As filed with the Securities and Exchange Commission on July 1, 1994
Registration No. 33-81098
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PRE-EFFECTIVE AMENDMENT NO. 3
to
FORM SB-2
Registration Statement Under The Securities Act of 1933
EXPRESSAIR MESSENGER, INCORPORATED
(Name of small business issuer as specified in its charter)
California 7389-70 33-0606230
(State of Incorporation)(Primary Standard Industry (I.R.S. Employer
Classification Code Number) Identification No.)
4300 Campus Drive
Suite 210
Newport Beach, California 92660
(714) 756-1011
(Address and telephone number of principal executive offices)
Robert L. Shear, Esquire
2710 Alt. 19 North
Suite 406
Palm Harbor, Florida 34683
(813) 771-1084
(Name, address and telephone number of Agent for Service)
Approximate date of commencement of proposed distribution of the
securities to the public: As soon as practicable after the
effective date of this Registration Statement.
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 state 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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Page 1 of 159 Pages
Exhibit Index located on Page 50
EXPRESSAIR MESSENGER, INCORPORATED
Cross Reference Sheet for Registration Statement on Form SB-2
Form SB-2 Item Number and Headings Location
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Item 1 Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus....... Outside Front Cover Page
Item 2 Inside Front and Outside Back
Cover Pages of Prospectus...... Inside Front and Outside Back
Cover Pages
Item 3 Summary Information and
Risk Factors................... Prospectus Summary; Risk Factors
Item 4 Use of Proceeds................ Use of Proceeds
Item 5 Determination of
Offering Price................. Risk Factors; Description of
Securities
Item 6 Dilution....................... Dilution
Item 7 Selling Security Holders....... Not Applicable
Item 8 Plan of Distribution........... Description of Securities
Item 9 Legal Proceedings.............. Business
Item 10 Directors and Executive
Officers....................... Management
Item 11 Security Ownership of
Certain Beneficial
Owners and Management.......... Principal Shareholders; Certain
Transactions
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Item 12 Description of the Securities
to be Registered............... Outside Front Cover Page;
Description of Securities
Item 13 Interest of Named Experts
and Counsel.................... Not Applicable
Item 14 Statement as to
Indemnification................ Indemnification
Item 15 Organizations Within Five Years Business; Risk Factors
Item 16 Description of Business........ Business
Item 17 Management's Plan of Operation. Business
Item 18 Description of Property........ Business
Item 19 Certain Relationships and
Related Transactions........... Management; Certain Transactions
Item 20 Market for Common Equity
and Related Stockholder Matters Description of Securities;
Risk Factors
Item 21 Executive Compensation......... Management
Item 22 Financial Statements........... Financial Statements
Item 23 Changes in and Disagreements
With Accountants on
Accounting and Financial
Disclosure..................... Not Applicable
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PROSPECTUS
25,000 Shares Of Common Stock Minimum
EXPRESSAIR MESSENGER, INCORPORATED
ExpressAir Messenger, Incorporated (hereinafter also referred to as
"EMI " and the "Company") is offering 700,000 shares of its Common Stock subject
to 25,000 share minimum, with no par value, at $6.00 per share on a best efforts
basis. For a description of the rights and privileges of the Common Stock see
"Description of Securities". Prior to this Offering, there has been no public
market for the Common Stock of the Company, and there can be no assurance that
any such market will develop. The initial offering price of the Common Stock has
been arbitrarily determined by the Company and does not necessarily bear any
relationship to the Company's asset value, net worth, or other criteria of
established value.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY INVOLVE A VERY HIGH DEGREE OF RISK. THEY SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT (SEE
"RISK FACTORS" FOR SPECIAL RISKS CONCERNING THE COMPANY).
Price to the Public Commissions and Proceeds to
Expenses (1) Company(2)
Per Share ...... $ 6.00 $ 0.78 $ 5.22
Total Minimum(3) $ 150,000.00 $ 19,500.00 $ 99,350.00(3)
Total Maximum(3) $ 4,200,000.00 $ 546,000.00
(1) EMI hereby offers to sell up to 700,000 shares of its Common Stock at $6.00
per share (hereinafter also referred to as the "shares" or the "securities").
This Offering is made on a "25,000 share minimum" basis for a period of up to,
and not to exceed, one year from the date of this Prospectus. Pending the sale
of the minimum of 25,000 shares of Common Stock offered hereby, all proceeds
from this Offering will be deposited in an escrow account with National Bank of
Southern California in accordance with Rule 15c2-4 of the Exchange Act. If the
minimum number of shares are not sold by the completion of this Offering, the
purchase price will be promptly returned to investors without interest or
deduction. The proceeds table set forth on the front cover page and in the " Use
of Proceeds" section of this Prospectus allow for the payment of a sales
commission and non-accountable expense allowance on the full amount of this
Offering (see "Use of Proceeds").
(2) The minimum proceeds from the sale of each share will be $5.22. Under the
terms of this Offering, $150,000 worth of the shares (25,000 shares) must be
sold prior to EMI receiving or using any proceeds from this Offering. Should
only the minimum number of shares be sold, EMI will realize $130,500, less
expenses of issuance and distribution of $31,150 in proceeds based upon the
payment of a sales commission and non-accountable expense allowance to any
broker/dealer for selling the minimum number of shares offered hereby. Should
all of the shares offered hereby. Should all of the shares offered hereby, EMI
will realize at least,$3,654,000.00,less expenses of issuance and distribution
of 31,150.00, in proceeds from this Offering based upon the payment of a sales
commission and non-accountable expense allowances to any broker/dealer (see
"Plan of Distribution"). EMI, through its Officers and Directors, will act as
selling agent for this Offering, which is being made on a "self-underwritten
basis pursuant to, and in compliance with, Rule 3a-4-1 of the Securities
Exchange Act of 1934, as amended (hereinafter referred to as the ("Exchange
Act") (see "Description of Securities"). The shares offered hereby may also be
sold by selected broker/dealers. Should these shares be sold by a broker/dealer.
EMI will pay a sales commission of up to 10 percent, and an additional
non-accountable expense allowance equal to up to 3 percent of the gross proceeds
from the sales of shares. Commission and non-accountable expense shall be paid
only after the sale of the minimum number of shares offered hereby. In no event
will EMI pay a commission, sales fee, or expense to its Officers or directors
related to this Offering. Should EMI sell any of the shares itself, it will pay
no commission and non-accountable expense allowance on such sales, and the net
proceeds available to EMI will increase accordingly (see "Use of Proceeds").
(3) This amount of net proceeds includes the payment of other expenses of
issuance and distribution.
EXPRESSAIR MESSENGER, INCORPORATED IS NOT A REPORTING COMPANY UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
The date of this Prospectus is , 1996
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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) which appear
elsewhere in this Prospectus and in the Registration Statement.
The Company
ExpressAir Messenger, Incorporated (hereinafter also referred to as
"EMI " and the "Company") was founded in March of 1990 and was incorporated in
the State of California on December 7, 1993. EMI currently provides same- day
messenger service primarily throughout the Los Angeles, Riverside, San
Bernadino, San Diego and the Orange County areas. On special request, EMI will
also provide same-day delivery of documents and other materials between these
and other California regions such as San Francisco and Sacramento.
On October 26, 1995, the Company entered into an agreement with On
Target/Golden West Express to purchase its client base for twelve monthly
payments of $1,500 toward the total purchase price of $120,000. At the end of
the twelve month period, it is the intention of the Company to initiate its
option of converting the remaining balance owed to stock at the agreed upon
price of $6 per share. As part of their agreement, On Target/Golden West Express
allowed the Company to keep $10,000 of their account receivables to assist in
the transition. In the interim, it was discovered that a balance of $7,500 was
due on the truck the Company acquired in the purchase of On Target/Golden West
Express. The Company assumed the debt, leaving a balance of $2,500. It was the
decision of the Company to sell the truck, paying off the debt incurred. This
sale also gave the Company approximately $5,000 in working capital. The
acquisition of On Target/Golden West Express included the addition of six
drivers and a client base. The client base of On Target/Golden West Express
included manufacturers and medical suppliers, among others. Although the
acquisition of On Target/Golden West Express did not expand the geographic
service area of the Company, it did expand its client base as was noted in the
addition of clients in the industries of manufacturing and medical suppliers.
The acquisition immediately increased the daily number of deliveries and with
the minimal investment made in the acquisition, an increase in sales and
subsequently an increase in cash flow occurred.
The Company intends to further expand its operations by establishing
offices in Northern California, particularly the San Francisco Bay area and
Sacramento, and then intends to expand its offices to include selected
metropolitan regions of the southern United States.
Management believes one of the main attributes of EMI and its
differentiation from other messenger companies is that the Company is the only
FAA licensed messenger service in California that uses its own aircraft to
expeditiously complete the same-day delivery of time-sensitive material
throughout Southern California and to other parts of the state upon request. The
Company uses aircraft at different times for its deliveries predicated on
numerous factors. Situations in which the Company would use aircraft would be
for long distance deliveries such as between Los Angeles and San Francisco and
based on traffic congestion and time of day, the Company would even use aircraft
for deliveries such as from the LA area to San Diego several hours away, or even
perhaps, from West to East LA at a time when traffic congestion could make such
a trip by highway a 3 to 5 hour trip. Of course, in all short deliveries in the
range of an hour or less, ground transportation would primarily be used.
Depending on the location of the clients, traffic conditions and even weather
conditions, the amount of aircraft versus ground transportation can vary on a
day to day basis, and in the future, if the Company develops additional clients
in areas distant from their home base, a significantly higher use of aircraft
may occur.
The majority of EMI's current clients are law firms needing documents
delivered to state and local courthouses. The Company's remaining clients are
primarily a mixture of property management companies, architectural firms,
medical suppliers, travel agencies, advertising companies, and secretarial
dictation services. The Company believes that there are numerous other markets
that could greatly benefit from this type of delivery system and will seek to
enter additional markets as the Company's development and revenues permit such
expansion.
Management believes that using aircraft for same-day deliveries is a
new and innovative concept in the messenger industry, which EMI has proved to be
a successful and viable alternative to deliveries made solely using drivers who
must rely on congested freeways to transport shipments to their intended
destinations. This delivery system could not only increase delivery times around
metropolitan areas, but could allow a faster response time picking up the
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package or document. Experience has shown EMI's management that fast response
times at pick-up locations is a high priority to customers. Based on the
Company's knowledge of the industry, delays in picking up packages and documents
make customers nervous and create questions of reliability.
The Company's principal executive offices are located at 4300 Campus
Drive, Suite 210, Newport Beach, California and the telephone number is (714)
756-1011. The person to contact at ExpressAir Messenger pursuant to this
Offering is Bruce Ross (see "Business").
The Securities Offered
The Company is offering to sell 700,000 shares of Common Stock for
$6.00 per share (see "Description of Securities"). Pending the sale of the
minimum of 25,000 shares of Common Stock offered hereby, all proceeds from this
Offering will be deposited in an escrow account with National Bank of Southern
California, 4100 Newport Place, Suite 130, Newport Beach, California 92660, in
accordance with Rule 15c2-4 of the Exchange Act. If the minimum number of shares
are not sold by the completion of this Offering, the purchase price will be
returned promptly to investors without interest or deduction. Subject to the
sale of the minimum shares, EMI may use invested funds immediately. (see
"Description of Securities").
Use of Proceeds
EMI intends to use the net proceeds of this Offering for the
acquisition of additional aircraft, for the leasing of additional operating
facilities, for the further development and marketing of its messenger service,
and for operating costs (see "Use of Proceeds" and "Business").
RISK FACTORS
An investment in the securities offered hereby involves a high and
substantial degree of risk. Prior to making an investment decision, a
prospective investor should carefully consider the risk factors listed below,
together with the other factors and financial data included herein, in relation
to his or her financial circumstances and the possible loss of his or her entire
investment. Failure to raise the required capital pursuant to this Offering will
have a significant impact on the Company's proposed operations.
This section of this Prospectus addresses the risks factors which
management believes present the most substantial risk to investors in this
Offering, and which constitute the greatest threat that an investment in the
shares may be lost in whole or in part, or not provide an adequate return on
investment.
Risks Related to the Company
Limited Revenue From Current Operations
EMI is engaged in the full-service messenger business, and requires
the proceeds from this Offering in order to further develop and expand the
Company's intended operations. The Company will incur substantial expenses in
further developing and expanding the Company's operations. There is no assurance
that EMI will be able to further develop and expand its business on a continuous
and profitable basis. If EMI's plans prove unsuccessful, the shareholders could
lose all or a substantial part of their respective investments.
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The Company's development and expansion is dependent upon its ability
to successfully complete at least the minimum sale of shares offered hereby or
to obtain financing from other sources. The Company had received only limited
revenue from operations as of the date of this Prospectus. Should financing be
required from such other sources, there is no assurance that such financing will
be available to the Company (see "Business").
Absence of Past Profitable Operations To Date
Since the Company's inception as a Partnership in February 1990 and
additionally its continuing as a corporation, EMI has been operating in a
formative stage while it develops many of its business systems. During this
time, the Company has received very little outside capitalization and thus has
been required to survive primarily from its cash flow. In the most recent
quarter of its operations, the Company has become profitable, but there is no
assurance that it can continue its profitability in the future.
The Highly Leveraged Financial Condition of the Company
Due to EMI's absence of profitable operations and negative net cash
flow it had to incur substantial debt relative to the size of its revenue.
Additionally, any substantial financial losses or setbacks to the Company in its
present highly leveraged condition, without the receipt of outside funding,
could result in the Company being required to cease operations and terminate its
business.
Lack of Working Capital
Due to the Company's current operation, expenses, and leveraged
condition it has not had the opportunity to set aside any reserve of working
capital and has been operating with an accumulated deficit to date. The only way
in which the Company would be able to reverse its deficit position and set aside
the required amount of working capital to cover unforeseen expenses would be for
the Company to expand its operations to increase its cash flow for working
capital. To do this, the Company will need to obtain outside funding, through
this Offering, or by other means.
Minimum and Maximum Shares Offered Hereby
The Company needs at least the minimum proceeds from this Offering to
further develop and expand its operations. Should the Company not raise at least
the minimum proceeds, it could preclude it from acquiring additional aircraft or
ground vehicles, this reducing its size and range of operations. This could also
preclude the Company from hiring additional administrative and delivery
personnel or having sufficient marketing and operations capital to expand its
business. In this case, the Company's developments milestones could be severely
delayed, thus materially affecting the Company's entry into its target market,
competing with its competition and other growth activities. Failure to sell at
least the minimum number of shares offered hereby may result in the Company's
inability to further develop and expand planned operations. Should this be the
case, then the Company may not be able to maintain profitability or expand its
operations at all. (See "Use of Proceeds") Additionally, should it be the case
that only the minimum number of shares offered hereby be sold, the purchase
price for the shares will not be returned to investors even in the event that
the amount of proceeds proves insufficient to allow the Company to further
develop and expand its operations.
Interruption of Aircraft in Service
EMI is currently operating with only one aircraft but intends to
acquire one or more additional aircraft subsequent to receiving funds from this
Offering. However, there is a risk that any interruption of service resulting
from aircraft maintenance requirements or the repair of any of the Company's
aircraft could adversely affect EMI's messenger service and reputation (see
"Business").
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Uncertainty of Future Additional Aircraft
Management believes that EMI will be able to acquire additional
suitable aircraft for its messenger service at a reasonable cost to the Company.
However, EMI has no firm agreements for the acquisition of any aircraft. There
is no assurance regarding management's belief concerning the Company's ability
to acquire suitable aircraft under favorable terms and conditions (see
"Business").
Due to the fact that the Company's future expansion and profitability
is materially dependent upon the acquisition of additional aircraft and helipads
within their service area, the inability of the Company to acquire these may
limit its ability to produce any growth or profitability beyond its current
stage of operations.
Fuel
Fuel prices for the company's aircraft are subject to fluctuations,
there is no absolute assurance regarding the future availability and cost of
aircraft fuel. Increases in fuel prices and diminished availability could have a
materially adverse affect upon the Company's operations and operating results.
Limited Market for EMI's Messenger Service
ExpressAir Messenger intends to initially operate its messenger
business in and between Southern California and other urban areas of California
such as San Francisco and San Diego. Any condition which might limit the
Company's ability to use suitable airports pursuant to its operations, or which
lessens the need or ability of potential customers to use a messenger service
between these areas may have a materially adverse affect upon the Company's
business, results of operation and profitability (see "Business").
Uncertainty of Significant Assumptions
EMI's plans for financing and implementing its planned business
operations and the projection of the Company 's potential for profitability from
its intended operations are based solely on the experience, judgment and certain
assumptions of management, and upon certain available information concerning the
messenger industry and the Company's intended market. While management has based
these assumptions on EMI's experience and operations to date, no independent
market studies have been conducted concerning the extent to which customers
would use the Company's expanded messenger service, nor are any such studies
planned.
EMI's plans are also based on the assumption that existing levels of
shipments in the Company's intended market will continue, and that EMI will
succeed in using the net proceeds from this Offering and in overcoming the risks
described herein. There is no assurance that the Company's plans will
materialize or that any of the assumptions made will prove correct. Even if
these assumptions prove correct, there is no assurance that EMI will not
experience substantial operating losses in attaining its intended goals (see
"Business").
Competition of The Company's Business
The Company may experience inherent difficulties in further developing
and expanding its business. There are numerous firms which possess greater
resources including financial, management and marketing resources, which will
compete directly with EMI. There are currently numerous competitors operating in
the Company's initial target market. Several of these competitors are Pegasus,
Inc., U.S. Courier Corp., Able Courier, I.C.B.M., Now Courier, 4- Speed
Delivery, Orange Messenger, Executive Express, Marathon Courier, and Messenger
Express (see "Business" "Competition").
Although EMI intends to offer competitive rates for its messenger
service other messenger services could meet or undercut EMI's rates, thus
preventing the Company from attaining the market share necessary to achieve
profitable operation. There is a risk that competitors may undercut EMI 's rates
and increase their service in an effort to force EMI out of business. Should EMI
encounter intense competition in its business, there can be no assurance that
the Company will be able to compete effectively.
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Uncertainty of Adequacy of Future Financing
Although management believes that the net proceeds from the sale of at
least the minimum number of shares offered hereby will be sufficient to allow
EMI to further develop and expand its operations as more fully described in this
Prospectus, additional financing may be required to implement EMI's operating
plans should management's estimates prove incorrect.
There is no assurance that any additional financing will be available
to the Company if and when required, and that even if such financing is
available, it will not materially dilute the ownership of the then existing
shareholders, including investors in the shares offered hereby (see "Description
of Securities", "Dilution" and "Use of Proceeds").
Risk of Additional Competitors of the Company's Business
In addition to the competitors currently operating in EMI's current and
intended markets, additional companies may seek to commence messenger services
which could compete directly with the messenger services offered by the Company.
Should this be the case, there can be no assurance that the Company will be able
to compete effectively or profitably.
FAA Regulation of EMI's Business
The Federal Aviation Administration regulates the air messenger aspects
of EMI's business. In order to operate aircraft to carry packages in a
commercial capacity, a Part 135 Air Carrier Certificate is required. To the
Company's knowledge, ExpressAir Messenger is the only same-day service in the
State of California that currently holds such a certificate. The Company will be
required to maintain a current and effective Part 135 Air Carrier Certificate in
order to conduct its operations. However, there can be no absolute assurance of
the Company's ability to do so.
Dependence Upon Management - Reliance Upon the Efforts of a Few Individuals
The Company's success largely depends on obtaining the continued
services of its Officers and Directors, and upon the abilities of its Officers
and Directors to manage, develop and conduct EMI 's operations. The loss of
their services could adversely affect the Company's prospects for success (see
"Management" and "Business").
Inclement Weather and Mechanical Problems Affecting Service
Although it is management's intention to establish operation in
southern regions of the United States in order to take advantage of generally
good weather, there still will be times when flights may be restricted, delayed,
or canceled due to severe inclement weather or because of mechanical problems.
Lack of Outside Directors
Due to the limited size of the Company's operations, all of its
directors are also currently officers of the Company. Therefore, the Company
does not have the advantage of having a larger compliment of directors some of
which would be outside directors, that is, directors not involved as officers or
employees in the day-to-day operation of the business.
Risks Related to this Offering
Current Dilution and Possible Future Dilution
This Offering involves immediate substantial dilution from the public
Offering price. Subsequent to this Offering, the book value of the Company's
Common Stock offered hereby will be substantially less than the price at which
the Company is offering the shares to the public. If the maximum number of
shares offered hereby are sold the book value of EMI's shares will be $1.14. If
only the minimum number of shares offered hereby are sold the book value of the
Company's shares will be $0.09. Accordingly, investors will sustain an immediate
substantial dilution of their respective investments. In as much as EMI may
issue additional shares of capital stock in order to provide for the
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further capitalization of the Company or for other corporate purposes, there may
be further dilution of the shareholders' interests (see "Dilution").
Arbitrary Determination of the Offering Price
The Offering price per share of the shares offered hereby was
determined arbitrarily by "EMI" based upon management's estimate of the capital
required for the Company to further develop and expand its operations, and bears
no relationship to the asset or book value of the Company. The Offering price is
not based on net worth, earnings, or other established investment criteria of
value. Accordingly, there can be no assurance that the shares offered hereby can
be resold at the Offering price, if at all (see "Description of Securities").
No Public Market and Potential Illiquid Investment
Prior to this Offering, there has been no public market for the
Company's securities, and there is no assurance that a public market will
develop or be sustained (see "Description of Securities"). Investors in the
shares may not be able to liquidate their investments should they desire to do
so. It is unlikely that a lending institution would accept the shares as pledged
collateral for loans unless a regular trading market develops.
Adverse Share Price Restrictions
Due to the speculative nature of the Company, it is possible that the
trading price per share, after the completion of the Offering, may fall below
$5.00 per share. Should this be the case, restrictions resulting from rules
15g-1 through 15g-9 promulgated under The Securities Act of 1934, as amended,
may be imposed on the trading of a Company's stock as well as, additional
restrictions under securities regulations on the State level. These restrictions
could adversely effect the ability of broker/dealers to trade the Company's
securities as well as an investor's ability to sell their shares and may
therefore, adversely limit the liquidity of shareholders of the Company.
No Dividends and None Anticipated
EMI has not paid or declared any dividends, nor, by reason of its
present financial status and its contemplated financial requirements, does it
anticipate paying any dividends upon the shares offered hereby in the
foreseeable future.
The future payment of dividends by EMI on its Common Stock, if any,
rests within the sole discretion of EMI's Board of Directors and will depend,
among other things, upon EMI's earnings, its capital requirements and its
financial condition, as well as other relevant factors. While EMI may declare
dividends in the future, there is no assurance as to the timing of such
declaration of dividends, if any (see "Description of Securities" and "Dividend
Policy").
Percentage of Intangible Assets to Total Assets
A percentage of the Company's assets are intangible in nature and the
percentage of the intangible assets to the total assets of the Company is
$138,442 to $272,094 or intangible to total of 50.9%. Approximately $98,850 of
these intangible assets are goodwill and a covenant not to compete arising from
the acquisition of the assets of On Target/ Golden West effected on June 25,
1995. These assets are being amortized over 5 years. The balance, $39,600,
represents deferred offering costs related to this offering and will be charged
to capital upon the sucessful completion of this offering, or charged to
expenses if the offering is unsucessful.
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Need for Current Registration
The Company must have a current Registration Statement on file with the
Commission and with securities commissions in certain states in which investors
reside. Any material changes in EMI's business could cause EMI to file
post-effective amendments to its Registration Statement. There can be no
assurance that EMI will keep its Registration Statement current should it file
such post-effective amendments. In the event that EMI cannot keep its
Registration Statement current, EMI would be unable to deliver prospectuses to
potential investors or to continue this Offering.
Should this Offering be discontinued prior to the sale of the minimum
number of shares offered hereby, all invested funds will be returned to
investors. Should this Offering be terminated after the sale of the minimum
number of shares offered hereby, the purchase price for the shares will not be
returned to investors even in the event that the proceeds prove insufficient to
allow EMI to further develop and expand its operations.
No Underwriter
As this is a self-underwritten Offering made under the provisions of,
and in compliance with, Rule 3a-4-1 of the Securities Exchange Act of 1934,
there is no underwriter for the Offering. Therefore, offerees will not have the
benefit of an underwriter's due diligence efforts, which would typically include
the underwriter being involved in the preparation of disclosure and the pricing
of the shares offered hereby, among others. As EMI has never engaged in the
public sale of its shares, it has no experience in the underwriting of any such
offering. Accordingly, there is no prior experience from which investors may
judge EMI's ability to consummate this Offering.
Indemnification of Officers and Directors
The Company's Bylaws provide for the indemnification of Officers and
Directors relating to their activities on behalf of the Company to the fullest
extent permitted under the laws of the State of California. These provisions may
provide indemnity in connection with suits brought by shareholders against
Officers or Directors who have been negligent, if he or she acted in good faith
and presumed to do so in the Company's interest (see "Indemnification").
Control of the Company to Remain with Present Shareholders
Following the completion of this Offering, if the maximum number of
shares are sold, the present shareholders of the Company will own approximately
80.8% of the outstanding Common Stock of EMI . Should only the minimum number of
shares be sold, the present shareholders of ExpressAir will own approximately
97.7% of the outstanding Common Stock of EMI. Consequently, because of their
percentage of ownership, the existing shareholders will be able to control EMI's
Board of Directors for at least the foreseeable future.
Management's Control of the Use of Proceeds
The Company's management intends to use the net proceeds from this
Offering for the purposes discussed in the "Use of Proceeds" and "Business"
sections of this Prospectus. The actual use of net proceeds shall be determined
by management in accordance with the policies and decisions of the Board of
Directors.
Authorization of Preferred Stock
The Company's Articles of Incorporation and Bylaws authorize the
issuance of up to 1,000,000 shares of undesignated Preferred Stock with such
rights and preferences as may be set by the Board of Directors. Accordingly, EMI
may issue Preferred stock with dividend, liquidation, conversion, and voting or
other rights which could adversely affect the voting power, dividend and
liquidation preference, or other rights of the holders of EMI 's Common Stock,
without obtaining shareholder approval to the extent permissible under
California law. Although the Company does not currently intend to issue
Preferred Stock, there is no assurance that the Company will not do so in the
future.
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Restricted Securities - Shares Available for Resale
All of the currently outstanding shares of EMI's Common Stock are
"restricted securities." In the future these restricted securities may be sold
in compliance with Rule 144 adopted under the Securities Act of 1933, as
amended. Rule 144 provides, in essence, that a person holding "restricted
securities" for a period of two years may sell an amount equal to 1% of the
Company's outstanding shares every three months. Non-affiliates may sell shares
held for three years without limitation. Investors should be aware that future
sales under Rule 144 may, in the future, have a depressive effect on the price
of the Company's stock in any market which may develop.
THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK
- -12-
USE OF PROCEEDS
The net proceeds from this Offering will be at least $3,622,850 if all
of the shares are sold, or at least $99,350 if only the minimum number of shares
are sold, after deducting sales commissions and non-accountable expense
allowances payable to any selling broker-dealers, if any and other expenses of
issuance and distribution. Should EMI sell any of the shares offered hereby
itself, the net proceeds realized by the Company will be higher. Management
estimates that the Offering proceeds will be applied substantially as follows:
APPLICATION OF PROCEEDS IF MINIMUM IF MAXIMUM
IS SOLD IS SOLD
- ------------------------------ ---------- ----------
Helipad Research & Development $ 0 $ 858,000
Aircraft Lease/Purchase ...... 4,000 600,000
Driver Salaries .............. 26,000 610,000
Office Salaries .............. 25,350 450,850
Advertising .................. 3,000 200,000
Fuel/Maintenance ............. 12,000 200,000
Marketing .................... 2,000 120,000
Working Capital .............. 0 100,000
Vehicle Lease/Purchase ....... 0 75,000
Insurance .................... 2,000 75,000
Aircraft/Vehicle Painting .... 0 64,000
Radio Equipment .............. 2,000 38,000
Health Care/Benefits ......... 0 30,000
Office Lease ................. 5,000 28,000
Supplies ..................... 1,000 25,000
Office Furniture ............. 0 25,000
Interest Re-Purchase ......... 0 25,000
Travel & Entertainment ....... 0 17,500
Office Equipment ............. 0 15,000
Aircraft Tie Down/Helipad .... 0 15,000
Telephone .................... 0 15,000
Accounting ................... 9,000
Legal ........................ 10,000 10,000
Pilot Training ............... 0 10,000
Computer Lease ............... 0 10,000
Postage and Delivery ......... 0 6,500
---------- ----------
TOTAL ........................ $ 99,350 $3,622,850
---------- ==========
If an amount is sold between the minimum and maximum listed here, then
the expenditures by priority of purpose will be made on a proportionate amount
as near as possible for each application. The priority of each purpose in order
starts with the payment of driver's salaries, office salaries, aircraft,
fuel/maintenance, office lease, accounting and legal and is then followed by
helipad research & development, advertising, marketing, vehicle lease/ purchase,
insurance, travel and entertainment, telephone and aircraft tie down/helipad.
The remaining applications of proceeds follow those listed but in equal priority
of purpose.
As the Company is engaged in discussions for the acquisition of
additional suitable aircraft, facilities, and materials, the actual use of
proceeds cannot be precisely calculated. The foregoing represents EMI 's best
estimate of the allocation of net proceeds based upon current plans, and is
subject to reapportionment of the proceeds among the uses described above. The
Company believes that the net proceeds from the minimum sale of shares from this
Offering will be adequate to fund immediate plans, and does not anticipate
requiring additional financing so long as at least the minimum sale of shares is
achieved.
- -13-
No portion of the proceeds will be paid to Officers, Directors or their
affiliates for expenses of this Offering. After attaining the minimum sale of
shares, pending application of the net proceeds, the Company may invest in
interest-bearing securities such as U.S. government securities, money market
funds or other cash investments, certificates of deposit, savings deposits or
short-term obligations of the United States, or the proceeds may be left in
checking accounts bearing no interest. The Company does not intend to become an
investment company under the Investment Company Act of 1940 and, therefore, may
be limited in the temporary investments that it can make with the proceeds from
this Offering.
DILUTION
The price at which investors will purchase the shares of Common Stock
offered hereby is substantially higher than the price at which EMI's existing
shareholders acquired their shares. Prior to this Offering, the current
shareholders of the Company purchased 3,080,720 shares of Common Stock for
$224,599, or approximately $0.073 per share. Net tangible book value per share
is determined by dividing the tangible net worth of the Company (total assets
less total liabilities and intangible assets) by the number of outstanding
shares of Common Stock.
The following table sets forth the dilution which will be realized by
the investors in the shares offered hereby in the case that the sale of the
minimum number of shares offered hereby is attained, and in the case that the
sale of the maximum number of shares offered hereby is attained:
Minimum Maximum
------- -------
Offering Price Per Share ........................ $ 6.00 $ 6.00
Net Tangible Book Value Per Share Before Offering 0.02* 0.02*
Net Tangible Book Value Per Share After Offering 0.04* 1.11*
Increase Per Share Attributable to Investors .... 0.02* 1.09*
Per Share Decrease to Investors After Offering .. 5.96 4.89*
<FN>
(* rounded to the nearest cent)
</FN>
Dilution If All Shares Offered Hereby Are Sold
If all of the shares offered hereby are sold, EMI will have issued
3,780,720 shares of Common Stock. The total paid-in capital will be $4,353,859,
allowing for the payment of sales commissions and non-accountable expense
allowances for the sale of all of the shares. The net tangible book value per
share after the completion of this Offering will be approximately $1.11 per
share.
In this case, the current shareholders of EMI will own 3,080,720 shares
or approximately 81.5% of the Company and investors purchasing shares in this
Offering will own 700,000 shares or approximately 18.5% of the Company, for
which they will have paid $4,200,000 or $6.00 per share. The current
shareholders of EMI will hold stock with an approximate book value of $3,522,621
for an approximate increase of $3,328,852 in value, and the investors will hold
stock with an approximate value of $800,408 for an approximate decrease of
$3,399,592.
Dilution If Only The Minimum Shares Offered Hereby Is Sold
If only the minimum share offered hereby is sold, EMI will have issued
3,105,720 shares of Common Stock. The total paid-in capital will be $303,859,
allowing for the payment of sales commissions and non-accountable expense
allowances for the sale of all of the shares. The total net tangible book value
per share after the completion of this Offering will be approximately $0.04 per
share.
In this case, the current shareholders of EMI will own 3,080,720 shares
or approximately 99.2% of the Company and investors purchasing shares in this
Offering will own 25,000 shares or approximately 0.8% of the Company, for which
they will have paid $150,000 or $6.00 per share. The current shareholders of EMI
will hold stock with an approximate book value of $270,831 for an approximate
increase of $77,062 in value, and the investors will hold stock with an
approximate value of $2,198 for an approximate decrease of $147,802.
- -14-
CAPITALIZATION
The following table shows the capitalization of the Company as of March
31, 1996 and as adjusted to give effect to the receipt of the net proceeds of
the sale of the shares offered hereby:
Actual Minimum Maximum
Short-Term Debt .................................................... 20,000 20,000 20,000
Current Portion of Long-term Debt .................................. 18,976 18,976 18,976
Long-Term Debt (Less current portion) .............................. 20,120 20,120 20,120
Capital Stock
Common stock, no par value:
5,000,000 shares authorized, 3,080,720 shares
issued and outstanding (1) ....................................... 224,599 303,859 4,353,859
Preferred Stock, $0.01 par value;
1,000,000 shares authorized, none issued ......................... -0- -0- -0-
Accumulated Deficit .............................................. (30,830) (30,830) (30,830)
---------- ---------- ---------
Total Capitalization............................................... $ 252,865 332,125 4,382,125
========== ========== =========
<FN>
(1) 3,105,720 shares to be outstanding after the minimum of the Offering and 3,780,720
after the maximum.
</FN>
SELECTED FINANCIAL INFORMATION
The following is selected financial information of ExpressAir
Messenger, Inc. as of March 31, 1996. The audited financial statements as of
March 31, 1996, December 31, 1995 and 1994 and the report of the independent
Certified Public Accountant are included elsewhere in this Prospectus. This
information is qualified by, and should be read in conjunction with, the
financial statements and related notes thereto in their entirety. Historical
amounts for dividends per share have not been presented, as the Company has paid
no dividends.
ExpressAir Messenger, Incorporated
Summary Balance Sheet
March 31, 1996
ASSETS LIABILITIES AND NET WORTH
Current Assets $ 86,014 Current Liabilities $ 58,205
Fixed Assets 47,638 Long Term Liabilities 20,120
Other Assets 138,442
TOTAL ASSETS $272,094 TOTAL LIABILITIES 78,325
STOCKHOLDERS EQUITY 193,769
TOTAL LIABILITIES & EQUITY $272,094
- -15-
CERTAIN TRANSACTIONS
To organize EMI, Bruce Ross, the President, CEO and Chairman of the
Board of Directors of ExpressAir Messenger, Inc. converted his partnership
interest in the predecessor partnership at a total value of $2,550.00 to
purchase a total of 2,550,000 shares of Common Stock at $0.001 per share. Glen
Provost, Vice President, Manager of Sales & Marketing and Director of EMI
purchased 160,200 shares of Common Stock at $0.001 per share.
DIVIDEND POLICY
The Company has paid no dividends to shareholders to date and does not
anticipate paying dividends on the shares in the foreseeable future.
Shareholders are entitled to dividends which the Board of Directors may declare
from time to time out of funds legally available for that purpose, if any. Any
dividends shall be distributed on a pro-rata basis. The payment of dividends by
EMI, if any, will depend, among other things, upon the ExpressAir 's earnings,
capital requirements and financial condition, as well as other relevant factors.
Management intends to reinvest any earnings in the development and expansion of
EMI 's business.
INDEMNIFICATION
The Company's Bylaws provide for indemnification of any Officer,
Director, employee or other agent of EMI to the maximum extent permitted by
California law if he or she acted in good faith and in a manner believed to be
in EMI's interests or, as regards criminal proceedings, if he or she had no
reasonable cause to believe his or her conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to such Directors, Officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Commission such indemnification is contrary
to public policy as expressed in the Act and therefore is unenforceable.
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- -16-
PRINCIPAL SHAREHOLDERS
The following table sets forth the ownership of ExpressAir Messenger
Inc.'s Common Stock by the beneficial owners of more than 5% of the Common
Stock, and by the Officers and Directors of the Company. The following shares
have been transferred to the named individuals as of the date of this
Prospectus.
Name Shares Issued Percentage Owned Percentage Owned
prior to Offering prior to offering after Offering if
Minimum sold/Maximum sold
- -------------------------------------------------------------------------------------------------------------------
Bruce Ross 2,550,000 82.77% 82.11% 67.45%
4300 Campus Drive
Suite 210
Newport Beach, CA 92660
Glen S. Provost 160,200 5.20% 5.16% 4.24%
4300 Campus Drive
Suite 210
Newport Beach, CA 92660
All Officers and Directors 2,710,200 87.97% 87.26% 71.68%
All Shareholders of 5% or more 2,710,200 87.97% 87.26% 71.68%
- -------------------------------------------------------------------------------------------------------------------
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- -17-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
General
Although the Company is subject to certain government regulations, primarily
with regard to flight operations including flight paths and landing rights, the
Company does not currently foresee any adverse affect on the Company's business
in this regard.
The Company is obligated to pay one loan from an individual totalling $20,000,
the proceeds of which were used to pay off half the then outstanding old payroll
taxes.The Company is obligated to assume or pay off the $16,645 note payable
collateralized by the Company's airplane at the close of escrow.
Three months Ended March 31, 1995 Compared With Three Months Ended March 31,
1996
Revenues for the three months ended March 31, 1996 increased 58.7% over the same
1995 period. The increase partially resulted from the Company's asset
acquisition of the business of OnTarget/Golden West, which was effective July 1,
1995. Net income changed from net loss for the three months ended March 31,
1996, by approximately 262%, over the same 1995 period.
Operating expenses increased $10,137, (or 16%). This was principally due to an
increase in subcontracted services, ($17,291) and decreases in office supplies
($2,400 or 57.7%) and miscellaneous expense ($6,420).Expenses which are not
generally directly proportional to revenues did increase somewhat which reduced
the positive effects of the increase in direct expenses. Even though expenses
increased, the increase was at a lower rate of growth than revenues increased.
The Company recorded a profit for the three months ended March 31, 1996 in the
amount of $13,683 conpared to a loss of ($8,461) for the same period in 1995.
The Company believes this is due to a concerted effort on the part of the
Company to control and reduce expenses relative to revenues, along with the
growth in revenues.
On June 25, 1995 the Company acquired the assets of On Target/Golden West
Express Delivery, another Los Angeles based messenger service in exchange for a
promissory note. The Company immediately consolidated the office and dispatch
functions into its own, with the expectation that it can realize certain
economies of scale which will contribute to continued profitability. It is
however too early in the combined operations to determine the full effects of
this consolidation.
Year Ended December 31, 1994 Compared with Year Ended December 31, 1995
Revenues for the year ended December 31, 1995 increased $113,579 (or 53.9%) from
1994. This increase resulted partially from the On target/Golden west asset
acquisition, and partially on the Company continuing to recoup the customers it
lost in early 1994. Net income changed from net loss for the year ended December
31, 1995, by approximately 143%, over the same 1994 period.
Operating expenses increased $1,567 (or 0.5%) from 1994. The Company believes
this is due to a concerted effort on the part of the Company to control and
reduce expenses, which was begun in January 1995, relative to revenues, along
with the growth in revenues.
Liquidity and Capital Resources
Although management believes that the net proceeds from the sale of at least the
minimum number of shares offered in the Offering will be sufficient to allow for
the further development of its operations, additional financing may be required
to implement the operating plans should management's estimates prove incorrect.
There is no assurance that any additional financing will be available to the
Company if and when required, and that even if such financing is
- -18-
available, it will be on terms which are favorable or acceptable to the Company
and its stockholders. The Company currently has no commitments for capital
expenditures.
The Company has historically had a net positive cash flow from operating
activities, except for the year ended December 31, 1994. 1994 Cash flow from
operations was significantly negative, principally as a result of the loss of
revenue related to the January earthquake, which affected the Company for
approximately five months. The Company was unable to recover from those effects
throuout the year.
The Company believes it has turned this problem around. In the three months
ended March 31, 1996, the cash flow from operations was $27,559.
The increase in negative cash flows from investing activities for the year ended
December 31, 1994, resulted from the Company upgrading its computer hardware and
software to increase its efficiency in package delivery.
The Company has also historically survived on its cash flows from financing
activities, principally by increasing debt incurred. As this is typical for
young companies, it has not concerned management to a great extent. Cash flows
from financing activities increased dramatically in 1994, over prior periods,
and the Company began to substantially reduce its debt load in 1995, and has
increased this pace in 1996.
In December 1995, the Company converted the then outstanding note payable of
$115,500 into 17,000 shares of its common stock at $6 per share and a note
payable of $13,500, which at March 31, 1996 had a remaining balance of $9,000.
The terms of the new note are for the Company to repay it at the rate of $1,500
per month. The Company expects the note will be paid in full at the end of
September 1996. The $6,000 note payable to the third party business broker
relating to this transaction was also converted to 1,000 shares of the Company's
common stock at $6 per share in December 1995. The Company is no longer required
to repay any of its existing debt from the proceeds of this offering, freeing up
the funds raised hereunder to be applied to its expansion plans.
The Company believes that it can continue operations for the foreseeable future
without any additional funding, including the proceeds from the Offering. This
is based primarily upon management's projection of revenues which could be
achieved from current level of operations. The Company believes that it can
significantly increase revenue and remain profitable more quickly with the
additional capital sought in this Offering. The primary purpose of raising this
additional capital is to provide the funding necessary to increase market
penetration more quickly than is currently possible, as well as allow the
Company to purchase the first helicopter and begin those services on a regular
scheduled basis.
The Company believes that the acquisition of a helicopter and implementation of
its projected helicopter service will help to protect the Company from revenue
declines in the event of natural disasters similar to that which it experienced
in 1994. The Company actually believes that such occurances may even increase
its business as it may be the only messenger service which could efficiently
work around the traffic congestion created by such occurances.
- -19-
BUSINESS
Background
The President and C.E.O. of ExpressAir Messenger, Inc., Bruce Ross,
originally developed the concept for the business which has now become the
Company while serving in law enforcement. Mr. Ross was a police officer between
1973 and 1984 when he served with the City of Long Beach Police, the UC Irvine
Police Department and the Costa Mesa Police department. During the last few
years of his career in law enforcement, he frequently served in the Aero Bureau
as an observer in a police helicopter, coordinating ground units during police
activities.
Mr. Ross first founded a company by the name of AEROGRAMS, Inc. in
1984. Its original concept was to sub-contract deliveries from existing
messenger companies to fly their time-urgent packages around Southern
California. Having to work closely with existing messenger companies throughout
California gave AEROGRAMS a tremendous opportunity to observe and analyze the
methods of operation of the messenger industry, particularly the restrictive
time and logistics limitations when driving packages over longer distances.
In January of 1987, AEROGRAMS acquired B-Quick Messenger and further
test marketed the idea of using aircraft for time-urgent deliveries with their
own clientele instead of sub-contracting from messenger companies. There seemed
to be a very positive response to this concept with an approximate 54% increase
in business during the first six months of operations from existing clients
alone.
In 1989 B-Quick Messenger acquired half interest in a large Los Angeles
messenger company called American Flyer Messenger Service in order to expand and
grow its operations. The acquired company was handling up to two hundred
deliveries a day requiring the supervision and coordination of thirty or more
employees at any given time. One unfortunate barrier to the success of this
merger was that there were too many managers and, while the company did grow,
its projected possibilities were limited due to the decision-making process
often being paralyzed. Each of the five partners had different ideas on how to
manage and which direction to take the company. All parties made an amicable
agreement to return the merger to its previous state with American Flyer
retaining their original clients and B-Quick taking back their Orange County
clients.
ExpressAir Messenger was established as a partnership in March of 1990
and was Incorporated in the State of California on December 7, 1993. EMI
presently competes in the same-day messenger market primarily within the greater
Los Angeles, Riverside and Orange County areas with occasional delivery service
to other parts of the state such as San Francisco, San Diego and Sacramento.
EMI's main competitive advantage over other messenger services is its ability to
perform the delivery of time-sensitive and urgent packages out of the immediate
area faster and more reliability than its competitors through the use of
aircraft.
It is management's experience in its interaction with the messenger
industry that most messenger services are addressing this increasing traffic
congestion problem in the only way possible for a ground-based messenger
service. They must allow more time for the delivery and that requires them to
set earlier pick-up times for their clients. Additionally, some have even
restricted their delivery boundaries so that they will not tie up individual
drivers for an entire day delivering a long distance package. Unfortunately,
this response by messenger services has been at the expense and inconvenience of
the business community.
Management has found that through the use of its aircraft, crowded
freeways are completely bypassed when making deliveries between primary
metropolitan locales in Southern California. As an example of the time savings,
a delivery between Orange County and San Diego will take between ninety minutes
and over two hours, depending on traffic and time of day, while an aircraft can
cover the same distance in approximately forty minutes. Driving time between
Orange County and Santa Monica will take upwards of an hour or more, again
depending on traffic and time of day, while an aircraft will take approximately
twenty minutes flying.
- -20-
In its present operation, the majority of packages are delivered by
Company drivers and the aircraft is used to augment its service when time and
distance are primary considerations. EMI has found it useful and affordable to
have the aircraft fly a long distance package instead of tying up a driver on a
single delivery out of the area for the entire day. There are also many
situations that have occurred when the aircraft has been the only means
available to complete a delivery on time.
Upon the completion of this offering, management intends further
enhancing its exclusive type of delivery system by dividing Southern California
into sectors (downtown L.A., Orange County, Riverside, San Fernando Valley, San
Diego...etc) and assigning drivers to service those specific geographic areas.
The aircraft will be utilized to transfer parcels and documents between those
sectors on a regular schedule and then have the local assigned drivers complete
the deliveries. The drivers will also pick-up and hand-off deliveries going out
of their areas to the aircraft who will then drop those packages off at the
appropriate sector. Ideally, those drivers will never have to leave their local
sector and will spend a minimal time, if any, on freeways.
Based on the Company's experience in the greater Los Angeles area, a
major benefit achieved by assigning messengers to specific geographic sectors is
that the Company does not lose valuable time with drivers being delayed in
traffic as they would be if they were required to drive extended distances on
the congested freeways. Another positive benefit is that because of the
efficiency and time savings using aircraft, fewer driver employees are needed in
the field which will amount to lower payroll expenses. Management feels that
this is one of the main contributing factors to the cost effectiveness of using
aircraft in this industry. While the aircraft is bypassing congested freeways,
the drivers are busy delivering and picking up packages in their respective
areas and providing on-time service to local clients.
Experience has shown EMI's management that fast response times at
pick-up locations are a high priority to customers. In the interaction between
management and existing clients over the years, management has learned that
delays in picking up packages and documents can make customers nervous and can
create questions of reliability. Management believes that EMI has several
competitive advantages over its competition.
Another conspicuous inadequacy in the messenger industry is the lack of
a standardized, professional image and set of operating rules. This is due to
the fact that many messengers are employed as independent contractors who work
on a bit-and-piece schedule and show up in virtually any condition or appearance
so long as they can make a delivery. This saves the messenger companies payroll
expense, because many messenger companies have very liberal appearance and
clothing standards, if any at all. While a number of messengers may wear a shirt
with a company name or logo on it, they are otherwise free to wear dirty jeans,
surfer shorts, baseball caps, and torn tennis shoes or sandals.
Management believes that one of the most important attributes which has
contributed to EMI's reputation is its employees. The Company's drivers are
required to adhere to strict appearance and grooming standards set by management
which include full uniforms, groomed hair not extending over the collar of the
shirt and being clean shaven, and always maintaining good personal hygiene
habits. This then is able to give the Company's messengers a professionally
standardized appearance much like delivery employees of Federal Express, UPS and
other next day express services that also require and maintain a standardized
appearance and grooming code.
Management is very selective during its hiring process. Applicants are
interviewed, tested, and only about one out of ten applicants are offered a
position with EMI. The Company also provides the drivers with training manuals
that advises them of almost every operating procedure as well as how to deal
with potential problems. The "team concept" is inspired and encouraged
throughout the Company and monthly driver meetings not only provide the
employees with updated information, but gives them the opportunity to
participate and suggest ideas that will increase customer service and
reliability. Furthermore, the Company continually recognizes "outstanding
performers" on an ongoing basis with awards and letters of appreciation.
Presently the Company is operating with approximately ten full-time
drivers and four full-time office employees including a dispatcher, two order
takers, and a sales representative. EMI mainly conducts its ongoing marketing
through a direct mail program targeting particular markets that utilized the
services of messengers. The majority of clients of EMI are in the legal field,
but the other markets EMI services and advertises to are architectural firms,
accounting firms, secretarial dictating services, freight forwarders, civil
engineers, property management, A.O.G.
- -21-
(Aircraft On Ground) repair facilities, and medical suppliers. When EMI targets
a market, it calls firms in that market and inquires as to the name of the
person who makes decisions concerning messenger services. The Company then
direct their mailer to that individual personally and, within a week, conducts a
follow up call over the phone to the particular individual.
Based on population and business concentration being similar in size to
the Company's current area of operation, management has concluded that the next
logical region would be that of the San Francisco Bay area. The region is
comprised of major cities separated by a large body of water and basically
connected with one main freeway system which circles the Bay. There is only one
bridge between San Francisco and Oakland which is also used to travel between
many of the east and west Bay cities. When traffic congestion occurs, especially
if there is an accident, this single route will experience long travel delays.
This traffic congestion problem is prominent throughout the entire area
and comparable to that of the poor traffic conditions in the Los Angeles Basin
and, in many ways, even worse. In the Los Angeles area there are more options
available for alternate routes of travel when an accident or severe congestion
occurs. In the San Francisco Bay area there are only two bridges, the Oakland
Bay Bridge and the San Mateo Bridge, that allow direct access between east and
west cities on either side of the Bay. The only other available option is to
drive around the southerly portion of the Bay which can take hours. The traffic
problems in this region are very favorable to the type of service which EMI will
be marketing and would be the next logical expansion area for the Company .
The Company currently owns no real property, but leases an approximate
eleven-hundred square foot office in Newport Beach on a year-to-year lease,
which expires in August of 1995. This office space is directly across from, and
within one block of the John Wayne Airport which is also where the Company
currently parks its aircraft and from which it runs its flight base of
operations. When the Company expands its operations in the San Francisco Bay
area, suitable office facilities will be leased or purchased to meet its needs
in that region.
Plan of Operation
Management intends to use two types of aircraft in EMI's operation:
fixed wing and rotary wing aircraft (helicopter). The fixed wing will be used
mainly for out of the area deliveries due to its efficiency and speed. The
Company intends to use helicopters to deliver parcels around the Los
Angeles/Orange County Basin with an emphasis on the downtown Los Angeles area.
Due to the heavy concentration of business in this area, this location has the
highest concentration of potential customers, as well as the greatest need for
this type of service because of the high concentration of traffic and associated
problems.
The present fixed wing aircraft used by the Company is a Cessna 172.
Management believes this type of aircraft is one of the most cost efficient
airplanes available, with a direct operating cost of approximately $22.00 per
hour based on the Company's experience with this type of aircraft. This four
place aircraft is ideal for this operation because of its size and speed.
The majority of deliveries currently made by the Company involve
documents, so weight and volume are not factors. For larger loads, there is
adequate space to accommodate bulky items. The Cessna 172 has a cruise speed of
approximately 130 miles per hour, therefore, most of Southern California, from
Santa Barbara to San Diego, is reachable within approximately one hour, which is
a delivery time unattainable by present ground based messenger services.
The Company uses aircraft at different times for its deliveries
predicated on numerous factors. Situations in which the Company would use
aircraft would be for long distance deliveries such as between Los Angeles and
San Francisco and based on traffic congestion and time of day, the Company would
even use aircraft for deliveries such as from the LA area to San Diego several
hours away, or even perhaps, from West to East LA at a time when traffic
congestion could make such a trip by highway a 3 to 5 hour trip. Of course, in
all short deliveries in the range of an hour or less, ground transportation
would primarily be used. Depending on the location of the clients, traffic
conditions and
- -22-
even weather conditions, the amount of aircraft versus ground transportation can
vary on a day to day basis, and in the future, if the Company develops
additional clients in areas distant from their home base, a significantly higher
use of aircraft may occur.
Management currently intends to hire pilots based on them meeting the
requirements established by the Federal Aviation Administration. Although it is
anticipated that the Company's pilots will not typically have direct contact
with EMI's clients, the same standards of professionalism and appearance
required of the Company's driving messengers will be required of the Company's
pilots.
Pilots will be paid using an hourly scale and management will keep
these pilots primarily on a standby basis, so that they will be available as
they are needed to make deliveries. A recent informal survey of pilot
availability for the type of pilots which the Company anticipates hiring
indicated that there are a relatively large number of such pilots currently
available to the Company at the intended compensation rates.
Management currently intends to use a fixed wing aircraft to deliver
packages between the state capital, Sacramento, and the San Francisco Bay Area.
This flight, based on distance, takes about forty-five minutes in an airplane,
while ground transportation based messengers would require at least two hours to
complete this trip. The Company also intends to use a fixed wing aircraft when
servicing other intended urban areas in northern California.
In addition to fixed wing aircraft, management currently intends to
acquire at least one helicopter for EMI's fleet shortly after the receipt of
proceeds from this Offering. Management initially plans to use an Enstrom
helicopter which, according to the Enstrom manufacturer, costs approximately
$73.00 per hour to operate. This is a three-place, piston-powered aircraft which
also has a small baggage compartment.
Although there are numerous helipads in the downtown Los Angeles area,
the majority of them are not accessible to the public. These helipads often
exist for emergency use only as required by insurance or fire/safety
regulations. Management believes that it is important for the Company to acquire
their own helipad in the future which would also allow twenty-four hour
unrestricted access. It is management's intention to further research and
develop this project and locate a suitable site and facility to fulfill this
phase of the Company's development. Management is presently discussing options
with Lee Ambers of Vertical Aeronautics, Inc., consultants specializing in these
types of projects.
The operating system which has already been developed by EMI's
management calls for the Company's messengers to generally remain in their
respective assigned sectors and to deliver local parcels within those sectors.
This system is designed so that when clients call in deliveries, a local driver
will be assigned to pick-up their parcels or documents. This system provides for
packages going out of a given messenger's area to be assigned to one of the
Company's aircraft depending on the package's final destination.
Using this system, a messenger would meet a Company operated aircraft
or helicopter at a designated local airport and the items to be shipped would
then be placed on board the aircraft and then flown to the general vicinity of
their final destination. At that location, other messengers would meet the
aircraft and complete the delivery using ground transportation.
The ideal situation resulting from this system would mean that very few
of the Company's driving messengers would have to leave their respective sectors
or drive extensively on congested freeways to make deliveries, as the Company's
aircraft can be used to pick-up and deliver packages between sectors which are
suitably distant from each other. This could permit the Company to achieve a
significantly better response time with fewer field personnel than could be
achieved by using only ground transportation in making such deliveries.
Management believes that this type of delivery system with aircraft is very cost
effective primarily due to the increased efficiency.
The most obvious advantage of this system will be the time saving
factors involved. For example, based on current Company operations and test
flights using helicopters, driving from downtown Los Angeles to Orange County in
the middle of the afternoon can take over an hour and a half, or even longer
near to the end of the day when rush hour starts, while a helicopter can cover
this distance in approximately seventeen minutes at any time of the day.
Therefore, based on the time involved, other Los Angeles based messenger
companies would have to deny a client's request for an Orange County delivery by
5:00 p.m., or at the least not be able to guarantee same day delivery, if that
client calls
- -23-
for service by mid-afternoon. However, management anticipates that once the
Company's intended helicopter service is available, the Company could attain a
5:00 p.m. delivery such as the example offered above even if a client isn't
ready for a messenger to pick-up a package until 4:00 p.m.
The Company's current plan of operation calls for EMI to commence
increased service into the San Francisco Bay Area and Sacramento during the
Company's first year of expanded operations and management currently intends to
implement an identical operating system in those areas. This should, like the
greater Los Angeles area, be a good market for the Company because while it can
take several hours for a typical ground transportation based messenger service
to traverse the entire San Francisco Bay Area. Based on distance and speed, an
EMI helicopter could circle the complete region in about thirty-four minutes.
The Company's operating system calls for the Company's sales
representatives to be assigned specific regions for which they will be
responsible for attaining new clients and for servicing the incoming calls of
present clients. These sales representatives will be required to personally
contact each client every two weeks at a minimum, and submit a report to the
President of ExpressAir Messenger regarding the status of clients' accounts,
including complaints, suggestions, and specific requirements and requests made
by those clients. As the Company expands, these reports will be sent to a
special quality control department.
Customer service representatives will be responsible for obtaining
delivery and pick-up information from the clients. These representatives
currently undergo extensive training so that they fully understand the delivery
process and the needs of the Company's clients.
ExpressAir Messenger intends to add clerical personnel to the Company's
payroll to augment the administrative functions of the Company. Clerical
personnel will receive an hourly salary comparable to that of an order taker. As
the Company grows and the principals need to delegate more responsibilities and
duties to clerical personnel, selected clerks will be promoted to manage areas
of more administrative requirements and will be compensated accordingly.
EMI's Target Market for Initial Expansion Activities
Management, based on its development to date, now intends to expand
into additional targeted markets. Based on the Company's experience, management
believes that regardless of the economic factors which affect a targeted or
existing market of the Company's, the efficient use of time will remain one of
the most essential elements in competitive business practice.
Management believes that with the establishment of the San Francisco
Bay area operations, the next logical growth step for the Company will be
connecting same-day service between the Bay area and Southern California.
Currently, this is a market which the major commercial airlines have been
operating in by offering "counter-to-counter" and a few offering "desk-to-desk"
service. The difference being is that counter-to-counter requires the client to
drop off the package at the airline terminal and arrange to have it picked up at
the terminal at the other end. In desk-to-desk service, the airline
representative will arrange to have the package picked up at the clients office,
taken to the flight, flown to the location, and then arrange to have it
delivered to the recipient's office or location.
However, these airlines are not in the messenger business and so they
do not provide ground transportation either at the pick-up or delivery points.
Therefore, those few airlines that do provide desk-to-desk service do not use
their own airline personnel, but sub-contract the pick-up and deliveries at each
location to local messenger services and, therefore, are dependent upon the
reliability and efficiency of those messengers.
Additionally, the carriage of passengers and their luggage is the
airline's prime function. Therefore, these airlines would be required to bump or
delay cargo and packages off of a flight in preference to a full load of
passengers. For these reasons, management intends to pursue these airline's
desk-to-desk delivery shipments by offering timely, affordable and reliable
service.
An additional target market which ExpressAir Messenger intends to
expand is designated as Aircraft on Ground ("AOG"). AOG mainly consists of
aircraft part distributors and suppliers who provide needed parts for repair
facilities to service commercial and private aircraft. These repair facilities
are mainly located at the airports which is ideal for
- -24-
the air delivery system being employed by the Company. Several of these AOG
companies presently use EMI to pick-up and deliver aircraft parts and supplies
between repair facilities primarily located at airports throughout Southern
California.
Since most of the AOG market is located at airports, the need of ground
delivery vehicles would be minimal. The pilot could taxi up to the parts
facility, pick-up the part and then fly back to the repair station in a timely
manner. In fact, in many cases, these deliveries could be incorporated with the
routes the aircraft will be making daily to deliver packages between urban
regions.
On the basis of the Company's operating experience and existing clients
in some of these potential markets currently using their services, management
believes that there are numerous other markets that the company intends to
target for expansion through marketing and advertising. These include
architectural firms, banks, accounting firms, secretarial dictating services,
freight forwarders, civil engineers, property management, and medical suppliers
since every one of these markets can involve urgent, time-sensitive deliveries.
Although presently only a smaller percentage of the Company's existing
clientele, management feels that the Company can obtain a larger share of these
markets through an extensive advertising and marketing program emphasizing the
uniqueness of the Company's exclusive air messenger service.
On October 26, 1995, the Company entered into an agreement with On
Target/Golden West Express to purchase its client base for twelve monthly
payments of $1,500 toward the total purchase price of $120,000. At the end of
the twelve month period, it is the intention of the Company to initiate its
option of converting the remaining balance owed to stock at the agreed upon
price of $6 per share. As part of their agreement, On Target/Golden West Express
allowed the Company to keep $10,000 of their account receivables to assist in
the transition. In the interim, it was discovered that a balance of $7,500 was
due on the truck the Company acquired in the purchase of On Target/Golden West
Express. The Company assumed the debt, leaving a balance of $2,500. It was the
decision of the Company to sell the truck, paying off the debt incurred. This
sale also gave the Company approximately $5,000 in working capital. The
acquisition of On Target/Golden West Express included the addition of six
drivers and a client base. The client base of On Target/Golden West Express
included manufacturers and medical suppliers, among others. Although the
acquisition of On Target did not expand the geographic service area of the
Company, it did expand its client base as was noted in the addition of clients
in the industries of manufacturing and medical suppliers. The acquisition
immediately increased the daily number of deliveries and with the minimal
investment made in the acquisition, an increase in sales and subsequently an
increase in cash flow occurred.
Once the California market has been further developed, management
anticipates that EMI 's business could be further established and developed
throughout selected additional regions of the United States. The Company has
tentatively targeted Houston, Dallas, Miami, Tampa, Phoenix and New Orleans,
among other locations, as areas which warrant further study with respect to the
potential for future expansion of the Company's business and operations.
Competition
The Company competes in the messenger/courier services market. Although
there is no single messenger service in today's industry that could be
considered an "industry leader," that the Company is aware of, the size of these
companies dramatically vary, from two to over a hundred drivers. According to
the Orange County Business Journal, the top ten same-day messenger services in
Orange County are Able Courier (120 drivers) , ICBM (120 drivers), Pegasus (120
drivers), U.S. Courier (105 drivers), 4-Speed Delivery (80 drivers), Air &
Surface Couriers (75 drivers), Norco Delivery (75 drivers), Orange Courier
Messenger (75 drivers), Executive Express (65 drivers), and Marathon Courier (30
drivers).
None of the above listed top ten messenger companies or any of the
other messenger services which operate in the Company's area that the Company is
aware, offer the type of air delivery service that is exclusive to ExpressAir
- -25-
Messenger.
Management prices its services competitively in the industry and the
Company plans on pricing deliveries between locations within the same price
range as a ground-based courier would charge. Through management's experience,
charging higher for its specialized air service could result in clients only
using ExpressAir Messenger for emergencies and the Company desires to be a
full-service messenger, not a stand-by service. This delivery system is not only
an affordable mode of transporting packages, but can also be less expensive than
driving due to the fact that fewer field personnel are needed to complete daily
deliveries which dramatically reduces payroll and other related expenses.
Therefore to summarize, the Company's primary methods of competition
with its competitors in the messenger industry are by the utilization of its
experience in the messenger, as well as the Air Courier industry, the
professionally regulated and standardized guidelines which must be followed by
all EMI's personnel and the Company's competitive rates while having the added
capability of delivering time-sensitive documents and packages by air.
FAA Part 135 Air Carrier Certificate
Many of the competitors of EMI use the name "air courier" in their
literature and even in the title of the messenger service itself. However, this
title only means that the messenger can take a package to an airline and pay to
have it flown to another location. They do not maintain or have immediate access
to their own aircraft and are subject strictly to the schedules, regulations and
policies of the airline industry. This is evidenced by the fact that the Company
is the only messenger in its area with a Part 135 Air Carrier Certificate from
the FAA.
If a competitor decided to start an operation similar to EMI's service
using aircraft, they must comply with Federal Aviation Administration
regulations and obtain a Part 135 Air Carrier Certificate. According to the
local F.A.A. office in Los Angeles, approval for such a certificate is generally
taking six months to a year giving EMI not only a distinct competitive advantage
over its present service, but a generous lead time to market its service to the
business community. This also does not take into consideration the years of time
spent by the Company learning how to operate as a real air carrier after it
received its FAA Certification, a process that any new carrier would also have
to go through.
ExpressAir Messenger's Acquisition of Messenger Company
On June 20, 1995, the Company purchased the customer base and business
of Golden Target, Inc., dba On Target/Golden West Express Delivery for the price
of $120,000. The addition of this new business has helped increase the Company's
revenues and operations until it is now profitable (see "Management's Discussion
& Analysis"). Additional terms of the purchase are covered in more detail in the
purchase contract which is part of the registration for this offering on file
with the Securities and Exchange Commission.
Regulation of ExpressAir Messenger's Business
The messenger industry is regulated under the Public Utilities
Commission in California and all companies must be licensed. They must further
comply with State and Federal statutes pertaining to employment tax, worker's
compensation, social security, and medical disability insurance to name a few.
In order to operate aircraft to carry packages in a commercial
capacity, a Part 135 Air Carrier Certificate issued by the Federal Aviation
Administration is required. To managements knowledge, the Company is the only
same-day messenger service in California that currently holds such a
certificate.
Aircraft Maintenance and Repairs
Based on past expenditures, management estimates that it takes
approximately $22.00 an hour to operate its fixed-wing aircraft and based on
information from the manufacturers, $76.00 per hour to operate the proposed
helicopters. These estimates include fuel, scheduled maintenance, unscheduled
maintenance, annual inspections, and 2000 hour engine overhaul.
- -26-
Fuel
The purchase of fuel in not expected to represent a significant
operating expense to EMI operations. Management believes fuel prices have
remained relatively stable. Although prices are subject to fluctuations, there
is no absolute assurance regarding the future availability and cost of aircraft
fuel. Increases in fuel prices and diminished availability could have a
materially adverse affect upon the Company's operations and operating results.
While management has taken the possibility of increased fuel costs into
consideration in estimating its intended use of the net proceeds from this
Offering, there is no assurance that the contingency reserve to be established
for this purpose will be sufficient to offset any additional increase in fuel
prices or to increase availability should supplies of fuel diminish.
Insurance
The Company currently carries general liability and aircraft loss or
damage insurance and customary coverage for its general business insurance.
Litigation
To the knowledge of the Board of Directors and Officers of ExpressAir
Messenger, there is no past, pending, contemplated or threatened litigations or
administrative action, nor are there any unsatisfied judgements, nor have there
been or are there any proceeding in which the Company was or is a party which
have had or may have a material effect upon the Company's business, financial
condition or operations, including any litigation or action involving EMI's
Officers, Directors, or other key personnel in their capacity as such.
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- -27-
MANAGEMENT
Directors and Officers
The Directors and Officers of ExpressAir Messenger, their ages and
their positions held, are as follows:
Name Age Positions Held
Bruce Ross 42 President, Chief Executive Officer and
Chairman of the Board
Glen S. Provost 34 Vice President, Manager of Sales &
Marketing, Director
Ronald F. Hierbaum 52 Chief Financial Officer and Director
Aileen M. Briceno 27 Corporate Secretary, Office Manager
Michael Patton 31 Dispatch Operations Manager
All of EMI's Officers and Directors have served in their respective
capacities since the Company's incorporation. Each Director is elected for a
period of one year at the Company's annual meeting of shareholders and serves
until his or her successor is duly elected and qualified. Vacancies and newly
created directorships resulting from any increase in the number of authorized
Directors may be filled by a majority vote of the Directors then in office.
Officers are elected by, and serve at the pleasure of, the Board of Directors.
Directors do not receive compensation for their services but may be reimbursed
for expenses incurred in connection with the performance of their duties.
The following is a brief summary of the background of each Director and
Officer of ExpressAir Messenger:
Bruce Ross is the President, Chief Executive Officer and Chairman of the Board
of Directors of ExpressAir Messenger, Incorporated. He has been one of the two
partners of EMI since March of 1990 until its recent incorporation in December
of 1993. From February 1989 to March of 1990, he was an owner/partner of
American Flyer Messenger Service where he supervised the general operations of
the company which was performing upwards of 200 deliveries per day.
Unfortunately, there were five "chiefs" running this company, each having their
own ideas for the direction and goals of American Flyer. In an amicable
agreement, Mr. Ross and his partner at that time separated from American Flyer
and started EMI. Bruce Ross received a Bachelor Degree in Management from the
University of Redlands in 1977. He has over 2000 hours of flying experience
including Instrument and Commercial ratings. He is certified by the F.A.A. as a
Part 135 pilot as well as being qualified and designated as the Chief Pilot and
Director of Operations for ExpressAir Messenger, Incorporated. Mr. Ross is also
a volunteer pilot for several charity organizations and flies doctors, nurses
and supplies to desolate areas in Mexico and Arizona on a regular basis.
Glen S. Provost is the Vice President, a Director, and the Manager of Sales and
Marketing of ExpressAir , Messenger, Incorporated. He has been with the Company
since July of 1991 during which time he served in the capacity of Sales
Representative as well as assisting with the general operations of the Company.
Since that time he has been actively involved in the growth, marketing, and
general management of ExpressAir Messenger, Incorporated. Previously, Mr.
Provost was the Recruiting Manager of Ulery Associates located in Santa Ana,
California from September 1985 to July of 1991. He was responsible for the
hiring, training, motivating and supervising of numerous recruiters attempting
to locate students for private technical colleges in the Orange County,
California areas. He was also responsible for conducting executive searches to
locate and qualify individuals who met specific job requirements for high tech
- -28-
electronic manufacturing companies. Many of these clients consisted of Fortune
500 companies including Motorola, Apple Computer, North American Honda, and
Rockwell International. Mr. Provost was responsible for the recruiting of the
senior staff of the Puerto Rican manufacturing arm of Western Digital, one of
Range County's largest high tech manufacturing companies. The positions
recruited and qualified included the General Manager, Vice President of Human
Resources, Director of Engineering, Manufacturing and Engineering Manager,
Manager of Finance, and Senior Cost Account. He was further responsible for
different financial aspects of Ulery Associates including payroll and budgeting.
Ronald F. Hierbaum, C.P.A. serves as Chief Financial Officer and Director of
ExpressAir Messenger, Incorporated. In this capacity, Mr. Hierbaum is
responsible for all aspects of financial management for the Company. Presently,
Mr. Hierbaum is employed at Hierbaum & Femino, a certified public accounting and
financial consulting firm located in Southern California. From March, 1990
through November of 1993, Mr. Hierbaum was the Chief Financial Officer and Vice
President of Norwalk Service Company, an Auto Auction firm located in Norwalk,
California. He was responsible for the company's accounting systems, and all
banking relations. Additionally, he was responsible for all accounts payable and
accounts receivable, and the development and integration of the company's
customized computer software. Mr. Hierbaum trained the company's personnel in
the use of personal computer systems for improved overall operations. Mr.
Hierbaum attended DePaul University located in Chicago, Illinois, where he
received his BSC in Accounting in 1971 and his MBA in 1973. He received his
certification from the State of Illinois in 1972.
Aileen M. Briceno has been volunteering on a part-time basis as a consultant
assisting in the organization of EMI since January of 1993. Ms. Briceno will
serve as Corporate Secretary and Office Manager on a full-time basis once the
Company has received at least the minimum amount of proceeds from the Offering.
Presently, Ms. Briceno has been active in the day-to-day operations, including
recordkeeping and collection procedures. From March 1992 to 1994, Ms. Briceno
has been the Office Manager for Timothy H. Barzegar, D.M.D., a dental service
business located in Newport Beach, California. She was responsible for
supervising and managing all the office functions including billing,
collections, scheduling, marketing, and compliance with local, State and Federal
regulations. From 1989 to 1992 she was employed as the Office Manager for R.
Steven Ballback, D.D.S. located in Newport Beach, California. Her duties
included general office management, billing, collections, marketing and the
training and supervision of office personnel. Ms. Briceno holds an Associates in
Arts Degree and is continuing her education certification by taking additional
classes in Principals of Accounting, Information Systems and Computers,
Microeconomics, and Business Law.
Michael Patton is the Dispatch Manager for ExpressAir Messenger, Incorporated.
He has previously worked as assistant to Bruce Ross, when Mr. Ross was the
part-owner of American Flyer. From August of 1990 to April 1994, Mr. Patton was
the Fleet Manager for First Courier Service, a Los Angeles based messenger
company. He was responsible for all operational aspects of the company including
the pickup and delivery of parcels, daily routing and the hiring, training and
supervision of drivers. His duties also included the supervision of the office
staff, billing, and customer service relations. He also administered their
health and dental plans and coordinated with all outside services and vendors.
Mr. Patton attended Los Angeles City College majoring in Business.
- -29-
Executive Compensation
SUMMARY COMPENSATION TABLE
Name of
Individual or Group Capacities Served Year Salary
Bruce Ross President, CEO and 1995 $12,183
Chairman of the Board of Directors 1994 12,708
1993 10,572
Glen S. Provost Vice President, Manager of Sales 1995 $20,007
& Marketing, Director 1994 18,862
1993 17,798
Michael Patton Dispatch Operations Manager 1995 $16,418
1994 11,847
1993 0
Compensation of Officers will be determined by the Board of Directors
based upon the financial condition and performance of EMI, the financial
requirements of the Company, and upon the individual performance of each
Officer. The Board of Directors intends to ensure that the salaries paid to EMI
's Officers and employees are reasonable and prudent, and are based upon both
the financial condition and performance of the Company and upon the performance
of individual Officers.
As several of EMI's Officers are also Directors of the Company,
Officers' future compensation will not be determined through "arm's length"
negotiations, but by the Board of Directors on a case-by-case basis. The
Directors of ExpressAir Messenger will serve in their capacities with the
Company without remuneration. The Company has no retirement, pension, profit
sharing program at this time. The Company intends to offer an employee health
insurance plan in the future.
In the future, the Company may adopt an Incentive Stock Option Plan
under which tax qualified options may be granted or an Employee Stock Option
Plan (ESOP). These plans would be intended to help EMI attract and retain the
best available persons, to enhance the Company's growth, and to provide
employees with an additional incentive to contribute to the growth and success
of EMI.
If implemented, any of these plans would be administered by a committee
appointed by the Board of Directors, which would determine which eligible
employees would receive options, the time at which any such options would be
granted, the option price, the time at which each option would be exercisable,
the exercise period, and interpretation and amendment of the rules relating to
any such plans.
Limitation on Directors' and Officers' Liabilities
The Company's Bylaws include provisions to indemnify the Company's
Directors, Officers, employees and other agents against judgments, fines,
amounts paid in settlement, and other expenses in connection with threatened,
pending or completed suits or proceedings against such persons by reason of
serving or having served as Directors, Officers, employees or agents of EMI,
except in relation to matters with respect to which they are determined to have
not acted in good faith, or in a manner which they did not believe was in the
best interest of the Company.
- -30-
General Information
Bruce Ross, the President, Chief Executive Officer and Chairman of the
Board of Directors of the Company, has served since the Company's formation. He
may be deemed to be a "parent" and "promoter" of ExpressAir Messenger as those
terms are defined in the Securities Act. As EMI is highly dependent on the
services of certain key personnel, management intends to have the Company enter
into employment agreements to assure that these persons will remain with EMI.
EMIintends to procure key-person life insurance policies on certain of
its Officers to protect the Company and its investors. The insurance proceeds on
such policies are to be made payable to the Company to protect investor's
financial interests in the Company. It is not anticipated that any of such
proceeds would be used to pay any cash benefits to the estate of the insured
person or to a surviving spouse.
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- -31-
DESCRIPTION OF SECURITIES
Shares Offered
EMI hereby offers to sell and issue up to 700,000 shares of Common
Stock at $6.00 per share to investors in this self-underwritten Offering on a
best efforts basis. The shares will be sold and issued for cash. The shares
offered hereby are not callable.
The Company has never paid any dividends to shareholders of its Common
Stock. It is the intention of the Board of Directors of EMI not to declare any
dividends until such time as the Company is fully established and profitable,
and has an excess of retained earnings sufficient for anticipated corporate
expansion and development activities (see "Dividend Policy").
Minimum Sale of Securities
The minimum proceeds which ExpressAir Messenger, Inc. must realize from
this Offering prior to using any proceeds is $150,000, prior to the payment of
any sales commissions or non-accountable expense allowances. The Company has
opened a designated escrow account with National Bank of Southern California,
4100 Newport Place, Suite 130, Newport Beach, California 92660 in which all
funds from this Offering will be deposited and held until this minimum amount of
proceeds has been raised, in accordance with Rule 15c2-4 of the Exchange Act.
In the event the Company does not raise the minimum proceeds set forth
herein within one year from the effective date of this Offering, all funds
received pursuant to this Offering shall be returned "promptly" to the
investors. EMI does not intend to pay any interest to investors on any funds
received pursuant to this Offering which are escrowed. Once the minimum amount
of proceeds has been raised, the Company will be free to use any funds received
pursuant to this Offering, subject to each investor's right of rescission.
Common Stock
The Company is authorized to issue 5,000,000 shares of Common Stock,
with no par value per share. Shareholders of Common Stock are entitled to one
vote per share on each matter to be decided by the shareholders. The Common
Stock has no redemption provisions. No holder of Common Stock has any preemptive
right to subscribe for any securities of the Company. The shareholders of EMI's
Common Stock are entitled to receive any dividends which the Board of Directors
may declare from time to time out of funds legally available for that purpose,
if any. Any such dividends shall be distributed on a pro-rata basis. The
outstanding shares of Common Stock are fully paid and nonassessable.
There are no shares of Common Stock subject to issuance under stock
purchase or option plans, and there are no outstanding stock purchase
agreements, options, warrants or rights. In the future, the Board of Directors
of the Company may propose employee stock options or warrants. EMI has not
publicly sold or otherwise issued securities of any kind since its inception,
other than the 3,062,386 shares issued to Bruce Ross, James Herman, etc. (see
"Certain Transactions").
Preferred Stock
ExpressAir Messenger is authorized to issue 1,000,000 share of
Preferred Stock. The Company has issued no Preferred Stock since its inception.
- -32-
Plan of Distribution
EMI, through its Officers and Directors, is offering to the public
700,000 shares of the Company's Common Stock, on a "best efforts",
"self-underwritten", "25,000 share minimum" basis, pursuant to, and in
compliance with, Rule 3a4-1 of the Exchange Act, at a purchase price of $6.00
per share. The Company will use its best efforts to find purchasers for the
shares offered hereby within a period of one year from the date of this
Prospectus.
Subsequent to the granting of an effective registration date by the
Commission, EMI may retain the services of selected broker/dealers. Should these
shares be sold by broker/dealers, EMI will pay commissions of up to 10 percent,
and additional non-accountable expense allowances of up to 3 percent, on the
gross proceeds from the sale of shares after the sale of the minimum number of
shares offered and after each investor's three day rescission ends.
The Company will only pay such commissions and non-accountable expense
allowances to broker/dealers who are members of the National Association of
Securities Dealers, Inc. (NASD). In no event will the Company pay any
commissions, sales fees, or expenses to its Officers or Directors. Should EMI
attempt to retain any such commissioned selling agents, there is no assurance
that EMI will be able to retain an underwriter or broker/dealers to participate
in the sale of the shares or that any such underwriter or broker/dealers will be
able to sell the shares even if retained by EMI.
Investment Procedures
No sale of the shares will be made by EMI to any prospective investor
who has not received a copy of this Prospectus at least 48 hours prior to the
confirmation of a sale of shares hereunder. Upon reaching a decision to invest
in the shares offered hereby, prospective investors who intend to purchase
shares directly from the Company must deliver to EMI: (1) a completed
Subscription Agreement and (ii) a check in the appropriate amount. Prospective
investors who intend to purchase shares from a broker/dealer should make payment
directly to that broker/dealer. Regardless of whether prospective investors
offer to purchase shares from EMI or from a broker/dealer, all checks for the
purchase of shares should be made payable to "ExpressAir Messenger, Incorporated
- - Escrow Account."
Acceptance for a prospective investor as an investor in the shares will
occur when EMI executes the Subscription Agreement or at the time such shares
are purchased from a broker/dealer. EMI will send an executed copy of the
Subscription Agreement to each investor who purchases shares from the Company
after acceptance by EMI, or if not accepted, will direct the Escrow Agent to
return the prospective investor's check promptly, should the offer to invest not
be accepted. If the prospective investor purchases shares from a broker/dealer,
a receipt for the purchase of shares will be delivered to the investor by the
broker/dealer.
Expenses and Commissions
All expenses associated with the Offering, except sales commissions and
non-accountable expense allowances, are payable by EMI regardless of whether the
Offering is consummated or not. Should commissions selling agents be retained,
EMI anticipates paying a sales commission of up to 10 percent, and additional
non-accountable expense allowances equal to up to 3 percent of gross proceeds
from any shares sold by an underwriter or selected broker/dealers.
Illiquid Investment
Prior to this Offering, there has been no public market for the Company's
securities. There can be no assurance
- -33-
that a public market will develop or be sustained. The shares are not suitable
for, and the Underwriter will use its best efforts to avoid offering them to,
any investor who cannot afford to maintain an investment in the shares or to
suffer a loss of his or her investment (see "Risk Factors").
Voidability of Sales
All sales of the securities offered hereby are subject to voidability
by a subscribing investor within 72 hours after tendering payment for any shares
purchased. In order to rescind the purchase of shares purchased from a
broker-dealer, an investor should notify the broker-dealer from whom the
investor purchased shares of the investor's rescission of the purchase within 72
hours of tendering payment for the shares.
Offering Price Factors
The net tangible book value per share of the shares of Common Stock in
ExpressAir Messenger, Inc. is substantially less than the price per share in
this Offering. The price was arbitrarily determined by EMI , is not based on the
Company's net worth, earnings or other established investment criteria of value,
is not the result of arm's length negotiation, and bears no relation to any
recognized standard of value. Accordingly, there can be no assurance that the
shares offered hereby can be resold at the Offering price, if at all. This
Offering involves immediate substantial dilution from the public Offering price
(see "Risk Factors" and "Dilution").
Transfer Agent
The transfer agent for the Common Stock of the Company is American
Securities Transfer of Denver, Colorado.
LEGAL MATTERS
The validity of the Common Stock to which this Prospectus pertains and
other legal matters in connection with this Offering have been passed upon for
the Company by Robert L. Shear, Esquire, 2710 Alt. 19 North, Suite 406, Palm
Harbor, Florida 34683.
EXPERTS
The financial statements included in the Prospectus and elsewhere in
the registration statement have been audited by Durland & Company, CPAs, PA
an independent certified public accounting firm, as indicated in their report
with respect hereto, and are included herein in reliance upon their authority
as an expert in accounting and auditing in giving said report.
AVAILABLE INFORMATION
The Company intends to furnish its shareholders with annual reports for
each fiscal year ending December 31,
- -34-
containing audited financial statements certified by its independent Certified
Public Accountant, and intends to distribute quarterly reports containing
unaudited financial information for each of the first three quarters of each
fiscal year. In addition, after this Offering, the Company will be subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, will file reports, proxy statements and other
information with the Securities and Exchange Commission.
REGISTRATION STATEMENT
The Company has filed a Registration Statement with the Securities and
Exchange Commission on Form SB-2 (together with any amendments, exhibits and
schedules thereto, the "Registration Statement") under the Securities Act of
1933, as amended, with respect to the shares of Common Stock offered hereby.
This Prospectus, which constitutes an integral part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted in accordance with the
rules and regulations promulgated by the Commission. For further information
with respect to the Company and the shares of Common Stock, reference is hereby
made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document are not necessarily complete, and, in each instance,
reference is made to the copy of such contract, agreement or document filed as
an exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including all
exhibits and schedules thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at its principal office
located at 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material
can be obtained from the Public Reference Section of the Commission, Washington,
DC 20549 at the prescribed rates.
No person has been authorized to give any
information or to make any representations not
made in this Prospectus in connection with the
- -35-
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountant .............. F-2
Balance Sheets .................................................. F-3
Statements of Operations ....................................... F-4
Statements of Stockholders' Equity ............................. F-5
Statements of Cash Flows ....................................... F-6
Notes to Financial Statements .................................. F-7
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To: The Board of Directors
ExpressAir Messenger, Inc.
Newport Beach, California
We have audited the accompanying balance sheet of ExpressAir Messenger, Inc.,
(the "Company") as of December 31, 1995 and March 31, 1996 and the related
statements of operations, stockholders' equity and cash flow for the two years
and three months then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
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 ExpressAir Messenger, Inc. at
December 31, 1995 and March 31, 1996 and the results of its operations and its
cash flows for the two years and three months then ended in conformity with
generally accepted accounting principles.
Durland & Company, CPAs, PA
Palm Beach, Florida
April 18, 1996
F-2
ExpressAir Messenger, Inc.
Balance Sheets
December 31, March 31,
1995 1996
ASSETS
CURRENT ASSETS
Cash ............................................................................. $ 0 2,360
Loan to stockholder (note 7) ..................................................... 22,632 35,731
Accounts receivable .............................................................. 50,756 47,923
--------- ---------
Total Current Assets .......................................................... 73,388 86,014
--------- ---------
PROPERTY AND EQUIPMENT (note 1d)
Furniture and equipment .......................................................... 40,911 40,911
Field equipment .................................................................. 8,400 8,400
Airplane ......................................................................... 17,967 17,967
Less - Accumulated depreciation .................................................. (17,288) (19,640)
--------- ---------
Total Property and Equipment .................................................. 49,990 47,638
--------- ---------
OTHER ASSETS
Deferred offering costs (note 1h) ................................................ 38,664 39,592
Goodwill, net of amortization (note 1g) .......................................... 79,556 78,537
Covenant not to compete (note 1f) ................................................ 21,875 20,313
--------- ---------
Total Other Assets ............................................................ 140,095 138,442
--------- ---------
Total Assets ......................................................................... $ 263,473 272,094
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................................................. $ 4,340 8,178
Accrued salaries payable ......................................................... 0 878
Payroll taxes payable (notes 6, 9) ............................................... 2,270 1,601
Short-term debt (notes 5, 9) ..................................................... 22,500 20,000
Accrued interest ................................................................. 7,605 8,572
Current portion of long-term debt (note 5) ....................................... 23,874 18,976
--------- ---------
Total Current Liabilities ..................................................... 60,589 58,205
--------- ---------
LONG-TERM LIABILITIES
Long-term debt (note 5) .......................................................... 46,672 39,096
Less: current portion ............................................................ (23,874) (18,976)
--------- ---------
Total Long-Term Liabilities ................................................... 22,798 20,120
--------- ---------
Total Liabilities .................................................................... 83,387 78,325
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, no par value; Authorized 5,000,000 shares; issued and
outstanding 3,080,720 (note 2) ................................................ 224,599 224,599
Preferred stock, no par value; Authorized 1,000,000 shares; issued and outstanding
(none) (note 2) ............................................................... 0 0
Retained earnings (deficit) ...................................................... (44,513) (30,830)
--------- ---------
Total Stockholders' Equity ........................................................... 180,086 193,769
--------- ---------
Total Liabilities and Stockholders' Equity ........................................... $ 263,473 272,094
========= =========
The accompanying notes are an integral part of the
financial statements.
F-3
ExpressAir Messenger, Inc.
Statements of Operations
Year ended December 31, 3 months ended March 31,
----------------------- ------------------------
1994 1995 1995 1996
------------ ------------ ------------ ------------
(Unaudited)
REVENUES
Messenger services ......................... $ 210,566 323,871 54,944 87,272
Other ...................................... 98 372 56 9
----------- ----------- ----------- -----------
Total Revenue ........................... 210,664 324,243 55,000 87,281
----------- ----------- ----------- -----------
EXPENSES
Advertising ................................ 751 2,352 155 1,087
Aircraft operating ......................... 6,680 4,277 1,077 1,315
Amortization ............................... 515 7,458 129 2,581
Automotive ................................. 80,639 68,593 16,107 16,408
Bank charges ............................... 487 832 177 62
Contributions .............................. 293 691 70 30
Depreciation ............................... 8,209 9,461 2,226 2,351
Dues, fees, subscriptions, licenses ........ 1,367 3,392 162 2,873
Equipment rent ............................. 5,573 3,688 788 729
Equipment repairs .......................... 2,313 1,047 0 0
Insurance .................................. 1,756 4,113 1,984 1,682
Interest ................................... 11,911 14,580 2,950 2,279
Layout (note 1c) ........................... 8,339 557 557 795
Office supplies ............................ 7,199 9,977 4,158 1,758
Professional fees .......................... 489 6,525 160 78
Radio air time ............................. 5,190 5,572 1,425 1,379
Rent ....................................... 11,024 11,136 2,884 2,845
Salaries - office .......................... 62,172 38,815 6,735 8,047
Salaries - drivers ......................... 31,959 21,923 7,961 4,533
Payroll taxes, employee benefits ........... 16,030 9,908 5,567 3,828
Subcontracted services ..................... 3,452 49,247 243 17,534
Telephone .................................. 8,402 8,045 1,220 643
Travel and entertainment ................... 2,011 1,185 215 253
Uniforms ................................... 1,669 778 69 486
Miscellaneous .............................. 10,750 6,595 6,442 22
----------- ----------- ----------- -----------
Total expenses .......................... 289,180 290,747 63,461 73,598
----------- ----------- ----------- -----------
Operating income/loss ...................... (78,516) 33,496 (8,461) 13,683
----------- ----------- ----------- -----------
Extraordinary item - collection of judgement 0 5,072 0 0
Gain on sale of fixed assets ............... 0 382 0 0
Provision for income tax benefit ........... 0 0 0 0
----------- ----------- ----------- -----------
Net income/loss ............................ $ (78,516) 38,950 (8,461) 13,683
=========== =========== =========== ===========
Net income per share ....................... $ (0.03) 0.01 (0.01) 0.01
=========== =========== =========== ===========
Shares outstanding ......................... 3,075,886 3,080,720 3,075,886 3,080,720
=========== =========== =========== ===========
The accompanying notes are an integral part of the
financial statements.
F-4
ExpressAir Messenger, Inc.
Statement of Stockholders' Equity
Retained Total
Common Preferred Earnings/ Stockholders'
Stock Stock (Deficit) Equity
BALANCE, December 31, 1992 $ 3,549 0 (4,947) (1,398)
Capital transactions:
A) 26,500 0 0 26,500
B) 1 0 0 1
C) 7,000 0 0 7,000
D) 9,000 0 0 9,000
E) 3,999 0 0 3,999
F) 6,000 0 0 6,000
G) 250 0 0 250
H) 31,300 0 0 31,300
I) 27,000 0 0 27,000
Net loss ................. 0 0 (78,516) (78,516)
-------- -------- -------- --------
BALANCE, December 31, 1994 114,599 0 (83,463) 31,136
Capital transactions:
J) 2,000 0 0 7,000
K) 102,000 0 0 31,300
L) 6,000 0 0 6,000
Net income ............... 0 0 38,950 38,950
-------- -------- -------- --------
BALANCE, December 31, 1995 224,599 0 (44,513) 180,186
Net income ............... 0 0 13,683 13,683
-------- -------- -------- --------
BALANCE, March 31, 1996 .. $224,599 0 (30,830) 193,769
======== ======== ======== ========
<FN>
A) January/February 1994; stock subscriptions cash received.
B) February 1994; 1 share of common; promotional gift valued at $1.
C) March 1994; 3,500 shares of common; $7,000 in cash.
D) April 1994; 9,000 shares of common; $9,000 in cash.
E) May 1994; 1,333 shares of common; $3,999 in cash.
F) June 1994; 2,000 shares of common; $6,000 in cash.
G) June 1994; 250 shares of common; prior services valued at $250.
H) July 1994; 12,100 shares of common; $31,300 in cash.
I) December 1994; 0 shares of common; $27,000 in cash contributed by principal stockholder.
J) September 1995; 334 shares of common; computer software valued at $2,000.
K) December 1995; 17,000 shares of common; conversion of $102,000 note payable.
L) December 1995; 1,000 shares of common; conversion of $6,000 note payable.
</FN>
The accompanying notes are an integral part of the
financial statements.
F-5
ExpressAir Messenger, Inc.
Statements of Cash Flows
Year ended December 31, 3 months ended March 31,
----------------------- ------------------------
1994 1995 1995 1996
---------- ------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES: ................ (Unaudited)
Net income/loss ...................................... $ (78,516) 38,950 (8,461) 13,683
Adjustments to reconcile net loss to
net cash used for operating activities:
Amortization ....................................... 515 7,458 129 2,581
Depreciation ....................................... 8,209 9,461 2,226 2,352
Stock issued for services .......................... 250 0 0 0
Stock issued for promotional value ................. 1 0 0 0
Note payable issued for professional services ...... 0 6,000 0 0
Gain on sale of fixed assets ....................... 0 (382) 0 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ......... 10,998 (24,143) 6,771 2,833
(Increase) in deferred offering costs .............. (7,524) (1,220) 0 (928)
Increase (decrease) in accrued interest ............ 388 7,217 (97) 967
Increase (decrease) in accounts payable ............ (17,286) 2,915 3,367 5,872
Increase (decrease) in accrued salaries ............ (1,174) (3,715) 0 878
Increase (decrease) in payroll taxes payable ....... (11,162) (42,384) (50) (669)
--------- --------- --------- ---------
Net cash (used) provided by operating activities ..... (95,301) 157 3,885 27,559
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Funds advanced on stockholder loan ................... 0 (58,840) (8,058) (13,099)
Repayments of stockholder loan ....................... 0 36,208 0 0
Sale of fixed assets ................................. 0 11,450 0 0
Purchase of fixed assets ............................. (32,511) (650) 0 0
--------- --------- --------- ---------
Net cash (used) provided by investing activities ..... (32,511) (11,832) 0 (13,099)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash ......................... 83,799 0 0 0
Funds advanced on third-party debt ................... 28,172 20,000 0 0
Payments on third-party debt ......................... (11,778) (29,368) (3,126) (10,076)
Cash contributed by principal stockholder ............ 27,000 0 (8,058) 0
--------- --------- --------- ---------
Net cash provided (used) by financing activities ..... 127,193 (9,368) (11,184) (10,076)
--------- --------- --------- ---------
Net increase (decrease) in cash ...................... (619) (21,043) (7,299) 4,394
--------- --------- --------- ---------
CASH, beginning of period ............................ 19,628 19,009 19,009 (2,034)
--------- --------- --------- ---------
CASH, end of period .................................. $ 19,009 (2,034) 11,710 2,360
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash ............................... $ 9,565 7,751 2,113 1,312
========= ========= ========= =========
Noncash financing activities:
Stock issued for fixed asset purchase ......... $ 0 2,000 0 0
========= ========= ========= =========
Note payable issued for business asset purchase $ 0 120,000 0 0
========= ========= ========= =========
Note payable issued for accounts receivable ... $ 0 10,000 0 0
========= ========= ========= =========
Note payable for vehicle assumed .............. $ 0 5,929 0 0
========= ========= ========= =========
N/P reduced for vehicle N/P assumption ........ $ 0 (7,500) 0 0
========= ========= ========= =========
Stock issued for note payable reduction ....... $ 0 102,000 0 0
========= ========= ========= =========
Stock issued for note payable ................. $ 0 6,000 0 0
========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
F-6
ExpressAir Messenger, Inc.
Notes to Financial Statements
(Information with respect to period ended March 31, 1995)
(1) Summary of Significant Accounting Principles
The Company ExpressAir Messenger, Inc. was chartered by the State of
California on December 24, 1993, and conducts business from its
headquarters in Newport Beach, California. The Company performs local
package delivery generally on a same day basis for Los Angeles
area-based customers, principally attorneys.
The financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial
statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the
dates of the statements of financial condition and revenues and
expenses for the years then ended.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Basis of presentation The financial statements for the three months
ended March 31, 1995, include all adjustments which in the opinion of
management are necessary for fair presentation.
b) Revenue recognition The Company's operating revenues are recorded at
the time service is rendered.
c) Layout expense The Company regularly advances minor expenses on behalf
of clients, such as court filing fees, and subsequently bills and
receives reimbursement from the client. Net layout expense for the
years ended December 31, 1994 and 1995, was $8,339 and $557; and for
the three months ended March 31, 1995 and 1996, it was $557 and $795
respectively.
d) Fixed assets Fixed assets are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, generally 5, 7 or 10 years. Depreciation expense was $8,209 and
$9,461 for the years ended December 31, 1994 and 1995; and $2,226 and
$2,351 for the three months ended March 31, 1995 and 1996,
respectively.
e) Accounts receivable The Company provides credit for open accounts in
the normal course of business. As of the dates of these statements, no
credit losses have been sustained nor reserved for. The Company
currently has no plans to provide reserves on the open credit provided
as virtually all of the customers are good credit quality. The Company
intends to review this policy at each balance sheet date and an
appropriate allowance will be recorded.
f) Income taxes Deferred income taxes are provided on elements of income
that are recognized for financial accounting purposes in periods
different than such items are recognized for income tax purposes. In
February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting number 109 (SFAS 109) relating to the
method of accounting for income taxes. SFAS 109 requires companies to
take into account changes in tax rates when valuing the deferred income
tax amounts carried on their Balance Sheets (the "Liability Method").
Management does not anticipate that SFAS 109 will have a material
impact on the Company, however management adopted SFAS 109 effective
with the fiscal year beginning January 1, 1994. The Company has a
deferred tax asset of $8,900 at December 31, 1995, and $5,700 at March
31, 1996. The Company has established a valuation reserve in the amount
of $8,900 at December 31, 1995, and $5,700 at March 31, 1996, as the
Company has no history of profitable operations. This deferred tax
asset is composed entirely of the tax benefit of net operating loss
carryforwards totaling $44,513 at December 31, 1995, and $30,830 at
March 31, 1996. The balance of these net operating loss carryforwards
expire in 2009.
g) Intangible assets Intangible assets are composed of goodwill.
Goodwill was created by the conversion of the Predecessor partnership
to a corporation. As the partnership had negative equity, the
Company's stock received
F-7
ExpressAir Messenger, Inc.
Notes to Financial Statements, Continued
(1) Summary of significant accounting principles, continued
g) Intangible assets, continued by the former partners resulted in the
creation of goodwill. The stock received by the partners was valued at
$0.001 per share, for a total of $2,575. Goodwill is amortized on a
straight-line basis over 5 years. Additional goodwill was created by
the purchase of the assets of On Target/Golden West Express Delivery.
This purchased goodwill amounts to $81,979, and is being amortized over
seven years. Goodwill amortization was $515 and $5,895 for the years
ended December 31, 1994 and 1995; and $129 and $1,019 for the three
months ended March 31, 1995 and 1996, respectively.
h) Deferred offering costs Deferred offering costs relating to the
Company's planned initial public offering are composed of approximately
$3,000 in printing cost, and $37,500 in legal and audit expenses. If
the Company's offering is successful, the accumulated deferred offering
costs will be charged directly to equity; if not, these costs will be
expensed through the income statement.
(2) Stockholders' equity The Company has authorized 5,000,000 shares of no
par common stock and 1,000,000 shares of no par preferred stock. Two
individuals entered into a partnership agreement on February 28, 1990,
to form the Predecessor as a California partnership upon the
dissolution of a prior partnership between these two individuals and a
California corporation, American Flyer Messenger Service, Inc. On June
20, 1993, these partners entered into an agreement to convert the
partnership to a corporation effective July 1, 1993, except that the
Company was continued to be operated as a partnership until the close
of business December 31, 1993. At close of business the partnership was
reorganized into a corporation in a tax-free reorganization under the
Internal Revenue Code, Section 351. Under the terms of the June 20,
1993, agreement, the partner remaining active in the Company received
51% of the authorized common stock of the Company, or 2,550,000 shares;
and the partner no longer active received 25,000 shares of common
stock, $25,000 cash at the closing of escrow under the IPO to be
completed by the Company and at the closing of escrow the Company would
purchase his Cessna 172 airplane for the then remaining outstanding
balance of the loan collateralized by the airplane. The remaining loan
balance was $1,743 higher than the partners' book value at December 31,
1993. This difference was charged to stockholders' equity. The $25,000
cash to be paid will be charged directly to stockholders' equity when
paid. Effective with the conversion of the partnership, the Company
also issued 299,000 additional shares of common stock in exchange for
$61,240 cash, $34,800 of which the partnership had received prior to
conversion on behalf of the Company, and $26,500 of which was
subscribed for at December 31, 1993. The Company also issued 160,200
shares to a valued employee for services rendered to the partnership,
valued at $0.001 per share, or $160 total. The Company issued 2 shares
for promotional value, one each to two parties, valued at $1 per share.
At the close of business on December 31, 1993, the active former
partner controlled 84% and the inactive partner 0.8% of the issued and
outstanding shares.
In February 1994 the Company issued another promotional share valued at
$1. In March 1994, the company issued 3,500 shares of common stock in
exchange for $7,000 cash. In April 1994, the Company issued 9,000
shares of common for $9,000 in cash. In May 1994, the Company issued
1,333 shares of common for $3,999 in cash. In June 1994, the Company
issued 2,000 shares of common for $6,000 in cash, and 250 shares of
common to three valued employees for prior services valued at $250. In
July 1994, the Company issued 12,100 shares of common in exchange for
$31,300 in cash. In September 1995, the Company issued 334 shares of
common in exchange for computer software valued at $2,000, for a
valuation of $6 per share. In December 1995, the Company converted
$102,000 of the remaining note payable issued for the acquisition of
the assets of On Target/Golden West for 17,000 shares of common, for a
valuation of $6 per share. At the same time, the Company also converted
the $6,000 note payable issued for the business broker's commission,
into 1,000 shares of common, for a valuation of $6 per share.
(3) Common stock public offering The Board of Directors authorized the
Company to sell up to 700,000 shares of the Company's common stock in a
"self-underwritten" public offering pursuant to a Registration
Statement on Form SB-2 under the Securities Act of 1933. This offering
is being made with a 70,000 share minimum,
F-8
ExpressAir Messenger, Inc.
Notes to Financial Statements, Continued
(3) Common stock public offering, continued and will be effective for 1
year from the effective date, should the Securities and Exchange
Commission, (SEC) grant such effective date.
(4) Commitments The Company is operating under a cancelable, written
operating lease for the company facilities. Future minimum lease
payments under this operating lease in effect at March 31, 1996, are
$948 per month, or $11,376 per year. Rent expense for the years ended
December 31, 1994 and 1995, was $11,024 and $11,136; and for the three
months ended March 31, 1995 and 1996, it was $2,884 and $2,845
respectively.
The Company also rents pagers for all employees under a month to month
operating lease. Pager rent expense for the years ended December 31,
1994 and 1995, was $5,573 and $3,688; and for the three months ended
March 31, 1995 and 1996, it was $788 and $729 respectively.
(5) Notes payable Short-term debt was made up almost entirely of credit
card debt. These cards were issued in the name of the former partners,
but all charges on such cards were for the benefit of the partnership
and all payments were made by the partnership. None of the short-term
debt is collateralized. Short-term debt consists of the following at
December 31, 1995 and March 31, 1996:
Interest Balance
Creditor Rate 12/31/95 3/31/96
- ------------------- -------- -------- -------
D.F. Mintmire, Esq 15.0% $20,000 20,000
On Target, Inc. ... 9.0% 2,500 0
------- -------
Total .......... $22,500 20,000
======= =======
Long-term debt consists of the following at December 31, 1995 and March
31, 1996:
Creditor Collateral Interest Balance
Rate 12/31/95 3/31/96
- --------------------- ---------- --------- -------- -------
On Target, Inc ...... none 9.0% $ 13,500 9,000
Motorola ............ radios 18.23% 242 0
Bank of America ..... none variable 1,912 0
Norwest ............. computers 28.00% 906 0
NationsBank ......... airplane 13.50% 17,130 16,645
AT&T Capital Corp. .. computer 18.22% 15,800 13,451
-------- --------
Subtotal .......... 46,672 39,096
-------- --------
Less: current portion (23,874) (18,976)
-------- --------
Total ............. $ 22,798 20,120
======== ========
The principal maturities of long term debt during the next five years
are: 1997 - $18,976, 1998 - $7,793, 1999 - $2,635, 2000 - $3,013, 2001
- $3,446. Interest expense was $11,911 and $14,580 for the years ended
December 31, 1994 and 1995; $2,950 and $2,279 for the three months
ended March 31, 1995 and 1996.
(6) Note receivable from stockholder The Company has lent the principal
stockholder $22,632 at December 31, 1995, and $34,7631 at March 31,
1995. This loan has been made without the benefit of collateral, nor
does it carry a stated interest rate or maturity date. The Company
currently expects this note to be repaid over the subsequent six
months.
(7) Statement of Financial Accounting Standards not yet evaluated In March
1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 121, "Accounting for the
impairment of long-lived assets and for long-lived assets to be
disposed of." The Company will have to implement SFAS 121 by the fiscal
year ended December 31, 1996. The provisions will require the Company
to review long-lived assets for impairment whenever events or changes
in circumstances indicate that the
F-9
ExpressAir Messenger, Inc.
Notes to Financial Statements, Continued
(7) Statement of Financial Accounting Standards not yet evaluated,
continued carrying amount of an asset may not be recoverable. If it is
determined that an impairment loss has occurred based on expected
future cash flows, then the loss should be recognized in the income
statement and certain disclosures regarding the impairment should be
made in the financial statements. The Company has not yet had
sufficient time to evaluate the impact, if any, of the provisions of
SFAS 121.
F-10
Offering made hereby. If given and made, such information or representations
must not be relied upon as being authorized by the Company. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any of
the securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus nor any sale made hereunder shall create any
implication that there has been no change in the affairs of the Company since
the date hereof or that the information contained herein is correct as of any
time subsequent to the date as of which such information is furnished.
TABLE OF CONTENTS
Page
Prospectus Summary..................................5
Risk Factors ...................................... 6
Use of Proceeds ...................................13
Dilution ..........................................14
Capitalization ....................................15
Selected Financial Information ....................15
Certain Transactions ..............................16
Dividend Policy ...................................16
Indemnification ...................................16
Principal Shareholders ............................17
Management's Discussion and Analysis of............18
Financial Condition and Results of Operations......19
Business ..........................................20
Management ........................................28
Description of Securities .........................32
Legal Matters .....................................34
Experts ...........................................34
Available Information .............................35
Registration Statement ............................35
Financial Statements .............................F-1
Until __________________________, 1996 (90 days after the effective date of the
Registration Statement) all dealers effecting transactions in the securities
offered hereby, whether or not participating in the distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions
- -36-
25,000 Shares Minimum
EXPRESSAIR MESSENGER,
INCORPORATED
COMMON STOCK
PROSPECTUS
ExpressAir Messenger, Inc.
4300 Campus Drive
Suite 210
Newport Beach, CA 92660
(714) 756-1011
May 31, 1996
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THIS PAGE INTENTIONALLY LEFT BLANK
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Part II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Bylaws of the Company provide for the indemnification of Directors
and Officers against certain liabilities to the maximum extent permissible under
the California law. Officers and Directors of the Company are indemnified
generally against expenses actually and reasonably incurred in connection with
proceedings, whether civil or criminal, provided that it is determined that they
acted in good faith and in a manner reasonably believed to be in the best
interests of the Company, and in any criminal matter had reasonable cause to
believe that their conduct was not unlawful.
Item 25. Other Expenses of Issuance and Distribution
The expenses of this offering are estimated to be a set forth below,
and all such expenses will be paid by the Company:
Legal Fees.................................. $20,000.00
Blue Sky Expenses and other Filing Fees..... 3,000.00*
Accounting Fees............................. 5,000.00
Printing and Engraving...................... 1,200.00*
Miscellaneous............................... 500.00*
Registration Fee............................ 1,448.28
TOTAL $31,148.28
* Estimated
Item 26. Recent Sales of Unregistered Securities
To organize ExpressAir Messenger, Bruce Ross, the President, CEO and
Chairman of the Board of Directors of ExpressAir Messenger, converted his
partnership interest in the predecessor partnership at a total value of
$2,550.00 to purchase a total of 2,550,000 shares of Common Stock at $0.001 per
share. The Company issued Glen Provost, Vice President of EMI, for services
rendered, 160,200 shares valued at $0.001 per share, or $160. James Herman who
originally co-founded the Company and is no longer active in EMI, converted his
partnership interest in exchange for 25,000 shares of Common Stock in the
Company and the agreement to be paid $25,000 upon the closing of escrow under
the initial public offering. Michael Patton, Dispatch Office Manager, received
100 shares of Common Stock, valued at $0.001 per share for prior services
rendered.
There were no underwriter's discounts or commissions involved in the
above transactions. These securities were not registered under the Securities
Act of 1933, as amended. The transactions described above were exempt from
registration under Section 4(2) of the Act as transactions by an issuer not
involving a public offering. All of the
- -39-
certificates representing the foregoing securities contain restrictive
legends thereon.
Item 27. Exhibits
- --------------------------------------------------------------------------------
- -40-
(3.1) Articles of Incorporation of Registrant as filed with the
Secretary of the State of California (1)................... 90
(3.2) Amendment of the Articles of Incorporation of
Registrant as filed with the Secretary of the State of
California (1)............................................. 93
(3.3) Bylaws of Registrant (1)................................... 96
(3.4) Minutes of Special Meeting Concerning the Resignation
and Appointment of Certain Officer and Directors (1)....... 132
(5.1) Opinion of Counsel as to Legality of Securities Being
Registered ................................................ 137
(10.1) Purchase Agreement for Messenger Company (1)............... 139
(10.2) Escrow Agreement (1)....................................... 149
(10.5) Form of Subscription Agreement Documents of the Registrant.. 000
(15.1) Letter on Audited Financial Information .................... 153
(24.1) Consents of Experts ........................................ 155
(27.1) FDS......................................................... 000
(28.1) Specimen of Stock Certificate of the Registrant (1)......... 158
(1) Included in a previous filing of this Offering
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
- -41-
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the Registration Statement; and
(iii) To include any additional or changed material information on the
plan of distribution.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the Securities
At of 1933 (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant 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 Registrant 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 Act and will be governed by the final adjudication of
such issue.
- -42-
Exhibit 5.1
ROBERT L. SHEAR, ESQUIRE
2710 ALT. 19 NORTH
SUITE 406
PALM HARBOR, FLORIDA 34683
(813) 771-1084
May 31, 1996
Board of Directors
ExpressAir Messenger, Incorporated
4300 Campus Drive
Suite 210
Newport Beach, California 92660
Dear Sirs:
I have reviewed the Articles of Incorporation, bylaws, resolutions of
the Board of Directors and other documents pertaining to the intended issuance
of 700,000 shares of Common Stock by ExpressAir Messenger, Incorporated in
connection with the filing of a Registration Statement on Form SB-2 with the
Securities and Exchange Commission.
It is my opinion that these securities, when issued, will be legally
issued, fully paid and non-assessable.
Sincerely,
Robert L. Shear
Attorney-At-Law
RLS:ir
Exhibit 10.5
EXPRESSAIR MESSENGER, INCORPORATED
INSTRUCTION TO INVESTORS
In order to invest in the securities:
(1) Complete and sign the Subscription Agreement.
(2) Enclose a check in the appropriate amount for the shares you
desire to purchase. The check should be payable to: "ExpressAir
Messenger, Incorporated. - Escrow Account"
(3) Trustees and other persons acting in a representative capacity
must provide a copy of their trust agreement, power of attorney or
other instrument granting the power and authority to invest.
(4) Mail or deliver the above items to: Mr. Bruce Ross President
ExpressAir Messenger, Incorporated 4300 Campus Drive Suite 210 Newport
Beach, California 92660
(5) You should receive an executed Subscription Agreement within ten
days. If you have not received this material by this time please
notify ExpressAir Messenger, Incorporated at the above address.
EXPRESSAIR MESSENGER, INCORPORATED
SUBSCRIPTION AGREEMENT
To: Mr. Bruce Ross
President
ExpressAir Messenger, Incorporated
4300 Campus Drive, Suite 210
Newport Beach, CA 92660
Dear Mr. Ross:
I have read and understand the Prospectus of ExpressAir Messenger, Incorporated
XXXX, 1996. I am tendering the enclosed Subscription agreement together with a
check made payable in United States currency to "ExpressAir Messenger,
Incorporated - Escrow Account" in the amount of $____________________ for
_________ shares of stock at $6.00 per share. I acknowledge that acceptance of
this subscription is in the sole discretion of ExpressAir Messenger, Inc. I
represent that the information contained herein is accurate and may be relied
upon by you, and I will immediately notify you, in writing, of any material
change in the accuracy or completeness of this information.
Sincerely,
Signature of Investor
Printed or Typed Name
Street Address
City / State / Zip Code
Telephone Numbers - Home / Work
Date
Exhibit 15.1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To: The Board of Directors
ExpressAir Messenger, Inc.
Newport Beach, California
We have audited the accompanying balance sheet of ExpressAir Messenger, Inc.,
(the "Company") as of December 31, 1995 and March 31, 1996 and the related
statements of operations, stockholders' equity and cash flow for the two years
and three months then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
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 ExpressAir Messenger, Inc. at
December 31, 1995 and March 31, 1996 and the results of its operations and its
cash flows for the two years and three months then ended in conformity with
generally accepted accounting principles.
/S/ Durland & Company, CPAs, PA
Durland & Company, CPAs, PA
Palm Beach, Florida
April 18, 1996
Exhibit 24.1(a)
ROBERT L. SHEAR, ESQUIRE
2710 ALT. 19 NORTH
SUITE 406
PALM HARBOR, FLORIDA 34683
(813) 771-1084
May 31, 1996
Board of Directors
ExpressAir Messenger, Incorporated
4300 Campus Drive
Suite 210
Newport Beach, California 92660
Dear Sirs:
I hereby consent to the use of my name as an expert under the heading
"Legal Matters" in the prospectus included in the Registration Statement on Form
SB-2 being filed with the Securities and Exchange Commission by ExpressAir
Messenger, Incorporated.
Sincerely,
Robert L. Shear
Attorney-At-Law
RLS:ir
Exhibit 24.1(b)
Durland & Company, CPAs, P.A.
340 Royal Palm Way, Suite 201
Palm Beach, FL 33480
(407) 822 9995 Fax (407) 822 9942
The Board of Directors
ExpressAir Messenger, Inc.
Newport Beach, California
Gentlemen:
We hereby consent to the use of our report dated April 18, 1996 on the financial
statements of the company and of the reference to our firm under the caption
"Experts" in the prospectus included in the Registration Statement on Form SB-2
being submitted to the Securities and Exchange Commission by the company.
/s/ Durland & Company, CPAs, P.A.
Durland & Company, CPAs, P.A.
Palm Beach, Florida
June 5, 1996