-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nu1+5llLp9L3tUzZV04xrHAKE13B/yf7RaQmNQLsgntf7BF0BoCF9Bvy1edepll9 O2SlT6atKojhYftS/xP4Uw== 0000928385-97-001347.txt : 19970815 0000928385-97-001347.hdr.sgml : 19970815 ACCESSION NUMBER: 0000928385-97-001347 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCORP INC CENTRAL INDEX KEY: 0000811664 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 941358276 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09591 FILM NUMBER: 97661463 BUSINESS ADDRESS: STREET 1: 13873 PARK CTR RD STE 490 CITY: HERNDON STATE: VA ZIP: 22071 BUSINESS PHONE: 7038349200 MAIL ADDRESS: STREET 1: 13873 PARK CENTER ROAD CITY: HERNDON STATE: VA ZIP: 22071 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------------------------------ For the Quarter ended: JUNE 30, 1997 Commission File Number 1-5351 WORLDCORP, INC. (Exact name of registrant as specified in its charter) DELAWARE 94-3040585 (State of incorporation) (I.R.S. Employer Identification Number) 13873 Park Center Road, Suite 490, Herndon, VA 20171 (Address of Principal Executive Offices) (703) 834-9200 (Registrant's telephone number) 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 X No ----- ----- The number of shares of the registrant's Common Stock outstanding on August 8, 1997 was 15,014,641. ================================================================================ WORLDCORP, INC. JUNE 1997, QUARTERLY REPORT ON FORM 10Q TABLE OF CONTENTS Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets, June 30, 1997 and December 31, 1996.......................................... 3 Condensed Consolidated Statements of Operations, Three months ended June 30, 1997 and 1996........................... 5 Condensed Consolidated Statements of Operations, Six months ended June 30, 1997 and 1996............................. 7 Condensed Consolidated Statement of Changes in Common Stockholders' Deficit, Six months ended June 30, 1997............... 9 Condensed Consolidated Statements of Cash Flows, Six months ended June 30, 1997 and 1996............................. 10 Notes to Condensed Consolidated Financial Statements................ 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................................... 30 2 ITEM 1. FINANCIAL STATEMENTS - ------- -------------------- WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (in thousands)
(unaudited) June 30, December 31, 1997 1996 -------- -------- CURRENT ASSETS Cash and cash equivalents, including restricted cash of $925 at June 30, 1997 and $447 at December 31, 1996 $ 8,390 $ 12,462 Restricted cash and short-term investments 2,201 2,047 Trade accounts receivable, less allowance for doubtful accounts of $409 at June 30, 1997 and $413 at December 31, 1996 8,013 15,460 Other receivables 5,645 4,667 Due from affiliate, net 4,171 4,181 Prepaid expenses and other current assets 6,666 8,314 Assets held for sale 500 500 -------- -------- Total current assets 35,586 47,631 -------- -------- ASSETS HELD FOR SALE 3,067 3,425 EQUIPMENT AND PROPERTY Flight and other equipment 87,032 75,191 Equipment under capital leases 11,639 11,639 -------- -------- 98,671 86,830 Less accumulated depreciation and amortization 25,198 21,357 -------- -------- Net equipment and property 73,473 65,473 -------- -------- LONG-TERM OPERATING DEPOSITS 15,965 15,951 INVESTMENT IN AFFILIATE 35,399 36,299 OTHER ASSETS AND DEFERRED CHARGES, NET 3,814 5,145 INTANGIBLE ASSETS, NET 984 1,072 -------- -------- TOTAL ASSETS $168,288 $174,996 ======== ========
3 WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (continued) LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT (in thousands except share data)
(unaudited) June 30, December 31, 1997 1996 -------- -------- CURRENT LIABILITIES Notes payable $ 15,806 $ 26,386 Current maturities of long-term obligations 10,933 9,990 Accounts payable 21,733 24,339 Net liabilities of discontinued operations 220 1,834 Unearned revenue 3,163 3,046 Accrued maintenance in excess of reserves paid 16,095 9,770 Accrued salaries and wages 11,856 10,344 Accrued interest 955 981 Accrued taxes 1,410 1,249 -------- -------- Total current liabilities 82,171 87,939 -------- -------- LONG-TERM OBLIGATIONS, NET 103,789 104,804 OTHER LIABILITIES Deferred gain from sale leaseback transactions, net of accumulated amortization of $19,627 as of June 30, 1997 and $19,099 as of December 31, 1996 5,724 6,252 Accrued postretirement benefits 2,648 2,545 Accrued maintenance in excess of reserves paid 2,123 6,867 Other 3,899 3,378 -------- -------- Total other liabilities 14,394 19,042 -------- -------- TOTAL LIABILITIES 200,354 211,785 -------- -------- MINORITY INTEREST 7,434 3,548 COMMON STOCKHOLDERS' DEFICIT Common stock, $1 par value, (60,000,000 shares authorized, 16,629,843 shares issued and 15,008,077 shares outstanding at June 30, 1997 and 16,617,031 shares issued and 15,020,265 shares outstanding at December 31, 1996) 16,630 16,617 Additional paid-in capital 43,861 43,824 Deferred compensation (549) (591) Accumulated deficit (90,870) (91,366) ESOP guaranteed bank loan (461) (805) Treasury stock, at cost (1,621,766 shares at June 30, 1997 and 1,596,766 shares at December 31, 1996) (8,111) (8,016) -------- -------- TOTAL COMMON STOCKHOLDERS' DEFICIT (39,500) (40,337) -------- -------- COMMITMENTS AND CONTINGENCIES TOTAL LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT $168,288 $174,996 ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements 4 WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, (in thousands except share data) (UNAUDITED)
1997 1996 -------- -------- OPERATING REVENUES World Airways $ 81,928 $ 86,508 US Order -- 548 -------- -------- Total operating revenues 81,928 87,056 -------- -------- OPERATING EXPENSES World Airways: Flight 16,682 13,318 Maintenance 17,917 15,964 Aircraft costs 24,693 22,837 Fuel 2,663 2,577 Flight operations subcontracted to other carriers 1,892 6,952 Promotions, sales and commissions 2,382 2,321 Depreciation and amortization 2,196 1,911 General and administrative 7,005 5,357 -------- -------- Total operating expenses - World Airways 75,430 71,237 -------- -------- US Order: Total operating expenses - US Order -- 3,639 -------- -------- WorldCorp: General and administrative 1,010 731 -------- -------- Total operating expenses 76,440 75,607 -------- -------- OPERATING INCOME 5,488 11,449 -------- -------- OTHER INCOME (EXPENSE) Interest expense (2,673) (2,969) Interest income 227 961 Equity in loss of affiliate (818) -- Loss on issuances (purchases) of equity by subsidiaries, net (109) 50 Other, net (60) (328) -------- -------- Total other expense (3,433) (2,286) -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 2,055 9,163 INCOME TAX EXPENSE (100) (315) MINORITY INTEREST (2,168) (4,469) -------- -------- EARNINGS (LOSS) FROM CONTINUING OPERATIONS (213) 4,379 -------- -------- LOSS FROM DISCONTINUED OPERATIONS BEFORE MINORITY INTEREST -- (28,518) MINORITY INTEREST -- 11,621 -------- -------- LOSS FROM DISCONTINUED OPERATIONS -- (16,897) -------- -------- NET LOSS $ (213) $(12,518) ======== ======== (Continued)
5 WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, (CONTINUED) (UNAUDITED)
1997 1996 ----------- ----------- PRIMARY NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ (0.01) $ 0.25 Discontinued operations -- (0.98) ----------- ----------- Net loss $ (0.01) $ (0.73) =========== =========== FULLY DILUTED NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ * $ 0.24 Discontinued operations * (0.73) ----------- ----------- Net loss $ * $ (0.49) =========== =========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Primary 15,008,077 17,215,901 =========== =========== Fully diluted * 23,109,978 =========== ===========
* Fully diluted earnings per share are anti-dilutive. See accompanying Notes to Condensed Consolidated Financial Statements 6 WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, (in thousands except share data) (UNAUDITED)
1997 1996 -------- -------- OPERATING REVENUES World Airways $160,676 $151,873 US Order -- 1,874 -------- -------- Total operating revenues 160,676 153,747 -------- -------- OPERATING EXPENSES World Airways: Flight 33,114 33,283 Maintenance 34,595 30,493 Aircraft costs 49,379 41,452 Fuel 5,703 8,070 Flight operations subcontracted to other carriers 2,249 8,013 Promotions, sales and commissions 4,663 3,633 Depreciation and amortization 4,331 3,894 General and administrative 13,808 11,089 -------- -------- Total operating expenses - World Airways 147,842 139,927 -------- -------- US Order: Total operating expenses - US Order -- 7,024 -------- -------- WorldCorp: General and administrative 1,324 2,020 -------- -------- Total operating expenses 149,166 148,971 -------- -------- OPERATING INCOME 11,510 4,776 -------- -------- OTHER INCOME (EXPENSE) Interest expense (5,625) (5,810) Interest income 429 1,967 Equity in loss of affiliate (770) -- Loss on purchases of equity by subsidiaries, net (397) (175) Other, net (204) (569) -------- -------- Total other expense (6,567) (4,587) -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST 4,943 189 INCOME TAX EXPENSE (350) (315) MINORITY INTEREST (4,097) (2,088) -------- -------- EARNINGS (LOSS) FROM CONTINUING OPERATIONS 496 (2,214) -------- -------- LOSS FROM DISCONTINUED OPERATIONS BEFORE MINORITY INTEREST -- (32,705) MINORITY INTEREST -- 13,328 -------- -------- LOSS FROM DISCONTINUED OPERATIONS -- (19,377) -------- -------- NET EARNINGS (LOSS) $ 496 $(21,591) ======== ======== (Continued)
7 WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, (CONTINUED) (UNAUDITED)
1997 1996 ------------- ------------ PRIMARY NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ 0.03 $ (0.14) Discontinued operations -- (1.18) ---------- ---------- Net income (loss) $ 0.03 $ (1.32) ========== ========== FULLY DILUTED NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ * $ * Discontinued operations * * ---------- ---------- Net income (loss) $ * $ * ========== ========== WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Primary 15,012,368 16,397,440 ========== ========== Fully diluted * * ========== ==========
* Fully diluted earnings per share are anti-dilutive. See accompanying Notes to Condensed Consolidated Financial Statements 8 WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' DEFICIT FOR THE SIX MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS EXCEPT SHARE DATA) (UNAUDITED)
Employee Stock Owner- Total Additional ship Plan Treasury Common Common Paid-in Deferred Accumulated Guaranteed Stock, Stockholders' Stock Capital Compensation Deficit Bank Loan at cost Deficit ------- ---------- ------------- ------------ ----------- --------- -------------- BALANCE AT DECEMBER 31, 1996 $16,617 $43,824 $(591) $(91,366) $(805) $(8,016) $(40,337) Issuance of stock 13 37 -- -- -- -- 50 Employee Stock Ownership Plan guaranteed bank loan -- -- -- -- 344 -- 344 Amortization of deferred compensation -- -- 42 -- -- -- 42 Purchase of common stock, at cost -- -- -- -- -- (95) (95) Net earnings -- -- -- 496 -- -- 496 ------- ---------- ------------ ----------- ---------- -------- -------- BALANCE AT June 30, 1997 $16,630 $43,861 $(549) $(90,870) $(461) $(8,111) $(39,500) ======= ========== ============ =========== ========== ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements 9 WORLDCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, (IN THOUSANDS) (UNAUDITED)
1997 1996 -------- -------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD $ 12,462 $ 74,443 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) 496 (21,591) Adjustments to reconcile net earnings (loss) to cash provided (used) by operating activities: Depreciation and amortization 4,571 4,471 Deferred gain recognition (528) (531) Losses on issuances (purchases) of equity by subsidiaries, net 397 175 Minority interest in earnings (loss) of subsidiaries 4,097 (11,240) Equity loss in affiliate 770 -- Equity loss in investee of subsidiary -- 894 Gain on sale of equipment and property (26) (302) Deferred compensation expense 42 157 Loss on disposal of discontinued operations -- 20,985 Other 416 -- Changes in certain assets and liabilities, net of effects of non-cash transactions: Decrease (increase) in accounts receivable 6,479 (15,077) Increase in restricted short-term investments (154) (120) Decrease in deposits, prepaid expenses and other assets 2,188 1,411 (Decrease) increase in accounts payable, accrued expenses and other liabilities (508) 8,204 Increase (decrease) in unearned revenue 117 (3,284) Increase in air traffic liability -- 4,878 -------- -------- Net cash provided (used) by operating activities 18,357 (10,970) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Additions to equipment and property (4,565) (5,829) Proceeds from disposal of equipment and property 439 1,094 -------- -------- Net cash used by investing activities (4,126) (4,735) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in line of credit borrowing arrangement, net (7,520) 7,668 Issuance of debt -- 361 Repayment of debt (10,212) (8,906) Proceeds from stock transactions -- 2,011 Proceeds from purchases of equity by subsidiaries, net -- (13) Purchase of common stock (95) -- Purchase of common stock of subsidiary (476) -- -------- -------- Net cash (used) provided by financing activities (18,303) 1,121 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (4,072) (14,584) -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,390 $ 59,859 ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements 10 WORLDCORP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The condensed consolidated balance sheet of WorldCorp, Inc. ("WorldCorp" or the "Company") as of June 30, 1997, the related condensed consolidated statements of operations for the three and six month periods ended June 30, 1997 and 1996, the condensed consolidated statements of changes in common stockholders' deficit for the six months ended June 30, 1997 and the condensed consolidated statements of cash flows for the six months ended June 30, 1997 and 1996 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. All significant intercompany balances have been eliminated. Interim results are not necessarily indicative of results for a full year. In addition, prior to November 7, 1996, these financial statements contain the historical results of US Order, Inc. ("US Order"). On November 7, 1996, US Order and Colonial Data Technologies Corp. ("Colonial Data") merged with and into InteliData Technologies Corporation ("InteliData"). Effective with this Merger, InteliData became the successor corporation to US Order. As a result of the Merger, WorldCorp's ownership percentage in InteliData was reduced to 28.9% and, as such, beginning November 7, 1996, WorldCorp reports its share of InteliData's net assets and results of operations under the equity method of accounting. The condensed consolidated financial statements and notes are presented as required by Form 10-Q, and do not contain certain information included in the Company's annual financial statements and notes. These financial statements should be read in conjunction with the financial statements and the notes included in the Company's Form 10-K for the year ended December 31, 1996. 2. In July 1996, World Airways announced its decision to exit its scheduled service operations by October 1996 and focus its operations on its core business: operating aircraft under contracts with international carriers, the U.S. Government, and international tour operators. Consistent with this decision, World Airways ceased all scheduled operations as of October 27, 1996. As a result, World Airways' scheduled service operations were reflected as discontinued operations as of June 30, 1996, and prior period results were restated to reflect scheduled service operations as discontinued operations. Loss from discontinued operations (net of income tax effect) approximated $11.7 million for the year ended December 31, 1996. In addition, an estimated loss on disposal of $21.0 million (net of income tax effect) which was recorded as of June 30, 1996, included the following: $13.6 million for estimated operating losses during the phase-out period; a $2.6 million estimated loss to be incurred in connection with sub-leasing DC- 10 aircraft which would not be utilized in its operations subsequent to the phase-out of scheduled service operations; a $2.3 million writeoff of related leasehold improvements; and $2.0 million for passenger reprotection expenses. World Airways has incurred approximately $21.0 million of these costs through June 30, 1997 and believes that its remaining accrual for estimated losses on disposal will be adequate to meet the remaining costs to be incurred during the phase-out period. In connection with the discontinuance of its scheduled service operations, World Airways was subject to claims by various third parties and may be subject to further claims in the future (see Note 7). 3. As mentioned above, WorldCorp's ownership interest in InteliData is approximately 28.9%. The Company's consolidated results for the three and six months ended June 30, 1996 include the results of US Order for the period prior to the Merger. Following the Merger, the Company reports its proportionate share of InteliData's financial results using the equity method of accounting. Summarized financial information of InteliData is as follows (in thousands):
Three Months Ended June 30, Six Months Ended June 30, ----------------------------- --------------------------- 1997 1996 1997 1996 -------------- ------------- ----------- -------------- Results of operations: Revenues $16,863 $ 548 $38,427 $ 1,874 Cost of revenues 12,319 342 26,147 1,272 Gross profit 4,544 206 12,280 602 Operating loss (5,130) (3,145) (5,381) (5,178) Net loss applicable to common shareholders (2,837) (3,206) (2,672) (5,194) June 30, December 31, 1997 1996 ------- ------- Financial position: Current assets $75,323 $82,989 Non-current assets 58,922 60,757 Current liabilities 12,470 19,457 Non-current liabilites -- --
11 On August 12, 1997, InteliData announced its intention to purchase up to 2.0 million shares of its common stock pursuant to open market transactions. There can be no assurances as to the number of shares ultimately repurchased. 4. As of August 14, 1997, World Airways was in the process of issuing $75.0 million of convertible senior subordinated debentures (the "Debentures"), in a private offering, due in 2004 (the "Offering"). The Debentures would be unsecured obligations, convertible into shares of World Airways' common stock, and subordinated to all present and future senior indebtedness of World Airways. The Debentures will be offered in reliance on the exemption from the registration requirements provided by Rule 144A of the Securities Act of 1933 (the "Securities Act"). Accordingly, the Debentures and the underlying common stock have not been registered under the Securities Act and will be offered only to certain accredited investors. World Airways intends to use net proceeds of the Offering to purchase between 4.0 and 5.8 million shares of is common stock, repay certain indebtedness and increase working capital. Failure by World Airways to repurchase at least 4.0 million shares of common stock within 150 days after the sale of the Debentures constitutes a repurchase event whereby each holder of the Debentures would have the right, at the holder's option, to require World Airways to repurchase such holders Debentures at 100% of their principal amount, plus accrued interest. No assurances, however, can be given with respect to the eventual outcome of the Offering or the subsequent repurchase of World Airways' common stock. In connection with the Offering, World Airways and WorldCorp are currently in discussions and expect to enter into an agreement for the repurchase of up to 4.7 million shares of common stock owned by WorldCorp. There can be no assurance that such agreement will be completed or related repurchase will be consummated. 5. In 1996, the Company announced its intention to purchase up to 2.5 million shares of its publicly-traded common stock pursuant to open market transactions. As of June 30, 1997, the Company had purchased 1,362,500 shares of its common stock for an aggregate cost of $7.8 million. WorldCorp does not intend to purchase any additional shares at this time. 6. The Company is a highly leveraged holding company. As a holding company, all of WorldCorp's funds are generated through its positions in World Airways and InteliData, which have not paid dividends on common stock since 1992. At June 30, 1997, World Airways has a working capital deficit of $31.9 million and has substantial debt and lease commitments. At June 30, 1997, InteliData has working capital of $62.9 million, with no long-term debt. World Airways' ability to pay dividends is currently restricted under a borrowing arrangement. Additionally, the provisions of the Indenture governing WorldCorp's Debentures causes World Airways not to pay dividends upon the occurrence of any events of default by WorldCorp under such Indenture. World Airways and InteliData currently intend to retain their future earnings, if any, to fund the growth and development of their business and, therefore, do not anticipate paying any cash dividends in the foreseeable future. Of the $8.4 million in cash and cash equivalents at June 30, 1997, approximately $8.3 million is held by World Airways and, therefore, is not available to satisfy WorldCorp's obligations. As of June 30, 1997, WorldCorp had parent company repayment obligations, including principal and interest, of approximately $18.1 million for the remainder of 1997. In order to meet these obligations and its general and administrative costs, the Company must use its existing cash and either sell shares of World Airways or InteliData, or issue additional debt or equity. In connection with a $15.0 million loan from a commercial bank (the "Bank Loan"), WorldCorp has pledged all of the shares of common stock of World Airways and InteliData beneficially owned by WorldCorp. The Bank Loan matures on September 29, 1997. As discussed above, WorldCorp and World Airways are currently in discussions and expect to enter into an agreement for the repurchase of up to 4.7 million shares of common stock owned by 12 WorldCorp. If a closing occurs under this agreement, WorldCorp expects to use a portion of the proceeds to repay the Bank Loan. If a closing does not occur under this agreement and WorldCorp does not refinance the Bank Loan, it would be necessary for WorldCorp to sell assets in order to repay the Bank Loan. There can be no assurance that WorldCorp will be successful in consummating these transactions. Management believes that its existing cash and the anticipated proceeds from a combination of sales of stock of World Airways or InteliData, renegotiations of its existing borrowing arrangements, new financing arrangements, or the issuance of debt or equity, will be sufficient to allow the Company to meet its operating requirements and repayment obligations for 1997. At August 14, 1997, based on quoted market prices, the market value of the Company's 6,929,586 shares of World Airways and 9,179,273 shares of InteliData, approximated $58.9 million and $27.0 million, respectively. 7. For a discussion of commitments and contingencies see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters". 8. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 ("FAS #128") Earnings per Share, and SFAS No. 129 ("FAS #129") Disclosure of Information About Capital Structure. FAS #128 was issued to simplify the computation of earnings per share and to make the U.S. standard more compatible with the standards of other countries and that of the International Accounting Standards Committee. FAS #128 replaces primary and full diluted earnings per share with basic earnings and diluted earnings per share. FAS #129 will change some of the required disclosures about capital structure. It is not expected that these statements will have a material effect on the Company's financial statements in the future. The statements are effective for the year ended December 31, 1997. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------- ----------------------------------------------------------------------- OF OPERATIONS ------------- Management's Discussion and Analysis of Financial Condition and Results of Operations presented below relates to the operations of WorldCorp, Inc. ("WorldCorp" or "the Company") as reflected in its condensed consolidated financial statements. These statements primarily include the accounts of World Airways, Inc. ("World Airways"). On February 28, 1994, pursuant to an October 1993 agreement, the Company sold 24.9% of its ownership in World Airways to MHS Berhad ("MHS"), a Malaysian aviation company. Effective December 31, 1994, WorldCorp repurchased 5% of World Airways' common stock from MHS. In October 1995, World Airways completed an initial public offering in which 2,000,000 shares were issued and sold by World Airways and 900,000 shares were sold by WorldCorp. At June 30, 1997, WorldCorp and MHS owned 6,929,586 shares, or 61.7%, and 1,990,000 shares, or 17.7%, respectively, of World Airways' outstanding common stock. The remaining balance was publicly traded. As of August 14, 1997, World Airways was in the process of issuing $75.0 million of convertible senior subordinated debentures (the "Debentures"), in a private offering, due in 2004 (the "Offering"). The Debentures would be unsecured obligations, convertible into shares of World Airways' common stock, and subordinated to all present and future senior indebtedness of World Airways. The Debentures will be offered in reliance on the exemption from the registration requirements provided by Rule 144A of the Securities Act of 1933 (the "Securities Act"). Accordingly, the Debentures and the underlying common stock have not been registered under the Securities Act and will be offered only to certain accredited investors. World Airways intends to use net proceeds of the Offering to purchase between 4.0 and 5.8 million shares of is common stock, repay certain indebtedness and increase working capital. Failure by World Airways to repurchase at least 4.0 million shares of common stock within 150 days after the sale of the Debentures constitutes a repurchase event whereby each holder of the Debentures would have the right, at the holder's option, to require World Airways to repurchase such holders Debentures at 100% of their principal amount, plus accrued interest. No assurances, however, can be given with respect to the eventual outcome of the Offering or the subsequent repurchase of World Airways' common stock. In connection with the Offering, World Airways and WorldCorp are currently in discussions and expect to enter into an agreement for the repurchase of up to 4.7 million shares of common stock owned by WorldCorp. There can be no assurance that such agreement will be completed or related repurchase will be consummated. WorldCorp also had an ownership interest in US Order, Inc. ("US Order"), a company which provided products and services for two markets: home banking and smart telephones. In August 1996, US Order and Colonial Data Technologies Corp. ("Colonial Data") entered into an Agreement and Plan of Merger pursuant to which US Order and Colonial Data would be merged with and into a new public company, InteliData Technologies Corporation ("InteliData"). Pursuant to this Merger, which was consummated on November 7, 1996, InteliData became the successor corporation to US Order. The Merger was treated as a purchase of Colonial Data by US Order. InteliData concentrates on three markets: (1) consumer telecommunications; (2) electronic commerce; and (3) interactive services. At June 30, 1997, WorldCorp owned 9,179,273 shares of InteliData, or a ownership interest of approximately 28.9%. Following this Merger, the Company reports its proportionate share of InteliData's financial results using the equity method of accounting. In 1996, the Company announced its intention to purchase up to 2.5 million shares of its publicly-traded common stock pursuant to open market transactions. As of June 30, 1997, the Company had purchased 1,362,500 shares of its common stock for an aggregate cost of $7.8 million. WorldCorp does not intend to purchase any additional shares at this time. The Private Securities Litigation Reform Act of 1995 (the "Act") was recently passed by Congress. The Company desires to take advantage of the new "safe harbor" provisions in the Act. Therefore, this report contains forward looking statements that are subject to risks and uncertainties, including, but not limited to, the impact of competitive products, product demand and market acceptance risks, reliance on key strategic alliances, fluctuations in operating results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These risks could cause the Company's actual results for 1997 and beyond to differ materially from those expressed in any forward looking statements made by, or on behalf of, the Company. For a complete discussion of these and other risks and uncertainties, please refer to the Company's Annual Report filed on Form 10-K for the year ended December 31, 1996. OVERVIEW WorldCorp owns positions in companies that operate in two distinct business areas. World Airways (Nasdaq:WLDA) provides worldwide passenger and cargo air transportation to major international airlines, the U.S. Air Force, and 14 international tour operators, with a fleet of MD-11 and DC10-30 aircraft. InteliData (Nasdaq:INTD) concentrates on three markets: (1) consumer telecommunications; (2) electronic commerce; and (3) interactive services. The Company is a highly leveraged holding company. As a holding company, all of WorldCorp's funds are generated through its positions in World Airways and InteliData, neither of whom intend to pay dividends in the foreseeable future. In addition, World Airways' ability to pay dividends is currently restricted under a borrowing arrangement. As of June 30, 1997, WorldCorp has substantial parent company debt service obligations. In order to meet these obligations and its general and administrative costs in 1997, the Company must use its existing cash and either sell shares of World Airways or InteliData, or issue additional debt or equity. Under the terms of certain borrowing arrangements, WorldCorp has pledged all of its shares of World Airways and InteliData as collateral for the borrowings. WORLD AIRWAYS - ------------- World Airways is a global provider of long-range passenger and cargo air transportation outsourcing services to major international airlines under fixed rate, multi-year contracts. World Airways' passenger and freight operations employ 13 wide-body aircraft which are operated under contracts, primarily with Pacific Rim airlines. These contracts generally require World Airways to supply aircraft, crew, maintenance and insurance ("ACMI" or "wet lease"), while it's customers are responsible for a large portion of the other operating expenses, including fuel. World Airways' airline customers have determined that outsourcing a portion of their wide-body passenger and cargo requirements can be less expensive, and offer greater operational and financial flexibility, than purchasing new aircraft and additional spare parts required for such aircraft. World Airways also leads a contractor teaming arrangement that is the one of the largest single supplier of commercial airlift services to the United States Air Force's Air Mobility Command ("U.S. Air Force" or "USAF"). In July 1996, World Airways restructured its business to focus on ACMI contract services. As such, World Airways ceased all scheduled passenger and scheduled charter services as of October 27, 1996, taking a one-time charge of $21.0 million as of June 30, 1996 (see "Discontinuation of Scheduled Service Operations"). World Airways generally charges customers on a block hour basis rather than a per seat or per pound basis. "Block hours" are defined as the elapsed time computed from the moment the aircraft first moves under its own power at the point of origin to the time it comes to rest at its final destination. World Airways provides most services under two types of contracts: wet lease contracts and full service contracts. Under wet lease contracts, World Airways provides the aircraft, cockpit crew, maintenance and insurance and the customer provides all other operating services and bears all other operating expenses, including fuel and fuel servicing, marketing costs associated with obtaining passengers and/or cargo, airport passenger and cargo handling fees, landing fees, cabin crews, catering, ground handling and aircraft push-back and de-icing services. Under full service contracts, World Airways provides fuel, catering, ground handling, cabin crew and all related support services as well. Accordingly, World Airways generally charges a lower rate per block hour for wet lease contracts than full service contracts, although it does not necessarily earn a lower profit. Because of shifts in the mix between full service contracts and wet lease contracts, fluctuations in revenues are not necessarily indicative of volume trends or profitability. It is important, therefore, to measure World Airways' business volume by block hours flown and to measure profitability by operating income per block hour. World Airways' operating philosophy is to build on its existing ACMI relationships to achieve a strong platform for future growth. World Airways concentrates on ACMI contracts which shift yield, load factor and certain cost risks to the customer. The customer bears the risk of filling the aircraft with passengers or cargo and assumes a large portion of the operating expenses, including fuel. World Airways has elected to emphasize its ACMI business because it perceives a number of opportunities created by a growing global economy, particularly growth in second and third world economies where the demand for airlift exceeds capacity. World Airways attempts to maximize profitability by combining its multi-year ACMI contracts with short term, higher-yielding ACMI agreements which meet the peak seasonal requirements of its customers. World Airways responds opportunistically to rapidly changing market conditions by maintaining a flexible fleet of aircraft that can be deployed in a variety of configurations. As is common in the air transportation industry, World Airways has relatively high fixed aircraft costs. World Airways operates a fleet of nine MD-11 and four DC10-30 wide-body aircraft and, while it believes that the lease rates on its MD-11 aircraft are favorable relative to lease rates of other MD-11 operators, its MD-11 aircraft have 15 higher lease costs (although lower operating costs) than its DC10-30 aircraft. Therefore, achieving high average daily utilization of its aircraft (particularly its MD-11 aircraft) at attractive yields are important factors to World Airways' financial results. In addition to fixed aircraft costs, a portion of World Airways' labor costs are fixed due to monthly minimum guarantees to cockpit crewmembers and flight attendants. SIGNIFICANT CUSTOMER RELATIONSHIPS World Airways' business relies heavily on its contracts with Malaysian Airline System Berhad ("Malaysian Airlines"), Philippine Airlines, Inc. ("Philippine Airlines"), P.T. Garuda Indonesia ("Garuda") and the U.S. Air Force. For the first six months of 1997, these customers provided approximately 27%, 36%, 19% and 15%, respectively, of World Airways' revenues and 30%, 38%, 20% and 8%, respectively, of total block hours. In 1996, these customers provided approximately 34%, 15%, 13%, and 25%, respectively, of World Airways' revenues and 42%, 17%, 14%, and 17%, respectively, of total block hours flown from continuing operations. Malaysian Airlines. World Airways has provided wet lease services to Malaysian - ------------------- Airlines since 1981, providing wet lease services for Malaysian Airlines' scheduled passenger and cargo operations as well as transporting passengers for the annual Hadj pilgrimage. MHS, which owned 17.7% of World Airways as of June 30, 1997, also owns 29.1% of Malaysian Airlines. World Airways recently entered into a new 32-month agreement for year-round operations (including the Hadj) with Malaysian Airlines whereby World Airways will provide two passenger aircraft with cockpit crews, maintenance and insurance to Malaysian Airlines' newly-formed charter division through May 1999. World Airways provided three aircraft for 1997 Hadj operations. World Airways has a long-term contract to operate three MD-11 cargo aircraft for Malaysian Airlines. However, beginning in July 1996, and as mutually agreed by the parties, World Airways redeployed two cargo aircraft, which had been operating under these contracts, into the Philippine Airlines contract. World Airways and Malaysian Airlines are currently discussing the future redeployment of these aircraft back into Malaysian Airlines' operations in order to meet the contracts' original obligations. World Airways can provide no assurances, however, that it will, in fact, be able to do so. Revenues associated with these contractual obligations are included in World Airways' backlog amount included herein. Garuda. World Airways has flown for Garuda periodically since 1973 and yearly - ------- since 1988. Since 1988, World Airways has been one of the largest providers of passenger services to Indonesia for the Hadj pilgrimage. The Indonesian Hadj pilgrimage is the world's largest due to the size of Indonesia's Islamic population. In 1997, approximately 40,000 of the 200,000 Indonesians who traveled to Jeddah for the Hadj pilgrimage flew on World Airways' aircraft. World Airways is currently negotiating an agreement with Garuda to operate six aircraft during the 1998 pilgrimage. Philippine Airlines. World Airways presently operates four MD-11 passenger - -------------------- aircraft for Philippine Airlines under an agreement with high minimum monthly utilization levels. Philippine Airlines, however, is experiencing financial difficulties, and since March 1997 had been making monthly lease payments to World Airways on an installment basis according to a payment plan agreed to by World Airways and Philippine Airlines at the beginning of each month. On July 11, 1997, World Airways agreed to shift two MD-11s currently operating for Philippine Airlines to Viacao Aereo Sao Paulo ("VASP") later in the third quarter. As of the date hereof, Philippine Airlines is in compliance with its agreements with World Airways and has reconfirmed its commitment to operate the remaining two MD-11s currently in its fleet until February 1998. Failure by Philippine Airlines to meet its aircraft lease obligations, if not offset by other business, would have a material adverse effect on the financial condition, cash flows and results of operations of World Airways. VASP. On July 3, 1997, World Airways entered a binding Memorandum of Agreement - ----- with VASP for the lease of two MD-11 passenger aircraft to commence in the third quarter for a six-month term with a six-month renewal option. World Airways is also leasing a cargo plane to VASP under an ACMI contract which began in June 1997. The loss of this agreement, a renegotiation of its terms or a substantial reduction of business for VASP, if not replaced, could have a material adverse effect on the financial condition or results of operations of World Airways. U.S. Air Force. World Airways has provided international air transportation to - --------------- the U.S. Air Force since 1956. The overall downsizing of the U.S. military places a premium on the mobility of the U.S. armed forces. This is reflected in the stable size over the past several years of the USAF's procurement of commercial airlift services. Although 16 its agreements with the USAF provide for full service contracts with certain minimum performance requirements, World Airways has risks similar to an ACMI agreement because the USAF agreements are cost-plus contracts at attractive rates. The USAF awards points to air carriers acting alone or through teaming arrangements in proportion to the number and type of aircraft such carriers make available to Civil Reserve Air Fleet. World Airways utilizes such teaming arrangements to maximize the value of potential awards. World Airways leads a contractor teaming arrangement that enjoys a 44% market share of the USAF's overall commercial airlift requirement. During a period in which the U.S. military downsized substantially, World Airways's portion of the fixed USAF award increased from $15.6 million for the government's 1992-93 fiscal year, to $52.8 million for the government's 1996-97 fiscal year. While the current annual contract expires on September 30, 1997, World Airways recently received a $73.9 million fixed award for the government's 1997-1998 fiscal year. World Airways, however, cannot determine how future cuts in military spending may affect future operations with the U.S. Air Force. As a result of these and other contracts, World Airways had an overall contract backlog at June 30, 1997 of $338.7 million, compared to $532.6 million at June 30, 1996. Approximately $116.3 million of the backlog relates to operations during the remainder of 1997. World Airways' backlog for each contract is determined by multiplying the minimum number of block hours (defined as the elapsed time computed from the moment the aircraft first moves under its own power at the point of origin to the time it comes to rest at its destination) guaranteed under the applicable contract by the specified hourly rate under such contract. Approximately 70% and 13% of the backlog relates to its contracts with Malaysian Airlines and Philippine Airlines, respectively. In addition, a significant portion of World Airways' current contracts expire near the end of 1997. Although there can be no assurance that it will be able to secure additional business to reduce this excess capacity, World Airways is actively seeking customers for 1998 and beyond. World Airways' financial results and financial condition would be affected adversely if it is unable to secure additional business to reduce this excess capacity. SEASONALITY Historically, World Airways' business has been significantly affected by seasonal factors. During the first quarter, World Airways typically experiences lower levels of utilization and yields due to lower demand for passenger and cargo services relative to other times of the year. World Airways experiences higher levels of utilization and yields in the second quarter, principally due to peak demand for commercial passenger services associated with the annual Hadj pilgrimage. In 1997, World Airways' flight operations associated with the Hadj pilgrimage occurred from March 15 to May 20. Because the Islamic calendar is a lunar-based calendar, the Hadj pilgrimage occurs approximately 10 to 12 days earlier each year relative to the Western (Gregorian) calendar. As a result, revenues resulting from future Hadj pilgrimage contracts will continue to shift from the second quarter to the first quarter over the next several years. World Airways believes that its contracts with Malaysian Airlines and the USAF should lessen the effect of these seasonal factors. GEOGRAPHIC CONCENTRATION World Airways derives a significant percentage of its revenues and block hours from its operations in the Pacific Rim region. While it believes the Pacific Rim region is a growth market for air transportation, any economic decline or any military or political disturbance in this area may interfere with World Airways' ability to provide service in this area and could have a material adverse effect on the financial condition or results of operations of World Airways. UTILIZATION OF AIRCRAFT Due to the large capital costs of leasing and maintaining World Airways' aircraft, each of World Airways' aircraft must have high utilization at attractive rates in order for World Airways to operate profitably. Although World Airways' strategy is to enter into long-term contracts with its customers, the terms of World Airways' existing customer contracts are substantially shorter than the terms of World Airways' lease obligations with respect to the aircraft. As mentioned above, a significant portion of World Airways' contract backlog at June 30, 1997, relates to its multi-year contracts with Malaysian Airlines and Philippine Airlines. In addition, a significant portion of World Airways' current contracts expire near the end of 1997. There can be no assurance that World Airways will be able to enter into additional contracts with new or existing customers or that it will be able to obtain enough additional 17 business to fully utilize each aircraft. World Airways' financial results could be materially adversely affected even by relatively brief periods of low aircraft utilization and yields. In order to maximize aircraft utilization, World Airways does not intend to acquire new aircraft unless such aircraft would be necessary to service existing needs or World Airways has obtained additional ACMI contracts for the aircraft to service. World Airways is seeking to obtain additional ACMI contracts with new and existing customers, to which such new aircraft would be dedicated when placed in service, but World Airways can provide no assurance that it will obtain new ACMI contracts or that existing ACMI contracts will be renewed or extended. MAINTENANCE Engine maintenance accounts for most of World Airways' annual maintenance expenses. Typically, the hourly cost of engine maintenance increases as the aircraft ages. World Airways outsources major airframe maintenance and power plant work to several suppliers. World Airways has a 10-year contract expiring in August 2003 with United Technologies Corporation's Pratt & Whitney Group for all off-wing maintenance on the PW 4462 engines that power its MD-11 aircraft. Under this contract, the manufacturer agreed to provide such maintenance services at a cost not to exceed specified rates per hour during the term of the contract. World Airways' maintenance costs associated with the MD-11 aircraft and PW 4462 engines have been significantly reduced due in part to manufacturer guarantees and warranties which began to expire in 1995 and which will fully expire by 1998. In addition, the specified rates per hour are subject to annual escalation, increasing substantially in 1998. Accordingly, while World Airways believes the terms of this agreement have resulted in lower engine maintenance costs than it otherwise would incur, engine maintenance costs will increase substantially during the last five years of the agreement. World Airways has begun to accrue these increased expenses in 1997 and such expenses will continue to increase during the remainder of the term of the contract as its aircraft fleet ages. OPERATING LOSSES While World Airways generated operating income each year from 1987 through 1992 and in 1995, it sustained operating losses in 1993 and 1994 of $7.3 million and $5.2 million, respectively, and net losses of $9.0 million in each of these two years. For the year ended December 31, 1996, World Airways incurred a net loss of $14.0 million, which resulted from operating losses incurred in its scheduled service operations, which were discontinued in 1996, and the related estimated loss on disposal. Earnings from continuing operations were $18.4 million for 1996. While it generated operating income for the six months ended June 30, 1997 of $12.8 million, there can be no assurance that World Airways will be able to continue generating operating income for the remainder of 1997 or future years. DISCONTINUATION OF SCHEDULED SERVICE OPERATIONS World Airways commenced service between Tel Aviv and New York in July 1995. In the first quarter of 1996, World Airways generated $4.2 million in losses related to these operations. In the second quarter of 1996, World Airways expanded its scheduled service operations with service between the United States and South Africa and introduced scheduled charter operations between the United States and various destinations within Europe. As it was unable to operate these scheduled service operations profitably, in July 1996, World Airways announced its decision to exit its scheduled service operations by October 1996 and focus its operations on its core wet lease operations. Consistent with this decision, World Airways ceased all scheduled operations as of October 27, 1996. As a result, World Airways' scheduled service operations were reflected as discontinued operations as of June 30, 1996, and prior period results were restated to reflect scheduled service operations as discontinued operations. Loss from discontinued operations (net of income tax effect) approximated $11.7 million for the year ended December 31, 1996. In addition, an estimated loss on disposal of $21.0 million (net of income tax effect) was recorded as of June 30, 1996 and World Airways believes that its remaining accrual for estimated losses on disposal will be adequate to meet the remaining costs to be incurred during the phase-out period. INTELIDATA - ---------- InteliData was incorporated in order to effect the merger of US Order and Colonial Data. The Merger was announced on August 5, 1996, when US Order and Colonial Data entered into an Agreement and Plan of Merger ("Merger Agreement"). On November 7, 1996, the Merger was consummated with each share of outstanding US Order and Colonial Data common stock being exchanged for one share of InteliData common stock. The Merger was treated as a purchase of Colonial Data by US Order. At June 30, 1997, WorldCorp's ownership in InteliData 18 was approximately 28.9%. Following this Merger, WorldCorp reports its proportionate share of InteliData's financial results using the equity method of accounting. Effective September 30, 1996, US Order acquired the business of Braun, Simmons & Co., ("Braun Simmons"), for approximately $7.0 million consisting of cash and US Order common stock and including US Order transaction costs. Braun Simmons was an information engineering firm specializing in the development of home banking and electronic commerce solutions for financial institutions. The acquisition expands InteliData's product line for both large and small financial institutions. The business of InteliData consists of the businesses previously conducted by US Order, Colonial Data and Colonial Data's subsidiaries. InteliData develops and markets products and services for the telecommunications and financial services industries through its three business divisions: consumer telecommunications, electronic commerce and interactive services. The consumer telecommunications division designs, develops and markets telecommunications products that support intelligent network services being developed and implemented by the regional Bell operating companies ("RBOCs") and other telephone companies ("telcos"). InteliData has concentrated its product development and marketing efforts on products that support Caller ID and other emerging intelligent network services, including a smart telephone, the Telesmart 4000/IntelifoneTM, which provide consumers call management features and the ability to access numerous network services and interactive applications via telephone. InteliData currently offers a line of Caller ID adjunct units and telephones with integrated Caller ID, small business telecommunications systems and high-end consumer telecommunications equipment. InteliData also repairs and refurbishes telecommunications products for commercial customers and provides other services that support the development and implementation of intelligent network services. The electronic commerce division develops and markets products and services to assist financial institutions in their home banking and electronic bill payment initiatives. The products are designed to assist consumers in accessing and transacting business with their banks and credit unions electronically, and to assist financial institutions in connecting to and transacting business with third parties, including data processors and billers. The services focus on a financial institution's back office, offering outsourcing for data entry, telemarketing, customer service and technical support. InteliData currently receives its electronic commerce revenues largely from the sale of products and services to Visa International Service Association, Inc. ("Visa") member banks. The interactive services division was established to provide interactive applications for use on smart telephones and other small screen devices, such as alpha-numeric pagers, Personal Communication Systems ("PCS") telephones and personal digital assistants ("PDAs"). InteliData intends to sell interactive applications directly to end users and through other companies, including telcos and wireless communications companies. InteliData's current interactive applications include electronic national directory assistance lookup, one-way alpha-numeric paging, one-way internet e-mail, a personal directory data save and restore function and information services such as news, weather, sports scores, stock quotes, lottery results and horoscopes. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996 WORLD AIRWAYS - ------------- Total block hours, including discontinued operations, decreased 1,571 hours, or 11%, to 12,336 hours in the second quarter of 1997 from 13,907 hours in 1996, with an average of 14.0 available aircraft per day in 1997 compared to 14.9 in 1996. Average daily utilization (block hours flown per day per aircraft) decreased to 9.7 hours in 1997 from 10.2 hours in 1996. In 1997, wet lease contracts accounted for 91% of total block hours, an increase from 80% in 1996. Total operating revenues decreased $4.6 million, or 5%, to $81.9 million in 1997 from $86.5 million in 1996. Continuing Operations - --------------------- Block hours from continuing operations increased to 12,336 hours in the second quarter of 1997 from 12,173 hours in 1996. 19 Operating Revenues. Revenues from flight operations decreased $0.2 million to - ------------------- $80.1 million in 1997 from $80.3 million in 1996. This decrease corresponds to a shift in its mix of business during 1997 with an increase in wet lease operations from full service operations, partially offset by a modest increase in block hours flown in 1997 compared to 1996. Operating Expenses. Total operating expenses increased $4.2 million, or 6%, in - ------------------- 1997 to $75.4 million from $71.2 million in 1996. Flight operations expenses include all expenses related directly to the operation of the aircraft other than aircraft cost, fuel and maintenance. Also included are expenses related to flight dispatch and flight operations administration. Flight operations expenses increased $3.4 million, or 26%, in 1997 to $16.7 million from $13.3 million in 1996. This increase resulted primarily from higher crew costs, partially offset by the shift in the mix of business from full service to wet lease operations. World Airways expects that it will experience increased training costs during the remainder 1997 as a result of crewmember attrition. Maintenance expenses increased $1.9 million, or 12%, in 1997 to $17.9 million from $16.0 million in 1996. This increase resulted primarily from the increase in the number of aircraft dedicated to its continuing operations and an increase in costs associated with the MD-11 aircraft and related engines as a result of certain manufacturer guarantees and warranties which began to expire in 1995 and will fully expire by 1998. This increase was partially offset by a reversal in 1997 of $1.0 million of accrued maintenance expense in excess of the cost of an overhaul of a DC-10 aircraft. The Company expects its maintenance expense to further increase in 1997 and 1998 due to escalations in the specified rates per hour under its maintenance agreement. Aircraft costs increased $1.9 million, or 8%, in 1997 to $24.7 million from $22.8 million in 1996. This increase resulted primarily from the increase in the number of aircraft dedicated to its continuing operations, partially offset by the return of one DC-10 aircraft in the fourth quarter of 1996 and a decrease in aircraft insurance as a result of a reduction in insurance policy rates. Depreciation and amortization increased $0.3 million, or 16%, in 1997 to $2.2 million from $1.9 million in 1996. This increase resulted primarily from an increase in spare parts required to support the additional MD-11 aircraft described above, offset by a decrease in the amortization of certain intangible assets. General and administrative expenses increased $1.6 million, or 30%, in 1997 to $7.0 million from $5.4 million in 1996. This increase was primarily due to the hiring of additional administrative personnel, beginning in the second quarter of 1996, necessary to support the growth in its core business and an increase in property tax accruals. As part of its strategy to increase its marketing efforts, World Airways is currently increasing its sales and marketing staff. As a result, World Airways expects a modest increase in general and administrative expenses during the second half of 1997. Discontinued Operations - ----------------------- World Airways commenced service between Tel Aviv and New York in July 1995. In the first quarter of 1996, World Airways generated $4.2 million in losses related to these operations. In the second quarter of 1996, World Airways expanded its scheduled service operations with service between the United States and South Africa and introduced scheduled charter operations between the United States and various destinations within Europe. As it was unable to operate these scheduled service operations profitably, in July 1996, World Airways announced its decision to exit its scheduled service operations by October 1996 and focus its operations on its core wet lease operations. Consistent with this decision, World Airways ceased all scheduled operations as of October 27, 1996. As a result, its scheduled service operations were reflected as discontinued operations as of June 30, 1996, and prior period results were restated to reflect scheduled service operations as discontinued operations. INTELIDATA - ---------- As previously discussed, in August 1996, US Order and Colonial Data entered into an Agreement and Plan of Merger pursuant to which US Order and Colonial Data were merged with and into a new public company, InteliData. Pursuant to this Merger on November 7, 1996, InteliData became the successor corporation to US Order. As of June 30, 1997, WorldCorp's ownership interest in InteliData was approximately 28.9%. 20 The Company's consolidated results for the quarter ended June 30, 1996 include the results of US Order for the period prior to the Merger. Following the Merger, the Company reports its proportionate share of InteliData's financial results using the equity method of accounting (see "Other Income (Expense) - Equity in Loss of Affiliate"). WORLDCORP - --------- General and administrative expenses increased $0.3 million for the quarter ended June 30, 1997 to $1.0 million from $0.7 million in the comparable 1996 period. This increase related primarily from an increase in legal fees, including an allocation of certain legal fees from World Airways to the Company. OTHER INCOME (EXPENSE) - ---------------------- Equity in Loss of Affiliate. For the quarter ended June 30, 1997, InteliData's - ---------------------------- revenues were $16.9 million, including $15.8 million generated by the consumer telecommunications division primarily resulting from marketing and promotional campaigns for Caller ID units and services conducted by telcos and InteliData. In addition, InteliData realized an increase in revenues generated from its electronic commerce division, attributed primarily to the expansion of the division's product sales during the quarter. InteliData's cost of revenues for the second quarter of 1997 increased to $12.3 million, including $11.6 million from its consumer telecommunications division. Overall gross profit margins decreased to 27% for the second quarter of 1997 from 38% in the comparable 1996 period. Gross profit margins for the consumer telecommunications, electronic commerce and interactive services divisions were 27%, 33% and 13%, respectively, for the second quarter of 1997. The gross profit margin derived from the sale of Caller ID and small business units was 23% for the second quarter of 1997. During the quarter, InteliData experienced pricing pressures from competition in Caller ID adjuncts. InteliData anticipates that gross profit margins may fluctuate in the future due to changes in product mix and distribution, continued competitive pricing pressure, the introduction of new products, and changes in the volume and terms of leasing activity. InteliData's total operating expenses were $9.7 million during the quarter ended June 30, 1997. Included in the 1997 general and administrative expenses was a reversal of $1.2 million for certain restructuring charges recognized in the fourth quarter of 1996. InteliData has determined that certain liabilities associated with facilities consolidations were no longer necessary and accordingly, such accruals were reversed in the second quarter or 1997. Exclusive of this restructuring charge, general and administrative expenses increased primarily as a result of the Merger and the upgrade of systems and operations. As a result of InteliData's increased marketing efforts to promote its residential and small business telecommunications product lines to retail markets and to RBOCs and other telephone operating companies, selling and marketing expenses also increased during the second quarter of 1997 compared to 1996. Finally, research and development costs increased during the second quarter of 1997 primarily from the developing, designing, and testing of new products and services. InteliData has been actively engaged in research and development since its inception and expects that these activities will remain consistent during the remainder of 1997 and be essential to the operations of InteliData in the future. During the second quarter of 1997, InteliData recorded a gain of $1.9 million resulting from a revaluation of its investment in Home Financial Network, Inc. ("HFN"). The revaluation relates to a reduction in InteliData's ownership in HFN as a result of the sale of additional shares of stock by HFN. SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 World Airways - ------------- Total block hours, including discontinued operations, decreased 391 hours, or 2%, to 24,150 hours in the first six months of 1997 from 24,541 hours in 1996, with an average of 13.7 available aircraft per day in 1997 compared to 13.3 in 1996. Average daily utilization (block hours flown per day per aircraft) decreased to 9.8 hours in 1997 from 10.2 hours in 1996. In 1997, wet lease contracts accounted for 90% of total block hours, an increase from 74% for the six months ended June 30, 1996. Total operating revenues increased $8.8 million, or 6%, to $160.7 million in 1997 from $151.9 million in 1996. Continuing Operations - ---------------------- Block hours from continuing operations increased 2,143 hours, or 10%, to 24,150 hours in the first six months of 1997 from 22,007 hours in 1996. Operating Revenues. Revenues from flight operations increased $13.7 million, or - ------------------- 9%, to $158.5 million in 1997 from $144.8 million in 1996. This increase was primarily attributable to the increase in block hours flown, partially 21 offset by a shift in its mix of business during 1997 with an increase in wet lease operations and a decrease in full service operations. Operating Expenses. Total operating expenses increased $7.9 million, or 6%, in - ------------------- 1997 to $147.8 million from $139.9 million in 1996. Flight operations expenses decreased $0.2 million in 1997 to $33.1 million from $33.3 million in 1996. This decrease resulted primarily from the shift in the mix of business from full service to wet lease operations, partially offset by higher crew costs. World Airways expects that it will experience increased training costs during the remainder of 1997 as a result of crewmember attrition. Maintenance expenses increased $4.1 million, or 13%, in 1997 to $34.6 million from $30.5 million in 1996. This increase resulted primarily from the increase in the number of aircraft dedicated to its continuing operations, the integration of additional aircraft into the fleet, and a corresponding increase in block hours flown. In addition, World Airways experienced an increase in costs of approximately $1.2 million associated with the MD-11 aircraft and related engines as a result of certain manufacturer guarantees and warranties which began to expire in 1995 and will fully expire by 1998. World Airways expects its maintenance expense to increase further in 1997 and 1998 due to escalations in the specified rates per hour under its maintenance agreement. The increase was partially offset by a reversal in 1997 of $1.0 million of accrued maintenance expense in excess of the cost of an overhaul of a DC-10 aircraft. Aircraft costs increased $7.9 million, or 19%, in 1997 to $49.4 million from $41.5 million in 1996. This increase resulted from the increase in the number of aircraft dedicated to its continuing operations, primarily due to the lease of two MD-11ER aircraft in March 1996, and the lease of additional spare engines necessary to maintain the expanded fleet. Fuel expenses decreased $2.4 million, or 30%, in 1997 to $5.7 million from $8.1 million in 1996. This decrease is due primarily to the shift from full service to wet lease operations where it is not responsible for fuel costs. This decrease was partially offset by an increase in price per gallon. Promotions, sales and commissions increased $1.1 million in 1997 to $4.7 million from $3.6 million in 1996. This increase resulted primarily from expenses incurred in connection with a customer contract. Depreciation and amortization increased $0.4 million in 1997 to $4.3 million from $3.9 million in 1996. This increase resulted primarily from an increase in spare parts required to support the additional MD-11 aircraft described above, offset by a decrease in the amortization of certain intangible assets. General and administrative expenses increased $2.7 million, or 24%, in 1997 to $13.8 million from $11.1 million in 1996. This increase was primarily due to the hiring of additional administrative personnel, beginning in the second quarter of 1996, necessary to support the growth in its core business and an increase in property tax accruals. As part of its strategy to increase its marketing efforts, the Company is currently increasing its sales and marketing staff. As a result, World Airways expects a modest increase in general and administrative expenses during the second half of 1997. INTELIDATA - ---------- As previously discussed, in August 1996, US Order and Colonial Data entered into an Agreement and Plan of Merger pursuant to which US Order and Colonial Data were merged with and into a new public company, InteliData. Pursuant to this Merger on November 7, 1996, InteliData became the successor corporation to US Order. As of June 30, 1997, WorldCorp's ownership interest in InteliData was approximately 28.9%. The Company's consolidated results for the quarter ended June 30, 1996 include the results of US Order for the period prior to the Merger. Following the Merger, the Company reports its proportionate share of InteliData's financial results using the equity method of accounting (see "Other Income (Expense) - Equity in Loss of Affiliate"). 22 WORLDCORP - --------- General and administrative expenses decreased $0.7 million for the six months ended June 30, 1997 to $1.3 million from $2.0 million in the comparable 1996 period. The Company paid approximately $0.5 million in incentive bonus awards in the first quarter of 1996. No such payments were made in 1997. OTHER INCOME (EXPENSE) - ---------------------- Equity in Loss of Affiliate. For the six months ended June 30, 1997, - ---------------------------- InteliData's revenues were $38.4 million, including $36.2 million generated by the consumer telecommunications division primarily resulting from marketing and promotional campaigns for Caller ID units and services conducted by telcos and InteliData. In addition, InteliData realized an increase in revenues generated from its electronic commerce division, attributed primarily to the expansion of the division's product sales. InteliData's cost of revenues for the first six months of 1997 increased to $26.1 million, including $24.6 million from its consumer telecommunications division. Overall gross profit margins were 32% for the first six months of 1997, consistent with the comparable 1996 period. Gross profit margins for the consumer telecommunications, electronic commerce, and interactive services divisions were 32%, 32% and 17%, respectively, for the first six months of 1997. The gross profit margin derived from the sale of Caller ID and small business units was 29% for the first six months of 1997. During the quarter ended June 30, 1997, InteliData experienced pricing pressures from competition in Caller ID adjuncts. InteliData anticipates that gross profit margins may fluctuate in the future due to changes in product mix and distribution, continued competitive pricing pressure, the introduction of new products, and changes in the volume and terms of leasing activity. InteliData's total operating expenses were $17.7 million during the six months ended June 30, 1997. Included in the 1997 general and administrative expenses was a reversal of $1.2 million for certain restructuring charges recognized in the fourth quarter of 1996. InteliData has determined that certain liabilities associated with facilities consolidations were no longer necessary and accordingly, such accruals were reversed in the second quarter or 1997. Exclusive of this restructuring charge, general and administrative expenses increased primarily as a result of the Merger and the upgrade of systems and operations. As a result of InteliData's increased marketing efforts to promote its residential and small business telecommunications product lines to retail markets and to RBOCs and other telephone operating companies, selling and marketing expenses also increased during the first six months of 1997 compared to 1996. Finally, research and development costs increased during the first six months of 1997 primarily from the developing, designing, and testing of new products and services. InteliData has been actively engaged in research and development since its inception and expects that these activities will remain consistent during the remainder of 1997 and be essential to the operations of InteliData in the future. During the second quarter of 1997, InteliData recorded a gain of $1.9 million resulting from a revaluation of its investment in Home Financial Network, Inc. ("HFN"). The revaluation relates to a reduction in InteliData's ownership in HFN as a result of the sale of additional shares of stock by HFN. LIQUIDITY AND CAPITAL RESOURCES The Company is a highly leveraged holding company. As a holding company, all of WorldCorp's funds are generated through its positions in World Airways and InteliData, which have not paid dividends on common stock since 1992. At June 30, 1997, World Airways has a working capital deficit of $31.9 million and has substantial debt and lease commitments. At June 30, 1997, InteliData has working capital of $62.9 million, with no long-term debt. World Airways' ability to pay dividends is currently restricted under a borrowing arrangement. Additionally, the provisions of the Indenture governing WorldCorp's Debentures causes World Airways not to pay dividends upon the occurrence of any events of default by WorldCorp under such Indenture. World Airways and InteliData currently intend to retain their future earnings, if any, to fund the growth and development of their business and, therefore, do not anticipate paying any cash dividends in the foreseeable future. Of the $8.4 million in cash and cash equivalents at June 30, 1997, approximately $8.3 million is held by World Airways and, therefore, is not available to satisfy WorldCorp's obligations. As of June 30, 1997, WorldCorp had parent company repayment obligations, including principal and interest, of approximately $18.1 million for the remainder of 1997. In order to meet these obligations and its general and administrative costs, the Company must use its existing cash and either sell shares of World Airways or InteliData, or issue additional debt or equity. In connection with a $15.0 million loan from a commercial bank (the "Bank Loan"), WorldCorp has pledged all of the shares of common stock beneficially owned by WorldCorp. The Bank Loan matures on September 29, 1997. As discussed above, WorldCorp and World Airways are currently in discussions and expect to enter into an agreement for the repurchase of up to 23 4.7 million shares of common stock owned by WorldCorp. If a closing occurs under this agreement, WorldCorp expects to use a portion of the proceeds to repay the Bank Loan. If a closing does not occur under this agreement and WorldCorp does not refinance the Bank Loan, it would be necessary for WorldCorp to sell assets in order to repay the Bank Loan. There can be no assurance that WorldCorp will be successful in consummating these transactions. Management believes that its existing cash and the anticipated proceeds from a combination of sales of stock of World Airways or InteliData, renegotiations of its existing borrowing arrangements, new financing arrangements, or the issuance of debt or equity, will be sufficient to allow the Company to meet its operating requirements and repayment obligations for 1997. At August 12, 1997, based on quoted market prices, the market value of the Company's 6,929,586 shares of World Airways and 9,179,273 shares of InteliData, approximated $58.9 million and $27.0 million, respectively. World Airways is also highly leveraged and will be substantially more leveraged upon completion of the Offering. World Airways incurred substantial debt and lease commitments during the past three years in connection with its acquisition of MD-11 aircraft and related spare parts. As of June 30, 1997, World Airways had outstanding $29.1 million in long-term debt and capital leases, with expected debt service and capital lease expense of $5.9 million for the six months ending December 31, 1997 and $13.3 million for the year ending December 31, 1998. In addition, World Airways has significant future long-term obligations under aircraft lease obligations relating to its aircraft. World Airways has historically financed its working capital and capital expenditure requirements out of cash flow from operating activities, public and private sales of its common stock, secured borrowings, and other financings from banks and other lenders. The degree to which World Airways is leveraged could have important consequences to holders of common stock, including the following: (i) World Airways' ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or other purposes may be limited; (ii) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of principal and interest on its indebtedness; (iii) World Airways' degree of leverage and related debt service obligations, as well as its obligations under operating leases for aircraft, may make it more vulnerable than some of its competitors in a prolonged economic downturn; (iv) World Airways' ability to meet its payment obligations under existing and future indebtedness, capital leases and operating leases may be limited; and (v) World Airways' financial position may restrict its ability to pursue new business opportunities and limit its flexibility in responding to changing business conditions. World Airways' cash and cash equivalents at June 30, 1997 and December 31, 1996 were $8.3 million and $7.0 million, respectively. As is common in the airline industry, World Airways operates with a working capital deficit. At June 30, 1997, World Airways' current assets were $33.5 million and current liabilities were $65.3 million. World Airways has substantial long-term aircraft lease obligations with respect to its current aircraft fleet. Although there can be no assurances, World Airways believes that its existing contracts and additional business which it expects to obtain in the near term, along with its existing cash and financing arrangements and net proceeds from the proposed Offering will be sufficient to allow World Airways to meet its cash requirements related to debt service and the operating and capital requirements for its continuing operations for the next 12 months. In 1996, World Airways instituted a program to purchase up to one million shares of its publicly-traded common stock pursuant to open market transactions. As of June 30, 1997, World Airways had purchased 770,000 shares of common stock at an aggregate cost of approximately $7.8 million pursuant to such program. WorldCorp and World Airways are currently in discussions and expect to enter into an agreement for the repurchase of up to 4.7 million common stock owned by WorldCorp. There can be no assurance that such agreement will be completed or related repurchase will be consummated. In the event that World Airways enters into leases for additional aircraft, World Airways will need to make capital expenditures for additional spare engines and parts. No assurances can be given, however, that World Airways will obtain all of the financing required for such capital expenditures. At June 30, 1997 InteliData had $24.3 million in cash, cash equivalents and short-term investments. InteliData has generated operating losses since its inception. InteliData's smart telephone and home banking products and services are subject to the risks inherent in the marketing and development of new products. The market for these products and services is relatively new and is characterized by rapid technological change, evolving standards, changes in end- 24 user requirements and frequent new product introductions and enhancements. However, the acquisition of Colonial Data has provided InteliData with established product lines and sales channels in large telecommunications markets. The industry for InteliData's products and services is intensely competitive. InteliData experiences direct competition from manufacturers of smart telephones, caller ID units, and cordless phones and from companies that develop transaction processing software for interactive applications and customer support services. There can be no assurance as to what level of future sales or royalties, if any, that InteliData will receive from Visa, Visa member banks and retail markets for its smart telephone and home banking products and services. On August 12, 1997, InteliData announced its intention to purchase up to 2.0 million shares of its common stock pursuant to open market transactions. There can be no assurances as to the number of shares ultimately repurchased. CASH FLOWS FROM OPERATING ACTIVITIES Operating activities provided $18.4 million in cash for the six months ended June 30, 1997 compared to using $11.0 million of cash in the comparable 1996 period. The increase in cash in 1997 resulted primarily from an increase in net earnings and a decrease in accounts receivable, partially offset by a decrease in accounts payable in 1997. CASH FLOWS FROM INVESTING ACTIVITIES Investing activities used $4.1 million in cash for the six months ended June 30, 1997 compared to using $4.7 million in the comparable 1996 period. In 1997, cash was used primarily for the purchase of rotable spare parts, a spare engine, and engine upgrades required for the integration of two MD-11 aircraft. CASH FLOWS FROM FINANCING ACTIVITIES Financing activities used $18.3 million in cash for the six months ended June 30, 1997 compared to providing $1.1 million in the comparable 1996 period. This decrease in cash resulted primarily from an increase in repayments of the Company's net borrowings and the purchase of shares of WorldCorp's and World Airways' common stock for an aggregate cost of $0.1 million and $0.5 million, respectively, in 1997. CAPITAL COMMITMENTS/FINANCING DEVELOPMENTS WORLD AIRWAYS - ------------- In October 1992 and January 1993, World Airways signed a series of agreements to lease seven new MD-11 aircraft for initial lease terms of two to five years, renewable for up to 10 years (and in the case of one aircraft, for 13 years) by the Company with increasing rent costs. As of March 1995, World Airways had taken delivery of all seven aircraft, consisting of four passenger MD-11 aircraft, one freighter MD-11, and two passenger/cargo convertible MD-11s. As part of the lease agreements, World Airways was assigned purchase options for four additional MD-11 aircraft. In 1992, World Airways made non-refundable deposits of $1.2 million toward the option aircraft. In March 1996, World Airways signed an agreement with the manufacturer to lease two MD-11ER aircraft. Under the agreement, it leased each aircraft for a term of 24 years with an option to return the aircraft after a seven year period with certain fixed termination fees. As part of the agreement, the above-mentioned deposits were applied towards the deposits required on these two aircraft. In addition, World Airways agreed to assume an existing lease of two additional MD-11 freighter aircraft for 20 years, beginning in 1999, in the event that the existing lessee terminates its lease with the manufacturer at that time. As of June 30, 1997, World Airways has long-term leases for four DC10-30 aircraft. Three of the leases expire in 1998 and one expires in 2003. In August 1995, World Airways amended its aircraft spare parts facility under the Credit Agreement to provide for a variable rate borrowing. Approximately $2.5 million of this facility was used to pay off the previously outstanding balance of the spare parts loan facility and $0.8 million was used to purchase additional spare parts for MD-11s required during the remainder of 1995. The balance of this loan facility was used to increase cash balances which were drawn down during the first half of 1995 to purchase MD-11 spare parts. 25 In September 1995, World Airways agreed to purchase a spare engine which was delivered in March 1996. The engine cost approximately $8.0 million. World Airways entered into an agreement with the engine's manufacturer to finance 80% of the purchase price over a seven-year term. World Airways made payments of $1.2 million and $0.4 million towards this purchase in September 1995 and January 1996, respectively. In January 1996, World Airways agreed to purchase an additional engine and received a commitment from the engine manufacturer to finance 85% of its purchase price over a seven-year term with an interest rate to be fixed at the time of delivery. In June 1997, World Airways took delivery of the engine and signed a note for $6.3 million. The note bears interest at a rate of 8.18% and is payable over an 84-month period at approximately $48,000 per month with the balance of $2.2 million due on June 18, 2004. As discussed above, World Airways signed an agreement for the lease of two MD- 11ER aircraft beginning in the first quarter of 1996 to provide additional capacity for growth opportunities. As part of the agreement for the MD-11 aircraft, World Airways received spare parts financing from the lessor of $9.0 million of which $3.0 million was made available with the delivery of each aircraft, and the remaining $3.0 million was made available in December 1996. As of June 30, 1997, approximately $7.4 million had been received. As of June 30, 1997, annual minimum payments required under World Airways's aircraft and lease obligations totaled $43.6 million for the remainder of 1997 and $84.9 million for 1998. World Airways anticipates that its total capital expenditures in 1997, which includes the spare engine, will approximate $13.0 million of which it will receive approximately $6.3 million in financing. World Airways expects that the remaining balance will be funded from its operating cash flow and proceeds from the Offering. As of June 30, 1997, World Airways held approximately $3.6 million (at book value) of aircraft spare parts currently available for sale. Effective June 30, 1996, World Airways amended its Credit Agreement with BNY Financial Corporation ("BNY") to include the following: a $10.0 million spare parts loan and an $8.0 million revolving line of credit. This amended Credit Agreement is collateralized by certain receivables, inventory, and equipment. As of June 30, 1997, the outstanding balance of the spare parts loan was $4.0 million with no outstanding balance or available capacity on the revolving line of credit. Under the terms of the amended Credit Agreement, World Airways is not permitted to (i) incur indebtedness in excess of $25.0 million (excluding capital leases), (ii) declare, pay, or make any dividend or distribution in any six month period which aggregate in excess of the lesser of $4.5 million or 50% of net income for the previous six months, (iii) declare or pay dividends if after giving effect to such dividends its cash or cash equivalents would be less than $7.5 million or (iv) make capital expenditures in 1997 of more than $25.0 million or in any subsequent year of more than $15.0 million. Recently, the date that World Airways is required to pay any outstanding amounts under the line of credit was extended to December 31, 2000. The aircraft security agreement remains payable in 1999. World Airways must also maintain a certain quarterly net worth and net income (loss) requirements. While it was in compliance with these covenants at June 30, 1997, no assurances can be given that World Airways will continue to meet these covenants or, if necessary, obtain the required waivers. In addition, World Airways granted warrants to BNY in October 1996 to purchase up to 50,000 shares of common stock. INTELIDATA - ---------- InteliData's principal needs for cash in 1996 were for investments in property and equipment and to fund working capital, primarily related to inventories and accounts receivable. InteliData's primary needs for cash in the future are for investments in product development, working capital, the financing of operations, strategic ventures, capital expenditures and the upgrade of its systems and operations. In order to meet its needs for cash over the next twelve months, InteliData will utilize cash, short-term investments and may utilize, to the extent available, funds generated from operations in the second half of 1997 through the collections of accounts receivable and sale of inventories. InteliData maintains three credit facilities aggregating $20.0 million. The first credit agreement covers the period through May 1997 and is a revolving line of credit of $1.0 million. The second credit agreement is a $4.0 million line of credit utilized for the purpose of issuing letters of credit. The third credit agreement is a credit facility totaling $15.0 million for cash advances and letters of credit. As of June 30, 1997, there were no outstanding balances under any of these facilities. 26 WORLDCORP - --------- On August 29, 1996, the Company entered into a bridge loan (the "Bridge Loan") with a financial institution pursuant to which the Company borrowed $25.0 million and subsequently retired its existing 13 7/8% Subordinated Notes of the same amount. The Bridge Loan is due September 29, 1997 and earns interest of LIBOR plus 2.5%, payable monthly. Under the terms of the Bridge Loan, the borrowings are collateralized by all of the shares of World Airways and InteliData owned by WorldCorp, a first priority security interest in WorldCorp's assets, and certain cash collateral. On September 30, 1996, the Company entered into a purchase agreement (the "Purchase Agreement") which contained a series of Senior Subordinated Notes ("the Notes") totaling $10.0 million which was used to retire $10.0 million of the Bridge Loan in October 1996. The Notes are payable in three installments through September 2000, earn interest of 10%, payable semi-annually, and are included in long-term obligations at December 31, 1996. Additionally, if the Company sells any shares of InteliData common stock, 20% of the net proceeds received by the Company upon such sale will be used to prepay the then outstanding Notes. On December 31, 1996, the Company refinanced the Bridge Loan, which resulted in a decrease in the interest rate to LIBOR plus 1.75%, and reduced the cash collateral under the loan to $1.0 million. The interest rate was 7.99% at March 31, 1997. The Purchase Agreement and the Bridge Loan generally restrict the amount of stock repurchases by WorldCorp based on certain specified conditions. These borrowings also contain a number of covenants that, among other things, restrict the ability of WorldCorp to dispose of assets, make certain acquisitions of the stock of other entities, incur additional indebtedness, and make capital expenditures. The Bridge Loan also contains certain covenants which, among other things, require WorldCorp to maintain at least a 50.1% ownership of World Airways. In the first quarter of 1997, WorldCorp entered into a $1.0 million margin loan with Scott & Stringfellow, Inc., whereby WorldCorp pledged approximately 400,000 shares of InteliData common stock which WorldCorp owns as collateral for such loan (the "Margin Loan"). As of June 30, 1997, the Company had no outstanding balance on the Margin Loan. The Bridge Loan was amended to permit this loan. In addition, the amendment stipulates that the fair market value of each share of World Airways and InteliData common stock which collateralizes the Bridge Loan must equal or exceed five dollars per share at all times. On July 31, 1997, the Company received a notice of default on the Bridge Loan, whereby the financial institution may proceed with the exercise of its rights and remedies under the loan documents and applicable law if the default is not cured within 15 days followig the date of the notice. Based on discussions with the financial institution, the Company believes that the financial institution will not exercise its rights at this time. No assurances can be given, however, that the financial institution will not exercise its rights in the future. OTHER MATTERS LEGAL AND ADMINISTRATIVE PROCEEDINGS World Airways and WorldCorp (the "World Defendants") were defendants in litigation brought by the Committee of Unsecured Creditors of Washington Bancorporation in August 1992, captioned Washington Bancorporation v. Boster et. al., Adv. Proc. 92-0133 (Bankr. D.D.C.) (the "Boster Litigation"). Under a settlement agreement, the plaintiff agreed to dismiss with prejudice the Boster Litigation against all defendants, including the World Defendants, with each party to bear its own costs. Under the settlement agreement, the World Defendants do not have any further liability in the Boster Litigation. World Airways has periodically received correspondence from the FAA with respect to minor noncompliance matters. In November 1996, as the FAA has increased its scrutiny of U.S. airlines, World Airways was assessed a preliminary fine of $810,000 in connection with certain security violations by ground handling crews contracted by World Airways for services at foreign airport locations. Under 49 U.S.C., Section 46301, any violation of pertinent provisions of 49 U.S.C. Subsection 40101 or related rules is subject to a civil penalty for each violation. Upon review of the evidence or facts and circumstances relating to the violation, the statute allows for the compromise of proposed civil penalties. The proposed penalties were imposed by the FAA in connection with recent inspections at foreign airport facilities and relate primarily to ground handling services provided by World Airways' customers in connection with their operations; specifically, the inspection procedures of its aircraft, passengers and associated cargo. In each of these instances, World Airways was in compliance with international regulations, but not the more stringent U.S. requirements, despite the fact that the flights in question did not originate or terminate in the United States. World Airways has taken steps to comply with the U.S. requirements and is currently working with the FAA to settle these claims and believes that any fines ultimately imposed by the FAA will not have a material adverse effect on the financial condition or results of operations of World Airways. While World Airways believes it is currently in compliance in all material respects with all appropriate standards and has all required licenses and authorities, any material non-compliance by World Airways therewith or the revocation or suspension of licenses or authorities could have a material adverse effect on the financial condition or results of operations of World Airways. 27 In connection with the discontinuance of World Airways' scheduled service operations, World Airways is subject to claims by various third parties and may be subject to further claims in the future. One claim which had been filed in connection with World Airways' discontinuance of scheduled service to South Africa, and which sought approximately $37.8 million in compensatory and punitive damages, has been settled by the parties for approximately $0.7 million. In addition, the Company is party to routine litigation and administrative proceedings incidental to its business, none of which is believed by the Company to be likely to have a material adverse effect on the financial condition of the Company. EMPLOYEES The Company employs four individuals. The majority of its administrative requirements are performed by employees of World Airways. The Company is charged an appropriate monthly fee for these services. World Airways cockpit crew members, who are represented by the International Brotherhood of Teamsters (the "Teamsters"), are subject to a four-year collective bargaining agreement that will become amendable in July 1998. World Airways' flight attendants, who are also represented by the Teamsters, are subject to a four-year collective bargaining agreement that will expire in August 2000. World Airways' flight attendants challenged the use of foreign flight attendant crews on World Airways' flights for Malaysian Airlines and Garuda Indonesia which has historically been its operating procedure. World Airways is contractually obligated to permit its Southeast Asian customers to deploy their own flight attendants. While the arbitrator in this matter recently denied the Union's request for back pay to affected flight attendants for flying relating to the 1994 Hadj, the arbitrator concluded that World Airways' contract with its flight attendants requires World Airways to first actively seek profitable business opportunities that require using its flight attendants, before it may accept wet lease business opportunities that use the flight attendants of its customers. World Airways can provide no assurances as to how the imposition of this requirement will affect its financial condition and results of operations. World Airways' aircraft dispatchers are represented by the Transport Workers Union (the "TWU"). This contract became amendable on June 30, 1993. In May 1995, the parties reached agreement with respect to a new four-year contract. This contract was ratified in February 1996. Fewer than 12 Company employees are covered by this collective bargaining agreement. World Airways is unable to predict whether any of its employees not currently represented by a labor union, such as its maintenance personnel, will elect to be represented by a labor union or collective bargaining unit. The election by such employees of representation in such an organization could result in employee compensation and working condition demands that could have a material adverse effect on the financial results of the Company. DIVIDEND POLICY WorldCorp has never paid any dividends and does not plan to do so for the foreseeable future. The Purchase Agreement governing the Notes, and the Indenture governing the Company's Debentures, in certain circumstances, restrict the Company form paying dividends or making distributions on its common stock. As a holding company, all of WorldCorp's funds are generated through its positions in World Airways and InteliData, neither of whom intend to pay dividends in the foreseeable future. In addition, World Airways' ability to pay dividends is currently restricted under a borrowing arrangement. INCOME TAXES At December 31 1996, WorldCorp had approximately $53.1 million in net operating loss carryforwards ("NOLs") that are available to offset future federal taxable income. There can be no assurance that the Company will generate taxable income in future years so as to allow the Company to realize a tax benefit from its NOLs. The NOLs are subject to examination by the IRS and, thus, are subject to adjustment or disallowance resulting from any such IRS examination. In addition, ownership changes of the Company, pursuant to the Internal Revenue Code, may occur in the future and may result in the imposition 28 of an annual limitation on the Company's NOLs existing at the time of any such ownership change. In addition, a portion of World Airways' NOLs are subject to an annual limitation as a result of a previous ownership change, for tax purposes, which occurred in 1991. World Airways does not file a consolidated income tax return with the Company. INFLATION The Company believes that inflation has not had a material effect on the Company's revenues during the past three years. NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 ("FAS #128") Earnings per Share, and SFAS No. 129 ("FAS #129") Disclosure of Information About Capital Structure. FAS #128 was issued to simplify the computation of earnings per share and to make the U.S. standard more compatible with the standards of other countries and that of the International Accounting Standards Committee. FAS #128 replaces primary and full diluted earnings per share with basic earnings and diluted earnings per share. FAS #129 will change some of the required disclosures about capital structure. It is not expected that these statements will have a material effect on the Company's financial statements in the future. The statements are effective for the year ended December 31, 1997. 29 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) Exhibits --------
Exhibit No. Exhibit ------- ------- 3.1 Certificate of Incorporation of Incorporated WorldCorp, Inc. dated March 16, 1987. by reference [Filed as Exhibit 3.1 to WorldCorp, Inc.'s Registration Statement on Form S-4 (Commission File No. 33012735) filed on March 19, 1987 and incorporated herein by reference.] 3.2 Amended and Restated Bylaws of Incorporated WorldCorp, Inc. dated November 13, by reference 1987. (Filed as Exhibit 3.1 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1987 and incorporated herein by reference.) 4.6 First Supplemental Indenture dated as Incorporated of February 22, 1994 between by reference WorldCorp, Inc. and The First National Bank of Boston, as Trustee. (Filed as Exhibit 4.6 to WorldCorp, Inc's Form S-3 Registration Statement (Commission file No. 33-60247) filed on June 15, 1995 and incorporated herein by reference.) 4.8 Stock Option Agreement dated as of Incorporated April 1, 1995 between WorldCorp, by reference Inc. and Patrick F. Graham. (Filed as Exhibit 4.8 to WorldCorp Inc's Form S-3 Registration Statement (Commission file No. 33-60247) filed on June 15, 1995 and incorporated herein by reference.) 10.5 Merger Agreement and Plan of Incorporated Reorganization dated as of April 28, by reference 1987 by and among World Airways, Inc., World Merger Corporation and WorldCorp, Inc. [Filed as Exhibit 10.50 to WorldCorp, Inc.'s Form S-2 Registration Statement (Commission File No. 33-1358276) filed on July 31, 1987 and incorporated herein by reference.] 10.9 Form of Assumption Agreement dated as Incorporated of June 23, 1987 among by reference WorldCorp, Inc., World Airways, Inc. and each Indemnified Party. [Filed as Exhibit 10.60 to WorldCorp, Inc.'s Form S-2 Registration Statement (Commission File No. 33-1358276) filed on July 31, 1987 and incorporated herein by reference.] 10.14 Office Lease - The Hallmark Building Incorporated dated as of May 16, 1987 by reference between WorldCorp, Inc. and GT Renaissance Centre Limited Partnership. (Filed as Exhibit 10.36 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by reference.) 10.15 Lease Amendment dated as of June 27, Incorporated 1989 between WorldCorp, Inc. by reference and GT Renaissance Centre Limited Partnership. (Filed as Exhibit 10.37 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by reference.) 10.16 Office Lease - The Hallmark Building Incorporated dated as of September 20, 1989 by reference between World Airways, Inc. and GT Renaissance Centre Limited Partnership. (Filed as Exhibit 10.38 to WorldCorp, Inc's Annual Report on form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by reference.)
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10.17 Warrant Agreement dated as of July Incorporated 22, 1989 between WorldCorp, by reference Inc. and Charles W. Pollard. (Filed as Exhibit 10.45 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by reference.) 10.20 WorldCorp, Inc. Employee Savings and Incorporated Stock Ownership Plan. (Filed by reference as Exhibit 10.49 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by reference.) 10.21 Amendment No. 1 to WorldCorp Inc. Incorporated Employee Savings and Stock by reference Ownership Plan. (Filed as Exhibit 10.50 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1989 and incorporated herein by reference.) 10.27 Aircraft Warranty Bill of Sale dated Incorporated as of January 15, 1991 between by reference World Airways, Inc. and First Security Bank of Utah, N.A., not in its individual capacity, but solely as Owner Trustee. (Filed as Exhibit 10.46 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference.) 10.28 Aircraft Lease Agreement dated as of Incorporated January 15, 1991 between World by reference Airways, Inc. and First Security Bank of Utah, N.A., not in its individual capacity, but solely as Owner Trustee. (Filed as Exhibit 10.47 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference.) 10.32 Aircraft Engine Purchase Agreement Incorporated dated as of April 26, 1991 between by reference Terandon Leasing Corporation and World Airways, Inc. (Filed as Exhibit 10.41 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by reference.) 10.33 Aircraft Engine Lease Agreement dated Incorporated as of April 26, 1991 between by reference Terandon Leasing Corporation and World Airways, Inc. (Filed as Exhibit 10.42 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by reference.) 10.34 Guaranty Agreement I dated as of Incorporated February 12, 1992 between McDonnell by reference Douglas Finance Corporation and World Airways, Inc. (Filed as Exhibit 10.43 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by reference.) 10.35 Guaranty Agreement II dated as of Incorporated February 12, 1992 between McDonnell by reference Douglas Finance Corporation and World Airways, Inc. (Filed as Exhibit 10.44 to WorldCorp, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein by reference.) 10.38 Aircraft Lease Agreement for Aircraft Incorporated Serial Number 48518 dated as by reference of September 30, 1992 between World Airways, Inc. and International Lease Finance Corporation. 10.39 Aircraft Lease Agreement for Aircraft Incorporated Serial Number 48519 dated as by reference of September 30, 1992 between World Airways, Inc. and International Lease Finance Corporation.
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10.40 Aircraft Lease Agreement for Aircraft Incorporated Serial Number 48520 dated as by reference of September 30, 1992 between World Airways, Inc. and International Lease Finance Corporation. 10.41 Aircraft Lease Agreement for Aircraft Incorporated Serial Number 48633 dated as by reference of September 30, 1992 between World Airways, Inc. and International Lease Finance Corporation. 10.42 Aircraft Lease Agreement for Aircraft Incorporated Serial Number 48631 dated as by reference of September 30, 1992 between World Airways, Inc. and International Lease Finance Corporation. 10.43 Aircraft Lease Agreement for Aircraft Incorporated Serial Number 48632 dated as by reference of September 30, 1992 between World Airways, Inc. and International Lease Finance Corporation. 10.46 Accounts Receivable Management and Incorporated Security Agreement dated as by reference of December 7, 1993 between World Airways, Inc. and BNY Financial Corporation. 10.47 Aircraft Parts Security Agreement Incorporated dated as of December 7, 1993 by reference between World Airways, Inc. and BNY Financial Corporation. 10.48 Warrant Certificate dated as of Incorporated December 7, 1993 between WorldCorp, by reference Inc. and BNY Financial Corporation. 10.62 Consignment Agreement dated as of Incorporated September 30, 1993 between World by reference Airways Inc. and The Memphis Group. 10.63 Assignment and Assumption and Consent Incorporated and Release for Aircraft by reference Serial Number 47818 dated as of July 20, 1993 among World Airways, Inc., WorldCorp, Inc., McDonnell Douglas Corporation, and McDonnell Douglas Finance Corporation. 10.64 Assignment and Assumption and Consent Incorporated and Release for Aircraft by reference Serial Number 46999 dated as of July 9, 1993 among World Airways, Inc., WorldCorp, Inc., McDonnell Douglas Corporation, and McDonnell Douglas Finance Corporation. 10.65 Aircraft Lease Agreement for Aircraft Incorporated Serial Number 48458 dated as by reference of January 15, 1993 between World Airways, Inc. and Wilmington Trust Company/GATX Capital Corporation. 10.66 Aircraft Lease Supplement for Incorporated Aircraft Serial Number 48458 dated as by reference of April 23, 1993 between World Airways, Inc. and Wilmington Trust Company/GATX Capital Corporation. 10.67 Aircraft Spare Parts Lease Agreement Incorporated dated as of April 15, 1993 by reference between World Airways, Inc. and GATX Capital Corporation. 10.68 Amendment No. 1 To Aircraft Lease Incorporated Agreement for Aircraft Serial by reference Number 48518 dated as of November 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.69 Amendment No. 2 to Aircraft Lease Incorporated Agreement for Aircraft Serial by reference Number 48518 dated as of March 8, 1993 between World Airways, Inc. and International Lease Finance Corporation.
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10.70 Assignment of Rights for Aircraft Incorporated Serial Number 48518 dated as of by reference March 8, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.71 Assignment of Rights for Aircraft Incorporated Engines Serial Numbers P723942, by reference P723945, and P723943 dated as of March 1, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.72 Agency Agreement for Aircraft Serial Incorporated Number 48518 dated as of by reference January 15, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.73 Amendment No. 2 to Aircraft Lease Incorporated Agreement for Aircraft Serial by reference Number 48437 dated as of March 31, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.74 Amendment No. 3 to Aircraft Lease Incorporated Agreement for Aircraft Serial by reference Number 48437 dated as of April 15, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.75 Agency Agreement for Aircraft Serial Incorporated Number 48437 dated as of by reference January 15, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.76 Assignment of Rights for Aircraft Incorporated Serial Number 48437 dated as of by reference April 15, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.77 Assignment of Rights for Aircraft Incorporated Engines Serial Numbers P723913, by reference P723912, and P723914 dated as of April 15, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.78 Amendment No. 2 to Aircraft Lease Incorporated Agreement for Aircraft Serial by reference Number 48520 dated as of April 22, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.79 Agency Agreement for Aircraft Serial Incorporated Number 48520 dated as of by reference January 15, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.80 Assignment of Rights for Aircraft Incorporated Serial Number 48520 dated as of by reference April 22, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.81 Assignment of Rights for Aircraft Incorporated Engines Serial Numbers P723957, by reference P723958, and P723956 dated as of March 1, 1993 between World Airways, Inc. and International Lease Finance Corporation. 10.82 Aircraft Charter Agreement dated as Incorporated of July 24, 1993 between World by reference Airways, Inc. and Malaysian Airline System Berhad. 10.85 Return Agreement for Aircraft Serial Incorporated Numbers 47818 and 46999 dated by reference as of July 9, 1993 among World Airways, Inc., WorldCorp, Inc., International Lease Finance Corporation, McDonnell Douglas Corporation, and McDonnell Douglas Finance Corporation.
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10.861 Acquisition Agreement Among VISA Incorporated International Service Association, by reference US Order, Inc, and WorldCorp, Inc, dated as of July 15, 1994. 10.87 Stock Purchase Agreement by and among Incorporated World Airways, Inc., by reference WorldCorp, Inc., and Malaysian Helicopter Services Berhad dated as of October 30, 1993. 10.88 Stock Registration Rights Agreement Incorporated between World Airways, Inc. by reference and Malaysian Helicopter Services Berhad dated as of October 30, 1993. 10.89 Shareholders Agreement between Incorporated Malaysian Helicopter Services by reference Berhad and WorldCorp, Inc., and World Airways, Inc. dated as of February 3, 1994. 10.90 Amendment No. 1 to Shareholders Incorporated Agreement dated as of February 28, by reference 1994, among WorldCorp, World Airways, and MHS. 10.94 Stock Option Agreement dated as of Incorporated August 1, 1994 ("Grant Date") by reference between WorldCorp, Inc. and William F. Gorog. 10.95 Employment Agreement dated as of Incorporated August 1, 1994 between US by reference Order, Inc. and John C. Backus, Jr. 10.96 Employment Agreement dated as of Incorporated August 19, 1994 between by reference WorldCorp, Inc. and T. Coleman Andrews, III. 10.97 Stock Option Agreement dated as of Incorporated August 19, 1994 ("Grant Date") by reference by and between WorldCorp, Inc. and T. Coleman Andrews, III. 10.98 Agreement between World Airways, Inc. Incorporated and the International by reference Brotherhood of Teamsters representing the Cockpit Crewmembers employed by World Airways, Inc. dated August 15, 1994-June 30, 1998. 10.101 Aircraft Services Agreement dated Incorporated September 26, 1994 by and between by reference World Airways, Inc. ("World") and Malaysian Airlines. 10.102 Freighter Services Agreement dated Incorporated October 1, 1994 by and between by reference World Airways, Inc. and Malaysian Airline System Berhad. 10.103 World Airways, Inc. 1995 AMC Contract Incorporated F11626-94-D0027 dated by reference October 1, 1994 between World Airways, Inc. and Air Mobility Command. 10.105 Stock Purchase Agreement (the Incorporated "Agreement") dated as of December by reference 31, 1994 by and between MHS Berhad, a Malaysian corporation (the "Shareholder") and WorldCorp, Inc., a Delaware corporation (the "Purchaser"). 10.107 Amendment No. 1 to Passenger Aircraft Incorporated Services and Freighter by reference Services Agreement dated December 31, 1994 by and between World Airways, Inc. and Malaysian Airline System Berhad. 10.109 Customer Agreement between WorldCorp Incorporated ESSOP and Scott & by reference Stringfellow, Inc. dated January 11, 1995 for a margin loan.
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10.110 Side Letter dated January 11, 1995 Incorporated from Scott & Stringfellow, Inc. to by reference William F. Gorog, Trustee of WorldCorp Employee Savings and Stock Ownership Plan for a margin loan to the WorldCorp ESSOP. 10.111 Guarantee Agreement dated January 11, Incorporated 1995 by WorldCorp, Inc. by reference ("Guarantor") for the benefit of Scott & Stringfellow, Inc. (the "Lender"). 10.112 Registration Rights Agreement dated Incorporated as of January 11, 1995 by and by reference between WorldCorp, Inc. and Scott & Stringfellow, Inc. 10.113 Side Letter dated January 11, 1995 Incorporated from WorldCorp, Inc. to Scott & by reference Stringfellow, Inc. regarding commitment to make contributions to the WorldCorp Employee Savings and Stock Ownership Plan (the "ESSOP"), for the duration of the Scott & Stringfellow loan to the ESSOP. 10.115 Amendment No. 2 to Passenger Aircraft Incorporated Services and Freighter by reference Aircraft Service Agreement dated February 9, 1995 by and between World Airways, Inc. and Malaysian Airline System Berhad. 11 Statement on Calculation of Earnings Filed Herewith (Loss) Per Common Share. 27 Financial Data Schedule for the Filed Herewith quarter ended June 30, 1997.
/1/ Confidential treatment of portions of the Agreement has been granted by the Commission. The copy filed as an exhibit omits the information subject to confidentiality request. Confidential portions so omitted have been filed separately with the Commission. (b) Reports on Form 8-K Form 8-K dated July 14, 1997, was filed with the Securities and Exchange Commission on July 14, 1997. * * * * * * * * 35 EXHIBIT 11 Page 1 of 2 WORLDCORP, INC. AND SUBSIDIARIES CALCULATIONS OF EARNINGS (LOSS) PER COMMON SHARE FOR THE THREE MONTHS ENDED JUNE 30, (IN THOUSANDS EXCEPT SHARE DATA) (UNAUDITED)
1997 1996 ----------- ----------- Earnings (loss) from continuing operations $ (213) $ 4,379 Loss from discontinued operations -- (16,897) ----------- ----------- Net loss $ (213) $ (12,518) =========== =========== PRIMARY NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ (0.01) $ 0.25 Discontinued operations -- (0.98) ----------- ----------- Net loss $ (0.01) $ (0.73) =========== =========== PRIMARY WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Weighted average common shares outstanding 15,008,077 16,466,695 Weighted average options and warrants treated as common stock equivalents -- 749,206 ----------- ----------- Primary number of shares 15,008,077 17,215,901 =========== =========== FULLY DILUTED NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ * $ 0.24 Discontinued operations * (0.73) ----------- ----------- Net loss $ * $ (0.49) =========== =========== FULLY DILUTED WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Weighted average common shares outstanding * 16,466,695 Weighted average options and warrants treated as common stock equivalents * 766,249 Weighted average other dilutive securities * 5,877,034 ----------- ----------- Fully diluted number of shares * 23,109,978 =========== ===========
* Fully diluted earnings per share are anti-dilutive. 36 EXHIBIT 11 Page 2 of 2 WORLDCORP, INC. AND SUBSIDIARIES CALCULATIONS OF EARNINGS (LOSS) PER COMMON SHARE FOR THE SIX MONTHS ENDED JUNE 30, (IN THOUSANDS EXCEPT SHARE DATA) (UNAUDITED)
1997 1996 ----------- ----------- Earnings (loss) from continuing operations $ 496 $ (2,214) Loss from discontinued operations -- (19,377) ----------- ----------- Net earnings (loss) $ 496 $ (21,591) =========== =========== PRIMARY NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ 0.03 $ (0.14) Discontinued operations -- (1.18) ----------- ----------- Net earnings (loss) $ 0.03 $ (1.32) =========== =========== PRIMARY WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Weighted average common shares outstanding 15,012,368 16,397,440 Weighted average options and warrants treated as common stock equivalents -- -- ----------- ----------- Primary number of shares 15,012,368 16,397,440 =========== =========== FULLY DILUTED NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE Continuing operations $ * $ * Discontinued operations * * ----------- ----------- Net earnings (loss) $ * $ * =========== =========== FULLY DILUTED WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Weighted average common shares outstanding * * Weighted average options and warrants treated as common stock equivalents * * Weighted average other dilutive securities * * ----------- ----------- Fully diluted number of shares * * =========== ===========
* Fully diluted earnings per share are anti-dilutive. 37 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WORLDCORP, INC. By: /s/ Mark S. Lynch ------------------- (Mark S. Lynch) Chief Financial Officer Date: August 14, 1997 38 EX-27 2 EXHIBIT-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1996 9,390 0 8,442 409 0 35,586 98,671 25,198 168,288 82,171 0 0 0 16,630 (56,130) 168,288 0 81,928 0 76,440 3,433 0 2,673 2,055 100 (213) 0 0 0 (213) (.01) 0 Fully diluted earnings per share are anit-diluted.
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