November 11, 2007
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C> 20549
Attn: Linda Cvrkel, Branch Chief
RE: Global Aircraft Solutions, Inc.
Form 10-K for the year ended December 21, 2006
Filed April 23, 2007
Form 10-Q for the quarter ended March 31, 2007
Filed May 23, 2007
Form 10-Q for the quarter ended June 30, 2007
Filed August 14, 2007
File No. 000-28575
Dear Ms. Cvrkel:
On behalf of Global Aircraft Solutions, Inc. (the "Company"), we are submitting
this letter. This letter provides a full and complete response to the Staff's
letter, dated October 9, 2007 (the "Comment Letter"), to Ms. Patricia Graham,
Chief Accounting Officer of the Company, regarding the Annual Report on Form
10-K, filed April 23, 2007, Quarter Report on Form 10-Q filed May 23, 2007 and
Quarter Report on Form-10Q filed August 14, 2007, File No. 000-28575.
As indicated in the responses, we agree to incorporate the comments applicable
to the Company in future filings with the Commission, and believe that revisions
are not needed to the current filings.
We have included the text of each of the Staff's comments itemized by number,
with corresponding response immediately following.
Form 10-K for the year ended December 31, 2006
Management's Discussion & Analysis - Results of Operations - 2005-2006
- ----------------------------------------------------------------------
Comment 1) We note from your response to our prior comment 5 that you will
expand MD&A in future filings to discuss and analyze net sales and cost of sales
separately for each segment. However, we do not believe your response addresses
our prior comment. As previously requested, please confirm that in future
filings, you will quantify and discuss each significant cost component that
contributed to the increase in SG&A expenses.
Response 1) In response to the Staff's comment, the Company will expand its MD&A
in future filings to quantify and discuss each significant cost component that
contributed to the increase in SG&A expense.
Item 9A. Controls and Procedures, page 31
- -----------------------------------------
Comment 2) We note from your response to our prior comment 9 that management and
internal auditors determined that the disclosure controls were not effective at
the end of the period due to the ineffective accounting at the Company's joint
venture partner, Jetglobal. However, your response is not consistent with your
disclosure in 9A of the Form 10-K that the Chief Executive/Chief Financial
Officer determined that disclosure controls and procedures were effective as of
the end of the period covered by the report. Please ensure that future filings
appropriately disclose the conclusions of management regarding the effectiveness
of disclosure controls.
Response 2) In response to the Staff's comment, the Company will ensure that
future filings appropriately disclose the conclusions of management regarding
the effectiveness of disclosure controls.
Audited Financial Statements
- ----------------------------
Consolidated Balance Sheets
- ---------------------------
Comment 3) We note from your response to our prior comment 10 that $1,957,692 of
the due from equity investee partner balance at December 31, 2006 and 2005
relates to the sale of four aircraft, and $688,722 of the amount relates to
Aircraft 328 to BCI under partnership agreement. In light of the fact that these
receivables remained outstanding as of December 31, 2006, please explain to us
why you believe it was appropriate to reclassify these amount to current
receivables for both years ended December 31, 2006 and 2005. Also, as previously
requested, please explain to us why you believe the amounts recorded as "due
from equity investee partner" are recoverable as of December 31, 2006.
Additionally, please explain to us the nature of the $(1,377,444) amount
included in the rollforward of activity in "equity in net assets of and advances
to affiliates" as of December 31, 2005 that is described as "Aircraft 328 and
382 to joint venture partners, by agreement."
Response 3)
The $1,957,692 was paid in January of 2006. The payment was posted to the
regular BCI receivable account.
At December 31, 2006, the amount shown as due from investee partner of
$1,957,692 should be part of the AR balance on the Balance Sheet.
1 In January of 2006, BCI put into escrow, on Global's behalf, the sum
of $3,375,000
Global used this money to close on an aircraft purchase. The
purchase did not involve Jetglobal.
2 $1,400,000 of this amount was repaid to BCI:
900,000 January
500,000 February
---------
1,400,000 Total repaid
3 3,375,000 original amount
1,400,000 paid to BCI
---------
1,975,000 This amount was posted to receivables due from BCI
The amount due from investee partner was, at the time of
application of this payment, still recorded under "equity in
net assets of and advances to affiliates" account.
4 At year end 2006, the Due from investee partners account was
presented on the BS for 2005 and 2006, and consisted of amounts
due from investee partner, BCI, that had previously been in the
equity investment account and the Jetglobal AR account. The
amounts for BCI only are those generated by their association in
Jetglobal. The amounts due from BCI that were not the result of
BCI's Jetglobal membership are part of the accounts receivable
balance.
The BCI payment was received in January of 2006.
It should have been applied to the amount shown as due from
investee partner The regular AR account of BCI should be higher
by the amount of $1,957,692 at December 31, 2006.
At the close of 2005, the amounts of $1,957,692 and $688,722 were
anticipated to be paid within one year and were classified as current
receivables.
Prior to the filing of December 2006, there was an agreement in
principal for a settlement agreement with BCI and that the amounts due
to the company from the investment in Jetglobal and from the investee
partner, BCI, were to be paid by cash and/or aircraft.
The amount of $(1,377,444) that is included in the rollforward of
activity in "equity in net assets of and advances to affiliates" that
is Described as "Aircraft 328 and 382 to joint venture partners by
agreement" is the result of the partners Global and BCI opting to each
take one aircraft from the original purchase of 26 rather than include
them in the Jetglobal partnership. (688,722 x 2 = 1,377,444; the
original allocated price on the purchase of each of the 26 aircraft
was $688,722).
The first 688,722, is the BCI amount and was deducted from the equity
in net assets account and added to the due from investee partner
account. The second 688,722 is the Global amount which was paid by
Global to BCI. Originally that payment had been recorded as a debit to
the equity in net assets account, necessitating the credit to the
account.
Consolidated Statements of Cash Flows
- -------------------------------------
Comment 4) We note from your response to our prior comment 12 that you have
included a table showing the nature and amounts of share based payments.
However, we do not believe that the table adequately responds to our prior
comment because it does not clearly reconcile the share issuance and expense
amounts with the disclosures in Note 9. for example, the table indicates that
1,200,000 shares were issued for third party services and an expense was
recorded in each year, however it is not clear from either the table, or the
disclosures in Note 9, if all the shares were issued at once or is this
represents several transactions. Please provide us a reconciliation that
includes the date and type of issuance of each transaction, along with the total
fair value of the transaction and the expense that was recognized for each year
2004-2006. If there are any expense amounts or share issuances included in the
table that are not discussed in Note 9, disclosure of the nature and terms of
the transaction should be included in both your response and in Note 9 in future
filings. Additionally, please explain to us why the price or value of share
granted for third party service is significantly lower that the price or value
assigned to share for other issuance in the three year period ended December 31,
2006.
Response 4)
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK - SHARE-BASED PAYMENTS
- -----------------------------------------------------------------------------------------------------------------------------
Shares Price of Total Measurement Shares Date of Amount expensed
granted shares Fair date issued Share/Option
(measurement Value Issuance
date)
- -----------------------------------------------------------------------------------------------------------------------------
2004 2005 2006
- -----------------------------------------------------------------------------------------------------------------------------
Third parties,
for services:
1,200,000 $0.18 $216,000 10/15/2003* 1,200,000 10/23/2003 $40,785 $69,912 $61,233
400,000 $0.23 $92,000 07/08/2004 400,000 07/09/2004 $29,288 $46,020 $16,692
100,000 $0.70 $70,000 03/09/2006 100,000 03/09/2006 $70,000
100,000 $1.53 $153,000 04/04/2006 100,000 04/07/2006 $153,000
- -----------------------------------------------------------------------------------------------------------------------------
Third party
options:
- -----------------------------------------------------------------------------------------------------------------------------
55,000 shares 55,000 $0.32 $17,600 02/03/2004 55,000 07/07/2004 $17,600
@ $.323 share
- -----------------------------------------------------------------------------------------------------------------------------
50,000 shares 50,000 $0.30 $15,000 04/28/2004 50,000 01/18/2005
@ $.30 per
share
- -----------------------------------------------------------------------------------------------------------------------------
Employees,
employment
agreements:
- -----------------------------------------------------------------------------------------------------------------------------
Employees, Options $0.23 05/13/2004 --- Unexercised $54,000
option
exercise price
under price at
date of grant
(Options for
900,000 shares
at $0.17,
price at date
of grant $0.23)
- -----------------------------------------------------------------------------------------------------------------------------
180,000 $0.30 $54,000 12/05/2002* 180,000 08/26/2003 $12,000
1,000,000 $0.32 $320,000 10/07/2003* 1,000,000 07/27/2004 $320,000
- -----------------------------------------------------------------------------------------------------------------------------
330,000 $0.60 $198,000 07/12/2004 Two $114,162 $46,378
issue
dates:
- -----------------------------------------------------------------------------------------------------------------------------
60,000 11/23/2005
270,000 08/28/2006
15,000 $1.30 $19,500 10/24/2005 15,000 11/23/2005 $19,500
375,000 $0.95 $356,250 05/03/2006 62,500 12/29/2006 $71,751
30,000 $1.23 $36,900 06/01/2006 --- --- $790
60,000 $1.20 $72,000 07/01/2006 20,000 08/28/2006 $33,334
30,000 $0.97 $29,100 12/01/2006 --- --- $10,781
- -----------------------------------------------------------------------------------------------------------------------------
Directors,
under
agreements:
- -----------------------------------------------------------------------------------------------------------------------------
Options for Options --- Unexercised $3,000
100,000
shares. Option
price $.20 per
share. The
value at
measurement
date was $.23
- -----------------------------------------------------------------------------------------------------------------------------
Options for Options $32,600 08/25/2006 --- Unexercised $32,600
30,000 shares
Option price
$1.03 per
share The
value at
measurement
date $1.09 per
share under
Black Scholes
Method
- -----------------------------------------------------------------------------------------------------------------------------
200,000 $0.80 $160,000 01/21/2005 200,000 11/23/2005 $77,000 $80,000
10,000 $1.39 $13,900 11/21/2005 10,000 03/09/2006 $13,900
20,000 $1.35 $27,000 05/13/2006 20,000 09/01/2006 $27,000
TOTALS $476,673 $326,594 $617,459
- -----------------------------------------------------------------------------------------------------------------------------
Tax effects - $148,079
stock
compensation
- -----------------------------------------------------------------------------------------------------------------------------
*Shares granted in years prior to 2004 that were under multi-year agreements
and expensed in year of grant and applicable succeeding years.
Pt. 1 The date of each issuance, Value of shares at measurement date, or fair
value, and expense taken 2004-2006 is included in the table above.
Pt. 2
A) Items on table not disclosed in note 9:
During 2006, there were options for 30,000 shares, at an option price
of $1.03, granted. The options are good for a term of five years and were
immediately vested. Using the Black Scholes Model with the monthly
stock-prices as variable from April 2002, the call option value of these
options were calculated to be $1.09. $32,600 was expensed during 2006
relative to these options. In connection with the adoption of SFAS123R we
assessed our valuation technique and related assumptions. Consistent with
the provisions of SFAS 123R, Staff Accounting Bulletin #107 (SAB 107), we
estimated the fair value of stock option on the date of grant using the
Black Scholes Options Valuation Model and the following assumptions: Risk
free interest rate of 4.76%, Expected life of 2.5 years, Dividend rate of
0% and expected volatility of 91.98%.
Under the terms of a new three-year employment agreement, which begins June
1, 2006, 10,000 shares of common stock will vest during the first quarter
of 2007 and 10,000 shares will vest on each of two anniversary dates
beginning June 1, 2007 (30,000 shares). The value of the shares at
measurement date was $36,900, which will be expensed in equal monthly
amounts over the term of the agreement
Under the terms of a new three-year employment agreement, which begins
December 1, 2006, 10,000 shares of common stock will vest on each of three
anniversary dates beginning December 1, 2007 (30,000 shares). The value of
the shares at measurement date was $29,100, which will be expensed in equal
monthly amounts over the term of the agreement
B) Items that should be included in note 9 that are other than expenses
paid with stock:
On May 26, 2004, the Company entered into a private placement agreement
with Barron Partners, LP. Under the terms of the private placement, Barron
Partners purchased restricted 9,600,000 shares of common stock at a price
of $.34 per share, and for each share purchased received .75 warrants to
purchase an additional share at $.68 per share plus .75 warrants to
purchase an additional share at $1.36 per share. If all of the warrants are
exercised at their full purchase price, Barron Partners will acquire a
total of 24,000,000 shares of the Company's common stock in exchange for a
total of $17,952,000 in equity funding.
On May 26, 2004, the Company agreed to issue 720,000 warrants to J G
Capital, Inc. to purchase one share for each warrant at a price of $.34 per
share plus 540,000 warrants to purchase one share for each warrant at a
price of $.68 per share plus 540,000 warrants to purchase one share for
each warrant at a price of $1.36 per share in consideration for
professional services rendered in securing the private placement discussed
above.
On July 15, 2004, the Company finalized an agreement to buy 100 percent of
the common stock of World Jet Corporation, a privately held aircraft parts,
sales and brokerage company for $1.55 million in cash and notes and
1,000,000 shares of restricted common stock valued at $.50 per share for
the purposes of this transaction. The effective date of this agreement is
January 1, 2004. The shares of stock were issued in July 2004.
On July 29, 2004 the Board of Directors of the Company elected to fully
vest the 2,000,000 incentive shares that resulted under the Employment
Agreements with Messrs. Herman and Sawyer, discussed earlier, that were
entered into on July 21, 2003.
On September 3, 2004, pursuant to the "safe harbor" private offering
exemption provided by Rule 506 of Regulation D under Section 4(2) of the
Securities Act of 1933, in exchange for One Million One Hundred Thousand
Dollars ($1,100,000.00) the Company sold 2,115,386 shares of the Company's
common stock (purchase price of $0.52), class A warrants to purchase
1,057,693 shares of the Company's common stock (exercise price of $1.00 per
share), and Class B warrants to purchase 1,057,693 shares of the Company's
common stock (exercise price of $1.36 per share).The Company also issued
the following warrants as part of the commissions paid in connection with
the above offering: (i) warrants to purchase 158,654 shares of the
Company's common stock at an exercise price of $0.52 per share; (ii)
warrants to purchase 79,327 shares of the Company's common stock at an
exercise price of $1.00 per share; (iii) warrants to purchase 79,327 shares
of the Company's common stock at an exercise price of $1.36 per share.
On October 26, 2004, the Company held its 2003 annual meeting. The
stockholders voted to increase the authorized shares of common stock from
50,000,000 to 100,000,000. The Stockholders also ratified an amendment to
the Company's Certificate of Incorporation to change the corporate name
from Renegade Venture (Nev.) Corporation to Global Aircraft Solutions, Inc.
In January 2005, 50,000 options issued as compensation for outside
consultancy services were exercised at the option price of $.30 per share.
In response to the Staff's comment, in future filings the Company will
include in its notes all items related to stock transactions for the period
covered in the financial statements.
Pt. 3 Shares granted for outside services are expensed consistently for each
type of transaction. The application of the price of our stock on measurement
date to any of the above transactions determines the amount of expense related
to the particular transaction. Stock issued, or to be issued, under agreements
for a period of time in the future has been expensed during the term of the
agreement. During the period covered in the above table, the value of all stock
issued, whether to a third party or to an employee or director, was consistently
calculated using the price of the stock on the measurement date.
Note 3. Summary of Significant Accounting Policies
- --------------------------------------------------
- - Inventory
- -----------
Comment 5) We note from your response to our prior comment 13 that inventory
items previously classified as non-current consisted of items that were held for
over one year. However, we do not believe that your response adequately
addresses our prior comment. As previously requested, please explain to us the
nature of the inventory items that were previously classified as non-current
that have been reclassified as current inventory during 2006. As part of your
response, please explain to us why you believe it was appropriate to reclassify
these items to current inventory in 2006.
Response 5) Our consolidated inventory is made up of rotable parts, consumables,
(items used up in the repair of aircraft such as tape, etc.), expendables
(rivets, hardware etc. used in the repair of aircraft that stay as part of the
aircraft) Inventory items previously classified as non-current consisted of
items that were held for over one year. The nature of this inventory was
primarily rotable parts and expendables. This reclassification is based on
standard aviation industry practice of showing all aircraft parts under current
inventory. Aircraft parts typically have more than one year of life, having, for
the most part, the same life as the aircraft. Repairable parts can be repaired
several times over the life of the aircraft and installed on the aircraft. This
reclassification conforms with what we now believe is more appropriate. This
change did not impact current or past results of the Company.
- - Revenue and Cost Recognition
- ------------------------------
Comment 6) We note from your response to our prior comment 14 that all parts are
forwarded FOB shipping so that title passes at time of shipping and the Company
has no further contractual or legal obligation to the customer upon shipping.
Please include this policy in your revenue recognition disclosure in future
filings.
Response 6) In response to the Staff's comment, the Company will include in
future filings, as part of our revenue recognition disclosure the following:
Revenue from part sales is recognized when parts are shipped. All parts are
shipped FOB shipping point; title passes at time of shipping and the
Company has no further contractual or legal obligation to the customer upon
shipping.
Note 5. Equity in Net Assets and Advances to Affiliates
- -------------------------------------------------------
Note 11. Related Party Transactions
- -----------------------------------
Comment 7) We note from your response to our prior comment 17 that BCI paid the
Company in cash. However, it appears from your response to our prior comment 10
that the $1,957,692 consideration for these aircraft is included in the "due
from equity investee partner: account. In light of the fact that it appears the
consideration for this transaction has not been received by the company in
connection with this settlement arrangement, it may not be appropriate to
recognize a gain on the transaction. Citing relevant authoritative literature,
please explain in detail why you believe recognition of a gain in connection
with this transaction was appropriate. Also, if cash of $1,957,692 was received
in this transaction, please indicate when it was received by the Company. We may
have further comment upon receipt of your response.
Response 7)
1 In January of 2006, BCI put into escrow, on Global's behalf, the sum
of $3,375,000
Global used this money to close on an aircraft purchase. The
purchase did not involve Jetglobal.
2 $1,400,000 of this amount was repaid to BCI:
900,000 January
500,000 February
---------
1,400,000
3 3,375,000 original amount
1,400,000 paid to BCI
---------
1,975,000 This amount was posted to receivables due from BCI
The amount due from investee partner was, at the time of
application of this payment, still recorded under the equity
investment asset account.
4 At year end 2006, the Due from investee partners account was presented
on the BS for 2005 and 2006, and consisted of amounts due from
investee partner, BCI, that had previously been in the equity
investment account and the Jetglobal AR account
The BCI payment was received.
Note: It should have been applied to the amount shown as due from investee
partner The AR account of BCI should be higher by the amount of $1,957,692.
This reclassification entry was made in the third quarter of 2007.
Additionally, the payment by BCI under the settlement agreement that
was in the form of aircraft, would have been applied to a Due from
investee partner account that was lower by the $1,957,692.
The resulting gain on the transaction would change from $27,210 to
$1,984,902.
However, as discussed in response 11, part of the calculation of the gain
included an amount to be received from Delta.
This amount was believed to be 2,118,461 at June 30, 2007. It now appears
that BCI, as the authorized party, is in negotiations to affect the sale of
the claim against Delta and there will be a discount involved. At September
30 the discounted amount is estimated to be $622,000.
This eventuality would adjust the gain on the transaction to about
$488,441, which is the amount shown in the third quarter of 2007.
Note 9. Shareholders' Equity
- ----------------------------
Comment 8) We note from your response to our prior comment 20 that for each
transaction which you issued shares of common stock, you determined and measured
fair value at the trading price of the stock on the date of the transaction.
However, we do not believe that your response adequately responds to our prior
comment. As previously requested, for each of the non-cash stock transactions,
please tell us, and disclose in the notes to the financial statements in future
filings, the amount of expense, if any, that was recorded for the transaction,
and explain to us how the expense was calculated or determined.
Response 8)
The following table shows the cashless exercises of warrants that have taken
place. There was no expense recorded for any of these transactions. The entries
made are indicated below:
Shares under
cashless
exercise Exercise price Shares received Entry to reflect transaction
-------- -------------- --------------- ----------------------------
APIC Common Stock
---- ------------
08/26/2005 501,000 $0.34 399,000 $399.00 $-399.00
09/14/2005 31,731 $0.52 22,812 $22.81 $ -22.81
12/27/2005 31,731 $0.52 21,017 $ 21.00 $ -21.00
05/08/2006 219,000 $0.34 165,814 $165.81 $-165.81
08/08/2006 240,000 $0.68 125,124 $125.00 $-125.00
01/23/2007 95,192 $0.52 48,494 $ 48.00 $ -48.00
In response to the Staff's comment, in future filings the Company will disclose
in the notes to the financial statements the amount of expense, if any, that is
recorded for cashless exercise of warrants.
Form 10-Q for the quarter ended March 31, 2007
- ----------------------------------------------
Consolidated Statements of Operations
- -------------------------------------
Comment 9) We note from your response to our prior comment 25 that you have
reclassified the discount amounts to appropriately reflect them as reductions to
revenue in the Form 10-Q for the second quarter 2007. As previously requested
please tell us if these discounts occurred in prior periods such as the years
ended December 31, 2006 and 2005 and if so, tell us the total amount of
discounts recognized each period and how the discounts were accounted for in
those periods.
Response 9) The items listed as discounts that were reclassified in the second
quarter of 2007 occurred in the first period of 2007. They actually originated
from credit memos that were improperly entered in discount classification rather
than into revenue. The "discount" term is a misnomer. These were not discounts
in the commonly accepted parlance but were reductions in the amount that the
customer should have been billed as the result of negotiations related to time
and material billings.
We have always accounted for similar items as a reduction in revenues in the
period when the credit memos are issued or when it is known that they will be
issued. We have never offered discounts per se but on rare occasions we may
discount an account receivable balance as part of the collection process. During
2005, the total discounts allowed customers was $13,515.75. Of that amount
$3,515.75 relates to sales made in 2004 and $10,000 relates to sales made in
2005. In 2006, the total discounts allowed customers was $30,000, which relates
to sales made in 2006. Both of these amounts were included in SG&A expense for
2005 and 2006 on the December 31, 2006, 10K.
Form 10-Q for the quarter ended June 30, 2007
- ---------------------------------------------
Balance Sheet
- -------------
Comment 10) We note your presentation of deferred compensation as a component of
stockholders' equity as of June 30, 2007. Please note that SFAS No. 123R
requires compensation costs to be recognized in the financial statements as
services are provided by employees and does not permit those costs to be
recognized as deferred compensation of the balance sheet before services are
provided. See paragraph 74 of SFAS No. 123R and SAB 107. Please revise future
filings.
Response 10) In response to Staff's comment, in future filings deferred
compensation will not be presented on the balance sheet as per SFAS No. 123R
paragraph 74.
Note 5. Equity in Net Assets and Advances to Affiliates
- -------------------------------------------------------
Comment 11) We note the disclosure indicating that during the quarter ended June
30, 2007, management, transferred its ownership interest in Jetglobal, LLC to
the other partner, BCI Aircraft Leasing, in consideration for aircraft inventory
and a trailing interest in certain claims of Jetglobal against third parties. We
also note that the final agreement calls for a transfer of six aircraft with a
total value of $8,650,000 and a trailing interest of 18% in the Delta Airlines
bankruptcy claim with an estimated value of $2,118,461. We further note that in
connection with this transaction the Company recorded a gain of $27,210 during
the second quarter of 2007. With regards to this transaction please address the
following matters:
o Please tell us and explain in the notes to your financial statements
in future filings how you determined the $8,650,000 value assigned to
the six aircraft to be received by the Company in connection with this
transaction.
o Please tell us and explain in the notes to your financial statements
in future filings how you determined the estimated value of the
trailing interest of 18% in the Delta Airlines bankruptcy claim with
an estimated value of $2,118,461. As part of your response and your
revised disclosure, please indicate the nature and amount of the
consideration that will be received by Jetglobal LLC as a result of
the Delta Airlines bankruptcy proceedings and explain how you
determined the fair value of the 18% interest that the Company expects
to receive.
o Explain in detail how the Company calculated or determined the $27,210
gain that was recognized during the second quarter of 2007.
Response 11)
Pt. 1 The value of the aircraft at $8,650,000 was established by analysis of
corresponding aircraft and their sales value in the marketplace.
Five of the aircraft were Boeing 737-200's and were valued at fair
value based on market. The company consulted The AVITAS Blue Book of
Values, which lists the 2007 value of this aircraft model at $1.5
Million. The MD80 was valued at its estimated fair market value,
$1,150,000.
Pt. 2 Jetglobal bought 26 aircraft that had been leased by Delta. The
aircraft were in two groups: Group A, 14 Aircraft that had been parked
and were no longer under a lease and Group B, 12 Aircraft that were
still under lease by Delta.
The lease terms required Delta to meet certain lease return
conditions.
Jetglobal instituted a claim against Delta for the dollar value of the
unpaid rent and lease return conditions not met. The original claim
was $51,540,000. Jetglobal agreed to forebear on the Group A aircraft
because they had not owned them when the aircraft were parked and
returned off lease. Delta agreed to pay on the Group B aircraft all
commercial requirements of the leases based on court approval under
the Agreed to Secured Claim payout formula.
The new resulting claim was $23,538,461 @ $.50 per Dollar =
$11,769,230 18% of which is $2,118,461, our estimated amount at June
30, 2007. As part of the settlement agreement with BCI, it was agreed
by BCI and Global that an 18% interest in the Delta claim would be
paid to Global.
Note: This amount was believed to be 2,118,461 at June 30, 2007.
During the third quarter of 2007, BCI, as the authorized party,
participated in negotiations to sell the claim against Delta for cash,
which involves a discount. At September 30, the discounted amount is
estimated to be $622,000.
Pt. 3 Sales price per settlement agreement terms:
4a/c @$1.5M each. $ 6,000,000 Received
1/ac @$1.5M 1,500,000 To be rec'd Sept (actually rec'd Oct)
1a/c @$1.15M 1,150,000 Received
18% interest in Delta 2,118,461 To be received
18% interest in AFG no value assignable
------------
$ 10,768,461
Allocation of sales price
AR at 12/31/06 from BCI for a/c $ 688,722
Sale of interest of 4 a/c 1,957,692
Acct due form Jetglobal 1,319,800
HAT AR amounts for Jetglobal 346,142
Equity investment 2,837,644
Balance of equity investment 3,591,251
------------
$ 10,741,251
Other
- -----
Comment 12) As previously requested, in connection with responding to our
comments, please provide in writing, a statement from the company acknowledging
that:
o The company is responsible for the adequacy and accuracy of the
disclosure in the filing;
o Staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filing; and
o The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Response 12) in response to the Staff's comment a statement from the company
acknowledging the items in comment 12 appears below:
Global Aircraft Solutions, Inc. hereby acknowledges that:
o The company is responsible for the adequacy and accuracy of the
disclosure in the filing;
o Staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with respect to the filing; and
o The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
On behalf of the Company, we hope the Staff finds this letter responsive to its
comments on the Company's Annual and Quarterly Reports. Please advise as to
whether or not you are requiring us to file a 10-K/A in connection with your
comments and our responses thereto or if our responses are sufficient as long as
we update all future filings as indicated above.
Should members of the Staff have any questions or comments regarding these
materials please feel free to call me at 520-294-3481.
Sincerely,
/s/ Patricia Graham
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Patricia Graham
Chief Accounting Officer