Prospectus Dated July 21, 1999
Cardinal Airlines, Inc.
1380 Sarno Road, Suite B,
Melbourne, Florida 32935
2,000,000 Units
$10.00 per unit
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Cardinal is starting an airline in Melbourne, Cardinal Airlines, Inc. is selling the units
Florida. through its officers and directors on a "best
efforts," "no minimum" basis. Cardinal may sell
The Offering some units through qualified selling agents.
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Per Unit Total This is an initial public offering of shares of
common stock and warrants. Each share is sold as
Public Price $10.00 $20,000,000 a unit with a warrant to purchase a second share
for $11.00.
Possible
Commissions $ 1.00 $ 2,000,000 Cardinal is selling 1,900,000 units. Current
shareholders are selling 100,000 units. Cardinal
Proceeds to will not receive any proceeds from the sale of
Cardinal $ 9.00 $17,100,000 units by current shareholders.
Proceeds to There is currently no public market for the
Selling shares or the warrants. The offering price may
Shareholders $ 9.00 $ 900,000 not reflect the market price for the share and
warrants after the offering.
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This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss. See "Risk Factors" beginning on page 3 for a
summary of items to consider before investing in Cardinal.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if the
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS
Prospectus Summary......................................................... 1
Risk Factors............................................................... 3
Use of Proceeds............................................................ 7
Dilution................................................................... 9
Dividend Policy............................................................10
Capitalization.............................................................11
Special Note Regarding Forward-Looking Statements..........................12
Management's Discussion and Analysis
or Plan of Operation......................................................12
Business...................................................................15
Available Information......................................................23
Management.................................................................23
Certain Transactions.......................................................31
Principal and Selling Shareholders.........................................31
Description of Securities..................................................37
Securities Eligible for Future Sale........................................39
Plan of Distribution.......................................................40
Legal Matters..............................................................41
Experts....................................................................41
Unit Purchase Agreement....................................................42
Financial Statements......................................................F-1
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including the "Risk
Factors" section and the financial statements and the notes to those statements.
The Company
Cardinal Airlines, Inc. is a new development stage company planning to
provide scheduled airline service to primary markets in the Eastern United
States from Melbourne, Florida. Our strategy is to provide service that exceeds
standard commercial coach service. We intend to offer standard service which
approximates first class service on major airlines by seating all passengers in
large "first class" seats and offering "first class" meals. Cardinal plans to
offer full fare, one price per destination, tickets that will approximate the
advanced restricted coach fares of major airlines. We plan to commence flight
operations with two MD-80 series aircraft providing service between Melbourne
Florida and the Baltimore/Washington D.C. markets. Cardinal plans to eventually
add additional MD-80 series aircraft and expand service to other prominent
markets. Cardinal has not had any flights and has operated at a loss. We have
assets of $59,438. Cardinal has not yet received its FAA certifications and has
not purchased any aircraft.
Cardinal's executive officers and key employees have substantial
experience in the airline industry. Management has chosen the Eastern United
States as Cardinal's initial geographic market due to the concentration of high
yield destinations from the Melbourne/Orlando area.
Cardinal's principal offices are located at Melbourne International
Airport and at 1380 Sarno Road, Suite B, Melbourne, Florida 32935, (407)
757-7388.
The Offering
Securities Offered by Cardinal 1,900,000 units, each
unit consisting of one
share of common stock and
one warrant to purchase
one share of common stock
for a price of $11.00 a
share until five years
from the effective date
of this offering.
Securities Offered by the Selling Shareholders 100,000 units, each unit
consisting of one share
of common stock and one
warrant to purchase one
share of common stock
for a price of $11.00 a
share until five years
from the effective date
of this offering.
Total Common Stock Offered 2,000,000 shares
Minimum Purchase 100 units ($1,000)
Common Stock Outstanding After the Offering 3,931,200 shares
Use of Proceeds Costs of the offering
will be paid first. After
which, funds will be
used for working capital
and general corporate
purposes including
obtaining a FAA 121 air
carrier operating
certificate, acquiring
aircraft and equipment,
and developing
maintenance and technical
programs.
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No Minimum The money received from
the first units sold may
be used by Cardinal. The
first proceeds will be
used to pay the cost of
the offering. If Cardinal
does not sell enough
units to commence
operations (approximately
600,000 units), Cardinal
will use the money
received to obtain
additional financing to
pay operating expenses
and to acquire FAA and
DOT certifications.
Selected Financial Data
The Selected Financial Data presented below are derived from the
Financial Statements of Cardinal. They are qualified in their entirety by, and
should be read in conjunction with, "Management's Discussion and Analysis or
Plan of Operation" and Cardinal's Financial Statements and the Notes thereto
included elsewhere in this prospectus. Cardinal is a development stage company.
Cardinal Airlines, Inc
(A Development Stage Company)
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Income Statement Data:
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REVENUES $ - $ - $ - $ - $ -
NET (LOSS) $(208,191) $ (184,462) $ (11,550) $ (20,561) $(3,168)
Net income
(loss) per
common share $ (.10) $ (.09) $ (.01) $ (.01) $ (.01)
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Balance Sheet Data:
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March 31, 1999 June 30, 1998 June 30, 1997
-------------- ------------- -------------
Total Assets $ 59,438 $ 24,000 $ 1,740
========= ========== ==========
Total Liabilities
Stockholders Equity $ 59,438 $ 24,000 $ 1,740
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RISK FACTORS
You should carefully consider the following factors and other
information in this prospectus before deciding to invest in the shares.
Risks Related to Cardinal
- -------------------------
Cardinal Has Not Begun Operations And There Is No Guarantee We Will Ever
Operate As An Airline. We have not begun airline operations. In order to operate
as an airline, Cardinal must obtain an FAA 121 air carrier certificate or
contract with a holder of a certificate to provide airline services. If fewer
than 600,000 units are sold, or an aggregate amount of $5,350,000 is raised,
Cardinal cannot obtain a certificate using its present business plan. If
Cardinal is unable to obtain the certificate, it will be forced to modify its
present business plan and offer services through certified contractors or
operate with less expensive aircraft. From inception through March 31, 1999,
Cardinal has sustained net losses in the amount of $208,191. Cardinal may be
vulnerable to fare discounts, changes in industry conditions and competitive
reactions by existing or new competitors.
As A New Company, We Have No Operating History Which Gives You Limited
Information Upon Which To Predict Our Future Performance. Cardinal has only a
limited operating history upon which an evaluation of its prospects can be
based. The risks, expenses and difficulties encountered by companies at an early
stage of development must be considered when evaluating Cardinal's prospects.
We Do Not Have Any Committed Sources Of Additional Funding And, If We
Sell Fewer Than 600,000 Units, We May Not Have Adequate Funds To Operate. We
have no commitments, from any source, for additional funding. There can be no
assurance that additional funding could be obtained. If less than 600,000 units
are sold, it would be necessary for Cardinal to modify its business plan.
Competition Could Prevent Us From Selling Enough Tickets To Break Even.
Competition could prevent Cardinal from selling tickets for more than 60% of its
available seats, which Cardinal anticipates, or even selling tickets for 42% of
its available seats, which must be sold in order for Cardinal to break even. The
average load factor, or the number of seats that need to be sold to cover
Cardinal's costs on a flight, is 47 seats. Although Cardinal would be the only
airline providing non-stop or direct service from Melbourne International
Airport to Baltimore Washington International Airport, it will compete with
Delta Air Lines, Inc., Spirit Airlines, Inc., and other airlines that currently
provide service from the Orlando International Airport to these markets.
Cardinal may also compete with new airlines providing service to these markets,
and, existing airlines, increasing service and/or lowering fares.
Our Competitors Could Undercut Our Fares, Which Could Lower Our Revenues.
Other airlines may offer fares equal to those offered by Cardinal or introduce
new non-stop service between cities served by our flights to prevent Cardinal
from attaining a share of the passenger traffic necessary to maintain profitable
operations. In addition, competitors with greater financial resources than us
may attempt to price their fares below our fares and/or increase their service,
which could adversely affect our profitability. Cardinal's ability to meet price
competition depends on its ability to operate at costs equal to or lower than
its competitors or potential competitors.
Although Prohibited, Our Competitors May Engage In Unfair Exclusionary
Practices, Which Could Lower Our Revenues. While the Department of
Transportation has adopted rules to eliminate exclusionary airline competition,
major air carriers may attempt to exclude new entrant air carriers through a
number of tactics including drastic price cuts and flooding the market with new
low-fare capacity. There can be no assurance that the rules will deter a large
air carrier from predatory actions.
We Do Not Have An Independent Melbourne Airline Feasibility Study And Our
Evaluation Of The Market May Be Incorrect. Cardinal's business plan for the
continuing implementation of its business strategy is based on the experience,
judgment and certain assumptions of management, and upon certain available
market information which includes reports for Melbourne International Airport
and the Department of Transportation origination and
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destination data. Cardinal has not obtained a third party independent
feasibility study relating to its plans to enter into the commercial airline
business, nor does it plan to commission such a study.
Our Lack Of A Frequent Flyer Program May Be A Competitive Disadvantage.
Other airlines offering these programs may attract more individuals and business
people who fly on a regular basis because of the upgrades and benefits received
from their frequent flyer programs.
Improved Delta Services Could Affect Our Customer Base. If Delta
increases flights or adds flights to Baltimore International Airport, it could
adversely affect our customer base. Delta and other airlines operating out of
the Orlando International Airport currently dominate the Melbourne market.
Our Management Will Control Cardinal Through Preferred Shares. After the
completion of the sale of all the units offered herein, Cardinal's executive
officers and directors, a group of four individuals, by virtue of their holdings
of both common stock and Series A Preferred Shares will hold approximately 82%
of all votes that could then be cast without taking into account the exercise of
any warrants to purchase common stock. As a result, the investors in this
offering will not be able to exercise any control over the management of
Cardinal. See "Principal Shareholders, Officers and Directors of Cardinal
Airlines, Inc." to view a chart of anticipated stock ownership after the
offering.
Our Airline Services May Be Affected By The Limited Number Of Available
Aircraft. Cardinal plans to start operations with two aircraft. If any of our
aircraft are out of service for an extended period of time or lost, Cardinal's
operations would be adversely affected until the aircraft was replaced. In the
event one aircraft is out of service, Cardinal will attempt to temporarily lease
or charter a suitable replacement. However, there can be no assurance that a
suitable aircraft can be located in a timely manner. This would have a material
effect on our operations. If Cardinal only raised enough capital to start
operations with one aircraft, and that aircraft was out of service, our revenues
would cease until a replacement was found.
The Aircraft We Are Planning To Use May Not Be Available When We Need
Them, Possibly Delaying The Commencement Of Airline Operations. If aircraft are
not available when we need them we would have to amend our business plan to
lease or purchase other aircraft or contract for such services, possibly
delaying commencement of our operations. Cardinal plans to initially lease or
lease/purchase 2 MD-80 series aircraft. We have identified sources and
availability of MD-80 series aircraft and the terms on which they can be leased
or lease/purchased. As of March 1999, we are aware of two airlines that are
making changes to their fleets and will have MD-80 aircraft available.
If We Use Some Proceeds To Make A Deposit On Aircraft, But Are Unable To
Sell Sufficient Units To Purchase The Aircraft, We Could Forfeit The Deposit. In
the event few units are sold in this offering, we could find ourselves in the
position of having spent a significant portion of the proceeds of this offering
(approximately $540,000 per airplane), but having insufficient remaining
proceeds to pay lease payments of $135,000 per month, thereby forfeiting our
entire interest. The purchase price of the aircraft which Cardinal intends to
use is $13.5 million. Cardinal intends to lease or make an installment purchase
for such aircraft under terms of a down payment of approximately 4% to 5% of the
purchase price and monthly payments equal to 1% of the price of the aircraft.
Among the first use of proceeds will be to obtain such aircraft.
If Our Employees Unionize, Our Costs Would Increase. If Cardinal is
unable to maintain a union free workforce, our costs could significantly
increase. Based on management's previous experience, we believe that Cardinal
can develop a productive, loyal workforce, and operate with lower personnel
costs than competitors with unionized workforces. We may not be able to achieve
and maintain this advantage.
If Service Contractors Do Not Perform Properly, It Will Adversely Affect
Our Operations. If third party contractors do not provide essential services in
a timely and reliable manner, our operations will be affected. Cardinal will
enter into agreements with contractors to provide certain equipment, facilities
and services required for support operations. These will include baggage and
ground handling services, certain aircraft maintenance, and specialized
personnel training. It is standard industry practice for small airlines to
contract these services. Typically,
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large airlines perform these services and use contractors on a supplemental
basis. Such contractual services are readily available.
If We Are Not Able To Use The Baltimore Washington International Airport,
Our Operations Could Be Adversely Affected. If we are delayed or unable to
secure access to the Baltimore Washington International Airport, it could
adversely effect our operations. It would not require Cardinal to change its
business plan because other airports serving the same market are available.
Baltimore Washington International Airport has indicated that facilities are
available, but that gates would have to be shared until gates currently under
lease become available, or additional gates are constructed. Because adequate
gates would be available for Cardinal's flights under a sharing arrangement, a
gate-sharing arrangement would not affect our operations.
Contingent Liability For Sale Of Unregistered Shares. Cardinal may have
liability to purchasers of 506,200 common shares at a price of $.50 per share
from June 10, 1998 through March 23, 1999 sold in possible violation of the
Securities Act of 1933. The maximum potential contingent liability for such
sales is $253,100 plus interest.
Risks Related to the Airline Industry Generally
- -----------------------------------------------
The Airline Business Is A Low Margin Business Making Controlling Our
Costs Critical. If Cardinal is unable to operate at costs less than its
competitors and lower costs cannot be achieved, it could adversely affect
Cardinal's viability. The airline industry, historically, has low gross profit
margins with high fixed costs in comparison to revenues. Cardinal believes it
will be very cost effective and have lower fixed costs than other airlines.
The Airline Business Is Very Sensitive To Changes In The General Economy.
The airline industry has a cyclical nature and is sensitive to overall economic
conditions. Historically, downturns in the economy have caused a reduction in
leisure and business airline passengers, any prolonged reduction in passenger
traffic may adversely affect Cardinal.
Changes In Fuel Costs Could Significantly Affect Our Profits. Typically
fuel costs are the highest operating expense for companies providing airline
service. Fuel costs and availability can be affected by political and economic
conditions throughout the world. Any changes in the availability or cost of fuel
could adversely affect us. See "Business - Fuel" for additional discussion of
the effect of fuel costs on operations.
Our Operations May Be Adversely Affected By The Cost Of Compliance With
Present And Future Federal Regulations. Cardinal must obtain the necessary
authorization from several government agencies to commence flight operations,
including a Certificate of Public Convenience and Necessity from the Department
of Transportation and an operating certificate from the Federal Aviation
Administration. Such authority is subject to compliance with applicable
statutes, rules and regulations pertaining to the airline industry, including
any new rules and regulations that may be adopted in the future. Cardinal will
be required to file a progress report with the DOT after the first year of
operations, at which time the FAA and DOT will determine if we are still fit to
operate an airline. The FAA will maintain increased surveillance and scrutiny of
Cardinal's operations for up to five years. There is no assurance that Cardinal
will be able to comply with all present and future rules and regulations. The
cost of regulatory compliance may have an adverse effect on our profitability.
Cardinal started discussions with the FAA in December of 1998. Allan W. Markam,
PC, in Washington, D.C., was engaged to prepare our formal DOT application. The
DOT initial application was filed on June 4, 1999 and was assigned Docket No.
OST 99-5798. On June 7, 1999, our FAA 121 application was terminated due to our
delay in filing our DOT application. Cardinal's FAA 121 application will be
re-filed under new certification procedures. The FAA has advised Cardinal that
the Certification Team previously assigned to us will remain the same. We
believe that we can obtain our 121 Air Carrier Certificate within six to nine
months after selling 600,000 units.
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Risks Related to this Offering
- ------------------------------
If This Offering Is Not Successful, Cardinal May Need Additional
Financing. If Cardinal does not sell 600,000 units we will be unable to
implement our current business plan. We believe that our existing capital
resources would be sufficient to meet operating requirements at existing
operating levels through December, 1999. In the event that our plans change or
our assumptions change or prove to be inaccurate or the proceeds of this
offering prove to be insufficient to fund operations, we could be required to
seek additional financing. The terms and prices of any additional financing may
be significantly more favorable than those of the units sold in this offering.
There can be no assurance that additional funding, if necessary, will be
available on acceptable terms, if at all. If adequate funds are not available,
we may be required to delay, scale back, or eliminate certain aspects of our
operations.
We May Have Difficulty Selling The Units Because We Do Not Have An
Underwriter. The units offered herein are offered directly by Cardinal. We have
not retained any underwriters, brokers, dealers or placement agents in
connection with this offering. However, we may engage broker/dealers to assist
in the sale and distribution of the units. None of the directors or officers of
Cardinal have any experience in making a direct public stock offering. The
absence of an underwriter could adversely affect our ability to sell the units.
Use Of Broker-Dealers Will Materially Reduce The Proceeds. If we
exercise our right to use broker-dealers, commissions paid to such
broker-dealers may materially affect the amount of proceeds received by Cardinal
from the offering. Cardinal retains the right to use broker-dealers to sell and
distribute the units in this offering.
Current Prospectus And State Blue Sky Laws Registration May Affect Your
Ability To Exercise Warrants. The warrants will be deprived of any value if a
current prospectus covering such shares issuable in exercise thereof is not kept
effective or if such shares are not registered in the states in which holders of
the warrants reside. There is no assurance that Cardinal will be able to
maintain a current prospectus covering such shares or be able to register or
qualify such shares in the states where such warrant holders reside. See
"Description of Securities -- Warrants" for additional discussion of the
warrants.
Unit Purchasers Will Be Immediately And Substantially Diluted. This
offering involves an immediate and substantial dilution between the initial
public offering price of $10.00 per unit and the pro forma net tangible book
value per share of common stock after the offering. Such dilution will amount
to:
o $5.65 if all units are sold;
o $6.18 if 1,500,000 units are sold;
o $7.03 if 1,000,000 units are sold;
o $7.95 if 600,000 units are sold; and
o $8.22 if 500,000 units are sold.
In addition, current shareholders acquired their shares of stock at prices lower
than those set forth in this offering. See "Dilution" for further information on
dilution figures; See "Selling Shareholders" for details of how many shares were
sold at prices differing from this offering.
If Our Common Stock Price Falls Below $5.00, Trading Common Stock May Be
More Difficult. If the trading price, if any, of the common stock were to fall
below $5.00 per share, trading in the common stock would be subject to certain
rules promulgated under the Exchange Act of 1934. This could severely limit the
liquidity of the common stock and the ability of purchasers in this offering to
sell the common stock in the secondary market. Those rules require additional
disclosure by broker-dealers in connection with any trades involving a stock
market price of less than $5.00 per share. Such rules require the delivery of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. Such delivery must occur prior to any transaction. Additional sales
practice requirements are imposed on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the purchaser and must have received the purchaser's written
consent to the transaction prior to sale. The broker-dealer also must disclose
the commissions payable to the broker-dealer, and current bid and offer
quotations for the
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penny stock. If the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Such information must be provided to the customer orally or in writing
prior to effecting the transaction and in writing before or with the customer
confirmation. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon
broker-dealers by such requirements may discourage them from effecting
transactions in the common stock.
If Cardinal Sells Fewer Than 600,000 Units, You May Lose Your
Investment Because Cardinal Is Unable To Commence Operations. The sale of fewer
than 600,000 units would materially and adversely effect Cardinal in that
Cardinal would be required to significantly limit its operational expenses, by
curtailing significantly or deferring the Company's planned airline services.
See "Use of Proceeds" for a more detailed discussion of how the cash received
from this offering will be used. Because there is no minimum amount of units
required to be sold in the offering, all the cash received will go directly to
Cardinal to be used as described in "Use of Proceeds." While $80,000 of the
total offering cost of $130,000 has previously been paid by Cardinal and will
not be reimbursed to Cardinal from the proceeds of this offering, $50,000 of the
costs of this offering will be paid from the proceeds. If only 5,000 or fewer
units are sold, the result would be that all the proceeds will be used to pay
the remaining expenses of the offering.
USE OF PROCEEDS
Set forth below is Cardinal's anticipated use of proceeds after deduction
of estimated remaining offering expenses of $50,000. There is no minimum number
of units that must be sold in the offering, and all funds will be paid directly
to Cardinal. Since there are no minimum proceeds we may not be able to do
anything discussed in this section.
In the event all units offered herein are sold, Cardinal would receive
$17,050,000 of net proceeds from this offering after deduction of possible fees
paid to qualified broker-dealers and expenses of this offering. The net proceeds
of this offering will be used for:
o expenditures for deposits and down payments on aircraft, equipment and
inventory;
o development of maintenance and technical programs designed to comply with
federal regulatory requirements;
o federal certification expenses;
o identifying, hiring and training of necessary labor force; and
o working capital and general corporate purposes.
The amounts and timing of expenditures for each purpose is subject to the
broad discretion of the management and will depend on factors such as the amount
of net proceeds available to Cardinal and the effects of competition, many of
which are beyond Cardinal's control. If only 5,000 or fewer units are sold, the
result would be that all the proceeds would be used to pay offering expenses and
Cardinal would attempt to obtain additional funding to continue implementing
Cardinal's business plans as discussed in this prospectus.
Because Cardinal has no minimum proceeds in this offering, it is
possible that Cardinal will receive no funds or insufficient funds to enable it
to effectuate its planned use of proceeds set forth above.
Until required for operations, our policy is to invest our cash reserves
in bank deposits, certificates of deposit, commercial paper, corporate notes,
U.S. government instruments, and other investment-grade quality instruments.
Cardinal will not receive any of the proceeds from the sale of shares of
common stock by the selling shareholders.
The following table represents Cardinal's use of proceeds from the sale
of units in this offering. The columns for the unit sales of 30% and greater
include startup costs and 90 days of revenue flight operations. This is to meet
the DOT Certification requirements of sufficient resources to cover all
pre-operating costs plus the operating costs incurred by Cardinal during the
first 3 months of normal operations. See "The Offering", "Use of Proceeds", and
"Management's Discussion and Analysis or Plan of Operation".
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100% 75% 50% 30% 25%
Unit Sales 1,900,000 1,500,000 1,000,000(1) 600,000(2) 500,000
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Gross Proceeds from Offering 19,000,000 15,000,000 10,000,000 6,000,000 5,000,000
Less Offering Expenses 50,000 50,000 50,000 50,000 50,000
Maximum (possible) Commissions 1,900,000 1,500,000 1,000,000 600,000 500,000
------- ------- ------- ------- -------
Net Proceeds from Offering 17,050,000 13,450,000 8,950,000 5,350,000 4,450,000
Use of Net Proceeds
Flight Operations (3) 2,188,030 2,188,030 2,188,030 1,140,459
Fuel (4) 863,244 863,244 863,244 446,622
Maintenance (5) 810,435 810,435 810,435 399,582
Passenger Services and Station
Operations (6) 1,769,371 1,769,371 1,769,371 1,037,902
Marketing, Sales and
Advertising (7) 714,922 714,922 714,922 452,417
General & Administrative (8) 834,998 834,998 834,998 659,018 450,000
Aircraft Deposits 1,080,000 1,080,000 1,080,000 540,000
Key Man Life Insurance 24,000 24,000 24,000 24,000 24,000
FAA DOT Certification 350,000 350,000 350,000 350,000 350,000
Computer System Lease 50,000 50,000 50,000 50,000 50,000
Initial Promotions 400,000 400,000 265,000 250,000
Working Capital 7,965,000 4,365,000 - - 3,576,000
-------- -------- ------- -------- --------
Proceeds Used 17,050,000 13,450,000 8,950,000 5,350,000 4,450,000
<FN>
(1) This represents the minimum proceeds needed to obtain FAA & DOT (5) Maintenance Expense Includes
Certification and commence revenue operations with 2 MD-80 aircraft. o Maintenance Personnel Cost of Labor
No working capital is shown because all the proceeds would be used to o Cost of Maintenance Personnel Training
obtain DOT certification. o Ground Equipment Lease Expense
o Maintenance Equipment Lease Expense
(2) This represents the mimium proceeds needed to obtain FAA & DOT o Maintenance Data Base Fees and Publications
Certification and commence revenue operations with 1 MD-80 aircraft.
No working capital is shown because all the proceeds would be used to (6) Passenger Services and Station Operations Expense
obtain DOT certification. o Flight Attendant Cost of Labor
o Flight Attendant Training Expense
(3) Flight Operations Expenses Includes o Passenger Food Service Expense
o Flight Crew Cost of Labor o Station Ramp Services Expenses
o Flight Support Personnel Cost of Labor o Terminal facilities Lease Expenses
o Aircraft Acquisition Expense (estimated to be $135,000
per month per aircraft) (7) Marketing, Sales and Advertising Expense Includes
o Aircraft Hull Insurance o Reservation and Ticket Agent Personnel Expense
o Staff Training Expenses
(4) Fuel Expense Includes o Advertising
o Cost of Fuel o Communications Systems Equipment Lease Expense
o Cost of Fuel Transportation and Storage o Web Site and Data Base Expenses
(8) General & Administrative Expenses Includes
o Administrative Labor Costs
o Accounting
o Legal
o Office Expense
o Insurance - General Liability
</FN>
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DILUTION
Dilution represents the difference between the initial public offering
per share of common stock and the pro forma net tangible book value per share of
common stock immediately after the completion of this offering. Pro forma net
tangible book value is the amount that results from subtracting the total
liabilities of Cardinal from its total tangible assets after giving effect to
common stock sold in a private placement. Dilution arises mainly from an
arbitrary decision by Cardinal with respect to the offering price per share of
common stock. In this offering, the level of dilution will be increased as a
result of Cardinal's low net tangible book value prior to this offering.
Based on the March 31,1999, financial statements the net tangible book
value of Cardinal's stock prior to this offering was $49,430 or $.02 per share
of common stock.
Between June 10, 1998, and March 23, 1999, Cardinal sold 506,200
common shares for $0.50 per share to 34 purchasers in a private placement.
We received a total of $253,100 in the private placement.
If the maximum shares offered herein are sold, Cardinal will have
3,931,200 shares issued and outstanding upon completion of the offering. After
giving effect to the sale of the shares of common stock offered hereby by
Cardinal and the receipt and application of the estimated proceeds therefrom,
net of estimated commissions and offering expenses of the offering, the post
offering pro forma net tangible book value of Cardinal will be $17,099,430 or
$4.35 per share or 44% from the offering price of $10.00 per share. Net tangible
book value per share would increase to the benefit of present shareholders from
$.02 prior to the offering to $4.35 after the offering, or an increase of $4.33
per share attributable to the purchase of the Shares by investors in this
offering.
The following table illustrates the estimated net tangible book value per
share after the offering and the dilution to persons purchasing shares based on
the foregoing maximum offering assumption:
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1,900,000 1,500,000 1,000,000 600,000 500,000 As of March 31
units units units units units 1999
<S> <C> <C> <C> <C> <C> <C>
Offering price of
common stock (per share) 10.00 10.00 10.00 10.00 10.00 10.00
Net tangible book value .02 .02 .02 .02 .02 .02
per share before the offering
Increase per share 4.33 3.80 2.95 2.03 1.76
attributable to
payments by new
investors
Pro forma net tangible 4.35 3.82 2.97 2.05 1.78
book value per share
after the offering
Dilution per share to new 5.65 6.18 7.03 7.95 8.22
investors
</TABLE>
9
<PAGE>
The following table set forth as of March 31, 1999, after giving effect
to the offering, the number of shares of common stock purchased from Cardinal,
the total consideration paid and the average price per share paid by existing
shareholders and by new investors on an as adjusted basis:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
Price Per
Number Percentage Amount Percentage Shares (1)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investors in this offering 2,000,000 50.88% $20,000,000 98.11% $10.00
Current stockholders (2) 1,931,200 49.12% 385,950 1.89% $ 0.20
-------- ------ ------- ----- -----
Totals. 3,931,200 100% $20,385,950 100% $ 5.19
</TABLE>
(1) The average price per share is calculated by dividing the total
consideration paid by the total number of shares purchased.
(2) Sales by the selling shareholders in this offering would cause the
number of shares currently held by existing shareholders (2,031,200), to
be reduced to 1,931,200, or 49.12% of the total number of shares of common
stock to be outstanding after this offering.
DIVIDEND POLICY
Since inception, Cardinal has not declared or paid any cash dividends on
its capital stock. Cardinal currently intends to retain any future earnings for
funding growth and, therefore, does not anticipate paying any cash dividends in
the foreseeable future.
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Cardinal giving
effect to the private placement of $267,629 which concluded on March 23, 1999
and should be read in conjunction with the financial statements and related
notes appearing elsewhere herein.
<TABLE>
<CAPTION>
As of
March 31, 1999 June 30, 1998 June 30, 1997
<S> <C> <C> <C>
Long Term Debt $ 0 $ 0 $ 0
Shareholder's Equity
common stock $.01
par value, 50,000,000
shares authorized,
2,031,200 shares
issued and outstanding $ 16,778 $ 10,167 $ 4,908
Preferred Shares
1,000,000 authorized
100,000 Series A issued,
900,000 unissued
and undesignated as
to series $ 1,000 $ 0 $ 0
Additional Paid-In
Capital $249,851 $ 35,539 $ 0
Retained Earnings ($208,191) ($ 21,706) ($ 3,168)
Total Shareholder's Equity $ 59,438 $ 24,000 $ 1,740
Total Capitalization $ 59,438 $ 24,000 $ 1,740
</TABLE>
11
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements herein regarding the dates on which Cardinal
anticipates commencing operations. With respect to such dates, Cardinal's
management has made certain assumptions regarding, among other things:
1) the successful and timely completion of the offering,
2) the completion of FAA certification,
3) the availability of adequate funding,
4) the absence of delays in acquiring necessary equipment, and
5) the availability of airport space available in an appropriate destination.
Cardinal's ability to commence operations on the dates anticipated is subject to
certain risks, including the risks discussed under "Risk Factors." Actual
airline activities may vary significantly from the current plans depending on
numerous factors including changes in the costs of such activities from current
estimates, the timing of regulatory submissions, the status of competitive
services and the status of the economy in general.
All of the above estimates are based on the current expectations of
Cardinal's management team, which may change in the future due to a large number
of potential events, including unanticipated future developments.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Results of Operations
- ---------------------
Cardinal is a development stage, airline company. Cardinal is considered
to be in the development stage because we have devoted substantially all of our
efforts to establishing the business plan, organization and raising capital.
Since inception in February 1997 our efforts have principally been
devoted to organization, development and raising capital. Cardinal has not
received any revenues from flight services, and does not expect any of its
flights to be commercially available until 600,000 units are sold. From
inception through March 31, 1999, we have sustained cumulative losses of
$208,191 of which $85,900 was for consulting fees, $73,552 was for professional
fees, $23,320 for rent, $7,838 for supplies, $8,561 for utilities, $5610 in
depreciation, $9,168 for miscellaneous expenses, and $50 in taxes. These losses
have resulted primarily from expenditures incurred in connection with general
and administrative activities, organization and development, trademark
registration and offering costs.
Between June 10, 1998, and March 23, 1999, Cardinal sold 506,200 common
shares for $0.50 per share to 34 purchasers in a private placement. We received
a total of $253,100 in the private placement.
A quarterly comparative analysis for results of operations provides no
additional information. Since inception we have been a development stage company
and there have been no significant developments which would allow for a
comparative analysis of the interim financial statements.
12
<PAGE>
We expect to incur substantial costs in the future resulting from the
acquisition of aircraft, equipment, agreements with airport service providers
such as baggage handling, and fuel service. Additional expenses will include
airport facilities, maintenance costs, and marketing. There can be no assurance
that Cardinal will ever achieve profitable operations.
To date, Cardinal has not marketed or generated revenues from the
commercialization of any service. Our current planned flights will not begin
until at least one month after 600,000 units of this offering are sold. During
this period following the sale of 600,000 units, we expect to hire additional
personnel. Depending on how rapidly units are sold, we may also be finalizing
arrangements for aircraft which could increase the time in which scheduled
operations would begin.
Cardinal has only a limited operating history upon which an evaluation of
its prospects can be based. The risks, expenses and difficulties encountered by
companies at an early stage of development must be considered when evaluating
Cardinal's prospects. To address these risks, Cardinal must, among other things,
successfully develop and commercialize its services, secure all necessary
proprietary rights, respond to competitive developments and continued government
regulation, and continue to attract, retain and motivate qualified persons.
There can be no assurance that we will be successful in addressing these risks.
See "Risk Factors- Cardinal Has Not Begun Operations And There Is No Guarantee
We Will Ever Operate As An Airline" for additional discussion of how the limited
offering history may affect investment in Cardinal.
Our operating expenses will depend on several factors, including the
level of aircraft maintenance and repair expenses. Development of Cardinal's
planned flights will depend upon economic factors which we cannot predict.
Management may, in some cases, be able to control the timing of developmental
expenses, in part, by controlling growth. As a result of these factors, we
believe that period-to-period comparisons are not necessarily meaningful and
should not be relied upon as an indicator of future performance. Due to all of
the foregoing factors, it is possible that our operating results will be below
the expectations of market analysts, if any, and investors. In such event, the
prevailing market price, if any, of the common stock would likely be materially
adversely affected.
Liquidity and Capital Resources
- -------------------------------
Until such time that Cardinal receives the proceeds of this public
offering or other financing, it will continue to operate on a limited basis. Our
approximate monthly expenditures during this interim development period are
approximately $17,000 per month. Without additional funding, Cardinal can
maintain its present operating level through the end of December, 1999.
Cardinal can delay the majority of the expenditures which are necessary
to carry out its business plan until adequate funds are on hand or appear to be
available. Put another way, Cardinal will delay incurring significantly greater
costs than its present expenditures of $17,000 per month, such as additional
personnel and the purchase or lease of aircraft, until funds are available from
this offering. The bulk of FAA certification expenses will be incurred when
sufficient funds are available.
13
<PAGE>
Cardinal has incurred negative cash flows from operations since its
inception. We have expended and expect to continue to expend in the future,
substantial funds to complete our planned service development efforts. Our
future capital requirements and the adequacy of available funds will depend on
numerous factors including:
o the successful commercialization of planned flights
o obtaining sufficient funding to acquire aircraft and equipment
o fuel price and availability
o hiring qualified personnel
o keeping pace with government regulation
o obtaining adequate insurance
o the development of contractual agreements with airports
o the use of airport service providers
Expenditures relating to aircraft and certification will be made prior to
crew and maintenance salaries being incurred. If Cardinal determines that the
offering is not likely to raise at least $5.35 million, it will defer
flight-related and certification expenses to seek additional financing or revise
its business plan to provide for the use of less expensive aircraft.
At such time as Cardinal sells 600,000 units, the proceeds of the
offering would be used to commence operations by purchasing one MD 80 Aircraft.
$540,000 would be used for aircraft deposit. Over a period of three to nine
months from the date of commencement, $1,037,902 would be used to staff
operations at both Melbourne International Airport and Baltimore Washington
International Airport. Approximately $1,140,459 would be used to finance
flight operations beginning in the fifth month of operations. Fuel and
maintenance expense totaling approximately $846,204 for the six month period
would begin in the fifth month of operations. Beginning in the third month of
operations, Cardinal would expend a total of $702,417 for advertising and
initial promotions. During this period, Cardinal anticipates expending
approximately $659,018 on general and administrative expenses, $50,000 for
computer leases and software and $24,000 for key man insurance. FAA and DOT
certification expenses are expected to be approximately $350,000 during the
period of three to six months following commencement of operations.
In the event our plans change or our assumptions change or prove to be
inaccurate or the proceeds of this offering prove to be insufficient to fund
operations, we could be required to seek additional financing. The terms and
prices of any additional financing may be significantly more favorable than
those of the units sold in this offering. Cardinal does not have any material
committed sources of additional financing, and there can be no assurance that
additional funding, if necessary, will be available on acceptable terms, if at
all. If adequate funds are not available, we may be required to delay, scale
back, or eliminate certain aspects of our operations. If adequate additional
funds are not available, Cardinal's business, financial condition, and results
of operations will be materially and adversely affected.
Cardinal may receive additional funding under the provisions pertaining to
the exercise of the warrants which are part of the units offered herein. See
"Warrants" for the terms of warrant exercise and pricing information.
Currently, we have no plans to sell or issue any additional preferred
stock.
The net proceeds from the sale of 600,000 units in this offering is
estimated to be the minimum amount necessary to begin operations. If fewer than
600,000 units are sold, then we would use the proceeds to pay the offering
expenses and possibly commissions. Any remaining proceeds would be used
14
<PAGE>
to secure additional funding to implement Cardinal's business plan or to amend
the plan and operate with less expensive aircraft or contract services.
If less than 600,000 units are sold, as an alternative until we are able
to receive our own certificate, Cardinal could contract its flight services to
another company which holds a FAA Operators Certificate. If this occurs,
Cardinal may be required to make certain deposits and bonds and would contract
actual flight operations. The usual cost per aircraft operating hour is $3,000
to $5,000. Assuming average operating hours of 240 per month, the estimated
monthly cost of using contracted flight services would range from approximately
$720,000 to $ 1,200,000 per month. Costs vary widely depending on operating
requirements, including the time of day and time of year. Contract flight
service fees typically include flight crew, fuel, insurance and maintenance.
This option could be accomplished with substantially fewer capital resources
than required to begin independent flight operations with our own operating
certificate.
BUSINESS
History
- -------
Cardinal Airlines, Inc. was organized as a Delaware corporation in
February 1997. To date, all activities have been organizational and
developmental in nature. Cardinal was formed to provide non-stop air service
between Melbourne International Airport and certain key high yield destinations.
Initial service is planned between Melbourne International Airport and Baltimore
Washington International Airport, providing four peak departures and arrivals
from each city daily. By carefully selecting its markets, offering high levels
of customer service, controlling growth and efficiently using its resources,
Cardinal believes it can profitably offer airline services from Melbourne,
Florida.
Industry Conditions and Competition
- -----------------------------------
The airline industry has experienced unprecedented growth and profits
over the last few years. Two basic reasons for this growth and profits are fuel
costs and an upturn in the economy. The cost of fuel greatly affects operating
costs. Demand for air service increases in a healthy economy.
Cardinal's business plan primarily focuses on the business passenger who
does not have the luxury of booking flights well in advance to get a low fare
and desires a higher level of service. While business travel, as a rule is not
discretionary, it generally diminishes during unfavorable economic times as
businesses tend to tighten cost controls. We anticipate, based on our experience
and DOT reports, that the weakest travel periods for business will generally be
during the months of January, May, and September. Leisure travel is highly
discretionary and may be subject to seasonal variations. Non-business pleasure
travel generally increases during the summer months and at holiday periods.
The Airline Deregulation Act of 1978 made the airline industry highly
competitive. It substantially reduced government regulation of domestic routes
and fares, and increased the airlines' ability to compete with respect to fares,
destinations and flight frequencies.
Most major airlines today have complex hub systems, with several
different type and sizes of aircraft and partner with commuter airlines to feed
passengers to their hubs and code share ticketing to the final destinations. The
major airlines smaller jet aircraft usually serve secondary cities with commuter
aircraft serving the smaller cities and towns. Commuter aircraft usually carry
nineteen passengers. Flights between the hub and small towns, small cities and
secondary cities are usually operated on higher frequencies to coordinate
service with connecting flights to and from the hub to other destinations and
hubs. This system allows airlines to:
15
<PAGE>
o serve more destinations,
o capture a greater share of the passenger market, and
o produce greater revenues.
Most major hub cities are dominated by a single large carrier, such as Delta
Air Lines in Atlanta.
Hub systems are complex and inherently require flights that are not
profitable to meet scheduling requirements. These flights may be scheduled for
inconvenient times, or use an aircraft which has a greater capacity than
required for the flight. These flights increase operating costs which must be
offset by the flights with high load factors and profits. In an attempt to
increase load factors on these flights, airlines operating hub systems have
contrived restrictive, conditional and complicated fares. Low fare tickets
encourage airline use for flights with low load factors. Additionally, having
multiple classes of service, such as First Class, Business Class, and Coach
creates a complex reservations system that can be very frustrating to
passengers.
Airlines that do not operate a hub system such as Southwest Airlines have
various operating strategies, most operate a direct flight system with usually
one class of minimal service, no frills, and aircraft configured with high
density seating. These airlines usually avoid highly serviced routes and
generally choose routes that fill a niche market.
To operate a profitable low fare airline, high load factors and low
operating costs must be maintained. Marketing substantially lower fares, direct
and consistent service can be very effective in maintaining high load factors.
Most low fare carriers, large and small, are very cost effective by focusing on
managing the airline, and outsourcing or contracting a majority of operations
and services.
Melbourne International Airport is presently serviced by two airlines,
Delta Air Lines, a major air carrier that operates a hub system and Spirit
Airlines, a small low fare air carrier. Delta Air Lines provides several daily
flights to Atlanta their major hub and flights from Atlanta to Cardinal's
planned destinations. Spirit provides two daily non-stop flights to New York's
LaGuardia Airport. Initially, Cardinal does not plan to provide service to the
New York LaGuardia Airport, but does plan to provide non-stop service to one of
New York's key airports. There can be no assurance that Delta, Spirit, or other
airlines will not provide additional service to Melbourne International Airport.
Company Strategy
- ----------------
Cardinal Airline's strategy is to focus on the business traveler who
usually does not have the luxury to book flights well in advance or to comply
with the highly restrictive conditions of low priced tickets. Because of this,
business travelers are usually forced to purchase a high priced full fare coach
ticket which offers a low level of service, or an extremely high priced first
class ticket that offers excellent service. Some airlines on some flights offer
a limited number of Business Class seats that provide more comfortable seating
and a higher level of service than coach. This is a desirable choice for the
business traveler, but often unavailable.
Cardinal believes that by developing a low cost highly efficient airline
it will be able to offer its passengers excellent service at a reasonable price,
while producing substantial profits. We plan to have a simple, straight forward
relationship with our customers offering full fare one price per destination
tickets that will approximate the cost of advanced restricted "coach" fares of
major airlines. Advanced tickets usually indicate 14 days or more prior to the
flight. The Passengers Bill of Rights which is before Congress at this time,
outlines airlines shortcomings in their relationship with passengers. Cardinal
wants
16
<PAGE>
to be recognized as an airline dedicated to safety, that provides a high level
of service and has an excellent relationship with its customers.
We believe that by offering the highest levels of safety and customer
service, as well as non-stop flights to key destinations, load factors would be
maximized. Cardinal will offer only one class of service which will be
equivalent to First Class service offered by other airlines. Cardinal will
configure its aircraft with large first class seats and specialized galleys to
facilitate serving excellent meals with complimentary champagne and wine.
Cardinal intends to support its flights by attracting customers now being
served by other airlines serving the Melbourne and Orlando airports. Melbourne
International Airport's air service area includes seven Florida counties with an
air service market of approximately 800,000 passengers. In a July 1997 study
conducted by SH&E Air Transport Consultancy for the Melbourne International
Airport, three of the top proposals SH&E made were:
o Improve Washington D.C. service to Non-Stop
o Expand service to the New York market
o Aggressively pursue having an airline headquartered in Melbourne
The same SH&E study estimates that 70% of Melbourne passengers are
diverted to Orlando every year. Further, a July 1997 survey of businesses in the
Melbourne air service market, conducted by the Melbourne - Palm Bay Chamber of
Commerce, showed that 76.3% of the businesses surveyed would commit 100% of
their travel resources to the Melbourne International Airport provided timing
and rates were comparable with other airports. Because of these results, we
believe that Cardinal can not only meet but also exceed our anticipated break
even load factor of 42%.
We will place special importance on the selection of new employees.
Cardinal believes that by hiring qualified employees with a structured
employment program that allows for career advancement and job security; and
providing proper training, necessary resources, and a safe pleasant work
environment, that it will be able to develop and maintain a highly productive
workforce. We intend to develop a cafeteria style employee benefits program,
that would add significant valuable benefits to the employees, and meet
individual needs without hindering Cardinal's ability to maintain profit levels.
This may include programs such as excellent employee child care, insurance,
retirement benefits, stock options, and company sponsored clubs and
organizations. Cardinal believes such employee programs will promote loyalty and
productivity.
Cardinal believes that a simplified corporate structure with limited tier
levels will promote excellent communications and interaction throughout the
entire workforce, allowing Cardinal to benefit from its employees' experience.
Cardinal has not established an employee benefits plan at this time. We plan to
implement comprehensive employee benefit programs when airline operations
commence.
Cardinal has selected EQUALS, a mature, fully integrated, year 2000
compliant, automated, turn key airline software system used by several small
airlines and the Colombian Air Force, which provides for complete airline
capabilities and functions. The system will cost between $400,000 and $500,000.
This is a unified system that operates on readily available generic IBM
compatible computers, is designed to provide for growth and expansion, and is
simple to learn and operate. The EQUALS system covers the entire spectrum of
airline operations including customer services, flight operations, ground
operations, maintenance, inventory control, and communications. As an example,
it provides for automated reservations and ticketing, with connectivity to
travel agents and remote operating sites. Travel agents will not be required to
obtain additional software to interface with our system. We believe that our
ability to begin operations using a simple, reliable, unified system will
provide significant cost savings and a
17
<PAGE>
competitive edge over other airlines using more complicated systems which have
evolved over a period of years.
Cardinal will outsource services where it is more cost effective or
productive. These services may include:
o baggage handling,
o ground handling,
o certain aircraft maintenance and,
o specialized personnel training.
Outsourcing these services is common practice in the airline industry and is
usually cost effective. However, we will be dependent on these contractors'
performance.
Geographic Market
- -----------------
Cardinal, based in Melbourne Florida, will initially provide service to
large key markets in the Eastern United States. Service between these prominent
markets and central Florida historically provides some of the highest passenger
and fare yields. We believe that Melbourne International Airport is
strategically located to capitalize on the significant business markets of
Central Florida, with an additional advantage of the close proximity to many
notable tourist attractions, such as:
o Kennedy Space Center,
o Port Canaveral,
o Beaches, and
o major Orlando Theme Parks.
Fares, Route System, and Scheduling
- -----------------------------------
Cardinal will offer a simple full fare, one class open ticket without
restrictive conditions and a single price per destination. Initially, all
flights will be non-stop. Cardinal plans to commence flight operations with
non-stop service between Melbourne International Airport and Baltimore
Washington International Airport, then add service to the New York market.
Cardinal has begun negotiations with Baltimore Washington International Airport
and believes that gate and maintenance areas can be leased on favorable terms.
One of the most common mistakes by new carriers is uncontrolled growth.
Maintaining a steady, controlled growth, Cardinal would add additional service
to other prominent markets throughout the Eastern United States. Flights will be
scheduled to provide significant and convenient service to these markets.
Marketing
- ---------
Cardinal plans to add additional safety equipment to its aircraft which
exceeds the mandated requirements of the FAA, such as fire and smoke detection
in all cargo and baggage compartments, and equipment designed for the flight
crew to deal with smoke in the aircraft's cockpit. Flight crews will be trained
in the proper use of certain emergency medical equipment that will be on all
company aircraft. We believe our planned configuration of the aircraft with
fewer, more comfortable seats, is also inherently safer.
Cardinal plans to maximize the effectiveness of its marketing by
concentrating on passenger potential areas surrounding destinations served by
it. Cardinal will use local cost effective media such as:
18
<PAGE>
o newspaper and magazine advertisements,
o radio advertisements during the morning and afternoon commuter rush hours,and
o billboards on prominent highways in potential market areas.
Additionally, by direct contact and promotions, Cardinal will nurture a
preferred airline relationship with;
o area businesses,
o clubs, and
o governmental agencies.
We believe visibility and recognition are extremely important in
marketing, especially for a new airline. Cardinal believes that by painting its
aircraft a vivid Cardinal red color they will be highly visible parked at the
gate, taxiing, and in flight. Cardinal's bright red aircraft will actually act
as a logo, and be identified even from a distance.
The ease of making reservations and ticketing is a crucial part of
capturing the largest possible market share. Cardinal believes an efficient and
reliable automated reservations system with connectivity to travel agents and
the Internet will increase initial and repeat use of its airline services. All
reservations, counter, and gate positions will be adequately staffed with
competent, friendly, and courteous personnel. Programs will be developed with
travel agents that provides incentives to book customers with Cardinal.
Management believes customers should have as many viable means of booking a
flight as possible such as through a national toll free number, the Internet and
travel agents. Cardinal will attempt to make purchasing a ticket as convenient
and customer friendly as possible as this is an important part of the travel
experience. Complete customer satisfaction will be a company objective. Cardinal
believes that word of mouth can be the most effective advertising.
Aircraft Acquisition
- --------------------
We believe, to be cost effective, Cardinal should only operate one type
of aircraft. Operating one type of aircraft should significantly lower
maintenance and crew training costs. Cardinal has identified sources, general
availability, and average cost to lease or lease/purchase used MD-80 series
aircraft. We believe that two MD-80 series aircraft with approximately 30,000 to
35,000 flight hours, can be located, acquired and configured to our
specifications to commence flight operations. The frequency of scheduled
maintenance on these aircraft should be the same as on a new aircraft. The
amount of maintenance performed on a scheduled maintenance visit may be slightly
higher. Cardinal can perform all routine scheduled maintenance without removing
the aircraft from service except for extensive maintenance visits that are
required approximately every 2500 flight hours which equates to 9 to 10 months
of service. The aircraft will be out of service for approximately 10 days to
complete this maintenance. Cardinal will short-term lease a substitute aircraft
during this time. Such short term leasing is a standard industry practice. Such
aircraft are generally available however, short-term lease rates may be slightly
higher than the standard range from $3,000 to $5,000 per aircraft operating
hour. See "Risk Factor- Our Airline Services May be Affected By the Limited
Number of Available Aircraft" for a discussion of potential problems with
replacing the aircraft when they are out of service.
Maintenance and Repairs
- -----------------------
Cardinal plans to operate MD-80 series aircraft, which are modern
commercial airliners, used extensively in the airline industry, with more than
1100 currently in service.
19
<PAGE>
Cardinal will have maintenance operations managed and staffed by seasoned
airline personnel that will perform routine daily and turn-around maintenance.
Overhauls and heavy maintenance that require extensive maintenance facilities
will be outsourced to reputable, FAA approved companies certified to perform
maintenance on MD-80 series aircraft and engines. Cardinal will maintain a
presence of Quality Assurance personnel on site to insure all work performed
meets the requirements of Cardinal Airline's Maintenance Program. Cardinal has
not made any agreements with maintenance organizations that are certified to
perform maintenance on MD-80 series aircraft and engines.
Cardinal plans to maintain an inventory of spare parts to support its
maintenance operations and will also rely on FAA approved vendors and
manufactures for additional parts requirements. We believe replacement parts are
available in sufficient quantities. There can be no assurance that these
industry conditions will continue.
Fuel
- ----
Aircraft fuel is expected to be Cardinal's largest operating expense. Jet
fuel costs and availability, being subject to world economic and political
conditions, cannot be predicted with any degree of certainty. Cardinal will
attempt to enter into agreements with fuel suppliers to stabilize fuel costs.
An increase in fuel prices or a diminished supply could have a material adverse
effect on its operations.
Insurance
- ---------
Cardinal plans to maintain $500,000,000 in liability insurance. This
amount surpasses the minimum industry requirements and covers public liability,
passenger liability, baggage and cargo liability, property damage, including
coverage for loss and damage to its flight equipment and worker's compensation
insurance. However, there is no assurance that the amount of insurance carried
by Cardinal will be sufficient to protect it from material loss.
Government Regulations
- ----------------------
Under United States Federal Statute, anyone who wants to provide air
transportation service as an air carrier must first obtain two separate
authorizations from the Department of Transportation: 1) the safety
authorization, in the form of an Air Carrier Certificate and Operations
Specifications from the FAA and 2) the economic authorization, from the Office
of the Secretary of Transportation (the Department), in the form of a
certificate for interstate passenger and/or cargo authority issued under the
Federal Statute. A certificate authorizing interstate air transportation may be
issued after a finding by the Department that the applicant is "fit, willing and
able" to perform the proposed service.
o "Air Transportation," as defined by Federal Statute, means the
transportation of passengers or property by aircraft as a common carrier
for compensation, or the transportation of mail by aircraft, in interstate
air transportation.
o "Interstate air transportation," as defined by Federal Statute, means
operations between place in a state, territory, or possession of the
United States and another state, territory, or possession of the United
States. Cardinal plans to only provide air transportation services within
the United States, its territories or possessions.
o Federal Statute defines a "citizen of the United States" as:
an individual who is a citizen of the United States;
a partnership each of whose partners is an individual who is a citizen of
the United States; or
20
<PAGE>
a corporation or association organized under the laws of the United States
or a state, the District of Columbia, or a territory or possession of the
United States. It must have a president and at least two-thirds of the
board of directors and other managing officers who are citizens of the
United States. At least 75 percent of the voting interest must be owned or
controlled by persons who are citizens of the United States.
Cardinal's President and Board of Directors are U.S. citizens and we anticipate
that a majority of the public investors will be U.S. citizens.
Cardinal will be required to provide information to the Department to
assess the financial position and its understanding of the costs of starting its
operations. Prior to being granted an effective certificate, Cardinal must
provide independent, third-party verification, that it has available to it
resources sufficient to cover all of its pre-operating costs and the operating
expenses that are reasonably projected for three months of normal operations. In
calculating available resources, projected revenues cannot be included.
Once Cardinal has been found fit initially, it becomes subject to the
requirements of Federal Statute which require that Cardinal must remain fit in
order to continue to hold its authority to provide air transportation services.
The Department will require Cardinal to provide a progress report twelve (12)
months after it commences operations. This report would include:
o information on Cardinal's then current operations,
o a summary of how its operations have changed during the year,
o a discussion of any changes it anticipates during its second year of
operations,
o its second year current financial statements, and
o information on whether Cardinal had undergone any changes in ownership or
management.
Cardinal will submit application to the proper authorities for the
necessary certification to operate a domestic airline. We believe we will be
able to obtain and maintain the proper certifications. If we are delayed or
unable to meet these requirements we would not be able to operate as an airline
under our own certificate.
According to the DOT informational packet, How to Become a Certified Air
Carrier, dated September, 1998,
"Before being granted an effective Certificate, an applicant must
provide independent, third-party verification that it has available
to it resources sufficient to cover all of its pre-operating costs
plus the operating expenses that are reasonably projected to be
incurred by the applicant during three months of "normal"
operations."
We estimate that the funds necessary to meet this DOT certification requirement
and therefore to begin operations are approximately $5,350,000. This is
equivalent to the net proceeds for the sale of 600,000 units.
Year 2000
- ---------
Defective date programming in computer hardware and software might cause
problems in the year 2000. Date errors may impact computer applications and also
production resources, and the procedures of outside suppliers and independent
contractors. Importantly, it is not always known where such date information is
used.
21
<PAGE>
If all computer systems and imbedded computers on which we relied failed
as a result of the Year 2000, the Company would be forced to cancel flights. In
order to avoid this, Cardinal has entered into a letter of intent for its
ticketing system and has received written assurance that this system is year
2000 compliant. Melbourne International Airport, Baltimore Washington
International Airport and First Union Bank have also stated that they are Year
2000 compliant. The MD-80 series aircraft and the EQUALS Airline Computer
Software system, are year 2000 compliant. We will continue to request written
assurances of year 2000 compliance from all software, hardware and information
technology vendors.
Cardinal plans to conduct regular back-ups of ticket sales throughout
1999 and immediately prior to the year 2000 to preserve previously received
reservations. We will not make significant changes in operation, such as adding
destinations or flights, during the period immediately before and after December
31, 1999. As a contingency we will prepare to adjust flight schedules just as
the FAA has stated it would reduce air traffic capacity before compromising the
safety of the National Airspace System. The FAA has adopted the U.S. Government
Accounting Office's recommended five-phase repair process to address the Year
2000 issue, the final phase is scheduled to be complete on June 30, 1999.
Cardinal has complied with the FAA's Year 2000 5-Phase Repair Approach. The 5
phases are:
1 Awareness
2 Assessment
3 Renovation
4 Validation
5 Implementation
Miscellaneous
- -------------
All air carriers are also subject to certain provisions of the
Communications Act of 1934, as amended, because of their extensive use of radio
and other communication facilities, and are required to obtain an aeronautical
radio license from the Federal Communications Commission. To the extent Cardinal
is subject to FCC requirements, it will take all necessary steps to comply with
those requirements.
Cardinal's operations may become subject to additional federal
requirements in the future under certain circumstances. For example, Cardinal's
labor relations are covered under Title II of the Railway Labor Act of 1926, as
amended, and are subject to the jurisdiction of the National Mediation Board.
During a period of past fuel scarcity, air carrier access to jet fuel was
subject to allocation regulations promulgated by the Department of Energy.
Cardinal is also subject to state and local laws and regulations at locations
where it will operate and the regulations of various local authorities that
operate the airports it will serve.
Properties
- ----------
Cardinal leases approximately 2,200 square feet of office space at its
principal address for general corporate and operational use at a current monthly
rent of approximately $1,250.00 under a lease which expires July of 1999.
Cardinal is presently negotiating leases for counter, office, gate, maintenance
and hangar facilities at Melbourne, and Baltimore Washington, International
Airports. Some facilities may be subleased from other airlines. Cardinal
believes that sufficient and adequate facilities exist at most airports
currently under consideration which can be leased on favorable terms.
22
<PAGE>
Service Marks
- -------------
Cardinal has filed intent to use service mark applications for "Cardair,"
"Dedicated to Safety and Service" and "The Little Airline with the Big Seats."
There is no assurance that the U.S. Patent and Trademark Office will approve
these service marks.
Legal Proceedings
- -----------------
There are no legal proceedings pending in which Cardinal is a party or
of which any of its property is the subject of any legal proceeding.
AVAILABLE INFORMATION
Cardinal has filed with the SEC a registration statement on Form S-1
under the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules thereto, certain portions having been omitted as
permitted by the rules and regulations of the SEC. For further information with
respect to Cardinal, the common stock offered hereby, the registration
statement, including the exhibits and financial statement schedules thereto,
contact the public reference facility maintained by the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, or through the internet at
(http://www.sec.gov\edgar)where these materials may be inspected without charge.
Copies of such material may be obtained from the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, (202) 942-8090 at the
prescribed rates. With respect to each such document filed with the SEC as an
exhibit to the registration statement, reference 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.
MANAGEMENT
The following table contains the name, age and position with Cardinal of
each executive officer and director as of the date of this prospectus. All the
officers will be employed full-time by Cardinal. The respective backgrounds of
the officers and directors are described following the table.
Age Position
Lawrence A. Watson 52 Chairman of the Board, President, CEO
H. Lawrence Mason 46 Chief Financial Officer, Vice-President Finance,
Secretary, Treasurer
Vincent T. Paris 51 Vice-President Logistics Support, Director
Ted A. Walker 55 Vice-President Properties and Facilities, Director
Thomas L. Vandervelde 63 Vice-President Safety & Regulatory Compliance
David A. Linsley 61 Vice-President Flight Operations
John J. Pertschi 52 Vice-President of Maintenance
Jack H. Freeman 68 Vice-President of Quality
Ronald J. Newbold 38 Vice-President Investor Relations
Dennis M. Cunningham 51 Chief Pilot
Karen D. Glover 35 Director of In-Flight Services
John J. Ryff 38 Director of Stores
23
<PAGE>
Lawrence A. Watson has been Chairman of the Board and Chief Executive
Officer of Cardinal since its inception in February 1997, and President since
March of 1997. He is a multi-engine, instrument rated commercial pilot with
extensive experience in the aviation industry. Mr. Watson in 1990 was one of the
Founders of Allied Aviation Inc., a commercial aircraft parts company, where as
Vice President of Corporate Development he organized the management team,
directed two private placements, and researched and developed new business. He
has been a member of Allied's Board of Directors since 1990. Mr. Watson was a
F.A.A. Air Traffic Controller at the Miami Air Route Control Center from 1970
to 1976.
Dr. H. Lawrence Mason has been Secretary Treasurer, Director,
Vice-President of Finance and Chief Financial Officer of Cardinal since March
of 1997. Dr. Mason has held a wide variety of research, engineering,
administrative, and executive level positions in various corporate settings.
He was Vice President of Finance from 1990 to 1996 for Allied Aviation, Inc.
and currently holds a position on the Board of Directors. Dr. Mason was
President and C.E.O. of Florida Design Build Systems, Inc. from 1985 to 1992.
He was President and C.E.O. of F.D.C.S.I. from 1984 to 1989. Dr. Mason
attended the University of Kentucky, the University of South Florida,
University of Louisville Graduate School and School of Medicine/Dentistry.
Vincent T. Paris has been a member of Cardinal's Board of Directors
since March of 1997. Mr. Paris has been involved in our development
is a consultant since March of 1998 and will become the Vice-President of
Logistics Support after the completion of this offering. Mr. Paris began his
aviation career in 1964 with the United States Navy. Mr. Paris held numerous
managerial and executive positions in the throughout his career. Mr. Paris
was employed by Allied Aviation, Inc. from 1992 to 1998 he was the Vice
President of Operations from 1994 to 1998, and was also a member of the Board of
Directors. From 1990 to 1992 he served as Director of Quality Assurance for Pan
American Airways Surplus Parts Subsidiary "Allmat International." Mr. Paris
was involved with several start up established operations in the past. He has a
Bachelor of Science degree in Technology from Florida International University.
Ted A. Walker has been a member of Cardinal's Board of Directors since
March of 1997 and will become the Vice-President of Properties and Facilities
after the completion of this offering. Mr. Walker graduated from South Florida
Junior College with an Associate of Arts degree in Business in 1968. He was a
Staff Sergeant in the United States Army and after leaving the Army became a FAA
Air Traffic Controller from 1970 to 1981. Since 1981, Mr. Walker has been
President and C.E.O. of Add Fire Inc., which he founded in that year. He is also
very active in many trade organizations and Community projects.
Thomas L. Vandervelde is currently a consultant for Cardinal, assisting
Cardinal to obtain the 121 Air Carrier Certificate from the F.A.A. and the
Economic Authority from the Secretary of Transportation (D.O.T.). After Cardinal
obtains its Certifications Mr. Vandervelde will become the Vice President of
Safety & Regulatory Compliance. Mr. Vandervelde was with the Federal Aviation
Administration for 35 years, and held various positions in the Flight Standards
District Offices. Since his retirement in 1991 from the Federal Aviation
Administration, Mr. Vandervelde has held various top level management positions
with Tech.Ops. International, Michael Goldfarb and Associates, and InterFlight
Services. Mr. Vandervelde has assisted in the Part 121 Certification process of
several start-up airlines. He has developed interactive database maintenance
programs for commercial aircraft, and has conducted numerous safety compliance
audits and provided recommendations to several large commercial aviation
operators.
David A. Linsley will become the Vice-President of Flight Operations
after the completion of this offering. Mr. Linsley has over 40 years of flying
experience, including a distinguished career as
24
<PAGE>
military pilot in the United States Marine Corp. from 1958 to 1967 where he
flew more than 120 combat missions over Vietnam. His career as a Commercial
Airline Pilot began in 1967 with United Airlines. He retired as a Senior
Captain in 1997 after 30 years of service. Mr. Linsley has over 18,000 hours
of accident and incident free flying with over 5300 hours as Pilot in
Command. Mr. Linsley Graduated from San Diego State University with a B.A.
in English. Mr. Linsley is the Founder and President of the Pegasus
Fear of Flying Foundation. He is also Editor and publisher of Pegasus
Magazine, a travel and entertainment magazine for airline employees worldwide.
John J. Pertschi will become the Vice-President of Maintenance after the
completion of this offering. Mr. Pertschi has more than 35 years of experience
in the aviation maintenance business. Mr. Pertschi was a jet mechanic in the
United States Air Force from 1963 to 1967. Mr. Pertschi has held several key
managerial positions with a major airline, start up airlines and maintenance
facilities. From 1968 to 1983 Mr. Pertschi worked for Continental Airlines
and was the Line Maintenance Supervisor from 1981 to 1983. Mr. Pertschi
left Continental to take a position as Manager of Technical Services for a new
start up airline; Frontier Horizon, Inc. Mr. Pertschi was also a manager of
aircraft maintenance for Evergreen Air Center, Inc., Director of Maintenance
for Jetborne Aircraft Leasing, Inc. from 1986 to 1989, and Director of
Maintenance for Carnival Airlines from 1989 to 1992. From 1993 to 1999, he
was Assistant Director of Maintenance and Production Control Operations
Manager for Commodore Aviation.
Jack H. Freeman will become the Vice-President of Quality after the
completion of this offering. Mr. Freeman has more than 39 years of experience in
airline maintenance operations. Mr. Freeman began his career in 1948 as an
aircraft mechanic in the United States Navy. His career in commercial airline
operations began in 1957 with Delta Airlines and he was with Delta until in
1994. Mr. Freeman was an aircraft mechanic until 1970, at which time he was
assigned to the inspection department. While in the inspection department he
inspected all fleet aircraft for airworthiness, including identifying any
aircraft engine and systems malfunctions and instituted corrections. Delta's
fleet included Boeing 727, 737, 747, 757,767, Douglas DC-8, DC-9, DC-10 MD-80,
and Lockheed L-1011 aircraft. Mr. Freeman had assignments as Quality Control
Representative for Delta at the Douglas and Lockheed Aircraft Factories, where
he was responsible for aircraft inspection during their construction.
Additionally, he was an inspector for Delta at the Boeing Aircraft Company.
Since his retirement from Delta in 1994, Mr. Freeman has been engaged as a
consultant and inspector for several aviation companies.
Ronald J. Newbold has worked as a consultant for Cardinal since October
1998, and was appointed Vice-President of Investor Relations on December 1st
1998. Mr. Newbold has an extensive background in sales, marketing and business
management and has held numerous management positions. He has developed
programs for streamlining operational procedures. Mr. Newbold has designed
several database and network systems to track aircraft, inventory's, as well
as sales and marketing of products. He has also developed markets and
accounts for new and existing product lines. Mr. Newbold graduated from
Wichita State University with a Bachelor of Business Administration in
Marketing. From September 1992 through March 1995, Mr. Newbold was employed
at Dallas Aerospace engaging in commercial aircraft parts and engine sales.
Following that, Mr. Newbold worked for thirteen months at AmTec as a Sales
Manager. From April 1996 until April 1997, he was engaged in the same position
for Kellstrom, Inc. He then worked for Allied Aviation, Inc. as Marketing
Manger for commercial aircraft parts.
Dennis M. Cunningham will become the Chief Pilot after the completion of
this offering. Mr. Cunningham has over 28 years of experience in airline
operations and flight training, with a total of over 15,000 flight hours and
10,884 hours as Pilot in Command. Mr. Cunningham began his commercial airline
career in 1970 with Air New England until 1980. Mr. Cunningham is experienced
with all aspects of Airline Certification, Simulator Training, Proficiency
Checks, Instructor Pilot. Responsible for training
25
<PAGE>
pilots during Initial Operating Experience and Flight Training. Mr. Cunningham
has extensive experience on both Domestic and International Routes. He also has
endorsements by the FAA as an Instructor Pilot/Check Airman on the DC9/MD80 and
Simulator Instructor on both DC-9 and L-1011. Mr. Cunningham has previously
assisted in establishing a training department and participated in developing
Operational Manuals, Training Syllabuses and Crew Instructions. From 1990 to
1995 Mr. Cunningham served as Captain/Instructor Pilot for Saudi Arabian
Airlines, from 1995 to 1996 was Captain for Caribjet, from 1996 to 1997 Project
Manager/Check Airman for Nations Air, from 1997 to 1998 Captain for Gemini Air
Cargo and is currently flying for TradeWinds Airlines.
Karen D. Glover will become the Director of In-Flight Services after the
completion date of this offering. Ms. Glover began her career as a Flight
Attendant with Ansett Australian Airlines in 1985 and was employed there until
1991. From 1991 to 1993 Eva Airways employed her as an Instructor. She is
qualified as a flight attendant on 7 aircraft types. While with Ansett, she was
a member of the Cabin Safety Committee. Ms Glover has held several positions in
all aspects of In-Flight Services, from assisting in developing an In-Flight
Department, Crew Scheduling, Training, Safety and Standards Compliance. She has
developed, written, and revised Flight Attendant Manuals, Training manuals, in
addition to developing Standards Programs.
John J. Ryff has worked as a consultant for Cardinal and will become
Director of Stores after the completion of this offering. Mr. Ryff served for 13
years in the United States Marine Corps and achieved the rank of Sergeant. The
last position he held was Maintenance Control Chief where his duty was
overseeing the units Material Support and Supply Division. Upon leaving the
Marine Corps, in December 1993, Mr. Ryff was employed by Allied Aviation, a
supplier of commercial aircraft parts. Mr. Ryff was initially employed as the
Inventory Control Manager, then appointed to the company's sales department and
later promoted to Sales Manager until June of 1998.
26
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------ ------ -------
Name Other Securities
and Annual Restricted Underlying LTIP All Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) Awards($) SARs ($) sation($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence A Watson 1997 --- --- ---- ---- ---- ---- ----
President 1998 --- --- ---- ---- ---- ---- ----
1999 --- $ 3,000 ---- ---- ---- ---- ----
H. Lawrence Mason 1997 --- --- ---- ---- ---- ---- ----
Secretary, Treasurer 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Vincent T. Paris 1997 --- --- ---- ---- ---- ---- ----
V.P. Logistics
Support 1998 --- --- ---- ---- ---- ---- ----
1999 --- $41,400 ---- ---- ---- ---- ----
Ted A. Walker 1997 --- --- ---- ---- ---- ---- ----
C.P. Properties 1998 --- --- ---- ---- ---- ---- ----
& Facilities 1999 --- --- ---- ---- ---- ---- ----
Thomas L.
Vandervelde 1997 --- --- ---- ---- ---- ---- ----
V.P. Safety & 1998 --- --- ---- ---- ---- ---- ----
Regulatory
Compliance 1999 --- --- ---- ---- ---- ---- ----
David A. Linsley 1997 --- --- ---- ---- ---- ---- ----
V.P. Flight
Operations 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
John J. Pertschi 1997 --- --- ---- ---- ---- ---- ----
V.P. Maintenance 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Jack H. Freeman 1997 --- --- ---- ---- ---- ---- ----
V.P. Quality 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Ronald J. Newbold 1997 --- --- ---- ---- ---- ---- ----
V.P. Investor
Relations 1998 --- --- ---- ---- ---- ---- ----
1999 --- $17,000 ---- ---- ---- ---- ----
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Name Other Securities
and Annual Restricted Underlying LTIP All Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) Awards ($) SARs ($) sation($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dennis M.
Cunningham 1997 --- --- ---- ---- ---- ---- ----
Chief Pilot 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Karen D. Glover 1997 --- --- ---- ---- ---- ---- ----
Director In-Flight 1998 --- --- ---- ---- ---- ---- ----
Services 1999 --- $ 3,000 ---- ---- ---- ---- ----
John J. Ryff 1997 --- --- ---- ---- ---- ---- ----
Director of Stores 1998 --- --- ---- ---- ---- ---- ----
1999 --- $20,100 ---- ---- ---- ---- ----
</TABLE>
1 1999 figures reflect the first three quarters of Cardinal's fiscal year.
On July 1, 1998, Cardinal entered into a five-year employment agreement
with Mr. Watson, providing for an annual salary of $110,000 per year to be
increased to $130,000 per year "upon Cardinal reaching break-even load factor
and maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Mr. Watson's disability for nine consecutive months or nine
months out of a 12-month period. The agreement may be terminated without cause
on 60 days' notice upon one-half of Mr. Watson's base salary for the remaining
term of the contract. Mr. Watson's employment agreement is renewable for
five-year terms unless either party gives written notice of termination at least
60 days before the then current term.
On July 1, 1998, Cardinal entered into a three-year employment agreement
with Mr. Mason, providing for an annual salary of $100,000 per year to be
increased to $110,000 per year "upon Cardinal reaching break-even load factor
and maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Mr. Mason's disability for nine consecutive months or nine months
out of a 12-month period. The agreement may be terminated without cause on 60
days' notice. Upon such termination, Mr. Mason will receive one-half of his base
salary for the remaining term of the contract. Mr. Mason's employment agreement
is renewable for three-year terms unless either party gives written notice of
termination at least 60 days before the then current term.
On July 1, 1998, Cardinal entered into a three-year employment agreement
with Mr. Paris, providing for an annual salary of $90,000 per year to be
increased to $100,000 per year "upon Cardinal reaching break-even load factor
and maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Mr. Paris's disability for nine consecutive months or nine months
out of a 12-month period. The agreement may be terminated without cause on 60
days' notice. Upon such termination, Mr. Paris will receive one-half of his base
salary for the remaining term of the contract. Mr. Paris's employment agreement
is renewable for three-
28
<PAGE>
year terms unless either party gives written notice of termination at least 60
days before the then current term.
On July 1, 1998, Cardinal entered into a three-year employment agreement
with Mr. Walker, providing for an annual salary of $90,000 per year to be
increased to $100,000 per year "upon Cardinal reaching break-even load factor
and maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Mr. Walker's disability for nine consecutive months or nine
months out of a 12-month period. The agreement may be terminated without cause
on 60 days' notice. Upon such termination, Mr. Walker will receive one- half of
his base salary for the remaining term of the contract. Mr. Walker's employment
agreement is renewable for three-year terms unless either party gives written
notice of termination at least 60 days before the then current term.
On November 5, 1998, Cardinal entered into a one-year employment
agreement with Mr. Vandervelde, providing for an annual salary of $90,000 per
year to be increased to $100,000 per year "upon Cardinal reaching break-even
load factor and maintaining that level for 30 consecutive days." The term of the
employment agreement will commence on the date Cardinal receives it's 121 Air
Carrier certificate from the FAA and Economic authority from the office of the
Secretary of Transportation. The agreement may be terminated for cause upon Mr.
Vandervelde's disability for nine consecutive months or nine months out of a
12-month period. The agreement may be terminated without cause on 60 days'
notice. Upon such termination, Mr. Vandervelde will receive one-half of his base
salary for the remaining term of the contract. Mr. Vandervelde's employment
agreement is renewable annually unless either party gives written notice of
termination at least 60 days before the then current term.
On November 5, 1998, Cardinal entered into a one-year employment
agreement with Mr. Linsley, providing for an annual salary of $90,000 per year
to be increased to $100,000 per year "upon Cardinal reaching break-even load
factor and maintaining that level for 30 consecutive days." The term of the
employment agreement will commence on the earlier of, the date agreed to by
employee and Cardinal or upon completion of this offering. The agreement may be
terminated for cause upon Mr. Linsley's disability for nine consecutive months
or nine months out of a 12-month period. The agreement may be terminated without
cause on 60 days' notice. Upon such termination, Mr. Linsley will receive
one-half of his base salary for the remaining term of the contract. Mr.
Linsley's employment agreement is renewable annually unless either party gives
written notice of termination at least 60 days before the then current term.
On December 10, 1998, Cardinal entered into a one-year employment
agreement with Mr. Pertschi, providing for an annual salary of $90,000 per year
to be increased to $100,000 per year "upon Cardinal reaching break-even load
factor and maintaining that level for 30 consecutive days." The term of the
employment agreement will commence on the earlier of, the date agreed to by
employee and Cardinal or upon completion of this offering. The agreement may be
terminated for cause upon Mr. Pertschi's disability for nine consecutive months
or nine months out of a 12-month period. The agreement may be terminated without
cause on 60 days' notice. Upon such termination, Mr. Pertschi will receive
one-half of his base salary for the remaining term of the contract. Mr.
Pertschi's employment agreement is renewable annually unless either party gives
written notice of termination at least 60 days before the then current term.
On January 11, 1999, Cardinal entered into a one-year employment agreement
with Mr. Freeman, providing for an annual salary of $90,000 per year to be
increased to $100,000 per year "upon Cardinal reaching break-even load factor
and maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or
29
<PAGE>
upon completion of this offering. The agreement may be terminated for cause
upon Mr. Freeman's disability for nine consecutive months or nine months out of
a 12-month period. The agreement may be terminated without cause on 60 days'
notice. Upon such termination, Mr. Freeman will receive one-half of his base
salary for the remaining term of the contract. Mr. Freeman's employment
agreement is renewable annually unless either party gives written notice of
termination at least 60 days before the then current term.
On October 2, 1998, Cardinal entered into a one-year employment agreement
with Mr. Newbold, providing for an annual salary of $90,000 per year to be
increased to $100,000 per year "upon Cardinal reaching break-even load factor
and maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Mr. Newbold's disability for nine consecutive months or nine
months out of a 12-month period. The agreement may be terminated without cause
on 60 days' notice. Upon such termination, Mr. Newbold will receive one-half of
his base salary for the remaining term of the contract. Mr. Newbold's employment
agreement is renewable annually unless either party gives written notice of
termination at least 60 days before the then current term.
On January 15, 1999, Cardinal entered into a one-year employment agreement
with Mr. Cunningham, providing for an annual salary of $85,000 per year to be
increased to $95,000 per year "upon Cardinal reaching break-even load factor and
maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Mr. Cunningham's disability for nine consecutive months or nine
months out of a 12-month period. The agreement may be terminated without cause
on 60 days' notice. Upon such termination, Mr. Cunningham will receive one-half
of his base salary for the remaining term of the contract. Mr. Cunningham's
employment agreement is renewable annually unless either party gives written
notice of termination at least 60 days before the then current term.
On December 10, 1998, Cardinal entered into a one-year employment
agreement with Ms. Glover, providing for an annual salary of $70,000 per year to
be increased to $80,000 per year "upon Cardinal reaching break-even load factor
and maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Ms. Glover's disability for nine consecutive months or nine
months out of a 12-month period. The agreement may be terminated without cause
on 60 days' notice. Upon such termination, Ms. Glover will receive one-half of
her base salary for the remaining term of the contract. Ms. Glover's employment
agreement is renewable annually unless either party gives written notice of
termination at least 60 days before the then current term.
On October 2, 1998, Cardinal entered into a one-year employment agreement
with Mr. Ryff, providing for an annual salary of $70,000 per year to be
increased to $80,000 per year "upon Cardinal reaching break-even load factor and
maintaining that level for 30 consecutive days." The term of the employment
agreement will commence on the earlier of, the date agreed to by employee and
Cardinal or upon completion of this offering. The agreement may be terminated
for cause upon Mr. Ryff's disability for nine consecutive months or nine months
out of a 12-month period. The agreement may be terminated without cause on 60
days' notice. Upon such termination, Mr. Ryff will receive one-half of his base
salary for the remaining term of the contract. Mr. Ryff's employment agreement
is renewable annually unless either party gives written notice of termination at
least 60 days before the then current term.
30
<PAGE>
CERTAIN TRANSACTIONS
The following is a summary of certain transactions among Cardinal and
related persons.
On March 1, 1997, Cardinal issued a total of 890,000 shares to its
directors for $.01 per share Two hundred thirty thousand shares were purchased
by Mr. Watson; 220,000 shares were purchased by Mr. Mason; 220,000 shares were
purchased by Mr. Paris; and 220,000 shares were purchased by TAWCOT, a trust
controlled by Mr. Walker.
On March 1, 1997, Cardinal issued a total of 50,000 shares to William
Rackley for $.01 per share.
On July 1, 1997, Cardinal issued a total of 240,000 shares to its
directors for $.50 per share Sixty thousand shares each were purchased by Mr.
Watson, Mr. Mason, Mr. Paris and the TAWCOT trust, a trust controlled by Mr.
Walker. The purchase price was payable in cash or by the execution of a
promissory note bearing interest at 8% payable in full on or before June 30,
2003. In connection with these purchases, Mr. Watson executed a promissory note
in the original pre-paid amount of $17,123; Mr. Walker executed a promissory
note for $27,971; Mr. Paris for $26,183; and Mr. Mason executed a promissory
note for $25,394.
On October 16, 1998, Cardinal sold each to Mr. Watson, Mr. Mason, Mr.
Walker and Mr. Paris 25,000 Series A Preferred Shares for a purchase price of
$.01 per share.
On January 11, 1999, Cardinal issued a total of 100,000 warrants for no
consideration to the selling shareholders on the basis of one warrant for each
share offered. The purpose of the issuance was to allow selling shareholders to
participate in the public offering. See "Selling Shareholders" for stock
ownership information.
Cardinal entered into a consulting agreement with Maviation, LLC, which
is owned by a key employee, Thomas Vandervelde. Pursuant to the terms of the
contract, Maviation will provide consulting services in obtaining Cardinal's
Part 121 Certification at a rate of $800.00 per day.
PRINCIPAL AND SELLING SHAREHOLDERS
The following tables set forth certain information regarding the
beneficial ownership of Cardinal's common stock as of March 31, 1999, and as
adjusted to give effect to the sale of the units offered hereby, by:
the selling shareholders,
o each person (or group or affiliated persons) known to Cardinal to be the
beneficial owners of more that 5% of its common stock,
o each director of Cardinal,
o each of Cardinal's executive officers, and
o all of the directors and officers as a group.
31
<PAGE>
<TABLE>
<CAPTION>
Selling Shareholders
Number of Common Shares Number of Common Shares
Beneficially Owned Prior Beneficially Owned After
to the Offering (1) the Offering (2)
Shareholder Name
and Address Number Percent Offered Number Percent
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Beauchesne, Alfred M. & Maryann 20,000 0.98% 2,000 18,000 0.46%
297 HWY A1A #315
Satellite Beach, FL 32937
Berkley, Thomas 30,000 1.48% 3,000 27,000 0.69%
8505 Sheridan Road
Melbourne, FL 32904
Couch, Eugene J. Jr. 5,000 0.25% 500 4,500 0.11%
3561 Sparrow Lane
Melbourne, FL 32935
Greenwood, Bruce D. & Mayra S. 30,000 1.48% 1,600 28,400 0.72%
1321 Mallard Court
Ft. Pierce, FL 34982
INDEGO(trust managed by Litton Walker) 36,000 1.77% 2,000 34,000 0.86%
P.O. Box 352
Avon Park, FL 33825
Kee, Terry L. 20,200 0.99% 1,540 18,660 0.47%
PSC 78 Box 2872 APO AP 96326-2872
APO AP, 96326-2872
Mason, L. Dianne 20,000 0.98% 2,000 18,000 0.46%
5415 Collins Ave., #602
Miami Beach, FL 33140
Mason, H. Lawrence 280,000 13.78% 16,600 263,400 6.70%
432 St. Johns Dr.
Satellite Beach, FL 32937
Newbold, Darin K. 10,000 0.49% 1,000 9,000 0.23%
4141 Horizon N. Parkway Apt. 1333
Dallas, TX 75287
Newbold, Ronald J. 50,000 2.46% 5,000 45,000 1.14%
600 Dinner St. N.E.
Palm Bay, FL 32907
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Selling Shareholders, continued
Number of Common Shares Number of Common Shares
Beneficially Owned Prior Beneficially Owned After
to the Offering (1) the Offering (2)
Shareholder Name
and Address Number Percent Offered Number Percent
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Paris, Vincent T. 280,000 13.78% 14,080 265,920 6.76%
855 Hawser St. N.E.
Palm Bay, FL 32907
Rackley, William R. Jr. 50,000 2.46% 5,000 45,000 1.14%
1000 Eastwood Rd. Apt. J7
Hilliard, FL 32046
Riles, Dennis 20,000 0.98% 2,000 18,000 0.46%
1823 Van Pelt Road
Sebring, FL 33870
Ryff, John J. Jr. 50,000 2.46% 5,000 45,000 1.14%
365 Needle Blvd.
Merritt Island, FL 32953
Serrao, Michael A. 26,000 1.28% 2,600 23,400 0.60%
218 Nemo Circle N.E.
Palm Bay, FL 32907
</TABLE>
33
<PAGE>
Selling Shareholders, continued
<TABLE>
<CAPTION>
Number of Common Shares Number of Common Shares
Beneficially Owned Prior Beneficially Owned After
to the Offering (1) the Offering (2)
Shareholder Name
and Address Number Percent Offered Number Percent
================================================================================================================
<S> <C> <C> <C> <C> <C>
Shores, Derrick V. & Shores, Faith L. 10,000 0.49% 1,000 9,000 0.23%
1458 Manzanita St. N.W.
Palm Bay, FL 32907
Simoncelli, Raymond A. 20,000 0.98% 2,000 18,000 0.46%
25461 Nottingham Ct
Laguna Hill, CA 92653
TAWCOT(trust managed by Ted A.
Walker)(3) 280,000 13.78% 15,000 265,000 6.74%
8528 N.W. 66th St.
Miami, FL 33166
Vandervelde, Tom 50,000 2.46% 2,500 47,500 1.21%
128 Albacore Lane
Foster City, CA 94404
Waters, Christine A. 17,000 0.84% 1,500 15,500 0.39%
P.O. Box 9022
Reston, VA 20195
Watson, Lawrence A. 290,000 14.28% 14,080 275,920 7.02%
1564 Raymor St. N.W.
Palm Bay, FL 32907
<FN>
(1) The information presented in this table with respect to beneficial
ownership reflects "beneficial ownership" as defined in Rule 13d-3 under
the Exchange Act. All information with respect to the beneficial ownership
of any shareholder and, except as otherwise indicated, each shareholder
has sole voting and investment power with respect shares listed as
beneficially owned by such shareholder. Pursuant to the rules of the
Commission, in calculating percentage ownership, each person deemed to
beneficially own shares subject to options or warrants exercisable within
60 days of the date of this prospectus.
(2) Assumes the sale of all of the units offered herein.
(3) Controlled by Ted A. Walker.
</FN>
</TABLE>
34
<PAGE>
The following tables set forth certain information regarding the beneficial
ownership of Cardinal's common stock as of March 31, 1999 for each person (or
group or affiliated persons) known to Cardinal to be the
o beneficial owners of more that 5% of its common stock,
o each director of Cardinal,
o each of Cardinal's executive officers, and
o all of the directors and officers as a group.
<TABLE>
<CAPTION>
Common Stock Owned by Principal Shareholders, Officers and Directors
of Cardinal Airlines
Common Shares Common Shares
Beneficially Owned Prior Beneficially Owned After
to the Offering (1) the Offering (2)(3)
Shareholder Name
and Address Number Percent Percent
=================================================================================================================================
<S> <C> <C> <C>
Watson, Lawrence A. 290,000 14.28% 7.02%
1564 Raymor St. N.W.
Palm Bay, FL 32907
Mason, H. Lawrence 280,000 13.78% 6.70%
432 St.Johns Dr.
Satellite Beach, FL 32937
Paris, Vincent T. 280,000 13.78% 6.76%
855 Hawser St. N.E.
Palm Bay, FL 32907
TAWCOT(trust managed by
Ted A. Walker)(4) 280,000 13.78% 6.74%
8528 N.W. 66th St.
Miami, FL 33166
Vandervelde, Tom 50,000 2.46% 1.21%
128 Albacore Lane
Foster City, CA 94404
Linsley, David A. 40,000 1.97% 1.02%
6483 Fox Run Circle
Jupiter, FL 33458-1875
Pertschi, John J. 40,000 1.97% 1.02%
5280 S.W. 4th Street
Plantation, FL 33317
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Common Stock Owned by Principal Shareholders, Officers and Directors
of Cardinal Airlines, continued
Common Shares Common Shares
Beneficially Owned Prior Beneficially Owned After
to the Offering (1) the Offering (2)(3)
Shareholder Name
and Address Number Percent Percent
===========================================================================================================================
<S> <C> <C> <C>
Freeman, Jack 40,000 1.97% 1.02%
1365 Lake Dow Road
McDonough, GA 30252
Newbold, Ronald J. 50,000 2.46% 1.14%
600 Dinner St. N.E.
Palm Bay, FL 32907
Cunningham, Dennis 30,000 1.48% 0.76%
Palm Bay, FL 32907
Glover, Karen D. 30,000 1.48% 0.76%
2455 Summer Brook St
Melbourne, FL 32940
Ryff, John J. Jr. 50,000 2.46% 1.14%
365 Needle Blvd.
Merritt Island, FL 32953
--------- ------- ------
TOTALS 1,460,000 85.26% 35.30%
<FN>
(1) The information presented in this table with respect to beneficial ownership
reflects "beneficial ownership" as defined in Rule 13d-3 under the Exchange Act.
All information with respect to the beneficial ownership of any shareholder and,
except as otherwise indicated, each shareholder has sole voting and investment
power with respect shares listed as beneficially owned by such shareholder.
Pursuant to the rules of the Commission, in calculating percentage ownership,
each persons deemed to beneficially own shares subject to options or warrants
exercisable within 60 days of the date of this prospectus.
(2) Assumes the sale of all of the units offered herein.
(3) Mr. Watson, Mr. Mason, Mr. Paris, TAWCOT, Mr. Vandervelde, Mr. Newbold and
Mr. Ryff are also selling shareholders.
(4) Controlled by Ted A. Walker.
</FN>
</TABLE>
36
<PAGE>
DESCRIPTION OF SECURITIES
Cardinal's Articles of Incorporation, as amended, authorize it to issue
50,000,000 shares of common stock, $0.01 par value per share and 1,000,000
shares of preferred stock, par value $.01. As of the date of this prospectus,
2,031,200 shares of the common stock were outstanding and 100,000 Series A
Preferred Shares were outstanding. The description in this prospectus of the
capital stock of Cardinal is qualified by and subject to the Delaware General
Corporation Law and Cardinal's Articles of Incorporation and By-laws, copies of
which Articles and By-laws have been filed as exhibits to the registration
statement of which this prospectus is a part and to which reference is made for
the provisions thereof which are summarized below.
Units
- -----
Each unit offered hereby consists of one (1) share of common stock and
one warrant to purchase one share of common stock. Each unit will be offered for
a price of $10.00. Warrants may be exercised at a price of $11.00 until five
years from the effective date of this offering. The warrants hereby are
immediately transferable separately from the common stock and issued with the
common stock as part of the units. The warrants are subject to the terms of a
warrant resolution by Cardinal's Board of Directors which defines the terms
under which the warrants may be exercised, called and transferred.
Common Stock
- ------------
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders and have no cumulative voting
rights. Holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared from time to time by the Board of Directors out of
funds legally available therefor. In the event of liquidation, dissolution, or
winding up of Cardinal, the holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities. The common stock
has no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable, and the
shares of common stock offered hereby will also be fully paid and nonassessable.
Warrants
- --------
The holder of each warrant is entitled, upon payment of the exercise
price of $11.00 to purchase one (1) share of common stock. Unless previously
redeemed, the warrants are exercisable at any time until five years from the
effective date of this offering, provided that at such time a current prospectus
relating to the underlying common stock is in effect and the underlying common
stock is qualified for sale or exempt from qualification under applicable state
securities laws. The warrants included in the units offered hereby are
immediately transferable separately from the common stock and issued with such
warrants as part of the units. The warrants are subject to redemption, as
described below.
Redemption. Commencing on the date of this prospectus, the warrants are
subject to redemption by Cardinal, on not more than sixty (60) nor less than
thirty (30) days' written notice, at a price of $.05 per warrant, if the average
closing bid price of the common stock for any thirty (30) consecutive business
days ending within 15 days of the date on which the notice of redemption is
given exceeds $15.00 per share. In the event Cardinal elects to redeem the
warrants, any remaining restrictions on transfer or exercise will expire.
Holders of warrants will automatically forfeit their rights to purchase the
shares of
37
<PAGE>
common stock issuable upon exercise of such warrants unless the warrants are
exercised before the close of business on the date immediately prior to the
date set for redemption. The notice of redemption shall be made by first class
mail, postage prepaid, not less than 15 days prior to the date of redemption,
and shall specify the redemption price, the date fixed for redemption, the
place where the warrant certificates shall be delivered and the redemption
price to be paid, and that the right to exercise the warrants shall terminate
at 5:00 PM EST on the business day immediately preceding the date fixed for
redemption. Cardinal may without notice to warrant holders extend the time in
which the warrants may be exercised or reduce the exercise price.
The warrants may be exercised upon surrender of the certificate(s)
therefor on or prior to the earlier of their expiration of the redemption date
at the offices of the warrant agent with the form of subscription agreement on
the reverse side of the certificate(s) filled out and executed as indicated,
accompanied by payment of the full exercise price for the number of warrants
being exercised.
The warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price in certain events, such as stock
dividends, stock splits, mergers, certain issuance of common stock below fair
market value, sale of substantially all of the assets, and for other
extraordinary events in order to enable the holders of the warrants to obtain
the same or equivalent rights which they would have obtained if the warrants had
been exercised prior to the event.
Cardinal is not required to issue fractional shares of common stock, and
in lieu thereof will make a cash payment based upon the current market value of
such fractional shares. The holder of a warrant will not possess any rights as a
stockholder of Cardinal unless and until the person exercises the warrant.
Preferred Shares
- ----------------
Cardinal has issued 100,000 Series A Preferred Shares of the 1,000,000
preferred shares authorized. Cardinal's Board of Directors will determine the
rights and preferences of preferred shares issued in the future, if any. Holders
of preferred shares have no right to receive dividends, but shall be entitled to
a preference in the amount of $.01 per share in the event of dissolution.
Holders of preferred shares are entitled to vote with the holders of common
shares on any matter upon which common share holders are entitled to vote,
including without limitation the election of directors, at a rate of 100 votes
for every share held. As a result, the holders of the 100,000 preferred shares,
Mr. Watson, Dr. Mason, Mr. Paris and Mr. Walker possess 10,000,000 votes and
will control the affairs of Cardinal. Preferred shares are non-transferable.
Undesignated Preferred Stock
- ----------------------------
The authorized but unissued preferred stock (900,000 shares) may be
issued in series, and shares of each series will have such rights and
preferences as are fixed by the Board of Directors in the resolutions
authorizing the issuance of that particular series. In designating any series of
preferred stock, the Board of Directors may, without further action by the
holders of common stock:
o fix the number of shares constituting that series, and
o fix the dividend rights, dividend rates, conversion rights, voting rights
(which may be greater or lesser than the voting rights of the common
stock), and
o fix the rights and terms of redemption (including any sinking fund
provisions), and the liquidation preferences of the series of Undesignated
Preferred Stock.
38
<PAGE>
The holders of any series of preferred stock, when and if issued, are expected
to have priority claims to dividends and to any distribution upon liquidation of
Cardinal, and they may have other preferences over the holders of the common
stock.
The Board of Directors may issue series of preferred stock without action
by the shareholders of Cardinal. Accordingly, the issuance of preferred stock
may adversely affect the rights of the holders of the common stock. In addition,
the issuance of preferred stock may be used as an anti-takeover device without
further action on the part of the shareholders. Issuance of preferred stock may
dilute the voting power of holders of common stock One example of this dilution
would be the issuance of preferred stock with super-voting rights. The issuance
of preferred stock may render more difficult the removal of current management,
even if such removal may be in the shareholders' best interest. Cardinal has no
current plans to issue any additional preferred stock.
Transfer Agent - Warrant Agent
- ------------------------------
The transfer agent, registrar for the common stock and warrant agent is
First Union National Bank.
Limitation of Liability and Indemnification of Directors
- --------------------------------------------------------
The right of the shareholders to sue any director for misconduct in
conducting the affairs of Cardinal is limited by its Articles of Incorporation
and Delaware statutory law to cases for damages resulting from breaches of
fiduciary duties involving acts or omissions involving intentional misconduct,
fraud, knowing violations of the law or the unlawful payment of dividends.
Ordinary negligence is not a ground for such a suit. The statute does not limit
the liability of directors or officers for monetary damages under the Federal
Securities laws.
Cardinal also has the obligation, pursuant to its By-laws, to indemnify
any director or officer of Cardinal for all expenses incurred by them in
connection with any legal action brought or threatened against such person for
or on account of any action or omission alleged to have been committed while
acting in the course and scope of the person's duties, if the person acted in
good faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of Cardinal's, and with respect to criminal
actions, had no reasonable cause to believe the person's conduct was unlawful,
provided that such indemnification is made pursuant to then existing provisions
of Delaware General Corporation Law at the time of any such indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers or persons
controlling Cardinal pursuant to the foregoing provisions, Cardinal has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is
therefore unenforceable.
SECURITIES ELIGIBLE FOR FUTURE SALE
At the completion of this offering, there will be 3,931,200 shares of
common stock outstanding if all units are sold. There will be 2,000,000 shares
of common stock issuable upon the exercise of outstanding warrants. There is no
current market for Cardinal's securities, and no market may exist at the
conclusion of this offering. In the event a market for Cardinal's stock
develops, Cardinal cannot predict the effect, if any, that market sales of
restricted shares of common stock or the availability of such shares for sale
will have on the market prices prevailing from time to time. Nevertheless, the
possibility that substantial amounts of common stock may be sold in the public
market would likely adversely affect any prevailing
39
<PAGE>
market price for the common stock and could impair Cardinal's ability to raise
capital through the sale of its equity securities.
Sales of Restricted Securities
- ------------------------------
Assuming all units offered herein are sold, 1,931,200 shares of common
stock outstanding prior to the offering, were or will be issued and sold by
Cardinal in private transactions not involving a public offering in reliance
upon exemptions under the Securities Act. These securities are treated as
restricted securities and may not be resold except in compliance with the
registration requirements of the Securities Act or pursuant to an exemption
therefrom. No outstanding shares are subject to registration rights.
PLAN OF DISTRIBUTION
Of the 2,000,000 units of common stock offered hereby, Cardinal is
selling 1,900,000 units and the selling shareholders are selling 100,000 units.
Each unit offered consists of one share of common stock and one warrant to
purchase one share of common stock for a price of $11.00 a share until five
years from the effective date of this offering. Cardinal will not receive any of
the proceeds from the sale of units by the selling shareholders. There is no
minimum number of units to be sold in the offering, and all funds received will
go immediately to Cardinal. The offering will be terminated upon the earliest
of: the sale of all units, twelve months after the date of this prospectus,
unless extended, or the date on which Cardinal decides to close the offering. A
minimum purchase of 100 units ($1,000) is required. Cardinal reserves the right
to reject any Unit Purchase Agreement in full or in part. Units being offered by
selling shareholders will only be sold following the sale of all 1,900,000 units
offered by Cardinal.
Under Rule 3a4-1 of the Exchange Act, none of the selling shareholders or
employees of Cardinal will be a "broker" as defined in the Exchange Act, solely
by reason of participation in this offering, because:
(1) none is subject to a statutory disqualification, as that term is defined in
Section 3(a)(39) of the Act, at the time of his participation; and
(2) none will receive, directly or indirectly, any commissions or other
remuneration based either directly or indirectly on transactions in securities,
(3) none is an associated person (partner, officer, director, or employee) of a
broker dealer, and
(4) each meets all of the following conditions: (a) primarily performs, or
is intended primarily to perform at the end of the offering, substantial duties
for the issuer otherwise than in connection with transactions in securities; (b)
none was not a broker or dealer, or an associated person of a broker dealer,
within the preceding 12 months; and (c) none will not participate in selling an
offering of securities for any issuer more than once every 12 months.
Cardinal plans to offer and sell the units directly to investors and has
not retained any underwriters, brokers, dealers, or placement agents in
connection with the offering. However, Cardinal reserves the right to use
brokers, dealers, or placement agents and could pay commissions equal to as much
as 10 percent of the gross proceeds. Cardinal will effect offers and sales of
units through printed copies of this prospectus delivered by mail and
electronically, by contacting prospective investors by publicizing the offering
through a posting on Cardinal's World Wide Web site www.flycardinal.com, through
newspaper advertisements, and by contacting additional potential investors by
direct e-mail and regular mail solicitation. Any voice or other communications
will be conducted in certain states through Cardinal's executive officers, and
in other states, where required, through a designated sales agent, licensed in
those states.
40
<PAGE>
Residents of Virginia purchasing units must have a net worth of at least
$225,000 or a net worth of at least $60,000 and an annual income of at least
$60,000. Net worth in all cases is calculated exclusive of home, furnishings and
automobiles. Virginia residents may not invest more than 10% of their readily
marketable assets in the offering.
Residents of California purchasing units must meet one of the following
suitability requirements: an investor must (1) be an "accredited investor"
within the meaning of Regulation D under the Securities Act of 1933; or (2) a
person who (a) has an income of $65,000 and a net worth of $250,000 or (b) has a
net worth of $500,000 (in each case excluding home, home furnishings, and
personal automobiles; or (3) a bank, savings and loan association, trust company
registered under the Investment Company Act of 1940, pension or profit-sharing
trust, corporation, or other entity which together with the corporation's or
other entity's affiliates, have net worth on a consolidated basis according to
the most recent regularly prepared financial statement (which shall have been
reviewed but not necessarily audited, by outside accountants of not less than
$14,000,000 and subsidiaries of the foregoing; or (4) a person (other than a
person formed for the sole purpose of purchasing the units offered hereby) who
is purchasing at least $1,000,000 in aggregate amount of the units.
LEGAL MATTERS
Brashear & Associates, P.L. of Gainesville, Florida will pass upon
certain legal matters in connection with validity of the units offered hereby
for Cardinal.
EXPERTS
The financial statements of Cardinal for the period from February 10,
1997 (inception) to June 30, 1998, appearing in this prospectus and registration
statement have been audited by Rosenfield & Company, P.A., independent auditors,
and unaudited interim financial statements for the period from February 10, 1997
(inception) to March 31, 1999 as set forth in their reports thereon appearing
elsewhere herein and in the registration statement, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
41
<PAGE>
UNIT PURCHASE AGREEMENT
[To purchase any of the units, you must be a resident of a state where the sale
of units is permitted under the state's securities laws.]
To: Cardinal Airlines, Inc.
1380 Sarno Road, Suite B
Melbourne, FL 32935 USA
Phone: (407) 757-7388
Fax: (407) 757-7390
E-mail: [email protected]
I have received and had an opportunity to read the prospectus by which the units
are offered.
Enclosed is payment for_-_units (minimum 100),at $10.00 per unit, totaling $___.
Make check payable to Cardinal Airlines, Inc.
Signature(s)______________________________________ Date___________________
Register the units in the following name(s) and amount(s):
Name(s)_________________________________________ Number of units _________
As (check one): Individual _______ Joint Tenants _____ Trust ____ IRA ____
Tenants in Common ____ Corporation _______ Keogh ___ Other_____
For the person(s) who will be registered owner(s):
Mailing Address:____________________________________________________________
City, State & Zip Code: ____________________________________________________
Business Phone: (_____)___________________ Home Phone: (_____)____________
Social Security or Taxpayer ID Number: _____________________________________
(Please attach any special mailing instructions other than shown above)
NO UNIT PURCHASE AGREEMENT IS EFFECTIVE UNTIL ACCEPTANCE.
(You will be mailed a signed copy of this Agreement to retain for your records.)
Subscription accepted by Cardinal Airlines, Inc.
- ------------------------------- --------------
Lawrence A. Watson Date
President
42
<PAGE>
VIRGINIA SUBSCRIBERS
Virginia subscribers must meet the following suitability requirement:
I certify that I am (initial blank)________ a person who (a) has an annual
income of $60,000 and a net worth of at least $60,000 or (b) has a net worth of
at least $225,000 (in each case excluding home, home furnishings, and personal
automobiles) and that I am not investing more than 10% of my readily marketable
assets in this offering.
CALIFORNIA SUBSCRIBERS
California subscribers must meet the following suitability requirement:
I certify that I am (intial blank)_________ (1) be an "accredited investor"
within the meaning of Regulation D under the Securities Act of 1933; or (2) a
person who (a) has an income of $65,000 and a net worth of $250,000 or (b) has a
net worth of $500,000 (in each case excluding home, home furnishings, and
personal automobiles; or (3) a bank, savings and loan association, trust company
registered under the Investment Company Act of 1940, pension or profit-sharing
trust, corporation, or other entity which together with the corporation's or
other entity's affiliates, have net worth on a consolidated basis according to
the most recent regularly prepared financial statement (which shall have been
reviewed but not necessarily audited, by outside accountants of not less than
$14,000,000 and subsidiaries of the foregoing; or (4) a person (other than a
person formed for the sole purpose of purchasing the units offered hereby) who
is purchasing at least $1,000,000 in aggregate amount of the units.
43
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Cardinal Airlines, Inc.
Melbourne, Florida
We have audited the accompanying balance sheets of Cardinal Airlines, Inc. (a
Delaware corporation in the development stage) as of June 30, 1998, and June 30,
1997, the related statements of operations and cash flows for the nine months
ended March 31, 1998, from February 10, 1997 (Inception) to March 31, 1998, for
the fiscal year ended June 30, 1998, from February 10, 1997 (Inception) to June
30, 1998 as well as February 10, 1997 (Inception) to June 30, 1997 and the
statements of stockholders' equity from February 10, 1997 (Inception) to June
30, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our 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 Cardinal Airlines, Inc. as of
June 30, 1998 and June 30, 1997, and the results of its operations and its cash
flows for the nine months ended March 31, 1998, from February 10, 1997
(Inception) to June 30, 1998 as well as February 10, 1997 (Inception) to June
30, 1997, in conformity with generally accepted accounting principles.
Rosenfield & Company, P.A.
February 15, 1999
Orlando, Florida
<PAGE>
CARDINAL AIRLINES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
BALANCE SHEETS..............................................................1
STATEMENTS OF OPERATIONS....................................................2
STATEMENT OF STOCKHOLDERS' EQUITY...........................................3
STATEMENTS OF CASH FLOWS..................................................4-5
NOTES TO FINANCIAL STATEMENTS............................................6-11
<PAGE>
CARDINAL AIRLINES, INC.
(A Development State Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1999 JUNE 30,1998 JUNE 30,1997
---------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 43,377 $ 14,169 $ --
Interest Receivable 5,808 -- --
--------------- ------------ ------------
TOTAL CURRENT ASSETS 49,185 14,169 --
PROPERTY AND EQUIPMENT, net 6,053 8,091 --
DEPOSITS 4,200 1,740 1,740
--------------- ------------ ------------
TOTAL ASSETS $ 59,438 $ 24,000 $ 1,740
=============== ============ ============
COMMITMENTS
STOCKHOLDERS' EQUITY, including deficit
accumulated during the development stage of
$208,191 $ 59,438 $ 24,000 $ 1,740
=============== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 1 -
<PAGE>
CARDINAL AIRLINES, INC.
(A Development State Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
February 10, 1997 --------------------------------------- February 10, 1997 Fiscal Year February 10, 1997
(Inception) to (Inception) to Ended (Inception) to
March 31, 1999 March 31, 1999 March 31, 1998 June 30, 1998 June 30, 1998 June 30, 1997
------------------- ----------------- -------------------- --------------- --------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ -- $ -- $ -- $ -- $ -- $ --
EXPENSES
Consulting Fees 85,900 85,900 -- -- -- --
Professional Fees 73,552 71,611 504 1,941 756 1,185
Rent 23,320 9,805 7,150 13,515 11,920 1,595
Supplies 7,838 4,832 2,000 3,006 2,942 64
Utilities 8,561 5,367 1,896 3,194 2,870 324
Depreciation 5,610 3,587 -- 2,023 2,023 --
Miscellaneous 9,168 9,168 -- -- -- --
Taxes 50 -- -- 50 50 --
----------- ----------- ---------- ---------- ----------- ----------
213,999 190,270 11,550 23,729 20,561 3,168
Interest Income 5,808 5,808 -- -- -- --
----------- ----------- ---------- ---------- ----------- ----------
NET (LOSS) $ (208,191) $ (184,462) (11,550) $ (23,729) $ (20,561) $ (3,168)
Provision for Federal
Income Taxes -- -- -- -- -- --
NET (LOSS) $ (208,191) $ (184,462) $ (11,550) $ (23,729) $ (20,561) $ (3,168)
=========== =========== =========== ========== =========== ==========
Net loss per share $ (0.10) $ (0.09) $ (0.01) $ (0.01) $ (0.01) $ (0.01)
=========== =========== =========== ========== =========== ===========
Shares used in computing
net loss per share 2,031,200 2,031,200 2,031,200 2,031,200 2,031,200 2,031,200
=========== =========== =========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
CARDINAL AIRLINES, INC.
(A Development State Company)
STATEMENT OF STOCKHOLDER'S EQUITY
February 10, 1997 (Inception) to March 31, 1999
<TABLE>
<CAPTION>
Additional
Number Common Preferred Paid-In Accumulated Total Stockholders'
of Shares Stock Stock Capital Deficit Equity
--------- -------- --------- -------- ----------- ------------------
ISSUANCE OF SHARES OF COMMON STOCK:
<S> <C> <C> <C> <C> <C> <C>
March 1, 1997 940,000 $ 9,400 $ -- $ -- $ -- $ 9,400
July 1, 1997 240,000 2,400 -- 117,600 -- 120,000
June 10, 1998 30,000 300 -- 14,700 -- 15,000
August 10, 1998 20,000 200 -- 9,800 -- 10,000
August 20, 1998 10,000 100 -- 4,900 -- 5,000
August 31, 1998 35,400 354 -- 17,346 -- 17,700
September 10, 1998 10,000 100 -- 4,900 -- 5,000
September 30, 1998 16,000 160 -- 7,840 -- 8,000
October 2, 1998 115,000 1,150 -- -- -- 1,150
October 3, 1998 17,000 170 -- 8,330 -- 8,500
October 5, 1998 5,000 50 -- 2,450 -- 2,500
November 5, 1998 90,000 900 -- -- -- 900
November 16, 1998 20,000 200 -- 9,800 -- 10,000
November 28, 1998 20,000 200 -- 9,800 -- 10,000
November 30, 1998 46,000 460 -- 22,540 -- 23,000
December 9, 1998 10,000 100 -- 4,900 -- 5,000
December 10, 1998 70,000 700 -- -- -- 700
December 28, 1998 8,000 80 -- 3,920 -- 4,000
December 29, 1998 10,000 100 -- 4,900 -- 5,000
January 6, 1999 6,000 60 -- 2,940 -- 3,000
January 11, 1999 40,000 400 -- -- -- 400
January 15, 1999 58,000 580 -- 13,720 -- 14,300
January 19, 1999 20,000 200 -- 9,800 -- 10,000
January 28, 1999 20,000 200 -- 9,800 -- 10,000
March 2, 1999 18,800 188 -- 9,212 -- 9,400
March 3, 1999 4,000 40 -- 1,960 -- 2,000
March 5, 1999 40,000 400 -- 19,600 -- 20,000
March 11, 1999 62,000 620 -- 30,380 -- 31,000
March 13, 1999 10,000 100 -- 4,900 -- 5,000
March 17, 1999 30,000 300 -- 14,700 -- 15,000
March 19, 1999 6,000 60 -- 2,940 -- 3,000
March 23, 1999 4,000 40 -- 1,960 -- 2,000
----------
TOTAL ISSUANCE OF SHARES OF
COMMON STOCK: 2,031,200
==========
ISSUANCE OF PREFERRED STOCK:
October 16, 1998-Series A 100,000 -- 1,000 -- -- 1,000
==========
LESS: STOCK SUBSCRIPTIONS (1,199) -- (24,451) -- (25,650)
LESS: NOTES RECEIVABLE-RELATED PARTIES (2,335) (91,336) -- (93,671)
NET (LOSS) -- -- -- (208,191) (208,191)
-------- -------- ---------- ----------- ------------
BALANCE - MARCH 31, 1999 $ 16,778 $ 1,000 $ 249,851 $ (208,191) $ 59,438
========= ======== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development State Company)
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
February 10,
February 10, 1997 Nine Months Ended February 10, 1997 Fiscal 1997
(Inception) to -------------------------------------- (Inception) to Year Ended (Inception) to
March 31, 1999 March 31, 1999 March 31, 1998 June 30, 1998 June 30, 1998 June 30, 1997
----------------- ----------------- ----------------- ------------- ------------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Cash paid for operating
expenses $(208,389) $(186,683) $ (11,550) $ (21,706) $ (18,538) $ (3,168)
--------- --------- ----------- ---------- --------- ----------
NET CASH USED IN OPERATING
ACTIVITIES (208,389) (186,683) (11,550) (21,706) (18,538) --
--------- --------- ----------- ---------- --------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment (11,663) (1,549) (6,961) (10,114) (10,114) --
Increase in security deposits (4,200) (2,460) -- (1,740) -- --
--------- --------- --------- ---------- --------- ---------
NET CASH USED IN INVESTING
ACTIVITIES (15,863) (4,009) (6,961) (11,854) (10,114) --
--------- --------- --------- ---------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of common stock 262,629 214,900 18,511 47,729 42,821 3,168
Issuance of preferred stock 1,000 1,000 -- -- -- --
Cash received from notes
receivable 4,000 4,000 -- -- -- --
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 267,629 219,900 18,511 47,729 42,821 --
--------- --------- --------- ---------- --------- ---------
NET INCREASE IN
CASH 43,377 29,208 -- 14,169 14,169
CASH AT BEGINNING OF PERIOD -- 14,169 -- -- -- --
--------- --------- --------- ---------- --------- ----------
CASH AT END OF PERIOD $ 43,377 $ 43,377 $ -- $ 14,169 $ 14,169 $ --
========= ========= ========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development State Company)
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
February 10,
February 10, 1997 Nine Months Ended February 10, 1997 Fiscal 1997
(Inception) to -------------------------------------- (Inception) to Year Ended (Inception) to
March 31, 1999 March 31, 1999 March 31, 1998 June 30, 1998 June 30, 1998 June 30, 1997
----------------- ----------------- ----------------- ------------- ------------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
RECONCILIATION OF NET LOSS TO
NET CASH USED IN OPERATING
ACTIVITIES:
Net loss $ (208,191) $ (184,462) $ (11,550) $ (23,729) $ (20,561) $ (3,168)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation 5,610 3,587 -- 2,023 2,023 --
Increase in receivables (5,808) (5,808) -- -- -- --
--------- ------------ ------------ ----------- --------- --------
NET CASH USED IN
OPERATING ACTIVITIES $(208,389) $ (186,683) $ (11,550) $ (21,706) $ (18,538) $ (3,168)
========= ============ ============= =========== ========= ========
SUPPLEMENTAL SCHEDULE OF NON-
CASH FINANCING ACTIVITIES:
Issuance of common stock in
exchange for notes receivable $ 97,671 $ -- $ -- $ 97,671 $ 92,179 $ --
========= ============ ============ ========== ========= ========
Increase in notes receivable
- - related parties in exchange
for preferred stock $ 1,000 $ 1,000 $ -- -- -- --
========= ============ ============ ========== ========= ========
Issuance of stock
subscriptions $ 41,650 $ 41,650 $ -- -- -- --
========= ============ ============ ========== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) NATURE OF OPERATIONS
The planned principal business activity of Cardinal Airlines, Inc.
("Company") is to provide commercial airline service to and from major
airports throughout the eastern United States with operations based in
Melbourne, Florida.
B) INTERIM FINANCIAL INFORMATION
The interim financial information for 1999 is unaudited but includes
all adjustments, consisting of normal recurring adjustments, which the
Company considers necessary for a fair presentation of the financial
position at such date and the operating results and cash flows for
those periods.
C) CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash and/or cash equivalents.
D) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the assets' expected useful lives.
E) MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported assets and liabilities.
Actual results could differ from these estimates.
F) INCOME TAXES
Deferred income taxes arise from the expected tax consequence of
temporary differences between the carrying amounts and the tax basis
of certain assets and liabilities. The differences result primarily
from different depreciation methods.
G) ORGANIZATION COSTS
Organization costs consist of expenses related to the start-up of the
Company. These costs are expensed as occurred in accordance with
Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" (SOP 98-5).
H) EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share" (SFAS 128) effective February 10, 1997
(Inception). As such, net loss per share is computed using the
weighted average number of common shares outstanding during the
period. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins and Staff Policy, such computations include all
common and equivalent shares issued as if they
-6-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-cont.
H) EARNINGS PER SHARE-CONT.
were outstanding for all periods presented. Common equivalent shares
consist of the incremental common shares issuable upon the conversion
of the convertible preferred stock (using the if converted method).
The Series A Preferred Stock issued has no preferences other than
voting rights over the common stock and no dividend payment
arrangements. The preferred stock has no effect in arriving at income
available to common shareholders in computing earnings per share.
I) NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130), and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 130 establishes
standards for the reporting and presentation of comprehensive income
and its components. SFAS 131 establishes standards for reporting
information about operating segments. The Company is required to adopt
both SFAS 130 and SFAS 131 in fiscal 1999. SFAS 131 has no effect on
the Company's financial statements at the present time.
In March 1998, the American Institute of Certified Public Accountants
AICPA) issued Statement of Position 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1),
which defines the type of costs related to such activities that should
be capitalized versus expensed as incurred. This statement is not
applicable to the Company at the present time.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities" (SOP 98-5), which requires all
costs incurred in the start-up of a new business or business segment
to be expensed as incurred.
In May, 1998, the FASB issued Statement of Financial Accounting
Standards 132, "Employers' Disclosure about Pensions and Other
Postretirement Benefits" (SFAS 132), which revises employers'
disclosures about pension and other postretirement benefit plans. This
statement is not applicable to the Company at the present time.
In June 1998, the FASB issued Statement of Financial Accounting
Standards 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133), which establishes accounting and reporting
standards for derivatives and hedging activities.
-7-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-cont.
I) NEW ACCOUNTING STANDARDS-CONT.
This pronouncement has no effect on the Company's financial statements
at the present time.
The Company is required to adopt SOP 98-1 and SFAS 133 in fiscal 2000.
The Company has adopted SOP 98-5 effective February 10, 1997
(inception) through March 31, 1999.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS
The Company was formed February 10, 1997, and began operations April
1, 1997. Through March 31, 1999, operations have been devoted
primarily to raising capital, negotiating leasing of airplanes,
related equipment, and related facilities as well as the performance
of general administrative functions. As of March 31, 1999, the Company
has 49 Stockholders.
NOTE 3 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
March 31, 1999 June 30,1998 June 30,1997
----------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
Computers and equipment $ 9,955 $ 9,955 $ --
Furniture and fixtures 159 159 --
Leasehold Improvements 1,549 -- --
----------------- --------------- ---------------
11,663 10,114 --
Less accumulated depreciation (5,610) (2,023) --
----------------- --------------- ---------------
$ 6,053 8,091 $ --
================= =============== ===============
</TABLE>
Depreciation expense was $3,587 for the nine months ended March 31,
1999; $2,023 for the fiscal year ended June 30, 1998; and $0 from
February 10, 1997 (Inception) to June 30, 1997.
-8-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 4 - RELATED PARTIES
The Company has made loans to four of its stockholders in exchange for
issuance of shares of common stock and preferred stock (NOTE 7). The loans
are unsecured, are due June 30, 2003 and bear interest at 8% annually.
Notes receivable due from related parties were $93,671 as of March 31,
1999, $96,719 as of June 30, 1998, and $4,492 as of June 30, 1997. A
summary of notes receivable is as follows:
Common stock issued during the fiscal
year end June 30, 1998 $ 92,179
Common stock issued from March 1, 1997 to
June 30, 1997 4,492
Preferred stock issued during the nine months
ended March 31, 1999 1,000
Payment of notes receivable during the nine
months ended March 31, 1999 (4,000)
------------
$ 93,671
============
The Notes receivable due from related parties are reported as
a reduction in stockholders' equity.
NOTE 5 - COMMITMENTS & CONTINGENCIES
The Company leases its facilities from an unrelated third party under an
operating lease expiring July, 1999. Rent expense was $9,805 and $23,320
for the nine months ended March 31, 1999 and February 10, 1997 (inception)
to March 31, 1999 respectively.
Future minimum lease payments are as follows:
Fiscal year ending June 30,
1999 $ 4000
2000 1,500
----------
$ 5,500
==========
During the period January through March, 1999, the Company issued shares of
stock to raise capital to fund its operations. The sales may be in
violation of Section 5 of the Securities Act of 1933 and, accordingly,
those who purchased may have the right rescind their shares. The potential
liability to the Company is $253,100 plus interest.
NOTE 6 - INCOME TAXES
The Company's effective tax rate differs from the expected federal income
tax rate as follows:
-9-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 6 - INCOME TAXES-cont.
<TABLE>
<CAPTION>
February 10, 1997
Nine Months Ended Fiscal Year Ended (Inception) to
March 31, 1999 June 30, 1998 June 30, 1997
----------------- ------------------ ----------------
(Unaudited)
<S> <C> <C> <C>
Income tax benefit at statutory
rate $ (70,785) $ (8,068) $ (1,077)
Increase in valuation
allowance 70,785 8,068 1,077
--------------- ------------------ ----------------
Actual income taxes $ -- $ -- $ --
=============== ================== ================
</TABLE>
The components of the deferred tax assets and liabilities areas follows:
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998 June 30, 1997
----------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 70,785 $ 8,068 $ 1,077
Total deferred tax assets 70,785 8,068 1,077
Less valuation allowance (70,785) (8,068) (1,077)
Deferred tax assets, net of
valuation allowance -- -- --
Deferred tax liabilities -- -- --
----------------- ------------ ------------
Net deferred tax asset (liability) $ -- $ -- $ --
================= ============ ============
</TABLE>
A summary of the net operating loss carryforwards is as follows:
<TABLE>
<S> <C>
Generated June 30, 1997 $ 3,168 expires June 30, 2012
Generated June 30, 1998 $ 20,561 expires June 30, 2013
Generated March 31, 1999 $ 184,462 expires March 31, 2014
=========
$ 208,191
=========
</TABLE>
As of March 31, 1999, the Company is still in development stage. As
such, all income and deductions for tax purposes are deferred until
the Company's planned principal operations have commenced.
-10-
<PAGE>
CARDINAL AIRLINES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 7 - STOCKHOLDERS' EQUITY
A summary of issuance of common stock involving noncash consideration is as
follows:
On March 1, 1997, the Company issued 449,200 shares of stock in
consideration for notes receivable due from related parties (NOTE 4)
of $4,492. The shares were sold at $.01 par value per share.
On July 1, 1997, the Company issued 184,358 shares of stock in
consideration for notes receivable due from related parties (NOTE 4)
of $92,179. The shares were sold at $.01 par value per share, with
$.50 per share consideration.
During the nine months ended March 31, 1999, the Company issued
83,300 shares of stock in consideration for stock subscriptions of
$41,650. The shares were sold at $.01 par value per share, with $.50
per share consideration.
As of June 30, 1997, the Company's common stock had a par value $.01 per
share with 50,000,000 shares authorized and 940,000 shares issued and
outstanding.
As of June 30, 1998, the Company's common stock had a par value $.01 per
share with 50,000,000 shares authorized and 1,210,000 shares issued and
outstanding.
As of March 31, 1999, the Company's common stock had a par value $.01 per
share with 50,000,000 shares authorized and 2,031,200 shares issued and
outstanding.
A summary of issuance of preferred stock involving noncash consideration is
as follows:
On October 16, 1998, the Company issued 100,000 shares of $.01 par
value "Series A" preferred stock in consideration for notes receivable
due from related parties (NOTE 4) of $1,000.
As of March 31, 1999, the Company's preferred stock had a par value
$.01 per share with 1,000,000 shares authorized. There are 100,000
shares issued and outstanding as "Series A" preferred stock. The
900,000 unissued shares have not been designated.
The shares of "Series A" preferred stock have super voting rights at
the multiple of 100 votes per share. In the event of liquidation, the
preferred stock has preference over the common stock. The shares are
not convertible to common stock and do not have any other rights or
preferences.
-11-
<PAGE>
No dealer, salesman or any other person has been authorized by Cardinal
to give any information or to make any representations other than those
contained in this prospectus in connection with the offering made hereby, and if
given or made, such information or representations may not be relied upon. The
prospectus does not constitute an offer to sell or the solicitation of an offer
to buy any securities other than those specifically offered hereby or an offer
to sell. Nor does it constitute a solicitation of an offer to buy, to any person
in any jurisdiction in which such offer or sale would be unlawful. Neither the
delivery of this prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of Cardinal since any of the dates as of which information is furnished
or since the date of this prospectus.
TABLE OF CONTENTS
Prospectus Summary .................................. 1
Risk Factors ........................................ 3
Use of Proceeds ..................................... 7
Dilution ............................................ 9
Dividend Policy ..................................... 10
Capitalization ...................................... 11
Special Note Regarding
Forward-Looking Statements .......................... 12
Management's Discussion And
Analysis or Plan of Operation .................. 12
Business ............................................ 15
Available Information ............................... 23
Management .......................................... 23
Certain Transactions ................................ 31
Principal Shareholders .............................. 31
Description of Securities ........................... 37
Securities Eligible For Future Sale ................. 39
Plan of Distribution ................................ 40
Legal Matters ....................................... 41
Experts ............................................. 41
Unit Purchase Agreement ............................. 42
Financial Statements ................................F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The fees and expenses to be paid by Cardinal in connection with this
offering are as follows:
SEC filing fee ...................................................$10,619
NASD filing .........................................................4,000
Blue Sky qualification fees and expenses* .........................10,000
Accounting fees and expenses* .....................................30,000
Legal fees and expenses* ..........................................40,000
Transfer Agent and Registrar Fees* .................................5,000
Printing Costs* ...................................................20,000
Miscellaneous* ....................................................10,381
Total ...........................................................$130,000
- ----------------------------
* Estimated
Item 14. Indemnification of Directors and Officers.
The Registrant's Certificate of Incorporation provide that directors of the
Registrant will not be personally liable for monetary damages to the Registrant
for certain breaches of their fiduciary duty as directors to the fullest extent
allowable by Delaware law. Under current Delaware law, directors would remain
liable for: (i) acts or omissions which involve intentional misconduct, fraud or
a knowing violation of law, and (ii) approval of certain illegal dividends or
redemption's. In appropriate circumstances, equitable remedies or non-monetary
relief, such as an injunction, will remain available to a stockholder seeking
redress from any such violation. In addition, the provision applies only to
claims against a director arising out of his role as a director and not in any
other capacity (such as an officer or employee of the Registrant).
The Registrant also has the obligation, pursuant to the Registrant's
By-laws, to indemnify any director or officer of the Registrant for all expenses
incurred by them in conjunction with any legal action brought or threatened
against such person for or on account of any action or omission alleged to have
been committed while acting in the course and scope of the person's duties, if
the person acted in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the Registrant, and
with respect to criminal actions, had no reasonable cause to believe the
person's conduct was unlawful, provided that such indemnification is made
pursuant to then existing provisions of Delaware General Corporation Law at the
time of any such indemnification.
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
Since its inception, Cardinal has made the following sales of unregistered
securities:
<TABLE>
<CAPTION>
Shareholder Name
Date (Name on Subscription
Type of Stock Purchased Agreement) Shares Owned Consideration
- ------------- ---------- --------------------- ------------ -------------
<S> <C> <C> <C> <C>
Common 03/11/99 Aragona, Joseph 10,000 $ 0.50/share
Common 11/16/98 Beauchesne, Alfred M. 20,000 $ 0.50/share
Common 06/10/98 Berkley, Thomas S. 30,000 $ 0.50/share
Common 01/15/99 Braun, Laura 10,000 $ 0.50/share
Common 01/19/99 Cicione, Denise 4,000 $ 0.50/share
Common 01/28/99 Cominsky, Bill 10,000 $ 0.50/share
Common 03/11/99 Cooper, Lan Vo 10,000 $ 0.50/share
Common 10/05/98 Couch, Eugene J. Jr. 5,000 $ 0.50/share
Common 01/15/99 Cunningham, Dennis M. 30,000 $ 0.01/share
Common 03/05/99 Davidson, Philip 40,000 $ 0.50/share
Common 12/28/98 Ellis, Marie D. 8,000 $ 0.50/share
Common 03/17/99 Falvo, Nicholas S. 10,000 $ 0.50/share
Common 01/11/99 Freeman, Jack H. 40,000 $ 0.01/share
Common 12/10/98 Glover, Karen D. 30,000 $ 0.01/share
Common 03/17/99 Gold, Corey B. 10,000 $ 0.50/share
Common 03/11/99 Goodman, Herbert J. 32,000 $ 0.50/share
Common 03/02/99 Greenwood, Bruce D. 14,000 $ 0.50/share
Common 09/30/98 Greenwood, Bruce D. 16,000 $ 0.50/share
Common 01/15/99 Icolari, Vincent 18,000 $ 0.50/share
Common 01/19/99 INDEGO (trust managed 16,000 $ 0.50/share
by Litton Walker)
Common 08/10/98 INDEGO (trust managed 20,000 $ 0.50/share
by Litton Walker)
Common 03/23/99 Jones, Susan 4,000 $ 0.50/share
Common 03/11/99 Judeman, Charles W. 10,000 $ 0.50/share
Common 03/02/99 Kee, Terry L. 4,800 $ 0.50/share
Common 08/31/98 Kee, Terry L. 15,400 $ 0.50/share
Common 03/13/99 Killeen, Alma L. 10,000 $ 0.50/share
Common 01/28/99 Lingsch, Edwin F. 10,000 $ 0.50/share
Common 11/05/98 Linsley, David A. 40,000 $ 0.01/share
Common 03/17/99 Maslanka, Mark R. 10,000 $ 0.50/share
Common 07/01/97 Mason, H. Lawrence 60,000 $ 0.50/share
Common 03/01/97 Mason, H. Lawrence 220,000 $ 0.01/share
Common 11/28/98 Mason, L. Dianne 20,000 $ 0.50/share
Common 01/06/99 Mulholland, Arleen C. 6,000 $ 0.50/share
Common 08/20/98 Newbold, Darin K. 10,000 $ 0.50/share
Common 10/02/98 Newbold, Ronald J. 50,000 $ 0.01/share
Common 07/01/97 Paris, Vincent T. 60,000 $ 0.50/share
Common 03/01/97 Paris, Vincent T. 220,000 $ 0.01/share
Common 12/10/98 Pertschi, John J. 40,000 $ 0.01/share
Common 03/01/97 Rackley, William R. Jr 50,000 $ 0.01/share
Common 08/31/98 Riles, Dennis 20,000 $ 0.50/share
Common 10/02/98 Ryff, John J. Jr. 50,000 $ 0.01/share
Common 11/30/98 Serrao, Michael A. 26,000 $ 0.50/share
Common 03/03/99 Shore, Benjamin D. 4,000 $ 0.50/share
Common 09/10/98 Shores, Derrick V. 10,000 $ 0.50/share
Common 11/30/98 Simoncelli, Raymond A. 20,000 $ 0.50/share
Common 03/01/97 TAWCOT (trust managed 220,000 $ 0.01/share
by Ted Walker)
Common 07/01/97 TAWCOT (trust managed 60,000 $ 0.50/share
by Ted Walker)
Common 12/29/98 Vandervelde, Todd 10,000 $ 0.50/share
Common 11/05/98 Vandervelde, Tom 50,000 $ 0.01/share
Common 03/19/99 Waters, Charles K. 6,000 $ 0.50/share
Common 10/02/98 Waters, Charles K. 15,000 $ 0.01/share
Common 10/03/98 Waters, Christine A. 17,000 $ 0.50/share
Common 07/01/97 Watson, Lawrence A. 60,000 $ 0.50/share
Common 03/01/97 Watson, Lawrence A. 230,000 $ 0.01/share
Common 12/09/98 Wheeler, James 10,000 $ 0.50/share
Series A Pref 10/16/98 Mason, H. Lawrence 25,000 0.01
Series A Pref 10/16/98 Paris, Vincent T. 25,000 0.01
Series A Pref 10/16/98 Walker, Ted A. 25,000 0.01
Series A Pref 10/16/98 Watson, Lawrence A. 25,000 0.01
</TABLE>
All issuances of securities described above were made in reliance on the
exemption from registration provided by Section 4(2) of the Securities Act of
1933 as transactions by an issuer not involving public offering. In each
instance, the purchaser was either a founder of Cardinal or other company
insider as a result of his relationship with Cardinal, the offers and sales
were made without any public solicitation, the stock certificates bear
restrictive legends and appropriate stop transfer instructions have been or will
be given to the transfer agent. No underwriter was involved in the transactions
and no commissions were paid.
<PAGE>
Exhibit
Number Description
* 3.1 Restated Articles to the Certificate of Incorporation
3.2 Bylaws of Registrant, as amended and restated
* 4.1 Form of Registrant's Common Stock Certificate
* 4.2 Form of Warrant to Purchase Common Stock
* 4.3 Warrant Resolution
* 5.1 Opinion of Bruce Brashear, Esq. regarding legality
*10.1 Employment Agreement dated July 1, 1998, between Registrant and
Lawrence A. Watson.
*10.2 Employment Agreement dated July 1, 1998, between Registrant and H.
Lawrence Mason
*10.3 Employment Agreement dated July 1, 1998, between Registrant and
Vincent T. Paris
*10.4 Employment Agreement dated October 2, 1998, between Registrant and
John Ryff
*10.5 Employment Agreement dated October 2, 1998, between Registrant and
Ronald Newbold
*10.6 Employment Agreement dated July 1, 1998, between Registrant and
Ted A. Walker
*10.7 Employment Agreement dated December 10, 1998, between Registrant and
Karen D. Glover
*10.8 Employment Agreement dated November 5, 1998, between Registrant
and David A. Linsley
*10.9 Employment Agreement dated December 10, 1998, between Registrant and
John J. Pertschi
*10.10 Employment Agreement dated November 5, 1998, between Registrant and
Thomas L. Vandervelde
**10.11 Promissory Note dated July 1, 1997 between Registrant and H.
Lawrence Mason
**10.12 Promissory Note dated July 1, 1997 between Registrant and Vincent T.
Paris
**10.13 Promissory Note dated July 1, 1997 between Registrant and Ted A.
Walker
**10.14 Promissory Note dated July 1, 1997 between Registrant and Lawrence A.
Watson
*10.15 Consulting Contract dated December 10, 1998 between Registrant and
Maviation, Inc.
**10.16 Employment Agreement dated January 11, 1999, between Registrant
and Jack H. Freeman
**10.17 Employment Agreement dated January 15, 1999 between Registrant and
Dennis M. Cunningham
**11.1 Statement regarding computation of earnings per share
***24.1 Consent of Independent Accountants
***24.2 Consent of Bruce Brashear, Esq. (included in Exhibit 5.1)
***25. Power of Attorney (included with the signature page to the
registration statement)
*27. Financial Data Schedule
* Previously filed with Form S-1 on January 11, 1999.
** Previously filed with Form S-1/A on April 9, 1999.
***Previously filed with Form S-1/A on July 7, 1999.
Item 17. Undertakings.
(a) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant, Cardinal, pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
had been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) The Registrant hereby undertakes that for purposes of determining
any liability under the Securities Act, (i) the information omitted from the
form of prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared effective,
and (ii) each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement:
(i) (To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Form S-1 Amendment No. 4 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Melbourne, State of Florida, on the 19th day of July, 1999.
CARDINAL AIRLINES, INC.
By:__/s/Lawrence A. Watson________________
Lawrence A. Watson
President
Chief Executive Officer
Chairman of the Board
Director
By:__/s/H. Lawrence Mason________________
H. Lawrence Mason
Secretary, Treasurer
Chief Financial Officer
Vice President of Finance
Chief Accounting Officer
Director
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities on the 19th of July, 1999.
SIGNATURE TITLE
_/s/ Lawrence A. Watson____________ President, Chief Executive Officer,
Lawrence A. Watson Chairman of the Board, and Director
___*/s/ H. Lawrence Mason__________ Vice President of Finance,
H. Lawrence Mason Secretary, Treasurer, Chief Financial
Officer and Director
____*/s/ Vincent T. Paris___________ V.P. Logistics Support, Director
Vincent T. Paris
____*/s/ Ted A. Walker______________ V.P. Properties and Facilities, Director
Ted A. Walker
By:_/s/ Lawrence A. Watson _________
*Lawrence A. Watson, Attorney in Fact
BYLAWS
OF
CARDINAL AIRLINES, INC.
(a Delaware Corporation)
ARTICLE 1 OFFICES
1. The Corporation shall establish and maintain a Registered Office and a
Registered Agent in the State of Delaware.
2. The corporation may also have offices at such other places both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
corporation shall be signed by, the corporation by the Chairman or Vice Chairman
of the Board of Directors, if any, or by the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation. Any and all signatures on any such certificate may
be facsimiles. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class of
stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or any such partly
paid stock, shall set forth thereon the statements prescribed by the General
Corporation Law. Any restrictions on the transfer or registration of transfer of
any shares of stock of any class or series shall be noted conspicuously on the
certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated shares in
place of any certificate therefore issued by it, alleged to have been lost,
stolen, or destroyed, and the Board of Directors may require the owner of any
lost, stolen, or destroyed certificate, or the owner's legal representative, to
give the corporation a bond sufficient to indemnify the corporation against any
claim that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new certificate
or uncertificated shares.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required
to, issue fractions of a share. If the corporation does not issue fractions of a
share, it shall (1) arrange for the disposition of fractional interests by those
entitled thereto, (2) pay in cash the fair value of fractions of a share as of
the time when those entitled to receive such fractions are determined, or (3)
issue script or warrants in registered form (either represented by a certificate
or uncertificated) or bearer form (represented by a certificate) which shall
entitle the holder to receive a certificate for a full share upon the surrender
of such script or warrants aggregating a full share. A certificate for a
fractional share or an uncertificated fractional share shall, but script or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause script or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing full
shares or uncertificated full shares before a specified date, or subject to the
conditions that the shares for which script or warrants are exchangeable may be
sold by the corporation and the proceeds thereof distributed to the holders of
script or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or
registration of transfer of shares of stock, if any, transfers or registration
of transfers of shares of stock of the corporation shall be made only on the
stock ledger of the corporation by the registered holder thereof, or by such
holder's attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case in the shares represented by certificates,
on surrender of the certificate or certificates for such shares of stock
properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not proceed the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less then ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholder shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not proceed the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to it's registered office in the state of Delaware,
it's principle place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporations registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall be precede
the date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of
a meeting of stockholders or a waiver thereof or to participate or vote thereat
or to consent or dissent in writing in lieu of a meeting, as the case may be,
the term "share" or "shares" or "share of stock" or "shares of stock" or
"stockholder" or "stockholders" refers to an outstanding share or shares of
stock and to a holder or holders of record of outstanding shares of stock when
the corporation is authorized to issue only one class of shares of stock, and
said reference is also intended to include any outstanding share or shares of
stock and any holder or holders of record of outstanding shares of stock of any
class upon which or upon whom the certificate of incorporation confers such
rights where there are two or more classes or series of shares of stock or which
or upon whom the General Corporation Law confers such rights notwithstanding
that the certificate of incorporation may provide for more than one class or
series of shares of stock, one or more of which are limited or denied such
rights thereunder; provided, however, that no such right shall vest in the event
of an increase or a decrease in the authorized number of shares of stock of any
class or series which is otherwise denied voting rights under the provisions of
the certificate of incorporation, except as any provision of law may otherwise
require.
6. STOCKHOLDER MEETINGS.
TIME. The annual meeting shall be held on the date and at the time fixed, from
time to time, by the directors, provided, that the first annual meeting shall be
held on a date within thirteen months after the organization of the corporation,
and each successive annual meeting shall be held on a date within thirteen
months after the date of the preceding annual meeting. A special meeting shall
be held on the date and at the time fixed by the directors.
PLACE. Annual meetings and special meetings shall be held at such place, within
or without the State of Delaware, as the directors may, from time to time, fix.
Whenever the directors shall fail to fix such place, the meeting shall be held
at the registered office of the corporation in the State of Delaware.
CALL. Annual meetings and special meetings may be called by the directors or by
any officer instructed by the directors to call the meeting. Special Meetings
may also be called by fifty percent (50%) of the Common Shareholders.
NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given,
stating the place, date, and hour of the meeting and stating the place within
the city or other municipality or community at which the list of stockholders of
the corporation may be examined. The notice of an annual meeting shall state
that the meeting is called for the election of directors and for the transaction
of other business which may properly come before the meeting, and shall, (if any
other action which could be taken at a special meeting is to be taken at such
annual meeting) state the purpose or purposes. The notice of a special meeting
shall in all instances state the purpose or purposes for which the meeting is
called. The notice of any meeting shall also include, or be accompanied by, any
additional statements, information, or documents prescribed by the General
Corporation Law. Except as otherwise provided by the General Corporation Law, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten days nor more than sixty days before the date of the meeting,
unless the lapse of the prescribed period of time shall have been waived, and
directed to each stockholder at the stockholder's record address or at such
other address which the stockholder may have furnished by request in writing to
the Secretary of the corporation. Notice by mail shall be deemed to be given
when deposited, with postage thereon prepaid, in the United States Mail. If a
meeting is adjourned to another time, not more than thirty days hence, and/or to
another place, and if an announcement of the adjourned time and/or place is made
at the meeting, it shall not be necessary to give notice of the adjourned
meeting unless the directors, after adjournment, fix a new record date for the
adjourned meeting. Notice need not be given to any stockholder who submits a
written waiver of notice signed by such stockholder before or after the time
stated therein. Attendance of a stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be specified
in any written waiver of notice.
STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one
of the following officers in the order of seniority and if present and acting
the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the
President, a Vice President, or, if none of the foregoing is in office and
present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in the Secretary's absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
PROXY REPRESENTATION. Every stockholder may authorize another person or persons
to act for such stockholder by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by the stockholder's attorney
in fact. No proxy shall be voted or acted upon after three years from its date
unless such proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the corporation
generally.
INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint
one or more inspectors of election to act at the meeting or any adjournment
thereof. If an inspector or inspectors are not appointed, the person presiding
at the meeting may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or act, the vacancy
may be filled by appointment made by the directors in advance of the meeting or
at the meeting by the person presiding thereat. Each inspector, if any, before
entering upon the discharge of his or her duties shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his or her ability. The inspector or
inspectors if any, shall determine the number of shares of stock outstanding and
the voting power of each, the shares of stock represented at the meeting, the
existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the results, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by such
inspector or inspectors and execute a certificate of any fact found by the
inspector(s). Except as otherwise required by subsection (e) of section 231 of
the General Corporation Law, the provisions of that section shall not apply to
the corporation.
QUORUM. The holders of a majority of the outstanding shares of stock shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. The stockholders present may adjourn the meeting despite the absence
of quorum.
VOTING. Each share of stock shall entitle the holder thereof to one vote.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote on the
election of directors. Any other action shall be authorized by a majority of the
votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these ByLaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General
Corporation Law to be taken at any annual or special meeting of stockholders, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Action taken pursuant to this paragraph shall be subject to the provisions of
section 228 of the General Corporation Law.
ARTICLE III DIRECTORS
FUNCTIONS AND DEFINITION. The business of affairs of the corporation shall be
managed by or under the direction of the Board of Directors of the corporation.
The Board of Directors shall have the authority to fix the compensation of the
embers thereof. The use of the phrase "whole board" herein refers to the total
number of directors which the corporation could have if there were no vacancies.
A director shall perform his duties as a Director, including his duties as a
member of any committee of the Board upon which he may serve, in good faith, in
a manner he reasonably believes to be in the best 1nterests of the Corporation,
and with such care as an ordinarily prudent person in a like position would use
under similar circumstances. In performing his duties, a Director shall be
entitled to rely on information, opinions reports or statements, including
financial data, in each case prepared or presented by:
(a) One or more officers or employees of the Corporation whom the Director
reasonably believes to be reliable and competent in the matters presented;
(b) Counsel, public accountants or other persons as to matters which the
Director reasonably believes to be within such person's professional or expert
competence; or
(c) A committee of the Board upon which he does not serve, duly designated
in accordance with a provision of the articles of Incorporation or these ByLaws,
as to matters within its designated authority, which committee the Director
reasonably believes to merit confidence.A Director shall not be considered to be
acting in good faith if he has knowledge concerning the matter in question that
would cause such reliance described above to be unwarranted. A person who
performs his duties in compliance with this action shall have no liability by
reasons of being or having been a Director of the Corporation.
QUALIFICATION AND NUMBER. A director need not be a stockholder, a citizen of the
United States, or a resident of the State of Delaware. The initial Board of
Directors shall consist of four persons. Thereafter, the number of directors
constituting the whole board shall be at least one. Subject to the foregoing
limitation and except for the first Board of Directors, such number may be fixed
from time to time by action of the stockholders or of the directors, or, if the
number is not fixed, the number shall be four. The number of directors may be
increased or decreased by action of the stockholders or of the directors.
ELECTION AND TERM. The first Board of Directors, unless the members thereof
shall have been named in the certificate of incorporation, shall be elected by
the incorporator or incorporators and shall hold office until the first annual
meeting of stockholders and until their successors are elected and qualified or
until their earlier resignation or removal. Any director may resign at any time
upon written notice to the corporation. Thereafter, directors who are elected at
an annual meeting of stockholders, and directors who are elected in the interim
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Except as the General
Corporation Law may otherwise require, in the interim between annual meetings of
stockholders or of special meetings of stockholders called for the election of
directors and/or for the removal of one or more directors and for the filling of
any vacancy in that connection, newly created directorships and any vacancies in
the Board of Directors, including unfilled vacancies resulting from the removal
of directors for cause or without cause, may be filled by the vote of a majority
of the remaining directors then in office, although less then a quorum, or by
the sole remaining director.
MEETINGS
TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after
its election as the directors may conveniently assemble.
PLACE. Meetings shall be held at such place within or without the State of
Delaware as shall be fixed by the Board.
CALL. No call shall be required for regular meetings for which the time and
place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, or the resident, or of a majority of the directors in
office.
NOTICE OF ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any
member of a committee of directors who submits a written waiver of notice
signed by him before or after the time stated herein. Attendance of any
such person at a meeting shall constitute a waiver of notice of such
meeting, except when he attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or
special meeting of the directors need be specified in any written waiver of
notice.
FORUM AND ACTION. A majority of the whole Board shall constitute a quorum
except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided,
that such majority shall constitute at least one-third of the whole Board.
A majority of the directors present, whether or not a quorum is present,
ray adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by he General Corporation Law,
the vote of the majority of the directors present at a meeting at which
quorum is present shall be the act of the board. The quorum and voting
provisions herein stated shall not be construed as conflicting with any
provisions of the General Corporation Law and these ByLaws which govern a
meeting of directors held to fill vacancies and newly created directorships
in the Board or action of disinterested directors. Any member or members
of the Board of Directors or of any committee designated by the Board, may
participate in a meeting of the Board, or any such committee, as the case
may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other.
CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if present
and acting, shall preside at all meetings. Otherwise, the Vice-Chairman of
the Board, if any and if present and acting, or the President, if present
and acting, or any other director chosen by the Board, shall preside.
REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General
Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares
then entitled to vote in an election of directors.
COMMITTEES. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of any member of any such
committee or committees, the member or members hereof present at any
meeting and not disqualified from voting, whether or not the member or
members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation with the exception of any authority the
delegation of which is prohibited by Section 141 of the General Corporation
Law, and may authorize the seal of the corporation to be affixed to all
papers which may require it.
WRITTEN ACTION. Any action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be taken without a
meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
ARTICLE IV OFFICERS
The officers of the corporation shall consist of a President, a Secretary,
a Treasurer, and, if deemed necessary, expedient, or desirable by the Board
of Directors, a Chairman of the Board, a Vice Chairman of the Board, an
Executive Vice President, one or more other Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other
officers with such titles as the resolution of the Board of Directors
choosing them shall designate. Except as may otherwise e provided in the
resolution of the Board of Directors choosing him or her, no officer other
than the Chairman or Vice Chairman of the Board, if any, need be a
director. Any number of offices may be held by the same person, as the
directors may determine, except that no person may hold the offices of
President and Secretary simultaneously. Unless otherwise provided in the
resolution choosing him or her, each officer shall be chosen for a term
which shall continue until the meeting of the Board of Directors following
the next annual meeting of stockholders and until his or her successor
shall have been chosen and qualified. All officers of the corporation
shall have such authority and perform such duties in the management and
operation of the corporation as shall be prescribed in the resolutions of
the Board of Directors designating and choosing such officers and
describing their authority and duties, and shall have such additional
authority and duties as are incident to their office except to the extent
that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings
of all meetings and actions in writing of stockholders, directors, and
committees of directors, and shall exercise such additional authority and
perform such additional duties as the Board shall assign to him or her. Any
officer may be removed with or without cause, by the Board of Directors.
Any vacancy in any office pay be filled by the Board of Directors. The
Chairman of the Board of the Corporation shall preside at all meetings of
the stockholders and the Board of Directors, shall have general and active
management of the business of the corporation and shall see that all orders
and resolutions of the Board of Directors are carried into effect. The
Chairman of the Board or the President, along with the secretary attesting
and signing under the seal of the corporation, may execute bonds,
mortgages, deeds, notes, contracts, and other instruments and papers in the
name of the corporation and on its behalf, except where required by law to
be otherwise signed and executed, and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the corporation.
ARTICLE V - CORPORATE SEAL
The seal of this Corporation shall be circular and shall have inscribed
thereon the name of the Corporation and such other words and figures and in such
design as may be prescribed by the Board of Directors, and may be facsimile,
engraved, printed or an impression or other type seal.
ARTICLE VI - FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VII CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter or repeal
these ByLaws and to adopt new ByLaws may be exercised by the Board of Directors
or by the stockholders.
HEREBY CERTIFY that the foregoing is a full, true, and correct copy of the
ByLaws of Cardinal Airlines, Inc., a Delaware Corporation, as in effect on the
date hereof. WITNESS my hand and the seal of the corporation.
/S/
Dated: __________________
/S/
Secretary: _____________________________
(SEAL)
