UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-30503
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AVSTAR AVIATION GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Colorado 76-0635938
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3600 GESSNER, SUITE 220, HOUSTON, TEXAS 77063
(Address of principal executive offices)
(713) 710-7103
(Registrant's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No [X]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 53,904,995 common shares as of
November 12, 2009
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AVSTAR AVIATION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2009 2008
ASSETS
Current assets:
Cash $ 9,536 $ 2,595
Accounts receivable 19,299 1,844
Prepaid expenses 8,301
Parts and Inventory 44,262
Property and equipment:
Oil and gas properties (successful efforts
method net of accumulated depletion of
$143,234 and $138,642) 44,262 28,734
Unproven oil and gas properties (successful
efforts method) 149,474 152,000
------------------------
Total property and equipment 174,737 180,734
Investment in subsidiary 60,988
------------------------
Total assets $ 317,123 $ 185,173
========================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 67,855 $ 43,595
Credit card payable 18,374
Other current liabilities 132,005
Accrued interest payable to related parties 99,197 79,090
Notes payable - other 0
Notes payable to related parties 0 11,500
-----------------------
Total current liabilities 299,057 152,559
Long-term debt to related parties 659,771 659,771
Asset retirement obligations 8,193
-----------------------
Total liabilities $ 958,828 820,523
Stockholders' deficit:
Preferred stock: $.001 par value; 10,000,000
shares authorized, none issued and outstanding - -
Common stock: $.001 par value; 500,000,000
shares authorized; 53,904,995 and 306,339,544
shares issued and outstanding at September 30, 2009
and December 31, 2008, respectively 490,500 365,499
Additional paid-in capital 18,521,904 18,521,904
Accumulated deficit (19,654,109)(19,522,753)
-----------------------
Total stockholders' deficit (641,705) (635,350)
-----------------------
Total liabilities and stockholders' deficit $ 317,123 185,173
========================
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AVSTAR AVIATION GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
June 30, September 30,
2009 2008 2009 2008
Oil and gas revenue $ - $ 4,945 $ 4,295 $ 26,805
Revenue from aviation
operations 183,718 519,913
---------------------------------------------------
Total revenue 183,718 4,945 524,208 26,805
Costs and expenses:
Cost of goods sold 160,500 363,304
Lease operating expenses 1,626 9,313
Production taxes 415 146 1,693
Dry hole costs - - - -
Depreciation, depletion and
amortization 24,515 745 19,534 5,337
Impairment - 42,696
Selling, general and
administrative
expenses 42,940 58,120 252,473 274,047
---------------------------------------------------
Total costs and expenses 232,955 60,906 635,457 333,086
---------------------------------------------------
Loss from operations (49,237) (55,961) (111,249) (306,281)
Other income and (expenses):
Other income - 257 - 257
Interest expense (19,804) (20,107) (58,983)
---------------------------------------------------
Net loss $ (49,237) $ (75,508) $ (131,356) $ (365,007)
===================================================
Basic and diluted net loss per common
share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
Weighted average common
shares 53,904,995 362,192,411 53,904,995 337,033,267
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AVSTAR AVIATION GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
for the Nine months ended September 30, 2009
(Unaudited)
Common Additional Accumu- Stockholders'
Stock Paid-In lated Equity
Shares Amount Capital Deficit (Deficit)
Balance at December
31, 2008 365,499,544 $ 365,500 $ 18,521,903 $ (19,522,753) $ (635,350)
Common stock
issued to
services 25,000,000 25,000 - - 25,000
Common stock
issued for
property
acquisition 10,000 10,000 - - 10,000
Reverse stock
split and
conversion to
common (336,604,549) 90,000 - - 90,000
Net loss - (131,356) (131,356)
---------------------------------------------------------------
Balance at September
30, 2009 53,904,995 $ 490,500 $ 18,521,904 $ (19,654,109) $(641,705)
================================================================
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AVSTAR AVIATION GROUP, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2009 and 2008
(Unaudited)
2009 2008
Cash flows from operating activities:
Net loss $ (131,355) $ (365,007)
Adjustments to reconcile net loss to net cash
used in operating activities 106,892 352,769
Net cash provided by operating activities (24,463) (12,238)
Cash flows from investing activities - -
Cash flows from financing activities:
Common stock 25,000 -
-----------------------
Net cash provided by (used in) financing activities 25,000 -
----------------------
Net increase/(decrease) in cash and cash equivalents 537 (12,238)
Cash and cash equivalents at beginning of period 8,998 11,500
-----------------------
Cash and cash equivalents at end of period $ 9,535 $ (738)
=======================
Supplemental Disclosures
Cash paid for interest $ - $ -
Cash paid for income taxes - -
Non Cash Disclosures
Reclassification of accrued interest into
principal - 126,730
Reclassification of long-term to short-term debt - 5,000
Oil and gas property acquired with common stock issuance 32,000
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AVSTAR AVIATION GROUP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of AvStar
Aviation Group, Inc. (the "Company"), a Colorado corporation formerly known as
"Pangea Petroleum Corp.," have been prepared in accordance with accounting
principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission (the "SEC") and should be read in
conjunction with the audited financial statements and notes thereto contained in
the Company 's latest Annual Report on Form 10-K filed with the SEC. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
Notes to the consolidated financial statements that would substantially
duplicate the disclosure contained in the audited financial statements for the
most recent fiscal year, December 31, 2008, as reported in the Company 's latest
Annual Report on Form 10-K, have been omitted.
2. GOING CONCERN CONSIDERATIONS
Since its inception, the Company has suffered recurring losses from operations
and has been dependent on existing stockholders and new investors to provide
cash resources to sustain its operations. During the three months ended
September 30, 2009 and 2008, the Company reported net losses of $ 22,640 and $
75,508, respectively. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
The Company has developed a multi-step plan and has taken actions to improve its
financial position and deal with its liquidity problems. The final steps of the
plan are still being developed, but may include additional private placements of
the Company's common stock, and efforts to raise additional debt financing or
equity investments. There can be no assurance that any of the plans developed by
the Company will produce cash flows sufficient to ensure its long-term viability
as a going concern.
The Company's long-term viability as a going concern is dependent on certain key
factors, as follows:
* the Company's ability to obtain adequate sources of outside
financing to support near term operations and to allow the Company
to continue forward with current strategic plans.
* the Company's ability to ultimately achieve adequate profitability
and cash flows to sustain continuing operations.
3. STOCKHOLDERS' EQUITY
There was no change in stockholders' equity as there was no stock issuance in
the third quarter of 2009.
4. RECENT EVENTS
The Company entered into a Share Exchange Agreement fully executed on February
20, 2009 (the "Exchange Agreement") by and between the Company and AvStar
Aviation Services, Inc. ("AvStar Services"), providing for the Company's
acquisition of all of the outstanding common stock in San Diego Airmotive
("SDA"), which (through its predecessor entity) has been providing maintenance,
repair and overhaul ("MRO") services in California since 1987. In connection
with this acquisition, the Company issued to AvStar Services, the prior owner of
SDA, 1,000,000 shares of the Company's newly-created series A preferred stock
("Series A Preferred Stock"), which shares constituted in the aggregate
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approximately 92.8% of outstanding economic interest and voting power in the
Company. All descriptions of the share exchange contained herein and all
references to the terms, provisions and conditions of the Exchange Agreement are
qualified in their entirety by reference to the Exchange Agreement which was
detailed in the 8-K filed on February 25, 2009.
On August 19, 2009, at a special meeting, the stockholders of the Company
approved all five of the amendments to the Company's Articles of Incorporation
and a sixth proposal that called for such Articles of Incorporation (as amended
heretofore) to be restated in a single document. The principal effects of these
amendments involved the change of the Company's corporate name to "AvStar
Aviation Group, Inc." and a one-for-100 reverse stock split of the Pangea
Petroleum Corp. shareholders common stock. One consequence of the reverse stock
split was the conversion of all outstanding shares of Series A Preferred Stock
into 50 million post-split shares of common stock, thereby simplifying the
Company's capitalization. Moreover, another consequence was the creation of
additional authorized but unissued common shares for general corporate use.
Several more technical amendments modernized the Company's Articles of
Incorporation. The Company has completed the name change and the reverse stock
split.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We have based
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other Securities and
Exchange Commission filings. The following discussion should be read in
conjunction with our Financial Statements and related Notes thereto included
elsewhere in this report.
GENERAL
We have historically been an independent energy company focused on
exploration and development of oil and natural gas reserves, whose core business
was directed to the development of oil and gas prospects in proven onshore
production areas. In February 2009, we adopted a significant change in our
corporate direction. We have decided to focus our efforts on acquiring aviation
related businesses and developing these businesses to their commercial
potential.
Our new business plan is to acquire, consolidate and grow businesses in the
general aviation industry. We have adjusted our future goals and will place our
primary focus on the acquisition of a portfolio of fixed base operations (FBOs)
at airports that support light jet traffic along with turbine powered and piston
engine aircraft. We believe that the time is here to invest in this sector. It
is both a combination of the economic trends, consumer confidence and valuation
levels as well as new technological innovations that have just started to impact
this sector that makes our prospects of growing a portfolio of FBO businesses
compelling. These facilities will be supported by our maintenance, repair and
overhaul (MRO) of aircraft providing products and services for the general
aviation sector. We believe that since September 11, 2001, both private air
transportation and the number of aircraft owned by both individuals and business
have dramatically increased. Each of these sectors, in addition to routine
maintenance, has mandated a number of inspections by the FAA that are commonly
included in traditional MRO services.
Our recently acquired, wholly owned subsidiary, San Diego Airmotive
("SDA"), has been operating (through its predecessor entity) as an MRO since
1987. SDA historically provided MRO services for single and multi-engine
aircraft. As capital is available to us, we intend to grow our business through
the expansion of our existing MRO business as well as by acquisitions of fixed
base operations (FBOs), expansion of our existing MRO, charter operations and
other operational aircraft related businesses.
Since our inception, we have recurring losses from operations and have
depended on existing stockholders and new investors to provide the cash
resources to sustain its operations. During the three months ended September 30,
2009, we reported a loss of $22,640 compared to a loss of $75,508 reported for
the three months ended September 30, 2008.
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Our long-term viability as a going concern depends on certain key factors,
as follows:
* Our ability to continue to obtain sources of outside financing to
allow us to continue our business operations.
* Our ability to increase profitability and sustain a cash flow level
that will ensure support for continuing operations.
On August 19, 2009 at a special meeting, the stockholders of the Company
approved all five proposed amendments to the Company's Articles of Incorporation
and a sixth proposal that called for such Articles of Incorporation (as amended
heretofore or at the meeting) to be restated in a single document. The
principal effects of these amendments involved the change of the Company's
corporate name to "AvStar Aviation Group, Inc." and a one-for-100 reverse stock
split of the Company's common stock. One consequence of the reverse stock split
was the conversion of all outstanding shares of Series A Preferred Stock into 50
million post-split shares of common stock, thereby simplifying the Company's
capitalization. Moreover, another consequence was the creation of additional
authorized but unissued common shares for general corporate use. Several more
technical amendments modernized the Company's Articles of Incorporation. The
name change and reverse stock split described in this paragraph became effective
on September 21, 2009.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of the financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate estimates. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. These estimates and assumptions provide a basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions, and these differences may
be material.
We believe the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
OIL AND GAS PRODUCING ACTIVITIES
We follow the "successful efforts" method of accounting for our oil and gas
properties. Under this method of accounting, all property acquisition costs
(cost to acquire mineral interests in oil and gas properties) and costs (to
drill and equip) of exploratory and development wells are capitalized when
incurred, pending determination of whether the well has found proved reserves.
If an exploratory well has not found proved reserves in commercial quantities,
the costs associated with the well are charged to expense. The costs of
development wells are capitalized whether productive or nonproductive.
Geological and geophysical costs and the costs of carrying and retaining
undeveloped properties are expensed as incurred. Management estimates the future
liability for plugging and abandonment of the related wells.
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Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of impairment by providing an impairment allowance. Other unproved
properties are amortized based on the average holding period. Capitalized costs
of producing oil and gas properties after considering estimated dismantlement
and abandonment costs and estimated salvage values are depreciated and depleted
by the unit-of-production method. On the sale or retirement of a complete unit
of a proved property, the cost and related accumulated depreciation, depletion,
and amortization are eliminated from the property accounts, and the resultant
gain or loss is recognized. On the retirement or sale of a partial unit of
proved property, the cost is charged to accumulated depreciation, depletion, and
amortization with a resulting gain or loss recognized in the statement of
operations.
On the sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any recorded impairment if the property had been assessed
individually. If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.
RESULTS OF OPERATIONS
Financial results for the quarter and nine months ended September 30, 2009
are not directly comparable to financial results for the equivalent periods
ended September 30, 2008. During the first nine months of 2008, the Company
had only limited participation interests in various oil and gas wells. During
the first quarter of 2009, the Company completed the acquisition of San Diego
Airmotive ("SDA"), which provides maintenance, repair and overhaul ("MRO")
services of aircraft in California. This acquisition greatly affected the
financial results for the third quarter and first nine months of 2009 compared
to the financial results for the equivalent periods of 2008.
QUARTER ENDED SEPT. 30, 2009 COMPARED TO THE QUARTER ENDED SEPT. 30, 2008
REVENUES. Revenues for the third quarter 2009 were $163,601, consisting
solely of revenues from aviation operations from SDA. These revenues represent
a great increase from revenues for the third quarter 2008 of $4,945, which
resulted solely from oil and gas interests, inasmuch as the Company did not own
SDA at any time during 2008. The decrease in oil and gas revenues from the
third quarter of 2008 to the third quarter of 2009 resulted from a decrease in
production.
EXPENSES. Costs and expenses increased to $167,452 in the third quarter
2009 from $55,961in the second quarter 2008. This increase in costs and
expenses reflects $93,546 in costs of goods sold in the third quarter 2009 from
SDA's operations (while the Company had no costs of goods sold in the third
quarter 2008), with the increase being offset by the absence in the third
quarter 2009 of certain costs and expenses relating to oil and gas operations
that were incurred during the second quarter 2008. Moreover, selling, general
and administrative expenses increased to $73,906 in the third quarter 2009 from
$58,120 in the second quarter 2008. Furthermore, the Company had interest
expense in the amount of $19,804 during the third quarter 2008 with no such
expense during the third quarter 2009.
NET LOSS. As a result of the considerable increase in revenues and the
comparative small increase in expenses, the net loss of $22,640 for the third
quarter 2009 represents a decrease of $52,868 from the net loss of $75,508 for
third quarter 2008.
NINE MOS. ENDED SEPT. 30, 2009 COMPARED TO THE NINE MOS. ENDED SEPT. 30, 2008
REVENUES. Revenues for the first nine months of 2009 were $524,208,
consisting of $519,913 in revenues from aviation operations from SDA and $4,295
in oil and gas revenues. These revenues represent a great increase from
revenues for the first nine months of 2008 of $26,805, which resulted solely
from oil and gas interests, inasmuch as the Company did not own SDA at any time
during 2008. The decrease in oil and gas revenues from the first nine months of
2008 to the first nine months of 2009 resulted from a decrease in production and
a decline in oil and gas prices.
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EXPENSES. Costs and expenses increased to $655,564 in the first nine
months of 2009 from $333,086 in the first nine months of 2008. This increase in
costs and expenses reflects $334,290 in costs of goods sold in the first nine
months of 2009 from SDA's operations (while the Company had no costs of goods
sold in the first nine months of 2008), with the increase being offset by the
absence in the first nine months of 2009 of certain costs and expenses relating
to oil and gas operations that were incurred during the first nine months of
2008. Moreover, selling, general and administrative expenses increased to
$295,868 in the first nine months of 2009 from $215,927 in the first nine months
of 2008. Furthermore, the Company had interest expense in the amount of $58,983
during the first nine months of 2008 with $20,107 during the first nine months
of 2009.
NET LOSS. As a result of the considerable increase in revenues and the
relatively smaller increase in expenses, the net loss of $151,463 for the first
nine months of 2009 represents a decrease of $213,544 from the net loss of
$365,007 for first nine months of 2008.
LIQUIDITY AND CAPITAL RESOURCES
Currently, we have limited financial ability to pursue our new business
plan. We are currently trying to determine the scope of the business activities
that we will pursue in the foreseeable future. The amount of capital that we
will need depends on the scope of the business activities that we ultimately
decide to pursue. This scope is uncertain at this time. However, we know that we
must obtain additional financing to pursue our business plan at any level that
we are likely to pursue. We are currently searching for sources of financing,
but we currently do not have any binding commitments for, or readily available
sources of, financing. We cannot assure anyone that financing will be available
to us when needed or, if available, that such financing can be obtained on
commercially reasonably terms. If we do not obtain financing we will be
constrained to contract the scope of our business plan. Under certain
circumstances, we may be constrained to attempt to sell some of our assets.
However, we cannot assure anyone that we will be able to find interested buyers
or that the funds received from any such sale would be adequate to fund our
activities. Under certain circumstances, we could be forced to cease our
operations and liquidate our remaining assets, if any.
We have outstanding the following notes that became due and payable at
December 31, 2008 totaling $659,771 and related accrued interest of $99,197 as
of September 30, 2009. We are currently exploring ways to satisfy these
amounts.
(a) Note payable to Mary Pollock Merritt, daughter of our former chief
executive officer. This note bears interest at rates of 12% per year and became
due on December 31, 2008. This note is not collateralized. The current
outstanding balance on this note as of September 30, 2009 was $146,691, plus
accrued interest.
(b) Note payable to Charles Pollock, our former chief executive officer and
a significant stockholder of ours. This note bears interest of 12% per year and
became due on December 31, 2008. This note is not collateralized. The current
outstanding balance on this note as of September 30, 2009 was $400,911, plus
accrued interest .
(c) Note payable to Mark Weller, our former president and a significant
stockholder of ours. This note bears interest of 12% per year and became due on
December 31, 2008. This note is not collateralized. The current outstanding
balance on this note as of September 30, 2009 was $112,169, plus accrued
interest .
OFF-BALANCE SHEET ARRANGEMENTS
We have no off balance sheet arrangements.
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ITEM 4T. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period of this report, our principal executive and
principal financial officer carried out an evaluation of the effectiveness of
the design and operation of our disclosure controls and procedures. This
evaluation was carried out under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief Financial
Officer. We have concluded, based on that evaluation, that, as of such date, the
disclosure controls and procedures were not effective to ensure that information
required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934 (the "Exchange Act") is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure. Although
the evaluation did not detect any material weaknesses in our system of internal
accounting controls over financial reporting, management identified significant
deficiencies with respect to the timely public reporting of events requiring
such reporting. We are instituting corrective action to ensure that such events
are timely reported publicly. Notwithstanding management's assessment that our
internal control over financial reporting was ineffective as of the end of the
period of this report, and the significant deficiencies described above, we
believe that the consolidated financial statements included in this report
correctly present our financial condition, results of operations and cash flows
for the periods covered thereby in all material respects.
LIMITATIONS ON EFFECTIVENESS OF CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company have been detected. These inherent
limitations include, but are not limited to, the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have not been any changes in our internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act, during the period of this report that have materially affected, or
are reasonably likely to materially affect our internal control over financial
reporting.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 19, 2009, the Company's special meeting of the Company's
stockholders, for which proxies were solicited pursuant to Regulation 14A under
the Securities Exchange Act of 1934 (as amended), was convened to consider and
vote on five proposals to amend the Company's Articles of Incorporation:
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* to change the name of the Company to "AvStar Aviation Group, Inc." (the
"Corporate Name Change Amendment");
* to effect a 1-for-100 reverse stock split (the "Reverse Stock Split") of
the Company's Common Stock, $.001 par value per share ("Common Stock"), in which
every one hundred shares of Common Stock outstanding as of the effective date of
the amendment would be converted into one share of Common Stock; provided,
however, that all fractional shares would be rounded up to one whole share (the
"Reverse Stock Split Amendment");
* to add a provision allowing the Company's shareholders to act by written
consent in lieu of a meeting provided that shareholders, holding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all of the shares entitled to vote
thereon were present and voted, consent to such action in writing (the "Written
Consent Amendment");
* to eliminate, immediately after the effectiveness of the Reverse Stock
Split, the provisions establishing the Company's Series A Preferred Stock (the
"Preferred Stock Amendment"); and
* to amend the "powers clause" in the Company's Articles of Incorporation to
delete the lengthy enumeration of the various powers that the Company possesses
and to provide simply that the Company possess "the powers provided for in the
Colorado Corporation Code with respect to corporations" (the "Powers Clause
Amendment").
The special meeting was also convened to consider and vote on a proposal
(the "Restatement Proposal") to amend and restate the Company's Articles of
Incorporation if and only if each of the Corporate Name Change Amendment, the
Reverse Stock Split Amendment, the Written Consent Amendment, the Preferred
Stock Amendment and the Powers Clause Amendment were approved.
The Company's stockholders approved the Corporate Name Change Amendment.
The following are the results of the voting on this amendment:
COMMON SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
296,008,880 75.8% 4,602,180 89,888,484 24.2%
SERIES A PREFERRED SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
5,000,000,000 100% -0- -0- -0-
The Company's stockholders approved the Reverse Stock Split Amendment. The
following are the results of the voting on this amendment:
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COMMON SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
270,422,757 69.3% 34,323,388 85,753,399 49.2%
SERIES A PREFERRED SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
5,000,000,000 100% -0- -0- -0-
The Company's stockholders approved the Written Consent Amendment. The
following are the results of the voting on this amendment:
COMMON SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
198,284,513 50.8% 3,257,966 188,957,065 49.2%
SERIES A PREFERRED SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
5,000,000,000 100% -0- -0- -0-
The Company's stockholders approved the Preferred Stock Amendment. The
following are the results of the voting on this amendment:
COMMON SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
289,813,779 74.2% 27,934,160 72,751,605 25.8%
SERIES A PREFERRED SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
5,000,000,000 100% -0- -0- -0-
The Company's stockholders approved the Powers Clause Amendment. The
following are the results of the voting on this amendment:
COMMON SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
296,552,976 75.9% 17,525,979 76,420,589 24.1%
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SERIES A PREFERRED SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
5,000,000,000 100% -0- -0- -0-
------------- ---- --- --- ---
The Company's stockholders approved the Restatement Proposal. The
following are the results of the voting on this proposal:
COMMON SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
297,594,364 76.2% 16,218,120 76,687,060 23.8%
SERIES A PREFERRED SHARES
Percentage of Abstain or Percentage of Votes "Against"
"For" Votes "For" Against Non-Votes Abstaining or Not Voting
- --------- ------------ ------- --------- -----------------------
5,000,000,000 100% -0- -0- -0-
ITEM 6. EXHIBITS.
(a) The following exhibits are filed with this Quarterly Report or are
incorporated herein by reference:
Exhibit
Number Description
31.01 Certification pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.
31.02 Certification pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.
32.01 Certification Pursuant to 18 U.S.C. Section 1350, as pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.02 Certification Pursuant to 18 U.S.C. Section 1350, as pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AVSTAR AVIATION GROUP, INC.
(Registrant)
By: /s/Russell Ivy
--------------
Russell Ivy,
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Robert Wilson
-----------------
Robert Wilson,
Vice President and Chief Financial
Officer
(Principal Financial Officer and
Principal Accounting Officer)
November 13, 2009
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