UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
----------------------------------------------
Date of Report (Date of earliest event reported): January 6, 1998
MEDICAL INDUSTRIES OF AMERICA, INC.
(Exact name of registrant as specified in its Charter)
FLORIDA 0-20356 65-0158479
(State of other jurisdiction (Commission file no.) (IRS Employer ID
of incorporation) Number)
1903 S. CONGRESS AVENUE, SUITE 400, BOYNTON BEACH, FLORIDA 33426
(Address of principal executive offices)
Registrant's telephone number, including area code: 561-737-2227
<PAGE>
Item 2. Acquisition and Disposition of Assets
(a) Description of Acquisitions
On January 6, 1998, the Company through MIOA Acquisition Company I, Inc.
(a wholly owned subsidiary of Medical Industries of America) entered into an
Exchange agreement effective December 31, 1997, with Global Air Rescue, Inc. The
Company received 100% of the outstanding stock of Global Air Rescue, Inc. for
restricted common shares of the Company. The number of shares to be issued is
based on the difference between the appraised value of owned aircraft and
related liabilities divided by $1.50 per share. The total restricted common
shares issued under this agreement is 2,174,285.
On January 6, 1998, the Company through MIOA Acquisition Company I, Inc.
entered into an Exchange Agreement, effective December 31, 1997, with Global Air
Charter, Inc. The Company received 100% of the outstanding stock of Global Air
Charter, Inc. for 1,432,000 shares of the Company's restricted common stock.
The Company entered into employment agreements with two of the original
shareholders providing them with an option to acquire up to 49% of the
outstanding stock in MIOA Acquisition Company I, Inc. at 85% of the book value
determined at the time an IPO is undertaken.
On January 6, 1998, the Company through MIOA Acquisition Company II, Inc.
( a wholly owned subsidiary of Medical Industries of America) entered into an
Exchange Agreement, effective December 31, 1997, to purchase a 51% interest in
Clearwater Jet Center, Inc. in exchange for 3,000 shares of the MIOA's
restricted common stock.
Item 7. Financial Statements, Pro forma Financial Information and
Exhibits
(a) Audited combined financial statements of Global Air Rescue, Inc. and
Global Air Charter, Inc. as of December 31, 1997 and 1996 and the
years then ended.
December 31, 1997
Report of: Combined balance sheets
Combined statements of operations
Combined statements of changes in stockholder's deficit
Combined statements of cash flows
Notes to financial statements
(b) Pro forma financial information required pursuant to Article II of
Regulation S-X:
Pro forma Condensed Combined Balance Sheet as of December 31, 1997
Proforma Condensed Statement of Income (loss) for the twelve months
ended December 31, 1997.
The unaudited pro forma condensed balance sheet as of December
31, 1997 and the unaudited pro forma condensed statement of income
(loss) for the twelve months ended December 31, 1997 give effect to
the acquisition, accounted for as a purchase, as if it had occurred
on January 1, 1997. The pro forma information is based on historical
financial statements of Global Air Charter, Inc., Global Air Rescue,
Inc., Clearwater Jet Center, Inc. and Medical Industries of America,
Inc. after giving effect to the proposed transaction using the
purchase method of accounting and the assumptions and adjustments in
the accompanying notes to the pro forma financial statements. The
pro forma financial statements have been prepared on the basis of
preliminary estimates.
<PAGE>
The pro forma statements have been prepared by Medical
Industries of America, Inc., based upon the financial statements of
Global Air Rescue, Inc., Global Air Charter, Inc. and Clearwater Jet
Center, Inc., which have been provided by Global Air Rescue, Inc.,
Global Air Charter, Inc. and Clearwater Jet Center, Inc. These pro
forma statements may not be indicative of the results that actually
would have occurred if the combination had been in effect on the
dates indicated or which may be obtained in the future. The pro
forma financial statements should be read in conjunction with the
audited financial statements and notes to the Global Air Rescue,
Inc. and Global Air Charter, Inc. audited financial statements.
(c) Exhibits
Exhibit Number Description
2 Share Exchange Agreement between MIOA Acquisition
Company I, Inc. and Global Air Rescue, Inc.*
2.1 Share Exchange Agreement between MIOA Acquisition
Company I, Inc. and Global Air Charter, Inc.*
2.2 Share Exchange Agreement between MIOA Acquisition
Company II, Inc. and Clearwater Jet Center, Inc.*
2.3 Employment agreement with Chris Doscher*
2.4 Employment agreement with Blaise Sciarra*
* Previously filed as an exhibit to the Company's Form 8K dated January 6, 1998.
Date: 4-21-98 MEDICAL INDUSTRIES OF AMERICA, INC.
By: /s/ ARTHUR KOBRIN
Arthur Kobrin
Chief Financial Officer
<PAGE>
Medical Industries of America, Inc.
Pro Forma Condensed Combined Balance Sheet (Unaudited)
As of December 31, 1997
<TABLE>
<CAPTION>
MEDICAL
INDUSTRIES GLOBAL AIR GLOBAL AIR CLEARWATER PRO FORMA PRO FORMA
Assets OF AMERICA RESCUE CHARTER JET CENTER ADJUSTMENTS COMBINED
---------- ----------- ----------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash ............................. $ 915,381 $ 921 $ 38,533 $ 2,611 $ -- $ 957,446
Accounts Receivable .............. 937,481 55,445 590,610 -- (121,382)(b) 1,462,154
Current portion of notes
and mortgages receivables ...... 611,677 -- -- -- -- 611,677
Inventories ...................... 53,071 -- -- -- -- 53,071
Prepaid expenses and other
current assets ................. 355,553 -- 49,912 -- -- 405,465
---------- ----------- ----------- -------- ----------- ------------
Total current assets ......... 2,873,163 56,366 679,055 2,611 (121,382) 3,489,813
Property and equipment, net ...... 803,539 3,597,269 85,766 22,647 4,777,804(a) 9,287,025
Notes and mortgages
receivables, less
current maturity ............... 1,820,377 -- -- -- -- 1,820,377
Goodwill ......................... 2,482,826 -- -- 3,000 1,290,371(a) 3,776,197
Investment in equity
securities ....................... 1,412,813 -- -- -- -- 1,412,813
Other assets ..................... 139,360 33,014 96,340 800 -- 269,514
License .......................... -- -- -- -- 1,000,000(a) 1,000,000
---------- ----------- ----------- -------- ----------- ------------
Total assets ................. $9,532,078 $ 3,686,649 $ 861,161 $ 29,058 $ 6,946,793 $ 21,055,739
========== =========== =========== ======== =========== ============
Liabilities and
Shareholders' Equity
Accounts payable ................. $ 200,111 $ -- $ 669,338 $ -- $ 4,324(a) $ 818,328
(55,445)(b)
Accrued liabilities .............. 1,062,264 22,387 61,189 354 -- 1,146,194
Current portion of notes
payable & long-term debt ....... 957,416 1,496,803 -- -- -- 2,454,219
Current portion of capital
lease obligations .............. 54,265 -- 3,786 -- -- 58,051
Inter-company payable ............ -- 18,700 -- 47,237 (65,937)(b) -0-
---------- ----------- ----------- -------- ----------- ------------
Total current liabilities .... 2,274,056 1,537,890 734,313 47,591 (117,058) 4,476,792
---------- ----------- ----------- -------- ----------- ------------
Notes payable & long-term
debt, net of current
portion ........................ 654,708 3,525,902 -- -- -- 4,180,610
Convertible subordinated
debentures ..................... 400,000 -- -- -- -- 400,000
Capital lease obligations,
net of current portion ......... 12,781 -- -- -- -- 12,781
Payable to officers .............. -- 75,000 306,096 -- -- 381,096
---------- ----------- ----------- -------- ----------- ------------
Total long term
liabilities .............. 1,067,489 3,600,902 306,096 -- -- 4,974,487
---------- ----------- ----------- -------- ----------- ------------
Total liabilities .......... 3,341,545 5,138,792 1,040,409 47,591 (117,058) 9,451,279
---------- ----------- ----------- -------- ----------- ------------
Shareholders' equity ....... 6,190,533 (1,452,143) (179,248) (18,533) 7,063,851(a) 11,604,460
---------- ----------- ----------- -------- ----------- ------------
Total liabilities and
Shareholders' equity ..... $9,532,078 $ 3,686,649 $ 861,161 $ 29,058 $ 6,946,793 $ 21,055,739
========== =========== =========== ======== =========== ============
</TABLE>
<PAGE>
Medical Industries of America, Inc.
Pro Forma Condensed Combined Statement of Income (Loss) (Unaudited)
For the year ended December 31, 1997
<TABLE>
<CAPTION>
MEDICAL
INDUSTRIES GLOBAL AIR GLOBAL AIR CLEARWATER PRO-FORMA PRO FORMA
OF AMERICA RESCUE CHARTER JET CENTER ADJUSTMENTS COMBINED
----------- ----------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue
Revenue ............................ $ 4,529,461 $ 920,065 $6,041,419 $ 9,159 $(919,000)(b) $ 10,581,104
Interest income .................... 182,757 -- -- -- -- 182,757
----------- ----------- ---------- -------- --------- ------------
Total revenue .................. 4,712,218 920,065 6,041,419 9,159 (919,000)(b) 10,763,861
----------- ----------- ---------- -------- --------- ------------
Expenses
Cost of revenue .................... 2,924,840 -- 5,003,157 20,637 (919,000)(b) 7,029,634
General and administrative
expenses ........................ 2,054,034 19,545 817,489 15,954 -- 2,907,022
Depreciation and
amortization .................... 338,306 803,426 44,621 -- 400,000(c) 1,586,353
Interest expense ................... 147,732 519,517 20,766 -- -- 688,015
Other .............................. 400,000 -- -- -- -- 400,000
----------- ----------- ---------- -------- --------- ------------
Total expenses ................. 5,864,912 1,342,488 5,886,033 36,591 (519,000) 12,611,024
----------- ----------- ---------- -------- --------- ------------
Net (loss) Income ..................... $(1,152,694) $ (422,423) $ 155,386 $(27,432) $(400,000) $ (1,847,163)
=========== =========== ========== ======== ========= ============
(Loss) income per share ............... $ (0.21) $ (0.19) $ 0.11 $ (9.14) $ -- $ (0.20)
=========== =========== ========== ======== ========= ============
Weighted average common shares
outstanding ........................ 5,476,495 2,174,285 1,432,000 3,000 -- 9,085,780
=========== =========== ========== ======== ========= ============
</TABLE>
<PAGE>
Medical Industries of America, Inc.
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
(a) The following pro forma adjustments are made to reflect estimated fair value
adjustments at December 31, 1997 between Medical Industries and Global Air
Rescue, Inc., Global Air Charter, Inc. and Clearwater Jet Center, Inc.
Fair value adjustments
Goodwill ............. $ 1,290,371
License .............. 1,000,000
Aircraft ............. 4,777,804
Accounts payable ..... (4,324)
-----------
$ 7,063,851
===========
(b) The following pro forma adjustments reflect Intercompany adjustments between
Clearwater Jet Center, Inc. and Global Air Rescue, Inc. and Global Air Charter,
Inc.
Accounts receivable .. $121,382
--------
Accounts payable ..... $ 55,445
--------
Intercompany payable . $ 65,937
--------
Revenue .............. $919,000
--------
Cost of Revenue ..... $919,000
--------
(c) The following pro forma adjustment is made to reflect additional
depreciation on the aircraft based on its fair market value.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Boards of Directors
Global Air Rescue, Inc. and Global Air Charter, Inc.
Clearwater, Florida
We have audited the accompanying combined balance sheets of Global Air
Rescue, Inc. (a Delaware corporation) and Global Air Charter, Inc., (a Florida
corporation) as of December 31, 1997 and 1996, and the related combined
statements of operations, operating expenses, changes in stockholders' deficit,
and cash flows for the years then ended, in accordance with standards
established by the American Institute of Certified Public Accountants. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 combined financial statements referred to above
present fairly, in all material respects, the financial position of Global Air
Rescue, Inc. and Global Air Charter, Inc. as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Moore, Oklahoma MURRELL, HALL, MCINTOSH & CO., PLLP
March 12, 1998
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Balance Sheets
December 31, 1997 and 1996
ASSETS
1997 1996
----------- -----------
Current Assets
Cash ................................... $ 39,454 $ 31,995
Accounts Receivable (net of
allowance for uncollectible
accounts in 1997 of $32,480
and 1996 of $3,200) ................. 569,056 448,836
Receivable from Employees .............. 2,854 19,864
Current Note Receivable ................ -- 25,100
Prepaid Expenses ....................... 49,912 55,012
----------- -----------
Total Current Assets ....................... $ 661,276 $ 580,807
----------- -----------
Property and Equipment, at Cost
Aircraft ............................... $ 5,967,463 $ 5,419,307
Furniture and Fixtures ................. 8,207 6,455
Office Equipment ....................... 92,981 65,952
Avionics ............................... 117,429 48,175
Medical Equipment ...................... 112,335 99,412
Leasehold Improvements ................. 12,657 12,657
Ground Support Equipment ............... 4,875 4,308
----------- -----------
$ 6,315,947 $ 5,656,266
Less Accumulated Depreciation .......... (2,632,912) (1,788,165)
----------- -----------
Net Property and Equipment ................. $ 3,683,035 $ 3,868,101
----------- -----------
Other Assets
Intangible Assets, Net of Accumulated
Amortization of $3,425 in 1997
and $125 in 1996 .................. $ 30,015 $ 315
European Start-Up Costs ................ 78,981 --
Deposits ............................... 20,358 17,858
----------- -----------
Total Other Assets ......................... $ 129,354 $ 18,173
----------- -----------
Total Assets ............................... $ 4,473,665 $ 4,467,081
----------- -----------
See Accompanying Notes to Financial Statements
<PAGE>
LIABILITIES AND STOCKHOLDER'S DEFICIT
1997 1996
----------- -----------
Current Liabilities
Accounts Payable ..................... $ 613,892 451,408
Accrued Salaries ..................... 38,418 37,736
Employment and Sales Taxes Payable ... 45,158 17,940
Current Portion of Long-Term Debt .... 1,500,589 573,865
----------- -----------
Total Current Liabilities .................... $ 2,198,057 $ 1,080,949
----------- -----------
Long-Term Liabilities
Long-Term Debt, Net of Current Portion $ 3,525,902 $ 3,912,436
Payable to Officers .................. 381,096 97,000
----------- -----------
Total Long-Term Liabilities .................. $ 3,906,998 $ 4,009,436
----------- -----------
Total Liabilities ............................ $ 6,105,055 $ 5,090,385
----------- -----------
Commitments and Contingent Liabilities ....... -- --
Stockholder's Deficit
Common Stock ......................... $ 750 $ 750
Capital Paid in Excess of Par Value .. 2,000 2,000
Retained Deficit ..................... (1,634,140) (626,054)
----------- -----------
Total Stockholder's Deficit .................. $(1,631,390) $ (623,304)
----------- -----------
Total Liabilities and Stockholder's Deficit .. $ 4,473,665 $ 4,467,081
=========== ===========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Statements of Operations
For the Years Ended December 31, 1997 and 1996
1997 1996
----------- -----------
Revenue
Charter Fees ...................... $ 5,786,449 $ 4,763,387
Medical and Other Fees ............ 246,713 208,400
Discounts ......................... (41,655) (15,530)
----------- -----------
Total Revenue, Net of Discounts .............. $ 5,991,507 $ 4,956,257
----------- -----------
Other Income
Interest/Dividends ................ $ 896 $ --
Miscellaneous ..................... 50,081 6,059
----------- -----------
Total Other Income ........................... $ 50,977 $ 6,059
----------- -----------
Total Revenue and Other Income ............... $ 6,042,484 $ 4,962,316
----------- -----------
Direct Costs
Fuel .............................. $ 1,287,996 $ 1,286,986
Aircraft and Engine Maintenance ... 943,789 651,332
Crew Salaries ..................... 711,943 578,686
Crew Travel Expenses .............. 201,759 139,935
Maintenance Salaries .............. 153,148 98,344
Employee Benefits ................. 96,763 84,119
Insurance ......................... 76,797 57,312
Continuing Education .............. 15,796 26,508
Rent-Hangar ....................... 45,548 50,762
Charts and Approach Plate-Update .. 17,855 25,840
Aircraft Rental ................... 62,050 10,055
Aircraft and Medical Supplies ..... 35,024 25,406
International Charges ............. 310,234 241,849
Other Costs ....................... 125,455 83,211
----------- -----------
Total Direct Costs ........................... $ 4,084,157 $ 3,360,345
----------- -----------
Gross Profit ................................. $ 1,958,327 $ 1,601,971
Operating Expenses ........................... 2,225,364 2,020,330
----------- -----------
Net Loss ..................................... $ (267,037) $ (418,359)
=========== ===========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Statements of Operating Expenses
For the Years Ended December 31, 1997 and 1996
1997 1996
---------- ----------
Operating Expenses
Salaries - Administration ............... $ 315,683 $ 222,696
Employee Benefits ....................... 35,734 49,923
Uniforms ................................ 6,525 9,749
Accounting and Consulting ............... 33,724 2,366
Legal Expenses .......................... 9,841 14,570
Travel, Meals, and Entertainment ........ 49,772 41,577
Taxes, Licenses and Fees ................ 58,574 47,739
Repairs and Maintenance ................. 10,303 16,496
Office Expense .......................... 33,684 29,175
Postage and Express Charges ............. 14,945 9,606
Bank and Credit Card Fees ............... 10,138 9,180
Bad Debt Expense ........................ 49,356 24,268
Dues, Memberships and Subscriptions ..... 8,205 10,451
Miscellaneous ........................... 13,315 10,131
Rent - Office ........................... 30,000 30,000
Utilities ............................... 9,288 7,019
Insurance ............................... 12,856 3,698
Telephone, Pagers, Answering Service .... 87,275 72,749
Commissions ............................. 24,154 15,658
European Start-up Costs ................. 23,662 118,308
Interest Expense ........................ 540,283 486,149
Depreciation Expense .................... 844,747 788,822
Amortization Expense .................... 3,300 --
---------- ----------
Total Operating Expenses ........................... $2,225,364 $2,020,330
========== ==========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Statements of Changes in Stockholder's Deficit
For the Years Ended December 31, 1997 and 1996
Capital
Paid In
Common Excess of Retained
Stock Par Value Deficit
---- ------ ------------
Balance, December 31, 1995 ....... $750 $2,000 $ (164,695)
Net Loss ......................... -- -- (418,359)
Distributions .................... -- -- (43,000)
---- ------ -----------
Balance, December 31, 1996 ....... $750 $2,000 $ (626,054)
Net Loss ......................... -- -- (267,037)
Distributions .................... -- -- (741,049)
---- ------ -----------
Balance, December 31, 1997 ....... $750 $2,000 $(1,634,140)
==== ====== ===========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Statements of Cash Flows
For the Years Ended December 31, 1997 and 1996
1997 1996
--------- ---------
Cash Flows From Operating Activities
Net Loss .................................. $(267,037) $(418,359)
Noncash Items Included in Net Loss
Depreciation and Amortization ... 848,047 788,822
Bad Debt Provision .............. 49,356 24,268
Net (Increase) Decrease in:
Receivables ..................... (152,567) (25,230)
Prepaid Expenses ................ 5,100 202
Net Increase (Decrease) in:
Accounts Payable ................ 162,484 77,628
Accrued Liabilities ............. 27,900 (14,068)
--------- ---------
Net Cash Provided by Operating Activities ............ $ 673,283 $ 433,263
--------- ---------
Cash Flows From Investing Activities
Purchase of Property and Equipment ........ $(408,941) $(326,131)
Proceeds of Sale of Property and
Equipment ............................... -- 108,000
(Increase) Decrease in Notes Receivable ... 25,100 (12,968)
(Increase) in Other Assets ................ (114,481) (3,325)
--------- ---------
Net Cash Used by Investing Activities ................ $(498,322) $(234,424)
--------- ---------
Cash Flows From Financing Activities
Proceeds from Long-Term Debt .............. $ 973,900 $ 277,500
Payments on Long-Term Debt ................ (708,035) (435,832)
Distributions to Officers ................. (433,367) (43,000)
--------- ---------
Net Cash Used by Financing Activities ................ $(167,502) $(201,332)
--------- ---------
Net Increase (Decrease) in Cash ...................... $ 7,459 $ (2,493)
Cash at Beginning of Year ............................ 31,995 34,488
--------- ---------
Cash at End of Year .................................. $ 39,454 $ 31,995
========= =========
Supplemental Disclosure of Cash Flow Information
Cash Paid For Interest .................... $ 522,416 $ 486,149
========= =========
Supplemental Schedule of Noncash Investing
and Financing Activities
Total Increase in Property and Equipment .. $ 659,680 $ 766,131
Cash Paid for Property and Equipment ...... (408,941) (326,131)
========= =========
Property and Equipment Acquired through
Debt .................................... $ 250,739 $ 440,000
========= =========
Total Proceeds from Sale of Property
and Equipment ........................... $ -- $ 108,000
========= =========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Notes to Combined Financial Statements
December 31, 1997 and 1996
NOTE 1 -- BUSINESS ENTITY AND NATURE OF OPERATIONS
Global Air Charter, Inc. was incorporated in the state of Florida in 1992.
Global Air Rescue, Inc. was incorporated in the state of Delaware in 1993. The
companies are related by common ownership. Global Air Rescue, Inc. owns aircraft
which it leases to Global Air Charter, Inc. Global Air Charter operates an air
ambulance/charter service headquartered in Clearwater, Florida.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION -- The financial statements include the accounts
of both Global Air Rescue, Inc. and Global Air Charter, Inc. after elimination
of lease transactions between the two companies. (See Note 3)
CASH EQUIVALENTS -- For purposes of reporting cash flows, cash and cash
equivalents include money market accounts and investment instruments purchased
with a maturity of 90 days or less. There are no cash equivalents at December
31, 1997 and 1996.
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.
PROPERTY AND EQUIPMENT -- Property and equipment are carried at cost.
Depreciation is calculated using an accelerated method over their estimated
useful lives ranging from 5 to 7 years. Depreciation expense for December 31,
1997 and 1996 was $844,747 and $788,822 respectively.
AMORTIZATION -- Amortization of loan fees is calculated using the
straight-line method over the life of the loan, ten years.
INCOME TAXES -- The Companies have elected to be taxed under the provisions
of Subchapter S of the Internal Revenue Code through 1997. Under those
provisions, the Companies do not pay Federal corporate income taxes on their
taxable income. Instead, the former stockholders are liable for individual
Federal income taxes on their respective share of the Companies' income or loss.
(See Note 9)
COMPENSATED ABSENCES -- The Companies have no formal compensated absence
policy; therefore no liability for absences has been accrued.
<PAGE>
NOTE 3 -- LEASES
OPERATING LEASES - The companies lease office and hangar space under a
short-term lease with monthly payments of $4,610 through June 30, 1997 and
$4,350 thereafter.
Minimum future lease payments on this lease at December 31, 1997, are as
follows:
1998 26,100
=========
CAPITALIZED LEASES - The companies have acquired equipment under the
provisions of long-term leases. For financial reporting purposes, minimum lease
payments relating to the equipment have been capitalized. The leases are
included with long-term debt. The leased property under capital leases as of
December 31, 1997 and 1996 has a cost of $19,708, accumulated amortization of
$16,302 and $14,032, respectively and a net book value of $3,406 and $5,676,
respectively. Amortization of the leased property is included in depreciation
expense.
The future minimum lease payments under the capital leases and the net
present value of the future minimum lease payments at December 31, 1997 are as
follows:
Total minimum lease payments ................. $4,041
Less amount representing interest ............ 255
------
Present value of net minimum lease payments .. $3,786
Current maturities of capital leases ......... 3,786
------
Long-term capital leases less current maturity $ --
======
INTERCOMPANY LEASES - Global Air Charter, Inc. leases aircraft from Global
Air Rescue, Inc. on a month to month basis. The lease can be canceled, without
recourse, by either party by written 30 day notice. Lease expense on this lease
and the corresponding lease income was $919,000 and $732,110 for the years ended
December 31, 1997 and 1996.
NOTE 4 -- PAYABLE TO OFFICERS
These amounts are payable on demand.
<PAGE>
NOTE 5 -- LONG-TERM DEBT
Long-term debt as of December 31, 1997 and 1996, consists of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
A capitalized lease, payable in monthly installments of
$449, interest at approximately 20%, collateralized by
equipment, maturing August, 1998 ...................... $ 3,786 $ 7,988
A capitalized lease, payable in monthly installments
$193, interest at approximately 15.9%, collateralized
by equipment, maturing April, 1997 .................... -- 1,145
Note payable to a bank, payable in monthly installments
of $23,300, interest at approximately 9%,
collateralized by aircraft, maturing December, 1998 ... 1,196,577 1,356,774
Note payable to a bank, payable in monthly installments
of $47,969, interest at approximately 11%,
collateralized by aircraft, maturing March, 1998 ...... -- 2,433,028
Note payable to a bank, payable in monthly installments
of $7,256, interest at approximately 9.75%,
collateralized by aircraft, maturing April, 2003 ...... 362,477 410,366
Note payable to a bank, payable in monthly installments
of $2,770, interest at approximately 11%,
collateralized by aircraft, maturing January, 1999 .... 246,822 277,000
Note payable to a financing company, payable in monthly
installments of $43,166, interest at approximately
9.75%, collateralized by aircraft, maturing July, 2007 3,216,829 --
----------- -----------
$ 5,026,491 $ 4,486,301
Less Current Portion .............................. (1,500,589) (573,865)
----------- -----------
Net Long-Term Portion ................................ $ 3,525,902 $ 3,912,436
=========== ===========
</TABLE>
<PAGE>
NOTE 5 -- LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt at December 31, 1997 are as follows:
YEAR ENDED
DECEMBER 31,
------------
1998 $ 1,500,589
1999 509,895
2000 325,429
2001 358,615
2002 395,185
Thereafter 1,936,778
-----------
$ 5,026,491
===========
NOTE 6 -- NOTE RECEIVABLE
Note receivable at December 31, 1996 included $25,100 due from related
parties.
NOTE 7 -- RECEIVABLE FROM EMPLOYEES
Receivables from employees includes $16,642 due from officers at December
31, 1996.
NOTE 8 -- RELATED PARTY TRANSACTIONS
Accounts receivable at December 31, 1997 and 1996 includes $ 55,813 and
$22,607, respectively, due from two companies related to Global Air Rescue, Inc.
and Global Air Charter, Inc. by common ownership. Revenue billed to these
companies in 1997 and 1996 was $361,699 and $114,954.
NOTE 9 -- CHANGE OF OWNERSHIP
Effective December 31, 1997, the companies were acquired by another
corporation through a stock exchange between the former stockholders and the
acquiring corporation.
NOTE 10 -- COMMON STOCK
Global Air Charter, Inc. has authorized, issued and outstanding 7,500
shares of $.10 par value common stock.
Global Air Rescue, Inc. has authorized 1,500 shares of no par value
common stock. No shares have been issued.
