We were incorporated as General Aircraft, Inc. on August 9, 2011 in the State of Nevada for the purpose of owning and operating helicopters for use in sightseeing tours and as pilot training aircraft. We have procured our first helicopter and have placed it into service in the Las Vegas, Nevada area. We purchased our first helicopter, a Robinson R44 Raven II, in August of 2011 at a cost of $212,500. The helicopter seats three passengers in addition to the pilot. Our purchase was financed in full by a secured, purchase-money loan. The helicopter is hangered at North Las Vegas Airport, an executive and general aviation airport in North Las Vegas, Nevada. Through the end of the fiscal year ended August 31, 2012, we rented the helicopter on an hourly basis to tour operators for use in sightseeing tours of the Las Vegas strip, as well as for helicopter pilot training flights, through our related-party manager, Elite Aviation VGT, LLC (“Elite”). Under our former arrangement with Elite, we rented the helicopter for varying retail rates of between $360 to $380 per hour. Elite provided routine maintenance, fuel, insurance, parking, and other operating needs for the helicopter billed us for these services on a monthly basis. In addition, Elite collected and disbursed our gross rental revenues monthly.
On November 1, 2012, we terminated our former agreement with Elite and entered into a simplified arrangement with provides for the direct rental of our helicopter by Elite. Under our Helicopter Lease Agreement dated November 1, 2012, Elite now rents our helicopter directly at a rate of $185 per Hobbs hour. Elite is responsible for all maintenance and repairs, hangar parking fees, insurance fees, as well as fuel and oil costs in relation to the helicopter for the duration of the lease, which is the sooner of December 31, 2014 or the date upon which the helicopter reaches a Hobbs register reading of 2,200 hours. We remain responsible for debt service, taxes, and license and registration fees for our helicopter.
Item 2. Properties
We do not currently own or lease any real property.
Item 3. Legal Proceedings
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is quoted under the symbol “GAIF” on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting. Our reporting is presently current and, since inception, we have filed our SEC reports on time.
A trading market for our securities did not begin to develop until after the fiscal year ended August 31, 2012.
The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
As of November 26, 2012, the last trading price of our common stock was $0.15 per share.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
Holders of Our Common Stock
As of November 27, 2012, we had 13,500,000 shares of our common stock issued and outstanding, held by thirty-one (31) shareholders of record.
Dividends
There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:
We have not declared any dividends and we do not plan to declare any dividends in the foreseeable future.
Item 6. Selected Financial Data
A smaller reporting company is not required to provide the information required by this Item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Results of Operations for the Year Ended August 31, 2012 and the Period From Inception (August 9, 2011) to August 31, 2012
During the fiscal year ended August 31, 2012, we generated $112,786 in revenue from the rental of our helicopter. Our operating expenses for the fiscal year ended August 31, 2012 were $229,447 and consisted of professional fees in the amount of $126,692, aircraft maintenance in the amount of $36,186, fuel and oil expense in the amount of $27,270, management fees in the amount of $19,793, depreciation in the amount of $19,481, and administrative fees of $25. In addition, we incurred interest expense in the amount of $13,012 during the fiscal year ended August 31, 2012. Our net loss for the fiscal year ended August 31, 2012 was $129,673.
During the period from our inception on August 9, 2011 through August 31, 2012, we generated $112,786 in revenue from the rental of our helicopter. Our operating expenses for the period from our inception on August 9, 2011 through August 31, 2012 were $236,821 and consisted of professional fees in the amount of $130,380, aircraft maintenance in the amount of $39,872, fuel and oil expense in the amount of $27,270, management fees in the amount of $19,793, depreciation in the amount of $19,481, and administrative fees of $25. In addition, we incurred interest expense in the amount of $13,873 during the period from our inception on August 9, 2011 through August 31, 2012. Our net loss for the period from our inception on August 9, 2011 through August 31, 2012 was $137,908.
Liquidity and Capital Resources
As of August 31, 2012, we had total current assets of $131,113, consisting entirely of cash in the amount of $32,005 and accounts receivable in the amount of 99,108. The accounts receivable are due primarily from Elite. Our total current liabilities as of August 31, 2012 were $204,227, and consisted of accounts payable and accrued expenses of $190,667 and accrued interest of $13,560. Our working capital deficit as of August 31, 2012 was therefore $72,114.
Our current aircraft loan is purchase money financing in the amount of $212, 812.50 secured by our Robinson R44 Raven II helicopter. The loan bears interest at the rate of six percent (6%) per year, and requires semi-annual interest payments of $6,385, commencing on March 31, 2012, and continuing every six months thereafter. All principal and interest is due under the loan on August 11, 2016.
As discussed in the notes to our financial statements, we have not attained profitable operations and are dependent upon obtaining financing or generating revenue from operations to continue operations for the immediate future. As a result, our auditor’s report on our financial statements for the fiscal year ended August 31, 2011 expressed a substantial doubt as to our ability to continue as a going concern.
Our current financial difficulties stem from three primary sources: (1) the fact that we have only recently commenced operations and therefore have not established a track record of generating positive cash flow and sustaining our operations over time; (2) the fact that, without additional financing, we will operate without significant reserves for unusual or unexpected expenses; and (3) the fact that we currently own only one aircraft and therefore have a narrow revenue base and a limited ability to generate net profits.
Known uncertainties which may result in our cash flows and liquidity increasing or decreasing significantly from the expectations of management include the following:
As discussed in the notes to our financial statements, we have not attained profitable operations and are dependent upon obtaining financing or generating revenue from operations to continue operations for the immediate future. This has raised substantial doubt for our auditors about our ability to continue as a going concern. We may be required to seek additional financing in order to sustain our operations throughout the current fiscal year. We can provide no assurance that such financing will be available on terms acceptable to us, or at all.
Off Balance Sheet Arrangements
As of August 31, 2012, there were no off balance sheet arrangements.
Going Concern
We have yet to achieve profitable operations, have accumulated losses of $137,908 since our inception and expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing from shareholders or other sources to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that we will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available or on acceptable terms, if at all.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. At this time, management does not believe that any of our accounting policies fit this definition.
Recently Issued Accounting Pronouncements
The Company has reviewed issued accounting pronouncements and plans to adopt those that are applicable to it. The Company does not expect the adoption of any other pronouncements to have an impact on its results of operations or financial position.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Required by Article 8 of Regulation S-X:
To the Board of Directors and Stockholders
General Aircraft Inc.
We have audited the accompanying balance sheet of General Aircraft Inc. ("the Company") as of August 31, 2012 and 2011 and the related statements of operation, changes in stockholders’ equity and cash flows for the year ended August 31, 2012 and for the periods of August 9, 2011 (Inception) to August 31, 2012 and 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of August 31, 2012 and 2011, and the results of its operations, shareholders’ equity, and cash flows for the year ended August 31, 2012 and from August 9, 2011 (Inception) to August 31, 2012 and 2011 in conformity with U.S. 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 2 to the financial statements, the Company has suffered losses from operations. This factor raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Weaver Martin & Samyn, LLC
Kansas City, Missouri
December 14, 2012
GENERAL AIRCRAFT, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
The accompanying notes are an integral part to these condensed financial statements.
STATEMENTS OF OPERATIONS