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 March 31, 1998 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) 765-0500
- -------------------------------------------------
(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 March 31, 1998.
NUMBER OF SHARES CLASS
---------------------- -----------
7,927,504 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
March 31, 1998 (Unaudited)
and September 30, 1997 3
Consolidated Statements of
Operations (Unaudited) for
the Three and Six Months ended
March 31, 1998 and 1997 4
Consolidated Statements of
Cash Flows (Unaudited) for
the Three and Six Months Ended
March 31, 1998 and 1997 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 10
Item 5. OTHER INFORMATION 10
PART II - OTHER INFORMATION 11
SIGNATURES 11
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Balance Sheets
March 31, 1998 and September 30, 1997
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997
Assets (Unaudited)
------ -------------- ------------------
<S> <C> <C>
Current Assets
Cash $ 7,021 $ 20,427
Accounts receivable 79,961 69,311
Notes Receivable 7,000 8,000
Prepaid expenses 25,715 21,800
----------- -----------
Total current assets 119,697 119,538
Advance to officer 4,026 27,769
Note receivable, net of current portion 46,544 52,044
Land held for development 602,233 577,327
Property & equipment, net of
accumulated depreciation 53,012 57,154
Agency acquisition, net of amortization 93,745 104,774
Goodwill, net 106,270 87,308
Course materials 14,736 15,718
Other 5,914 24,527
----------- -----------
1,046,177 1,066,159
----------- -----------
Liabilities & Stockholder's Equity
----------------------------------
Current Liabilities
Note Payable, bank 25,000
Current portion of long-term debt 28,000 37,775
Convertible debentures & related accrued interest 86,490 82,938
Accounts payable 57,242 86,159
Accrued expenses 70,699 68,263
Unearned tuition 64,037 45,290
----------- -----------
Total current liabilities 331,468 320,425
Long term debt, net of current portion 14,223 19,979
Trust deed notes payable with land for
development as collateral 601,000 601,000
Stockholders' Equity
Capital stock
Class A: $.50 par value,
10,000,000 shares authorized,
7,927,504 issued 3,963,752 3,826,252
Class B: $.001 par value,
5,000,000 shares authorized,
4,962,801 issued 4,963 4,963
Paid in capital (861,827) (751,827)
Retained earnings (deficit) (3,007,402) (2,954,633)
----------- -----------
99,486 124,755
----------- -----------
$ 1,046,177 $ 1,066,159
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended March 31,1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
-------- --------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Real estate education $ 122,757 $ 109,146 $ 218,109 $ 193,518
Travel Agency 281,339 696,617
Other 1,025 1,010 1,025
------------ ------------ ------------ ------------
Total revenue $ 404,096 $ 110,171 $ 915,736 $ 194,543
------------ ------------ ------------ ------------
Expenses
Costs of sales travel agency 255,121 626,510
Personnel expenses 84,780 63,519 187,246 124,584
Facility cost 21,401 13,647 33,650 18,700
Other operating cost 35,024 25,025 51,896 40,134
General and administration 23,646 18,026 43,543 27,922
------------ ------------ ------------ ------------
419,972 120,217 942,845 211,340
------------ ------------ ------------ ------------
Income (loss) before interest
expense, depreciation and
amortization (15,876) (10,046) (27,109) (16,797)
Interest expense 2,888 3,378 6,391 6,925
Depreciation and amortization 9,635 4,173 19,269 8,345
------------ ------------ ------------ ------------
Income (loss) from continuing
operations (28,399) $ (17,597) (52,769) $ (32,067)
Income (loss) from discontinued
operations (2,996) (2,806)
------------ ------------ ------------ ------------
Net income (loss) $ (28,399) $ (20,593) $ (52,769) $ (34,873)
------------ ------------ ------------ ------------
Net income (loss) per share $ (.002) $ (.002) $ (.004) $ (.003)
------------ ------------ ------------ ------------
Weighted number of shares
outstanding 12,840,305 11,542,528 12,727,805 11,393,917
------------ ------------ ------------ ------------
</TABLE>
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 and Six Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
-------- --------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (28,399) $ (20,593) $ (52,769) $ (34,873)
Adjustments to reconcile net to cash
used by operating activities
Depreciation 2,662 2,481 5,324 4,962
Amortization 6,973 2,089 13,945 4,178
Net increase (decrease) in current liabilities
and (increase) decrease in accounts receivable
prepaid expense and other assets 20,141 30,922 34,418 40,140
--------- --------- --------- ---------
Net cash provided by (used by)
operating activities 1,377 14,899 918 14,407
--------- --------- --------- ---------
Cash flows from investing activities
Reduction in advance to officer 11,526 23,743
Increase in goodwill-Western College, Inc
acquisition (20,000) (20,000) (20,000) (20,000)
Addition to land held for development (14,666) (528,529) (24,906) (528,529)
Disposition (acquisition) of equipment (765) (1,190) (1,182) (4,894)
--------- --------- --------- ---------
Net cash provided by (used by)
investing activities (23,905) (549,719) (22,345) (553,423)
--------- --------- --------- ---------
Cash flows from financing activities
Trust deed notes payable for land acquisition 501,000 501,000
Issuance of Class A Common shares for:
Land acquisition 25,000 25,000
Contingent shares-Western College, Inc. Acq 20,000 20,000 20,000 20,000
Decrease in long-term debt (9,646) (3,009) (11,979) (5,390)
--------- --------- --------- ---------
Net cash provided by (used by)
financing activities 10,354 542,991 8,021 540,610
--------- --------- --------- ---------
Net increase (decrease) in cash (12,174) 8,171 (13,406) 1,594
Cash Beginning of Period 19,195 3,560 20,427 10,137
--------- --------- --------- ---------
Cash, End of Period $ 7,021 $ 11,731 $ 7,021 $ 11,731
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
UNITED STATES AIRCRAFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 (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 six months ended March 31, 1998 to 1997
The loss before interest, depreciation and amortization expense
increased by $10,312. The increased loss consists of the following:
Increase in Real Estate Education 1998
operating income over 1997 $ 22,851.
Operating loss from
travel agency operation
during the six months ended
March 31, 1998 with no
comparable amount for 1997 $ (17,527).
Increase in general
corporate overhead $ (15,621).
Decrease in other revenue $ (15).
The operating income from the adult education division improved by $22,851. The
improvement was due to an $24,591 increase in revenues offset by a $1,740
increase in operating costs. The revenue increase is the result of additional
enrollments including those at the new East campus, and due to a $3,232 increase
in advertising revenue related to the publication of the Renewal News. The
operating cost increase consists of an $6,593 decrease in personnel expense,
$10,646 increase in facility costs and $2,313 decrease 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 six
months ended March 31, 1998 with no comparable amounts for the six months ended
March 31, 1997 as follows:
Amount
------
Sales $696,617
Cost of sales $626,510
--------
Gross profit 70,107
Operating Costs
Personnel expense $69,255
Facility cost 4,304
Other operating costs 14,075
-------
Total operating costs 87,634
--------
Income (loss) before interest
depreciation and amortization $(17,527)
--------
<PAGE>
General corporate overhead increased by $15,621 primarily due to management
compensation increases of $12,000 and professional fee increases of $3,500.
Other revenue consisting primarily of interest on travel agency deposits
declined by $15. Depreciation and amortization increased by $10,924 primarily
due to equipment and business acquisitions. Interest decreased by $534.
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 1997 operating loss of $2,806 with no
comparable amount for 1998.
Comparison three months ended March 31, 1998 to 1997
The loss before interest, depreciation and amortization expense
increased by $5,830. The increased loss consists of the following:
Increase in Real Estate Education 1998
operating income over 1997 $ 11,668.
Operating loss from
travel agency operation
during the three months
ended March 31, 1998 with no
comparable amount for 1997 $ (10,853).
Increase in general
corporate overhead $ (5,620).
Decrease in other revenue $ (1,025).
The operating income from the adult education division improved by $11,668. The
improvement was due to an $13,611 increase in revenues offset by a $1,943
increase in operating costs. The revenue increase is the result of additional
enrollments including those at the new East campus. The operating cost increase
consists of an $401 increase in personnel expense, $5,227 increase in facility
costs and $3,685 decrease 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 March 31, 1998 with no comparable amounts for the three
months ended March 31, 1997 as follows:
Amount
------
Sales $281,339
Cost of sales $255,121
--------
Gross profit 26,218
Operating Costs
Personnel expense $20,859
Facility cost 2,528
Other operating costs 13,684
-------
Total operating costs 37,071
--------
Income (loss) before interest
depreciation and amortization $(10,853)
--------
<PAGE>
Effective January 1, 1998, management reduced its full time travel staff to
bring personnel expenses in line with the revenue production with a further a
reduction of its full time staff on May 1, 1998.
General corporate overhead increased by $5,620 primarily due to management
compensation increases of $2,000 and professional fee increases of $3,500. Other
revenue consisting primarily of interest on travel agency deposits declined by
$1,025. Depreciation and amortization increased by $5,462 primarily due to
equipment and business acquisitions. Interest decreased by $490.
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 1997 operating loss of $2,996 with no
comparable amount for 1998.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
The working capital deficit increased $10,884 from September 30, 1997
to $211,771. Current assets increased by $159 from September 30, 1997 to
$119,697. The increase consists of a $13,406 decrease in cash, a $10,650
increase in accounts receivable, an $1,000 decrease in notes receivable related
to the sale of Hansen & Associates Inc. dba Property Masters and a $3,915
increase in prepaid expenses.
Current liabilities increased $11,043 from September 30, 1997 to
$331,468. The increase consists of a $25,000 increase in the notes payable bank
related to the new $30,000 line of credit obtained in March, 1998, a $9,775
decrease in the current portion of long-term debt, a $3,562 increase related to
the accrued interest on the debentures, a $28,917 decrease in accounts payable
and a $2,436 increase in accrued expenses. Unearned tuition increased by
$18,747.
Advances to officer made pursuant to the officer's compensation program
decreased by $23,743. 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 $4,142 as a result of equipment acquisitions
of $1,182 offset by depreciation of $5,324. Goodwill increased by $18,962 due to
the issuance of the contingent shares related to the 1996 acquisition of Western
College, Inc. valued at $20,000 offset by amortization of $1,038. Course
materials decreased by $982 due to amortization. Other assets decreased by
$18,613.
In February 1997, the Company acquired 35.66 acres of undeveloped land
in Glenn County, California which is recorded for financial reporting purposes
at $602,233. 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 $16,543 with $11,029 of amortization being
recorded in the six months ended March 31, 1998.
Long-term debt decreased by $5,756 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 $601,000, and the holder of the $276,600 first and second trust
deed notes payable has filed a notice of default with respect to the
non-.payments on the related notes. 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
first and 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 concluded 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:
<PAGE>
* Authorization of new common shares and an exchange of the currently
authorized Class A and B shares for the new common share.
* Authorization of preferred stock with the Board of Directors being
authorized to establish preferences for separate classes of the
preferred stock.
* Approval of a name change to Neo Vision. Systems, Inc. and a
restatement of and revision to the articles of incorporation.
* 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. 27 - Financial Data Schedule
None
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: 6-29-98 /s/ Harry V. Eastlick
------- ----------------------------------------------------
Harry V. Eastlick, President and Chief
Executive Officer
Date: 6-29-98 /s/ Harry V. Eastlick
------- ----------------------------------------------------
Harry V. Eastlick, Acting Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 7,021
<SECURITIES> 0
<RECEIVABLES> 86,961
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 119,697
<PP&E> 124,298
<DEPRECIATION> 71,286
<TOTAL-ASSETS> 1,046,177
<CURRENT-LIABILITIES> 331,468
<BONDS> 615,223
0
0
<COMMON> 3,968,715
<OTHER-SE> 3,869,229
<TOTAL-LIABILITY-AND-EQUITY> 1,046,177
<SALES> 915,736
<TOTAL-REVENUES> 915,736
<CGS> 942,845
<TOTAL-COSTS> 942,845
<OTHER-EXPENSES> 19,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,391
<INCOME-PRETAX> (52,769)
<INCOME-TAX> 0
<INCOME-CONTINUING> (52,769)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,769)
<EPS-PRIMARY> (.004)
<EPS-DILUTED> (.004)
</TABLE>
