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, 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 December 31, 1998.
NUMBER OF SHARES CLASS
---------------- -----
9,927,504 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
December 31, 1998 (Unaudited)
and September 30, 1998 3
Consolidated Statements of
Operations (Unaudited) for
the Three Months ended
December 31, 1998 and 1997 4
Consolidated Statements of
Cash Flows (Unaudited) for
the Three Months Ended
December 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 11
PART II - OTHER INFORMATION 14
SIGNATURES 15
2
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1998 and September 30, 1998
December 31, September 30,
1998 1998
------------ -----------
Assets (Unaudited)
Current Assets
Cash $ 1,160 $ 8,070
Accounts receivable 79,569 75,902
Notes receivable 1,500 1,500
Prepaid expenses 30,978 7,844
----------- -----------
Total current assets 113,207 93,316
Note receivable, net of current portion 25,000 25,000
Investment, Neo Vision, Inc. 152,338 103,338
Property & equipment, net of
accumulated depreciation 47,443 47,613
Agency acquisitions, net of amortization 79,040 84,555
Goodwill, net 101,840 103,339
Course materials 13,263 13,754
Other 13,243 13,874
----------- -----------
545,374 484,789
----------- -----------
Liabilities & Stockholder's Equity
Current Liabilities
Current portion of long-term debt 26,000 26,000
Notes payable, bank 30,000 30,000
Convertible debentures & related
accrued interest 91,817 90,041
Accounts payable 86,566 90,734
Accrued expenses 258,382 214,062
Unearned tuition 67,153 62,900
----------- -----------
559,918 513,737
Long term debt, net of current portion 2,415 5,360
Total liabilities 562,333 519,097
Stockholders' Equity
Capital stock
Class A: $.50 par value,
10,000,000 shares authorized,
9,927,504 issued 4,963,752 4,963,752
Class B: $.001 par value,
5,000,000 shares authorized,
4,962,801 issued 4,963 4,963
Paid in capital (1,838,862) (1,838,862)
Retained earnings (deficit) (3,146,812) (3,164,161)
----------- -----------
(16,959) (34,308)
----------- -----------
$ 545,374 $ 484,789
----------- -----------
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended December 31, 1998 and 1997
(Unaudited)
1998 1997
----------- -----------
Revenue
Real estate education $ 108,980 $ 95,352
Travel agency 271,330 415,278
Other 90,000 1,010
----------- -----------
Total revenue 470,310 511,640
----------- -----------
Expenses
Cost of sales-travel agency 240,113 71,389
Personnel expenses 83,580 102,466
Facility cost 16,578 12,249
Other operating cost 35,124 16,872
General and administration 63,960 19,897
----------- -----------
439,355 522,873
----------- -----------
Income (loss) before interest
expense, depreciation and
amortization 30,955 (11,233)
Interest expense 3,445 3,503
Depreciation and amortization 10,161 9,634
----------- -----------
Net income (loss) $ 17,349 $ (24,370)
=========== ===========
Net income (loss) per share $ .001 $ (.002)
----------- -----------
Weighted number of shares
outstanding 14,890,305 11,245,305
----------- -----------
The accompanying notes are an integral part of these statements.
4
<PAGE>
United States Aircraft Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months Ended December 31, 1998 and 1997
(Unaudited)
1998 1997
-------- --------
Cash Flows From Operating Activities
Net income (loss) 17,349 (24,370)
Adjustments to reconcile net to cash
used by operating activities
Depreciation 2,662 2,662
Amortization 7,499 6,972
Net increase (decrease) in current liabilities
and (increase) decrease in accounts receivable
prepaid expense and other assets (28,983) 14,277
-------- --------
Net cash provided by (used by)
operating activities (1,473) (459)
Cash flows from investing activities
Reduction in advance to officer 12,217
Addition to land (10,240)
Disposition (acquisition) of equipment (2,492) (417)
-------- --------
Net cash provided by (used by)
investing activities (2,492) 1,560
-------- --------
Cash flows from financing activities
Decrease in long-term debt (2,945) (2,333)
-------- --------
Net cash provided by (used by)
financing activities (2,945) (2,333)
-------- --------
Net increase (decrease) in cash (6,910) (1,232)
Cash, Beginning of Period 8,070 20,427
-------- --------
Cash, End of Period $ 1,160 $ 19,195
-------- --------
The accompanying notes are an integral part of these statements.
5
<PAGE>
UNITED STATES AIRCRAFT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 (UNAUDITED) AND SEPTEMBER 30, 1998
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,
1998.
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") except Neo Vision, Inc whose exchanges agreement was entered into on
June 30, 1998. Neo Vision has not been consolidated until its acquisition has
been fully assured. The balance sheet as of December 31, 1998 for Neo Vision,
Inc and the related statements of operations and cash flows for the three months
ended December 31, 1998 are presented in Note 3 and pro forma financial
information is presented in Note 4. 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, 1998.
NOTE 3 - ACQUISITION - NEO VISION INC.
At June 30, 1998 acquired all of the outstanding shares of Neo Vision, Inc.
whose principal business purpose is to provide advertising, programming and
information to remote audiences using computer, video and transmission
technology throughout the United States. The merger was closed with the exchange
of 2,000,000 shares of the Company's Class A common stock for all of the
outstanding shares of Neo Vision, Inc. The exchange agreement requires that an
amendment and restatement of the Company's Certificate of Incorporation be
approved by the stockholders authorizing (i) the reclassification of the
Company's Class A Common Stock and Class B Common Stock in a single new class of
Common Stock ("New Common Stock,") pursuant to the following ratios: shares of
Class A Common Stock will be reclassified into shares of New Common Stock on the
basis of 10 shares of Class A Common Stock into one share of New Common Stock
and 13 shares of Class B Common Stock into one share of New Common Stock; (ii)
the issuance of up to 100,000,000 shares of New Common Stock: (iii) the issuance
of up to 75,000,000 shares of preferred stock: (iv) the change of the name of
the Company from United States Aircraft Corporation to Neo Vision Corporation,
Inc. and (v) make certain technical amendments to the Company's Certificate of
Incorporation. The exchange agreement provides that if the amendment and
restatement of the Certificate of Incorporation is not approved by a majority of
each of the Class A and Class B stockholders then the Neo Vision stockholders
can each elect to rescind their exchange of shares with the Company.
6
<PAGE>
UNITED STATES AIRCRAFT CORPORATION, AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
NOTE 3 - ACQUISITION - NEO VISION INC. (CONTINUED)
The financial statements of Neo Vision, Inc. will not be consolidated with the
Company, until approval of the amendment and restatement of the Certificate of
incorporation is fully assured and the investment is being accounted pursuant to
the cost method. At September 30, 1998, the investment in Neo Vision, Inc.
representing the initial 2,000,000 Class A Common Stock shares issued for all of
the outstanding shares of Neo Vision, Inc. has been recorded for financial
reporting purposes at $22,965, which represents the portion of the total
investment in Neo Vision Inc. represented by the initial issuance of the
Company's Class A shares. The investment, Neo Vision, Inc, includes the
following:
Acquisition of Neo Vision, Inc.
common shares $ 22,965
Management Fee Receivable
from Neo Vision Inc. 129,373
---------
$ 152,338
---------
The management fees are expected to be received from the future operating
profits of Neo Vision, Inc. and the proceeds of its planned capital infusion.
Upon approval of the amendment and restatement of the Certificate of
Incorporation an additional 3,977,560 shares of the New Common Stock will be
issued to the former stockholders of Neo Vision, Inc., approximately 973,000
shares of the New Common Stock will be in exchange for the outstanding Neo
Vision, Inc convertible debentures and 753,000 shares of the New Common Stock
issued in payments of fees to a Neo Vision, Inc. financial advisor. When the
acquisition of Neo Vision, Inc is fully assured it will be accounted for under
the purchase method of accounting with a reverse merger and Neo Vision, Inc
being the acquirer for financial reporting purposes.
7
<PAGE>
UNITED STATES AIRCRAFT CORPORATION, AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
NOTE 3 - ACQUISITION - NEO VISION INC. (CONTINUED)
The following unaudited Pro forma Consolidated Balance Sheets of United Stated
Aircraft Corporation as of December 31, 1998 sets forth the consolidation of
United States Aircraft Corporation with Neo Vision, Inc. under the purchase
method of accounting with a reverse merger and Neo Vision, Inc. being the
acquirer for financial reporting purposes. The pro forma adjustments report the
exchange of the Class A and Class B shares for the New Common stock, the
issuance of 4,577,560 additional New Common shares pursuant to the Exchange
Agreement and approximately 1,126,000 of New Common shares for the conversion of
the Neo Vision, Inc convertible debentures.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS -
December 31, 1998
<TABLE>
<CAPTION>
United States
Aircraft Corp. Pro Forma Neo Vision
And Subsidiaries Neo Vision, Inc. Combined Adjustments Corporation
----------------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash $ 1,160 $ 5,646 $ 6,806 $ 6,806
Accounts Receivable 79,569 57,481 137,050 137,050
Notes Receivable 1,500 1,500 1,500
Prepaid expenses 30,978 11,489 42,467 42,467
----------- ---------- ----------- ----------
Total current asets 113,207 74,616 187,823 187,823
Investment, Neo Vision, Inc. 152,338 152,338 (152,338)(3)(4)(5)
Note receivable, net of current
portion 25,000 25,000 25,000
Property & equipment, net 47,443 564,371 611,814 611,814
Agency acquisition, net of
amortization 79,040 79,040 79,040
Goodwill, net 101,840 101,840 101,840
Course materials 13,263 13,263 13,263
Other 13,243 28,566 41,809 41,809
----------- ---------- ----------- ----------
Total assets 545,374 667,553 1,212,927 1,060,589
----------- ---------- ----------- ----------
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Note Payable, bank $ 30,000 40,393 70,393 70,393
Current portion of long-term
debt 26,000 26,000 26,000
Convertible debentures &
related accrues interest 91,817 798,297 890,114 (798,297)(6) 91,817
Accounts payable 86,566 291,384 377,960 377,960
Accrued expenses 258,382 30,936 289,318 (25,950)(6) 263,368
Unearned revenue 67,153 12,360 79,513 79,513
----------- ---------- ----------- ----------
Total current liabilities 559,918 1,173,380 1,733,298 909,051
Due to United States Aircraft Corp. 129,373 129,373 (129,373)(5)
Long term debt, net 2,415 2,415 2,415
Minority Interest in Neo Vision
LLC 136,096 136,096 136,096
Stockholders' Equity - Capital stock
Class A: $.50 par value,
9,927,504 issued 4,963,752 4,963,752 (4,963,752)(1)
Class B: $.001 par value,
4,962,801 issued 4,963 4,963 (4,963)(2)
Common Stock, Neo Vision, Inc 6,250 6,250 (6,250)(4)
New Common Shares
$.001 par value, 7,078,303 issued 7,078(1)(2)(3)(6) 7,078
Paid in Capital (1,838,862) (1,838,862) 2,622,357(1)(2)(3)(6) 783,495
Retained earnings (deficit) (3,146,812) (777,546) (3,924,358) 3,146,812(4) (777,546)
----------- ---------- ----------- ----------
(16,959) (771,296) (788,255) 13,027
----------- ---------- ----------- ----------
Total liabilities and stockholders'
equity $ 545,374 $ 667,553 $ 1,212,927 $1,060,589
----------- ---------- ----------- ----------
</TABLE>
See explanation of pro forma adjustments on following page.
8
<PAGE>
UNITED STATES AIRCRAFT CORPORATION, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 3 - ACQUISITION - NEO VISION, INC. (CONTINUED)
Pro Forma Adjustments:
1. To record the exchange of Class A shares outstanding for the New
Common shares on the basis of 10 Class A shares for 1 New Common
Share.
2. To record the exchange of Class B shares outstanding for the New
Common shares on the basis of 13 Class B shares for 1 New Common
shares.
3. To record the 4,577,560 additional New Common shares to be issued to
the former Neo Vision, Inc. shareholders pursuant to the June 30, 1998
exchange agreement.
4. To record elimination of intercompany investment on Neo Vision, Inc
using the purchase method of accounting with a reverse merger and Neo
Vision, Inc being the acquirer for financial reporting purposes.
5. To eliminate intercompany receivables and payables.
6. To record the conversion of the Neo Vision, Inc convertible
debentures, accrued interest to December 31, 1998 and the payment of
financial consulting fees all through the issuance of approximately
1,126,000 shares of New Common stock.
9
<PAGE>
UNITED STATES AIRCRAFT CORPORATION, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 3 - ACQUISITION - NEO VISION SYSTEMS, INC. (CONTINUED).
The following unaudited consolidated statements of operations of Unites States
Aircraft Corporation for the quarter ended December 31, 1998 sets forth the
consolidation of United States Aircraft Corporation with the Neo Vision, Inc.
under the purchase method of accounting as if the acquisition was completed on
October 1, 1998.
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
United States Neo Vision
Aircraft Corp. Pro Forma Corporation
And Subsidiaries Neo Vision, Inc. Adjustments Consolidated
---------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue
Real estate education $ 108,980 $ 108,980
Travel Agency 271,330 271,330
Video Wall advertising 143,572 143,572
Other 90,000 (90,000)(1)
--------- --------- ---------
Total revenue 470,310 143,572 523,882
--------- --------- ---------
Expenses
Cost of sales 240,113 100,461 340,574
Personnel expenses 83,580 16,360 99,940
Facility cost 16,578 4,232 20,810
Other operating cost 35,124 57,080 92,204
General and administration 63,960 90,000 (90,000)(1) 63,960
Depreciation and amortization 10,161 10,818 20,979
--------- --------- ---------
Total expenses 449,515 278,951 638,466
--------- --------- ---------
Income (loss) before interest
expense and minority interest 20,795 (135,379) (114,584)
Interest expense 3,446 28,198 31,644
--------- --------- ---------
Net income (loss) $ 17,349 $(163,577) $(146,228)
========= ========= =========
Pro forma net income (loss) per
New common shares (2) (.02)
---------
</TABLE>
- ----------
(1) To eliminate intercompany management fees.
(2) Based on pro forma shares of 7,078,303 to be outstanding after the exchange
of Class A and B shares for the New Common shares to be authorized and the
New Common shares to be issued in the acquisition of Neo Vision, Inc., the
conversion of the Neo Vision, Inc. convertible debentures and the payment
of financial consulting fees.
10
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Comparison Three months ended December 1998 to 1997
The total revenue of $470,310 for the year three month ended December
31, 1998 is made up of $108,980 or 23% from the real estate education segment
and $271,330 or 58% from the travel agency segment with the remaining 90,000 or
19% consisting o the management fee charged to Neo Vision, Inc. Total revenue
decreased by 41,330 in 1998 compared to a $427,268 increase in 1997. The 1998
revenue decrease consists of an increase in real estate education revenue of
$13,628, a decrease in travel agency sales of $143,948 and management fees and
other revenues of 88,990.
The loss before interest, depreciation and amortization expense
decreased by $42,188 and consists of the following:
Decrease in Real Estate Education 1998
income before interest, depreciation
and amortization over 1997 $(10,615)
Decrease in Travel Agency 1998
loss before interest, depreciation
and amortization loss over 1997 $ 7,876
Increase in consulting and other income $ 88,990
Increase in general corporate overhead $ 44,063
The decrease in real estate education 1998 results over 1997 consists
of the following:
Increase
1998 1997 (Decrease)
-------- -------- --------
Revenue $108,980 $ 95,352 $ 13,628
-------- -------- --------
Costs and expenses
Personnel expense 66,645 54,071 12,574
Facility cost 14,924 10,472 4,452
Other operating cost 24,089 16,872 7,217
-------- -------- --------
Total 105,658 81,415 24,243
-------- -------- --------
Income before interest,
depreciation and
amortization $ 3,322 $ 13,737 $(10,615)
======== ======== ========
The adult education division results declined by $10,615. The decline
was due to a $24,243 increase in operating costs offset by a $13,628 increase in
revenues. The revenue increase is the result of additional enrollments including
those at the new East campus. The operating cost increase consists of an $12,574
increase in personnel expense, including additional marketing personnel, $4,452
increase in facility costs and $7,217 increase in other operating costs.
11
<PAGE>
The decrease in the travel agency 1998 loss before interest,
depreciation and amortization consists of the following:
Increase
1998 1997 (Decrease)
--------- --------- ---------
Sales $ 271,330 $ 415,278 $(143,948)
Costs of sales 240,113 371,389 (131,276)
--------- --------- ---------
Gross profit 31,217 43,889 (12,672)
--------- --------- ---------
Operating costs
Personnel expense 16,936 48,376 (31,460)
Facility cost 1,154 1,776 (122)
Other operating costs 11,425 391 11,034
--------- --------- ---------
Total 30,015 50,563 (20,548)
--------- --------- ---------
Income (loss) before interest,
depreciation and amortization 1,202 (6,674) (7,876)
--------- --------- ---------
Sales for the travel agency operation decreased by $143,948 for the
quarter ended December 31, 1998 over the agencies sales for the three months
ended December 31, 1997 with a gross profit decrease of $12,672. The sales
decrease was the result of the travel agency restructuring completed in January
1998. The gross profit percentage improved from 10.5% to 11.5% primarily due to
an increase in the portion of sales attributable to cruise and tours sales where
the gross profit percentage generally ranges from 10% to 13%. Operating costs
for the quarter were $30,015 compared to $50,563 for the three months ended
December 31, 1997, which reflects the restructuring of travel agency operations
to reduce the fixed operating costs to approximate $30,000 per quarter.
Other revenue consists of the $90,000 of management fees from Neo
Vision, Inc., the unconsolidated subsidiary acquired on June 30, 1998, which
exceeded other miscellaneous income for 1997 by $88,990. The management fee of
$90,000 represents the $30,000 per month charge to Neo Vision, Inc. for
executive management, general and administrative expense provided by the
Company.
General corporate overhead increased by 44,063 primarily due to
management compensation increases resulting primarily from the June 30, 1998
acquisition of Neo Vision, Inc.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The working capital deficit increased $26,290 from September 30, 1998
to $446,711. Current assets increased by $19,891 from September 30, 1998 to
$113,207. The increase consists of a $6,910 decrease in cash, a $3,667 increase
in accounts receivable, and a $23,134 increase in prepaid expenses.
Current liabilities increased $46,181 from September 30, 1998 to
$559,918. The increase consists of a $1,776 increase related to the accrued
interest on the Company's convertible debentures, a $4,168 decrease in accounts
payable and a $44,320 increase in accrued expenses which consists primarily of
increase in the estimated compensation due executive officers. Unearned tuition
increased by $4,253.
The long term note receivable of $25,000 relates to the sale of Hansen
and Associates Inc. Property and equipment decreased by $170 as a result of
equipment acquisitions of $2,492 offset by depreciation of $2,662. Goodwill
decreased by $1,499 due to amortization. Course materials decreased by $491 due
to amortization. Other assets decreased by $631.
The Company has formed RVP-LLC, an Arizona limited liability company
for the purpose of owning recreational vehicle parks that will be leased to and
operated by the Company. The operating agreement provides that the Company will
manage RVP-LLC and that profits and losses will be allocated 90% to a trust
whose trustee is the individual from whom the RV Park consulting fee has been
earned, with the remainder allocated to the Company.
12
<PAGE>
The Company has earned a consulting fee of $412,999 relating to its
research project on the recreational vehicle park industry net of its
contribution to RVP-LLC. The Company for over two years has investigated the
recreational vehicle park industry and instituted a program to establish a chain
of RV Parks. In connection therewith, the Company has earned a consulting fee
for its research and development of the RV Parks program from which it will
contribute $1,700,000 to RVP-LLC. The net consulting fee at September 30, 1998
consists of the following:
Fee, net of contribution to RVP-LLC $300,000
Equity in RVP-LLC. 112,999
--------
$412,999
========
No additional consulting fees were earned during the quarter ended
December 31, 1998.
The consulting fee revenue was earned upon completion of the research
and the agreement with the unrelated individual who is the trustee of the family
trust that holds 90% of RVP-LLC. However, for financial reporting purposes the
consulting fee revenue will not be recognized until it is received, since there
is insufficient evidence to assure its realization. Management believes the
consulting fee, which is expected to be revenue with an infrequent occurrence,
will be collected in the year ending September 30, 1999. The costs related to
earning the consulting fee consisted primarily of executive compensation and
travel all of which has been expensed over the period of the project.
On June 30, 1998 the Company approved the transfer to RVP-LLC of the
35.66 acres of land in Glenn County, California subject to trust deeds payable
in the amount of $601,000. The 35.66 acres of land transferred to RVP-LLC
resulted in $12,516 being included as the original investment in RVP-LLC. The
$12,516 represents the excess of the land cost at June 30, 1998 over the balance
of the trust deeds payable and it has been included in the Company's general and
administrative expenses for the year ended September 30, 1998. The land was
acquired for the purpose of developing the initial recreational vehicle park of
the planned chain of RV parks. The holder of the second trust deed filed a
notice of default due to non payment of interest. The LLC determined not to
reinstate the defaulted trust deed and in August 1998, RVP-LLC lost the
California land in a foreclosure sale. There are no collection activities being
pursued by the trust deed noteholders and management does not believe there will
be any collection efforts.
At September 30, 1998, the members equity of RVP-LLC is $1,707,500 and
consists of primarily of the $1,700,000 capital contribution to be received from
the consulting fee which for financial reporting purposes reduces the member's
equity of RVP-LLC until the capital contribution of $1,700,000 is received. The
Company's interest in the RVP-LLC, if the capital contributions were recognized,
would be approximately $135,988.
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 $31,248 with $5,514 of
amortization being recorded in the three months ended December 31, 1998.
Long-term debt decreased by $2,945 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 or the New
Common Stock to be authorized; although no assurance that such a conversion will
be elected by the debenture holders. If the debentures holders do not elect to
convert into the Company's New Common Stock, they could demand payment and seek
enforcement through legal action; however, the Company has had no contact with
the debentures holders.
13
<PAGE>
The report by the Company's independent certified public accountant on
the Company's financial statements for the fiscal year ended September 30, 1998
states that the Company's significant operating losses raise substantial doubt
about the Company's ability to continue as a going concern. The net loss for the
year ended September 30, 1998 primarily results from the increase in general and
administrative expenses related to increases in the management team and their
compensation, which have been made to facilitate the planned expansion including
the acquisition and expansion of Neo Vision, Inc. Management projects that all
of its operating units including Neo Vision, Inc. will operate at a sufficient
profit to cover all of its general and administrative expenses during the year
ended September 30, 1999. To accomplish its planned expansion and resulting
profitability, management has adopted a program to expand its existing services
operations plus the acquisition of other service organization; however, the
expansion program requires the resolution of its working capital deficiency and
the infusion of additional capital for which the following program has been
adopted.
The internal sources of liquidity include the acquisition of Neo
Vision, and its projected profitability, the collection of the net consulting
fee, and the anticipated conversion of the convertible debentures all of which
are expected to resolve the current working capital deficiency. However, the
Company intends to rapidly expand its newly acquired Neo Vision operation by the
expected installation of 21 and 36 video walls in the years ended September 30,
1999 and 2000, respectively at a projected cost of $250,000 for each wall. The
planned expansion will require capital from external sources of approximately
$3,000,000 to $5,000,000 by early 1999. Neo Vision has engaged financial
advisors to assist in the funding of its capital needs for the planned
expansion, including private placements. Management believes that the funding
will be a combination of long-term lease, convertible debt financing or the
preferred stock to be authorized and that it will be funded in time to complete
the expected installation of video walls in the year ended September 30, 1999.
However, the Company does not intend to make material commitments for further
capital expenditures until financing becomes available. 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. No assurance can be
given that the acquisitions or installation of the video walls will be completed
or the private placement to obtain the required capital infusion will be
successful.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. 27 - Financial Data Schedule
14
<PAGE>
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: February 16, 1999 /s/ Albert C. Lundstrom
------------------ -------------------------------------------
Albert C. Lundstrom, President and Chief
Executive Officer
Date: February 16, 1999 /s/ Harry V. Eastlick
------------------ -------------------------------------------
Harry V. Eastlick, Chief Financial Officer
15
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
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0
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<INCOME-PRETAX> (17,349)
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