As filed with the Securities and Exchange Commission on January 4, 2001
Registration No. 333-46672
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
ALBION AVIATION, INC.
(Name of registrant as specified in its charter)
Delaware 4512 33-0619254
(State or Jurisdiction of Primary SIC Code (IRS Employer
incorporation or organization) Identification No.)
24351 Pasto Road, #B Jehu Hand, President
Dana Point, California 92629 24351 Pasto Road, #B
(949) 489-2400 Dana Point, California 92629
(Address, including zip code, and telephone number,
including area code (949) 489-2400
of Registrant's principal executive offices) (Name, address, including
zip code, and telephone
number, including area code, of agent for service
COPY TO:
Jehu Hand, Esq.
Hand & Hand
24351 Pasto Road, Suite B
Dana Point, California 92629
(949) 489-2400
Facsimile (949) 489-0034
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this registration
statement.
If 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, please check the following box: [X]
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, please check the following box:[ ]
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CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Be Registered Per Share(1) Offering Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock offered by the Company.... 50,000 $5.00 $ 250,000 $ 73.75
Total.................................. 50,000 $ 250,000 $ 73.75 (2)
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(1) Estimated solely for purposes of calculating the registration fee.
(2) Minimum fee of $100.00 paid with 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 the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
PROSPECTUS
ALBION AVIATION, INC.
50,000 Shares of Common Stock
(par value $.001)
The 50,000 shares of common stock, par value $.001 of Albion Aviation,
Inc., a Delaware corporation ("Albion") are offered by Albion at $5.00 per
share. See "Plan of Distribution." The expenses of the offering, estimated at
$10,000, will be paid by Albion.
There is currently no trading market for the common stock. Albion has
applied for trading of the common stock on the Electronic Bulletin Board under
the proposed symbol "ALAV". There can be no assurance that the Electronic
Bulletin Board will accept the common stock for trading nor that there will ever
exist a broad trading market for the common stock.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PURCHASE OF THESE SECURITIES INVOLVES RISKS. See "Risk Factors" on page 4.
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Underwriting
Discounts and Proceeds
Price to Public Commissions (1)to Company(2)
<S> <C> <C> <C>
Per Unit $ 5.00 $ .50 $ 4.50
Total(2) $ 250,000 $ 5,000 $ 225,000
(Footnotes on following page)
</TABLE>
(1) Does not reflect additional compensation to be received by the form of a
non-accountable expense allowance
of $7,500 ($.15 per share). In addition, Albion has agreed to indemnify
the selected broker dealers against
certain civil liabilities, including liabilities under the Securities Act
of 1933. See "Plan of Distribution."
(2) Before deducting approximately $20,000 ($.40 per unit) in estimated
expenses of the offering payable by Albion, including the non-accountable
expense allowance.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
The date of this prospectus is January __,2001.
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No person has been authorized in connection with this offering to give any
information or to make any representation other than as contained in this
prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by Albion. This prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities covered by this prospectus in any state or other jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such state
or jurisdiction. Neither the delivery of this prospectus nor any sales made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of Albion since the date hereof.
PROSPECTUS SUMMARY
The following is only a summary of the information, financial statements
and the notes included in this prospectus.
Albion
Albion Aviation, Inc. ("Albion") intends to engage in the business of a
charter air carrier under Part 135 of the Federal Aviation Regulations. Part 135
is similar to the rules which scheduled airlines must follow but less stringent.
Albion owns one aircraft, a Cessna 421 B ("aircraft"). The tail identification
number is N3AJ. This aircraft can carry 8 passengers. The Cessna 421 B is widely
used for charter and corporate services. It is pressured to fly in altitudes
over 30,000 feet.
We think we will base the aircraft at Orange County Airport in Orange
County California. With time we hope to acquire other aircraft if business
grows. Orange County is benefitting from a strong and growing economy. There are
5 other charter airlines operating out of Orange County, as well as 10
commercial airlines and two commuter airlines.
The market for charter services primarily consists of business executives
and wealthy individuals who do not wish to be bound by airline schedules. The
cost of chartering an aircraft similar to the aircraft is about $500 per hour.
This compares to hourly jet aircraft charter cost of $1,000 or $2,000 or more.
If several passengers are flown the cost per passenger can be less than business
or first class tickets. Although the aircraft is slower than a jet airliner's
typical speed of over 500 nautical miles per hour, on flights of one or two
hours duration the time differential is not material. The primary flight market
expected to be served is California, (San Diego, Los Angeles, Palm Springs,
Mammoth, San Francisco, Santa Barbara), Arizona (Phoenix) and Nevada (Las
Vegas.)
Albion has never received revenues and will not receive revenues until it
begins operations. Until we receive Part 135 authority (which is subject to
government approval) we can't begin operations. Although we think this will take
about 6 months, and start-up will require $90,000 from the proceeds of this
offering, it's difficult to predict when if at all this will happen and so we
may never receive revenues or make a profit.
The Offering
We are seeking to sell 50,000 shares to raise up to $250,000 of which
$20,000 will go for expenses and $25,000 for sales commissions, resulting in
proceeds of $205,000. If we sell less than this amount our president will
purchase shares to provide funding. Although he has agreed in writing to do so,
he has not and is not obligated to place any amounts in escrow. Later on we will
need more funds and expect to sell more shares or incur debt. We don't know on
what terms future sales of shares or debt will be made, if at all. This would
depend on what future investors and we might agree upon.
The corporate offices of Albion are located at 24351 Pasto Road, Suite B,
Dana Point, California 92629, and its telephone number is (949) 489-2400.
Securities Offered:............................ 50,000 shares of common stock.
Risk Factors. The securities offered hereby involve a high degree of risk
and immediate substantial dilution and should not be
purchased by investors who cannot afford the loss of their
entire investment. See "Risk Factors."
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Common Stock Outstanding(1) Before Offering:..... 1,000,000(1) shares
Common Stock Outstanding After Offering:......... 1,050,000(1) shares
NASD Electronic Bulletin Board Symbol (proposed)ALAV
(1) Based on shares outstanding as of September 30, 2000.
Risk Factors
The securities offered hereby are highly speculative and very risky.
Some of these risk factors follow. Before you buy consider the following risk
factors and the rest of this prospectus.
RISK FACTORS
The shares are a speculative investment and very risky. You should
especially consider these risk factors.
No operating history to evaluate, and start up costs.
We have not done any business. Albion's only activity to date is buying
the aircraft and developing a business plan. There is no operating history for
an investor to evaluate. It might take several months to obtain our 135 permit.
Although we think there will be strong demand for our charter services, no one
really knows for sure. We will try to minimize overhead by hiring pilot and
maintenance people on an as needed basis, similar to other small charter
airlines. Even if we can obtain business, it can't be predicted when we will be
profitable, if ever.
Best efforts offering may mean insufficient proceeds.
The offering is made on a best efforts basis with no minimum offering.
If less than 20,000 shares are sold Albion will not have sufficient funds to
commence operations, and investors will not legally be entitled to receive a
refund of their investment.
We might need more capital to continue business.
We may need significant capital for the expansion of our operations. We
believe that the net proceeds from this offering should be sufficient to fund
operations at least until April 30, 2002. However, we might need additional
funds before then. If additional funds are required, but cannot be raised, it
will have an adverse effect upon operations. To the extent that additional funds
are obtained by the sale of equity securities, the stockholders may sustain
significant dilution. If adequate capital is not available Albion will have to
reduce or eliminate planned activities, which could otherwise ultimately provide
significant revenue to Albion. Even if such additional financing is available on
satisfactory terms, it, nonetheless, could entail significant additional
dilution of the equity ownership of Albion to existing shareholders and the book
value of their outstanding shares.
There is lots of competition in the business.
The domestic airline industry is fiercely competitive. Currently, any
carrier deemed fit by the U.S. Department of Transportation (DOT) is free to
operate chartered or scheduled passenger service between any two points within
the U.S. and its possessions. To most of its destinations Albion will face
competing service from at least one, and sometimes more than one, major domestic
airline including: America West Airlines, Continental Airlines, Delta Air Lines,
Southwest Airlines, Skywest Airlines, American Airlines and their affiliated
regional carriers as well as innumerable charter operators. There are five
charter operators known to Albion at Orange County Airport and they all are
longer established and might be better financed. Albion also competes,
particularly on shorter segments, with ground transportation. Competition could
make it difficult or impossible for us to obtain customers or to charge enough
for our services to earn an operating profit.
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Government regulation significantly controls our operations and we must deal
with it.
The Airline Deregulation Act of 1978, as amended, eliminated most
domestic economic regulation of passenger and freight transportation. However,
the DOT and the Federal Aviation Administration (FAA) still exercise certain
regulatory authority over air carriers. The DOT maintains jurisdiction over the
approval of international codeshare agreements, international route authorities
and certain consumer protection matters, such as advertising, denied boarding
compensation, baggage liability and computer reservations systems.
The FAA regulates flying operations generally, including establishing
personnel, aircraft and security standards. As part of that oversight, the FAA
has implemented a number of requirements that Albion must incorporate into its
business. These matters relate to, among other things, inspection and
maintenance of aircraft, pilot training, and supervision. Albion must prove to
the FAA that it complies with Part 135 and other regulations before it can begin
operations. Noise restrictions exist at many airports including Orange County.
The aircraft complies with these restrictions if operated correctly. The FAA and
local airports can modify existing regulations or impose additional regulations.
If we don't comply with all regulations, the aircraft could be grounded, Albion
could be fined, or its operating activities could be significantly restricted or
our costs of operations would be too high to be competitive, if we can operate
at all. Management will in all likelihood make mistakes due to inexperience, and
this could affect the operating results.
We may never receive operating authority.
The DOT and FAA have discretion over persons to whom operating
authority under Part 135 is given. We may never obtain operating authority. If
this happens we won't be able to operate our business and investors may not
realize any return on their investment.
No cash dividends have or will be paid.
Albion has not paid any cash dividends on its capital stock. Albion
anticipates that its future earnings, if any, will be retained for use in the
business, or for other corporate purposes, and it is not anticipated that any
cash dividends on its common stock will be paid in the foreseeable future.
Investors cannot expect to receive any dividends or other periodic income on
their investment. See "Dividend Policy" and "Description of Securities."
Nasdaq Stock Market rules could make it hard to resell your shares.
Albion's common stock does not meet the current Nasdaq listing
requirements for the SmallCap(R) Market. Until Albion is able to satisfy
Nasdaq's requirements for listing, trading, if any, of the common stock will be
conducted on the NASD's OTC Bulletin Board, established for securities that do
not meet the Nasdaq SmallCap(R) Market listing requirements. Consequently, the
liquidity of Albion's securities could be impaired, not only in the number of
securities which could be bought and sold, but also through delays in the timing
of transactions, reduction in security analysts' and the news media's coverage
of Albion, and lower prices for Albion's securities than might otherwise be
attained.
In addition, the "penny stock" rules limit trading of securities not
traded on NASDAQ or a recognized stock exchange, or securities which do not
trade at a price of $5.00 or higher, in that brokers making trades in those
securities must make a special suitability determination for purchasers of the
security, and obtain the purchaser's consent prior to sale. The application of
these rules may make it difficult for purchasers in this offering to resell
their shares.
We could issue more shares in the future without your permission.
Albion's board of directors has the power, without the consent of the
shareholders, to issue additional shares of common stock or preferred stock for
such consideration as may be permitted under the Delaware General Corporation
Law. Preferred stock may be issued with preferences or rights as to dividends,
voting or liquidation which are superior to those of holders of common stock. In
view of the large number of authorized but unissued shares of common stock
(19,000,000 Shares as of the date of this prospectus) current shareholders are
subject to significant potential dilution in their ownership interest in Albion.
See "Description of Securities."
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Economic conditions can affect our business.
The airline industry is affected by changes in international, national,
regional and local economic conditions as they impact the need and financial
ability to travel. Southern California is an international travel destination
since charter air travel is discretionary even for business travelers, adverse
economic conditions can be expected to affect demand for charter services more
than commercial carriers.
War or political instability, abroad or in the United States, can lead
to terrorism (or the threat thereof). Like any other air carrier, we might be
the target of terrorist attacks. Travelers might reduce air travel in response
to actual or threatened acts of terrorism against other air carriers as well.
Your investment will be diluted on a book-value basis.
Investors will pay $5.00 per share. However, the net tangible book
value of Albion as of September 30, 2000 was $(.008) per share. After giving
effect to the deduction of expenses, and if all the offered shares are sold, net
tangible book value after the offering will be $.19 per share, or dilution of
$4.81 per share to public investors, and an increase of $.19 per share in
tangible book value attributable to investors. See "Dilution."
Management control discourages takeovers and affects value.
Management owns 893,850 shares. Even after the offering is sold
management will be able to elect all
the board of directors and otherwise control Albion and its operations,
and investors will have little, if any
control over Albion's management. The concentration of control in management
will discourage takeover
attempts and the purchase of shares by persons who wish to acquire control of
Albion. See "Management."
Management has limited experience and may make lots of mistakes.
Management has very limited experience in managing aviation
enterprises, and is not expected to work full time and will not receive any
compensation for the near future. Instead management intends to hire qualified
personnel. We may not be able to find such personnel, especially in an expanding
economy. or we might not be able to afford to pay market rate salaries or hourly
compensation. Management will in all likelihood make mistakes due to
inexperience, and this could affect the operating results.
High gasoline prices can make our costs increase.
Due to the competitive nature of the airline industry, in the event of
any increase in the price of fuel, there can be no assurance that we would be
able to pass on increased fuel prices to its customers by increasing charter
prices. We don't plan to engage in hedging for fuel prices when we only operate
one aircraft.
We could change the strategy we outline in this prospectus.
Although it has no current plan to do so, we may change our business
strategy in the future and may not pursue some of the goals stated herein.
USE OF PROCEEDS
The proceeds from this offering will be used to obtain the Part 135
license ($20,000) debt service ($27,500) marketing ($4,000) other operating
expenses ($26,000) and the rest (up to $122,500) for working capital. If less
than all offered shares are sold the amount allocated to working capital shall
be reduced. See "Plan of Operation."
ADDITIONAL INFORMATION
Albion has filed a registration statement under the Securities Act with
respect to the securities offered hereby with the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. This prospectus, which is a part of the
registration statement, does not contain all of the information contained in the
registration statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to Albion and the securities
offered, reference is made to the registration statement, including all exhibits
and schedules thereto, which may be
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inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
its regional offices located at 7 World Trade Center, New York, New York 10048,
and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 at prescribed rates during regular business hours. Statements contained in
this prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the registration statement, each
such statement being qualified in its entirety by such reference. Albion will
provide, without charge upon oral or written request of any person, a copy of
any information incorporated by reference herein. This request should be
directed to Albion at 24351 Pasto Road, Suite B, Dana Point, California 92629,
telephone (949) 489-2400.
Upon effectiveness of the registration statement Albion will be
required to file reports and other information with the Commission. All of such
reports and other information may be inspected and copied at the Commission's
public reference facilities described above. The Commission maintains a web site
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
such site is http://www.sec.gov. In addition, Albion intends to make available
to its shareholders annual reports, including audited financial statements and
such other reports as Albion may determine.
DIVIDEND POLICY
Albion has not paid any dividends on its common stock. Albion currently
intends to retain any earnings for use in its business, and therefore does not
anticipate paying cash dividends in the foreseeable future.
MARKET PRICE OF COMMON STOCK
Our common stock has never been traded. As of September 30, 2000, there
were approximately 110 record holders of common stock.
There are no warrants or options outstanding and no registration rights
have been granted. At the present time all 1,000,000 shares outstanding are
eligible to be sold under Rule 144, subject to volume limitations (10,000 shares
each 90 days) by each individual who is an "affiliate" such as any director or
executive officer, or otherwise as defined under Rule 144.
DILUTION
If you purchase shares in this offering you will suffer immediate
dilution in the book value of your shares. As of September 30, 2000 our tangible
book value (deficit) was $(7,819), or $(.008) per share. The price per share you
will pay is $5.00. If all the shares offered are sold net proceeds will be
$200,000, and net tangible book value on a pro forma basis would be $197,181 or
$.19 per share. The per share dilution to investors would be $4.81 per share, or
96%, while current shareholders would receive an increase in net tangible book
value of their shares of $.19. The following table illustrates the dilution:
Price per share $5.00
Net tangible book value before offering (.008)
Net tangible book value (pro forma) after offering .19
Dilution to public investors 4.81
Increase to current shareholders .19
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PLAN OF OPERATION
We have made a plan of operations for the first 12 months after
receiving funding from the offering. We hope to receive net proceeds of
$205,000. Obtaining the 135 permit will cost $20,000, primarily for consultants
to write manuals for operating procedures. We plan to market our charter
services primarily to charter brokers or via the internet. Although using
brokers reduces our profitability, its more cost effective than employing our
own marketing department, and most charter operations rely on brokers. However,
$1,000 will be spent on brochures and $4,000 on other marketing expenses. The
remaining $180,000 will be budgeted as follows:
One year's debt service on airplane $ 27,500
Pilot training; initial and recurrent 8,000
Insurance 6,000
Tie down rent 2,000
Marketing 4,000
Maintenance 10,000
Working capital reserve 117,500
If less than the maximum proceeds are received working capital will be
reduced. The president of Albion has agreed in writing to purchase up to 20,000
shares which will be invested without sales commissions so that at least $90,000
in net proceeds are received, but no amounts have been escrowed by him to
fulfill this obligation. See "Plan of Distribution." The proceeds of the sale of
20,000 shares will cover the estimated fixed costs for eighteen months with each
additional $6,000 in proceeds providing for one month's fixed costs. The
variable costs of operation include fuel, oil and crew labor, which will be paid
solely from charter revenues. Crew will be hired on an hourly basis, as needed
when flights commence. The Cessna 421 is widely used for charter work and the
hourly operating costs are widely understood to be as follows:
Crew 2 pilots (only one needed) $ 40
Fuel - 40 gallons per hour at $2.00 per gallon 80
Oil - 2 quarts per hour at $2.00 per quart 4
Air frame and Avionics - Parts Reserve 50
Engine Reserve (2 engines) 100
TOTAL $ 274
The price of charter flights are based upon hourly usage. In Southern
California the hourly charter rate for pressurized turbo props such as the
Aircraft is about $500.00, less a brokerage commission of 10%. The resulting
operating profit per hour is $176.00. Since annual fixed costs are estimated to
be $53,500 per year, the projected break even point is 303 hours flown per year.
The above assumptions are based upon current prices. The most volatile
cost is fuel. Fuel prices are at a record high as of September 30, 2000 but they
could go still higher. If they do our profitability could be adversely affected.
We don't intend to engage in hedging for fuel prices while we only operate one
aircraft.
Another assumption we have made is on maintenance expenses. These
expenses since the acquisition of the aircraft in October 1998 have been
$17,953, incurred $6,238 in fiscal 1998 and $11,715 in fiscal 1999. We have
budgeted only $10,000 for annual maintenance. We think that maintenance expenses
were higher than they will be in the future because in management's experience
any used airplane will incur high maintenance expenses when first purchased,
equal to 10-15% of the purchase price. Its commonly believed the initial high
expenses are due to deferred maintenance items on aircraft. However, we can't
forecast future maintenance expenses.
Other factors can also adversely affect operations. Heretofore there
has been an abundant supply of pilots. However, many airline pilots are near
retirement age and a pilot shortage could develop as commuter airlines hire
qualified pilots. Mechanical problems can delay or ground flights. Waiting for
parts or maintenance personnel can also ground the aircraft. Weather is
generally good in the our planned area of operations but bad weather can delay
or cancel flights. Also, currently Orange County Airport is closed to takeoffs
and landings from 11:00 pm to 7:00 am. This could limit flights.
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We are a development stage company as that term is defined in
paragraphs 8 and 9 of SFAS No. 7. Our activities to date have been limited to
selection and purchase of an aircraft, aircraft maintenance, and development of
a business plan. Our auditors have included an explanatory paragraph in their
report on our financial statements, relating to the uncertainty of our business
as a going concern. [discuss factors]
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BUSINESS
General
Albion's business plan is to offer aircraft charter service based at
Orange County Airport in Southern California. In early 1997 Albion commenced the
search for an appropriate aircraft. The Cessna 421B (Golden Eagle) was selected
because of its familiarity to the charter community, its pressurization and
speed. After some months of search Albion's current aircraft was acquired. The
aircraft then underwent a substantial maintenance program which required one
year. Finally, at the commencement of calendar 2000, the aircraft was ready to
be utilized. In the meantime Albion officers met with charter brokers and
aviation professionals to evaluate probable operating expenses, charter rates
and consumer demand. The aircraft is owned by a subsidiary, "Svetlana Aviation".
We plan to obtain our operating permit and conduct all operations in the name of
this subsidiary.
Charter Services
Orange County Airport served more than 7.4 million passengers in 1998,
according to airport management, and is the principal airport for Orange County
with more than 3 million population. Orange County enjoys a growing economy and
is also a popular tourist destination featuring Disneyland and some of
California's best beaches. We think that there is a growing market for aircraft
charter services in Orange County. The area is affluent. Pursuant to airport
rules the number of commercial and commuter flights is limited. Growing consumer
dissatisfaction with airline service, we think, will cause more and more
travelers to consider charter service. The cost of charter aircraft for flights
of one to two hour flights can be equivalent to the cost of first or business
class tickets, but the convenience and prestige of charter services can outweigh
the cost factor. Charter can be especially attractive for business travelers
with a busy schedule.
Operations
More detail on the operations aspects of a charter airline is provided
under the caption "Plan of Operations." You should read that section if you have
not already. We plan to commence service approximately six months after receipt
of proceeds of this offering.
In brief, aircraft charter operations have to be carefully managed. The
aircraft does not generate any revenue unless it is flying for hire. Most
charter airlines don't engage in much advertising, but rely on charter brokers
or customer referrals. A potential customer usually requests information from a
charter broker on price, availability and types of aircraft, when the need for
services arises. Aircraft brokers receive a negotiable percentage of the charter
fee. Fees are based on hourly flight time, usually with a one or two hour
minimum.
Fixed expenses such as debt service, insurance, tiedown rental and some
minimum level of maintenance are incurred regardless of the hours flown.
However, most of the expenses are incurred only when the aircraft is being
operated, and include fuel and oil, crew expenses, maintenance and engine
reserves. Engine life is limited by FAA rules to fixed hours of total operation,
after which an engine must be replaced or overhauled. Maintenance expenses can
arise at any time and although difficult to predict are generally consistent
with each type of aircraft. With each hour of operation we are going to set
aside a fixed amount of cash for future engine overhauls, and another amount for
maintenance expenses.
Employees
As is typical in the industry we will pay pilots and maintenance
personnel on any hourly basis. We think we can find personnel without
difficulty, but it's possible that it will be increasingly difficult to find
experienced pilots if commercial airlines continue to expand hiring. The rate of
compensation is subject to pilot availability and could increase to an amount we
can't afford. The president serves without compensation at this time and will
only devote part time to the business until warranted by business.
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Properties
It is not necessary for us to have dedicated office space. We are using
the office space of our president. Since sales will be effected through brokers,
all that is needed is telephone availability and a place to keep records and a
checkbook. The amount of space is minimal.
MANAGEMENT
Directors and Executive Officers
The member of the Board of Directors of Albion serve until the next
annual meeting of stockholders, or until his successors have been elected. The
officer serves at the pleasure of the Board of Directors. The following is the
director and executive officer of Albion.
Jehu Hand, age 44, has been President and Chief Financial Officer of
Albion since its inception. Mr. Hand has been engaged in corporate and
securities law practice and has been a partner of the law firm of Hand & Hand
since 1992. Hand & Hand incorporated as a law corporation in May 1994. From
January 1992 to December 1992 he was the Vice President-Corporate Counsel and
Secretary of Laser Medical Technology, Inc., which designs, manufactures and
markets dental lasers and endodontics equipment. He was a director of Laser
Medical from February 1992 to February 1993. From January to October, 1992 Mr.
Hand was Of Counsel to the Law Firm of Lewis, D'Amato, Brisbois & Bisgaard. From
January 1991 to January 1992 he was a shareholder of McKittrick, Jackson,
DeMarco & Peckenpaugh, a law corporation. From January to December 1990 he was a
partner of Day, Campbell & Hand, and was an associate of its predecessor law
firm from July 1986 to December 1989. From 1984 to June 1986 Mr. Hand was an
associate attorney with Schwartz, Kelm, Warren & Rubenstein in Columbus, Ohio.
Jehu Hand received a J.D. from New York University School of Law and a B.A. from
Brigham Young University. He is a registered principal (Series 7, 24 and 63) of
SoCal Securities, a broker-dealer and member of the National Association of
Securities Dealers, Inc. SoCal Securities will not participate in the offering
of the common stock, does not make a market in the securities of any company and
will not make a market in the Company's common stock. Mr. Hand was formerly a
director and president of Las Vegas Airlines, Inc., a Delaware corporation. In
1998 Las Vegas Airlines purchased a controlling interest in Las Vegas Airlines,
Inc., a Nevada corporation, engaged in Part 135 operations in Las Vegas. Shortly
after the acquisition Mr. Hand discovered that significant liabilities of the
Nevada company had not been disclosed that its liabilities greatly exceeded its
assets, and that its costs of doing business exceeded market price for its
flights and decided it was necessary to discontinue operations. Accordingly, in
mid December 1998 Las Vegas Airlines, Inc. notified the FAA that it would
discontinue all flight operations effective immediately. At this time the fleet
of leased planes was returned to the lessor, and receivables were used to pay
obligations to employees. Mr. Hand was never involved in the day to day
operations of the Nevada subsidiary.
Kimberly Peterson, age 34, has been corporate secretary since October
2000. She is self employed as a legal secretary. Prior to July 1999 she was
employed by Hand & Hand for more than five years.
10
<PAGE>
Executive Compensation
The following table sets forth the cash compensation of Albion's
executive officers and directors during each of the last three fiscal years. The
remuneration described in the table does not include the cost to Albion of
benefits which may be furnished to the named executive officers, including
premiums for health insurance and other benefits provided to such individual
that are extended in connection with the conduct of Albion's business. The value
of such benefits cannot be precisely determined, but the executive officers
named below did not receive such other compensation in the years set forth
below.
<TABLE>
<CAPTION>
Summary Compensation Table
ANNUAL COMPENSATION LONG TERM COMPENSATION
Name and Other Annual Awards Payouts All
Principal Position Year Salary Bonus Compensation Other
Restricted Options/ LTIP
Stock ($)SARs(#) Payouts ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jehu Hand 1999 $0 0 0 0 0 0 0
President and CFO 1998 0 0 0 0 0 0
1997 0 0 0 0 0 0 0
</TABLE>
11
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information relating to the beneficial
ownership of Company common stock as of the date of this prospectus by (I) each
person known by Albion to be the beneficial owner of more than 5% of the
outstanding shares of common stock (ii) each of Albion's directors and executive
officers, and (iii) the Percentage After Offering assumes the sale of the
maximum offering of 50,000 shares.
<TABLE>
<CAPTION>
Percentage Percentage
Name and Address(1) Common Stock Before Offering After Offering
<S> <C> <C> <C>
Jehu Hand 800,000 80.0% 76.2%
24351 Pasto Road, #B
Dana Point, California 92629
Kimberly Peterson 93,850 9.4% 9.2%
18776 Fairfax Lane
Huntington Beach, California 92648
All officers and directors
as a group (1 person) 893,850 89.4% 85.4%
</TABLE>
(1) Unless otherwise noted below, Albion believes that all persons named in
the table have sole voting and investment power with respect to all
shares of common stock beneficially owned by them. For purposes hereof,
a person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date hereof upon the
exercise of warrants or options or the conversion of convertible
securities. Each beneficial owner's percentage ownership is determined
by assuming that any warrants, options or convertible securities that
are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date hereof, have been
exercised.
12
<PAGE>
CERTAIN TRANSACTIONS
From time to time Mr. Hand has advanced operating expenses of Albion.
The cumulative expenses related to general administrative expenses of Albion
were $1,249, $1,101 and $468 as of September 30, 2000, December 31, 1999 and
December 31, 1998, respectively, and have been classified as related party
payables. No advances were made after September 30, 2000. The amount
of $1,249 will be contributed to capital by Mr. Hand upon
completion of the offering. Those expenses related to the purchase and
maintenance of the aircraft and other expenses of the operating subsidiary,
Svetlana Aviation, have been accounted for as contributions to capital, and were
$30,063, $41,770 and $30,909, for the nine months ended September 30, 2000 and
the years ended December 31, 1999 and 1998, respectively. No amounts were
contributed after September 30, 2000. Mr. Hand's contributions have consisted
only of cash.
The aircraft was acquired on October 23, 1998 from an unrelated party,
an aircraft broker in Mississippi. The purchase price was $159,400, paid $16,000
in cash and $143,900 in debt financing from Greentree Financial. The loan is
payable over 7 years in monthly installments of $2,297, and the interest rate is
8.75%. Mr. Hand guaranteed the loan which financed the purchase of the aircraft.
As of September 30, 2000 the amount owed on the loan was $114,244. In the event
Albion defaults on the loan, Mr. Hand would be personally liable for any unpaid
balance, and he might have the right as guarantor to take posession of or sell
the aircraft.
PLAN OF DISTRIBUTION
The Shares are being offered for sale on a "best efforts," no minimum,
50,000 Share maximum basis, by Albion or selected broker dealers, who will
receive a sales commission of $.50 per share and a non-accountable expense
allowance of $.15 per Share. Officers and directors may purchase shares.
Ms. Peterson will not be paid any commission or other remuneration for her
selling efforts. In the event shares are sold on behalf of the Company by her,
such commissions will be less and proceeds to Albion will be
greater. Mr. Hand will not make any selling efforts.
The Company anticipates other offering expenses to be $10,000. Neither
Jehu Hand, Albion's President, nor SoCal Securities, an NASD broker-dealer of
which he is a principal, will participate in the offering.
No escrow account will be established to receive offering proceeds. The
offering will close on [four months from date of prospectus] unless sooner
terminated by Albion. Albion has the unconditional right to accept or reject any
subscription. If Albion rejects any subscription, it will promptly notify the
subscriber and return all subscription funds.
The offering price and terms of the shares has been determined by
Albion based on its financial condition, prospects and conditions in the
aviation industry.
Regulation M and Market Making.
Albion's president, Jehu Hand, has agreed to purchase up to 20,000
shares without deduction for commission, to the extent required to ensure no
less than $90,000 in offering proceeds. This would probably happen towards the
end of the offering period. He agreed to do so in order to ensure a minimum
level of funding for the business plan. Even though they were purchased in the
offering, Mr. Hand has agreed he will take these shares as "restricted"
securities and resell only in accordance with Rule 144.
As affiliates of Albion, no officer or director of Albion, or Socal
Securities (a broker-dealer affiliated with Albion's president) may bid for,
purchase, or attempt to induce any person to bid for or purchaser securities of
Albion. In light of the foregoing, and since Mr. Hand's potential purchase of up
to 20,000 shares will be made directly from Albion, and not through any exchange
or interdealer quotation system, Albion believes that his investment will comply
with Regulation M promulgated under the Securities Exchange Act of 1934.
We don't know who will make a market in Albion's common stock, but
SoCal Securities does not make a market in securities. Neither SoCal Securities
nor Mr. Hand will have any role in the after market for Albion's securities.
13
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
Albion's Articles of Incorporation authorizes the issuance of 20,000,000
shares of common stock, $.001 par value per share, of which 1,000,000 shares
were outstanding as of September 30, 2000. Albion has no plans to sell
additional shares of common stock at this time, but reserves the right to do so
to meet future operating requirements. Holders of shares of common stock are
entitled to one vote for each share on all matters to be voted on by the
stockholders. Holders of common stock have no cumulative voting rights. Holders
of shares of common stock are entitled to share ratably in dividends, if any, as
may be declared, from time to time by the Board of Directors in its discretion,
from funds legally available therefor. In the event of a liquidation,
dissolution or winding up of Albion, the holders of shares of common stock are
entitled to share pro rata all assets remaining after payment in full of all
liabilities and the liquidation preference to holders of Preferred Stock.
Holders of common stock have no preemptive rights to purchase Albion's common
stock. There are no conversion rights or redemption or sinking fund provisions
with respect to the common stock. The shareholders have already approved a
reverse or forward stock split as may be also approved by the board of
directors, but no such stock split is contemplated.
Preferred Stock
Albion's Articles of Incorporation authorize the issuance of 1,000,000
shares of preferred stock, $.001 par value, of which no shares of Preferred
Stock are outstanding.
Albion's Board of Directors has authority, without action by the
shareholders, to issue all or any portion of the authorized but unissued
preferred stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other rights
of such series. Albion considers it desirable to have preferred stock available
to provide increased flexibility in structuring possible future acquisitions and
financings and in meeting corporate needs which may arise. If opportunities
arise that would make desirable the issuance of preferred stock through either
public offering or private placements, the provisions for preferred stock in
Albion's Articles of Incorporation would avoid the possible delay and expense of
a shareholder's meeting, except as may be required by law or regulatory
authorities. Issuance of the preferred stock could result, however, in a series
of securities outstanding that will have certain preferences with respect to
dividends and liquidation over the common stock which would result in dilution
of the income per share and net book value of the common stock. Issuance of
additional common stock pursuant to any conversion right which may be attached
to the terms of any series of preferred stock may also result in dilution of the
net income per share and the net book value of the common stock. The specific
terms of any series of preferred stock will depend primarily on market
conditions, terms of a proposed acquisition or financing, and other factors
existing at the time of issuance. Therefore, it is not possible at this time to
determine in what respect a particular series of preferred stock will be
superior to Albion's common stock or any other series of preferred stock which
Albion may issue. The Board of Directors may issue additional preferred stock in
future financings, but has no current plans to do so at this time.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of Albion.
Albion intends to furnish holders of its common stock annual reports
containing audited financial statements and to make public quarterly reports
containing unaudited financial information.
Transfer Agent
The transfer agent for the common stock is Colonial Stock Transfer
Corporation, 455 East 400 South, Suite 100, Salt Lake City, Utah 84111 and its
telephone number is (801) 355-5740.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for Albion
by Hand & Hand, a law corporation, Dana Point, California. The principal of Hand
& Hand owns 800,000 shares of common stock.
14
<PAGE>
EXPERTS
The audited financial statements included in this Prospectus as of
December 31, 1999 and 1998 have been audited by Tanner & Co., independent
certified public accountants, to the extent and for the periods set forth in
their report thereon and are included in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
INDEMNIFICATION
Albion has adopted provisions in its articles of incorporation and bylaws
that limit the liability of its directors and provide for indemnification of its
directors and officers to the full extent permitted under the Delaware General
Corporation Law ("DGCL"). Under Albion's articles of incorporation, and as
permitted under the Delaware General Business Act, directors are not liable to
Albion or its stockholders for monetary damages arising from a breach of their
fiduciary duty of care as directors. Such provisions do not, however, relieve
liability for breach of a director's duty of loyalty to Albion or its
stockholders, liability for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, liability for transactions
in which the director derived as improper personal benefit or liability for the
payment of a dividend in violation of Delaware law. Further, the provisions do
not relieve a director's liability for violation of, or otherwise relieve Albion
or its directors from the necessity of complying with, federal or state
securities laws or affect the availability of equitable remedies such as
injunctive relief or recision.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of Albion where indemnification will be
required or permitted. Albion is not aware of any threatened litigation or
proceeding that may result in a claim for indemnification by any director or
officer.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of Albion pursuant to the foregoing provisions, or otherwise, Albion has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Albion of expenses incurred or paid by a director,
officer or controlling person of Albion in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, Albion will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
15
ALBION AVIATION, INC.
(A Development Stage Company) Consolidated Financial Statements December 31,
1999 and 1998 (audited) and September 30, 2000 (unaudited)
<PAGE>
<TABLE>
<CAPTION>
ALBION AVIATION, INC.
(A Development Stage Company)
Index
-------------------------------------------------------------------------------------------------------------------
Page
<S> <C>
Independent auditors' report F-2
Consolidated Balance sheet F-3
Consolidated Statement of operations F-4
Consolidated Statement of stockholders' equity F-5
Consolidated Statement of cash flows F-6
Notes to consolidated financial statements F-7
-------------------------------------------------------------------------------------------------------------------
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Albion Aviation, Inc.
We have audited the accompanying consolidated balance sheet of Albion Aviation,
Inc., (a development stage company) as of December 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for the years then ended and the cumulative amounts from April
20, 1994 (date of inception) to December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Albion Aviation,
Inc., (a development stage company) at December 31, 1999 and 1998 and the
results of their operations and their cash flows for the years then ended and
cumulative amounts from April 20, 1994 (date of inception) to December 31, 1999
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses and
has an accumulated deficit. These conditions raise substantial doubt about its
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
TANNER & CO.
Salt Lake City, Utah
June 9, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
ALBION AVIATION, INC.
(A Development Stage Company)
Consolidated Balance Sheet
-------------------------------------------------------------------------------------------------------------------
September 30,
2000 December 31,
---------------------------------------------
Assets (Unaudited) 1999 1998
---------------------------------------------
<S> <C> <C> <C>
Current assets - cash $ 2,297$ $ -
Aircraft, net of accumulated depreciation of
$54,523 and $34,534, and $4,442, respectively 105,377 125,366 155,458
---------------------------------------------
Total assets $ 107,674$ 125,366$ 155,458
---------------------------------------------
----------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' (Deficit) Equity
Current liabilities:
Related party payables $1,249 $ 1,101$ 468
Current portion of long-term debt 18,290 17,132 15,702
---------------------------------------------
Total current liabilities 19,539 18,233 16,170
---------------------------------------------
Long-term debt 95,954 109,819 126,950
---------------------------------------------
Stockholders' (deficit) equity:
Preferred stock; $.001 par value; 1,000,000
shares - - -
authorized; no shares issued and outstanding
Common stock; $.001 par value; 20,000,000
shares authorized; 1,000,000 shares issued
and outstanding 1,000 1,000 1,000
Additional paid-in capital 102,757 72,694 30,924
Deficit accumulated during the
development stage (111,576) (76,380) (19,586)
---------------------------------------------
Total stockholders' (deficit) equity (7,819) (2,686) 12,338
---------------------------------------------
Total liabilities and stockholders'
(deficit) equity $ 107,674$ 125,366$ 155,458
---------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ALBION AVIATION, INC.
(A Development Stage Company)
Consolidated Statement of Operations
-------------------------------------------------------------------------------------------------------------------
Cumulative
Nine Amounts
Months Ended September 30, Years Ended Since
------------------------------
2000 1999 December 31, Inception
--------------------------
(Unaudited) (Unaudited) 1999 1998 (Unaudited)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ $ - $ - $ - $ - -
---------------------------------------------------------------------
Costs and expenses:
General and administrative expenses 26,312 34,828 44,932 17,076 79,455
Interest expense 8,884 9,981 11,862 1,394 32,121
---------------------------------------------------------------------
35,196 44,809 56,794 18,470 111,576
---------------------------------------------------------------------
Loss before income taxes (35,196) (44,809) (56,794) (18,470) (111,576)
Income taxes - current - - - - -
---------------------------------------------------------------------
Net loss $ (35,196$ (44,809$ (56,794$ (18,470$ (111,576)
---------------------------------------------------------------------
Loss per share - basic and diluted $ $ (.02) $ (.04) $(.06) (.02)
---------------------------------------------------------------------
Weighted average common shares -
basic and diluted 1,000,000 1,000,000 1,000,000 1,000,000
---------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ALBION AVIATION, INC.
(A Development Stage Company)
Consolidated Statement of Stockholders' (Deficit) Equity
April 20, 1994 (Date of Inception)
Through September 30, 2000 (Unaudited)
-------------------------------------------------------------------------------------------------------------------
Additional
Preferred Stock Common Stock Paid-In Accumulated
-------------------------------------------
Shares Amount Shares Amount Capital Deficit Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 20, 1994 -$ - -$ $ - $ - $ - -
Shares issued for cash - - 1,000,000 1,000 15 - 1,015
Net loss - - - - - (144) (144)
--------------------------------------------------------------------------------
Balance, December 31, 1994 - - 1,000,000 1,000 15 (144) 871
Net loss - - - - - (338) (338)
--------------------------------------------------------------------------------
Balance, December 31, 1995 - - 1,000,000 1,000 15 (482) 533
Net loss - - - - - (320) (320)
--------------------------------------------------------------------------------
Balance, December 31, 1996 - - 1,000,000 1,000 15 (802) 213
Net loss - - - - - (314) (314)
--------------------------------------------------------------------------------
Balance, December 31, 1997 - - 1,000,000 1,000 15 (1,116) (101)
Contributions to capital - - - - 30,909 - 30,909
Net loss - - - - - (18,470) (18,470)
--------------------------------------------------------------------------------
Balance, December 31, 1998 - - 1,000,000 1,000 30,924 (19,586) 12,338
Contributions to capital - - - - 41,770 - 41,770
Net loss - - - - - (56,794) (56,794)
--------------------------------------------------------------------------------
Balance, December 31, 1999 - - 1,000,000 1,000 72,694 76,380 2,686
Contributions to
capital (unaudited) - - - - 30,063 - 30,063
Net loss (unaudited) - - - - - (35,196) (35,196)
--------------------------------------------------------------------------------
Balance, September 30,
2000 (unaudited) -$ -1,000,000$ 1,000$ 102,757$ (111,576$ (7,819)
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
ALBION AVIATION, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
-------------------------------------------------------------------------------------------------------------------
Nine Cumulative
Months Ended Amounts
September 30, Years Ended Since
---------------------------
2000 1999 December 31, Inception
--------------------------
(Unaudited) (Unaudited) 1999 1998 (Unaudited)
------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C> <C> <C>
Net loss $ (35,196$ (44,809$ (56,794$ (18,470$ (111,576)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 19,989 19,989 30,092 4,701 55,538
Increase in
related party payables 148 633 633 108 1,249
------------------------------------------------------------------
Net cash used in
operating activities (15,059) (24,187) (26,069) (13,661) (54,789)
------------------------------------------------------------------
Cash flows from investing activities:
Purchase of aircraft - - - (16,000) (16,000)
Organization costs - - - - (1,015)
------------------------------------------------------------------
Net cash used in
investing activities - - - (16,000) (17,015)
------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (12,707) (12,989) (15,701) (1,248) (29,656)
Contributions to capital 30,063 37,176 41,770 30,909 102,742
Issuance of common stock - - - - 1,015
------------------------------------------------------------------
Net cash provided by
financing activities 17,356 24,187 26,069 29,661 74,101
------------------------------------------------------------------
Net increase in cash 2,297 - - - 2,297
Cash, beginning of period - - - - -
------------------------------------------------------------------
Cash, end of period $ 2,297$ $ - $ - $ - 2,297
------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ALBION AVIATION, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. Organization
and
Summary of
Significant
Accounting
Policies
Organization
The Company was organized under the laws of the state of Delaware on April 18,
1994 (date of inception). The Company has not commenced planned principal
operations and purposes to seek business ventures which will allow for long-term
growth. Further, the Company is considered a development stage company as
defined in SFAS No. 7. Its principal activities since inception have consisted
of the offer and sale of common stock and the purchase of a commercial airplane,
financed by long-term debt. The Company intends to engage in the charter air
carrier business. The Company has, at the present time, not paid any dividends
and any dividends that may be paid in the future will depend upon the financial
requirements of the Company and other relevant factors.
Unaudited Information
In the opinion of management, the accompanying unaudited financial statements
for the nine month periods ended September 30, 2000 and 1999 contain all
adjustments (consisting only of normal recurring items) necessary to present
fairly the results of operations and cash flows for the Company for the nine
month periods ended September 30, 2000 and 1999.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, and
its consolidated subsidiary. All significant intercompany balances and
transactions have been eliminated.
Cash and Cash Equivalents
Cash equivalents are generally comprised of certain highly liquid investments
with maturities of less than three months.
Aircraft
The Company's aircraft is carried at cost. Maintenance and repairs, including
overhauls, were charged to operating expenses as they are incurred. The aircraft
is depreciated on a straight-line basis over the estimated useful life of 6
years.
---------------------------------------------------------------------------
F-7
<PAGE>
ALBION AVIATION, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
Continued
------------------------------------------------------------------------------
1. Organization
and
Summary of
Significant
Accounting
Policies
Continued
Use of Estimates in the Preparation of Financial Statements The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
2. Going
Concern
The accompanying consolidated financial statements have been prepared on a
going-concern basis, which contemplates profitable operations and the
satisfaction of liabilities in the normal course of business. There are
uncertainties that raise substantial doubt about the ability of the Company to
continue as a going concern. As shown in the consolidated statement of
operations, the Company has had no revenues from operations, and reported a net
losses in all periods since inception.
The Company intends to fund start-up costs during the next twelve months with
the capital contributions from related parties, however, such related parties
are not obligated under any agreement to contribute such funds.
The Company's ability to continue as a going concern is dependent upon
management's ability to secure additional debt or equity financing. The Company
is currently seeking to sell 50,000 shares of common stock for $250,000 of which
$50,000 will be used to pay commissions and expenses of the offering. There is
no guarantee that the Company will be successful in securing this equity
financing or other forms of financing. There is also no guarantee that, if
successful, such financing will be sufficient to fund necessary start up costs
and sustain operations upon commencement of such operations. The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
-----------------------------------------------------------------------------
F-8
<PAGE>
ALBION AVIATION, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
Continued
--------------------------------------------------------------------------------
3. Long-term
Debt
In October 1998, the Company entered into a note agreement, with a financing
company, in the amount of $143,900, due in monthly installments of $2,297,
including interest at 8.75%, secured by aircraft and personal guarantee of an
officer of the Company, and maturing in November 2005. The total proceeds and
cash of $16,000 were used to purchase used aircraft for a total purchase price
of $159,900. The note balance outstanding at December 31, 1999 and 1998 was
$126,951 and $142,652, respectively.
Future maturities of the note payable are as follows:
Years Ending December 31: Amount
-----------------
2000 $ 17,132
2001 18,693
2002 20,396
2003 22,254
2004 24,281
Thereafter 24,195
-----------------
$ 126,951
-----------------
4. Income
Taxes
The difference between income taxes at statutory rates and the amount presented
in the financial statements is a result of the following:
Cumulative
Years Ended Amounts
December 31, Since
-------------------------
1999 1998 Inception
---------------------------------------
Income tax benefit at statutory
rate $ 8,000$ 3,000$ 14,000
Change in valuation allowance (8,000) (3,000) (14,000)
---------------------------------------
$ $ $ -
---------------------------------------
-------------------------------------------------------------------------------
F-9
<PAGE>
ALBION AVIATION, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
Continued
----------------------------------------------------------------------------
4. Income
Taxes
Continued
Deferred tax assets are as follows:
December 31,
-----------------------------------
1999 1998
-----------------------------------
Operating loss carryforwards $ 14,000$ 6,000
Valuation allowance (14,000) (6,000)
-----------------------------------
$ $ - -
-----------------------------------
The Company has net operating loss carryforwards of approximately $76,000, which
begin to expire in the year 2009. The amount of net operating loss carryforward
that can be used in any one year will be limited by significant changes in the
ownership of the Company and by the applicable tax laws which are in effect at
the time such carryforwards can be utilized.
5. Related
Party
Transactions
At December 31, 1999 and 1998, the Company owed the Company's president and
majority shareholder $1,101 and $468, respectively. The advances are unsecured,
non-interest bearing and have no specific repayment terms.
During the years ended December 31, 1999 and 1998 the Company's
president/majority shareholder made capital contributions of cash of $41,770 and
$30,909, respectively.
6. Supplemental
Cash Flow
Information
During the year ended December 31, 1998, the Company acquired aircraft in
exchange for long-term debt of $143,900.
Actual amounts paid for interest and income taxes are as follows:
Nine Months Ended Cumulative
September 30, Years Ended Amounts
------------------------
2000 1999 December 31, Since
--------------------
(Unaudited) (Unaudited) 1999 1998 Inception
-------------------------------------------------------
Interest $ 8,884$ 9,981$ 11,862$ 1,394$ 19,348
-------------------------------------------------------
Income taxes $ $ - $ - $- $ - -
-------------------------------------------------------
-----------------------------------------------------------------------------
F-10
<PAGE>
ALBION AVIATION, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements
Continued
-------------------------------------------------------------------------------
7. Recent
Accounting
Pronounce-
ments
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective date of FASB
Statement No. 133." SFAS 133 establishes accounting and reporting standards for
derivative instruments and requires recognition of all derivatives as assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. SFAS 133 is now effective for fiscal years beginning
after June 15, 2000. The Company believes that the adoption of SFAS 133 will not
have any material effect on the financial statements of the Company.
8. Sale of Stock
The Company is seeking to sell 50,000 shares of common stock for $250,000 of
which $50,000 will be used to pay commissions and expenses of the offering.
------------------------------------------------------------------------------
F-11
<PAGE>
No dealer, salesman or other person is authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by Albion.
This Prospectus does not constitute an offer to sell or a solicitation to an
offer to buy the securities offered hereby to any person in any state or other
jurisdiction in which such offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary.......................... 2
Risk Factors................................ 3
Use of Proceeds............................. 5
Additional Information...................... 6
Dividend Policy............................. 6
Market Price of Common Stock................ 7
Plan of Operation........................... 8
Business.................................... 9
Management.................................. 10
Principal Shareholders...................... 12
Certain Transactions........................ 13
Plan of Distribution........................ 13
Description of Securities................... 14
Legal Matters............................... 15
Experts..................................... 16
Financial Statements........................ 17
ALBION AVIATION, INC.
50,000 SHARES
PROSPECTUS
January __, 2001
<PAGE>
ALBION AVIATION, INC.
PART II
Item 24. Indemnification of Directors and Officers.
Albion has adopted provisions in its articles of incorporation and
bylaws that limit the liability of its directors and provide for indemnification
of its directors and officers to the full extent permitted under the Delaware
General Corporation Law. Under Albion's articles of incorporation, and as
permitted under the Delaware General Corporation Law, directors are not liable
to Albion or its stockholders for monetary damages arising from a breach of
their fiduciary duty of care as directors. Such provisions do not, however,
relieve liability for breach of a director's duty of loyalty to Albion or its
stockholders, liability for acts or omissions not in good faith or involving
intentional misconduct or knowing violations of law, liability for transactions
in which the director derived as improper personal benefit or liability for the
payment of a dividend in violation of Delaware law. Further, the provisions do
not relieve a director's liability for violation of, or otherwise relieve Albion
or its directors from the necessity of complying with, federal or state
securities laws or affect the availability of equitable remedies such as
injunctive relief or recision.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of Albion where indemnification will be
required or permitted. Albion is not aware of any threatened litigation or
proceeding that may result in a claim for indemnification by any director or
officer.
Item 25. Other Expenses of Issuance and Distribution.
<TABLE>
<CAPTION>
<S> <C> <C>
Filing fee under the Securities Act of 1933 $ 100.00
Printing and engraving(1) $ 300.00
Blue Sky Fees $ 3,500.00
Auditing Fees(1) $ 5,000.00
NASD Filing Fees $ 500.00
Non-accountable expenses $ 7,500.00
Miscellaneous(1) $ 3,100.00
TOTAL $ 20,000.00
</TABLE>
(1) Estimates
Item 26. Recent Sales of Unregistered Securities.
Not Applicable.
<PAGE>
Item 27. Exhibits and Financial Schedules
3. Certificate of Incorporation and Bylaws
3.1. Articles of Incorporation(1)
3.2 Articles of Amendment(1)
3.3 Bylaws(1)
5. Opinion of Hand & Hand as to legality of securities being registered.(2)
10. Material Contracts
10.1 Loan Agreement with Greentree Financial(2)
10.2 Funding Agreement between Jehu Hand and the Issuer(2)
21. Subsidiaries of the small business issuer-Svetlana Aviation, a
Nevada corporation, is
the only subsidiary. It does business under the name Svetlana Aviation.
23. Consents of Experts and Counsel
23.1 Consent of Tanner & Co.(2)
23.2 Consent of Hand & Hand included in Exhibit 5 hereto
27. Financial Data Schedule(2)
All other Exhibits called for by Rule 601 of Regulation S-B are not
applicable to this
filing.
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or because
the required information is included in the financial statements or notes
thereto.
(1) Filed with original registration statement.
(2) Filed herewith.
Item 28. Undertakings.
(a) The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(I) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)
Reflect in the prospectus any facts or events which, individually or together
represent a fundamental change in the information in the registration statement;
<PAGE>
(iii)
Include any material or changed information the plan of distribution.
(2) For determining liability under the Securities Act, treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities as at that time to be the initial
bona fide offering thereof.
(3) File a post effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(d) To provide to the underwriter at the Closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as may be required by the underwriter to permit prompt delivery to each
purchaser.
(e) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel that matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(f) The undersigned small business issuer hereby undertakes that it will:
(1) For purposes of determining any liability under the
Securities Act that the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time the Commission declared it effective.
(2) For the purpose of determining any liability under the
Securities Act, that each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it meets all the requirements for filing on Form SB-2
and has duly caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Dana
Point, State of California on December 30, 2000.
ALBION AVIATION, INC.
By: /s/ Jehu Hand
Jehu Hand
President
In accordance with the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following persons in
the capacities indicated on December 30, 2000.
By: /s/ Jehu Hand President, Chief Financial Officer and Director
Jehu Hand (principal executive officer and principal
accounting and financial officer)
<PAGE>
December 28, 2000
Albion Aviation, Inc.
Re:Registration Statement on
Form S-1 (the "Registration Statement")
Gentlemen:
You have requested our opinion as to the legality of the issuance by you
(the "Corporation") of 50,000 shares of common stock ("Shares"), all as further
described in the Registration Statement in the form to be filed with the U.S.
Securities and Exchange Commission.
As your counsel, we have reviewed and examined:
1. The Articles of Incorporation of the Corporation;
2. The Bylaws of the Corporation;
3. A copy of certain resolutions of the corporation; and
4. The Registration Statement.
In giving our opinion, we have assumed without investigation the
authenticity of any document or instrument submitted us as an original, the
conformity to the original of any document or instrument submitted to us as a
copy, and the genuineness of all signatures on such originals or copies.
Based upon the foregoing, we are of the opinion that the Shares to be
offered pursuant to the Registration Statement, if sold as described in the
Registration Statement (and as to shares issuable upon options if the options
are exercised in accordance with their terms), will be legally issued, fully
paid and nonassessable, provided that no less than par value is paid for any
Shares.
No opinion is expressed herein as to the application of state securities
or Blue Sky laws.
We consent to the reference to our firm name in the Prospectus filed as
a part of the Registration Statement and the use of our opinion in the
Registration Statement. In giving these
<PAGE>
consents, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
HAND & HAND
<PAGE>
