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General Aircraft Corp – ‘10-K’ for 12/31/97

As of:  Friday, 9/25/98   ·   For:  12/31/97   ·   Accession #:  40409-98-2   ·   File #:  0-02723

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  As Of                Filer                Filing    For·On·As Docs:Size

 9/25/98  General Aircraft Corp             10-K       12/31/97    1:62K

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         26    141K 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Item 1. Business
"Item 2. Properties
"Item 3. Pending Legal Proceedings
"Item 4. Submission of Matters to A Vote of Security Holders
"Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters
"Item 6. Selected Financial Data
"Item 7. Management Discussion and Analysis of Financial Condition and Results of Operation
"Item 8. Financial Statements, Financial Statements Schedules and Supplementary Data
"Item 9. Disagreements on Accounting and Financial Disclosure
"Item 10. Directors and Executive Officers of the Registrant
"Item 11. Executive Compensation
"Item 12. Security Ownership of Certain Beneficial Owners and Management
"Item 13. Transactions With Management and Others
"Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
3Independent Auditor's Report
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--------------------------------------------------------------------------- --------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NUMBER 0-2723 ------------------------ GENERAL AIRCRAFT CORPORATION 04-2082799 (I.R.S. EMPLOYER IDENTIFICATION NO.) DELAWARE (STATE OF INCORPORATION) 21 NOTTINGHAM STREET LOWELL, MASSACHUSETTS 01851 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 978-937-5081 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED COMMON STOCK $0.01 PAR VALUE NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _____ No __X__. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant: Unknown - there is currently no public market. On September 22, 1998 the registrant had outstanding 5,347,744 shares of common stock of $0.01 par value, which is registrant's only class of common stock. PART I ITEM 1. BUSINESS DEVELOPMENT OF BUSINESS Incorporated in 1950, General Aircraft Corporation ("GAC" or the "Company") has evolved over the past 48 years from a manufacturer of aircraft to its current businesses of the manufacture of semiconductor test equipment and printed circuit boards. The Company discontinued operations as a manufacturer of STOL aircraft and sold the production rights and assets of its Helio Aircraft division in October 1976. From then until October 1986, all Company operations were conducted through Helio Precision Products ("HPP"), a manufacturer of sheet metal parts, located at Hanscom Field, Bedford, Massachusetts. In October 1986, the Company acquired the inventory of Accutest Corporation ("Accutest"), a manufacturer of test equipment for the semiconductor industry. Also in October 1986, the Company commenced manufacturing of printed circuit boards under the name GAC Printed Circuits ("PC"). In March 1989, the Company launched the Presage Computer ("Presage") division to assemble IBM compatible personal computers. In October 1991, the Company sold the assets of HPP after several years of steadily declining business. During 1992, Presage Computer was dissolved when increased competition made its business unprofitable. Since 1993, the Company operations have solely consisted of its Accutest and GAC Printed Circuits Divisions. During 1994 and 1995, Accutest developed an upgrade to its Model 3000 and Model 3600 Process Evaluation Testers which eliminates the DEC computer, and, utilizing an IBM compatible Pentium computer, enabling the user to run new test software under their choice of DOS, OS2/Warp, or Windows operating systems. Additionally, Accutest developed a new two-piece housing for its tester which allows only a small remote test station to occupy space in a user's clean room, reducing both required space and potential contamination. Accutest created a new tester model utilizing the software upgrade, combined with the new housing, called the Model 4600. IBM Corporation purchased several software upgrades for its Model 3600 units during 1995, and IBM engineers report a 50% increase in the unit's throughput. In addition to IBM, major customers of Accutest include: Motorola, Philips Semiconductor, National Semiconductor Corporation and Harris Semiconductor. In June 1994, the Company hired a new General Manager for its PC division. This individual brought with him many years of experience in the successful day-to-day management of manufacturing printed circuit boards. Numerous changes have been made in PC plant operations resulting in improved manufacturing efficiencies. Additionally, all computerized information systems have been reworked and upgraded to provide accurate and timely information. Other improvements include: a computerized bar-coding system for job tracking, a Mania bare board tester, and several new machines utilized in the manufacturing process. The results of the changes and improvements are numerous and include a reduction in customer returns from 6.65% of sales in 1993 to less than 0.52% in 1997. Significant efforts have been made by PC to improve service to its customer base. Internal changes have been implemented between the sales and customer service departments to increase service to PC's customers. Significant customers currently include: Eastprint, Inc., Spacetec I.M.C. Corp., Cambridge Technology, Eastern Air Devices, and A.T.C. Power. PC employs a Director of Environmental Control to insure that the Company is in compliance with the continually changing and increasingly stringent regulations from the Department of Environmental Protection, Lowell Wastewater Treatment Facility and OSHA. The Company is a Delaware corporation. Its principal offices are located in two adjacent buildings located at 21 Nottingham Street, Lowell, Massachusetts, 01851. Its telephone number is (978) 937-5081. PRINCIPAL PRODUCTS Commencing in 1993 and continuing through the present, the Company has operated in two business segments: As a manufacturer of printed circuit boards and electronic test equipment. GAC Printed Circuits Division manufactures single sided, double sided, and multi-layered printed circuit boards. The division's work is UL certified and Qualified to Military Specification MIL-P-55110D. All boards are made to customer specifications. Commercial industries, including computer, medical, testing, automotive, research, space, and electronics are being pursued. Accutest Division's business consists of the manufacture of three models of automatic test equipment for the semiconductor industry. The Model 7700 is a static memory tester, and the Models 3600 and 4600 are parametric testers. Additionally, the business includes the design and engineering of customized products to customer specifications. There is also a small repair business, based on servicing an installed customer base. The Division pursues only commercial business in the computer, IC (integrated circuits) testing, automotive, space, research and design, and electronic industries. MARKETING For the GAC Printed Circuits Division, sales are handled by an in-house sales representative, an independent sales representative, and by management. Sales for the Accutest Division are handled by management. COMPETITION The GAC Printed Circuits Division sells to customers primarily in the New England region. There are approximately 100 circuit board manufacturers in New England. HADCO Company (Salem, New Hampshire) is substantially larger than all other competitors in the region. The Accutest Division has approximately six competitors in the United States. Of these, Teradyne (Boston, Massachusetts), Genrad (Concord, Massachusetts), and Keithley (Cleveland, Ohio) dominate the field. BACKLOG For the Company, at December 31, 1997, the dollar amount of unfilled contract backlog and firm orders for custom manufacturing was approximately $97,303 compared with a backlog of approximately $81,490 as of December 31, 1996. All of the 1996 year-end backlog of work was completed by the end of 1997. There is no significant seasonal aspect to the business of any of the Company's Divisions. RAW MATERIALS The GAC Printed Circuits Division uses copper clad laminate and various chemicals in the manufacturing process of printed circuit boards. All of these materials are readily available from numerous sources. No one source is essential to the Division. The Accutest Division uses various electronic components to manufacture and repair its products. All components are available from numerous electronic distributors within a five to ten day period. PATENTS, LICENSES, ETC. None of the processes used in the Company's Divisions' custom manufacturing business is proprietary, and no patents, special licenses, franchises or concessions are owned by the Company. RESEARCH AND DEVELOPMENT The Company developed no new products during the calendar year 1997. CUSTOMERS The Accutest and GAC Printed Circuits Divisions rely on numerous commercial customers from a wide-range of industries. No single customer is responsible for 10% or more of these Divisions' consolidated revenues. These Divisions did not do business with the United States Government on a direct basis in either 1996 or 1997. EXPORT SALES The Company exported no products to customers in 1997. The Company is not dependent on foreign sales. EMPLOYEES As of December 31, 1997, The Company employed twenty full-time and two part-time people, including thirteen in manufacturing and seven in selling and administrative capacities, during 1997. The Company has never had a work stoppage by its employees and none of its employees is presently represented by any labor organization. The Company believes that its employee relations are satisfactory. ENVIRONMENTAL LAWS It is not expected that compliance with Federal, State or local governmental protection laws will materially affect the operation of either of the Company Divisions. ITEM 2. PROPERTIES The Company rents approximately 100,000 square feet of space in Lowell, Massachusetts. This space consists of two buildings: one is a two-story masonry structure; the other, a one-story cinder block structure. The former building is utilized by GAC Printed Circuits Division, and the latter provides facilities for the Accutest Division and the Company's corporate headquarters. ITEM 3. PENDING LEGAL PROCEEDINGS The Company is not involved in any legal proceedings at this time. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On January 29, 1997, a special meeting of the stockholders was held. The sole item of business brought before the meetings was a proposal to amend the Company's Certificate of Incorporation to effect a one for five split of the Company's issued and outstanding stock. The proposal was approved by a vote of 15,022,573 shares voting in favor, 2,500 shares against, and 500 shares abstaining. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. In the past, the common stock of the Company was traded in the Over-The- Counter Market. Over the past several years, there has been no established, public trading market for the Company's common stock. As of September 22, 1998, the approximate number of holders of common stock is 1,500. Dividends have not been paid in the last fourteen years. The Company's immediate plans are to reinvest earnings. CHANGES IN SECURITIES (A) On January 29, 1997, a special meeting of the stockholders was held at which an amendment to the Company's Certificate of Incorporation effecting a one for five reverse split of the Company's issued and outstanding common stock was approved. The amendment was filed with the Secretary of State of Delaware on February 13, 1997. No fractional shares were issued in connection with the reverse split. In lieu thereof, stockholders whose shares were not evenly divisible by five received one additional share of common stock for the fractional share to which the stockholder would otherwise have been entitled. (B) In December 1996, the Company agreed to sell an aggregate of 1,000,000 shares of the Company's common stock, $.01 par value per share, for a total purchase price of $1,000,000, or $1.00 per share, to two investors, namely Centennial Technologies, Inc. ("Centennial") and Standbridge, Ltd. ("Standbridge"). The sale of the shares was to be consummated following completion of the one for five reverse split of the Company's common stock. On or before December 11, 1996, the parties revised their agreement to provide for consummation of the transactions in advance of the reverse stock split. Specifically, on December 11, 1996, the Company executed two promissory notes, one payable to Centennial and one payable to Standbridge. Each note was in the original principal amount of $500,000 and was convertible into shares of the Company's common stock. In exchange for the notes, the Company received $500,000 from Standbridge and 11,490 shares of Centennial from Centennial. It was contemplated that the notes would be converted to common stock immediately following the reverse stock split. Due to various factors affecting Centennial, including a large-scale investigation of its former President and Chief Executive Officer, a major restatement of its financial statements and the de-listing of its common stock from NYSE, on May 20, 1997, the Company and Centennial agreed to unwind the sale of shares of common stock of the Company to Centennial. Centennial returned the $500,000 promissory note to the Company and the Company returned the 11,940 shares of Centennial common stock to Centennial. The transaction with Standbridge was unaffected. During the first quarter of 1997, 803,330 warrants were issued to debt holders of the Company in exchange for $2,409,990 in debt. These warrants entitle the holders to buy stock at $1.85 per share within five years of the issuance of the warrants. ITEM 6. SELECTED FINANCIAL DATA The selected financial data set forth below are derived from financial statements that have been audited by Becker & McCafferty, P.C. The balance sheet at December 31, 1995, 1996 and 1997 and the related statements of operations and of cash flows for the three years ended December 31, 1997 and notes thereto appear elsewhere in this form 10-K. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's financial statements and related notes included elsewhere in this Form 10-K. ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 1997 COMPARED TO 1996 Accutest sales declined by 2.5% during 1997, while GAC Printed Circuit's sales declined 14.0%. Net sales for the Company were $1,200,049 which represented a 1.4% or $19,432 decline from 1996 sales of $1,394,369. Cost of goods sold increased 4.1% from 78.7% in 1996 to 82.8% in 1997. Selling, general and administrative expenses decreased by $273,253 or 35.9% compared to prior year expenses of $760,306. Return on net sales after taxes was negative due to the substantial net loss. Working capital increased by $5,117,510 to $731,258, compared to last year at ($4,386,252). The current ratio at the end of the year was positive at 1:0.2. Return on total assets for the period was negative. Return on equity for the period was negative. 1996 COMPARED TO 1995 Accutest sales declined by 66.6% during 1996, while GAC Printed Circuit's sales declined 10.2%. Net sales for the Company were $1,394,369 which represented a 16.5% or $274,623 decline from 1995 sales of $1,668,992. Cost of goods sold increased 4.7% from 74.0% in 1995 to 78.7% in 1996. Selling, general and administrative expenses increased by $35,205 or 4.9% compared to prior year expenses of $725,101. Return on net sales after taxes was negative due to the substantial net loss. Working capital decreased by $571,591 to ($4,386,252), a decrease of 13.0% compared to last year ($3,814,661). The current ratio at the end of the year was negative at 1:13.4. Return on total assets for the period was negative. Return on equity for the period was negative. LIQUIDITY AND CAPITAL RESOURCES The Company historically received amounts sufficient to provide for working capital from affiliated entities. It is not expected that further funds will be available from affiliates, and there is no requirement that would ensure future funding. Continuing losses could further erode the Company's working capital and the net capital deficiency raises doubts about the Company's ability to remain a going concern. There are no immediate plans for any capital improvements. Although the Company's 1 for 5 reverse stock split provided the Company with stock to issue to raise additional equity, there is no assurance that the Company will be successful. ITEM 8. FINANCIAL STATEMENTS, FINANCIAL STATEMENTS SCHEDULES AND SUPPLEMENTARY DATA Financial statements are located at the latter part of this report. Please see Pages F1 - F24. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table indicates certain information with respect to the directors of the Company. [Enlarge/Download Table] Positions and Offices with the Company (in addition to that of Director Name of Individual Director) Age Since ----------------- ----------------------- ------ ----- Robert E. Lockwood Chief Executive Officer 50 1985 Secretary Susan M. Winslow President/Treasurer 40 1986 -------- Mr. Lockwood has been a senior management consultant from 1983 to present. Prior to that, he practiced for several years as a private management and financial consultant to businesses in Massachusetts and New Hampshire. He has been involved in the successful turnaround of many troubled businesses. He currently serves as a director on the boards of several companies in Massachusetts. Mr. Lockwood was appointed director of the Company on March 19, 1985. He was elected Chief Executive Officer on October 13, 1986. Mrs. Winslow has been a management consultant to a number of businesses for the past ten years. On October 13, 1986, Mrs. Winslow was appointed director of the Company. She was elected Treasurer of the Company on March 19, 1987, and elected to the additional position of President on January 4, 1988. There is no family relationship between the above named persons. There is currently a vacancy on the Board of Directors. The term of office of each of these directors is until the next annual meeting and the election and qualification of their successors. [Enlarge/Download Table] THE EXECUTIVE OFFICERS OF THE COMPANY Name Age Position ------------------------ ----- ---------------------------- Robert E. Lockwood 50 Chief Executive Officer Secretary Susan M. Winslow 40 President/Treasurer -------- The term of office of each of these executive officers is until the next annual meeting and the election and qualification of their successors. To the Company's knowledge, based solely on review of copies of reports pursuant to Section 16(a) of the Securities Exchange Act, as amended, furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 1997, the Company's officers, directors, and greater than ten percent beneficial owners complied with all filing requirements under Section 16(a). ITEM 11. EXECUTIVE COMPENSATION Executive compensation disclosure has been omitted because the Company's Chief Executive Officer takes no salary, bonus, restricted stock awards, options, SARS, long-term incentives or other compensation from the Company and no other officer of the Company earns total salary and bonus exceeding $100,000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) The following table indicates as to each class of equity securities of the Company the amount beneficially owned directly or indirectly by each owner of at least five percent of the shares outstanding as of September 22, 1998. [Enlarge/Download Table] Shares Percent Title of Beneficially of Class Name Owned Class --------------------- ---------------------- ------------ -------- Common Stock Brookline Management 477,600 9% (1) $0.01 par value Corporation Profit Sharing Trust Brookline Management 318,400 6% (1) Corporation Pension Trust -------- (1) Calculated on the basis of 5,347,744 shares of Common Stock outstanding on September 22, 1998. (b) The following table indicates as to each class of equity securities of the Company, the amount beneficially owned directly or indirectly by each director, the Chief Executive Officer and by all directors and executive officers as a group as of September 22, 1998. [Download Table] Shares Percent Title of Beneficially of Class Name Owned Class --------------- ----------------------- -------------- ----------- Common Stock Robert E. Lockwood 2,000 (1) 0.0005 (2) $0.01 par value Susan Winslow 20,000 (3) 0.005 (2) All current Directors 22,000 0.0055 (2) and Executive Officers as a group (2 persons) -------- (1) Does not include (i) 477,600 and 318,400 shares issued to Mr. Lockwood as a Trustee of Brookline Management Corporation Profit Sharing Trust (BMC-PST) and Brookline Management Corporation Pension Trust (BMC-PT), respectively, (ii) 198,000 shares issued to Mr. Lockwood's wife, Mary H. Lockwood, as Trustee of the Lockwood Family Trust, and (iii) 28,223 shares issued to Mary H.Lockwood. Mr. Lockwood disclaims any beneficial ownership of the above shares. (2) Calculated on the basis of 5,347,744 shares of Common Stock outstanding on September 22, 1998. (3) Does not include 100,000 shares issued to Mrs. Winslow as Trustee of the Fisher Hill Trust and 20,000 shares issued to Mrs. Winslow's daughter, Kathryn Mary Winslow. Mrs. Winslow disclaims any beneficial ownership of the above stock. ITEM 13. TRANSACTIONS WITH MANAGEMENT AND OTHERS None ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements - See index to Financial Statements 2. Financial Statement Schedules - See index to Financial Statements. 3. Exhibits - None. (b) Reports on Form 8-K - None. Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GENERAL AIRCRAFT CORPORATION By: Robert E. Lockwood By: Susan M. Winslow Robert E. Lockwood Susan M. Winslow Chief Executive Officer President/Treasurer Secretary September 22, 1998 September 22, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and the dates indicated: By: Robert E. Lockwood By: Susan M. Winslow Robert E. Lockwood Susan M. Winslow Chief Executive Officer President/Treasurer Secretary September 22, 1998 September 22, 1998
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INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND REPORT OF CERTIFIED PUBLIC ACCOUNTANTS [Download Table] PAGE --------- INDEPENDENT AUDITOR'S REPORT...................... F1 FINANCIAL STATEMENTS Balance Sheets.................................. F2 - F3 Statements of Income and Retained Earnings...... F4 - F5 Statement of Shareholders Equity................ F6 Statements of Cash Flow......................... F7 - F8 Notes to Financial Statements................... F9 - F17 SUPPLEMENTARY INFORMATION Statements of Income By Division................ F19 Statements of Selling, General and Administrative Expenses By Division............ F20 Prior Period Statements of Income and Retained Earnings.............................. F21 Prior Period Statements of Cash Flow............ F22 - F24 --------
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To the Board of Directors and Stockholders General Aircraft Corporation Lowell, MA 01851 INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheets of General Aircraft Corporation as of December 31, 1997 and 1996, and the related statements of income, retained earnings, 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 audit. Except as explained in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit 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 audit provides a reasonable basis for our opinion. We did not observe the taking of the physical inventory as of December 31, 1995, since that date was prior to our appointment as auditor for the Company, and we were unable to satisfy ourselves regarding inventory quantities by means of other auditing procedures. Inventory amounts as of December 31, 1995 enter into determination of net income and cash flows for the year ended December 31, 1996. Because of the matter discussed in the preceding paragraph, the scope of our work was not sufficient to enable us to express, and we do not express and opinion on the results of operations and cash flows for the year ended December 31, 1996. In our opinion, the balance sheets of General Aircraft Corporation as of December 31, 1997 and 1996, and the related statements of income and retained earnings, and cash flows for the year ended December 31, 1997, present fairly in all material respects the financial position of General Aircraft Corporation as of December 31, 1997 and 1996, and the results of its operations and cash flows for the year ended December 31, 1997, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note H to the financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management's plan in regards to these matters are also described in Note H. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Becker & McCafferty, P.C. Certified Public Accountants April 22, 1998 F1
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[Enlarge/Download Table] GENERAL AIRCRAFT CORPORATION BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996 1997 1996 -------------- -------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 182,670 $ 106,360 Accounts Receivable 229,219 150,564 Loans Receivable - Employee 10,090 0 Loans Receivable 23,045 0 Security Deposits 1,200 1,200 Prepaid Expenses 5,586 6,087 Inventory 103,767 90,390 Notes Receivable 300,000 0 Available For-Sale Securities 11,625 0 Investments 50,000 0 -------------- ------------- TOTAL CURRENT ASSETS 917,202 354,601 -------------- ------------- PROPERTY AND EQUIPMENT Furniture and Fixtures 10,777 10,727 Leasehold Improvements 124,515 124,515 Machinery 252,352 247,902 Computer Equipment 59,537 59,537 -------------- ------------ 447,181 442,681 Less Accumulated Depreciation (374,577) (366,733) -------------- ------------ TOTAL PROPERTY AND EQUIPMENT 72,604 75,948 -------------- ------------ TOTAL ASSETS $ 989,806 $ 430,549 ============== ============ SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS F2
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[Enlarge/Download Table] GENERAL AIRCRAFT CORPORATION BALANCE SHEETS AS OF DECEMBER 31, 1997 AND 1996 1997 1996 ------------ ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes Payable $ 0 $ 506,500 Accounts Payable 165,825 113,086 Accrued Expenses and Withholdings 20,119 16,098 Accrued Loss Contingency 0 37,000 Accrued Interest 0 320,650 Loans Payable - Affiliates 0 2,485,724 Loans Payable - Stockholders 0 119,961 ------------ ----------- TOTAL CURRENT LIABILITIES 185,944 3,599,019 ------------ ----------- STOCKHOLDERS' EQUITY Common Stock 268,739 200,000 Warrants Outstanding 2,160,990 0 Additional Paid-in Capital 3,149,219 1,099,633 Unrealized Loss on Available For-Sale Securities (3,042) 0 Retained Earnings/(Deficit) (4,772,044) (4,468,103) ------------ ----------- TOTAL STOCKHOLDERS' EQUITY 803,862 (3,168,470) ------------ ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 989,806 $ 430,549 ============ =========== SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS F3
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[Enlarge/Download Table] GENERAL AIRCRAFT CORPORATION STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 ---------------- -------------- REVENUE Sales $ 1,206,514 $ 1,404,071 Sales Returns and Allowances (6,465) (9,702) ---------------- -------------- NET SALES 1,200,049 1,394,369 ---------------- -------------- COST OF GOODS SOLD Beginning Inventory 90,390 172,335 Purchases 261,565 237,093 Labor 689,035 738,063 Other 56,945 39,902 Ending Inventory (103,767) (90,390) ---------------- -------------- TOTAL COST OF GOODS SOLD 994,168 1,097,003 ---------------- -------------- GROSS PROFIT 205,881 297,366 OPERATING EXPENSES Selling, General and Administrative 487,053 760,306 ---------------- -------------- NET (LOSS) FROM OPERATIONS (281,172) (462,940) OTHER INCOME AND (EXPENSE) Interest Income 24,763 6 Interest Expense (9,383) (114,162) Forgiveness of Debt 10,127 0 Loss on Sale of Securiies (365,186) 0 --------------- --------------- NET INCOME/(LOSS) BEFORE UNUSUAL AND (620,851) (577,096) EXTRAORDINARY ITEM UNUSUAL ITEMS Change In Accounting Estimate 316,910 75,000 Loss Contingency 0 (12,000) Inventory Obsolescence 0 (61,914) -------------- --------------- 316,910 1,086 NET (LOSS) BEFORE EXTRAORDINARY (303,941) (576,010) ITEM EXTRAORDINARY ITEM - INCOME FROM FORGIVENESS OF DEBT (Net of Income Tax Obligation of Zero) - 1,141,834 -------------- --------------- NET INCOME/(LOSS) $ (303,941) $ 565,824 (CONTINUED) SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS F4
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[Download Table] GENERAL AIRCRAFT CORPORATION STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 1997 1996 -------------- -------------- Retained Earnings at Beginning of Year as Previously Reported $ (5,609,937) $ (5,033,927) Prior Period Adjustment 1,141,834 0 Balance at Beginning of Year, ------------- ------------- as Adjusted (4,468,103) (5,033,927) ------------- ------------- Retained Earnings at End of Year $ (4,772,044) $ (4,468,103) ============= ============= BASIC EARNINGS (LOSS) PER SHARE: Net Income before Unusual and Extraordinary Item $ (0.7731) $ (0.1443) Unusual Item 0.3947 0.0002 Extraordinary Item (Net of Income Tax Obligation of Zero) 0.0000 0.2855 ------------ ------------- NET INCOME PER SHARE $ (0.3784) $ 0.1414 ============ ============= FULLY DILUTED EARNINGS (LOSS) PER SHARE: Net Income before Unusual Item $ (0.7731) $ (0.1443) Unusual Item 0.3947 0.0002 Extraordinary Item (Net of Income Tax Obligation of Zero) 0.0000 0.2855 ------------ ------------ NET INCOME PER SHARE $ (0.3784) $ 0.1414 ============ ============ SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS F5
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[Download Table] GENERAL AIRCRAFT CORPORATION STATEMENT OF SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1997 AND 1996 Additional Unrealized Retained Common Warrants Paid-In Loss on Earnings/ Stock Outstanding Capital Securities (Deficit) Total -------- ----------- ----------- ---------- ---------- ---------- Balance - 12/31/95 $200,000 $1,099,633 (5,033,927)(3,734,294) Net 1996 Income 565,824 565,824 --------- ---------- ----------- ----------- ---------- ---------- Balance - 12/31/96 $200,000 $1,099,633 (4,468,103)(3,168,470) Stk Split (Par Val $0.05) 0 0 Sale of Common Stock 22,388 805,937 828,325 Issuance of Common Stock for Note Rec. 8,108 291,892 300,000 Issuance of Common Stock for Note Rec. 13,243 476,757 490,000 Debt Converted to Common Stock 25,000 475,000 500,000 Issuance of Warrants to Cover Debts 2,160,990 2,160,990 Unrealized Loss on Available For-Sale Securities (3,042) (3,042) Net Loss - 1997 (303,941) (303,941) --------- ----------- ---------- ---------- ---------- ---------- Balance - 12/31/97 $268,739 2,160,990 3,149,219 (3,042) (4,772,044) 803,862 SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS F6
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[Download Table] GENERAL AIRCRAFT CORPORATION STATEMENTS OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1997 1997 ------------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME/(DEFICIT) $ (303,941) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation 7,844 Management Fees 3,000 Forgiveness of Debt (10,127) Unusual Item - Change in Accounting Estimate (316,910) CHANGES IN OPERATING ASSETS AND LIABILITIES Increase in Accounts Receivable (78,655) Increase in Inventory (13,377) Increase in Marketable Securitie (14,667) Decrease in Loss Contingency (37,000) Decrease in Prepaid Expenses 501 Increase in Accounts Payable 52,739 Decrease in Accrued Interest (113) Increase in Accrued Expenses and Taxes 4,021 ----------- NET CASH USED BY OPERATING ACTIVITIES (706,685) ----------- CASH FLOWS FROM INVESTING ACTIVITIES Investments in Other Entities (50,000) Purchase of Equipment (4,500) Loans to Affiliates (60,000) Advance to Affiliates (100,000) Loan Receivable (23,045) Loans to Employees (10,090) Payments from Affiliates 650,000 ----------- NET CASH PROVIDED BY INVESTING ACTIVITIES 402,365 ----------- CASH FLOW FROM FINANCING ACTIVITIES Payments to Affiliates (327,734) Payments to Stockholder (119,961) Proceeds from Sale of Common Stock 828,325 ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 380,630 ----------- NET INCREASE IN CASH 76,310 CASH BALANCE, JANUARY 1, 1997 106,360 ----------- CASH BALANCE, DECEMBER 31, 1997 $ 182,670 =========== SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS F7
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[Download Table] GENERAL AIRCRAFT CORPORATION STATEMENTS OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1996 1996 ------------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME/(DEFICIT) $ 565,821 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation 6,919 Forgiveness of Debt (1,041,711) Unusual Item - Change in Accounting Estimate (75,000) Unusual Item - Loss Contingency 12,000 CHANGES IN OPERATING ASSETS AND LIABILITIES Decrease in Accounts Receivable 50,541 Decrease in Inventory 81,945 Increase in Prepaid Expenses (6,087) Increase in Accounts Payable 606 Increase in Accrued Expenses and Taxes (110,622) Increase in Accrued Interest 12,458 ----------- NET CASH USED BY OPERATING ACTIVITIES (503,130) ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Equipment (2,500) ----------- NET CASH USED BY INVESTING ACTIVITIES (2,500) ----------- CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Affiliates 584,000 Payments to Affiliates (502,015) Proceeds from Long Term Borrowing 500,000 ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 581,985 ----------- NET INCREASE IN CASH 76,355 CASH BALANCE, JANUARY 1, 1996 30,005 ---------- CASH BALANCE, DECEMBER 31, 1996 $ 106,360 ========== SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS F8
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of General Aircraft Corporation is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of General Aircraft Corporation's management who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. BUSINESS OPERATIONS The Company had two operating divisions at December 31, 1997 and 1996. Each division independent of the other. GAC Printed Circuits manufactures according to customer specifications, printed circuit boards. GAC Accutest manufactures, installs and repairs electronic test equipment. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. DEPRECIATION AND AMORTIZATION Depreciation is provided for by the straight-line method in amounts sufficient to relate the cost of the depreciable assets to operations over their estimated service lives. Leasehold improvements are amortized over the estimated service lives of the improvements. Depreciation expense for the years ending 1997 and 1996 were $7,844 and $6,919 respectively. INVENTORY At December 31, inventories consisted of the following: [Download Table] 1997 1996 ---------- ---------- Raw Material $ 45,007 $ 46,637 Work in Process 30,688 23,038 Finished Goods 28,072 20,715 $ 103,767 $ 90,390 Inventories are stated at the lower cost or market. Cost is determined by the first-in, first-out method. NOTE B - EXTRAORDINARY ITEM/PRIOR PERIOD ADJUSTMENT In 1997, subsequent to issuing the 1996 year-end financial statement, the Federal Deposit Insurance Company (FDIC) issued the company a 1099 for the year ending 1996 forgiving debt in the amount of $1,141,834. F9
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 (NOTE B - CONTINUED) In 1991 the Company was indebted to Bank Five who became insolvent and was seized by federalregulators. Prior to forgiveness of the debt and issuance of the 1099 no terms, conditions, or efforts by the bank or the FDIC were made to collect on the note from the Company. Restatement of the 1996 financial statements reported as an extraordinary item, resulted in income of $1,141,834. The applicable income tax effect is zero. NOTE C - UNUSUAL ITEMS CHANGE IN ACCOUNTING ESTIMATE Since 1991, when Bank Five was seized by the federal regulators (see Note B above) the Company was indebted to Bank Five, therefore interest was accrued and recorded each year. The amount of accrued interest beginning in 1991 and continuing through 1996 were estimates deemed appropriate by the Company. As a result of the information received by the FDIC and the amount of debt forgiven, the actual amount of accrued interest forgiven required a change in estimates of the prior periods of $316,910. During January of 1997, the Company, settled a claim in which a contingent liability was recorded for $100,000 at December 31, 1995. The settlement was for $25,000, and required a change in estimate of $75,000 at December 31, 1996. CONTINGENT LIABILITY The Company had the following outstanding claims against them at December 31, 1996. Both claims were settled in January of 1997. [Download Table] Workers Compensation Lawsuit $ 25,000 Massachusetts Dept. of Environmental Protection 12,000 ---------- $ 37,000 ========== INVENTORY OBSOLESCENCE The Company wrote-off Accutest Division inventory deemed obsolete totaling $61,914 at December 31, 1996. NOTE D - LOAN PAYABLE - STOCKHOLDER In 1995 a Stockholder of the Corporation paid off a bank note and accrued interest on behalf of the Corporation in the amount of $119,961. Non- interest bearing. Balance was paid in full during 1997. F10
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE E - RELATED PARTY TRANSACTIONS LOANS PAYABLE - AFFILIATES The Company had received in prior years amounts sufficient to provide for working capital from the following affiliated entities. The affiliated entities share in common ownership and/or management. During 1997 all outstanding balances due to affiliated Companies were satisfied. [Download Table] 1996 ------------------ Brookline Management $ 267,566 St. Jude Trust 1,532,344 Employment Leasing 407,200 Team 185,000 Liquidators, Inc. 93,614 ------------------ $ 2,485,724 ================== MINIMUM LEASE PAYMENTS ON FACILITIES In 1996 the Company leased and occupied approximately 100,000 square feet of production and office facilities from St. Jude Management Company, a related party. Terms of lease, a tenancy at will, required monthly payments of $20,000. NOTE RECEIVABLE AFFILIATE The Company, during 1997 advanced to a related entity working capital loans aggregating $490,000. The debt was satisfied during 1997. NOTE F - NOTES PAYABLE Note Payable at December 31, 1996 consists of the following: [Download Table] 1996 ------------ Note Payable - Stanbridge, Payable on demand, monthly payments of interest 5%. Secured by all corporate assets. $ 500,000 Note Payable - Shawmut Bank, Payable on demand, monthly payments of interest only at prime plus 1.5%. Secured by all corporate assets. 6,500 ------------- TOTAL NOTES PAYABLE $ 506,500 ============= F11
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE G - GOING CONCERN The Company, as a result of continued losses has raised substantial doubt about its ability to continue as a going concern. Recurring losses are direct results of the printed circuits divisions inability to obtain competitive contracts to manufacture printed circuit boards and the Accutest division's inability to secure a market for their new test equipment. Management's plan to restructure debt, increase owner equity and to raise capital to retool the existing manufacturing process and to restructure management during 1997 has been delayed while management continues to define a market niche and select and/or find the appropriate management team. NOTE H - COMMON STOCK [Download Table] Dec 31, 1997 Dec 31, 1996 --------------- ------------- Par Value 0.05 0.01 Shares Authorized 20,000,000 20,000,000 # of Shares Issued and Outstanding 5,374,771 20,000,000 NOTE I - REVERSE STOCK SPLIT On January 27, 1997 at a special meeting, the shareholders of the corporation approved a five-for-one reverse stock split effectively reducing the outstanding shares of common stock from 20,000,000 to 4,000,000 shares. The share and per share amounts included in these financial statements are presented on a post-split basis and have been adjusted to reflect this stock split. NOTE J - EARNINGS PER SHARE Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the year. As of December 31, 1997 and 1996, 5,374,771 and 20,000,000 shares were issued and outstanding, respectively. F12
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE J - (CONTINUED) Fully diluted earnings per share is computed by dividing net income by the weighted average number of shares outstanding. The denominator is adjusted assuming all warrants had been issued. The computations for weighted average shares, basic earnings per share and fully diluted earnings per share are as follows: COMPARATIVE WEIGHTED AVERAGE SHARES RETROACTIVE RECOGNITION OF REVERSE STOCK SPLIT ---------------------------------------------- [Download Table] Shares Fraction Equivalent Date Outstanding X Restatement X of Year = Whole Units -------- ------------ ----------- ---------- ----------- 1996 ----- Jan 1 - Dec 31 20,000,000 1/5 12/12 = 4,000,000 ========= 1997 ----- Jan 1 - Jan 28 20,000,000 1/5 28/365 = 306,849 Jan 29 - Dec 31 5,374,771 337/365 = 496,246 ---------- 803,095 ========== EARNINGS PER SHARE COMPUTATIONS: -------------------------------- - Primary earnings per share computation for 1997: [Download Table] Earnings Earnings -- Shares = Per Share ---------- --------- ---------- Primary earnings per share (303,941) 803,095 (0.3784) - Fully diluted earnings per share computations for 1997: [Download Table] Fully diluted EPS (303,941) 803,095 (0.3784) F13
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE K - CONVERSION OF LONG TERM DEBT On January 29, 1997 the note payable - Stanbridge for $500,000 was converted to 500,000 shares of General Aircraft common stock. The common stock issued to Stanbridge is unregistered and restricted. NOTE L - MARKETABLE SECURITIES As of December 31, 1997, the Company had the following available for-sale marketable securities: [Download Table] Gross # of Amortized Unrealized Fair Realized Shares Cost Losses Value Losses --------- --------- ---------- ------ -------- December 31, 1997 JW Charles Financial Service 1,000 14,667 3,042 11,625 0 Omni Multimedia Group, Inc. 9,900 21,163 0 0 21,163 Omni Multimedia Group, Inc. had stopped trading in the market. All stocks became worthless in October, 1997. NOTE M - CONVERSION OF DEBT TO WARRANTS On February 2, 1997 the Company issued to the following affiliated entities warrants in exchange for their outstanding debt. The exchange was one warrant for every $3 of debt. [Download Table] Debt # of Warrants Affiliated Entity Converted Issued ----------------- --------------- ------------- St. Jude Management Company $ 1,350,000 $ 450,000 Brookline Management Company 267,000 89,000 TEAM 60,000 20,000 Employment Leasing Corp. 407,190 135,730 Liquidators, Inc. 76,800 25,600 --------------- ------------- $ 2,160,990 $ 720,330 =============== ============= The warrants grant to the holders the right to purchase from the Company at any time prior to February 1, 2002 fully paid and non-assessable shares of common stock of the Company at the purchase price of $1.85 per share. F14
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE N - CASH FLOW INFORMATION The Company considers all short term investments with an original maturity of three months or less to be cash equivalents. The Company had the following non-cash investing and financing activities: December 31, 1997 ----------------- - A note receivable for $300,000 was assigned to the Company for collection in exchange for 162,162 shares of common stock. - Notes payable, Shawmut Bank, in the amount of $6,500 was written-off. - Accrued interest in the amount of $3,627 was written-off. - Loans payable to affiliates in the amount of $2,160,990 were converted to 720,330 warrants. - Note receivable from affiliate was assumed by the Company in the amount of $490,000. - Note payable for $500,000 was converted to 500,000 shares of common stock. - Change in accounting estimate - accrued interest in prior periods was overstated by $316,910. - Amount due to affiliated company for management fees of $3,000 was converted to debt. December 31, 1996 ----------------- - Accrued interest from note payable to bank was forgiven, $100,122. - Note payable to bank was forgiven, $1,041,711. - Amount due to affiliated companies for rent and management fees of $204,000 and $110,000, respectively were converted to debt. Cash paid for interest and taxes are as follows: [Download Table] 1997 1996 ----------- ---------- Interest $ 9,383 $ 2,887 =========== ========== Taxes $ 456 $ 456 =========== ========== F15
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE O - NOTES RECEIVABLE During 1997 the Company in exchange for 162,162 shares of its common stock ($1.85 per share) assumed the rights to collect on the promissory note with a face value of $300,000 accruing interest at 8% per annum and due December 20, 1997. The note receivable had not been collected as of December 31, 1997. NOTE P - INVESTMENTS As of December 31, 1997 the Company had purchased for $40,000 the exclusive license agreements to market and sell goods at retail. The agreement is for an infinite period of time, and will operate independently of the Company. Consolidated financial statements will be required in subsequent years. As of December 31, 1997 the Company made an initial advance to purchase what will eventually be a 40% share in Pegasus Acquisition Co., LLC. NOTE Q - LOAN RECEIVABLE As of December 31, 1997 the Company had advanced $23,045 as working capital to an unrelated Company. NOTE R - INCOME TAXES The Company has net operating loss carryforwards totaling $4,225,961 that may be offset against future taxable income. The Company had no federal or state tax obligations at December 31, 1997 and 1996. A deferred tax liability on income of $565,824 as restated at December 31, 1996 of $207,819. Is not expected to be realized. The net operating loss carryforwards will expire as follows: [Download Table] Expiring Operating Year Losses ---------- -------------------- 2004 $ 257,584 2005 845,146 2006 679,052 2007 828,416 2008 621,604 2009 196,349 2010 144,626 2011 351,039 2017 302,145 ------------------- $ 4,225,961 ================== F16
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GENERAL AIRCRAFT CORPORATION NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1996 NOTE S - FAIR VALUE OF FINANCIAL INSTRUMENTS Estimated fair values of the Companies financial instruments (all of which are held for non-trading purposes) are as follows: [Download Table] 1997 1996 ----------------------- ---------------------- Carrying Fair Carrying Fair Amount Value Amount Value --------- ---------- ----------- ---------- Cash & Cash Equivalents $ 182,670 $ 182,670 $ 106,360 $ 106,360 Loans Receivable 33,135 33,135 - - Notes Receivable 300,000 300,000 - - Avail For-Sale Securities 11,625 11,625 - - Investments 50,000 50,000 - - Notes Payable - - 506,500 506,500 The carrying amount approximates fair value of cash and loans receivable. Carrying amount and fair value of the note receivable approximate the same as the balance sheet date and due date of the loan are the same. Available for sale securities are reported at quoted market prices. The investments are carried at cost. It is not practicable to estimate the fair value of the investments because it consists of common stock of untraded companies. NOTE T - CONCENTRATIONS OF CREDIT RISK Cash and Cash Equivalents ------------------------- The Company maintains cash balances at several financial institutions. Accounts at each instititute are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 1997, the Company's uninsured cash balances total $28,000. Trade Accounts Receivable ------------------------- The Company's accounts receivable are spread among a large number of customers that operate in many different geographical locations. Accordingly, concentration of credit risk is not significant. The Company adheres to strict credit policies and no one account receivable is significant in amount. F17
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Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying Statements of Income and Expense by Division and Prior Period Financial Information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. BECKER & McCAFFERTY, P.C. Certified Public Accountants April 22, 1998 F18
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[Download Table] GENERAL AIRCRAFT CORPORATION SUPPLEMENTARY STATEMENT OF REVENUE BY DIVISION FOR THE YEAR ENDED DECEMBER 31, 1997 PRINTED TOTAL CIRCUITS ACCUTEST CORPORATE ---------- ----------- ---------- ----------- SALES Sales $1,081,738 $1,028,814 $16,905 $36,019 Sales Tooling 61,348 42,530 18,818 0 Sales Misc. 12,654 12,404 250 0 Sales Field Svc 4,042 0 4,042 0 Shipping Charges 6,334 6,300 34 0 Sales Discounts (997) (292) 0 (705) Sales Comp Hdware 8,225 0 8,225 0 Sales Software 24,675 0 24,675 0 Slss Rtrns & Allow (6,465) (5,865) (600) 0 Rework/Repl Rtrns 5,714 5,714 0 0 Sls- Svc Contracts 1,950 0 1,950 0 Misc. Revenue 831 0 0 831 ---------- ---------- --------- --------- NET SALES $1,200,049 $1,089,605 $74,299 $36,145 ========== ========== ========= ========= SEE ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION F19
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[Download Table] GENERAL AIRCRAFT CORPORATION SUPPLEMENTARY STATEMENT OF OPERATING EXPENSES BY DIVISION FOR THE YEAR ENDED DECEMBER 31, 1997 PRINTED TOTAL CIRCUITS ACCUTEST CORPORATE --------- ----------- ----------- ---------- OPERATING EXPENSES Depreciation Expense $ 7,844 $ 7,844 $ 0 $ 0 Insurance Expense 6,120 5,482 0 638 Sales Expense 7,446 5,938 1,200 308 Management 44,850 0 0 44,850 Taxes-Payroll 13,038 6,389 0 6,649 Field Service Expense 637 0 637 0 Professional & Legal 33,288 0 0 33,288 Advertising & Promo 2,156 408 1,748 0 Bank Charges 779 773 0 6 Uncollected Accounts 3,353 3,353 0 0 Office Expenses 6,609 3,705 1,277 1,627 Dues & Subscriptions 150 50 0 100 Sales & Salary 43,496 43,496 0 0 Rent 93,120 90,000 3,120 0 Telephone 9,154 7,293 1,861 0 Utilities 125,096 95,345 29,751 0 Repairs & Maintenance 22,064 21,289 775 0 Maintenance/Rubbish 5,217 4,392 825 0 R & M Labor 30,504 30,504 0 0 Travel & Entertainment 3,592 0 385 3,207 Stock Transfer Fees 15,000 0 0 15,000 Stock Expense 4,818 0 0 4,818 Proxy Expense 7,298 0 0 7,298 Janitorial Expense 1,424 1,118 306 0 -------- --------- -------- --------- TOTAL OPERATING EXP $487,053 $327,379 $ 41,885 $117,789 SEE ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION F20
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[Enlarge/Download Table] GENERAL AIRCRAFT CORPORATION SUPPLEMENTARY STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1997 1996 1995 ------------- ------------ ------------ REVENUE Sales $ 1,206,514 $ 1,404,071 $ 1,676,802 Sales Returns and Allowances (6,465) (9,702) (7,880) ------------- ------------ ------------ NET SALES 1,200,049 1,394,369 1,668,922 ------------- ------------ ------------ COST OF GOODS SOLD Beginning Inventory 90,390 172,335 172,232 Purchases 261,565 237,093 376,215 Labor 689,035 738,063 809,586 Other 56,945 39,902 48,897 Ending Inventory (103,767) (90,390) (172,335) ------------- ------------ ------------ TOTAL COST OF GOODS SOLD 994,168 1,097,003 1,234,595 ------------- ------------ ------------ GROSS PROFIT 205,881 297,366 434,327 OPERATING EXPENSES Selling, General & Administrative 487,053 760,306 725,101 ------------- ------------- ------------ NET (LOSS) FROM OPERATIONS (281,172) (462,940) (290,774) OTHER INCOME AND (EXPENSE) Interest Income 24,763 6 0 Interest Expense (9,383) (114,162) (42,211) Forgiveness of Debt 10,127 1,141,834 78,249 Loss from Sale of Securities (365,186) 0 0 ------------ ------------- ------------ NET INCOME(LOSS) BEFORE UNUSUAL ITEM (620,851) 564,738 (254,736) UNUSUAL ITEMS (NOTE I) 316,910 1,086 (100,000) ------------ ------------- ------------ NET INCOME(LOSS) (303,941) 565,824 (354,736) Adjusted Retained Earnings Deficit, January 1, (4,468,103) (5,033,927) (4,679,191) ------------ ------------ ------------- Adjusted Retained Earnings Deficit, December 31, $ (4,772,044) $ (4,468,103) $(5,033,927) ============ ============ ============= SEE ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION F21
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[Enlarge/Download Table] GENERAL AIRCRAFT CORPORATION STATEMENTS OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1995 1997 ------------ CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME/(DEFICIT) $ (303,941) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation 7,844 Management Fees 3,000 Forgiveness of Debts (10,127) Unusual Item - Change in Accounting Estimate (316,910) CHANGES IN OPERATING ASSETS AND LIABILITIES Increase in Accounts Receivable (78,655) Increase in Inventory (13,377) Increase in Marketable Securities (14,667) Decrease in Loss Contingency (37,000) Decrease in Prepaid Expenses 501 Increase in Accounts Payable 52,739 Decrease in Accrued Interest (113) Increase in Accrued Expenses and Taxes 4,021 ----------- NET CASH USED BY OPERATING ACTIVITIES (706,685) ----------- CASH FLOWS FROM INVESTING ACTIVITIES Investments in Other Entities (50,000) Purchase of Equipment (4,500) Loans to Affiliates (60,000) Advance to Affiliates (100,000) Loans to Prosports (23,045) Loans to Employees (10,090) Payments from Affiliates 650,000 ---------- NET CASH PROVIDED BY INVESTING ACTIVITIES 402,365 ---------- CASH FLOW FROM FINANCING ACTIVITIES Payments to Affiliates (327,734) Payments to Stockholder (119,961) Proceeds from Sale of Common Stock 828,325 ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 380,630 ---------- NET INCREASE IN CASH 76,310 CASH BALANCE, JANUARY 1, 1997 106,360 ---------- CASH BALANCE, DECEMBER 31, 1997 $ 182,670 ========= SEE ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION F22
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[Download Table] GENERAL AIRCRAFT CORPORATION STATEMENTS OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1995 1996 -------------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME/(DEFICIT) $ 565,821 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation 6,919 Forgiveness of Debts (1,041,711) Unusual Item - Change in Accounting Estimate (75,000) Unusual Item - Loss Contingency 12,000 CHANGES IN OPERATING ASSETS AND LIABILITIES Decrease in Accounts Receivable 50,541 Decrease in Inventory 81,945 Increase in Prepaid Expenses (6,087) Increase in Accounts Payable 606 Increase in Accrued Expenses and Taxes (110,622) Increase in Accrued Interest 12,458 ----------- NET CASH USED BY OPERATING ACTIVITIES (503,130) ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Equipment (2,500) ----------- NET CASH USED BY INVESTING ACTIVITIES (2,500) ----------- CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Affiliates 584,000 Payments to Affiliates (502,015) Proceeds from Long Term Borrowing 500,000 ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 581,985 ----------- NET INCREASE IN CASH 76,355 CASH BALANCE, JANUARY 1, 1996 30,005 ----------- CASH BALANCE, DECEMBER 31, 1996 $ 106,360 ========== SEE ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION F23
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[Download Table] GENERAL AIRCRAFT CORPORATION STATEMENTS OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 1995 1995 -------------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME/(DEFICIT) $ (354,736) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation 33,884 Unusual Item - Loss Contingency 100,000 CHANGES IN OPERATING ASSETS AND LIABILITIES Decrease in Accounts Receivable 133,841 Increase in Inventory (103) Decrease in Accounts Payable (47,186) Increase in Accrued Expenses and Taxes 24,586 Increase In Accrued Interest 25,050 ------------ NET CASH USED BY OPERATING ACTIVITIES (84,664) ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Equipment (16,300) ------------ NET CASH USED BY INVESTING ACTIVITIES (16,300) ------------ CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Affiliates Companies 229,850 Principal Payments of Long Term Debts (228,249) Proceeds from Stockholder 119,961 ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 121,562 ----------- NET INCREASE IN CASH 20,598 CASH BALANCE, JANUARY 1, 1995 9,407 ----------- CASH BALANCE, DECEMBER 31, 1995 $ 30,005 =========== SEE ACCOUNTANTS' REPORT ON SUPPLEMENTARY INFORMATION F24 [ARTICLE] 5 [Download Table] [PERIOD-TYPE] YEAR [FISCAL-YEAR-END] DEC-31-1997 [PERIOD-END] DEC-31-1997 [CASH] 182,670 [SECURITIES] 11,625 [RECEIVABLES] 562,354 [ALLOWANCES] 0 [INVENTORY] 103,767 [CURRENT-ASSETS] 917,202 [PP&E] 447,181 [DEPRECIATION] (374,577) [TOTAL-ASSETS] 989,806 [CURRENT-LIABILITIES] 185,944 [BONDS] 0 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 268,739 [OTHER-SE] 535,123 [TOTAL-LIABILITY-AND-EQUITY] 989,806 [SALES] 1,200,049 [TOTAL-REVENUES] 1,224,812 [CGS] 994,168 [TOTAL-COSTS] 1,481,221 [OTHER-EXPENSES] 0 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] (9,383) [INCOME-PRETAX] 0 [INCOME-TAX] 0 [INCOME-CONTINUING] 0 [DISCONTINUED] 0 [EXTRAORDINARY] (38,149) [CHANGES] 0 [NET-INCOME] (303,941) [EPS-PRIMARY] (0.38) [EPS-DILUTED] (0.38)

Dates Referenced Herein   and   Documents Incorporated by Reference

Referenced-On Page
This ‘10-K’ Filing    Date First  Last      Other Filings
2/1/0216
Filed on:9/25/98
9/22/981
4/22/98320
For Period End:12/31/97124
12/20/9718
5/20/971
2/13/971
2/2/9716
1/29/97116DEFS14A
1/27/9714PRES14A
12/31/96125PRES14A
12/11/961
12/31/95126
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