SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
QUARTERLY REPORT UNDER SECTION 13 OF 15(d)
of the Securities Exchange Act of 1934
-----------------------------
For quarter ended December 31, 1997 Commission file number 0-9974
-----------------
UNITED STATES AIRCRAFT CORPORATION
----------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3518487
- ------------------------------- -----------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER I.D. NUMBER)
INCORPORATION OR ORGANIZATION)
3121 E. Greenway Rd., Phoenix, Arizona 85032
- ---------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(602) 787-1351
- -------------------------------------------------
(REGISTRANT'S TELEPHONE NO., INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of December 31, 1997.
NUMBER OF SHARES CLASS
---------------- -----
7,652,504 Class A
4,962,801 Class B
<PAGE>
UNITED STATES AIRCRAFT CORPORATION
COMMISSION FILE NUMBER 0-9974
FORM 10-Q
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
December 31, 1997 (Unaudited)
and September 30, 1997 3
Consolidated Statements of
Operations (Unaudited) for
the Three Months ended
December 31, 1997 and 1996 4
Consolidated Statements of
Cash Flows (Unaudited) for
the Three Months Ended
December 31, 1997 and 1996 5
Notes to Consolidated
Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
of Financial Condition and Results of
Operations 7
Item 3. DEFAULTS UPON SENIOR SECURITIES 9
Item 5. OTHER INFORMATION 9
PART II - OTHER INFORMATION 10
SIGNATURES 10
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1997 and September 30, 1997
<TABLE>
<CAPTION>
December 31, 1997 September 30, 1997
Assets (Unaudited)
------ ----------------- ------------------
<S> <C> <C>
Current Assets
Cash $ 19,195 $ 20,427
Accounts receivable 64,514 69,311
Notes receivable 7,000 8,000
Prepaid expenses 19,701 21,800
----------- -----------
Total current assets 110,410 119,538
Advance to officer 15,552 27,769
Note receivable, net of current portion 46,544 52,044
Land held for development 587,567 577,327
Property & equipment, net of
accumulated depreciation 54,909 57,154
Agency acquisitions, net of amortization 99,260 104,774
Goodwill, net 86,478 87,308
Course materials 15,227 15,718
Other 5,902 24,527
----------- -----------
1,021,849 1,066,159
----------- -----------
Liabilities & Stockholder's Equity
----------------------------------
Current Liabilities
Current portion of long-term debt 36,275 37,775
Convertible debentures & related accrued interest 84,714 82,938
Accounts payable 81,131 86,159
Accrued expenses 56,664 68,263
Unearned tuition 44,310 45,290
----------- -----------
303,094 320,425
Long term debt, net of current portion 17,370 19,979
Trust deed notes payable 601,000 601,000
Stockholders' Equity
Capital stock
Class A: $.50 par value,
10,000,000 shares authorized,
7,652,504 issued 3,826,252 3,826,252
Class B: $.001 par value,
5,000,000 shares authorized,
4,962,801 issued 4,963 4,963
Paid in capital (751,827) (751,827)
Retained earnings (deficit) (2,979,003) (2,954,633)
100,385 124,755
----------- -----------
$ 1,021,849 $ 1,066,159
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended December 31, 1997 and 1996
(Unaudited)
1997 1996
------------ ------------
Revenue
Real estate education $ 95,352 $ 84,372
Travel agency 415,278
Other 1,010
------------ ------------
Total revenue 511,640 84,372
Expenses
Cost of sales-travel agency 371,389
Personnel expenses 102,466 61,065
Facility cost 12,249 5,053
Other operating cost 16,872 15,109
General and administration 19,897 9,896
------------ ------------
522,873 91,123
Income (loss) before interest
expense, depreciation and
amortization (11,233) (6,751)
Interest expense 3,503 3,547
Depreciation and amortization 9,634 4,172
------------ ------------
Income (loss) from continuing operations (24,370) (14,470)
Income (loss) from discontinued operations 190
------------ ------------
Net income (loss) $ (24,370) $ (14,280)
------------ ------------
Net income (loss) per share $ (.002) $ (.001)
------------ ------------
Weighted number of shares
outstanding 11,245,305 9,870,305
------------ ------------
The accompanying notes are an integral part of these statements.
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 1997 and 1996
(Unaudited)
1997 1996
-------- --------
Cash Flows From Operating Activities
Net income (loss) (24,370) (14,280)
Adjustments to reconcile net to cash
used by operating activities
Depreciation 2,662 2,481
Amortization 6,972 2,089
Net increase (decrease) in current liabilities
and (increase) decrease in accounts receivable
prepaid expense and other assets 14,277 9,218
-------- --------
Net cash provided by (used by)
operating activities (459) (492)
Cash flows from investing activities
Reduction in advance to officer 12,217
Addition to land (10,240)
Disposition (acquisition) of equipment (417) (3,704)
-------- --------
Net cash provided by (used by)
investing activities 1,560 (3,704)
-------- --------
Cash flows from financing activities
Decrease in long-term debt (2,333) (2,381)
-------- --------
Net cash provided by (used by)
financing activities (2,333) (2,381)
-------- --------
Net increase (decrease) in cash (1,232) (6,577)
Cash, Beginning of Period 20,427 10,137
-------- --------
Cash, End of Period $ 19,195 $ 3,560
-------- --------
The accompanying notes are an integral part of these statements.
<PAGE>
UNITED STATES AIRCRAFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 (UNAUDITED) AND SEPTEMBER 30, 1997
NOTE 1 - Basis of Presentation
---------------------
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included.
For further information, refer to the audited financial statements and footnotes
thereto included in the Company's Form 10-K for the year ended September 30,
1997.
NOTE 2 - Summary of Significant Accounting Policies
------------------------------------------
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of United States
Aircraft Corporation and its subsidiaries (hereinafter referred to as "the
Company"). All intercompany transactions have been eliminated in consolidation.
For further information concerning significant accounting policies, refer to the
audited financial statements and footnotes thereto in the Company's Form 10-K
for the year ended September 30, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
---------------------
Comparison 1997 to 1996
The loss before interest, depreciation and amortization expense
increased by $4,482. The increased loss consists of the following:
Increase in Real Estate Education 1997
operating income over 1996 $ 11,183.
Operating loss from
travel agency operation
during the three months ended
December 31, 1997 with no
comparable amount for 1996 $ (6,674).
Increase in general
corporate overhead $ (10,001).
Increase in other revenue $ 1,010.
The operating income from the adult education division improved by $11,183. The
improvement was due to an $10,980 increase in revenues plus a $203 decrease in
operating costs. The revenue increase is the result of additional enrollments
including those at the new East campus, and due to a $3,272 increase in
advertising revenue related to the publication of the Renewal News. The
operating cost decrease consists of an $6,994 decrease in personnel expense,
$5,419 increase in facility costs and $1,372 increase in other operating costs.
The travel services operation was started on July 1, 1997 with the purchase of
an existing travel agency and the operating results are included during the
three months ended December 31, 1997 with no comparable amounts for the three
months ended December 31, 1996 as follows:
Amount
------
Sales $ 415,278
Cost of sales $ 371,389
---------
Gross profit 43,889
Operating Costs
Personnel expense $ 48,396
Facility cost 1,776
Other operating costs 391
---------
Total operating costs 50,563
---------
Income (loss) before interest
depreciation and amortization $ (6,674)
---------
Effective January 1, 1998, management reduced its full time travel staff to
bring personnel expenses in line with the revenue production.
<PAGE>
General corporate overhead increased by $10,000 primarily due to management
compensation increases. Other revenue consisting primarily of interest on travel
agency deposits increased by $1,010. Depreciation and amortization increased by
$5,462 primarily due to equipment and business acquisitions. Interest decreased
by $44.
On September 30, 1997 the company sold its wholly-owned subsidiary Hansen and
Associates, Inc. dba Property Masters after determining to discontinue its real
estate brokerage and property management line of business. The financial
statements have been restated to reflect the operations of the subsidiary as a
discontinued operation reflecting a 1996 operating profit of $190 with no
comparable amount for 1997.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
The working capital deficit decreased $8,203 from September 30, 1997 to
$192,684. Current assets decreased by $9,128 from September 30, 1997 to
$110,410. The decrease consists of a $1,232 increase in cash, a $4,797 decrease
in accounts receivable, an $1,000 decrease in Notes receivable related to the
sale of Hansen & Associates Inc. dba Property Masters and a $2,099 decrease in
prepaid expenses primarily related to the travel agency operations.
Current liabilities decreased $17,331 from September 30, 1997 to
$303,094. The decrease consists of a $1,500 decrease in the current portion of
long-term debt, a $1,776 increase related to the accrued interest on the
debentures, a $5,028 decrease in accounts payable and a $11,599 decrease in
accrued expenses. Unearned tuition decreased by $980.
Advances to officer made pursuant to the officer's compensation program
decreased by $12,217. The long term note receivable of $46,544 relates to the
sale of Hansen and Associates Inc. and decreased by $5,500 due to collections.
Property and equipment decreased by $2,245 as a result of equipment acquisitions
of $417 offset by depreciation of $2,662. Goodwill decreased by $830 due to
amortization. Course materials decreased by $491 due to amortization. Other
assets decreased by $18,625.
In February 1997, the Company acquired 35.66 acres of undeveloped land
in Glenn County, California which is recorded for financial reporting purposes
at $587,567. The land has been pledged as collateral for three trust deed notes
payable totaling $601,000. The Company is planning the formation of a Real
Estate Investment Trust (REIT) or other alternative to whom the undeveloped land
would be sold or contributed. Interest payments on the second and third trust
deed notes payable are delinquent and the holder of the second trust deed Note
payable filed a notice of default on March 30, 1998. If the REIT or other
alternative is not formed with the resulting sale or contribution of the land,
the Company will be required to take other steps to sell the land which could be
at a sales price that would be less than the trust deed notes payable.
The July and August 1997 purchase price of the travel agencies exceeded the
indentifiable tangible assets of the agencies by $110,288 and relates primarily
to the value of the income production of the approximately 175 Home Based Travel
Agents who place their travel sales through FirsTravel . The original cost has
been reduced by amortization of $11,028 with $5,514 of amortization being
recorded in the three months ended December 31, 1997.
Long-term debt decreased by $2,609 due to payments. The convertible debentures
of $56,450 plus the related accrued interest are classified as current
liabilities as they were due on December 31, 1996. Currently, the debentures
remain unpaid and the Company believes that they will eventually be retired
through conversion to the Company's Class A common stock, although no assurance
that such a conversion will be elected by the debenture holders.
<PAGE>
The Company's management has continued its program to expand the services
operations through further expansion of its existing operations plus the
acquisition of other service organizations. Working capital continues to limit
the expansion of the Company although the Company in February 1997 acquired
35.66 acres of undeveloped land for 250,000 Class A shares of its common stock
plus approximately $500,000 of trust deed notes payable. The Company intends to
plan the development of the parcel and has used the land as collateral for a
$100,000 loan to provide an interim resolution to the working capital
deficiency. Further, in March 1998 the Company obtained a one year bank
revolving line of credit in the amount of $30,000. Additionally, the Company is
aggressively investigating acquisitions of adult education, travel services or
other operations that are compatible with the existing operations and that can
be acquired for the Company's common stock or with debt that is retired from the
cash flow from the acquired operation. Further, the Company plans to complete a
private placement aggregating approximately $150,000 to provide working capital,
fund the acquisitions and retire a portion of the long-term debt. No assurance
can be given the acquisitions will be completed or the private placement will be
successful.
In May 1998, The Company signed a letter of intent to acquire all of the
outstanding shares of Neo Vision, Inc. For additional information, reference is
made to Item 5 Other Information of this report.
Item 3. Defaults Upon Senior Securities
-------------------------------
The Company currently is in default on the payment of various convertible
debentures in the outstanding principal amount of $56,450. The Company also is
in default on various trust deed notes payable with respect to 35.66 acres of
undeveloped land it owns in Glenn County, California (the "California Land") in
the amount of $435,000, and the holder of the $100,000 second trust deed note
payable has filed a notice of default with respect to the non-.payments on the
related note. The Company is pursuing various alternatives for realizing the
value of the California land, including the possibility of forming a Real Estate
Investment Trust (REIT) to whom the undeveloped land would be sold or
contributed. If the Company is unable to pay the balance due on the second trust
deed note payable, then the Company may lose the California Land in a
foreclosure sale and would be liable for any deficiency in the payment on the
notes securing the land, which could be substantial. The Company currently does
not have the ability to pay any of its defaulted debts and no assurance can be
given that the Company will have sufficient capital to pay such debts.
Item 5. Other Information
-----------------
On May 28, 1998, the Company signed a letter of intent to acquire Neo Vision,
Inc. in tax-free exchange of 2,000,000 of the Company's Class A common shares
for all of the outstanding shares of Neo Vision, Inc. The letter of intent
provides for a closing on June 30, 1998 but is subject to several contingencies
and the due diligence review of both parties. Neo Vision, Inc. (Neo), an Arizona
corporation, has been in the development stage since its inception in June,
1997. Neo has developed the technology to provide out-of-home, high impact
advertising, programming and information to remote audiences using state of the
art, computer, video and signal transmission technology. Neo expects to conclude
the development phase of its operation in mid June 1998 with the start of
operations of the three video screens that have been installed in Las Vegas,
Nevada. The letter of intent further provides for the issuance of common shares
of United States Aircraft Corporation contingent upon Neo meeting certain future
conditions that prove the viability of the technology and the goodwill of the
Neo Vision, Inc. product. If all of the contingent shares are issued the Neo
shareholders would own approximately 80% of the outstanding shares of United
States Aircraft Corporation. The letter of intent also provides for an increase
in the Board of Directors at closing to nine individuals with one of the current
outside directors resigning and the election of five new members to the board of
directors two of whom will be outside directors nominated by Neo. Additionally
the letter of intent calls for the filing of a proxy statement shortly after
closing for a shareholders' meeting where the following will be presented for
shareholder approval:
o Authorization of new common shares and an exchange of the
currently authorized Class A and B shares for the new common
share.
<PAGE>
o Authorization of preferred stock with the Board of Directors
being authorized to establish preferences for separate classes
of the preferred stock.
o Approval of a name change to Neo V. Systems, Inc. and a
restatement of and revision to the articles of incorporation.
o Adoption of a stock option plan along with approval of the
initial grants.
At this time no assurance can be given that the acquisition of Neo Vision, Inc.
will be completed
PART II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. 10.5 - Letter of intent with Neo Vision, Inc. dated
May 27, 1998
b. 27 - Financial Data Schedule
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
UNITED STATES AIRCRAFT CORPORATION
Date: June 19, 1998 /s/ Harry V. Eastlick
----------------- --------------------------------------------------
Harry V. Eastlick, President and Chief
Executive Officer
Date: June 19, 1998 /s/ Harry V. Eastlick
----------------- --------------------------------------------------
Harry V. Eastlick, Acting Chief Financial Officer
[OBJECT OMITTED]
UNITED STATES AIRCRAFT CORPORATION
3121 East Greenway Rd., Suite #201
Phoenix, AZ 85032
- --------------------------------------------------------------------------------
Telephone (602) 787-1351
Fax (602) 787-1384
May 28, 1998
Mr. Albert C. Lundstrom, President
Neo Vision, Inc.
3625 N. 16th St. Suite 110
Phoenix, AZ 85016
Letter of intent
----------------
Dear Mr. Lundstrom:
We are writing to set forth our mutual intention to exchange all of the
outstanding shares of Neo Vision, Inc. (NEO) owned by the shareholders (Sellers)
for shares of United States Aircraft Corporation.
United States Aircraft Corporation (USAC), a Securities and Exchange
Commission reporting company, ("Purchasers"), desire to make it clear that this
letter of intent, if agreed to by Seller does not represent a binding contract
to exchange shares, but is merely a "meeting of the minds" of the parties and
this letter will be used by appropriate legal counsel as a basis for writing the
binding agreement. Purchasers propose that the final form of the purchase
agreement include an expanded version of the following provisions subject to the
approval of both party's Boards of Directors.
The Purchasers and Sellers intend to complete a tax free stock for
stock or stock for assets exchange whereby the shares or the net assets of NEO
owned by the shareholders (representing all of the outstanding shares) are
exchanged for shares of United States Aircraft Corporation. The basic provisions
of this exchange and its objectives are as follows:
1. Objective:
Our mutual objective is to include the operations of NEO with the
current USAC operations to provide increased profitability, capital, and
management that will allow expansion of all operations.
2. Organization:
NEO will be operated as a separate subsidiary of USAC with its existing
officers and management, except that the Board of Directors of NEO shall consist
of Anthony Christopher, Chairman, Albert C. Lundstrom, Jack Eberentz and Harry
V. Eastlick plus Harry V. Eastlick shall also serve as the Treasurer and Chief
Financial Officer of NEO.
<PAGE>
The Board of Directors of United States Aircraft Corporation will be increased
to nine members at the closing and will include the following:
Anthony Christopher Chairman of the Board of Directors
Albert C. Lundstrom President and Chief Executive
Officer/Director
Harry V.Eastlick Executive Vice President and
Chief Operating and Financial Officer/Director
Jack Eberenz Executive Vice President and
Secretary/Director
Donald E.Cline Director
Dale L. Dykema Director
Whipple H.Manning Director
John R. Thomas Director
One of the existing outside directors shall resign prior to the closing
and two new Outside Directors will be nominated by NEO and elected by
the existing board.
3. Employment Contracts:
United States Aircraft Corporation will execute employment
contracts with Anthony Christopher, Albert Lundstrom, Jack Eberenz and
the employment contract with Harry V. Eastlick will be revised with the
following provisions:
o Term - to be determined
o Compensation - to be determined
o Fringe Benefits - Health insurance premiums to be
paid plus participation in any
other fringe benefits provided as
described in the Employment
Contract Draft.
o Stock Options - Stock Options grants will be made,
subject to shareholder approval of
the stock option plan and initial
grants, with the aggregate initial
grants to the four officers covered
by this paragraph, being 1,800,000
shares of the new common stock
(assuming a 10 for 1 reverse
split).
o Business Expenses - Employees will be reimbursed for
their use in the business of their
personal automobile.
o A copy of the Harry V. Eastlick current Employment Contact is
attached and will serve as the basic form for the final
contracts to be executed.
<PAGE>
4. Share Exchange:
At the closing, the Sellers shall exchange all of their shares in NEO, duly
endorsed, for 2,000,000 Class A common shares with a par value of $.50 of the
Purchaser.
As well as the foregoing, additional shares of United States Aircraft
Corporation Class A, $.50 par value common stock will be issued to the Seller,
collectively, contingent on the following future conditions:
Additional
Shares
(a). Extended performance of technology
over a 90 day period from April 1, 1998
or later. 35,000,000
(b). Installation of the two screens in
the "D" concourse at the
McCarran Airport in Las Vegas,
Nevada and program screening
for a period of 30 days 20,000,000
(c). Obtaining positive cash flow for a 30
day period from the operation of the
Meadows Mall Screen or comparable location. 10,000,000
The total additional shares to be issued pursuant to this provision is
limited to 45,775,592 which brings Sellers interest to 80% of the outstanding
shares. The Purchaser and Seller understand that there is not sufficient
authorized common shares to issue the additional shares set forth above;
however, the Purchaser has agreed to present at the next meeting of its
shareholders amendments to its Articles of Incorporation to provide sufficient
authorized common shares to allow the issuance of the additional shares. It is
further understood by the Seller that one new class of common stock will be
authorized and that the Class A shares will be exchanged for the new common
shares. Further, there could be a reverse split of the outstanding shares at
rate to be mutually agreed upon by the Purchaser and Seller. The number of
additional shares to be issued will be adjusted accordingly and the shares to be
issued at closing will be exchanged for the newly authorized common shares.
Purchaser and Seller intend to close the transaction prior to the next
shareholders meeting. The common shares of Purchaser delivered to Seller shall
be validly issued, fully paid and nonassessable. All such shares shall bear a
legend containing a restriction on transfer indicating that the shares may not
be offered or sold and no transfer of them may be made unless in compliance with
the Securities Act of 1933. This transaction shall be completed in accordance
with the provisions of Section 368(a)(1)(b) of the Internal Revenue Code.
<PAGE>
5. Contingencies:
A. Purchasers and Seller's have a right to review and approve the
books, financial statements, tax returns and records, list of
assets related to the respective business hereunder.
B. Sellers and Purchasers disclosure of all litigation,
proceeding, or assessed tax deficiency pending against or
relating to Seller and Purchaser or properties, assets, or
business sold hereunder which may interfere with the use and
quiet possession of the assets of the respective businesses.
C. Purchasers have a right to review and evaluate the technology,
systems,, procedures including current board locations and
will be allowed to hire consultants, at Purchasers expense, to
complete the review and evaluation.
D. Purchasers and Sellers have a right to complete background
checks and evaluate all key officers and employees of the
respective businesses hereunder, including any subsidiaries.
E. NEO has issued convertible debentures with a principal balance
of $500,000. The debentures provide for conversion at $1 per
share when NEO "goes public" including through a transaction
such as set forth in this letter of Intent. The debenture
holders shall agree prior to closing to convert the debentures
into 500,000 shares of the New USAC common stock to be
authorized at the USAC shareholders meeting.
F. Purchaser and Seller agree that $450,000 of additional capital
is required by May 31, 1998 and that such additional capital
shall be raised by NEO prior to closing. It is anticipated
that NEO will issue convertible preferred stock through an
issuance exempt from registration and that the convertible
preferred shares will provide for conversion into
approximately 333,333 shares of the New USAC common stock to
be authorized at the shareholders meeting. The parties shall
mutually agree on the financing terms including arrangements
with any consultants engaged to complete the financing and
that the funding of this additional capital shall be completed
prior to closing. The parties further acknowledge that an
additional $550,000 of capital will be required to be raised
prior to September 30, 1998 and that the terms and conditions
for that financing will be determined subsequent to closing.
G. Purchaser and Seller agree that a reverse split of the
Purchasers new common shares will be required to facilitate
the raising of the new capital and in order to have an
appropriate market for the shares and the parties shall
mutually agree to the reverse split ratio prior to closing.
6. Condition of Business and Subsequent Performance:
Seller and Purchasers shall take no action in the period preceding
closing that will materially change the nature of the business and its
relationship with its customers, employees, and suppliers beyond normal business
actions of a prudent business person. Any material changes that require a
decision in the period preceding closing shall only be made after the mutual
agreement of the Purchaser and Seller.
After the Closing the Purchaser commits to the following:
(a) The shares to be issued to Sellers pursuant to the contingent
provisions of Section 4 hereof exceed the currently authorized
shares of the Purchaser. At the next shareholders meeting of
the Purchaser, expected to be held in August 1998, the
following actions will be presented to the shareholders for
approval:
<PAGE>
(i) Authorization of a single new class of common shares
totaling approximately 50,000,000 to 100,000,000
shares as mutually agreed to by the Purchaser and
Seller.
(ii) Exchange of the currently outstanding Class A shares
for the newly authorized common shares on the basis
of 1 share of the Class A for each 1 share of the new
common.
(iii) Exchange of the currently outstanding Class B shares
for the newly authorized common shares on a basis of
1.3 shares of the Class B for each 1 share of the new
common.
(iv) A reverse split of the outstanding shares of the new
common stock at rates to be agreed upon by the
Purchaser and Seller.
(v) Approval of Neo V Systems, Inc. as the New Name of
Purchaser or some other name mutually agreeable to
Purchaser and Seller.
(vi) Adoption of Stock Option Plans and initial grants.
(vii) Authorization of preferred stock of 75,000,000 shares
with the Board of Directors being authorized to
establish the preferences for separate classes of
preferred stock.
(b) It is understood that an S-4 registration statement is
intended to be filed in connection with the above exchange and
accordingly the new common shares issued should be registered
shares, subject to such restriction on transfer as set forth
in the Rules and Regulations of the Securities and Exchange
Commission.
7. Costs:
Each of the parties will bear their own costs and expenses in
connection with this transaction.
8. Closing:
It is the intent of the Parties that closing will occur no later than
June 30, 1998 at a time and place mutually agreeable to all parties.
<PAGE>
Please sign, where provided below, if all of the foregoing provisions
meet with your approval and you agree that binding agreements, subject to the
approval of both parties Board's of Directors, will be entered into with
Purchasers containing these provisions.
Sincerely,
United States Aircraft Corporation
(Purchasers)
/s/ Harry V. Eastlick
Harry V. Eastlick President and Chief
Executive Officer
Accepted by Seller on behalf of the Shareholders
Neo Vision, Inc.
Albert C. Lundstrom, President
/s/ Albert C. Lundstrom
------------------------------
Date: 5-28-98
-----------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 19,195
<SECURITIES> 0
<RECEIVABLES> 71,514
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 110,410
<PP&E> 123,533
<DEPRECIATION> 68,624
<TOTAL-ASSETS> 1,021,849
<CURRENT-LIABILITIES> 303,094
<BONDS> 618,370
0
0
<COMMON> 3,831,215
<OTHER-SE> (3,730,830)
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<CGS> 522,873
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<INCOME-PRETAX> (24,370)
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<EPS-PRIMARY> (.002)
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</TABLE>
