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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2001
REGISTRATION NO. 333-41606
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1/A1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
TOURJETS AIRLINE CORPORATION
(Exact name of registrant
as specified in its charter)
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Florida 4522 / 4725 65-1004371
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
incorporation or organization) Classification Code Number)
4225 Ingraham Highway Lee C. Schmachtenberg, Esq.
Miami, Florida 33133 1533 Sunset Drive, Suite 201
(305) 668-5119 Coral Gables, Florida 33143
(305) 666-4676
(Address and telephone number of (Name, address and telephone
principal executive offices number of agent for service)
and principal place of business)
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COPIES OF COMMUNICATIONS TO:
Richard E. Brodsky, Esq. Randall S. Parks, Esq.
Richard E. Brodsky, P.A. Hunton & Williams
25 SE Second Avenue, Suite 919 951 East Byrd Street
Miami, Florida 33131 Richmond, Virginia 23219
Telephone: (305) 755-9470 Telephone: (804) 788-8200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of the Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each class of Proposed maximum Amount of
securities to be registered: aggregate registration
--------------------------- Offering price:(1) fee:
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Common Stock, par value $.001 $ 75,000,000 $ 18,750(2)
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as
amended.
(2) We paid a fee of $33,000 in connection with our initial filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 19, 2001.
6,250,000 SHARES
[TOURJETS LOGO]
"THE NON-STOP AIR TRAVEL SERVICE VACATIONERS NEED"
TOURJETS AIRLINE CORPORATION
COMMON STOCK
We are a new air travel company. Our strategy is in reaction to the
increasing consolidation of the airline industry. We will provide non-stop
service from numerous U. S. cities from which passengers now must usually take
burdensome connecting flights through the "hub & spoke" systems of large
airlines to reach favored vacation destinations. We believe that the continuing
consolidation in the airline industry has created a niche for our "Tourjets
Non-Stop Vacation Packages(sm)". Our packages will combine non-stop service on
our own airplanes and quality vacation accommodations.
This is an initial public offering of our common stock. We expect the
public offering price of our common stock will be between $11.00 and $13.00.
We intend to use the proceeds of the offering to buy six aircraft, to
pay Federal Aviation Authority certification expenses, and for general working
capital.
Prior to the offering, there has been no public market for our common
stock. We have applied to list our common stock on under the
symbol .
THIS INVESTMENT INVOLVES SUBSTANTIAL RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
-------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
Per Share Total
Public offering price:...............................
Underwriting discount:...............................
Proceeds, before expenses, to our company:...........
The underwriter has the option to purchase up to an additional 625,000
shares from us at the initial public offering price less the underwriting
discount to cover over-allotments, if any.
Delivery of the shares is expected to be made on or about , 2001.
J. W. KORTH & COMPANY
THE DATE OF THIS PROSPECTUS IS , 2001
<PAGE> 4
TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ......................... ii
PROSPECTUS SUMMARY ........................................................ 1
THE OFFERING .............................................................. 4
RISK FACTORS .............................................................. 4
USE OF PROCEEDS ........................................................... 10
CAPITALIZATION ............................................................ 11
DIVIDEND POLICY ........................................................... 11
DILUTION .................................................................. 11
SELECTED FINANCIAL DATA ................................................... 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND PLAN OF OPERATIONS .................................................... 14
OUR BUSINESS .............................................................. 17
THE TRAVEL INDUSTRY IN GENERAL ............................................ 21
OUR MARKETING STRATEGY .................................................... 23
AIRLINE OPERATIONS ........................................................ 26
MANAGEMENT ................................................................ 33
INDEMNIFICATION OF OFFICERS AND DIRECTORS ................................. 37
CERTAIN TRANSACTIONS ...................................................... 38
DESCRIPTION OF CAPITAL STOCK .............................................. 39
UNDERWRITING .............................................................. 40
COMMON STOCK OWNED BY PRINCIPAL SHAREHOLDERS, OFFICERS AND
DIRECTORS ................................................................. 43
LEGAL PROCEEDINGS ......................................................... 44
EXPERTS ................................................................... 44
WHERE YOU CAN FIND MORE INFORMATION ....................................... 44
INDEX TO FINANCIAL STATEMENTS ............................................. 45
Until , all dealers that effect transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as agents or dealers and with respect to their unsold allotments or
subscriptions.
This prospectus contains all of the representations by the company concerning
this offering, and no person shall make different or broader statements than
those contained herein. Investors are cautioned not to rely upon any information
not expressly set forth in this prospectus.
(i)
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information contained in this prospectus includes forward-looking
information which can be identified by forward-looking terminology like
"believes," "expects," "intends," "plans," "may," "will," "should,"
"anticipates," "expects," and similar words. This type of forward-looking
information is based upon management's expectations of future events given its
current knowledge of factors affecting our business. The differences between
expected outcomes and actual results can be material, depending upon the
circumstances. Where we express an expectation or belief as to future results in
any forward-looking information, that expectation or belief is expressed in good
faith and is believed to have a reasonable basis. We can provide no assurance
that the statement of expectation or belief will prove to be accurate.
The principal risks of this offering are described in more detail under
"Risk Factors."
We do not undertake to update our forward-looking statements to reflect
future events or circumstances, other than as required by law.
(ii)
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in
this prospectus. You should read the entire prospectus carefully, including
"Risk Factors" and our consolidated financial statements, before making an
investment decision.
OUR BUSINESS
Our strategy is in reaction to the increasing consolidation of the
airline industry. We intend to offer reasonably priced vacation packages with
nonstop service from numerous U.S. metropolitan areas where non-stop airline
service to selected vacation destinations currently is not available. Passengers
now must take burdensome connecting flights to reach their destination.
Our non-stop "point to point" flights will attempt to reduce travel
times, thereby increasing vacation times. Whenever possible, we will depart from
less stressful, smaller and less congested airports. Our customers will have a
choice of quality accommodations pre-approved by us. Our vacation packages will
often cost less than accommodations and air travel booked separately. Our goal
is to become the best choice for the modern trend of 3, 4 and 7 day getaway
vacations.
As a result of airline consolidation, non-hub airport cities generally
have fewer non-stop flights to non-hub airports than in the past. We hope to
exploit this niche. Based on our experience and our evaluation of the air travel
industry, we believe our service and product offerings will attract sufficient
passengers to be successful and, at least at the outset, generate little direct
competition.
The key to the success of our business model is our financing plan. Our
goal is to be largely debt free. We plan to purchase quality used aircraft at
lower costs than comparable new aircraft. We plan to use the proceeds from this
offering to acquire these aircraft for cash and avoid the financing costs
associated with aircraft lease payments. We expect to earn money from leasing
our aircraft and providing ad hoc service for tour operators, other airlines,
and cruise lines while we establish our core product vacation packages.
EXPECTED COMPETITION
At least at the outset we expect little competition from major airlines
which has caused the failure of new airlines, in the past. This is because we
intend to fly from each of our gateway U. S. cities to selected vacation
destinations only a few times per week. At this level of service we believe it
will not be profitable for large airlines to establish scheduled service for the
same routes.
HISTORY OF TOURJETS
Tourjets Airline Corporation was incorporated in April 2000 as
successor to Dove One, Inc., a small air taxi service established in 1990.
Tourjets' founders, Serge F. Feller and J. W. Korth & Company, purchased Dove
One in November 1999 to assist them in marketing flexible airline service to
tour operators and travel agents, utilizing medium size aircraft "wet-leased"
from other airlines for non-stop "point to point" flights. A wet lease covers
the aircraft, together with crew, maintenance and insurance. Mr. Feller had
identified this market niche while he worked as Executive Vice President of
World Airways.
In February of 2000, Dove One wet-leased a Boeing 737-200 with pilots
and crews from an unaffiliated airline on a short-term basis. Dove One then
contracted with tour operators to fly customers to vacation destinations in the
Caribbean and Bahamas. The operation ended in March 2000 when the aircraft Dove
One was using was no longer available.
After announcing this service to tour operators, aircraft travel
brokers and travel agents, Dove One received numerous inquiries for new nonstop
"point to point" service for vacationers. Because of the unavailability of other
suitable aircraft for lease at the time and the high costs of wet-leasing
aircraft, the founders decided to start a new airline to provide this service,
and founded Tourjets.
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Immediately after the formation of Tourjets, we began negotiations with
a major airline, Inc. to acquire aircraft. These negotiations resulted in a
non-binding Memorandum of Understanding (MOU) between Tourjets and a major
airline to acquire six MD-82 aircraft. Under the MOU, Tourjets will take
delivery of the aircraft on a staggered schedule. Prior to delivery, the major
airline will lease the aircraft from Tourjets at a market rate. We expect to use
the lease payments, which we expect to amount to approximately $4.5 million, to
offset most if not all of the expenses we expect to incur in the development of
Tourjets prior to our commencement of service.
We will need to reach a final agreement with the major airline before
we can buy the six aircraft. If we are unable to do so, we will seek to buy
suitable aircraft from another source. We expect, based on current market
conditions, that we will not have substantial difficulty in obtaining
alternative aircraft at reasonable prices if we do not consummate the a major
airline transaction. However, we may be unable to lease these aircraft quickly
or at all, which would adversely affect our results of operations.
We have not begun commercial operations as Tourjets Airline
Corporation. We are in the process of completing the required certification from
the Department of Transportation (DOT) and the Federal Aviation Administration
(FAA). As soon as we have successfully closed this offering, we will acquire the
aircraft in order to complete the certification. We hope to obtain DOT and FAA
certification and begin operations within 120 days of completion of this
offering.
OUR STRATEGY
We plan to market our Tourjets Non-Stop Vacations(sm) through three
major channels: travel agents, corporate travel desks and direct to customers
via the Internet. We will take advantage of an Internet reservation system,
which offers diverse and less expensive sales distribution than conventional
reservation systems from the past.
Our core strategy will be to provide vacation packages (a) taking less
travel time, (b) with convenient schedules and (c) through a single point of
contact. We believe we will be the first regional-sized airline to build itself
around these features. By following this strategy, we intend to become the
leader in getaway vacation packages.
We believe we can offer these attractive vacations and operate at a
profit for these reasons:
- Controlled Growth in Selected Markets. We plan to grow our
operations plane-by-plane in carefully selected markets that have
a demonstrated demand for vacation travel to our planned
destinations but do not have non-stop service. For each aircraft
we take into service we will link three U.S. gateway cities to
one vacation destination, with several flights per week. As we
add aircraft, we will increase vacation destination options from
gateway cities.
- Less Expensive "Point To Point" Non-Stop Service. Unlike hub
airline operations, we will not have to carry passengers often
hundreds of miles out of their way through the "hub" airports.
This will save on fuel, crew, maintenance, and landing fees and
airport fees.
- Economic, Reliable Aircraft. We believe the MD-80 series aircraft
we intend to use are highly reliable, noise compliant and
relatively fuel-efficient.
- Flexible Aircraft Deployment. We will not be locked into
unprofitable fixed schedules; when appropriate, we should be able
to deploy our aircraft readily and inexpensively into new
markets.
- Hotel Booking Profits. When we buy hotel rooms directly in bulk
and resell them to our customers, we will save commissions paid
to third-party agents and expect to earn profits on the resale of
the rooms.
- Aircraft To Be Owned Outright Rather Than Leased or Financed. The
cost of owning an aircraft is substantially less than leasing
one.
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We also intend to supplement our Tourjets Non-Stop Vacations(sm)
revenue with income from ad-hoc charters, by serving tour operators, cruise
lines, corporate incentive groups and the U.S. military.
Currently, tour operators offer travel vacation packages, utilizing
scheduled and non-scheduled air carriers to travel to vacation destinations.
When using scheduled air carriers, customers are often limited to existing
schedules and may be required to make several connections prior to arrival at
their final destination. We will operate independently of tour operators. By
maintaining our own aircraft and flight schedule and arranging accommodations
ourselves, we believe our Tourjets Non-Stop Vacations(sm) will fill a niche in
an underserved market by providing non-stop service from non-hub airports to
vacation destinations. We believe that the capital resources and industry
expertise necessary to offer integrated air service are substantial barriers to
entry in our market niche.
If we meet our goal, we expect to be able to operate profitably, and
grow in a steady and orderly fashion. In the event that our business grows less
quickly, we have the ability to limit our expenses and lease our aircraft to
other airlines.
Our business plan is subject to risks, which are described under "Risk
Factors." There is no assurance that we will obtain the required authorities
from DOT and the FAA in the projected timeframe or meet our financial goals.
OUR ADDRESS
Our corporate communications office is located at 4225 Ingraham
Highway, Miami, Florida 33133. Our telephone number at that address is (305)
668-5119. Corporate headquarters, operations and maintenance is located at the
Ft. Lauderdale-Hollywood Airport, 750 SW 34th Street, Suite 207, Ft. Lauderdale,
Florida 33315. Our airplane basis will be established in selected vacation
destinations. The Website is located at www.tourjets.com. The information
contained on our Website is not part of this prospectus.
3
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THE OFFERING
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Common stock offered by Tourjets ............................. 6,250,000 shares
Common stock to be outstanding after this offering ........... 8,333,333 shares
Use of proceeds .............................................. Acquisition of six MD-80 series
aircraft, FAA certification expenses,
and general working capital.
Trading ...................................................... We have applied to list our common
stock on under the
symbol .
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below, together with all of the
other information contained in this prospectus (including our financial
statements and related notes), before you decide to purchase shares of our
common stock. YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
IF WE DO NOT OBTAIN OPERATING AUTHORITY FROM THE FEDERAL GOVERNMENT, WE
WILL NOT BE PERMITTED TO OPERATE. We have applied for the required certification
from the DOT and the FAA to operate as a domestic and international airline.
Although we expect to receive these approvals within six months, there is no
assurance that we will receive these approvals within this time period or at
all. We cannot begin operations without these approvals.
OBTAINING THE REQUIRED OPERATING AUTHORITY WILL BE TIME-CONSUMING AND
EXPENSIVE. The DOT and FAA application processes are costly. FAA certification
alone can cost up to $2,000,000 in testing and training our aircraft and
personnel, and can take four to six months or longer. A delay beyond six months
would likely cost between $100,000 and $150,000 per month in salaries and
overhead.
WE MAY NOT BE ABLE TO CONSUMMATE OUR AGREEMENT WITH US AIRWAYS TO
ACQUIRE SIX AIRCRAFT OR ACQUIRE OTHER SUITABLE AIRCRAFT AT REASONABLE PRICES.
The success of our business plan depends on our ability to buy appropriate
aircraft at reasonable prices. The market for buying used medium-sized, single
aisle aircraft like the MD-80 series has varied over the years. Substantial
changes in price and availability can occur over as little time as a few months.
We may not finalize our plan to buy six MD-82 aircraft we believe that there
will be available aircraft that meet our requirements at a reasonable price,
there are there is no assurance that we will be able to buy planes on terms as
favorable as those contemplated in the MOU with the or at all.
WE CANNOT GUARANTEE THAT ANY AIRCRAFT WE PURCHASE WILL BE FREE FROM
LATENT DEFECTS. We do not anticipate that the purchase contracts for our
aircraft will provide us with any representations as to the quality of the
aircraft. While we intend to hire third-party contractors to inspect any
aircraft prior to purchase, there can be no assurance that the aircraft we
purchase will be free from latent defects. In the event that the aircraft
contain latent defects, the cost to repair the defects may be substantial, and
there can be no assurance that we will be able to recover the cost of these
repairs from the third-party contractor that performed the inspection. In
addition, in the event that we purchase aircraft with deficient documentation,
the FAA could require us at our expense to repeat or physically confirm
previously accomplished maintenance and modification as well as impose a fine
upon us or revoke the Certificate of Airworthiness of the aircraft at issue.
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OUR EXTREMELY LIMITED OPERATING HISTORY PROVIDES LITTLE OR NO BASIS FOR
ASSESSING OUR FUTURE PERFORMANCE. We have no operating experience as a separate
corporation. Our founders' operating experience with respect to our business
plan is limited to a brief period during which they operated as Dove One. While
they generated a small net profit, we cannot assure you that we will be able to
duplicate this result during normal business operations, because our expenses
might be higher or our revenues lower, or both, than they were during this brief
period. If we are unable to lease our aircraft to other carriers at market
rates, we will have no operating revenue to offset expense while we attempt to
complete the FAA and DOT application processes in order that we may commence
flight operations. There can be no assurance, even if we obtain the required
certification to operate, that customers will purchase our vacation packages or
that we will ever become profitable. If we fail to achieve profitability in
accordance with our business plan and investors' expectations, the losses could
adversely affect the market price of our common stock as well as our financial
condition and results of operations.
AS A NEW COMPANY WITH NO NAME RECOGNITION, WE MAY HAVE DIFFICULTY
BUILDING OUR "BRAND." Although all key employees we expect to hire have
extensive experience in the airline industry, we have not conducted operations
under the Tourjets name. This means that we will have little or no name
recognition among potential customers. As a new company, we will work to
establish name recognition and build brand loyalty. There can be no assurance
that we will be successful in establishing name recognition or building brand
loyalty, which could adversely affect our ability to attract customers and, as a
result, could adversely affect our results of operations.
OUR INITIAL DEPENDENCE ON LIMITED NUMBER OF MARKETS AND ROUTES MAY
LEAVE US MORE VULNERABLE TO FAILURE IN THOSE MARKETS. At the outset of our
operations, we will be operating from a limited number of markets to a limited
number of vacation destinations. While we will not be tied down to any one
market, our small size and initial lack of diversification will make us more
vulnerable to the failure of our strategy in the initial markets we choose to
serve.
OUR INITIAL DEPENDENCE ON A SMALL NUMBER OF AIRCRAFT WILL MAKE US MORE
VULNERABLE TO UNAVAILABILITY OF THOSE AIRCRAFT. At the outset of our operations,
we will be operating with a relatively small number of aircraft. If any one of
those aircraft becomes unavailable for us to use in operations, it will be more
difficult for us than for a larger airline with more aircraft to fill the gap in
service from our other aircraft. If our other aircraft are unavailable, we would
have to lease another aircraft from an outside source in order to fill that gap,
or we would have to do without the revenues that would be earned from the
operations of the unavailable aircraft. In either case, the profitability of our
operations would be adversely affected.
IN THE EVENT OUR PLANS CHANGE OR OUR ASSUMPTIONS CHANGE OR PROVE TO BE
INACCURATE, WE COULD BE REQUIRED TO SEEK ADDITIONAL FINANCING. There can be no
assurance that proceeds from this offering will be sufficient to fund our
operations without requiring additional financing. The terms and prices of any
additional financing may be significantly more or less favorable than those of
this offering. We do not have any 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 some aspects of our
operations. Lack of adequate additional funds could materially adversely affect
our business, financial condition, and results of operations.
OUR ABILITY TO GROW WILL BE DEPENDENT ON OBTAINING ADDITIONAL CAPITAL.
The net proceeds from this offering should enable us to acquire and operate six
aircraft. Our ability to expand beyond this level will be dependent on our
raising substantial additional capital, either through borrowings or sales of
securities. There can be no assurance that we will be able to borrow money or
that market conditions will permit us to raise additional funds through sale of
additional securities on terms acceptable to us, or at all.
OUR BUSINESS MAY BE SEASONAL IN NATURE. Our primary business model is
based on travel from U.S. metropolitan areas with no nonstop service to selected
vacation destinations. We intend to offer travel to destinations in Mexico and
the Caribbean during the cold weather months in the U.S., and to national parks
and other U.S. and Canadian vacation destinations during warm weather months in
the U.S. Our revenues may vary from quarter to quarter and season to season
because of differing travel patterns during the year.
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IF THE TREND TOWARDS GETAWAY VACATIONS CHANGE, WE MAY HAVE TO REVISE
OUR BUSINESS PLAN. We believe that this trend is well established and not likely
to diminish over the next several years. It is one of the principal assumptions
on which our business plan is based. If the situation changes, it will likely
require us to refocus our business.
WE MAY FACE HEAVY AND COSTLY COMPETITION. While our business plan does
not contemplate substantial direct competition with scheduled airlines, there
can be no assurance that, despite our strategy, we will not face price-cutting
competition. Many airlines have far more capital available to them than we
expect to. If our model is successful, larger airlines can compete with us by
offering comparable service at a lower price than we could afford to offer.
Since the deregulation of the airline industry in the late 1970s, many new
airlines have started business, but have failed to compete successfully with
established airlines.
OUR EVALUATION OF THE MARKET MAY BE INCORRECT. Our business plan for
the continuing implementation of our business strategy is based upon the
experience, judgment and assumptions of management, upon available market
information, and upon the results of Dove One. There is no assurance, however,
that our analysis is accurate or that we will, in fact, be able to follow our
business plan or operate successfully.
WE MAY HAVE LARGE FINANCING COSTS WHETHER OR NOT WE CAN GENERATE
REVENUES. We plan to purchase aircraft from the proceeds of this offering. If we
are unable to buy the needed aircraft at reasonable prices, we may decide to
lease aircraft or buy aircraft partially on credit. If we lease our aircraft, we
will have to make substantial lease payments. If we buy our aircraft partially
on credit, we will have to borrow part of the cost and thus will have to make
interest payments on the debt. In either case, lease payments or interest
payments on the aircraft must be made even if there is no revenue from which to
make the payments. If we are unable to attract enough business or our costs are
higher than we expect, these lease or interest payments could result in
substantial losses and the discontinuation of our operations.
OUR REVENUES COULD BE ADVERSELY AFFECTED BY OUR RELATIONSHIP WITH
TRAVEL AGENTS. Our revenues will be partially dependent on our being recommended
by travel agents to their customers. We expect travel agents to be particularly
sensitive to the level and reliability of service we provide. While we
anticipate paying a 15% commission to travel agents, which is higher than the
level of commission being paid by the major airlines, travel agents may be
unwilling to recommend our service to their customers until we have operated
reliably with a high level of service for a period of time. If we do not gain
favor, or we lose favor, with travel agents, this could adversely affect our
results of operations.
OUR COSTS COULD INCREASE IF THE NUMBERS OF FERRY FLIGHTS ARE GREATER
THAN WE EXPECT. One of the principal ways that we intend to minimize our costs
is to schedule flights in a way that minimizes "ferry flying," the repositioning
of aircraft without paying passengers. In the event that we are unable to
schedule "back-to-back" flights to the same vacation destination, our number of
ferry flights will increase, resulting in an increase in costs. This cost
increase could adversely affect our results of operations and financial
condition.
WE MAY HAVE HIGHER LABOR COSTS IF OUR EMPLOYEES UNIONIZE. Our business
plan is based on salary scales comparable to other airlines, some of which are
unionized. While we intend to treat and compensate our employees fairly and
comply with the labor laws, we may not be able to prevent unionization of our
work force. Resulting wage scales and work rules would likely increase our costs
and make it more difficult for us to operate competitively.
IF SERVICE CONTRACTORS DO NOT PERFORM PROPERLY, IT COULD ADVERSELY
AFFECT OUR OPERATIONS. We will enter into agreements with contractors to provide
equipment, facilities and services required for support operations. These will
include baggage and ground handling services, aircraft maintenance, and
specialized personnel training. The quality, cost and timely performance of
these services is not under our control. In the event that the performance of
the third-party contractors is unsatisfactory or delayed, it could require us to
engage additional contractors to maintain schedule commitments, resulting in
increased cost. In addition, unsatisfactory work by third-party contractors
could adversely affect our operations by creating delays in our service to our
customers, subjecting us to fines and penalties from the FAA as well as subject
us to increased liability that may result from the work of the third-party
contractors.
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SINCE WE WILL RELY ON A THIRD PARTY VENDOR TO MAINTAIN OUR RESERVATION
DATABASE, OUR REVENUES COULD BE ADVERSELY AFFECTED BY ANY SERVICE INTERRUPTION.
Only the largest airlines maintain their own reservation databases. Others rely
on third party vendors to provide this service. We expect to use an Internet
based ticketless reservation system owned and managed by a third party vendor.
In the event such vendor ceases business operations or otherwise cannot provide
us service, we would have to change vendors. Any interruption in our reservation
database service could limit or eliminate our ability to receive reservations,
which would have an immediate negative effect on our revenues.
IF WE ARE UNABLE TO MAKE THE DESIRED ARRANGEMENTS WITH HOTELS, WE MAY
HAVE HIGHER COSTS THAN WE ANTICIPATE. We assume that we will be able to obtain
rooms for our Tourjets Non-Stop Vacation(sm) passengers on a bulk discount
basis, as is generally the case for other tour operators. If we are unable to do
so, our costs will be higher than we currently anticipate, and therefore either
our prices to our passengers will increase or our margins will decrease. We do
not currently have any contracts with any hotel or travel agency.
WE WILL BE DEPENDENT ON THE EFFORTS OF A FEW KEY OFFICERS. Almost all
of the planning for our launching and operation of our business has been
performed by Serge F. Feller and James W. Korth. Our business could
substantially suffer, or our success be prevented, if either of them become
unavailable to us as our business progresses.
RISKS RELATED TO THE AIRLINE INDUSTRY GENERALLY
WE MAY NOT BE ABLE TO CONTROL OUR COSTS ADEQUATELY. The airline
industry, historically, has low gross profit margins with high fixed costs in
comparison to revenues. We believe we will be able to operate in a cost
effective manner, but if we are unable to do so and lower costs cannot be
achieved, it could adversely affect our results of operations.
WE WILL BE VULNERABLE TO INCREASED COSTS. The operation of an aircraft
depends on fuel, insurance costs, the payment of taxes, ground handling fees,
airport fees and other expenses all of which may increase from time to time.
These costs could rise faster than our ability to raise our prices or otherwise
generate the cash to pay increased costs. Rising costs could limit or eliminate
our ability to operate profitably. 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.
WE MAY INCUR SUBSTANTIAL LOSSES IN THE EVENT OF AN AIRCRAFT ACCIDENT.
We may incur substantial losses in the event of an aircraft accident. These
losses may include the repair or replacement of a damaged aircraft, and the
consequent temporary or permanent loss of the aircraft from service, as well as
claims of injured passengers and other persons. We will be required by the DOT
to carry liability insurance on each of our aircraft. We expect to maintain
public liability insurance in the amount of at least $500,000,000. Although we
believe our insurance coverage is adequate, we cannot assure you that the amount
of our insurance coverage will not be changed or that we will not be forced to
bear substantial losses from accidents. Substantial claims resulting from an
accident could have a material adverse effect on our business, operations and
financial results and could seriously inhibit passenger acceptance of our
services.
AIRLINES AND RELATED BUSINESS ARE VULNERABLE TO LABOR DISPUTES. The
airline industry is heavily unionized and has a history of labor disputes and
work stoppages and slowdowns. These factors could stop our operations even if
the labor disputes occur at another company, like a ground handling company or a
supplier of fuel on which we rely. Any stoppages or slowdowns could adversely
affect our operations.
AIRLINES ARE 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 us.
7
<PAGE> 13
OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY THE COST OF COMPLIANCE WITH
PRESENT AND FUTURE FEDERAL REGULATIONS. We must obtain and maintain the
necessary authorization from several government agencies to commence flight
operations, including a Certificate of Public Convenience and Necessity from DOT
and an operating certificate from the FAA. The DOT principally regulates
economic matters affecting air service, including air carrier certification and
fitness, insurance, and other economic operational matters. The FAA primarily
regulates flight operations, especially matters affecting air safety, including
airworthiness requirements for each type of aircraft and pilot and crew
certification, and anti-noise restrictions on certain kinds of engines. Our
authority, if we obtain it, will be 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. Because we are
a new airline, the FAA will maintain increased surveillance and scrutiny of our
operations for up to five years. In recent years, the FAA has issued or proposed
mandates relating to, among other things, collision avoidance systems, airborne
windshear avoidance systems, noise abatement, and increased inspections and
maintenance procedures. There is no assurance that we will be able to comply
with present and future federal regulations, including any additional
safety-oriented regulations adopted by the FAA, and, if we are able to comply,
this compliance could result in a substantial expense and could adversely affect
our operations. If we are found by the FAA not to be in compliance with their
regulations, we could be subject to fines, suspension of operating authority or
criminal charges, any of which could adversely affect our operations.
FAA REGULATIONS WILL REQUIRE US TO EXPEND A SIGNIFICANT AMOUNT OF MONEY
IN ORDER TO REMAIN IN COMPLIANCE. FAA regulations will require us to replace the
insulation blankets on the aircraft we intend to purchase from a major airline
by June 30, 2005 at an estimated cost of approximately $545,000 per aircraft.
There can be no assurance that the cost of this work will not exceed this
estimate or that we will not be required to expend significant additional
funds to comply with other FAA regulations for these aircraft or other
aircraft acquired by us. The cost of this compliance could have an adverse
effect on our results of operations and financial condition.
OUR BUSINESS IS HEAVILY AFFECTED BY OTHER GOVERNMENT REGULATION. The
aircraft industry is highly regulated and scrutinized continuously by the
federal government and foreign governments. It is possible that regulatory
action could have an adverse impact on our business.
OUR BUSINESS IS SUSCEPTIBLE TO POLITICAL RISK IN FOREIGN COUNTRIES. We
will be landing some of our aircraft in foreign countries. A war, domestic
disturbances, or a disagreement between the foreign country and the United
States could cause a confiscation of our aircraft or otherwise limit our ability
to carry on our business.
RISKS RELATED TO THIS OFFERING
INVESTORS WILL INCUR IMMEDIATE DILUTION AND MAY EXPERIENCE FURTHER
DILUTION. If you purchase shares in this offering, you will experience immediate
and substantial dilution of $3.70 in pro forma net tangible book value per share
based on our book value as of October 31, 2000. Net tangible book value per
share represents the amount of our total assets less our total liabilities,
divided by the number of shares of our common stock outstanding immediately
after the offering. Our existing stockholders paid an average price per share of
$.07, and will therefore have an average unrealized gain of $8.32 per share
based upon the initial public offering price of $12.00.
OUR STOCK PRICE COULD BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL
LOSSES FOR INVESTORS PURCHASING SHARES IN THIS OFFERING AND COULD RESULT IN
LITIGATION. The trading price of our stock is likely to be volatile. The stock
market has experienced extreme volatility in recent years. We cannot be sure
that an active public market for our stock will develop or continue after this
offering. Investors may not be able to sell their stock at or above our initial
public offering price. The price for our stock will be determined in the
marketplace and may be influenced by many factors, including the following:
- variations in our financial results or those of companies that
are perceived to be similar to ours;
- changes in earnings estimates by industry research analysts;
- investors' perceptions of us; and
- general economic, industry and market conditions.
8
<PAGE> 14
In the past, companies that have experienced volatility in the market
price of their stock have been the objects of securities class action
litigation. If we were the object of securities class action litigation, it
could result in substantial costs and a diversion of our management's attention
and resources and may therefore have a material adverse effect on our business,
financial condition and results of operations.
NO PUBLIC MARKET HAS EXISTED FOR OUR SHARES AND AN ACTIVE TRADING
MARKET MAY NOT DEVELOP OR BE SUSTAINED. Before this offering, there has been no
public market for our common stock. We cannot assure you that an active trading
market will develop or be sustained after this offering. You may not be able to
resell your shares at or above the initial public offering price. There can be
no assurance that the market price of our common stock after this offering will
relate to our book value, assets, past operating results, financial condition or
other established criteria of value. Therefore, the initial public offering
price may not be indicative of the market price for our shares of common stock
after this offering.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK AFTER
THIS OFFERING MAY CAUSE OUR STOCK PRICE TO FALL. The market price of our shares
of common stock could decline as a result of sales of substantial amounts of our
common stock in the public market after the closing of this offering or the
perception that substantial sales could occur. These sales also might make it
difficult for us to sell shares in the future at a time and at a price that we
deem appropriate.
After this offering, we will have 8,333,333 outstanding shares of
common stock. This number includes 6,250,000 shares we are selling in this
offering, which may be resold immediately in the public market. The remaining
2,083,333 shares, or 25.0% of our total outstanding shares, are restricted from
immediate resale under the federal securities laws and lock-up agreements
between our current stockholders and the underwriter, but may be sold into the
market in the near future. These shares will become available for sale at
various times following the expiration of the lock-up agreements, which is 180
days after the effective date of the registration statement that includes this
prospectus, subject to volume limitations under Rule 144 of the Securities Act
of 1933.
OUR BOARD OF DIRECTORS HAS THE AUTHORITY TO ISSUE PREFERRED STOCK,
WHICH COULD DETER TAKEOVER BIDS EVEN IF THOSE BIDS ARE IN THE STOCKHOLDERS' BEST
INTERESTS. We have 50,000,000 shares of authorized and unissued preferred stock.
These shares of preferred stock could be issued to third parties selected by
management or used as the basis for a stockholders' rights plan, which could
have the effect of deterring potential acquirers. The ability of the board of
directors to establish the terms and provisions of different series of preferred
stock could discourage unsolicited takeover bids from third parties even if
those bids are in the stockholders' best interests.
WE MAY NOT BE ABLE TO MAINTAIN THE LISTING OF OUR COMMON STOCK ON THE
, AND PENNY STOCK RULES MAY APPLY TO THE SALE OF OUR COMMON STOCK,
WHICH, IN EACH CASE, WOULD MAKE IT MORE DIFFICULT FOR STOCKHOLDERS TO DISPOSE OF
OUR COMMON STOCK. We have applied for listing of our common stock on the .
Even if it is accepted for listing, we cannot guarantee that it will always be
listed. The rules for continual listing include stockholders' equity
requirements, which we may not meet if we experience losses, and market value
requirements, which we may not meet if the price of the common stock declines.
If our common stock is delisted from the , trading in our common stock
would be conducted, if at all, in the over-the-counter market. This would make
it more difficult for stockholders to dispose of their common stock and more
difficult to obtain accurate quotations on our common stock. This could have an
adverse effect on the price of the common stock.
9
<PAGE> 15
The Securities and Exchange Commission (SEC) has adopted regulations
that define "penny stock" to include common stock that has a market price of
less than $5.00 per share, subject to certain exceptions. These rules include
the following requirements:
- broker-dealers must deliver, prior to the transaction, a
disclosure schedule prepared by the SEC relating to the penny
stock market;
- broker-dealers must disclose the commissions payable to the
broker-dealer and its registered representative;
- broker-dealers must disclose current quotations for the
securities;
- if a broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker- dealer's presumed control
over the market; and
- a broker-dealer must furnish its customers with monthly
statements disclosing recent price information for all penny
stocks held in the customer's account and information on the
limited market in penny stocks.
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.
Many securities listed on the would be covered by the
definition of penny stock, but transactions in a security listed on the
are exempt from such rules (except the "sole market-maker"
provision mentioned in point (d) above) if the issuer has $2,000,000 in tangible
assets, the customer is an institutional accredited investor, and the
transaction is not recommended by the broker-dealer. These disclosure
requirements may have the effect of reducing the level of trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
USE OF PROCEEDS
The net proceeds to us from the sale of the shares of common stock in
this offering are estimated at $69.4 million (approximately $76.3 million if the
underwriter exercises the over-allotment option in full), after deducting the
underwriting discounts and commissions and offering expenses payable by us.
The company will use the net proceeds of the offering for the
acquisition of aircraft, pre-certification expenses and general corporate
purposes, including working capital.
The amounts and timing of expenditures for each purpose is subject to
the broad discretion of the management and will depend on the amount of net
proceeds available to us and the effects of competition, many of which are
beyond our control. 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.
The following table represents our expected use of proceeds from the
sale of stock in this offering. See "The Offering" and "Management's Discussion
and Analysis of Financial Condition and Plan of Operations."
<TABLE>
<CAPTION>
AREA OF USE ESTIMATED AMOUNT
----------- ----------------
<S> <C>
Gross proceeds from offering ......................... $75,000,000
Less offering expenses ............................... 350,000
Less underwriting discounts and commissions........... 5,250,000
-----------
Net Proceeds from Offering ........................... 69,400,000
Less FAA & DOT certification expenses ................ 2,000,000
Less acquisition cost of 6 MD-80 Aircraft ............ 54,000,000
-----------
General working capital .............................. 13,400,000
</TABLE>
10
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of Tourjets Airline
Corporation as of October 31, 2000 and as adjusted for the sale of $75,000,000
in common stock and for a 1-for-2.21 reverse stock split and the application of
the net proceeds of the offering. This information should be read in conjunction
with the financial statements and related notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 2000
--------------------------
ACTUAL PRO FORMA
--------- -----------
<S> <C> <C>
Accounts payable....................................... $ 73,148 $ 73,148
Due to stockholders 147,725 147,725
(Including FAA & DOT Certification Notes)..............
Total current liabilities.............................. $ 220,873 $ 220,873
Stockholders' Equity (deficit):
Preferred shares, 50,000,000 shares authorized,
$0.001 par value, no shares outstanding:
Common shares, 50,000,000 shares
authorized, $0.001 par value, 4,605,000
shares outstanding (actual) 8,333,333 4,605 8,333
shares outstanding (pro forma)................
Additional paid-in capital.................... 143,428 69,539,700
Accumulated deficit........................... (341,507) (341,540)
--------- -----------
Total stockholders' equity (deficit).......... (193,507) 69,206,493
--------- -----------
Total capitalization.......................... $ 27,377 $69,427,366
========= ===========
</TABLE>
DIVIDEND POLICY
Since inception on April 3, 2000, we have not declared or paid any cash
dividends on our capital stock. We intend to pay dividends as soon as we are
profitable, though we cannot assure you when or if that will occur. Any future
dividends will be paid at the discretion of our board of directors and will be
dependent on our financial condition, results of operations, capital
requirements and any other factors as the board deems relevant.
DILUTION
As of October 31, 2000, our net tangible book value was $(193,507) or
$(0.09) per share of our common stock. Net tangible book value per share of
common stock is determined by dividing our tangible net worth (total tangible
assets less total liabilities) by the aggregate number of shares of common stock
outstanding.
Dilution is determined by subtracting net tangible book value per share
after the offering from the initial public offering price per share. After
giving effect to the 1-for-2.21 reverse stock split, the sale of 6,250,000 new
shares of common stock in this offering at an assumed public offering price of
$12.00 per share, and after deducting underwriting discounts and commissions and
estimated offering expenses, our net tangible book value as of October 31, 2000
would have been $69,206,493 or $8.30 per share of our common stock. This
represents an immediate increase in our net tangible book value of $8.39 per
share to current shareholders and an immediate dilution of $3.70 per share to
new investors purchasing our common stock in this offering.
11
<PAGE> 17
The following table illustrates the foregoing information as of October
31, 2000 with respect to dilution to new purchasers of common stock:
<TABLE>
<S> <C> <C>
Assumed public offering price per share............................. $ 12.00
Number of new shares sold........................................... 6,250,000
Net tangible book value per share at October 31, 2000........ $ (.09)
Increase in net tangible book value per share attributable to
this offering................................................ 8.39
-------
Pro forma net tangible book value per share after this offering..... 8.30
----------
Dilution per share to new investors................................. $ 3.70
==========
</TABLE>
The following table summarizes, assuming 6,250,000 shares sold pursuant
to this Offering, as of October 31, 2000, the number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by Founding Stockholders and by new investors at an assumed offering
price of $12.00 per share and before deducting the underwriting discount and
assumed offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------------ ---------------------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Investors in this offering............ 6,250,000 75% $75,000,000 99.80% $ 12.00
Current stockholders.................. 2,083,333 25% 148,033 0.20% 0.07
--------- ----- ----------- ------ -------
Total................................. 8,333,333 100.0% $75,148,033 100.00%
========= ===== =========== ======
</TABLE>
The foregoing table excludes 1,250,000 shares of common stock reserved
for issuance under our stock option plan, and 625,000 shares for the
underwriter's over-allotment option granted in connection with this offering.
12
<PAGE> 18
SELECTED FINANCIAL DATA
We derived the selected financial data presented below from our
historical financial statements, and related notes included in another part of
this prospectus. You should read the selected financial data together with our
financial statements and the section of the prospectus entitled, "Management's
Discussion and Analysis of Financial Condition and Plan of Operations." Kaufman
Rossin & Co., independent certified public accountants, audited our financial
statements for the period from inception (April 3, 2000) through October 31,
2000 and the statement of income of Dove One from commencement of operations
(February 15, 2000) to March 24, 2000. The pro forma balance sheet for October
31, 2000 assumes that the proposed offering was consummated on October 31, 2000.
See the notes to the pro forma balance sheet beginning at page F-1 of this
prospectus for information containing the adjustments made in the pro forma
Balance Sheet.
SUMMARY FINANCIAL DATA
DOVE ONE - PREDECESSOR AND TOURJETS - SUCCESSOR
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR SUCCESSOR & PREDECESSOR
----------------- ---------------- -------------------------------
PERIOD FEB 15,
2000 PRO-FORMA
(OPERATIONS PERIOD APR 3, NINE MONTHS YEAR ENDED
COMMENCED) 2000 TO ENDED DEC. 31, 2000
TO MAR 24, 2000 OCT. 31, 2000 OCT. 31, 2000 (UNAUDITED)
----------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Charter Revenues................................ $ 488,028 $ -- $ 488,028 $ 488,0280
Other Income.................................... -- 2,688 2,688 2,688
Cost of charter revenues........................ 303,063 -- 303,063 303,063
--------- ---------- ----------- ----------
Gross profit............................... 184,965 2,688 187,653 187,653
Operating costs and expenses:
Ground services............................ 92,425 -- 92,425 92,425
Crew accommodations........................ 44,192 -- 44,192 44,192
Catering................................... 17,556 -- 17,556 17,556
Depreciation........................... 937 2,921 3,858 3,858
Selling, general and administrative........ 12,510 341,307 353,817 764,521
--------- ---------- ----------- ----------
Income (loss) before income taxes............... 17,345 (341,540) (324,195) (734,899)
Income taxes.................................... -- -- -- --
--------- ---------- ----------- ----------
Pro forma net income (loss)..................... $ 17,354 $ (341,540) $ (324,195) $ (734,899)
========= ========== =========== ==========
</TABLE>
BALANCE SHEET DATA
This unaudited pro forma information on the Balance Sheet does not
purport to present what our financial position would actually have been if the
transactions in fact occurred on those dates, or to project our financial
position for any future date or period. These unaudited financial statements
should be read in conjunction with historical statements of Tourjets and Dove
One.
The following referenced balance sheet is presented on a historical
basis and on a pro forma basis, as adjusted to reflect the net proceeds from the
sale of the common stock in this offering at an assumed price of $12.00 per
share of common stock; less a maximum of $5,250,000 in commission and offering
expenses of approximately $350,000; and the purchase of six MD 82 aircraft at
$9,000,000 each.
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 2000
------------------------------------------
BALANCE SHEET DATA: PRO FORMA
AS ADJUSTED
ACTUAL (UNAUDITED)
---------- --------------
<S> <C> <C>
Current assets.............................. $ -- $ 15,400
Property and equipment...................... 20,891 54,020,891
Other assets................................ 6,475 6,475
Total assets................................ 27,366 69,427,366
</TABLE>
13
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
RESULTS OF OPERATIONS
We are a successor to the business of Dove One Inc, a Delaware
corporation, which was incorporated in 1990. Since inception until 1998, Dove
One operated an air taxi service throughout Florida and the Bahamas with smaller
aircraft than Tourjets expects to use. Our founders acquired Dove One in
November 1999. Because the post-acquisition operations of Dove One are relevant
to an understanding of our business plan, we are including with this section a
discussion of Dove One's operations.
OPERATIONS OF DOVE ONE
Serge Feller and J.W. Korth & Company purchased all of the outstanding
stock of Dove One in November 1999. The company did not have an operating
aircraft at the time, but offered Mr. Feller and J. W. Korth & Company the
ability to implement their business plan through a corporate entity with a
10-year history in the aviation industry.
Upon purchasing Dove One, Mr. Feller contacted numerous tour operators
and aircraft brokers to determine their interest in using Dove One to arrange,
through certificated airlines, airline service for tour packages. Numerous tour
operators and aircraft brokers expressed positive interest in doing business
with Dove One.
Dove One then arranged, as agent for tour operators, flights using the
aircraft, personnel and ground facilities of Casino Express Airlines and Lorair,
two unrelated air carriers. Dove One contracted with these airlines to "wet
lease" a Boeing 737-200, along with crew, maintenance and insurance, for those
flights.
Dove One's first flight occurred on February 19, 2000 from Boston Logan
Airport to Montego Bay, Jamaica. Forty flights occurred on this basis from
February 19, 2000 to March 24, 2000, serving three different tour operators. The
flights were from Boston, Massachusetts to Curacao, Aruba, Nassau, Montego Bay,
Jamaica, and Ft. Lauderdale, Florida.
During this period, Dove One realized $488,000 in revenues from tour
operators and other airlines in need of substitute aircraft. Dove One's primary
customer relationship was with a tour operator, which contracted through Dove
One to arrange for flights. Dove One arranged for Casino to provide all of these
flights. The tour operator paid Casino $332,384 for the flights. In addition,
Dove One paid some of Casino's expenses (catering, ground handling and crew
stationing), amounting to $134,981 to third party vendors. Casino reimbursed
Dove One a portion of the amount paid by the tour operator ($23,701) and gave
Dove One credit for the $134,981 in expenses paid by Dove One. In addition, Dove
One arranged for additional flight hours' use of the aircraft of Casino and
Lorair. Dove One received $146,200 from these additional aircraft operations for
which it arranged these air services. Dove One paid the airlines $2,900 per
block hour, or $96,599. Dove One also paid $13,055 to transport the crew for
these flights to the point of operations.
Based on generally accepted accounting principles, Dove One generated
$488,028 in revenues, incurred $470,683 in expenses, including depreciation, and
had a net income of $17,345 for the 38 days it operated.
These figures have only limited significance for predicting how our
business can be expected to operate once we begin regular operations. Our
operations will differ from Dove One's operations in the following major
respects:
- Dove One "wet leased" its aircraft, which is the most expensive way of
paying for the use of aircraft and which is used in the airline
industry only in the event of a short-term shortage of available
aircraft. We expect to acquire and operate our own aircraft.
14
<PAGE> 20
- Dove One, by not employing its own full time personnel, incurred some
expenses ($44,000 to house crews in hotels during off-duty time and
$13,000 in crew transport expenses) that would not be expected under
normal operations. We believe that these expenses would be limited to
hotel accommodations during duty time in the normal course of
operations.
- Dove One had virtually no aircraft operations overhead, which was paid
by Casino. Once we begin operations, we will have substantial overhead,
i.e., employees, office and rental expenses, the level of which
overhead will depend on the number of aircraft and the scope of
sustained operations.
- Dove One's services involved one aircraft on a short-term basis. All
contract-related costs, including catering and ground services, were
acquired at or near consumer retail prices. We expect that our costs
for these items will be substantially less per unit.
On March 24, 2000, a truck operated by a ground services company
damaged the Boeing 737-200 aircraft while parked at Logan International Airport
in Boston, Massachusetts. Suitable substitute aircraft were not available at
that time to provide comparable services. Our founders decided to cease
operations as Dove One and form a new corporation, with the goal of becoming a
certified air carrier with its own aircraft fleet. The new corporation was
formed in April 2000, and, in September 2000, changed its name to Tourjets
Airline Corporation.
The results experienced during Dove One's operations helped the
founders to conclude that their business plan is sound and has a reasonable
chance to succeed when applied on a permanent basis through Tourjets. We feel
optimistic about our business model because Dove One's operations demonstrated
that there is an opportunity to develop substantial business in the market we
have targeted. Dove One attracted its business without substantial marketing
expense and with essentially no track record as an operating airline. Dove One
continues to receive inquiries from tour operators, aircraft travel brokers and
travel agents. We believe that with a reasonable amount of direct marketing to
travel agents, aircraft travel brokers and tour operators, we will be able to
increase the level of business Dove One was able to develop in the first quarter
of 2000.
TOURJETS AIRLINE CORPORATION
Since our incorporation on April 3, 2000, we have not engaged in any
commercial operations. We have devoted our efforts to establishing the business
plan, preparing for this offering, locating experienced officers and employees,
engaging directors, talking with owners of aircraft about possible purchases,
and developing necessary manuals for aircraft, maintenance and crew training.
We have applied to DOT for authority to operate in domestic and
international air transportation of persons, property and mail. The objection
period to our DOT application has expired without any objections having been
filed. On June 23, 2000, DOT informed us that further processing of our
application would await the filing of the Registration Statement for this
offering. Since the filing of our initial registration statement on July 17,
2000, DOT has reviewed the application in detail and has requested additional
information. This is normal for the application process, and all additional
requested information has been submitted. Based on our understanding of DOT
practices and procedures, we expect a "show cause" order (approval subject to
capitalization) to be issued within the near future.
We have also filed a PASI (Pre Application Statement of Intent) with
the FAA. The FAA has assigned a National Certification Team to assist the local
FAA office with the processing of our certification. We are involved in the
regular process of detailed FAA review of our proposed method of operations.
Final FAA approval will require us to demonstrate our capabilities with our
actual aircraft. Thus, until and unless we close this offering and are thereby
able to acquire aircraft, we will be unable to receive FAA approval.
15
<PAGE> 21
Since our formation in April 2000, we have not received any revenues,
and we are unable to offer flights until we receive DOT and FAA certification.
From inception through October 31, 2000, we have sustained cumulative losses of
$341,540 of which $136,624 was for offering cost, $168,000 was for consulting
fees, $12,600 was for professional fees, $3,918 for rent, $5,971 for travel,
$2,921 in depreciation and $14,194 for miscellaneous expenses. These losses have
resulted primarily from expenditures incurred in connection with general and
administrative activities, organization and development. Since October 31, 2000,
we have incurred additional expenses of approximately $393,359.
We expect to incur substantial costs in the future resulting from the
acquisition of aircraft, equipment, pre-certification costs, deposits, airport
service providers and fuel service. Additional expenses will include airport
facilities, maintenance costs, and marketing.
Our operating expenses will depend on several factors, including the
level of aircraft maintenance and repair expenses. Development of our planned
flights will depend upon economic factors that 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.
The risks, expenses and difficulties encountered by companies at an
early stage of development must be considered when evaluating our prospects. To
address these risks, we must, among other things, successfully develop and
commercialize our services, secure all necessary government approvals, respond
to competitive developments and continued government regulation, and continue to
attract, retain and motivate qualified persons.
LIQUIDITY AND CAPITAL RESOURCES
While Dove One, our predecessor company, generated $488,000 in revenue
within its first month of operation, Tourjets has not yet incurred any cash
flows from operations since inception. We have expended and expect to continue
to expend 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:
- obtaining sufficient funding to acquire aircraft and equipment;
- the successful commercialization of planned flights;
- fuel price and availability;
- hiring qualified personnel;
- keeping pace with government regulation;
- obtaining adequate insurance;
- the development of contractual agreements with airports; and
- the use of airport service providers.
Until we receive the proceeds from this offering, the principal
founders are financing the operation out of their own funds in the form of loans
to the Company. As of October 31, 2000, the company owed the founders $147,725.
Our monthly expenditures during this interim development period will be
approximately $35,000 per month.
Our principal founders (Serge F. Feller and J.W. Korth & Company) have
supplied all of the funds necessary to get started and pay the pre-filing
expenses of this offering. We have agreed to reimburse the founders for all of
the DOT, FAA and offering expenses incurred by them on behalf of the company. We
expect to defer the majority of the additional expenditures that are necessary
to carry out our business plan until adequate funds are on hand. The bulk of FAA
certification expenses will be incurred when sufficient funds are available from
this offering.
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Up to $5,600,000 of the proceeds from this offering will be spent on
underwriting fees, other expenses of this offering, and other start-up expenses.
This should leave enough money to cover pre-certification operational costs of
approximately $2,000,000 and the cost of acquiring the aircraft, and to leave
sufficient operating funds to meet DOT capital requirements. Under DOT
regulations, our business plan filed with the DOT requires us to have a minimum
of $6,187,000 in "spare cash" to obtain certification and commence 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 or less favorable
than those of this offering. We do not have any 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 some aspects of
our operations. Lack of adequate additional funds could materially adversely
affect our business, financial condition, and results of operations.
REVERSE STOCK SPLIT
Before closing of this offering we intend to complete a reverse split
of our common stock in which every 2.21 shares of common stock will be converted
into one share. As a result of the reverse stock split, after this offering our
current shareholders will own approximately 25% of our shares outstanding.
OUR BUSINESS
INTRODUCTION
Tourjets is the successor to Dove One, Inc. and was incorporated on
April 3, 2000. We intend to operate our own airplanes and to create, market and
provide complete getaway vacation packages. We are in the process of DOT and FAA
certification. If this offering is successfully completed, we intend to purchase
aircraft, complete the certification process, and commence operations.
OUR PRIMARY PRODUCT: TOURJETS NON-STOP VACATIONS(SM)
We will be offering nonstop scheduled flights to selected vacation
destinations from metropolitan areas not generally served by non-stop flights.
Customers will be able to choose their accommodations from pre-selected options
or create their own vacation itinerary online.
We will focus and capitalize on the growing trend of busy Americans to
take 3, 4, and 7-day getaway vacations. To do this efficiently and economically,
we will combine two traditionally separate entities, the airline and the tour
operator, to offer easy and affordable getaway vacations from secondary, less
crowded airports.
Our vacations will be booked through travel agents and on our website
on the Internet. Our non-stop "point to point" flights will offer the shortest
possible travel times and the longest possible vacation times. Wherever
possible, we will depart from less stressful, smaller, less congested airports.
We will also offer hotel accommodations together with air travel for one price.
Our vacation packages will be economical, often costing less than accommodations
and air travel booked separately.
We will focus on the numerous cities across the U.S. that currently
require passengers to take burdensome and time consuming connecting flights to
reach selected vacation destinations. For our customers from these cities, we
think our service will mean more vacation time and more relaxation and fun.
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OUR OPERATING MODEL
Key to our business plan is the financing plan. Our goal is to be a
generally debt free company. We plan to purchase quality used aircraft at much
lower costs than comparable new aircraft. We plan to own our planes outright.
Therefore, we will not have expensive lease or debt costs.
Our business plan has been built from the experience of operating our
predecessor company, Dove One, and from our analysis of the airline/travel
industry. We believe that, taken together, our experience, our plans and the
financing provided by this offering give us a high chance of success.
We intend to distribute these vacation packages to the public through
travel agents, corporate travel desks and directly via the Internet. We intend
to feature a high level of personal service by our cabin attendants and other
airline personnel in order to make our service as attractive as possible to
individual travelers.
Our core strategy will be to provide vacation packages (a) taking less
travel time, (b) with convenient schedules and (c) through a single point of
contact. We will be the first regional-sized airline to build itself around
these features. By following this strategy, we intend to become the leader in
getaway vacation packages.
Our research indicates that there is a market for this kind of service,
based on the continued growth of the vacation travel marketplace, domestic
economic prosperity, the travel industry trends discussed under "The Travel
Industry In General", and the results and experience of Dove One.
We believe the following key strategic advantages in our operating
model will allow us to offer these attractive vacations and operate at a profit:
- NON-STOP FLIGHTS. We will fly non-stop to vacation spots, thereby
adding many hours to the vacationers' actual vacation time. Vacation
travelers from many cities are often routed through connecting flights
before arriving at their final vacation destination. Although we will
be authorized to fly from all public airports, we plan to fly non-stop
from less congested, non-hub airports. Therefore, we will avoid
time-consuming connections. Shorter flight times will also save us fuel
and crew costs.
- COMPETITIVE PRICING. In addition to offering convenient and
comfortable flying and quality accommodations, our Tourjets Non Stop
Vacations(sm) will be priced competitively with prices for travel
packages offered by travel agents and major airlines. Also, based on
our study of recent newspaper advertisements and prices listed on the
Internet, we expect that our one-price packages will generally cost
less than comparable flights and accommodations bought separately.
- MD-82 AIRCRAFT. We intend to fly MD-80 series aircraft, which feature
five-across seating, fewer middle seating areas, and ample leg room.
- QUALITY SERVICE. We will feature quality food and beverage service,
with such low-cost and attractive features as chocolate truffles and
hot towels to all passengers.
- QUALITY PRE-APPROVED ACCOMMODATIONS. Vacationers booking Tourjets
Non-Stop Vacations(sm) will be staying in hotels that we have
pre-approved for quality and value. We intend to maintain the highest
quality of vacation destination accommodations to further enhance the
Tourjets brand.
- SERVICE-ORIENTED PERSONNEL. We plan to hire service-oriented personnel,
train them to provide superior service, and rate their performance on
the basis of customer satisfaction. Our goal is to provide our service
staff current, accurate information about flight delays and weather
conditions so that they can quickly communicate this information to our
customers.
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- SINGLE POINT OF CONTACT. We plan to provide our customers with a single
point of contact for all their vacation matters. Travelers on Tourjets
Non-Stop Vacations(sm) will have the comfort of knowing they can
contact us with their travel needs and questions. We will have an
international 24-hour help line for travel problems, extensive first
aid equipment on the aircraft with trained staff and a medical hot
line.
WHY WE BELIEVE WE CAN SUCCEED - TOURJETS ADVANTAGES
We have based our business plan and financial model on assumptions
involving the various aspects of our business: our expected financial structure,
the aircraft fleet, revenues, cost of our operations, and overhead. We believe
that our business model can be a financial success because of the following
reasons:
- EXPERIENCED PERSONNEL. Serge F. Feller, our Chairman, CEO & President,
has substantial aviation experience. During 1998 and 1999, he was
Executive Vice President of World Airways, Inc., a U.S. certified
charter and scheduled airline, where he directed the airlines sales and
marketing efforts and operations of the scheduled, charter and military
businesses, of that airline. During his tenure at World Airways, Mr.
Feller identified an underserved niche in the airline business and made
numerous contacts in the tour operator industry. He left World Airways
to fully develop the Tourjets business plan with J.W. Korth & Company.
During February and March 2000, the principal founders tested the
business plan as Dove One, Inc., developing tour operator business
utilizing unaffiliated airlines. In addition to Mr. Feller, we have
recruited a number of veteran airline executives to fill the key
positions needed to commence commercial operations. See "Management."
- ADEQUATE CAPITAL TO FUND OUR OPERATIONS. If our estimates of the amount
of capital necessary to start operations prove correct and our
operations go according to our economic forecast, we will avoid the
problems of inadequate cash resources that have crippled and ultimately
killed other start-up airlines. If we commence operations with
purchased aircraft, we believe that the net proceeds from this offering
will be sufficient to satisfy our cash requirements for at least
thirty-six months if we do not grow or make a profit.
- FLEXIBLE UTILIZATION OF AIRCRAFT AND ASSET DEPLOYMENT. Because we will
not need to commit to a long term and high frequency schedule, we will
have the advantage of not having to commit to the overhead
traditionally associated with major hub-operating scheduled carriers.
We also will have greater flexibility in scheduling. We intend to
maintain seasonal schedules to vacation destinations and subcontract
ground and passenger handling, catering, and fueling, enabling us to
switch destinations within a very short time frame. Once certificated,
we can readily file a public charter prospectus with the DOT and gain
approval to fly into new airports on comparatively short notice and
develop and offer a product targeted at that market. We can then choose
to retain or change the product, depending on how many people we fly
and the competitive pricing situation. In short, filing a public
charter prospectus with the DOT can, with relative ease, enable us to
test a new market and focus on those most responsive to our products.
- OWNING AIRCRAFT OUTRIGHT. By owning rather than leasing aircraft, we
will lower our cost of ownership of aircraft, providing a cushion that
costly leasing arrangements would not permit. Thus, even if we are not
able to develop a large amount of business at the outset, we should be
able to survive our early "growing pains" and build a sound future on a
sound economic base.
- EFFICIENT AIRCRAFT. MD-80 series aircraft are more efficient than the
aircraft typically flown by existing smaller airlines. These aircraft
are more than adequate to serve our intended range. Our central
location in South Florida will give our jets easy access to major
Caribbean destinations and major Northeast and Central United States
population centers. This reduction in "down" time should enable us to
deploy our assets efficiently.
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- PLANNED ACQUISITION OF AIRCRAFT FROM a major airline. We have entered a
non-binding MOU with a major airline to buy six used MD-82 aircraft on
a staggered schedule, and to lease them back to a major airline for
$137,500 per month until we are ready to take delivery. The rental
amount will be well in excess of our expected operating expenses while
we seek operating and safety authority from DOT and the FAA. If we are
unable to finalize our agreement with the major airline to buy the six
planes, or to buy fewer planes from the major airline if our financing
will not permit buying six planes, we will have to look elsewhere to
buy aircraft and may be unable to lease them.
- AVOIDANCE OF HUB AIRPORTS. We will fly nonstop "point to point."
Because we will not be tied to hub airports, we will avoid extra flying
time from connecting airports to hub airports. This means that our
non-stop flights will be generating revenue in the most efficient
manner possible - on non-stop flights from departure city to vacation
destination. In addition, we will avoid the costly fee structures
associated with gate space, take-offs and landings at major hub
airports.
- SERVICE FROM AREAS NOT SERVED BY NON-STOP VACATION FLIGHTS. We intend
to depart largely from cities that have no scheduled non-stop service
to our planned vacation destinations. If competition develops in any of
our markets, because we are a non-scheduled airline, we can reposition
our aircraft to another market that is less competitive.
- SALE OF HOTEL ROOMS. We expect to be able to sell hotel rooms to our
Tourjets "Non-Stop" Vacation(sm) customers at a mark-up, based on our
purchase of hotel rooms on a wholesale basis. Moreover, since we will
not be paying a hotel broker or travel agent for these rooms, our
margin will increase by the amount of commission saved.
- INTERNET RESERVATION SYSTEM: We expect to use an internet based
ticketless reservation system owned and managed by a third party vendor
and designed for use by consumers and travel agents. The benefit of an
Internet-based system is that it provides a low cost means of linking
remote users to the system. A remote user can log in over the world
wide web. In most reservation systems, customer records are removed
from the system the day after the passenger has flown. In our system,
an on-line transaction history will remain and allow us to recognize
returning customers and cataloge their travel histories, and contact
information.
- RELIABLE PARTS SUPPLY. We expect to purchase parts on a "just-in-time"
basis though AAXICO Sales Inc., a leading supplier of aircraft parts
minimizing inventory costs. We intend to purchase parts from AAXICO and
hope to take advantage of their worldwide network of distributors.
AAXICO may be deemed an affiliate of J.W. Korth & Company, one of our
principal founders and our principal underwriter.
There can be no assurance that our business strategy will prove
successful in the short or the long run. See "Risk Factors" for a summary of the
risks we believe exist that might prevent us from being successful in carrying
out our business plan.
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THE TRAVEL INDUSTRY IN GENERAL
TRAVEL FORECAST REMAINS STRONG THROUGH 2002
The Travel Industry Association of America (TIA), in its November 17,
2000 Travel Forecast, predicted that domestic and international travel in the
U.S. would jump by nearly 3 percent during 2000 and that those travelers will
spend more than $561.3 billion in the U.S. during 2000. Domestic and
international travel expenditures in the U.S. are expected to increase from
$523.0 billion in 1999 to a record $622.0 billion in 2002.
TARGET MARKET
Our target market is the vacation traveler. Many Americans are
increasingly constrained from scheduling a two-week vacation, but they will take
several short vacation trips throughout the year at various times when work
schedules permit. A 3 or 4-day vacation around a weekend is a particularly
attractive way of maximizing leisure time without having to jeopardize any work
deadlines.
The targeted customers for Tourjets Non-Stop Vacations(sm) are mature
Americans with a yearly household income of $50,000 or more and active retirees.
Demographics favor continued growth both in the customized vacation and
pre-planned vacation categories. Between 1995 and 2010, some 78 million baby
boomers will move into their peak earning and vacation years. During this
period, the 45-64 year-old segment will grow 31 percent, according to U.S.
Statistical Abstracts, and those age 65 or older will increase 14 percent.
Mature couples without children under 18 will rise 36 percent during the same
period.
According to TIA's Domestic Travel Market Report, 2000 Edition, baby
boomers (35 to 54 year-olds) generated the most travel in 1999, more than any
other age group in the U.S., registering more than 259 million trips last year.
They are also more likely than other age groups to stay in a hotel or motel
(60%), travel for business (35%) and to fly (26%). Two-thirds (65%) of Boomer
travelers have an annual household income of $50,000 or more, much higher than
any other age group.
In a survey of 12,400 Americans conducted by Plog Research, Inc.
released in November 2000, respondents were asked to rate how important it was
to take a vacation away from home with 1.0 being not at all important and 10.0
being very important. The overall rating was a strong 8.0, which cut across all
age and demographic groups. The leisure travel industry has shown consistent
growth for the past 13 years, growing at an average annual compound rate of more
than six percent.
Baby boomer travelers, our target customers, contributed the most to
the increase, as their overall index jumped 8 percent from the 3(rd) quarter of
2000, largely due to a sharp increase in their perceptions of the affordability
of travel. As time-constrained baby-boomers seek simpler ways to book vacations
and greater value, we believe packaged vacations will increase.
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TRAVEL TRENDS
- OUR BUSINESS model takes advantage of current travel trends. Weekend trips
by Americans jumped by a dramatic 70% between 1986 and 1996 and they now
account for more than half of all U.S. travel. In comparison, non-weekend
travel increased by only 15% during the same period. Americans took 604
million weekend person-trips in 1996 and nearly 80% of the travel was for
pleasure. Weekend trips are popular year round, but summer is the most
popular time for weekend travel, accounting for 28% of all weekend trips.
(Source: TIA)
- ADVENTURE TRAVELERS are everywhere. According to TIA, one-half of U.S.
adults, or 98 million people, have taken an adventure trip in the past five
years. This includes 31 million adults who engaged in vigorous adventure
activities like whitewater rafting, scuba diving and mountain biking.
Adventure travelers are more likely to be young, single and employed
relative to all U.S. adults.
- ROMANTIC GETAWAY VACATIONS are popular with all Americans, especially
married couples who are looking to rekindle the romantic feelings in their
relationships. Thirty-one percent of U.S. adults (61.8 million Americans)
said they took a romantic getaway in the past 12 months. The average
traveler took 2.5 romantic trips in the past year. Romantic travelers
without children in their households took more getaways in the past 12
months than romantic travelers with children (3.1 vs. 1.9 trips,
respectively). Visiting a distant city for dining and entertainment purposes
is the number one type of romantic getaway taken by Americans last year.
(Source: TIA)
- BEACH vacations are one of the most popular travel activities during the
summer. Nearly 50 million travelers say they visit the beaches in June, July
and August. Over one-third of travelers (35%, 48.8 million adults) plan to
take a trip of 100 miles or more, one-way, to visit a beach in the summer. A
higher share of men than women are beach-bound. Beach appeal is also high
for those with children at home and travelers ages 18-34. Nearly one-half
of beach goers (45%, 22.1 million travelers) say they expect to stay
overnight in a hotel or motel. Another group, 29%, say they stay with family
or friends. Women are more likely than men to stay with family or friends
(36% vs. 24%). (Source: TIA)
- INTERNET TRAVEL SITES ARE MOST USEFUL TO TRAVELERS. Half of all Americans
(approximately 101.9 million adults) say that they use the travel media - -
everything from newspaper travel sections and television travel shows to
online newsletters - - to plan their vacations. However, Internet web sites
are ranked as the most useful sources for travel news, 16.5 million
travelers booked trips online in 1999, which is up over 200% from 1997. The
percentage of travelers who use the Internet for travel plans or
reservations has increased from 11% in 1996 to 62% in 1999, which equals
52.2 million travelers who planned online. The most popular types of sites
to visit for Internet travel planning include: search engines (62%),
destination sites for cities, states and countries (51%), company sites,
such as airlines, hotel and rental cars (48%), and commercial sites, such as
Expedia and Travelocity (36%). The most popular types of sites for booking
travel include: company sites (51%), commercial sites (39%) and search
engines (32%). (Source: TIA)
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OUR MARKETING STRATEGY
Consumers have choices in determining who their travel providers will
be. Building brand loyalty by offering greater value is critical in motivating
our customers to choose our vacation packages and other travel products over
another. The winning strategies will clearly create competitive advantage by
delivering value as the key product. Value is a qualitative term that means
different things to different types of air travelers or vacationers.
For the business traveler, value may mean frequency, schedule, on-time
departure, expedited check-in, or no lost bags. For visiting friends and
relatives (and leisure traffic), value may mean the lowest seat price and,
direct, point-to-point service. For long-haul passengers, value may be seat
pitch (the distance between seats in the aircraft cabin), in-flight
entertainment, and food and beverage service. Successful airlines, regardless of
their markets, clearly must understand how to build a strategy for delivering
value to their targeted consumers. Understanding what our target market
considers as value and consistently delivering it will be the task of our
employees, officers and directors.
We will deliver a high value product, featuring less travel time,
convenient schedules and single point of contact for all vacation details. We
will be the first regional-sized airline (airlines with less than $100,000,000
in annual revenues) to provide air travel and accommodation packages. We intend
to become the leader in getaway vacation packages. In addition to delivering a
high-value travel product, we will strive to deliver quality, reliability and
consistency.
TARGETED U.S. GATEWAY CITIES
For each aircraft we take into service we will link three U.S. gateway
cities to one vacation destination, with several flights per week. As we add
aircraft, we will increase vacation destination options from gateway cities.
In preparing and analyzing suitable U.S. gateway cities, we have
utilized official U.S. Government data to determine the largest air travel
markets in the United States. Our analysis identified 41 metropolitan areas in
which more than 1 million passengers are boarded each quarter with an average
ticket price ranging from 11.71 to 24.50 cents per mile per passenger. Only a
few of these cities provide convenient non-stop service to selected destinations
in the Caribbean and Mexico.
We have identified a number of communities or non-hub metropolitan
airports that currently do not offer non-stop service to our targeted vacation
destinations. Each "point to point" market will be analyzed based on the number
of existing flights, routing and departure times, the size of the overall
market, year to year growth, seasonal airline activity and prevailing ticket
prices. We will choose to serve those cities that offer the best opportunity
based on an analysis of these factors, and we will constantly update this
analysis and re-deploy our aircraft based on changes in the marketplace.
By offering convenient non-stop service from U.S. gateway cities that
currently do not have non-stop service to selected Caribbean/Mexico
destinations, we believe that we can establish ourselves as the preferred
vacation travel carrier.
TARGETED DISTRIBUTION
We plan to market our Tourjets Non-Stop Vacations(SM) through three
major channels: travel agents, corporate travel desks, and direct to customers
via our web site. Enhanced web interface provides diverse and less expensive
sales distribution then conventional reservation systems of the past.
Most vacation travelers continue to consult with their travel agent.
Currently more than 66% of all international travel is booked through travel
agents and 20% directly with the airline. It is projected that more and more
people will book online as systems become available based on American Travel
Survey issued by the DOT. For this reason we expect to allocate resources to all
three channels.
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- TRAVEL AGENTS with IATA (International Association of Travel Agents) codes
will be able to log onto our web site and make reservations online. Ticket
confirmations will be issued via e-mail or fax and submitted directly to the
customer and the commission will immediately be calculated and accounted
for. We plan to pay between 10% to 15% commission to travel agents who sell
our vacation packages. This commission structure compares very favorably to
the 5% to 7% commissions paid by major airlines and is comparable to the
amount paid by tour operators. Travel agents will not need any special
software or hardware to book a Tourjets vacation reservation.
- CUSTOMERS will also be able to log on to our web site to make reservations
online. However, bookings made by individuals do not need an IATA number and
will not earn commissions. We plan to maintain an easy to understand pricing
module with the following choices: Standard Package or Deluxe Package
(includes higher price hotel, transfers, etc.) and 3, 4, or 7 days.
Additional options may include taxi vouchers, activity tickets or
reservations such as golf, scuba excursions and volcano tours.
- CORPORATE TRAVEL DESKS of larger companies with 1,000 or more employees
often search for additional vacation travel products and services to offer.
Corporate travel desks typically search the Internet to find the best fares
and to make reservations for business travel and hotels. With today's
technology it has become very easy to establish a corporate travel desk and
often creating a separate profit center. We believe this trend will continue
and will seek to market directly to these in-house travel desks. We expect
to pay the same 10% to 15% commissions as we will pay to IATA travel agents.
PRICING OF TOURJETS NON-STOP VACATION(SM) PACKAGES
We will analyze each potential gateway city as to the number of
existing flights, routing and departure times, reputation of other carriers, the
size of the overall market, year-to-year growth, seasonal charter activity and
prevailing ticket prices. Once we choose a new market, we will use a simple
pricing module that is easy to alter if market conditions change.
We will set the price for the airline ticket portion of the package
based on prevailing ticket prices for that market. We will set the price for the
accommodations portion by marking up our cost by a factor appropriate to the
hotel market for that destination. We expect that, on the average, our vacations
will cost customers between $600 and $800 per person, double occupancy, for to a
3 to 4-day vacation, and between $900 and $1450 per person, double occupancy,
for a 7-day vacation. Ticket prices will vary depending on prevailing market
conditions and seasonality.
OTHER POTENTIAL MARKETS
To obtain revenue when our aircraft may not be fully utilized serving
vacation travelers, we will offer services to people and companies in need of
supplemental flights, directly and through airline brokers. Irrespective of the
number of aircraft we operate we will actively seek to promote our services on a
one time or continuing basis.
To supplement our Tourjets Non-Stop Vacations(sm) revenues, we will
seek to be active participants in servicing the following types of customers:
- TOUR OPERATORS: Tour operators generally create land and air packages for
sale through retail travel agents. The majority of the air travel portion of
these packages is provided by scheduled airlines or by "track" programs (low
frequency but repetitive domestic and international flights between city
pairs). Incidental or ad hoc flights provide airline seats to cover
passenger overflow during peak holiday seasons. In addition, tour operator
business consists of special events - like fan travel to holiday football
bowls - in which the tour packager may contract directly with us at the
outset to ensure availability, quality and reliability and direct service.
We intend to focus on developing all three segments of the tour operator
market, with an emphasis on vacation packages.
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- CRUISE LINES: We intend to provide our aircraft, as available, to supplement
the scheduled airlines' carriage of passengers to cruise departure points.
We also intend to commit capacity to seasonal cruise line flying as market
opportunities arise and our capacity permits. Being headquartered in South
Florida, we are located in the "cruise capital" of the world, in that both
the Port of Miami and Port Everglades in Ft. Lauderdale are within minutes
of two major international airports. Major cruise lines, including Royal
Caribbean, Carnival Cruise Lines, Princess Cruises, and Holland America
Line, are located in one or both of these ports. Cruise vacationing has
continued to grow throughout most of the 1990s. The recent resumption of
growth has led the Cruise Lines International Association to estimate that
cruise lines will add approximately 15 new ships, representing approximately
26,000 new berths, to the total worldwide cruise fleet during the 1999-2002
period.
- CORPORATE INCENTIVE TRAVEL: There is a large and growing market for
corporate incentive travel. Corporations that sponsor incentive travel
programs typically do so between two and four times per year, with an
average length of stay of three to five days. The primary targets of
incentive travel programs are internal salespeople, followed by dealers and
distributors. Climate is generally the major consideration when selecting a
destination, with Florida and the Caribbean ranking as the number one
domestic and international destinations, respectively. Additional factors
considered by corporate travel planners include cost, accessibility, type of
resort, and reliability and convenience of air service. Most
incentive-related travel occurs during the January-March and
October-November periods. We intend to service the incentive provider
(either the end-user's in-house corporate travel department, or an outside
professional organizer) by offering to fly from all public airports.
- THE U.S. MILITARY: After one year of service, we will be eligible to qualify
as a member of the Civil Reserve Air Fleet (CRAF), which means that we would
be required to provide air service to the military in time of war. Similar
to other non-scheduled airlines, in peacetime we intend to provide military
non-scheduled services under two basic contract types:
- COMMERCIAL AIR MISSIONS: these contracts are for domestic flights only
and are awarded to the lowest bidder. While membership in CRAF is not a
requirement for bidding, CRAF members are generally given priority in
the awarding of contracts.
- FIXED BUY/EXPANSION: An airline must be a CRAF member to be awarded a
Fixed Buy or Expansion mission, which are for international flights
only. These contracts provide for set rates based on an airline's
Mobilization Value (MV) points. As members of CRAF, carriers are
entitled to a number of Fixed Buy contracts based on their accumulated
MV points. Points are awarded by the military based on the number and
type of aircraft in an airline fleet. Companies frequently enter
teaming arrangements in order to share MV points, or purchase points
from other air carriers to supplement their own MV totals.
- "AD-HOC" FLIGHTS: There is a substantial market for "ad hoc" (one-time)
airline service, including providing airlift to sports teams to "away"
games. We intend to focus our marketing efforts in this regard on
intercollegiate athletics. While a portion of the college business is booked
through brokers, some is booked directly by colleges with individual
airlines. We intend to establish and maintain direct contact with university
athletic directors - through mailings, e-mails, phone calls and attendance
at conventions of college athletics administrators. We also intend to target
specific football conferences that we believe have a strong potential for
new and repeat business. We believe that we will be able to provide
consistent, reliable, high-quality service to the intercollegiate athletics
market through our expected fleet of mid-size jets.
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<PAGE> 31
AIRLINE OPERATIONS
The following is a description of our plans to operate the airline once
we obtain the operating authority and acquire the necessary aircraft. These
plans are subject to review and revision both by us and by the DOT and the FAA.
In some instances substantial planning, preparation and investment will be
needed to set up the airline's operations. We believe that, based on our
relevant aviation industry experience and the anticipated availability of funds
from this offering, we will be able to sufficiently satisfy the required
preparation, planning and training and that we will be ready for operations once
the authority is obtained.
- FLIGHT OPERATIONS: Flight operations (including aircraft dispatching and
crew scheduling) will be planned and controlled by our flight operations
group operating out of our headquarters. Our operations headquarters will be
staffed on a 24-hour basis, seven days a week. Logistical support necessary
for extended operations outside our fixed base will be coordinated from
headquarters. We intend to maintain a fully automated dispatch facility,
including advanced weather tracking services, automated flight planning and
standard air-to-ground communications systems. All required personnel will
be specially trained and licensed. Part of our operation will be a 24-hour
customer hot line. Here a dispatcher can get a distress call from a customer
and then contact our local representative at the vacation destination to
help the customer.
- OFFICE SPACE: Our principal founders plan to lease office space at Ft.
Lauderdale-Hollywood International Airport on a one-year lease term basis.
We expect to assume the lease as soon as we begin operations. We may choose
to lease additional space at other airports as necessary. In addition, we
will lease other facilities at various locations as required by our sales
staff, flight crews, maintenance staff and other employees. We consider our
present office space facilities to be sufficient for our needs. However,
within about six months following this offering, we will likely need to add
additional office space. We believe that suitable office space is generally
available at commercially reasonable terms and conditions.
- FUEL COSTS: Jet fuel costs represent approximately 20% of the gross expenses
of operating aircraft that we intend to fly. Fuel costs have been rising in
the past year and thus far the costs have been passed on by airlines to
airline customers. It is possible that, should costs rise to a higher level,
they may not be accepted by the customers and that gross profit margins may
be lowered as a result. We intend to mitigate our fuel price risk somewhat
by including a provision within our standard contract that requires
customers to reimburse us for fuel price increases in excess of the fuel
price agreed upon in the contract. The contract will require us, however, to
notify the customer of any price increases at least ten days prior to
departure. If the increase is more than 15% of the initial contract price,
the customer may cancel the flight without penalty.
- RESERVATION SYSTEM: We expect to use an Internet-based ticketless
reservation system owned and managed by a third party vendor. Web-based
reservation and customer service systems are designed for use by consumers
and travel agents. The benefit of an Internet based system is that it
provides a low cost means of linking remote users to the system. A remote
user can log in over the world wide web. In most reservation systems,
customer records are removed from the system the day after the passenger has
flown. In our system, on-line transaction history will remain and allow us
to recognize returning customers. Our system will allow for immediate
customer recognition, cataloged travel history, and contact information.
- FLIGHT CREWS: Each flight crew on the aircraft we intend to operate will
consist of two cockpit crewmembers and four flight attendants. Although the
FAA requires that only three flight attendants be used on the aircraft we
intend to fly, we believe that the extra attendant will provide an
additional level of service, as well as providing for a backup flight
attendant if needed. We intend for our flight attendants to be service-
conscious with emphasis on training and on providing a differentiated,
premium product for group travelers.
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<PAGE> 32
- CATERING: We intend to offer specialized catering packages for the
particular needs of customers, ranging from peanuts and soda service, to
full buffets for sports teams, to gourmet-style meals. We currently have
stand-by catering contracts with two catering companies, Dobbs International
and Jerry's Catering, in order to serve 150 airport locations in North
America. Other catering companies may also be contracted with in the future.
We anticipate that most if not all catering companies we contract with will
also be serving numerous other scheduled and non-scheduled airlines. At
airports where we will fly that are not served by existing contractors, we
will employ local catering operators. In all cases, the actual cost of the
required beverage and food service catering is priced into the contract with
the customer. Part of our service to customers will be hot towels and
chocolate truffles.
- AIRPORT GROUND PERSONNEL: We do not intend to employ our own airport-based
personnel with the exception of Customer Service Representatives, but
instead to outsource all of our ground handling services with major
contractors. These contractors include airline personnel as well as
franchises of non-airline companies such as Hudson General, MAS WorldWide,
Ogden Corporation and SwissPort Services. Ground handling services include
greeting and servicing passengers at check-in, gate and baggage claim areas;
provision of flight information display services; guiding of aircraft to and
from gates; baggage handling services and the furnishing of all ground
support equipment; lavatory, water and general aircraft cabin servicing;
de-icing; and the provision of overnight aircraft maintenance procedures. We
will seek to secure system-wide pricing among its ground-handling
sub-contractors. The cost of ground handling services is priced into the
contract up front with the customer. We intend to hire both full-time and
contract personnel for all our operations. Although contract services may in
some instances be more expensive, management believes that this strategy
will allow us flexibility as market conditions warrant.
- INSURANCE: We will carry types and amounts of insurance customary in the
airline industry, including coverage for public liability, passenger
liability, property damage, aircraft loss or damage, baggage and cargo
liability and workers' compensation. We also intend to obtain war risks
insurance from the U.S. Government under Title XIII of the Aviation Act.
Title XIII generally authorizes the U.S. Government to issue insurance with
respect to aircraft engaged in operations deemed by the U.S. Government to
be necessary to carry out the foreign policy of the U.S. when insurance is
either unavailable or prohibitively expensive when sought from private
insurers. Payment of valid claims pursuant to insurance issued under Title
XIII is made out of and subject to congressional appropriations. As is
customary in the air transportation business, we do not plan to maintain
business interruption insurance.
- REPAIRS AND MAINTENANCE: We expect to contract with a certified FAA repair
station, for a significant part of the regular maintenance of our aircraft
and their engines. We will expect the repairs and maintenance on our
aircraft to be performed on the same basis and order of priority as repairs
of other customer's fleets. Service is expected to be provided to us at a
fixed cost per flight hour. We expect the FAA certified repair station to
provide us with FAA certified engines, and, to the extent that we incur any
additional costs and expenses (e.g., for the leasing of additional engines
while engines are being repaired), we would expect to be reimbursed for
these costs and expenses. We expect that routine, daily maintenance,
consisting of the inspection and minor repair, if necessary, of an aircraft
and its components, will be conducted by Tourjets trained personnel
subcontracted at airports in which we will operate based upon actual labor
time and the parts necessary for this service.
- NON-ROUTINE FLIGHT DELAY: The MD-80 series aircraft is generally believed to
be one of the most reliable aircraft currently in service. However,
non-routine flight delays will occur from causes such as bad weather,
mechanical problems, crew duty delay, gate-holds, traffic flow, and winds
aloft. We have developed a recovery plan to minimize the delays and costs
associated with such delays. In the unlikely event that one of our aircraft
is stranded in a destination location, we have standing, bilateral
sub-service (back-up) agreements with two airlines located in Miami, at
predetermined rates.
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<PAGE> 33
- FLIGHT OPERATIONS MANAGEMENT SYSTEM: The information flow of flight
operations is crucial and requires an efficient reliable system. We will not
maintain the hardware or software in-house. Rather, we will use a highly
specialized and state of the art operations system on a yearly contract. The
selected system will provide the latest notifications from the FAA regarding
weather and airport conditions and other matters of interest to aviation.
The dispatch module provides a chronological chart showing the airline's
schedule, including flight information by aircraft. As departure and arrival
messages are received, the display of actual information is updated
accordingly. The display also provides information about aircraft
maintenance status, weather for all stations used in the flight plan, time
and fuel deviations, position report data and real time comparisons of
actual and planned data. The fleet management reporting functions will allow
us to effectively manage aircraft utilization, payload calculations, delay
times, block times, fuel uplift, maintenance planning, crew times and crew
utilization. For non-scheduled ad-hoc operations the system is equipped with
integrated quoting capability, which utilizes historical data with
anticipated payload and fuel loading to generate accurate flight plan
scenarios. Accurate and comprehensive bidding for charter business is then
calculated and stored or sent to the customer via e-mail or fax. The costs
of contracting for this software are substantially less expensive then
maintaining our own software license.
ACQUISITION OF ASSETS FROM DOVE ONE, INC.
On April 20, 2000, we acquired all the assets of Dove One, Inc. from
its shareholders, our two principal founders, as additional paid-in capital.
These assets include equipment and all operating rights such as airport usage
and station operation, ground and passenger service handling agreements,
contractual arrangements with suppliers, and other vendors, and catering
agreements. These contracts are on an as-needed basis and are cancelable at
will. Pursuant to generally accepted accounting principles, these assets were
transferred onto our books at $30,034, representing the book value of these
assets on Dove One's books. This does not necessarily represent the fair market
value of the assets. We believe that we will receive a benefit from Dove One's
customer lists and goodwill in terms of easing our entry into this business, but
that benefit will be comparatively small given the limited nature of Dove One's
operations.
ACQUISITION OF AIRCRAFT
We expect to be able to acquire from the proceeds of this offering six
used medium-sized single aisle jet aircraft, like the MD-80 series aircraft, at
a price consistent with our plans. Because these aircraft are configured with
five seats across each row, they have 35% more aisle and window seats than many
other aircraft their size. We believe that two MD-80 series aircraft with
approximately two thirds of their useful lives still available, can be located,
acquired and configured to our specifications to commence flight operations.
In July 2000, we contracted with Sigma Aircraft Management LLC to serve
until June 19, 2002 as our exclusive and worldwide agent for finding aircraft
available for lease, lease-purchase or purchase. For its services, we will pay
Sigma $4,000 month to month. If we acquire any aircraft located by Sigma, we
will owe Sigma $75,000 for the first two aircraft acquired, $50,000 for the
second two aircraft acquired, and $25,000 per aircraft for any other aircraft
acquired, less the total monthly fees paid to the date of the aircraft
acquisition fees.
We have budgeted up to $9,000,000 to acquire each aircraft. The price
we will be willing to pay will depend on the model, age and condition of the
particular aircraft and the state of the market for the type of aircraft we are
considering. The aircraft market is subject to wide fluctuations based on supply
and demand factors, and the budgeted amount may not be sufficient to acquire the
desired aircraft.
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<PAGE> 34
MEMORANDUM OF UNDERSTANDING WITH A MAJOR AIRLINE
We have entered into a non-binding Memorandum of Understanding with a
major airline, Inc. to buy six used MD-82 aircraft. The MOU is subject to a
written the agreement must be approved by the major airline's senior management
and board of directors. Under the MOU, we will acquire six aircraft over a
period of time for $9,000,000 each. The price could increase by a maximum of
$75,000 per aircraft if the major airline delivers the aircraft with newer than
expected engines. Until we take delivery of each aircraft, we will lease it back
to the major airline for $137,500 per month. We will be required to put up a
deposit of up to $ 350,000 before a written agreement with the major airline can
be finalized. The deposits will become non-refundable once we make the second
deposit. The first two aircraft are expected to be delivered within the first
120 days after the closing of this offering and the remaining aircraft within 12
to 18 months.
We will need to reach a final agreement with the major airline before
we can buy the six aircraft. If we are unable to do so, we will seek to buy
suitable aircraft from another source. We expect, based on current market
conditions, that we will not have substantial difficulty in obtaining
alternative aircraft at reasonable prices if we do not consummate the a
transaction with the major airline. However, we may be unable to lease these
aircraft quickly or at all, which would adversely affect our results of
operations.
DESCRIPTION OF PROPERTY
We intend to occupy office space leased by our principal founders at
the Ft. Lauderdale-Hollywood International Airport in Ft. Lauderdale, Florida.
The term of the lease is one year from March 1, 2000 renewable at our option for
additional one-year periods. The total annual rental for this space is $7,440,
payable monthly. With the proceeds of this offering we intend to purchase MD-80
type aircraft and office equipment, maintenance equipment, cars and trucks as
necessary to support the aircraft.
TRADEMARKS
We have filed trademark applications for the name "Tourjets." While we
obtained a research report indicating that the name has not been trademarked in
the past, there is no assurance that the U.S. Patent and Trademark office will
approve this trademark.
NAME CHANGE
We were originally called "Swissjet Inc." and filed our initial
registration statement under that name. While we do not believe that the use of
this name would cause airline passengers or anyone else to confuse us with any
other company, upon inquiry from SAir Group (Swissair) we decided to change our
name to Tourjets Airline Corporation. We did not conduct any operations under
the prior name and will make no further use of that name. We do not anticipate
any claims by any other companies as a result of our limited use of the prior
name.
RISK MANAGEMENT STRATEGY
We may use risk management strategies in an attempt to reduce our
exposure to increased fuel prices. These arrangements, such as fuel swap
contracts, would have the net effect of either increasing or decreasing our fuel
expense.
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<PAGE> 35
COMPETITION
We will face potential competition from two different sources:
scheduled airlines and non-scheduled (charter) airlines. Scheduled carriers
compete with commercial operations for leisure travel customers in a variety of
ways, including wholesaling discounted seats on scheduled flights to tour
operators, promoting packaged tours to travel agents for sale to retail
customers, and selling discounted, airfare-only products to the public.
Currently we are not aware of any "regional size" airlines that offer
direct vacation packages. To our knowledge, major airlines that offer vacation
packages do not operate their vacation division themselves, but rather
subcontract with tour operators to operate vacation packages. The following list
identifies various airline vacation package providers and the actual tour
operators / travel agents:
- Continental Vacations: by Certified Vacations Group Inc.
- Delta Vacations: by Certified Vacations Group Inc.
- Midwest Express Vacations: by Holland America Line Westours, Inc.
- Southwest Airlines Vacations: by Mark Travel Corporation and affiliated
companies
- United Vacations: by Mark Travel Corporation and affiliated companies
- US Airways Vacations: by Mark Travel Corporation and affiliated
companies
Scheduled airlines, including United, American, Delta and Northwest,
may offer from time to time vacation packages to tour operators, travel agents
or the general public, which may be lower priced than our services and which
therefore would offer formidable competition for us. Each of these scheduled
airlines has far greater capital than us and operates many more aircraft. Thus,
if they want to attempt to respond to our competitive efforts, they will likely
have the capital and equipment to do so.
There is no assurance that we can establish ourselves before a large
scheduled airline could target our product and services, discount its prices and
severely limit our business. We believe that this outcome is unlikely, because
we will be flying Tourjets Non-Stop Vacation(sm) trips only a few times per week
to each vacation destination from each city served by the major airlines. To
compete with us, we believe it would not be profitable to put in place scheduled
service for so few flights. The number of our passengers per flight from each
destination will be relatively small by comparison to the number carried by the
major airlines and should be overlooked by them unless we have already
demonstrated substantial success with our business plan.
In some cases, we may also be competing against non-scheduled airlines.
Some of these carriers are substantially larger in size than we are, and,
because of their size, may have the ability to meet any competition that we pose
to them by offering comparable service.
Currently we are aware of only a few small airlines operating
medium-sized jets. Competition most likely will occur on price and reliability.
We intend to feature high-quality service, and we believe that on-time
departures and arrivals and exceptional in-flight service will earn the loyalty
of our customers. Currently, most of the other airlines that could compete with
us have older less fuel-efficient aircraft than those we intend to acquire.
Therefore, we believe we can compete with them directly on the base costs of our
operation. There is no assurance that our assumptions will be correct.
We intend to depart largely from cities that do not currently have
scheduled non-stop service to the selected vacation destinations. While there is
no assurance that we will not have a great degree of direct competition, we
believe that we will not generate much active competition because we will be
flying only a few times per week from each U.S. city. We believe it will not be
profitable for a major carrier to begin scheduled service between two points for
just a few flights per week. If competition does intensify in one of our
markets, because we are a non-scheduled airline we can reposition our aircraft
to another market that is less competitive. There is no assurance, however, that
price competition from other carriers would not be effective against us.
Sustained price competition could have a material effect on our results of
operations.
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<PAGE> 36
OPERATING AUTHORITY
Under federal law, anyone who wants to provide air transportation
service as an air carrier must first obtain two separate authorizations:
"safety" authority in the form of an Air Carrier Certificate and Operations
Specifications from the FAA and "economic" authority from the Office of the
Secretary of Transportation in the form of either a certificate for interstate
or foreign passenger and/or cargo authority, or an all-cargo air transportation
certificate.
Certificates for "economic" authority may authorize either scheduled
service or non-scheduled service. A certificate authorizing interstate or
all-cargo air transportation may be issued after a finding by DOT that the
applicant is "fit, willing, and able" to perform the proposed service. The award
of a certificate for foreign authority must also be found to be "consistent with
the public convenience and necessity."
On June 19, 2000, we filed the appropriate DOT application for a
certificate for interstate and foreign passenger authority as a charter air
carrier. We also filed the appropriate FAA application on June 14, 2000 with the
flight standard district office in Ft. Lauderdale, Florida. The current status
of our applications is discussed under "Management's Discussion and Analysis of
Financial Condition and Plan of Operations - Tourjets Airline Corporation."
DOT uses a three-part test to determine the fitness of a company.
First, DOT examines the managerial competence of the applicant's key personnel
to determine whether they have sufficient business and aviation experience to
operate an airline, and whether the management team, as a whole, possesses the
background and experience necessary for the specific kind of operations
proposed. Second, DOT reviews the applicant's operating and financial plans to
see whether the applicant has a reasonable understanding of the costs of
starting its operations and has a specific and realistic plan for raising the
necessary capital. Before being granted effective air carrier authority, the
applicant must submit third-party verification that it has acquired the
necessary capital. Third, DOT looks at the applicant's compliance record to see
whether it and its key personnel have a history of safety violations or consumer
fraud activities that would pose a risk to the traveling public, or whether
other factors indicate that the applicant is unlikely to comply with government
laws, rules and directives. In addition, the applicant must establish that it is
an U.S. citizen. The above information is intended to provide DOT with a
sufficient basis upon which to determine whether an applicant is qualified in
each of these areas to provide the public with its proposed service.
We believe that we have or will have the ability to satisfy the
three-part test described above within a reasonable period of time. We estimate
that if we are able to provide satisfactory evidence to DOT, the entire process
described above will take approximately four months. There is no assurance,
however, that we will be able to convince DOT of our fitness to operate as an
airline.
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<PAGE> 37
The FAA authority to grant operations specifications for the proposed
operations will require us to follow a concise certification plan and timeline.
The certification process is both capital and man-hours intensive and we will
require approximately $2,000,000 in order to complete the certification process.
We cannot operate as a direct air carrier until and unless both FAA and DOT
authority have been granted.
Our anticipated pre-certification operational costs will be as follows:
<TABLE>
<S> <C>
Administrative Expenses $ 255,000
Flight Operations Payroll 108,000
Additional Computer & Office Equipment 50,000
Legal & Professional 75,000
Flight Crew Initial Training 105,000
Background Checks & Drug Test 4,000
Aircraft Costs & Parts 806,000
Insurance 50,000
Proving Flights 58,000
Operations Equipment & Supply 174,000
Office Cost 23,000
Estimated Pre-Certification Costs 1,708,000
-----------
Over-run Contingency for above items (15%) 256,000
Total Pre-Certification Costs $ 1,964,000
-----------
</TABLE>
These figures are based on these assumptions: that it will take six
months to obtain final DOT and FAA certification; that we will acquire one
aircraft one month before certification and one aircraft at certification; and
that all employees will be contract employees through certification and we will
therefore not be paying them any fringe benefits.
OTHER GOVERNMENT REGULATION
Several aspects of airline operations are subject to regulation or
oversight by federal agencies other than DOT and the FAA. Labor relations in the
air transportation industry are generally regulated under the Railway Labor Act,
which vests in the National Mediation Board regulatory powers with respect to
disputes between airlines and labor unions arising under collective bargaining
agreements. At the present, we have no unionized employees. We will be subject
to the jurisdiction of the Federal Communications Commission regarding the
utilization of our radio facilities. In addition, the Immigration and
Naturalization Service, the U.S. Customs Service, and the Animal and Plant
Health Inspection Service of the Department of Agriculture will have
jurisdiction over inspection of the our aircraft, passengers and cargo to ensure
our compliance with U.S. immigration, customs and import laws. Also, while our
aircraft are in foreign countries, they will be required to comply with the
requirements of similar authorities in those countries. The Commerce Department
also regulates the export and re-export of our U.S.-manufactured aircraft and
equipment.
In addition to various federal regulations, local governments and
authorities in some markets have adopted regulations governing various aspects
of aircraft operations, including noise abatement, curfews and use of airport
facilities. Many U.S. airports have adopted or are considering adopting a
Passenger Facility Charge of up to $3.00 generally payable by each passenger
departing from the airport and remitted by to the applicable airport authority.
We will also be subject to federal, state and local regulations
relating to protection of the environment and to discharge of material into the
environment. We do not expect that the costs associated with ongoing compliance
with any of these regulations will have a material impact on our capital
expenditures, earnings or competitive position. Additional laws and regulations
have been proposed from time to time that could significantly increase the cost
of airline operations by, for instance, imposing additional requirements or
restrictions on operations.
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Based upon bilateral aviation agreements between the U.S. and other
nations, we will generally not be restricted as to the frequency of flights to
and from most foreign destinations. However, these agreements generally restrict
us to the carriage of passengers and cargo on flights which either originate in
the U.S. and terminate in a single foreign nation, or which originate in a
single foreign nation and terminate in the U.S. Proposals for any additional
routes must generally be specifically approved by the civil aeronautics
authorities in the relevant countries. Approval of requests is typically based
on considerations of comity and reciprocity and cannot be guaranteed.
MANAGEMENT
We intend to hire both full time and contract personnel for all our
operations. The following table is a summary of our intended employee make-up:
<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF EMPLOYEES
-------------------------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Management 3 4 5 6 6
Administrative 12 16 18 19 20
Operations 115 207 255 308 399
--- --- --- --- ---
Total 130 227 278 333 425
--- --- --- --- ---
</TABLE>
Additional services will be provided by personnel from companies
providing services to us. For example, we expect to outsource mandatory random
drug testing for flight and maintenance personnel to an outside medical testing
service, and we expect, at the outset of our operations, that we will outsource
portions of human resources administration. We have budgeted for all foreseeable
cost increases and, to account for unexpected costs, we added a 20% contingency
factor to our planned overhead expenses.
The following table sets forth information with respect to each
director and nominee for director of the company, if any, each individual
serving as a company officer and each management employee. We will offer all the
officers full time employment upon DOT approval. The respective backgrounds of
the officers and directors are described following the table. All of the
following persons are considered Founders of Tourjets Airline Corporation.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH TOURJETS DIRECTOR SINCE TERM OF OFFICE
---- --- ---------------------- -------------- --------------
<S> <C> <C> <C> <C>
Serge F. Feller 38 Chairman, CEO & President 2000 Until 2003
James W. Korth 50 Director 2000 Until 2003
Benham Elliott 49 Director 2000 Until 2003
Richard F. Spaulding 71 Director 2000 Until 2003
Isidor Buholzer 40 Director 2001 Until 2004
Daniel A. Jenkins 57 Chief Operating Officer(*)
Todd A. Demand 32 Chief Financial Officer(*)
Joseph Pettigrew 59 Director of Maintenance(*)
J. Dan Govatos 38 Director of Safety(*)
Roy J. Spencer, Jr. 47 Chief Pilot(*)
James P. Walsh 67 Airworthiness Compliance Officer(*)
</TABLE>
(*) to be hired upon DOT approval of Tourjets' authority.
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MANAGEMENT BACKGROUND
Serge F. Feller has served as our President, CEO, and Chairman of the
board of directors since April 3, 2000. Since October 1999, he has served as
Chairman, CEO, and President of Dove One Inc., the company through which the
Founders tested Tourjets' business plan. During 1998 and 1999, Mr. Feller served
as Executive Vice President of World Airways, Inc., an airline providing
scheduled and non-scheduled (charter) air service worldwide. From 1994 to 1998,
Mr. Feller was a Managing Director at J. W. Korth & Company, an
investment-banking firm, one of our Principal founders, and our managing
underwriter. From 1992 to 1994, Mr. Feller was an owner and manager of Swisscorp
Currency Fund, an offshore hedge fund. From 1983 to 1991 he founded and served
as President of FellAir, Inc., an international flight school and air charter
company. He is a licensed airline transport pilot with 18 years experience and
held positions as Captain and Flight Officer for Continental Airlines and
American Eagle between 1984 and 1988. Mr. Feller served in the Swiss Air Force.
He immigrated to the United States in 1983 and became and an U.S. Citizen in
1989. He holds a bachelor's degree in Business Administration from Handels &
Verkehrsschule, Bern, Switzerland.
James W. Korth has served as a director since April 3, 2000. He is the
Managing General Partner and principal owner of J.W. Korth & Company, a
securities broker-dealer founded in 1982, and our principal underwriter. He is a
director of Dove One, Inc., the company through which the Principal founders
tested the Tourjets business plan. He has spent much of the past two years
working with Mr. Feller in developing our business plan. From 1979 to 1982, Mr.
Korth was Vice President Corporate Finance at First of Michigan, an
investment-banking firm in Detroit, Michigan. Prior to that Mr. Korth was the
owner and manager of Basic Research Systems, which conducted marketing studies.
He is an advisor to AAXICO, an aircraft parts company owned principally by
members of his family, and other private entities. Mr. Korth graduated from
Michigan State University with a Masters of Science in Social Psychology. For
more information about Mr. Korth and J.W. Korth & Company, including an
unrelated SEC action, see "Certain Relationships and Related Transactions".
Benham Elliott has served as a director since June 2000. Since 1994, he
has been Executive Vice President of The Farwell Group, Inc., an executive
placement firm. From 1991 to 1994 he was President of CRS, Inc. (d/b/a
WorldLink) an international development and distribution company for telecom
products. Between 1980 and 1990 Mr. Elliott was an Airline Pilot for Eastern
Airlines, flying Boeing 727 and L1011 aircraft and served in the U.S. Naval
reserve, flying P3, DC6, aircraft. From 1973 to 1980 he was a Carrier based
Naval Aviator and held positions as Advanced Jet Flight Instructor, NATOPS
Instructor and Test Pilot. He holds a bachelor's degree from Boston College, and
studied at the University of Vienna, Austria and graduate studies in Systems
Management at the University of Southern California. Mr. Elliott is also a
member of the board of directors of several non-public entities outside the
aviation industry.
Richard F. Spaulding has served as a director since June 2000. Since
1996, he has been in business as Spaulding Aviation, a consultant to the airline
and aviation industry. From 1994 to 1996, he was a consultant to US Air Group,
Inc., in connection with aircraft sales and leasing. From 1990 to 1994 he was
Chairman of various subsidiaries of US Air Group, Inc. From 1986 to 1994, he was
President of US Air Leasing and Services, Inc. and, from 1973 to 1986 he was
Vice President, Director of Marketing of US Airways Inc. Between 1964 and 1968,
he was President and Chief Executive Officer of Boreas Corporation, an
international aircraft sales and leasing company. Mr. Spaulding received a
bachelor's degree from the University of Michigan and served in the United
States Air Force, flying F-84 aircraft in Korea. He retired from the United Air
Force Reserve in 1981 with the rank of Colonel.
Isidor Buholzer has served as a director since January 2001. Since 1998
he has served as Vice President of American Financial Group of Aventura, Inc.
and is an active member of AFG's investment committee. Prior to that, he was
General Manager of Austro Financial Services Inc. and Vice President of Banque
National De Paris. From 1994 to 1995 he was Vice President of Clariden Asset
Management (New York) Inc. From 1983 to 1993 he served as Vice President of
Citibank International. He is a member of the board of the directors of
HealthStar Corp., a publicly held company.
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<PAGE> 40
Todd A. DeMand has served as Director of Finance since April 2000. From
1992 until present, he has been Chief Financial Officer and Financial Operations
Principal of J. W. Korth & Company, a registered securities broker-dealer and
our primary underwriter. He is a member of the United States Navy Reserves. Mr.
DeMand graduated from Wayne State University with a BS in Accounting in 1990,
and received his Masters of Science in Finance with Distinction in Corporate
Finance from the Walsh College of Accountancy and Business Administration in
1996.
We have reached tentative agreements, subject to formal written
contracts, to hire the following individuals, who will assume their full-time
responsibilities with Tourjets upon our obtaining DOT approval of our
application for operating authority:
Daniel A. Jenkins will assume the responsibility of Chief Operating
Officer. Since 1996, he has been Vice President for Flight Operations and
Training of Gemini Air Cargo. From 1995 to 1996, he held the same position at
Trans Meridian Airlines. In 1994 and 1995, he was Vice President for Flight
Operations for Express Airlines I Inc. In those positions, he was responsible
for, among other things, airline certification, airline operations and flight
training. From 1983 to 1994, he held numerous senior management positions in the
aviation industry, including Reflecton Training System, British Aerospace, Inc.,
Southwest Airlines, Presidential Airways, and Frontier Horizon/Skybus. From 1975
to 1983, he was employed by the FAA and held numerous positions including
Assistant Division Manager in its Denver regional offices. While serving in the
United States Air Force, Mr. Jenkins was awarded the Distinguished Flying Cross
and Air Medal with Three Oak Leaf Clusters during his two tours in Viet Nam. He
was most recently cited for his services during Desert Shield and Desert Storm.
He holds Airline Transport Rating, Flight Engineer and Flight Instructor
certificates.
Joseph Pettigrew will be our Director of Maintenance. Since 1989, he
has been President of Cavtec, Inc., which provides technical management to
airlines in such areas as records auditing, aircraft inspection, aircraft
maintenance program certification, and aircraft technical representation. From
1985 to 1989, he served as Vice President of Maintenance and Engineering for
Presidential Airlines. From 1981 and 1985, he was appointed Manager-Maintenance
for People Express. Between 1965 and 1981, he held positions as Director of
Quality Control; Manager Aircraft Overhaul; Jet Engine Technician for Guy
American Airways, Seaboard World Airlines, Lockheed and Pratt & Whitney. From
1961 to 1965, he served as Aircraft Inspector for the United States Air Force.
Mr. Pettigrew graduated from the Academy of Aeronautics in Flushing, New York
and Fairleigh Dickinson University. He holds a FAA license in Aircraft and
Powerplant.
James P. Walsh will be our Airworthiness Oversight Officer. Since 1994,
Mr. Walsh has been a consultant to the airline industry in the areas of
certification, preparation and operation of maintenance programs and procedures,
and other areas related to aircraft airworthiness and regulatory compliance.
From 1971 to 1994 Mr. Walsh worked at the FAA and retired after 22 years with
the Miami and Ft. Lauderdale Flight Standard District Office (FSDO). He served
as Principal Airworthiness Inspector, supervisor and manager for certificate
holders operating under FAA Part 121,135,125,129,145,147 and 91. Mr. Walsh was
appointed as Certification Project Manager responsible for coordinating
Principal Operations, Maintenance and Avionics activity related to certification
process of Air Carriers. Mr. Walsh holds an Aircraft and Powerplant Mechanic
certificates, a Radio Operating Permit and is a Designated Airworthiness
Representative (DAR).
Roy J. Spencer, Jr. will be our Chief Pilot. Since 1996, he has served
as Chief Pilot and Senior Line Captain of Gemini Air Cargo. During 1995 and
1996, he was General Manager/Vice President of Airline Operations at
TransMeridian Airlines. From 1994 to 1995, he was a Director of Flight Crew
Training at DHL Worldwide Express. From 1993 to 1994, he was Vice President,
Airline Operations at Eastwind Airlines. From 1980 to 1993, he held positions as
Chief Operating Officer, Vice President of Operations, Vice President of
Maintenance, Airline Captain and Check Airman for American Flight Group, Delta
Connection, Continental Express, Chicago Airlines and Frontier Horizon. Between
1975 and 1980, he served as Air Carrier Inspector for the Federal Aviation
Administration. From 1971 to 1975 held positions within the Department of
Defense as Air Reserve Technician and Special Agent -Drug Enforcement
Administration. Mr. Spencer served in the United States Air Force as Officer,
Pilot in Vietnam between 1967 and 1971 and received the Distinguished Flying
Cross. He holds Aircraft Type ratings in DC9, DC10, A320, B767, B737, B727,
ATR42/72 aircraft. He holds a bachelor's degree from the University of Southern
Mississippi and the Industrial College of the Armed Forces.
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<PAGE> 41
J. Dan Govatos will be our Director of Safety. Since 1999, he has
served as Chief Pilot and Check Airman for Casino Express, a Part 121
certificated charter and scheduled air carrier based in Elko, Nevada. From 1998
to 1999 he served as Director of Operations Training for Polar Air Cargo. From
1997 to 1998, he served as Vice President Operations and Chief Pilot for Caljet
Airlines in Long Beach, California. Between 1995 and 1996, he was appointed
Director of Training at Jet USA Airlines, and from 1991 to 1996, he held
positions as Captain and Line Check Airman for Mesa Airlines. From 1989 until
cessation of Eastern Airlines in 1991, he was an airline pilot. Mr. Govatos
holds an Airline Transport Pilot License, is Type Rated in A300, B737 aircraft,
and is a Flight Engineer and A&P Mechanic. He graduated from Spartan School of
Aeronautics, Tulsa Oklahoma.
ANNUAL COMPENSATION
No salaries have been paid to existing officers. All of our expenses
have been borne by the two principal founders. All unpaid officer compensation
has been accrued for and all expenses born by officers are shown in our
financial statements as contributions to capital.
2000 STOCK OPTION PLAN
On June 6, 2000, the Company's board of directors approved a 2000 Stock
Option Plan. Members of the Company's board of directors, employees and
consultants to the company or its affiliates are eligible to participate in the
2000 Plan. The Company has reserved 1,250,000 shares of common stock for
issuance upon the exercise of options granted to participants under the 2000
Plan. As of December 31, 2000, the company has not awarded any options to
purchase shares of common stock. The 2000 Plan permits the grant of both
incentive stock options and non-qualifying stock options and is administrated by
the board of directors, which has the authority to select individuals to
participate in the 2000 Plan and to determine the terms of all options awards
made under the plan.
EMPLOYMENT AGREEMENTS
On June 1, 2000 we entered into a month-to-month consulting agreement
with Mr. Serge Feller, as Chairman, CEO and President, providing for a
consulting fee of $15,000 per month. This agreement may be canceled by either
party on ten days' notice and all payments are being deferred without interest
until the company is fully capitalized. Once we receive our operating authority,
the consulting agreement will become into an employment agreement and Mr. Feller
will receive a one-time payment of $371,000 for reimbursement of expenses. The
principal terms of the employment agreement will be as follows: Mr. Feller will
receive an annual salary of $225,000 per year with subsequent annual increase of
the greater of 10% or an amount determined by the board of directors. The term
of the agreement expires on December 31, 2006, subject to a renewal and
extension provision described below. Mr. Feller is eligible to participate in
all company bonus and stock option plans as may be adopted from time to time.
If, as of December 31, 2006 we and Mr. Feller have not executed a new employment
agreement, or neither party has given written notice to the other of an
intention to allow the agreement to expire at the end of its term on December
31, 2006, the agreement will be automatically extended for five years, with all
economic provisions extended on a pro rata basis. Mr. Feller may terminate his
employment in the event (i) we relocate our headquarters outside of the Ft.
Lauderdale area, (ii) his duties are diminished in a manner materially altering
his responsibilities, (iii) the board of directors determine that we should be
liquidated or dissolved during the term of the employment agreement, or (iv)
there is a change in control. Under the terms of the agreement, a change in
control includes (i) any person, other than Tourjets, becoming the beneficial
owner of more than 50% of our then outstanding securities, (ii) certain changes
involve a majority of the board of directors, (iii) certain mergers or
acquisitions with any other corporations and (iv) the liquidation or sale of
substantially all of our assets. In the event Mr. Feller exercises this
termination right, or in the event we terminate Mr. Feller's employment with the
company other than for cause (as defined in the employment agreement), we are
obligated to pay the undiscounted remainder of his base salary then in effect,
any deferred salary and/or bonus compensation payable, and any granted but
unvested stock options shall immediately become exercisable. We may terminate
the agreement for cause or if Mr. Feller becomes disabled for a period of 12
months. Mr. Feller will also be eligible for customary employee benefits
including, health insurance, bonus, and indemnification provisions.
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<PAGE> 42
We intend to enter into a three-year employment agreement with Mr.
Daniel Jenkins, as Chief Operating Officer, providing for an annual salary of
$150,000 per year, including a one-time bonus payment of $27,000 upon receipt of
our DOT and FAA operating authority. The term of the employment agreement will
commence on the earlier of the date agreed to by Mr. Jenkins or us or upon
completion of this offering. The agreement may be terminated for cause upon Mr.
Jenkins's disability for nine months or nine months out of any twelve month
period. Either party may terminate the agreement without cause on 180 days'
notice. The employment agreement is renewable unless either party gives written
notice of termination at least 90 days before the then current term. Mr. Jenkins
will also be eligible for customary employee benefits including, health
insurance, bonus, and indemnification provisions.
No other employment arrangements have a base salary of $100,000 or
more. We anticipate that other employment agreements with non-officer employees
will contain customary employee benefits including, health insurance, bonus, and
indemnification provisions.
BOARD OF DIRECTORS
Our board of directors is responsible for establishing broad corporate
policies and for our overall performance. We expect that it will establish
Executive, Audit, and Compensation Committees. The members of the board are
Serge Feller (Chairman), James Korth, Benham Elliott, Richard Spaulding, and
Isidor Buholzer. Each member is elected for a period of three years.
COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee's principal functions will be to give additional
assurance that the financial information is accurate and timely and that it
includes all appropriate disclosure; to ascertain the existence of an effective
accounting and control system. The Audit Committee consists of Messrs. Buholzer,
Elliott, and Spaulding.
The Compensation Committee will study, advise and consult with
management respecting the compensation of our officers, and will recommend for
the Board's consideration any plan for additional compensation that it deems
appropriate. The Compensation Committee consists of Messrs. Elliott and
Buholzer.
The Executive Committee will have authority to act for the Board on
most matters during the intervals between Board meetings. The Executive
Committee will exercise all of the Board's power and authority when the Board is
unable to meet, except that some fundamental responsibilities, like the
declaration of dividends, are reserved to the Board. The Executive Committee
consists of Messrs. Feller and Korth.
COMPENSATION OF MEMBERS OF THE BOARD
Directors who are not also executive officers of Tourjets or of a
Tourjets affiliate will receive $5,000 annually for serving on our Board, which
amount is to be paid quarterly in advance. Non-Affiliate Directors are
reimbursed for usual and ordinary expenses of meeting attendance.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our Articles of Incorporation provide that, to the fullest extent
permitted by the Florida Business Corporation Act, we shall indemnify each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, because he is or was, or has agreed
to become, a director or officer, or is or was serving, or has agreed to serve,
at our request, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan). This indemnification will also cover all
persons covered by our indemnification for actions alleged to have been taken or
not taken in their designated capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, which are
actually and reasonably incurred by or on behalf of any person in any action,
suit or proceeding, and any appeal therefrom.
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<PAGE> 43
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise, we
have been advised that in the opinion of the SEC that indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
J.W. KORTH & Company
James W. Korth, who, through J.W. Korth & Company, owns 47.77% of our
outstanding common stock, is one of our founders, and is a Director. In
addition, he owns an 88% interest in, and is the General Partner of, J.W. Korth
& Company, our Managing Agent. Mr. Korth thus has a potential conflict of
interest in relation to his activities as one of our officers and directors and
his status as the principal owner of our principal underwriter. See "Plan of
Distribution" and "Determination of Offering Price."
J.W. Korth & Company is serving as a consultant to us pursuant to a
written consulting agreement. Todd A. DeMand, a partner and Financial Principal
of J. W. Korth & Company, is serving as our Chief Financial Officer. If Mr.
DeMand can no longer fulfill his responsibilities as Chief Financial Officer, he
will be replaced by a successor CFO appointed by the board of directors. Other
partners of J. W. Korth & Company are supplying services to us that we may
reasonably request. For its services, J.W. Korth & Company will be paid a
consulting fee of $15,000 per month beginning June 1, 2000. However, these
payments may be made in arrears after the closing of this offering without
interest penalties.
In 1997, J.W. Korth & Company and James W. Korth were the subjects of a
court action brought against them by the SEC. The court action dealt with bonds
owned or held in custody for its customers by J.W. Korth & Company that had been
issued by the German Government between 1924 and 1930. The SEC, during a routine
examination of J.W. Korth & Company, requested the serial numbers of these
bonds. The SEC Staff informed J.W. Korth & Company that the serial numbers would
be sent to the German Government, purportedly to verify their legal status. J.W.
Korth & Company declined to provide this information without assurance that the
serial numbers would not be provided to Germany, because of a concern that the
German Government would repudiate the bonds irrespective of whether they
represented a continuing obligation. Therefore, J.W. Korth & Company argued that
the refusal to provide the information to the SEC was reasonable. The SEC
brought an action in the United States District Court for the Southern District
against J.W. Korth & Company and James W. Korth in his capacity as Managing
General Partner of J.W. Korth & Company, for violating record-keeping provisions
of the Securities Exchange Act applicable to securities brokers and dealers. A
permanent injunction against violating those provisions was entered. Also, J.W.
Korth & Company was fined $50,000 and Mr. Korth was fined $5,500.
Although the court ruled against J.W. Korth & Company and Mr. Korth,
the court specifically found that no fraud was involved and that no investor
losses had occurred. We do not believe that the entry of this order will have a
material effect on our operations or business prospects and does not adversely
reflect on the integrity of J.W. Korth & Company or Mr. Korth.
AAXICO, INC.
We expect to acquire our initial inventory of spare parts from AAXICO
Inc., a major worldwide aircraft parts supplier located in Miami, Florida. J.W.
Korth & Company is 10% owned by James E. Korth, father of James W. Korth, who is
also a principal owner of AAXICO. Several family members of James W. Korth,
principal owner of J. W. Korth & Company, also are employed at AAXICO. We have
no contract or other arrangement with AAXICO that requires us to buy all or some
of our parts from AAXICO. We intend to purchase parts from AAXICO on an item by
item ad hoc basis if the terms and conditions of these purchases are at least as
favorable could be obtained from an unaffiliated entity in an arm's length
transaction.
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<PAGE> 44
BONUS PAYMENT TO MANAGEMENT AFTER DOT & FAA CERTIFICATION
Founding shareholders and management employees directly responsible for
obtaining DOT and FAA certification are entitled to receive a onetime bonus
payment for their efforts after we become a licensed airline. These payments are
reflected in each party's employment or consulting agreement. The total of these
payments is estimated to be $951,000.
REIMBURSEMENT OF CAPITAL EXPENDITURES
Our principal founders (Serge F. Feller and J.W. Korth & Company) have
supplied all of the funds necessary to get started and pay the pre-filing
expenses of this offering. We have agreed to reimburse the founders for all of
the DOT, FAA and offering expenses incurred by them on behalf of the company. As
of October 31, 2000, the company owed the founders $147,725.
CONTRIBUTION OF DOVE ONE'S ASSETS TO TOURJETS
On April 20, 2000, we acquired all the assets of Dove One, Inc. from
its shareholders, our two principal founders, as additional paid-in capital.
Pursuant to generally accepted accounting principles, these assets were
transferred onto our books at $30,034, representing the book value of these
assets on Dove One's books.
DESCRIPTION OF CAPITAL STOCK
The securities being offered are shares of common stock.
Under our Amended and Restated Articles of Incorporation, we are
authorized to issue 50,000,000 shares of common stock, par value $.001 per
share, and 50,000,000 shares of preferred stock, par value $.001 per share. As
of October 31, 2000, no shares of preferred stock have been issued, and
4,605,000 shares of common stock were issued and outstanding.
COMMON STOCK
Common stock holders are entitled to one vote for each share, subject
to any voting rights of holders of issued and outstanding shares of preferred
stock. There will be no cumulative voting. Dividends are payable as lawful and
as determined by the board of directors, subject to any preferential dividend in
favor of issued and outstanding shares of preferred stock.
PREFERRED STOCK
The board of directors may issue preferred stock in one or more series
and may fix the designations, powers, preferences and relative, participating,
optional and other special rights, qualifications, limitations and restrictions
on the preferred stock, including the dividend rate, conversion rights, voting
rights, redemption price and liquidation preference, and may fix the number of
shares to be included in any such series. Any preferred stock may rank senior to
the common stock for the payment of dividends or amounts upon liquidation,
dissolution or winding-up, or both. In addition, any shares of preferred stock
may have class or series voting rights. Issuances of preferred stock, while
providing us with flexibility in connection with general corporate purposes,
may, among other things, have an adverse effect on the rights of holders of
common stock.
The board of directors, without shareholder approval, can issue
preferred stock with voting and conversion rights that could adversely affect
the voting power and other rights of holders of common stock. Preferred stock
could thus be issued quickly with terms calculated to delay or prevent a change
of control or to make the removal of management more difficult. In certain
circumstances, this could have the effect of decreasing the market price of our
common stock.
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<PAGE> 45
CERTAIN PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
ARTICLES OF INCORPORATION
Our articles of incorporation permit the board of directors without
shareholder approval to issue shares of preferred stock up to the number of
shares authorized for issuance in our certificate of incorporation. We could use
these additional shares for a variety of corporate purposes. These purposes
include future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. Our ability to issue these shares of
preferred stock could make it more difficult or discourage an attempt to obtain
control of our company by means of a proxy contest, tender offer, merger or
otherwise.
LIMITATION ON VOTING BY FOREIGN OWNERS
There are applicable provisions of law and regulations to ownership or
control of U. S. air carriers. These restrictions currently require that no more
than 25% of the voting stock of the company be owned or controlled, directly or
indirectly, by foreign citizens for purposes of foreign ownership restrictions,
and that the company's president and two-thirds of its board of directors be U.
S. citizens. Our Articles of Incorporation have been amended so that no shares
of capital stock may be voted by or at the direction of foreign citizens unless
such shares are registered on our foreign stock record. Registration on our
foreign stock record is made in chronological order based on the date the
company receives a written request for registration. In the event that
registration on the foreign stock record is greater than 25% of the voting stock
then only those persons registered prior to exceeding the 25% limitation may
vote.
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement, we have agreed to sell to the underwriter, J.W. Korth &
Company, 6,250,000 shares of common stock. If the underwriter sells more than
the total number of shares set forth in the table above, the underwriter has a
30-day option to buy from us up to an additional shares at the initial public
offering price, less the underwriting discounts and commissions, to cover these
sales.
The underwriting agreement provides that the underwriter is obligated
to purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the option described above.
The underwriter proposes to offer the shares of common stock initially
at the public offering price on the cover page of this prospectus and to selling
group members at that price less a maximum concession of $0.91 per share. After
the initial public offering, the public offering price and concession and
discount to broker/dealers may be changed by the underwriter.
The following table shows the per share and total public offering
price, underwriting discounts and commissions and proceeds before expenses to
the company, which are estimated at $350,000. Total amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase up to
625,000 additional shares.
<TABLE>
<CAPTION>
WITHOUT WITH
OVER- OVER-
PER SHARE ALLOTMENT ALLOTMENT
--------- --------- ---------
<S> <C> <C> <C>
Public Offering Price
Underwriting Discounts and
Commissions paid by us
Net proceeds before expenses
</TABLE>
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<PAGE> 46
Because of our relationship with J.W. Korth & Company, this offering is
being conducted in accordance with Rule 2720 of the National Association of
Securities Dealers. That rule requires that the initial public offering price
can not be greater than that recommended by a "qualified independent
underwriter", as defined by the NASD. Accordingly, has served
in that capacity and performed due diligence investigations and reviewed and
participated in the preparation of the registration statement of which this
prospectus forms a part.
The underwriter has informed us that it does not expect discretionary
sales to exceed 5% of the share of common stock being offered. The company and
its founding stockholders have agreed, subject to certain limited exceptions,
not to offer, sell, contract to sell or otherwise dispose of any shares of
common stock for a period of 180 days after the date of this prospectus.
We have applied to list our common stock on under the symbol .
Prior to this offering, there has been no public market for our common stock.
The initial public offering price will be determined between the
company and the underwriter, subject to the recommendation of .
Among the principal factors to be considered in determining the initial public
offering price will be:
- market conditions for initial public offerings;
- the history of and prospects for our business and industry;
- our present state of development and our current financial
position;
- an assessment of our management;
- the market for securities of companies in businesses similar
to ours; and
- the general condition of the securities markets.
There can be no assurance that the initial public offering price will
correspond to the price at which the common stock will trade in the public
market subsequent to the offering or that an active trading market will develop
and continue after the offering.
In connection with the offering, the underwriters may engage in
stabilizing transactions, over-allotment transactions, syndicate covering
transactions and penalty bids in accordance with Regulation M under the
Securities Exchange Act of 1934.
Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
Over-allotment involves sales by the underwriters of shares in excess
of the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a covered
short position or a naked short position. In a covered short position, the
number of shares over-allotted by the underwriters is not greater than the
number of shares that they may purchase in the over-allotment option. In a
naked short position, the number of shares involved is greater than the number
of shares in the over-allotment option. The underwriters may close out any short
position by either exercising their over-allotment option and/or purchasing
shares in the open market.
Syndicate covering transactions involve purchases of the common stock
in the open market after the distribution has been completed in order to cover
syndicate short positions. In determining the source of shares to close out the
short position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the price at
which they may purchase shares through the over- allotment option. If the
underwriters sell more shares than could be covered by the over-allotment
option, a naked short position, that position can only be closed out by buying
shares in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the shares in the open market after pricing that could adversely affect
investors who purchase in the offering.
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<PAGE> 47
Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such syndicate
member is purchased in a stabilizing transaction or a syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and
penalty bids may have the effect of raising or maintaining the market price of
the priority common stock or preventing or retarding a decline in the market
price of the priority common stock. As a result the price of the priority common
stock may be higher than the price that might otherwise exist in the open
market. These transactions may be effected on the American Stock Exchange or
otherwise and, if commenced, may be discontinued at any time.
We have agreed to indemnify the underwriter and against
specified liabilities, including liabilities under the Securities Act, or to
contribute to payments that they may be required to make in respect of those
liabilities.
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<PAGE> 48
COMMON STOCK OWNED BY PRINCIPAL
SHAREHOLDERS, OFFICERS AND DIRECTORS
The following table set forth the information regarding the beneficial
ownership of Tourjets Airline Corporation common stock as of December 31, 2000
(adjusted for the 1-for-2.21 reverse stock split expected to be effected before
the closing of this offering) and for each person (or group of affiliated
person) known to Tourjets to be the beneficial owners or more than 5% of its
common stock, each of Tourjets executive officers, and all of the directors and
officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK OWNED BY PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS OF TOURJETS
--------------------------------------------------------------------------------
COMMON SHARES BENEFICIALLY COMMON SHARES BENEFICIALLY
OWNED PRIOR TO THE OFFERING OWNED AFTER THE OFFERING
--------------------- ------------------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
<S> <C> <C> <C> <C>
Serge F. Feller
4225 Justison Court 995,295 47.77% 995,295 11.94%
Coconut Grove, FL 33133
-------------------------------
James W. Korth
J.W. Korth & Company 995,295 47.77% 995,295 11.94%
3575 Stewart Avenue
Miami, FL 33133
-------------------------------
Benham Elliott
5845 S.W. 97(th) Street 22,620 1.09% 22,620 0.27%
Pinecrest, FL 33156
-------------------------------
Richard L. Spaulding
211 North Union Street # 100 11,310 0.54% 11,310 0.14%
Alexandria, Va 22314
-------------------------------
Isidor Buholzer
3170 Virginia Street -- -- -- --
Coconut Grove, FL 33133
-------------------------------
Daniel A. Jenkins
15 Harrow Court 9,049 0.43% 9,049 0.11%
Sterling, VA 20165
-------------------------------
Joseph Pettigrew
11427 Vale Spring Drive 4,524 0.22% 4,524 0.05%
Oakton, VA 22124
-------------------------------
Roy J. Spencer, Jr.
4019 N. Water Iris Court 4,524 0.22% 4,524 0.05%
Houston, TX 77059
-------------------------------
James P. Walsh
58 N.W. 127 Terrace 4,524 0.22% 4,524 0.05%
Coral Gables, FL 33076
-------------------------------
J. Dan Govatos
202 Holyoke Dr. 4,524 0.22% 4,524 0.05%
Spring Creek, NV 89815
-------------------------------
Richard E. Brodsky, P.A.
25 Southeast 2(nd) Ave. # 919 22,620 1.08% 22,620 0.27%
Miami, FL 33131
-------------------------------
Holly MacDonald-Korth
3575 Stewart Avenue 4,524 0.22% 4,524 0.05%
Miami, FL 33133
-------------------------------
Charles M. Chinn
2407 Dartmouth Drive 4,524 0.22% 4,524 0.05%
Midland, TX 79705
-------------------------------
All directors and officers
as a group (13 persons) 2,083,333 100.00% 2,083,333 25.00%
========= ====== ========= =====
</TABLE>
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
securities and, except as otherwise indicated, each shareholder has sole voting
and investment power with respect shares listed as beneficially owned by the
shareholder. Pursuant to the rules of the SEC, 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.
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<PAGE> 49
LEGAL PROCEEDINGS
There are no legal proceedings pending in which we are a party or as to
which any of our property is the subject.
LEGAL MATTERS
The validity of the shares of common stock we are offering will be
passed upon for us by Lee Schmachtenberg, P.A., Miami, Florida. Legal matters in
connection with this offering will be passed upon for the underwriters by Hunton
& Williams, Richmond, Virginia.
EXPERTS
The financial statements of Dove One Inc for the period of February 15,
2000 (beginning of operations) to March 24, 2000 (end of operations) and for
Tourjets for the period from April 3, 2000 (inception) to October 31, 2000
appearing in the prospectus and registration statement have been audited by
Kaufman Rossin & Co., certified public accountants, and are included in reliance
upon the reports given upon the authority of that firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under
the Securities Act of 1933 with respect to the common stock being offered. This
prospectus does not contain all of the information presented in the registration
statement and the exhibits to the registration statement. For further
information with respect to us and the common stock we are offering, reference
is made to the registration statement and the exhibits filed as a part of the
registration statement. Statements contained in this prospectus concerning the
contents of any contract or any other document referred to may be only summaries
of these documents. The exhibits to this registration statement should be
referenced for the complete contents of these contracts and documents. Each
statement is qualified in all respects by reference to the exhibit. The
registration statement, including the exhibits, may be inspected without charge
at the public reference facilities maintained by the SEC in Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part may be
obtained from this office after payment of fees prescribed by the SEC. The SEC
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants, including us, that file
electronically with the SEC. The address of the site is http://www.sec.gov. In
addition, we intend to post all SEC filings on our own site, www.tourjets.com.
Information contained on our website is not part of this prospectus.
* * * * *
44
<PAGE> 50
INDEX TO FINANCIAL STATEMENTS
C O N T E N T S
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS
Balance Sheet F-3
Statements of Operations F-4
Statement of Deficiency in Assets F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7 to F-10
</TABLE>
45
<PAGE> 51
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Tourjets Airline Corporation
Miami, Florida
We have audited the accompanying balance sheet of Tourjets Airline Corporation
(successor) (a development stage company) as of October 31, 2000, and the
related statements of operations, deficiency in assets and cash flows for the
period from inception (April 3, 2000) to October 31, 2000 and the statement of
income of Dove One, Inc. (predecessor) from commencement of operations (February
15, 2000) to March 24, 2000 which have been have prepared on the basis of
accounting principles accepted in the United States. These financial statements
are the responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform these
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tourjets Airline Corporation as
of October 31, 2000, and the results of its operations and cash flows for the
period from inception (April 3, 2000) through October 31, 2000 and the results
of operations of the predecessor from commencement of operations (February 15,
2000) to March 24, 2000, in conformity with accounting principles generally
accepted in the United States.
KAUFMAN, ROSSIN & CO.
Miami, Florida
November 22, 2000
F - 2
<PAGE> 52
TOURJETS AIRLINE CORPORATION - SUCCESSOR
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
OCTOBER 31, 2000
<TABLE>
<S> <C>
ASSETS
EQUIPMENT, net of accumulated depreciation of $2,717 $ 20,891
OTHER ASSETS 6,475
-----------------
$ 27,366
=================
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accounts payable $ 73,148
Due to stockholders (Note 2) 147,725
-----------------
Total current liabilities 220,873
-----------------
COMMITMENTS (NOTE 5)
DEFICIENCY IN ASSETS
Preferred stock, $.001 par value; 50,000,000 shares authorized
none issued and outstanding -
Common stock, $.001 par value; 50,000,000 shares authorized;
4,605,000 issued and outstanding 4,605
Additional paid-in capital 143,428
Deficit accumulated during the development stage (341,540)
-----------------
Total deficiency in assets (193,507)
-----------------
$ 27,366
=================
</TABLE>
See accompanying notes.
F - 3
<PAGE> 53
TOURJETS AIRLINE CORPORATION - SUCCESSOR
(A DEVELOPMENT STAGE COMPANY)
AND DOVE ONE, INC. - PREDECESSOR
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
for the period from commencement of
inception operations
(April 3, 2000) to (February 15, 2000) to
October 31, 2000 March 24, 2000
<S> <C> <C>
CHARTER REVENUE $ - $ 488,028
-------------------- -----------------
OPERATING EXPENSES
CHARTER EXPENSES - 303,063
GROUND SERVICES - 92,425
CREW ACCOMMODATIONS - 44,192
CATERING - 17,556
DEPRECIATION 2,921 937
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Professional fees 12,600 -
Consulting fees (Note 2) 168,000 11,000
Offering costs 136,624 -
Travel expense 5,971 -
Rental expense 3,918 -
Miscellaneous operating expenses 14,194 1,510
-------------------- -----------------
Total operating expenses 344,428 470,683
-------------------- -----------------
INCOME (LOSS) FROM OPERATIONS (344,428) 17,345
OTHER INCOME
Gain on sale of assets 2,688 -
-------------------- -----------------
NET INCOME (LOSS) $ (341,540) $ 17,345
==================== =================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,605,000 100
-------------------- -----------------
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ (0.07) $ 173.45
==================== =================
</TABLE>
See accompanying notes.
F - 4
<PAGE> 54
TOURJETS AIRLINE CORPORATION - SUCCESSOR
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF DEFICIENCY IN ASSETS
FOR THE PERIOD FROM INCEPTION (APRIL 3, 2000) THROUGH OCTOBER 31, 2000
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Par Value Paid-in Development
Date Shares At $.001 Capital Stage Total
---- ------ -------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Shares issued to founders 4/20/2000 4,605,000 $ 4,605 $ (4,605) $ -- $ --
Contributions of capital in the form of
equipment and payment of professional
fees, consulting fees, travel expenses,
rental expense, miscellaneous operating -- -- -- 148,033 -- 148,033
expenses and deferred offering costs paid
by certain founders
Net loss for the period from inception (April 3,
2000) to October 31, 2000, representing
deficit accumulated during the development
stage -- -- -- -- (341,540) (341,540)
---------- --------- ---------- ---------- ---------- ----------
4,605,000 $ 4,605 $ 143,428 $ (341,540) $ (193,507)
========== ========= ========== ========== ========== ==========
</TABLE>
See accompanying notes.
F - 5
<PAGE> 55
TOURJETS AIRLINE CORPORATION - SUCCESSOR
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (APRIL 3, 2000) THROUGH OCTOBER 31, 2000
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (341,540)
---------------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 2,921
Gain on sale of equipment (2,688)
Changes in operating assets and liabilities:
Accounts payable 73,148
Due to stockholders - net 147,725
---------------
Total adjustments 221,106
---------------
Net cash used in operating activities (120,434)
---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of equipment 8,910
Acquisition of other assets (6,475)
---------------
Net cash provided by investing activities 2,435
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from capital contributions 117,999
---------------
INCREASE IN CASH AND BALANCE AT OCTOBER 31, 2000 $ -
===============
Supplemental Disclosures:
---------------
Interest paid $ -
===============
Income taxes paid $ -
===============
Supplemental Disclosure of Non-cash Investing Activity:
---------------
</TABLE>
During the period from inception (April 3, 2000) through October 31, 2000,
founding shareholders contributed approximately $30,000 of equipment. This
amount is included in additional paid-in capital.
See accompanying notes.
F - 6
<PAGE> 56
TOURJETS AIRLINE CORPORATION - SUCCESSOR
(A DEVELOPMENT STAGE COMPANY)
AND DOVE ONE, INC. - PREDECESSOR
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITY
Dove One, Inc. ("Dove One" or "predecessor") was incorporated in the
State of Florida in 1990 to operate charter flights. The principal founders of
Tourjets Airline Corporation acquired the common stock of Dove One in November
1999 for its status as an "Airline". At the purchase Dove One was a
non-operating shell company. The basis of presentation for the accompanying
statement of operations reflects the activity of Dove One from February 15, 2000
(commencement of temporary operations) to March 24, 2000 (termination of
temporary operations). During this period, Dove One arranged, as an agent for
tour operators, charter flights using the aircraft, personnel and ground
facilities of two unrelated air carriers. On April 3, 2000, management and
stockholders of Dove One formed Tourjets Airline Corporation (f/k/a Swissjet,
Inc.) ("Tourjets" or "successor"). Simultaneously, Dove One's assets were
transferred to Tourjets in a transaction accounted for as a capitalization in a
manner similar to a pooling of interests.
Tourjets (successor) was incorporated in the State of Florida in order
to operate an airline for leisure. Its primary focus will be to provide
round-trip air transportation to and from selected vacation destinations (from
the Eastern and Central States to Mexico, the Caribbean and Central America),
hotel accommodations, ground services, and other vacation-related services, such
as car rental, sightseeing tours and golf privileges. Tourjets has applied for
FAA Part 121 airline operating authority from the Federal Aviation
Administration ("FAA") and "economic" authority to operate as a domestic and
international airline for the transportation of persons, property and mail from
the Office of the Department of Transportation ("DOT") (Note 2). There can be no
assurance such authorities will be obtained.
Tourjets is considered to be in the development stage, as planned
operations have not commenced and the accompanying financial statements
represent those of a development stage company. The operations to date have
consisted of the process of DOT and FAA licensing and the filing of an initial
registration statement with the Securities and Exchange Commission.
EQUIPMENT - SUCCESSOR AND PREDECESSOR
Equipment is recorded at cost. Depreciation is computed using the straight-line
method based upon the estimated useful lives of the assets, which are as
follows:
<TABLE>
<S> <C>
Computer and office equipment 5 years
Software and manuals 5 years
Life rafts 5 years
</TABLE>
F - 7
<PAGE> 57
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation expense during the period from the successor's inception
(April 3, 2000) through October 31, 2000 amounted to $2,921 (Tourjets) and for
the period from commencement of the predecessor's operations (February 15, 2000)
to March 24, 2000 amounted to $937 (Dove One).
OFFERING COSTS - SUCCESSOR
Offering costs consist of direct expenditures relating to a proposed
initial public offering (IPO) of Tourjets' common stock (see Note 7) of
approximately $137,000 through October 31, 2000. In accordance with Staff
Accounting Bulletin No. 71, because of the delay of the proposed IPO, the
Company charged this amount to general and administrative expenses.
INCOME TAXES
The Company accounts for income taxes under the liability method
according to Statement of Financial Accounting Standards No. 109. Deferred tax
assets and liabilities are recognized for future tax consequences attributable
to differences between the financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
REVENUE RECOGNITION - SUCCESSOR AND PREDECESSOR
Revenues are recognized when the transportation is provided.
USE OF ESTIMATES - SUCCESSOR AND PREDECESSOR
The accounting and reporting policies of Tourjets and Dove One are in
conformity with accounting principles generally accepted in the United States.
The presentation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of the
balance sheet date (successor) and the reported amounts of revenues and expenses
for the periods presented (successor and predecessor). Actual results could
differ from those estimates.
The Successor has recorded a deferred tax asset of approximately
$116,000 at October 31, 2000 which is offset by a valuation allowance of the
same amount. Realization of the deferred tax asset is dependent on generating
sufficient taxable income in the future. The amount of the deferred tax asset
considered realizable could change in the near term if estimates of future
taxable income are revised.
RISKS AND UNCERTAINTIES - SUCCESSOR
Tourjets' business plan does not contemplate substantial direct
competition with scheduled airlines. Larger airlines can compete with Tourjets
by offering comparable service at a lower price than Tourjets could afford to
offer. This could have a material effect on the results of operations of
Tourjets.
NET INCOME (LOSS) PER SHARE - SUCCESSOR AND PREDECESSOR
Net income (loss) per share is computed by dividing the net income
(loss) by the weighted average number of common shares outstanding during the
periods. There were no potentially dilutive securities outstanding during the
periods.
F - 8
<PAGE> 58
NOTE 2. RELATED PARTY TRANSACTIONS
On June 1, 2000, Tourjets entered into two agreements with the
founding shareholders. The first agreement provides that Tourjets will receive
services related to general business consulting. Under the second agreement,
Tourjets will receive financial, planning and business development services.
These agreements call for monthly fees of $30,000 in the aggregate. These
contracts are month to month and may be terminated by management at any time. In
addition, these contracts provide for a one time bonus payment of approximately
$950,000 for services rendered in obtaining final DOT and FAA certification.
As of October 31, 2000, Tourjets has incurred $150,000 related to these
agreements, which is included in due to stockholder and consulting fees in the
accompanying financial statements and are due upon demand. Based upon the short
term nature of this obligation the carrying amounts of due to stockholders
approximate market value.
NOTE 3. INCOME TAXES
INCOME TAXES - SUCCESSOR
Deferred tax assets at October 31, 2000 consisted of the following:
<TABLE>
<S> <C>
Net operating loss carryforward $ 20,000
Accrued expenses to stockholder 50,000
Offering costs 46,000
Less valuation allowance (116,000)
---------------
$ -
===============
</TABLE>
Tourjets has a net operating loss carryforward of approximately $57,000 for
income tax purposes, which expires in 2020.
F - 9
<PAGE> 59
NOTE 3. INCOME TAXES (CONTINUED)
A reconciliation of the difference between the income tax expense and
the amount computed by applying the federal statutory tax rate of 34% to income
before income taxes for the period ended October 31, 2000 is as follows:
<TABLE>
<S> <C>
Statutory rate $ 116,000
Valuation allowance (116,000)
------------
$ -
============
</TABLE>
INCOME TAXES - PREDECESSOR
No provision for income taxes has been made in the accompanying financial
statement as Dove One has elected, with the consent of the stockholders, to be
taxed under S Corporation provisions of the Internal Revenue Code. Under these
provisions, the taxable income of Dove One is reflected on the stockholders'
personal income tax returns.
NOTE 4. CONCENTRATION OF RISK - PREDECESSOR
Charter revenues during the period from commencement of operations (February 15,
2000) to March 24, 2000 from one tour operator accounted for 69% of total
charter revenues.
NOTE 5. COMMITMENTS
LEASE COMMITMENT - PREDECESSOR
On January 11, 2000, Dove One entered into a lease agreement with an
unrelated third party, Casino Express Airlines ("Casino") for its B-737-200-17a
aircraft. This contract became effective on the date of the first charter
flight, February 15, 2000. Casino was responsible for providing qualified,
licensed cockpit and cabin crew, flight dispatch services, maintenance and
repair of the aircraft and insurance. Casino was also responsible for providing
fuel and taxes, subject to certain limitations pursuant to the agreement. The
contract contained a minimum hourly guarantee for the duration of the contract
amounting to $2,900 per block hour. On March 13, 2000 this contract was
terminated as a result of damage to the leased aircraft. In order to accommodate
flight scheduling, Dove One contracted with another airline for similar terms
for the two final flights during its operating period. Charter expense during
the period from commencement of operations (February 15, 2000) to March 24, 2000
approximated $303,000.
PURCHASE AND LEASE BACK ARRANGEMENT OF AIRPLANES - SUCCESSOR
Tourjets has entered into a Memorandum of Understanding (MOU) with a
major airline, Inc. to acquire up to six used MD-82 aircrafts from a major
airline. The MOU that is subject to a written agreement and must be approved by
the major airline's senior management or Board of Directors. Under the MOU,
Tourjets will acquire up to six aircraft over a period of time for $9,000,000
each. The price could increase by a maximum of $75,000 per aircraft if Airways
delivers the aircraft with newer than expected engines. Until Tourjets takes
delivery of each aircraft, it will lease them back to a major airline for
$137,500 per month. Tourjets will be required to put up a deposit of $50,000 per
aircraft and a second deposit of $300,000 per aircraft 30 days after the
written agreement with the major airline is signed. The deposits will become
non-refundable once the second deposit is made. This agreement is in
anticipation of the IPO of the common stock of Tourjets (see Note 7).
Tourjets is currently negotiating contracts for employees and
consultants and a related stock option plan, also in anticipation of the IPO of
the common stock of Tourjets (see Note 7). Management believes none of these
contracts will become binding unless and until the IPO is successful.
F - 10
<PAGE> 60
NOTE 6. STOCK BASED COMPENSATION
In April 2000, the Company established a Stock Option Plan which
authorizes the Company to issue options to employees, directors and outside
consultants of the Company. The issuance and form, including vesting terms of
the options shall be at the discretion of the Company's board of directors,
except that the exercise price may not be less than 85% of the fair market value
at the time of grant. The total number of shares of common stock reserved and
available for issuance under this plan is 1,250,000. There are no outstanding
stock options as of October 31, 2000 and management does not intend to issue
such options until the completion of the public offering (see Note 7).
NOTE 7. INITIAL PUBLIC OFFERING
Tourjets intends to file an amendment to its registration statement on
form S-1A to sell shares of common stock in order to raise $75,000,000 in an
offering to the public. The proceeds from the offering are expected principally
to be used to fund asset acquisitions (Note 5) and to provide working capital.
Tourjets anticipates the registration statement to become effective early 2001.
There can be no assurance the planned IPO will ever be consummated.
F - 11
<PAGE> 61
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses Of Issuance and Distribution
The following is a listing of all expenses in connection with the
issuance and distribution of the securities to be registered, other than
underwriting discounts and commissions. All amounts are estimates except the SEC
filing fee and the NASD filing fees.
<TABLE>
<S> <C>
Legal counsel: 155,000
Auditors: 50,000
Transfer Agent: 3,000
Department of Transportation Filing Fees: 2,000
SEC Filing Fee: 33,000
Listing Fee: 25,000
Printing 65,000
Mailing: 2,000
Travel: 15,000
Total: $ 350,000
</TABLE>
Item 14. Indemnification of Directors and Officers
Our Articles of Incorporation provide that, to the fullest extent
permitted by the Florida Business Corporation Act, we shall indemnify each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, because he is or was, or has agreed
to become, a director or officer, or is or was serving, or has agreed to serve,
at our request, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan). This indemnification will also cover all
persons covered by our indemnification for actions alleged to have been taken or
not taken in their designated capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, which are
actually and reasonably incurred by or on behalf of any person in any action,
suit or proceeding, and any appeal therefrom.
Item 15. Recent Issuance Of Unregistered Securities
On April 20, 2000 Tourjets (f/k/a Swissjet Inc.), issued 4,605,000
shares of common stock, $.001 par value per share, to our founding shareholders
(twelve in number). The shares were issued privately to founders in reliance on
the exemption for non-public offerings under section 4(2) of the Securities Act.
The names of these shareholders and the number of shares issued to each are as
follows:
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF SHARES
----------- ----------------
<S> <C>
Serge F. Feller 2,200,000
J. W. Korth & Company 2,200,000
Richard E. Brodsky, P.A. 50,000
Benham Elliott 50,000
Richard Spaulding 25,000
Daniel Jenkins 20,000
Joseph Pettigrew 10,000
Roy Spencer 10,000
James Walsh 10,000
J. Dan Govatos 10,000
Holly MacDonald-Korth 10,000
Charles M. Chinn 10,000
</TABLE>
<PAGE> 62
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
1(*) Form of Underwriting Agreement
3.2(**) Articles of Incorporation, as amended
3.2(**) Bylaws, as amended
4(*) Form of Common Stock certificate
5(*) Opinion of Counsel
10(**) Agreement between Tourjets and Sigma Aircraft Mgmt.
10.1 2000 Stock Option Plan
10.2 Agreement between J. W. Korth & Company and Tourjets
Consulting / Employment Agreement between Tourjets and
10.3 Mr. Feller
23.1 Consent of Independent Public Accountants
23.2 Consent of Lee C. Schmachtenberg
24(**) Power of Attorney
</TABLE>
-----------------
(*)To be filed by amendment.
(**)Previously filed.
(b) All financial statement schedules have been omitted because the
information required to be presented in them is not applicable or is shown in
the financial statements or related notes.
Item 17. Undertakings
We undertake to provide to the underwriters at the closing specified
in the underwriting agreement, certificates in the denominations and registered
in the names as required by the underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant under Florida law, the Articles of Incorporation or
our bylaws, the underwriting agreement, or otherwise, we have been advised that
in the opinion of the SEC this indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against these liabilities, other than the
payment by us of expenses incurred or paid by a director, officer, or
controlling person of ours in the successful defense of any action, suit or
proceeding, is asserted by a director, officer or controlling person in
connection with the securities being registered in this offering, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
this indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of this issue.
We undertake that:
(1) For purposes of determining any liability under the Securities
Act, 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 us under 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.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered,
and the offering of these securities at that time shall be deemed to be the
initial bona fide offering.
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment No. 1 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Miami, State of Florida, on January , 2001.
---
Tourjets Airline Corporation
By: /s/ Serge F. Feller
-----------------------------------
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Serge F. Feller President (Principal Executive January 19, 2001
------------------------------- Officer), Chief Executive Officer and
Serge F. Feller Chairman of the Board of Directors
/s/ Todd Demand(*) Acting Chief Financial Officer January 19, 2001
------------------------------- (Principal Financial and Accounting
Todd Demand Officer)
/s/ James W. Korth(*) Director January 19, 2001
-------------------------------
James W. Korth
/s/ Richard Spaulding(*) Director January 19, 2001
-------------------------------
Richard Spaulding
/s/ Benham Elliott(*) Director January 19, 2001
-------------------------------
Benham Elliott
/s/ Isidor Buholzer(*) Director January 19, 2001
-------------------------------
Isidor Buholzer
</TABLE>
(*)By: /s/ Serge F. Feller
------------------------
Serge F. Feller
Attorney-in-Fact
Pursuant to Power of Attorney
<PAGE> 64
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
1(*) Form of Underwriting Agreement
3.2(**) Articles of Incorporation, as amended
3.2(**) Bylaws, as amended
4(*) Form of Common Stock certificate
5(*) Opinion of Counsel
10(**) Agreement between Tourjets and Sigma Aircraft Mgmt.
10.1 2000 Stock Option Plan
10.2 Agreement between J. W. Korth & Company and Tourjets
Consulting / Employment Agreement between Tourjets and
10.3 Mr. Feller
23.1 Consent of Independent Public Accountants
23.2(*) Consent of Lee C. Schmachtenberg
24(**) Power of Attorney
</TABLE>
---------------
(*)To be filed by amendment.
(**)Previously filed.
