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.
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) Financial statements of the businesses acquired, prepared pursuant
to Rule 3.05 of Regulation S-X and provided to Medical Industries of
America, Inc. by Global Air Rescue, Inc., Global Air Charter, Inc.
and Clearwater Jet Center, Inc.
Audited financial statements of Global Air Rescue, Inc. and Global
Air Charter, Inc. and unaudited financial statements of Clearwater
Jet Center, Inc.
December 31, 1997
Report of: Combined balance sheet
Combined statement of income
Combined statements of changes in stockholders
equity
Combined statement 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 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
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
<PAGE>
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.
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.
<PAGE>
Medical Industries of America, Inc.
Pro Forma Condensed Combined Balance Sheet (Unaudited)
As of December 31, 1997
<TABLE>
<CAPTION>
MEDICAL GLOBAL AIR CHARTER
INDUSTRIES AND GLOBAL AIR CLEARWATER PRO FORMA PRO FORMA
ASSETS OF AMERICA RESCUE JET CENTER ADJUSTMENTS COMBINED
------ ---------- ------ ---------- ----------- --------
<S> <C> <C> <C> <C>
Cash 915,381 39,454 2,611 957,446
Accounts Receivable 1,133,254 569,056 (b) (47,237) 1,655,073
Current portion of notes and
mortgages receivables 694,696 694,696
Inventories 59,208 59,208
Prepaid expenses and other current
assets 774,436 52,766 827,202
Total current assets 3,576,975 661,276 2,611 (47,237) 4,193,625
Property and equipment, net 449,052 8,275,073 22,647 (320,000) 8,426,772
Notes and mortgages receivables,
less current maturity 1,597,050 1,597,050
Goodwill 1,901,054 3,000 (a) 1,376,986 3,281,040
Investment in equity securities 3,513,200 3,513,200
Other assets 154,148 129,354 800 284,302
License (a) 1,000,000 1,000,000
Total assets 11,191,479 9,065,703 29,058 2,009,749 22,295,989
Liabilities and Shareholders'
Equity
Accounts payable 255,557 613,892 869,449
Accrued liabilities 1,109,921 83,576 354 1,193,851
Amount due on purchase of
business-current portion 815,000 815,000
Current portion of notes payable 322,000 1,496,803 1,818,803
Current portion of capital lease
obligations 61,870 3,786 65,656
Intercompany payable 47,237 (b) (47,237) -0-
Total current liabilities 2,564,348 2,198,057 47,591 (47,237) 4,762,759
Notes payable, net of current portion 32,000 3,525,902 3,557,902
Convertible subordinated debentures 400,000 400,000
Amounts due on purchase of business,
net of current portion 600,000 600,000
Capital lease obligations, net of
current portion 38,361 38,361
Payable to officers 381,096 381,096
<PAGE>
Total long term liabilities 1,070,361 3,906,998 4,977,359
Total liabilities 3,634,709 6,105,055 47,591 (47,237) 9,740,118
(a) 2,376,986
Shareholders' equity 7,556,770 2,960,648 (18,533) (c) (320,000) 12,555,871
Total liabilities and
shareholders' equity 11,191,479 9,065,703 29,058 2,009,749 22,295,989
<PAGE>
Medical Industries of America, Inc.
Pro Forma Condensed Combined Statement of Income (Unaudited)
For the year ended December 31, 1997
MEDICAL GLOBAL AIR CHARTER
INDUSTRIES AND GLOBAL AIR CLEARWATER PRO FORMA PRO FORMA
OF AMERICA RESCUE JET CENTER ADJUSTMENTS COMBINED
---------- ------ ---------- ----------- --------
Revenue
Revenue 3,842,102 5,991,507 9,159 9,842,768
Interest income 182,757 896 183,653
Other revenue 2,873,607 50,081 2,923,688
Total revenue 6,898,466 6,042,484 9,159 12,950,109
Expenses
Cost of revenue 2,160,660 4,084,157 20,637 6,265,454
General and administrative expenses 3,225,363 837,034 15,954 4,078,351
Depreciation and amortization 339,315 47,921 (c) 320,000 707,236
Interest expense 147,789 540,283 688,072
Other 370 370
Total expenses 5,873,497 5,509,395 36,591 320,000 11,739,483
Adjustment to market value 633,295 (a) (633,295) -0-
Net Income 1,024,969 1,166,384 (27,432) (953,295) 1,210,626
Income per share 0.17 0.34 (0.09) 0.13
Weighted average common shares outstanding 5,891,563 3,432,000 3,000 9,326,563
</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.
Global Air Rescue, Global Air Charter and
Clearwater Jet Center $2,942,115
Fair value adjustments
Goodwill 1,376,986
License 1,000,000
----------
$5,319,101
==========
(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 $ 47,237
Intercompany payable $ 47,237
(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 income, operating expenses, changes in stockholders' equity, and
cash flows for the year 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.
As more fully described in Note 9 to the financial statements, aircraft
are stated at market value in the accompanying balance sheet. In our opinion
such assets should be stated at acquisition cost, net of depreciation on
aircraft, to conform with generally accepted accounting principles. If the
financial statements were corrected for that departure from generally accepted
accounting principles, property and equipment, net of depreciation, would be
decreased by $4,592,038 and $3,158,618 as of December 31, 1997 and 1996, and
income before taxes would be decreased by $1,433,420 and $864,718 for the years
then ended.
In our opinion, except for the effects of valuing aircraft at market value
as discussed in the preceding paragraph, 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
1997 1996
---------- ----------
ASSETS
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
Aircraft (Note 9) .......................... $8,189,306 $6,938,601
Furniture and Fixtures ..................... 8,207 6,455
Office Equipment ........................... 92,981 65,952
Avionics ................................... 25,745 25,745
Medical Equipment .......................... 112,335 99,412
Leasehold Improvements ..................... 12,657 12,657
Ground Support Equipment ................... 4,875 4,308
---------- ----------
$8,446,106 $7,153,130
Less Accumulated Depreciation .............. (171,033) (126,412)
---------- ----------
Net Property and Equipment ......................... $8,275,073 $7,026,718
---------- ----------
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 ....................................... $9,065,703 $7,625,698
========== ==========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Balance Sheets
December 31, 1997 and 1996
LIABILITIES AND STOCKHOLDER'S EQUITY
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 Equity
Common Stock ................................... $ 750 $ 750
Capital Paid in Excess of Par Value ............ 2,000 2,000
Retained Earnings (Note 9) ..................... 2,957,898 2,532,563
---------- ----------
Total Stockholder's Equity ....................... $2,960,648 $2,535,313
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ....... $9,065,703 $7,625,698
========== ==========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RECUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Statements of Income
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 ........................... 1,425,238 1,272,263
----------- -----------
Net Operating Income ......................... $ 533,089 $ 329,708
Adjustment to Market Value on
Aircraft (Note 9) .................. 633,295 116,110
----------- -----------
NET INCOME (NOTE 9) .......... $ 1,166,384 $ 445,818
=========== ===========
See Accompanying Notes to Financial Statements
<PAGE>
GLOBAL AIR RESCUE, INC. AND GLOBAL AIR CHARTER, INC.
Combined Statements of Changes in Stockholder's Equity
For the Years Ended December 31, 1997
Capital
Paid In
Common Excess of Retained
Stock Par Value Earnings
---- ----- ----------
Balance, December 31, 1995 ............ $750 $2,000 $2,129,745
Net Income (Note 9) ................... -- -- 445,818
Distributions ......................... -- -- (43,000)
---- ----- ----------
Balance, December 31, 1996 ............ $750 $2,000 $2,532,563
Net Income (Note 9) ................... -- -- 1,166,384
Distributions ......................... -- -- (741,049)
---- ----- ----------
Balance, December 31, 1997 ............ $750 $2,000 $2,957,898
==== ===== ==========
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
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Note 9) ................................ $ 1,166,384 $ 445,818
Noncash Items Included in Net Income
Depreciation and Amortization .............. 47,921 40,755
Bad Debt Provision ......................... 49,356 24,268
Market Value Adjustment to Aircraft (Note 9) (633,295) (116,110)
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 ........... $ 1,292,975 $ 882,241
Increase due to Market Value Adjustment ............ (633,295) (116,110)
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
=========== =========
</TABLE>
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 ..................... 44,621 40,755
Amortization Expense ..................... 3,300 --
---------- ----------
Total Operating Expenses ......................... $1,425,238 $1,272,263
========== ==========
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, with the exception of
aircraft are carried at cost. (See Note 9). 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 $44,621 and $40,755
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 10)
COMPENSATED ABSENCES -- The Companies have no formal compensated absence
policy; therefore no liability for absences has been accrued.
NOTE 2 -- 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.
<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:
1997 1996
---- ----
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
=========== ===========
<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 -- AIRCRAFT MARKET VALUE ADJUSTMENT
Aircraft are stated at market value, using recognized aircraft value
publications, rather than at cost. Management believes that this basis more
clearly reflects the companies' investment in the aircraft. Original cost of the
aircraft, net of accumulated depreciation at December 31, 1997 and 1996 would be
$3,597,268 and $3,779,984. The market value adjustment before income taxes of
$633,295 in 1997 and $116,100 in 1996 results from recording these assets at
retail value.
NOTE 10 -- 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.
