<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
REGISTRATION NO. 333-27197
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PROFLIGHT MEDICAL RESPONSE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
COLORADO 4522 84-1200480
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
7211 S. PEORIA STREET,
ENGLEWOOD, COLORADO 80112
(800) 949-5387
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
7211 S. PEORIA STREET,
ENGLEWOOD, COLORADO 80112
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF BUSINESS)
------------------------
KEVIN L. BURKHARDT
7211 S. PEORIA STREET, ENGLEWOOD, COLORADO 80112
(800) 949-5387
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPY OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
GERALD A. ADLER, ESQ. LAWRENCE G. NUSBAUM, ESQ.
MARY P. O'HARA, ESQ. GUSRAE, KAPLAN & BRUNO
BONDY & SCHLOSS LLP 120 WALL STREET
6 EAST 43RD ST., 25TH FLOOR NEW YORK, NY 10005
NEW YORK, NY 10017 PH: (212) 269-1400
PH: (212) 661-3535 FAX: (212) 809-5449
FAX: (212) 972-1677
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 1, 1998
PROSPECTUS
PROFLIGHT MEDICAL RESPONSE, INC.
1,019,200 SHARES OF COMMON STOCK AND
1,019,200 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
Proflight Medical Response, Inc., a Colorado corporation (the 'Company'),
hereby offers (the 'Offering') 1,019,200 shares of common stock, $.001 par value
(the 'Common Stock') of the Company and 1,019,200 Redeemable Common Stock
Purchase Warrants (the 'Warrants'). The initial public offering prices of the
Common Stock and Warrants are $6.50 and $.10, respectively. The Offering is
being offered through First Liberty Investment Group, Inc. (the 'Underwriter').
See 'Underwriting.' The Common Stock and the Warrants offered hereby (sometimes
hereinafter collectively referred to as the 'Securities') will be separately
tradeable immediately upon issuance and may be purchased separately. Investors
will not be required to purchase shares of Common Stock and Warrants together or
in any particular ratio. Each Warrant entitles the holder to purchase one share
of Common Stock at an exercise price of $8.00 (the 'Exercise Price'), subject to
adjustment, for five years commencing twenty-four months from the date of this
Prospectus (provided that with the prior written consent of the Underwriter, the
Warrants may be exercised commencing twelve months from the date hereof).
The Warrants are redeemable, in whole or in part, by the Company at a price
of $.10 per Warrant, commencing twenty-four (24) months after the date hereof
(provided that with the prior written consent of the Underwriter, the Warrants
may be redeemed commencing twelve (12) months from the date hereof) and prior to
the expiration, provided that (i) prior written notice of not less than thirty
(30) days is given to the Warrantholders, and (ii) the closing bid price of the
Company's Common Stock for the twenty (20) consecutive trading days immediately
prior to the date on which the notice of redemption is given, shall have
exceeded $12.75 per share. Notwithstanding the foregoing, Warrantholders shall
have exercise rights until the close of business the day preceding the date
fixed for redemption.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. There can be no assurance that a public market will
develop or be sustained for such securities after the completion of the
Offering. The offering prices of the Common Stock and the Warrants, exercise
price and other terms of the Warrants were established by negotiations between
the Company and the Underwriter and do not necessarily bear any direct
relationship to the Company's assets, earnings, book value, results of
operations or any other generally accepted criteria of value. The Company has
received a tentative approval for listing of the Common Stock and the Warrants
on the Nasdaq SmallCap Market'sm' under the trading symbols 'PFLT' and 'PFLTW.'
See 'Risk Factors' and 'Underwriting.'
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE AND
SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT AFFORD THE
LOSS OF HIS OR HER ENTIRE INVESTMENT. SEE 'RISK FACTORS' BEGINNING ON PAGE 9 OF
THIS PROSPECTUS FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(1) COMPANY(2)(3)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................................................................... $6.50 $0.65 $5.85
Per Warrant.................................................................... $.10 $.01 $.09
Total(3)....................................................................... $6,726,720 $672,672 $6,054,048
</TABLE>
(1) Does not include (i) an option issued to the Underwriter (the 'Underwriter's
Option') to purchase 101,920 shares of Common Stock at $8.00 per share and
101,920 Warrants at a price of $.12 per Warrant exercisable at $8.00 per
share, (ii) a non-accountable expense allowance payable to the Underwriter
equal to 3% of the gross proceeds of the Offering, (iii) a consulting
agreement providing for fees totalling $120,000 payable in full to the
Underwriter on the Closing Date and (iv) a 5% commission on Warrants
exercised through the Underwriter. The Underwriter's Option is exercisable
for a period of four years commencing one year after the date of this
Prospectus. The Company has agreed to indemnify the Underwriter against, or
contribute to losses arising out of, certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
'Underwriting.'
(footnotes continued on following page)
FIRST LIBERTY INVESTMENT GROUP, INC.
------------------------
, 1998
<PAGE>
<PAGE>
(footnotes continued from previous page)
(2) After deducting underwriting discounts and commissions, but before deducting
estimated Offering expenses of $476,802 in the aggregate, which includes the
Underwriter's non-accountable expense allowance all of which are payable by
the Company. See 'Underwriting.'
(3) The Securities are being sold on a 'firm commitment' basis. The Company has
granted the Underwriter an option, exercisable during the 45-calendar-day
period after the date hereof, to purchase, at the initial public offering
price less underwriting discounts, up to an additional 152,880 shares of
Common Stock and 152,880 Warrants, on the same terms as offered hereby,
solely to cover over-allotments, if any (the 'Over-Allotment Option'). If
the Over-Allotment Option is exercised in full, the Total Price to the
Public will be $7,735,728, Underwriting Discount and Commissions will be
$1,005,644, and the Proceeds to the Company will be $6,730,083, before
deducting estimated offering expenses payable by the Company. See Note (2)
above and 'Underwriting.'
------------------------
The Securities are being offered by the Underwriter, as agent for the
Company, subject to prior sale, when, as and if accepted by it and subject to
certain legal matters to be approved by counsel and to certain other conditions.
The Company and the Underwriter reserve the right to withdraw, cancel or modify
the Offering and to reject any order in whole or in part.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements of the Company, after the end of each
fiscal year, and make available such other periodic reports as the Company may
deem appropriate or as may be required by law.
A SIGNIFICANT AMOUNT OF THE COMMON STOCK AND WARRANTS MAY BE SOLD TO
CUSTOMERS OF THE UNDERWRITER. SUCH CUSTOMERS MAY SUBSEQUENTLY ENGAGE IN THE SALE
OR PURCHASE OF THE COMMON STOCK OR WARRANTS THROUGH OR WITH THE UNDERWRITER.
ALTHOUGH IT HAS NO OBLIGATION TO DO SO, THE UNDERWRITER MAY BECOME A MARKET
MAKER AND OTHERWISE EFFECT TRANSACTIONS IN SECURITIES OF THE COMPANY, AND, IF IT
PARTICIPATES IN SUCH MARKET ACTIVITIES, MAY BE A DOMINATING INFLUENCE IN THE
TRADING OF THE COMMON STOCK AND WARRANTS. THE PRICES AND THE LIQUIDITY OF THE
COMMON STOCK AND WARRANTS MAY BE SIGNIFICANTLY AFFECTED BY THE DEGREE, IF ANY,
OF THE PARTICIPATION OF THE UNDERWRITER IN SUCH MARKET, SHOULD A MARKET ARISE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET.
2
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information, including the financial
statements and notes thereto, appearing elsewhere in this Prospectus. All share
and per share amounts reflect a .667-for-one reverse stock split effective April
1998 and a fifty-for-one and a 3.85356-for-one forward stock split effective
July 1996 and January 1996, respectively, of the Company's issued and
outstanding Common Stock. In December 1996, the Company contracted to acquire
all of the outstanding shares of capital stock of (i) Air Response, Inc., a New
York corporation ('Air Response') in a stock-for-stock exchange and (ii) Air
Response South, Inc., a Florida corporation ('Air Response South'), for cash.
Each of these corporations provides fixed wing air ambulance services. These
agreements were amended in April and May 1997 and in March 1998. Pursuant to the
terms of these agreements, such acquisitions will close simultaneously with the
closing of this Offering. Unless the context otherwise requires, the term 'the
Company' includes Air Response and Air Response South. Except where otherwise
indicated, all information in this Prospectus assumes no exercise of the
Underwriter's Over-Allotment Option or Underwriter's Option. Each prospective
investor is urged to read this Prospectus in its entirety.
THE COMPANY
The Company is a national and international provider of fixed wing air
ambulance transport services for persons who are ill, injured or otherwise
incapacitated who need to be relocated and who may require emergency medical
care during flight. The Company currently operates from its main facility
located in Colorado, and has bases in New York and Tennessee. The Company
provides its services throughout the United States, Canada, Europe, Mexico,
Central America, South America, Bermuda and the Mediterranean. In addition, the
Company, when operating at full capacity, has subcontracted its services by
brokering its air ambulance trips to other air transport providers. For the year
ended December 31, 1997, the Company, including Air Response and Air Response
South, had pro forma net sales of approximately $12.7 million.
As of the date hereof, the Company has an air ambulance fleet of 11 fixed
winged aircraft. The Company provides transport services in connection with the
relocation of patients requiring specialized medical procedures such as organ
transplants, cancer treatment, specialized cardiac surgery, burn care, stroke
care and advanced head and spinal cord surgery and rehabilitation to hospitals
recognized as national centers of excellence in these fields, for the
repatriation of patients who are injured or become ill away from home and in
connection with the transportation of non-ambulatory long-term care patients who
need to be relocated. The flights operated are on a non-emergency basis and are
generally long distance in nature. Emergency flights are usually contracted to
helicopters and such flights are generally short distances. The Company's
customers include individual patients, managed care companies, hospitals,
government agencies, national health insurance companies, health maintenance
organizations ('HMOs') and air ambulance brokers.
The Company believes that the need for non-emergency ambulance transport
services will increase as pressure on the health insurance industry to reduce
costs increases. The Company believes that it can capitalize on this market. The
Company believes that the fixed wing segment of the medical air transport
industry will grow as hospital consolidation produces regional health networks
responsible for patients spread over a greater geographic area. The Company also
believes, although no assurance can be given, that relocating patients with
specialized needs to hospitals recognized as national centers of excellence and
which have pricing agreements with insurers and HMOs will increase as a way to
provide high quality, cost effective health care. The fixed wing air ambulance
market is currently served by a number of small, regional companies lacking a
national presence and the ability to serve an insurance company or HMO on a
national basis. The Company believes that through the acquisitions of Air
Response and Air Response South (the 'Acquisitions') and by implementing its
business strategy, it will begin to establish a national presence while
continuing to ensure that patients receive the highest quality care. The
Company's beliefs in this paragraph are based upon management's experience and
an independent research report by Wintergreen Research, Inc., copyright 1995,
entitled 'Fixed Wing Air Medical Transport Market, 1991 - 2000.' No assurance
can be given that such beliefs will be realized or are predictive of future
developments. No assurance can be given that the facts, predictions or the
independent research report upon which such beliefs are premised are accurate.
3
<PAGE>
<PAGE>
The Company's business strategy over the next 24 months is to attempt to
become a leading national provider of fixed wing air ambulance services by:
Improving the efficiency of its existing operations by integrating the
operations of Air Response and Air Response South into the Company and by
providing additional management expertise, recognizing economies of scale,
introducing sophisticated operating systems and controls, instituting a
centralized dispatching function and providing a stronger, more stable
capital base.
Implementing strategic acquisitions of other air ambulance service
providers. The Company believes that opportunities exist to acquire
additional air ambulance service providers in the future that would
benefit from the efficiency, as well as the capital and management
resources of the Company. The Company regularly evaluates acquisition
possibilities and considers a number of factors in evaluating such
acquisition candidates, including the quality of management and medical
personnel, historical operating results, the demographic characteristics
of service areas, the regulatory environment in which such company
operates and the fee structure and reimbursement levels. In addition, by
combining existing companies, the Company hopes it will be able to deliver
fixed wing air ambulance services to insurance companies and other health
care providers at cost effective rates. Except as otherwise described in
this Prospectus, there are no present negotiations, arrangements or
understandings with respect to any potential material acquisitions.
Increasing its market share and expanding its operations by contracting
with insurers and HMOs seeking an air ambulance provider with national and
international capabilities and by appealing to individual consumers
through a prepaid service package. No assurances can be given that the
Company will be able to successfully negotiate additional contracts with
such parties on favorable terms, if at all, or otherwise expand its
operations.
The Company's senior management has extensive experience in the air
ambulance transport services business. Kevin L. Burkhardt, the Company's Chief
Executive Officer and President, has over 10 years experience in the air
ambulance industry and over 20 years experience in the aviation industry,
including experience as captain, flight instructor and corporate pilot. Jane S.
Burkhardt, the Company's Secretary and medical and legal coordinator, received
her B.S. degree in nursing in 1981 from the University of Wisconsin and her JD
degree in 1990 from St. Louis University Law School. Mrs. Burkhardt has over 14
years experience in the nursing industry and was a registered nurse and risk
manager for Presbyterian/St. Lukes Medical Center. Donald Jones will, upon
closing of the Offering, serve as the Company's Vice President of Sales and a
Director of the Company. Mr. Jones has over 13 years experience in the air
ambulance industry, including experience as flight coordinator, and director of
marketing and sales. David Cohen, the Company's Chief Financial Officer and
Treasurer, has over 30 years of management and financial experience. Mr. Cohen
was the chief financial officer of Air Resources Corp., a public company which
manufactures adhesives and held various senior management positions for two
aircraft sales corporations.
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
further amended in May 1997 and January 1998, pursuant to which the Company
agreed to acquire at the closing of the Offering, subject to the terms and
conditions contained therein, all of the outstanding capital stock of Air
Response in exchange for 496,154 shares of Common Stock of the Company to be
issued two years from the date hereof. If the Company completes a second public
offering, Mr. Capece has a put option to sell to the Company such number of
shares of Common Stock at the then current market value, which value shall be
equal to 20% of the net proceeds of such offering not to exceed $1,000,000.
Under the terms of the put option, the Company is obligated to purchase such
shares once the put option is exercised. The Company simultaneously entered into
an Amended Stock Purchase and Sale Agreement with Air Response South and Louis
R. Capece, Jr., which was further amended January 1998, pursuant to which the
Company agreed to acquire at the closing of the Offering, subject to the terms
and conditions contained therein, all of the outstanding capital stock of Air
Response South for $800,000 which is payable upon closing of the Offering. The
Company has also agreed to issue to Donald Jones, a principal of Air Response
and Air Response South, 76,924 shares on the closing date of the Offering as a
bonus under his employment agreement. See 'Employment Agreements.'
4
<PAGE>
<PAGE>
The Company was incorporated in May 1992. The Company's executive offices
are located at 7211 S. Peoria St., Englewood, CO 80112 and its telephone number
is (800) 949-5387.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered......................... 1,019,200 shares(1)
Redeemable Common Stock Purchase Warrants
Offered.................................... 1,019,200 Warrants(1)
Common Stock Outstanding Before the
Offering................................... 1,784,350 shares(1)(2)
Common Stock Outstanding After the
Offering................................... 2,803,550 shares(1)(2)
Warrants Outstanding Before Offering......... -0-
Warrants Outstanding After Offering.......... 1,019,200 Warrants(1)(3)
Exercise Terms.......................... Each Warrant entitles the holder to purchase one share of Common
Stock for $8.00, during the three (3) year period commencing
twenty-four (24) months from the date hereof (provided that with
the express prior written consent of the Underwriter, the Warrants
may be exercised twelve (12) months from the date hereof), subject
to adjustment in certain circumstances. See 'Description of
Securities -- Warrants.'
Expiration Date......................... , 2003 (five years after the date hereof).
Redemption.............................. Redeemable by the Company, in whole or in part, at a price of $.10
per Warrant, commencing twenty four (24) months after the date
hereof (provided that with the prior written consent of the
Underwriter, the Warrants may be redeemed commencing twelve (12)
months from the date hereof) upon not less than thirty (30) days
prior written notice to the holders of such Warrants, provided
that the closing bid price (as defined in the Warrant Agreement)
of the Company's Common Stock for the twenty (20) consecutive
trading days immediately prior to the date on which the notice of
redemption is given, shall have exceeded $12.75 per share.
Use of Proceeds.............................. The net proceeds from the Offering will be used to pay the first
payment in connection with the acquisition of Air Response South, to
repay indebtedness incurred in connection with the Company's bridge
financing and certain short term notes, to fund costs relating to its
expansion strategy and for general corporate purposes, including
working capital. See 'Use of Proceeds.'
Risk Factors................................. An investment in the Securities offered hereby involves a high
degree of risk and immediate substantial dilution to the public
investors. See 'Risk Factors' and 'Dilution.'
Proposed Trading Symbols(4):
Nasdaq SmallCap MarketSM
Common Stock............................ PFLT
Warrants................................ PFLTW
</TABLE>
(footnotes on next page)
5
<PAGE>
<PAGE>
(footnotes from previous page)
(1) Does not include 152,880 shares of Common Stock or 152,880 Common Stock
Purchase Warrants that may be sold by the Company pursuant to the
Underwriter's Over-Allotment Option.
(2) Does not include: (i) 350,000 shares of Common Stock reserved for issuance
under the Company's stock option plan; (ii) 496,154 shares of Common Stock
which will be issued to Louis R. Capece, Jr., in connection with the
acquisition of Air Response, two years from the closing of the Offering,
(iii) 76,924 shares of common stock which will be issued to Don Jones at the
closing of the Offering, (iv) 1,019,200 shares reserved for issuance upon
exercise of the Warrants offered hereby; (v) 700,350 shares reserved for
issuance upon exercise of other outstanding options; and (vi) 101,920 shares
of Common Stock and 101,920 Common Stock Purchase Warrants issuable upon
exercise of the Underwriter's Option, including 101,920 shares of Common
Stock issuable upon exercise of the Common Stock Purchase Warrants which are
included in and issuable upon exercise of the Underwriter's Option; (vii)
152,880 shares of Common Stock and 152,880 Common Stock Purchase Warrants
issuable upon exercise of the Underwriter's Over-Allotment Option; and
(viii) 6,670 shares of Common Stock to be issued to an Officer at the
closing of the Offering; (ix) Does include 250,000 shares returned by a
shareholder before and after the offering. See 'Management -- Stock Option
Plan,' 'Certain Transactions,' 'Description of Securities' and
'Underwriting.'
(3) Does not include Underwriter's Options or the 101,920 Warrants issuable upon
exercise thereof.
(4) The Company has received tentative approval to have the Common Stock and
Warrants approved for quotation on the Nasdaq SmallCap Market'sm', subject
to compliance with requests for documentation and payment of the listing
fee, and believes it will meet the initial listing requirements upon
consummation of the Offering. There is no assurance that, if listed, it will
be able to satisfy the criteria for continued quotation on the Nasdaq
SmallCap Market'sm' following the Offering. See 'Risk Factors -- Listing and
Continued Quotation on the Nasdaq SmallCap Market.'sm''
6
<PAGE>
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary historical financial data of (i)
Proflight for the years ended December 31, 1997 and 1996 and (ii) Air Response
and Air Response South for the years ended December 31, 1997 and 1996. The
historical financial data for the years ended December 31, 1997 and 1996 are
derived from the audited financial statements of Proflight, and the audited
combined financial statements of Air Response and Air Response South. The
financial statements of Proflight have been audited by Grant Thornton LLP,
independent certified public accountants, whose report thereon has been modified
to include an explanatory paragraph which refers to various matters which raise
substantial doubt about Proflight's ability to continue as a going concern and
are included elsewhere in this Prospectus. The combined financial statements of
Air Response and Air Response South for the years ended December 31, 1997 and
1996 have been audited by Staff Ciampino & Company, P.C., independent certified
public accountants, which statements are included elsewhere in this Prospectus.
The summary historical financial data should be read in conjunction with the
financial statements and notes thereto of Proflight, Air Response and Air
Response South and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' included elsewhere in this Prospectus. The following
table also sets forth pro forma financial data of the Company as if the
Acquisitions (which will close simultaneously with the closing of this Offering)
had occurred as of December 31, 1997 for balance sheet results and as of January
1, 1997 for operating data. The pro forma financial data was derived from the
unaudited pro forma financial statements appearing elsewhere in this Prospectus.
The summary pro forma financial data should be read in conjunction with the
Company's pro forma financial statements and the notes thereto. The pro forma
balance sheet data and the pro forma statement of operations for the year ended
December 31, 1997 are unaudited, but, in the opinion of management, reflect all
adjustments necessary for a fair presentation of pro forma results of
operations. The pro forma operating results are not necessarily indicative of
the Company's future results of operations.
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
AIR RESPONSE AND AIR
THE COMPANY RESPONSE SOUTH
----------------------- -----------------------
YEARS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING DATA
Historical:
Net sales......................................................... $5,644,799 $3,906,211 $8,783,037 $7,658,243
Flying operations and maintenance................................. 3,964,831 3,001,507 5,840,403 4,875,505
Promotion and sales............................................... 69,985 255,616 492,331 447,061
General, administrative expense................................... 1,406,483 650,036 1,885,940 1,538,761
Depreciation and amortization..................................... 488,867 377,930 311,554 396,139
Income (loss) from operations..................................... (285,367) (378,878) 252,809 400,777
Interest expense.................................................. 415,343 287,188 189,242 136,148
Other income (expense)............................................ 25,000 34 (43,063) (349,590)
Income tax benefit................................................ -- -- 85,222 38,747
Net income (loss)................................................. (675,710) (666,032) 105,726 (46,214)
</TABLE>
7
<PAGE>
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Pro Forma Operating Data:
Net sales............................................................................. $12,712,990
Flying operations and maintenance..................................................... 8,090,388
Promotion and sales................................................................... 562,316
General and administrative expense.................................................... 3,292,423
Depreciation and amortization......................................................... 1,068,256
Total operating expense............................................................... 13,013,383
Operating loss........................................................................ 300,393
Other expense......................................................................... 622,648
Income tax benefit.................................................................... 85,222
Net loss.............................................................................. 837,819
Per share data:
Net loss.............................................................................. $ (0.35)(1)(2)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------
ACTUAL(3) PRO FORMA(4) ADJUSTED(5)
----------- ------------ --------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit).................................. $(3,226,040) $(4,609,392) $ 967,854
Total assets............................................... 3,722,170 9,666,048 14,465,294
Long term obligations...................................... 687,754 1,749,139 1,749,139
Retained (deficit)......................................... (786,715) (786,715) (1,330,890)
Stockholders' equity (deficit)(2).......................... (753,338) 2,471,662 8,048,908
</TABLE>
- ------------
(1) Based on 2,382,747 shares which do not include (i) 1,019,200 shares of
Common Stock offered hereby, (ii) 6,670 shares of Common Stock being offered
to an officer as a bonus at the closing of the Offering, or (iii) 76,924
shares of Common Stock to be issued to Don Jones as part of his employment
agreement at the completion of the offering.
(2) All per share and equity data have been adjusted to reflect the .667-for-1
reverse split of the Company's Common Stock effective as of April 16, 1998.
(3) Represents Proflight Medical Response.
(4) Includes Air Response and Air Response South.
(5) The adjusted pro forma data includes adjustments that reflect the effects of
the Acquisitions, including the sale of 1,019,200 shares of Common Stock and
1,019,200 Warrants offered hereby and the application of the net proceeds.
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RISK FACTORS
An investment in the Securities offered hereby involves a high degree of
risk. Prior to making any investment decision, prospective investors should
carefully consider the following risk factors together with the other
information presented in this Prospectus including the financial statements (and
notes thereto).
HISTORY OF LOSSES; ACCUMULATED DEFICIT; NO HISTORY OF COMBINED OPERATIONS.
Proflight reported net losses for the year ended December 31, 1997 of $675,710
and for the year ended December 31, 1996 of $666,032. Air Response and Air
Response South, on a combined basis, reported a net profit of $105,726 and a net
loss of $46,214 for the years ended December 31, 1997 and 1996, respectively. On
a pro forma basis, after giving effect to the Acquisitions, the Company would
have had a net loss for the year ended December 31, 1997 of $837,819. As of
December 31, 1997, Proflight had an accumulated deficit in stockholders' equity
of $753,338 and a working capital deficiency of $3,226,040. On a pro forma
basis, after giving effect to the Acquisitions, the Company would have had total
stockholders equity of $2,471,662. For the year ending December 31, 1998, the
Company may incur additional losses which may be substantial as a result of,
among other things, its expansion strategy. There can be no assurance that the
Company's operations will be profitable in the future or if achieved, that such
profitability will be sustained. The Company will consummate the Acquisitions on
closing of the Offering, and to date, each of the companies has been operating
as a separate, independent entity. The Company's profitability will depend upon,
among other factors, the ability of its management to integrate these entities
into a single cohesive business entity with a single business philosophy. There
can be no assurance that the Company's management will be successful in managing
the combined operations or in implementing the Company's business strategy. See
'Management's Discussion and Analysis of Financial Condition and Results of
Operations.'
MODIFICATION OF AUDITOR'S OPINION; GOING CONCERN. Proflight's independent
accountants have included an explanatory paragraph in their report on
Proflight's financial statements at December 31, 1997 and 1996, which states
that Proflight has accumulated a deficit in stockholders' equity of $753,338
through December 31, 1997 and total current liabilities exceed total current
assets by approximately $3,226,040 as of December 31, 1997, all of which raise
substantial doubt about Proflight's ability to continue as a going concern. See
'Financial Statements and Report of Independent Certified Public Accountants'
included elsewhere in this Prospectus.
EXPANSION STRATEGY; DEPENDENCE ON REVENUES FROM ACQUISITION TARGETS; NO
ASSURANCE OF COMPLETION OF PROPOSED ACQUISITIONS. The Company's success will
depend, in large measure, upon management's ability to successfully implement
its business strategy to expand the Company's operations and enhance its
national and international presence by improving the efficiency of its existing
operations including integrating the operations of Air Response and Air Response
South, implementing strategic acquisitions of other air ambulance service
providers and increasing its market share by contracting with insurers and HMOs.
In addition, the Company's success will depend upon revenues generated by Air
Response and Air Response South as well as any future acquisition targets. The
Company currently has no agreements or understandings, nor is it engaged in any
negotiations with respect to any acquisitions other than those contemplated
herein with Air Response and Air Response South. The Company has a contract with
Aetna Health Management, Inc. ('Aetna') to provide air transport services. The
Company's contract with Aetna does not guarantee any specific amount of
revenues. For the year ended December 31, 1997, Aetna represented 7.5% of the
Company's revenues. However, the Company does not have any other agreements with
insurers or HMOs. There can be no assurance that the proposed acquisitions with
Air Response and Air Response South will be completed or, if completed, will be
successful. There can be no assurance that suitable growth opportunities or
acquisitions or strategic alliances can be identified, consummated or
successfully implemented or that the Company's expansion strategy will result in
profitability. See 'Dependence on Major Customers.'
RISKS ASSOCIATED WITH ACQUISITIONS. The Company is not currently
considering, nor are there any agreements, negotiations or understandings
involving the Company with respect to, the acquisition of any business (other
than those of Air Response and Air Response South discussed elsewhere in this
Prospectus) or entering into a joint venture with any other business, individual
or other entity. From time to time in the future, the Company may enter into
negotiations with respect to potential acquisitions or joint ventures, some of
which may result in preliminary agreements. In the course of
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such negotiations and/or due diligence, these negotiations and/or preliminary
agreements may be abandoned or terminated, and the Company may incur significant
transaction expenses (such as legal and accounting fees) despite the abandonment
or termination of such negotiation or agreement.
NEED FOR ADDITIONAL FINANCING. The Company anticipates that the proceeds
from the Offering, together with projected cash flow from operations, will be
sufficient to fund its operations, including its proposed expansion, for at
least the next 12 months. However, there can be no assurance that events
affecting the Company's operations will not result in the Company depleting its
funds before that time. The Company may need to raise additional funds to
continue to implement its expansion strategy. There can be no assurance that
additional financing will be available, or, if available, that such financing
will be on terms favorable to the Company. Failure to obtain such additional
financing could have a material adverse effect on the Company. The Company
anticipates issuing additional securities to fund its expansion, either to raise
capital to fund internal growth or as principal consideration for acquisitions.
There can be no assurance that the Company will be able to successfully finance
its expansion or that the Company's securities will be acceptable consideration
to acquisition candidates. The failure of the Company to successfully implement
its expansion strategy may negatively impact the Company's competitive position
and its future results of operations. See 'Use of Proceeds,' 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources' and the Company's financial
statements and notes thereto.
PROCEEDS FOR ACQUISITION PAYMENT AND DEBT REPAYMENT; BROAD DISCRETION IN
APPLICATION OF PROCEEDS. Approximately 30% of the net proceeds of this Offering
will be used to pay the first payment in connection with the acquisition of Air
Response South and to repay certain short term notes and to repay the bridge
lenders. Approximately $1,185,246 (21%) of the net proceeds of this Offering
will be used for general corporate purposes, including working capital.
Accordingly, management will have broad discretion over the use of such
proceeds. See 'Use of Proceeds.'
GOVERNMENTAL REGULATION. The Company is subject to governmental regulation
at the federal and state levels. At the federal level, the Company is subject to
regulation by the Federal Aviation Administration ('FAA') and the Occupational
Safety and Health Administration ('OSHA'). The FAA regulations are primarily
related to flight safety issues, and to govern flight operating procedures,
aircraft and equipment standards, maintenance and inspections, flight crew
standards, training and limitations, weather requirements and record keeping
requirements. The OSHA regulations are primarily designed to protect the
employees of the Company. Certain of the states in which the Company operates
regulate various aspects of its business. The Company's business is subject to
state requirements including, business licenses, training and certification of
medical personnel, the scope of services that may be provided by medical
personnel, staffing requirements, medical control and procedures. Applicable
federal and state laws and regulations are subject to change. Any changes could
adversely affect the Company's operations as well as the air ambulance business
in general. The Company believes, based upon management's experience, that it is
in substantial compliance with all regulatory requirements applicable to its
business. The failure to be in compliance with any applicable governmental
regulations could adversely affect the business, financial condition or results
of operations of the Company. See 'Business -- Governmental Regulation.'
POSSIBLE ADVERSE CHANGES IN REIMBURSEMENT RATES OR COVERAGE; MEDICARE,
MEDICAID AND HEALTH CARE REFORM. A substantial portion (approximately 18% for
the year ended December 31, 1997) of the Company's revenue is attributable to
payments received from third-party payors, including Medicare, Medicaid, HMOs,
state-run insurance pools and private insurers. The revenue, cash flow and
profitability of the Company, like those of other companies in the health care
industry, will be affected by the continuing efforts of third-party payors to
control expenditures for health care. In addition, reimbursement can be
influenced by the financial instability of private third-party payors and by
budget pressures and cost shifting by governmental payors. With regard to
Medicare and Medicaid reimbursement, Congress has consistently attempted to curb
federal spending on these programs. The Company cannot predict whether any
health care or Medicare or Medicaid reform measures will be enacted, and if they
are enacted, what effect they may have on the Company's business. No assurances
can be given that future funding and reimbursement levels will be favorable to
the Company. A reduction in coverage or reimbursement rates by third-party
payors, whether in the private or
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government sector, could have a material adverse effect on the Company's
business, financial condition or results of operations.
LIABILITY INSURANCE. The Company's air ambulance operations involve the
risks of potential liability incurred by the Company in the event of, among
other things, accidents involving the Company's airplanes and medical
malpractice. The Company maintains aircraft insurance with a maximum liability
per occurrence of up to $20,000,000 along with hull coverage (similar to auto
collision insurance) for the value of the aircraft. The annual premiums cost
approximately $15,000 per jet aircraft and $7,000 per piston aircraft. In
addition, the Company carries medical liability insurance in the amount of
$1,000,000 per claim and $3,000,000 in the aggregate per incident with an annual
premium of approximately $19,000. Although the Company currently maintains
insurance coverage which it believes is adequate to cover the risks of potential
liability against the Company, there can be no assurance that the coverage
limits of its insurance are adequate or that the Company will be able to
continue to obtain such insurance policies in the future or that the Company
will be able to continue to obtain insurance rates which will not negatively
impact the Company's earnings. The inability of the Company to maintain adequate
liability insurance could have a material adverse effect on its business,
financial condition or results of operations.
COMPETITION. The air ambulance service industry is a highly competitive and
highly fragmented industry. The Company competes with other fixed wing air
ambulance companies which operate their own fleets of airplanes. The Company
believes, based upon management's experience and the Wintergreen Research
Report, that each of these companies are small with a market share of less than
5%. The Company also competes with brokers who do not own their own fleets but
act as middlemen who market air ambulance services by generally auctioning such
services to the lowest bidder. The Company believes that brokers control a large
percentage of the air medical transport business and keep prices in the industry
very low. The Company's major competitors include Global Air Ambulance,
(Clearwater, Florida), Advanced Air Ambulance, (Miami, Florida), Critical Air
Care, (Atlanta, Georgia) and Aeronational Air Ambulance, (Pittsburgh,
Pennsylvania). The Company believes, based upon management's experience, that
air ambulance service providers compete primarily on the basis of quality of
service, performance and prices. The Company anticipates that its one-way
pricing structure will allow the Company to be competitive in the industry. In
addition to present competition, other companies with significantly greater
economic resources than the Company including potential customers of the Company
such as insurance companies, HMOs and health care facilities that do not
currently provide air ambulance services may enter the air ambulance service
business. Entry into such business by such entities could adversely affect the
business, financial condition or results of operations of the Company. See
'Business -- Competition.'
DEPENDENCE ON MAJOR CUSTOMERS. During fiscal 1997, four of the Company's
customers together accounted for approximately 50% of its sales. Air Response,
its largest customer and a proposed acquiree, accounted for 27% of sales. There
can be no assurance that any of these companies will remain customers of the
Company or that there will be adequate demand for the Company's services.
Cessation of business with one or more of these customers would have a material
adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the experience,
abilities and continued service of Kevin L. Burkhardt, the Company's Chief
Executive Officer and President. The Company has entered into an employment
agreement with Mr. Burkhardt and the loss of his services or any other key
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company intends to obtain
$1,000,000 of key man life insurance on the life of Kevin L. Burkhardt. In
addition, the Company's future success depends in large part upon its ability to
attract and retain highly qualified personnel. The Company faces competition for
such personnel from other companies and organizations, many of which have
significantly greater resources than the Company. There can be no assurance that
the Company will be able to attract and retain the necessary personnel on
acceptable terms or at all. See 'Management.'
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POTENTIAL LIABILITY FOR ACTS OF OFFICERS AND DIRECTORS. The Company's
Articles of Incorporation and Bylaws provide that the Company shall indemnify
its directors and officers to the fullest extent permitted by the Colorado Law.
The Company will enter into an indemnification agreement ('Indemnification
Agreement') with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any civil or criminal action or administrative proceeding
arising out of his or her performance of his or her duties as a director or
officer, other than an action instituted by the director or officer. Such
indemnification is available if the indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action, had no
reasonable cause to believe his or her conduct was unlawful. Each
Indemnification Agreement also will require that the Company indemnify the
director or other party thereto in all cases to the fullest extent permitted by
applicable law. The term of the Indemnification Agreement will be the later of
(i) ten (10) years after the date that the indemnitee ceases to serve as a
director or officer of the Company, or (ii) the final termination of all
proceedings, as defined in the Indemnification Agreement, in which the
indemnitee is granted rights of indemnification.
Each Indemnification Agreement will permit the indemnitee to bring suit to
seek recovery of amounts due under such Indemnification Agreement and will
require that the Company indemnify the director or other party thereto in all
cases to the fullest extent permitted by applicable law. Although the Company
intends to seek to obtain directors' and officers' liability insurance, such
insurance is generally very expensive. If the Company is not able to obtain
directors' and officers' liability insurance to cover amounts, any payments made
by the Company under an Indemnification Agreement will have an adverse impact on
the Company.
Pursuant to the Indemnification Agreement, the Company may be obligated to
fund the defense of its officers or directors in certain cases which could
materially adversely affect the financial condition of the Company and the
ability of shareholders to recover monetary damages from directors and officers
of the Company for breaches of their fiduciary duties.
ABSENCE OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; VOLATILITY.
Prior to the Offering, there has been no public trading market for the Common
Stock or Warrants and there can be no assurance that an active trading market
for either the Common Stock or the Warrants will develop following the Offering
or, if developed, will be sustained. The initial public offering prices of the
Common Stock and Warrants were determined by negotiations between the Company
and the Underwriter and may not necessarily bear any relationship to the
Company's assets, earnings, book value, results of operations or any other
generally accepted criteria of value. There can be no assurance that the Common
Stock and Warrants will trade in the public market at or above the initial
public offering price following the closing of the Offering. The trading price
of the Common Stock and Warrants could be subject to significant fluctuations in
response to variations in quarterly operating results and other factors and such
fluctuations could cause the market price of the Common Stock and Warrants to
fluctuate substantially. In addition, the stock markets of the United States
have from time to time, experienced significant price and volume fluctuations
that are unrelated or disproportionate to the operating performance of
individual companies. Such fluctuations may adversely affect the price of the
Common Stock and Warrants. See 'Underwriting.'
LACK OF UNDERWRITING HISTORY. The Underwriter was incorporated on August
11, 1958 and first registered as a broker-dealer on October 3, 1958. Although
prior to this Offering the Underwriter has participated as a selling group
member in two underwritings, it has not participated as a sole or co-manager in
a public offering. Prospective purchasers of the Common Stock and Warrants
offered hereby should consider the Underwriter's lack of experience in being a
manager of an underwritten public offering. There can be no assurance that such
lack of experience will not have a material adverse effect upon the Offering.
See 'Underwriting.'
LISTING AND CONTINUED QUOTATION ON THE NASDAQ SMALLCAP MARKET'sm'. The
Company has received conditional approval to have the Common Stock and Warrants
approved for quotation on the Nasdaq
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SmallCap MarketSM. There can be no assurance that, if listed, the Company will
be able to satisfy the criteria for continued quotation on the Nasdaq SmallCap
MarketSM following the Offering. Failure to meet the maintenance criteria in the
future may result in the Common Stock and Warrants not being eligible for
quotation on the Nasdaq SmallCap MarketSM or otherwise. In such event, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the market value of the Common Stock or Warrants. See
'Description of Securities.'
NASDAQ SMALLCAP MAINTENANCE REQUIREMENTS; PENNY STOCK REGULATION. The
trading of the Company's Securities on the NASDAQ SmallCap MarketSM is
conditioned upon the Company meeting certain asset, capital surplus and stock
price tests. To maintain eligibility on the NASDAQ SmallCap Market, the Company
is required to maintain total net tangible assets in excess of $2,000,000,
capital and surplus in excess of $1,000,000 and a bid price of $1.00 per share.
If the Company fails any of these tests, the Securities may be delisted from
trading on the NASDAQ SmallCap Market. In the absence of the Common Stock being
quoted on the NASDAQ SmallCap Market, or the Company's having $2,000,000 in
stockholders' equity, trading in the Common Stock would be covered by Rule 15g-9
promulgated under the Securities Exchange Act of 1934 (the 'Exchange Act'), for
non-NASDAQ and non-exchange listed securities. Under such rule, broker-dealers
who recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities are exempt from this rule if the market price is at
least $5.00 per share.
The Commission has adopted regulations that generally define a 'penny
stock' to be any equity security that has a market price of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Such exceptions include an equity security listed on NASDAQ, and an
equity security issued by an issuer that has (i) net tangible assets of at least
$4,000,000, if such issuer has been in continuous operation for three years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average revenue of at
least $6,000,000 for the preceding three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a risk disclosure schedule explaining the penny
stock market and the risks associated therewith.
If the Company's securities were to become subject to the regulations
applicable to penny stocks, the market liquidity for the securities would be
severely affected, limiting the ability of broker-dealers to sell the securities
and the ability of purchasers in this Offering to sell their securities in the
secondary market. There is no assurance that trading in the Company's securities
will not be subject to these or other regulations that would adversely affect
the market for such securities.
POSSIBLE ADVERSE EFFECTS OF ISSUANCE OF PREFERRED STOCK. The Company's
Amended and Restated Articles of Incorporation, as of March 28, 1997, authorizes
the issuance of 500,000 shares of 'blank check' preferred stock, par value
$1.00, with designations, rights and preferences as determined from time to time
by the Board of Directors ('Preferred Stock'). As a result of the foregoing, the
Board of Directors can issue, without further stockholder approval, Preferred
Stock with dividend, liquidation, conversion, voting or other rights that could
adversely affect the voting power or other rights of the holders of the Common
Stock. The issuance of Preferred Stock could, under certain circumstances,
discourage, delay or prevent a change in control of the Company. In addition,
the issuance of Preferred Stock could dilute the rights of holders of the Common
Stock and the market price of the Common Stock. Although the Company has no
plans to issue any shares of Preferred Stock, there can be no assurance that it
will not issue Preferred Stock at some future date.
IMMEDIATE AND SUBSTANTIAL DILUTION; NO DIVIDENDS ANTICIPATED. Purchasers of
the shares of Common Stock offered hereby will incur immediate and substantial
dilution of the net tangible book value of the Common Stock of $5.09 per share
(78%) from the initial public offering price of $6.50 per share. In addition, an
immediate increase in the Company's net tangible book value of $1.41 per share
to the existing shareholders will result upon the consummation of the Offering.
Thus, the net tangible book value per share will be significantly lower than the
price per share paid by the public investors. The public investors, therefore,
will bear most of the risk of loss, while effective control of the Company will
remain in the hands of the present shareholders. The Company has never paid any
dividends on its
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Common Stock and does not anticipate the payment of dividends in the foreseeable
future. See 'Dividend Policy' and 'Dilution.'
SHARES ELIGIBLE FOR FUTURE SALE; EXERCISE OF REGISTRATION RIGHTS. Upon the
consummation of the Offering and giving effect to 496,154 shares of Common Stock
to be issued to Louis R. Capece two years from the closing of the Offering,
6,670 shares of Common Stock to be issued to an officer of the Company and
76,924 shares to be issued to Donald Jones at the closing of the Offering, there
will be 3,383,298 shares of Common Stock outstanding, of which 2,364,098 shares
of Common Stock are 'restricted securities' under Rule 144 under the Securities
Act of 1933, as amended (the 'Securities Act'). In the future, these restricted
shares may be sold only pursuant to a registration statement under the
Securities Act or an applicable exemption, including pursuant to Rule 144. The
Securities and Exchange Commission ('Commission') has amended Rule 144,
effective April 29, 1997, reducing the holding period before shares subject to
Rule 144 become eligible for sale in the public market. Under the revised Rule
144, a person who has owned Common Stock for one year may, under certain
circumstances, sell within any three-month period, a number of shares of Common
Stock that does not exceed the greater of 1% of the then outstanding shares of
Common Stock or the average weekly trading volume during the four calendar weeks
prior to such sale. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the three months preceding a sale,
and who has beneficially owned the restricted securities for the last two years
is entitled to sell all such shares without regard to the volume limitations,
current public information requirements, manner of sale provisions and notice
requirements. Sales or the expectation of sales of a substantial number of
shares of Common Stock in the public market following this Offering could
adversely affect the prevailing market price of the Common Stock. All of the
officers, directors and shareholders of the Company have agreed with the
Underwriter not to directly or indirectly register, issue, offer, sell, offer to
sell, contract to sell, hypothecate, pledge or otherwise dispose of any shares
of Common Stock (or any securities convertible into or exercisable or
exchangeable for shares of Common Stock) for a period of two years from the date
of this Prospectus except that after the first year, such securities may be sold
only with the prior written consent of the Underwriter. In addition, the Company
has agreed not to offer or sell any securities or file a registration statement
for a period of three (3) years from the hereof without the express prior
written consent of the Underwriter. In addition, the 496,154 shares of
Common Stock to be issued to Mr. Capece will not be issued until two years from
the closing of the Offering and the Rule 144 holding period will not commence
until such shares have been issued. See 'Shares Eligible for Future Sale.'
The holders of the Underwriter's Option have been granted certain
'piggy-back' and demand registration rights, for a period of five years from the
date hereof, with respect to the 101,920 shares of Common Stock and 101,920
Warrants (including shares issuable upon exercise thereof) issuable upon
exercise of the Underwriter's Option. The Company has granted Louis R. Capece,
Jr. certain 'piggy-back' registration rights with respect to the 496,154 shares
of Common Stock to be issued to him two years from the closing of the Offering.
The sale, or availability for sale, of the outstanding Common Stock underlying
the Underwriter's Warrants and Underwriter's Option and the shares issued to
Srotnac Group LLC or Mr. Capece, in the public market subsequent to the Offering
could adversely affect the prevailing market price of the Common Stock and could
impair the Company's ability to raise additional capital. See 'Description of
Capital Stock -- Registration Rights' and 'Shares Eligible for Future Sale.'
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants offered
hereby are redeemable, in whole or in part, at a price of $.10 per Warrant,
commencing twenty-four (24) months after the Closing Date (except with the prior
written consent of the Underwriter permitting redemption commencing twelve (12)
months from the Closing Date), and prior to their expiration; provided that (i)
prior notice of not less than 30 days is given to the Warrantholders; and (ii)
the closing bid price of the Company's Common Stock for the twenty (20)
consecutive trading days immediately prior to the date on which the notice of
redemption is given, shall have exceeded $12.75 per share. Warrantholders shall
have exercise rights until the close of the business day preceding the date
fixed for redemption. Notice of redemption of the Warrants could force the
holders to exercise the Warrants and pay the Exercise Price at a time when it
may be disadvantageous for them to do so, or to sell the Warrants at the current
market price when they might otherwise wish to hold them, or to accept the
redemption price, which may be substantially less than the market value of the
Warrants at the time of redemption.
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The Company has agreed to use its best efforts to keep the registration
statement current in connection with any proposed exercise of the Warrants.
Further, the Warrants may not be exercised unless the registration statement
pursuant to the Securities Act covering the underlying shares of Common Stock is
current and such shares have been qualified for sale, or there is an exemption
from applicable qualification requirements, under the securities laws of the
state of residence of the holder of the Warrants. Although the Company does not
presently intend to do so, the Company reserves the right to call the Warrants
for redemption whether or not such underlying shares are not, or cannot be,
registered in the applicable states. Such restrictions could have the effect of
preventing certain Warrantholders from liquidating their Warrants. Further, in
the event the Company does not have a current registration statement in effect,
the Company would be unable to call the Warrants for redemption. See
'Description of Securities -- Warrants.'
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. Holders of the Warrants will have the right to exercise the Warrants
for the purchase of shares of Common Stock only if a current prospectus relating
to such shares is then in effect and only if the shares are qualified for sale
under the securities laws of the applicable state or states or exempt therefrom.
The Company has undertaken and intends to file and keep current a prospectus
which will permit the purchase and sale of the Common Stock underlying the
Warrants, but there can be no assurance that the Company will be able to do so.
Although the Company intends to seek to qualify for sale the shares of Common
Stock underlying the Warrants in those states in which the securities are to be
offered, no assurance can be given that such qualification will occur. In
addition, purchasers may buy Warrants in the aftermarket or may move to
jurisdictions in which the shares of Common Stock issuable upon exercise of the
Warrants are registered or qualified during the period that the Warrants are
exercisable. In such event, the Company would be unable to issue shares to those
persons desiring to exercise their Warrants unless and until the shares could be
registered or qualified for sale in the jurisdiction in which such purchasers
reside, or an exemption to such qualification exists or is granted in such
jurisdiction. The Warrants may lose or be of no value if a prospectus covering
the shares issuable upon the exercise thereof is not kept current or if such
underlying shares are not, or cannot be, registered in the applicable states.
See 'Description of Securities -- Warrants.'
RELATIONSHIP OF UNDERWRITER TO TRADING. The Underwriter may act as a broker
and/or dealer with respect to the purchase or sale of the Securities in the
Nasdaq SmallCap Market'sm' where each is expected to trade. The Underwriter also
may act as the Company's agent in connection with any future solicitation of
warrantholders to exercise their Warrants. Unless granted an exemption by the
Commission from Regulation M under the Exchange Act, the Underwriter will be
prohibited from engaging in any market-making activities or solicited brokerage
activities with regard to the Company's securities during a period beginning
nine business days prior to the commencement of any such solicitation and ending
on the later of the termination of such solicitation activity or the termination
(by waiver or otherwise) of any right the Underwriter may have to receive a fee
for the exercise of the Warrants following such solicitation. As a result, the
Underwriter and soliciting broker/dealers may be unable to continue to make a
market in the Company's securities during certain periods while the exercise of
Warrants is being solicited. Such a limitation, while in effect, could impair
the liquidity and market price of the Securities.
UNDERWRITER'S OPTION AND REGISTRATION RIGHTS. In connection with this
Offering, the Company has agreed to sell to the Underwriter, for $10, the
Underwriter's Option which entitles the Underwriter to purchase up to 101,920
shares of Common Stock and 101,920 Warrants, as well as 101,920 shares of Common
Stock issuable on exercise of such Warrants. The securities issuable upon
exercise of the Underwriter's Option are identical to those offered pursuant to
this prospectus. The Underwriter's Option is exercisable for a period of four
years commencing one year from the Effective Date. The exercise of the
Underwriter's Option may dilute the value of the shares of Common Stock to be
acquired by holders of the Option, may adversely affect the Company's ability to
obtain equity capital, and, if the Common Stock issuable upon the exercise of
the Underwriters' Warrants are sold in the public market, may adversely affect
the market price of the Common Stock. The Underwriter has been granted certain
'piggyback' and demand registration rights for a period of five years from the
Effective Date with respect to the registration under the Securities Act of the
securities directly or indirectly
15
<PAGE>
<PAGE>
issuable upon exercise of the Underwriter's Option. The exercise of such rights
could result in substantial expense to the Company. See 'Underwriting.'
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby at an initial public offering price of $6.50 per share, after deduction
of underwriting discounts and commissions, and other Offering expenses including
the Underwriter's non-accountable expense allowance, will be approximately
$5,577,246 (and $6,455,083 if the Underwriter's over-allotment option is fully
exercised). The Company intends to use the net proceeds as follows:
(i) payment of approximately $800,000 to Louis R. Capece, Jr. pursuant
to the amended stock purchase and sale agreement for Air Response South;
(ii) approximately $425,000 to repay bridge lenders pursuant to 10%
and 15% promissory notes issued in March 1997 and March 1998, in bridge
financings, due upon closing of an initial public offering, which funds
were used for legal, accounting and, printing expenses in connection with
this Offering and an earlier aborted initial public offering and expenses
in connection with moving to new facilities;
(iii) approximately $467,000 to repay short term notes, including
approximately $375,000 to pay off a line of credit of Air Response, secured
by accounts receivable with Central National Bank, Canajoharie, New York,
approximately $20,000 to pay Andrew Hiestand for the balance owed for the
purchase of his stock in January 1996, approximately $22,000 to pay Charles
W. Bartholomew, a director of the Company, on a loan made to the Company in
November, 1993 with an original balance of $75,000, and $50,000 to pay off
a short-term note to Steven Cantor that was used as operating capital;
(iv) $2,700,000 to fund costs related to the Company's expansion
strategy, including approximately $500,000 for down payment on a
maintenance facility, approximately $500,000 for the purchase of additional
aircraft parts inventory, approximately $200,000 for expenses associated
with the Company's new facilities, the upgrade of the Company's computer
network and the purchase of new dispatch software, approximately $500,000
for marketing, and approximately $1,000,000 for leasing and equipping
additional aircraft; and
(v) approximately $1,185,246 for general corporate purposes, including
working capital.
The foregoing allocations of proceeds are estimates only and there may be
significant variations in the uses of proceeds due to, among other things,
changes in the Company's business or financial condition or economic
circumstances. Accordingly, the Company reserves the right to reallocate among
the foregoing uses upon any such change.
The Company anticipates that the proceeds from the Offering, together with
projected cash flow from operations, will be sufficient to fund its operations,
including its proposed expansion, for approximately 12 months. If the
Underwriters exercises the over-allotment option, the Company intends to add the
net proceeds of such exercise to working capital. However, there can be no
assurance that events affecting the Company's operations will not result in the
Company depleting its funds before that time. The Company may need to raise
substantial additional funding through public or private financings, corporate
collaborations or other sources. However, there can be no assurance that
additional financings will be available through any of these sources or, if
available, that such financing will be on acceptable terms. See 'Risk
Factors -- Need for Additional Financing' and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources.'
Pending application of the net proceeds of the Offering, the Company will
make temporary investments in certificates of deposit, money market accounts
established by major commercial banks or financial institutions, United States
government obligations or high-grade commercial paper.
16
<PAGE>
<PAGE>
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying dividends in the foreseeable future. The Company currently
intends to retain future earnings, if any, to finance its expansion strategy.
The payment of future cash dividends by the Company on its Common Stock will be
at the discretion of the Board of Directors and will depend on the Company's
earnings (if any), financial condition, cash flows, capital requirements, and
contractual prohibitions with respect to the payment of dividends and other
considerations as the Board of Directors may consider relevant.
17
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1997 (i) the 'actual'
capitalization of Proflight; (ii) the 'pro forma' capitalization of the Company
giving effect to (a) its historical capitalization and (b) the Acquisitions, and
(iii) the 'pro forma as adjusted' capitalization of the Company giving effect to
the 'pro forma' capitalization and the issuance of the Securities offered hereby
(at an initial public offering price of $6.50 per share and $.10 per Warrant),
after deduction of underwriting discounts and commissions and estimated Offering
expenses payable by the Company and the application of a portion of the net
proceeds therefrom to repay indebtedness. The number of shares issued and
outstanding has been adjusted to reflect a .667-for-1 reverse split of the
Company's Common Stock effective as of April 16, 1998.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
<S> <C> <C> <C>
Total current liabilities.................................... $3,787,754 $5,445,247 $ 4,667,247
Long-term debt............................................... 687,754 1,749,139 1,749,139
Stockholders' equity
Common Stock -- $.001 par value
Authorized -- 20,000,000 shares, 2,034,350 shares
issued and outstanding
Pro forma -- 2,530,504 shares
As adjusted -- 3,383,298 shares.............................. 2,034 2,530 3,383(1)(2)
Additional paid-in capital................................... 31,343 3,255,847 9,376,415(1)(2)
Accumulated deficit.......................................... (786,715) (786,715) (1,330,890)
---------- ---------- -----------
Total Stockholders' equity (deficit)......................... (753,338) 2,471,662 8,048,908
---------- ---------- -----------
Total capitalization.................................... $3,722,170 $9,666,048 $14,465,294
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
- ------------
(1) Reflects the issuance of 1,019,200 shares of Common Stock and 1,019,200
Warrants offered hereby; 496,154 shares to be issued for the purchase of Air
Response, 6,670 shares of Common Stock to be issued as a bonus to an officer
of the Company at the closing of the Offering, 76,924 shares of Common Stock
to be issued as part of an employment agreement, and 250,000 shares of
Common Shares retired in April of 1998.
(2) Reflects the receipt of $5,577,246 in net proceeds from the issuance of
1,019,200 shares of Common Stock at $6.50 per share of 1,019,200 Warrants at
$.10 per Warrant, after deduction of underwriting discounts and commissions
and Offering expenses estimated at $1,149,474.
18
<PAGE>
<PAGE>
DILUTION
At December 31, 1997, the pro forma net tangible book value of the Company
was a deficit of approximately $(820,589), or $(0.32) per share of Common Stock
after giving effect to the Acquisitions as if they occurred on such date. Net
tangible book value (deficit) per share is determined by dividing tangible book
value (total tangible assets less total liabilities) by the number of shares of
Common Stock issued and outstanding at that date. After giving effect to (i) the
sale of the 1,019,200 shares of Common Stock offered hereby (at an initial
public offering price of $6.50 per share) and the application of the net
proceeds therefrom, after deducting underwriting discounts and commissions and
Offering expenses; (ii) 6,670 shares of Common Stock to be issued as a bonus
to an officer of the Company at the closing of the Offering; (iii) 76,924 shares
of common stock issued as part of an employment agreement; (iv) the retirement
of 250,000 shares of Common Stock, the adjusted pro forma net tangible book
value of the Company at December 31, 1997 after giving effect to the
Acquisitions as if they occurred on such date would have been 4,756,657 or $1.41
per share. This represents an immediate increase in net tangible book value of
$1.73 per share to existing shareholders and an immediate dilution of $5.09 per
share to investors purchasing shares of Common Stock in the Offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price......................................................... $6.50
Net pro forma tangible book value (deficit) per share at December 31, 1997...... $(0.32)
Increase in net tangible book value per share attributable to new investors..... $ 1.73
Pro forma net tangible book value per share after the Offering....................... $1.41
Dilution per share to new investors.................................................. $5.09
</TABLE>
------------------------
If the underwriter exercises the over-allotment option in full, the pro
forma net tangible book value will be $5,634,494 or $1.59 per share, resulting
in an immediate dilution of $4.91 per share or 75% to New Investors.
The following table summarizes, on a pro forma basis, as of December 31,
1997 the difference between existing shareholders and new investors with respect
to the number and percentage of shares of Common Stock purchased from the
Company, and the total consideration per share paid (at the assumed initial
public offering price of $6.50 per share):
<TABLE>
<CAPTION>
SHARES
PURCHASED(1)(2)(3) TOTAL CONSIDERATION AVERAGE
-------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders................. 2,364,098 70% $3,258,377 33% $1.38
New investors......................... 1,019,200 30 6,726,720 67 6.50
------- -------
100.0% 100.0%
------- -------
------- -------
</TABLE>
- ------------
(1) Does not include: (i) 350,000 shares of Common Stock reserved for issuance
under the Option Plan; (ii) 1,019,200 shares reserved for issuance upon
exercise of the Warrants offered hereby; (iii) 700,350 shares reserved for
issuance upon exercise of other outstanding options and warrants; and (iv)
101,920 shares of Common Stock and 101,920 Warrants issuable upon exercise
of the Underwriter's Option. See 'Management -- Stock Option Plan.'
'Description of Capital Stock' and 'Underwriting.'
(2) Includes (i) the issuance of 496,154 shares of Common Stock to Louis R.
Capece, Jr. in connection with the acquisition of Air Response two years
from the closing of the Offering; (ii) 6,670 shares of Common Stock to be
issued to an Officer; and (iii) the issuance of 76,924 to Don Jones in
conjunction with his employment agreement and (iv) the retirement of 250,000
shares of Common Stock. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources' and 'Certain Transactions.'
(3) The number of shares purchased both by existing shareholders and new
investors has been adjusted to reflect the .667 for 1 reverse split of the
Company's Common Stock effective April 16, 1998.
19
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth summary historical financial data of (i)
Proflight for the years ended December 31, 1997 and 1996 (ii) Air Response and
Air Response South for the years ended December 31, 1997 and 1996. The
historical financial data for the years ended December 31, 1997 and 1996 are
derived from the audited financial statements of Proflight, and the audited
combined financial statements of Air Response and Air Response South. The
financial statements of Proflight have been audited by Grant Thornton LLP,
independent certified public accountants, whose report thereon has been modified
to include an explanatory paragraph which refers to various matters which raise
substantial doubt about Proflight's ability to continue as a going concern and
are included elsewhere in this Prospectus. The combined financial statements of
Air Response and Air Response South for the years ended December 31, 1997 and
1996 have been audited by Staff Ciampino & Company, P.C., independent certified
public accountants, which statements are included elsewhere in this Prospectus.
The summary historical financial data should be read in conjunction with the
financial statements and notes thereto of Proflight, Air Response and Air
Response South and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' included elsewhere in this Prospectus. The following
table also sets forth pro forma financial data of the Company as if the
Acquisitions (which will close simultaneously with the closing of this Offering)
had occurred as of December 31, 1997 for balance sheet results and as of January
1, 1997 for operating data. The pro forma financial data was derived from the
unaudited pro forma financial statements appearing elsewhere in this Prospectus.
The summary pro forma financial data should be read in conjunction with the
Company's pro forma financial statements and the notes thereto. The pro forma
balance sheet data and the pro forma statement of operations for the year ended
December 31, 1997 are unaudited, but, in the opinion of management, reflect all
adjustments necessary for a fair presentation of pro forma results of
operations. The pro forma operating results are not necessarily indicative of
the Company's future results of operations.
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
AIR RESPONSE AND AIR
THE COMPANY RESPONSE SOUTH
----------------------- -----------------------
YEARS ENDED YEARS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING DATA
Historical:
Net sales......................................................... $5,644,799 $3,906,211 $8,783,037 $7,658,243
Flying operations and maintenance................................. 3,964,831 3,001,507 5,840,403 4,875,505
Promotion and sales............................................... 69,985 255,616 492,331 447,061
General, administrative expense................................... 1,406,483 650,036 1,885,940 1,538,761
Depreciation and amortization..................................... 488,867 377,930 311,554 396,139
Income (loss) from operations..................................... (285,367) (378,878) 252,809 400,777
Interest expense.................................................. 415,343 287,188 189,242 136,148
Other income (expense)............................................ 25,000 34 (43,063) (349,590)
Income tax benefit................................................ -- -- 85,222 38,747
Income (loss)..................................................... (675,710) (666,032) 105,726 (46,214)
</TABLE>
20
<PAGE>
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Pro Forma Operating Data:
Net sales................................................................................ $12,712,990
Flying operations and maintenance........................................................ 8,090,388
Promotion and sales...................................................................... 562,316
General and administrative expense....................................................... 3,292,423
Depreciation and amortization............................................................ 1,068,256
Total operating expense.................................................................. 13,013,383
Operating (loss)......................................................................... (300,393)
Other expense............................................................................ 622,648
Income tax benefit....................................................................... 85,222
Net (loss)............................................................................... (837,819)
Per share data:
Net (loss)............................................................................... $ (0.35)(1)(2)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------
ACTUAL(3) PRO FORMA(4) ADJUSTED(5)
----------- ------------ --------------
<S> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit).................................. $(3,226,040) $(4,609,392) $ 967,854
Total assets............................................... 3,722,170 9,666,048 14,465,294
Long term obligations...................................... 687,754 1,749,139 1,749,139
Retained (deficit)......................................... (786,715) (786,715) (1,330,890)
Stockholders' equity (deficit)(2).......................... (753,338) 2,471,662 8,048,908
</TABLE>
- ------------
(1) Based on 2,382,747 shares which do not include (i) 1,019,200 shares of
Common Stock offered hereby, or (ii) 6,670 shares of Common Stock being
offered to an officer as a bonus at the closing of the Offering, or (iii)
76,924 shares of Common Stock to be issued to Don Jones as part of his
employment agreement at the completion of the Offering.
(2) All per share and equity data have been adjusted to reflect the .667 for 1
reverse split of the Company's Common Stock effective as of April 16, 1998.
(3) Represents Proflight Medical Response.
(4) Includes Air Response and Air Response South.
(5) The adjusted pro forma data includes adjustments that reflect the effects of
the Acquisitions, including the sale of 1,019,200 shares of Common Stock and
1,019,200 Warrants offered hereby and the application of the net proceeds.
21
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements and notes thereto appearing elsewhere in this
Prospectus.
OVERVIEW AND PLAN OF OPERATION
The Company was formed in May 1992 under the name Proflight, Inc. and is a
national and international provider of fixed wing air ambulance transport
services for persons who are ill, injured or otherwise incapacitated who need to
be relocated and who may require emergency medical care during flight. In March
of 1997 the Company changed its name to Proflight Medical Response, Inc.
('Proflight'). The Company has contracted to acquire Air Response, Inc., a New
York corporation ('Air Response') and Air Response South, Inc., a Florida
corporation ('Air Response South') which acquisitions (the 'Acquisitions') will
close simultaneously with the closing of the Offering. See 'Certain
Transactions -- Acquisition of Air Response and Air Response South.'
The revenues of the Company are primarily derived from service fees for air
medical transport services. The number of transports and rates as well as the
source affect revenues in different ways. Greater revenues are derived from
third party and direct patient paid trips as compared to transports arranged by
brokers.
The Company's business strategy over the next 24 months is to become a
leading national provider of fixed wing air ambulance services by:
Improving the efficiency of its existing operations by integrating the
operations of Air Response and Air Response South and by providing
additional management expertise, recognizing economies of scale,
introducing sophisticated operating systems and controls, instituting a
centralized dispatching function and providing a stronger, more stable
capital base.
Implementing strategic acquisitions of other air ambulance service
providers. The Company believes that opportunities exist to acquire
additional air ambulance service providers in the future that would
benefit from the efficiency, as well as the capital and management
resources of the Company. The Company regularly evaluates acquisition
possibilities and considers a number of factors in evaluating such
acquisition candidates, including the quality of management and medical
personnel, historical operating results, the demographic characteristics
of service areas, the regulatory environment in which such company
operates and the fee structure and reimbursement levels. In addition, by
combining existing companies, the Company hopes it will be able to deliver
fixed wing air ambulance services to insurance companies and other health
care providers at cost effective rates. Except as otherwise described in
this Prospectus, there are no present negotiations, arrangements or
understandings with respect to any potential material acquisitions.
Increasing its market share and expanding its operations by contracting
with insurers and HMOs seeking an air ambulance provider with national and
international capabilities and by appealing to individual consumers
through a prepaid service package. No assurances can be given that the
Company will be able to successfully negotiate additional contracts with
such parties on favorable terms, if at all, or otherwise expand its
operations.
The Company is continuing to expand services through the purchase of
additional aircraft resulting in increased revenues, more efficient use of
current aircraft, proportionately lower operating costs and the acquisition of
Air Response and Air Response South. Overall, the Company believes, based upon
management's experience, this should provide higher gross margins. It is hoped
that this combination will allow all three companies to operate more efficiently
through elimination of certain duplicative general and administrative costs,
purchasing discounts on fuel, and more efficient use of each aircraft. The
Company believes, based upon management's experience, that these actions will
provide growth and improve the Company's operating and financial condition,
providing the opportunity to continue as a going concern. See ' -- Effects of
Combination.'
22
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
PROFLIGHT MEDICAL RESPONSE, INC.
The following sets forth, in tabular form, a comparison of the results of
operations for Proflight for the years ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1996
----- -----
<S> <C> <C>
Net sales........................................................................ 100.0% 100.0%
Flying operations and maintenance................................................ 70.2 82.5
Promotion and sales.............................................................. 1.2 0.9
General and administrative expenses.............................................. 24.9 16.6
Depreciation and amortization.................................................... 8.7 9.7
Interest expense................................................................. 7.4 7.4
Net loss......................................................................... 12.0 17.0
</TABLE>
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Sales: Net sales increased by $1,738,588 to $5,644,799 for the year
ended December 31, 1997 as compared to $3,906,211 for the year ended December
31, 1996. Over $1 million in increased sales is attributed to receiving more
trips (business referrals) from Air Response in contemplation of the impending
merger. In addition, the Company handled more brokered flights, which added to
sales volume without having to acquire additional aircraft. The Company also
sold one of its Learjet 35A's which produced net income of $638,179.
Flying operations and maintenance: Flying operations and maintenance
increased by $742,292 to $3,964,831 for the year ended December 31, 1997, as
compared to $3,222,539 for the year ended December 31, 1996. This increase was
mostly due to proportionally higher sales.
Promotion and Sales Expense: Promotion and sales expense increased $35,401
for the year ended December 31, 1997 to $69,985 as compared to $34,584 for the
year ended December 31, 1996. This increase of $35,402 was mostly for
commissions paid to a dispatcher.
General and Administrative Expense: General and Administrative expenses
increased $756,447 to $1,406,483 for the year ended December 31, 1997 as
compared to $650,036 for the year ended December 31, 1996. This increase was
mostly due to $259,275 of expenses associated with abortive IPO costs, legal
fees and settlement of a lawsuit including legal fees amounting to approximately
$130,000, and additional IPO accounting fees of approximately $63,000. $60,000
was also expensed as a bad debt in anticipation of an uncollectible receivable.
In addition, moving costs, higher rent, and proportional increased costs
associated with higher sales helped account for added G&A expense for 1997.
Depreciation and Amortization: Depreciation and amortization increased
$110,937 to $488,867 for the year ended December 31, 1997. as compared to
$377,930 for the same period in 1996. This was mostly to due to expensing as
amortization $60,000 of deferred bridge loan costs and increased depreciation
association with more hours of flight time on the aircraft's engines.
Interest Expense: Interest expense increased $128,155 to $415,343 for the
year ended December 31, 1997 as compared to $287,188 for the year ended December
31, 1996. This increase was due mostly to interest paid on more expensive
aircraft and the cost for factoring accounts receivable, which factoring was
implemented in February of 1997.
Net Loss: Net loss increased by $9,678 to $675,710 for the year ended
December 31, 1997 as compared to $666,032 for the year ended December 31, 1996.
This increase was due to the factors discussed above.
23
<PAGE>
<PAGE>
AIR RESPONSE AND AIR RESPONSE SOUTH
RESULTS OF OPERATIONS
The following sets forth, in tabular form, a comparison of the results of
operations for Air Response and Air Response South and the years ended December
31, 1997 and 1996.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1996
----- -----
<S> <C> <C>
Net sales........................................................................ 100.0% 100.0%
Flying operations and maintenance................................................ 66.5 63.7
Promotion and sales.............................................................. 5.6 5.8
General and administrative expenses.............................................. 21.5 20.1
Depreciation and amortization.................................................... 3.5 5.2
Interest expense................................................................. 2.2 1.8
Other income (expense)........................................................... 0.5 (4.0)
Net income (loss)................................................................ 1.2 (0.6)
</TABLE>
THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Sales: Net sales increased $1,124,794 to $8,783,037 for the year ending
December 31, 1997 as compared to $7,658,243 for the year ending December 31,
1996. The Company believes that this was mostly due to more demand for the
Company's air ambulance service because of the effects of advertising and direct
sales. In addition, direct access to Proflight's aircraft fleet in anticipation
of an acquisition yielded better overall positioning which allowed more
attractive pricing to customers and, the Company believes, a correspondingly
greater usage of services.
Flying Operations and Maintenance: Flying Operations and Maintenance
increased $964,898 to $5,840,403 for the year ending December 31, 1997 as
compared to $4,875,505 for the year ending December 31, 1996. This was mostly
due to expenses relating to increased revenues. In addition, slightly higher
fuel prices occurred during the first 8 months of the period. Also, maintenance
labor was obtained through an outside source rather by hired mechanics as was
the case in 1996 which resulted in higher costs. Other increases were due to the
performance of more aircraft inspections as a result of a greater number of
hours flown.
Advertising: Advertising expenses increased $45,270 to $492,331 for the
year ending December 31, 1997 as compared to $447,061 for the year ending
December 31, 1996. This was mostly due to increased cost of yellow page
advertising and more direct mailings. In addition, the Company attended more
sales conventions to promote its air ambulance service. The Company believes
that these additional expenditures helped increase sales by an undetermined
amount.
General and administrative: General and administrative expenses increased
$347,179 to $1,885,940 for the year ending December 31, 1997 as compared to
$1,538,761 for the year ending December 31, 1996. This was mostly due to
increased sales resulting in higher overhead. In addition, the company incurred
substantial moving expenses relocating to Denver.
Depreciation: Depreciation decreased $84,585 to $311,554 for the year
ending December 31, 1996. as compared to $396,139 for the year ending December
31, 1997. This was mostly due to one aircraft being fully depreciated in October
of 1997.
Interest expense: Interest expense increased $53,094 to $189,242 for the
year ending December 31, 1996 as compared to $136,148 for the year ending
December 31, 1997. This was mostly due to some aircraft refinancing in late
1996.
Other expense: Other expenses decreased $306,527 to $43,063 for the year
ending December 31, 1996 as compared to $349,590 for the year ending December
31, 1996. This change was mostly due to a non-recurring $381,216 charge in 1996
for an asset abandonment.
Net earnings: Net earnings increased $151,940 to $105,726 for the year
ending December 31, 1996 as compared to a $46,214 loss for the year ending
December 31, 1996. This increase was due to the factors discussed above.
24
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the twelve months ended December 31, 1997, Proflight had no material
increase in cash. During this period net cash used in operating activities was
$522,127. Cash provided from investing activities was $1,714,421 primarily due
to the sale of an aircraft. Net cash used in financing activities was $1,162,294
due to the repayment of notes payable.
As of December 31, 1997, Proflight had a working capital deficiency of
$3,226,040. This deficiency increased from December 31, 1996 by $2,145,729 as a
result of a long term debt being reclassified to a current liability because of
the slow payment of such debt which may have resulted in a default by the
debtor. The debt was subsequently paid in full in February of 1998.
Air Response and Air Response South had a decrease in cash of $254,871 for
the twelve months ended December 31, 1997. During this period net cash of
$574,289 was provided by operating activities, and $559,525 in cash was used in
investing activities to purchase property and equipment, net advances to
officer, and advances to affiliates. A total of $269,635 in cash was used in
financing activities primarily for repayment of notes. Cash and cash equivalents
had a balance of $37,426 at December 31, 1997.
At December 31, 1997, Air Response and Air Response South had a working
capital deficiency of $805,852. This deficiency increased by $361,048 from the
December 31, 1996 deficiency of $444,804 due to increases in account payable and
the current portion of notes payable.
During fiscal 1996, Proflight had two customers whose sales each accounted
for 10% or more of net sales. In fiscal 1997, Air Response accounted for more
than 27% of net sales. In 1996 Air Response accounted for 8.25% of Proflight's
business. At year end 1997, $224,094 was due from Air Response in accounts
receivable and $151,767 was due to Air Response in accounts payable.
Historically, Proflight has financed its working capital requirements to
date from private bridge financing, borrowing, issuance of its Common Stock, and
internally generated cash flow. For the year ended December 31, 1997, the
Company financed its working capital requirements as follows: approximately 30%
from the sale of a Lear 35, approximately 20% from borrowing, and approximately
50% from internally generated cash flow. Air Response and Air Response South
have financed their working capital through, profits, internally generated cash
flow, and factoring accounts receivable.
As of December 31, 1997, the Company had a total current liabilities of
$3,787,754, of which $1,657,807 was due because of a potential default due to
slow payment. This note for a Learjet 35A was paid in full in February of 1998
when this aircraft was sold. $794,022 of current liabilities are notes to be
paid with the proceeds from the offering. The remaining balance of $1,335,970
will be paid out of operations. The Company defaulted on a note to a former
shareholder in 1996. The holder has agreed to renew the note and the Company
plans to pay the remaining balance of approximately $20,000 from the proceeds of
the offering.
In order for the Company to obtain sufficient financing to purchase a 1973
Lear Jet 25B-XR in March, 1995, it was necessary for the Company to have an
accomodator guarantee repayment of a loan. In exchange, the accomodator is paid
a fee of $100 per month for each month the loan is outstanding.
In October 1996, the Company loaned $200,000 to Air Response. The note bore
interest at the rate of 10% per annum and was payable in two installments of
$100,000 plus accrued interest on May 14, 1998 and May 14, 2000. In March of
1998, the Company agreed to forgive the entire principal amount of and all
accrued interest on the note. This was granted in consideration of extending the
acquisition agreement. See 'Certain Transactions -- Loan to Air Response.'
In October 1996, Proflight, in a private placement, sold to subscribers an
aggregate of $350,000 principal amount notes bearing interest at the rate of 10%
per annum and issued 466,900 shares of Common Stock. In May 1997, the
subscribers in the private placement released and discharged the Company from
any and all obligations arising out of the promissory notes and agreed to cancel
such notes.
In January 1997, Proflight, in a private placement, sold to subscribers an
aggregate of $150,000 principal amount notes bearing interest at the rate of 10%
per annum and issued 200,100 shares of Common Stock. In May 1997, the
subscribers in the private placement released and discharged the
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Company from any and all obligations arising out of the promissory notes and
agreed to cancel such notes.
In March 1997, Proflight, in a private placement, sold to subscribers an
aggregate of $125,000 principal amount notes bearing interest at the rate of 10%
per annum and issued 16,675 shares of Common Stock.
In March of 1997 the Company sold one of its Lear 35A's for approximately
$1,750,000.
On March 10, 1998, the Company received $300,000 in uncollateralized
short-term bridge financing. These bridge notes carry an interest rate of 15%
per annum and are payable in full, principal and interest on the earlier of May
31, 1998, or upon closing of an initial public offering.
Presently, the Company does approximately 50% of its billing through
insurance companies. In some cases this billing is indirect through brokers
which are customers of the Company. Generally, payment is received within 60-90
days. This delay in collection weakens the Company's cash flow. The Company
finances its receivables to help alleviate this cash flow problem. The Company
plans to initiate electronic billing to help speed up the collection process and
hopes to eliminate the need for factoring in the future.
The Company anticipates that the net proceeds from the Offering, together
with cash flow from operations should be sufficient to fund the Company's
operations, including its proposed expansion, for approximately 12 months.
However, there can be no assurance that events affecting the Company's
operations will not result in the Company depleting its funds before that time.
The Company may be required to raise substantial additional funds to continue to
fund operating expenses or its expansion strategy. There can be no assurance
that the Company will be able to obtain such additional financing or that such
financing, if available, will be on acceptable terms. See 'Risk Factors -- Need
for Additional Financing' and 'Use of Proceeds.'
EFFECTS OF COMBINATION
The Company believes that operating efficiencies will be achieved through
integration of the operations. The Company anticipates cost savings after the
combination in the areas of fuel, parts, marketing and advertising and
personnel. The Company has obtained preliminary quotes from aviation fuel and
part suppliers which will provide the Company with fuel and part cost
reductions. Fuel reductions are available because of the anticipated increase in
the volume of aviation fuel to be purchased as well as an increase in the number
of fueling sites needed and part reductions are available because the Company
plans to purchase larger quantities at one time. The Company believes that it
will realize cost savings in marketing and advertising expenses by eliminating
duplicated efforts. The Company also believes cost savings will also be realized
by the elimination of overstaffing and duplicative positions which will arise
through combination and the closing of the Company's facilities in New York and
Florida. For example, the Company believes cost savings will be realized in
areas such as accounts receivable and bookkeeping, which will be centralized.
The Company believes that effective aircraft and crew deployment will be a
significant factor in reducing operational costs. The Company intends to enhance
its computer system which will detail the ready status and location positions of
its aircraft and crews. The computer system will be able to analyze data on
demographics, usage frequency and similar factors to help determine optimal
fleet deployment.
The Company will begin to incur increased expenses not reflected in the
Company's historical financial statements, including increased salaries for
senior management and key employees as well as other costs related to the
establishment of its corporate and administrative infrastructure, such as lease
costs, accounting and legal costs.
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BUSINESS
THE COMPANY
The Company is a national and international provider of fixed wing air
ambulance transport services for persons who are ill, injured or otherwise
incapacitated who need to be relocated and who may require emergency medical
care during flight. The Company currently operates from facilities located in
Colorado, New York and Florida and upon consummation of the Offering plans to
consolidate its operations into its Colorado facilities. The Company provides
its services throughout the United States, Canada, Europe, Mexico, Central
America, South America, Bermuda and the Mediterranean. In addition, the Company,
when operating at full capacity, has subcontracted its services by brokering its
air ambulance trips to other air transport providers. For the year ended
December 31, 1997, the Company, including Air Response and Air Response South,
had pro forma net sales of approximately $12.7 million.
As of the date hereof the Company has an air ambulance fleet of 11 fixed
winged aircraft. The Company provides transport services in connection with the
relocation of patients requiring specialized medical procedures such as organ
transplants, cancer treatment, specialized cardiac surgery, burn care, stroke
care and advanced head and spinal cord surgery and rehabilitation to hospitals
recognized as national centers of excellence in these fields, for the
repatriation of patients who are injured or become ill away from home and in
connection with the transportation of non-ambulatory long-term care patients who
need to be relocated. The flights operated are on a non-emergency basis and are
generally long distance in nature. Emergency flights are usually contracted to
helicopters and such flights are generally short distances. The Company's
customers include individual patients, managed care companies, hospitals,
government agencies, national health insurance companies, HMOs and air ambulance
brokers.
The Company believes that the need for non-emergency ambulance transport
services, will increase as pressure on the health insurance industry to reduce
costs increases. The Company believes that it can capitalize on this market. The
Company believes that the fixed wing segment of the medical air transport
industry will grow as hospital consolidation produces regional health networks
responsible for patients spread over a greater geographic area. The Company also
believes, although no assurance can be given, that relocating patients with
specialized needs to hospitals recognized as national centers of excellence and
which have pricing agreements with insurers and HMOs will increase as a way to
provide high quality, cost effective health care. The fixed wing air ambulance
market is currently served by a number of small, regional companies lacking a
national presence and the ability to serve an insurance company or HMO on a
national basis. The Company believes that through the acquisitions of Air
Response and Air Response South and by implementing its business strategy, it
will begin to establish a national presence while continuing to ensure that
patients receive the highest quality care. The Company's beliefs in this
paragraph are based upon management's experience and an independent research
report, presumed to be accurate and truthful as of its publication, by
Wintergreen Research, Inc. copyright 1995, entitled 'Fixed Wing Air Medical
Transport Market 1991 - 2000.' No assurance can be given that such beliefs will
be realized or are predictive of future developments. No assurance can be given
that the facts, predictions or the independent research report upon which such
beliefs are premised are accurate.
The Company's senior management has extensive experience in the air
ambulance transport services business. Kevin L. Burkhardt, the Company's Chief
Executive Officer and President, has over 10 years experience in the air
ambulance industry and over 20 years experience in the aviation industry,
including as captain, flight instructor and corporate pilot. Jane S. Burkhardt,
the Company's Secretary and medical and legal coordinator, received her B.S.
degree in nursing in 1981 from the University of Wisconsin and her JD degree in
1990 from St. Louis University Law School. Mrs. Burkhardt has over 14 years
experience in the nursing industry and was a registered nurse and risk manager
for Presbyterian/St. Lukes Medical Center. Donald Jones will, upon consummation
of the Offering, serve as the Company's Vice President of Sales and a Director
of the Company. Mr. Jones has over 13 years experience in the air ambulance
industry, including flight coordinator, and director of marketing and sales.
David Cohen, the Company's Chief Financial Officer and Treasurer, has over 30
years of management and financial experience. Mr. Cohen was the chief financial
officer of Air Resources Corp.,
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a public company which manufacturers adhesives and held various senior
management positions for two aircraft sales corporations.
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
amended in May 1997 and January 1998, pursuant to which the Company agreed to
acquire at the closing of the Offering, subject to the terms and conditions
contained therein, all of the outstanding capital stock of Air Response in
exchange for 496,154 shares of Common Stock of the Company to be issued two
years from the closing of the Offering. If the Company completes a second public
offering, Mr. Capece has the option to put such number of shares of Common Stock
at the then current market value, equal to 20% of the net proceeds of such
offering to the Company, not to exceed $1,000,000. The Company simultaneously
entered into an Amended Stock Purchase and Sale Agreement with Air Response
South and Louis R. Capece, Jr. pursuant to which the Company agreed to acquire
at the closing of the Offering, subject to the terms and conditions contained
therein, all of the outstanding capital stock of Air Response South for $800,000
which is payable upon closing of the Offering.
BUSINESS STRATEGY
The Companies' business strategy over the next 24 months is to attempt to
become a leading national provider of fixed wing air ambulance services by:
Improving the efficiency of its existing operations by integrating the
operations of Air Response and Air Response South and by providing
additional management expertise, recognizing economies of scale,
introducing sophisticated operating systems and controls, instituting a
centralized dispatching function and providing a stronger, more stable
capital base.
Implementing strategic acquisitions of other air ambulance service
providers. The Company believes that opportunities exist to acquire
additional air ambulance service providers in the future that would
benefit from the efficiency, as well as the capital and management
resources of the Company. The Company regularly evaluates acquisition
possibilities and considers a number of factors in evaluating such
acquisition candidates, including the quality of management and medical
personnel, historical operating results, the demographic characteristics
of service areas, the regulatory environment in which such company
operates and the fee structure and reimbursement levels. In addition, by
combining existing companies, the Company hopes it will be able to deliver
fixed wing air ambulance services to insurance companies and other health
care providers at cost effective rates. Except as otherwise described in
this Prospectus, there are no present negotiations, arrangements or
understandings with respect to any potential material acquisitions.
Increasing its market share and expanding its operations by contracting
with insurers and HMOs seeking an air ambulance provider with national and
international capabilities and by appealing to individual consumers
through a prepaid service package. No assurances can be given that the
Company will be able to successfully negotiate additional contracts with
such parties on favorable terms, if at all, or otherwise expand its
operations.
MEDICAL TRANSPORT SERVICES
The Company provides fixed wing air ambulance transport services for
individual patients, HMOs, insurance companies and individual hospitals and
other providers of medical care. If necessary the Company provides 'bed to bed'
service, arranging for ground ambulance transportation, specialized medical care
during transport, overnight accommodations, and any other incidentals necessary
to a successful transport. The Company is able to provide air transport services
at any of the three recognized levels of medical care, Basic Life Support
(patients who may need CPR), Advanced Life Support (patients who need medication
and respiratory monitoring) and Critical Care (patients who are severely ill or
injured).
The level of treatment provided to a patient during transportation is
dependent upon the patient's condition. Basic Life Support is mostly
preventative in nature. It is appropriate for patients needing minimal external
life support, but in need of monitoring or potential care during flight.
Aircraft
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involved in the transport of patients requiring Basic Life Support must have
both the equipment and personnel on board capable of handling and treating a
medical emergency.
The Company provides air transport for patients needing Advanced Life
Support services. Aircraft suited to transporting these patients must have all
personnel and equipment necessary to provide Basic Life Support functions as
well as the capability to perform cardiac defibrillation, control dysrhythmias,
administer drugs and establish and maintain respiratory airways. In addition,
medical personnel on board the aircraft must be capable of providing care for
the condition causing the need for the transport. Patients requiring Advanced
Life Support care may typically be suffering from trauma, burns, or cardiac
failure, as well as a variety of other conditions.
Finally, the Company provides air transport services to patients who are
severely ill or injured in need of Critical Care, the highest level of care. To
properly provide Critical Care services, highly and specifically trained
physicians and flight nurses must be part of the on board aircraft crew. It is
important that these medical personnel have specialized training to enable them
to perform services in an aeromedical environment. The Company has the required
personnel and equipment to provide these high level medical services.
The Company employs full-time registered nurses that accompany patients on
all medical flights. The nurses are given air ambulance training when they are
hired and on-going training every six months. In addition, the Company can
supply other medical professionals including medical doctors, respiratory
therapists and other medical personnel, if required by the patient.
The Company charges for its services on a retail and wholesale basis.
Flights are charged by the hour with additional costs for medical and
international fees. Cost per flight hour range from approximately $500 for
piston aircraft to $1500 for jet aircraft. Generally, high volume users like air
ambulance brokers and insurance companies receive up to a 20% discount.
Catering, ground medical, and other services are added to the basic charges.
MEDICAL PERSONNEL AND QUALITY ASSURANCE
The Company believes, based upon management's experience, that hiring and
maintaining highly qualified personnel, including physicians and nurses is
essential to its future success. Although the Company has not had a problem
attracting such persons to date, the loss of these persons or the inability to
attract and retain sufficient numbers of qualified personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The medical care provided during transports is provided pursuant to
established medical treatment protocols which were established based upon the
professional advice and direction of the Company's medical directors. Proflight,
Air Response and Air Response South each has its own medical director.
Initially, the Company will retain the medical directors of each Company.
However, these positions may be consolidated where legally and operationally
practical. Any medical treatment beyond that contained in the treatment
protocols requires an order from the patient's attending physician. Physician
orders are submitted to the Company with all case documentation, prior to
delivery of the patient to the Company for transport. Physician orders are then
reviewed by the Company's medical director to insure proper handling of the
patient. In some circumstances, the medical director may change the physician's
orders if 'in flight' conditions warrant alterations.
DISPATCHING
The Company intends to implement a centralized dispatching system for the
air ambulance operations. The Company plans to purchase a dispatch program
called 'Omnis 7' which is designed to schedule transports as well as keep track
of those in progress. The program features a visual mapped display of the
location of the aircraft which can help dispatchers select the aircraft in the
best proximity for a future flight. In addition, the program has an extensive
database with airport, hotel, and fueling information. An additional module can
be added that allows the aircraft's maintenance and pilot data to be stored and
analyzed. The cost of the entire Omnis 7 program is approximately $25,000.
Computer hardware for the dispatch system will cost about $15,000. When
implemented, this system will allow the Company to dispatch aircraft from the
most advantageous of its locations and enhance the Company's
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ability to avoid one way trips with empty return flights. By ensuring that the
Company's aircraft are efficiently used, the dispatching system is expected to
reduce the Company's cost per transport.
The Company plans to have a dispatch center staffed at least six full-time
dispatch personnel that work in shifts to provide 24 hour a day coverage. They
will be supported by sales personnel that price the trips to the customers.
MARKETING
Presently, the Company relies on advertising in national telephone
directories and direct mail to attract customers. The Company has enhanced its
current marketing strategy through the hiring, under a six year employment
contract, of Donald Jones, an air ambulance marketing specialist. Mr. Jones has
an extensive customer list of hospitals, insurance companies, and other users of
air medical transport. Mr. Jones will implement a sales strategy using the
Company's existing sales and marketing staff.
The Company believes, based upon management's experience, that the air
ambulance transport market may be broken down into two distinct market segments,
the 'directed' market and the 'independent' market. The directed market segment
consists of accounts that send all or most of their ambulance service needs to a
single designated service provider, whether by contract or practice. These
accounts include insurance companies, HMOs, other managed care providers and
hospitals. The Company intends to market this segment both through the use of
personal contacts and media advertising, which will include direct mail,
advertising in national telephone directories, advertising in trade publication,
advertising on the internet and participation in trade shows.
The independent market consists of transport requests originating from
individual patients and referral sources such as individual physicians. The
Company's marketing campaign addresses this segment of the market by local
advertising in telephone directories, advertising on the internet, and direct
mail campaigns.
BILLING AND COLLECTION
Since the Company's air ambulance services are on a non-emergency basis,
the Company is not required to transport patients without regard to a patient's
insurance coverage or ability to pay. The Company ensures that a prospective
patient is able to pay the Company's fees, either through appropriate insurance
coverage or other resources and frequently is paid in advance for its services.
Consequently, the Company's provisions for uncompensated care is generally lower
than it would be if the Company provided emergency air ambulance transportation.
On a consolidated basis for the year ended December 31, 1997, the Company
derived approximately 9% of its net revenue directly from private insurers,
including prepaid health plans and other non-government sources, 3% from
governmental payors and 88% directly from patients and private sources.
INSURANCE
The Company's air ambulance operations involve the risks of potential
liability against the Company in the event of, among other things, accidents
involving the Company's airplanes and medical malpractice. The Company maintains
aircraft insurance with a maximum liability per occurrence of up to $20,000,000
along with hull coverage (similar to auto collision insurance) for the value of
the aircraft. The annual premiums cost approximately $15,000 per aircraft and
$7,000 per piston aircraft annually. In addition, the Company carries medical
liability insurance in the amount of $1,000,000 for each claim and $3,000,000 in
the aggregate for each incident with an annual premium of approximately $19,000.
Although the Company currently maintains insurance coverage which it believes is
adequate, there can be no assurance that the coverage limits of its insurance
are adequate or that the Company will be able to continue to obtain such
insurance in the future or that the Company will be able to continue to obtain
such insurance rates which will not negatively impact the Company's earnings.
The inability of the Company to maintain adequate liability insurance could have
a material adverse effect on its business, financial condition or results of
operations.
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COMPETITION
The air ambulance service industry is a highly competitive and highly
fragmented industry. The Company competes with other fixed wing air ambulance
companies which operate their own fleets of airplanes. The Company believes,
based upon management's experience and the Wintergreen Research report, that
each of these companies are small with a market share of less than 5%. The
Company also competes with brokers who do not own their own fleets but act as
middlemen who market air ambulance services by generally auctioning the service
to the lowest bidder. The Company believes that brokers control a large
percentage of the air medical transport business and keep prices in the industry
very low. The Company's major competitors include Global Air Ambulance,
(Clearwater, Florida), Advanced Air Ambulance, (Miami, Florida), Critical Air
Care, (Atlanta, Georgia) and Aeronational Air Ambulance, (Pittsburgh,
Pennsylvania). The Company believes, based upon management's experience, that
air ambulance service providers compete primarily on the basis of quality of
service, performance and prices. The Company provides one way pricing on most of
its domestic flights. Patients are charged from point of pick up to final
destination, allowing the Company in most cases to charge less than other
operators that charge on a round trip basis. The Company's aircraft and crews
very rarely stay in one location more than one night due to the Company's high
volume of transport requests from all over the world. Having aircraft at several
locations at any given time, gives the Company a competitive bidding edge.
In addition to present competition, other companies with significantly
greater economic resources than the Company including potential customers of the
Company such as insurance companies, HMOs and health care facilities not
currently providing air ambulance services, may enter the air ambulance service
business. Entry into such business by such entities could adversely affect the
business, financial condition or results of operations of the Company.
GOVERNMENT REGULATION
The Company is subject to governmental regulation at the federal and state
levels. At the federal level, the Company is subject to regulation by the
Federal Aviation Administration ('FAA') and the Occupational Safety and Health
Administration ('OSHA'). The FAA regulations are primarily related to flight
safety issues, and govern flight operating procedures, aircraft and equipment
standards, maintenance and inspections, flight crew standards, training and
limitations, weather requirements and record keeping requirements. The OSHA
regulations are primarily designed to protect the employees of the Company.
Certain of the states in which the Company operates regulate various
aspects of its business. The Company's business is subject to state requirements
including, business licenses, training and certification of medical personnel,
the scope of services that may be provided by medical personnel, staffing
requirements, medical control and procedures.
Since the Company was established, it has met all FAA regulations necessary
to provide the services offered. The Company has also met all OSHA standards and
state and federal licensing requirements for the medical and business services
offered.
Applicable federal and state laws and regulations are subject to change.
Any changes could adversely affect the Company's operations as well as the air
ambulance business in general. The Company believes, based upon management's
experience, that it is in substantial compliance with all regulatory
requirements applicable to its business. The failure to be in compliance with
any applicable governmental regulations could adversely affect the business,
financial condition or results of operations of the Company.
EMPLOYEES
As of the date hereof, the Company employed 34 full-time employees and five
part-time employees, of whom fourteen are employed as flight crew, eight are
employed as medical personnel, six are employed as mechanics, three are employed
as dispatchers, three are employed in sales and five are employed in general or
administrative positions. The Company believes that the success of its business
will depend, in part, on its ability to attract and retain highly qualified
personnel. The Company's
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employees are not a party to any collective bargaining agreements. The Company
believes that it has good relations with its employees.
LEGAL PROCEEDINGS
In September of 1997, Mr. James Fuller filed a complaint against the
Company claiming that he is entitled to an unspecified amount of compensation
for the value of shares of the Company's Common Stock which he alleges he owns.
No amount was stated in the suit. The Company maintains that Mr. Fuller never
paid the agreed upon price for the shares and therefore never owned them.
Moreover, Mr. Fuller signed the shares back to the Company in December 1994.
The Company, through its counsel, intends to vigorously defend against the
suit by Mr. Fuller. No assurance can be made that the Company will reach a
satisfactory resolution of the suit. Failure to reach such a resolution could
have a material adverse effect on the Company's financial condition or cash
reserves.
PROPERTIES
The Company's executive offices are located in approximately 9,364 square
feet of office space at Arapahoe County Airport at 7211 South Peoria Street,
Suite 200, Englewood, Colorado 80112. The lease is a seven year lease expiring
in June 2004. The lease is at a rental of approximately $11,700 per month.
Pursuant to an oral agreement the Company will continue to occupy a portion of
hanger space at 7211 S Peoria Street, Englewood Co 80112 for aircraft
maintenance at a monthly rental rate of approximately $3,000 per month.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------------------- --- ------------------------------------
<S> <C> <C>
Kevin L. Burkhardt...................................... 39 Chief Executive Officer, President,
Director
Jane S. Burkhardt....................................... 40 Secretary
David H. Cohen.......................................... 55 Chief Financial Officer, Treasurer
Donald Jones............................................ 38 Vice President of Sales, Director
Charles W. Bartholomew.................................. 62 Director
Steven B. Myers......................................... 38 Director
Arthur G. Rosenberg..................................... 59 Director
Louis R. Capece, Jr..................................... 50 Director
Stanley Abrams.......................................... 58 Director
</TABLE>
The business experience of each of the directors and executive officers of
the Company for at least the last five years is as follows:
Kevin L. Burkhardt has served as Chief Executive Officer, President and a
Director of Proflight since its inception in May 1992. From April 1991 to March
1992, Mr. Burkhardt was a learjet captain for HPH Aviation, a learjet charter
corporation. From July 1990 to April 1991, Mr. Burkhardt was a learjet captain
and corporate pilot for Great Plains Resources, a company engaged in the oil
industry. From February 1989 to April 1990, Mr. Burkhardt was a learjet captain
for PC Air, a learjet charter corporation. From January 1987 to February 1989,
Mr. Burkhardt was a learjet captain for American Jet, an air ambulance
corporation. Kevin L. Burkhardt and Jane S. Burkhardt are husband and wife.
Jane S. Burkhardt has served as Secretary of Proflight since its inception
in May 1992 and is responsible for establishing all medical policies and
procedures, establishing required medical equipment, establishing risk
management of medical operations and liaison between medical director and
medical staff. From August 1991 to July 1994, Mrs. Burkhardt was a risk manager
for Presbyterian/St. Lukes Medical Center. From December 1989 to July 1991, Mrs.
Burkhardt was a part-time RN for Presbyterian/St. Luke's Medical Center. From
June 1989 to July 1991, Mrs. Burkhardt was an associate attorney at Wood, Ris &
Hames. Kevin L. Burkhardt and Jane S. Burkhardt are husband and wife.
David Cohen has served as Chief Financial Officer and Treasurer of
Proflight since August 1993. From January 1990 to June 1993, Mr. Cohen was the
chief financial officer of Air Resources Corp., a manufacturer of adhesives.
From January 1982 to January 1990, Mr. Cohen was the chief executive officer of
Aim Aircraft, Inc., an aircraft sales corporation and from 1979 to 1982, Mr.
Cohen was the sales manager for Aim Aircraft. From 1975 to 1978, Mr. Cohen was
the president of Basin Aviation, an aircraft sales, charter and flight training
corporation. Mr. Cohen is the author of a book entitled FBO (fixed based
operations) Management as well as the author of an aircraft brokering manual.
Donald Jones will, upon consummation of the Offering, serve as the
Company's Vice President of Sales and a Director. From August 1992 to the
present, Mr. Jones has been the director of sales and marketing and the flight
coordinator for Air Response and Air Response South. From August 1984 to August
1992, Mr. Jones held various positions at Air Ambulance Network, an air
ambulance brokerage company, including director of sales and flight coordination
and director of marketing.
Charles W. Bartholomew has served as a Director of Proflight since November
1993. From September 1988 to September 1994, Mr. Bartholomew was the program
manager for CTA Incorporated, a company which was an aerospace and information
systems contractor to the United States government. Mr. Bartholomew was
responsible for several information system engineering contracts with the United
States Air Force and directed approximately 30 engineering professionals in such
capacity.
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Steven B. Myers has served as a Director of the Company since February
1996. From 1993 to March 1998, Mr. Myers has been the Company's director of
marketing and contracting. From 1980 to 1993, Mr. Myers was engaged in real
estate investing and property management.
Arthur G. Rosenberg has served as a Director of Proflight since January
1997. Since 1986, Mr. Rosenberg has served as vice president of acquisitions for
The Associated Companies, a real estate development company. Mr. Rosenberg is a
practicing attorney admitted to the New York State Bar in 1962. For five years,
Mr. Rosenberg was general counsel to ITT Levitt & Sons, Inc., an international
home builder. Mr. Rosenberg is also a director of Mike's Original, Inc., EcoTyre
Technologies, Inc., Wall Street Records, Inc. and Phar-Mor, Inc. which are
publicly traded companies.
Louis R. Capece, Jr. will, upon consummation of the Offering, become a
Director of the Company and a consultant. Since 1986 and 1993, Mr. Capece has
served as president of Air Response and Air Response South, respectively.
Stanley Abrams has served as a Director of the Company since January 1998.
Since June 1987, Mr. Abrams has served as President and Director of Waste
Conversion Systems, Inc. Since November 1995, he has served as CEO, President
and Director and of Ripe Touch Greenhouses, Inc. Mr. Abrams is currently on the
board of directors of Waste Conversion Systems, Inc.
Messrs. Jones and Capece will become directors of the Company only upon
consummation of the Offering and the Closing of the Acquisitions, which are
expected to occur simultaneously. All directors hold office until the next
annual meeting of shareholders or until their successors are elected and
qualified. Officers are appointed by the Board of Directors and serve at the
discretion of the Board. All of the executive officers of the Company have
employment agreements with the Company. See ' -- Employment Agreements.'
EXECUTIVE COMPENSATION
The Company did not pay any compensation exceeding $100,000 to its
executive officers for the year ended December 31, 1997. Kevin L. Burkhardt, the
Company's President and Chief Executive Officer received approximately $87,000
during this period. See ' -- Employment Agreements.'
EMPLOYMENT AGREEMENTS
In March 1997, the Company entered into an amended employment agreement
with Donald Jones to serve as the Company's Vice President of Sales. The
employment agreement is for a six-year term commencing upon consummation of the
Offering and is subject to successive automatic renewal periods of one year
unless earlier terminated. Mr. Jones is to receive a 5% increase in his base
salary in years four, five and six. Pursuant to the terms of this employment
agreement, Mr. Jones is required to devote his full business time and attention
to fulfill his duties and responsibilities to the Company. Mr. Jones will
receive a base salary of $150,000 per annum. In addition, Mr. Jones will receive
a stock bonus in the total amount of 76,924 shares of Common Stock issuable on
the Closing Date.The Company has agreed to pay Mr. Jones a relocation bonus of
$100,000 and reasonable relocation expenses. Mr. Jones will also have the right
to participate in all benefit plans afforded to other comparable officers during
the term of the agreement, including, executive incentive plan, stock option
plan, monetary bonus plan, participation or extra compensation plan, pension
plan, profit sharing plan, disability insurance, health and major medical
insurance. Mr. Jones's employment agreement contains certain confidentiality and
non-competition provisions. Either the Company or Mr. Jones may cancel the
agreement for any reason after six years upon 60 days prior notice.
On March 31, 1997, the Company entered into an employment agreement with
Kevin L. Burkhardt, the Company's President and Chief Executive Officer for a
term of five years with successive automatic renewal periods of one year with a
base salary of $90,000 for the first year and 10% increases in each of the
following years. Mr. Burkhardt will receive a $25,000 one time bonus if he
consummates another acquisition. Pursuant to the terms of this employment
agreement, Mr. Burkhardt is required to devote his full business time and
attention to fulfill his duties and responsibilities to the Company. Mr.
Burkhardt will also have the right to participate in all benefit plans afforded
to all executive officers during the term of the agreement, including, executive
incentive plan, stock option plan, monetary
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<PAGE>
bonus plan, participation or extra compensation plan, pension plan, profit
sharing plan, disability insurance, health and major medical insurance.
On March 31, 1997, the Company entered into an employment agreement with
David Cohen, the Company's Chief Financial Officer and Treasurer, for a term of
three years with successive automatic renewal periods of one year with a base
salary of $70,000. Pursuant to the terms of this employment agreement, Mr. Cohen
is required to devote his full business time and attention to fulfill his duties
and responsibilities to the Company. Mr. Cohen will also have the right to
participate in all benefit plans afforded to all executive officers during the
term of the agreement, including, executive incentive plan, stock option plan,
monetary bonus plan, participation or extra compensation plan, pension plan,
profit sharing plan, disability insurance, health and major medical insurance.
On March 31, 1997, the Company entered into an employment agreement with
Jane S. Burkhardt, the Company's Secretary, for a term of three years with
successive automatic renewal periods of one year with a base salary of $36,000.
Pursuant to the terms of this employment agreement, Mrs. Burkhardt is required
to devote 20 hours per week to fulfill her duties and responsibilities to the
Company. Mrs. Burkhardt will also have the right to participate in all benefit
plans afforded to all executive officers during the term of the agreement,
including, executive incentive plan, stock option plan, monetary bonus plan,
participation or extra compensation plan, pension plan, profit sharing plan,
disability insurance, health and major medical insurance.
CONSULTING AGREEMENTS
In March, 1998, the Company entered into a two year consulting agreement
with Louis R. Capece, Jr. Under the terms of the agreement, Mr. Capece has
agreed to devote a minimum of 100 hours per month to the Company. Mr. Capece
will be paid an aggregate of $100,000 per year. The Company or Mr. Capece may
cancel the consulting agreement for any reason after two years upon 60 days
prior notice. Continuation of this Consulting Agreement is contingent upon
consummation of the Offering and the Acquisitions.
STOCK OPTION PLAN
The Board of Directors plans to submit to the shareholders a stock option
plan (the 'Option Plan'). The Option Plan provides for the grant of incentive
stock options ('ISOs'), intended to qualify for preferential tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended, and nonstatutory
stock options ('NSOs') that do not qualify for such treatment. Only employees
(including officers and directors who are also employees) of the Company or any
of its subsidiaries are eligible to receive grants of ISOs. Employees, officers,
directors, consultants, contractors and advisers of the Company or any
subsidiary are eligible to receive grants of NSOs. The purpose of the Option
Plan is to enable the Company to attract and retain exemplary directors,
employees, agents and consultants. No options can be granted under the Option
Plan at less than 100% of the fair market value of the Company's securities on
the date of grant.
The Option Plan provides that a maximum of 350,000 shares of Common Stock
may be issued upon the exercise of options granted under the Option Plan. If an
option granted under the Option Plan expires or terminates for any reason
without having been exercised in full, then the unpurchased shares subject to
that option will be available for additional option grants. No shares of Common
Stock underlying any stock options issued under the Plan may be registered on
Form S-8 or any successor form for two years after the date hereof.
The Option Plan will be administered by the Board of Directors of the
Company which will determine, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs or NSOs, or a
combination thereof, and the number of shares of Common Stock to be subject to
such options. The Board of Directors of the Company may, in its discretion,
delegate its powers, duties and responsibilities under the Option Plan to a
committee consisting of two or more directors who are 'disinterested persons'
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended.
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LIMITATIONS ON PERSONAL LIABILITY OF DIRECTORS
The Colorado Corporation Code, as revised, in general, allows corporations
to indemnify their directors and officers against reasonable expenses incurred
in connection with a proceeding if the director and/or officer acted in good
faith and in a manner the person believed to be in or not opposed to the best
interests of the corporation. In the case of a criminal action, the director or
officer must have had no reasonable cause to believe that the person's conduct
was unlawful. Under current law, a corporation may not indemnify a director or
officer in connection with a proceeding by or in the right of the corporation in
which the director or officer was adjudged liable to the corporation or if the
director or officer derived an improper personal benefit.
The Company's Articles of Incorporation and Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
the Colorado Law.
The Company will enter into an indemnification agreement ('Indemnification
Agreement') with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any civil or criminal action or administrative proceeding
arising out of his or her performance of his or her duties as a director or
officer, other than an action instituted by the director or officer. Such
indemnification is available if the indemnitee acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action, had no
reasonable cause to believe his or her conduct was unlawful. Each
Indemnification Agreement also will require that the Company indemnify the
director or other party thereto in all cases to the fullest extent permitted by
applicable law. The term of the Indemnification Agreement will be the later of
(i) ten (10) years after the date that the indemnitee ceases to serve as a
director or officer of the Company, or (ii) the final termination of all
proceedings, as defined in the Indemnification Agreement, in which the
indemnitee is granted rights of indemnification.
Each Indemnification Agreement will permit the indemnitee to bring suit to
seek recovery of amounts due under such Indemnification Agreement and will
require that the Company indemnify the director or other party thereto in all
cases to the fullest extent permitted by applicable law. Although the Company
intends to seek to obtain directors' and officers' liability insurance, such
insurance is generally very expensive. If the Company is not able to obtain
directors' and officers' liability insurance to cover amounts, any payments made
by the Company under an Indemnification Agreement will have an adverse impact on
the Company.
It is the position of the Commission that insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, that such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock, as of the date of this Prospectus, and as
adjusted to reflect the sale by the Company of the Securities offered hereby, by
(i) each person who is known by the Company to beneficially own more than five
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each of the Company's named executive officers, and (iv) all directors and
executive officers of the Company as a group. The information presented assumes
no exercise of the Warrants offered hereby.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS (1)
BENEFICIALLY OWNED ---------------------------------
BENEFICIAL OWNER PRIOR TO OFFERING BEFORE OFFERING AFTER OFFERING
- ------------------------------------------------------------- ------------------ --------------- --------------
<S> <C> <C> <C>
Kevin L. Burkhardt and Jane S. Burkhardt(2).................. 404,360 22.2% 14.0%
David Cohen(3)............................................... -- -- *
Charles W. Bartholomew(4).................................... 214,409 12.3% 8.4%
Steven B. Myers(5)........................................... 277,621 14.0% 9.6%
Arthur G. Rosenberg(6)....................................... 16,675 * *
Louis R. Capece, Jr.(8)...................................... -- -- --
Donald Jones(9).............................................. 76,924 -- *
Stanley Abrams(10)........................................... -- -- --
Srotnac Group, LLC(7)........................................ 733,825 41.1% 25.4%
All executive officers and directors as a group (7
persons)................................................... 940,072 52.7% 32.6%
</TABLE>
- ------------
* Less than 1%.
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated, subject to community property
laws, where applicable. The number of shares of Common Stock outstanding
prior to the Offering is 2,034,350. For purposes of this table, a person or
group of persons is deemed to have 'beneficial ownership' of any shares
which such person has the right to acquire within 60 days. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above, any security which such person or group of persons
has the right to acquire within 60 days after such date is deemed to be
outstanding for the purpose of computing the percentage ownership for such
person or persons, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person.
(2) Includes 112,275 shares of Common Stock and options to purchase 292,085
shares of Common Stock at an exercise price of $6.50 per share. Mr. and
Mrs. Burkhardt's business address is 7211 S. Peoria St., Englewood,
Colorado 80112. Mr. and Mrs. Burkhardt are husband and wife and own their
shares as joint tenants.
(3) Excludes 6,670 shares of Common Stock Mr. Cohen will be issued as a bonus
at the completion of the Offering. Mr. Cohen's business address is 7211 S.
Peoria St., Englewood, Colorado 80112.
(4) Includes 67,030 shares of Common Stock and options to purchase 174,379
shares of Common Stock at an exercise price of $6.50 per share. Mr.
Bartholomew's home address is 2150 Oak Hills Drive, Colorado Springs, CO
80919.
(5) Includes 77,085 shares of Common Stock and options to purchase 200,536
shares of Common Stock at an exercise price of $6.50 per share. Mr. Myers's
home address is 5769 S. Andes Street, Aurora, CO 80033.
(6) Includes options to purchase 16,675 shares of Common Stock exercisable at
$1.66 per share. Mr. Rosenberg's business address is 7979 Old Georgetown
Road, Suite 800, Bethesda, Maryland 20814.
(7) Srotnac Group, LLC's mailing address is P.O. Box 473, Babylon, NY 11702.
(8) Excludes 496,154 shares of Common Stock which will be issued to Mr. Capece
in connection with the acquisition of Air Response two years from the
closing of the Offering. Mr. Capece's address is 10845 Bayshore Drive,
Windermere, Florida 34786. See 'Certain Transactions -- Acquisition of Air
Response and Air Response South.'
(9) Includes 76,924 shares of Common Stock to be issued to Mr. Jones at the
closing of the Offfering as part of his employment agreement. Mr. Jones's
address is 5776 S. Fulton Way, Englewood, CO 80111.
(10) Mr. Abrams address is 4871 N Mesa Dr. Caslerock, CO 80104.
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CERTAIN TRANSACTIONS
ACQUISITION OF AIR RESPONSE AND AIR RESPONSE SOUTH
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
amended in May 1997 and in January 1998, pursuant to which the Company agreed to
acquire at the closing of the Offering, subject to the terms and conditions
contained therein, all of the outstanding capital stock of Air Response in
exchange for 496,154 shares of Common Stock of the Company, valued at $6.50 per
share, to be issued two years from the closing of the Offering. If the Company
completes a second public offering, Mr. Capece has a put option to sell to the
Company such number of shares of Common Stock at the then current market value,
in an amount equal to 20% of the net proceeds of such second offering, such
amounts not to exceed $1,000,000. Under the terms of such put option, the
Company is obligated to purchase the shares offered. Simultaneously, the Company
entered into an Amended Stock Purchase and Sale agreement with Air Response
South and Louis R. Capece, Jr. pursuant to which the Company agreed to acquire
at the closing of the Offering, subject to the terms and conditions contained
therein, all of the outstanding capital stock of Air Response South for $800,000
which is payable upon closing of the Offering.
The Acquisitions will close simultaneously with the closing of the
Offering. The Company entered into a consulting agreement with Louis R. Capece,
Jr. which agreement is effective as of the closing of the Offering. In
connection with the Acquisitions, Mr. Capece covenanted that he will not, for a
period of five years from closing, compete with the Company. Mr. Capece has the
right to nominate two members to the Company's Board of Directors. Mr. Capece
has nominated himself and Donald Jones as nominees to the Board of Directors.
See 'Management.'
On January 23, 1998, the Company sold its 1978 Learjet 35A, N18FN for $2.2
million to Air Response, Inc. The Company used the proceeds to pay off the notes
payable related to the aircraft and other current obligations including the
maintenance service plan on this aircraft's engines and settlement of the Susan
Fuller lawsuit.
LOAN TO AIR RESPONSE
In October 1996, the Company loaned $200,000 to Air Response. The note bore
interest at the rate of 10% per annum and was payable in two installments of
$100,000 plus accrued interest thereon on May 14, 1998 and May 14, 2000. As per
an agreement made in March of 1998, all principal and interest on the loan have
been waived.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
In October 1993, Charles W. Bartholomew, a Director of the Company, entered
into a stock purchase agreement pursuant to which he purchased 18% of the then
outstanding shares of Common Stock of the Company for $75,000 and loaned an
additional $75,000 to the Company. Interest for the first 24 months of the loan
was in the form of an additional 2% ownership interest in the Company
(constituting a rate of approximately 8%). Thereafter, interest on the loan was
at the rate of 10% per annum due December 1997.
As of December 31, 1997, Air Response and Air Response South have a
receivable due from its sole shareholder, Louis R. Capece, Jr., in the amount of
approximately $475,000. This amount will be offset from the shares to be issued
to Mr. Capece. Mr. Capece, upon consummation of the Offering, will be a director
of the Company.
In January 1996, Steven B. Myers, a Director of the Company, purchased
231,214 (before the .667 for 1 reverse stock split in 1998) shares of Common
Stock from the Company for $100,000 or $.43 per share.
In March 1997, Donald Jones entered into a six year employment agreement
with the Company to serve as the Company's Vice President of Sales upon
consummation of the Offering. The Employment Agreement also includes the
issuance of 76,924 shares of Common Stock at the completion of the Offering. See
'Management -- Employment Agreements.'
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In April 1997, Kevin L. Burkhardt, the Company's Chief Executive Officer,
President and a Director entered into a five-year employment agreement with the
Company. See 'Management -- Employment Agreement.'
In April 1997, Jane S. Burkhardt, the Company's Secretary, entered into a
three-year employment agreement with the Company. See 'Management -- Employment
Agreement.'
In April 1997, David Cohen, the Company's Chief Financial Officer and
Treasurer, entered into a three-year employment agreement with the Company. See
'Management -- Employment Agreement.'
In May 1997, Kevin L. Burkhardt and Jane S. Burkhardt agreed to return
146,042 shares of Common Stock to the Company solely in exchange for options to
purchase 292,085 shares of Common Stock at an exercise price of $6.50 per share.
The options are five-year options exercisable upon closing of the Offering. The
Underwriter believed there were too many shares outstanding and as a condition
of underwriting this Offering and required these shares to be returned to
treasury and the Company in consideration for returning these shares issued the
individuals options.
In May 1997, Charles W. Bartholomew agreed to return 87,170 shares of
Common Stock to the Company solely in exchange for options to purchase 174,379
shares of Common Stock at an exercise price of $6.50 per share. The options are
five-year options exercisable upon closing of the offering. The Underwriter
believed there were too many shares outstanding and as a condition of
underwriting this Offering required these shares to be retired and the Company,
in consideration for returning these shares, issued the individuals options.
In May of 1997, Steven B. Myers agreed to return 100,268 shares of Common
Stock to the Company solely in exchange for options to purchase 200,536 shares
of Common Stock at an exercise price of $6.50 per share. The options are
five-year options exercisable upon closing of the Offering. The Underwriter
believed there were too many shares outstanding and as a condition of
underwriting this Offering required these shares to be returned to treasury and
the Company, in consideration for returning these shares, issued the individuals
options.
In October of 1997, David H. Cohen, the Company's CFO, was offered 6,670
shares of Common Stock as a bonus to be issued upon completion of the public
offering. The Company has agreed to pay for any additional tax liability the
stock bonus adds to his income.
TRANSACTIONS WITH PRINCIPAL SHAREHOLDERS
In January 1996, the Company issued Steven A. Cantor, 983,825 shares of
Common Stock for business and financial services valued at $50,000. This
represented 67% of the then issued and outstanding shares of Common Stock. The
value of these shares were appraised by Zweifler Financial Research at $.03 per
share. Mr. Cantor has provided investment banking services to the Company. Mr.
Cantor transferred all of his shares to Srotnac Group, LLC, a limited liability
company which is 98% owned by Mr. Cantor.
In October 1996, the Company completed a bridge financing pursuant to which
it sold 70 units ('Units') each Unit consisting of a $5,000 principal amount
promissory note bearing interest at a rate of 10% and 6,670 shares of the
Company's Common Stock or an aggregate of $350,000 promissory notes and 466,900
shares of Common Stock. In January 1997, the Company sold an additional 30
units, or an aggregate of 200,100 additional shares of Common Stock and
$150,000, promissory notes.
In April 1998, as a condition of the Underwriter underwriting this
Offering, Srotnac Group LLC agreed to return 250,000 shares to the Company for
cancellation.
As a condition of the Underwriter underwriting this Offering, the
Underwriter required that the bridge lenders forgive the entire $500,000
principal amount of the promissory notes (and all interest due thereunder) sold
in October 1996 or January 1997 in order to reduce the Company's indebtedness
and that the funds loaned to the Company be allocated to the purchase price of
the shares of Common Stock. In May 1997, the bridge lenders in the October 1996
and January 1997 private placements released and discharged the Company from any
and all obligations arising out of promissory notes aggregating $500,000 and
agreed to cancel such notes.
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Air Response purchases both fuel and oil from Response Aviation, Inc.
('Aviation'), a company wholly-owned by the Companies' shareholder. The total
amount of purchases for the years ended December 31, 1997 and 1996 approximated
$88,000 and $172,000, respectively. Due to the common ownership between Air
Response and Response Aviation, the prices for fuel and oil charged by Response
Aviation to Air Response may not be indicative of the prices that Response may
be able to obtain if common ownership did not exist. In June of 1997 Response
Aviation was sold.
DESCRIPTION OF SECURITIES
GENERAL
The Company amended its articles of incorporation in February 1997, which
increased the authorized capital stock of the Company to 20,500,000 shares, of
which 20,000,000 shares are Common Stock, par value $.001 per share, and 500,000
shares are Preferred Stock, par value $1.00 per share.
COMMON STOCK
As of the date of this Prospectus, there are 1,784,350 shares of Common
Stock outstanding and 32 record stockholders. Upon consummation of the Offering,
2,887,144 shares of Common Stock will be issued and outstanding, excluding (i)
350,000 shares of Common Stock reserved for issuance under the Company's stock
option plan (ii) 496,154 shares of Common Stock which will be issued to Louis R.
Capece, Jr., in connection with the acquisition of Air Responses, two years from
the closing of the Offering; (iii) 1,019,200 shares reserved for issuance upon
exercise of the Warrants offered hereby; (iv) 700,350 shares reserved for
issuance upon exercise of other outstanding options and warrants; (v) 203,840
shares of Common Stock issuable upon exercise of the Underwriter's Option,
including shares issuable upon the exercise of the Underwriter's Warrants
underlying the Underwriter's Option.
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders. Holders of Common
Stock do not have any cumulative voting rights for the election of directors.
Subject to preferences that may be applicable to any outstanding shares of
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors from time
to time out of funds legally available for that purpose. Upon any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
holders of Common Stock are entitled to receive pro rata all assets of the
Company available for distribution to its shareholders after payment or
provision for payment of debts and other liabilities of the Company and the
liquidation preferences of any then outstanding shares of Preferred Stock. The
shares of Common Stock are neither redeemable nor convertible, except for the
put which will be issued to Mr. Capece and the holders thereof have no
preemptive or subscription rights to purchase any securities of the Company. See
'Certain Transactions -- Acquisition of Air Response and Air Response South.'
PREFERRED STOCK
As of the date of this Prospectus, no shares of Preferred Stock are
outstanding. The Board of Directors has the authority to issue Preferred Stock
in one or more series and to determine the powers, preferences and rights and
the qualifications, limitations or restrictions granted to or imposed upon any
series of Preferred Stock and to fix the number of shares constituting any
series and the designation of such series without any further vote or action by
the shareholders of the Company. Any Preferred Stock designated by the Board may
have voting, conversion, liquidation preference, redemption, dividend and other
rights which are superior to the Common Stock. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control of
the Company without further action by the shareholders, may discourage bids for
the Company's Common Stock and may adversely affect the market price of and the
voting and other rights of the Common Stock.
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OPTIONS AND WARRANTS
As of the date hereof, other than as described in the Registration
Statement, there are no outstanding options or warrants to purchase, or
securities convertible into, Common Stock of the Company.
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
The Warrants will be issued pursuant to a warrant agreement (the 'Warrant
Agreement') among the Company, the Underwriter and American Securities Transfer
& Trust, Inc., the warrant agent, and will be evidenced by warrant certificates
in registered form.
Each Warrant entitles the holder to purchase one share of Common Stock at
an exercise price of $8.00 per share, subject to adjustment, for three years
commencing twenty-four (24) months from the date of this Prospectus, provided
that with the express prior written consent of the Underwriter, the Warrants may
be exercised twelve (12) months from the date hereof.
The exercise price of the Warrants and the number and the shares of Common
Stock or other securities and property issuable upon exercise of the Warrants
are subject to adjustment in certain circumstances, including stock splits,
stock dividends, subdivisions, combinations, reclassification or issuances of
stock at a price lower than the current market price. Additionally, an
adjustment will be made upon the sale of all or substantially all of the assets
of the Company in order to enable the holders of the Warrants to purchase the
kind and number of shares of stock or other securities or property (including
cash) receivable in such event by a holder of the number of shares of Common
Stock that might otherwise have been purchased upon exercise of the Warrants.
The Warrants do not confer upon the holder any voting or any other rights
of a shareholder of the Company. Upon notice to the holders of the Warrants, the
Company has the right to reduce the exercise or extend the expiration date of
the Warrants.
Warrants may be exercised upon surrender of the Warrant certificate
evidencing those Warrants on or prior to the expiration date (or earlier
redemption date) of the Warrants to the Warrant Agent, with the form of
'Election to Purchase' on the reverse side of the Warrant certificate completed
and executed as indicated, accompanied by payment of the full exercise price (in
United States funds, by cash or certified bank check payable to the order of the
Warrant Agent) for the number of Warrants being exercised.
No fractional shares will be issued upon exercise of the Warrants. However,
if a holder of a Warrant exercised all Warrants then owned of record by him, the
Company will pay to that holder in lieu of the issuance of any fractional share
which would otherwise be issuable, an amount in cash based on the market value
of the Common Stock on the last trading day prior to the exercised date.
No Warrant will be exercisable unless at the time of exercise the Company
has filed with the Securities and Exchange Commission a current prospectus
covering the issuance of shares of Common Stock issuable upon exercise of the
Warrants and the issuance of shares has been registered or qualified or is
deemed to be exempt from registration or qualification under the securities laws
of the state of residence of the holder of the Warrant. The Company has
undertaken to use its best efforts to maintain a current prospectus relating to
the issuance of shares of Common Stock upon the exercise of the Warrants until
the expiration of the Warrants, subject to the terms of the Warrant Agreement.
While it is the Company's intention to maintain a current prospectus, there is
no assurance that it will be able to do so.
The Warrants are redeemable, in whole or in part, by the Company at a price
of $.10 per Warrant, commencing twenty-four (24) months the closing date (except
the Warrants may be redeemed commencing twelve (12) months following the closing
date with the Underwriter's express written consent), and prior to their
expiration, provided that (i) prior written notice of not less than 30 days is
given to the Warrantholders and (ii) the closing bid price (as defined) of the
Company's Common Stock for the twenty (20) consecutive trading days immediately
prior to the date on which the notice of redemption is given, shall have
exceeded $12.75 per share. The Warrantholders shall have exercise rights until
the close of business, the day preceding the date fixed for redemption.
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REGISTRATION RIGHTS
In connection with the acquisition of Air Response, the Company has granted
Louis R. Capece, Jr., upon the issuance of 496,154 shares of Common Stock two
years from the closing of the Offering, certain 'piggyback' registration rights
(other than a Registration Statement on Form S-4 or Form S-8 or successor form
thereto). These registration rights are not limited to a term and are subject to
approval of any underwriter for the Company. See 'Certain Transactions.'
Upon the consummation of the Offering, the Company will sell to the
Underwriter an Option to purchase 101,920 shares of Common Stock, and 101,920
Warrants, which may be exercised for an additional 101,920 shares of Common
Stock for $10. The Underwriter's Option will be exercisable for a period of four
years commencing one year from the date of this Prospectus. In addition, holders
of the Underwriter's Option will have certain demand or piggy-back registration
rights during the period the Underwriter's Option is exercisable with respect to
the Underwriter's Option and the underlying shares of Common Stock. See
'Underwriting.'
TRANSFER AGENT
American Securities Transfer & Trust, Inc., 1825 Lawrence Street, Denver,
CO 80202-1817, will serve as the Company's transfer agent for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offering, the Company will have outstanding an
aggregate of 2,887,144 shares of Common Stock of which 1,867,944 are 'restricted
securities' under Rule 144 under the Securities Act of 1933, as amended (the
'Securities Act') (exclusive of (i) the 350,000 shares of Common Stock reserved
for issuance under the Option Plan; (ii) 496,154 shares of Common Stock which
will be issued to Louis R. Capece, Jr. in connection with the acquisition of Air
Response, two years from the closing of the Offering; (iii) 1,019,200 shares
reserved for issuance upon exercise of the Warrants offered hereby; (iv) 700,350
shares reserved for issuance upon exercise of other outstanding options and
warrants; and (v) 101,920 shares of Common Stock issuable upon exercise of the
Underwriter's Warrants. All of the 1,019,200 shares of Common Stock sold in the
Offering will be freely tradeable without restriction under the Securities Act
except for any shares purchased by 'affiliates' of the Company (as that term is
defined in the rules and regulations under the Securities Act).
In the future, these restricted shares may be sold only pursuant to a
registration statement under the Securities Act or an applicable exemption,
including the exemption provided by Rule 144. The Securities and Exchange
Commission ('Commission') has amended Rule 144, effective April 29, 1997,
reducing the holding period before shares subject to Rule 144 become eligible
for sale in the public market. Under the revised Rule 144, a person who has
owned Common Stock for one year may, under certain circumstances, sell within
any three-month period, a number of shares of Common Stock that does not exceed
the greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. In
addition, a person who is not deemed to have been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned the restricted securities for the last two years is entitled to sell all
such shares without regard to the volume limitations, current public information
requirements, manner of sale provisions and notice requirements. Sales or the
expectation of sales of a substantial number of shares of Common Stock in the
public market following this Offering could adversely affect the prevailing
market price of the Common Stock. In addition, the sale of substantial amounts
of Common Stock acquired through the exercise of the (i) options granted, or
(ii) Underwriter's Option could adversely affect prevailing market prices for
the Common Stock. Except as otherwise described herein, the Company and its
officers, directors and shareholders have agreed with the Underwriter not to,
directly or indirectly, register, issue, offer, sell, offer to sell, contract to
sell, hypothecate, pledge or otherwise dispose of any shares of Common Stock,
(or any securities convertible into or exercisable or exchangeable for shares of
Common Stock), for a period of two years from the date of this Prospectus,
except that such shares may be sold with the prior written consent of the
Underwriter after one year. The Underwriter's consent may be based on several
factors, including, but not limited to the financial performance of the Company
and market conditions, including price and trading volume of the Company's
Common Stock.
42
<PAGE>
<PAGE>
UNDERWRITING
First Liberty Investment Group, Inc. (the 'Underwriter') has agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company and the Company has agreed to sell on a firm commitment basis
1,019,200 shares of Common Stock and 1,019,200 Warrants offered hereby, not
including the Over-Allotment Option. The Underwriter is committed to purchase
all Securities offered hereby, if any, such as purchases subject to certain
conditions, which may be waived by the Underwriter in its sole discretion,
specified in the Underwriting Agreement.
The Underwriter has advised the Company that it proposes to offer the
Securities to the public at the public offering price set forth on the cover
page of this Prospectus and that it may allow to certain dealers who are members
of the National Association of Securities Dealers, Inc. ('NASD') concessions not
in excess of $ per share of Common Stock and $ per Warrant.
The Company has agreed to pay to the Underwriter a non-accountable,
non-refundable expense allowance of 3% of the gross proceeds of this Offering.
The Company has also agreed to pay all expenses in connection with qualifying
the Common Stock and Warrants offered hereby for sale under the laws of such
states as the Underwriter may designate, including expenses of counsel retained
for such purpose by the Underwriter.
The Company has agreed to sell to the Underwriter for $10, upon
consummation of this Offering, the Underwriter's Option exercisable to purchase
up to 101,920 shares of Common Stock and up to 101,920 Warrants to purchase
Common Stock. The Underwriter's Option may not be sold, transferred, assigned or
hypothecated for one year from the date of this Prospectus, except to the
officers or partners of the Underwriter and members of the selling group, and is
exercisable during the four-year period commencing one year from the Effective
Date (the 'Option Exercise Term'). During the Option Exercise Term, the holders
of the Underwriter's Option are given, at nominal cost, the opportunity to
profit from a rise in the market price of the Common Stock. To the extent that
the Underwriter's Option is exercised, in whole or in part, dilution to the
interests of the Company's shareholders will occur. Further, the terms upon
which the Company will be able to obtain additional equity capital may be
adversely affected since the holders of the Underwriter's Option can be expected
to exercise at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than those
provided in the Underwriter's Option. Subject to certain limitations and
exclusions, the Company has agreed, at the request of the holders of a majority
of the securities underlying the Underwriter's Option to register the
Underwriter's Option and the underlying securities under the Securities Act on
two occasions (one at the Company's expense and one at the holder's expense)
during the Option Exercise Term and to include such Underwriter's Option and the
underlying securities in any appropriate registration statement which is filed
by the Company during the five years following the date of this Prospectus.
The Company has granted to the Underwriter the Over-Allotment Option,
exercisable during the 45 calendar day period after the Closing Date, to
purchase from the Company at the initial public offering price less underwriting
discounts, up to an additional 152,880 shares of Common Stock and 152,880
Warrants, exercisable for up to an additional 152,880 shares of Common Stock, on
the same terms as the Securities offered hereby, solely to cover
over-allotments, if any. In addition, the Underwriter may short sell Securities
in its syndicate account in excess of the Securities offered hereby and included
in its over-allotment option and cover such short sales by purchases of
Securities in the open market or otherwise.
The Underwriter has informed the Company that it does not expect sales to
be made to discretionary accounts in excess of one percent (1%) of the
Securities offered hereby.
In the event the Underwriter exercises its registration rights to effect
the distribution of the securities underlying the Underwriter's Option, the
Underwriter and any holder of such securities who is a market maker in the
Company's securities, prior to such distribution, will be unable to make a
market in the Company's securities for up to a period of nine days prior to the
commencement of such distribution and until such distribution is completed. If
the Underwriter ceases making a market, the market and market prices for the
Securities may be adversely affected, and the holders thereof may be unable to
sell such securities.
The Company has agreed to engage and pay for, on the Underwriter's behalf,
a consultant selected by the Underwriter and approved by the Company who is an
expert in the industry in which the
43
<PAGE>
<PAGE>
Company does business to analyze the Company's prospects and respond to the
Underwriter's questions and concerns regarding the offering of Securities
hereby. The aggregate expenses of such consultant shall not exceed $10,000.
Additionally, the Underwriter has been engaged by the Company as its
warrant solicitation agent and pursuant thereto may participate in the
solicitation of the exercise of the Warrants. Upon the exercise of the Warrants,
the Company will pay the Underwriter a commission of 5% of the aggregate
exercise price of the Warrants exercised. In accordance with the NASD Notice to
Members 92-98, no fee shall be paid: (i) upon the exercise of warrants where the
market price of the underlying Common Stock is lower than the exercise price;
(ii) upon the exercise of any Warrants not solicited by the Underwriter, (iii)
for the exercise of Warrants held in any discretionary account; or (iv) upon the
exercise of Warrants where disclosure of compensation arrangements has not been
made and documents have not been provided to customers both as part of the
original offering and at the time of exercise. Further, the exercise of any
Warrant shall be presumed unsolicited unless the holder of such Warrant states
in writing that the transaction was solicited by the Underwriter.
Notwithstanding the foregoing, no fees will be paid to the Underwriter or any
other NASD members upon exercise of the Warrants within the first twelve months
from the Effective Date.
In connection with the solicitation of Warrant exercises, unless granted an
exemption by the Commission from Regulation M under the Exchange Act, the
Underwriter and any other soliciting broker-dealer will be prohibited from
engaging in any market-making activities with respect to the Securities for the
period commencing either two or nine business days (depending on the market
price of the Company's shares of Common Stock) prior to any solicitation
activity with respect to the exercise of Warrants until the later of (i) the
termination of such solicitation activity or (ii) the termination (by waiver or
otherwise) of any rights which the Underwriter or any other soliciting
broker-dealer may have to receive a fee for the exercise of Warrants following
such solicitation. As a result, the Underwriter or other soliciting
broker-dealer may be unable to provide a market for the Company's securities,
should it desire to do so, during certain periods in which the Warrants are
exercisable.
In addition, the Company has agreed to enter into a financial consulting
agreement with the Underwriter, who will act as a financial consultant for the
Company for a period of two years, commencing upon the consummation of this
Offering, for an aggregate fee of $120,000, all of which is payable in full at
the Closing.
Except as otherwise described herein, the Company has agreed not to issue
any equity and/or other securities for a period of two (2) years from the date
hereof without the express prior written consent of the Underwriter.
All of the Company's officers, directors and shareholders have agreed not
to offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or rights to acquire shares of Common Stock without the prior consent of
the Underwriter for a period of two (2) years from the date hereof, except that
after one year, such shares may be resold only with the Underwriter's express
prior written consent.
Although the Underwriting Agreement will provide that the Underwriter may
designate for election one person to the Company's Board of Directors, the
Underwriter has advised the Company that it has not selected such individual and
has no immediate plans to do so. If the Underwriter elects not to assert such
right, then it may designate one person to attend all Board of Directors
meetings as an observer. In the event that such an individual is designated,
such individual shall receive reimbursement of expenses for attending the
meetings of the Board of Directors.
The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act. To the extent this
section may purport to provide exculpation from possible liabilities arising
under the Federal securities laws, it is the opinion of the Commission that such
indemnification is against public policy and is therefore unenforceable.
The foregoing is a summary of the principal terms of the Underwriting
Agreement, the Underwriter's Warrant and the Financial Advisory and Investment
Banking Agreement. Reference is made to the copies of the Underwriting
Agreement, the Underwriter's Warrants and the Financial Advisory and Investment
Banking Agreement which will be filed as exhibits to the Registration Statement
of which this Prospectus forms a part.
The Underwriter was incorporated on August 11, 1958, and first registered
as a broker-dealer on October 3, 1958. Prior to this Offering, although the
Underwriter has participated as a selling group
44
<PAGE>
<PAGE>
member in two underwritings, it has not participated as a sole or co-manager in
any public offerings. Prospective purchasers of the Common Stock and Warrants
offered hereby should consider the Underwriter's lack of experience in being a
manager of an underwritten public offering.
Prior to this Offering, there has been no public market for the Common
Stock or the Warrants. Accordingly, the Offering and exercise price of such
Securities being offered hereby was determined, in large part, by negotiations
between the Company and the Underwriters on an arbitrary basis and bear no
direct relationship to the assets, earnings, book value, results of operations
or other recognized criterion of value. Factors considered in determining such
prices, in addition to prevailing market conditions, include the history of and
the business prospects of the Company, as well as such other factors as were
deemed relevant, including an evaluation of management and the general economic
climate. The prices should in no event, however, be regarded as an indication of
any future market price of the Common Stock or the Warrants.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Bondy & Schloss LLP, New York, NY. Gerald A. Adler, a
partner of Bondy & Schloss LLP indirectly owns an aggregate of 2,500 shares of
Common Stock of the Company. Certain legal matters in connection with the
Offering will be passed upon for the Underwriter by Gusrae, Kaplan & Bruno,
New York, NY.
EXPERTS
The audited balance sheets of Proflight Medical Response, Inc. as of
December 31, 1997 and 1996, the audited statements of operations, cash flows and
stockholders' equity (deficit) for the years ended December 31, 1997 and 1996
have been included herein and in the Registration Statement in reliance upon the
report appearing elsewhere herein of Grant Thornton LLP, independent certified
public accountants, whose report thereon has been modified to include an
explanatory paragraph which refers to various matters which raise substantial
doubt about Proflight's ability to continue as a going concern, and upon the
authority of said firm as experts in accounting and auditing. The audited
combined balance sheet of Air Response and Air Response South as of December 31,
1997, the audited combined statements of operations and retained earnings and
cash flows, for the years ended December 31, 1997 and 1996 have been included
herein and in the Registration Statement in reliance upon the report appearing
elsewhere herein of Staff Ciampino & Company, P.C., independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 (together with
all amendments, schedules and exhibits thereto, the 'Registration Statement')
under the Securities Act with respect to the Securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference hereby is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. For
further information with respect to the Company and the Securities offered
hereby, reference is made to the Registration Statement. The Registration
Statement filed by the Company may be inspected, without charge, at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, NW, Washington, DC 20549 and at the Commission's regional
offices at 1801 California Street, Suite 4800, Denver, Colorado 80202-2648 and 7
World Trade Center, Suite 1300, New York, NY 10048. Copies of such material also
may be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, NW, Washington, DC 20549, upon payment of certain fees prescribed by the
Commission. Electronic registration statements made through the Electronic Data
Gathering, Analysis and Retrieval system are publicly available through the
Commission's Web site (http://www.sec.gov).
45
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PROFLIGHT MEDICAL RESPONSE, INC.
Report of Independent Certified Public Accountants................................................ F-2
Balance Sheet as at December 31, 1997 and 1996.................................................... F-3
Statements of Operations For the Years Ended December 31, 1997 and 1996........................... F-4
Statements of Stockholders' Deficit For the Years Ended December 31, 1997 and 1996................ F-5
Statements of Cash Flows For the Years Ended December 31, 1997 and 1996........................... F-6
Notes to Financial Statements..................................................................... F-7
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
Independent Auditors' Report -- Staff Ciampino & Company, P.C..................................... F-17
Combined Balance Sheet as at December 31, 1997.................................................... F-18
Combined Statements of Operations and Retained Earnings For the Years Ended December, 1997 and
1996............................................................................................. F-19
Combined Statements of Cash Flows For the Years Ended September 30, 1997 and 1996................. F-20
Notes to Financial Statements..................................................................... F-21
PROFLIGHT MEDICAL RESPONSE, INC. PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Statement of Operations For the Year Ended December 31, 1997 (Unaudited)................ F-27
Pro Forma Statement of Operations For the 12 months ended December 31, 1997 (Unaudited)........... F-29
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
and Stockholders
PROFLIGHT MEDICAL RESPONSE, INC.
We have audited the accompanying balance sheets of Proflight Medical
Response, Inc. (a Colorado corporation) as of December 31, 1997 and 1996, and
the related statements of operations, stockholders' deficit and cash flows for
the years 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 audits.
We conducted our audits 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 audits provide 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 Proflight Medical Response,
Inc. as of December 31, 1997 and 1996, and the results of its operations and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in note B to the
financial statements, the Company's total liabilities exceed total assets as of
December 31, 1997. This factor and others discussed in note B raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in note B. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
GRANT THORNTON LLP
Denver, Colorado
February 20, 1998
(except for Note A, Item (6) as to which the
date is April 16, 1998, Note C, Note J,
Item 4 and 5 as to which the date is March 10, 1998,
and Note J, Item 6 as to which the date is April 20, 1998
F-2
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Accounts receivable, trade
Air Response, Inc........................................................... $ 224,094 $ 131,887
Other....................................................................... 416,420 374,206
---------- ----------
640,514 506,093
Less allowance for doubtful accounts........................................ 100,000 40,000
---------- ----------
540,514 466,093
Other current assets............................................................. 21,200 8,705
---------- ----------
Total current assets................................................... 561,714 474,798
Property and Equipment -- At Cost
Aircraft......................................................................... 3,118,526 4,281,883
Furniture and fixtures........................................................... 54,050 22,997
Medical equipment................................................................ 164,787 160,262
---------- ----------
3,337,363 4,465,142
Less accumulated depreciation and amortization.............................. (714,343) (337,013)
---------- ----------
2,623,020 4,128,129
Other Assets
Note receivable, including interest -- Air Response, Inc......................... 222,500 200,000
Deferred loan costs, less accumulated amortization of $16,250 in 1996............ -- 93,750
Deferred offering costs.......................................................... 64,350 10,000
Cost of intangible business asset, less accumulated amortization of $4,000 in
1996............................................................................ -- 26,000
Prepaid engine maintenance reserve............................................... 250,586 42,489
---------- ----------
537,436 372,239
---------- ----------
Total assets........................................................... $3,722,170 $4,975,166
---------- ----------
---------- ----------
LIABILITIES
Current Liabilities
Current portion of notes payable
Shareholders/directors...................................................... $ 719,669 $ 513,694
Other....................................................................... 1,836,165 428,253
Bank overdraft................................................................... 187 19,910
Accounts payable -- trade
Air Response, Inc........................................................... 151,767 19,535
Other....................................................................... 1,008,092 476,256
Accrued liabilities.............................................................. 71,874 97,461
---------- ----------
Total current liabilities.............................................. 3,787,754 1,555,109
Notes payable, less current portion
Shareholders/directors........................................................... -- 154,000
Other............................................................................ 687,754 3,809,935
---------- ----------
687,754 3,963,935
---------- ----------
Total liabilities...................................................... 4,475,508 5,519,044
Commitments and Contingencies......................................................... -- --
Stockholders' Deficit
Common stock -- authorized 20,000,000 shares of $.001 par value; issued and
outstanding, 2,034,350 and 2,151,075 for 1997 and 1996, respectively............ 2,034 2,151
Paid-in capital (deficit)........................................................ 31,343 (435,024)
Preferred stock -- authorized 500,000 shares of $1 par value; no shares issued or
outstanding..................................................................... -- --
---------- ----------
33,377 (432,873)
Accumulated deficit.............................................................. (786,715) (111,005)
---------- ----------
Total stockholders' deficit................................................. (753,338) (543,878)
---------- ----------
Total liabilities and stockholders' deficit............................ $3,722,170 $4,975,166
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Operating revenue
Air ambulance.................................................................... $4,218,182 $3,090,527
Medical.......................................................................... 583,226 607,490
Passenger........................................................................ 125,409 175,068
Maintenance...................................................................... 79,803 33,126
Gain on sale of aircraft......................................................... 638,179 --
---------- ----------
Total operating revenue..................................................... 5,644,799 3,906,211
Operating expenses
Flying operations................................................................ 3,312,564 2,631,332
Maintenance...................................................................... 652,267 591,207
Promotion and sales.............................................................. 69,985 34,584
General and administrative....................................................... 1,406,483 650,036
Depreciation and amortization.................................................... 488,867 377,930
---------- ----------
Total operating expenses.................................................... 5,930,166 4,285,089
---------- ----------
Operating (loss)............................................................ (285,367) (378,878)
Nonoperating expenses (income)
Interest expense................................................................. 415,343 287,188
Other, net....................................................................... (25,000) (34)
---------- ----------
Total nonoperating expenses (income)........................................ 390,343 287,154
---------- ----------
Net (Loss).................................................................. $ (675,710) $ (666,032)
---------- ----------
---------- ----------
Basic loss per common share........................................................... $(0.36) $(0.45)
---------- ----------
Weighted average number of common shares outstanding.................................. 1,886,593 1,487,300
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK PAID-IN
------------------- CAPITAL (ACCUMULATED
SHARES AMOUNT (DEFICIT) (DEFICIT) TOTAL
--------- ------ -------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995...................... 771,097 $ 771 $144,047 $ (197,099) $ (52,281)
Net loss.......................................... -- -- -- (666,032) (666,032)
Transfer of S Corporation accumulated deficit to
paid-in capital................................. -- -- (752,126) 752,126 --
Cost of 387,282 shares of common stock retired.... (258,317) (258) (12,807) -- (13,065)
Common stock issued for cash...................... 154,220 154 99,846 -- 100,000
Common stock issued for promotion services........ 983,825 984 49,016 -- 50,000
Common stock issued for bridge loans.............. 466,900 467 34,533 -- 35,000
Common stock issued for services.................. 20,010 20 1,480 -- 1,500
Common stock issued in conjunction with loan...... 13,340 13 987 -- 1,000
--------- ------ -------- ------------ ---------
Balance at December 31, 1996...................... 2,151,075 2,151 (435,024) (111,005) (543,878)
Net loss.......................................... -- -- -- (675,710) (675,710)
Common stock issued for bridge loans.............. 216,775 217 16,033 -- 16,250
Retired common stock in exchange for options...... (333,500) (334) 334 -- --
Forgiveness of bridge loans....................... -- -- 450,000 -- 450,000
--------- ------ -------- ------------ ---------
Balance at December 31, 1997...................... 2,034,350 $2,034 $ 31,343 $ (786,715) $(753,338)
--------- ------ -------- ------------ ---------
--------- ------ -------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities
Net (loss)............................................................................ $ (675,710) $ (666,032)
Adjustment to reconcile net earnings (loss) to net cash provided by operating
activities
Depreciation and amortization.................................................... 488,867 377,930
(Gain) on sale of aircraft....................................................... (638,179) --
Provision for losses on accounts receivable...................................... 60,000 11,353
Stock issued for services............................................................. -- 2,500
Changes in assets and liabilities
(Increase) in accounts receivable................................................ (134,421) (141,413)
(Increase) in other assets....................................................... (217,092) (76,787)
Net increase in deferred costs................................................... (54,350) (35,000)
Increase (decrease) in bank overdraft............................................ (19,723) 19,910
Increase in accounts payable..................................................... 664,068 214,760
Increase (decrease) in accrued liabilities....................................... (25,587) 78,689
---------- ----------
Net cash (used in) operating activities................................ (552,127) (214,090)
Cash flows from investing activities
Acquisition of property and equipment............................................ (35,579) (3,858,564)
Proceeds from sale of aircraft................................................... 1,750,000 --
Issuance of note receivable...................................................... -- (200,000)
---------- ----------
Net cash flows provided by (used in) investing activities.............. 1,714,421 (4,058,564)
Cash flows from financing activities
Proceeds from sale of stock...................................................... -- 100,000
Retirement of common stock....................................................... -- (13,065)
Principal payments on notes payable.............................................. (1,518,658) (175,745)
Proceeds from notes payable...................................................... 356,364 4,359,780
---------- ----------
Net cash provided by (used in) financing activities.................... (1,162,294) 4,270,970
---------- ----------
Net (Decrease) in Cash and Cash Equivalents........................................... -- (1,684)
Cash and cash equivalents, beginning of year.......................................... -- 1,684
---------- ----------
Cash and cash equivalents, end of year................................................ $ -- $ --
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information
Cash paid during the year for interest........................................... $ 387,009 $ 262,808
Supplemental schedule of noncash investing and financing activities
Common stock issued for services and bridge loans..................................... 16,250 85,000
Refinancing of long-term debt......................................................... -- 435,687
Notes forgiven from bridge lenders net of deferred loan cost.......................... 500,000 --
333,500 shares of common stock returned to Company by its officers in exchange for
five-year options to purchase 667,000 shares of common stock over a period of three
to four years at an exercise price of $6.50 per share............................... 334 --
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
the understanding of Proflight Medical Response Inc.'s (the Company) financial
statements. The financial statements and notes are representations of the
Company's management, which is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles.
1. HISTORY AND BUSINESS ACTIVITY
The Company provides airborne transport for patients who are critically
ill, injured or otherwise incapacitated such that they may require emergency
medical care during flight. Services are provided by the Company for hospital
patients who need to be transported to other hospitals; hospital patients who
need to be transported to residences or nursing homes and other convalescent
facilities; organ transplant harvest teams and harvested organs and significant
numbers of vacationers who become ill or injured during trips. The flights
operated are generally long distance in nature and they include international as
well as domestic transport.
2. CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid cash investments with an original maturity of three months or less
to be cash equivalents.
3. PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Major additions, betterments,
and renewals are capitalized. Maintenance and repairs are charged to operating
expenses as they are incurred. Depreciation and amortization to estimated
residual values are computed on the straight-line basis for the aircraft; the
units-of-production method for aircraft engines/overhauls; the double-declining
method is used for all other property and equipment, over the estimated useful
lives of the related assets as follows:
<TABLE>
<S> <C>
Aircraft................................................. 20 years
Aircraft engines/overhauls............................... Estimated flight hours
Furniture and fixtures................................... 5 - 7 years
Medical equipment........................................ 7 years
</TABLE>
4. DEFERRED OFFERING COSTS
The Company has deferred the costs in connection with the proposed public
offering (note B). The costs will be charged against paid in capital if the
offering is successful, or will be charged to expense if the offering is
unsuccessful. Deferred offering costs of $259,275 related to an unsuccessful
offering were expensed in the year ended December 31, 1997.
5. STOCK OPTIONS
The Company has chosen to account for stock based compensation to employees
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock issued to Employees, and related
interpretations. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the exercise price.
F-7
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
6. LOSS PER COMMON SHARE
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128). SFAS 128
requires the presentation of basic earnings per share (EPS) and, for companies
with potentially dilutive securities such as convertible debt, options and
warrants, diluted EPS.
Basic EPS is computed in accordance with SFAS 128 by dividing net income by
the weighted average number of shares outstanding during the period. All
outstanding securities at the end of 1997 which could be converted into common
shares are anti-dilutive. Therefore, the basic and diluted EPS are the same.
There is no impact on EPS for prior years as a result of the adoption of SFAS
128.
During the year ended December 31, 1996, the Company effected a 50 to 1 and
3.85356 to one stock split. On April 16, 1998, the Company effected a 0.667 to
one reverse stock split. All shares and per share amounts have been
retroactively restated to reflect the splits additionally, all shares that are
nominal issuances returns have been given retroactive treatment in the weighted
average shares calculation.
7. INCOME TAXES
Prior to October 31, 1996, income taxes on net earnings were payable
personally by the stockholders pursuant to an election under Subchapter S of the
Internal Revenue Code not to have the Company taxed as a corporation.
Accordingly, no provision had been made for federal income taxes.
In October 1996, the Company lost its S corporation status as a result of
issuing stock to a corporation. Therefore, the Company was taxed as a C
Corporation for a portion of 1996. Accordingly, the accumulated deficit has been
recorded to paid-in capital as of November 1, 1996. Deferred income taxes are
provided for items which are reported for tax purposes in different periods than
in the financial statements (see note G).
8. IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of (SFAS 121). SFAS 121 requires
that long-lived assets and certain identifiable intangibles held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If the sum
of the expected future cash flows (undiscounted and without interest) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of that loss would be based on the fair value of the asset. SFAS 121
also generally requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of the carrying amount or
the fair value, less cost to sell. SFAS 121 is effective for the Company's 1997
fiscal year end. Any impairment provisions recognized in accordance with SFAS
121 are permanent and may not be restored in the future. No impairment expense
was recognized in the years ended December 31, 1997 and 1996.
9. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
10. RECLASSIFICATIONS
Certain financial information for the year ended December 31, 1996, has
been reclassified to conform with the presentation for the current year.
NOTE B -- REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, as shown in the accompanying financial
statements, the Company has accumulated a deficit in stockholders' equity of
$753,338 through December 31, 1997. In addition, total current liabilities
exceed total current assets by approximately $3,226,040 as of December 31, 1997.
In view of the matters described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to meet its financing requirements
on a continuing basis, to maintain present financing, and to succeed in its
future operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
The Company is pursuing additional financing from outside sources,
including an initial public offering (IPO) (see note E2). With the proceeds of
the IPO, management intends to acquire a company which will more than double
current sales. Management believes this combination will allow both companies to
operate more efficiently through elimination of certain duplicate general and
administrative costs, purchasing discounts on aircraft fuel, and more efficient
use of each aircraft.
Management also plans to expand services through the purchase of additional
aircraft, resulting in increased revenues, more efficient use of current
aircraft, and proportionately lower operating costs. Management believes this
should provide a higher gross margin. Management believes that these actions
will provide growth and improve the Company's operating and financial condition,
providing the opportunity to continue as a going concern.
NOTE C -- NOTE RECEIVABLE -- AIR RESPONSE, INC.
In 1996, the Company loaned $200,000 to Air Response, Inc., a company it
intends to purchase (see note E3), which is also a major customer. The note is
unsecured and bears interest at 10%. The note is payable in two installments of
$100,000 plus accrued interest on May 14, 1998 and May 14, 2000 (see note J4).
In March of 1998 the note and interest was forgiven as consideration for
extending the acquisition agreement.
NOTE D -- NOTES PAYABLE
Notes payable at December 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Shareholders/Directors
10.0% note to a shareholder, payable in full, principal and interest on
the earlier of May 31, 1998 or closing of an initial public offering... $ 21,669 $ 19,694
11.0% note to a shareholder with monthly interest-only payments due
September 30, 1998; secured by a secondary lien on a 1973 Learjet
25B-XR and other key components, as well as all accounts receivable,
and certain medical equipment and other assets as specified in the
agreement.............................................................. 198,000 198,000
</TABLE>
F-9
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
12.0% note to a shareholder with monthly interest only payments, due
September 30, 1998; secured by a third lien on a 1973 Learjet 25B-XR
and a second interest in all accounts receivable and certain medical
equipment.............................................................. $ 100,000 $ 100,000
36.0% notes to a shareholder, with monthly interest-only payments due on
the earlier of January 31, 1998 or upon closing of an initial public
offering; secured by a fourth and fifth lien on a 1973 Learjet 25B-XR
and other key components, as well as all accounts receivable and
certain medical equipment.............................................. 225,000 --
10.0% notes with nineteen shareholders, payable in full, principal and
interest, on the earlier of one year from date of each note or upon
closing of an initial public offering; note forgiven in April 1997..... -- 350,000
10.0% notes with four shareholders payable in full, principal and interest
on the earlier of March 27, 1998, or upon closing of an initial public
offering............................................................... 125,000 --
8.0% note to a shareholder, payable on demand............................. 50,000 --
---------- ----------
719,669 667,694
Less current maturities.............................................. 719,669 513,694
---------- ----------
$ -- $ 154,000
---------- ----------
---------- ----------
Other
9.75% note due in monthly installments of $19,419 including interest, due
November 10, 2006; collateralized by a 1978 Learjet 35A and other
equipment.............................................................. $ -- $1,477,646
9.75% note due in 60 monthly installments of $14,720 including interest,
beginning December 15, 1996, with a balloon payment of $322,284 due on
December 15, 2001; collateralized by a 1973 Learjet 25B and other
equipment. Guaranteed by certain stockholders.......................... 791,759 886,139
10.5% note due in 59 monthly installments of $17,717 including interest,
beginning June 30, 1996, with a balloon payment of $841,995 due on May
31, 2001, collateralized by a 1978 Learjet 35A. Guaranteed by certain
stockholders. At December 31, 1997, the note is in default and the
entire balance due is reflected as current............................. 1,202,583 1,268,241
10.5% note due in 55 monthly installments of $6,513 including interest,
beginning November 15, 1996, with a balloon payment of $324,627 due on
June 15, 2001; collateralized by a 1978 Learjet 35A. Guaranteed by
certain stockholders. The note is in default and the entire balance due
is reflected as current................................................ 455,224 478,053
10.0% note issued January 16, 1996, due in monthly installments of $1,500
with the balance due on July 16, 1996. Defaulted in 1996 and interest
rate increased to 20.0%; entire balance reflected as current........... 26,865 85,009
10.25% line of credit with bank, due February 27, 1998.................... 47,488 43,100
---------- ----------
2,523,919 4,238,188
Less current maturities.............................................. 1,836,165 428,253
---------- ----------
$ 687,754 $3,809,935
---------- ----------
---------- ----------
</TABLE>
F-10
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
The aggregate maturities of the notes payable are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1998................................................... $2,555,834
1999................................................... 114,611
2000................................................... 126,299
2001................................................... 446,844
----------
$3,243,588
----------
----------
</TABLE>
NOTE E -- COMMITMENTS AND CONTINGENCIES
1. LEASES
The Company leases aircraft, office space and office equipment under
operating lease arrangements. In February 1997, the Company entered into a
seven-year office building lease with monthly rental of $11,705. Total lease
expense was $252,468 and $86,738 for the years ended December 31, 1997 and 1996,
respectively. In addition, as part of the aircraft lease, the Company is
required to make monthly payments of $150 per engine hour flown. A total of
$117,405 and $12,720 was recognized in 1997 and 1996, respectively, as
maintenance expense.
The minimum rental commitments under the noncancelable lease agreements are
as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1998................................................... $ 320,979
1999................................................... 305,460
2000................................................... 140,460
2001................................................... 140,460
2002................................................... 140,460
Thereafter............................................. 204,838
----------
$1,252,657
----------
----------
</TABLE>
2. INITIAL PUBLIC OFFERING
In October 1997 the Company signed a letter of intent with First Liberty
Investment Group to act as managing underwriter on a firm commitment basis for a
$6,726,720 initial public offering (IPO). The underwriting calls for the sale of
1,019,200 shares of common stock at $6.50 per share and 1,019,200 warrants at
$0.10 each.
In addition, the Company has agreed to enter into a financial consulting
agreement with the Underwriter, who will act as a financial consultant for the
Company for a period of two years, commencing upon the consummation of this
Offering, for an aggregate fee of $120,000, all of which is payable in full at
the Closing.
3. ACQUISITION OF AIR RESPONSE AND AIR RESPONSE SOUTH
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
amended in May 1997 and in January 1998, pursuant to which the Company agreed to
acquire at the closing of the IPO, subject to the terms and conditions contained
therein, all of the outstanding capital stock of Air Response in exchange for
496,154 shares of common stock of the Company, valued at $6.50 per share, to be
issued two years from the closing of the IPO. If the Company completes a second
public offering, Mr. Capece has a put option to sell to the Company such number
of shares of common stock at the then current market value, equal
F-11
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
to 20% of the net proceeds of such second offering, not to exceed $1,000,000.
Under the terms of such put option, the Company is obligated to purchase the
shares offered. Simultaneously, the Company entered into an Amended Stock
Purchase and Sale agreement with Air Response South and Louis R. Capece, Jr.,
pursuant to which the Company agreed to acquire at the closing of the IPO,
subject to the terms and conditions contained therein, all of the outstanding
capital stock of Air Response South for $800,000 which is payable upon closing
of the IPO.
The Acquisition will close simultaneously with the closing of the IPO. The
Company entered into a consulting agreement with Louis R. Capece, Jr., which
agreement is effective as of the closing of the IPO. In connection with the
acquisitions, Mr. Capece covenanted that he will not, for a period of five years
from closing, compete with the Company. Mr. Capece has the right to nominate two
members to the Company's Board of Directors. Mr. Capece has nominated himself
and Donald Jones as nominees to the Board of Directors. This acquisition
agreement has been subsequently modified (see note J4).
4. CONSULTING AGREEMENT
The Company entered into a two year consulting agreement, effective at IPO,
with Louis R. Capece, Jr. Under the terms of the agreement, Mr. Capece has
agreed to devote a minimum of 100 hours per month to the Company. Mr. Capece
will be paid an aggregate of $100,000 per year. The Company or Mr. Capece may
cancel the consulting agreement for any reason after one year and upon 60 days
prior notice.
5. LITIGATION
In March 1997, the Company and the Company's president were named in a
lawsuit Susan Fuller v. Proflight, Inc., Kevin Burkhardt, Andrew Hiestand and
James Fuller, Arapahoe County District Court, Colorado, which alleges the
plaintiff's former husband merged a business into the Company to conceal and
otherwise preclude plaintiff from receiving plaintiff's share of her former
husband's interest in the Company. The lawsuit was settled for $100,000 in
January 1998, and the related liability has been reflected on the Company's
financial statement as of December 31, 1997 (see note J1).
In September 1997, Mr. James Fuller filed a separate complaint against the
Company claiming that he is entitled to compensation for the value of shares of
the Company's common stock which he alleges he owns. No amount was stated in the
suit. The Company maintains that Mr. Fuller never paid the agreed upon price for
the shares and therefore never owned them. Moreover, Mr. Fuller signed the
shares back to the Company in December 1994. The Company, through its counsel,
intends to vigorously defend against this action. No assurances can be made that
the Company will reach a satisfactory resolution of the above stated
proceedings. Failure to reach such a resolution could have a material adverse
effect on the Company's financial condition or cash reserves.
6. EMPLOYMENT AGREEMENTS
In March 1997, the Company entered into an amended employment agreement
with Donald Jones to serve as the Company's Vice President of Sales. The
employment agreement is for a six-year term commencing upon consummation of the
IPO and is subject to successive automatic renewal periods of one year unless
earlier terminated. Mr. Jones is to receive a 5% increase in his base salary in
years four, five and six. Pursuant to the terms of this employment agreement,
Mr. Jones is required to devote his full business time and attention to fulfill
his duties and responsibilities to the Company. Mr. Jones will receive a base
salary of $150,000 per annum. The Company has agreed to pay Mr. Jones a
relocation bonus of $100,000 and reasonable relocation expenses. In addition Mr.
Jones will receive 76,924 shares of common stock upon the closing of the
offering.
F-12
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
On March 31, 1997, the Company entered into an employment agreement with
Kevin L. Burkhardt, the Company's President and Chief Executive Officer, for a
term of five years with successive automatic renewal periods of one year with
a base salary of $90,000 for the first year and 10% increases in each of the
following years. Mr. Burkhardt will receive a $25,000 one-time bonus if he
consummates another acquisition.
On March 31, 1997, the Company entered into an employment agreement with
Steven Myers to serve as Assistant Vice President of Marketing, for a term of
five years with successive automatic renewal periods of one year with a base
salary of $70,000. Mr. Myers has subsequently resigned from the Company (see
note J3).
On March 31, 1997, the Company entered into an employment agreement with
David Cohen, the Company's Chief Financial Officer and Treasurer, for a term of
three years with successive automatic renewal periods of one year with a base
salary of $70,000.
On March 31, 1997, the Company entered into an employment agreement with
Jane S. Burkhardt, the Company's Secretary, for a term of three years with
successive automatic renewal periods of one year with a base salary of $36,000.
Pursuant to the terms of this employment agreement, Mrs. Burkardt is required to
devote 20 hours per week to fulfill her duties and responsibilities to the
Company.
7. STOCK OPTION PLAN
The Board of Directors plans to submit to the shareholders a stock option
plan (the 'Option Plan'). The Option Plan provides for the grant of incentive
stock options ('ISOs') intended to qualify for preferential tax treatment under
Section 422 of the Internal Revenue Code of 1986, as amended, and nonstatutory
stock options ('NSOs') that do not qualify for such treatment. Only employees
(including officers and directors who are also employees) of the Company or any
of its subsidiaries are eligible to receive grants of ISOs. Employees, officers,
directors, consultants, contractors and advisers of the Company or any
subsidiary are eligible to receive grants of NSOs. The purpose of the Option
Plan is to enable to the Company to attract and retain exemplary directors,
employees, agents and consultants.
No options can be granted under the Option Plan at less than 100% of the
fair market value of the Company's securities on the date of the grant.
The Option Plan provides that a maximum of 350,000 shares of common stock
may be issued upon the exercise of options granted under the Option Plan. If an
option granted under the Option Plan expires or terminates for any reason
without having been exercised in full, then the unpurchased shares subject to
that option will be available for additional option grants. No shares of common
stock underlying any stock options issued under the Plan may be registered on
Form S-9 or any successor form for two years after the date thereof.
NOTE F -- MAJOR CUSTOMERS
The Company had approximate sales to major customers as follows:
<TABLE>
<CAPTION>
CUSTOMER 1997 1996
- ------------------------------------------------------------------------------------------ ---- ----
<S> <C> <C>
Air Response, Inc....................................................................... 27% 8%
Advanced Air Ambulance.................................................................. 9 13
Aetna................................................................................... 8 6
Air Ambulance America................................................................... 6 10
</TABLE>
In addition, the Company is due approximately $224,094 and $132,000 in
accounts receivable, and $222,500 and $200,000 in a note receivable as of
December 31, 1997 and 1996, respectively, (see note C) from Air Response, Inc.
The Company owes approximately $151,767 and $19,535 in accounts payable as
F-13
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
of December 31, 1997 and 1996, respectively, to Air Response, Inc. This
customer is the company Proflight intends to purchase as discussed in note
E -- Acquisition of Air Response and Air Response South.
NOTE G -- INCOME TAXES
There is no income tax expense or benefit for 1997 or 1996. The provision
for income taxes differs from the amount determined by applying the statutory
rate to net income before taxes, due to the following reasons for the year ended
December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Income tax benefit at statutory rate.......................................... $(262,000) $(246,000)
Subchapter S loss............................................................. -- 205,000
Change in valuation allowance................................................. 331,000 52,000
Other......................................................................... (69,000) (11,000)
--------- ---------
Income tax benefit............................................................ $ -- $ --
--------- ---------
--------- ---------
</TABLE>
Components of deferred tax assets are as follows at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net operating loss carryforwards.............................................. $ 296,000 $ 34,000
Allowance for bad debts....................................................... 39,000 15,000
Accrued litigation............................................................ 39,000 --
Accrued vacation.............................................................. 9,000 3,000
--------- ---------
383,000 52,000
Valuation allowance........................................................... (383,000) (52,000)
--------- ---------
Net assets.................................................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
The Company has net operating loss carryforwards for tax purposes of
approximately $683,000 and $87,000 which expire in the years 2012 and 2011,
respectively. A portion of the net operating loss carryforwards may be subject
to limitations as a result of provisions of the Internal Revenue Code relating
to changes in ownership.
NOTE H -- RELATED PARTY TRANSACTIONS
In order for the Company to obtain sufficient financing to purchase a 1973
Learjet 25B-XR, it was necessary for the Company to have a shareholder guarantee
repayment of a loan. In exchange, the shareholder is paid a fee of $100 per
month for each month that the loan is outstanding.
In January 1997, the Company issued an option to purchase 16,675 shares of
common stock at $1.67 per share to a director of the Company. In March 1997, the
Company issued an option to purchase 16,675 shares of common stock at $6.50 per
share to a shareholder in consideration for extending the due date on certain
notes.
In April 1997, bridge loans from shareholders totaling $500,000 were
forgiven. In May 1997, shares totaling 333,500 were retired that were owned by
the President and Directors in return for options to purchase 667,000 shares of
common stock at $8.00 per share.
In October 1997, David H. Cohen, the Company's CFO, was offered 6,670
shares of common stock as a bonus to be issued upon completion of the IPO. The
Company has agreed to pay for any additional tax liability the stock bonus adds
to his income.
During 1997, the Company combined its operations with the operations of Air
Response in anticipation of a public offering and the concurrent merger of the
companies. Certain costs of
F-14
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
operations were provided to Air Response by Proflight, including costs of
pilots, mechanics and certain administrative costs. These costs were not
charged to Air Response and accordingly, have not been reflected in these
financial statements. Management has estimated the costs of the services
provided to be $37,000.
NOTE I -- DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value.
NOTES RECEIVABLE
It is not considered practicable to estimate the fair value of the note
receivable due to the related-party nature of the transaction.
NOTES PAYABLE
Carrying amount approximates fair value as the interest rates approximate
market rates at December 31, 1997 and 1996.
NOTE J -- SUBSEQUENT EVENTS
1. LITIGATION SETTLEMENT
On January 12, 1998, the Company settled the Susan Fuller lawsuit for
$100,000. The liability related to this lawsuit has been reflected in the
Company's financial statements as of December 31, 1997.
2. SALE OF AIRCRAFT
On January 23, 1998, the Company sold its 1978 Learjet 35A, N18FN for $2.2
million to Air Response, Inc. The Company used the proceeds to pay off the notes
payable related to the aircraft and other current obligations including the
maintenance service plan on this aircraft's engines and settlement of the Susan
Fuller lawsuit.
3. KEY MANAGEMENT RESIGNATION
On March 1, 1998, Steven Meyers, Assistant Vice President of Marketing,
resigned from the Company, which voided his employment contract. However, his
common stock options will still remain in effect. Mr. Myers will continue his
services as a director of the Company's Board.
4. REVISION OF ACQUISITION AGREEMENT
On March 10, 1998, the Company, Air Response (AR), Air Response South
(ARS), and Srotnac Group, LLC (Srotnac), a 55.3% shareholder in the Company,
agreed to the following:
a. The Company, AR and ARS will do what is required to complete the
IPO by May 31, 1998 and not negotiate with other parties until after that
date.
b. The Company will receive bridge financing of at least $200,000 by
March 12, 1998 and an additional $100,000 by April 12, 1998.
c. The $200,000 note owed to the Company by AR has been forgiven,
including accrued interest.
F-15
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
d. All audit costs AR incurs from producing its year-end financials
for the IPO shall be paid first from bridge loan funds.
e. The Company and AR will agree as to the use of proceeds of the
$300,000 in bridge loan proceeds.
f. If the IPO does not occur by May 31, 1998, then the Company and
Srotnac will release AR, its President (Louis Capece, Jr.), and its
employees for all past, present, and future obligations regarding the IPO.
This includes the right to negotiate with any other company for the purpose
of a merger or acquisition without any interference or litigation from the
Company or Srotnac.
g. As previously agreed, Mr. Capece, will receive a $100,000
annual employment agreement for two years from the date of the IPO.
5. SHORT-TERM BRIDGE FINANCING
On March 10, 1998, the Company received $300,000 in uncollateralized
short-term bridge financing. These bridge notes carry an interest rate of 15%
per annum and are payable in full, principal and interest on the earlier of May
31, 1998, or upon closing of an initial public offering.
6. RETIREMENT OF SHARES
In April of 1998, Srotnac, LLC agreed to retire 250,000 shares of Common
Stock at the request of the Underwriter.
F-16
<PAGE>
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
We have audited the accompanying combined balance sheet of Air Response,
Inc. (a New York corporation) and Air Response South, Inc. (a Florida
corporation) (combined 'the Companies') as of December 31, 1997 and the related
statements of operations and retained earnings and cash flows for the years
ended December 31, 1997 and 1996. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Air Response, Inc.
and Air Response South, Inc. as of December 31, 1997, and the combined results
of their operations and their cash flows for the years ended December 31, 1997
and 1996 in conformity with generally accepted accounting principles.
STAFF CIAMPINO & COMPANY, P.C.
Albany, New York
March 24, 1998
F-17
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents...................................................................... $ 9,583
Cash and cash equivalents -- restricted........................................................ 27,843
Accounts receivable, net of allowance for doubtful accounts of $48,339......................... 922,463
Other receivables.............................................................................. 6,992
Prepaid expenses............................................................................... 125,031
Refundable income taxes........................................................................ 54,556
----------
Total current assets...................................................................... 1,146,468
----------
Property and Equipment at Cost
Aircraft fleet................................................................................. 2,831,172
Machinery and equipment........................................................................ 225,557
Office equipment............................................................................... 30,820
----------
3,087,549
Less -- accumulated depreciation............................................................... 1,631,562
----------
Total property and equipment.............................................................. 1,455,987
----------
Other Assets
Due from officers.............................................................................. 488,148
Other assets................................................................................... 12,983
----------
Total other assets........................................................................ 501,131
----------
Total assets.............................................................................. $3,103,586
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Line of credit................................................................................. $ 278,425
Accounts payable............................................................................... 1,337,491
Current maturities of long-term debt........................................................... 286,099
Accrued expenses............................................................................... 50,305
----------
Total current liabilities................................................................. 1,952,320
Long-term debt, less current maturities............................................................. 1,061,385
----------
Total liabilities......................................................................... 3,013,705
----------
Commitments and Contingencies
Stockholder's Equity
Common stock................................................................................... 2,000
Retained earnings.............................................................................. 87,881
----------
Total stockholder's equity................................................................ 89,881
----------
Total liabilities and stockholder's equity........................................... $3,103,586
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
COMBINED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Air ambulance revenue................................................................. $8,783,037 $7,658,243
---------- ----------
Operating Expenses
Flying operations................................................................ 5,186,687 4,495,123
Advertising...................................................................... 492,331 447,061
Repairs and maintenance.......................................................... 653,716 380,382
Depreciation..................................................................... 311,554 396,139
General and administrative....................................................... 1,885,940 1,538,761
---------- ----------
Total operating expenses.................................................... 8,530,228 7,257,466
---------- ----------
Income from operations................................................................ 252,809 400,777
---------- ----------
Other Income (Expense)
Loss on disposal of property and equipment....................................... 0 (381,216)
Bad debt expense -- affiliate.................................................... (48,343) (18,328)
Interest income.................................................................. 4,723 6,510
Interest expense................................................................. (189,242) (136,148)
Miscellaneous.................................................................... 557 43,444
---------- ----------
Total other income (expense)................................................ (232,305) (485,738)
---------- ----------
Income (loss) before income taxes..................................................... 20,504 (84,961)
Income tax benefit.................................................................... 85,222 38,747
---------- ----------
Net income (loss)..................................................................... 105,726 (46,214)
Retained earnings -- beginning of year................................................ (17,845) 28,369
---------- ----------
Retained earnings -- end of year...................................................... $ 87,881 $ (17,845)
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss)..................................................................... $ 105,726 $ (46,214)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation....................................................................... 311,554 396,139
Loss on disposal of property and equipment......................................... 0 381,216
Provision for doubtful accounts.................................................... 0 39,674
Bad debt expense -- affiliate...................................................... 48,343 18,328
(Increase) decrease in assets:
Accounts receivable.............................................................. (446,842) 79,821
Other receivables................................................................ 17,742 (24,734)
Prepaid expenses................................................................. 172,338 (140,130)
Refundable income taxes.......................................................... (1,451) 64,835
Deposits and other assets........................................................ (183) (12,250)
Increase (decrease) in liabilities:
Accounts payable................................................................. 339,959 (10,803)
Accrued expenses................................................................. 41,461 (142,296)
Income taxes payable............................................................. (14,358) 14,358
--------- ---------
Net cash provided by operating activities................................ 574,289 617,944
--------- ---------
Cash flows from investing activities
Purchases of property and equipment................................................... (327,198) (595,817)
Net advances to officer............................................................... (165,726) (308,893)
Net advances to affiliates............................................................ (66,601) (76,377)
--------- ---------
Net cash used by investing activities.................................... (559,525) (981,087)
--------- ---------
Cash flows from financing activities
Net borrowings (repayments) under line of credit...................................... (96,559) 451
Proceeds from long-term debt.......................................................... 0 798,074
Repayments of long-term debt.......................................................... (173,076) (218,277)
--------- ---------
Net cash (used) provided by financing activities......................... (269,635) 580,248
--------- ---------
Net increase (decrease) in cash and cash equivalents.................................... (254,871) 217,105
Cash and cash equivalents -- beginning of year.......................................... 292,297 75,192
--------- ---------
Cash and cash equivalents -- end of year................................................ $ 37,426 $ 292,297
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid....................................................................... $ 2,072 $ 0
--------- ---------
--------- ---------
Interest paid........................................................................... $ 157,941 $ 136,148
--------- ---------
--------- ---------
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
In 1996, the Companies refinanced certain debt associated with the
Companies aircraft fleet. This refinancing amounted to $557,775 and has been
excluded from the statement of cash flows.
See accompanying notes to financial statements.
F-20
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Air Response, Inc. and
Air Response South, Inc. (combined 'the Companies') is presented to assist in
understanding the Companies' financial statements. The financial statements and
notes are representations of the Companies' management who is responsible for
their integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
PRINCIPLES OF COMBINATION
The accompanying financial statements present the combined financial
position and results of Air Response, Inc. ('Response') and Air Response South,
Inc. ('Response South'), which are wholly-owned by a common shareholder. All
significant intercompany accounts have been eliminated in combination.
ORGANIZATION AND BUSINESS ACTIVITY
The Companies provide air ambulance services throughout the United States
and coordinate air ambulance services internationally through other carriers.
USE OF ESTIMATES
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, income and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
REVENUE RECOGNITION
Revenue is recognized when services have been performed and is reported net
of contractual allowances provided to third party payors.
CASH AND CASH EQUIVALENTS
The Companies consider all short-term investments having a maturity of
three months or less when purchased to be cash equivalents. There were no cash
equivalents at December 31, 1997 or 1996.
ACCOUNTS RECEIVABLE -- ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Companies provide for doubtful accounts receivable using the allowance
method based on actual outstanding account balances at year-end and management's
estimation of collectibility of these accounts.
MEDICAL SUPPLIES
It is the Companies' policy to expense all purchases of medical supplies as
incurred as large quantities of these items are generally not held in an
inventory for long periods.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed on the
double-declining balance and straight-line methods over the estimated useful
lives of the assets, which range from 5 to 7 years.
Expenditures for maintenance and repairs which do not extend the useful
lives of the assets are charged to income as incurred.
F-21
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes are established for all temporary differences between the
amount of assets and liabilities recognized for financial reporting purposes and
for tax purposes. Deferred tax balances are adjusted to reflect tax rates, based
on currently enacted tax laws, that will be in effect in the years in which the
temporary differences are expected to reverse.
GOVERNMENTAL REGULATION
Response is subject to the rules and regulations of the Federal Aviation
Administration (FAA) and the New York State Department of Health. Response South
is regulated by the State of Florida Department of Health and Rehabilitative
Services.
(2) LONG-TERM DEBT
<TABLE>
<S> <C>
Long-term debt consists of the following at December 31, 1997 :
Note payable to Cessna Finance Corporation -- payable in monthly installments of $2,728
including interest at prime plus 1.5% (10.0% at December 31, 1997), maturing December
2000; secured by an airplane and aviation equipment installed therein................... $ 88,562
Note payable to Textron Financial Corporation -- payable in monthly installments of $6,526
including interest at prime plus 1.5% (10.0% at December 31, 1997), maturing October
2006. This note is secured by an airplane and aviation equipment installed therein and
is personally guaranteed by the president/shareholder of the Companies.................. 462,798
Note payable to Cessna Finance Corporation -- payable in monthly installments of $2,069
including interest at prime plus 2% (10.5% at December 31, 1997), maturing August 1999;
secured by an airplane and aviation equipment installed therein......................... 44,790
Note payable to Cessna Finance Corporation -- payable in monthly installments of $4,149
including interest at prime plus 1.25% (9.75% at December 31, 1997), maturing September
2003; secured by an airplane and aviation equipment installed therein. This note is
personally guaranteed by the president/shareholder of the Companies..................... 219,248
Note payable to Textron Financial Corporation -- payable in monthly installments of $5,429
including interest at prime plus 1.5% (10.0% at December 31, 1997), maturing December
2001. This note is secured by an airplane and aviation equipment installed therein and
is personally guaranteed by the president/shareholder of the Companies.................. 215,066
Note payable to Proflight Medical Response -- payable in two installments of $100,000 plus
accrued interest at 10% on May 14, 1998 and 2000. This note was forgiven in 1998. See
Note (11)............................................................................... 200,000
Note payable to Textron Financial Corporation -- payable in monthly installments of $5,429
including interest at prime plus 1.5% (10.0% at December 31, 1997), maturing December
2001. This note is secured by an airplane and aviation equipment installed therein and
is personally guaranteed by the president/shareholder of the Companies.................. 117,020
----------
Total long-term debt............................................................ $1,347,484
Less current maturities......................................................... 286,099
----------
Total long-term debt, less current maturities................................... $1,061,385
----------
----------
</TABLE>
F-22
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
Based on borrowing rates currently available to the Companies for loans
with similar terms and maturities, the fair value of long-term debt approximates
the recorded amounts.
Maturities of long-term debt as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
REQUIRED
YEAR ENDING DECEMBER 31, PRINCIPAL REPAYMENT
- ----------------------------------------------------------------------------------- -------------------
<S> <C>
1998.......................................................................... $ 286,099
1999.......................................................................... 202,236
2000.......................................................................... 301,073
2001.......................................................................... 177,674
2002.......................................................................... 95,307
Thereafter.................................................................... 285,095
-------------------
Total.................................................................... $ 1,347,484
-------------------
-------------------
</TABLE>
(3) LINE OF CREDIT/CASH AND CASH EQUIVALENTS-RESTRICTED
Response has a $375,000 line of credit with Central National Bank, with a
balance outstanding of $278,425 as of December 31, 1997. The line is secured by
specific accounts receivable, as designated at the time of advance, a cash
reserve of 10% of the receivables, and the personal guarantee of the
stockholder. A finance charge of 2.85% of the receivables is charged by the bank
and is deducted from the loan proceeds. Repayments are made upon collection of
the receivables. In addition, the bank is entitled to a finance charge of 1.5%
of the unremitted receivables outstanding over thirty days. Total charges
incurred by Response for the years ended December 31, 1997 and 1996 pursuant to
this facility were approximately $80,000 and $129,000, respectively, and are
included in 'general and administrative expenses'.
(4) STOCKHOLDER'S EQUITY
Common stock of the entities consists of the following:
<TABLE>
<CAPTION>
SHARES
-----------------------------------
AUTHORIZED ISSUED OUTSTANDING
---------- ------ -----------
<S> <C> <C> <C>
Response:
Voting common stock; no par value.............................. 200 100 100
Response South:
Non-voting, Series A common stock;
$.01 par value............................................ 100,000 0 0
Voting, Series B common stock;
$.01 par value............................................ 100,000 51,000 51,000
</TABLE>
F-23
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
(5) INCOME TAXES
The Companies provide for income taxes using the applicable statutory
rates. The components of income taxes for the years ended December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Current:
Current tax expense............................................................. $ 15,696 $ 14,358
Fuel tax credit................................................................. (96,469) (53,105)
Benefit from net operating loss carryforward.................................... (4,449) 0
Deferred:
Deferred tax expense (benefit), net............................................. 47,877 (28,246)
Change in valuation allowance................................................... (47,877) 28,246
-------- --------
Income tax benefit......................................................... $(85,222) $(38,747)
-------- --------
-------- --------
</TABLE>
The following are the differences between the income tax provision
(benefit) and the amount computed by applying the federal statutory income tax
rate to income (loss) before taxes for the years ended December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Tax (benefit) at U.S. statutory rates................................................ $ 6,971 $(28,887)
State income taxes (benefit), net of federal tax benefit............................. 1,099 (4,554)
Fuel tax credit...................................................................... (96,469) (53,105)
Permanent differences................................................................ 50,349 31,692
Change in valuation allowance........................................................ (50,969) 28,246
Other................................................................................ 3,797 (12,139)
-------- --------
Income tax benefit.............................................................. $(85,222) $(38,747)
-------- --------
-------- --------
</TABLE>
Deferred income taxes were recognized in the balance sheet at December 31,
1997 due principally to the tax effect of temporary differences, alternative
minimum tax credits and loss carryforwards as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Non-deductible reserves............................................................... $ 20,302
Alternative minimum tax credit carryforwards -- Federal............................... 91,205
Net operating loss carryforwards -- Federal........................................... 0
Net operating loss carryforwards -- State............................................. 17,542
---------
129,049
Valuation allowance................................................................... (13,751)
---------
Total deferred tax assets........................................................ 115,298
Deferred tax liabilities:
Accelerated depreciation.............................................................. (115,298)
---------
Net deferred taxes............................................................... $ 0
---------
---------
</TABLE>
At December 31, 1997, Response had approximately $91,000 in alternative
minimum tax credit carryforwards which may be used to offset future federal
income tax.
At December 31, 1997, Response had net operating loss carryforwards for
Federal and State purposes of approximately $0 and $219,000, respectively. These
carryforwards begin to expire in 2009.
F-24
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
(6) ADVERTISING COSTS
The Companies incur costs for yellow page advertising in local phone
directories. The advertisements remain listed for the life of the directory,
generally twelve months. The Companies pay the cost of this advertising prior to
publication of the directory and amortize those costs over a twelve month period
beginning with the month that the phone directory is distributed to the public.
At December 31, 1997, $95,336 of advertising costs were reported as assets
and are included as a prepaid expense. Advertising expense relating to the
directory advertising was $452,788 and $396,587 for the years ended December 31,
1997 and 1996, respectively.
(7) COMMITMENTS AND CONTINGENCIES
Response is a defendant in a lawsuit with alleged claims approximating
$100,000 plus unspecified damages, which arose from a transaction in 1991,
related to the purchase of an aircraft. Management believes the suit is
completely without merit and will continue to vigorously defend its position.
(8) RELATED PARTY TRANSACTIONS
Response purchased both fuel and oil from Response Aviation, Inc.
('Aviation'), a company which had been wholly-owned by the Companies' sole
shareholder. Response Aviation, Inc. was sold to a third party in June, 1997.
The total amount purchased while Aviation was wholly owned approximated $88,000
and $172,000 for the years ended December 31, 1997 and 1996 respectively. Due to
the common ownership between Response and Aviation, the prices for fuel and oil
charged by Aviation to Response may not be indicative of the prices that
Response may be able to obtain if common ownership did not exist.
Response advanced funds to Aviation in the form of notes receivable and
working capital advances. These balances were deemed uncollectible and
written-off to expense as bad debts in 1997 and 1996, amounting to $48,343 and
$18,328, respectively.
The Companies have a receivable due from the Companies' president, the sole
shareholder of the Companies, amounting to $463,148 at December 31, 1997. This
amount is due on demand and is non-interest bearing. It is not the Companies'
intent to collect this balance within the next fiscal year. As a requirement of
Proflight Medical Response, Inc.'s purchase of the Companies' capital stock (see
Note 10), this balance will be paid back to the Companies from the shareholder's
stock sales proceeds.
Response has a receivable due from another officer amounting to $25,000.
This amount is due on demand and is non-interest bearing. It is not the
Companies' intent to collect this balance within the next fiscal year.
During 1997, the Companies combined their operations with the operations of
Proflight Medical Response, Inc. ('Proflight') in anticipation of a public
offering of Proflight's securities and the concurrent merger of the three
companies. Certain costs of operations were provided to the Companies by
Proflight, including costs of pilots, mechanics and certain administrative
costs. These costs were not charged to the Companies and accordingly, have not
been reflected in these financial statements. Management has estimated the costs
of the services provided to be $37,000.
(9) EMPLOYEE BENEFIT PLANS
Response and Response South both have voluntary defined contribution
savings plans covering all of their employees who have met certain age and
length of service requirements. The plan qualifies under Section 401(k) of the
Internal Revenue Code. The Companies may provide discretionary matching
contributions each year. Matching contributions totaled $552 and $6,357 for the
years ended December 31, 1997 and 1996, respectively.
F-25
<PAGE>
<PAGE>
AIR RESPONSE, INC. AND AIR RESPONSE SOUTH, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996
(10) PENDING SALE OF COMPANY
In May 1997, the Companies and the Companies' shareholder entered into an
Amended Agreement and Plan of Reorganization with Proflight Medical Response,
Inc. (Proflight) whereby Proflight agreed to acquire all of the outstanding
capital stock of the Companies. This acquisition is contingent upon the success
of the initial public offering of Proflight's securities.
(11) SUBSEQUENT EVENT
The Companies entered into an agreement with Proflight Medical Response,
Inc., dated March 10, 1998, whereby the note, including all accrued interest,
due to Proflight was forgiven. (See Note 2)
F-26
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
AIR RESPONSE
AND AIR PRO FORMA
PROFLIGHT RESPONSE SOUTH AJUSTMENT(A) PRO FORMA PRO FORMA(B)
---------- -------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents............ $ -- $ 9,583 $ (800,000)(1) $ (790,417) $5,577,246(1)
Restricted cash...................... 27,843 27,843 (778,000)(2)
Accounts Receivable, net............. 540,514 929,455 (72,327)(3) 1,397,642
Other current assets................. 21,200 179,587 200,787
---------- -------------- ------------- ----------- ------------
Total current assets............. 561,714 1,146,468 (872,327) 835,855 4,799,246
---------- -------------- ------------- ----------- ------------
Fixed Assets
Aircraft, property and equipment at
cost............................... 3,337,363 3,087,549 (513,694)(2) 5,911,218
Less accumulated depreciation and
amortization....................... (714,343) (1,631,562) 1,631,562 (2) (714,343)
Other Assets............................. 537,436 501,131 (222,500)(3) 341,067
(475,000)(4)
Goodwill................................. 3,292,251 (1) 3,292,251
---------- -------------- ------------- ----------- ------------
Total Assets..................... 3,722,170 3,103,586 2,840,292 9,666,048 4,799,246
---------- -------------- ------------- ----------- ------------
---------- -------------- ------------- ----------- ------------
Current Liabilities
Accounts payable..................... 1,159,859 1,337,491 (72,327)(3) 2,425,023
Current portion of notes/short term
borrowings......................... 2,556,021 564,524 (222,500)(3) 2,898,045 (778,000)(2)
Accrued liabilities.................. 71,874 50,305 122,179
---------- -------------- ------------- ----------- ------------
Total current liabilities........ 3,787,754 1,952,320 (294,827) 5,445,247 (778,000)
Long Term Debt........................... 687,754 1,061,385 1,749,139
---------- -------------- ------------- ----------- ------------
Total Liabilities................ 4,475,508 3,013,705 (294,827) 7,194,386 (778,000)
---------- -------------- ------------- ----------- ------------
Stockholders' Equity
Common Stock, par value $.001 for
Proflight and no par for Air
Response...........................
Air Response South $0.01 par value...
Proflight has 2,034,350 shares issued
and outstanding. Air Response has
100 shares and AR South has 51,000
shares issued and outstanding...... 2,034 2,000 (1,504)(1) 2,530 853(1)
Additional Paid-in capital
(deficit).......................... 31,343 -- 3,224,504(1)(4) 3,255,847 7,270,042(1)
(1,149,474)(1)
Accumlated Earnings (deficit)........ (786,715) 87,881 (87,881)(1) (786,715) (544,175)(1)
---------- -------------- ------------- ----------- ------------
Total Stockholders' Equity....... (753,338) 89,881 3,135,119 2,471,662 5,577,246
---------- -------------- ------------- ----------- ------------
3,722,170 3,103,586 2,840,292 9,666,048 4,799,246
---------- -------------- ------------- ----------- ------------
---------- -------------- ------------- ----------- ------------
<CAPTION>
ADJUSTED
PRO FORMA
-----------
<S> <C>
Current Assets
Cash and cash equivalents............ $ 4,036,672
Restricted cash......................
Accounts Receivable, net............. 1,397,642
Other current assets................. 200,787
-----------
Total current assets............. 5,635,101
-----------
Fixed Assets
Aircraft, property and equipment at
cost............................... 5,911,218
Less accumulated depreciation and
amortization....................... (714,343)
Other Assets............................. 341,067
Goodwill................................. 3,292,251
-----------
Total Assets..................... 14,465,294
-----------
-----------
Current Liabilities
Accounts payable..................... 2,425,023
Current portion of notes/short term
borrowings......................... 2,120,045
Accrued liabilities.................. 122,179
-----------
Total current liabilities........ 4,667,247
Long Term Debt........................... 1,749,139
-----------
Total Liabilities................ 6,416,386
-----------
Stockholders' Equity
Common Stock, par value $.001 for
Proflight and no par for Air
Response...........................
Air Response South $0.01 par value...
Proflight has 2,034,350 shares issued
and outstanding. Air Response has
100 shares and AR South has 51,000
shares issued and outstanding...... 3,383
Additional Paid-in capital
(deficit).......................... 9,376,415
Accumlated Earnings (deficit)........ (1,330,890)
-----------
Total Stockholders' Equity....... 8,048,908
-----------
14,465,294
-----------
-----------
</TABLE>
- ------------
(A) The pro forma adjustments to the historical balance sheets using purchase
acquisition accounting reflect the acquisition of Air Response and Air Response
South (Air Response) by Proflight. The adjustments reflect the following:
(1) Estimated purchase price of $4,500,000, comprised of $800,000 in cash
payable on the closing of an initial public offering, and shares of
stock equal to $3,225,000, less debt to the Company of $475,000, based
upon the initial public offering price issued within two years from
closing of the offering. The adjustments reflect the allocation of that
purchase price to the net assets acquired. Goodwill is being amortized
over 20 years using the straight-line method.
F-27
<PAGE>
<PAGE>
RECONCILIATION OF ACQUISITION
<TABLE>
<S> <C>
Consideration paid.............................................................. $4,500,000
----------
----------
Net assets acquired............................................................. $ 89,881
Adjustment of aircraft basis to FMV............................................. 1,117,868
Goodwill........................................................................ 3,292,251
----------
$4,500,000
----------
----------
</TABLE>
(2) Eliminated AR accumulated depreciation and adjusted aircraft and
medical equipment to fair market value. These adjustments increased
aircraft and medical equipment by $1,117,868.
(3) Elimination of intercompany receivables/payables of $72,327 and
$222,500.
(4) To adjust number of shares paid for acquisition to reflect the
elimination of loan to officer.
(B) The adjustments to pro forma represent:
(1) The offering of 1,019,200 shares of common stock and 1,019,200
redeemable common stock purchase warrants, 6,670 shares of common stock
given to an officer as a bonus 76,294 shares of common stock given as
part of an employment agreement, and the retirement of 250,000 shares
of common stock. The initial public offering prices of common stock and
warrants are $6.50 and $.10, respectively. The proceeds are recognized
net of underwriter discounts and costs of $874,473 and attorney fees,
printing costs, consulting fees, and miscellaneous closing costs
totalling $275,000.
(2) Payment of debt with proceeds from offering.
F-28
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
AIR RESPONSE
AND PRO FORMA
PROFLIGHT AIR RESPONSE SOUTH ADJUSTMENTS(C) PRO FORMA
---------- ------------------ -------------- -----------
<S> <C> <C> <C> <C>
Income..................................... $5,644,799 $8,783,037 $ (1,714,846)(1) $12,712,990
Operating expense
Flying operations..................... 3,312,564 5,186,687 $ (1,714,846)(1) 6,784,405
Maintenance........................... 652,267 653,716 1,305,983
Promotion and sales................... 69,985 492,331 562,316
General and administrative............ 1,406,483 1,885,940 3,292,423
Depreciation and amortization......... 488,867 311,554 267,835(2) 1,068,256
---------- ------------------ -------------- -----------
Total operating expense.......... 5,930,166 8,530,228 (1,447,011) 13,013,383
Operating income (loss).......... (285,367) 252,809 (267,835) (300,393)
Nonoperating expenses (income)
Bad debt -- affiliate................. 48,343
Interest income....................... (25,000) (4,723) (29,723)
Interest expense...................... 415,343 189,242 604,585
Other expense and (income)............ (557) (557)
---------- ------------------ -------------- -----------
390,343 232,305 -- 622,648
Income tax (benefit)....................... (85,222) (85,222)
---------- ------------------ -------------- -----------
Net income (loss).......................... $ (675,710) $ 105,726 $ (267,835) $ (837,819)
---------- ------------------ -------------- -----------
---------- ------------------ -------------- -----------
Per share data
Basic net income (loss)............... $(0.35)
------
------
Average shares........................ 2,382,747
</TABLE>
- ------------
(C) The adjustments to the historical statements of operations reflect the
following:
(1) Elimination of 1997 intercompany sales.
(2) Recognition of $167,835 of goodwill amortization and an additional
$100,000 in depreciation expense, due to revaluation of aircraft assets.
F-29
<PAGE>
<PAGE>
_____________________________ _____________________________
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.......................................................................................................... 3
Risk Factors................................................................................................................ 9
Use of Proceeds............................................................................................................. 16
Dividend Policy............................................................................................................. 17
Capitalization.............................................................................................................. 18
Dilution.................................................................................................................... 19
Selected Financial Data..................................................................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of Operations....................................... 22
Business.................................................................................................................... 27
Management.................................................................................................................. 33
Principal Shareholders...................................................................................................... 37
Certain Transactions........................................................................................................ 38
Description of Securities................................................................................................... 40
Shares Eligible For Future Sale............................................................................................. 42
Underwriting................................................................................................................ 43
Legal Matters............................................................................................................... 45
Experts..................................................................................................................... 45
Additional Information...................................................................................................... 45
Index to Financial Statements............................................................................................... F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT 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.
PROFLIGHT MEDICAL
RESPONSE, INC.
1,019,200 SHARES OF
COMMON STOCK
AND 1,019,200 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
--------------------------
PROSPECTUS
--------------------------
FIRST LIBERTY INVESTMENT
GROUP, INC.
, 1998
_____________________________ _____________________________
<PAGE>
<PAGE>
PART II
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado Corporation Code, as revised, in general, allows corporations
to indemnify their directors and officers against reasonable expenses incurred
in connection with a proceeding, if the person acted in good faith and in a
manner the person believed to be in or not opposed to the best interests of the
corporation. In the case of a criminal action, the director or officer must have
had no reasonable cause to believe that the person's conduct was unlawful. Under
current law, a corporation may not indemnify a director or officer in connection
with a proceeding by or in the right of the corporation in which the director or
officer was adjudged liable to the corporation or if the director or officer
derived an improper personal benefit.
The Company's Articles of Incorporation and By-Laws provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the Colorado Law.
The Company will enter into an indemnification agreement ('Indemnification
Agreement') with each of its directors and officers. Each Indemnification
Agreement will provide that the Company will indemnify the indemnitee against
expenses, including reasonable attorneys' fees, judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with any civil or criminal action or administrative proceeding
arising out of his performance of his duties as a director or officer, other
than an action instituted by the director or officer. Such indemnification is
available if the indemnitee acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action, had no reasonable cause to believe his conduct
was unlawful. Each Indemnification Agreement also will require that the Company
Indemnify the director or other party thereto in all cases to the fullest extent
permitted by applicable law. The term of the Indemnification Agreement will be
the later of (i) ten (10) years after the date that the indemnitee ceases to
serve as a director or officer of the Company, or (ii) the final termination of
all proceedings, as defined in the Indemnification Agreement, in which the
indemnitee is granted rights of indemnification.
Each Indemnification Agreement will permit the indemnitee to bring suit to
seek recovery of amounts due under such Indemnification Agreement and will
require that the Company indemnify the director or other party thereto in all
cases to the fullest extent permitted by applicable law. Although the Company
intends to seek to obtain directors' and officers' liability insurance, such
insurance is generally very expensive. If the Company is not able to obtain
directors' and officers' liability insurance to cover amounts, any payments made
by the Company under an Indemnification Agreement will have an adverse impact on
the Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be borne by the
Company (also referred to herein as the Registrant) in connection with the
issuance and distribution of the shares of Common Stock pursuant to the Offering
(other than underwriting discounts and commissions).
<TABLE>
<S> <C>
SEC registration fee....................................................................... $1,186.36
NASD filing fee............................................................................ $ *
Nasdaq SmallCap MarketSM................................................................... $ *
Legal fees and expenses.................................................................... $ *
Accounting fees............................................................................ $ *
Blue Sky fees and expenses................................................................. $ *
Printing and engraving expenses............................................................ $ *
Underwriter's non-accountable expense allowance............................................ $ 117,450
Underwriter's consulting fee............................................................... $ 120,000
Miscellaneous.............................................................................. $ *
---------
Total fees and expenses.................................................................... $ *
---------
---------
</TABLE>
- ------------
* To be completed by amendment
II-1
<PAGE>
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth certain information with respect to all
securities sold by the Company within the past three years without registration
under the Securities Act of 1933, as amended (the 'Securities Act'). The
information includes the names of the purchasers, the date of issuance, the
title and number of securities sold and the consideration received by the
Company for the issuance of these shares.
In January 1996, Steven B. Myers, a Director of the Company, purchased
154,220 shares of Common Stock from the Company for $100,000. These shares of
Common Stock were issued by the Company without registration under the
Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4(2) thereof, as transactions by an issuer not involving a
public offering.
In January 1996, the Company issued Steven A. Cantor, 983,825 shares of
Common Stock valued at $50,000. Mr. Cantor has provided investment banking
services to the Company. These shares of Common Stock were issued by the Company
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering. Mr. Cantor transferred these
shares to Srotnac Group LLC of which he is the 98% owner.
In April 1998, Srotnac agreed to return 250,000 of these shares to the
Company for cancellation.
In November 1996, the Company issued 3,335 shares of Common Stock to
Loselle Greenwalt valued at $250. These shares of Common Stock were issued by
the Company without registration under the Securities Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof,
as transactions by an issuer not involving a public offering.
In November 1996, the Company issued 13,340 shares of Common Stock to Tom
Cox valued at $1,000. These shares of Common Stock were issued by the Company
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering.
In November 1996, the Company issued 16,675 shares of Common Stock to Brett
Abrams valued at $1,250. These shares of Common Stock were issued by the Company
without registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering.
In January 1997, the Company issued Arthur G. Rosenberg, a director of the
Company an option to purchase 16,675 shares of Common Stock of the Company at an
exercise price of $1.66 per share as an incentive to become a director of the
Corporation. These shares of Common Stock were issued by the Company without
registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving a public offering.
In March 1997, the Company issued Tom Cox an option to purchase 16,675
shares of Common Stock of the Company at an exercise price of $6.50 per share in
consideration for Mr. Cox extending the due date of certain notes. These shares
of Common Stock were issued by the Company without registration under the
Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4(2) thereof, as transactions by an issuer not involving a
public offering.
In April 1997, the Company entered into an Amended Agreement and Plan of
Reorganization with Air Response and Louis R. Capece, Jr., which agreement was
amended in May 1997, pursuant to which the Company agreed to acquire at the
closing of the Offering, subject to the terms and conditions contained therein,
all of the outstanding capital stock of Air Response in exchange for 496,154
shares of Common Stock of the Company to be issued two years from the closing of
the Offering. If the Company completes a second public offering, Mr. Capece has
the option to put such number of shares of Common Stock at the then current
market value, equal to 20% of the net proceeds of such offering, to the Company,
not to exceed $1,000,000. The Company simultaneously entered into an Amended
Stock Purchase and Sale Agreement with Air Response South and Louis R. Capece
Jr. pursuant to which the Company agreed to acquire at the closing of the
Offering, subject to the terms and conditions
II-2
<PAGE>
<PAGE>
contained therein, all of the outstanding capital stock of Air Response South
for $800,000 which is payable upon closing of the Offering.
In May 1997, Kevin L. Burkhardt and Jane S. Burkhardt agreed to return
146,042 shares of Common Stock to the Company in exchange for options to
purchase 292,085 shares of Common Stock at an exercise price of $6.50 per share.
The options are five year options exercisable upon closing of the offering. The
Underwriter believed there were too many shares outstanding and as a condition
of underwriting this Offering required these shares be retired and the Company
in consideration for returning these shares issued the individual warrants.
These shares were exchanged by reason of an exemption from registration afforded
by the provisions of Section 4(1) and 4(2).
In May 1997, Charles W. Bartholomew agreed to return 87,190 shares of
Common Stock to the Company in exchange for options to purchase 174,379 shares
of Common Stock at an exercise price of $6.50 per share. The options are five
year options exercisable upon closing of the offering. The Underwriter believed
there were too many shares outstanding and as a condition of underwriting this
Offering required these shares be returned to treasury and the Company in
consideration for returning these shares issued the individual warrants. These
shares were exchanged by reason of an exemption from registration afforded by
the provisions of Sections 4(1) and 4(2).
In May 1997, Steven B. Myers agreed to return 100,268 shares of Common
Stock to the Company in exchange for options to purchase 200,536 shares of
Common Stock at an exercise price of $6.50 per share. The options are five year
options exercisable upon closing of the offering. The Underwriter believed there
were too many shares outstanding and as a condition of underwriting this
Offering and required these shares be retired. In consideration for returning
these shares issued the individual warrants.
The investors in each of the above transactions were sophisticated and had
access to information about the Company.
The Company has agreed to sell to the Underwriter for $10, upon
consummation of this Offering, the Underwriter's Option exercisable to purchase
up to 101,920 shares of Common Stock and 101,920 Warrants at an exercise price
of $8.00 per share.
The following shares of Common Stock were issued by the Company without
registration under the Securities Act in accordance with Rule 506 of Regulation
D of the Securities Act.
II-3
<PAGE>
<PAGE>
In October 1996, the Company completed a private placement issuing 70 Units
of the Company's securities ('Units'), each Unit consisting of a $5,000
principal amount 10% promissory note and 6,670 shares of the Company's Common
Stock. The following shares of Common Stock were issued by the Company without
registration under the Securities Act in accordance with Rule 506 of Regulation
D of the Securities Act. The offering was to 'Accredited Investors' only as that
term is defined in Rule 501 promulgated under the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES DATE
- -------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Alphanet Communications Corp.................................................... 13,340 10/31/96
Barbara Banach and Sally Miglio................................................. 6,670 10/31/96
Cindy Bermingham custodian for Maverick Bermingham.............................. 3,335 10/31/96
Brite Lite Industries, Inc...................................................... 20,010 10/31/96
Annette Cantor.................................................................. 216,775 10/31/96
Charlene Cantor................................................................. 3,335 10/31/96
Rosemary D'Amato................................................................ 3,335 10/31/96
Tiffany D'Amato................................................................. 3,335 10/31/96
Merchant Investors Management Limited........................................... 20,010 10/31/96
Dolores Miller.................................................................. 20,010 10/31/96
Corey Morrison.................................................................. 13,340 10/31/96
Sherry Cantor Morrison.......................................................... 3,335 10/31/96
Josephine Pace.................................................................. 13,340 10/31/96
Gregory Pollack................................................................. 3,335 10/31/96
Sean Reid....................................................................... 3,335 10/31/96
River Rock Equities, Inc. ...................................................... 100,050 10/31/96
RII Partners, Inc............................................................... 20,010 10/31/96
</TABLE>
In January 1997, the Company issued 300,000 additional shares of Common
Stock and $150,000, 10% promissory note. The following shares of Common Stock
were issued by the Company without registration under the Securities Act in
accordance with Rule 506 of Regulation D of the Securities Act. The offering was
to 'Accredited Investors' only as that term is defined in Rule 501 promulgated
under the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES DATE
- -------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Morbury Corporation............................................................. 106,720 01/13/97
Valinvest Corp.................................................................. 93,380 01/10/97
</TABLE>
In March 1997, the Company issued 25,000 additional shares of Common Stock
and $125,000, 10% promissory note. The following shares of Common Stock were
issued by the Company without registration under the Securities Act in
accordance with Rule 506 of Regulation D of the Securities Act. The offering was
to 'Accredited Investors' only as that term is defined in Rule 501 promulgated
under the Securities Act.
<TABLE>
<CAPTION>
NUMBER OF PROMISSORY
NAME SHARES NOTE DATE
- ------------------------------------------------------------------- --------- ---------- ---------
<S> <C> <C> <C>
Barry and Elizabeth Mevorach JTWROS................................ 1,668 $ 12,500 03/31/97
Raymond G. Hancock................................................. 1,668 $ 12,500 03/31/97
Barbara Banach..................................................... 11,673 $ 87,500 03/31/97
North Shore Financial Money Purchase Plan DLJSC-FBO
Richard Banach................................................... 1,668 $ 12,500 03/31/97
</TABLE>
II-4
<PAGE>
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
1.2 -- Selected Dealers Agreement.
2.1 -- Amended Agreement and Plan of Reorganization, dated April 8, 1997, by and among, Proflight, Louis R.
Capece, Jr. And Air Response, Inc.
2.2 -- Amended Stock Purchase Agreement, dated April 8, 1997, by and among, Proflight, Louis R. Capece, Jr.
And Air Response South, Inc.
3.1 -- Amended and Restated Articles of Incorporation.
3.2 -- Bylaws.
* 4.1 -- Form of Certificate for Shares of Common Stock.
4.2 -- Form of Underwriter's Warrant.
4.3 -- Form of Underwriter's Warrant Agreement.
* 4.4 -- Common Stock Purchase Warrant.
5.1 -- Opinion and Consent of Bondy & Schloss LLP.
10.1 -- Lease Agreement dated February 27, 1997, between the Company and Airplaza Co., Inc.
10.2 -- Air Ambulance Transport Services Agreement dated February 9, 1996, by and between the Company and Aetna
Health Management, Inc.
10.3 -- Promissory Note and Accommodation Agreement dated March 17, 1995, between the Company and Lear Three,
L.L.C.
*10.4 -- First Promissory Note Extension, dated March 26, 1997, between the Company and Lear Three, L.L.C.
10.5 -- Promissory Note dated May 20, 1996, between the Company and Lear Three, L.L.C.
*10.6 -- Second Promissory Note Extension, dated March 26, 1997, between the Company and Lear Three, L.L.C.
10.7 -- Promissory Note date May 31, 1996, between the Company and Textron Financial Corporation.
10.8 -- Security Agreement dated May 31, 1996, between the Company and Textron Financial Corporation.
10.9 -- Promissory Note dated October 8, 1996, between the Company and Textron Financial Corporation.
10.10 -- Aircraft Lease Agreement dated November 15, 1996, between the Company and Superior Transport Service,
Inc.
10.11 -- Promissory Note dated November 13, 1996, between the Company and Norwest Equipment Finance, Inc.
10.12 -- Agreement Under Standards dated October 13, 1994, between the Company and the Arapahoe County Public
Airport Authority.
10.13 -- Amended Employment Agreement dated May 1997, by and between the Company and Donald Jones.
10.14 -- Employment Agreement dated March 1997, by and between the Company and Kevin L. Burkhardt.
10.15 -- Employment Agreement dated March 1997, by and between the Company and David Cohen.
10.16 -- Employment Agreement dated March 1997, by and between the Company and Jane S. Burkhardt.
10.17 -- Consulting Agreement dated April 1997, by and between the Company and Louis R. Capece, Jr.
10.18 -- Agreement dated April 30, 1995, between Air Response, Inc. and Central National Bank Canajoharie.
10.19 -- Note and Security Agreement dated February 24, 1993, between Air Response, Inc. and Cessna Finance
Corporation.
10.20 -- Aircraft Lease Agreement dated June 27, 1996, between Air Response, Inc. and U.S. Bancorp Leasing &
Financial.
10.21 -- Promissory Note dated September 20, 1996, between Air Response, Inc. and Cessna Finance Corporation.
10.22 -- Promissory Note dated October 23, 1996, between Air Response, Inc. and Textron Financial Corporation.
10.23 -- Promissory Note dated October 23, 1996, between Air Response, Inc. and Textron Financial Corporation.
*10.24 -- Insurance Policy between the Company and Nationair Insurance Agency.
</TABLE>
(table continued on next page)
II-5
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<C> <S>
10.25 -- Stock Option Plan
10.26 -- Escrow Agreement
10.27 -- Employment Agreement dated September 15, 1997 by and between the Company and Steven B. Myers. (Rescinded)
10.28 -- Form of Consulting Agreement dated , 1998 by and between the Company and the
Underwriter.
10.29 -- Letter of Amendment to Employment Agreement of Donald Jones, dated September 15, 1997. (Rescinded)
10.30 -- Letter of Amendment to Employment Agreement of Kevin L. Berkhardt, dated September 15, 1997. (Rescinded)
**10.31 -- Letter of Amendment to Amended Agreement and Plan of Reorganization and Amended Stock Purchase Agreement
dated .
*23.1 -- Consent of Grant Thornton LLP
23.2 -- Consent of Bondy & Schloss (included Exhibit 5.1).
*23.3 -- Consents of Staff Maikels and Ciampino, P.C.
23.4 -- Consents of Kaufman Rossin & Co., P.C.
24.1 -- Power of Attorney.
</TABLE>
- ------------
* Filed herewith
** To be filed by amendment.
ITEM 28. UNDERTAKINGS
(a) The Registrant will,
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) The Registrant will provide to the Underwriter at the closing
certificates in such denominations and registered in such names as required by
the Underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
II-6
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorized this
Amendment No. 3 to the registration statement to be signed on its behalf by the
undersigned, in the City of Denver, State of Colorado on the 1st day of May,
1998.
PROFLIGHT MEDICAL RESPONSE, INC.
By: /S/ KEVIN L. BURKHARDT
...................................
KEVIN L. BURKHARDT, PRESIDENT
In accordance with the requirements of the Securities Act of 1933, as
amended, this Amendment No. 3 to the registration statement was signed by the
following persons in the capacities indicated on the dates stated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ KEVIN L. BURKHARDT Chief Executive Officer, President, Director May 1, 1998
.........................................
(KEVIN L. BURKHARDT)
/s/ JANE S. BURKHARDT Secretary May 1, 1998
.........................................
(JANE S. BURKHARDT)
/s/ DAVID COHEN Chief Financial Officer, Treasurer, Chief May 1, 1998
......................................... Accounting Officer
(DAVID COHEN)
* Director May 1, 1998
.........................................
(ARTHUR G. ROSENBERG)
* Director May 1, 1998
.........................................
(CHARLES W. BARTHOLOMEW)
* Director May 1, 1998
.........................................
(STEVEN B. MYERS)
Director May 1, 1998
.........................................
(STANLEY ABRAMS)
*By: /S/ KEVIN L. BURKHARDT
.........................................
KEVIN L. BURKHARDT
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints Kevin L. Burkhardt and David
Cohen, or either of them, as such person's true and lawful attorneys-in-fact and
agents, will full powers of substitution and re-substitution, for such person in
name, place and stead, to sign in any and all amendments (including
post-effective amendments) to this Registration Statement on Form SB-2, in any
and all capacities, and to file the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
such attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ KEVIN L. BURKHARDT Chief Executive Officer, President, Director May 15, 1997
.........................................
(KEVIN L. BURKHARDT)
/s/ JANE S. BURKHARDT Secretary, Director May 15, 1997
.........................................
(JANE S. BURKHARDT)
/s/ DAVID COHEN Chief Financial Officer, Treasurer, Chief May 15, 1997
......................................... Accounting Officer
(DAVID COHEN)
/s/ ARTHUR G. ROSENBERG Director May 15, 1997
.........................................
(ARTHUR G. ROSENBERG)
/s/ CHARLES W. BARTHOLOMEW Director May 15, 1997
.........................................
(CHARLES W. BARTHOLOMEW)
/s/ STEVEN B. MYERS Director May 15, 1997
.........................................
(STEVEN B. MYERS)
</TABLE>
II-8
STATEMENT OF DIFFERENCES
------------------------
The service mark symbol shall be expressed as......................... 'sm'
<PAGE>
<PAGE>
EXHIBIT 4.1
[NUMBER-SEAL] [SHARES-SEAL]
PROFLIGHT MEDICAL RESPONSE, INC.
INCORPORATES UNDER THE LAWS OF THE STATE OF COLORADO
20,000,000 AUTHORIZED SHARES $.001 PAR VALUE
CUSIP 74317P 10 7
SEE REVERSE
FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF $.001 PAR VALUE COMMON STOCK OF
PROFLIGHT MEDICAL RESPONSE, INC.
transferable only on the books of the Company in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this Certificate to be
executed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Company.
Dated:
JANE S. BURKHARDT KEVIN L. BURKHARDT
Secretary Chief Executive Officer
PROFLIGHT MEDICAL RESPONSE, INC.
[CORPORATE SEAL]
COLORADO
COUNTERSIGNED AND REGISTERED:
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201
By
---------------------------------------------
Transfer Agent & Registrar Authorized Signature
BEFORE PRINTING
O.K. AS IS O.K. AS CORRECTED
----- -------
Signature
------------------------------
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED
The following abbreviations when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-....Custodian......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act .......................
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
- -------------------------------------------------------------------------------
For Value Received. hereby sell, assign and transfer unto
---------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
--------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------------------------------------------------------------- Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
--------------------------------------------
- --------------------------------------------------------------attorney-in-fact
to transfer the said stock on the books of the within-named Corporation, with
full power of substitution in the premises.
Dated
----------------------
---------------------------------------------------------
---------------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATSOEVER.
Signature(s) Guaranteed:
- -----------------------------------------
The signature(s) must be guaranteed by an eligible guarantor institution (Banks,
Stockbrokers, Savings and Loan Associations and Credit Unions with membership
in an approved signature guarantee Medallion Program), pursuant to S.E.C.
Rule 17Ad-15.
<PAGE>
<PAGE>
EXHIBIT 4.4
VOID AFTER DECEMBER 9, 2000
NUMBER REDEEMABLE WARRANT TO WARRANT
PURCHASE COMMON STOCK
PROFLIGHT MEDICAL RESPONSE, INC.
CUSIP 74317P 11 5
THIS CERTIFIES that, for value received
or registered assigns (the 'Registered Holder'), is the owner of the number of
Common Stock Purchase Warrants ('Warrants') specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one (1) fully paid and nonassessable share of Common
Stock, $.001 par value ('Common Stock'), of Proflight Medical Response, Inc., a
Colorado corporation (the 'Company'), at any time prior to the Expiration Date
(as hereinafter defined), upon the presentation and surrender of this Warrant
Certificate, with the Subscription Form on the reverse hereof, duly executed at
the corporate office of American Securities Transfer & Trust, Inc., as Warrant
Agent or its successor (the 'Warrant Agent'), accompanied by payment of $6.00
(the 'Purchase Price'), in lawful money of the United States of America in cash
or by official bank or certified check made payable to the order of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement dated (the 'Warrant Agreement'), by and
among the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price, or the number of shares of Common Stock subject
to purchase upon the exercise of each Warrant represented hereby, is subject to
modification or adjustment.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Colorado.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile, by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
PROFLIGHT MEDICAL RESPONSE, INC.
Dated:
By: KEVIN L. BURCKHARDT
--------------------------
President and CEO
JANE S. BURCKHARDT
--------------------------
Secretary
COUNTERSIGNED AND REGISTERED:
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201
By
-----------------------------------------
Warrant Agent Authorized Signature
<PAGE>
<PAGE>
PROFLIGHT MEDICAL RESPONSE, INC.
TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED
The following abbreviations when used in the inscription on the face of
this instrument, shall be construed as though they were written and in full
according to applicable laws or regulations:
TEN COM --as tenants in common UNIF GIFT MIN ACT-Custodian
TEN ENT --as tenants by the entireties ----------------------
JT TEN --as joint tenants with right (Cust) (Minor)
of surivorship and not as under Uniform Gifts to Minors
tenants in common Act
-------------------------
(State)
Additional abbreviations may also be used though not in the above list.
SUBSCRIPTION FORM
To Be Executed by the Holder
in Order to Exercise Warrants
The undersigned hereby elects to exercise _____________ Warrants represented
by this Warrant Certificate, and to purchase the securities issuable upon the
exercise of such Warrants, and requests that certificates for such securities be
issued in the name of:
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
- -----------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Please print or type name and address
and be delivered to
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Please print or type name and address
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
Dated: X
-------- -----------------------------------------------------
X
-----------------------------------------------------
Address:
-----------------------------------------------------
-----------------------------------------------------
Signature Guaranteed:
-----------------------------------------------------
ASSIGNMENT
(To be Executed by the Registered Holder
In Order to Assign Warrants)
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
FOR VALUE RECEIVED,------------------------hereby sells,
assigns and transfers to ----------------------------------------------------
- -----------------------------------------------------------------------------
(Please Print Name and Address Including Zip Code)
- -----------------------------------------------------------------------------
Warrants represented by this Warrant Certificate and hereby irrevocable
constitutes and appoint------------------------------------------------------
- -----------------------------------------------------------------------------
Attorney to transfer this Warrant Certificate on the books of the Company,
with full power of substitution in the premises.
Signature X
----------------------------------
Signature(s) Guaranteed: X
----------------------------------
- -----------------------------
The signature(s) must be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee Medallion Program), pursuant
to S.E.C. Rule 17Ad-15.
<PAGE>
<PAGE>
[LETTERHEAD]
May 1, 1998
Board of Directors
Proflight Medical Response, Inc.
7211 S. Peoria Street
Englewood, Colorado 80112
Re: Proflight Medical Response, Inc.
Registration Statement on Form SB-2
Ladies and Gentlemen:
We refer to the Registration Statement on Form SB-2 (the Registration
Statement) filed by Proflight Medical Response, Inc. (the 'Company') under the
Securities Act of 1933, as amended. The Registration Statement covers up to
1,019,200 shares of common stock $.001 par value (the 'Common Stock') and
1,019,200 redeemable common stock purchase warrants (the 'Warrants').
In our opinion, the shares of Common Stock and Warrants of the Company
included in the Registration Statement will, when sold as contemplated therein,
be legally issued, fully paid and non-assessable.
We hereby consent to be named, and to the use of this opinion, in the
above-referenced Registration Statement.
Very truly yours,
/s/ Bondy & Schloss LLP
<PAGE>
<PAGE>
FIRST PROMISSORY NOTE EXTENSION
Englewood, Colorado
March 26, 1997
THIS FIRST PROMISSORY NOTE EXTENSION is made effective the 26th day of
March, 1997 by and between PROFLIGHT MEDICAL RESPONSE, INC., a Colorado
corporation formerly known as PROFLIGHT, INC. ('Proflight'), whose address is
12420 East Control Tower Road, Englewood, Colorado 80112 and Lear Three, L.L.C.
(which is hereinafter referred to, together with each subsequent holder of this
note, as 'Holder') whose address is 7427 South Richfield Street, Foxfield,
Colorado 80016.
RECITALS:
1. Proflight Medical Response, Inc. is the successor of Proflight, Inc. and all
prior Agreements entered into by Lear Three, L.L.C. and Proflight, Inc. are
enforceable by and against Proflight Medical Response, Inc.
2. For value received, Proflight executed a Promissory Note in the Principal sum
of Two Hundred Twenty Thousand Dollars ($220,000.00) payable to Lear Three,
L.L.C., or Holder, on March 17, 1995 (hereafter, the 'First Promissory Note')
calling for monthly payments of interest only at eleven percent per annum,
with a first payment of Principal in the amount of Twenty Two Thousand
Dollars ($22,000.00) plus accrued interest due and payable on March 17, 1996;
a second payment of Principal in the amount of Forty Four Thousand Dollars
($44,000.00) plus accrued interest due and payable on March 17, 1997; and a
final payment of Principal in the amount of One Hundred Fifty Four Thousand
Dollars ($154,000.00) plus accrued interest due and payable on March 17,
1998. (The First Promissory Note is attached as Exhibit 1).
3. The remaining Principal Balance on the First Promissory Note is One Hundred
Ninety-Eight Thousand Dollars ($198,000.00).
4. The Parties wish to modify the terms of the Promissory Note as hereinafter
set forth.
NOW THEREFORE, in consideration of their mutual promises, the sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. The due date for final payment of the entire principal balance of
One Hundred Ninety Eight Thousand Dollars ($198,000.00) and accrued
interest shall be extended to September 30, 1998.
<PAGE>
<PAGE>
2. Monthly payments of interest only at the rate of eleven percent
(11%) per annum shall continue to be due and payable on the
seventeenth (17th) day of each month, with the next payment due on
March 17, 1997.
3. All other terms and conditions of the First Promissory Note shall
remain the same as stated therein.
4. As inducement for the extension of the due date of the aforesaid
Promissory Note, Proflight agrees to deliver to Lear Three, L.L.C.
an option to purchase Twelve Thousand Five Hundred (12,500) Shares
of Proflight common stock at the Initial Public Offering price, if
and when Proflight makes an Initial Public Offering. The Stock
Option Agreement even dated herewith sets forth with particularity
the terms and conditions thereof.
5. By his signature hereon, the authorized representative of
Proflight, Inc. hereby acknowledges and reaffirms the Aircraft
Security Agreement, Security Agreement and Financing Statement
executed by Proflight as security for the First Promissory Note.
(The Aircraft Security Agreement, Security Agreement and Financing
Statement executed by Proflight as security for the First
Promissory Note are attached hereto as Exhibits 2.3 and 4
respectively.)
EXECUTED this 26th day of March, 1997.
Maker:
PROFLIGHT MEDICAL RESPONSE, INC.,
a Colorado corporation, formerly known as
PROFLIGHT, INC.
KEVIN L. BURKHARDT President
By: .................................
Title
Holder:
LEAR THREE, L.L.C., a Colorado Limited
Liability Company
[SIGNATURE ILLEGIBLE] Manager
By: .................................
Title
-2-
<PAGE>
<PAGE>
SECOND PROMISSORY NOTE EXTENSION
Englewood, Colorado
March 26, 1997
THIS SECOND PROMISSORY NOTE EXTENSION is made effective the 26th day of
March, 1997 by and between PROFLIGHT MEDICAL RESPONSE, INC., a Colorado
corporation formerly known as PROFLIGHT, INC. ('Proflight') whose address is
12420 East Control Tower Road, Englewood, Colorado 80112 and Lear Three, L.L.C.
(which is hereinafter referred to, together with each subsequent holder of this
note, as 'Holder') whose address is 7427 South Richfield Street, Foxfield,
Colorado 80016.
RECITALS:
1. Proflight Medical Response, Inc. is the successor of Proflight, Inc. and all
prior Agreements entered into by Lear Three, L.L.C. and Proflight, Inc. are
enforceable by and against Proflight Medical Response, Inc.
2. For value received, Proflight executed a Promissory Note in the Principal sum
of One Hundred Thousand Dollars ($100,000.00) (hereafter, the 'Second
Promissory Note') payable to Lear Three, LLC, or Holder, on May 20, 1996
calling for monthly payments of interest only calculated at three percent
(3%) greater than the prime lending rate at Norwest Banks on the first
business day of each month, with the final payment of principal and interest
due on May 20, 1997. (The Second Promissory Note is attached hereto as
Exhibit 1).
3. The Parties wish to modify the terms of the Promissory Note as hereinafter
set forth.
NOW THEREFORE, in consideration of their mutual promises, the sufficiency
of which is hereby acknowledged, the parties agree as follows:
1. The due date for final payment of the entire principal balance of
One Hundred Thousand Dollars ($100,000.00) and accrued interest
shall be extended to September 30, 1998.
2. Monthly payments of interest only at the rate of twelve percent
(12%) per annum shall be due and payable on the twentieth (20th)
day of each month and shall be calculated at the new interest
rate from the effective date of this Second Promissory Note
Extension.
3. All other terms and conditions of the Second Promissory Note shall
remain the same as stated therein.
<PAGE>
<PAGE>
4. As inducement for the extension of the due date of the aforesaid
Promissory Note, Proflight agrees to deliver to Lear Three, LLC an
option to purchase Twelve Thousand Five Hundred (12,500) Shares of
Proflight common stock at the Initial Public Offering price, if and
when Proflight makes an Initial Public Offering. The Stock Option
Agreement even dated herewith sets forth with particularity the
terms and conditions thereof.
5. By his signature hereon, the authorized representative of
Proflight, Inc. hereby acknowledges and reaffirms the Aircraft
Security Agreement, Security Agreement and Financing Statement
executed by Proflight as security for the Second Promissory Note.
(The Aircraft Security Agreement, Security Agreement and Financing
Statement executed by Proflight as security for the Second
Promissory Note are attached hereto as Exhibits 2.3 and 4
respectively.)
EXECUTED this 26th day of March, 1997.
Maker:
PROFLIGHT MEDICAL RESPONSE, INC.,
a Colorado corporation, formerly known as
PROFLIGHT, INC.
KEVIN L. BURKHARDT President
By: .................................
Title
Holder:
LEAR THREE, L.L.C., a Colorado Limited
Liability Company
[SIGNATURE ILLEGIBLE] Manager
By: .................................
Title
-2-
<PAGE>
<PAGE>
EXHIBIT 10.24
[LOGO USAIG All-Clear] POLICY NUMBER: 400AC-36012
ADDITION OF ONE OR MORE AIRCRAFT ENDORSEMENT
Your Coverage Summary Page also includes coverage for the following aircraft:
Aircraft, Year, Make, Airworthiness FAA Passenger Capacity
Model and Type. Category Identification Excluding Crew
1977 LEAR 35, LAND STANDARD N18FN 05
Limits of Your Coverage. You are insured up to the limits shown below for those
coverages for which a dollar amount has been filled in. If no dollar amount
appears, you don't have that coverage. These limits may be altered by the policy
or any attached endorsements.
COVERAGE LIMITS OF COVERAGE
- --------------------------------------------------------------------------------
Combined Liability Coverage $25,000,000.
for bodily injury Each Occurrence
and property damage
Medical Coverage $ 10,000.
Each Person
Aircraft Physical Damage Coverage
FAA Not In-motion In-Motion
Identification Deductible Deductible Limit
N18FN NIL NIL $2,000,000.
Additional Premium $21,100.
362-AC
This endorsement does not change any of your coverage except as stated above. It
is effective 07/03/97 at 12:01 A.M. local Standard Time at the policyholder's
address.
Policy issued to: PROFLIGHT MEDICAL RESPONSE, INC.
Endorsement Approved by: United States Aviation
Number Underwriters, Inc.
1 Aviation Managers
[SIGNATURE ILLEGIBLE]
----------------------
<PAGE>
<PAGE>
[LOGO USAIG All-Clear] POLICY NUMBER: 400AC-36012
4 0 0 P O L I C Y
COVERAGE SUMMARY PAGE
LIMITS OF YOUR COVERAGE. You are insured up to the Limits shown below. The
limits may be altered by the policy or by any attached endorsements.
COVERAGE LIMITS OF COVERAGE
Combined Liability Coverage for
bodily injury and property damage $20,000,000. Each Occurrence
Medical Coverage $ 10,000. Each Person
Aircraft Physical Damage Coverage
FAA Not In Motion In-Motion
Ident. Deductible Deductible Limit
N25HA NIL NIL $1,200,000.
N161RB NIL NIL $ 975,000.
WHOM WE WILL PAY: Payments for loss covered under your Aircraft Physical Damage
Coverage will be made to you and ANY LIENHOLDER AND/OR LESSOR UNDER WRITTEN
LEASE AGREEMENT.
This policy is written through the
Aviation Managers on August 13, 1997.
Approved by United States Aviation
Underwriters, Inc., Aviation Managers Premium $31,657.
Endorsement
[SIGNATURE ILLEGIBLE] Premium $22,100.
- ---------------------------------------------
[SIGNATURE ILLEGIBLE] Total
- --------------------------------------------- Premium $53,757.
Countersignature of Authorized Representative
Place of signing: CONIFER, CO
----------------------------
Page 2 of 2 Pages
<PAGE>
<PAGE>
EXTENSION AGREEMENT
THIS EXTENSION AGREEMENT is made and entered into effictive the day of
NOVEMBER 1997 by and between PROFLIGHT MEDICAL RESPONSE, INC., a Colorado
corporation formerly known as PROFLIGHT, INC., ('Proflight') whose address is
7211 S. Peoria, Suite 200, Englewood, Colorado 80112 and Lear Three, L.L.C.
(which is hereinafter referred to, together with each subsequent holder of this
note, as 'Holder') whose address is 7427 South Richfield Street, Foxfield,
Colorado 80016.
RECITALS:
1. On February 6, 1997, Proflight executed its Promissory Note in favor of
Holder in the amount of $100,00.00 to $150,000.00 calling for monthly payments
due on the fifth (5th) day of each month of interest only at the rate of three
percent (3%) per month payable at a rate equal to one dollar for each one
thousand dollars loaned to Proflight by Holder (the 'Promissory Note').
2. According to the terms of the Promissory Note, the entire principal
balance, together with accrued interest, filing and related fees would be due
and payable on May 31, 1997 or upon Proflight's receipt of proceeds generated by
Initial Public Offering of common stock in Proflight, whichever was earlier.
3. On or about May 22, 1997, Proflight and Holder extended the date for
repayment of said Promissory Note from May 31, 1997 to November 30, 1997, or
upon Proflight's receipt of proceeds generated by the Initial Public Offering of
common stock in Proflight, whichever was earlier.
4. Proflight and the Holder have determined it to be in their mutual best
interests to further extend the date for repayment of all principal, together
with accrued interest, filing and related fees.
NOW THEREFORE, in consideration of their mutual promises and covenants, the
sufficiency of which is hereby acknowledged, the Parties hereto agree as
follows:
The due date for payment of the entire outstanding indebtedness
evidenced by the Promissory Note, including principal, accrued interest, filing
and related fees shall be due and is hereby extended to be payable on January
31, 1998 or upon the receipt of proceeds generated by the Initial Public
Offering of common stock in Proflight, whichever is earlier.
All other terms and conditions of the Promissory Note shall remain in
full force and effect, including the continuance of monthly interest payments as
set forth in the Promissory Note.
<PAGE>
<PAGE>
Dated this 17 day of November, 1997.
Proflight Medical Response, Inc. Lear Three, LLC
by: [signature illegible] by: [signature illegible]
_____________________________ ________________________
its: CFO its: Manager
_____________________________ ________________________
<PAGE>
<PAGE>
[LETTERHEAD OF GRANT THORNTON]
We have issued our reports dated February 20, 1998 (except for note A. Item (b),
as to which the date is April 16, 1998, Note C, Note J, Items 4 and 5, as to
which the date is March 10, 1998, and Note J, Item 6, as to which the date is
April 20, 1998 (accompanying the financial statements of Proflight Medical
Response, Inc. contained in the Registration Statement and Prospectus. We
consent to the use of the aforementioned reports in Amendment No. 3 to the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts"; "Summary Historical and Pro Forma Financial Data"
and "Selected Financial Data."
GRANT THORNTON LLP
Denver, Colorado
May 1, 1998
<PAGE>
<PAGE>
[LETTERHEAD OF STAFF MAIKELS & CIAMPINO, P.C.]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2,
Amendment No. 3, of our report dated March 24,1998 on our audit of the combined
financial statements of Air Response, Inc. and Air Response South, Inc. We also
consent to the reference to our firm under the caption "Experts."
April 30, 1998 /s/ Staff Maikels & Ciampino, P.C.
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheets and Statements of Operations and the Pro Forma Balance Sheets
and Pro Forma Statement of Operation of Proflight Medical Response, Inc.,
as at and for the year ended December 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 0 (790,417)
<SECURITIES> 0 0
<RECEIVABLES> 640,514 1,397,642
<ALLOWANCES> 100,000 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 561,714 835,855
<PP&E> 3,337,363 5,911,218
<DEPRECIATION> (714,343) (714,343)
<TOTAL-ASSETS> 3,722,170 9,666,048
<CURRENT-LIABILITIES> 3,787,754 5,445,247
<BONDS> 3,243,588 4,647,184
0 0
0 0
<COMMON> 2,034 2,530
<OTHER-SE> (786,715) 2,469,132
<TOTAL-LIABILITY-AND-EQUITY> 3,722,170 9,666,048
<SALES> 0 0
<TOTAL-REVENUES> 5,644,799 12,712,990
<CGS> 0 0
<TOTAL-COSTS> 5,930,166 13,013,383
<OTHER-EXPENSES> 0 (557)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 415,343 604,585
<INCOME-PRETAX> (675,710) (923,041)
<INCOME-TAX> 0 (85,222)
<INCOME-CONTINUING> (675,710) (923,041)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (675,710) (837,819)
<EPS-PRIMARY> (0.36) (0.35)
<EPS-DILUTED> 0 0
<PAGE>
