|
|
|
|
|
|
|
|
|
|
|
|
|
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 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) April 28, 1998
LAS VEGAS AIRLINES, INC.
(Exact name of registrant as specified in its charter)
HERMATON COMPANY
(Former name)
Delaware
(State or other jurisdiction of incorporation)
0-22310 33-0564327
(Commission File Number) (IRS Employer Identification No.)
24901 Dana Point Harbor Drive, Suite 200 92629
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 488-8494
<PAGE>
Item 2. Acquisition or Disposition of Assets.
As previously announced, on January 23, 1998, Hermaton Company (the
"Registrant") entered into a Share Purchase Agreement under which it agreed to
acquire 51% of the common stock of Las Vegas Airlines, Inc., a Nevada
corporation ("LVA Nevada") $500,000. The acquisition closed on April 28, 1998.
In connection with the acquisition, the Registrant, a Delaware corporation,
changed its name to Las Vegas Airlines, Inc.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a)(b) The required financial statements and pro forma
financial information is filed herewith.
(c) Exhibits
2. Plan of acquisition, reorganization, arrangement,
liquidation or succession.
2.1. Share Purchase Agreement, between the Regist-
rant and David J. Donohue, Sr. Previously
filed.
3. Certificate of Incorporation and Bylaws
3.3 Amendment to Certificate of Incorporation,
changing name to Las Vegas Airlines, Inc.
Previously filed.
SIGNATURES
Pursuant to the requirements 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.
Dated: July 9, 1998 LAS VEGAS AIRLINES, INC.
By: /s/ Jehu Hand
Jehu Hand
Chief Executive Officer
3
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS AIRLINES, INC.
Table of Contents
<S> <C>
Independent Auditors' Report 5
Balance Sheets, September 30, 1997 and 1996 6
Statement of Operations and Retained Earnings (defecit)
years ended September 30, 1997 and 1996 8
Statement of Cash Flows, years ended September 30,
1997 and 1996 9
Notes to Financial Statements 10
Accountants' Compilation Report 16
Balance Sheet 17
Statement of Operations and Retained Earnings (defecit)
for the six months ended March 31, 1998 19
Statement of Cash Flows for the six months
ended March 31, 1998 20
Notes to Financial Statements 21
4
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Las Vegas Airlines, Inc.
We have audited the accompanying balance sheets of Las Vegas Airlines, Inc. as
of September 30, 1997 and 1996, and the related statements of operations and
retained earnings (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
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
misstatements. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Las Vegas Airlines, Inc., as of
September 30, 1997 and 1996, and the results of its operations and cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Thurman Shaw & Co., L.C.
Bountiful, Utah
May 23, 1998
5
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS AIRLINES, INC.
Balance Sheets
September 30, 1997 and 1996
ASSETS 1997 1996
Current assets
<S> <C> <C>
Cash $ 13,431 $ 4,012
Accounts receivable 83,839 67,980
Expendable parts, at cost 154,306 184,242
Refundable taxes based on income 43,193 42,193
Refundable excise taxes 7,463 9,798
Prepaid insurance 176,100 226,349
Total current assets 478,332 534,574
Furniture, vehicle and equipment, at cost
Furniture and equipment 28,749 28,749
Transportation 77,680 77,680
Aircraft 1,000 135,000
Engines 122,608 122,608
230,037 364,037
Less accumulated depreciation 139,637 220,708
90,400 143,329
Other assets 4,930 4,950
$ 573,662 $ 682,853
See accompanying notes to financial statements
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1997 1996
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities
<S> <C> <C>
Checks written in excess of cash in bank $ 33,791 $ 96,341
Accounts payable 211,000 218,628
Insurance payable 202,101 185,839
Accrued payroll and payroll taxes 63,599 66,238
Other accrued liabilities 15,944 -
Current portion of long-term debt 194,034 165,003
Total current liabilities 720,469 732,049
Long-term debt, net of current portion 41,523 152,090
Total liabilities 761,992 884,139
Commitments
Stockholder's equity (deficit):
Common stock 2,500 shares authorized, 500
shares issued and outstanding 5,000 5,000
Paid in capital 30,041 30,041
Retained earnings (deficit) (223,371) (236,327)
(188,330) (201,286)
$ 573,662 $ 682,853
7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS AIRLINES, INC.
Statement of Operations and Retained Earnings (Deficit)
Years Ended September 30, 1997 and 1996
1997 1996
Revenues
<S> <C> <C>
Air transportation $ 2,270,729 $ 2,265,813
Other 17,682 13,677
2,288,411 2,279,490
Cost of revenues
Aircraft expense 676,307 602,000
Insurance 383,808 358,541
Salaries and wages 399,344 408,350
Tour expense 217,682 251,609
Lease expense - aircraft and vehicles 238,973 238,287
Depreciation 53,929 69,207
Vehicle expense 57,528 50,776
Other 50,112 32,306
2,077,683 2,011,076
Gross profit 210,728 268,414
Selling, general and administrative expenses 378,151 409,986
Operating (loss) (167,423) (141,572)
Other income (expense)
Interest income - 366
Interest expense (73,485) (36,817)
Gain on sale of aircraft 252,864 -
179,379 (36,415)
Income (loss) before income taxes 11,956 (178,023)
Income taxes - credit 1,000 31,000
Net income (loss) 12,956 (147,023)
Retained earnings (deficit), beginning (236,327) (89,304)
Retained earnings (deficit), ending $ (223,371) $ (236,327)
See accompanying notes to financial statements
8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS AIRLINES, INC.
Statements of Cash Flows
Years Ended September 30,1997 and 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 12,956 $ (147,023)
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Depreciation 53,929 69,207
Net gain from sale of aircraft (252,864) -
Deferred income taxes - 11,000
Adjustment to retained earnings for prior year expenses - (33,500)
Increase (decrease) in cash resulting from
changes in assets and liabilities
Accounts receivable (15,859) 20,283
Expendable parts 29,936 (27,786)
Refundable income taxes (1,000) (42,193)
Refundable excise taxes 2,335 (9,798)
Prepaid insurance 50,249 133,364
Other assets 20 50
Checks written in excess of cash in bank (62,550) 69,657
Other accrued liabilities 15,944 (46,179)
Accounts payable (7,628) (55,436)
Income taxes - (23,203)
Insurance payable 16,262 (111,543)
Accrued payroll and payroll taxes (2,639) 10,589
Net cash used in operating activities (160,909) (182,511)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture, vehicles and equipment (1,000) (104,367)
Proceeds from sale of aircraft 252,864 -
Net cash provided by (used in)
investing activities 251,864 (104,367)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 134,597 338,155
Payment of long-term debt (216,133) (50,755)
Net cash (used in) provided by
Financing activities (81,536) 287,400
Net increase in cash 9,419 522
Cash, beginning 4,012 3,490
Cash, ending $ 13,431 $ 4,012
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 73,485 $ 36,817
See accompanying notes to financial statements
9
</TABLE>
<PAGE>
LAS VEGAS AIRLINES, INC.
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated in October, 1973, under the laws of the
State of Nevada to operate air taxis services under Federal Aviation
Regulation 135. The primary services include scheduled commuter, air
tours and charters to the Grand Canyon and surrounding areas.
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 amount reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Basis of Presentation
At September 30, 1997, the Company's current obligations exceed its
current assets by approximately $242,000 ($198,000 in 1996). Management
believes the Company will be able to continue in business as a going
concern; however, that is dependent upon its ability to continue
profitable operations and/or obtain additional working capital to finance
continuance of operations. (See note 6)
Inventories
Inventories consist of airplane parts and are stated at the cost.
Revenue Recognition
Income is recognized after air transportation is provided.
Concentration of Credit Risk
The Company sell its tours primarily through independent travel industry
organizations located throughout the United States and overseas. Ongoing
credit evaluations of customers' financial condition is performed by the
Company and generally collateral is not required. Management believes
that an allowance for doubtful accounts is not necessary.
Income taxes
The Company's tax provision is calculated in accordance with Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents. The Company had no such equivalents as
September 30, 1997 and 1996.
Depreciation
10
<PAGE>
Depreciation is generally computed over a range of three to seven years
of estimated useful lives of the assets using the straight-line and
double-declining balance methods for financial and tax reporting
purposes. Depreciation expense for the years ended September 30, 1997 and
1996 was $99,999 and $99,999.
Advertising
The Company expenses the cost of advertising and promotions as incurred.
Advertising expense for the years ended September 30, 1997 and 1996, was
$30,065 and $33,780, respectively.
2. INCOME TAXES
Deferred taxes are determined based on the difference between the
financial statement basis and tax basis of assets and liabilities, and
measured at the enacted tax rates that will be in effect when those
differences reverse. Deferred tax expense is determined by the change in
the net deferred tax asset or liability.
The provision (credit) for income taxes for the years ended September 30,
1997 and 1996 is comprised of the following:
<TABLE>
<CAPTION>
1997 1996
Federal:
<S> <C> <C>
Current $ (1,000) $ (42,000)
Deferred - 11,000
$ (1,000) $ (31,000)
At September 30, 1997, the Company has a federal net operating of
approximately $150 ($150,000 in 1996). The credit for income taxes for
the years ended September 30, 1997 and 1996, reflect the utilization of
the net operating losses that will be carried back to prior years.
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Notes (continued)
The tax effect of temporary differences resulted in deferred income tax
assets (liabilities) as follows:
1997
Current Noncurrent
Deferred tax asset (liability):
<S> <C> <C>
Depreciation $ - $ (3,000)
Accrued vacation 5,200
5,200 (3,000)
Valuation allowance (5,200) 3,000
$ - $ -
1996
Current Noncurrent
Deferred tax asset (liability):
Depreciation $ - $ (3,300)
Accrued vacation 9,600 -
9,600 (3,300)
Valuation allowance (9,600) 3,300
$ - $ -
As of September 30, 1997, the Company had net deferred tax assets of
approximately $2,200. The net deferred tax asset has been fully offset by
a valuation allowance. The net valuation allowance decreased by $4,100
during the current year. Deferred tax assets relate primarily to net
operating losses to be carried back, and certain accrued expenses and
reserves that are not currently deductible for income tax purposes.
</TABLE>
<TABLE>
<CAPTION>
3. LONG TERM DEBT
Rate of Balance
Lender Interest Due Date 1997 1996
<S> <C> <C>
Nevada State Bank 12.26% November 14, 1998 $ 7,069 $ --
Payable in 24 monthly installments of principal and interest
of $544.59, secured by a 1984 Ford mini bus.
Norwest Bank NV 10.25% October 28, 2001 13,207 --
Payable in 60 monthly installments of principal and interest
of $331.04, secured by a 1995 Dodge Maxiwagon.
First Charter 9.95% December 12, 1999 -- 15,352
Payable in 60 monthly installments of principal and interest
of $462.32, secured by a 1995 Dodge van.
Joda Partnership 18.00% -- 126,922
Payable in 24 monthly installments of principal and interest
of $4,406.25 and on final payment of $92,665.26, secured by
12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Notes continued)
two airplanes
<S> <C> <C>
*Credit cards payable 41,542 36,322
*Nevada State Bank 12.15% September 15, 1996 -- 13,460
Payable in monthly installments of interest only of approximately
$300.00, guaranteed by a second trust deed on an officer/
stockholder's personal residence.
*Nevada State Bank 6.25% 58,045 58,373
Payable in monthly installments of interest only of approximately
$300.00, guaranteed by a second trust deed on an officer/
stockholder's personal residence.
Note payable - shareholder 8.00% Demand 65,700 --
Unsecured
*Orix Credit Alliance 10.50% January 12, 2000 49,994 66,664
Payable in 48 monthly installments of principal of $1,667.00, plus
interest, secured by an airplane owned by an officer/stockholder.
235,557 317,093
Less current portion 194,034 165,003
$ 41,523 $ 152,090
</TABLE>
* These loans were granted to an officer/stockholder, who assigned them to
Las Vegas Airlines, Inc.
<TABLE>
<CAPTION>
Principal payments are due as follows:
Years ending September 30,
<S> <C> <C>
1998 $ 194,034
1999 24,115
2000 13,353
2001 3,728
2002 327
$ 235,557
</TABLE>
4. COMMITMENTS
The company leases two airplanes under operating lease arrangements
expiring July 31, 2003, at a total annual rent of $58,564. The lease
agreements include the option to terminate the lease after August 5,
1999 upon payment of 4% of the remaining payments. Each year this
payment will decline by 1% per year. After July 31, 2003, the company
has the option to acquire each airplane by paying $66,288 and
$62,010, respectively. Future minimum rental payments under these
leases will be as follows:
<TABLE>
<CAPTION>
Years ending September 30,
<S> <C> <C>
1998 $ 58,564
1999 58,564
2000 58,564
2001 58,564
2002 58,564
2003 48,800
13
<PAGE>
$ 341,620
Notes (continued)
The Company leases its plant facilities under a month to month
renewable lease. The rent expense included in the statements of
operations (including equipment rental) amounted to $163,807 at
September 30, 1997 ($191,799 at September 30, 1996).
</TABLE>
5. CONTINGENCIES
Excise Taxes
The Internal Revenue Service has assessed additional excise taxes on
airline tickets as follows:
Tax period ended
December 31, 1990 $ 24,460
December 31, 1991 151,854
December 31, 1992 151,216
Total $ 327,530
The company denies responsibility for these taxes since the airline
tickets which cover these additional taxes were issued overseas by
unrelated agencies and the Company is not responsible for collection
and payment. The Internal Revenue Service appeals officer made a
verbal offer to settle this dispute for 20% of the total amount at
issue. The Company filed a complaint with the U.S. Court of Federal
Claims on April 21, 1995. On July 24, 1995, the Company received the
answer to the complaint. The case is currently pending in the U.S.
Court of Federal Claims. Outside counsel believes the Company has a
very good chance to prevail in this litigation. Management believes
the final outcome of this litigation will not have a significant
effect on the Company's financial statements.
Payroll Taxes
The Company is currently disputing certain payroll taxes that the
Internal Revenue Service says are past due in the amount of $34,000.
The Company believes the Internal Revenue Service has applied certain
credits and refunds to periods already closed by a Bankruptcy Court
Order dated January 4, 1994.
Negotiations are ongoing and the company believes it will prevail.
6. SUBSEQUENT EVENT
On January 23, 1998, the Company and its sole shareholder entered into
a Share Purchase Agreement with Hermaton Company to sell 51% of the
Common Stock. The purchase price is $500,000. The funds from the sale
will be used to support operations of the Company.
7. SALE/LEASEBACK TRANSACTION
The Company entered into a sale/leaseback transaction regarding two
airplanes (see note 4). The sale/leaseback transaction resulted in a
gain of $252,864, which is reported in the statement of operations.
14
<PAGE>
ACCOUNTANTS' COMPILATION REPORT
To the Stockholders
Las Vegas Airlines, Inc.
We have compiled the accompanying balance sheet of Las Vegas Airlines, Inc. as
of March 31, 1998 and the related statements of operations and retained earnings
and cash flows for the six months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements, and accordingly, do not express
an opinion or any other form of assurance on them.
Thurman Shaw & Co., L.C.
Bountiful, Utah
June 11, 1998
15
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS AIRLINES, INC.
Balance Sheet
March 31, 1998
ASSETS
Current assets
<S> <C>
Cash $ 104,810
Accounts receivable 30,723
Expendable parts, at cost 133,053
Refundable taxes based on income 43,193
Refundable excise taxes 7,463
Prepaid insurance 65,209
Total current assets 384,451
Furniture, vehicle and equipment, at cost
Furniture and equipment 28,749
Transportation 77,680
Engines 122,608
229,037
Less accumulated depreciation 166,602
62,435
Other assets 14,896
$ 461,782
See accompanying notes to financial statements
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Current liabilities
<S> <C>
Accounts payable $ 147,344
Insurance payable 59,267
Income taxes payable (1,250)
Accrued payroll and payroll taxes 94,847
Other accrued liabilities 1,208
Current portion of long-term debt 322,943
Total current liabilities 624,359
Long-term debt, net of current portion 32,819
Total liabilities 657,178
Commitments
Stockholder's equity (deficit):
Common stock 2,500 shares authorized, 500
shares issued and outstanding 5,000
Paid in capital 30,041
Retained earnings (deficit) (230,437)
(195,396)
$ 461,782
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS AIRLINES, INC.
Statement of Operations and Retained Earnings (Deficit)
Six Months Ended March 31, 1998
Revenues
<S> <C>
Air transportation $ 850,665
Other 8,321
858,986
Cost of revenues
Aircraft expense 268,075
Insurance 108,453
Salaries and wages 146,706
Tour expense 137,737
Lease expense - aircraft and vehicles 59,998
Depreciation 26,965
Vehicle expense 15,125
Other 18,620
781,679
Gross profit 77,307
Selling, general and administrative expenses 183,794
Operating (loss) (106,487)
Other income (expense)
Interest income 98
Interest expense (42,182)
Gain on sale of aircraft 140,255
98,171
(Loss) before income taxes (8,316)
Income taxes (credit) (1,250)
Net (loss) (7,066)
Retained earnings (deficit), beginning (223,371)
Retained earnings (deficit), ending $ (230,437)
See accompanying notes to financial statements
18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LAS VEGAS AIRLINES, INC.
Statement of Cash Flows
Six Months Ended March 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C>
Net (loss) $ (7,066)
Adjustments to reconcile net (loss) to net
cash used in operating activities
Depreciation 26,965
Net gain from sale of aircraft (140,255)
Increase (decrease in cash resulting from
changes in assets and liabilities
Accounts receivable 53,116
Expendable parts 21,253
Prepaid insurance 110,891
Other assets (9,966)
Checks written in excess of cash in bank (33,791)
Other accrued liabilities (14,736)
Accounts payable (63,656)
Income taxes (1,250)
Insurance payable (142,834)
Accrued payroll and payroll taxes 31,248
Net cash used in operating activities (170,081)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of aircraft 141,255
Net cash provided by investing activities 141,255
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 150,000
Payment of long-term debt (29,795)
Net cash (used in) financing activities 120,205
---------------
Net Increase in cash 91,379
Cash, beginning 13,431
Cash, ending $ 104,810
SUPPLEMENTAL CASH FLOWS DISCLOSURES
Interest paid $ 42,182
See accompanying notes to financial statements
19
</TABLE>
<PAGE>
LAS VEGAS AIRLINES, INC.
Notes to Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated in October 1973, under the laws of the
State of Nevada to operate air taxis services under Federal Aviation
Regulation 135. The primary services include scheduled commuter, air
tours and charters to the Grand Canyon and surrounding areas.
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 amount reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
Basis of Presentation
At March 31, 1998, the Company's current obligations exceed its current
assets by approximately $240,000. Management believes the Company will
be able to continue in business as a going concern; however, that is
dependent upon its ability to continue profitable operations and/or
obtain additional working capital to finance continuance of operations.
(See note 6)
Inventories
Inventories consist of airplane parts and are stated at the cost.
Revenue Recognition
Income is recognized after air transportation is provided.
Concentration of Credit Risk
The Company sell its tours primarily through independent travel
industry organizations located throughout the United States and
overseas. Ongoing credit evaluations of customers' financial condition
is performed by the Company and generally collateral is not required.
Management believes that an allowance for doubtful accounts is not
necessary.
20
<PAGE>
Notes (continued)
Income taxes
The Company's tax provisions is calculated in accordance with Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. The Company had no such
equivalents as of March 31, 1998
Depreciation
Depreciation is generally computed over a range of three to seven years
of estimated useful lives of the assets using the straight-line and
double-declining balance methods for financial and tax reporting
purposes. Depreciation expense for the six months ended March 31, 1998
was $26,965.
Advertising
The Company expenses the cost of advertising and promotions as
incurred. Advertising expense for the six months ended March 31, 1998
was $16,400.
2. INCOME TAXES
Deferred taxes are determined based on the difference between the
financial statement basis and tax basis of assets and liabilities, and
measured at the enacted tax rates that will be in effect when those
differences reverse. Deferred tax expense is determined by the change
in the net deferred tax asset or liability.
The provision (credit) for income taxes for the six months ended March
31, 1998 is comprised of the following:
<TABLE>
<CAPTION>
Federal:
<S> <C>
Current $ (1,250)
Deferred --
$ (1,250)
As of March 31, 1998, the Company had net deferred tax assets of
approximately $2,200. The net deferred tax asset has been fully offset
by a valuation allowance. The net valuation did not change during the
six-month period. Deferred tax assets relate primarily
21
</TABLE>
<PAGE>
to net operating losses to be carried back, and certain expenses and
reserves that are not currently deductible for income tax purposes.
<TABLE>
<CAPTION>
3. LONG TERM DEBT
Rate of
Lender Interest Due date
<S> <C>
Nevada State Bank 12.26% November 14, 1998 $ 4,162
Payable in 24 monthly installments of principal and
interest of $544.59, secured by a 1984 Ford mini bus.
Norwest Bank NV 10.25% October 28, 2001 12,097
Payable in 60 monthly installments of principal and
interest of $331.04, secured by a 1995 Dodge Maxiwagon.
*Credit cards payable 41,505
*Nevada State Bank 6.25% 57,807
Payable in monthly installments of interest only of
approximately $300.00, guaranteed by a second trust
deed on an officer/stockholder's personal residence.
Note payable - shareholder 8.00% Demand 90,216
Unsecured
Note payable- individual 8.00% Demand 149,975
------------
Unsecured
355,762
Less current portion 322,943
$ 32,819
* These loans were granted to an officer/stockholder, who assigned them to
Las Vegas Airlines, Inc.
22
</TABLE>
<PAGE>
Principal payments are due as follows:
Years ending March 31,
1999 $ 322,943
2000 21,139
2001 11,353
2002 327
$ 355,762
4. COMMITMENTS
The company leases three airplanes under operating lease agreements
expiring July through December 2003, at a total annual rent of $86,864.
The lease agreements include the option to terminate the lease after the
year 1999 upon payment of 4% of the remaining payments. Each year this
payment will decline by 1% per year. After July 31, 2003, or December
31, 2003, the company has the option to acquire each airplane by paying
$66,288, $62,010 and $66,288, respectively. Future minimum rental
payments under these leases will be as follows:
Years ending March 31,
1999 $ 86,864
2000 86,864
2001 86,864
2002 86,864
2003 86,864
2004 26,597
$ 460,917
The Company leases its plant facilities under a month to month renewable
lease. The rent expense included in the statements of operations
(including equipment rental) amounted to $55,136 for the six months
ended March 31, 1998.
5. CONTINGENCIES
Excise Taxes
The Internal Revenue Service has assessed additional excise taxes on
airline tickets as follows:
23
<PAGE>
Tax period ended
December 31, 1990$ 24,460
December 31, 1991 151,854
December 31, 1992 151,216
Total $ 327,530
The company denies responsibility for these taxes since the airline
tickets which cover these additional taxes were issued overseas by
unrelated agencies and the Company is not responsible for collection and
payment. The Internal Revenue Service appeals officer made a verbal
offer to settle this dispute for 20% of the total amount at issue. The
Company filed a complaint with the U.S. Court of Federal Claims on April
21, 1995. On July 24, 1995, the Company received the answer to the
complaint. The case is currently pending in the U.S. Court of Federal
Claims. Outside counsel believes the Company has a very good chance to
prevail in this litigation. Management believes the final outcome of
this litigation will not have a significant effect on the Company's
financial statements.
Payroll Taxes
The Company is currently disputing certain payroll taxes that the
Internal Revenue Service says are past due in the amount of $34,000. The
Company believes the Internal Revenue Service has applied certain
credits and refunds to periods already closed by a Bankruptcy Court
Order dated January 4, 1994. Negotiations are ongoing and the company
believes it will prevail.
6. SUBSEQUENT EVENT
On January 23, 1998, the Company and its sole shareholder entered into a
Share Purchase Agreement with Heramaton Company to sell 51% of the
Common Stock. The purchase price is $500,000. The funds from the sale
will be used to support operations of the Company.
7. SALE/LEASEBACK TRANSACTION
The Company entered into a sale/leaseback transaction on one airplane
(see note 4). The sale/leaseback transaction resulted in a gain of
$140,255, which is reported in the Statement of Operations.
24
<PAGE>
Pro Forma Financial Information
The following proforma balance sheets includes the historical
financial statements of Las Vegas Airlines, Inc. ("LVA") and the Registrant as
of September 30, 1997 and March 31, 1998, the proforma adjustments assuming the
acquisition of LVA by the Registrant was effected as of September 30, 1997 and
March 31, 1998, and the resulting proforma balance sheets. The following
proforma statements of operations present historical operating information of
LVA and the Registrant for the year and 12 months ended September 30, 1997, and
the six months ended March 31, 1998, respectively, with the proforma adjustments
being made on the assumption that the acquisition was made on October 1, 1996
and 1997, respectively. The acquisition has been accounted for as a purchase
with Hermaton deemed to be the acquiring entity. The proforma financial
statements below are unaudited and are not necessarily indicative of the actual
results that might have occurred had the acquisition been made as of the dates
indicated.
25
<PAGE>
<TABLE>
<CAPTION>
Las Vegas Airlines, Inc.
Proforma Balance Sheet
September 30, 1997
Las Vegas Hermaton Proforma
Airlines, Inc. Company Proforma Balance
Historical Historical Adjustments(1)(2) Sheet
Current Assets
<S> <C> <C> <C>
Cash 13,431 13,431
Accounts Receivable 83,839 83,839
Expendable Parts
at Cost 154,306 154,306
Refundable Taxes 50,656 50,656
Investment in Subsidiary 649,975 649,975
Prepaid Insurance 176,100 176,100
Total Current Assets 478,332 649,975 1,128,307
Furniture, Vehicles and
Equipment, Less
Accumulated Depreciation 90,400 90,400
Other Assets 4,930 4,930
Total Assets $ 573,662 $ $ $ 1,223,637
Current Liabilities
Checks written in excess
of Cash 33,791 33,791
Accounts Payable 211,000 2,634 213,634
Other Payables and
accrued expenses 281,644 281,644
Current portion of long-term
Debt 194,034 194,034
Related Party Debt 399,975 399,975
Total Current Liabilities 720,469 2,634 399,975 1,123,078
Long-term Debt, net of
Current portion 41,523 41,523
Common Stock 5,000 3,625 (4,900) 3,725
Additional Paid in Capital 30,041 821 254,900 285,762
Retained Earnings (deficit) (223,371) (7,080) (230,451)
Total Shareholders' Equity (188,330) (2,634) 250,000 59,036
$ 573,662 $ $ 649,975 $ 1,223,637
26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Las Vegas Airlines, Inc.
Proforma Balance Sheet
March 31, 1998
Las Vegas Hermaton Proforma
Airlines, Inc. Company Proforma Balance
Historical Historical Adjustments(1)(2) Sheets
Current Assets
<S> <C> <C> <C>
Cash 104,810 104,810
Accounts Receivable 30,723 30,723
Expendable Parts
at Cost 133,053 133,053
Refundable Taxes 50,656 50,656
Investment in Subsidiary 649,975 649,975
Prepaid Insurance 65,209 65,209
Total Current Assets 384,451 649,975 1,034,426
Furniture, Vehicles and
Equipment, Less
Accumulated Depreciation 62,435 62,435
Other Assets 14,896 14,896
Total Assets $ 461,782 $ $ 649,975 $ 1,111,757
Current Liabilities
Accounts Payable 147,344 2,758 150,102
Other Payables and
accrued expenses 154,072 154,072
Current portion of long-term
Debt 322,943 322,943
Related Party Debt 399,975 399,975
Total Current Liabilities 624,359 2,758 399,975 1,027,092
Long-term Debt, net of
current portion 32,819 32,819
Common Stock 5,000 3,625 (4,900) 3,725
Additional Paid in Capital 30,041 821 254,900 285,762
Retained Earnings (deficit) (230,437) (7,204) (237,641)
Total Shareholders' Equity (195,396) (2,758) 250,000 51,846
$ 461,782 $ $ 649,975 $ 1,111,757
27
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Las Vegas Airlines, Inc.
Proforma Income Statement
Twelve months ended September 30, 1997
Las Vegas Proforma
Airlines, Inc. Hermaton Proforma Income
Historical Historical Adjustments Statement
<S> <C> <C>
Revenues 2,288,411 2,288,411
Costs of Revenues 2,077,683 2,077,683
Gross Profit 210,728 210,728
Selling, General and
Administrative 378,151 261 378,412
Operating Loss (167,423) (261) (167,684)
Other Income (Loss) 179,379 179,379
Income (loss) before income taxes 11,956 (261) 11,695
Income taxes (credit) 1,000 1,000
Net Income (Loss) after
Taxes $ 12,956 $ (261) $ $ 12,695
28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Las Vegas Airlines, Inc.
Proforma Income Statement
Six months ended March 31, 1998
Las Vegas
Proforma
Airlines, Inc. Hermaton Proforma
Income
Historical Historical Adjustments
Statement
<S> <C> <C>
Revenues 858,986 858,986
Costs of Revenues 781,679 781,679
Gross Profit 77,307 77,307
Selling, General and
Administrative 183,794 124 183,918
Operating (Loss) (106,487) (124) (106,611)
Other Income 98,171 98,171
Income (loss)
before income taxes (8,316) (124) (8,440)
Income taxes (credit) (1,250) (1,250)
Net loss after Taxes $ (7,066)$ (124)$ (7,190)
29
</TABLE>
<PAGE>
Notes to Proforma Statements
1. In connection with the acquisition of LVA the Registrant loaned $149,475
to LVA which the Registrant borrowed from a related party.
2. The Registrant sold 100,000 shares of its common stock for $250,000
after March 31, 1998 to fund the acquisition of 51% of LVA. $100 of this
amount has been credited to common stocks and $249,900 to additional
paid in capital. In addition the Registrant gave a promissory note for
$250,000 due July 28, 1998, for a total purchase price of $500,000. The
common stock and additional paid in capital accounts of LVA have been
eliminated.
30
<PAGE>
|
|