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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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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                        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

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                         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

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                        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

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                       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

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                     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  

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                       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

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                       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

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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.                    

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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.                        

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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            
                                                 =============        

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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.                                                  

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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)

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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.        

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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
           ===========     ==========

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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                                 
                   ==================                          

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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.                                                       

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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                                                                  

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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      

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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

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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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                     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

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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
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		12/20/97		18
		5/20/97		1
		2/13/97		1
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		1/29/97		1		16			DEFS14A
		1/27/97		14					PRES14A
		12/31/96		1		25			PRES14A
		12/11/96		1
		12/31/95		1		26
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