WORLDCORP INC, 10-K, 1996-04-01

WORLDCORP INC
10-K, 1996-04-01
AIR TRANSPORTATION, NONSCHEDULED

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
______________

For the fiscal year ended: DECEMBER 31, 1995 Commission File Number 1-5351

WORLDCORP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 94-3040585
(State of incorporation) (I.R.S. Employer Identification Number)

13873 Park Center Road, Suite 490, Herndon, VA 22071
(Address of Principal Executive Offices)
(703) 834-9200
(Registrant's telephone number)

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

Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------

Common Stock par value $1.00 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: NONE

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 _________
----------

State by check mark if 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 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 [ ].

The aggregate market value of the Common Stock held by non-affiliates of the
registrant on March 15, 1996 was approximately $149,022,504.

The number of shares of the registrant's Common Stock outstanding on March 15,
1996 was 16,362,388.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of WorldCorp, Inc.'s Notice of Annual Stockholder's Meeting and Proxy
Statement, to be filed within 120 days after the end of the registrant's fiscal
year, are incorporated into Part III of this Report.

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WORLDCORP, INC.

1995 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Page
PART I ----
- ------
<S> <C> <C>

Item 1. Business.................................................................... 3

Item 2. Properties.................................................................. 15

Item 3. Legal Proceedings........................................................... 15

Item 4. Submission of Matters to a Vote of Security Holders......................... 15

PART II
- -------

Item 5. Market for Registrant's Common Stock and Related Security Holder Matters.... 16

Item 6. Selected Financial Data..................................................... 17

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 18

Item 8. Financial Statements and Supplementary Data................................. 36

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................................... 76

PART III
- --------

Item 10. Directors and Executive Officers of the Registrant.......................... 76

Item 11. Executive Compensation...................................................... 77

Item 12. Security Ownership of Certain Beneficial Owners and Management.............. 77

Item 13. Certain Relationships and Related Transactions.............................. 77

PART IV
- -------

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............. 78
</TABLE>

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PART I

ITEM 1. BUSINESS
- -----------------

WorldCorp, Inc., a Delaware corporation ("WorldCorp" or the "Company"), was
organized in March 1987 to serve as the holding company for World Airways, Inc.,
a Delaware corporation ("World Airways"), which was organized in March 1948 and
is the predecessor to the Company. Currently, WorldCorp operates in two business
areas: air transportation services and transaction processing.

WorldCorp's air transportation subsidiary, World Airways, is a leading
provider of long-range passenger and cargo air transportation, serving customers
in four distinct markets: (i) major international air carriers; (ii) the U.S.
Government; (iii) international tour operators in the leisure passenger market;
and (iv) small package shippers and freight forwarders. In addition, in 1995
World Airways commenced operations in a fifth market: scheduled passenger/cargo
service (which, beginning in 1996 will include scheduled charters to leisure
passenger markets on a seasonal basis). World Airways was a wholly-owned
subsidiary in 1993. In February 1994, pursuant to an October 1993 agreement,
WorldCorp sold 24.9% of its ownership in World Airways to MHS Berhad ("MHS"), a
Malaysian aviation company. Effective December 31, 1994, the Company increased
its ownership in World Airways to 80.1% through the purchase of 5% of World
Airways common stock held by MHS. In October 1995, World Airways completed an
initial public offering in which 2,000,000 shares of its common stock were
issued and sold by World Airways and 900,000 shares were sold by WorldCorp. As
of December 31, 1995, WorldCorp owned approximately 59.3% of the outstanding
common stock of World Airways.

WorldCorp's transaction processing business consists of its ownership
interest in US Order, Inc. ("US Order"), a company which provides products and
services for two markets: home banking and smart telephones. In June 1995, US
Order completed an initial public offering whereby 3,062,500 shares were issued
and sold by US Order, and 1,365,000 shares were sold by WorldCorp. As of
December 31, 1995, WorldCorp owned approximately 56.9% of the outstanding common
stock of US Order.

The principal executive offices of WorldCorp are located at Washington
Dulles International Airport in The Hallmark Building, 13873 Park Center Road,
Herndon, Virginia 22071. WorldCorp's telephone number is (703) 834-9200.

OVERVIEW

WorldCorp owns majority positions in companies that operate in two distinct
business areas: air transportation (through World Airways) and transaction
processing (through US Order). MHS Berhad of Malaysia is an equity investor in
World Airways. Knight Ridder and Colonial Data Technologies, Inc. are equity
investors in US Order.

AIR TRANSPORTATION
- ------------------

World Airways is a U.S. certificated air carrier, which operates in the air
transportation industry. Airline operations accounted for 100% of the Company's
operating revenue and operating income through 1991. In 1992, and subsequent
years, revenue from other business areas represented less than 2% of the
Company's total operating revenues. World Airways is a leading provider of long-
range passenger and cargo air transportation, serving customers in four distinct
markets: (i) major international air carriers; (ii) the U.S. Government; (iii)
international tour operators in the leisure passenger market; and (iv) small
package shippers and freight forwarders. In addition, in 1995 World Airways
commenced operations in a fifth market: scheduled passenger/cargo service
(which, beginning in 1996 will include scheduled charters to leisure passenger
markets on a seasonal basis). With the exception of scheduled passenger/cargo
service, World Airways' customers purchase the use of the entire aircraft and
sell either passenger seats or cargo space directly to their customers and
assume the risk of filling the aircraft.

In July 1995, World Airways commenced year-round scheduled passenger service
between New York and Tel Aviv. In scheduled passenger service operations, World
Airways sells seats on an individual basis and, therefore, assumes load factor
risk. Recently, World Airways received authority to provide scheduled passenger
and cargo service between the United States and points in West Africa and South
Africa beginning in the second quarter of 1996. In addition, World Airways has
formed a strategic alliance with Continental Airlines ("Continental"), subject
to definitive documentation. This agreement with Continental includes
codesharing, joint marketing, and participation

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in Continental's computer reservation system and OnePass frequent flyer program.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Outlook: Issues and Risks - Growth Opportunities".

In scheduled charter operations, World Airways has identified what it
believes is a significant opportunity to increase revenues and profits by
serving potentially profitable leisure passenger markets between the U.S. and
Europe on a seasonal basis. In the scheduled charter business, World Airways
sells less-than-planeload blocks of seats to international tour operators and
markets the remaining seats to the public through computer reservation systems
(see "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Outlook: Issues and Risks - Growth Opportunities"). For the 1996
leisure market season, World Airways has developed schedules and is marketing
capacity to tour operators with particular emphasis on the markets between the
U.S. and Germany, Switzerland, Ireland, and the United Kingdom.

World Airways operates a balanced fleet of passenger, cargo, and
passenger/cargo convertible aircraft, allowing it to serve the needs of its
diverse customer base, respond to market changes throughout the year, and reduce
seasonality. To strengthen its competitive position, particularly with its
Southeast Asian customers, World Airways recently re-equipped its fleet with new
generation MD-11 aircraft, a state-of-the-art, wide-body aircraft which provides
superior range, payload, and operating economics compared to World Airways'
older DC10 aircraft. In March 1996, World Airways took delivery of two new
MD-11ER aircraft which have extended-range capabilities (see "New MD-11ER
Aircraft"). World Airways' fleet of nine MD-11 and six DC10-30 aircraft appeal
to customers who desire long-range, non-stop, international service.

CUSTOMERS

World Airways' business relies heavily on its contracts with Malaysian
Airline System Berhad ("Malaysian Airlines"), P.T. Garuda Indonesia ("Garuda")
and the U.S. Air Force.

World Airways has provided wet lease service to Malaysian Airlines since
1981, operating aircraft in Malaysian Airlines' scheduled passenger and cargo
operations as well as transporting passengers for the annual Hadj pilgrimage.
MHS, which owns 16.6% of World Airways as of December 31, 1995, also owns 32% of
Malaysian Airlines. In late 1994, World Airways entered into a series of multi-
year contracts, with expiration dates ranging from 1997 to 2000, to provide five
aircraft to Malaysian Airlines (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Customers"). As a result of
these contracts, World Airways expects that the percentage of its total revenue
generated from Malaysian Airlines in 1996 will continue to increase over
historical levels. In 1995, World Airways provided three aircraft for Hadj
operations and will provide three aircraft in 1996. The current Malaysian
Airlines Hadj contract, which was entered into in 1992, expires in 1996. World
Airways is currently in negotiations with Malaysian Airlines regarding future
Hadj operations.

World Airways has provided wet lease services to Garuda since 1973
(operating under an annual Hadj contract since 1988). World Airways operated
five aircraft in the 1995 Garuda Hadj and will operate seven aircraft in the
1996 Hadj.

World Airways has provided international air transportation to the U.S. Air
Force since 1956. As compensation for pledges of aircraft to the Civil Reserve
Air Fleet ("CRAF") for use in times of national emergency, the U.S. Air Force
awards contracts to CRAF participants for peacetime transportation of personnel
and cargo. The U.S. Air Force awards points to air carriers acting alone or
through teaming arrangements in proportion to the number and type of aircraft
that the carriers make available to CRAF. As a result of World Airways'
increasingly effective use of teaming arrangements, World Airways' fixed awards
have grown in recent years and is the largest U.S. Air Force fixed award under
the CRAF program for the U.S. Government's 1995-96 fiscal year. The current
annual contract commenced on October 1, 1995 and expires on September 30, 1996.
These contracts provide for a fixed level of scheduled business from the U.S.
Air Force with opportunities for additional short-term expansion business on an
ad hoc basis as needs arise. World Airways' fixed award for the current contract
is $55.4 million, compared to the $33.9 million for the prior year. Due to the
utilization of a significant number of its aircraft under multi-year contracts
with Malaysian Airlines and other contractual commitments, it is unlikely that
World Airways will be able to accept all of the available expansion business.
Although overall Defense Department spending is being reduced, the level of U.S.
Air Force contract awards has remained relatively constant in recent years.
World Airways, however, cannot determine how future cuts in military spending
may affect future operations with the U.S. Air Force.

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As a result of these and other contracts, World Airways had an overall
contract backlog at December 31, 1995 of $462.0 million, compared to $285.9
million at December 31, 1994. Approximately $219.1 million of the backlog
relates to 1996 operations. World Airways' backlog for each contract is
determined by multiplying the minimum number of block hours (defined as the
elapsed time computed from the moment the aircraft first moves under its own
power at the point of origin to the time it comes to rest at its destination)
guaranteed under the applicable contract by the specified hourly rate under such
contract. Approximately 74% of the backlog (including substantially all of the
backlog beginning in 1997) relates to multi-year contracts with Malaysian
Airlines. The loss of any of these contracts or a substantial reduction in
business from any of these key customers, if not replaced, would have a material
adverse effect on World Airways' financial condition and results of operations.

The information regarding major customers and foreign revenue is contained
in Note 17 "Segment Information" of the Company's "Notes to Consolidated
Financial Statements" in Item 8.

Information concerning the classification of products within the air
transportation industry comprising 10% or more of World Airways' operating
revenues is presented in the following table (in millions):

<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>

Flight Operations - Passenger $183.0 $134.6 $147.6
Flight Operations - Cargo 66.7 39.3 28.9
</TABLE>

COMPETITION

The air transportation industry is highly competitive and susceptible to
price discounting. Certain of the passenger and cargo air carriers against which
World Airways competes possess substantially greater financial resources and
more extensive facilities and equipment than those which are now, or will in the
foreseeable future become, available to World Airways.

World Airways' ability to provide service in certain foreign markets in the
future may depend in part on the willingness of the U.S. Department of
Transportation (the "DOT") to allocate limited traffic rights to World Airways
rather than to competing U.S. airlines, including major scheduled passenger
carriers capable of carrying greater passenger traffic, and the approval of the
applicable foreign regulators. There can be no assurance that World Airways will
be able to obtain the traffic rights it seeks in expanding its business.

The allocation of military air transportation contracts by the U.S. Air
Force is based upon the number and type of aircraft a carrier, alone or through
a teaming arrangement, makes available for use in times of national emergencies.
The formation of competing teaming arrangements that have larger partners than
those sponsored by World Airways, an increase by other air carriers in their
commitment of aircraft to the emergency program, or the withdrawal of World
Airways' current partners, could adversely affect the size of the U.S. Air Force
contracts, if any, which are awarded to World Airways in future years.

In the passenger airline market, World Airways generally competes on the
basis of price, quality of service, including on-time reliability and in-flight
service, and schedule convenience. Many of its competitors in the passenger
airline market (both scheduled and non-scheduled passenger air carriers) compete
for passengers in a variety of ways. During periods of dramatic fare cuts by its
competitors, World Airways may be forced to respond with reduced pricing, which
could have a material adverse effect on its financial condition and results of
operations. World Airways also competes directly against charter airlines, some
of which are substantially larger than it, and certain of which are affiliates
of major scheduled airlines or tour operators. As a result, in addition to
greater access to financial resources, these charter airlines may have greater
distribution capabilities, including exclusive or preferential relationships
with affiliates that are tour operators.

World Airways believes that the most important bases for competition in the
air cargo business are the payload and cubic capacities of the aircraft, and the
price, flexibility, quality and reliability of the cargo transportation service.
Competitors in the cargo market include all-cargo carriers, such as Atlas Air,
Inc. and Polar Air Cargo, and scheduled and non-scheduled passenger carriers
which have substantial belly cargo capacity.

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SEASONALITY

Historically, World Airways' business has been significantly affected by
seasonal factors. During the first quarter, World Airways typically experiences
lower levels of utilization and yields as demand for passenger and cargo
services is lower relative to other times of the year. World Airways experiences
higher levels of utilization in the second quarter, principally due to peak
demand for commercial passenger services associated with the annual Hadj
pilgrimage. During 1995, World Airways' flight operations associated with the
Hadj pilgrimage occurred from April 1 to June 8. Because the Hadj occurs
approximately 10 to 12 days earlier each year, revenues resulting from future
Hadj contracts will begin to shift from the second quarter to the first quarter
over the next several years. In recent years, soft demand and weakening yields
in worldwide passenger markets adversely affected its results in the third
quarter. Fourth quarter utilization depends primarily on the demand for air
cargo services in connection with the shipment of merchandise in advance of the
U.S. holiday season. World Airways believes that its new multi-year contracts
with Malaysian Airlines and a recent increase in peak European summer tourist
travel occurring in the third quarter should lessen the effect of these seasonal
factors. The quarterly financial data is contained in Note 20 "Unaudited
Quarterly Results" of the Company's "Notes to Consolidated Financial Statements"
in Item 8.

NEW MD-11ER AIRCRAFT

World Airways has entered into two 24-year leases with McDonnell Douglas to
operate a new extended-range model of the McDonnell Douglas MD-11 (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources - Capital Commitments"). The MD-
11ER is capable of flying nonstop between such cities as Zurich and Santiago,
New York and Johannesburg, and Los Angeles and Shanghai. The jetliner's
increased range is due to a combination of the following: engineering
innovations; aerodynamics improvements that minimize aircraft drag; major
reductions in the airframe weight; significantly increased fuel capacity; and a
higher allowable maximum takeoff weight that provides the heavier fuel load
without loss of payload. World Airways will debut this aircraft in its 1996 Hadj
operations with flights from Indonesian cities to Saudi Arabia.

AVIATION FUEL

World Airways' source of aviation fuel is primarily from major oil
companies, under annual delivery contracts, at often frequented commercial
locations, and from United States military organizations at military bases.
World Airways' current fuel purchasing policy consists of the purchase of fuel
within seven days in advance of all flights based on current prices set by
individual suppliers. More than one supplier is under contract at several
locations. World Airways purchases no fuel under long-term contracts nor does it
enter into futures or fuel swap contracts.

The air transportation industry in general is affected by the price and
availability of aviation fuel. Both the cost and availability of aviation fuel
are subject to many economic and political factors and events occurring
throughout the world and remain subject to the various unpredictable economic
and market factors that affect the supply of all petroleum products.
Fluctuations in the price of fuel has not had a significant impact on World
Airways' operations in recent years. World Airways' exposure to fuel risk is
limited because (i) under the terms of its basic contracts, the customer is
responsible for providing fuel, (ii) under the terms of its full service
contracts with the U.S. Government, World Airways is reimbursed for the cost of
fuel it provides, and (iii) under its charter contracts, World Airways is
reimbursed for fuel price increases in excess of 5% of the price agreed upon in
the contract, subject to a 10% cap. However, a substantial increase in the price
or the unavailability of aviation fuel could have a material adverse effect on
the air transportation industry in general and the financial condition and
results of operations of World Airways.

REGULATORY MATTERS

World Airways is subject to government regulation and control under the
U.S. laws and the laws of the various countries which it serves. It is also
governed by bilateral services agreements between the U.S. and the countries to
which World Airways provides airline service. Under bilateral air services
agreements between the U.S. and many foreign countries, traffic rights in those
countries are available to only a limited number of, and in some cases only one
or two, U.S. carriers and are subject to approval by the applicable foreign
regulators.

World Airways is subject to Title 49 of the United States Code (the
"Transportation Code"), under which the DOT and the Federal Aviation
Administration (the "FAA") exercise regulatory authority. World Airways is
subject

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to the jurisdiction of the FAA with respect to aircraft maintenance and
operations, including flight operations, equipment, aircraft noise, ground
facilities, dispatch, communications, training, weather observation, flight
time, crew qualifications, aircraft registration, and other matters affecting
air safety. The FAA has the authority to suspend temporarily or revoke
permanently the authority of World Airways or its licensed personnel for failure
to comply with regulations promulgated by the FAA and to assess civil penalties
for such failures. The FAA also conducts safety audits and has the power to
impose fines and other sanctions for violations of airline safety regulations.
The DOT maintains authority over international aviation, subject to review by
the President of the United States, and has jurisdiction over unfair trade
practices and consumer protection policies on domestic and international routes
and fares. Additionally, foreign governments assert jurisdiction over air routes
and fares to and from the U.S., airport operation rights, and facilities access.

Under the Airport Noise and Capacity Act of 1990 and related FAA
regulations, World Airways' aircraft fleet must comply with certain Stage 3
noise restrictions by certain specified deadlines. All of its aircraft currently
meet the Stage 3 noise reduction requirement, which is currently the most
stringent FAA noise requirement. FAA regulations require installation of the
Traffic Alert and Collision Avoidance System ("TCAS"), approved airborne
windshear warning system and aging aircraft regulations.

Additional laws and regulations have been proposed from time to time which
could significantly increase the cost of airline operations by imposing
additional requirements or restrictions on operations. Laws and regulations have
been considered from time to time that would prohibit or restrict the ownership
and transfer of airline routes or slots. There is no assurance that laws and
regulations currently enacted or enacted in the future will not adversely affect
World Airways' ability to maintain its current level of operating results.

Several aspects of airline operations are subject to regulation or
oversight by Federal agencies other than the DOT or FAA. For instance, labor
relations in the air transportation industry are generally regulated under the
Railway Labor Act, which vests in the National Mediation Board certain
regulatory powers with respect to disputes between airlines and labor unions
arising under collective bargaining agreements. In addition, World Airways is
subject to the jurisdiction of other governmental entities, including (i) the
FCC regarding its use of radio facilities pursuant to the Federal Communications
Act of 1934, as amended, (ii) the Commerce Department, the Customs Service, the
Immigration and Naturalization Service, and the Animal and Plant Health
Inspection Service of the Department of Agriculture regarding the Company's
international operations, (iii) the Environmental Protection Agency (the "EPA")
regarding compliance with standards for aircraft exhaust emissions and (iv) the
Department of Justice regarding certain merger and acquisition transactions. The
EPA regulates operations, including air carrier operations, which affect the
quality of air in the U.S. World Airways has made all necessary modifications to
its operating fleet to meet fuel-venting requirements and smoke emissions
standards issued by the EPA.

Pursuant to federal law, no more than 25% of the voting interest in World
Airways may be owned or controlled by foreign citizens. In addition, under
existing precedent and policy, actual control must reside in U.S. citizens. As a
matter of regulatory policy, the DOT has stated that it would not permit
aggregate equity ownership of a domestic air carrier by foreign citizens in an
amount in excess of 49%. World Airways fully complies as of the date hereof with
these U.S. citizen ownership requirements.

World Airways believes it is in compliance in all material respects with
all requirements necessary to maintain in good standing its operating authority
granted by the DOT and its air carrier operating certificate issued by the FAA.
A modification, suspension or revocation of any of its DOT or FAA authorizations
or certificates could have a material adverse effect upon World Airways. World
Airways also is subject to state and local laws and regulations at locations
where it operates and the regulations of various local authorities which operate
the airports it serves. Certain airport operations have adopted local
regulations which, among other things, impose curfews and noise abatement
regulations. While it believes it is currently in compliance in all material
respects with all appropriate standards and has all required licenses and
authorities, any material non-compliance by the Company therewith or the
revocation or suspension of licenses or authorities could have a material
adverse effect on World Airways.

EMPLOYEES

As of February 29, 1996, World Airways had 816 full time employees
classified as follows:

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<TABLE>
<CAPTION>
Number of
Classification Full-Time Employees
-------------- -------------------
<S> <C>
Management.............................. 11
Administrative and Operations........... 308
Cockpit Crew (including pilots)......... 262
Flight Attendants....................... 235
---
Total Employees........................ 816
===
</TABLE>

World Airways' cockpit crew members, who are represented by the
International Brotherhood of Teamsters (the "Teamsters"), are subject to a
four-year collective bargaining agreement that will become amendable in June
1998.

World Airways' flight attendants are also represented by the Teamsters
under a collective bargaining agreement that became amendable in 1992. The
parties exchanged their opening contract proposals in 1992 and have had numerous
contract negotiation sessions. In December 1994, World Airways and the Teamsters
jointly requested the assistance of a federal mediator to facilitate
negotiations. After several mediated sessions, the National Mediation Board (the
"NMB") mediator recommended that the NMB release the parties to pursue "direct"
(i.e., non-mediated) negotiations with the flight attendants. World Airways and
the Teamsters agreed and direct negotiations continue. The outcome of the
negotiations with the flight attendants cannot be determined at this time. The
inability to reach an agreement upon terms favorable to World Airways could have
a material adverse effect on World Airways. World Airways' flight attendants
continue to challenge the use of foreign flight attendant crews on the Company's
flights for Malaysian Airlines and Garuda which has historically been World
Airways' operating procedure. World Airways is contractually obligated to permit
its Southeast Asian customers to deploy their own flight attendants. While World
Airways intends to contest this matter vigorously in an upcoming arbitration, an
unfavorable ruling for it could have a material adverse effect on World Airways.

World Airways' aircraft dispatchers are represented by the Transport
Workers Union (the "TWU"). This contract became amendable on June 30, 1993. In
May 1995, the parties reached agreement with respect to a new four-year
contract. This contract was ratified on February 7, 1996. Fewer than 12
employees are covered by this collective bargaining agreement.

World Airways is unable to predict whether any of its employees not
currently represented by a labor union, such as its maintenance personnel, will
elect to be represented by a labor union or collective bargaining unit. The
election of such employees for representation in such an organization could
result in employee compensation and working condition demands that could have a
material adverse effect on the financial results of World Airways.

TRANSACTION PROCESSING
- ----------------------

US Order provides products and services for two markets: home banking and
smart telephones. Home banking allows consumers to pay bills, check account
balances and receive other bank information from their homes. US Order currently
receives its home banking revenues largely from the sale of products and
services to Visa International Service Association, Inc. ("Visa") member banks.
Smart telephones are telephones with a central processing unit, an integrated
display screen and memory which allow consumers to send and receive text
information. US Order currently receives its smart telephone revenues from the
sale of its products and bundled interactive applications to companies in the
home banking and telecommunications industries. To date, US Order has generated
limited revenues from the sale of its products and services. US Order has
entered into agreements with Visa InterActive, Inc. ("Visa InterActive") a
wholly owned subsidiary of Visa, in the home banking market and Colonial Data
Technologies Corp. ("Colonial Data") in the smart telephone market.

On August 1, 1994, US Order sold its electronic banking and bill pay
operations to Visa for approximately $15.0 million in cash and a 72-month
royalty stream commencing January 1, 1995 and ending December 31, 2000. The
royalty amount is based on the number of customers who use the bill payment
technology sold to Visa and is subject to a cumulative offset amount aggregating
$0.9 million. No assurances can be given as to the amount of the royalty
payments that will be received from Visa. US Order does not expect to receive
any significant royalty payments until at least the second half of 1996.

As a result of the purchase of US Order's banking operations by Visa, US
Order has agreed to certain restrictions on its operations with respect to the
banking and financial services industry. Similarly, Visa has agreed

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to certain restrictions on its activities as they might relate to the ongoing
businesses of US Order. Additionally, the Visa agreement designates US Order as
a "preferred provider" to supply certain products and services including smart
telephones, consumer applications, and customer service throughout the royalty
period. Under the agreement, Visa must make its member banks aware of the
preferred provider status of US Order and its products and services, although it
is under no obligation to guarantee any minimum purchases of any such US Order
products or services by Visa or any of its members. Until August 1, 1995, Visa
also agreed not to designate any third party as a provider of US Order's
services. In January 1995, US Order signed a two-way exclusive strategic
alliance with a leading manufacturer of Caller ID units, Colonial Data, to
jointly develop and distribute US Order's next generation of smart telephones
and interactive applications to consumers in other markets, including the home
banking market. While US Order expects the agreements with Visa InterActive and
Colonial Data to result in increased revenue, there can be no assurances that it
will receive any revenues pursuant to these agreements.

In June 1995, pursuant to a stock exchange agreement dated April 1995, US
Order exchanged 230,000 shares of its common stock with a value of approximately
$3.4 million for 170,743 shares of Colonial Data's unregistered common stock
with an equivalent value.

In October 1995, US Order completed a transaction to acquire a 40% equity
interest in Home Financial Network, Inc. ("HomeNet"), a newly formed,
development stage personal computer company that plans to develop and deliver
electronic financial products and services to consumers via the personal
computer. US Order believes that its investment in HomeNet will complement its
home banking strategy by adding a PC-based application to the current smart
telephone and touch-tone applications that US Order offers.

PRODUCTS

US Order's product strategy is to develop products and services for its
strategic partners and their customers. US Order strives to develop products
with broad appeal that are easy-to-use, practical, inexpensive and built around
common industry standards. US Order's products position it to offer support
services and interactive applications which are expected to generate recurring
monthly fee revenue. US Order's product development and strategic marketing are
organized within two markets: home banking and smart telephones.

Home Banking
- ------------

US Order's strategy in the home banking market is to support banks by
providing products and services that help them deploy home banking to their
customers. In addition, US Order supports Visa InterActive with products and
services which facilitate bill payment and bill presentment. US Order believes
its home banking products and services will provide it with an important source
of recurring monthly fee revenue both from ongoing customer support services for
banks as well as a royalty from Visa InterActive (based on the number of
customers using the Visa Bill-Pay System). US Order's products and services are
designed to provide consumers the ability to access and utilize their bank
account information. They are also designed to provide financial institutions
with connectivity to the Visa InterActive host computer system. The following
represent US Order's home banking products and services:

Consumer Access Products. The Electronic Banking Center ("EBC") product
------------------------
line, which runs on an InterVoice platform, was developed by US Order for sale
to Visa InterActive financial institutions. US Order is an authorized value-
added reseller of InterVoice's hardware products. The EBC product line is an
advanced touch-tone-telephone based bill payment system with built-in
connectivity to the Visa Bill-Pay System. The products are custom-branded for
each individual bank or credit union customer. The products offer three levels
of touch-tone interaction. The first application allows a customer to establish
a list of payees identified by numerical codes. The customer then uses the EBC
to pay bills using the telephone by pressing the appropriate payee code and
desired payment amount. The second application allows a customer to establish a
list of payees identified by numerical codes and record the customer's own voice
identifying the payee by name. The customer then uses the EBC to pay bills using
the telephone by pressing the appropriate payee code. After the customer's voice
recording confirms that the proper payee has been selected, the customer keys in
the desired amount of payment. The third application allows a customer, after
establishing a list of payees identified by numerical codes and recording the
customer's own voice identifying the payee by name, to pay bills by telephone by
speaking the name of the payee and then touching in the desired amount of the
payment.

9
<PAGE>

HomeNet is developing, and plans to publish, simple to use PC software
designed to provide financial institutions with the ability to deliver a wide
range of electronic financial services directly to consumers at home. The
software imitates the look and feel of the familiar ATM machine and is designed
to ship without a user manual. HomeNet expects to introduce its first products
in the second half of 1996.

Support Services. US Order offers bank-branded, turnkey customer service
----------------
to financial institutions in support of personal computers, smart telephones and
touch-tone telephone platforms. US Order's customer service operation is open
seven days a week, 24 hours a day. If a bank chooses US Order to provide
customer service, US Order receives a start-up fee from that bank and a monthly
fee per customer. In addition, US Order offers secondary customer service
technical support as well as customer service training. US Order also offers
outbound and inbound telemarketing, data entry and other related support
services to financial institutions.

Connectivity Products. Electronic Exchange Center ("EXC*banking") is the
---------------------
first product in the EXC line currently being developed by US Order that
supports the Visa Bill-Pay System and provides a real time connection between
banks and their customers. EXC*banking is a data translator which enables a
real time connection between a customer's access device and a bank's host data
processor, allowing the customer to access all of his or her account activity
from the bank's mainframe CICS or IMS system. EXC*banking runs on a Sun SPARC
5 platform (or larger) and can communicate with almost any mainframe host.

US Order is currently developing the Electronic Merchant Center ("EMC")
biller workstation. The EMC biller workstation will allow merchants to design
bill templates, transmit customized marketing information, and give customers
direct access to statement information in partnership with their financial
institutions. The EMC product family incorporates the Visa InterActive and E-Pay
standards for electronic exchange of bill payment information with Visa banks
and supports formatting and delivery of bill information to consumers. Billers
will also be able to send and receive payment and invoice information
electronically to and from their commercial banks through the Visa Bill-Pay
System.

Smart Telephones
- ----------------

US Order's strategy in the smart telephone market is to build a subscriber
base for its bundle of interactive applications. US Order strives to accomplish
this strategy by designing cost-effective smart telephones, such as its
Telesmart 4000(TM) smart phone, that it licenses for manufacture and sale,
incorporating the BellCore ADSI protocol and US Order's own proprietary digital
signal processing technology.

The Telesmart 4000(TM) smart phone (formerly referred to as the "Falcon")
was designed and developed exclusively by US Order. Its design is based on a DSP
architecture. The Telesmart 4000(TM) smart phone is an ADSI telephone device
that incorporates a graphics display screen, magnetic card reader, alpha-numeric
keypad, V.22 modem and a processor. The Telesmart 4000(TM) smart phone
supports Caller ID (both "number only" and "name and number"), ID on call
waiting and visual message waiting indicator. The Telesmart 4000(TM) smart
phone will also support the Visa InterActive standard protocol for electronic
banking and bill payment, and the US Order protocol for information, transaction
and communication services. In May 1995, US Order executed a contract with
Sprint for the initial sale of Telesmart 4000(TM) smart phone units and, in
December 1995, the Telesmart 4000(TM) smart phone to be its primary source for
ADSI phone shipments for the 1996 fiscal year. US Order expects that the
Telesmart 4000(TM) smart phone will be available for sale during the first
half of 1996.

In addition, US Order's strategy is first to deploy its interactive
applications on its smart telephones and later to deploy its interactive
applications on smart telephones manufactured by other companies. US Order
believes that it must deliver a limited number of interactive applications that
exploit the unique capabilities of smart telephones. US Order intends to sell
interactive applications to local telephone companies through Colonial Data. US
Order's current interactive applications include electronic National Directory
Assistance lookup, one-way alpha-numeric Paging, one-way Internet E-Mail,
catalog shopping and a personal directory data save and restore function. In the
future, US Order expects to expand its interactive services by offering stock
quotes, two way Internet E-Mail, two-way paging and prepaid long distance.

MARKETING AND SALES

10
<PAGE>

US Order's marketing strategy is to identify strategic partners with
established distribution channels in each of its target markets: home banking
and smart telephones.

Home Banking
- ------------

There are three distinct market channels within the home banking market:
bill payment, bill presentment and account access.

Bill Payment Channel. Visa InterActive selected US Order as a preferred
--------------------
provider of certain of US Order's bill pay and bill presentment products and
services. One of US Order's strategies with Visa is to increase the number of
subscribers for its bill pay products and services with the goal of growing
monthly fee revenues. Visa is the largest consumer payment system in the world
with more than 12 million acceptance locations. As of December 31, 1995 Visa has
stated that it has more than 20,000 member financial institutions worldwide that
have issued more than 387 million credit cards, including 13,000 members that
have issued 205 million credit cards in the United States.

Visa markets its bill payment and bill presentment services directly to its
member banks. Once a Visa member bank signs a commitment to deploy home banking
services through the Visa Bill-Pay System (the "Commitment Date"), an extended
roll-out period of the bank's home banking services begins.

During the first ninety days following the Commitment Date, Visa
InterActive begins technical and operational implementation of the home banking
service for the Visa member bank and the member bank determines which consumer
access devices it will offer to its customers and how it will provide customer
support services. During this period, US Order has opportunities to market its
products and services directly to the member bank. The bank may choose US Order
to provide EBC, EXC, customer support services and, in the future, EMC, or the
bank may choose any number of other suppliers. Typically, during the second
ninety days following the Commitment Date, the Visa member bank completes the
technical trial phase and begins a market trial of its home banking system,
including any selected US Order-provided products and services. Approximately
six to twelve months following the Commitment Date, the member bank completes
its market trial and can begin a market roll-out of its home banking services.

In March 1996, Microsoft, Inc. entered into an agreement with Visa
InterActive to include an interface that will allow users of Microsoft's Money
personal finance software package to access Visa InterActive's electronic bill
payment system. Previously, banks working with the Money software were only able
to process bill payments through Intuit Service Corporation ("ISC"), which is a
subsidiary of Intuit Corporation. With the signing of this agreement and the
release of the next Money software upgrade, which is expected in late 1996,
banks working with the Money software will be able to choose between Visa
InterActive and ISC as their electronic bill pay processor. Royalties due US
Order from Visa will be equal to $.666 per month per bill pay customer whose
transactions are processed by Visa InterActive's bill pay system. US Order's
right to receive these quarterly royalty payments is subject to a cumulative
offset of $0.07 million per quarter beginning January 1, 1995 through December
31, 1997.

As of February 29, 1996, Visa InterActive had announced commitments from
more than ninety financial institutions for the Visa Bill-Pay System. Although
more than ninety banks have committed to participate in the Visa Bill-Pay
System, due to the time necessary to install and implement the system for each
bank, only eleven banks have rolled out in small, limited markets and have
enrolled a relatively small number of customers. There can be no assurances as
to the banks' ultimate success with this program or the number of customers that
ultimately will use the program. US Order believes its relationship with Visa
InterActive keeps it in close contact with Visa, its banks and the end users of
home banking services. US Order believes that this relationship will enable it
to continue to develop complementary products and services, such as applications
software for Visa member banks, and potentially enable US Order to have access
to Visa's world wide member banks. There can be no assurance, however, that US
Order's marketing efforts will be successful or that Visa will not reassess its
commitment to US Order at any time in the future.

Bill Presentment Channel. US Order's marketing strategy in the bill
------------------------
presentment channel is to offer its bill presentment products and services, such
as its EMC product, directly to financial institutions as well as to billers
using the Visa E-PAY system. In December 1995, Visa commenced its E-PAY
electronic bill-payment programs with major U.S. financial institutions,
including Banc One Corp., Barnett Banks, The Chase Manhattan Bank, Crestar Bank,
First Bank System, First Interstate Bank, First Chicago, First Tennessee Bank,
First Union National Bank,

11
<PAGE>

Mellon Bank, Norwest Banks, Star Bank and U.S. Bancorp. Visa's two-way E-PAY
standard allows financial institutions to implement a fully electronic,
seamless, back-end bill payment system. The E-PAY system is patented in the
United States and is expected to significantly reduce remittance-processing
inefficiencies for participating financial institutions and organizations that
bill for goods and services. In addition, the system will enable billers to
electronically send invoices to their customers who pay bills on-line. The
system currently offers summary-invoice presentment capability. It is expected
that during 1996, the system will be able to facilitate fully detailed, image-
based, invoice-presentment services.

Account Access Channel. US Order also is developing products and services
----------------------
for financial institutions who want to provide their customers with products and
services that allow customers the ability to access certain information from
their banking accounts, much as they do with touch tone telephones today, but
over personal computers and screen based telephones as well.

Smart Telephones
- ----------------

US Order is committed to marketing its smart telephone products and
interactive applications in the following distribution channels:

Telecommunications Channel. US Order has formed a strategic alliance with
--------------------------
Colonial Data. US Order's strategy with Colonial Data is to gain access to
telephone company customers through Colonial Data's existing relationships with
the Regional Bell Operating Companies (RBOCs) and other local telephone
companies. Colonial Data manufactures and sells to or on behalf of its local
telephone company customers smart telephones that have ADSI capability and are
based on US Order's designs. The features include a display screen, an embedded
CPU, a QWERTY keyboard and a credit card reader. Pursuant to a strategic
alliance agreement between US Order and Colonial Data dated January 1995,
Colonial Data has agreed that, after introduction of US Order's Telesmart
4000(TM) smart phone product and through January 17, 2000, all ADSI smart
telephones that it produces and sells to local telephone companies will be based
on US Order's designs. For each such smart telephone produced and sold by
Colonial Data through December 31, 1997, Colonial Data will pay US Order a
royalty of 10% of the sale price, with the royalty thereafter subject to annual
good faith renegotiation. Under the agreement with Colonial Data, US Order can
manufacture and market ADSI-based smart telephones outside of the telephone
company market but must pay Colonial Data a 10% royalty for each sale. In
connection with this arrangement, US Order also has authorized Colonial Data to
manufacture its Telesmart 4000(TM) smart phone using Colonial Data's
manufacturers in Hong Kong and the People's Republic of China.

Colonial Data designs, develops and markets telecommunications products
that support intelligent network services. Its most successful product is a
Caller ID adjunct device that it sells to or on behalf of RBOCs, such as US
WEST, Inc., NYNEX Corp. and BellSouth Corp., and other local telephone
companies. As of December 31, 1995 Colonial Data has reported that since 1987 it
has shipped over 3 million units. US Order believes that Colonial Data has been
successful in selling Caller ID adjunct devices because it has developed
relationships with RBOCs and other local telephone companies, from whom most
consumers prefer to order access devices when subscribing for intelligent
network services. Colonial Data currently has direct fulfillment arrangements
with US WEST, NYNEX, BellSouth, Ameritech Corp. and Bell Atlantic Corp. under
which Caller ID units are sold or leased to RBOC subscribers. Local telephone
company representatives may market both Caller ID service and Colonial Data
equipment to subscribers and transmit equipment orders to Colonial Data
electronically.

US Order believes that the marketing of smart telephones will be more
successful when a consumer can subscribe to network services and purchase the
telephone from a single source, especially when the payment for the equipment
can be made either on an installment basis or by monthly lease payments through
the subscriber's telephone bill. It should be noted, however, that failure by US
Order to complete its strategic alliance strategy or failure of Colonial Data to
successfully develop and sustain a market for US Order's products and services
would adversely affect its overall performance.

Other Distribution Channels. US Order has identified additional
---------------------------
distribution channels for its smart telephones that it will begin to exploit
during 1996. The first channel is paging. US Order expects that paging companies
will view the smart telephone, such as its Telesmart 4000(TM) smart phone, as
a product that will differentiate their service offering, as well as a way to
reduce back-end operator support costs. In addition to the paging channel, US
Order expects to begin selling its smart telephones and interactive content on a
wholesale basis through retail stores and

12
<PAGE>

related outlets. US Order expects to begin to develop this channel towards the
end of 1996. The final channel for its smart telephones during 1996 is the bank
channel, where bank customers will be offered the smart telephone activated with
a Visa bill pay application as well as the other interactive applications
currently available on the phone.

COMPETITION

Home Banking
- ------------

US Order's home banking products and services compete with services offered
by a number of competitors and competition may intensify as a result of new
market entrants. Banks such as Citibank, NationsBank and Bank of America have
developed home banking products for their own customers and, in the future, may
offer these services to other banks. Non-banks, such as EDS and First Data
Corporation, also may develop home banking products to offer to banks. Computer
software and data processing companies, such as Intuit, also offer home banking
services. Visa competes with other organizations, including MasterCard
International, Inc. ("MasterCard"), which offers its Masterbanking home banking
service through CheckFree Corporation. US Order's success in home banking
depends in large part on the ultimate success of Visa and on the ability of Visa
InterActive and Visa member banks to successfully market home banking to their
customers. In addition, the success of US Order's home banking strategy depends
on the ability of Visa member banks to maintain market share in an environment
of disintermediation. US Order believes that its primary competition for its
customer support services to the customer will come from financial institutions
and third parties that choose to offer customer support services either directly
through Visa's customer support messaging standard ("CSMS") product or on their
own.

US Order expects that competition in all of these areas will increase in
the near future and believes that a principal competitive factor in its markets
is the ability to offer an integrated system, in conjunction with Visa, of
various home banking products and services. Competition will be based upon
price, performance, customer service and the effectiveness of marketing and
sales efforts. US Order competes in its various markets on the basis of its
relationships with strategic partners, by developing many of the products
required for complete solutions, and by building reliable products and offering
those products at reasonable prices.

Smart Telephones
- ----------------

The market for US Order's smart telephone products and services is highly
competitive and subject to rapid technological change. At present, US Order's
principal competitors in the market for smart telephones are Philips, Northern
Telecom and AT&T. US Order expects competition to increase in the future from
existing and new competitors and expects new competitors to include electronics
manufacturers, such as Sony Corp. and Panasonic Company. US Order's competitors,
including Philips and Northern Telecom, have already introduced smart telephones
that include technological features incorporated in US Order's Telesmart
4000(TM) smart phone product. Visa InterActive and Philips have announced that
they have entered into a letter of intent to collaborate on a series of
projects, including the development of a Visa InterActive banking application on
a Philips smart telephone. Any bill pay transaction generated by a Phillips
smart telephone that is processed by Visa InterActive will potentially generate
a royalty payment due to US Order from Visa.

US Order's Telesmart 4000(TM) smart phone product incorporates newer DSP
technology. Although it is currently unaware of any efforts by its competitors
to deploy DSP technology in their smart telephones, US Order expects that its
competitors will attempt to replicate the Telesmart 4000(TM) smart phone DSP
design if it is commercially successful. US Order expects that as the market for
smart telephones grows, it will face competition from traditional personal
computer on-line service providers, such as America Online, Prodigy, and
Compuserve, Inc., as well as from personal computer software companies such as
Intuit and Novell, Inc.

PRODUCT DEVELOPMENT

US Order's product development efforts are focused on software and systems
for the banking and smart telephone markets. In particular, US Order applies its
research and development expenditures to audio and data transaction processing
and messaging software, customer support services and smart telephone designs.
The home banking and smart telephone industries are characterized by rapid
change. To keep pace with this change, US Order maintains an aggressive program
of new product development. US Order dedicates considerable resources to
research and development to further enhance its existing products and to create
new products and technologies. During fiscal

13
<PAGE>

years 1995, 1994, and 1993, US Order expended $1.1 million, $1.8 million, and
$1.0 million, respectively, for software and hardware design, development and
project management activities.

US Order's ability to attract and retain highly skilled research and
development personnel is important to its continued success. At January 31,
1996, 26 of its 80 full-time employees were engaged in product and service
development. US Order expects to increase the number of personnel devoted to
product development throughout 1996 and possibly beyond.

GOVERNMENT REGULATION

US Order's smart telephone products are subject to regulation by the
Federal Communications Commission ("FCC"). Among other requirements, US Order's
smart telephones must comply with Parts 15 and 68 of the FCC's regulations.

The two markets which US Order has targeted are highly regulated. The
banking industry, although it has recently undergone significant deregulation,
remains quite regulated at both the federal and state levels. Similarly, the
telecommunications industry has undergone rapid change in the past decade.
Federal and state regulations are currently undergoing constant review and
revision as evidenced by the recent passing of the Telecommunications Bill in
February 1996. Interpretation, implementation or revision of banking and
telecommunications regulations can accelerate or hinder the ultimate success of
US Order and its products.

PATENTS, PROPRIETARY RIGHTS AND LICENSES

As of January 31, 1996, US Order holds no patents or other restricted
intellectual property rights with respect to its products. US Order's original
patent for an automated order and payment system was sold to Visa in August
1994.

US Order has filed for patents in 1995 on certain new features developed by
US Order for use in the Telesmart 4000(TM) smart phone ADSI smart telephone
and certain of its transaction processing technology, but there can be no
assurances that such patents will be granted, or if granted, will have any
commercial value.

Although US Order does not believe that its products and services infringe
on the rights of third parties, there can be no assurance that third parties
will not assert infringement claims against US Order in the future or that any
such assertion will not result in costly litigation or require it to cease
using, or obtain a license to use, intellectual property rights of such parties.

EMPLOYEES

At January 31, 1996, US Order had approximately 105 employees, of whom 80
were full-time. Of the full-time employees, 26 were engaged in research and
development, 20 were engaged in customer service and fulfillment, 13 were
engaged in sales and marketing and 21 were engaged in administration and
finance. US Order has no collective bargaining agreements with its employees and
believes that its relationship with its employees is good.

14
<PAGE>

ITEM 2. PROPERTIES
- -------------------

FLIGHT EQUIPMENT

At December 31, 1995, World Airways' aggregate operating fleet consisted of
eleven leased aircraft as follows (see Note 12 "Long-Term Obligations" of the
Company's "Notes to Consolidated Financial Statements" in Item 8):

<TABLE>
<CAPTION>
Capacity
--------------------------------------
Aircraft /(a)/ Passenger (seats)/(b)/ Cargo (Tons) Total /(c)(d)/
--------------------------- ---------------------- ------------ --------------
<S> <C> <C> <C>

McDonnell Douglas MD-11CF 410 90 2
McDonnell Douglas MD-11F -- 95 1
McDonnell Douglas MD-11 410 -- 4
McDonnell Douglas DC10-30CF 380 65 1
McDonnell Douglas DC10-30 350 -- 3
--

Total 11
====
</TABLE>

Notes
-----
(a) "F" aircraft are freighters, "CF" are convertible freighters and may
operate in either passenger or freight configurations. Aircraft with no
letter designation are passenger-only aircraft.
(b) Based on standard operating configurations. Other configurations are
occasionally used.
(c) Lease terms expire between 1997 and 2010 (assuming exercise of all lease
extensions).
(d) Subsequent to December 31, 1995, World Airways took delivery of two
leased McDonnell Douglas MD-11ER (extended range) aircraft and two
leased McDonnell Douglas DC10-30 passenger aircraft.

GROUND FACILITIES

WorldCorp, World Airways, and US Order lease office space located near
Washington Dulles International Airport which houses its corporate headquarters
and substantially all of the administrative employees of the airline and
transaction processing operations.

In addition, World Airways leases additional office and warehouse space in
Wilmington, Delaware; Philadelphia, Pennsylvania; Miami, Florida; Los Angeles,
California; Kuala Lumpur, Malaysia; Tel Aviv, Israel; Yakota, Japan; and
Frankfurt, Germany. Additional small offices and maintenance material storage
space are leased at often frequented airports to provide administrative and
maintenance support for commercial and military contracts. US Order leases a
facility in Salt Lake City, Utah for sourcing, testing, software downloading,
inventory storage, and distribution.

ITEM 3. LEGAL PROCEEDINGS
- --------------------------

For a description of the Company's current legal proceedings, see Note 19,
"Commitments and Contingencies" of the Company's "Notes to Consolidated
Financial Statements" in Item 8.

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 1995.

15
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK & RELATED SECURITY HOLDER
- -----------------------------------------------------------------------
MATTERS
-------

The Company's common stock is traded on the New York Stock Exchange under
the symbol "WOA". The high and low closing sales prices of the Company's common
stock, as reported on the New York Stock Exchange for each quarter in the last
two fiscal years, are as follows:

<TABLE>
<CAPTION>
Common Stock
-----------------------

High Low
---- ---
<S> <C> <C>
1995

Fourth Quarter $ 12 1/8 $ 8 1/8
Third Quarter 13 3/8 9 7/8
Second Quarter 12 5/8 8 7/8
First Quarter 9 5/8 7 3/8

1994

Fourth Quarter $ 10 $ 6 3/8
Third Quarter 7 7/8 3 3/4
Second Quarter 5 7/8 3 5/8
First Quarter 6 5/8 5 1/2
</TABLE>

In March 1992, the Company filed with the Securities and Exchange
Commission ("SEC") a registration statement on Form S-3 registering $60.0 to
$90.0 million of Convertible Subordinated Debentures due 2004 (the
"Debentures"). On May 26, 1992, $65.0 million of the Debentures were issued. The
Debentures are convertible into WorldCorp common stock at $11.06 per share and
bear an annual interest rate of 7%. Semi-annual interest payments are due on May
15 and November 15.

The Company did not declare any cash dividends in 1995 or 1994 and does not
plan to do so in the foreseeable future. The Indenture governing the Company's
Debentures and 13 7/8% Subordinated Notes due 1997 in certain circumstances may
restrict the Company from paying dividends or making other distributions on its
common stock. (See Note 1 "Summary of Significant Accounting Policies" of the
Company's "Notes to Consolidated Financial Statements" in Item 8.)

The approximate number of shareholders of record at March 15, 1996 is
2,560, and does not include those shareholders who hold shares in street name
accounts.

16
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------

WORLDCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
- ----------------------

Operating revenues $ 263,668 $ 182,147 $ 179,932 $ 180,416 $ 268,826
Operating expenses 262,931 200,959 /(b)/ 203,177 /(d)/ 217,271 255,397
Operating income (loss) 737 (18,812) (23,245) (36,855) /(e)/ 13,429
Earnings (loss) before income taxes,
minority interest, extraordinary
item and change in accounting
principle 60,129 /(a)/ 10,496 /(c)/ (33,698) (44,692) 7,311 /(f)/
Earnings (loss) before extraordinary item
and change in accounting principle 60,208 8,308 (30,945) (42,891) 6,830
Extraordinary gain (loss) on acquisition
of debt, net -- -- -- (3,253) 3,535
Change in accounting principle -- -- -- (1,973) --
Net earnings (loss) 60,208 8,308 (30,945) (48,117) 10,365

Primary earnings (loss) per share:
Continuing operations $ 3.52 $ 0.54 $ (2.12) $ (3.02) $ 0.46
Gain (loss) from acquisition of debt -- -- -- (0.23) 0.24
Change in accounting principle -- -- -- (0.14) --
Net earnings (loss) 3.52 0.54 (2.12) (3.39) 0.70

Fully diluted earnings (loss) per share:
Continuing operations $ 2.82 $ 0.53 $ * * $ 0.42
Gain (loss) from acquisition of debt -- -- -- -- 0.22
Change in accounting principle -- -- -- -- --
Net earnings (loss) 2.82 0.53 * * 0. 64

FINANCIAL POSITION:
- -------------------

Cash and short-term investments $ 78,661 $ 8,828 $ 17,584 $ 14,769 $ 29,147
Total assets 202,089 98,536 98,119 93,346 138,966
Long-term obligations including
current maturities 122,167 119,032 129,049 104,192 94,167
Common stockholders' deficit (23,297) (88,193) (101,073) (76,362) (30,363)
</TABLE>

* Fully diluted earnings per share are anti-dilutive.

/(a)/ Includes the $51.3 million gain realized on US Order's offering in June
1995 and other stock transactions (see Note 3) and the $16.0 million gain
realized on World Airways' offering in October 1995 (see Note 2).
/(b)/ Includes a $4.2 million reversal of excess accrued maintenance reserves
associated with the expiration of three DC10 aircraft leases in 1994.
/(c)/ Includes a $27.0 million gain on the sale of 24.9% of World Airways common
stock (see Note 4) and a $14.5 million gain on the sale of US Order's bill
payment operations (see Note 3).
/(d)/ Includes $2.3 million of termination fees related to the early return of
three DC10-30 aircraft.
/(e)/ Includes a $31.4 million loss on the sale of Key Airlines, Incorporated,
and $4.1 million related to settlement of contract claims with the U.S.
Government related to Operation Desert Shield/Desert Storm.
/(f)/ Includes a $5.5 million gain as a result of settling litigation with the
State of California Franchise Tax Board.

17
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
-------------

Management's Discussion and Analysis of Financial Condition and Results of
Operations presented below relates to the operations of WorldCorp, Inc.
("WorldCorp" or "the Company") as reflected in its consolidated financial
statements. These statements primarily include the accounts of the flight
operations of World Airways, Inc. ("World Airways"). On February 28, 1994,
pursuant to an October 1993 agreement, the Company sold 24.9% of its ownership
in World Airways to MHS Berhad ("MHS"), a Malaysian aviation company. Effective
December 31, 1994, WorldCorp repurchased 5% of World Airways' common stock from
MHS. In October 1995, World Airways completed an initial public offering in
which 2,000,000 shares were issued and sold by World Airways and 900,000 shares
were sold by WorldCorp. As of December 31, 1995, WorldCorp owned approximately
59.3% of World Airways' outstanding common stock. The managements of WorldCorp
and World Airways are currently exploring ways to maximize value for the
shareholders of each company, including actively exploring the feasibility of
employee initiatives to purchase a substantial portion of WorldCorp's ownership
position in World Airways. In addition to employee initiatives, WorldCorp is
evaluating the feasibility of a spinoff of its interest in World Airways or a
disposition to a third party. There can be no assurances, however, that any such
transactions will ultimately be consummated.

WorldCorp also has an ownership interest in US Order, Inc. ("US Order"), a
company which provides products and services for two markets: home banking and
smart telephones. In December 1993, US Order completed a $12.0 million private
equity placement. In August 1994, US Order sold its electronic banking and bill
payment operations to VISA International Services Association, Inc. ("Visa"). In
February 1995, WorldCorp exercised an option to purchase additional shares of
the voting stock of US Order for consideration equal to $3.9 million. In June
1995, US Order completed an initial public offering whereby 3,062,500 shares
were issued and sold by US Order, and 1,365,000 shares were sold by WorldCorp.
As of December 31, 1995, WorldCorp owned approximately 56.9% of the outstanding
common stock of US Order.

The Private Securities Litigation Reform Act of 1995 (the "Act") was recently
passed by Congress. The Company desires to take advantage of the new "safe
harbor" provisions in the Act. Therefore, the Company wishes to caution readers
that the important factors discussed below in "Outlook: Issues and Risks" may,
in some cases have affected, and in the future may affect, the Company's actual
results and may cause the Company's actual results for 1996 and beyond, to
differ materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.

OVERVIEW

AIR TRANSPORTATION
- ------------------

World Airways earns revenue primarily from four distinct markets within the
air transportation industry: passenger and cargo services to major international
air carriers; passenger and cargo services, on a scheduled and ad hoc basis, to
the U.S. Government; passenger services in seasonal charter markets; and cargo
services to small package shippers and freight forwarders. In addition, in 1995
World Airways commenced operations in a fifth market: scheduled passenger/cargo
service (which, beginning in 1996, will include scheduled charters to leisure
passenger markets on a seasonal basis).

With the exception of scheduled passenger/cargo service, World Airways
generally charges customers on a block hour basis rather than a per seat or per
pound basis. A "block hour" is defined as the elapsed time computed from the
moment the aircraft first moves under its own power at the point of origin to
the time it comes to rest at its final destination. World Airways provides most
services under two types of contracts: basic contracts and full service
contracts. Under basic contracts, World Airways provides the aircraft, cockpit
crew, maintenance and insurance and the customer provides all other operating
services and bears all other operating expenses, including fuel and fuel
servicing, marketing costs associated with obtaining passengers and/or cargo,
airport passenger and cargo handling fees, landing fees, cabin crews, catering,
ground handling and aircraft push-back and de-icing services. Under full service
contracts, World Airways provides fuel, catering, ground handling, cabin crew
and all related

18
<PAGE>

support services as well. Accordingly, World Airways generally charges a lower
rate per block hour for basic contracts than full service contracts, although it
does not necessarily earn a lower profit. Because of shifts in the mix between
full service contracts and basic contracts, fluctuations in revenues are not
necessarily indicative of volume trends or profitability. It is important,
therefore, to measure World Airways' business volume by block hours flown and to
measure profitability by operating income per block hour.

As is common in the air transportation industry, World Airways has
relatively high fixed aircraft costs. While World Airways believes that the
lease rates on its MD-11 aircraft are favorable relative to lease rates of other
MD-11 operators, its MD-11 aircraft have higher lease costs (although lower
operating costs) than its DC10-30 aircraft. Therefore, achieving high average
daily utilization of its aircraft (particularly its MD-11 aircraft) at
attractive yields are two of the most critical factors to its financial results.
In addition to fixed aircraft costs, a portion of its labor costs are fixed due
to monthly minimum guarantees to cockpit crewmembers and flight attendants.

CUSTOMERS

World Airways' business relies heavily on its contracts with Malaysian
Airline System Berhad ("Malaysian Airlines"), P.T. Garuda Indonesia ("Garuda")
and the U.S. Air Force's Air Mobility Command ("AMC"). These customers provided
approximately 39%, 10%, and 20%, respectively, of World Airways' revenues and
46%, 10%, and 13%, respectively, of the total block hours during 1995. These
customers provided approximately 18%, 18% and 22%, respectively, of World
Airways' revenues and 23%, 20%, and 14%, respectively, of total block hours in
1994.

World Airways has provided service to Malaysian Airlines since 1981,
providing wet lease services for Malaysian Airlines' scheduled passenger and
cargo operations as well as transporting passengers for the annual Hadj
pilgrimage. In 1995, World Airways provided three aircraft for Hadj operations
and will provide three aircraft in 1996. The current five-year Hadj contract
with Malaysian Airlines expires after the 1996 Hadj. World Airways is currently
in negotiations with Malaysian Airlines regarding future Hadj operations.

As a means of improving aircraft utilization, World Airways has recently
sought multi-year contracts with high utilization guarantees. In late 1994,
World Airways entered into a series of multi-year contracts, with expiration
dates running from 1997 through 2000, to provide basic services to Malaysian
Airlines. One contract provides for World Airways' operation of three MD-11
freighter aircraft for a five-year period for a combined guaranteed minimum of
1,200 hours per month (except when an aircraft is in scheduled maintenance). The
lease for one of the aircraft commenced in June 1994, and the leases for the
other two aircraft commenced in June and July 1995. A second contract provides
for each of two of its MD-11 passenger aircraft to operate a guaranteed minimum
of 320 hours per month from October 1994 through March 1997. For fiscal years
1995 and 1994, 29% and 9%, respectively, of World Airways' revenues and 37% and
14%, respectively, of its block hours flown resulted from these new multi-year
contracts with Malaysian Airlines. As a result of these contracts, World Airways
expects that the percentage of its total revenue generated from Malaysian
Airlines in 1996 will continue to increase over historical levels.

World Airways has provided international air transportation to the U.S. Air
Force since 1956. As compensation for pledges of aircraft to the Civil Reserve
Air Fleet ("CRAF") for use in times of national emergency, the U.S. Air Force
awards contracts to CRAF participants for peacetime transportation of personnel
and cargo. The U.S. Air Force awards points to air carriers acting alone or
through teaming arrangements in proportion to the number and type of aircraft
that the carriers make available to CRAF. As a result of its increasingly
effective use of teaming arrangements, World Airways' fixed awards have grown in
recent years and it has the largest U.S. Air Force fixed award under the CRAF
program for the U.S. Government's 1995-96 fiscal year. The current annual
contract commenced on October 1, 1995 and expires on September 30, 1996. These
contracts provide for a fixed level of scheduled business from the U.S. Air
Force with opportunities for additional short-term expansion business on an ad
hoc basis as needs arise. World Airways' fixed award for the current contract is
$55.4 million compared to the $33.9 million fixed award for the prior contract.
Due to the utilization of a significant number of its aircraft under multi-year
contracts with Malaysian Airlines and other contractual commitments, it is
unlikely that World Airways will be able to accept all of the available
expansion business. Although overall Defense Department spending is being
reduced, the level of U.S. Air Force contract awards has remained relatively
constant in recent years. World Airways, however, cannot determine how future
cuts in military spending may affect future operations with the U.S. Air Force.

19
<PAGE>

As a result of these and other contracts, World Airways had an overall
contract backlog at December 31, 1995 of $462.0 million, compared to $285.9
million at December 31, 1994. World Airways' backlog for each contract is
determined by multiplying the minimum number of block hours guaranteed under the
applicable contract by the specified hourly rate under such contract.
Approximately 74% of the backlog (including substantially all of the backlog
beginning in 1997) relates to the multi-year contracts with Malaysian Airlines.
The loss of any of these contracts or a substantial reduction in business from
any of these key customers, if not replaced, would have a material adverse
effect on World Airways' financial condition and results of operations.

The information regarding major customers and foreign revenue is contained
in Note 17 "Segment Information" of the Company's "Notes to Consolidated
Financial Statements" in Item 8.

See "Outlook: Issues and Risks" below for specific issues and risks that
may affect the financial performance of World Airways.

TRANSACTION PROCESSING
- ----------------------

In August 1994, US Order sold its electronic banking and bill pay
operations to Visa for approximately $15.0 million, the assumption of certain
liabilities and the right to receive certain royalties during a 72 month period
commencing January 1, 1995. In addition, Visa designated US Order as a
"preferred provider" through the 72-month royalty period and, as such, will make
its member banks aware that US Order can provide certain of its interactive
applications, customer support services and smart telephones to Visa member
banks. Prior to December 31, 1994, US Order's primary source of revenue was from
the monthly service fees that it charged its customers for the use of its smart
telephones and interactive applications. As a result of the Visa transaction, US
Order is in the process of converting these customers over to Visa member banks,
and expects to be offering its services strictly on a wholesale basis to Visa
and other strategic partners by the end of 1996. As each customer is converted
to a Visa member bank, US Order will no longer collect monthly fee revenue
directly from these customers. In January 1995, US Order entered into a
strategic alliance with a leading manufacturer of Caller ID units, Colonial
Data, to jointly develop and distribute US Order's next generation of smart
telephones to the telecommunications industry. US Order's next generation smart
telephone, the Telesmart 4000/TM/ smart phone, is expected to be available for
sale in the first half of 1996.

On October 19, 1995, US Order completed a transaction to acquire a 40%
equity interest in Home Financial Network, Inc. ("HomeNet"), a newly formed,
development stage personal computer company that plans to develop and deliver
electronic financial products and services for consumers. At closing, US Order
exchanged 296,746 shares of its common stock, valued at approximately $5
million, for 40% of HomeNet. US Order believes that its investment in HomeNet
will complement its home banking strategy by adding a personal computer based
application to the current smart telephone and touch-tone applications that it
offers. US Order expects HomeNet to incur operating losses at least through 1996
of which US Order will record its proportionate share.

To date, US Order has generated limited revenue. As a result of its new
strategic relationships in the home banking and smart telephone markets, US
Order no longer offers its services directly to the end user but instead markets
its products and services on a wholesale basis. This shift in strategy has
reduced its overall cost structure, in particular its expenditures for
advertising and promotion, while improving its distribution channels. Due to the

20
<PAGE>

change in its strategy, US Order expects that its sources of revenues in 1996
and the future, and the costs it incurs to generate such revenues, will differ
from its results prior to 1995.

As a result of the strategic change in its business focus, US Order will
generate revenue by selling its home banking products, and smart telephones, as
well as by generating monthly fees for providing ongoing services, including
interactive applications and customer support services. Revenue from product
sales will be dependent on the success of US Order's two largest strategic
partners, Visa InterActive and Colonial Data, in marketing and selling the
products in the banking and smart telephone channels. In addition, US Order has
the right to receive on a quarterly basis from Visa $0.666 per month per active
bill pay customer that uses the Visa Bill-Pay System through December 31, 2000.
This payment from Visa is subject to certain limitations, including a reduction
in the royalty payment for each quarter beginning January 1, 1995 through
December 31, 1997 by an offset amount (the "Visa Offset"). The Visa Offset,
initially set at $0.07 million per quarter, accumulates quarterly up to an
aggregate of $0.9 million. US Order has not received any revenue from these Visa
royalty payments through 1995 and does not expect to receive any revenue from
these payments, after application of the Visa Offset, through at least the first
half of 1996.

See "Outlook: Issues and Risks" below for specific issues and risks that
may affect the financial performance of US Order.

RESULTS OF OPERATIONS

AIR TRANSPORTATION
- ------------------

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Operating Revenues. Total block hours increased 10,885 hours, or 41%, to
------------------
37,342 hours in 1995 from 26,457 hours in 1994, with an average of 10.3
available aircraft per day in 1995 compared to 8.2 in 1994. Average daily
utilization (block hours flown per day per aircraft) increased to 9.9 hours in
1995 from 8.8 hours in 1994. In 1995, World Airways continued to obtain a higher
percentage of its revenues under basic contacts as opposed to full service
contracts. In 1995, basic contracts accounted for 70% of total block hours, up
from 63% in 1994. Total operating revenues increased $78.8 million, or
44%, to $259.5 million in 1995 from $180.7 million in 1994.

Revenues from flight operations increased $75.8 million, or 44%, to $249.7
million in 1995 from $173.9 million in 1994. This increase was primarily
attributable to a $58.4 million increase in revenues generated from the new
multi-year contracts with Malaysian Airlines. Average daily utilization for
these contracts was 11.2 hours in 1995. In addition, World Airways realized an
increase in revenues associated with services to certain international carriers
and from the commencement of scheduled service operations to Tel Aviv in July
1995. Partially offsetting these increases was a decrease in revenues associated
with the 1995 summer charter programs to Europe.

Revenues from flight operations subcontracted to other carriers increased
$3.2 million for 1995 to $8.6 million from $5.4 million in 1994. This increase
resulted primarily from World Airways' need to subcontract certain flights to
other carriers due to peak airlift requirements for the 1995 Hadj pilgrimage.
This increase was partially offset by the subservice of certain contracts in the
fourth quarter of 1994 primarily to make aircraft capacity available for the
commencement of operations under its multi-year contracts with Malaysian
Airlines.

Operating Expenses. Total operating expenses increased $63.2 million, or
------------------
34%, in 1995 to $249.1 million from $185.9 million in 1994.

Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft cost, fuel and maintenance. Also
included are expenses related to flight dispatch and flight operations
administration. Flight operations expenses increased $15.0 million, or 26%, in
1995 to $72.8 million from $57.8 million in 1994. This increase resulted
primarily from the following: an increase in block hours flown; higher cockpit
crew levels associated with the integration of additional aircraft into the
fleet in 1995; and an increase in accruals under World Airways' profit sharing
plans for its crewmembers during 1995. These factors were partially offset by a
shift from full service to basic contracts.

Maintenance expenses increased $17.1 million, or 65%, in 1995 to $43.3
million from $26.2 million in 1994. This increase resulted primarily from a
non-recurring 1994 reversal of $4.2 million of excess reserves associated with

21
<PAGE>

the expiration of three DC10-30 aircraft leases and the increase in block hours
flown in 1995, partially offset by lower costs associated with reduced
maintenance requirements of new MD-11 aircraft and the guarantees and warranties
received from the engine and aircraft manufacturers of the MD-11 aircraft and
related engines, which guaranties and warranties began to expire in 1995.

Aircraft costs increased $17.3 million, or 32%, in 1995 to $71.2 million
from $53.9 million in 1994. This increase was primarily due to the lease of two
additional MD-11 convertible aircraft in the first quarter of 1995 and the
short-term lease of incremental DC10-30 aircraft which began in the fourth
quarter of 1994 and second quarter of 1995, partially offset by the return of
three lower-cost DC10-30 aircraft to the lessor in the third quarter of 1994.

Fuel expenses increased $2.8 million, or 17%, in 1995 to $19.7 million from
$16.9 million in 1994. This increase is due primarily from an increase in fuel
uplifted for military and scheduled service operations, partially offset by a
shift from full service to basic contracts in 1995 under which World Airways is
not responsible for fuel.

Promotions, sales and commissions increased $4.2 million in 1995 to $5.3
million from $1.1 million in 1994. This increase resulted primarily from
commissions paid in connection with scheduled service operations to Tel Aviv
which commenced in 1995 and an increase in joint venture commissions associated
with the larger fixed-award contract received from the U.S. Air Force beginning
October 1995.

Depreciation and amortization increased $2.1 million, or 53%, in 1995 to
$6.1 million from $4.0 million in 1994. This increase resulted primarily from an
increase in spare parts required to support the additional MD-11 aircraft and
incremental DC10-30 aircraft described above as well as the amortization of
certain MD-11 aircraft integration costs and other deferred costs.

General and administrative expenses increased $1.2 million, or 6%, in 1995
to $21.7 million from $20.5 million in 1994. This increase was primarily due to
various start-up expenses and personnel necessary for scheduled service
operations as well additional marketing personnel, partially offset by a
decrease in certain legal and professional fees.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Operating Revenues. Total block hours increased 2,995 hours, or 13%, to
------------------
26,457 hours in 1994 from 23,462 hours in 1993. Average daily utilization
increased from 7.3 block hours in 1993 to 8.8 hours partially due to a planned
reduction in average available aircraft per day from 8.8 in 1993 to 8.2 in 1994.
During 1994, World Airways began to obtain a higher percentage of its revenues
under basic contracts as opposed to full service contracts. In 1994, basic
contracts accounted for 63% of total block hours up from 45% in 1993. Total
operating revenues increased $2.0 million, or 1%, to $180.7 million in 1994 from
$178.7 million in 1993.

Revenues from flight operations decreased $2.6 million, or 1%, to $173.9
million in 1994 from $176.5 million in 1993. This decrease resulted primarily
from a decrease in military charter revenues and cargo revenues in 1994 compared
to 1993. While World Airways' U.S. Air Force fixed award revenues increased
during 1994, this increase was offset by a decrease in short-term expansion
flying. During 1993, World Airways participated in short-term expansion flying
in connection with the transportation of military personnel to Mogadishu,
Somalia. In addition, a reduction in cargo revenues resulted primarily from the
expiration of a contract with a cargo carrier in January 1994. These decreases
were partially offset by increases of $17.1 million in revenues generated from
the multi-year contracts with Malaysian Airlines entered into in 1994 and an
increase in charter passenger service revenues resulting from additional charter
programs to Europe and South America.

Revenues from flight operations subcontracted to other carriers were $5.4
million in 1994 compared to $1.2 million in 1993. This increase was required
primarily to make aircraft capacity available for the commencement of operations
under its multi-year contracts with Malaysian Airlines.

Operating Expenses. Total operating expenses decreased slightly in 1994 to
------------------
$185.9 million from $186.1 million in 1993.

Flight operations expenses increased $2.5 million, or 5%, in 1994 to $57.8
million from $55.3 million in 1993. This increase was primarily due to the
increase in block hours flown, partially offset by the shift to more basic

22
<PAGE>

contracts. In addition, in 1993, World Airways incurred costs related to MD-11
integration which were not incurred in 1994.

Maintenance expense decreased $2.5 million, or 9%, in 1994 to $26.2 million
from $28.7 million in 1993 primarily due to a $4.2 million reversal of excess
accrued maintenance reserves associated with the expiration of three DC10-30
aircraft leases during 1994. Excluding the effect of this reversal, maintenance
expenses increased $1.7 million, or 6%, primarily due to an increase in block
hours flown in 1994, partially offset by lower costs associated with reduced
maintenance requirements of new MD-11 aircraft and the guarantees and warranties
received from engine and aircraft manufacturers on the MD-11 aircraft and
related engines, which guaranties and warranties began to expire in 1995.

Aircraft costs increased $1.8 million, or 3%, in 1994 to $53.9 million from
$52.1 million in 1993. This increase was primarily due to the higher lease costs
associated with MD-11 aircraft, partially offset by World Airways' return of
three DC10-30 aircraft with long-term leases in 1993 and related termination
fees of $2.3 million.

Fuel expenses decreased $8.8 million, or 34%, in 1994 to $16.9 million from
$25.7 million in 1993. This decrease was primarily due to the shift to more
basic contracts in 1994 under which World Airways is not responsible for fuel.

Depreciation and amortization decreased $1.6 million, or 29%, in 1994 to
$4.0 million from $5.6 million in 1993 primarily due to the elimination of
amortization for leasehold improvements in connection with two DC10-30 aircraft
returned to the lessor in July 1993. In addition, depreciation was reduced due
to the transfer of DC10-30 spare parts to assets held for sale following the
return of the DC10-30 aircraft. This decrease was partially offset by the
depreciation of spare parts purchased for MD-11 aircraft.

General and administrative expenses increased $4.3 million, or 27%, in 1994
to $20.5 million in 1994 from $16.2 million in 1993 primarily due to increased
professional fees and marketing expenses. During 1994, World Airways began
increasing its marketing and sales personnel and related activities to develop
future marketing programs.

TRANSACTION PROCESSING
- ----------------------

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Operating Revenue. US Order's operating revenues increased by $2.8 million
-----------------
from $1.4 million in 1994 to $4.2 in 1995. This increase is primarily related to
the sale of US Order's products, such as its smart telephones, which it began
selling through its "preferred provider" relationship with Visa in 1995. All of
US Order's product sales for 1995 were generated from the sale of its smart
telephones and home banking products. Service fees for 1995 were generated
primarily from three sources: (1) customer support services, (2) monthly service
fees and (3) non-recurring development fees for smart telephone applications. US
Order's customer support services, amounting to $0.5 million for 1995, were
remarketed by Visa InterActive to Visa member banks under US Order's reseller
agreement with Visa InterActive. The monthly service fees, which accounted for
$0.9 million of US Order's service revenues, were from its customers who used
its smart telephones and interactive applications during the year, compared to
$1.2 million during the same period in 1994. The decrease of $0.3 million was
primarily due to the fact that US Order is in the process of converting these
customers to Visa member banks and over time expects to be offering these
services strictly on a wholesale basis. In addition, in 1995, US Order earned
approximately $0.6 million in fees for development of smart telephone
applications.

Cost of Revenue. US Order's cost of revenue increased by $1.5 million for
---------------
1995 compared to 1994, due to the sale of its products such as its voice
response systems and smart telephones. US Order's cost of revenue historically
has consisted of bill pay processing costs and depreciation of its smart
telephones being utilized by customers for a monthly fee under US Order's prior
retail strategy. Beginning in 1995, US Order began selling its smart telephones
and voice response systems pursuant to a market penetration strategy designed to
build an installed base of subscribers who are potential sources of revenue from
monthly fees. US Order expects its gross margin percentage to vary in future
periods based upon the revenue mix between product sales and service revenues
and based upon the composition of service fee revenues earned during the period.

23
<PAGE>

Operating Expenses. Research and development costs were $1.1 million in
------------------
1995 compared to $1.8 million in 1994. US Order has been actively engaged in
research and development since its inception and expects that these activities
will be essential to the operations of US Order in the future. Research and
development related expenses for 1995 were largely attributable to developing,
designing and testing its fourth generation smart telephone, the Telesmart
4000(TM) smart phone, which US Order anticipates will be available for sale in
the first half of 1996. The decrease of $0.7 million from 1994 was partially due
to a one time payment to employees in August 1994 of $3.3 million for the
cancellation of their vested options of which approximately $0.4 million was
attributed to research and development employees. In addition, the decrease was
due to reduced costs associated with approximately 60% of US Order's personnel
becoming Visa InterActive employees effective August 1, 1994.

General and administrative expenses were $5.9 million in 1995 versus $7.8
million during the comparable period in 1994. The decrease of $1.9 million was
primarily due to a one time payment to certain employees in August 1994 of $3.3
million made in conjunction with the August 1, 1994 sale of US Order's bill pay
operations where Visa required that all US Order employees who became employees
of Visa InterActive cancel their vested options to eliminate any potential
conflict of interest. This decrease was partially offset by reduced costs in
1994 associated with approximately 60% of US Order's personnel becoming Visa
InterActive employees effective August 1, 1994. In the future, US Order expects
that aggregate general and administrative expenses will increase as it grows.
The amount of any increase will depend on the products and services offered by
US Order and its alliances with strategic partners. In particular, US Order
expects that general and administrative expenses will increase rapidly during
the first half of 1996 as it upgrades its systems and operations in anticipation
of the potential for increased business late in 1996 from the March 1996
Microsoft and Visa InterActive bill payment agreement. This agreement provides
that bill pay and other on-line banking transactions offered through Microsoft
Money personal finance software package may be processed by Visa InterActive
upon the next release of Money, which is expected to be late in 1996. US Order
has the opportunity to offer its branded customer service to Visa InterActive
for the customers acquired through the Microsoft bill payment agreement.

While advertising and promotion expenses were $0.8 million in 1994, there
was relatively no expense of this type in 1995. Advertising expenses were
significant prior to 1995 due to US Order's efforts to market its smart
telephones and interactive applications directly to the end user. US Order
ceased advertising to end users after the sale of its electronic bill pay system
to Visa in August 1994, as it began to offer its services and products on a
wholesale basis. During the second half of 1996, US Order expects to begin
selling its Telesmart 4000(TM) smart telephone in retail stores and outlets and
to paging companies. US Order expects its advertising and promotion expenses to
increase substantially from the minimal expenditures incurred during 1995 with
the entrance of the Telesmart 4000(TM) smart phone into these channels. US
Order, however, does not expect its advertising and promotion expenses to
increase, on a per customer basis, to the levels experienced during 1993 or
1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Operating Revenue. Total operating revenue for 1994 was $1.4 million
-----------------
compared to $0.9 million in 1993. The increase is attributable to the increased
deployment of smart telephones during the year as a result of several marketing
campaigns throughout the first half of 1994 and greater customer retention. At
the end of 1994, US Order had approximately 9,000 ScanFones in use.

Cost of Revenue. US Order's cost of revenue through December 31, 1994
---------------
primarily represented bill pay processing costs and depreciation of US Order's
telephones deployed in the field. Cost of revenue increased from $0.9 million in
1993 to $1.0 million in 1994 primarily due to the increase in service fees
generated from smart telephones. The increase in 1994 was partially offset by a
decrease in depreciation expense of its smart telephones due to a write-down in
the carrying value of the smart telephones in 1993.

Operating Expenses. Research and development costs were $1.8 million in
------------------
1994 compared to $1.0 million in 1993. The increase of $0.8 million in 1994 from
1993 was primarily due to US Order's increased activities associated with
simultaneously developing its third and fourth generation smart telephones and
transaction processing software.

General and administrative expenses were $7.8 million in 1994 compared to
$8.5 million in 1993. The decrease of $0.7 million from 1993 to 1994 was
partially due to a write-down of $1.5 million in 1993 of the carrying value of
first and second generation smart telephones to their estimated net realizable
value. In addition, the 1994

24
<PAGE>

costs were reduced as approximately 60% of US Order's personnel became Visa
InterActive employees effective August 1, 1994. These decreases were partially
offset by compensation expense incurred in 1994 in connection with the Visa
transaction. US Order paid $3.3 million to certain employees on August 1, 1994
(including approximately $2.1 million paid to employees transferred to Visa) in
exchange for the cancellation of 675,334 outstanding vested options.

Advertising and promotion expenditures were $0.8 million in 1994 compared
to $1.6 million in 1993. Advertising expenses decreased by $0.8 million from
1993 to 1994 due to US Order's strategic shift from offering its products and
services on a retail basis to a wholesale basis after the August 1994 Visa
transaction.

HOLDING COMPANY
- ---------------

General and administrative expenses increased $0.7 million for the year
ended December 31, 1995 to $4.3 million from $3.6 million during the comparable
1994 period. This increase resulted primarily from goodwill amortization and
compensation expense associated with executive stock options in 1995.

General and administrative expenses decreased $0.7 million for the year
ended December 31, 1994 to $3.6 million from $4.3 million in the comparable 1993
period. This decrease was primarily due to a reduction in certain legal and
professional fees.

On October 23, 1992, WorldCorp sold 100% of the outstanding common stock of
Key Airlines, Inc. ("KeyAir"). Loss on sale of KeyAir in 1993 primarily consists
of the write-off of a $0.3 million uncollateralized line of credit and $0.3
million drawdown of a letter of credit.

OTHER INCOME (EXPENSE)
- ----------------------

Interest Income. Interest income increased $2.0 million for the year ended
---------------
December 31, 1995 from the same period in 1994. This increase was primarily due
to an increase in cash and investments balances.

Gain on Sales of Equity by Subsidiaries and Sales of Subsidiaries' Stock.
------------------------------------------------------------------------
In February 1994, WorldCorp recognized a gain of $26.9 million from the sale of
24.9% of World Airways common stock, pursuant to an October 1993 agreement.
Also, in August 1994, US Order sold its electronic banking and bill payment
operations to Visa. As a result of this transaction, the Company recognized a
gain of $14.5 million.

In April 1995, US Order filed a registration statement on Form S-1 with the
Securities and Exchange Commission to register 4,427,500 shares of US Order's
common stock. The offering was completed in June 1995. Of the shares registered,
3,062,500 were issued and sold by US Order, and 1,365,000 shares were sold by
WorldCorp. In June 1995, US Order exchanged 230,000 shares of its restricted
common stock for 170,743 shares of Colonial Data's unregistered common stock. In
October 1995, US Order acquired a 40% interest in HomeNet through the issuance
of 296,746 shares of its common stock in exchange for 40% of HomeNet. In August
1995, World Airways filed a registration statement on Form S-1 with the
Securities and Exchange Commission to register 2,900,000 shares of World
Airways' common stock. The offering was completed in October 1995. Of the shares
registered, 2,000,000 were issued and sold by World Airways and 900,000 shares
were sold by WorldCorp. The Company recognized a gain of $43.7 million as result
of these sales of stock by US Order and World Airways, and a gain of $23.7
million from its sales of US Order and World Airways stock.

Other, Net. Other expenses decreased $2.6 million in 1995 from 1994
----------
primarily due to a $0.7 million loss on the sale of a DC10 engine by World
Airways in 1994. In addition, World Airways recognized a $0.8 million gain in
1995 resulting from a settlement with the lessor relating to the return of two
DC10 aircraft in 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company is highly leveraged, primarily due to debt restructurings in
1987 and 1992, substantial debt and operating lease commitments during 1993 in
connection with acquiring MD-11 aircraft and related spare parts, and losses the
Company incurred in the past several years. The Company has historically
financed its working capital and capital expenditure requirements out of public
and private sales of stock of its subsidiaries, secured borrowings, and other
financings from banks and other lenders.

25
<PAGE>

While World Airways was profitable each year from 1987 through 1992 and in
1995, it sustained operating losses in 1993 and 1994 of $7.3 million and $5.2
million, respectively, and net losses of $9.0 million in each of these two
years. There can be no assurance that World Airways will be able to sustain its
current profitability.

US Order has generated operating losses since its inception. US Order's
products and services are subject to the risks inherent in the marketing and
development of new products. To date, US Order has generated limited revenue
through the sale if its products and services and there can be no assurance as
to what level of future sales or royalties, if any, US Order will receive from
Visa or its member banks.

CASH FLOWS FROM OPERATING ACTIVITIES

During 1995, operating activities provided $1.1 million compared to using
$29.1 million of cash in the prior year. This increase in cash in 1995 was
primarily due to an increase in operating income over 1994 and an increase in
accounts payable and accrued expenses. These increases were partially offset by
an increase in accounts receivable during 1995 over 1994.

CASH FLOWS FROM INVESTING ACTIVITIES

Cash flows from investing activities used $22.7 million in 1995 as compared
to providing $13.3 million in 1994. This increase in cash used resulted
primarily from the following: the purchase of rotable spare parts required for
the integration of two MD-11 aircraft; the purchase of rotable spare parts
required as station spares in Malaysia as a result of the new multi-year
contracts with Malaysian Airlines; and the purchase of a spare engine in the
third quarter of 1995. In addition, the Company made a $1.2 million downpayment
towards the purchase of an additional spare engine to be delivered in the first
quarter of 1996. Also, in 1994, US Order sold its banking operations to Visa for
$14.8 million (net of related expenses).

CASH FLOWS FROM FINANCING ACTIVITIES

In 1995, financing activities provided $87.9 million compared to $7.0
million in the prior year. This increase in cash provided resulted primarily
from sales of stock by US Order and World Airways aggregating $64.5 million and
sales by the Company of a portion of its US Order and World Airways stock
aggregating $29.0 million. In 1994, pursuant to an October 1993 agreement, the
Company sold 24.9% of World Airways to MHS for $24.7 million in cash (including
$12.5 million received directly by World Airways). In addition, US Order
repurchased $2.7 million of preferred stock. The Company made $9.0 million of
net repayments for debt and a revolving bank line of credit in 1995 versus $16.3
million in 1994.

CAPITAL COMMITMENTS

Air Transportation
- ------------------

In October 1992 and January 1993, World Airways signed a series of
agreements to lease seven new MD-11 aircraft for initial lease terms of two to
five years, renewable for up to 10 years (and in the case of one aircraft, for
13 years) by World Airways with increasing rent costs. As of March 1995, World
Airways had taken delivery of all seven aircraft, consisting of four passenger
MD-11 aircraft, one freighter MD-11, and two passenger/cargo convertible MD-11s.
As part of the lease agreements, World Airways was assigned purchase options for
four additional MD-11 aircraft. In 1992, World Airways made non-refundable
deposits of $1.2 million toward the option aircraft.

In March 1996, World Airways signed an agreement with the manufacturer to
lease two MD-11ER aircraft. Under the agreement, World Airways leased each
aircraft for a term of 24 years with an option to return the aircraft after a
seven year period with certain fixed termination fees. As part of the agreement,
the above-mentioned deposits were applied towards the deposits required on these
two aircraft. In addition, World Airways agreed to assume an existing lease of
two additional MD-11 freighter aircraft for 20 years, beginning in 1999, in the
event that the existing lessee terminates its lease with the manufacturer at
that time.

World Airways maintains four long-term DC10-30 aircraft leases with terms
expiring in 1998, 2003, and two in 1997. In addition, beginning in 1996, World
Airways leased two additional DC10-30 aircraft for three- year terms. World
Airways may choose to lease additional DC10-30 aircraft primarily to meet peak
demand requirements.

26
<PAGE>

Annual minimum payments required under World Airways' aircraft and lease
obligations total $88.7 million for 1996, including the two MD-11ER aircraft
leased in 1996 (see Note 12 of "Notes to Consolidated Financial Statements").

World Airways spent $11.0 million to purchase spare parts and to make cash
security deposits for MD-11 integration in 1995. In August 1995, World Airways
amended its aircraft spare parts facility under the Credit Agreement to provide
for a variable rate borrowing of $10.5 million. Approximately $2.5 million of
this facility was used to pay off the previously outstanding balance of the
spare parts loan facility and $0.8 million was used to purchase additional spare
parts for MD-11s required during the remainder of 1995. The balance of this loan
facility was used to increase cash balances which were drawn down during the
first half of 1995 to purchase MD-11 spare parts.

On September 29, 1995, World Airways entered into an agreement with a
lessor to purchase a spare engine, previously under lease, for $5.5 million (see
Note 12 of "Notes to Consolidated Financial Statements"). In addition, World
Airways purchased an additional spare engine delivered in the first quarter of
1996. The engine cost approximately $8.0 million. World Airways entered into an
agreement with the engine's manufacturer to finance 80% of the purchase price
over a seven-year term. World Airways made payments of $1.2 million and $0.4
million towards this purchase in September 1995 and January 1996, respectively.

As discussed above, World Airways signed an agreement for the lease of two
MD-11ER aircraft beginning in the first quarter of 1996 to provide additional
capacity for growth opportunities. As a result of this agreement, World Airways
estimates that it will expend approximately $1.6 million for crewmember
training, $8.9 million for additional spare parts and $8.5 million for an
additional spare engine and a QEC kit in 1996. As part of the agreement for the
MD-11 aircraft, World Airways will receive spare parts financing from the lessor
of $9.0 million of which $3.0 million will be advanced with the delivery of each
aircraft, and the remaining $3.0 million will be available in December 1996. In
January 1996, World Airways received a commitment from the engine manufacturer
to finance 85% of the engine purchase price over a seven-year term with an
interest rate to be fixed at the time of delivery.

World Airways anticipates that its total capital expenditures in 1996 will
be approximately $28.0 million. As discussed above, World Airways will receive
approximately $22.6 million in financing for these expenditures. The remaining
balance will be funded from its operating cash flow and available cash balances.

On September 28, 1995, the Credit Agreement was amended to increase the
limit on capital expenditures by World Airways to no more than $25.0 million in
1995. While the Credit Agreement limits capital expenditures by World Airways to
no more than $15.0 million in 1996, World Airways currently is negotiating with
BNY Financial Corporation to amend the Credit Agreement to increase the annual
limit on capital expenditures. There can be no assurance that the Credit
Agreement will be so amended or that a waiver will be obtained, in which event
World Airways would expect to limit its annual capital expenditures to $15.0
million.

In March 1996, World Airways received regulatory authority to provide
scheduled passenger and cargo service between Newark and points in West Africa
and South Africa beginning in the second quarter of 1996. World Airways
anticipates that it will incur approximately $1.0 million in start-up costs in
connection with this operation and will fund such start-up costs from its
operating cash flow.

Transaction Processing
- ----------------------

In October 1995, US Order entered into a facilities operating lease for
30,000 additional square feet of office space which will be used in addition to
its current office space. The lease covers a fifty-three month period commencing
July 1,1996 with aggregate minimum lease payments equal to approximately $2.7
million.

In November 1995, US Order committed to purchase from Standard
Telecommunication Ltd. 30,000 Telesmart 4000/TM/ smart telephones for a total of
approximately $3.3 million, for delivery during the first half of 1996. The
entire commitment is secured by a cash collateralized letter of credit. US Order
had no other material commitments for capital expenditures nor does it
anticipate a significant change in the current level of its capital
expenditures.

US Order's primary needs for cash in the future are for investments in
product development, working capital, the financing of operating losses,
strategic ventures, potential acquisitions, capital expenditures and the upgrade
of

27
<PAGE>

its systems and operations in order to support the Visa InterActive and
Microsoft bill payment alliance. In order to meet its needs for cash over the
next twelve months, US Order will utilize proceeds from its 1995 initial public
offering. Additionally, US Order may utilize funds it expects to generate from
asset sales, including approximately $0.5 million of earlier generation smart
telephones (which it sells to third parties for use as point of sale terminals)
and from its approximately $2.5 million advertising credit, which was received
as partial consideration for certain shares of Series C convertible preferred
stock in 1993, subject to certain restrictions regarding its usage.

Holding Company
- ---------------

WorldCorp is highly leveraged, and therefore requires substantial funds to
cover debt service. As a holding Company, all of WorldCorp's funds are generated
through its subsidiaries, neither of which has paid dividends since 1992.
Additionally, WorldCorp, which owns a majority position in World Airways' and US
Order's common stock, is subject to the provisions of two indentures expiring in
1997 and 2004, respectively, under which it is obligated to cause the companies
not to pay dividends under certain circumstances. Of the $74.4 million in cash
and cash equivalents at December 31, 1995, approximately $50.4 million is held
by World Airways and US Order and, therefore, is not available to satisfy
WorldCorp's obligations. As of December 31, 1995, WorldCorp had parent company
repayment obligations, including principal and interest, of approximately $9.6
million and $32.7 million for 1996 and 1997, respectively.

The Company believes that the combination of the financings consummated to
date and the operating and additional financing plans previously discussed will
be sufficient to allow the Company to meet its operating and capital
requirements for the next twelve months.

FINANCING DEVELOPMENTS

In June 1995, US Order completed an initial public offering pursuant to
which US Order and WorldCorp received $41.6 million and $18.7 million in net
proceeds, respectively. US Order used part of its proceeds to satisfy debt
obligations (including those to WorldCorp). The remaining balance was added to
US Order's cash reserves. World Corp used its proceeds to fund its debt service
requirements and increase its cash position.

In October 1995, World Airways completed an initial public offering
pursuant to which World Airways and WorldCorp received approximately $22.8
million and $10.2 million in net proceeds, respectively. Each company used its
proceeds to increase cash reserves.

On October 30, 1993, WorldCorp, World Airways, and MHS entered into the MHS
Stock Purchase Agreement pursuant to which MHS, subject to satisfactory
completion of its due diligence investigations, agreed to purchase 24.9% of
World Airways' common stock. On February 28, 1994, the transaction was
completed. World Airways received upon closing $12.4 million to fund its working
capital requirements. The remaining proceeds from the sale ($15.0 million less a
$2.6 million deposit received in November 1993) were paid directly to WorldCorp.

In 1993, World Airways entered into the Credit Agreement, which included a
$12.0 million spare parts loan and an $8.0 million revolving line of credit
collateralized by certain receivables, inventory, equipment, and general
intangibles. World Airways is prohibited from granting a security interest in
such collateral to anyone other than BNY Financial Corporation. Approximately
$10.8 million of the proceeds from this borrowing were used to retire existing
obligations. This agreement contains certain covenants related to World Airways'
financial condition and operating results. In March, August and September of
1995, World Airways amended this agreement to adjust certain covenants beginning
in the first quarter of 1995, in August 1995 and in September 1995,
respectively, and extended the credit facility's term to 1998. Under the terms
of the amended Credit Agreement, World Airways is not permitted to (i) incur
indebtedness in excess of $25.0 million (excluding capital leases), (ii)
declare, pay, or make any dividend or distribution in any six month period which
aggregate in excess of the lesser of $4.5 million or 50% of net income for the
previous six months, (iii) declare or pay dividends if after giving effect to
such dividends its cash or cash equivalents would be less than $7.5 million or
(iv) make capital expenditures in 1995 of more than $25.0 million or in any
subsequent year of more than $15.0 million. World Airways must also maintain a
certain quarterly net worth and net income (loss) requirements, and at December
31, 1995, World Airways was in compliance with the terms of the Credit Agreement
as in effect as of such date. No assurances can be given that World Airways will
continue to meet these revised covenants or, if necessary, obtain the required
waivers. In addition, World Airways amended the aircraft spare parts facility
under the Credit Agreement to provide for a variable rate spare parts loan

28
<PAGE>

of $10.5 million. As of December 31, 1995, $1.7 million of the $8.0 million
portion of the credit facility collateralized by receivables was utilized, with
$0.3 million capacity currently available, and $8.6 million of the $10.5 million
spare parts loan was outstanding.

As discussed above, on September 29, 1995 World Airways entered into an
agreement with a lessor to purchase a spare engine, previously under lease, for
$5.5 million. World Airways paid $0.5 million upon closing and signed a note for
the $5.0 million balance. The note bears interest at a rate of 7.25% and is
payable over a 40-month period at $69,000 a month, with the balance of $3.3
million due on January 29, 1999.

In the first quarter of 1995, World Airways obtained approximately $6.0
million in short-term borrowings from equipment lessors for working capital
purposes, at an average interest rate of approximately 11%. These borrowings
were repaid as of December 31, 1995.

OUTLOOK: ISSUES AND RISKS

AIR TRANSPORTATION
- ------------------

Customers. World Airways' business relies heavily on its contracts with
---------
Malaysian Airlines, Garuda and the U.S. Air Force. These customers provided
approximately 39%, 10%, and 20%, respectively, of World Airways' revenues and
46%, 10%, and 13%, respectively, of the total block hours during 1995. These
customers provided approximately 18%, 18% and 22%, respectively, of World
Airways' revenues and 23%, 20%, and 14%, respectively, of total block hours in
1994. The loss of any of these contracts or a substantial reduction in business
from any of these key customers, if not replaced, would have a material adverse
effect on World Airways' financial condition and results of operations.

Competition. The air transportation industry is highly competitive and
-----------
susceptible to price discounting. Certain of the passenger and cargo air
carriers against which World Airways competes possess substantially greater
financial resources and more extensive facilities and equipment than those which
are now, or will in the foreseeable future become, available to World Airways.

29
<PAGE>

Cyclical Nature of Air Carrier Business. World Airways operates in a
---------------------------------------
challenging business environment. The air transportation industry is highly
sensitive to general economic conditions. Since a substantial portion of
passenger airline travel (both business and personal) is discretionary, the
industry tends to experience severe adverse financial results during general
economic downturns. The airline industry may also be adversely affected by
unexpected global political developments. This is important since World Airways
flies to and from countries such as Northern Ireland, Israel, and South Africa.
The financial results of air cargo carriers are also adversely affected by
general economic downturns due to the reduced demand for air cargo
transportation. In 1993 and 1994, the combination of a generally weak global
economy and the depressed state of the air transportation industry has adversely
affected World Airways' operating performance. Although World Airways has
experienced a growth in demand, such that World Airways has increased block
hours flown by 41% in 1995 over 1994 and 13% in 1994 over 1993, there can be no
assurance that this growth will continue.

Seasonality. Historically, World Airways' business has been significantly
-----------
affected by seasonal factors. During the first quarter, World Airways typically
experiences lower levels of utilization and yields as demand for passenger and
cargo services is lower relative to other times of the year. World Airways
experiences higher levels of utilization in the second quarter, principally due
to peak demand for commercial passenger services associated with the annual Hadj
pilgrimage. During 1995, World Airways' flight operations associated with the
Hadj pilgrimage occurred from April 1 to June 8. Because the Hadj occurs
approximately 10 to 12 days earlier each year, revenues resulting from future
Hadj contracts will begin to shift from the second quarter to the first quarter
over the next several years. In recent years, soft demand and weakening yields
in worldwide passenger markets adversely affected its results in the third
quarter. Fourth quarter utilization depends primarily on the demand for air
cargo services in connection with the shipment of merchandise in advance of the
U.S. holiday season. World Airways believes that its recent multi-year
contracts with Malaysian Airlines and an increase in peak European summer
tourist travel occurring in the third quarter should lessen the effect of these
seasonal factors. The quarterly financial data is contained in Note 20
"Unaudited Quarterly Results" of the Company's "Notes to Consolidated Financial
Statements" in Item 8.

Operating Losses. While World Airways was profitable each year from 1987
----------------
through 1992 and in 1995, it sustained operating losses in 1993 and 1994 of $7.3
million and $5.2 million, respectively, and net losses of $9.0 million in each
of these two years. There can be no assurance that World Airways will be able
to sustain its current profitability. See "Selected Financial Data" and
"Results of Operations".

Maintenance. World Airways outsources major airframe maintenance and power
-----------
plant work to several suppliers. World Airways has a 10-year contract ending in
August 2003 with United Technologies Corporation's Pratt & Whitney Group ("Pratt
and Whitney") for all off-wing maintenance on the PW 4462 engines that power its
MD-11 aircraft. Under this contract, the manufacturer agreed to provide such
maintenance services at a cost not to exceed a specified rate per hour during
the term of the contract. The specified rate per hour is subject to annual
escalation, and increases substantially in 1998. Accordingly, while World
Airways believes the terms of this agreement will result in lower engine
maintenance costs than it otherwise would incur during the first five years of
the agreement, these costs will increase substantially during the last seven
years of the agreement. World Airways has contracted with Caledonian Airmotive
Limited for off-wing maintenance on the CF6-50C2 engines that power its DC10-30
aircraft. World Airways believes these contracts provide high quality power
plant services at competitive costs.

World Airways' maintenance costs associated with the MD-11 aircraft and PW
4462 engines have been significantly reduced due in part to manufacturer
guarantees and warranties, which guarantees and warranties began to expire in
1995 and will fully expire by 1998. Therefore, World Airways expects that
maintenance expenses will increase as these guarantees and warranties expire.

World Airways' material services group acquires and manages the inventory
of spare parts and consumable materials required to support line maintenance,
scheduled airframe maintenance and power plant maintenance. World Airways has
established an inventory management facility in Wilmington, Delaware, to support
this activity. As part of this activity, the material services group tracks the
inventory status of the spare parts kits carried aboard each of its aircraft.
Each of World Airways' aircraft carries spare parts and support kits, which
consist of approximately $1.5 to $3.5 million in parts and special equipment. In
addition, a highly-trained maintenance representative is on board all flights to
destinations where it does not have on-site maintenance facilities.

30
<PAGE>

Growth Opportunities. In the scheduled charter market, World Airways has
--------------------
identified what it believes is a significant opportunity to increase revenues
and profits by serving potentially profitable leisure passenger markets between
the U.S. and Europe. In the scheduled charter business, World Airways sells
less-than-planeload blocks of seats to international tour operators and markets
the remaining seats through computer reservations systems. Based on the
successful experience of European carriers, World Airways believes serving the
seasonal passenger markets on a scheduled charter basis will have several
benefits which it believes outweigh the potential increased load and yield risk
associated with serving this market. First, it should be possible to achieve
greater revenue per block hour because tour operators will pay higher prices in
exchange for not bearing the risk of filling an entire aircraft. Second, World
Airways expects to increase the hourly utilization of its aircraft deployed in
this market because it will set the schedules rather than a tour operator that,
in the case of a full-planeload charter, has contracted for the entire aircraft
and controls scheduling. This strategy gives World Airways more control within
the charter distribution channel and a stronger commercial position in this
market than it would have in the full-load charter business. For the 1996
leisure market season, World Airways has developed schedules and is marketing
capacity to tour operators with particular emphasis on the markets between the
U.S. and Germany, Switzerland, Ireland, and the United Kingdom. Although World
Airways believes that scheduled charters may improve utilization and yields in
the leisure passenger market for the reasons described above, it has no prior
experience operating scheduled charters and can, therefore, provide no
assurances that it will be able to operate scheduled charters profitably.

In the scheduled passenger business, World Airways will consider entering
only those markets that it believes (i) are well suited to the competitive
advantages of its long-range, wide-body aircraft, (ii) have prospects for rapid
growth, and (iii) have barriers to entry. After determining that the market
between New York and Tel Aviv met these criteria, World Airways commenced
scheduled passenger service in this market in July 1995 with three weekly round
trips. In March 1996, World Airways reduced its weekly frequencies from three to
two until the summer peak tourist season. In addition, World Airways recently
received regulatory authority to provide scheduled passenger and cargo service
between the United States and points in West Africa and South Africa beginning
in the second quarter of 1996.

While World Airways has achieved a 72% cumulative load factor on the Tel
Aviv route as of February 1996, yields have been significantly lower than
expected due to price sensitive, high commission traffic originating in the New
York area and the lack of a marketing relationship with a major U.S. carrier to
feed its New York departures. As a result of these factors, World Airways has
sustained operating losses on this route since commencing scheduled service to
Tel Aviv in July 1995. In response to these issues, World Airways has taken
steps to improve its yield and load factor performance. First, as discussed
above, World Airways has reduced its weekly frequencies to Tel Aviv from three
to two until this summer's peak tourist season. Second, and more importantly,
World Airways has formed, subject to definitive documentation, a strategic
alliance with Continental Airlines ("Continental"). This agreement with
Continental includes codesharing, joint marketing, and participation in
Continental's computer reservation system and OnePass frequent flyer program.
World Airways' international passengers will connect through Continental's
Newark International Airport ("Newark") hub to major U.S. cities as well as
Canada and Mexico. Continental's passengers will connect directly on World
Airways' international destinations including Israel, Ireland, and South Africa.
In conjunction with this alliance, World Airways will begin flying from Newark
in June 1996. Although World Airways hopes that its strategic alliance with
Continental will improve financial results on its scheduled passenger routes,
including but not limited to its Tel Aviv route, no assurances can be given that
World Airways will be able to operate its scheduled passenger routes profitably
even with the Continental alliance.

Ability to Manage Growth. As described above, World Airways is currently
------------------------
experiencing rapid growth in its existing operations and intends to enter new
markets. For example, World Airways' fleet size increased 38% from 1994 to 1995,
and total block hours increased 41% over the comparable period. In the first
quarter of 1996, World Airways' fleet size was further enhanced with the
delivery of two MD-11ER aircraft and two additional DC10-30 aircraft. If World
Airways' management is unable to manage this growth, its financial performance
and results of operations may be adversely affected. Additionally, World
Airways' entrance into new markets requires more skilled personnel and
distribution capability. An inability to hire skilled personnel or to develop
its distribution capability may also adversely affect World Airways' ability to
operate profitably in its new markets.

Control by WorldCorp; Potential Conflicts of Interest. As of December 31,
-----------------------------------------------------
1995, WorldCorp owned approximately 59.3% of World Airways. WorldCorp is highly
leveraged and therefore requires substantial funds to cover debt service each
year. As a result of WorldCorp's cash requirements, it may be required to sell
additional shares of World Airways' common stock from time to time, and such
sales, or the threat of such sales, could have

31
<PAGE>

a material adverse affect on the market price on World Airways' common stock.
Except as limited by contractual arrangements with MHS, WorldCorp also is in a
position to control the outcome of substantially all issues submitted to World
Airways' stockholders, including the election of all of World Airways' Board of
Directors, adoption of amendments to World Airways' Certificate of
Incorporation, and approval of mergers. Under Delaware law, WorldCorp may
approve certain actions by written consent without a meeting of the stockholders
of World Airways. In addition, World Airways' Board of Directors has eight
members, one of whom, T. Coleman Andrews, III, is President, Chief Executive
Officer, and a Director of WorldCorp.

The managements of WorldCorp and World Airways are currently exploring ways
to maximize value for the shareholders of each company, including actively
exploring the feasibility of World Airways' employee initiatives to purchase a
substantial portion of WorldCorp's ownership position in World Airways. In
addition to employee initiatives, WorldCorp is evaluating the feasibility of a
spinoff of its interest in World Airways or a disposition to a third party.
There can be no assurances, however, that any such transactions will ultimately
be consummated.

TRANSACTION PROCESSING
- ----------------------

Minimal Revenues; History of Losses. US Order did not introduce its first
-----------------------------------
commercial product until 1991 and accordingly has a limited operating history.
To date, US Order has generated limited revenues from the sale of its products
and services, has incurred significant losses and has experienced a substantial
negative cash flow. US Order expects to incur operating losses during 1996.
There can be no assurance that US Order will be able to achieve profitability
and, if achieved, sustain such profitability, nor can there be any assurance as
to when such profitability might be achieved. US Order is subject to all of the
risks inherent in the establishment of a new business enterprise.

Developing Marketplace. Home banking and smart telephones are developing
----------------------
markets. Consumer preferences in interactive technologies are difficult to
predict. US Order's future growth and profitability will depend, in part, upon
consumer acceptance of electronic home banking and smart telephone technologies
and a significant expansion in the consumer market for telephone-based
interactive applications technologies. Even if these markets experience
substantial growth, there can be no assurance that US Order's products and
services will be commercially successful or benefit from such growth.

Early Stage Products and Services. The continued development of the
---------------------------------
marketplace for US Order's products and services will depend in part upon its
ability to create and develop additional applications for its technologies.
Many of US Order's products and services, including its smart telephones, are in
the early stages of development or marketing, and are subject to the risks
inherent in the development and marketing of new products and services.

Control by WorldCorp; Potential Conflicts of Interest. As of December 31,
-----------------------------------------------------
1995, WorldCorp Investments, Inc., a wholly owned subsidiary of WorldCorp owned
approximately 56.9% of US Order's outstanding common stock. WorldCorp is highly
leveraged, and therefore requires substantial funds to meet debt service
requirements each year. As a result of WorldCorp's cash requirements, it may be
required to sell shares of US Order from time to time and such sales, or the
threat of such sales, could have a material adverse effect on the market price
for US Order's common stock. As of December 31, 1995 WorldCorp was also in a
position to control the outcome of substantially all issues submitted to US
Order's stockholders. Under Delaware law, WorldCorp is also able to approve
certain actions by written consent without a meeting of the stockholders of US
Order. In addition, US Order's Board of Directors has eight members, five of
whom also serve on the Board of Directors of WorldCorp.

Dependence on Strategic Alliances. US Order's business strategy is to sell
---------------------------------
products and services that support and enhance home banking and smart telephones
primarily through a strategic alliance in each of these two markets. US Order's
primary success in each area depends both on the ultimate success of these
partners as well as on the ability of its partners to successfully market its
products, services and interactive applications. Also, there can be no assurance
that these alliance partners, Visa InterActive and Colonial Data, view their
alliance with US Order as significant for their own businesses or that they will
not reassess their commitment to US Order at any time in the future.

Fluctuations in Operating Results. US Order may experience fluctuations in
---------------------------------
quarterly operating results due to the size and timing of customer orders or the
royalty payments from Visa InterActive, changes in US Order's pricing policies
or those of its competitors, new product introductions or enhancements by
competitors, delays in the introduction of new products or product enhancements
by US Order or by its competitors, customer order deferrals

32
<PAGE>

in anticipation of upgrades and new products, market acceptance of new products,
the timing and nature of sales and marketing expenses, research and development
expenses, other changes in operating expenses, personnel changes and general
economic conditions. Fluctuations in operating results could result in
volatility in the price of US Order's common stock.

Restrictions from the Visa Agreement. As a condition of Visa's acquisition
------------------------------------
of US Order's bill payment and banking operation, US Order has agreed to work
exclusively with Visa in certain areas and to refrain from certain activities
that are in competition with Visa and its affiliates. These covenants may
increase US Order's reliance upon Visa. US Order's dependence on Visa, and the
terms of the agreement between the parties, may have a material adverse effect
on US Order.

Volatility of Stock Price. Since its recent initial public offering, the
-------------------------
market price of US Order's common stock has experienced significant volatility.
The stock market has experienced volatility that has particularly affected the
market prices of equity securities of many high technology and developmental
stage companies and that has often been unrelated to the operating performance
of such companies. Factors such as announcements of the introduction of new
products or services by US Order or its competitors, announcements of joint
development efforts or corporate partnerships in the interactive applications
industry, market conditions in the banking, telecommunications and other
emerging growth company sectors and rumors relating to US Order or its
competitors may have a significant impact on the market price of its common
stock.

Technological Considerations. US Order's business activities are
----------------------------
concentrated in fields characterized by rapid and significant technological
advances. There can be no assurance that US Order will remain competitive
technologically or that its products, processes or services will continue to be
reflective of such advances.

Dependence on Key Employees. US Order is highly dependent on certain key
---------------------------
executive officers and technical employees, the loss of any of whom could have
an adverse impact on the future operations of US Order.

Dependence on Foreign Production. US Order's smart telephones are
--------------------------------
manufactured by manufacturers with facilities in Hong Kong, Taiwan and the
People's Republic of China. The availability or cost of these smart telephones
may be adversely affected by political, economic or labor conditions in Hong
Kong, including the 1997 return of Hong Kong to China, and by fluctuations in
currency exchange rates. In addition, a change in the tariff structure or other
trade policies of the United States or countries from which it imports products
could adversely affect US Order's foreign manufacturing strategies.

OTHER MATTERS

LEGAL AND ADMINISTRATIVE PROCEEDINGS

The Company and World Airways (the "World Defendants") are defendants in
litigation brought by the Committee of Unsecured Creditors of Washington
Bancorporation (the "Committee") in August 1992, captioned Washington
Bancorporation v. Boster, et. al., Adv. Proc. 92-0133 (Bankr. D.D.C.) (the
"Boster Litigation"). The complaint asserts that the World Defendants received
preferential transfers or fraudulent conveyances from Washington Bancorporation
when the World Defendants received payment at maturity on May 4, 1990 of
Washington Bancorporation commercial paper purchased on May 3, 1990. Washington
Bancorporation filed for relief under the Federal Bankruptcy Code on August 1,
1990. The Committee seeks recovery of approximately $4.8 million from World
Airways and approximately $2.0 million from WorldCorp, which are alleged to be
the amounts paid to each of World Airways and WorldCorp by Washington
Bancorporation. On the motion of the World Defendants, among others, the Boster
Litigation was removed from the Bankruptcy Court to the District Court for the
District of Columbia on May 10, 1993. The World Defendants filed a motion to
dismiss the Boster Litigation as it pertains to them on June 9, 1993, and intend
to vigorously contest liability. On September 20, 1995, the District Court for
the District of Columbia granted the motion to dismiss filed by the World
Defendants with respect to three of the four counts alleged in the litigation,
but declined to grant a motion to dismiss the remaining claim regarding
fraudulent transfers. The District Court's ruling is subject to appeal in
certain cases. The World Defendants filed a summary motion with respect to the
remaining claim on October 19, 1995, which remains pending. In any event, the
Company believes it has substantial defenses to this action, although no
assurance can be given of the eventual outcome of this litigation. Depending
upon the timing of the resolution of this claim, if the Committee were
successful in recovering the full amount claimed, the resolution could have a
material adverse effect

33
<PAGE>

on the Company's financial condition and results of operations.

In addition, the Company is party to routine litigation and administrative
proceedings incidental to its business, none of which is believed by the Company
to be likely to have a material adverse effect on the financial condition of the
Company.

EMPLOYEES

World Airways cockpit crew members, who are represented by the
International Brotherhood of Teamsters (the "Teamsters"), are subject to a four-
year collective bargaining agreement that will become amendable in June 1998.

World Airways' flight attendants are also represented by the Teamsters
under a collective bargaining agreement that became amendable in 1992. The
parties exchanged their opening contract proposals in 1992 and have had numerous
contract negotiation sessions. In December 1994, World Airways and the Teamsters
jointly requested the assistance of a federal mediator to facilitate
negotiations. After several mediated sessions, the National Mediation Board (the
"NMB") mediator recommended that the NMB release the parties to pursue "direct"
(i.e., non-mediated) negotiations with the flight attendants. World Airways and
the Teamsters agreed and direct negotiations continue. The outcome of the
negotiations with the flight attendants cannot be determined at this time. The
inability to reach an agreement upon terms favorable to World Airways could have
a material adverse effect on World Airways. World Airways' flight attendants
continue to challenge the use of foreign flight attendant crews on its flights
for Malaysian Airlines and Garuda Indonesia which has historically been World
Airways' operating procedure. World Airways is contractually obligated to permit
its Southeast Asian customers to deploy their own flight attendants. While it
intends to contest this matter vigorously in an upcoming arbitration, an
unfavorable ruling for World Airways could have a material adverse effect on
World Airways.

World Airways' aircraft dispatchers are represented by the Transport Workers
Union (the "TWU"). This contract became amendable on June 30, 1993. In May 1995,
the parties reached agreement with respect to a new four-year contract. This
contract was ratified on February 7, 1996. Fewer than 12 Company employees are
covered by this collective bargaining agreement.

World Airways' is unable to predict whether any of its employees not
currently represented by a labor union, such as its maintenance personnel, will
elect to be represented by a labor union or collective bargaining unit. The
election by such employees of representation in such an organization could
result in employee compensation and working condition demands that could have a
material adverse effect on the financial results of the Company.

DIVIDEND POLICY

The $20 million credit facility also contains restrictions on World
Airways' ability to pay dividends. Under this agreement, World Airways cannot
declare, pay, or make any dividend or distribution in any six-month period which
aggregate in excess of the lesser of $4.5 million or 50% of net income for the
previous six months. In addition, World Airways must have a cash balance of at
least $7.5 million immediately after giving effect to such dividend or
distribution.

Additionally, WorldCorp, which owns a majority position in World Airways'
and US Order's common stock, is subject to the provisions of two indentures
expiring in 1997 and 2004, respectively, under which it is obligated to cause
the companies not to pay dividends under certain circumstances. Under the
indenture terminating in 2004, WorldCorp has agreed to cause the companies not
to pay dividends if at the time WorldCorp is in default under such indenture.
Further, under the indenture terminating in 1997, WorldCorp has agreed to cause
the companies not to pay dividends unless WorldCorp has a positive adjusted net
worth (as defined therein). As of March 11, 1996, WorldCorp's adjusted net worth
was negative and under the indenture terminating in 1997 WorldCorp is therefore
obligated to cause the companies not to pay dividends.

34
<PAGE>

All of the funds from operations are generated by the Company's
subsidiaries. The ability of the Company and its subsidiaries to pay principal
and interest on their respective short and long-term obligations is
substantially dependent upon funds generated by the operations of the
subsidiaries, the payment to the Company of dividends, and its ability to sell
additional shares of its subsidiaries' stock.

INCOME TAXES

At December 31 1995, WorldCorp had approximately $30.7 million in net
operating loss carryforwards ("NOLs") that are available to offset future
federal taxable income.

There can be no assurance that the Company will generate taxable income in
future years so as to allow the Company to realize a tax benefit from its NOLs.
The NOLs are subject to examination by the IRS and, thus, are subject to
adjustment or disallowance resulting from any such IRS examination. In addition,
ownership changes of the Company, pursuant to the Internal Revenue Code, may
occur in the future and may result in the imposition of an annual limitation on
the Company's NOLs existing at the time of any such ownership change.

In addition, World Airways, which does not file a consolidated income tax
return with the Company, had a valuation allowance for deferred tax assets as of
December 31, 1995 of $39.5 million. World Airways' estimate of the required
valuation allowance is based on a number of factors, including historical
operating results. World Airways generated net earnings for the year ended 1995
as compared to losses in both 1994 and 1993. If World Airways continues to
generate net earnings in 1996, it is possible that a change in the estimate of
the required valuation allowance will occur in the near term, and could differ
materially from the amount recorded at December 31, 1995. A portion of World
Airways' NOLs are subject to an annual limitation as a result of a previous
ownership change, for tax purposes, which occured in 1991.

NEW ACCOUNTING STANDARDS

In June 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to Be Disposed Of ("SFAS No. 121"). SFAS
No. 121 requires companies to review long-lived assets and certain identifiable
intangibles to be held, used or disposed of, for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company believes the adoption of this statement will not
have a significant effect on its financial statements. The Company is required
to adopt this statement in 1996.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-based
Compensation ("Statement 123"). Statement 123 recommends, but does not require,
the adoption of a fair value based method of accounting for stock-based
compensation to employees, including common stock options, and stock-based
compensation to individuals other than employees. The Company currently intends
to continue recording stock-based compensation to employees under the intrinsic
value method and does not intend to adopt the fair value based method of
accounting for stock-based compensation to employees as permitted by Statement
123. Certain pro forma disclosures will be required in the Company's financial
statements for the year ending December 31, 1996 as if the fair value based
method had been adopted.

INFLATION

The Company believes that inflation has not had a material effect on the
Company's revenues during the past three years.

35
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
December 31,
-----------------
1995 1994
-------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents, including restricted
cash of $625 at December 31, 1995 and $107
at December 31, 1994 (Note 19) $ 74,443 $ 8,160

Restricted short-term investments (Notes 7 and 19) 4,218 668

Trade accounts receivable, less allowance for doubtful
accounts of $322 at December 31, 1995 and $81
at December 31, 1994 (Notes 4 and 11) 15,457 5,748

Other receivables (Note 4) 4,438 3,134

Prepaid expenses and other current assets (Notes 8 and 18) 11,668 8,222

Assets held for sale (Notes 9 and 12) 700 2,500
-------- -------

Total current assets 110,924 28,432
-------- -------

ASSETS HELD FOR SALE (Notes 9 and 12) 2,383 11,645

EQUIPMENT AND PROPERTY (Notes 5, 9 and 12)
Flight and other equipment 60,794 27,698
Equipment under capital leases 11,734 12,006
-------- -------
72,528 39,704
Less accumulated depreciation and amortization 17,878 12,657
-------- -------

Net equipment and property 54,650 27,047
-------- -------

LONG-TERM OPERATING DEPOSITS (Note 12) 16,157 13,562

OTHER ASSETS AND DEFERRED CHARGES, NET (Notes 3, 4 and 8) 15,384 10,689

INTANGIBLE ASSETS, NET (Note 10) 2,591 7,161
-------- -------

TOTAL ASSETS $202,089 $98,536
======== =======
</TABLE>

(Continued)

36
<PAGE>

WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
(IN THOUSANDS EXCEPT SHARE DATA)
(CONTINUED)

<TABLE>
<CAPTION>
December 31,
---------------------
1995 1994
--------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable (Note 11) $ 6,764 $ 15,662
Current maturities of long-term obligations (Note 12) 10,822 9,664
Deferred aircraft rent (Note 12) 533 907
Accounts payable 17,363 13,311
Unearned revenue 10,421 5,615
Air traffic liability 2,332 --
Accrued maintenance in excess of reserves paid 8,919 6,395
Accrued salaries and wages (Note 18) 10,804 7,652
Accrued interest 2,061 2,297
Accrued taxes 1,283 1,855
-------- ---------
Total current liabilities 71,302 63,358
-------- ---------

LONG-TERM OBLIGATIONS, NET (Note 12)
Subordinated convertible debt 65,000 65,000
Subordinated notes, net 24,961 24,942
Deferred aircraft rent, net of current portion 1,143 1,522
Equipment financing and other long-term obligations 20,241 17,904
-------- ---------
Total long-term obligations, net 111,345 109,368
-------- ---------

OTHER LIABILITIES
Deferred gain from sale leaseback transactions, net of
accumulated amortization of $18,041 as of December 31,
1995 and $16,978 as of December 31, 1994 7,310 8,373
Accrued postretirement benefits (Note 15) 2,596 2,384
Accrued maintenance in excess of reserves paid 3,579 2,866
Other 2,035 380
-------- ---------
Total other liabilities 15,520 14,003
-------- ---------

TOTAL LIABILITIES 198,167 186,729
-------- ---------

MINORITY INTEREST (Notes 2, 3 and 4) 27,219 --

COMMON STOCKHOLDERS' DEFICIT (Notes 3, 12, 13, 14, 15, and 18)
Common stock, $1 par value, (60,000,000 shares authorized,
16,416,134 shares issued and 16,353,549 shares outstanding
at December 31, 1995 and 15,491,699 shares issued and
15,429,114 shares outstanding at December 31, 1994) 16,354 15,492
Additional paid-in capital 42,210 37,563
Deferred compensation (553) (1,102)
Accumulated deficit (79,598) (139,806)
ESOP guaranteed bank loan (Notes 12 and 15) (1,370) --
Treasury stock, at cost (340) (340)
-------- ---------

TOTAL COMMON STOCKHOLDERS' DEFICIT (23,297) (88,193)
-------- ---------

COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, 12,
15, 17, 18 and 19)

TOTAL LIABILITIES AND COMMON STOCKHOLDERS'
DEFICIT $202,089 $ 98,536
======== =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements

37
<PAGE>

WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES (Note 17)
Air transportation - World Airways $259,482 $180,715 $178,736
Transaction processing - US Order 4,186 1,432 905
Other -- -- 291
-------- -------- --------
Total operating revenues 263,668 182,147 179,932
-------- -------- --------

OPERATING EXPENSES
Air transportation - World Airways:
Flight 72,812 57,792 55,336
Maintenance (Notes 12 and 19) 43,272 26,212 28,668
Aircraft costs (Note 12) 71,238 53,860 52,056
Fuel 19,678 16,915 25,660
Flight operations subcontracted to other carriers 9,096 5,549 1,312
Promotions, sales and commissions 5,281 1,060 1,237
Depreciation and amortization 6,056 4,006 5,573
General and administrative 21,707 20,522 16,223
-------- -------- --------
Total operating expenses - air transportation 249,140 185,916 186,065
-------- -------- --------

Transaction Processing - US Order (Note 14):
Cost of revenue 2,470 1,013 908
Research and development 1,067 1,769 964
General and administrative 5,893 7,800 8,550
Advertising and promotion 27 847 1,569
-------- -------- --------
Total operating expenses - transaction processing 9,457 11,429 11,991
-------- -------- --------

Holding Company - WorldCorp:
General and administrative 4,334 3,614 4,288
Loss on sale of Key Airlines (Note 5) -- -- 833
-------- -------- --------

Total operating expenses 262,931 200,959 203,177
-------- -------- --------

OPERATING INCOME (LOSS) 737 (18,812) (23,245)
-------- -------- --------

OTHER INCOME (EXPENSE)
Interest expense (Notes 11 and 12) (12,586) (12,154) (11,179)
Interest income 2,909 863 730
Gain on sales of equity by subsidiaries (Notes 2 and 3) 43,676 10,524 --
Gain on sales of subsidiaries' stock (Notes 2 and 3) 23,717 16,398 --
Gain on sale of US Order banking operations (Note 3) -- 14,547 --
Other, net 1,676 (870) (4)
-------- -------- --------
Total other income (expense) 59,392 29,308 (10,453)
-------- -------- --------

EARNINGS (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST 60,129 10,496 (33,698)

INCOME TAX EXPENSE (Note 16) (355) (159) (116)

MINORITY INTEREST (Notes 2, 3 and 4) 434 (2,029) 2,869
-------- -------- --------

NET EARNINGS (LOSS) $ 60,208 $ 8,308 $(30,945)
======== ======== ========
(Continued)
</TABLE>

38
<PAGE>

WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)

<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
NET EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARE

Primary $3.52 $0.54 $(2.12)
===== ===== ======

Fully diluted $2.82 $0.53 $ *
===== ===== ======

<CAPTION>
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
<S> <C> <C> <C>
Primary 17,103,669 15,516,063 14,590,265
========== ========== ==========

Fully diluted 22,994,866 15,793,046 14,590,265
========== ========== ==========
</TABLE>

* Fully diluted earnings per share are anti-dilutive.

See accompanying Notes to Consolidated Financial Statements

39
<PAGE>

WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN COMMON STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
Employee
Stock Owner- Total
Additional ship Plan Treasury Common
Common Paid-in Deferred Accumulated Guaranteed Stock, Stockholders'
Stock Capital Compensation Deficit Bank Loan at cost Deficit
------- ----------- ------------- ------------ ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1992 $14,261 $29,160 $ -- $(117,169) $(2,274) $(340) $ (76,362)

Exercise of 954,875 options
and warrants 963 3,921 -- -- -- -- 4,884
Employee Stock Ownership Plan
guaranteed bank loan -- -- -- -- 360 -- 360
Sale of equity by US Order (Note 3) -- 847 -- -- -- -- 847
Other -- 143 -- -- -- -- 143
Net loss -- -- -- (30,945) -- -- (30,945)
------- ------- ------------ ----------- ---------- -------- ---------

BALANCE AT
DECEMBER 31, 1993 $15,224 $34,071 $ -- $(148,114) $(1,914) $(340) $(101,073)
======= ======= ============ =========== ========== ======== =========

Exercise of 266,723 options
and warrants 268 1,160 -- -- -- -- 1,428
Employee Stock Ownership Plan
guaranteed bank loan -- -- -- -- 1,914 -- 1,914
Grant of stock options -- 2,217 (2,217) -- -- -- --
Amortization of deferred compensation -- -- 1,115 -- -- -- 1,115
Other -- 115 -- -- -- -- 115
Net earnings -- -- -- 8,308 -- -- 8,308
------- ------- ------------ ----------- ---------- -------- ---------

BALANCE AT
DECEMBER 31, 1994 $15,492 $37,563 $(1,102) $(139,806) $ -- $(340) $ (88,193)

Exercise of 559,568 options
and warrants (Notes 13 and 14) 560 2,503 -- -- -- -- 3,063
Employee Stock Ownership Plan
guaranteed bank loan -- -- -- -- (1,370) -- (1,370)
Grant of stock options -- 615 (615) -- -- -- --
Amortization of deferred
compensation -- (260) 1,164 -- -- -- 904
Issuance of stock (Note 3) 302 1,789 -- -- -- -- 2,091
Net earnings -- -- -- 60,208 -- -- 60,208
------- ------- ------------ ----------- ---------- -------- ---------

BALANCE AT
DECEMBER 31, 1995 $16,354 $42,210 $ (553) $ (79,598) $(1,370) $(340) $ (23,297)
======= ======= ============ =========== ========== ======== =========
</TABLE>

See accompanying Notes to Consolidated Financial Statements

40
<PAGE>

WORLDCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR (Note 6) $ 8,160 $ 16,916 $ 13,759
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) 60,208 8,308 (30,945)
Adjustments to reconcile net earnings (loss) to cash
provided (used) by operating activities:
Depreciation and amortization 8,043 5,212 6,275
Deferred gain recognition (1,063) (1,949) (4,587)
Deferred aircraft rent payments, net 153 576 8,145
Gain on sales of equity by subsidiaries (43,676) (10,524) --
Gain on sales of subsidiaries' stock (23,717) (16,398) --
Gain on sale of US Order banking operations -- (14,547)
Minority interest in earnings (loss) of subsidiaries (434) 2,029 (2,869)
(Gain) loss on sale of equipment and property (462) 669 (154)
Writedown of assets held for sale -- -- 1,778
Deferred compensation expense 904 1,115 --
Reversal of excess maintenance reserves -- (4,200) --
Other 570 889 1,446
Changes in certain assets and liabilities net of
effects of non-cash transactions:
(Increase) decrease in accounts receivable (11,013) 5,230 2,802
(Increase) decrease in restricted short-term investments (3,550) -- 342
Increase in deposits, prepaid expenses and other assets (3,528) (10,461) (2,113)
Increase in accounts payable, accrued expenses
and other liabilities 11,500 3,842 8,345
Increase in unearned revenue 4,806 1,159 3,260
Increase in air traffic liability 2,332 -- --
-------- -------- --------
Net cash provided (used) by operating activities 1,073 (29,050) (8,275)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to equipment and property (24,286) (4,854) (23,402)
Proceeds from disposal of equipment and property 1,768 3,893 5,425
Proceeds from sale of US Order banking operations -- 14,750 --
Purchase of investments (219) (6,533) (82)
Proceeds from sales of short-term investments, net -- 6,029 3,082
-------- -------- --------
Net cash provided (used) by investing activities (22,737) 13,285 (14,977)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in line of credit borrowing arrangement, net (1,051) (4,275) 7,069
Issuance of debt 25,278 6,034 34,936
Repayment of debt (33,187) (18,065) (23,419)
Proceeds from stock transactions 4,353 1,428 4,884
Proceeds from sales of equity by subsidiaries 64,453 12,488 800
Proceeds from sales of subsidiaries' stock 28,986 12,300 2,700
Debt issuance costs -- -- (561)
Purchase of preferred stock by subsidiary -- (2,718) --
Payment of dividends by subsidiary (885) -- --
Other -- (183) --
-------- -------- --------
Net cash provided by financing activities 87,947 7,009 26,409
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 66,283 (8,756) 3,157
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF YEAR (Note 6) $ 74,443 $ 8,160 $ 16,916
======== ======== ========
</TABLE>

See accompanying Notes to Consolidated Financial Statements

41
<PAGE>

WORLDCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

WorldCorp, Inc. was organized in March 1987 to serve as the holding company
for World Airways, Inc., ("World Airways"). Currently, WorldCorp operates in two
business areas: air transportation services and transaction processing.

WorldCorp's air transportation subsidiary, World Airways, is a leading
provider of long range passenger and cargo air transportation, serving customers
in four distinct markets: (i) major international air carriers; (ii) the U.S.
Government; (iii) international tour operators in the leisure passenger market;
and (iv) small package shippers and freight forwarders. In addition, the
Company recently commenced operations in a fifth market, scheduled
passenger/cargo service (including scheduled charters to leisure passenger
markets on a seasonal basis). World Airways' business relies heavily on its
contracts with Malaysian Airline System Berhad ("Malaysian Airlines"), P.T.
Garuda Indonesia ("Garuda") and the U.S. Air Force (see Note 17).

WorldCorp's transaction processing business consists of its ownership
interest in US Order, Inc. ("US Order"), a company which provides products and
services for two markets: home banking and smart telephones. US Order's primary
success in both the home banking and smart telephone markets is dependent on the
ultimate success of its strategic partners, Visa InterActive and Colonial Data,
as well as on the ability of these partners to successfully market US Order's
products, service and interactive applications.

WorldCorp is highly leveraged, and therefore requires substantial funds to
cover debt service. As a holding Company, all of WorldCorp's funds are
generated through its subsidiaries, neither of which has paid dividends since
1992. Additionally, WorldCorp, which owns a majority position in World Airways'
and US Order's common stock, is subject to the provisions of two indentures
expiring in 1997 and 2004, respectively, under which it is obligated to cause
the companies not to pay dividends under certain circumstances. Under the
indenture terminating in 2004, WorldCorp has agreed to cause the companies not
to pay dividends if at the time WorldCorp is in default under such indenture.
Further, under the indenture terminating in 1997, WorldCorp has agreed to cause
the companies not to pay dividends unless WorldCorp has a positive adjusted net
worth (as defined therein). As of March 11, 1996, WorldCorp's adjusted net
worth was negative and under the indenture terminating in 1997 WorldCorp is
therefore obligated to cause the companies not to pay dividends.

Of the $74.4 million in cash and cash equivalents at December 31, 1995,
approximately $50.4 million is held by World Airways and US Order and,
therefore, is not available to satisfy WorldCorp's obligations. WorldCorp's
investment in the net assets of World Airways and US Order aggregates $40.8
million as of December 31, 1995.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
WorldCorp, Inc. ("WorldCorp" or the "Company"); its approximately 59.3%
ownership interest in the outstanding common stock of World Airways, Inc.
("World Airways"); its approximately 56.9% ownership interest in the outstanding
common stock in US Order, Inc. ("US Order"); and its wholly owned subsidiaries:
WorldCorp Investments, Inc., World Flight Crew Services, Inc., World Airways
Cargo, Inc. and World Games, Inc. All significant intercompany balances have
been eliminated.

FINANCIAL STATEMENT RECLASSIFICATIONS

Certain items in prior year consolidated financial statements included
herein have been reclassified to conform to the 1995 financial statement
presentation. In addition, in 1995 World Airways changed its presentation of
activity under contracts in which certain of the services to be provided under
the contract are subcontracted by World Airways to the customer. In prior years,
equal amounts of revenue and expenses related to these subcontracted services
were reflected in the consolidated financial statements. For the year ended
December 31, 1995, no revenue or expenses have been included in the consolidated
financial statements for these subcontracted services. Prior year

42
<PAGE>

consolidated financial statements have been reclassified to conform to the 1995
presentation. The revenue and expenses which have been reclassified amounted to
$22.3 million and $22.8 million for the years ended December 31, 1994, and 1993,
respectively.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH EQUIVALENTS

For purposes of the Statements of Cash Flows, the Company considers all
highly liquid investments purchased with an original maturity of ninety days or
less to be cash equivalents.

REVENUE RECOGNITION

Air transportation revenues and transaction processing service revenues are
recognized as the services are provided. Transaction processing product revenue
is recognized upon the passage of title.

EARNINGS (LOSS) PER COMMON SHARE

Primary earnings (loss) per common share is computed by dividing net
earnings (loss) by the weighted average number of common and common equivalent
shares outstanding during the period. Common equivalent shares include warrants
and options. Fully diluted earnings (loss) per common and common equivalent
shares, including convertible debt, have not been presented where the results
are anti-dilutive.

EQUIPMENT AND PROPERTY

Equipment and property are stated at cost or, if acquired under capital
leases, at the present value of the minimum lease payments. Engine overhauls
and major airframe maintenance and repairs are charged to operating expense on
an accrual basis. Modifications performed in response to Airworthiness
Directives issued by the Federal Aviation Administration are capitalized at
cost.

Provisions for depreciation and amortization of equipment and property are
computed over estimated useful lives or the term of the lease, if shorter, for
capital leases, by the straight-line method, with estimated residual values of 0
- - 15%. Estimated useful lives of equipment and property are as follows:

DC10 and MD-11 flight equipment 15-16 years
Other equipment and property 3-10 years

Deferred gains realized in connection with sale-leasebacks of aircraft and
equipment are amortized over the periods of the respective leases.

ASSETS HELD FOR SALE

Assets held for sale are recorded at the lower of cost or estimated net
realizable value. Net realizable value is based on the estimated fair value
(measured by using a current selling price for similar assets) less estimated
selling costs.

INTANGIBLE ASSETS

The excess of cost over the estimated fair value of the Company's share of
its subsidiaries' net assets at the date of acquisition is being amortized over
5 to 6 years, using the straight-line method (see Note 10).

AIR TRAFFIC LIABILITY

43
<PAGE>

The air traffic liability relates to scheduled service to Tel Aviv, Israel,
which World Airways began in July 1995. Scheduled service passenger ticket
sales are initially recorded in the air traffic liability account. When
transportation is provided by World Airways, revenue is recognized and the
liability is reduced. The liability is also reduced by any refunds to
passengers or billings from other airlines that provide the passenger
transportation.

OTHER ASSETS AND DEFERRED CHARGES

Contract enhancements and pre-operating costs are amortized on a straight
line basis over certain estimated periods (see Notes 4 and 8).

INCOME TAXES

The Company computes income taxes in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," ("FAS #109"). Under the asset and liability method of FAS
#109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under FAS #109, the effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

The results of World Airways' operations prior to February 28, 1994 are
included in the Company's consolidated income tax returns. As a result of
certain transactions with MHS Berhad during 1994 (see Note 4), the results of
World Airways' operations for the period from February 28, 1994 to December 1994
and subsequent periods will not be included in WorldCorp's consolidated income
tax returns. In addition, US Order's results of operations are not included in
the Company's consolidated income tax returns.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

World Airways' cockpit crewmembers and eligible dependents are covered
under postretirement health care benefits to age 65. The Company accounts for
the benefit costs in accordance with Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
("FAS #106"). The Company funds the benefit costs on a pay-as-you-go (cash)
basis.

TRANSACTIONS IN SUBSIDIARIES' STOCK

Gains or losses realized in connection with the sale of stock by a
subsidiary are recognized in income by the Company (see Notes 2 and 3).

44
<PAGE>

2. INVESTMENT IN WORLD AIRWAYS

On February 28, 1994, pursuant to an October 1993 agreement, the Company
sold 24.9% of its 100% ownership in World Airways to MHS Berhad ("MHS"), a
Malaysian aviation company. Effective December 31, 1994, WorldCorp repurchased
5% of World Airways' common stock from MHS (see Note 4).

On August 8, 1995, World Airways filed a registration statement on Form S-1
with the Securities and Exchange Commission to register 2,900,000 shares of
World Airways' common stock. The offering was completed on October 12, 1995 at
an offering price of $12.50 per share. Of the 2,900,000 shares registered,
2,000,000 shares were issued and sold by World Airways which resulted in an
$11.9 million net gain to the Company, and 900,000 shares were sold by the
Company, resulting in a $4.1 million net gain. Net proceeds received from the
offering by the Company and World Airways approximated $10.2 million and $22.8
million, respectively. At December 31, 1995, the Company and MHS own
approximately 59.3% and 16.6%, respectively, of the outstanding common stock of
World Airways. The remaining shares are publicly traded.

45
<PAGE>

3. INVESTMENT IN US ORDER

FORMATION

On September 10, 1990, the Board of Directors of WorldCorp unanimously
authorized WorldCorp to enter into and consummate a Stock Purchase Agreement
dated as of September 14, 1990 (the "Stock Purchase Agreement"), under which
WorldCorp agreed to purchase Series A Preferred Stock ("the Preferred Stock")
issued by US Order. The Board of Directors of the Company authorized the
purchase of US Order, which has had limited revenue to date, as part of the
Company's continuing efforts to diversify its interests. In connection with
this agreement, the Company was granted an option to purchase the common stock
held by the founding shareholders. Mr. Gorog is Chairman of the Board of US
Order and is Chairman of the Board of Directors of WorldCorp. Mr. Gorog,
together with certain members of his immediate family (the "Founders"), were
majority owners of US Order.

On July 1, 1992, the Company purchased an incremental 6% of the preferred
stock of US Order for $1.0 million which increased the Company's ownership in
US Order to 51%. Accordingly, US Order's results of operations are included in
the accompanying consolidated financial statements since this date.

In December 1992, WorldCorp agreed to convert $7.6 million in principal
amount of loans from WorldCorp to US Order into 7,550 shares of redeemable
preferred stock of US Order. The preferred stock earned quarterly dividends at
a rate of 7.5%. As part of this transaction, WorldCorp's option to purchase
additional shares of the capital stock of US Order was extended from September
15, 1993 to December 15, 1994, and WorldCorp received an exclusive license to
apply US Order's transaction processing technology to lottery and gaming
applications. In August 1994, US Order redeemed $3.3 million (or 3,250 shares)
of this redeemable preferred stock.

In December 1993, US Order completed a private equity placement for $12.0
million with financial and strategic partners. WorldCorp invested $1.7 million
in this equity offering. Following this transaction, the Company owned 46% of
the voting stock of US Order. At that time, US Order was still in the
development stage and, therefore, the gain of $0.8 million resulting from this
transaction was recorded as additional paid-in capital in the accompanying
consolidated financial statements. As of December 1993, WorldCorp had purchased
for $5.3 million a total of 5,204,082 shares of US Order preferred stock, which
were convertible into common stock.

On August 25, 1994, the Company's Board of Directors approved the exercise
of WorldCorp's option to purchase 4.8 million shares of US Order common stock
held by the Founders. Under the terms of this agreement, prior to December 31,
1994, WorldCorp paid $0.4 million in cash to the Founders in exchange for
498,794 shares of US Order common stock, increasing WorldCorp's ownership of
voting stock to 52%. Effective February 16, 1995, WorldCorp purchased the
remaining 4.3 million shares of US Order common stock with 302,282 shares of
WorldCorp common stock, $0.3 million in cash, and $1.1 million in the form of
notes due to the Founders. These notes were paid in 1995. As a result of this
option exercise, WorldCorp increased its ownership in US Order's voting stock to
approximately 89% in February 1995.

In addition, at December 31, 1995, WorldCorp has 346,429 warrants to
purchase an equivalent number of shares of US Order's common stock at $4.00 per
share until May 1996.

SALE OF BANKING OPERATIONS

On August 1, 1994, US Order sold its electronic banking and bill payment
operations to Visa International Services Association, Inc. ("Visa") (which
subsequently transferred these assets to the wholly owned subsidiary, Visa
InterActive) for $14.6 million in cash (net of closing costs of $0.2 million),
the assumption of certain of US Order's capital lease obligations and other
miscellaneous liabilities totaling $0.9 million, 100 shares of Visa
InterActive's redeemable preferred stock, and a 72 month royalty stream
commencing January 1, 1995 and ending December 31, 2000 (the "Royalty Period").
The Company recognized a gain of $14.5 million (before minority interest of $3.9
million) from this sale. Of the proceeds received by US Order, $9.4 million was
used to retire a portion of its preferred stock (of which WorldCorp received
$3.3 million) and to cancel vested employee options. The royalty amount is based
on the number of Visa InterActive customers using the electronic banking
and bill payment technology sold by US Order to Visa.

Under the terms of the agreement, Visa InterActive is not required to pay
US Order for the first $73,315 of

46
<PAGE>

royalties earned during each quarter on a cumulative basis for a total of twelve
quarters. Due to the uncertainties which exist regarding the number of Visa
InterActive's customers that will use the bill payment system during the Royalty
Period and the possible effect of technological advances, it is not possible to
predict the amount of royalties which US Order may earn pursuant to the
agreement. Any royalties received will be recognized as revenue during the
period in which the royalties are earned. US Order did not receive any Visa
royalty payments in 1995.

Under the agreement with Visa, US Order was designated as Visa's "preferred
provider" for certain of US Order's services, such that US Order provides these
services at certain predetermined prices and established standards during the
Royalty Period. Visa agreed to inform its members/banks through Visa's
customary communications that US Order is a preferred provider of Visa with
respect to US Order's services. Visa also agreed not to designate any third
party as a "preferred provider" of US Order's services until after August 1,
1995. Through July 1995, US Order paid Visa InterActive a monthly fee of $6.40
for each of US Order's bill pay customers which were not yet customers of a Visa
member bank. This fee was reduced to $4.00 per bill pay customer on August 1,
1995. As part of the Visa transaction, US Order's president was appointed to,
and its chairman and chief executive officer was named an advisor to, the board
of directors of Visa InterActive.

INITIAL PUBLIC OFFERING

In June 1995, US Order completed an initial public offering of 4,427,500
shares of its common stock at an offering price of $14.75 per share. Of the
4,427,500 shares sold, 3,062,500 were issued and sold by US Order which resulted
in a gain of approximately $27.0 million to the Company, and 1,365,000 shares
were sold by the Company resulting in a gain of approximately $19.6 million.
Net proceeds from the offering to the Company and US Order approximated $18.7
million and $41.6 million, respectively. In conjunction with the offering, the
US Order preferred stock previously held by the Company was converted to common
stock. As a result of the above transactions, WorldCorp owns 56.9% of the
outstanding common stock of US Order at December 31, 1995.

COLONIAL DATA EXCHANGE

On April 6, 1995, US Order entered into a stock exchange agreement with
Colonial Data, a strategic alliance partner. Pursuant to the terms of the
agreement, on June 8, 1995, US Order exchanged 230,000 shares of its common
stock, valued at the initial public offering price of $14.75 per share or $3.4
million, for 170,743 shares of Colonial Data's unregistered common stock (valued
based on the average closing price of Colonial Data's stock for the twenty
trading days preceding the date of the exchange) which was equivalent to the
value of US Order stock exchanged. The Company recognized a gain of $2.0
million on the exchange of this stock. The fair value of this investment at
December 31, 1995 was approximately $3.5 million, based on the quoted market
price of the stock, and was held for purposes other than trading (see Note 8).

As part of the agreement, US Order also agreed to exchange $3.0 million of
its restricted common stock on April 15, 1996 for $3.0 million of Colonial
Data's unregistered common stock, subject to certain limitations. Each
company's stock will be valued at the average closing price of their respective
common stock as reported on the NASDAQ National Market for each of the 20
trading days prior to April 10, 1996. Both companies will have certain
"piggyback" registration rights and rights of first refusal with respect to each
other's stock. As of December 31, 1995, none of US Order's or Colonial Data's
common shares issued in the stock exchange agreement of April 6, 1995 were
registered. Since the sale of the Colonial Data stock held by US Order is
currently restricted, this investment is carried at cost.

INVESTMENT IN HOMENET

On October 18, 1995, US Order acquired a 40% equity interest in HomeNet, a
newly formed, development stage personal computer software company that plans to
develop and deliver electronic financial products and services to consumers,
through the issuance of 296,746 shares of its common stock valued at $5.0
million, in exchange for 40% of HomeNet. The Company recognized a $2.5 million
gain as a result of this stock issuance. The purchase price exceeded US Order's
proportionate share of the equity in net assets of HomeNet at October 18, 1995
by approximately $3.1 million which is considered to be goodwill and is being
amortized over a period of 5 years on a straight-line basis. The shareholders'
agreement among US Order, HomeNet and HomeNet's founding shareholders contains
provisions whereby, under certain conditions, beginning three years from the
closing, US Order could elect to acquire, or be required to acquire at the then-
determined fair market value, the founding shareholders' HomeNet equity for US
Order's common stock or cash. US Order uses the equity method of accounting for
its investment

47
<PAGE>

in HomeNet, which had a carrying value of $4.8 million at December 31, 1995 (see
Note 8).

48
<PAGE>

4. TRANSACTIONS WITH MHS AND MALAYSIAN AIRLINES

On October 30, 1993, WorldCorp, Inc., World Airways, Inc., and MHS Berhad
("MHS") entered into a Stock Purchase Agreement (the "Stock Purchase Agreement")
pursuant to which MHS, subject to satisfactory completion of its due diligence
investigations, agreed to purchase 24.9% of World Airways' common stock for
$27.4 million in cash. Under this Agreement, World Airways would receive upon
closing $12.4 million to fund its working capital requirements. The remaining
$15.0 million would be paid to WorldCorp to add to its cash reserves. WorldCorp
received $2.7 million prior to December 31, 1993 as an advance on the sales
price. At the time of the signing of the Stock Purchase Agreement, World
Airways was a wholly-owned subsidiary of WorldCorp. On February 28, 1994,
WorldCorp, World Airways, and MHS concluded the transaction according to the
terms described above. Under the agreement, if at any time after October 30,
1996 World Airways registers its common stock under the Securities Act of 1933,
MHS has the right to demand the registration of its shares of World Airways'
common stock. Under a shareholders agreement, MHS agreed not to transfer, sell,
or pledge any of its shares of common stock prior to February 28, 1997 without
the prior written consent of WorldCorp. MHS has the right to nominate two
members to World Airways' board of directors and WorldCorp has agreed to vote
its shares of common stock to elect such nominees. Also, if without the prior
written consent of MHS: (1) World Airways sells all or substantially all of its
business; or (2) World Airways fundamentally changes its line of business, then
MHS has the option (a) to sell or transfer all or a portion of its shares to a
third party prior to February 28, 1997, and/or (b) to require WorldCorp to
purchase all or part of MHS's shares at fair market value. Fair market value is
defined to be not less than the aggregate of the costs borne by MHS in acquiring
and holding its World Airways shares. Management has indicated that it does not
have any current intent to take any such actions without the prior consent of
MHS or the directors nominated by MHS. The shareholders agreement also provides
that if WorldCorp's ownership interest in World Airways falls below 51% of the
outstanding shares of common stock, then MHS may either sell its shares to a
third party or require WorldCorp to sell a pro rata number of shares held by MHS
to the party purchasing WorldCorp's shares. MHS also has a right of first
refusal to purchase shares of common stock issued by World Airways or sold by
WorldCorp and to purchase additional shares of common stock to maintain its
ownership percentage in World Airways.

During 1994, MHS acquired 32% of Malaysian Airline System Berhad
("Malaysian Airlines"), the flag carrier of Malaysia. World Airways has provided
service to Malaysian Airlines for many years, providing aircraft for integration
into Malaysian Airlines' scheduled passenger and cargo operations as well as
transporting passengers for the annual Hadj pilgrimage. The current Malaysian
Airlines Hadj contract, which was entered into in 1992, expires in 1996. World
Airways is currently in negotiations with Malaysian Airlines regarding future
Hadj operations. In 1995 and 1994, World Airways provided three and two
aircraft, respectively, for Hadj operations and will provide three aircraft for
the 1996 Hadj operations. Malaysian Airlines is World Airways' largest customer
(see Note 17).

Effective December 31, 1994, WorldCorp entered into a 6% note payable to
MHS in the amount of $8.5 million, due December 31, 1995, in exchange for 5% of
World Airways' common stock held by MHS and the execution of a series of multi-
year contracts between World Airways and Malaysian Airlines. The shares were
pledged as security for the note payable. The note was repaid in accordance with
the agreement. As a result of this transaction, effective December 31, 1994, MHS
owned 19.9% of World Airways' common stock. As a result of World Airways'
initial public offering (see Note 2), MHS owns approximately 16.6% of World
Airways' common stock as of December 31, 1995.

Under the terms of its new multi-year contracts with Malaysian Airlines,
World Airways operates three freighter aircraft for a combined guaranteed
minimum of 1,200 block hours per month (except when an aircraft is in scheduled
maintenance). One freighter began service in June 1994 and will operate through
September 1999; two additional freighters began service in June and July 1995,
respectively, and will operate through September 2000. Also under the new
contracts, Malaysian Airlines extended through March 1997 the operation of two
MD-11 passenger aircraft that had been previously contracted by Malaysian
Airlines to operate from October 1994 through March 1995. Each of these
passenger aircraft operates a minimum of 320 block hours per month. Certain
operating costs incurred by World Airways pursuant to these contracts are
reimbursed by Malaysian Airlines. As of December 31, 1995 and 1994, the Company
has $3.0 million and $0.6 million, respectively, included in trade accounts
receivable in the accompanying consolidated balance sheets relating to these
costs.

Of the $8.5 million consideration paid by WorldCorp to MHS, $3.0 million is
attributable to the contract

49
<PAGE>

enhancements discussed above. This amount is included in other assets and
deferred charges in the accompanying consolidated balance sheets, and is being
amortized over the terms of the Malaysian Airlines contracts, approximately two
to five years. As of December 31, 1995, the unamortized balance of the deferred
contract cost is $2.3 million, net of $0.7 million of accumulated amortization
(see Note 8).

World Airways and Malaysian Airlines entered into an agreement in March
1995 pursuant to which Malaysian Airlines provides routine maintenance checks,
structural inspections and other necessary work for World Airways' aircraft in
Kuala Lumpur. World Airways paid Malaysian Airlines approximately $0.4 million
during 1995 related to these services.

During 1995, World Airways entered into agreements with Malaysian Airlines
to lease two DC10-30 aircraft. The aircraft were delivered in June and December
1995 and have lease terms of 26 and 36 months, respectively. Rent expense and
maintenance reserve payments related to these aircraft amounted to $1.6 million
in 1995. World Airways incurred approximately $1.4 million during 1995 related
to improvements made to these two aircraft, which will be reimbursed by
Malaysian Airlines. Approximately $0.7 million of this amount is included in
trade and other receivables in the accompanying consolidated balance sheet at
December 31, 1995.

In March 1996, World Airways leased two additional DC10-30 aircraft from
Malaysian Airlines. These aircraft have lease terms of 36 months with monthly
rent expense and other lease terms similar to the aircraft leased during 1995.
World Airways may choose to enter into additional aircraft leases with Malaysian
Airlines to meet short-term peak demand requirements.

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<PAGE>

5. SALE OF KEY AIRLINES

In October 1992, WorldCorp disposed of its wholly-owned subsidiary, KeyAir.
WorldCorp sold all of the outstanding common shares of KeyAir for $6.5 million
to Savannah Aviation Group, and an estimated loss on sale was recorded at that
time. On February 8, 1993, KeyAir filed a voluntary petition for bankruptcy
protection under Chapter 11 and certain disputes arose between the Company and
the purchasers of KeyAir. The Company recorded an additional loss of
approximately $0.8 million in 1993 related to amounts outstanding under a line
of credit and certain letters of credit related to KeyAir which will not be
recovered by the Company.

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<PAGE>

6. SUPPLEMENTAL INFORMATION -- STATEMENTS OF CASH FLOWS

Additional information pertaining to certain cash payments and noncash
investing and financing activities is as follows (in thousands):

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Cash paid for:
Interest $12,130 $11,550 $10,274
Income taxes 711 140 91
</TABLE>

During 1995, WorldCorp exercised its remaining options to purchase 4.3
million shares of US Order common stock held by its founders which included an
exchange of stock (see Note 3).

In 1995, US Order entered into stock exchange agreements with Colonial Data
and HomeNet (see Note 3).

In December 1994, WorldCorp agreed to pay MHS $8.5 million in exchange for
the 5% of World Airways' common stock held by MHS and the execution of a series
of long-term contracts with Malaysian Airlines (see Note 4).

World Airways paid approximately $1.8 million and exchanged a DC10 engine
valued at approximately $1.0 million in connection with the settlement of
maintenance reserves due on the return of three DC10 aircraft in 1994.

During 1994 and 1993, US Order entered into capital leases and other long-
term obligations of $0.2 million and $1.7 million, respectively, in connection
with the purchase of transaction processing equipment. Additionally, during
1994, $0.8 million of capital leases and other obligations were assumed by VISA
(see Note 3).

During 1994, US Order redeemed preferred stock through the issuance of a
note payable of $0.9 million.

During 1993, US Order completed a $12.0 million private equity placement in
which WorldCorp invested $1.7 million (see Note 3). Included in the remaining
$10.3 million investment was $2.5 million received in the form of an advertising
credit and $4.3 million received in the form of forgiveness of various
liabilities of US Order.

During 1993, World Airways sold $9.5 million of MD-11 aircraft spare parts
and leased the parts back under a 79 month capital lease. The following is a
summary of the transaction (in thousands):

<TABLE>
<S> <C>
Sales price of parts $ 9,463
Debt retired (7,570)
Security deposit (1,893)
-------
Net cash proceeds $ 0
=======
</TABLE>

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<PAGE>

7. SHORT-TERM INVESTMENTS

At December 31, 1995 and 1994, short-term investments consist of cash
pledged as collateral for letters of credit with original maturities in excess
of ninety days, and expiration dates within one year.

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<PAGE>

8. OTHER ASSETS AND DEFERRED CHARGES

Other assets and deferred charges consist of the following (in thousands):

<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
----------- ------------
<S> <C> <C>
Long-term investment, at cost (Note 3) $ 3,392 $ --
Investment in HomeNet (Note 3) 4,835 --
Debt issuance costs, net 2,036 2,326
Long-term notes receivable (Notes 15 and 18) 868 2,436
Deferred contract cost (Note 4) 2,285 3,000
Aircraft integration costs, net 1,968 2,927
------- -------
$ 15,384 $ 10,689
======= =======
</TABLE>

Debt issuance costs consist of the costs of issuing the 13 7/8%
Subordinated Notes due 1997, the Convertible Subordinated Debentures due 2004,
and revolving lines of credit agreements. These costs are being amortized over
the term of the respective debt instruments using the effective interest method
(see Notes 11 and 12).

Aircraft integration costs consist of pre-operating costs incurred in
connection with integrating the new MD-11 aircraft into World Airways' fleet
(see Note 12). These costs, consisting primarily of flight crew training, are
being amortized on a straight-line basis over a five-year period.

Prepaid expenses and other current assets at December 31, 1995 includes
prepaid insurance of approximately $5.9 million, prepaid rent of approximately
$1.5 million and a deposit on a spare engine of approximately $1.2 million.
Included in the December 31, 1994 balance is approximately $4.8 million of
prepaid insurance.

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<PAGE>

9. ASSETS HELD FOR SALE

Assets held for sale consist primarily of DC10 and B727 rotables with a net
book value of $3.0 million and $11.0 million as of December 31, 1995 and 1994,
respectively, as well as two DC10 engines with a net book value of $2.8 million
as of December 31, 1994. The Company has consigned these parts with a third
party to sell these parts over a reasonable period of time with the objective of
maximizing the proceeds from the sales. Due to the increased number of DC10
aircraft leased by World Airways during 1995, DC10 rotables and the two DC10
engines with a total net book value of $9.9 million were reclassified from
assets held for sale to flight and other equipment in the accompanying
consolidated balance sheet at December 31, 1995. This amount represents World
Airways' estimate of the additional spare parts needed to support its fleet of
DC10-30 aircraft. During 1993, US Order recorded a $1.8 million write-down
associated with its older generation of terminal components, a small amount of
which remain available for sale.

55
<PAGE>

10. INTANGIBLE ASSETS

As a result of various transactions in the capital stock of US Order during
1994 and 1995(see Note 3), the Company recorded approximately $1.7 million and
$3.5 million, respectively, of goodwill, which is being amortized over
approximately six years using the straight-line method. As a result of the sale
of a portion of its stock of US Order pursuant to US Order's initial public
offering, approximately $1.9 million of this goodwill was eliminated and offset
against the gain on sale of stock (see Note 3).

Effective December 31, 1994, the Company agreed to purchase 500,000 shares
of MHS's 2,490,000 shares of World Airways common stock for $8.5 million,
resulting in goodwill of $5.5 million (see Note 4). As a result of the sale of a
portion of its stock of World Airways pursuant to the World Airways' initial
public offering, approximately $5.3 million of this goodwill was eliminated and
offset against the gain on sale of stock (see Note 2).

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<PAGE>

11. NOTES PAYABLE

In 1993, World Airways entered into an $8.0 million revolving line of
credit borrowing arrangement which is collateralized by certain receivables
which were sold to the bank with recourse. Borrowing availability under the line
is based on the amount of eligible receivables. At December 31, 1995, World
Airways had an unused borrowing capacity of $0.3 million. At December 31, 1994,
World Airways had no unused borrowing capacity available. Borrowings under the
line of credit were $1.7 million and $2.8 million at December 31, 1995 and 1994,
respectively, and bear interest at the greater of the federal funds rate plus
2.5% or the prime rate plus 2%. The interest rate was 10.5% at December 31, 1995
and 1994. World Airways is required to pay any outstanding amounts under the
line of credit on January 7, 1998. This agreement contains certain covenants
related to World Airways' financial condition and operating results, including
minimum quarterly net income tests. In March 1995, World Airways amended this
agreement to adjust certain covenants beginning in the first quarter of 1995. No
assurances can be given that the Company will continue to meet these covenants
or, if necessary, obtain the required waivers. The agreement also requires an
unused facility fee of 0.5% per year.

A $5.0 million note bearing interest at 3.8% and a $4.4 million note
bearing interest at 4.4% are included in notes payable at December 31, 1995 and
1994, respectively. Principal and interest is payable monthly in 1996 and 1995,
respectively.

Also included in notes payable as of December 31, 1994 is a 6.0% note
payable to MHS in the amount of $8.5 million with principal and interest due
December 31, 1995 (see note 4). This note was repaid during 1995.

In the first quarter of 1995, World Airways received approximately $6.0
million in working capital and short-term financing from certain of its
equipment lessors, bearing interest at approximately 11%. The balance was
repaid during 1995.

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<PAGE>

12. LONG-TERM OBLIGATIONS

LONG-TERM DEBT

The Company's long-term obligations at December 31 are as follows (in
thousands):

<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Note payable due 1995 -- with interest at one month LIBOR plus
1.95% payable monthly (7.95% at December 31, 1994),
collateralized by one General Electric CF6-50C2 engine. $ -- $ 300

Spare parts loan due 1998 -- with principal and interest at 8.5%
payable monthly, collateralized by certain MD-11 spare parts. 3,617 4,004

Spare parts loan due 1997 -- with principal paid semi-annually
beginning in 1995 and interest at 8.5% payable semi-annually,
collateralized by certain MD-11 spare parts. 2,857 5,000

Aircraft parts security agreement payable to a bank due 1998 -- with
interest at the greater of the federal funds rate plus 2.5% or the
prime rate plus 2% (10.5% at December 31, 1995 and December
31, 1994), collateralized by certain rotables. 8,568 6,371

Note payable due 1999 -- with interest at 7.25% payable monthly,
collateralized by one Pratt & Whitney PW4462 engine. 4,883 --

Guaranteed bank loan due 1996 -- with interest at the call loan rate
plus 1.5% (8.45% at December 31, 1995), collateralized by 286,681
shares of WorldCorp common stock held by the WorldCorp Employee
Savings and Stock Ownership Plan (see Note 15). 1,370 --

Unsecured promissory note due 1997 -- with interest at 6% payable
quarterly beginning May 8, 1994. 900 900

Unsecured promissory note -- with interest at 7.5% payable at maturity. -- 1,133

13 7/8% Subordinated Notes due August 15, 1997 -- interest payable
semi-annually beginning February 15, 1988 (net of unamortized
discount of $0.1 million in 1995 and 1994). 24,961 24,942

Convertible Subordinated Debentures due 2004 -- with interest at 7%
payable semi-annually beginning May 15, 1992. The Debentures
are convertible into WorldCorp common stock at $11.06 per share
subject to adjustment in certain events. 65,000 65,000

Deferred aircraft rent, non-current 1,142 1,522

Capitalized lease obligations 8,869 9,860
------- -------

Total 122,167 119,032

Less: current maturities 10,822 9,664
------- -------

Total long-term obligations, net $111,345 $109,368
======= =======
</TABLE>

58
<PAGE>

The Indenture pursuant to which the 13 7/8% Subordinated Notes (the
"Indenture") were issued may restrict the Company's ability to pay dividends on
its common stock. Under the Indenture, the Notes are redeemable beginning
August 15, 1992, at which time they are redeemable at 104% of par value and at
rates declining thereafter.

In May 1992, the Company issued $65.0 million of Convertible Subordinated
Debentures due 2004 (the "Debentures"). The Debentures are convertible into
WorldCorp common stock at $11.06 per share, subject to adjustment in certain
events, and bear an annual interest rate of 7%. Semi-annual interest payments
are due on May 15 and November 15. During the second and third quarters of
1992, the Company used $47.1 million of the proceeds from this borrowing to
retire a portion of its 13 7/8% Subordinated Notes due 1997 (the "Notes").

WorldCorp has never paid any cash dividends and does not plan to do so in
the foreseeable future. Both the 13 7/8% Subordinated Notes Indenture and the
indenture pursuant to which the Debentures were issued (the "Indentures")
restrict the Company's ability to pay dividends or make other distributions on
its common stock. Under the indenture terminating in 2004, WorldCorp has
agreed to cause the companies not to pay dividends if at the time WorldCorp is
in default under such indenture. Further, under the indenture terminating in
1997, WorldCorp has agreed to cause the companies not to pay dividends unless
WorldCorp has a positive adjusted net worth (as defined therein). As of March
11, 1996, WorldCorp's adjusted net worth was negative and under the indenture
terminating in 1997 WorldCorp is therefore obligated to cause the companies not
to pay dividends. In addition, the Indentures originally restricted the ability
of World Airways to pay dividends other than to the Company. In 1994, however,
the Company received approval from the holders of the Indentures to allow World
Airways to pay dividends to parties other than the Company (see Note 1).

The carrying values of the amounts outstanding under the above Debentures
and Indenture currently approximate fair value.

The aircraft security agreement is subject to the terms of the $8.0 million
revolving line of credit borrowing (see Note 11). Under this agreement the
borrowing must be reduced by the amount of proceeds received from the sale of
excess spare parts, but at a minimum of $0.5 million each month. The borrowing
facility also restricts World Airways' ability to pay dividends. Under this
agreement, World Airways cannot declare, pay, or make any dividend or
distributions in any six month period which aggregate in excess of the lesser of
$4.5 million or 50% of net income for the previous six months. In addition,
World Airways must have a cash balance of at least $7.5 million immediately
after giving effect to such dividend. Under the terms of the agreement, World
Airways is also not permitted to incur indebtedness in excess of $25.0 million
(excluding capital leases) or make capital expenditures in 1995 of more than
$25.0 million or in any subsequent year of more than $15.0 million. In 1995,
World Airways amended this agreement to adjust certain covenants beginning in
the first quarter of 1995, extend the credit facility to 1998, and to defer
payments of principal due in February and March 1995 until the second quarter of
1995. On August 24, 1995, World Airways again amended the agreement to provide
for a variable rate, $10.5 million borrowing, which is payable over a 21-month
term. World Airways used a portion of the proceeds from this loan to pay off
the previously outstanding balance of the aircraft parts loan. No assurances
can be given that World Airways will continue to meet these revised covenants
or, if required, obtain the required waivers.

In January 1995, the ESSOP refinanced its debt to the Company through a
margin loan (the "Refinanced ESSOP Loan") in the amount of $1.5 million.
Principal payments of $90,000 are due quarterly and a final principal payment of
$1,050,000 is due May 1996. Interest is payable quarterly at the call loan rate
plus 1.5%. The Refinanced ESSOP Loan is collateralized by 286,681 of
unallocated shares of common stock owned by the ESSOP at December 31, 1995 (see
Note 15).

World Airways has a commitment to purchase a spare engine in the first
quarter of 1996. World Airways has made deposits of $1.6 million as of March
1996 towards this engine and intends to finance the remaining balance of
approximately $6.4 million through the manufacturer over a seven year period at
a fixed interest rate.

In January 1996, World Airways entered into an agreement with an engine
manufacturer to purchase another spare engine and a quick engine change (QEC)
kit for approximately $8.5 million to be delivered by July 1996. As part of the
agreement, World Airways plans to finance 85% of the purchase price through the
manufacturer over a seven year period at a fixed interest rate.

The following table shows the aggregate amount of scheduled principal
maturities (in thousands) of debt outstanding at December 31, 1995:

59
<PAGE>

<TABLE>
<S> <C>
1998 3,408
1999 3,300
2000 --
Thereafter 65,000
--------
Total $112,194
========
</TABLE>

DEFERRED AIRCRAFT RENT

During 1993, World Airways negotiated with several of its lessors to defer
approximately $14.7 million of lease payments on eight aircraft. Of this
amount, World Airways repaid approximately $13.7 million in 1995, 1994, and
1993. In addition, during 1995 and 1994, World Airways deferred approximately
$0.7 million of rent, pursuant to the 1993 agreement. The remaining deferrals
at December 31, 1995 bear interest at rates ranging from 7% to 11.7% and are due
as follows (in thousands):

<TABLE>
<S> <C>
1996 $ 533
1997 227
1998 244
1999 261
2000 280
Thereafter 130
------
Total $1,675
======
</TABLE>

CAPITAL LEASES

The present values of the obligations under capital leases at December 31,
1995 are calculated using rates ranging from 6.1% to 11.7%. The following are
scheduled minimum capital lease payments (in thousands) due in the succeeding
five years and thereafter, together with the present value of such obligations:

<TABLE>
<S> <C>
1996 $ 2,001
1997 1,721
1998 3,376
1999 1,317
2000 2,941
Thereafter --
-------
Total minimum lease payments 11,356
Less imputed interest 2,487
-------
Present value of obligations under capital leases $ 8,869
=======
</TABLE>

Property under capital leases consists of equipment leases and are
amortized on a straight-line basis over the lease terms or expected useful lives
of the assets. Accumulated amortization under capital leases was $3.7 million
and $3.0 million at December 31, 1995 and 1994, respectively. Amortization
expense of property under capital leases totaled $0.7 million, $1.0 million, and
$0.7 million for the years ended December 31, 1995, 1994, and 1993,
respectively.

OPERATING LEASES

In October 1992 and January 1993, World Airways signed a series of
agreements with International Lease Finance Corporation ("ILFC"), McDonnell
Douglas Corporation, GATX Capital Corporation, and United Technologies
Corporation's Pratt & Whitney Group ("Pratt and Whitney") to lease seven new
McDonnell Douglas MD-11 aircraft under initial lease terms of two to five years.
Six of the seven aircraft leases contain annual renewal options in years six
through fifteen of the lease term. Under the terms of the lease agreements,
World Airways may be required to pay additional rent in excess of the fixed
monthly amounts depending on block hours flown.

In February 1992, World Airways signed 12 year operating leases for two
McDonnell Douglas DC10-30 passenger aircraft. In July 1993, World Airways
returned these aircraft to their lessor which resulted in a $1.5 million early
termination payment of which $1.1 million was expensed in 1993 and included in
aircraft costs. Certain matters related to the termination of these leases were
resolved in 1995 and resulted in a gain to the Company of approximately $0.8
million. This gain is included in other income in 1995 (see Note 19).

60
<PAGE>

In October 1993, World Airways returned an aircraft to its lessor and
recorded an expense of $1.2 million related to the early termination of the
lease which is also included in aircraft costs.

In 1994, the Company recorded a $4.2 million reversal of excess accrued
maintenance reserves associated with the expiration of three additional DC10-30
aircraft leases in 1994. The reversal is recorded as a reduction to maintenance
expense.

As of December 31, 1995, the World Airways' fleet consisted of four
passenger MD-11 aircraft, one freighter MD-11 aircraft, two convertible MD-11
aircraft, three passenger DC10-30 aircraft, and one DC10-30 convertible
aircraft. The MD-11 leases contain options to purchase the aircraft at various
times throughout the lease terms. Long-term deposits consist primarily of
deposits on the MD-11 leases. As part of the lease agreements, World Airways was
assigned purchase options for four additional MD-11 aircraft. In 1992, World
Airways made non-refundable deposits to McDonnell Douglas toward the option
aircraft. These options expired in 1995. In March 1996, World Airways entered
into an agreement with McDonnell Douglas to lease two MD-11ER aircraft. Under
this agreement, World Airways will lease each aircraft for a term of 24 years
with an option to return the aircraft after a seven year period, subject to
fixed termination fees of $2.8 million per aircraft. The non-refundable deposits
of $1.2 million previously paid to McDonnell Douglas towards options on four MD-
11 aircraft will be applied to the deposits required on the MD-11ER aircraft.
World Airways entered into a simultaneous agreement with McDonnell Douglas to
finance MD-11 spare parts. World Airways will receive a total of $9.0 million of
which $3.0 million will be advanced with the delivery of each aircraft and an
additional $3.0 million will be available in December 1996. McDonnell Douglas
will retain a purchase money lien in the purchased parts. In connection with
this lease agreement, World Airways agreed to assume an existing lease of two
additional MD-11 freighter aircraft for 20 years, beginning in 1999, in the
event the existing lessee terminates its lease with McDonnell Douglas at that
time.

World Airways ultimately plans to exit DC10 aircraft and standardize its
fleet around the MD-11 aircraft. However, to the extent World Airways can
obtain DC10 aircraft at favorable lease terms, it will continue to utilize these
aircraft to supplement the MD-11 fleet during peak flying times until the MD-11
fleet is sufficient to fulfill its obligations. Therefore, in 1995, World
Airways entered into three DC10-30 aircraft leases with lease terms expiring in
August 1997, September 1997, and December 1998. In March 1996, World Airways
leased two additional DC10-30 aircraft (see Note 4).

World Airways extended the lease terms on two spare engines subsequent to
year end. One lease, originally expiring on December 31, 1995, was extended
until February 1998. This lease was classified as a capital lease at December
31, 1995, but will be classified as an operating lease under the new agreement.
The other engine was extended three years from its original April 20, 1996
termination date.

Rental expense, primarily relating to aircraft leases, totaled
approximately $68.7 million, $52.7 million, and $50.9 million for the years
ended December 31, 1995, 1994 and 1993, respectively.

The following is a schedule of future annual minimum rental payments,
principally aircraft rentals (excluding variable portions), required under
operating leases that have initial or remaining noncancellable lease terms in
excess of one year as of December 31, 1995, including the leases entered into
subsequent to year-end (in thousands):

<TABLE>

<S> <C>
1996 $ 89,273
1997 93,840
1998 89,816
1999 75,672
2000 71,940
Thereafter 749,335
---------
Total $ 1,169,876
=========
</TABLE>

These future annual minimum rental payments include all option years. Under
the terms of certain of the leases, if the options are not exercised, the
Company must pay to the lessor either a fixed penalty or a penalty based on the
number of block hours flown since delivery of the aircraft per the lease
agreement. The Company intends to exercise the options under these leases.

61
<PAGE>

13. COMMON STOCK PURCHASE WARRANTS

BNYFC WARRANTS

On December 7, 1993, in connection with a revolving line of credit facility
and an aircraft parts security agreement (see Notes 11 and 12), the Company
granted to Bank of New York Financial Corporation ("BNYFC") warrants expiring
December 7, 1996 to purchase 250,000 shares of the Company's common stock, at a
price of $6.15 per share. At December 31, 1995, these warrants were fully
vested and outstanding.

1986 EXECUTIVE WARRANTS

During 1986, the Company entered into agreements with certain officers of
the Company to issue 3,600,000 warrants, expiring May 24, 1994, each to purchase
one share of the Company's common stock at a price of $5.00 per share, subject
to certain anti-dilution adjustments (the "Executive Warrants"). During 1994
and 1993, 90,000 and 779,875, respectively, of these warrants were exercised.
During 1994, the remaining 2,272,336 1986 Executive Warrants expired.

1989 EXECUTIVE WARRANTS

During 1989, the Company entered into warrant agreements with certain
officers of the Company providing for the issuance of warrants ("the 1989
Executive Warrants") to purchase a total of 745,000 shares of the Company's
common stock at an exercise price of $5.50; such warrants vest at differing
rates over 60 months. The 1989 Executive Warrants expire on August 31, 1997.
During 1995, 141,083 warrants were exercised. As of December 31, 1995, 453,417
of these warrants had been cancelled and there were 150,500 1989 Executive
Warrants fully vested and outstanding.

62
<PAGE>

14. STOCK OPTIONS

On July 19, 1988, the Board of Directors approved The WorldCorp, Inc. 1988
Stock Option Plan (the "1988 Plan"). The 1988 Plan was amended and restated on
May 13, 1992. The 1988 Plan calls for one share of WorldCorp common stock to be
issued upon exercise of one stock option. Shares issuable under the 1988 Plan,
as amended, shall not exceed 2,800,000 in the aggregate. Options may be granted
to employees and directors at the discretion of the Administrative Committee of
the 1988 Plan. In 1990, the 1988 Plan was amended to change the vesting
percentage to 20% per year beginning on the grant date provided that the grantee
was still an employee of the Company or a subsidiary.

In August 1994, the Company granted 1,050,000 options to an officer and a
board member of the Company. These options become vested at various times
through May 2004. During 1995 and 1994, approximately $0.7 million and $1.1
million, respectively, of compensation expense was recognized in connection with
the vested portion of these options.

A summary of option transactions under the 1988 Plan for the years ended
December 31, 1993, 1994, and 1995 is presented below:

<TABLE>
<S> <C>
Options outstanding, December 31, 1992 1,600,962
Options granted (exercise prices from $4.72 to $7.03) 300,000
Options exercised (exercise price of $5.625) (175,000)
Options expired or cancelled (77,600)
---------
Options outstanding, December 31, 1993 1,648,362
Options granted (exercise prices from $4.50 to $4.56) 1,100,000
Options exercised (exercise prices from $4.72 to $5.625) (176,723)
Options expired or cancelled (249,235)
---------
Options outstanding, December 31, 1994 2,322,404
Options granted (exercise prices from $4.56 to $9.55) 50,000
Options exercised (exercise prices from $4.50 to $7.70) (418,485)
Options expired or cancelled (125,000)
---------
Options outstanding, December 31, 1995 1,828,919
=========
</TABLE>

A total of 1,434,601 options have vested and are exercisable by the
participants under the 1988 Plan as of December 31, 1995.

On May 24, 1995, World Airways' stockholders approved the 1995 Stock Option
Plan (the "1995 Plan") that took effect May 31, 1995. Members of World Airways'
Board of Directors, employees, and consultants to World Airways or its
affiliates are eligible to participate in the 1995 Plan. World Airways has
reserved 1,100,000 shares of its common stock for issuance upon the exercise of
options granted to participants under the 1995 Plan. As of December 31, 1995,
World Airways has awarded options to purchase 1,070,083 shares of common stock,
which are exercisable at prices ranging from $10.00 to $11.55 per share. As of
December 31, 1995, no options had been exercised. These options become vested
at various times through May 2003.

On July 27, 1995, World Airways adopted the Non-Employee Directors' Stock
Option Plan (the "Directors' Plan"), pursuant to which each non-affiliate
director will be offered options to purchase 10,000 shares of common stock upon
election or appointment to the Board of Directors of World Airways. On the
third anniversary of the initial award, each such director will be offered an
option to purchase 5,000 shares of common stock. Options granted under the
Directors' Plan become exercisable in equal monthly installments during the 36
months following the award, as long as the person remains a director of World
Airways. The exercise price of all such options will be the average closing
price of the common stock during the 30 trading days immediately preceding the
date of grant. Up to 250,000 shares of common stock may be issued under the
Directors' Plan, subject to certain adjustments.

US Order sponsors the following stock option plans which cover
substantially all US Order employees and certain directors: the 1991 Stock
Option Plan (the "1991 Plan"), the 1995 Incentive Plan (the "1995 Plan") and the
1995 Non-Employee Directors' Stock Option Plan (the "Directors' Plan"). The 1991
Plan was terminated in May 1995. US Order had reserved 3,000,000 shares of
common stock for the exercise of options under this plan. As of December 31,
1995, 2,767,784 options had been granted for purchases of the same number of
shares of US Order's

63
<PAGE>

common stock under the 1991 Plan. These options vest monthly over a period of
three to five years. However, no vesting occurs until after the employee has
completed one year of service with US Order. As of December 31, 1995, the
2,263,155 options outstanding under the 1991 Plan had exercise prices ranging
from $.98 to $9.50 per share, and 1,463,527 options were vested and exercisable.
During 1995 and 1994, 373,106 and 120,788 options, respectively, were exercised
for the same number of shares of US Order's common stock at prices ranging from
$.98 to $7.13.

US Order adopted both the 1995 Plan and the Directors' Plan in May 1995. US
Order has reserved 1,000,000 and 250,000 shares of its common stock for the
exercise of options under the 1995 Plan and the Directors' Plan, respectively.
As of December 31, 1995, 110,050 options had been granted for purchases of the
same number of shares of US Order's common stock under the 1995 Plan. These
options vest monthly over a period of three to five years. However, no vesting
occurs until after an employee has completed one year of service with US Order.
The 108,550 options outstanding at December 31, 1995 under the 1995 Plan have
option prices ranging from $14.50 to $23.75. The grant price is based on the
closing NASDAQ market price of US Order's stock on the date of the grant. As of
December 31, 1995, there were 6,114 shares vested and exercisable under the 1995
Plan. As of December 31, 1995, there were no options issued under the Directors'
Plan. Options under this plan will vest monthly over a three year period
beginning on the date of grant. The grant price for the Directors' Plan will be
based on the average of the closing NASDAQ market price of US Order's stock on
the thirty trading days preceding the date of the grant.

In addition to options issued in 1995 under both the 1991 and 1995 Plans,
US Order issued 15,000 options to three of its five non-affiliate directors and
25,000 options to a non-affiliate who helped in arranging a placement of Series
C preferred stock. Each of these grants has a $7.13 exercise price. The 45,000
options issued to non-affiliate directors vest monthly over a three-year period,
and the 25,000 options granted to the non-affiliate vested immediately. As of
December 31, 1995, of these 70,000 options, options for 36,665 shares of common
stock are exercisable with a weighted average exercise price of $7.13.

During 1995, US Order recognized approximately $225,000 of compensation
expense in connection with options granted at exercise prices below the
estimated fair market value of US Order's common stock at the date of grant. As
of December 31, 1995, deferred compensation relating to these grants was
approximately $0.3 million, which will be recognized over the remaining vesting
period, which is generally three to five years.

In August 1994, US Order paid $3.3 million to certain employees to cancel
675,334 outstanding vested options. This amount is allocated between general
and administrative and research and development expenses in the accompanying
1994 consolidated statement of operations.

64
<PAGE>

15. EMPLOYEE BENEFIT PLANS

During 1989, the Company adopted an Employee Stock Ownership Plan (the
"ESOP") for the benefit of employees not covered by collective bargaining
agreements. The ESOP is designed as a stock bonus plan which qualifies for
favorable tax treatment under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and as an employee stock ownership plan under
Section 4975(e)(7) of the Code. In addition, the ESOP includes a "cash or
deferred arrangement" under Section 401(k) of the Code.

During 1989, the ESOP acquired 450,000 shares of common stock from Violet
June Daly and 450,000 shares of common stock from the Estate of Edward J. Daly.
The purchase price in each transaction was $4.00 per share or a total of $3.6
million.

In 1990, the ESOP was replaced by the Employee Savings and Stock Ownership
Plan ("the ESSOP"). Participation in the ESSOP is limited to employees not
covered under a collective bargaining agreement. Employees may elect to invest
Salary Deferral Contributions in either the WorldCorp Stock Fund or in other
investment funds. The ESSOP provides employer matching contributions in the
WorldCorp Stock Fund at a rate determined by the Board of Directors, but at
least 50% of the Salary Deferral Contribution. The employer matching
contribution rate in the WorldCorp Stock Fund for 1995, 1994, and 1993 was 100%.
The employer matching contribution in other investment funds is at the rate of
33 1/3% of the Salary Deferral Contribution. The Company charged approximately
$251,000, $367,000, and $416,000, to expense for its contributions to the ESSOP
in 1995, 1994, and 1993, respectively.

The ESOP obtained bank financing of $3.6 million (the "ESOP Loan") which
required quarterly principal payments of $90,000 and a final principal payment
of $1,080,000. Interest was payable monthly at 85% of the bank's prime rate.
During 1994, the Company paid off the balance of the ESOP loan in the amount of
$1.7 million. ESSOP agreed to repay to the Company the amount of the bank loan
and pledged 472,500 shares to the Company as collateral, subject to release of
shares in connection with each quarterly principal payment. In January 1995,
the ESSOP refinanced its debt to the Company through a margin loan (the
"Refinanced ESSOP Loan") in the amount of $1.5 million. Principal payments of
$90,000 are due quarterly and a final principal payment of $1.0 million is due
May 1996. Interest is payable quarterly at the call loan rate plus 1.5% The
Refinanced ESSOP Loan is collateralized by 286,681 of the unallocated shares of
common stock owned by the ESSOP at December 31, 1995. The Company is required to
make minimum annual discretionary contributions to the ESSOP in an amount
necessary to pay principal and interest due on the refinanced ESSOP Loan to
the extent that other contributions to the ESSOP are insufficient to make such
payments. The Company expensed $0.2 million of principal and interest for these
loans in each of 1995, 1994 and 1993.

The World Airways' Crewmembers Target Benefit Plan and the World Airways'
Flight Attendants Target Benefit Plan are defined contribution plans covering
flight engineers and pilots, and flight attendants, respectively, with
contributions based upon defined wages. These are both tax-qualified retirement
plans under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). Pension expense for both plans totaled $1.9 million, $1.4 million, and
$1.5 million for the years ended December 31, 1995, 1994, and 1993,
respectively.

Effective January 1, 1987, World Airways adopted the World Airways, Inc.
Profit Sharing Bonus Plan (the "1987 Profit Sharing Plan"). Distributions
under the 1987 Profit Sharing Plan are equal to 20% of World Airways' defined
operating income, subject to an annual limitation of 10% of the total annual
aggregate compensation of World Airways' employees participating in the 1987
Profit Sharing Plan in that year. This is not a tax-qualified retirement plan
under Section 401(a) of the Code. The Company made no distributions in 1995 or
1994 pertaining to 1994 or 1993 financial results, respectively. The Company
has recorded expense and expects to distribute approximately $1.8 million in
1996 pertaining to 1995 results.

World Airways' cockpit crewmembers and eligible dependents are covered
under postretirement health care benefits to age 65. The Company accounts for
the cost of health benefits in accordance with Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions ("FAS #106"). FAS #106 requires accrual accounting for all
postretirement benefits other than pensions. World Airways funds the benefit
costs on a pay-as-you-go (cash) basis.

65
<PAGE>

A summary of the net periodic postretirement benefit costs for the years
ended December 31, 1995, 1994, and 1993 is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Service cost $118,000 $145,000 $103,000
Interest cost on accumulated
postretirement benefit obligation 134,000 143,000 156,000
Net amortized gain (40,000) -- --
-------- -------- --------
Net periodic postretirement benefit cost $212,000 $288,000 $259,000
======== ======== ========
</TABLE>

The components of the Accumulated Postretirement Benefit Obligation for the
years ended December 31, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Retirees and dependents $ 951,000 $ 935,000
Fully eligible, active participants 165,000 211,000
Not fully eligible participants 1,480,000 1,238,000
---------- ----------
$2,596,000 $2,384,000
Less: plan assets 0 0
---------- ----------
Accrued postretirement benefit obligation $2,596,000 $2,384,000
========== ==========
</TABLE>

The assumed discount rates used to measure the accumulated postretirement
benefit obligation for 1995 and 1994 were 6.0% and 8.0%, respectively. The
medical cost trend rate in 1995 was 7.0% trending down to an ultimate rate in
2020 of 3.5%. A one percentage point increase in the assumed health care cost
trend rates for each future year would have increased the aggregate of the
service and interest cost components of 1995 net periodic postretirement benefit
cost by $33,000 and would have increased the accumulated postretirement benefit
obligation as of December 31, 1995 by $136,000.

Effective June 1, 1991, US Order adopted a defined contribution plan (the
"Plan"), available to all full-time employees following three months of service.
The Plan qualifies for preferential tax treatment under Section 401(a) of the
Internal Revenue Code. Employee contributions are voluntary and are determined
on an individual basis with a maximum annual amount for 1995, 1994 and 1993
equal to 20 percent of compensation paid during the plan year, not to exceed the
annual IRS contribution limitations. All participants are fully vested in their
contributions. There are no employer contributions under the Plan.
Administrative expenses for the Plan were incurred and paid for by US Order.

66
<PAGE>

16. FEDERAL AND STATE INCOME TAXES

Income tax expense attributable to income from continuing operations
consists of (in thousands):

<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
U.S. Federal $ 267 $ 131 $ 71
State 88 28 45
----- ----- -----
Income tax expense $ 355 $ 159 $ 116
===== ===== =====
</TABLE>

There is no deferred tax expense or benefit for the years ended December
31, 1995, 1994, and 1993.

Income tax expense attributable to income (loss) from continuing operations
for the years ended December 31, 1995, 1994, and 1993 differed from the amounts
computed by applying the U.S. Federal income tax rate of 34 percent as a result
of the following (in thousands):

<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------
1995 1994 1993
----------- --------- -----------
<S> <C> <C> <C>
Expected Federal income tax expense
(benefit) at the statutory rate $ 20,444 $ 3,569 $ (11,457)
Amounts attributable to (earnings)/loss of subsidiaries not
consolidated for tax purposes (1,521) 830 3,130
Income tax expense of subsidiaries not consolidated
for tax purposes 296 44 --
Gain on sales of equity by subsidiaries not consolidated
for tax purposes (14,850) -- --
Amortization of goodwill 283 35 149
Book/tax difference in gain on sales of subsidiaries stock (252) (2,170) --
Generation (utilization) of net operating
loss and capital loss carryforwards (3,946) (3,056) 7,879
Federal alternative minimum tax and environmental tax 231 115 --
State income tax expense, net of Federal benefit 58 18 30
Other (388) 774 385
-------- ------- --------
Income tax expense $ 355 $ 159 $ 116
======== ======= ========
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, are as follows
(in thousands):

<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax assets:

Net operating loss carryforwards $ 10,444 $ 14,390
Compensated absences, primarily due to accrual for
financial statement purposes 5 33
------- -------
Gross deferred tax assets 10,449 14,423
Less: valuation allowance 10,156 13,973
------- -------
Net deferred tax assets 293 450
------- -------
Deferred tax liabilities:
Property and equipment 105 82
Bonus amortization 188 368
------- -------
Gross deferred tax liabilities 293 450
------- -------
Net deferred income taxes -- --
======= =======
</TABLE>

67
<PAGE>

The valuation allowance for deferred tax assets as of January 1, 1994 was
$73.0 million. The net change in the total valuation allowance for the years
ended December 31, 1994 and 1995 was a decrease of $59.0 million and $3.8
million, respectively.

As a result of certain transactions with MHS in 1994 (see Note 4), World
Airways is no longer consolidated with the Company for income tax purposes. As a
result, approximately $100.4 million of the Company's previous consolidated net
operating loss carryforward ("NOLs") was allocated to World Airways in 1994, and
therefore, is only available to offset future federal taxable income of World
Airways. Of this amount, $62.0 million is subject to a $6.9 million annual
limitation resulting from an ownership change, pursuant to the Internal Revenue
Code of 1986, as amended, which occurred in 1991. In addition, future
transactions in the Company's or World Airways' stock could cause an additional
ownership change at World Airways. The valuation allowance for World Airways'
deferred tax assets as of December 31, 1995 was $39.5 million. World Airways'
estimate of the required valuation allowance is based on a number of factors,
including historical operating results. World Airways generated net earnings for
the year ended 1995 as compared to losses in both 1994 and 1993. If World
Airways continues to generate net earnings in 1996, it is possible that a change
in the estimate of World Airways' required valuation allowance will occur in the
near term, and could differ materially from the amount recorded at December 31,
1995.

As of December 31, 1995, the Company has approximately $30.7 million of net
operating loss carryforwards, which expire as follows (in millions):

There can be no assurance that the operations of the Company will generate
taxable income in future years so as to allow the Company to realize a tax
benefit from its NOLs. The NOLs are subject to examination by the IRS and thus,
are subject to adjustment or disallowance resulting from any such IRS
examination. In addition, an ownership change of the Company, as defined in the
Internal Revenue Code, may occur in the future and may result in the imposition
of a lower annual limitation on the Company's NOLs existing at the time of any
such ownership change.

68
<PAGE>

17. SEGMENT INFORMATION

The Company operates in two business segments: air transportation and
transaction processing. The air transportation segment consists of its
approximately 59.3% ownership of the outstanding common stock of World Airways,
a provider of long range passenger and cargo air transportation for commercial
and government customers. The Company's transaction processing business
consists of its approximately 56.9% ownership of the outstanding common stock of
US Order, a company which provides products and services for two markets: home
banking and smart telephones.

Summarized financial information by business segment is as follows (in
thousands):

<TABLE>
<CAPTION>
Operating Depreciation
Year Ended Income Total and Capital
December 31, 1995 Revenues (Loss) Assets Amortization Expenditures
----------------- -------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Air transportation $259,482 $ 10,342 $130,695 $ 6,056 $ 22,060
Transaction processing 4,186 (5,271) 40,252 619 1,234
Holding company -- (4,334) 31,142 1,368 12
-------- ---------- -------- --------- ---------
$263,668 $ 737 $202,089 $ 8,043 $ 23,306
======== ========== ======== ========= =========

<CAPTION>
Operating Depreciation
Year Ended Income Total and Capital
December 31, 1994 Revenues (Loss) Assets Amortization Expenditures
----------------- -------- ---------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Air transportation $180,715 $ (5,201) $ 78,051 $ 4,006 $ 3,418
Transaction processing 1,432 (9,997) 4,637 749 1,436
Holding company -- (3,614) 15,848 457 199
-------- ---------- -------- --------- ---------
$182,147 $ (18,812) $ 98,536 $ 5,212 $ 5,053
======== ========== ======== ========= =========
</TABLE>

There were no significant intersegment sales or transfers during 1995, 1994
or 1993.

Information concerning customers for years in which their revenues
comprised 10% or more of the Company's consolidated operating revenues is
presented in the following table (in thousands):

<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Malaysian Airlines $100,934 $ 32,773 $ 24,162
U.S. Department of Defense (including U.S. Air Force) 52,889 44,572 54,201
P. T. Garuda Indonesia 26,263 32,356 30,309
Look Charters 3,677 21,222 12,468
Burlington Air Express, Inc. -- 526 22,358
</TABLE>

World Airways has provided service to Malaysian Airlines since 1981,
providing aircraft for integration into Malaysian Airlines' scheduled passenger
and cargo operations as well as transporting passengers for the annual Hadj
pilgrimage. World Airways recently entered into a series of multi-year
agreements with Malaysian Airlines (see Note 4). World Airways provides five
aircraft to Malaysian Airlines under multi-year contracts with expirations
ranging from March 1997 to September 2000. As a result of these contracts, World
Airways expects that the percentage of its total revenue generated from
Malaysian Airlines in 1996 will continue to increase as compared to historical
levels. The current Malaysian Airlines' Hadj contract, which was entered into in
1992, expires in 1996. World Airways is currently in negotiations with Malaysian
Airlines regarding future Hadj operations. World Airways provided three aircraft
for the 1995 Hadj operations and two aircraft for the 1994 Hadj operations, and
will provide three aircraft for the 1996 Hadj operations.

World Airways' contract with the U.S. Air Force expires in September 1996.
The Company anticipates that future renewals of the U.S. Air Force contract will
be on an annual basis.

69
<PAGE>

World Airways has provided service to PT Garuda Indonesia since 1973 and
has operated under an annual Hadj contract since 1988. World Airways provided
five aircraft for the 1995 Garuda Hadj operations, six aircraft for the 1994
Garuda Hadj operations, and will provide seven aircraft for the 1996 Garuda Hadj
operations. In addition, World Airways has provided aircraft for Garuda's cargo
operations in previous years.

World Airways has provided service to Look Charters under an annual
contract since 1992. In 1995 and 1994, World Airways performed operations for a
summer charter program transporting passengers between Paris, France and various
locations in the United States and Mexico.

The loss of any of World Airways' contracts described above, or a
substantial reduction in business from any of World Airways' major customers,
could have a material adverse effect on the Company's results of operations and
financial condition.

World Airways derives a significant percentage of its revenues and block
hours from its operations in Southeast Asia and the Middle East primarily as a
result of its contracts with Malaysian Airlines, Garuda Indonesia and its
scheduled passenger service to Tel Aviv. While World Airways believes Southeast
Asia and the Middle East are growth markets for air transportation, any economic
decline or any military or political disturbance in these areas may interfere
with its ability to provide service in these areas and could have a material
adverse effect on the Company's financial condition and results of operations.

US Order's primary success in both the home banking and smart telephone
markets is dependent on the ultimate success of its strategic partners, Visa
InterActive and Colonial Data, as well as on the ability of these partners to
successfully market US Order's products, service, and interactive applications.

All export contracts are denominated in U.S. dollars as are substantially
all of the related expenses. The classification between domestic and export
revenues is based on entity definitions prescribed in the economic regulations
of the Department of Transportation. Information concerning the Company's export
revenues is presented in the following table (in thousands):

<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Operating Revenues:
Domestic $ 80,560 $ 64,588 $ 97,832
Export - Malaysia 100,934 32,773 24,162
- Indonesia 26,263 32,356 30,310
- France 6,897 22,217 12,531
- Other 49,014 30,213 15,097
-------- -------- --------
Total $263,668 $182,147 $179,932
======== ======== ========
</TABLE>

70
<PAGE>

18. RELATED PARTY TRANSACTIONS

Effective November 10, 1988, T. Coleman Andrews', III employment agreement
to serve as Chief Executive Officer and President of WorldCorp, which was
originally entered into in August 1986, was extended an additional five years to
August 1, 1994. In connection with the employment agreement, Mr. Andrews had
also entered into a Supplemental Incentive Agreement ("the Incentive Agreement")
with WorldCorp that provided for a bonus in the amount of $1.3 million plus
interest earned at 8.91% to be paid to Mr. Andrews on August 1, 1994, provided
he was still an employee of WorldCorp at that time. In connection with this
employment arrangement, the Company loaned Mr. Andrews $1.3 million on January
10, 1989. Mr. Andrews executed and delivered to the Company a full recourse
promissory note dated January 10, 1989. The principal amount of the note was due
and payable on December 31, 1994 and interest accrued quarterly and was payable
at maturity at a fixed rate of 8.91% per annum. Effective December 1993, the
Company and Mr. Andrews terminated the Incentive Agreement and entered into a
new agreement. In connection with the new agreement, the Company paid Mr.
Andrews in December 1993 (approximately seven months early) $0.2 million due him
under the Incentive Agreement. The new agreement delays payment to Mr. Andrews
of the balance due under the Incentive Agreement and provides that the Company
will make four annual installment payments of $0.4 million beginning January 2,
1995, plus interest earned at 3.83% in 1995 and 1996 and 5.07% in 1997 and 1998.
The first two payments were made as scheduled in 1995 and 1996. At the same
time, Mr. Andrews agreed to cancel his previous promissory note dated January
10, 1989 and issue a full recourse promissory note dated December 29, 1993. The
principal amount of $1.8 million is payable in annual installments of varying
amounts beginning January 1, 1994 and payable every February 1 thereafter until
1998. Interest is payable at 3.83% in 1995 and 1996 and 5.07% in 1997 and 1998.
Mr. Andrews has reduced the principal balance of his obligation to the Company
by $0.9 million through March 15, 1996. On August 19, 1994, the Company and Mr.
Andrews extended Mr. Andrews' employment agreement to serve as Chief Executive
Officer and President of WorldCorp through December 31, 1997. The Incentive
Agreement amounts are included in accrued wages in the accompanying consolidated
1995 and 1994 balance sheets. As of December 31, 1995 and 1994, $0.5 million and
$0.4 million, respectively, of the promissory note are included in prepaid
expenses and other current assets and $0.9 million and $1.2 million,
respectively, are included in other assets and deferred charges in the
accompanying consolidated balance sheets.

As of December 31, 1995, WorldCorp owns approximately 56.9% of the
outstanding common stock of US Order (see Note 3). The Chairman of the Board of
Directors of WorldCorp is also one of the founders of, and currently the
Chairman of the Board of, US Order.

At December 31, 1995, WorldCorp owns approximately 59.3% of the outstanding
common stock of World Airways (see Note 2), MHS owns approximately 16.6% and the
remaining shares are publicly traded. During 1994, MHS acquired 32% of
Malaysian Airlines, the flag carrier of Malaysia. Malaysian Airlines is World
Airways' largest commercial customer (see Notes 4 and 17).

Bain & Company, Inc. provided consulting services of approximately $150,000
and $400,000 to the Company during 1995 and 1994, respectively. A principle of
Bain & Company is also a member of the Board of Directors of WorldCorp.

W. Jerrold Scoutt, Jr., a member of the Board of Directors of WorldCorp
until May 1994, is a member of the law firm of Zuckert, Scoutt & Rasenberger,
Washington, D.C. Zuckert, Scoutt & Rasenberger rendered legal services to the
Company during 1995, 1994, and 1993.

71
<PAGE>

19. COMMITMENTS AND CONTINGENCIES

LITIGATION AND CLAIMS

World Airways and WorldCorp (the "World Defendants") are defendants in
litigation brought by the Committee of Unsecured Creditors of Washington
Bancorporation (the "Committee") in August 1992, captioned Washington
Bancorporation v. Boster, et. al., Adv. Proc. 92-0133 (Bankr. D.D.C.) (the
"Boster Litigation"). The complaint asserts that the World Defendants received
preferential transfers or fraudulent conveyances from Washington Bancorporation
when the World Defendants received payment at maturity on May 4, 1990 of
Washington Bancorporation commercial paper purchased on May 3, 1990. Washington
Bancorporation filed for relief under the Federal Bankruptcy Code on August 1,
1990. The Committee seeks recovery of approximately $4.8 million from World
Airways and approximately $2.0 million from WorldCorp, which are alleged to be
the amounts paid to each of World Airways and WorldCorp by Washington
Bancorporation. On the motion of the World Defendants, among others, the Boster
Litigation was removed from the Bankruptcy Court to the District Court for the
District of Columbia on May 10, 1993. The World Defendants filed a motion to
dismiss the Boster Litigation as it pertains to them on June 9, 1993, and intend
to vigorously contest liability. On September 20, 1995, the District Court for
the District of Columbia granted the motion to dismiss filed by the World
Defendants with respect to three of the four counts alleged in the litigation,
but declined to grant a motion to dismiss the remaining claim regarding
fraudulent transfers. The District Court's ruling is subject to appeal in
certain cases. The World Defendants filed a summary motion with respect to the
remaining claim on October 19, 1995, which remains pending. In any event, the
Company believes it has substantial defenses to this action, although no
assurance can be given of the eventual outcome of this litigation. Depending
upon the timing of the resolution of this claim, if the Committee were
successful in recovering the full amount claimed, the resolution could have a
material adverse effect on the Company's financial condition and results of
operations.

As of February 29, 1996, World Airways' flight attendants represented
approximately 29% of World Airways' work force. The collective bargaining
agreement between World Airways and the Teamsters on behalf of World Airways'
flight attendants expired in 1992. The parties exchanged their opening contract
proposals in 1992 and have had numerous contract negotiation sessions. In
December 1994, World Airways and the Teamsters jointly requested the assistance
of a federal mediator to facilitate negotiations. After several mediated
sessions, the National Mediation Board (the "NMB") mediator recommended that the
NMB release the parties to pursue "direct" (i.e., non-mediated) negotiations
with the flight attendants. World Airways and the Teamsters agreed and direct
negotiations continue. The outcome of the negotiations with the flight
attendants cannot be determined at this time. The inability to reach an
agreement upon terms favorable to World Airways could have a material adverse
effect on the Company. World Airways' flight attendants continue to challenge
the use of foreign flight attendant crews on the Company's flights for Malaysian
Airlines and Garuda Indonesia which has historically been World Airways'
operating procedure. World Airways is contractually obligated to permit its
Southeast Asian customers to deploy their own flight attendants. While World
Airways intends to contest this matter vigorously in an upcoming arbitration, an
unfavorable ruling for World Airways could have a material adverse effect on the
Company.

In conjunction with US Order's August 1, 1994 sale of its banking
operations (see Note 3), US Order transferred to VISA all of its rights as they
related to a patent which covered various proprietary aspects of the Company's
ScanFone automated order and payment system. Although not technically pending or
threatened, US Order has received notices from third parties claiming potential
infringement of previously issued patents to these third parties. US Order has
also received a notice of a third party patent infringement claim related to a
product currently under development by US Order. US Order and its counsel
believe that the company has substantial defenses to any potential claims of
infringement, should that occur. However, there can be no assurance that such
third parties will not make a formal claim of infringement or that US Order
would prevail in any proceedings in relation thereto.

The Company is involved in various other claims and legal actions arising
in the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position.

72
<PAGE>

CONTINGENT RENTAL PAYMENTS

In July 1993, World Airways returned certain DC10-30 aircraft to the lessor
(see Note 12). As a result of this early lease termination, World Airways is
responsible, until 2004 for one aircraft and 2005 for the second aircraft, for
one-third of any deficit in rent incurred in future leases of the aircraft, up
to $100,000 monthly per plane, with an overall combined cap of $1.9 million.
World Airways accrued $0.9 million for rent shortfalls for the period August
1993 to September 1995. One aircraft is currently being leased for an amount in
excess of the shortfall limit. The current lease for the second aircraft
requires World Airways to contribute $8,000 per month. The estimated shortfall
liabilities relating to these aircraft are accrued in the accompanying
consolidated balance sheet at December 31, 1995. The Company's remaining
contingent liability related to this matter approximates $0.9 million.

COMMITMENTS TO PURCHASE SPARE ENGINES

The Company has commitments to purchase two spare engines in the first and
second quarters of 1996 (see Note 12).

LETTERS OF CREDIT

At December 31, 1995 and 1994, restricted cash and short-term investments
included customer deposits held in escrow and cash pledged as collateral for
various letters of credit facilities issued by a bank on World Airways' behalf
totaling $0.9 million and $0.7 million, respectively, with expiration dates
principally occurring in 1996.

Also, in November 1995, US Order committed to purchase from Standard
Telecommunication Ltd. ("STL") approximately $3.3 million of its next generation
smart telephone, the Telesmart 4000/TM/ smart phone, for delivery in the first
half of 1996. As part of this commitment, US Order issued an irrevocable letter
of credit to STL collateralized by a certificate of deposit in the amount of
$3.3 million. The letter of credit extends through May 1996. This amount is
shown as restricted short-term investments in the accompanying consolidated
balance sheet as of December 31, 1995.

MD-11 ENGINE MAINTENANCE AGREEMENT

In July 1995 and January 1996, World Airways amended its MD-11 engine
maintenance agreement covering the leased MD-11 engines. Under the terms of the
amended agreement with the engine manufacturer, which expires in August 2003,
the manufacturer will perform a significant portion of World Airways' required
engine overhauls. In exchange, the manufacturer agreed to provide such
maintenance services at a cost not to exceed a specified rate per hour during
the term of the contract. The specified rate per hour is subject to annual
escalation, and increases substantially in September 1998. Accordingly, while
World Airways believes the terms of this agreement will result in lower engine
maintenance costs than it otherwise would incur during the first five years of
the agreement, these costs will increase substantially during the last seven
years of the agreement. Also under this agreement, World Airways will pay
approximately $0.7 million for MD-11 spare parts in 1996.

73
<PAGE>

20. UNAUDITED QUARTERLY RESULTS

The results of the Company's quarterly operations (unaudited) for 1995 and
1994 are as follows (in thousands except per share amounts):

<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------------------------
March 31 June 30 September 30 December 31 Total Year
-------- ------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
1995
Operating revenues $ 41,282 $ 76,725 $ 80,454 $ 65,207 $ 263,668

Operating income (loss) (5,648) 8,861 1,754 (4,230) 737

Earnings (loss) before income
taxes and minority interest (8,454) 55,494 /(a)/ (395) 13,484 /(b)(c)/ 60,129

Net earnings (loss) (8,454) 54,749 (819) 14,732 60,208

Primary net earnings (loss)
per common share $ (0.55) $ 3.22 $ (0.05) $ 0.85 $ 3.52
====== ====== ======= ====== ======

Fully diluted net earnings
(loss) per common share $ * $ 2.44 $ * $ 0.69 $ 2.82
======= ====== ======= ====== ======

1994

Operating revenues $ 32,037 $ 56,229 $ 51,886 $ 41,995 $ 182,147

Operating income (loss) (8,409) /(d)/ 4,265 (12,391) (2,277) (18,812)

Earnings (loss) before income
taxes and minority interest 15,467 /(e)/ 1,485 (1,180) /(f)/ (5,276) 10,496

Net earnings (loss) 15,596 579 (2,540) (5,327) 8,308

Primary net earnings (loss)
per common share $ 0.93 $ 0.04 $ (0.16) $ (0.35) $ 0.54
======= ====== ======= ====== =======

Fully diluted net earnings
(loss) per common share $ 0.74 $ * $ * $ * $ 0.53
======== ====== ======= ====== ========
</TABLE>

* Fully diluted earnings per share are anti-dilutive.

/(a)/ Includes the $46.6 million gain realized on US Order's offering in
June 1995 (see Note 3).
/(b)/ Includes a gain of approximately $0.8 million on a settlement
relating to the return of two DC10-30 aircraft in 1993 (see Note 12).
/(c)/ Includes the $16.0 million gain realized on World Airways' offering
in October 1995 (see Note 2).
/(d)/ Includes approximately $4.2 million of reversals of excess accrued
maintenance reserves associated with the expiration of three DC10
aircraft leases in 1994.
/(e)/ Includes the $27.0 million gain realized on the sale of 24.9% of
World Airways common stock (see Note 4).
/(f)/ Includes the $14.5 million gain realized on the sale of US Order's
electronic banking and bill payment operations (see Note 3).

74
<PAGE>

INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND STOCKHOLDERS
WORLDCORP, INC.:

We have audited the accompanying consolidated balance sheets of WorldCorp,
Inc. and subsidiaries (WorldCorp) as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in common stockholders'
deficit and cash flows for each of the years in the three-year period ended
December 31, 1995. In connection with our audits of the consolidated financial
statements, we also have audited the related financial statement schedules as
listed in Item 14(a)(2) herein. These consolidated financial statements and
financial statement schedules are the responsibility of WorldCorp's management.
Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of WorldCorp,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.

KPMG PEAT MARWICK LLP

WASHINGTON, D.C.
MARCH 18, 1996

75
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------

Directors

The Company incorporates herein by reference the information concerning
directors contained in its Notice of Annual Stockholder's Meeting and Proxy
Statement to be filed within 120 days after the end of the Company's fiscal year
(the "1996 Proxy Statement").

Executive Officers

The following table sets forth the names and ages of all executive officers
of the Company and all positions and offices within the Company presently held
by such executive officers:
<TABLE>
<CAPTION>

Name Age Position Held
---- --- -------------
<S> <C> <C>
T. Coleman Andrews, III 41 Chief Executive Officer, President, and Principal
Accounting Officer

William F. Gorog 70 Chief Executive Officer, US Order, and
Chairman of the Board, WorldCorp

Charles W. Pollard 38 Chief Executive Officer and President, World Airways

John C. Backus, Jr. 37 President and Chief Operating Officer, US Order

Andrew M. Paalborg 40 Vice President and General Counsel
</TABLE>

Mr. T. Coleman Andrews, III was elected a director of World Airways in
August 1986 and served as Chief Executive Officer from August 1986 to March
1996. In addition, he was elected Chief Executive Officer, President and a
director of WorldCorp in June 1987. He has served as a director and Chairman of
the Executive Committee of US Order since 1990. From 1978 through 1986, he was
affiliated with Bain & Company, an international strategy consulting firm. At
Bain, he was elected partner in 1982 and was a founding general partner of Bain
Capital Fund, a private venture capital partnership, in 1984. Prior to his
experience with Bain & Company, Mr. T. Coleman Andrews, III served in several
appointed positions in the Ford Administration.

Mr. William F. Gorog has served as Chief Executive Officer of US Order
since May 1, 1990. He was elected a director of WorldCorp in April 1989 and was
elected Chairman of the WorldCorp Board of Directors in May 1993. From October
1987 until founding US Order, he served as Chairman of the Board of Arbor
International, an investment management firm. From 1982 to 1987, he served as
President and Chief Executive Officer of Magazine Publishers of America, a trade
association representing the principal consumer publications in the United
States. During the Ford Administration, Mr. Gorog served as Deputy Assistant to
the President for Economic Affairs and Executive Director of the White House
Council on International Economic Policy. Prior to that time, he founded and
served as Chief Executive Officer of Data Corporation, which developed the LEXIS
and NEXIS information systems for legal and media research. He currently serves
as a director of NationsBank (Maryland), a bank holding company.

Mr. Charles W. Pollard was appointed Chief Executive Officer of World
Airways in March 1996, succeeding Mr. T. Coleman Andrews, III, who remains
Chairman of the Board. Mr Pollard was elected President of World Airways in May
1992 and has served as a director since September 1989. He was elected General
Counsel and Secretary of WorldCorp in October 1987, and Vice President,
Administration and Legal Affairs in October 1990.

76
<PAGE>

From August 1983 to October 1987, he practiced law in the Corporate Department
of Skadden, Arps, Slate, Meagher & Flom, Washington, D.C. Mr. Pollard is a
member of the District of Columbia bar.

John C. Backus, Jr. has worked with US Order since its inception in 1990
and has served as President and Chief Operating Officer of US Order since 1994.
Prior to joining US Order on a full time basis in 1992, Mr. Backus worked for
six years at WorldCorp holding a variety of executive positions including Vice
President of Corporate Development and Vice President of Finance at a WorldCorp
subsidiary. Prior to joining WorldCorp, Mr. Backus worked for Bain & Company,
Inc. in its consulting and venture capital group where he focused on consumer
products and services. Mr. Backus serves on the board of directors of WorldCorp,
US Order, and Visa Interactive. Mr. Backus received both his B.S. and M.B.A.
from Stanford University.

Mr. Andrew M. Paalborg joined World Airways as General Counsel in October
1989 and was elected Vice President and General Counsel of WorldCorp in May
1992. From 1984 to 1989 Mr. Paalborg practiced law with Hogan & Hartson,
McLean, Virginia. From 1982 to 1984 he was an associate with Morgan, Lewis &
Bockius, New York, New York. Mr. Paalborg received his law degree cum laude
from Georgetown University in 1982 and is a member of the New York, Virginia and
District of Columbia Bars.

Beneficial Ownership Reporting

The Company incorporates herein by reference the information required by
Item 405 of Regulation S-K contained in its 1996 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------

The Company incorporates herein by reference the information concerning
executive compensation contained in the 1996 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------

The Company incorporates herein by reference the information concerning
security ownership of certain beneficial owners and management contained in the
1996 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------

The Company incorporates herein by reference the information concerning
certain relationships and related transactions contained in the 1996 Proxy
Statement.

77
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------

(a) The following documents are filed as part of this report:

(1) Financial Statements

The following consolidated financial statements of WorldCorp, Inc. and
subsidiaries are filed herewith:

Consolidated Balance Sheets, December 31, 1995 and 1994

Consolidated Statements of Operations, Years Ended
December 31, 1995, 1994, and 1993

Consolidated Statements of Changes in Common Stockholders'
Deficit, Years Ended December 31, 1995, 1994 and 1993

Consolidated Statements of Cash Flows, Years Ended
December 31, 1995, 1994 and 1993

Notes to Consolidated Financial Statements

Independent Auditors' Report

(2) Financial Statement Schedules

Schedule
Number
--------

I. Condensed Financial Information of Registrant
II. Valuation and Qualifying Accounts

NOTE: All other schedules are omitted because the requisite
information is either presented in the financial statements or
notes thereto or is not present in amounts sufficient to
require submission of the schedules.

STATUS OF PRIOR DOCUMENTS

WorldCorp's Annual Report on Form 10-K for the year ended December 31,
1994, at the time of filing with the Securities and Exchange Commission, shall
modify and supersede all prior documents filed pursuant to Sections 13, 14, and
15(d) of the Securities Exchange Act of 1934 for purposes of any offers or sales
of any securities after the date of such filing pursuant to any Registration
Statement or Prospectus filed pursuant to the Securities Act of 1933, as
amended, which incorporates by reference such Annual Report on Form 10-K.

(3) Index to Exhibits

<TABLE>
<CAPTION>
Exhibit
No. Exhibit
------- -------
<S> <C> <C>
3.1 Certificate of Incorporation of WorldCorp, Inc. dated March Incorporated
16, 1987. [Filed as Exhibit 3.1 to WorldCorp, Inc.'s by reference
Registration Statement on Form S-4 (Commission File No.
33012735) filed on March 19, 1987 and incorporated herein
by reference.]
</TABLE>

78
<PAGE>

<TABLE>
<S> <C> <C>
3.2 Amended and Restated Bylaws of WorldCorp, Inc. dated November 13, Incorporated
1987. (Filed as Exhibit 3.1 to WorldCorp, Inc.'s Annual Report on by reference
Form 10-K for the fiscal year ended December 31, 1987 and
incorporated herein by reference.)

4.1 Indenture dated as of August 1, 1987 between WorldCorp, Inc. and Incorporated
Norwest Bank of Minneapolis, N.A. (Filed as Exhibit 4.1 to Amendment by reference
No. 2 to WorldCorp Inc.'s Form S-2 Registration Statement (Commission
File No. 33-1358276) filed August 13, 1987 and incorporated herein
by reference.]

4.2 First Supplemental Indenture dated as of March 1, 1988 between Incorporated
WorldCorp, Inc. and Norwest Bank of Minneapolis, N.A. (Filed as by reference
Exhibit 4.2 to WorldCorp, Inc.'s Annual Report on Form 10-K for the
fiscal year ended December 31, 1988 and incorporated herein by
reference.)

4.3 Second Supplemental Indenture dated as of February 22, 1994 Incorporated
between WorldCorp, Inc. and Norwest Bank Minnesota, National Association. by reference
(Filed as Exhibit 4.3 to WorldCorp, Inc's Form S-3 Registration Statement
(Commission file No. 33-60247) filed on June 15, 1995 and incorporated
herein by reference.)

4.4 Third Supplemental Indenture dated as of March 15, 1995 between Incorporated
WorldCorp, Inc. and Norwest Bank Minnesota, National Association. by reference
(Filed as Exhibit 4.4 to WorldCorp, Inc's Form S-3 Registration Statement
(Commission file No. 33-60247) filed on June 15, 1995 and incorporated
herein by reference.)

4.6 First Supplemental Indenture dated as of February 22, 1994 between Incorporated
WorldCorp, Inc. and The First National Bank of Boston, as Trustee. by reference
(Filed as Exhibit 4.6 to WorldCorp, Inc's Form S-3 Registration Statement
(Commission file No. 33-60247) filed on June 15, 1995 and incorporated
herein by reference.)

4.8 Stock Option Agreement dated as of April 1, 1995 between WorldCorp, Incorporated
Inc. and Patrick F. Graham. (Filed as Exhibit 4.8 to WorldCorp Inc's by reference
Form S-3 Registration Statement (Commission file No. 33-60247)
filed on June 15, 1995 and incorporated herein by reference.)

10.1 Warrant Agreement between WorldCorp, Inc. and Drexel Burnham Incorporated
Lambert, Incorporated ("Drexel") dated as of June 30, 1988. (Filed by reference
as Exhibit 10.1 to WorldCorp, Inc.'s Form 10-Q for the quarter
ended March 31, 1989 and incorporated herein by reference.)

10.4 Aircraft Lease Agreement dated as of March 30, 1987 between World Incorporated
Airways, Inc. and The Connecticut National Bank, not in its individual by reference
capacity, but solely as Owner Trustee. (Filed as Exhibit 10.34
to World Airways, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1986 and incorporated herein by reference.)

10.5 Merger Agreement and Plan of Reorganization dated as of April 28, Incorporated
1987 by and among World Airways, Inc., World Merger Corporation by reference
and WorldCorp, Inc. [Filed as Exhibit 10.50 to WorldCorp, Inc.'s
Form S-2 Registration Statement (Commission File No. 33-1358276)
filed on July 31, 1987 and incorporated herein by reference.]
</TABLE>

79
<PAGE>

<TABLE>
<S> <C> <C>
10.6 Assumption Agreement dated as of June 23, 1987 among Incorporated
WorldCorp, Inc., World Airways, Inc. and T. Coleman Andrews, by reference
III. [Filed as Exhibit 10.51 to WorldCorp, Inc.'s Form S-2
Registration Statement (Commission File No. 33-1358276)
filed on July 31, 1987 and incorporated herein by
reference.]

10.7 Assumption Agreement dated as of June 23, 1987 among Incorporated
WorldCorp, Inc., World Airways, Inc. and D. Fraser Bullock. by reference
[Filed as Exhibit 10.52 to WorldCorp, Inc.'s Form S-2
Registration Statement (Commission File No. 33-1358276)
filed on July 31, 1987 and incorporated herein by
reference.]

10.8 Guaranty and Amendment Agreement dated as of June 23, 1987 Incorporated
between WorldCorp, Inc. and The Connecticut National Bank, a by reference
national banking association, as Owner Trustee, with Burnham
Leasing Corporation, as Owner Participant. [Filed as Exhibit
10.55 to WorldCorp, Inc.'s Form S-2 Registration Statement
(Commission File No. 33-1358276) filed July 31, 1987 and
incorporated herein by reference.]

10.9 Form of Assumption Agreement dated as of June 23, 1987 among Incorporated
WorldCorp, Inc., World Airways, Inc. and each Indemnified by reference
Party. [Filed as Exhibit 10.60 to WorldCorp, Inc.'s Form S-2
Registration Statement (Commission File No. 33-1358276)
filed on July 31, 1987 and incorporated herein by
reference.]

10.11 Agreement between World Incorporated Airways, Inc. and Incorporated
Flight Attendants represented by International by reference
Brotherhood of Teamsters. [Filed reference as Exhibit 10.67
to WorldCorp, Inc.'s Form S-3 Registration Statement
(Commission File No. 2-91998) filed on December 10, 1987 and
incorporated herein by reference.]

10.12 Agreement between World Airways, Inc. and Mechanics Incorporated
represented by the International Brotherhood of Teamsters. by reference
(Filed as Exhibit 10.41 to WorldCorp, Inc.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 1988 and
incorporated herein by reference.)

10.13 Agreement between World Airways, Inc. and Stock Clerks and Incorporated
Store Room Employees represented by the International by reference
Brotherhood of Teamsters. (Filed as Exhibit 10.42 to
WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1988 and incorporated herein by
reference.)

10.14 Office Lease - The Hallmark Building dated as of May 16, Incorporated
1987 between WorldCorp, Inc. and GT Renaissance by reference
Centre Limited Partnership. (Filed as Exhibit 10.36 to
WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1989 and incorporated herein by
reference.)

10.15 Lease Amendment dated as of June 27, 1989 between WorldCorp, Incorporated
Inc. and GT Renaissance Centre Limited Partnership. (Filed by reference
as Exhibit 10.37 to WorldCorp, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1989 and
incorporated herein by reference.)

10.16 Office Lease - The Hallmark Building dated as of September Incorporated
20, 1989 between World Airways, Inc. and GT Renaissance by reference
Centre Limited Partnership. (Filed as Exhibit 10.38 to
WorldCorp, Inc's Annual Report on form 10-K for the fiscal
year ended December 31, 1989
</TABLE>

80
<PAGE>

<TABLE>
<S> <C> <C>
and incorporated herein by reference.)

10.17 Warrant Agreement dated as of July 22, 1989 between Incorporated
WorldCorp, Inc. and Charles W. Pollard. (Filed as Exhibit by reference
10.45 to WorldCorp, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1989 and incorporated
herein by reference.)

10.20 WorldCorp, Inc. Employee Incorporated as Exhibit 10.49 to Incorporated
Savings and Stock Ownership Plan. (Filed Incorporated to by reference
WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1989 and incorporated herein by
reference.)

10.21 Amendment No. 1 to WorldCorp Inc. Employee Savings and Stock Incorporated
Ownership Plan. (Filed as Exhibit 10.50 to WorldCorp, Inc.'s by reference
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989 and incorporated herein by reference.)

10.27 Aircraft Warranty Bill of Sale dated as of January 15, 1991 Incorporated
between World Airways, Inc. and First Security Bank of Utah, by reference
N.A., not in its individual capacity, but solely as Owner
Trustee. (Filed as Exhibit 10.46 to WorldCorp, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31,
1990 and incorporated herein by reference.)

10.28 Aircraft Lease Agreement dated as of January 15, 1991 Incorporated
between World Incorporated Airways, Inc. and First Security by reference
Bank of Utah, N.A., not in its individual capacity, but
solely as Owner Trustee. (Filed as Exhibit 10.47 to
WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 and incorporated herein by
reference.)

10.29 Loan and Security Agreement dated as of February 26, 1992 Incorporated
between WorldCorp, Inc. and US Order Incorporated. (Filed as by reference
Exhibit 10.38 to WorldCorp, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.)

10.30 Aircraft Lease Agreement I dated as of February 12, 1992 Incorporated
between McDonnell Douglas Finance Corporation and World by reference
Airways, Inc. (Filed as Exhibit 10.39 to WorldCorp, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.)

10.31 Aircraft Lease Agreement II dated as of February 12, 1992 Incorporated
between McDonnell Douglas Finance Corporation and World by reference
Airways, Inc. (Filed as Exhibit 10.40 to WorldCorp, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.)

10.32 Aircraft Engine Purchase Agreement dated as of April 26, Incorporated
1991 between Terandon Leasing Corporation and World Airways, by reference
Inc. (Filed as Exhibit 10.41 to WorldCorp, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference.)

10.33 Aircraft Engine Lease Agreement dated as of April 26, 1991 Incorporated
between Incorporated Terandon Leasing Corporation and World by reference
Airways, Inc. (Filed as by reference Exhibit 10.42 to
WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein by
reference.)
</TABLE>

81
<PAGE>

<TABLE>
<S> <C> <C>
10.34 Guaranty Agreement I dated as of February 12, 1992 between Incorporated
McDonnell Douglas Finance Corporation and World Airways, by reference
Inc. (Filed as Exhibit 10.43 to WorldCorp, Inc.'s Annual
Report on Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference.)

10.35 Guaranty Agreement II dated as of February 12, 1992 between Incorporated
McDonnell Douglas Finance Corporation and World Airways, Inc. by reference
(Filed as Exhibit 10.44 to WorldCorp, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.)

10.36 Series A Preferred Stock Purchase Agreement dated as of Incorporated
September 14, 1990 between US Order, Inc. and WorldCorp, by reference
Inc. (Filed as Exhibit 10.45 to WorldCorp, Inc.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.)

10.37 Stock Restriction Agreement dated as of September 14, 1990 Incorporated
between WorldCorp, Inc., William F. Gorog, Jonathan M. Gorog, by reference
Peter M. Gorog, Henry R. Nichols, William N. Melton and
John Porter. (Filed as Exhibit 10.46 to WorldCorp, Inc.'s
Annual Report on Form 10-K for the fiscal year ended December
31, 1991 and incorporated herein by reference.)

10.38 Aircraft Lease Agreement for Aircraft Serial Number 48518 Incorporated
dated as of September 30, 1992 between World Airways, by reference
Inc. and International Lease Finance Corporation.

10.39 Aircraft Lease Agreement for Aircraft Serial Number 48519 Incorporated
dated as of September 30, 1992 between World Airways, Inc. by reference
and International Lease Finance Corporation.

10.40 Aircraft Lease Agreement for Aircraft Serial Number 48520 Incorporated
dated as of September 30, 1992 between World Airways, by reference
Inc. and International Lease Finance Corporation.

10.41 Aircraft Lease Agreement for Aircraft Serial Number 48633 Incorporated
and dated as of September 30, 1992 between World Airways, Inc. by reference
International Lease Finance Corporation.

10.42 Aircraft Lease Agreement for Aircraft Serial Number 48631 Incorporated
dated as of September 30, 1992 between World Airways, Inc. by reference
and International Lease Finance Corporation.

10.43 Aircraft Lease Agreement for Aircraft Serial Number 48632 Incorporated
dated as of September 30, 1992 between World Airways, Inc. by reference
and International Lease Finance Corporation.

10.45 MD-11 Aircraft Charter Agreement dated as of March 18, 1993 Incorporated
between World Airways, Inc. and PT. Garuda Indonesia. by reference

10.45 DC10-30 Aircraft Charter Agreement dated as of March 18, 1993 Incorporated
between World Airways, Inc. and PT. Garuda Indonesia. by reference

10.46 Accounts Receivable Management and Security Agreement dated Incorporated
as of December 7, 1993 between World Airways, Inc. and BNY by reference
Financial Corporation.

10.47 Aircraft Parts Security Agreement dated as of December 7, 1993 Incorporated
between World Airways, Inc. and BNY Financial Corporation. by reference
</TABLE>

82
<PAGE>

<TABLE>
<S> <C> <C>
10.48 Warrant Certificate dated as of December 7, 1993 between Incorporated
WorldCorp, Inc. and BNY Financial Corporation. by reference

10.50 Subscription and Preferred Stock Purchase Agreement dated Incorporated
as of December 20, 1993 between US Order, Inc. and by reference
Knight-Ridder, Inc.

10.51 Subscription and Preferred Stock Purchase Agreement dated Incorporated
as of December 21, 1993 between US Order, Inc. and by reference
WorldCorp, Inc.

10.52 Subscription and Preferred Stock Purchase Agreement dated Incorporated
as of December 20, 1993 between US Order, Inc. and Jerome by reference
Kohlberg, Jr.

10.53 Subscription and Preferred Stock Purchase Agreement dated Incorporated
as of December 21, 1993 between US Order, Inc. and Hoechst by reference
Celanese Corporation Employee Benefit Master Trust

10.54 Series C Preferred Stock Purchase Agreement dated as of Incorporated
December 21, 1993 between US Order, Inc. and VeriFone, Inc. by reference

10.55 Registration Rights Agreement dated as of December 21, 1993 Incorporated
between US Order, Inc. and VeriFone, Inc. by reference

10.57 Investment Agreement dated as of December 21, 1993 by and Incorporated
among US Order, Inc., WorldCorp, Inc., and VeriFone, Inc. by reference

10.58 Settlement Agreement dated as of February 8, 1994 between Incorporated
World Airways, Inc, WorldCorp, Inc., Concord Asset Management, by reference
Inc., Concord Leasing, Inc., and The CIT Group.

10.59 Lease Agreement dated as of June 1, 1993 between World Incorporated
Airways, Inc. and Mattei Corporation. by reference

10.60 Lease Agreement dated as of March 30, 1993 between World Incorporated
Airways, Inc. and Tinicum Properties Associates Limited by reference
Partnership, as amended by First Amendment to Lease dated July
9, 1993.
10.61 Lease Agreement dated as of January 25, 1993 between World Incorporated
Flight Crew Services, Inc. and Sakioka Farms. by reference

10.62 Consignment Agreement dated as of September 30, 1993 between Incorporated
World Airways Inc. and The Memphis Group. by reference

10.63 Assignment and Assumption and Consent and Release for Aircraft Incorporated
Serial Number 47818 dated as of July 20, 1993 among World by reference
Airways, Inc., WorldCorp, Inc., McDonnell Douglas Corporation,
and McDonnell Douglas Finance Corporation.

10.64 Assignment and Assumption and Consent and Release for Aircraft Incorporated
Serial Number 46999 dated as of July 9, 1993 among World by reference
Airways, Inc., WorldCorp, Inc., McDonnell Douglas Corporation,
and McDonnell Douglas Finance Corporation.

10.65 Aircraft Lease Agreement for Aircraft Serial Number 48458 Incorporated
dated as of January 15, 1993 between World Airways, Inc. and by reference
Wilmington Trust Company/GATX Capital Corporation.

10.66 Aircraft Lease Supplement for Aircraft Serial Number 48458 Incorporated
dated as of April 23, 1993 between World Airways, Inc. and by reference
Wilmington Trust
</TABLE>

83
<PAGE>

<TABLE>
<S> <C> <C>
Company/GATX Capital Corporation.

10.67 Aircraft Spare Parts Lease Agreement dated as of April 15, Incorporated
1993 between World Airways, Inc. and GATX Capital by reference
Corporation.

10.68 Amendment No. 1 To Aircraft Lease Agreement for Aircraft Incorporated
Serial Number 48518 dated as of November 1993 between World by reference
Airways, Inc. and International Lease Finance Corporation.

10.69 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Incorporated
Serial Number 48518 dated as of March 8, 1993 between World by reference
Airways, Inc. and International Lease Finance Corporation.

10.70 Assignment of Rights for Aircraft Serial Number 48518 dated Incorporated
as of March 8, 1993 between World Airways, Inc. and by reference
International Lease Finance Corporation.

10.71 Assignment of Rights for Aircraft Engines Serial Numbers Incorporated
P723942, P723945, and P723943 dated as of March 1, 1993 by reference
between World Airways, Inc. and International Lease Finance
Corporation.

10.72 Agency Agreement for Aircraft Serial Number 48518 dated Incorporated
as of January 15, 1993 between World Airways, Inc. and by reference
International Lease Finance Corporation.

10.73 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Incorporated
Serial Number 48437 dated as of March 31, 1993 between World by reference
Airways, Inc. and International Lease Finance Corporation.

10.74 Amendment No. 3 to Aircraft Lease Agreement for Aircraft Incorporated
Serial Number 48437 dated as of April 15, 1993 between World by reference
Airways, Inc. and International Lease Finance Corporation.

10.75 Agency Agreement for Aircraft Serial Number 48437 dated as of Incorporated
January 15, 1993 between World Airways, Inc. and International by reference
Lease Finance Corporation.

10.76 Assignment of Rights for Aircraft Serial Number 48437 dated Incorporated
as of April 15, 1993 between World Airways, Inc. and by reference
International Lease Finance Corporation.

10.77 Assignment of Rights for Aircraft Engines Serial Numbers Incorporated
P723913, P723912, and P723914 dated as of April 15, 1993 by reference
between World Airways, Inc. and International Lease Finance
Corporation.

10.78 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Incorporated
Serial Number 48520 dated as of April 22, 1993 between World by reference
Airways, Inc. and International Lease Finance Corporation.

10.79 Agency Agreement for Aircraft Serial Number 48520 dated Incorporated
as of January 15, 1993 between World Airways, Inc. and by reference
International Lease Finance Corporation.

10.80 Assignment of Rights for Aircraft Serial Number 48520 dated Incorporated
as of April 22, 1993 between World Airways, Inc. and by reference
International Lease Finance Corporation.
</TABLE>

84
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<TABLE>
<S> <C> <C>
10.81 Assignment of Rights for Aircraft Engines Serial Numbers Incorporated
P723957, P723958, and P723956 dated as of March 1, 1993 by reference
between World Airways, Inc. and International Lease
Finance Corporation.

10.82 Aircraft Charter Agreement dated as of July 24, 1993 between Incorporated
World Airways, Inc. and Malaysian Airline System Berhad. by reference

10.83 Amendment No. 1 to Aircraft Lease Agreement for Aircraft Incorporated
Serial Numbers 46835, 46837, and 46820 dated as of May by reference
14, 1993 between World Airways, Inc. and The Connecticut
National Bank (assigned to Federal Express Corporation).

10.84 Amendment No. 2 to Aircraft Lease Agreement for Aircraft Incorporated
Serial Numbers 46835, 46837, and 47820 dated as of May by reference
14, 1993 between World Airways, Inc. and The Connecticut
National Bank (assigned to Federal Express Corporation).

10.85 Return Agreement for Aircraft Serial Numbers 47818 and Incorporated
46999 dated as of July 9, 1993 among World Airways, Inc., by reference
WorldCorp, Inc., International Lease Finance Corporation,
McDonnell Douglas Corporation, and McDonnell Douglas Finance
Corporation.

10.86/1/Acquisition Agreement Among VISA International Service Incorporated
Association, US Order, Inc, and WorldCorp, Inc, dated as by reference
of July 15, 1994.

10.87 Stock Purchase Agreement by and among World Airways, Inc., Incorporated
WorldCorp, Inc., and Malaysian Helicopter Services Berhad by reference
dated as of October 30, 1993.

10.88 Stock Registration Rights Agreement between World Airways, Incorporated
Inc. and Malaysian Helicopter Services Berhad dated as of by reference
October 30, 1993.

10.89 Shareholders Agreement between Malaysian Helicopter Services Incorporated
Berhad and WorldCorp, Inc., and World Airways, Inc. dated by reference
as of February 3, 1994.

10.90 Amendment No. 1 to Shareholders Agreement dated as of Incorporated
February 28, 1994, among WorldCorp, World Airways, and MHS. by reference

10.91 Right of First Refusal Agreement dated as of February 28, Incorporated
1994, between US Order, Inc. ("US Order") and Technology by reference
Resources, Inc. Berhad ("TRI")

10.92 Amendment No. 1 dated as of August 29, 1991 to the US Order, Incorporated
Inc. Stock Restriction Agreement dated as of September 14, by reference
1990 among WorldCorp, Inc., a Delaware corporation
("WorldCorp"), William F. Gorog, Jonathan M. Gorog, Peter M.
Gorog, Henry R. Nichols, William N. Melton and John Porter
(collectively, the "Founders" and each a "Founder"), and the
Employees.

10.93 Amendment No. 2 dated as of March 31, 1993 to the US Order, Incorporated
Inc. Stock Restriction Agreement dated as of September 14, by reference
1990 among WorldCorp, Inc., a Delaware corporation
("WorldCorp"), William F. Gorog, Jonathan M. Gorog, Peter
M. Gorog, Henry R. Nichols, William N. Melton and John Porter
(collectively, the "Founders" and each a "Founder"), and
the Employees.
</TABLE>

85
<PAGE>

<TABLE>
<S> <C> <C>
10.94 Stock Option Agreement dated as of August 1, 1994 Incorporated
("Grant Date") between WorldCorp, Inc. and William F. Gorog. by reference

10.95 Employment Agreement dated as of August 1, 1994 between US Incorporated
Order, Inc. and John C. Backus, Jr. by reference

10.96 Employment Agreement dated as of August 19, 1994 between Incorporated
WorldCorp, Inc. and T. Coleman Andrews, III. by reference

10.97 Stock Option Agreement dated as of August 19, 1994 ("Grant Incorporated
Date") by and between WorldCorp, Inc. and T. Coleman by reference
Andrews, III.

10.98 Agreement between World Airways, Inc. and the International Incorporated
Brotherhood of Teamsters representing the Cockpit Crewmembers by reference
employed by World Airways, Inc. dated August 15,
1994-June 30, 1998.

10.99 Letter Employment Agreement of William F. Gorog dated August Incorporated
25, 1994. by reference

10.100 Amendment No. 3 dated as of September 1, 1994 to the US Order, Incorporated
Inc. Stock Restriction Agreement dated as of September 14, by reference
1990 among WorldCorp, Inc., a Delaware corporation
("WorldCorp"), William F. Gorog, Jonathan M. Gorog, Peter
M. Gorog, Henry R. Nichols, William N. Melton and John Porter
(collectively, the "Founders" and each a "Founder"), and
the Employees.

10.101 Aircraft Services Agreement dated September 26, 1994 by Incorporated
and between World Airways, Inc. ("World") and Malaysian by reference
Airlines.

10.102 Freighter Services Agreement dated October 1, 1994 by and Incorporated
between World Airways, Inc. and Malaysian Airline System by reference
Berhad.

10.103 World Airways, Inc. 1995 AMC Contract F11626-94-D0027 dated Incorporated
October 1, 1994 between World Airways, Inc. and Air Mobility by reference
Command.

10.104 Amendment No. 4 dated as of December 1, 1994 to the US Incorporated
Order, Inc. Stock Restriction Agreement dated as of September by reference
14, 1990 among WorldCorp, Inc., a Delaware corporation
("WorldCorp"), William F. Gorog, Jonathan M. Gorog, Peter M.
Gorog, Henry R. Nichols, William N. Melton and John Porter
(collectively, the "Founders" and each a "Founder"), and
the Employees.

10.105 Stock Purchase Agreement (the "Agreement") dated as of Incorporated
December 31, 1994 by and between MHS Berhad, a Malaysian by reference
corporation (the "Shareholder") and WorldCorp, Inc., a
Delaware corporation (the "Purchaser").

10.106 Promissory Note dated December 31, 1994 for $8,500,000 Incorporated
between WorldCorp, Inc., a Delaware corporation ("Borrower") by reference
and Malaysian Helicopter Services Berhad, a Malaysian
corporation ("Lender").

10.107 Amendment No. 1 to Passenger Aircraft Services and Freighter Incorporated
Services Agreement dated December 31, 1994 by and between by reference
World Airways, Inc. and Malaysian Airline System Berhad.

10.108 Amendment No. 5 dated January 2, 1995 to the US Order, Inc. Incorporated
Stock Restriction Agreement dated as of September 14, 1990 by reference
among WorldCorp, Inc., a Delaware corporation ("WorldCorp"),
William F.
</TABLE>

86
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<TABLE>
<S> <C> <C>
Gorog, Jonathan M. Gorog, Peter M. Gorog, Henry R. Nichols,
William N. Melton and John Porter (collectively, the
"Founders" and each a "Founder"), and the Employees.

10.109 Customer Agreement between WorldCorp ESSOP and Scott & Incorporated
Stringfellow, Inc. dated January 11, 1995 for a margin loan. by reference

10.110 Side Letter dated January 11, 1995 from Scott & Stringfellow, Incorporated
Inc. to William F. Gorog, Trustee of WorldCorp Employee by reference
Savings and Stock Ownership Plan for a margin loan to
the WorldCorp ESSOP.

10.111 Guarantee Agreement dated January 11, 1995 by WorldCorp, Inc. Incorporated
("Guarantor") for the benefit of Scott & Stringfellow, Inc. by reference
(the "Lender").

10.112 Registration Rights Agreement dated as of January 11, 1995 by Incorporated
and between WorldCorp, Inc. and Scott & Stringfellow, Inc. by reference

10.113 Side Letter dated January 11, 1995 from WorldCorp, Inc. to Incorporated
Scott & Stringfellow, Inc. regarding commitment to make by reference
contributions to the WorldCorp Employee Savings and Stock
Ownership Plan (the "ESSOP"), for the duration of the Scott
& Stringfellow loan to the ESSOP.

10.114 Strategic Alliance Agreement dated January 16, 1995 by and Incorporated
between Colonial Data Technologies Corp. and US Order. by reference

10.115 Amendment No. 2 to Passenger Aircraft Services and Freighter Incorporated
Aircraft Service Agreement dated February 9, 1995 by and by reference
between World Airways, Inc. and Malaysian Airline System
Berhad.

11.1 Statement on Calculation of Earnings (Loss) Per Common Filed Herewith
Share.

22.1 Subsidiaries of the Registrant WorldCorp, Inc. Filed Herewith

23.1 Consent of Independent Auditors Filed Herewith
</TABLE>

/1/ Confidential treatment of portions of the Agreement has been
granted by the Commission. The copy filed as an exhibit omits
the information subject to confidentiality request.
Confidential portions so omitted have been filed separately
with the Commission.

(b) Reports on Form 8-K

Form 8-K dated June 8, 1995, was filed with the Securities and
Exchange Commission on June 9, 1995.

Form 8-K/A dated June 8, 1995, was filed with the Securities and
Exchange Commission on August 2, 1995.

Form 8-K dated September 13, 1995, was filed with the Securities and
Exchange Commission on September 13, 1995.
* * * * * * * * * * *

87
<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 duly authorized.

WORLDCORP, INC.

By /s/ T. Coleman Andrews, III
---------------------------
T. Coleman Andrews, III
Chief Executive Officer, President, and
Principal Accounting Officer

Pursuant to the requirements of the Securities 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>
Signature Title Date
- --------- ----- ----

<S> <C> <C>
/s/ T. Coleman Andrews, III Chief Executive Officer, March 31, 1995
- ---------------------------
(T. Coleman Andrews, III) President, and Principal
Accounting Officer

/s/ William F. Gorog Director and March 31, 1995
- --------------------
(William F. Gorog) Chairman of the Board

/s/ John C. Backus, Jr. Director March 31, 1995
- -----------------------
(John C. Backus, Jr.)

/s/ James E. Colburn Director March 31, 1995
- --------------------
(James E. Colburn)

/s/ Patrick F. Graham Director March 31, 1995
- ---------------------
(Patrick F. Graham)

/s/ Juan C. O'Callahan Director March 31, 1995
- ----------------------
(Juan C. O'Callahan)

/s/ Geoffrey S. Rehnert Director March 31, 1995
- -----------------------
(Geoffrey S. Rehnert)
</TABLE>

88
<PAGE>

SCHEDULE I

WORLDCORP, INC.
CONDENSED BALANCE SHEETS
ASSETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents, including restricted
short-term investments of $6 at December 31,
1995 and $4 at December 31, 1994 $ 24,050 $ 1,536

Other receivables 552 971

Prepaid expenses and other current assets 715 997
------ ------

Total current assets 25,317 3,504
------ ------

EQUIPMENT AND PROPERTY
Equipment 3,075 3,063
Equipment under capital leases 173 173
------ ------
3,248 3,236
Less accumulated depreciation and amortization 2,474 2,061
------ ------

Net equipment and property 774 1,175
------ ------

INVESTMENT IN SUBSIDIARIES 40,854 (3,903)

OTHER ASSETS AND DEFERRED CHARGES, NET 2,904 4,774

NOTE RECEIVABLE FROM SUBSIDIARY -- 3,500

INTANGIBLE ASSETS, NET 2,591 7,161
------ ------

TOTAL ASSETS $ 72,440 $ 16,211
====== ======
</TABLE>
(Continued)

<PAGE>
SCHEDULE I
(continued)

WORLDCORP, INC.
CONDENSED BALANCE SHEETS
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
(CONTINUED)

<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES
Note payable $ -- $ 8,500
Current maturities of long-term obligations 1,410 37
Accounts payable 421 617
Accrued salaries and wages 1,349 2,219
Accrued interest 1,877 1,877
Accrued taxes (250) 160
-------- ---------
Total current liabilities 4,807 13,410
-------- ---------

LONG-TERM OBLIGATIONS, NET
Subordinated convertible debt 65,000 65,000
Subordinated notes, net 24,961 24,942
Other long-term obligations 969 1,007
-------- ---------
Total long-term obligations, net 90,930 90,949
-------- ---------

OTHER LIABILITIES -- 45
-------- ---------

TOTAL LIABILITIES 95,737 104,404
-------- ---------

COMMON STOCKHOLDERS' DEFICIT
Common stock, $1 par value, (60,000,000 shares authorized,
16,416,134 shares issued and 16,353,549 shares outstanding
at December 31, 1995 and 15,491,699 shares issued and
15,429,114 shares outstanding at December 31, 1994) 16,354 15,492
Additional paid-in capital 42,210 37,563
Deferred compensation (553) (1,102)
Accumulated deficit (79,598) (139,806)
ESOP guaranteed bank loan (1,370) --
Treasury stock, at cost (340) (340)
-------- ---------

TOTAL COMMON STOCKHOLDERS' DEFICIT (23,297) (88,193)
-------- ---------

COMMITMENTS AND CONTINGENCIES

TOTAL LIABILITIES AND COMMON STOCKHOLDERS'
DEFICIT $ 72,440 $ 16,211
======== =========
</TABLE>

See accompanying Notes to Condensed Financial Statements
<PAGE>

SCHEDULE I
(CONTINUED)

WORLDCORP, INC.
CONDENSED STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------
1995 1994 1993
----------- ---------- -----------
<S> <C> <C> <C>
OPERATING EXPENSES
General and administrative 4,334 3,614 4,288
Loss on sale of Key Airlines -- -- 833
------- ------- --------

Total operating expenses 4,334 3,614 5,121
------- ------- --------

OPERATING LOSS (4,334) (3,614) (5,121)
------- ------- --------

OTHER INCOME (EXPENSE)
Interest expense (9,071) (8,354) (8,419)
Interest income 1,263 900 3,291
Equity in earnings (loss) of subsidiaries 4,612 (7,152) (20,594)
Gain on sales of equity by subsidiaries 43,676 10,524 --
Gain on sales of subsidiaries' stock 23,717 16,398 --
Other, net 404 (279) 2
------- ------- --------
Total other income (expense) 64,601 12,037 (25,720)
------- ------- --------

EARNINGS (LOSS) BEFORE INCOME TAXES 60,267 8,423 (30,841)

INCOME TAX EXPENSE (59) (115) (104)
------- ------- --------

NET EARNINGS (LOSS) $ 60,208 $ 8,308 $ (30,945)
======= ======= ========
</TABLE>

See accompanying Notes to Condensed Financial Statements
<PAGE>

SCHEDULE I
WORLDCORP, INC. (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR $ 1,536 $ 2,388 $ 893

CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) 60,208 8,308 (30,945)
Adjustments to reconcile net earnings (loss) to cash
used by operating activities:
Depreciation and amortization 1,368 457 1,208
Gain on sales of equity by subsidiaries (43,676) (10,524) --
Gain on sales of subsidiaries' stock (23,717) (16,398) --
Equity in (earnings) loss of subsidiaries (4,612) 7,152 20,594
Deferred compensation expense 678 1,115 --
Other (827) 52 (1,254)
Changes in certain assets and liabilities net of
effects of non-cash transactions:
Decrease in accounts receivable 419 852 2,072
(Increase) decrease in prepaid expenses and 1,862 (1,537) 4,504
other assets
Increase (decrease) in accounts payable, accrued
expenses and other liabilities (1,521) (5,569) 5,938
------- ------- -------
Net cash provided (used) by operating activities (9,818) (16,092) 2,117
------- ------- -------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to equipment and property (12) (199) (492)
Proceeds from disposal of equipment and property -- 609 --
Purchase of investments (282) (400) (4,708)
Proceeds from sales of short-term investments, net -- -- 3,000
Proceeds from collection of note receivable from
subsidiary 3,500 -- --
Loan to subsidiary -- -- (3,500)
------- ------- -------
Net cash provided (used) by investing activities 3,206 10 (5,700)
------- ----- -------

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of debt -- 20 1,058
Repayment of debt (9,648) (1,768) (3,564)
Proceeds from stock transactions 3,064 1,428 4,884
Proceeds from sales of subsidiaries' stock 28,986 12,300 2,700
Proceeds from redemption of preferred stock in subsidiary 4,300 3,250 --
Dividends from subsidiary 2,424 -- --
------- ------ -------
Net cash provided by financing activities 29,126 15,230 5,078
------- ------- -------

NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 22,514 (852) 1,495
------- ------- -------

CASH AND CASH EQUIVALENTS AT END
OF YEAR $ 24,050 $ 1,536 $ 2,388
======= ======= =======
</TABLE>

See accompanying Notes to Condensed Financial Statements
<PAGE>

SCHEDULE 1
(Continued)

WORLDCORP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1995

A. The condensed financial statements of WorldCorp, Inc. (parent company)
include its wholly owned subsidiaries and should be read in conjunction
with the consolidated financial statements and accompanying notes thereto
of WorldCorp, Inc, and subsidiaries for the year ended December 31, 1995.

B. The parent company's long-term obligations at December 31 are as follows
(in thousands):

<TABLE>
<CAPTION>
1995 1994
--------- ----------
<S> <C> <C>
Guaranteed bank loan due 1996 -- with interest at the call loan rate plus
1.5% (8.45% at December 31, 1995), collateralized by 286,681 shares of
WorldCorp common stock held by the WorldCorp Employee Savings and Stock
Ownership Plan. 1,370 --

Unsecured promissory note due 1997 -- with interest at 6% payable quarterly
beginning May 8, 1994. 900 900

13 7/8% Subordinated Notes due August 15, 1997 -- interest payable
semi-annually beginning February 15, 1988 (net of unamortized discount
of $0.1 million in 1995 and 1994). 24,961 24,942

Convertible Subordinated Debentures due 2004 -- with interest at 7% payable
semi-annually beginning May 15, 1992. The Debentures are convertible
into WorldCorp common stock at $11.06 per share subject to adjustment in
certain events. 65,000 65,000

Capitalized lease obligations 109 144
------ ------

Total 92,340 90,986

Less: current maturities 1,410 37
------- ------

Total long-term obligations, net $ 90,930 $ 90,949
======== =======
</TABLE>

See Note 12 of the Company's "Notes to Consolidated Financial Statements"
for further description of the above obligations.

The following table shows the aggregate amount of scheduled principal
maturities (in thousands) of debt outstanding at December 31, 1995:

<TABLE>
<S> <C>
1996 $ 1,410
1997 25,906
1998 24
1999 --
2000 --
Thereafter 65,000
------
Total $ 92,340
======
</TABLE>
<PAGE>

SCHEDULE II

WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

(IN THOUSANDS)

<TABLE>
<CAPTION>
Balance at Charged to Deductions Balance
beginning costs and charged to at end of
of period expenses reserve period
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
- -------------------------------

Year ended December 31, 1995 $ 81 $ 414 $ 173 $ 322
====== ======= ====== ======

Year ended December 31, 1994 $ 311 $ 436 $ 666 $ 81
====== ======= ====== ======

Year ended December 31, 1993 $ 15 $ 309 $ 13 $ 311
====== ======= ====== ======

Valuation Allowance for
Deferred Tax Assets
- -------------------------------

Year ended December 31, 1995 $ 13,973 $ -- $ 3,817 $ 10,156
====== ===== ====== ======

Year ended December 31, 1994 $ 73,003 $ -- $ 59,030 $ 13,973
====== ===== ====== ======

Year ended December 31, 1993 $ 64,443 $ 8,560 $ -- $ 73,003
====== ===== ====== ======
</TABLE>

<PAGE>

EXHIBIT 11.1

WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
CALCULATION OF EARNINGS (LOSS) PER COMMON SHARE
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Net earnings (loss) applicable to
common stock $ 60,208 $ 8,308 $ (30,945)
========== ========== ==========

Weighted average common shares outstanding 15,988,365 15,277,954 14,590,265
Weighted average options and warrants treated
as common stock equivalents 1,115,304 238,109 --
---------- ---------- ----------

Primary number of shares 17,103,669 15,516,063 14,590,265

Incremental weighted average options and
warrants treated as common stock
equivalents for fully diluted purposes 5,891,197 276,983 --
---------- ---------- ----------

Fully diluted number of shares 22,994,866 15,793,046 14,590,265
========== ========== ==========

Net earnings (loss) per share:
Primary $ 3.52 $ 0.54 $ (2.12)
==== ==== =====
Fully-diluted $ 2.82 $ 0.53 $ *
==== ==== =====
</TABLE>

* Fully diluted earnings per share are anti-dilutive

<PAGE>

EXHIBIT 22.1

WORLDCORP, INC. AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
Name Jurisdiction
---- ------------
<S> <C>
World Airways, Inc. Delaware

World Airways Cargo, Inc. Delaware

WorldCorp Investments, Inc. Delaware

World Flight Crew Services, Inc. Delaware

WorldGames, Inc. Delaware

US Order, Inc. Delaware
</TABLE>

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS
WORLDCORP, INC.:

We consent to the incorporation by reference in the registration statements
(Nos. 33-44245, 33-46443, 33-62864, 33-57247 and 33-60247) on Form S-3 and
registration statement (No. 33-33468) on Form S-8 of WorldCorp, Inc. of our
report dated March 18, 1996, relating to the consolidated balance sheets of
WorldCorp, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, changes in common stockholders'
deficit and cash flows for each of the years in the three-year period ended
December 31, 1995 , and the related financial statement schedules, which report
appears in the December 31, 1995 annual report on Form 10-K of WorldCorp, Inc.

KPMG PEAT MARWICK LLP

WASHINGTON, D.C.
MARCH 29, 1996

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 74,443
<SECURITIES> 0
<RECEIVABLES> 15,779
<ALLOWANCES> 322
<INVENTORY> 0
<CURRENT-ASSETS> 110,924
<PP&E> 72,528
<DEPRECIATION> 17,878
<TOTAL-ASSETS> 202,089
<CURRENT-LIABILITIES> 71,302
<BONDS> 0
0
0
<COMMON> 16,354
<OTHER-SE> (39,651)
<TOTAL-LIABILITY-AND-EQUITY> (23,297)
<SALES> 0
<TOTAL-REVENUES> 263,668
<CGS> 0
<TOTAL-COSTS> 249,140
<OTHER-EXPENSES> 59,392
<LOSS-PROVISION> 414
<INTEREST-EXPENSE> 12,586
<INCOME-PRETAX> 60,129
<INCOME-TAX> 355
<INCOME-CONTINUING> 60,208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,208
<EPS-PRIMARY> 3.52
<EPS-DILUTED> 2.82

</TABLE>