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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 1998
REGISTRATION NO. 333-40107
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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JET AVIATION TRADING, INC.
(Name of small business issuer in its charter)
FLORIDA 5008 52-2040613
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
15675 NORTHWEST 15TH AVENUE
MIAMI, FLORIDA 33169
(305) 624-6700
(Address and telephone number of principal executive offices
and principal place of business)
JOSEPH J. NELSON, PRESIDENT
JET AVIATION TRADING, INC.
15675 NORTHWEST 15TH AVENUE, MIAMI, FLORIDA 33169
(305) 624-6700
(Name, address and telephone number of agent for service)
With a copy to:
SHAPO, FREEDMAN & BLOOM, P.A.
200 SOUTH BISCAYNE BLVD., SUITE 4750
MIAMI, FLORIDA 33131
ATTN: LEONARD H. BLOOM, ESQ.
(305) 358-4440
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] -- [Added in
Release No. 33-7168 (para.85,620), effective June 7, 1995, 60 F.R. 26604.]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] -- [Added in Release No. 33-7168 (para.85,620),
effective June 7, 1995, 60 F.R. 26604.]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ] [Added in Release No. 33-7168 (para.85,620),
effective June 7, 1995, 60 F.R. 26604.]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE PRICE REGISTRATION FEE
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Common Stock(1)................... 1,000,000 4.50 $4,500,000 $1,364(2)
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Common Stock...................... 1,969,000 4.50 $8,860,500 $2,685(2)
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(1) Shares of Common Stock offered for sale upon exercise of outstanding
Warrants.
(2) This fee was previously paid with the initial filing on November 13, 1997.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
MAY DETERMINE.
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JET AVIATION TRADING, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION OR
CAPTION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM SB-2
ITEM REGISTRATION STATEMENT ITEM NUMBER AND HEADING LOCATION OR CAPTION IN PROSPECTUS
- ---- ---------------------------------------------- ---------------------------------
1. Front of Registration Statement and Outside
Front Cover Page of Prospectus............ Outside front cover of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................ Inside front and outside back cover pages
of Prospectus
3. Summary Information and Risk Factors........ Prospectus Summary; the Company; Risk
Factors
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. The Offering
6. Dilution.................................... Dilution
7. Selling Security Holders.................... Selling Security Holders
8. Plan of Distribution........................ Outside front cover page; Plan of
Distribution
9. Legal Proceedings........................... Business
10. Directors, Executive Officers, Promoters and
Control Persons........................... Management
11. Security Ownership of Certain Beneficial
Owners and Management..................... Principal Stockholders
12. Description of Securities................... Description of Securities
13. Interest of Named Experts and Counsel....... Legal Matters; Experts
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
15. Organization Within Last Five Years......... Certain Transactions
16. Description of Business..................... The Company; Business
17. Management's Discussion and Analysis or Plan
of Operation.............................. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations
18. Description of Property..................... Business
19. Certain Relationships and Related
Transactions.............................. Certain Transactions
20. Market for Common Equity and Related
Stockholder Matters....................... Market Price of the Common Stock
21. Executive Compensation...................... Management
22. Financial Statements........................ Report of Independent Certified Public
Accountants
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH __ , 1998
PROSPECTUS
JET AVIATION TRADING, INC.
1,000,000 SHARES OF COMMON STOCK
OFFERED BY CERTAIN SELLING SECURITY HOLDERS UPON EXERCISE
OF OUTSTANDING WARRANTS
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1,969,000 SHARES OF COMMON STOCK
OFFERED BY CERTAIN SELLING SECURITY HOLDERS
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This Prospectus relates to the resale of 1,000,000 shares of common stock,
$.001 par value per share (the "Common Stock") following the exercise of
outstanding Common Stock Purchase Warrants (the "Warrants") and the resale of
1,969,000 additional shares of Common Stock previously issued by the Company in
certain private placement transactions, all of which are offered by the holders
thereof identified as "Selling Security Holders" in this Prospectus. See
"SELLING SECURITY HOLDERS."
Each Warrant entitles the holder to purchase at any time until June 30,
2002 one share of Common Stock upon payment of an exercise price of $4.50. See
"DESCRIPTION OF SECURITIES."
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Security Holders, although it will receive proceeds from
the exercise of the Warrants. Sales of shares of Common Stock may be made from
time to time in transactions (which may include block transactions) by or for
the account of the Selling Security Holders in the over-the-counter market or in
negotiated transactions, or otherwise, at market prices prevailing at the time
of sale or at negotiated prices. The Company has informed the Selling Security
Holders that the anti-manipulative rules under the Securities Exchange Act of
1934, Regulation M, may apply to their sales in the market and has furnished
each of the Selling Security Holders with a copy of these rules. The Company has
also informed the Selling Security Holders of the need for delivery of copies of
this Prospectus. See "SELLING SECURITY HOLDERS" and "PLAN OF DISTRIBUTION."
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THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AND "DILUTION."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO THE PROCEEDS TO THE SELLING
CLASS OF SECURITY SECURITY HOLDERS DISCOUNTS COMPANY(1) SECURITY HOLDERS
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Shares of Common Stock(2)....... N/A N/A $0 N/A
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Shares of Common Stock(4)....... -- N/A $0 $ (3)
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(1) Does not take into account the costs of this offering, including among
others, printing, blue sky and professional fees, estimated at $100,000,
which will be borne entirely by the Company; assumes all warrants are
exercised.
(2) Represents the anticipated sale by the Selling Security Holders of shares of
Common Stock issuable upon exercise of the Warrants, at $ , the
high bid price on . There can be no assurances, however, that
the Selling Security Holders will be able to sell their shares of Common
Stock at this price, or that a liquid market will exist for the Company's
Common Stock.
(3) Does not give effect to ordinary brokerage commissions or other costs of
sale that will be borne solely by the Selling Security Holders.
(4) Represents the anticipated sale by the Selling Security Holders at
$ , the high bid price on . There can be no assurances,
however, that the Selling Security Holders will be able to sell their shares
of Common Stock at this price, or that a liquid market will exist for the
Company's Common Stock.
The Common Stock is traded in the over-the-counter market and is quoted on
The OTC Bulletin Board under the symbol "JTAV".
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The date of this Prospectus is , 1998
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AVAILABLE INFORMATION
The Company is not subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will provide a report to stockholders, at least annually, which
will include audited financial statements of the Company.
The Company will provide, without charge, to each person who receives a
Prospectus, upon the written or oral request of such person, a copy of any of
the information that was incorporated by reference in the Prospectus (not
including exhibits to the information that was incorporated by reference unless
the exhibits are themselves specifically incorporated by reference). Requests
should be directed to the Secretary, Jet Aviation Trading, Inc., 15675 Northwest
15th Avenue, Miami, Florida 33169 (Telephone No. 305-624-6700).
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PROSPECTUS SUMMARY
The following Summary is qualified in its entirety by the more detailed
information and financial statements, including the Notes thereto, appearing
elsewhere in this Prospectus.
THE COMPANY
The Company (formerly known as Schuylkill Acquisition Corp.) was formed
pursuant to the laws of the State of Florida in May, 1997. It conducted no
business.
On July 28, 1997, the Company merged with Jet Aviation Trading, Inc., a
Florida corporation ("Old Jet"), remained the surviving entity and changed its
name to Jet Aviation Trading, Inc. Old Jet had commenced business on October 3,
1996. Unless the context otherwise requires, references to the "Company"
throughout this Prospectus, including the Financial Statements contained herein,
refer to the operations of Old Jet prior to July 28, 1997 and the Company
thereafter.
The Company specializes in the sale, lease, exchange and purchase of
technical spares for fixed-wing commercial jet transport aircraft manufactured
by Boeing, McDonnell Douglas, Airbus and Lockheed. Complimenting this core
business, the Company provides its customers with inventory management services
including new product distribution, technical purchasing, maintenance repair
management, consignment marketing and purchase/leaseback of technical spares
inventory. The Company also pursues opportunities involving the purchase, sale
and lease of jet turbine engines, jet turbine aircraft and related aviation
industry equipment.
Industry estimates are that the annual worldwide market for aircraft spare
parts is approximately $10.2 billion, of which approximately $1.6 billion
reflects annual sales of aircraft spare parts in the redistribution market.
These sales figures are expected to grow considerably in the near future, as
continued cost pressures affect airlines, manufacturers and maintenance service
providers. The emphasis upon cost containment in recent years has led to a
marked increase in the average age of the worldwide airline fleet, as commercial
airlines seek to prolong the depreciable life of their aircraft. The Company
seeks to exploit these key market trends by positioning itself as a low cost
participant in the redistribution market. In addition, the Company offers its
customers a wide range of inventory management services, allowing them to reduce
operational expenses. This service complements the recent trend of commercial
airlines seeking to outsource certain activities in order to focus upon their
core business of passenger and cargo air transportation. Finally the Company
believes that with sufficient financial resources it can successfully exploit
opportunities for bulk purchases of inventory and purchases of jet turbine
engines and aircraft at favorable prices, thereby increasing profitability. (See
"Business" and "Risk Factors").
From inception (October 3, 1996) though the fiscal year ended August 31,
1997, the Company generated net sales of $6,215,553. Of such revenues,
approximately 57.3% were derived from sales to domestic customers and
approximately 42.7% were derived from sales to international customers.
Transactions involving technical spares accounted for 100% of net sales. For the
first quarter ended November 30, 1997, the Company generated net sales at
$2,452,322 and income at $227,589.
The Company's operations are conducted from leased facilities at 15675
Northwest 15th Avenue, Miami, Florida 33169 where it maintains its executive
offices. Its telephone number is (305) 624-6700.
THE OFFERING
Securities Being Offered: This Prospectus relates to the resale of 1,000,000
shares of common stock, $.001 par value per share
(the "Common Stock") following the exercise of
outstanding Common Stock Purchase Warrants (the
"Warrants"), by the holders thereof, and to the
resale of 1,969,000 additional shares of Common
Stock previously issued by the Company in certain
private placement transactions, all of which are
being offered by the
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holders thereof identified as "Selling Security
Holders" in this Prospectus. See "SELLING SECURITY
HOLDERS."
The shares of Common Stock offered by the Selling
Security Holders may be offered for sale from time
to time by the holders in regular brokerage
transactions, either directly or through brokers or
to dealers, in private sales or negotiated
transactions, or otherwise, at prices related to
then prevailing market prices. The Company will not
receive any proceeds from the sale of shares of
Common Stock by the Selling Security Holders. All
expenses of the registration of such securities
are, however, being borne by the Company. The
Selling Security Holders, and not the Company, will
pay or assume such brokerage commissions as may be
incurred in the sale of their securities.
The Common Stock is traded on The OTC Bulletin
Board under the symbol "JTAV". On the
high bid price was $ .
Total number of shares of
Common Stock
outstanding.............. 2,996,500
Total number of shares of
Common Stock offered by
the Company pursuant to
outstanding Warrants..... 1,000,000
Total number of shares of
Common Stock outstanding
upon exercise of the
outstanding Warrants..... 3,996,500
Total number of shares of
Common Stock being
offered by Selling
Security Holders
(including shares
issuable upon exercise of
the Warrants)............ 2,969,000
Use of Proceeds: The net proceeds realized by the Company upon the
exercise of the Warrants will be used to purchase
jet turbine engines and additional inventory and to
offset general working capital requirements of the
Company. See "USE OF PROCEEDS." Inasmuch as the
Company has received no firm commitments for the
exercise of the Warrants, however, there can be no
assurances as to the amount of the net proceeds to
be realized by the Company. Except for any proceeds
that may be realized upon exercise of the Warrants,
the Company will not receive any of the proceeds
from the sale of any of the shares of Common Stock
by the Selling Security Holders.
Risk Factors: The Common Stock offered hereby involves a high
degree of risk and prospective investors should
consider carefully the factors specified under
"Risk Factors" before electing to invest. See "RISK
FACTORS."
Trading Symbol: Common Stock -- "JTAV"
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SELECTED FINANCIAL INFORMATION
Set forth below is the historical selected financial information with
respect to the Company for the period from inception (October 3, 1996) until
August 31, 1997 and the 11 months then ended, and for the 3 months ended
November 30, 1997 and the period October 3, 1996 to November 30, 1996.
OCTOBER 3, 1996 THREE MONTHS OCTOBER 3, 1996
TO ENDED TO
AUGUST 31, 1997 NOVEMBER 30, 1997 NOVEMBER 30, 1996
---------------- ----------------- -----------------
INCOME STATEMENT INFORMATION
Revenue............................................. $ 6,215,553 $2,452,322 $ 467,882
Net Income (Loss)................................... $(1,383,641) $ 128,480 $ (381,428)
Net Income (Loss) per Share......................... $ (.83) $ .04 $ (0.32)
Weighted Average Shares Outstanding................. 1,672,968 2,996,500 1,200,000
BALANCE SHEET INFORMATION (AT END OF PERIOD)
Working Capital..................................... $ 3,246,086 $3,309,606 $ 108,081
Total Assets........................................ $ 4,561,330 $4,959,140 $ 744,375
Total Liabilities................................... $ 1,181,057 $1,448,387 $ 600,802
Stockholders' Equity................................ $ 3,380,273 $3,508,753 $ 143,572
Net Tangible Book Value Per Share................... $ 1.13 $ 1.17 $ .12
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RISK FACTORS
Prospective investors should consider carefully the following Risk Factors,
together with the other information contained in this Prospectus, in evaluating
an investment in the shares of Common Stock offered hereby.
LIMITED OPERATING HISTORY
The Company has a limited operating history upon which an evaluation of its
performance and prospects can be made. The Company's prospects must be
considered in light of the numerous risks, expenses, delays, problems and
difficulties frequently encountered in the establishment of a new enterprise in
industries characterized by intense competition. Although for the quarter ended
November 30, 1997, the Company operated profitably, the Company intends to
expand its operations, which will bring increased cash flow pressures.
Accordingly, expansion of inventory and operations may have a negative impact on
the profitability of the Company, at least in the near term. Further, there can
be no assurance that the Company will be able to successfully expand its
operations and continue profitability. See "FINANCIAL STATEMENTS" and
"BUSINESS."
NEED FOR ADDITIONAL FUNDING
The exercise of all the Warrants will result in net proceeds to the Company
of approximately $4,400,000. The Company believes that revenues from operations
will be sufficient for the Company's operational needs for the next 12 months.
The additional funds from the exercise of the Warrants will be used to expand
the Company's business over time. There can be no assurance however, that
additional funds will not be required for expansion purposes or that the Company
will be able to secure such financing when required. See "BUSINESS" and
"MANAGEMENT'S DISCUSSION."
EFFECTS OF THE ECONOMY ON THE OPERATIONS OF THE COMPANY
Since the Company's customers consist of airlines, maintenance and repair
facilities that service airlines and other spare parts redistributors, the
Company's business is impacted by the economic factors which affect the airline
industry. When such factors adversely affect the airline industry, they tend to
reduce the overall demand for aircraft spare parts and peripheral services,
causing price reductions and increasing the credit risk associated with doing
business with airlines and others. Additionally, factors such as the price of
fuel affect the aircraft spare parts market, since older aircraft (into which
aircraft spare parts are most often placed), which tend to be less fuel
efficient, become less viable as the price of fuel increases. There can be no
assurance that economic and other factors which might affect the airline
industry will not have an adverse impact on the Company's results of operations.
TRENDS IN THE MARKET
Airline purchasing departments have been reducing the number of "approved"
suppliers in order to reduce costs. During the last few years certain major
airlines have reduced the number of "approved" suppliers from as many as fifty
to as few as five. Although the Company presently is an approved supplier of
fourteen airlines, no assurances can be given that the Company can maintain or
expand this status. Further, the reduction in the supplier base for airlines
contributed to a consolidation in the redistribution market which, the Company
believes, will continue. Only redistributors with extensive inventories,
experienced management, sufficient capital and the ability to adhere to the
industry standards for traceability will, the Company believes, operate
profitably. No assurances can be given that the Company can effectively compete
in this changing marketplace.
RISK REGARDING THE COMPANY'S INVENTORY
The Company's inventory consists principally of new, overhauled,
serviceable and repairable aircraft parts that are purchased from many sources.
Before parts may be installed in an aircraft, they must meet certain standards
of condition established by the Federal Aviation Administration ("FAA") and/or
the
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equivalent regulatory agencies in other countries. Specific regulations vary
from country to country, although regulatory requirements in other countries
generally coincide with FAA requirements. Parts owned or acquired by the Company
may not meet applicable standards or standards may change in the future, causing
parts which are already contained in the Company's inventory to be scrapped or
modified. Aircraft manufacturers may also develop new parts to be used in lieu
of parts already contained in the Company's inventory. In all such cases, to the
extent that the Company has such parts in its inventory, their value may be
reduced. See "BUSINESS -- Government Regulation and Traceability."
RISKS REGARDING THE PURCHASE OF JET TURBINE ENGINES AND AIRCRAFT
Although the Company has not, to date, purchased jet turbine engines or jet
turbine aircraft for resale, it intends in the future, to engage in these
activities. The purchase for resale of these items are subject to risks related
to the volatility in the market place for engines and aircraft. These activities
also involve a commitment of substantial capital, and if the engines or aircraft
are purchased at too high a price for subsequent resale, substantial losses
could be incurred. In addition, engines and aircraft may need repair work, which
increases their cost and adversely affects profitability.
GOVERNMENT REGULATION
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. While the Company's business is not
regulated, the aircraft spare parts which it sells to its customers must be
accompanied by documentation which enables the customer to comply with
applicable regulatory requirements. There can be no assurance that new and more
stringent government regulations will not be adopted in the future or that any
such new regulations, if enacted, would not have an adverse impact on the
Company. See "BUSINESS -- Government Regulation and Traceability."
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results are affected by many factors, including the
timing of orders from customers, the timing of expenditures to purchase
inventory in anticipation of future sales, the timing of bulk inventory
purchases, the timing of purchases and financing requirements for jet engines or
aircraft and the mix of available technical spare parts contained, at any time,
in the Company's inventory. A large portion of the Company's operating expenses
are relatively fixed. Since the Company typically does not obtain long-term
purchase orders or commitments from its customers, it must anticipate the future
volume of orders based upon the historic purchasing patterns of its customers
and upon its discussions with its customers as to their future requirements.
Cancellations, reductions or delays in orders by a customer or group of
customers could have a material adverse effect on the Company's business,
financial condition and results of operations. See "FINANCIAL STATEMENTS" and
"MANAGEMENT'S DISCUSSION."
RELIANCE ON CHIEF EXECUTIVE OFFICER
The continued success of the Company is dependent to a significant degree
upon the services of Joseph J. Nelson, its president and chief executive officer
and upon the Company's ability to attract and retain qualified personnel
experienced in the various phases of the Company's business. The Company has an
employment agreement with Mr. Nelson which terminates on October 31, 1999. The
Company anticipates obtaining term insurance for Mr. Nelson in an amount not to
exceed $1,000,000. However, the ability of the Company to operate successfully
could be jeopardized with the loss of Mr. Nelson's services. See "MANAGEMENT."
COMPETITION
There are numerous suppliers of aircraft spare parts in the aviation market
worldwide and, through inventory listing services, customers have access to a
broad array of suppliers. These include major aircraft manufacturers, airline
and aircraft service companies, and aircraft spare parts redistributors. Many of
the Company's competitors have substantially greater financial and other
resources than the Company. There can
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be no assurance that competitive pressures will not materially and adversely
affect the Company's business, financial condition or results of operations. See
"BUSINESS -- Competition."
PRODUCT LIABILITY
The Company's business exposes it to possible claims for personal injury or
death which may result from a failure of aircraft spare parts sold by it.
Although the Company believes that it has taken adequate precautions to assure
the quality and traceability of the parts it sells, there can be no assurances
that the Company will not be exposed to lawsuits and the possibility of damage
awards. The Company does not carry product liability insurance and therefore any
substantial judgment could have a material adverse affect on its financial
condition. See "BUSINESS -- Product Liability and Legal Proceedings."
POSSIBLE VOLATILITY OF STOCK PRICES
As of , 1998, the Company had outstanding 2,996,500 shares of
Common Stock, of which approximately are eligible for public trading.
Taking into account the sale of shares held by Selling Security Holders and the
exercise of the Warrants, assuming all of the Warrants are exercised, the
Company will have 3,996,500 shares of Common Stock outstanding, approximately
of which will be eligible for public trading. Although it is impossible
to predict market influences and prospective values for securities, it is
possible that, in and of itself, the substantial increase in the number of
shares available for sale could have a depressive effect upon the market value
of the Company's Common Stock.
Furthermore, although the Company's Common Stock trades in the
over-the-counter market, there can be no assurances that a regular trading
market will develop, or, if developed, will continue, or that the prices of the
Common Stock will exceed the exercise price paid by the holders of the Warrants.
There has been a history of significant volatility in the market prices for
shares of companies in a similar stage of development. Hence, there can be no
assurances that holders who elect to exercise their Warrants will ultimately be
able to sell the underlying shares of Common Stock at a profit, if at all.
Because of the factors described above and elsewhere in this Prospectus, the
market price of the Company's Common Stock following the date of this Prospectus
may be highly volatile.
POSSIBLE LIMITATIONS UPON TRADING ACTIVITIES; RESTRICTIONS IMPOSED UPON
BROKER-DEALERS EFFECTING TRANSACTIONS IN CERTAIN SECURITIES
Trading of the Company's securities may be subject to material limitations
as a consequence of certain provisions of the Securities Exchange Act of 1934
(the "Exchange Act") which limit the activities of broker-dealers effecting
transactions in "penny stocks."
"Penny stocks" are defined as any equity securities other than a security
that is registered on a national exchange; included for quotation in the NASDAQ
system; or whose issuer has net tangible assets of more than $2,000,000 and has
been in continuous operation for greater than three (3) years. Issuers who have
been in operation less than three (3) years must have net tangible assets of at
least $5,000,000.
Rules promulgated by the Commission under Section 15(g) of the Exchange Act
require broker-dealers engaging in transactions in low-priced over-the-counter
securities defined as "penny stocks," to first provide to their customers a
series of disclosures and documents, including: (i) a standardized risk
disclosure document identifying the risks inherent in investing in "penny
stocks;" (ii) all compensation received by the broker-dealer in connection with
the transaction; (iii) current quotation prices and other relevant market data;
and (iv) monthly account statements reflecting the fair market value of the
securities. In addition, these rules require a broker-dealer obtain financial
and other information from a customer, determine that transactions in penny
stocks are suitable for such customer and deliver a written statement to such
customer setting forth the basis for such determination.
The Company's Common Stock presently constitutes a "penny stock."
Accordingly, trading activities for the Company's Common Stock will be made more
difficult for broker-dealers than in the case of securities not
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defined as "penny stock." This may have the result of depressing the market for
the Company's securities and an investor may find it difficult to dispose of
such securities.
Further, under the Exchange Act, and the regulations thereunder, any person
engaged in a distribution of the shares of Common Stock of the Company offered
by this Prospectus may not simultaneously engage in market making activities
with respect to the Common Stock of the Company during the applicable "cooling
off" periods prior to the commencement of such distribution. In addition, and
without limiting the foregoing, each Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of Common Stock by the Selling Security
Holders.
ARBITRARY DETERMINATION OF EXERCISE PRICE
The exercise prices of the Warrants do not bear any relationship to the
assets, book value, operating results or net worth of the Company, and should
not be considered to be an indication of the actual value of the Company.
POSSIBLE STATE AND FEDERAL RESTRICTIONS ON EXERCISE OF WARRANTS
Holders of Warrants will be able to sell the underlying Common Stock
issuable upon exercise thereof only if a current registration statement relating
to such underlying Common Stock is then in effect and on file with the
Securities and Exchange Commission and only if such Common Stock is qualified
for sale or exempt from qualification under the applicable state securities
laws. The Warrants contain certain provisions requiring the Company to file for,
and endeavor to secure, current and effective registration of the shares of
Common Stock issuable upon exercise. Although the Company has undertaken to use
its best efforts to maintain the effectiveness of this Prospectus covering the
securities underlying the Warrants, there can be no assurances that the Company
will be able to do so. The value of the Warrants may be greatly reduced if a
current prospectus covering the securities issuable upon the exercise of
Warrants is not kept effective or if such securities are not qualified or exempt
from qualification in the states in which the holders of Warrants reside. See
"DESCRIPTION OF SECURITIES."
EFFECT OF OUTSTANDING WARRANTS
As of , 1998, the Company had outstanding Warrants to purchase
1,000,000 shares of Common Stock upon exercise. To the extent that the shares
underlying the Warrants enter the market, the price of the Common Stock in the
market may be substantially reduced. Moreover, for the term of the Warrants
issued by the Company, the holders thereof are given an opportunity to profit
from a rise in the market price of the Company's Common Stock, with resulting
dilution in the interest of the other stockholders. Further, the terms on which
the Company may obtain additional financing during that period may be adversely
affected by the existence of such Warrants. The holders of such Warrants may
exercise them at a time when the Company might be able to obtain additional
capital through a new offering of securities on terms more favorable than those
provided by therein. The Company has undertaken to file this Prospectus with the
Securities and Exchange Commission pursuant to certain registration rights
enjoyed by holders of Warrants. The expense of registration of this Prospectus
shall be borne by the Company, which expense may be significant.
DIVIDENDS NOT LIKELY
The Company does not intend to declare or pay cash dividends in the
foreseeable future. Earnings, if any, are expected to be retained to finance and
develop its business. See "DESCRIPTION OF SECURITIES."
DILUTION
The exercise price of the Warrants is $4.50 per share. Officers, directors,
promoters and affiliated persons of the Company purchased their shares for cash
and other consideration ranging from $.001 to $2.50.
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USE OF PROCEEDS
The Company will not realize any proceeds from the sale of shares of Common
Stock by the Selling Security Holders. See "SELLING SECURITY HOLDERS."
The net proceeds which may be realized by the Company upon the exercise of
one-hundred (100%) percent of the Warrants will be approximately $4,400,000.
Inasmuch as the Company has received no firm commitments for their exercise,
there can be no assurance that any or a substantial portion of the Warrants will
be exercised.
Management cannot predict with any certainty the amount of proceeds, if
any, which may be generated from the exercise of Warrants. The net proceeds, if
any, which may be realized by the Company upon the exercise of the Warrants,
will be utilized to continue the operations of the Company in accordance with
the business strategy identified by management. See "BUSINESS." Based upon this
strategy, assuming that net proceeds of $4,400,000 are realized by the Company
upon the exercise of Warrants, management would reasonably expect to utilize
such proceeds within a period of twenty-four (24) months, in the following
relative proportions and order of priority:
Application of Funds % of Funds
- -------------------- ----------
Purchase of jet turbine engines............................. 34%
Purchase of additional spare parts inventory................ 25
General working capital..................................... 21
Employment of key personnel................................. 15
Improve facilities and purchase new equipment............... 5
---
100%
===
In the event half of the $4,400,000 was received from the Warrant
exercises, all of the aforementioned categories would be reduced pro rata.
The Company contemplates purchasing jet turbine engines from unaffiliated
parties such as Allied Signal Corp., Garuda Airlines, CFM International, Inc.,
and KLM Airlines. The Company anticipates purchasing additional spare parts
inventory from unaffiliated parties such as Iberia Airlines, Alitalia Airlines
and Garuda Airlines.
The amounts actually expended for the purposes described above could vary
significantly depending on, among other things, the Company's ability to obtain
capital from other sources, the demand for the Company's services and the
availability of inventory, jet engines and aircraft at attractive prices.
MARKET PRICE OF THE COMMON STOCK
As of the date of this Prospectus, the Company's Common Stock is traded in
the over-the-counter market through The OTC Bulletin Board under the symbol
"JTAV." From to the high and low bid prices of the Common
Stock were and respectively.
Records of the Company's stock transfer agent indicate that as of December
31, 1997, the Company had record holders of its Common Stock.
The Company has not paid any cash dividends to date, and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It is
the present intention of management to utilize all available funds for working
capital of the Company.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion should be read in conjunction with the
Company's Financial Statements, including the notes thereto. This Prospectus
contains certain forward-looking information which involves risks and
uncertainties. The actual results could differ from the results anticipated
herein.
OVERVIEW
The Company was incorporated in Florida on May 28, 1997 for the purpose of
acquiring by merger the business and operations of Old Jet upon the completion
of a stock offering by the Company. On July 28, 1997, the Company acquired 100%
of the outstanding common stock of Old Jet in exchange for 1,776,800 shares of
common stock of the Company in a one for one stock exchange. The merger has been
accounted for as a purchase. Old Jet was incorporated in the state of Florida on
October 3, 1996 for the purpose of buying, selling, leasing and exchanging spare
parts for fixed-wing commercial jet transport aircraft. Effective July 28, 1997
the Company's name was changed from Schuylkill Acquisition Corp. to Jet Aviation
Trading, Inc.
The effect of the transaction was a reverse merger; accordingly, the
historical financial statements presented are those of the accounting survivor,
Old Jet, and the stockholders' equity of the merged company was recapitalized to
reflect the capital structure of the surviving legal entity (the Company) and
the retained earnings of Old Jet.
The Company derives its revenues from selling, leasing and exchanging spare
parts for fixed-wing commercial jet transport aircraft.
The Company has only a limited operating history upon which an evaluation
of its operations and prospects can be based. Although the Company has since
inception experienced increasing net sales, the Company may experience
significant fluctuations in its gross margins and operating results in the
future, both on an annual and a quarterly basis. These fluctuations may be
caused by various factors, including general economic conditions, specific
economic conditions in the commercial aviation industry, the availability and
price of surplus aviation material, the size and timing of customer orders,
returns by and allowances to customers and the cost of capital to the Company.
RESULTS OF OPERATIONS
Three Months Ended November 30, 1997 Compared to Two Months Ended November 30,
1996
The Company's net sales increased by $1.984 million, or 424% from the two
months ended November 30, 1996 to the quarter ended November 30, 1997. During
the quarter ended November 30, 1997, domestic sales increased from $467,882 to
$2,017,262, and international sales increased from $0 to $435,060. The increase
in net sales was due to the addition of new sales personnel, increased customer
penetration, increased investment in, and availability of, inventory and the
expansion of services offered to customers.
Gross profit decreased from 24.4% to 24.0% and gross margins remained
unchanged during these periods.
Selling, general and administrative expenses decreased approximately
$130,000 or 26.5% from $491,200 in the period ended November 30, 1996 to
$360,816 in the period ended November 30, 1997. This decrease was related to
start up activities in the 1996 period that were not ongoing, including non-cash
compensation expense of $400,000 related to the issuance, at the difference
between the fair market value of $2.50 per share and $.417 per share, of 192,000
shares of common stock to the president of the Company.
As a result of the above factors, the Company generated income from
operations of $128,480 in the period ended November 30, 1997, compared to a loss
of $381,428 in the period ended November 30, 1996.
From Inception through August 31, 1997
Net sales of $6,215,553 have been generated since inception on October 3,
1996 through August 31, 1997. The Company has been able to sustain an increase
in monthly sales since inception through August 31,
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1997, primarily due to the increased availability of cash resources to acquire
inventory for resale. The Company generated foreign sales of $2,655,968 since
inception through August 31, 1997 due to its marketing efforts and expansion of
its product lines to its foreign customers.
Gross margins of 25% as a percentage of sales resulted in gross profits of
$1,530,689 since inception through August 31, 1997.
Selling, general and administrative expenses, including non-cash
compensation expenses of $1,501,600, totalled $2,881,660 and were 46% of sales.
In management's opinion this unusually high expense, as a percentage of sales,
was a result of expanding the Company's office and warehouse facilities along
with its sales, administrative and warehouse personnel levels to efficiently
address its increasing inventory and revenues as well as the charges to non-cash
compensation expense. These charges related to the issuance of shares of common
stock to the Company's president, and in payment of advisory fees, fees in
connection with loans, and founders shares issued by Old Jet. Management does
not anticipate that the unusually high expenses (as a percentage of sales)
experienced from inception through August 31, 1997 will continue on a regular
basis.
Interest expense net of interest income of $16,470 resulted from borrowings
to expand the Company's inventory levels, its operations as well as the
financing of the expansion of the Company's office and warehouse facilities.
Further increases in interest expense can be anticipated in the future as the
Company continues to expand its inventory levels and facilities to support
future growth.
Net loss was $1,383,641, and net loss per share was $0.83 per share in the
period from inception through August 31, 1997. Net loss per share is based upon
the weighted average of the common shares outstanding (1,672,968) from inception
through August 31, 1997. The losses for the period were due to noncash
compensation charges of $1,501,600 resulting principally from the issuance of
Common Stock to founding shareholders at less than fair market value.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $3,309,606 as of November 30, 1997
compared to $108,081 for the prior period. The principal reasons for the
increase in working capital since inception were the increase in inventories and
increase in cash resulting from private placements of equity securities and the
conversion of debt to equity.
During the quarter ended November 30, 1997 the Company collected
approximately 98% of accounts receivables outstanding as of the end of its prior
fiscal year. The Company's net cash provided by operating activities was
$208,248 for the period ended November 30, 1997 as compared to $370,863 used for
the prior period.
Net cash used in investing activities was $23,714, and $500 for the period
ended November 30, 1997 and the period ended November 30, 1996, respectively.
Net cash used in investing activities for the period ended November 30, 1997
represented the acquisition of property and equipment and deposit with an
aircraft parts manufacturer for purchase of aircraft parts.
The net cash provided by financing activities for the period ended November
30, 1996 was $460,496 and resulted from the issuance of Common Stock. The net
cash of $27,622 used by financing activities for the period ended November 30,
1997 was related to deferred offering costs.
The Company is unaware of any factors that may adversely impact its ability
to recover the carrying value of the DC-10-30 flight simulator other than the
discontinued operation of the DC-10 aircraft. It is anticipated that this asset
will be liquidated by the end of the third quarter of fiscal 1998.
The Company believes that the cash flows expected to be generated by
operations will meet its anticipated short term cash needs for working capital
and the proceeds from the exercise of the Warrants will enable the Company to
make future inventory expenditures, through the next 18 months.
The Company does not have any commitments for material capital
expenditures.
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PLAN OF OPERATION
Following the exercise of the Warrants in this offering, the Company
intends to use a portion of the proceeds, as well as trade credit, to acquire
turbine jet engines and expand its inventory of engine spare parts. The Company
also anticipates hiring additional employees, particularly in the marketing
area.
Finally the Company seeks to establish a $1.5 million revolving credit
facility for working capital and inventory purchases. The Company currently is
discussing the terms and conditions of such a facility with banks, although no
bank has yet offered the Company a commitment.
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BUSINESS
GENERAL
The Company was formed pursuant to the laws of the State of Florida in May,
1997. It conducted no business.
On July 28, 1997, the Company, then known as Schuylkill Acquisition Corp.,
merged with Jet Aviation Trading, Inc., a Florida corporation ("Old Jet"),
remained the surviving entity and changed its name to Jet Aviation Trading, Inc.
Old Jet had commenced business on October 3, 1996. Unless the context otherwise
requires, references to the "Company" throughout this Prospectus, including the
Financial Statements contained herein, refer to the operations of Old Jet prior
to July 28, 1997 and the Company thereafter.
The Company specializes in the sale, lease, exchange and purchase of
technical spares for fixed-wing commercial jet transport aircraft manufactured
by Boeing, McDonnell Douglas, Airbus and Lockheed. Complimenting this core
business, the Company provides its customers with inventory management services
including new product distribution, technical purchasing, maintenance repair
management, consignment marketing and purchase/leaseback of technical spares
inventory. The Company believes that with sufficient financial resources it can
also pursue opportunities involving the purchase, sale and lease of jet turbine
engines, jet turbine aircraft, and related aviation industry equipment.
INDUSTRY OVERVIEW
Industry estimates are that the annual worldwide market for aircraft spare
parts is approximately $10.2 billion, of which approximately $1.6 billion
reflects annual sales of aircraft spare parts in the redistribution market. The
redistribution market is highly fragmented, with a limited number of large,
well-capitalized companies selling a broad range of aircraft spare parts, and
many smaller competitors servicing particular segments of the industry. The
Company believes that significant trends affecting the market will increase its
overall size and at the same time eliminate some market participants. These
trends are:
Growth in Market for Aircraft Spare Parts
According to Boeing's 1996 Market Outlook (the "Boeing Report"), the
worldwide fleet of commercial passenger airplanes is expected to double from
11,066 airplanes at the end of 1995 to 23,081 airplanes by 2015. The Boeing
Report also projects that cargo jet aircraft will increase from 1,219 airplanes
in 1995 to 2,260 airplanes by 2015. Seventy percent of the airplanes delivered
to cargo operators are expected to be used aircraft which were converted from
commercial passenger service. Further, the number of planes in service for more
than 10 years is continuing to increase, and these older planes are the primary
market for redistributors. Finally, cost considerations are forcing many
airlines and repair and maintenance facilities to utilize aircraft spare parts
sold by redistributors, instead of purchasing new parts for inventory. The
Company believes that all of these factors will increase the demand for aircraft
spare parts from the redistribution market.
Increased Outsourcing of Inventory Management Function
Airlines incur substantial expenditures in connection with fuel, labor and
aircraft ownership. Further, during the last decade, airlines have come under
increasing pressure to reduce the costs associated with providing air
transportation services. Although several of the expenditures required to
operate an airline are beyond the direct control of airline operators (e.g., the
price of fuel and labor costs), obtaining replacement parts from the
redistribution market and outsourcing inventory management functions are, the
Company believes, areas in which airlines can allow these functions to be
handled more inexpensively and efficiently.
Increasing Emphasis on Traceability
Due to concerns regarding unapproved aircraft spare parts, regulatory
authorities have increased the level of documentation which must be maintained
on aircraft spare parts. This requirement has, in turn, been extended by
end-users to the vendors of the parts. The sophistication required to track the
history of an
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inventory consisting of thousands of aircraft spare parts is considerable and
has required companies to invest significantly in information systems
technology.
Increased Consignment
Certain of the Company's customers adjust inventory levels on a periodic
basis by disposing of excess aircraft spare parts. Traditionally, larger
airlines have used internal personnel to manage such dispositions. The Company
believes that major airlines and other owners of aircraft spare parts, in order
to concentrate on their core businesses and to more effectively redistribute
their excess parts inventories, are increasingly entering into long-term
consignment agreements with redistributors. By consigning inventories to a
redistributor such as the Company, customers are able to distribute their
aircraft spare parts to a larger number of prospective inventory buyers,
allowing the customer to maximize the value of its inventory. Consignment also
enables the Company to offer for sale significant parts inventory at minimal
capital cost to the Company.
Increased Leasing
The Company believes that cost considerations will result in airlines'
increased use of leasing with respect to spare parts and engines. This practice
can prove beneficial to the Company, for it can obtain a steady income stream
over a period of time from lease payments and upon termination of the lease,
regain the part or engine for subsequent sale. In addition, leasing arrangements
may afford the Company the ability to obtain additional financing.
COMPANY STRATEGY
The Company believes that it can become a low cost leader in the
redistribution market, as well as for its ancillary inventory management
services, by combining its managerial experience with increased capital and
building upon its present operations. The essential elements of its business
strategy are:
Internal Growth
The Company's strategy is to increase operating revenues and operating
income through continued customer penetration in its existing markets and
expansion into new markets. The Company intends to achieve this by continuing to
increase the size and scope of its inventory and by continuing to expand its
marketing efforts worldwide. The Company will also expand its inventory
management, leasing and on-site consignment services to allow its customers to
reduce their costs of operations by outsourcing some or all of their inventory
management and supply functions and to take advantage of opportunities to
maximize the value of their spare parts inventory. The Company seeks to
establish and maintain close working relationships with its customers and to
become their vendor of choice.
Capitalize on Large Bulk Purchase Opportunities
Although opportunities to purchase large inventories in bulk in the
aircraft spare parts industry cannot be predicted, historically they become
available on a regular basis. "Bulk" purchase opportunities arise when airlines,
in order to reduce capital requirements, sell large amounts of inventory in a
single transaction or when inventories of aircraft spare parts are sold in
conjunction with bankruptcy proceedings, or when operators upgrade their fleet.
In these situations the Company can obtain large inventories of aircraft spare
parts at a lower cost than can ordinarily be obtained by purchasing on an
individual basis. This results generally in higher gross margins on sales of
such parts. Since inception, the Company has successfully completed six bulk
inventory purchases in excess of $100,000. The Company believes that due to the
experience of management, and as a result of additional capital, an increased
number of larger bulk purchases can be effectuated.
Initiate Purchase and Sale of Jet Turbine Engines and Aircraft
The Company believes that with sufficient financial resources, it would be
in a position to enter the market for the purchase and sale of jet turbine
engines and aircraft. This market is extremely competitive and
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capital intensive. However, the Company believes that it has the management
expertise and industry contacts to make prudent purchases, the key to
profitability in this market.
Pursue Acquisitions of Complementary Businesses
Another element of the Company's strategy involves acquisitions of other
companies, assets or product lines that would complement or expand the Company's
existing aircraft spare parts redistribution and inventory management services
business. The Company believes that acquisitions will enable it to achieve
economies of scale and expand the product and service line available to its
customers. The Company is currently evaluating a number of acquisition
opportunities. No commitments or binding agreements have been entered into to
date and accordingly, no assurance can be given that any of the acquisitions
currently being considered will be consummated.
AIRCRAFT SPARE PARTS
Aircraft spare parts can be categorized by their ongoing ability to be
repaired and returned to service. The general categories are as follows: (i)
rotable; (ii) repairable; and (iii) expendable. A rotable is a part which is
removed periodically as dictated by an operator's maintenance procedures or on
an "as needed" basis and is typically repaired or overhauled and re-used an
indefinite number of times. An important subset of rotables is life limited
parts. A life limited part has a designated number of allowable flight hours
and/or cycles (one take-off and landing generally constitutes one cycle) after
which it is rendered unusable. A repairable is similar to a rotable except that
it can only be repaired a limited number of times before it must be discarded.
An expendable is generally a part which is used and not thereafter repaired for
further use.
Aircraft spare parts conditions are classified within the industry as (i)
factory new, (ii) new surplus, (iii) overhauled, (iv) serviceable, and (v) as
removed. A factory new or new surplus part is one that has never been installed
or used. Factory new parts are purchased from manufacturers or their authorized
distributors. New surplus parts are purchased from excess stock of airlines,
repair facilities or other redistributors. An overhauled part has been
completely disassembled, inspected, repaired, reassembled and tested by a
licensed repair facility. An aircraft spare part is classified serviceable if it
is removed by the operator from an aircraft or engine while operating under an
approved maintenance program and is functional and meets any manufacturer or
time and cycle restrictions applicable to the part. A factory new, new surplus,
overhauled or serviceable part designation indicates that the part can be
immediately utilized on an aircraft. A part in "as-removed" condition requires
functional testing, repair or overhaul by a licensed facility prior to being
returned to service in an aircraft.
OPERATIONS
The Company's main business is the buying and selling of aircraft spare
parts. The Company purchases spare parts from numerous unaffiliated sources,
including airlines, original equipment manufacturers and other parts
distributors. The Company has also pursued opportunities regarding the purchase
and sale of related aviation industry equipment. In this regard, the Company
acquired a DC-10-30 flight simulator and related support package and software.
The Company also provides value-added inventory management services to its
customers. The Company believes that inventory management services provide
significant opportunities for expansion of the Company's business in the future.
Finally, the Company intends to develop business as a redistributor of turbine
jet engines and become involved in the purchase, sale and lease of jet turbine
aircraft.
Inventory Purchases and Sales
The daily operations of the Company encompass inventory sales, brokering
and exchanging aircraft spare parts. The Company advertises its available
inventories held for sale or exchange on the Inventory Locator Service ("ILS"),
the Airline Inventory Redistribution System ("AIRS") and BCOM electronic
databases. Buyers of aircraft spare parts can access the ILS, AIRS and BCOM
databases and determine the companies which have the desired inventory
available. The Company estimates that twenty-five percent of its daily sales
activity results from an ILS, AIRS or BCOM inquiry. All major airlines and
repair agencies subscribe to one
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or more of these databases and accordingly, the Company maintains continual
on-line direct access with them. ILS, AIRS and BCOM do not, however, list price
information relating to particular parts. The ability to properly evaluate and
price spare parts derives from management experience in the industry.
The Company currently has over 35,000 line items in stock. The Company
monitors market availability, pricing and historical data on a continuous basis.
The Company sells new, overhauled and serviceable replacement parts from its
inventory and by buying them at the request of its customers against a specific
order; usually purchasing the parts for its own account and selling them to its
customers.
For the period ended August 31, 1997, inventory sales accounted for 100% of
revenues.
Inventory Management Services
The Company provides a number of inventory management services to its
customers. These services assist airlines in downsizing their inventory
management operations, thus enabling them to utilize their capital more
efficiently and reduce costs. Through the offering of various services, the
Company believes it can provide an inventory management program geared to any
particular customer's requirements.
Consignment
By consigning inventories to a redistributor such as the Company, customers
are able to distribute their aircraft spare parts to a larger number of
prospective inventory buyers, allowing the customer to maximize the value of its
inventory. Consignment also enables the Company to offer for sale significant
parts inventory at minimal capital cost. The Company currently maintains or
manages or has consignment agreements in place and its revenues from consignment
arrangements have accounted for approximately 5% of net sales for the period
ended August 31, 1997. The Company anticipates that revenues from consignments
will increase as a percentage of total revenues in the future.
Purchasing Services
The Company provides services whereby it purchases spare parts for smaller
and start-up airlines. These arrangements allow the Company's customers to take
advantage of the Company's greater purchasing power and repair management
services.
SALES AND MARKETING; CUSTOMERS
The Company utilizes six inside and outside salespersons and a network of
independent representatives in its sales and marketing efforts. The Company's
President directs the Company's sales force. The Company's sales force is
responsible for obtaining new customers and maintaining relationships with
existing customers. The majority of the Company's day-to-day sales are
accomplished through the Company's inside sales force.
The Company provides sales and delivery services seven days a week, 24
hours a day. This service is critical to provide support to airline customers
which, at any time, may have an aircraft grounded in need of a particular part.
The Company's South Florida location, with easy access to Miami International
Airport and Fort Lauderdale International Airport, assists the Company in
providing reliable and timely delivery of purchased products.
The Company has over 140 customers, which include commercial passenger
airlines, air cargo carriers, maintenance and repair facilities, original
equipment manufacturers and other aircraft parts redistribution companies.
During the eleven month period ended August 31, 1997, the Company's top 10
customers accounted for approximately 75% of net sales, and one customer has
accounted for more than 20% of net sales.
MANAGEMENT INFORMATION SYSTEM
The Company has implemented the first phase of upgrading its management
information systems by acquiring computer hardware and software. The Company's
data system is being developed to incorporate state-of-the-art records imaging,
archiving, inventory and asset management analysis, financial recordation
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and other support systems. The Company believes that upon full implementation of
its data management system, such system will be more than adequate to manage the
requirements of the Company in accordance with its forecasted growth.
COMPETITION
The aircraft spare parts redistribution market is highly fragmented.
Competition in the redistribution market is generally based on price,
availability of product and quality, including traceability. The Company's major
competitors include AAR Corp., Aero Controls Corp., Solair, Inc., The Memphis
Group and Aviation Sales Company. There is also substantial competition, both
domestically and overseas, from smaller, independent dealers who generally
participate in niche markets. Several of the Company's competitors have greater
financial and other resources than the Company.
The jet turbine engine and jet turbine aircraft market is currently
dominated by various financial institutions, such as GE Capital, CIT Group, and
International Lease Finance Corp. as well as the major competitors from the
spare parts redistribution market. The market also includes many smaller
entities who engage in transactions on a sporadic basis.
GOVERNMENT REGULATION AND TRACEABILITY
The FAA regulates the manufacture, repair and operation of all aircraft and
aircraft parts operated in the United States. Its regulations are designed to
insure that all aircraft and aviation equipment are continuously maintained in
proper condition to ensure safe operation of the aircraft. Similar rules apply
in other countries. All aircraft must be maintained under a continuous condition
monitoring program and must periodically undergo thorough inspection and
maintenance. The inspection, maintenance and repair procedures for the various
types of aircraft and equipment are prescribed by regulatory authorities and can
be performed only by certified technicians at certified repair facilities.
Certification and conformance is required before installation of a part on an
aircraft. Presently, whenever necessary with respect to a particular part, the
Company utilizes FAA and/or Joint Aviation Authority certified repair stations
to repair and certify parts to ensure worldwide marketability. The operations of
the Company may in the future be subject to new and more stringent regulatory
requirements. In that regard, the Company closely monitors the FAA and industry
trade groups in an attempt to understand how possible future regulations might
impact the Company. See "RISK FACTORS -- Market Trend" and "Government
Regulation."
An important factor in the aircraft spare parts redistribution market
relates to the documentation or traceability that is supplied with an aircraft
spare part. The Company requires all of its suppliers to provide adequate
documentation as required by the industry and the regulatory agencies. The
Company is designing its data management system to image, capture, manage and
communicate this documentation.
EMPLOYEES
As of December 31, 1997, the Company employed 20 persons. None of the
Company's employees are covered by collective bargaining agreements. The Company
believes that its relations with its employees are good.
PROPERTIES
The Company's executive offices and warehouse facilities are located in
Miami, Florida. These facilities comprise a total of approximately 17,600P
square feet. The premises are subject to a lease dated January 1, 1997 and
subsequently amended on November 1, 1997, which expires on December 31, 2000, at
an annual rental of $79,614 plus pass-throughs of (i) utilities, (2) increases
in real estate taxes, (3) assessments, (4) increases in insurance and (5) the
Company's share of assessments imposed by the industrial park's association.
Rent is subject to a cost of living increase adjustment. The Company has two
additional one year options to renew. These facilities are adequate for the
Company's present needs.
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PRODUCT LIABILITY AND LEGAL PROCEEDINGS
The Company's business exposes it to possible claims for personal injury or
death which may result from a failure of aircraft spare parts sold by it. The
Company takes what it believes are adequate precautions to ensure the quality
and traceability of the aircraft parts which it sells. The Company has a
director of quality control whose responsibilities include visual inspections of
parts and documentation and supervision of the Company's licensed airframe and
powerplant inspectors and inventory control personnel. The Company's President,
with approximately 20 years of experience in the industry, also works with the
director of quality control. Parts that require maintenance are submitted to FAA
certified facilities for overhaul and certification as required. The Company
also ensures that all parts received or shipped are accompanied by proper
documentation. The director of quality control also supervises the Company's
document traceability program. The Company does not carry product liability
insurance. See "RISK FACTORS -- Product Liability."
The Company is not involved in any litigation.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND PROMOTERS
The present members of the Board of Directors, all executive officers,
their ages and positions with the Company are set forth below:
NAMES AGE POSITION
- ----- ---- --------
Joseph J. Nelson...................... 48 President and Chief Executive Officer,
Director
Michael J. Cirillo.................... 49 Director
Theodore H. Gregor.................... 46 Director
Joseph F. Janusz...................... 46 Vice President -- Finance
Chief Financial Officer
Joseph J. Nelson has been President and Chief Executive Officer of the
Company since October, 1996. Prior thereto, he was Senior Vice-President of The
AGES Group, L.P. ("AGES"), responsible for the operations of four divisions with
revenues of approximately $100 million, and held other positions with AGES since
October, 1990. Prior thereto, Mr. Nelson was with Ryder Corporation attaining
the position of Vice President of Sales. Mr. Nelson holds a B.S degree from
DePaul University and an M.B.A. in Finance from Farleigh Dickinson University.
Michael J. Cirillo has been a director of the Company since June, 1997. He
is President of The D.A.R. Group, Inc. an investment banking firm and President
of CBM Consultants, Inc., a marketing and consulting firm. From 1987 through
1995 Mr. Cirillo was an officer and director of Flex Resources, Inc., a
temporary and permanent employment firm. Mr. Cirillo holds a B.S. degree from
Farleigh Dickinson University.
Theodore H. Gregor has been a director of the Company since October, 1997.
Since 1987, he has been the President of Aero Kool Corporation, a privately held
company engaged in business as an FAA approved repair facility. Mr. Gregor holds
a B.S. degree in Mechanical Engineering from the University of Miami.
Joseph F. Janusz has been Vice President of Finance and Chief Financial
Officer of the Company since June 1, 1997. Prior thereto he was a practicing
certified public accountant. From September, 1993 through March, 1996, he was
the Chief Financial and Operations Officer of Homeshield Industries, Inc. a
privately held manufacturing company. From January, 1987 through June, 1990, Mr.
Janusz was the Chief Financial Officer of RMJ Associates, Inc., a holding
company involved in the office supply, furniture and printing businesses. Mr.
Janusz holds a B.S. degree in Accounting from the University of Florida. He is a
member of the American Institute of CPAs, the Florida Institute of CPAs and is a
licensed real estate broker in Florida.
Allen Beni, who may be deemed to have been an organizer of the Company, was
the President of Florida West Airlines, Inc., which filed for bankruptcy in the
United States Bankruptcy Court for the Southern District of Florida in September
1994.
The officers of the Company are elected by the Board of Directors to serve
until their successors are elected and qualified. The directors of the Company
are elected at the annual meeting of the stockholders.
The Company's Certificate of Incorporation and Bylaws provide for the
indemnification of, and advancement of expenses to, directors and officers of
the Company. The Company has also entered into agreements to provide
indemnification for its directors and executive officers.
COMMITTEES
The Board of Directors intends to establish an Audit Committee within the
next fiscal year. The Audit Committee will recommend the independent accountants
appointed by the Board of Directors to audit the financial statements of the
Company, which includes an inspection of the books and accounts of the Company,
and will review with such accountants the scope of their audit and their report
thereon, including any questions
20
23
and recommendations that may arise relating to such audit and report of the
Company's internal accounting and auditing procedures.
DIRECTOR COMPENSATION
The Company intends to pay directors of the Company who are not employed by
the Company a fee at the rate of $500 for each meeting of the Board of Directors
attended and $500 for each committee meeting attended.
In addition, all directors will receive on an annual basis stock option
grants under the Stock Option Plan for serving on the Board. Options to purchase
5,000 shares of Common Stock will be automatically granted to each director on
December 31 of each year, starting December 31, 1997, at an option exercise
price equal to the closing bid or sales price of the Common Stock on such date.
Additionally, directors appointed to the Board in the future will be granted
options to purchase 10,000 shares of Common Stock at an option exercise price
equal to the closing bid or sales price of the Common Stock on the date of their
appointment to the Board.
EXECUTIVE COMPENSATION
The following table reflects compensation paid or accrued by the Company
during the year ended August 31, 1997 to the Company's Chief Executive Officer.
NAME YEAR SALARY
- ---- ---- --------
Joseph J. Nelson............................................ 1997 $135,385(1)
- ---------------
(1) Represents compensation from November 1, 1996 to August 31, 1997.
EMPLOYMENT AGREEMENTS
The Company and its President and Chief Executive Officer entered into an
employment agreement effective November 1, 1996. This Agreement is for a period
of three (3) years, terminating on October 31, 1999. The Agreement provides for
an annual base salary of $160,000 and a year-end cash bonus of 3% of the pre-tax
net income of the Company, as defined therein.
STOCK OPTION PLAN
On September 1, 1997, the Board of Directors adopted a Stock Option Plan
(the "Plan"). This Plan provides for the grant of Incentive Stock Options,
Non-qualified Stock Options and Stock Appreciation Rights to employees selected
by the Board of Directors, or Compensation Committee. The Plan also sets forth
applicable rules and regulations for stock options granted to non-employee
directors. To date, 124,500 options have been granted under the Plan, including
60,000 to Mr. Nelson and 30,000 to Mr. Janusz. The Plan is subject to
stockholder approval and will be submitted to the stockholders at the Company's
annual meeting in 1998.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of December 31, 1997 (a) by each
of the Company's directors, (b) all executive officers and directors as a group,
and (c) all persons known by the Company to own beneficially more than 5% of the
Company's Common Stock.
NAME SHARES PERCENT
- ---- --------- -------
Joseph J. Nelson(1)(2)...................................... 272,000 8.9%
Michael J. Cirillo(1)(3).................................... 1,150,000 29.1
21
24
NAME SHARES PERCENT
- ---- --------- -------
Argaman, Inc.(4)............................................ 600,000 20.0
M.S.A. Trust Company Ltd., Co.
#51-138681-5 of 3
Daniel Frisch Street
64731 Tel Aviv, Israel
Silvertown International Corp.(5)........................... 279,800 9.3
Israel Galili No. 6
Tel Aviv, Israel 69377
Fersam International Ltd.(6)................................ 280,000 9.3
PA Verkuyllaan 51-55 (Acht.)
11-71 EB
Badhoevedorp, The Netherlands
Joseph Laura................................................ 233,600 7.8
105 Mountainside View
Morgantown, NJ 07751
All officers and directors as a group(4 persons)(2)(3)(7)... 1,452,000 36.0%
- ---------------
(1) The addresses for Mr. Nelson and Mr. Cirillo are c/o Jet Aviation Trading,
Inc., 15675 N.W. 15 Avenue, Miami, FL 33169.
(2) Includes 60,000 shares subject to stock options presently exercisable; does
not include 20,000 shares subject to stock options which become exercisable
in October, 1998.
(3) Includes Warrants to purchase 950,000 shares of Common Stock owned by the
D.A.R. Group, Inc. of which Mr. Cirillo is the President.
(4) An Isle of St. Kitts, Nevis corporation; its sole officer and director by
power of attorney, is Michael Shaham. Mr. Shaham has the sole voting and
dispositive power for this company's shares by power of attorney.
(5) A Panamanian corporation; its President/director is Mario Fonseco; its
Secretary/director is Zvi Moshe; these individuals are also the principal
shareholders.
(6) A Netherlands corporation; its President is Hans Hel Sloth; its Secretary is
Samantha El Masry; its directors and principal shareholders are Nazie El
Masry and Patricia El Masry.
(7) Includes 30,000 shares subject to stock options granted to Joseph F. Janusz;
does not include 10,000 shares subject to stock options which become
exercisable in October, 1998.
CERTAIN TRANSACTIONS
Effective October 1, 1996, the Company sold 600,000 shares of its Common
Stock to Jet Avionics Systems, Inc. ("Jet Avionics") in consideration of a
promissory note in the principal amount of $175,000, payable on demand, together
with accrued interest at the applicable federal rate. The Company also entered
into a Consignment Agreement with Jet Avionics, whereby the Company agreed to
sell certain inventory of technical spares for the benefit of the Company and
Jet Avionics. The Consignment Agreement was for a period of one year and
provided for the delivery of inventory by Jet Avionics to the Company and the
storage by the Company, on a segregated basis, of such inventory. Title to such
inventory remained with Jet Avionics until sale to a third party, at which time
title passed to the Company and then to the third party. The Company insured the
inventory. The Consignment Agreement provided that the Company retained 25% of
the selling price for the inventory and remitted the balance of 75% to Jet
Avionics. Jet Avionics certified that each item of inventory covered by the
Agreement was maintained by an FAA approved source and was properly documented.
Pursuant to such Consignment Agreement, the Company sold to third parties
certain of the consignment inventory for approximately $452,000 and owed Jet
Avionics $303,000 after giving effect to a $36,000 payment. On August 29, 1997,
the Company and Jet Avionics entered into a Consignment Cancellation and
Purchase Agreement whereby (i) Jet Avionics cancelled the debt of $303,000 and
(ii) the
22
25
Company purchased the remaining consignment inventory with a value of
approximately $336,000 from Jet Avionics all in exchange for 230,000 shares of
the Company's Common Stock, $4,000 in cash, and the cancellation of $175,000 of
indebtedness of Jet Avionics to the Company. The President and sole shareholder
of Jet Avionics is Sharon Taoz, the daughter of Allen Beni. Ms. Taoz was
employed by the Company, as an account executive, from October 3, 1996 through
August 31, 1997 and was paid $37,000. From October 3, 1996 through October 2,
1997, Mr. Beni served in a non-executive capacity as Vice President of Special
Projects pursuant to an employment agreement. Mr. Beni's activities involved
sales promotion and the pursuit of inventory purchase opportunities. During this
period of time, Mr. Beni was paid $88,615 for services rendered. On October 2,
1997, Mr. Beni and the Company terminated the aforementioned employment
agreement and entered into a one (1) year Consulting Agreement. This Consulting
Agreement provides for a monthly retainer of $4,000 and a commission of 15%
which may be earned based upon sales or purchases introduced by Mr. Beni to the
Company. Mr. Beni also owns an equity interest in the lessor of the Company's
facilities. See "MANAGEMENT -- Directors, Executive Officers and Promoters."
On October 3, 1996, the Company sold 80,000 shares of its Common Stock to
IP Services, Inc. ("IP") for $24,510. IP is an affiliate of Howard M. Appel.
During 1996 FAC Enterprises, Inc. ("FAC), an affiliate of Mr. Appel, loaned the
Company an aggregate of $325,000. During the year, the Company repaid $125,000.
The balance ($200,000) was repaid on August 29, 1997 through the issuance of
100,000 shares of Common Stock. FAC was also issued 7,500 shares for advisory
services rendered. Mr. Appel may be deemed to have been an organizer of the
Company.
On November 1, 1996, the Company sold 192,000 shares of its Common Stock to
Joseph J. Nelson in consideration of a promissory note in the principal amount
of $80,000 payable on demand, together with accrued interest at the applicable
federal rate.
On November 14, 1996, the Company entered into a contract with Fersam
International Ltd. ("Fersam") for the purchase of a one-half interest in a CAE
Electronics Ltd. Sigma 3-six (6) axis DC-10 simulator (the "DC-10 simulator").
In consideration for the purchase of this interest, the Company paid $125,000 in
cash and issued 40,000 shares of Common Stock valued at $100,000. On March 28,
1997, the Company entered into another contract with Fersam for the purchase of
one (1) Novoview 2000 Visual Support System, Simulator Spares Parts Package and
Maintenance Training Data Package to be used in connection with the DC-10
simulator. In consideration of and as payment for the purchase of these assets,
the Company issued 200,000 shares of Common Stock valued at $500,000.
On March 27, 1997, Silvertown International Corp. ("Silvertown") loaned the
Company $120,000. This loan was evidenced by a promissory note payable to
Silvertown, due on June 27, 1997, together with interest at 6% per annum. In
consideration for this unsecured loan, the Company issued to Silvertown 4,800
shares of Common Stock. This note was extended for an additional three (3)
months. On May 12, 1997, Silvertown loaned the Company $250,000. This loan was
evidenced by a promissory note payable to Silvertown, due on or about July 27,
1997, together with interest at 6% per annum. In consideration for this
unsecured loan, the Company issued to Silvertown 10,000 shares of Common Stock.
On August 29, 1997, the Company satisfied the principal amounts of these
promissory notes through the issuance of 185,000 shares of Common Stock to
Silvertown.
On May 23, 1997, Joseph Laura loaned $500,000 to the Company. This loan was
evidenced by a promissory note payable to Mr. Laura, due on the earlier of May
31, 1998 or the Company obtaining equity financing in excess of $1,000,000,
together with interest at 12% per annum. The Company satisfied the principal
amount of this note through the issuance of 250,000 shares of Common Stock to
Mr. Laura on August 29, 1997.
On May 30, 1997, The D.A.R. Group, Inc., an affiliate of Michael J.
Cirillo, a director of the Company, was issued 200,000 shares of Common Stock of
the Company, for $200. On June 1, 1997, The D.A.R. Group, Inc., was issued
warrants to purchase 950,000 shares of Common Stock for a fee in connection with
advice concerning the formation, capitalization and structure of Schuylkill
Acquisition Corp. See "DESCRIPTION OF SECURITIES."
23
26
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock, $.001
par value per share, of which 2,996,500 shares are outstanding. An additional
1,000,000 shares of Common Stock are reserved for issuance upon the exercise of
the Warrants and an additional 750,000 shares are reserved for issuance pursuant
to the Company's Stock Option Plan.
Holders of Common Stock have equal rights to receive dividends when, as and
if declared by the Board of Directors, out of funds legally available therefor.
Holders of Common Stock have one vote for each share held of record and do not
have cumulative voting rights.
Holders of Common Stock are entitled upon liquidation of the Company to
share ratably in the net assets available for distribution, subject to the
rights, if any, of holders of any preferred stock then outstanding. Shares of
Common Stock are not redeemable and have no pre-emptive or similar rights. All
outstanding shares of Common Stock are fully paid and non-assessable.
PREFERRED STOCK
Within the limits and restrictions contained in the Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 3,000,000 shares of Preferred Stock, $.10
par value per share (the "Preferred Stock"), in one or more series, and to fix,
as to any such series, the dividend rate, redemption prices, preferences on
liquidation or dissolution, sinking fund terms, if any, conversion rights,
voting rights, and any other preferences or special rights and qualifications.
Shares of Preferred Stock issued by the Board of Directors could be
utilized, under certain circumstances, to make an attempt to gain control of the
Company more difficult or time consuming. For example, shares of Preferred Stock
could be issued with certain rights which might have the effect of diluting the
percentage of Common Stock owned by a significant stockholder or issued to
purchasers who might side with management in opposing a takeover bid which the
Board of Directors determines is not in the best interests of the Company and
its stockholders. This provision may be viewed as having possible anti-takeover
effects. A takeover transaction frequently affords stockholders the opportunity
to sell their shares at a premium over current market prices. The Board of
Directors has not authorized any series of Preferred Stock, and there are no
agreements, understandings or plans for the issuance of any Preferred Stock.
OUTSTANDING WARRANTS
The Warrants were issued in June 1, 1997 in connection with the
organization of the Company. Each Warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $4.50 until June 30, 2002. The
Warrants are redeemable by the Company at $.05 upon the occurrence of both of
the following events: (a) the listing of the Company's shares of common stock on
a securities exchange and (b) the Company's common stock trading in excess of
$5.25 per share for a ten day period.
The Warrants provide for adjustment of the exercise price and for a change
in the number of shares issuable upon exercise to protect holders against
dilution in the event of a stock dividend, stock split, combination or
reclassification of the Common Stock. The Warrants may be exercised upon
surrender of the Warrant Certificate on or prior to the expiration date (or
earlier redemption date) of such Warrant at the offices of the Company's
transfer agent, with the form of "Election to Purchase" completed and executed
as indicated, accompanied by payment of the full exercise price (by certified or
bank check, payable to the order of the Company) for the number of shares with
respect to which the Warrant is being exercised. Shares issued upon exercise of
Warrants and paid for in accordance with the terms of the Warrants will be fully
paid and nonassessable.
The costs of filing the registration statement will be borne entirely by
the Company. The Warrants do not confer upon the holder thereof any voting or
other rights of a stockholder.
24
27
TRANSFER AGENT
StockTrans, Inc., 7 East Lancaster Avenue, Ardmore, Pennsylvania 19003,
serves as transfer agent for the Common Stock.
SELLING SECURITY HOLDERS
The selling security holders identified in the following table ("Selling
Security Holders") are offering for sale an aggregate of 1,000,000 shares of
Common Stock issuable upon exercise of the Warrants, as well as 1,969,000 shares
of Common Stock previously issued by the Company in certain private placement
transactions.
The following table sets forth the number of Shares being held of record or
beneficially (to the extent known by the Company) by such Selling Security
Holders and provides (by footnote reference) any material relationship between
the Company and such Selling Security Holder, all of which is based upon
information currently available to the Company.
NUMBER OF
SHARES OF
COMMON NUMBER OF
NUMBER OF STOCK SHARES OF
SHARES OF PERCENTAGE TO BE SOLD COMMON PERCENTAGE
COMMON STOCK BEFORE IN STOCK AFTER
NAME BEFORE OFFERING(1) OFFERING(1) OFFERING(1) AFTER OFFERING OFFERING(1)
- ---- ------------------- ------------ ------------ --------------- -----------
The D.A.R. Group, Inc.(2)(3)..... 950,000 24.7 % 950,000 -- --%
Argaman, Inc..................... 600,000 15.2 300,000 300,000 7.6
Leonard H. Bloom................. 10,000 * 10,000 -- --
Amaury Borges(4)................. 20,000 * 10,000 10,000 *
Clifton Capital Corp............. 128,000 3.21 128,000 -- --
Michael J. Cirillo(2)............ 200,000 5.07 200,000 -- --
Dallas Investments, Ltd.(5)...... 125,000 3.17 125,000 -- --
Discretionary Investment Trust
dtd 7/7/93..................... 70,000 1.77 70,000 -- --
Brian Due........................ 20,000 * 10,000 10,000 *
Elanken Family Trust............. 41,400 1.05 41,400 -- --
Fersam International Ltd.(2)..... 280,000 7.0 260,000 20,000 *
Godwin Finance Ltd............... 100,000 2.5 100,000 -- --
I.P. Services, Inc.(2)........... 70,000 1.77 70,000 -- --
Jet Avionics Systems, Inc.(2).... 80,400 2.01 40,000 40,400 1.01
KAB Investments, Inc............. 70,000 1.77 50,000 20,000 *
Joseph Laura(2).................. 233,600 5.82 233,600 -- --
Joseph Nelson(6)................. 212,000 5.37 100,000 112,000 2.84
Zvi Moshe(2)(7).................. 20,000 * 10,000 10,000 *
Yoram Moussaieff................. 40,000 1.0 20,000 20,000 *
Mustang Electronics Affiliated
Defined Benefits Pension
Plan........................... 20,000 * 10,000 10,000 *
Bill Seidel...................... 10,000 * 5,000 5,00 *
Joseph Shalhon................... 20,000 * 10,000 10,000 *
Bella Shrem...................... 12,000 * 6,000 6,000 *
Silvertown International
Corp.(2)....................... 279,800 7.1 140,000 139,800 3.5
SPH Equities, Inc................ 60,000 1.52 60,000 -- --
Janet & Robert Weinstein......... 20,000 * 10,000 10,000 *
- ---------------
* Less than 1%
(1) Including 1,000,000 shares issued upon exercise of all the Warrants.
(2) See "Certain Transactions".
(3) Shares to be issued upon exercise of Warrants.
(4) Mr. Borges is employed as the Senior Account Executive of the Company.
(5) Includes 50,000 shares to be issued upon exercise of Warrants.
(6) Mr. Nelson is the President of the Company.
(7) Mr. Moshe is the President of Silvertown International Corp.
25
28
Certain of the Selling Security Holders have agreed not to sell their
remaining shares of Common Stock for a period of one year from the effective
date of the registration statement.
PLAN OF DISTRIBUTION
EXERCISE OF WARRANTS
The Company is registering for resale shares of Common Stock issuable upon
exercise of Warrants that were previously issued to the holders thereof.
The Warrants are exercisable by tendering to the Company the appropriate
exercise price along with the Warrant Certificate (with the "Election to
Purchase" addendum properly filled out). Upon exercise, the Company will issue
such fully paid and non-assessable shares of Common Stock as are specified on
the Certificate so tendered and deliver to the holder thereof such additional
securities as are required by the terms thereof. Payment of the exercise price
shall be made in cash or by certified check or bank draft made payable to the
order of the Company. The Warrants may be subject to redemption by the Company.
See "DESCRIPTION OF SECURITIES."
SELLING SECURITY HOLDERS
The Selling Security Holders are offering shares of Common Stock for their
own account and not for the account of the Company. The Company will not receive
any proceeds from the sale of the shares of Common Stock by the Selling Security
Holders.
Each Selling Security Holder will, prior to any sales, agree (a) not to
effect any offers or sales of the Common Stock in any manner other than as
specified in this Prospectus, (b) to inform the Company of any sale of Common
Stock at least one business day prior to such sale and (c) not to purchase or
induce others to purchase Common Stock in violation of Regulation M under the
Exchange Act.
The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Security Holders acting as principals for their
own accounts in one or more transactions in the over-the-counter market or in
negotiated transactions at market prices prevailing at the time of sale or at
prices otherwise negotiated. Alternatively, the shares of Common Stock may be
offered from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or underwriters
may receive compensation in the form of commissions or concessions from the
Selling Security Holders or the purchasers of the Common Stock.
Under the Exchange Act, and the regulations thereunder, any person engaged
in a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of Common Stock by the Selling Security
Holder. There are possible limitations upon trading activities and restrictions
upon broker-dealers effecting transactions in certain securities which may also
materially affect the value of, and an investor's ability to dispose of, the
Company's securities. See "RISK FACTORS."
The Company will use its best efforts to file, during any period in which
offers or sales are being made, one or more post-effective amendments to the
Registration Statement, of which this Prospectus is a part, to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
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29
LEGAL MATTERS
The validity of the Common Stock offered hereby will passed upon for the
Company by Shapo, Freedman & Bloom, P.A., 200 South Biscayne Boulevard, Suite
4750, Miami, Florida 33131. Leonard H. Bloom, a shareholder of the firm, owns
10,000 shares of Common Stock of the Company.
EXPERTS
The financial statements of the Company for the fiscal year ended August
31, 1997 included in this Prospectus have been audited by Sweeney, Gates & Co.,
certified public accountants, and are included herein in reliance upon the
authority of said firm as experts on accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, a
Registration Statement on Form SB-2 with respect to the Common Stock being
registered hereby. This Prospectus does not contain all the information
contained in such Registration Statement, as permitted by the Rules and
Regulations of the Securities and Exchange Commission. The Registration
Statement, including exhibits thereto, may be inspected without charge and
copies of all or any part thereof may be obtained from the Commission's
principal office in Washington, D.C. at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 75 Park
Place, 14th Floor, New York, New York 10007 and at Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained upon written request addressed to the Commission,
Public Reference Section 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. For further information with respect to the Company, the
Common Stock being registered hereby and the contents of any contract or
document referred to herein, reference is made to the Registration Statement and
the exhibits filed as a part thereof.
27
30
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report................................ F-2
Balance Sheet, August 31, 1997.............................. F-3
Statement of Income, October 3, 1996 (Date of Inception) to
August 31, 1997........................................... F-4
Statement of Changes in Stockholders' Equity................ F-5
Statement of Cash Flows..................................... F-6
Notes to Financial Statements............................... F-7
Balance Sheet, November 30, 1997 (Unaudited)................ F-15
Statement of Income
Three Months ended November 30, 1997 and October 3, 1996
(date of inception) to November 30, 1996 (Unaudited)... F-16
Statement of Cash Flows
Three Months ended November 30, 1997 and October 3, 1996
(date of inception) to November 30, 1996 (Unaudited)... F-17
Note to Financial Statements................................ F-18
F-1
31
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Jet Aviation Trading, Inc.
We have audited the accompanying balance sheet of Jet Aviation Trading,
Inc. as of August 31, 1997, and the related statements of income, stockholders'
equity, and cash flows for the period from October 3, 1996 (Date of Inception)
through August 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jet Aviation Trading, Inc.
as of August 31, 1997, and the results of its operations and cash flows for the
period from October 3, 1996 (Date of Inception) through August 31, 1997, in
conformity with generally accepted accounting principles.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
October 9, 1997, except as to Note 12
which is as of October 29, 1997
F-2
32
JET AVIATION TRADING, INC.
BALANCE SHEET
AUGUST 31, 1997
ASSETS
Current assets:
Cash...................................................... $ 341,660
Accounts receivable, less $93,000 allowance for doubtful
accounts............................................... 1,764,119
Inventory................................................. 1,532,333
DC-10 flight simulator held for resale (Note 3)........... 734,421
Deferred tax asset........................................ 23,000
Prepaid expenses and other current assets................. 29,610
----------
Total current assets.............................. 4,425,143
----------
Property and equipment, less accumulated depreciation of
$8,293.................................................... 88,437
Deferred offering costs..................................... 22,750
Deposit-Boeing.............................................. 25,000
----------
$4,561,330
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 977,706
Accrued expenses.......................................... 144,540
Accrued interest.......................................... 19,611
Income taxes payable...................................... 37,200
----------
Total current liabilities......................... 1,179,057
----------
Deferred tax liability...................................... 2,000
----------
Stockholders' equity:
Preferred stock, par value $.10 per share, 3,000,000
shares authorized, and no shares issued and
outstanding............................................ --
Common stock, par value $.001 per share; 30,000,000 shares
authorized, and 2,996,500 shares issued and
outstanding............................................ 2,997
Additional paid-in capital................................ 4,840,917
Accumulated Deficit....................................... (1,383,641)
----------
3,460,273
Less: Stockholders' notes receivable (Note 8)............... (80,000)
----------
Total stockholder's equity........................ 3,380,273
----------
$4,561,330
==========
The accompanying notes are an integral part of these financial statements.
F-3
33
JET AVIATION TRADING, INC.
STATEMENT OF OPERATIONS
OCTOBER 3, 1996 (DATE OF INCEPTION) TO AUGUST 31, 1997
Sales, net of returns and allowances........................ $ 6,215,553
Cost of sales............................................... 4,684,864
-----------
Gross profit.............................................. 1,530,689
-----------
Selling, general and administrative expenses................ 2,881,660
-----------
Operating Loss.............................................. (1,350,971)
-----------
Other income (expense):
Interest income........................................... $ 21,867
Interest expense.......................................... (38,337) (16,470)
-------- -----------
Loss before income taxes.................................... (1,367,441)
Income tax expense:
Current................................................... 37,200
Deferred.................................................. (21,000) 16,200
-------- -----------
Net Loss.......................................... $(1,383,641)
===========
Net Loss per share................................ $ (.83)
===========
Weighted average number of common shares outstanding........ 1,672,968
===========
The accompanying notes are an integral part of these financial statements.
F-4
34
JET AVIATION TRADING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
OCTOBER 3, 1996 (DATE OF INCEPTION) TO AUGUST 31, 1997
COMMON STOCK ADDITIONAL STOCKHOLDER'S
------------------ PAID-IN ACCUMULATED NOTE
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
--------- ------ ---------- ----------- ------------- ----------
Issuance of common stock to
founding stockholders...... 1,200,000 $1,200 $ 778,800 $ -- $(255,000) $ 525,000
Issuance of common stock in
connection with the
purchase of equipment and
aircraft parts............. 10,000 10 24,990 -- -- 25,000
Issuance of common stock in
connection with private
placement.................. 312,000 312 745,997 -- -- 746,309
Issuance of common stock in
connection with purchase of
DC-10 Simulator held for
resale..................... 240,000 240 599,760 -- -- 600,000
Issuance of common stock in
connection with debt....... 14,800 15 36,985 -- -- 37,000
Issuance of common stock to
founders of Schuylkill
Acquisition Corp........... 400,000 400 999,600 -- -- 1,000,000
Issuance of common stock in a
private offering by
Schuylkill Acquisition
Corp. ..................... 47,200 47 95,856 -- -- 95,903
Issuance of 1,000,000
warrants................... -- -- 50,000 -- -- 50,000
Accumulated deficit of
Schuylkill Acquisition
Corp. adjusted due to
merger..................... -- -- (35,298) -- -- (35,298)
Conversion of $370,000 of
notes payable to common
stock...................... 185,000 185 369,815 -- -- 370,000
Conversion of $200,000
stockholder loan to common
stock and payment of
$15,000 advisory fee in
common stock............... 107,500 108 214,892 -- -- 215,000
Conversion of $500,000 note
payable to common stock.... 250,000 250 499,750 -- -- 500,000
Issuance of common stock for
the payment of amounts due
to a stockholder and for
the purchase of remaining
consigned inventory........ 230,000 230 459,770 -- 175,000 635,000
Net Loss..................... -- -- -- (1,383,641) -- (1,383,641)
--------- ------ ---------- ----------- --------- ----------
Balance, August 31, 1997..... 2,996,500 $2,997 $4,840,917 $(1,383,641) $ (80,000) $3,380,273
========= ====== ========== =========== ========= ==========
The accompanying notes are an integral part of these financial statements.
F-5
35
JET AVIATION TRADING, INC.
STATEMENT OF CASH FLOWS
OCTOBER 3, 1996 (DATE OF INCEPTION) TO AUGUST 31, 1997
Cash flows from operating activities:
Net (loss)................................................ $(1,383,641)
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 8,293
Allowance for doubtful accounts........................ 93,000
Noncash compensation expense related to sale of
founders shares....................................... 400,000
Noncash compensation expense related to sale of
Schuylkill Acquisition founders shares................ 999,600
Noncash compensation expense related to warrants....... 50,000
Noncash compensation relating to an advisory fee....... 15,000
Noncash compensation relating to loan origination
fee................................................... 37,000
Deferred tax asset, net of deferred tax liability...... (21,000)
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable.................................. (1,857,119)
Inventory (Note 6)................................... (872,333)
Cash paid in connection with purchase of DC-10 flight
simulator........................................... (134,421)
Prepaid expenses and other current assets............ (29,610)
Increase (decrease) in:
Accounts payable..................................... 977,706
Accrued expenses..................................... 144,541
Accured interest..................................... 19,611
Income tax payable................................... 37,200
-----------
Total adjustments................................. (132,532)
-----------
Net cash used for operating activities...................... (1,516,173)
-----------
Cash flows from investing activities:
Deposit--Boeing........................................... (25,000)
Purchase of property and equipment........................ (96,730)
-----------
Net cash used for investing activities............ (121,730)
-----------
Cash flows from financing activities:
Deferred offering costs................................... (22,750)
Proceeds from stockholder loans, subsequently converted to
common stock........................................... 1,195,000
Payments on stockholder loans............................. (125,000)
Proceeds from issuance of securities...................... 932,313
-----------
Net cash provided by financing activities......... 1,979,563
-----------
Cash, ending................................................ $ 341,660
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Interest paid............................................. $ 24,103
-----------
Income taxes paid......................................... $ --
===========
The accompanying notes are an integral part of these financial statements.
F-6
36
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Organization and History -- Schuylkill Acquisition Corp. ("the Company" or
"SAC") was incorporated in Florida on May 28, 1997, for the purpose of acquiring
by merger the business and operations of Jet Aviation Trading, Inc. ("Old Jet")
upon the completion of a stock offering by the Company. On July 28, 1997, the
Company acquired 100% of the outstanding common stock of Old Jet in exchange for
1,776,800 shares of common stock of the Company in a one for one stock exchange.
Old Jet was incorporated in the state of Florida on October 3, 1996 for the
purpose of buying, selling, leasing and exchanging spare parts for fixed-wing
commercial jet transport aircraft. Effective July 28, 1997, the Company's name
was changed from Schuylkill Acquisition Corp. to Jet Aviation Trading, Inc.
Merger and Recapitalization -- The merger was completed on July 28, 1997,
whereby SAC acquired 100% of the outstanding common stock of Old Jet in exchange
for 1,776,800 shares of common stock of SAC in a one for one stock exchange. The
merger has been accounted for as a purchase.
The effect of the transaction was a reverse merger, whereas SAC changed its
name to Jet Aviation Trading, Inc. and Old Jet became the acquiring entity and
accounting survivor. Accordingly, the historical financial statements presented
are those of the accounting survivor, Old Jet, and the stockholders' equity of
the merged Company was recapitalized to reflect the capital structure of the
surviving legal entity and the accumulated deficit of Old Jet at the time of
merger.
Nature of Business and Credit Policies -- The Company buys, sells, leases
and exchanges spare parts for fixed-wing commercial jet transport aircraft. The
Company's customers are primarily commercial passenger and cargo operators,
original equipment manufacturers and Federal Aviation Administration and Joint
Aviation Authority repair stations throughout the world. The Company performs
ongoing credit evaluations of its customers' financial condition and extends
credit to its customers based upon its evaluations. If creditworthiness is
questionable, parts are shipped COD. The allowance for doubtful accounts is
based upon the expected collection of accounts receivable.
Cash Equivalents -- The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents.
Revenue and Cost Recognition -- The Company recognizes revenue when parts
are shipped to the customer. Amounts paid in advance are recorded as deferred
income and recognized in the period in which the parts are shipped. The Company
recognizes revenue and the related cost of consigned inventory when the parts
are shipped to the customer.
Inventories -- Inventory is stated at the lower of cost or market. Cost of
aircraft parts is determined on a specific identification basis. When parts are
purchased in lots, the individual parts are expensed at a predetermined
percentage of the sales price until the cost of the lot is recovered. Costs to
repair, inspect and/or modify the parts are charged to the specific part when
incurred. Inventories held by the Company on consignment from others are not
included in the inventory in the accompanying financial statements.
Deferred Offering Costs -- Amounts paid or accrued for costs related to the
anticipated public offering will be recorded as a reduction of the proceeds when
the offering is completed. If the offering is not completed, the costs will be
expensed.
Income Taxes -- The Company accounts for income taxes on an asset and
liability approach for financial accounting. Deferred income tax assets and
liabilities are computed annually for temporary differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
F-7
37
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net Income Per Share -- Net income per common share is computed by dividing
net income by the weighted average number of shares outstanding during the
period. Warrants issued during the period are not considered dilutive, and
therefore, are not included in the computation of net income per share.
In February 1997, the Financial Accounting Standards Board issued SFAS 128,
"Earnings Per Share". The adoption of SFAS 128 did not have an effect on the
computation of earnings per share because the effective date is December 15,
1997, and earlier application is not permitted.
Recoverability of Long Lived Assets -- The Company has adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company is not aware of
any events or circumstances which indicate the existence of an impairment which
would be material to the Company's financial statements.
Financial Instruments -- The carrying amount of cash, accounts receivable,
accounts payable and accrued expenses approximates fair value as of August 31,
1997. The carrying value of the stockholder's note receivable at August 31,
1997, approximates fair value.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates based on
management's knowledge and experience. Accordingly, actual results could differ
from those estimates.
2. RELATED PARTY TRANSACTIONS
CONSIGNMENT AGREEMENT WITH RELATED PARTY
The Company entered into a Consignment Agreement (the "Agreement") with a
related party, Jet Avionics Systems, Inc. ("Avionics"), effective October 3,
1996, wherein the Company agreed to sell certain consignment inventory of
technical spare parts belonging to Avionics and pay Avionics 75% of the sales
price collected for the inventory sold. The sales price is the gross sales price
less any costs involved if any item of inventory is required to be overhauled,
certified or modified in order to be sold. Total consideration to be paid for
the inventory under the Agreement was $675,000. Pursuant to such Agreement, the
Company sold approximately $452,000 of parts during the year to third parties
and Avionics was due $339,000 of this amount. During the year, the Company paid
Avionics $36,000 of the amount due. On August 29, 1997, the Company and Avionics
entered into a Consignment Cancellation and Purchase Agreement whereby the
Company purchased the remaining inventory not sold with a value of approximately
$336,000 from Avionics and thereafter paid the balance of $639,000 in exchange
for 230,000 shares of the Company's common stock valued at $2.00 per share, the
cancellation of $175,000 of indebtedness of Avionics due the Company, and $4,000
in cash.
The president and sole stockholder of Avionics was employed by the Company
from October 3, 1996 through October 2, 1997. The president and sole stockholder
is the daughter of an employee of the Company who served in a non-executive
capacity as Vice President of Special Projects.
F-8
38
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OFFICE AND WAREHOUSE FACILITY
The Company leases its office and warehouse facility from a company
partially owned by a stockholder of the Company under a four year lease expiring
December 31, 2000 with two one year options to renew. The monthly rental is
$4,609 plus applicable sales tax and pass through of expenses. Rent expense was
$29,435 for the period ended August 31, 1997. At August 31, 1997, the Company
was obligated under this operating lease arrangement as follows:
YEARS ENDING AUGUST 31, AMOUNT
- ----------------------- --------
1998........................................................ $ 55,308
1999........................................................ 55,308
2000........................................................ 55,308
2001........................................................ 18,436
--------
$184,360
========
3. PURCHASE OF DC-10 FLIGHT SIMULATOR AND SUPPORT PACKAGE
On November 1, 1996, the Company entered into an agreement with a company
domiciled in the Netherlands (the "seller" or the "Netherlands Company") to
purchase one half (50%) ownership in a DC 10-30 six axis flight simulator and
all associated equipment required to operate the flight simulator. The agreement
calls for the seller and the Company to equally participate in all revenues
generated from the sale, lease or disassembly of the hardware of the flight
simulator. The Company paid the seller $125,000 in cash and issued 40,000 shares
of the Company's common stock valued at $2.50 per share for the flight simulator
The Company intends to sell the flight simulator as a complete package.
On March 28, 1997, the Company entered into a second agreement with the
seller to purchase one Novoview 2000 Visual System, one package of simulator
parts, one maintenance training/procedure manual and one data support package
used to support the DC 10-30 flight simulator. The price of the items purchased
was $500,000 and the Company paid for the items by issuing 200,000 shares of its
common stock at $2.50 per share. The Company will receive 100% of the revenues
generated from the sale of these items. The interest in the simulator, related
items and freight costs are reflected in the accompanying balance sheet as DC-10
flight simulator totaling $734,421.
This Netherlands Company is also a purchaser and supplier of spare parts
from and to the Company. During the year ended August 31, 1997, the Netherlands
Company purchased spare parts totaling $82,775 from the Company, and sold
$183,331 of spare parts to the Company in addition to the DC 10-30 flight
simulator. At August 31, 1997, the Company was owed $1,375 by the Netherlands
Company and the Company owed the Netherlands Company $47,750. Additionally, the
Netherlands Company held $22,400 of the Company's inventory in their warehouse
at August 31, 1997.
4. RISKS REGARDING THE COMPANY'S INVENTORY
The Company's inventory consists principally of new, overhauled,
serviceable and repairable aircraft parts that are purchased from many sources.
Before parts may be installed in an aircraft, they must meet certain standards
of condition established by the Federal Aviation Administration ("FAA") and/or
the equivalent regulatory agencies in other countries. Specific regulations vary
from country to country, although regulatory requirements in other countries
generally coincide with FAA requirements. Parts owned or acquired by the Company
may not meet applicable standards or standards may change in the future, causing
parts, which are already contained in the Company's inventory to be scrapped or
modified. Aircraft manufacturers may also develop new parts to be used in lieu
of parts already contained in the Company's inventory. In all such cases, to the
extent that the Company has such parts in its inventory, their value may be
reduced.
F-9
39
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. CONSIGNMENT INVENTORY
By consigning inventories to a redistributor such as the Company, customers
are able to distribute their aircraft spare parts to a large number of
prospective inventory buyers, allowing the customer to maximize the value of its
inventory. Consignment also enables the Company to offer for sale significant
parts inventory at minimal capital cost. The Company currently maintains or
manages or has consignment agreement in place and its revenues from consignment
arrangement have accounted for approximately 5% of net sales for the period
ended August 31, 1997.
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at August 31, 1997:
Furniture and fixtures...................................... $28,715
Computer equipment.......................................... 27,068
Leasehold improvements...................................... 30,443
Software.................................................... 10,504
-------
96,730
Less: Accumulated depreciation.............................. (8,293)
-------
$88,437
=======
Property and equipment is depreciated on a straight-line basis with useful
lives ranging from 5 to 7 years. Depreciation expense for the period was $8,293.
7. CAPITAL STOCK
PREFERRED STOCK
Within the limits and restrictions contained in the Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 3,000,000 shares of Preferred Stock, $.10
par value per share, in one or more series, and to fix, as to any such series,
the dividend rate, redemption prices, preferences on liquidation or dissolution,
sinking fund terms, if any, conversion rights, voting rights, and any other
preferences or special rights and qualifications.
COMMON STOCK
Founders' shares totaling 400,000 common shares were issued on May 28,
1997, to four entities for par value of $.001. Net proceeds from the issuance of
founders' shares was $400. Compensation expenses was charged for the difference
between the fair market value per share of $2.50 and $.001 per share paid or a
total charge of $999,600.
During 1997, the Company sold 47,200 shares of common stock for $2.50 per
share resulting in total proceeds of $118,000. Deferred offering costs of
$22,098 have been reflected as a reduction of the proceeds of the private
placement offering.
On July 17, 1997, the Company issued 1,776,800 shares of common stock to
acquire 100% of the outstanding common stock of Jet Aviation in a 1 for 1 stock
exchange.
WARRANTS
On June 1, 1997, 1,000,000 warrants were issued in connection with the
organization of Schuylkill Acquisition Corp. to related parties for an advisory
fee. The Company has reserved 1,000,000 shares of its common stock for exercise
of the warrants. Each warrant entitles the holder to purchase one share of
common
F-10
40
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
stock at an exercise price of $4.50 until June 30, 2002. The warrants are
redeemable by the Company at $.05 upon the occurrence of both of the following
events: (a) the listing of the Company's shares of common stock on a securities
exchange, and (b) the Company's common stock is trading in excess of $5.25 per
share for a ten day period.
The Company has adopted SFAS No. 123, Accounting for Stock-Based
Compensation, for non-employee stock compensation. Accordingly, the warrants
referred to above have been valued at $.05 per warrant and expensed.
CONVERSION OF DEBT
During October and November, 1996, an affiliate of a stockholder loaned the
Company $325,000. The loans were payable on demand and did not bear a stated
interest rate. During the year $125,000 was repaid. On August 29, 1997, the
Company converted $200,000 of the loan to 100,000 shares of common stock at
$2.00 per share.
On March 27 and May 12, 1997, the Company borrowed $370,000 from a
stockholder and entered into two short term notes payable, bearing interest at
6% per annum. One of the notes was extended on June 19, 1997, and interest was
increased to 10% per annum. On August 29, 1997, the Company and stockholder
converted the notes payable to 185,000 shares of common stock at $2.00 per share
and the Company paid the interest accrued on the short term notes payable
through that date.
On May 23, 1997, prior to the merger, Schuylkill Acquisition Corp. borrowed
$500,000 from a stockholder, evidence by a promissory note bearing interest at
12%. On August 29, 1997, the promissory note was converted to 250,000 shares of
common stock at $2.00 per share, and the Company paid the accrued interest
through that date.
COMMON STOCK TRANSACTIONS OF JET AVIATION TRADING, INC. (OLD JET) PRIOR TO
MERGER
On October 3, 1996, Old Jet sold 408,000 founders' shares of common stock
for total proceeds of $125,000. Effective October 1, 1996, Old Jet issued
600,000 shares of the Old Jet's common stock for a $175,000 note bearing
interest of 6% to Avionics. Further, effective November 1, 1996, Old Jet issued
192,000 shares of common stock to its President for a $80,000 note bearing
interest of 6%. See Note 2 and Note 8. Compensation expenses was charged for the
difference between the fair market value of $2.50 per share and $.417 per share
or a total charge of $400,000. See Note 2 and Note 8.
On October 22, 1996, Old Jet issued 10,000 shares valued at $2.50 per share
in partial payment of the purchase of equipment and aircraft parts totaling
$50,000.
On January 22, 1997, Old Jet issued 40,000 shares of Old Jet's common stock
in partial payment for the purchase of a DC-10 flight simulator. See Note 3.
Also, on January 22, 1997, and June 2, 1997, Old Jet issued 312,000 shares of
common stock in private placement transactions. Net proceeds from the private
placement totaled $746,309, after giving effect to $33,691 in offering costs.
On March 31, 1997, Old Jet issued 200,000 shares of common stock valued at
$2.50 per share in connection with the purchase of a DC-10 flight simulator
support package. See Note 3.
On April 4, 1997, and May 12, 1997, Old Jet issued a total of 14,800 shares
valued at $2.50 per share, for a total of $37,000, to a stockholder as
additional incentive for providing stockholder loans. The expense has been
recorded as debt issue costs.
F-11
41
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. STOCKHOLDERS' NOTES RECEIVABLE
Stockholders' notes receivable relate to the issuance of Old Jet's common
stock as follows:
- Effective October 1, 1996, Old Jet issued 600,000 shares of common stock
to Avionics for a $175,000 note bearing interest at 6%. The note was
canceled in partial payment of the amounts due under the Consignment
Cancellation and Purchase Agreement. See Note 2.
- On November 1, 1996, Old Jet issued 192,000 shares of common stock to its
president for an $80,000 note bearing interest at 6%. Should the
president earn bonuses per his employment contract, one half of the
bonuses in excess of $25,000 earned annually, may be applied to the
outstanding note balance. The note is due on demand and is unsecured.
9. INCOME TAXES
The income tax provision was comprised of the following at August 31, 1997:
Current:
Federal................................................... $ 30,500
State..................................................... 6,700
Deferred:
Federal................................................... (16,700)
State..................................................... (4,300)
--------
Income tax provision........................................ $ 16,200
========
A reconciliation between the statutory rate and the effective rate is as
follows for the year ended August 31, 1997:
Federal statutory tax rate.................................. 34.0%
State statutory rate, net of federal benefit................ 3.6
Permanent difference and other.............................. 12.8
----
Effective tax rate.......................................... 50.4%
====
Significant components of the Company's deferred tax assets and
liabilities, computed using currently enacted tax rates, are as follows at
August 31, 1997:
Current items:
Assets:
Allowances for doubtful accounts which are currently
nondeductible......................................... $23,000
-------
Net current deferred tax assets............................. $23,000
=======
Long-term items:
Property and equipment principally due to the use of
accelerated depreciation for tax purposes.............. $(2,000)
-------
Net long-term deferred tax liabilities...................... $(2,000)
=======
10. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENT
Effective November 1, 1996, Old Jet entered into an employment contract
with its president for a three year period and the agreement automatically
extends on a month to month basis thereafter. Base compensation
F-12
42
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
is $160,000 per year, plus 3% of the pretax net income of the Company. The
agreement also calls for one half of the bonus in excess of $25,000 earned
annually by the president to be applied to reduce the outstanding balance of the
president's obligation under his promissory note given to Old Jet for his stock.
See Note 6.
Effective October 3, 1996, Old Jet entered into an employment contract with
an individual who is an affiliate of Avionics as an employee for a three year
period. Base compensation is $120,000 per year, plus a bonus determined by the
Board of Directors. On October 2, 1997, the Company and the employee mutually
agreed to the termination of said employment agreement dated October 3, 1996.
The Company and individual have entered into a Consulting Agreement on October
3, 1997, for a twelve month period ending October 2, 1998. Base compensation is
$4,000 per month, plus a commission of 15% of the collected purchase price of
sales, and 15% of the purchase price of material for resale which the individual
introduces to the Company.
11. SALES TO MAJOR CUSTOMERS
The Company sells, leases and exchanges spare parts for fixed-wing
commercial jet transport aircraft to foreign and domestic customers.
The information with respect to revenue, by geographic area, is presented
in the table below for the period from October 3, 1997 (inception) through
August 31, 1997.
United States............................................... $3,559,585
Africa and Middle East...................................... 36,119
Europe...................................................... 938,896
Latin America............................................... 25,140
Asia........................................................ 1,655,813
----------
Total............................................. $6,215,553
==========
One Asian customer accounted for 20% of the Company's sales in fiscal 1997.
12. SUPPLEMENTAL NON-CASH FLOW INFORMATION
Effective October 3, 1996, Old Jet issued 192,000 shares of common stock to
its President for a $80,000 note bearing interest of 6%. Compensation expenses
was charged for the difference between the fair market value of $2.50 per share
and $.417 per share or a total charge of $400,000.
During the year the Company purchased equipment and aircraft parts with a
value of $50,000 by issuing 10,000 shares of common stock at $2.50 per share and
paying the remainder in cash.
As part of the purchase of the DC-10 flight simulator and support package
for $734,421, the Company issued 240,000 shares of common stock at $2.50 per
share and paid the remainder in cash.
As part of its cost of borrowing money during the year the Company issued
14,800 shares of common stock valued at $2.50 per share to a stockholder of the
Company.
On August 29, 1997, the Company issued 230,000 shares of common stock
valued at $2.00 per share, canceled a $175,000 note due to the Company by
Avionics and paid $4,000 in cash in satisfaction of a $303,000 debt due Avionics
and the purchase of the remaining consigned inventory valued at $336,000.
Schuylkill Acquisition Corp. (prior to merging with Old Jet) issued
founders' shares totaling 400,000 on May 28, 1997 to four entities for par value
of $.001. Net proceeds from the issuance of founders' shares was $400.
Compensation expenses was charged for the difference between the fair market
value of $2.50 per share and $.001 per share paid or a total charge of $999,600.
F-13
43
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On August 29, 1997, the Company converted four notes payable totaling
$1,070,000 by issuing 535,000 shares of common stock at a value of $2.00 per
share.
On August 29, 1997, the Company paid $15,000 as an advisory fee to a
related party by issuing 7,500 shares of common stock at a value of $2.00 per
share.
13. CONCENTRATION OF CREDIT RISK INVOLVING CASH
During the year, the Company maintained cash balances in excess of the
Federally insured limits. The Company maintained the balances in four banks, one
of which is a major money center bank. Three of the banks are Federally insured.
A fourth bank, Israel Discount Bank Limited is a major international bank and
operates in the United States under the Edge Act, but is not Federally insured.
At August 31, 1997, the Company had balances under $100,000 in the three
Federally insured banks, but maintained a balance of $264,550 in Israel Discount
Bank Limited. However, the Company does not believe a significant risk existed
in having the balance with Israel Discount Bank Limited.
14. SUBSEQUENT EVENTS
On October 29, 1997, the Board of Directors adopted a Stock Option Plan
(the "Plan") effective September 1, 1997. This Plan provides for the grant to
employees selected by the Board of Directors, or Compensation Committee, of
incentive stock options, non-qualified stock options and stock appreciation
rights in the aggregate not exceeding 750,000 shares. The Plan also sets forth
applicable rules and regulations for stock options granted to non-employee
directors. The Board of Directors authorized the issuance of 74,500 stock
options. The Plan is subject to stockholder approval and will be submitted to
the stockholders at the Company's annual meeting in 1998.
F-14
44
JET AVIATION TRADING, INC.
BALANCE SHEET
(UNAUDITED)
NOVEMBER 30, 1997
ASSETS
Current assets:
Cash...................................................... $ 498,572
Accounts receivable, less allowance for doubtful accounts
of $103,000............................................ 1,927,333
Inventory................................................. 1,546,380
DC-10 flight simulator held for resale.................... 734,421
Deferred tax asset........................................ 26,000
Prepaid expenses and other current assets................. 25,287
----------
Total current assets.............................. 4,757,993
----------
Property and equipment, less accumulated depreciation of
$8,293.................................................... 108,394
Deferred offering costs..................................... 50,372
Other assets................................................ 42,381
----------
$4,959,140
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $1,160,036
Accrued expenses.......................................... 165,151
Income taxes payable...................................... 123,200
----------
Total current liabilities......................... 1,448,387
----------
Deferred tax liability...................................... 2,000
----------
Stockholders' equity:
Preferred stock, par value $.10 per share, 3,000,000
shares authorized, and no shares issued and
outstanding............................................ --
Common stock, par value $.001 per share; 30,000,000 shares
authorized, and 2,996,500 shares issued and
outstanding............................................ 2,997
Additional paid-in capital................................ 4,840,917
Accumulated deficit....................................... (1,255,161)
----------
3,588,753
Less: Stockholder's notes receivable........................ (80,000)
----------
Total stockholders' equity........................ 3,508,753
----------
$4,959,140
==========
The accompanying notes are an integral part of these financial statements.
F-15
45
JET AVIATION TRADING, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30, 1997
AND OCTOBER 3, 1996 (DATE OF INCEPTION) TO NOVEMBER 30, 1996
1997 1996
---------- ----------
Sales, net of returns and allowances........................ $2,452,322 $ 467,882
Cost of sales............................................... 1,863,917 353,510
---------- ----------
Gross profit.............................................. 588,405 114,372
---------- ----------
Selling, general and administrative expenses................ 360,816 491,200
---------- ----------
Operating income (loss)..................................... 227,589 (376,828)
---------- ----------
Other income (expense):
Interest expense.......................................... (16,109) --
---------- ----------
Income (loss) before income taxes........................... 211,480 (376,828)
Income tax expense:
Income tax expense-current................................ 86,000 4,600
Income tax expense-deferred............................... (3,000) --
---------- ----------
83,000 4,600
---------- ----------
Net Income (loss)........................................... $ 128,480 $ (381,428)
========== ==========
Net Income (loss) per share................................. $ 0.04 $ (0.32)
========== ==========
Weighted average number of common shares outstanding........ 2,996,500 1,200,000
========== ==========
The accompanying notes are an integral part of these financial statements.
F-16
46
JET AVIATION TRADING, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30, 1997
AND OCTOBER 3, 1996 (DATE OF INCEPTION) TO NOVEMBER 30, 1996
1997 1996
--------- ---------
Cash flows from operating activities:
Net income (loss)......................................... $ 128,480 $(381,428)
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 3,757 8
Allowance for doubtful accounts........................ 10,000 1,000
Noncash compensation expenses related to sale of
founders shares....................................... 400,000
Deferred tax asset, net of deferred tax liability...... (3,000) --
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable.................................. (173,214) (447,094)
Inventory............................................ (14,047) (168,657)
Prepaid expenses and other current assets............ 4,323 (5,000)
Other assets......................................... (17,381) (25,000)
Increase (decrease) in:
Accounts payable..................................... 182,330 225,510
Accrued expenses..................................... 1,000 25,198
Income tax payable................................... 86,000 4,600
--------- ---------
Total adjustments........................................... 79,768 10,565
--------- ---------
Net cash (used) provided by operating activities............ 208,248 (370,863)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment........................ (23,714) (500)
--------- ---------
Net cash (used) for investing activities.......... (23,714) (500)
--------- ---------
Cash flows from financing activities:
Deferred offering costs................................... (27,622) (10,000)
Advances from related Company............................. 45,496
Shareholder loan payable.................................. 300,000
Proceeds from sale of securities.......................... 125,000
--------- ---------
Net cash (used) provided by financing
activities...................................... (27,622) 460,496
--------- ---------
Increase in cash............................................ 156,912 89,133
--------- ---------
Cash, beginning of period................................... 341,660 --
--------- ---------
Cash, ending................................................ $ 498,572 $ 89,133
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Interest paid.......................................... $ 24,103 $ --
========= =========
Income taxes paid...................................... $ -- $ --
========= =========
The accompanying notes are an integral part of these financial statements.
F-17
47
JET AVIATION TRADING, INC.
NOTE TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
statement of results for the interim period.
The results of operations for the three months ended November 30, 1997 are
not necessarily indicative of the results to be expected for the full year.
F-18
48
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.................... 3
The Company........................... 3
The Offering.......................... 3
Selected Financial Information........ 5
Risk Factors.......................... 6
Dilution.............................. 9
Use of Proceeds....................... 10
Market Price of the Common Stock...... 10
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 11
Business.............................. 14
Management............................ 20
Principal Stockholders................ 21
Certain Transactions.................. 22
Description of Securities............. 24
Selling Security Holders.............. 25
Plan of Distribution.................. 26
Legal Matters......................... 27
Experts............................... 27
Additional Information................ 27
Financial Statements.................. F-1
---------------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THE
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.
======================================================
======================================================
1,000,000 SHARES OF COMMON STOCK
OFFERED BY CERTAIN
SELLING SECURITY HOLDERS
UPON EXERCISE OF
OUTSTANDING WARRANTS
---------------------
1,969,000 SHARES OF COMMON STOCK
OFFERED BY CERTAIN
SELLING SECURITY HOLDERS
JET AVIATION
TRADING, INC.
-----------------
PROSPECTUS
-----------------
, 1998
======================================================
49
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Pursuant to Section 607.0850 of the Florida Business Corporation Act, the
Company has the power to indemnify directors, officers, employees or agents. The
Company's Articles of Incorporation [and Bylaws provide for indemnification of
directors and officers. In addition, the Company's executive officers and
directors have entered into agreements with the Company which also indemnifies
them for certain acts and omissions.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance of the securities
being registered are as follows:
SEC Registration Fee........................................ $ 4,049
Printing Expenses........................................... 20,000
Accounting Fees and Expenses................................ 15,000
Legal Fees and Expenses..................................... 30,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent and Registrar Fees and Expenses.............. 5,000
Miscellaneous............................................... 16,000
--------
Total............................................. $100,049
========
- ---------------
All amounts, except the SEC registration fee, are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth the Company's sales of unregistered
securities.
NUMBER OF SHARES OF
COMMON STOCK DATE SOLD PURCHASER CONSIDERATION
- ------------------- --------- --------- ------------------------
600,000 ............... 10/1/96 Jet Avionics Systems, Inc.(1) $175,000(note)
128,000 ............... 10/3/96 Clifton Capital Corp.(1) $ 39,216
80,000 ............... 10/3/96 IP Services, Inc.(1) $ 24,510
70,000 ............... 10/3/96 Discretionary Investment Trust(1) $ 21,446
70,000 ............... 10/3/96 K.A.B. Investments(1) $ 21,446
60,000 ............... 10/3/96 S.P.H. Equities(1) $ 18,382
192,000 ............... 11/1/96 Joseph Nelson(1) $ 80,000(note)
=====================================================================================================
10,000 ............... 12/31/96 Bill Seidel(2) inventory of spare parts
=====================================================================================================
20,000 ............... 1/22/97 Joseph J. Nelson(3) $ 50,000
20,000 ............... 2/7/97 Brian Due(3) $ 50,000
20,000 ............... 2/7/97 Amaury Borges(3) $ 50,000
80,000 ............... 2/7/97 Silvertown International Corp.(3) $200,000
20,000 ............... 2/7/97 Zvi Moshe(3) $ 50,000
20,000 ............... 2/7/97 Fersam International Ltd.(3) $ 50,000
20,000 ............... 2/7/97 Janet & Robert Weinstein(3) $ 50,000
12,000 ............... 3/6/97 Bella Shrem(3) $ 30,000
20,000 ............... 3/6/97 Joseph Shalhon(3) $ 50,000
20,000 ............... 2/27/97 Mustang Electronics, Inc. Affiliated
Defined Benefits Pension Plan(3) $ 50,000
=====================================================================================================
II-1
50
NUMBER OF SHARES OF
COMMON STOCK DATE SOLD PURCHASER CONSIDERATION
- ------------------- --------- --------- ------------------------
40,000 ............... 3/17/97 Yoram Moussaieff(3) $100,000
=====================================================================================================
40,000 ............... 3/14/97 Fersam International Ltd.(2) inventory consisting of
interest in DC-10-30
flight simulator
200,000 ............... 3/28/97 Fersam International Ltd.(2) inventory consisting of
computer software and
training manuals
=====================================================================================================
200,000 ............... 5/30/97 The D.A.R. Group, Inc.(1) $ 200
75,000 ............... 5/30/97 Dallas Investments, Ltd.(1) $ 75
100,000 ............... 5/30/97 Godwin Finance Ltd.(1) $ 100
25,000 ............... 5/30/97 Joseph Laura(1) $ 25
=====================================================================================================
20,000 ............... 6/2/97 Fersam International Ltd.(2) $ 50,000
14,800 ............... 6/2/97 Silvertown International Corp.(2) fee associated with loan
=====================================================================================================
400 ............... 6/26/97 Adler, Bruce/Dorothy(4) $ 1,000
400 ............... 6/28/97 Aiello, Alfonso(4) $ 1,000
400 ............... 7/2/97 Aldorasi, Michael/Tina(4) $ 1,000
400 ............... 6/28/97 Askin, Joseph(4) $ 1,000
200 ............... 7/1/97 Baerga, Carol(4) $ 500
400 ............... 7/2/97 Balletto, Robert(4) $ 1,000
400 ............... 6/28/97 Blumer, Jeffrey I.(4) $ 1,000
400 ............... 6/25/97 Brigante, Gennaro(4) $ 1,000
400 ............... 7/2/97 Burke, Michael B.(4) $ 1,000
500 ............... 6/26/97 Cappucci, Edward Vincent(4) $ 1,250
500 ............... 6/26/97 Cappucci, Marianne Joy(4) $ 1,250
400 ............... 7/1/97 Carlson, Robin(4) $ 1,000
400 ............... 6/28/97 Casazza, James T.(4) $ 1,000
500 ............... 7/1/97 Costa, Joanne(4) $ 1,250
400 ............... 7/1/97 Coyle, Tom(4) $ 1,000
400 ............... 7/1/97 Coyle, Robert(4) $ 1,000
1,000 ............... 6/25/97 Cucchiari-Palmieri, Annette(4) $ 2,500
400 ............... 7/2/97 Cuzzocrea, Joseph(4) $ 1,000
400 ............... 6/27/97 Daly, Bill(4) $ 1,000
400 ............... 6/26/97 Damiano, John A.(4) $ 1,000
400 ............... 7/2/97 D'Amica, Palmina(4) $ 1,000
400 ............... 6/28/97 Delicious Desserts, Inc.(4) $ 1,000
400 ............... 7/1/97 DeMartino, Jerome(4) $ 1,000
400 ............... 6/30/97 DeVito, Donato J.(4) $ 1,000
1,000 ............... 6/25/97 DiCarlo, Rosemary(4) $ 2,500
400 ............... 7/2/97 Dini, Constance(4) $ 1,000
400 ............... 7/1/97 Fallon, Robert & Ann(4) $ 1,000
II-2
51
NUMBER OF SHARES OF
COMMON STOCK DATE SOLD PURCHASER CONSIDERATION
- ------------------- --------- --------- ------------------------
100 ............... 7/1/97 Finn, Robert(4) $ 250
400 ............... 7/2/97 Fogliano, Christine(4) $ 1,000
400 ............... 6/27/97 Fogliano, Frank(4) $ 1,000
400 ............... 6/27/97 Fogliano, Daniel F.(4) $ 1,000
400 ............... 6/28/97 Fogliano, Jr., Nicholas(4) $ 1,000
400 ............... 6/28/97 Furci, Joseph N.(4) $ 1,000
400 ............... 6/28/97 Fusco, Joseph(4) $ 1,000
400 ............... 6/28/97 Fusco, Joseph & Rose(4) $ 1,000
400 ............... 6/28/97 Fusco, Rose A.(4) $ 1,000
400 ............... 6/28/97 Genovese, Carmine(4) $ 1,000
400 ............... 6/28/97 Genovese, Carmela(4) $ 1,000
400 ............... 6/27/97 Giammarino, Thomas & June(4) $ 1,000
400 ............... 6/28/97 I-Yell-O-Foods(4) $ 1,000
400 ............... 7/1/97 Gil, Michele R.(4) $ 1,000
800 ............... 6/25/97 Greco, Gary(4) $ 2,000
1,000 ............... 6/25/97 Gullery, Judith(4) $ 2,500
400 ............... 6/27/97 Hanlon, Theresa(4) $ 1,000
400 ............... 7/2/97 Hinz, Brian(4) $ 1,000
400 ............... 7/2/97 Honan, Brian(4) $ 1,000
400 ............... 7/2/97 Ianiello, Christopher(4) $ 1,000
400 ............... 7/2/97 Ianiello, Michael J.(4) $ 1,000
400 ............... 7/2/97 Johnsen, Bendik C.(4) $ 1,000
400 ............... 7/2/97 Johnsen, Joan(4) $ 1,000
400 ............... 7/2/97 Johnsen, Kelly(4) $ 1,000
400 ............... 7/2/97 Johnsen, Maureen(4) $ 1,000
400 ............... 7/2/97 Johnsen, Robert(4) $ 1,000
400 ............... 7/2/97 Johnsen, Robert & Joan(4) $ 1,000
400 ............... 7/2/97 Johnsen Jr., Robert E.(4) $ 1,000
400 ............... 7/1/97 Kilgannon, Thomas(4) $ 1,000
400 ............... 6/28/97 Marino, Paul(4) $ 1,000
400 ............... 7/1/97 Mayr, Laura(4) $ 1,000
400 ............... 7/1/97 McNee, Donald & Julie(4) $ 1,000
500 ............... 7/1/97 Millington, Cheryl A.(4) $ 1,250
400 ............... 7/2/97 Modafferi, James S.(4) $ 1,000
300 ............... 7/1/97 Montalto, Dorothy M.(4) $ 750
300 ............... 7/1/97 Morisano, Maria(4) $ 750
400 ............... 6/25/97 Paolino, Frank(4) $ 1,000
800 ............... 6/30/97 Paolino, Linda(4) $ 2,000
1,200 ............... 6/25/97 Paolini, Stephen A.(4) $ 3,000
300 ............... 7/1/97 Parisi, Dawn(4) $ 750
500 ............... 7/1/97 Parisi, Lucille(4) $ 1,250
300 ............... 7/1/97 Parisi, Neil(4) $ 750
200 ............... 7/1/97 Parisi, Vincent(4) $ 500
300 ............... 7/1/97 Parisi c/f, Vincent & Parisi,
Vincent Anthony(4) $ 750
500 ............... 7/1/97 Parisi, Vincent(4) $ 1,250
300 ............... 7/1/97 Parisi c/f, Dawn & Danielle(4) $ 750
200 ............... 7/1/97 Parisi c/f, Neil & Anniello(4) $ 500
300 ............... 7/1/97 Parisi c/f, Dawn & Parisi Jr.,
Vincent(4) $ 750
500 ............... 7/1/97 Petillo, Dolores(4) $ 1,250
II-3
52
NUMBER OF SHARES OF
COMMON STOCK DATE SOLD PURCHASER CONSIDERATION
- ------------------- --------- --------- ------------------------
500 ............... 7/1/97 Petillo c/f, Dolores & Costa, Joseph
A.(4) $ 1,250
400 ............... 7/2/97 Picciano, Georgene(4) $ 1,000
400 ............... 7/2/97 Puccio, Jr., David & Puccio,
Kathleen(4) $ 1,000
4,000 ............... 7/1/97 R.P. Capital Growth, L.P.(4) $ 10,000
400 ............... 7/2/97 Raffelo, Carrie(4) $ 1,000
400 ............... 7/1/97 Ramdharie, Tagewattie(4) $ 1,000
200 ............... 7/1/97 Ravanos, Lisbeth(4) $ 500
400 ............... 6/25/97 Ricciotti, James M.(4) $ 1,000
400 ............... 6/28/97 Santo, William R.(4) $ 1,000
400 ............... 6/26/97 Santo, Jr., Frank J.(4) $ 1,000
600 ............... 6/26/97 Santore, Gina M.(4) $ 1,500
400 ............... 6/28/97 Sblendorio, Dominick & Sblendorio,
Sarah(4) $ 1,000
400 ............... 6/28/97 Sblendorio, Dominick(4) $ 1,000
400 ............... 7/2/97 Sole, Linda(4) $ 1,000
400 ............... 7/2/97 Strommen, Cindy(4) $ 1,000
200 ............... 7/1/97 Tomasino c/f, Domineck & Tomasino,
Christie(4) $ 500
1,000 ............... 6/25/97 Vaccaro, Christopher(4) $ 2,500
1,000 ............... 6/25/97 Vaccaro, Catherine(4) $ 2,500
1,000 ............... 6/25/97 Vaccaro, Elicia(4) $ 2,500
1,000 ............... 6/25/97 Vaccaro, Thomas(4) $ 2,500
400 ............... 6/26/97 Winkler, John(4) $ 1,000
100,000 ............... 8/29/97 FAC Enterprises, Inc.(4) $200,000
7,500 ............... 8/29/97 FAC Enterprises, Inc.(4) fee associated with
financial advice
150,000 ............... 8/29/97 Jet Avionics Systems, Inc.(4) $300,000
=====================================================================================================
80,000 ............... 8/29/97 Jet Avionics Systems, Inc.(2) inventory consisting of
spare parts
250,000 ............... 8/29/97 Joseph Laura(2) $500,000
185,000 ............... 8/29/97 Silvertown International Corp.(2) $370,000
NUMBER OF WARRANTS
- -------------------------
950,000 ............... 6/1/97 The D.A.R. Group services
50,000 ............... 6/1/97 Dallas Investment Group services
The shares to be issued through exercise of the Warrants (1,000,000) will
be issued in reliance upon Section 4(2).
- ---------------
(1) Founder's shares
(2) Sold in reliance upon Section 4(2) of the Act
(3) Sold in reliance upon Rule 506/Regulation D and/or 4(2). All investors were
either "accredited" or sophisticated. The Company represents that all
investors had access to information about the Company.
(4) Sold in reliance upon Rule 504/Regulation D
No Commissions or other remuneration was paid in connection with the above
described sales of Common Stock.
II-4
53
ITEM 27. EXHIBITS.
2.1 -- Agreement and Plan of Reorganization dated July 15, 1997*
2.2 -- Articles of Merger*
3.1 -- Articles of Incorporation*
3.2 -- Amendment to Articles of Incorporation*
3.3 -- Amended -- By-Laws*
4.1 -- Form of Warrant*
5.1 -- Opinion of Shapo, Freedman & Bloom, P.A.**
10.1 -- Employment Agreement with Joseph J. Nelson*
10.2 -- Business Lease*
10.3 -- Consignment Agreement with Jet Avionics Systems, Inc.*
10.4 -- Consignment, Cancellation and Purchase Agreement with Jet
Avionics Systems, Inc.*
10.5 -- Stock Option Plan*
10.6 -- Form of Indemnity Agreement with directors and officers.*
10.7 -- Promissory Note dated March 27, 1997 for $120,000 payable to
Silvertown International Corp.**
10.8 -- Promissory Note dated May 12, 1997 for $250,000 payable to
Silvertown International Corp.**
10.9 -- Promissory Note dated May 23, 1997 for $500,000 payable to
Joseph Laura**
10.10 -- Agreement dated November 1, 1996 between Fersam
International Ltd. and the Company**
10.11 -- Agreement dated March 28, 1997 between Fersam International
Ltd. and the Company**
10.12 -- Employment Agreement dated as of October 3, 1996 with Allen
Beni**
10.13 -- Consulting Agreement dated October 3, 1997 with Allen Beni**
10.14 -- Form Lock Up Agreement**
23.1 -- Consent of Shapo, Freedman & Bloom, P.A. (included in
Exhibit 5.1)**
23.2 -- Consent of Sweeney, Gates & Co., independent certified
public accountants, contained in Part II of the registration
statement.**
- ---------------
* previously filed
** filed herewith
II-5
54
ITEM 28. UNDERTAKING.
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b), if, in the
aggregate, the changes in the volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
person of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the undersigned of expenses incurred or paid by a
director, officer or controlling persons of the undersigned in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
undersigned will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-6
55
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to Registration Statement on Form SB-2 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Miami, State of Florida, on the 13th day of March, 1998.
JET AVIATION TRADING, INC.
By: JOSEPH J. NELSON
------------------------------------
Joseph J. Nelson
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacity
and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
JOSEPH J. NELSON President and Chief Executive March 13, 1998
- ----------------------------------------------------- Officer, Director
Joseph J. Nelson
JOSEPH F. JANUSZ Vice President and Chief March 13, 1998
- ----------------------------------------------------- Financial Officer
Joseph F. Janusz
MICHAEL J. CIRILLO Director March 13, 1998
- -----------------------------------------------------
Michael J. Cirillo
THEODORE H. GREGOR Director March 13, 1998
- -----------------------------------------------------
Theodore H. Gregor
II-7