
sales.  Information  regarding the company's export sales and major customers is
incorporated herein by reference to Note H - Sales Concentrations,  of the Notes
to Consolidated  Financial  Statements.  The company  anticipates  that domestic
sales will  continue to account for a  significant  portion of its market in the
future,  however it is anticipated that  international  markets will continue to
improve and  account  for an  increased  portion of the  company's  sales in the
future.

The company has been  dependent  upon its ability to sell a single  product line
for which a small  market  exists,  and sales in  sufficient  quantities  and at
prices that will allow it to recover operating costs and earn a profit. Although
the  company  believes  that the market for its new  aircraft  will grow and its
share will increase,  there can be no assurances  that economic  conditions will
not have an adverse effect on future sales.

Revenues  generated by the Aviation Services Division grew significantly in 1998
and 1999,  and are  expected  to  continue  to grow in 2000.  In  addition,  the
company's  new  subsidiary,  Strategic Jet  Services,  Inc.  generated its first
revenues in 1999 and is expected to grow significantly in 2000.

Parts and Materials Availability

Aviation  General,  Incorporated  purchases  parts and  materials  from over 100
different suppliers.  Though some of these vendors are key to the manufacture of
the company's aircraft, there are no long term commitments or contracts with any
suppliers.  The company  considers  its  relationship  with its  suppliers to be
satisfactory and does not anticipate any shortages or interruption to production
due to lack of available components on a timely basis.

Competition

Purchasers of single engine, high performance  aircraft choose among competitive
models on the basis of numerous  factors,  including  performance,  reliability,
price,  appearance,  quality of service and  reputation  of the aircraft and the
manufacturer.  Aviation  General,  Incorporated  believes  that it can favorably
compete with its competitors on the basis of the safety,  quality,  comfort, and
performance of its aircraft,  and the quality and scope of the support  services
the company provides to its customers. The company further believes its aircraft
are competitively priced and have a number of features,  including certification
to stricter  standards,  newer,  more  attractive  design and larger cabin size,
which  make  them  competitive  with or  superior  to the  single  engine,  high
performance  aircraft  produced  by its  four  principal  competitors.  Raytheon
Aircraft  Corporation  suspended  production of one of its single  engine,  high
performance models, the F33A Bonanza,  in 1994.  Raytheon's other single engine,
high  performance  model,  the  A36,  remains  in  production.  Mooney  Aircraft
Corporation   produces  single  engine,  high  performance   aircraft  that  are
significantly  smaller than the 114B and 114TC.  New Piper Aircraft  Corporation
produces two single engine,  high  performance,  six place aircraft with similar
performance.  Socata's  marketing  efforts  are,  for the most part,  focused in
Europe and Asia.  Each of these  competitors  has been well  established  in the
general  aviation  industry  for years and may have access to greater  resources
than are available to the company.

The company's aircraft are decades newer in design than the Bonanza,  Mooney and
Piper competitive  models and are certified to the newer, more stringent Federal
Aviation  Regulation (FAR) 23 through Amendment 7 standard rather than the older
Civil Air  Regulation  (CAR) 3. The Commander line has the best safety record in
its class, according to an independent study of FAA and National  Transportation
and Safety Board (NTSB) statistics  conducted by R.E. Breiling  Associates,  the
leading accident analysis firm in general aviation.

Insurance

The company  carries most types of insurance  customary  for a  manufacturer  of
general aviation aircraft,  including  coverage for general liability,  property
damage,  aircraft loss or damage and worker's  compensation,  but does not carry
product liability insurance.  There is no assurance that the amount of insurance
carried by the company would be sufficient to protect it fully in the event of a
serious  accident or liability  claim, but the company believes that the amounts
and coverage of its insurance  protection are reasonable and appropriate for the
company's business operations.  Although highly probable,  there is no assurance
that such  insurance  will continue to be available on  commercially  reasonable
terms.

In mid-1994,  Congress enacted the General Aviation Revitalization Act, S. 1458,
which established an 18-year statute of repose for general aviation aircraft and
component  manufacturers.  This legislation  prohibits  product  liability suits
against aircraft manufacturers when the aircraft involved in an accident is more
than 18 years old when the accident occurs.  This action eliminated all Rockwell
manufactured  Commanders  produced  in the 1970's from the  company's  liability
tail. The only aircraft that the company bears manufacturing  responsibility for
are the models 114B, 114AT and 114TC produced from 1992 through the present.  At
December 31, 1999 this totaled  approximately  156 aircraft,  which  includes 71
aircraft exported from the United States.

Through March 1, 1995, the company maintained  product liability  insurance with
coverage of $10 million per occurrence  and $10 million in the  aggregate,  with
deductible  of $200,000 for aircraft  built  through  March 1, 1995.  Management
believes  that the  premiums  for this  type of  insurance  are  rapacious,  the
policies are full of holes,  the  insurance  companies  end up  controlling  any
litigation and are loathe to vigorously defend unwarranted claims, and prefer to
settle  and  raise  premiums  rather  than  defend  unwarranted  claims.   Thus,
management  believes  that the  interest  of  shareholders  is better  served by
vigorously defending claims through the services of highly qualified specialists
and  attorneys  rather than  retaining  product  liability  insurance  to settle
exorbitant  claims. As such, the company elected not to retain product liability
insurance  coverage  commencing  March 1, 1995.  The company could be exposed to
significant financial risks if losses from products liability were to occur.

The company does not carry business interruption or key man insurance.


<PAGE>



Governmental Regulation

In order for an aircraft model to be manufactured for sale, the FAA must issue a
Type Certificate for the aircraft model and, in order for a particular  aircraft
to be operated,  an Airworthiness  Certificate for that aircraft must be issued.
The company was issued a Type  Certificate  for the Commander 114B in 1992 and a
Type  Certificate  for the  Commander  114TC  in 1995.  The  company  owns  Type
Certificates  for all predecessor  single engine Commander  models.  The company
received a Production Certificate from the FAA in 1993, which allows the company
to issue  Airworthiness  Certificates  under authority  delegated by the FAA. An
Airworthiness  Certificate  is  issued  for a  particular  aircraft  when  it is
certified to have been built in accordance  with  specifications  approved under
the Type Certificate for that particular model aircraft.  Commander aircraft are
certified to FAR 23,  Amendment 7 meeting more  stringent  standards  for single
engine aircraft than aircraft  certified  under the older CAR 3 regulation.  The
following table compares these standards:

Certification Requirements:                 FAR 23                   CAR 3
                                     (through Amendment 7)

Increased gust loading                      50 ft/sec              30 ft/sec
Fatigue evaluation -                        Fail-safe              Static load
   Wing and associated structures           Safe life               margin
Fail-safe elevator control system              Yes                    No
Gear and door substantiation under
   all conditions                              Yes                    No
Flap actuated aural warning                    Yes                    No
More stringent usable fuel testing             Yes                    No
Non-siphoning fuel caps                        Yes                    No
Improved accessibility of fuel
   selector switch                             Yes                    No
More stringent lightning strike
   analysis                                    Yes                    No


Employees

The  company  has  a  total  of  98  full-time   employees.   Aviation  General,
Incorporated  believes that its future  success will depend,  in part,  upon its
continued  ability to recruit  and retain  highly  skilled  employees.  Although
competition for qualified  personnel is strong,  the company has been successful
in attracting and retaining skilled employees.  None of the company's  employees
are  covered  by  a  collective  bargaining  agreement,  and  Aviation  General,
Incorporated considers its employee relations to be good.

Item 2.  Properties

The company's  103,650 square foot facility,  which consists of three  buildings
constructed in 1981, is located at the Wiley Post Airport in Bethany,  Oklahoma.
The facility is leased from the Oklahoma  City Airport Trust  Authority  under a
lease that expires in October 2003, with a five year renewal option. The company
performs all of its operations and services from this facility.  During the past
ten years, the company has improved its facility to assure safety and compliance
with environmental laws and regulations.

A summary of lease  payments is  presented  in Note G - Leases,  of the Notes to
Consolidated  Financial  Statements for 1999,  which is hereby  incorporated  by
reference.

Item 3.  Legal Proceedings

On February 18, 2000, a lawsuit was filed in the Third  Judicial  District Court
in Salt  Lake  City,  Utah  on  behalf  of the  estate  of  Frank  Earl  against
Aeroquip-Vickers,  Inc., Commander Aircraft Company, and Textron Lycoming,  Inc.
The plaintiff alleges that Mr. Earl was killed in the crash of a Commander 114TC
July 18, 1998 due to the failure of a clamp  manufactured  by  Aeroquip-Vickers,
Inc. that secured the turbocharger to the exhaust pipe, which ultimately  caused
the aircraft to crash.  Amounts of damages are not  specified in the  complaint.
Although  it is  too  early  for  the  ultimate  outcome  of  this  claim  to be
determined, management does not believe the company bears any responsibility and
will  vigorously  defend  against this claim and  currently  believes  that this
action will not have a material impact on the company's operations.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year covered by this report.

                                     PART II

Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters

The common stock of Commander  Aircraft  Company,  $.50 par value, was traded on
the NASDAQ  Small-Cap  Market  (symbol CMDR) prior to the merger in August 1998.
Subsequent  to the merger,  the stock  continues  to trade as Aviation  General,
Incorporated  (symbol AVGE).  This table presents its high and low market prices
during the past two years. The company has never paid dividends in the past, and
does not intend to pay dividends in 2000.

                       Quarterly Common Stock Price Ranges

                         1999                                1998
               --------------------------         ---------------------------
Quarter           High             Low                High              Low
-------           ----             ---                ----              ---
 1st               3                1 1/2              2 1/2             1 1/2
 2nd               2 1/8            1 1/4              3                 1 3/8
 3rd               2                1 1/8              4 1/8             1 1/2
 4th               1 31/32           7/16              3 1/2             1 1/4

There were 111 holders of record of the  company's  common  stock as of December
31, 1999. The company issued no shares during 1999.


<PAGE>




Item 6.  Selected Financial Data

The  selected  financial  data  presented  below  for each year in the five year
period ended  December 31, 1999 have been  derived  from the  company's  audited
financial statements. This data should be read in conjunction with the Financial
Statements and related notes thereto and other financial  information  appearing
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>


                                                     Year Ended December 31
                           --------------------------------------------------------------------------
                                           (Amounts in thousands, except per share data)
                           1999             1998              1997              1996             1995
                           ----             ----              ----              ----             ----
<S>                        <C>              <C>               <C>              <C>            <C>
   Operation Data:

   Net sales               $13,667          $10,712           $8,062            $7,958          $9,398
   Net loss                $(385)           $(1,849)          $2,140)           $(3,408)        $(2,559)
   Loss per share          $(.05)           $(.25)            $(.31)            $(.51)          $(.39)

   Balance Sheet Data:

   Total assets            $8,632           $10,148           $10,940           $11,060         $14,715
   Long-term debt            -                 -                 -              $2,446             -

</TABLE>


Item 7.

Management's Discussion and Analysis of Financial Condition and Results of
Operations


Results of Operations:

                                  1999 vs. 1998

Revenues  increased 28% in 1999 to $13,667,245 from $10,711,827 in 1998, and the
net loss was reduced 79% to $385,018 from $1,849,400 in 1998. Net loss per share
decreased to $.05 per share in 1999 from $.25 per share in 1998.

Revenues  from  aircraft  sales  increased  27%  in  1999  to  $11,926,234  from
$9,375,478 in 1998. New aircraft  deliveries  remained constant in 1999 and 1998
at 13 units,  while  pre-owned  and  consigned  aircraft  sales  increased to 35
aircraft in 1999 from 29 in 1998.  A portion of the increase in revenues was due
to an increase in selling  prices of new aircraft,  but most of the increase was
due to the additional number of pre-owned aircraft sold, particularly late model
114Bs and 114TCs.

The  revenues  generated  by  the  service,  parts  and  refurbishment  business
increased 30% in 1999 to  $1,741,011  from  $1,336,349 in 1998.  The increase in
revenue was due to a major rebuild of a customer's  aircraft,  along with higher
volume of parts shipments.

Aircraft cost of sales  increased by 17% to $10,198,033 in 1999 from  $8,751,936
in 1998.  The  increase was  significantly  smaller than the increase in revenue
from aircraft sales which resulted in substantially  higher margins in 1999. The
increase in aircraft cost of sales was due to the increased  number of pre-owned
aircraft sold and higher costs for material and labor for new aircraft produced.

Service and parts cost of sales  increased to $1,178,633 in 1999 from $1,094,075
in  1998.  The  increase  of only 8% in  costs  on a sales  increase  of 30% was
accomplished  by higher  prices for parts and  refurbishment  work and continued
control of labor and overhead costs in the Completion Center.

Engineering and product  development costs increased 9% in 1999 to $336,855 from
$308,772 in 1998.  The increase was due primarily to expenses  involved with the
certification of new avionics and electrical equipment introduced as standard or
optional  equipment  for new  aircraft.  The balance of costs was  incurred  for
routine sustaining engineering projects.

Sales and marketing expenses decreased 18% to $1,430,266 in 1999 from $1,745,732
in 1998.  Advertising  expenses  accounted for the decrease as they were reduced
from $590,000 in 1998 to $270,000 in 1999. General and  administrative  expenses
were reduced 4% in 1999 to $1,006,306  from $1,044,266 in 1998. The decrease was
due to a reduction in  insurance  expense and lower  expenses in  virtually  all
areas. Included in general and administrative  expenses for 1999 is $178,500 for
costs associated with the operations of Strategic Jet Services, Inc. compared to
$128,000 in 1998.

Interest  income totaled  $200,010 in 1999,  down from $324,043 in 1998. Most of
the reduction in interest  income in 1999 was due to the  redemption of $800,000
notes  receivable  from a related party in February,  which bore interest at 10%
per annum.  The balance of the change was due to interest earned on certificates
of deposit that were redeemed during 1998.

Interest  expense  increased  to  $115,405  in 1999 from  $12,619 in 1998.  This
increase was due to the company's line of credit with several  financial sources
that provided floor planning for aircraft held for sale.

                                  1998 vs. 1997

Total revenues  increased by 33% in 1998 to $10,711,827 from $8,062,369 in 1997,
and the net loss was reduced by  approximately  14% to  $1,849,400  in 1998 from
$2,140,637  in 1997.  Net loss per share  decreased to $.25 in 1998 from $.31 in
1997.

New aircraft  deliveries  increased  to 13 units in 1998 from 12 in 1997,  while
pre-owned and consigned  aircraft sales increased to 29 aircraft in 1998 from 22
in 1997.  Revenues from aircraft sales  increased 37% to $9,375,478 in 1998 from
$6,860,413  in 1997.  The increase was due to higher unit prices,  especially in
pre-owned aircraft, coupled with an increase in volume of aircraft delivered.

Revenues generated by service and parts sales increased by more than 11% in 1998
to $1,336,349 from  $1,201,956 in 1997. This  improvement was due to an increase
in  refurbishment  work in the Service  Center,  along with an increase in spare
parts sales.

Aircraft  cost  of  sales  increased  nearly  30% in  1998  to  $8,751,936  from
$6,750,525  in 1997.  The increase  was due  primarily to the volume of aircraft
sold in 1998.  Margins on both new and  pre-owned  aircraft  improved due to the
company's  products  commanding  higher prices and continued  cost controls that
reduced the incremental unit costs. Service and parts cost of sales increased in
proportion  to the increase in revenues,  increasing  to $1,094,075 in 1998 from
$1,025,367 in 1997.

Engineering  and product  development  costs  decreased  more than 2% in 1998 to
$308,772 from $316,158 in 1997. This reduction in expense occurred primarily due
to the completion of the flight into known icing project, which was certified by
the FAA in  1998.  Most  of the  costs  in 1998  were  incurred  for  sustaining
engineering and routine product improvements.

Sales  and  marketing  expenses  increased  in  1998 by 18% to  $1,745,732  from
$1,483,439 in 1997.  Expenditures  for  advertising and trade shows increased by
nearly $217,000 in 1998, as new advertising was strategically  placed in various
business and trade  publications.  Other sales and marketing  expenses increased
slightly in 1998.  General and  administrative  expenses increased 8% in 1998 to
$916,266 from $850,233. Legal and administrative fees associated with the merger
accounted for  approximately  $20,000 in 1998.  Printing  costs,  healthcare and
professional  fees  accounted  for the  balance of the  increase  in general and
administrative  costs in 1998.  Included in selling,  general and administrative
expenses for 1998, is $128,000 for costs  associated with the creation and start
up of Strategic Jet Services, Inc., a wholly owned subsidiary.

Interest  income  increased  in 1998 to  $324,043  from  $292,949  in 1997.  The
increase was due to the interest  earned on  certificates of deposit during 1998
and interest  earned on the note due from an affiliated  company.  Interest from
notes receivable  decreased slightly as only one aircraft is now financed by the
company.  All  other  notes  receivable  have  been  paid in full.  Income  from
miscellaneous sources totaled $83,346 in 1998 compared to $73,848 in 1997.

Interest expense decreased to $12,619 in 1998 from $131,768 in 1997. The company
had virtually no debt outstanding during 1998 and most of the expense arose from
trade payables and miscellaneous sources.

Liquidity and Capital Resources

Cash used in  operations  totaled only $61,505 for 1999 compared to cash used in
operations  of $932,295 in 1998.  Notes and  accounts  receivable  increased  by
$79,393 due to the sale of one  pre-owned  aircraft,  paid in full shortly after
year-end,  and the  changes  in the  balance  of the note  receivable  for a new
aircraft.  Notes  receivable  from  related  parties  increased  during  1999 to
$1,736,552  from $1,507,843 at December 31, 1998 due to the sale of one aircraft
on account less payments on account. Accrued interest due on the note receivable
from the related party at year-end 1999 was $0, compared to $143,588 at December
31, 1998. The note is secured by Aviation General,  Incorporated  stock pledged,
as well as a personal  guarantee  from the  principal  shareholder  of Commander
International. The note was reclassified from current assets to other assets due
to the probability that payment in full will not occur within the next year.

Inventories were reduced $639,678 as raw materials and purchased parts inventory
declined  $245,000 and  pre-owned  aircraft held for resale at December 31, 1999
declined $365,000.  Three new demonstration  aircraft were on hand at the end of
1999  carried at a value of $964,324  compared to three  aircraft on hand at the
end of 1998  totaling  $987,325.  Six  pre-owned  aircraft were held for sale at
December  31,  1999 at a total  value  of  $716,701  compared  to six  pre-owned
aircraft on hand as of December 31, 1998 carried at a cost of $1,081,359.

Accounts  payable were reduced to $451,645 at December 31, 1999 from $622,618 at
the end of the prior year as  payments  were made more timely and  purchases  on
account for inventories were lower. Refundable deposits for aircraft and service
decreased as of December 31, 1999 to $233,363  from  $252,498 the previous  year
end due primarily to a large deposit  received prior to year-end 1998 to rebuild
a customer's aircraft damaged in Mexico. The company had no long-term debt as of
December 31, 1999 and 1998.

Capital expenditures totaled $61,633 in 1999. The company invested approximately
$38,000 in new  tooling.  The  balance of the  expenditures  was  primarily  for
computer hardware and software to insure compliance with the year 2000 change.

The company established a line of credit with a bank in the amount of $1,500,000
for the purpose of funding  used  aircraft for  inventory.  At December 31, 1999
borrowings  under this line totaled  $431,780.  The notes bear interest at prime
plus 1% and are  secured by  individual  aircraft  and  certain  guarantees.  In
addition,  the company established a line of credit with a financial institution
in the amount of  $3,000,000  to provide  funding  for new  aircraft  as well as
pre-owned piston and turbine aircraft. The notes contain variable interest rates
up to 12.5%,  mature in six month  intervals  and are renewable at the option of
the company for an  additional  six months.  Borrowings  under this line totaled
$300,000 at December 31, 1999.

Pursuant to the company's  1,000,000 share stock repurchase plan, 910,284 shares
of Aviation  General,  Incorporated  common stock have been repurchased  through
December 31, 1999.  During 1999, the stock  repurchased  by the company  totaled
784,184  shares at a cost of  $1,108,904.  Subsequent  to December  31, 1999 the
company  repurchased  an  additional  80,000  shares for  $100,000.  The company
expects to announce another stock repurchase program in 2000.

The  company has  financed  its cash needs since  inception  with debt,  private
investor  capital,  proceeds from an initial public offering and from subsequent
stock issuances.  Management does not believe additional outside funding will be
required in 2000. A more detailed  discussion of the company's plans to maintain
liquidity  for 2000 is included in Note N -  Management  Plans,  of the Notes to
Consolidated Financial Statements for 1999.

Management Plans

Since  commencement  of  production  in 1992,  annual  revenues  have  increased
significantly  and annual losses have  substantially  declined,  concurrent with
ongoing  investment.  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 1999 these plans continued the implementation  started in 1998. Revenues from
aircraft  deliveries rose 29% in 1999 and 37% in 1998. Most of this increase was
due to the  expansion  of the  Aviation  Services  Division's  efforts  to  buy,
refurbish  and sell more  pre-owned  aircraft.  Revenues  from service and parts
sales  increased 30% in 1999 as well.  Strategic Jet Services was created to add
the potential for increased  profits in the jet brokerage  business.  Management
continues  to  minimize  inventory  costs  through  just-in-time  scheduling  as
planned.  Efforts  to  reduce  marketing  expenses  have been  successful  while
increasing the number of potential customer  contacts.  The programs to optimize
marketing  costs continue to be refined in 2000. The company has reorganized its
service  center,  paint and upholstery  facilities  into a completion  center to
effectively meet the growth in refurbishment  and pre-owned  aircraft sales. The
creation of Strategic Jet Services  gives the company an  opportunity  to expand
into the more lucrative used jet aircraft sales and brokerage business.

Market Risk

The  company's  market risk is impacted  by changes in interest  rates,  foreign
currency exchange rates and certain  commodity prices.  The note receivable held
by the company includes a quarterly adjustment clause, which permits the company
to increase or  decrease,  the amount of  interest  charged  based on bank prime
rates. Virtually all transactions with international  customers are made in U.S.
dollars,  thereby  minimizing the risk associated with foreign currency exchange
rates. The company has no significant risk associated with commodity prices. The
company has no other financial  instruments  that are subject to material market
risk.

Inflation

Management believes that the overall effects of inflation on the company's costs
of materials and supplies  have been  minimal.  For each of the past five years,
cost of sales was  virtually  the same as it would  have been on a current  cost
basis.  The company uses a moving average cost for inventory  valuation and cost
changes are not readily recognized in the short-term.


<PAGE>



Item 8.  Financial Statements and Supplementary Data

         Index to Financial Statements and Supplementary Data:

                                                                      Page

Report of Independent Public Accountants                              15

Financial Statements:

Consolidated Balance Sheets December 31, 1999 and 1998                16

Consolidated      Statements of Operations for the years ended        18
            December 31, 1999, 1998 and 1997

Consolidated Statement of  Stockholders' Equity for the               19
            years ended December 31, 1999, 1998 and 1997

Consolidated Statements of Cash Flows for the years ended             20
            December 31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements                            22


Supplementary Financial Data:

         Selected Quarterly Financial Data for the years ended
              December 31, 1999 and 1998 (unaudited)                    36



<PAGE>



15

               Report of Independent Certified Public Accountants

Stockholders
Aviation General, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  Aviation
General, Inc. (a Delaware corporation) and Subsidiaries (Note A), as of December
31,  1999 and 1998,  and the  related  consolidated  statements  of  operations,
stockholders'  equity,  and cash flows for each of the three years in the period
ended December 31, 1999. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of Aviation General,
Inc. and  Subsidiaries,  as of December 31, 1999 and 1998, and the  consolidated
results of their  operations and their  consolidated  cash flows for each of the
three years in the period ended  December 31, 1999 in conformity  with generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note N to the
consolidated financial statements, the Company has suffered recurring losses and
net cash outflows from operations that raise substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note N. The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.

GRANT THORNTON LLP

Oklahoma City, Oklahoma
February 12, 2000


<PAGE>



                     Aviation General, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,

<TABLE>
<CAPTION>

                                    ASSETS                                                  1999               1998
                                                                                     ------------------ ---------------
<S>                                                                                  <C>                <C>
CURRENT ASSETS

    Cash and cash equivalents                                                         $      281,138     $      645,706
    Investment in debt securities - related parties                                              -            1,000,000
    Accounts receivable                                                                      111,403              6,941
    Notes receivable from related party                                                          -            1,507,843
    Current portion of note receivable                                                        19,535             21,286
    Inventories                                                                            5,143,720          5,783,398
    Prepaid expenses and other assets                                                        172,273            259,860
                                                                                       -------------      -------------

                  Total current assets                                                     5,728,069          9,225,034

PROPERTY AND EQUIPMENT - AT COST
    Office equipment and furniture                                                           355,492            347,565
    Vehicles and aircraft                                                                     84,021             84,021
    Manufacturing equipment                                                                  362,205            358,332
    Tooling                                                                                  563,193            525,536
    Leasehold improvements                                                                   311,764            309,144
                                                                                       -------------      -------------
                                                                                           1,676,675          1,624,598
       Less accumulated depreciation                                                         951,791            850,313
                                                                                       -------------      -------------
                                                                                             724,884            774,285

OTHER ASSETS

    Note receivable, less current maturities                                                 125,331            148,649
    Available-for-sale equity securities - related party                                     317,151                -
    Note receivable from related party                                                     1,736,552                -
                                                                                        ------------      -------------
                                                                                           2,179,034            148,649
                                                                                        ------------      -------------

                                                                                       $   8,631,987      $  10,147,968
                                                                                        ============      =============
</TABLE>



<PAGE>




                     Aviation General, Inc. and Subsidiaries
17
<TABLE>
<CAPTION>


           LIABILITIES AND STOCKHOLDERS' EQUITY                                             1999               1998
                                                                                     ------------------ ---------------
<S>                                                                                  <C>                <C>
CURRENT LIABILITIES
    Accounts payable                                                                  $      451,645     $      622,618
    Accrued expenses                                                                         344,525            343,100
    Refundable deposits                                                                      233,363            252,498
    Notes payable                                                                            731,780            600,000
                                                                                       -------------      -------------

                  Total current liabilities                                                1,761,313          1,818,216

COMMITMENTS AND CONTINGENCIES                                                                    -                  -

STOCKHOLDERS' EQUITY
    Preferred stock - $.01 par value; authorized, 5,000,000 shares; none issued                  -                  -
    Common stock - $.50 par value;  authorized,  20,000,000 shares;  issued,
       7,043,186 shares in 1999; issued and outstanding,
       7,280,548 shares in 1998                                                            3,521,593          3,640,274
    Additional paid-in capital                                                            36,881,466         37,178,230
    Treasury stock - at cost (529,400 shares)                                               (658,615)               -
    Accumulated deficit                                                                  (32,873,770)       (32,488,752)
                                                                                         -----------        -----------
                                                                                           6,870,674          8,329,752
                                                                                        ------------       ------------


                                                                                       $   8,631,987       $ 10,147,968
                                                                                        ============        ===========

</TABLE>




    The accompanying notes are an integral part of these statements.

<PAGE>



                     Aviation General, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended December 31,
<TABLE>
<CAPTION>

                                                                            1999              1998              1997
                                                                      ----------------  ----------------  -------------
<S>                                                                   <C>               <C>               <C>
NET SALES

    Aircraft                                                             $11,926,234     $  9,375,478       $ 6,860,413
    Service                                                                1,741,011        1,336,349         1,201,956
                                                                         -----------      -----------        ----------
                                                                          13,667,245       10,711,827         8,062,369

COST OF SALES

    Aircraft                                                              10,198,033        8,751,936         6,750,525
    Service                                                                1,178,633        1,094,075         1,025,367
                                                                         -----------      -----------        ----------
                                                                          11,376,666        9,846,011         7,775,892
                                                                          ----------      -----------        ----------

                  Gross margin                                             2,290,579          865,816           286,477

OTHER OPERATING EXPENSES
    Product development and engineering costs                                336,855          308,772           316,158
    Selling, general, and administrative expenses                          2,436,578        2,792,826         2,333,673
                                                                         -----------      -----------        ----------
                                                                           2,773,433        3,101,598         2,649,831
                                                                         -----------      -----------        ----------

                  Operating loss                                            (482,854)      (2,235,782)       (2,363,354)

OTHER INCOME (EXPENSES)
    Interest income                                                          200,010          324,043           292,949
    Other income                                                              14,858           83,346            73,848
    Interest expense                                                        (115,405)         (12,619)         (131,768)
    Other expense                                                             (1,627)          (8,388)          (12,312)
                                                                        ------------     ------------       -----------
                                                                              97,836          386,382           222,717
                                                                        ------------     ------------       -----------

                  NET LOSS                                             $    (385,018)    $ (1,849,400)      $(2,140,637)
                                                                        ============      ===========        ==========

BASIC AND DILUTED LOSS PER SHARE
    Weighted average common shares outstanding                             7,037,267        7,280,548         6,980,494
                                                                        ============      ===========        ==========

    Loss per share                                                     $        (.05)    $       (.25)      $      (.31)
                                                                        ============      ===========        ==========
</TABLE>

    The accompanying notes are an integral part of these statements.

<PAGE>



                     Aviation General, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                  Years ended December 31, 1999, 1998, and 1997
<TABLE>
<CAPTION>

                                                                   Additional                                             Total
                                        Common stock                 paid-in       Treasury           Accumulated     Stockholders'
                                    Shares         Amount            capital        stock               deficit          equity
                                 ------------  -------------     ------------    ---------------     -------------     ------------
<S>                             <C>            <C>               <C>             <C>                <C>                <C>
Balance at January 1, 1997        6,720,548       $3,360,274      $31,770,862     $       -         $(28,498,715)      $  6,632,421

Exchange of notes payable
   for common stock                 200,000          100,000        1,987,368              -                 -            2,087,368

Sale of common stock                360,000          180,000        3,420,000              -                 -            3,600,000

Net loss                                -                -                -                -          (2,140,637)        (2,140,637)
                                 ------------  -------------     ------------    ---------------     -------------     ------------

Balance at December 31, 1997      7,280,548        3,640,274       37,178,230              -         (30,639,352)        10,179,152

Net loss                                -                -                -                -          (1,849,400)        (1,849,400)
                                 ------------  -------------     ------------    ---------------     -------------     ------------

Balance at December 31, 1998      7,280,548        3,640,274       37,178,230              -         (32,488,752)         8,329,752

Purchase of treasury stock              -                -                -         (1,108,904)              -           (1,108,904)

Retirement of treasury stock       (237,362)        (118,681)        (296,764)         415,445               -                  -

Sale of treasury stock                  -                -                -             34,844               -               34,844

Net loss                                -                -                -                -            (385,018)          (385,018)
                                 ------------  -------------     ------------    ---------------     -------------     ------------

Balance at December 31, 1999      7,043,186       $3,521,593      $36,881,466     $   (658,615)     $(32,873,770)      $  6,870,674
                                 ============  =============     ============    ===============     =============     ============


</TABLE>







    The accompanying notes are an integral part of these statements.

<PAGE>



                     Aviation General, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,
<TABLE>
<CAPTION>

                                                                                    1999           1998           1997
                                                                             ---------------  -------------   -------------
<S>                                                                          <C>              <C>             <C>
Increase (Decrease) in Cash and Cash Equivalents

Cash flows from operating activities
   Net loss                                                                  $   (385,018)    $(1,849,400)   $(2,140,637)
   Adjustments to reconcile net loss to net cash used in operating activities
        Depreciation and amortization                                             111,034         106,130        101,853
        Noncash interest earnings                                                 (17,151)            -              -
        Sale of aircraft and parts on notes receivable                           (493,977)        (17,044)       (73,352)
        Receipts on aircraft notes receivable                                     290,337         161,611        952,147
        Gain on retirement of property and equipment                                 (850)            (91)        (8,425)
        Changes in assets and liabilities
           (Increase) decrease in

              Accounts receivable                                                (104,462)        335,976       (319,479)
              Inventories                                                         639,678        (173,269)     1,697,969
              Prepaid expenses and other assets                                    87,587         (56,045)      (199,893)
           Increase (decrease) in

              Accounts payable                                                   (170,973)        352,364       (237,390)
              Accrued expenses                                                      1,425          30,155       (264,271)
              Refundable deposits                                                 (19,135)        177,318         65,200
                                                                              -----------     -----------   ------------

              Net cash used in operating activities                               (61,505)       (932,295)      (426,278)

Cash flows from investing activities
   Change in short-term investments                                                   -         1,224,845     (1,106,453)
   Capital expenditures                                                           (61,633)       (167,936)       (23,356)
   Proceeds on sales of property and equipment                                        850           1,068         42,700
   Purchase of debt securities                                                        -        (1,000,000)           -
   Proceeds from investment in debt securities                                    800,000             -              -
   Purchase of available-for-sale equity securities                              (100,000)            -              -
                                                                              -----------     -----------   ------------

              Net cash provided by (used in) investing activities                 639,217          57,977     (1,087,109)

Cash flows from financing activities
   Proceeds from borrowings                                                     3,819,714         873,000        645,000
   Payments on borrowings                                                      (3,687,934)       (375,000)    (1,788,500)
   Proceeds from sale of stock                                                        -               -        3,600,000
   Purchase of treasury stock                                                  (1,108,904)            -              -
   Sale of treasury stock                                                          34,844             -              -
                                                                              -----------     -----------   ------------

              Net cash provided by (used in) financing activities                (942,280)        498,000      2,456,500
                                                                              -----------     -----------     ----------

              NET INCREASE (DECREASE) IN CASH
                AND CASH EQUIVALENTS                                             (364,568)       (376,318)       943,113

Cash and cash equivalents at beginning of year                                    645,706       1,022,024         78,911
                                                                              -----------      ----------   ------------

Cash and cash equivalents at end of year                                     $    281,138    $    645,706    $ 1,022,024
                                                                              ===========     ===========     ==========
</TABLE>


<PAGE>


                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                             Year ended December 31,
<TABLE>
<CAPTION>

                                                                                    1999           1998           1997
                                                                             ---------------  -------------   -------------
<S>                                                                          <C>              <C>             <C>

Cash paid during the year for:

   Interest                                                                  $    115,000      $    8,000      $   105,000
   Income taxes                                                                     -                -               -

</TABLE>


Noncash investing and financing activities:

1999

   Exchange  of  debt  securities  -  related  party  with  a  carrying  value
   of  $200,000  and  accrued   interest  of  $17,151  for available-for-sale
   equity securities - related party.

1997

   Transfer of  aircraft  with a net book value of $178,778  from  property  and
   equipment  to  inventory  and  exchange of $484,765 in notes  receivable  and
   $65,235 in accrued  interest  receivable from related party for used aircraft
   inventory.  Exchange of  $2,000,000  in notes  payable and $87,368 in accrued
   interest for 200,000 shares of common stock.


















    The accompanying notes are an integral part of these statements.
<PAGE>



43

                                       22

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1999 and 1998

NOTE A - ORGANIZATION AND OPERATIONS

    Aviation  General,  Inc. ("AGI") was  incorporated  August 4, 1998 under the
    laws of the State of Delaware,  and is the  successor to the  operations  of
    Commander Aircraft Company ("CAC").  AGI is a holding company which, through
    its wholly-owned subsidiaries,  CAC and Strategic Jet Services, Inc. ("SJS")
    (collectively  referred to as the  "Company"),  manufactures,  markets,  and
    provides  support  services for single engine,  high  performance  Commander
    aircraft  and to a lesser  extent  provides  sales and service of other used
    aircraft.  On  August  5,  1998,  CAC  (incorporated  under  the laws of the
    Commonwealth  of Virginia on June 22, 1988) was merged with AGI.  Each share
    of CAC common stock was converted  into one share of AGI common  stock.  All
    outstanding  stock options of CAC were converted into AGI stock options on a
    one-to-one basis and all terms of the options remained unchanged.  On August
    6, 1998, SJS was incorporated  under the laws of the State of Delaware.  SJS
    provides consulting,  sales,  brokerage,  and refurbishment services for jet
    aircraft. The reorganization and merger had no effect on previously reported
    stockholders' equity or loss per share amounts.

    The Board of Directors of AGI is authorized to issue  preferred stock in one
    or more  series.  The Board of Directors  is further  authorized  to fix the
    number of shares constituting such series and to fix the relative rights and
    preferences of the shares of the series.

NOTE B - SUMMARY OF ACCOUNTING POLICIES

    A summary of the significant accounting policies consistently applied in the
    preparation of the accompanying consolidated financial statements follows.

    1.     Principles of Consolidation

    The Company consolidates the accounts of its subsidiaries,  CAC and SJS. All
    intercompany balances and transactions are eliminated in consolidation.

    2.     Cash and Cash Equivalents

    The Company  considers all highly liquid debt  instruments  purchased with a
    maturity  of  three  months  or  less  and  money  market  funds  to be cash
    equivalents.  The Company maintains its cash in bank deposit accounts which,
    at  times,  may  exceed  federally  insured  limits.  The  Company  has  not
    experienced  any losses in such  accounts  and believes it is not exposed to
    any significant  credit risks on cash and cash  equivalents.  As of December
    31, 1999 and 1998,  the Company has  approximately  $279,000  and  $600,000,
    respectively, on deposit at one financial institution.


<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

    3.     Investments

    Debt securities that the Company has both the positive intent and ability to
    hold until maturity are classified as  held-to-maturity,  and are carried at
    amortized cost.

   The   Company's   investment   in  equity   securities   is   classified   as
   available-for-sale  with unrealized  gains or losses excluded from income and
   reported  as  other  comprehensive  income.  Declines  in the  fair  value of
   securities  that are other than temporary  result in write-downs  included in
   earnings.  At  December  31,  1999,  the  fair  value  of  available-for-sale
   securities approximates cost.

    4.     Revenue Recognition

   Sales of aircraft are  recognized  upon execution and funding of the purchase
   agreement  by  the  buyer  which  occurs  after  the  Company   receives  the
   airworthiness  certificate from the Federal Aviation  Administration  ("FAA")
   and for financed  aircraft sales when it has been determined that the buyer's
   initial  and   continuing   investments  in  the  aircraft  are  adequate  to
   demonstrate a commitment to pay. Sales of used aircraft are  recognized  upon
   execution  and  funding  of  the  purchase  agreement.   Service  revenue  is
   recognized when the services are performed and billable.

    5.     Inventories

    Inventories  consist primarily of finished goods and parts for manufacturing
    and servicing of 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 December 31 were as follows:

                                                     1999              1998
                                                --------------    -------------

       Raw materials                              $2,867,102        $3,112,257
       Work in process                               595,593           602,457
       Demonstration aircraft                        964,324           987,325
       Used aircraft                                 716,701         1,081,359
                                                  ----------         ---------

                                                  $5,143,720        $5,783,398
                                                   =========         =========






<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

    7.     Income Taxes

    Deferred  income  taxes  are  provided  on  carryforwards  and on  temporary
    differences  between the tax basis of an asset or liability and its reported
    amount in the financial statements that will result in taxable or deductible
    amounts in future  years.  Deferred  income tax assets and  liabilities  are
    determined by applying the presently enacted tax rates and laws.

    The Company  provides  for a valuation  allowance on deferred tax assets if,
    based on the weight of available  evidence,  it is more likely than not that
    some portion or all of the deferred tax asset will not be realized.

    AGI  files  a   consolidated   income  tax  return  with  its   wholly-owned
    subsidiaries.

    8.     Refundable Deposits

    Refundable  deposits  consist of payments made by customers  prior to having
    repairs  performed on their  aircraft and deposits on aircraft  sold.  These
    deposits are  recognized as revenue in the period the services are completed
    or the aircraft sale is recognized.

    9.     Prepaid Advertising and Advertising Costs

    The Company expenses the cost of advertising as incurred, except for prepaid
    advertising.  Prepaid  advertising  consists  of costs for  future  magazine
    advertisement.   These  costs  are  expensed  when  the  advertisements  are
    published.  Advertising expense for the years ended December 31, 1999, 1998,
    and 1997 was approximately $270,000, $590,000, and $390,000, respectively.

    10.    Loss Per Common Share

    Loss per common share is calculated  based on the weighted average number of
    shares  outstanding  during the year  pursuant  to  Statement  of  Financial
    Accounting  Standards  ("SFAS")  No. 128,  Earnings  per Share.  Because the
    conversion  prices for  warrants  and options  are greater  than the average
    market  price for the  periods  presented,  the assumed  conversion  of such
    securities are antidilutive (see Note F).

    11.    Use of Estimates

    In preparing the Company's  consolidated  financial  statements,  management
    makes estimates and  assumptions  that affect certain  reported  amounts and
    disclosures; accordingly, actual results could differ from those estimates.


<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

6.  Property and Equipment

    Depreciation  is  computed  using the  straight-line  method  for  financial
reporting  purposes  and  accelerated  methods for tax purposes  over  estimated
useful lives ranging from three to fifteen years.

NOTE C - NOTE RECEIVABLE

    From time to time, the Company  finances the sale of new aircraft with notes
    receivable from customers which are collateralized by the aircraft. The note
    receivable matures February 1, 2005 and bears interest at prime plus 1.5%.

    A summary of the note receivable as of December 31 is as follows:

                                                  1999             1998
                                              ------------     -----------

       Amounts due within one year             $  19,535        $  21,286
       Amounts due after one year                125,331          148,649
                                                 -------          -------

            Total note receivable               $144,866         $169,935
                                                 =======          =======

NOTE D - NOTES PAYABLE

    Notes  payable  consist  of  outstanding   draws  under   revolving   credit
    facilities.  The revolving  credit  facilities may be drawn down to purchase
    new and used aircraft.  Interest is payable  monthly at fixed rates of 9.25%
    to 9.5% and variable rates of 4% over prime  (effective rate at December 31,
    1999 of 12.5%).

NOTE E - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following  methods and assumptions  were used to estimate the fair value
    of each class of financial  instruments  as of December 31, 1999 and 1998 as
    required  by  SFAS  No.  107,  Disclosure  About  Fair  Value  of  Financial
    Instruments.  Such  information,  which pertains to the Company's  financial
    instruments,  is based  upon the  requirements  of SFAS No. 107 and does not
    purport to represent the aggregate net fair value of the Company:

       Cash and Cash Equivalents. The balance sheet carrying amounts of cash and
       cash equivalents approximate fair values of such assets.

       Investment  in Debt  Securities  - Related  Party  (see Note I). The fair
       values of investments in debt securities are estimated by discounting the
       future cash flows using the current rates at which similar loans would be
       made to borrowers  with similar credit ratings and for the same remaining
       maturities.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE E - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED

       Notes Receivable.  The carrying amount approximates fair value because of
       the fluctuating  interest rate associated with the notes receivable.

       Notes  Receivable  From Related  Party (see Note I). The carrying  amount
       approximates  fair  value  because  of  the  fluctuating   interest  rate
       associated with the line of credit and its short-term nature.

       Available-For-Sale  Equity Securities - Related Party. The estimated fair
       value is based on quotes from independent pricing sources.

       Notes  Payable.  The carrying  value of notes  payable  approximates fair
       value  because of variable  interest  rates and the short-term nature  of
       the instruments.

    All of the  Company's  financial  instruments  are for  purposes  other than
trading.

<TABLE>
<CAPTION>

                                                                         1999                            1998

                                                               Carrying           Fair         Carrying            Fair
                                                                amount           value          amount           value
                                                             ------------   ---------------  ------------   --------------
<S>                                                         <C>             <C>              <C>            <C>
    Cash and cash equivalents                                $   281,138    $   281,138      $   645,706    $   645,706
    Notes receivable                                             144,866        144,866          169,935        169,935
       Investment in debt securities - related party                 -              -          1,000,000      1,007,137
       Notes receivable from related party                     1,736,552      1,736,552        1,507,843      1,507,843
       Available-for-sale equity securities - related party      317,151        317,151              -              -
       Notes payable                                            (731,780)      (731,780)        (600,000)      (601,474)
</TABLE>


NOTE F - STOCK OPTION PLANS

   In December 1993, the Company approved a stock option plan for issuance of up
   to 300,000  shares of stock to employees at the  discretion  of the committee
   appointed  by the Board of  Directors.  The number of shares  authorized  for
   issuance has  subsequently  been  increased to  1,800,000  shares.  The stock
   option plan also provides for automatic  grants to purchase  20,000 shares of
   common  stock to each  director on an annual  basis.  At December  31,  1999,
   approximately  332,000  shares remain to be granted under the plan. The stock
   options generally vest ratably over a three-year period.

    The Company uses the intrinsic  value method to account for its stock option
    plan in which  compensation  is recognized  only when the fair value of each
    option  exceeds its  exercise  price at the date of grant.  Accordingly,  no
    compensation   cost  has  been  recognized  for  the  options  issued.   Had
    compensation  cost been determined based on the fair value of the options at
    the grant dates,  the  Company's net loss and loss per share would have been
    increased to the pro forma amounts for the years ended as indicated below.


<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE F - STOCK OPTION PLANS -  CONTINUED

                                    1999              1998              1997
                               --------------   ----------------  --------------

       Net loss

           As reported           $(385,018)       $(1,849,400)      $(2,140,637)
           Pro forma              (708,612)       $(2,069,761)      $(2,362,514)

       Loss per share

           As reported           $   (.05)        $    (.25)        $   (.31)
           Pro forma             $   (.10)        $    (.28)        $   (.34)

   The fair  value of each  grant is  estimated  on the date of grant  using the
   Black-Scholes  options-pricing  model  with  the  following  weighted-average
   assumptions  used for  grants  in 1999,  1998,  and  1997,  respectively:  No
   expected  dividends;  expected  volatility  of 66%,  66%, and 64%,  risk-free
   interest rate of 5.5%,  5.5%, and 5.9%, and expected lives of five years. The
   exercise price of all options  equaled or exceeded  market price of the stock
   at the date of grant.

    The Black-Scholes option valuation model was developed for use in estimating
    the fair value of traded options which have no vesting  restrictions and are
    fully transferable.  In addition,  option valuation models require the input
    of  highly  subjective   assumptions  including  the  expected  stock  price
    volatility.    Because   the   Company's   employee   stock   options   have
    characteristics  significantly  different from those of traded options,  and
    because changes in the subjective  input  assumptions can materially  affect
    the fair value estimate, in management's opinion, the existing models do not
    necessarily  provide a  reliable  single  measure  of the fair  value of its
    employee stock options.

   A summary of the status of the Company's stock option plan as of December 31,
   1999,  1998,  and 1997 and changes  during the years ending on those dates is
   presented below.

<TABLE>
<CAPTION>

                                                           1999                   1998                     1997
                                                   --------------------  ------------------------   -----------------
                                                              Weighted                Weighted                Weighted
                                                                average                 average                average
                                                               exercise                exercise               exercise
                                                    Shares       price     Shares        price     Shares       price
                                                  --------   ----------  ---------   ----------  ----------  ---------
<S>                                             <C>           <C>         <C>         <C>        <C>          <C>
       Outstanding at beginning of year             980,880      $2.97     691,349      $3.65      510,500      $4.21
       Granted                                      700,000      $1.58     672,400      $2.67      206,850      $2.28
       Exercised                                      -          -             -         -             -         -
       Forfeited                                    (220,000)    $3.30    (382,869)     $3.68      (26,001)     $4.73
                                                  ----------              --------                --------

       Outstanding at end of year                  1,460,880     $2.27     980,880      $2.97      691,349      $3.65
                                                   =========              ========                 =======

       Options exercisable at year end              398,983      $3.01     234,360      $3.89      304,327      $4.37

       Weighted average fair value of options
           granted during the year                               $0.74                  $1.33                   $1.33


</TABLE>

<PAGE>


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE F - STOCK OPTION PLANS -  CONTINUED

The following  table  summarizes  information  about  fixed-price  stock options
outstanding at December 31, 1999:

<TABLE>
<CAPTION>

                                                             Options outstanding                   Options exercisable
                                                                   Weighted-
                                                                    average    Weighted-                    Weighted-
                                                      Number      remaining     average         Number       average
                                                   outstanding   contractual    exercise      exercisable    exercise
                                                   at 12/31/99       life        price        at 12/31/99    price
                                                   -----------   ----------     -------      -------------  ----------
<S>                                             <C>              <C>            <C>            <C>          <C>
       Range of exercise prices
           $1.38 to $1.75                             643,000     3.26 years      $1.57              -          -
           $1.76 to $2.75                             713,880     2.88 years      $2.59          294,983       $2.52
           $2.76 to $4.00                              40,000     1 year          $3.25           40,000       $3.25
           $4.01 to $5.25                              64,000     .37 years       $5.08           64,000       $5.08
                                                  -----------                                   --------

           $1.38 to $5.25                           1,460,880                                    398,983
                                                    =========                                    =======
</TABLE>

NOTE G - LEASES

    The Company leases office space, hangar space, its manufacturing and service
    facility,  and certain  office  equipment  under  agreements  classified  as
    operating  leases that expire at various dates through 2004.  Rental expense
    under these leases was approximately  $271,000,  $264,000,  and $256,000 for
    the years ended December 31, 1999, 1998, and 1997, respectively.  The future
    annual minimum lease payments under these leases at December 31, 1999 are as
    follows:

    Year ending December 31
                     2000                                          $   274,278
                     2001                                              281,861
                     2002                                              289,672
                     2003                                              250,536
                     2004                                               21,504
                                                                   -----------

                     Total future minimum lease payments            $1,117,851
                                                                     =========



<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE H - SALES CONCENTRATIONS

    The geographic sales of the Company's new aircraft are as follows:

<TABLE>
<CAPTION>

                                                  1999                       1998                      1997
                                          -----------------------   -----------------------   ------------------------
                                          Number        Amount       Number        Amount      Number         Amount
                                          ------     ------------    ------     ------------   ------      ---------
<S>                                       <C>        <C>             <C>        <C>            <C>         <C>
    United States                             12       $5,757,791       10        $4,182,703       12        $4,583,063
    Europe                                   -                -          2           828,750        -               -
    South America                              1          424,770        1           511,700        -               -

</TABLE>


    The  Company's  1999 used aircraft sold in the United States and Europe were
    29 and 2,  respectively,  totaling  $4,853,789  and $733,400,  respectively.
    Brokerage  commissions  of $156,484 were received in 1999 as a selling agent
    for used aircraft.

    The  Company's  1998 used aircraft sold in the United States and Europe were
    21 and 2, respectively, totaling $3,205,325 and $647,000, respectively.

    During 1997,  used aircraft sold in the United States and Europe were 13 and
    2, respectively, totaling $1,876,350 and $401,000, respectively.

NOTE I - RELATED PARTY TRANSACTIONS

    The  Company  extends  financing  for  aircraft  and spare parts sold either
    directly to a director of the  corporate  general  partner of the  Company's
    majority  stockholder or to an Authorized  Sales and Service  Representative
    owned by the director under a line of credit of $5,000,000.  All outstanding
    advances under this line of credit and accrued  interest  thereon are due on
    June 30,  2000.  The line of credit  bears  interest  at 1% over the  Morgan
    Guaranty  of New York  prime  rate  (9.5% at  December  31,  1999),  payable
    quarterly,  in arrears.  Following is a summary of  transactions  under this
    line of credit for 1999, 1998, and 1997:
<TABLE>
<CAPTION>

                                                                                 1999            1998           1997
                                                                            --------------  -------------- -------------
<S>                                                                         <C>             <C>            <C>
       Balance at beginning of year                                            $1,508,000     $1,497,000     $2,648,000

       Sale of used aircraft                                                      493,000            -              -
       Sale of spare parts                                                            -           11,000         57,000
       Purchase of aircraft for inventory                                             -              -         (485,000)
       Cash payments received                                                    (265,000)           -         (723,000)
                                                                               ---------- --------------     ----------

       Balance at end of year                                                  $1,736,000     $1,508,000     $1,497,000
                                                                                =========      =========      =========
</TABLE>



<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE I - RELATED PARTY TRANSACTIONS - CONTINUED

   Accrued interest  receivable  under this line of credit agreement  totaled $0
   and $143,588 as of December 31, 1999 and 1998, respectively.  Interest income
   under this line of credit was approximately $144,000,  $142,000, and $207,000
   for 1999, 1998, and 1997, respectively.

    The line of credit is  collateralized  by one used  aircraft,  approximately
    1,000,000  shares of the  Company's  stock owned  directly  by the  majority
    stockholder, and the personal guarantee of the majority stockholder.

    During 1998, the Company  purchased debt securities  with  detachable  stock
    purchase warrants for $1,000,000 from an entity under common control. During
    1999,  $800,000 of the debt  securities were paid off and the balance of the
    securities plus accrued interest was converted into 133,333 shares of common
    stock of the affiliate in exchange for shortening the expiration date of the
    accompanying  warrants. The Company purchased an additional 66,667 shares of
    the entity for $100,000 during 1999.

    The Chairman of the Board of Directors of the Company is also a stockholder,
    director,  and the Managing Director of the corporate general partner of the
    Company's majority stockholder.

   In January  1997,  the Board of Directors of the Company  voted to accept the
   stockholder's  offer to exchange  $2,000,000 of outstanding notes payable for
   common  stock at  approximately  $10 per  share.  The  repayment  of  accrued
   interest of approximately $87,000 was waived. Effective February 1, 1997, the
   stockholder   and  its   affiliate   exchanged   $1,450,000   and   $550,000,
   respectively,  of notes payable for a total of 200,000 shares of common stock
   at $10 per share.

NOTE J - INCOME TAXES

    No  current  tax  provisions  have  been  recognized  in  the   accompanying
statements of operations given the operating losses incurred.

    Components of the net deferred tax assets at December 31 are as follows:

                                                         1999            1998
                                                  --------------   -------------

    deferred tax assets (liabilities)
       Inventories                                 $      270,000   $   280,000
       Depreciation and amortization                     (163,000)     (167,000)
       Accrued liabilities                                142,000       149,000
       Net operating loss carryforwards                11,225,000    11,066,000
                                                      -----------    ----------
                                                       11,474,000    11,328,000
    Valuation allowance                               (11,474,000)  (11,328,000)
                                                      -----------   -----------

           Total deferred tax assets               $          -     $        -
                                                   ==============   ===========


<PAGE>



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE J - INCOME TAXES - CONTINUED

    The Company's net operating loss carryforwards will expire as follows:

    December 31
                     2004                                 $     220,657
                     2005                                     3,196,640
                     2006                                        17,434
                     2007                                     6,466,819
                     2008                                     3,982,473
                     2009                                     4,523,401
                     2010                                     2,279,486
                     2011                                     3,445,366
                     2012                                     1,869,674
                     2018                                     1,681,538
                     2019                                       378,948
                                                           ------------

    Total net operating loss carryforwards                  $28,062,436
                                                             ==========

NOTE K - COMMITMENTS AND CONTINGENCIES

    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 aircraft
    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.
    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.


<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE K - COMMITMENTS AND CONTINGENCIES - CONTINUED

    The Company has been named in a lawsuit  concerning the crash of a Commander
    114TC resulting in the death of the pilot and has further been notified of a
    claim  by the  insurer  of the  aircraft  hull.  In  addition,  although  no
    litigation  has been filed,  the Company has been contacted by the attorneys
    for the estates and  survivors of the  decedents  concerning  the crash of a
    Commander 114B resulting in the death of four passengers. Although it is too
    early for any factual development to take place concerning these claims, the
    ultimate outcome of these matters cannot be determined;  however, management
    intends to vigorously  defend  against  these claims and currently  believes
    that these will not result in any material  adverse  effect on the Company's
    financial position or results of operations.  Accordingly,  no provision for
    any  liabilities  that  may  result  have  been  recorded  in the  financial
    statements.  Due to the  uncertainties  of  these  matters,  it is at  least
    reasonably possible that management's view of the outcome will change in the
    near term.

    The Company is routinely  involved in various legal  matters  arising in the
    normal course of business.  Management believes that losses, if any, arising
    from such actions will not have a material  adverse  effect on the financial
    position or operations of the Company.

NOTE L - EMPLOYEE BENEFIT PLANS

    The Company has a profit  sharing  401(k) plan  covering  substantially  all
    employees.   Eligible   employees   may   contribute  up  to  15%  of  their
    compensation.  The Company  contributes  an amount  equal to at least 25% of
    each employee's contributions not in excess of 10% of compensation. However,
    additional  contributions may be made at the Company's  discretion.  Expense
    under the plan was  approximately  $45,000,  $53,000,  and $44,000 for 1999,
    1998, and 1997, respectively.

    The  Company  has  a   contributory   health  care  benefit  plan   covering
    substantially all employees and eligible  dependents.  The plan provides for
    covered  major  medical  expense  benefits  subject to certain  deductibles,
    coinsurance  provisions,   and  lifetime  maximums.   Employee  and  Company
    contributions  are  determined by the Company from time to time based on the
    amounts  of  claims  and  other  expenses  incurred.  The plan  has  certain
    stop-loss  coverage under an insurance  policy that provides for payments of
    covered  benefits  in excess of $25,000  per year per  covered  person.  The
    policy also  provides an aggregate  monthly  stop-loss for the plan based on
    number  of  covered  persons.  Expense  under  the  plan  was  approximately
    $110,000, $160,000, and $142,000 for 1999, 1998, and 1997, respectively.


<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE M - SEGMENT INFORMATION

   The Company operates in the segments of piston engine aircraft  manufacturing
   sales and service and jet aircraft brokerage and  refurbishment.  The Company
   had  no  segments  prior  to  1998.   Information  concerning  the  Company's
   reportable segments for the year ended December 31 are as follows:
<TABLE>
<CAPTION>

                                                                                            1999               1998
                                                                                      ----------------   ---------------
<S>                                                                                   <C>               <C>
    Revenues

       Jet aircraft brokerage and refurbishment                                        $     107,750     $           -
       Aircraft sales and service                                                         13,559,495         10,711,827
                                                                                          ----------         ----------

           Total                                                                         $13,667,245        $10,711,827
                                                                                          ==========         ==========

    Operating loss

       Jet aircraft brokerage and refurbishment                                       $      (70,758)     $    (127,795)
       Aircraft sales and services                                                          (412,096)        (2,107,987)
                                                                                        ------------        -----------

           Total                                                                       $    (482,854)      $ (2,235,782)
                                                                                        ============        ===========

    Assets

       Jet aircraft brokerage and refurbishment                                      $         9,978     $       25,921
       Aircraft sales and service                                                          8,622,009         10,122,047
                                                                                         -----------         ----------

           Total                                                                        $  8,631,987        $10,147,968
                                                                                         ===========         ==========
</TABLE>


<TABLE>
<CAPTION>

                                                                    Jet aircraft
                                                                   brokerage and       Aircraft sales     Consolidated
                                                                   refurbishment         and service             total
                                                                  ---------------      ---------------    ------------
<S>                                                              <C>                  <C>                 <C>
Other significant items - 1999
    Interest income                                                 $         -             $200,010           $200,010
    Interest expense                                                          -              115,405            115,405
    Depreciation and amortization                                           5,295            105,739            111,034
    Expenditures for long-lived assets                                        782             60,851             61,633

Other significant items - 1998
    Interest income                                                 $         -             $324,043           $324,043
    Interest expense                                                          -               12,619             12,619
    Depreciation and amortization                                           1,229            104,901            106,130
    Expenditures for long-lived assets                                     10,461            157,475            167,936

</TABLE>

<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE N - MANAGEMENT PLANS

   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 the 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 1999, the Company  continued to expand the Aviation Services
   Division ("ASD"),  which sells pre-owned  aircraft and markets  refurbishment
   services.  Also in 1999,  the Company  continued  expansion of 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 45% in 1999 after increasing 69% in 1998 and
   revenues from refurbishment and service increased over 30% in 1999 and 11% in
   1998.  Management  expects growth to continue in 2000 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  Stategic  Jet
    Services,  Inc. ("SJS"),  a wholly-owned  subsidiary  established to provide
    brokerage,  sale, consulting, and refurbishment work for jet aircraft. While
    results from this start-up were less than planned in 1999,  income from this
    line of business is expected to begin improving the Company's  profitability
    in 2000.

    During  1999,  the  Company  began  certification  of  new  state-of-the-art
    avionics   systems  that  offer  the  customer  the  latest   technology  in
    navigational  and  communication  equipment.  The Company  introduced  a new
    de-icing  option  and  received  certification  from  the  Federal  Aviation
    Administration in 1998, allowing equipped aircraft to operate in known icing
    conditions  similar  to  larger,  more  expensive  aircraft.  Sales  of this
    equipment  not only  provide  additional  revenues  and  earnings,  but also
    increase the value of the aircraft relative to its competition.

    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.


<PAGE>



             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE N - MANAGEMENT PLANS - CONTINUED

    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 ASD and SJS, improved its
    products,  dramatically  decreased sales and marketing expenses, and reduced
    debt and  interest  expense.  Through  the above  efforts,  the  Company has
    lowered its  break-even  sales to only 13 new  aircraft  per year.  With the
    large investment complete,  management believes that it has made significant
    progress  towards  the  building of a world  class  aviation  company and is
    poised to break into profitability.  Furthermore, it is reasonable to expect
    the Company to  continue  improving  revenues,  reducing  costs,  increasing
    operating  profits,  and  generating  positive  cash  flow in  2000.  Due to
    numerous  factors  beyond  the  control  of  the  Company,  there  can be no
    assurances that these results will be achieved.


<PAGE>




               AVIATION GENERAL, INCORPORATED AND SUBSIDIARIES
                     SELECTED QUARTERLY FINANCIAL DATA
                            (unaudited)

<TABLE>
<CAPTION>

                                                                    Three Months Ended

                                      --------------------------------------------------------------------------------
                                          MARCH 31,            JUNE 30,          SEPTEMBER 30,        DECEMBER 31,
                                             1999                1999                1999                 1999
                                      -------------------  ------------------  ------------------  -------------------
<S>                                   <C>                  <C>                 <C>                 <C>
Net Sales                                 $2,258,292          $3.055,110          $2,980,139           $5,373,704

Net income/(loss)                         ($379,565)            $48,244           ($165,604)            $111,907

Income/(loss) per share                    ($0.05)               $0.01              ($0.02)              $0.02

Weighted average shares outstanding       7,269,437            7,171,108           7,093,322           6,643,156




                                          MARCH 31,            JUNE 30,          SEPTEMBER 30,        DECEMBER 31,
                                             1998                1998                1998                 1998
                                      -------------------  ------------------  ------------------  -------------------
Net Sales                                 $2,923,229          $2,633,898          $3,675,194           $1,479,506

Net income/(loss)                         ($241,496)          ($435,352)           ($95,189)          ($1,077,363)

Income/(loss) per share                    ($0.03)              ($0.06)             ($0.01)             ($0.15)

Weighted average shares outstanding        7,280,548           7,280,548           7,280,548            7,280,548

</TABLE>



Quarterly  and  year  to  date   computation  of  per  share  amounts  are  made
   independently.  Therefore,  the sum of  quarterly  per share  amounts may not
   agree with per share amounts for the year.


<PAGE>







                                       37

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure


There were no Form 8-K filings in fiscal year ended  December 31, 1999 and there
were no changes in or disagreements with accountants on accounting and financial
disclosure in 1999.

                                    PART III

Certain  information  required  by Part III is omitted  from this report in that
registrant will file a definitive proxy statement pursuant to Regulation 14A for
its 2000 Annual Meeting of Shareholders, and the information included therein is
incorporated by reference.

Item 10.  Directors and Executive Officers of the Registrant

Information  regarding  directors  of the  Registrant  required  by this item is
incorporated herein by reference to the company's 2000 Proxy Statement under the
caption "Election of Directors - Nominees".

The information  regarding  executive  officers of the company  required by this
item appearing in the company's 2000 Proxy Statement under the caption "Election
of Directors - Other Officers" is hereby incorporated by reference.

Item 11.  Executive Compensation

The  information  required by this item  appearing in the  company's  2000 Proxy
Statement under the captions "Election of Directors - Director Compensation" and
"Executive Compensation" is hereby incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The  information  required by this item  appearing in the  company's  2000 Proxy
Statement under the caption  "Information  Concerning  Solicitation and Voting -
Security  Ownership  of  Certain  Beneficial  Owners and  Management"  is hereby
incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions

Note E -  Disclosures  About Fair Value of  Financial  Instruments  and Note I -
Related Party Transactions,  of the Notes to Consolidated  Financial  Statements
for 1999 are hereby incorporated by reference.

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports of Form 8-K:
---------------------------------------------------------------------------



(a)      (1)  The following financial statements are included in Part II Item 8:

                  Report of Independent Public Accountants

                  Financial Statements:
                  Consolidated Balance Sheets December 31, 1999 and 1998

                  Consolidated Statements of Operations for the years ended
                         December 31, 1999, 1998 and 1997

                  Consolidated  Statement of Stockholders' Equity for the
                         years ended 1999, 1998 and 1997

                  Consolidated Statements of Cash Flows for the years ended
                         December 31, 1999, 1998 and 1997

                  Notes to Consolidated Financial Statements


         (2)   The following financial schedule for the years 1999, 1998 and
               1997 is submitted herewith:

                 Selected Quarterly Financial Data for the years ended
                  December 31, 1999 and 1998 (unaudited)

                 All other schedules are omitted because they are not applicable
                 or the required information has been presented in the financial
                 statements or notes thereto.

         (3)      Exhibits included are hereby  incorporated by reference to the
                  Exhibit Index, page 39 of this report.


<PAGE>



                                INDEX OF EXHIBITS

Exhibit No                                   Description

3.1  Certificate  of  Incorporation  of  Aviation  General,  Incorporated.  This
     exhibit is  incorporated  by reference  to Exhibit 3.1 of the  Registrant's
     Form S-4 filed June 12, 1998 (Reg. No. 333-56731).

3.2  Bylaws of Aviation General,  Incorporated.  This exhibit is incorporated by
     reference to Exhibit 3.2 of the  Registrant's  Form S-4 filed June 12, 1998
     (Reg. No. 333-56731).

4.1(a) Certificate of  Incorporation,  describing the Common Stock  (included in
     Exhibit 3.1).  This exhibit is  incorporated by reference to Exhibit 4.1(a)
     of the Registrant's Form S-4 filed June 12, 1998 (Reg. No. 333-56731).

10.1 Federal  Aviation   Administration  ("FAA")  Type  Certificates  issued  to
     Commander  Aircraft  Company (the  "Company")  for models 112, 114,  112TC,
     112B,  112TCA 114A, and 114B.  This exhibit is incorporated by reference to
     Exhibit  10.1 of the  Registrant's  Form S-1 filed March 4, 1993 (Reg.  No.
     33-59128).

10.2 FAA Repair  Station  Air Agency  Certificate  issued to the  Company.  This
     exhibit is  incorporated  by reference to Exhibit 10.2 of the  Registrant's
     Form S-1 filed March 4, 1993 (Reg. No. 33-59128).

10.3 Lease and operations  Agreement between the Company and the Trustees of the
     Oklahoma  City  Airport  Trust  dated  August 9,  1988,  as  amended by the
     Supplemental  Agreement No. 1 dated December 18, 1991, and the Supplemental
     Agreement  No. 2 dated  April 2,  1992.  This  exhibit is  incorporated  by
     reference to Exhibit 10.19 of the Registrant's Form S-1 filed March 4, 1993
     (Reg. No. 33-59128).

10.4 Textron Lycoming Finance Plan No. 1 between Textron  Financial  Corporation
     and the Company  dated June 26, 1991,  as amended to the Finance Plan No. 1
     dated as of May 28, 1992,  the Second  Amendment  dated as of September 29,
     1992, and the Third  Amendment  dated as of December 10, 1992. This exhibit
     is incorporated by reference to Exhibit 10.29 of the Registrant's  Form S-1
     filed March 4, 1993 (Reg.No. 33-59128).











                                INDEX OF EXHIBITS

Exhibit No                                   Description

10.5 International  Distributorship  Agreement  between  the Company and Com-Air
     Flugzeughandel  Gmbh.  This exhibit is incorporated by reference to Exhibit
     10.31 of the Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).

10.6 International  Distributorship  Agreement  between  the  Company  and  Aero
     Service b.v. This exhibit is  incorporated by reference to Exhibit 10.32 of
     the Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).

10.7 International  Dealership  Agreement  between  the  Company  and  Commander
     Khaleej Trading Establishment. This exhibit is incorporated by reference to
     Exhibit10.28 of the Registrant's Form 10-K filed March 30, 1994.

10.8 Form of the Company's  Authorized Sales and Service  Representative  Policy
     and Procedures Manual. This exhibit is incorporated by reference to Exhibit
     10.37 of the Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).

10.9 Form  of  the  Company's   Authorized  Sales  and  Service   Representative
     Agreement.  This exhibit is  incorporated  by reference to Exhibit 10.38 of
     the Registrant's Form S-1 filed March 4, 1993 (Reg. No. 33-59128).

10.10Form  of  the  Company's   Service  Center   Agreement.   This  exhibit  is
     incorporated  by reference to Exhibit  10.39 of the  Registrant's  Form S-1
     filed March 4, 1993 (Reg. No. 33-59128).

10.11The  Commander  Aircraft  Company  Profit  Sharing  Plan.  This  exhibit is
     incorporated  by reference to Exhibit  10.40 of the  Registrant's  Form S-1
     filed March 4, 1993 (Reg. No. 33-59128).

10.12Nonstatutory  Stock  Option  Agreement  between  the  Company  and  Wirt D.
     Walker,  III dated  January  31,  1994.  This  exhibit is  incorporated  by
     reference to Exhibit  10.48 of the  Registrant's  Form 10-K filed March 30,
     1994.

10.13Nonstatutory  Stock Option Agreement between the Company and Mishal Y.S. Al
     Sabah dated January 31, 1994.  This exhibit is incorporated by reference to
     Exhibit 10.49 of the Registrant's Form 10-K filed March 30, 1994.

10.14Form of Company's Aircraft Delivery and Acceptance Agreement.  This exhibit
     is incorporated by reference to Exhibit 10.63 of the Registrant's  Form S-1
     filed March 4, 1993 (Reg. No. 33-59128).



<PAGE>







                                INDEX OF EXHIBITS

Exhibit No                                   Description

10.15Form  of  the  Company's   Aircraft  Retail   Warranty.   This  exhibit  is
     incorporated  by reference to Exhibit  10.64 of the  Registrant's  Form S-1
     filed March 4, 1993 (Reg. No. 33-59128).

10.16Commander  Aircraft  Company  1993  Stock  Option  Plan.  This  exhibit  is
     incorporated  by reference to Exhibit 10.53 of the  Registrant's  Form 10-K
     filed March 28, 1996.

21   List of subsidiaries

27   Financial Data Schedule



<PAGE>



                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto authorized on the 29th day of March, 2000.

                          AVIATION GENERAL INCORPORATED

                             By: Wirt D. Walker, III

                              Chairman of the Board

Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Principal Executive Officers:
<S>                                         <C>                                     <C>
Wirt D. Walker,III                          Chief Executive Officer                  March 29, 2000
------------------

Dean N. Thomas                              President and Chief
--------------                              Operating Officer                        March 29, 2000


Principal Financial Officer and Accounting Officer:

Stephen R. Buren                            Chief Financial Officer                  March 29, 2000
----------------

Directors:

Wirt D. Walker, III                         Director                                 March 29, 2000
-------------------

Mishal Y.S. Al Sabah                        Director                                 March 29, 2000
--------------------

N. Gene Criss                               Director                                 March 29, 2000
-------------
</TABLE>