SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e) (2))
AERO SERVICES INTERNATIONAL, INC.
(Name of Registrant as Specified in it Charter)
[NAME OF PERSON FILING]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(1)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY COPIES
AERO SERVICES INTERNATIONAL, INC.
660 Newtown-Yardley Road
Newtown, Pennsylvania 18940
-------------------------
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS OF
AERO SERVICES INTERNATIONAL, INC.
to be held on September 23, 1999
-------------------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the shareholders of Aero
Services International, Inc., a Louisiana corporation (the "Company"), is hereby
called to be held at the Ramada Inn on Market Square, 23 South Second Street,
Harrisburg, Pennsylvania 17101, on September 23, 1999 at 9:00 a.m., for the
following purposes:
1. To elect directors to serve for a term of one year and until their
successors are elected and qualified;
2. To ratify the amendment of the Company's articles of incorporation
to increase the Company's authorized Common Stock from 15,000,000 to
60,000,000.
3. To exchange the Company's Series A Cumulative Convertible Preferred
Stock into Common Stock, no par value, at a rate of eight shares of
Common Stock for every one share of Preferred Stock for every holder
other than Transtech Holding Company, Inc., and four shares of
Common Stock for every one share of Preferred Stock for Transtech.
4. To ratify the issuance of 12,507,000 shares of Company's Common
Stock, no par value, in consideration of the forgiveness of certain
indebtedness owed to Transtech Holding Company, Inc.
5. To ratify the amendment of the Company's articles of incorporation
to change the name of the Company from Aero Services International,
Inc. to b-Fast Corp.
6. To ratify the selection of BDO Seidman, LLP as the Company's
independent certified accountant;
7. To transact such other business as may lawfully come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors fixed the close of business on July 29, 1999 as the
record date for the determination of shareholders entitled to notice of and to
vote at such meeting.
Your vote is important. Even if you plan to attend the Annual Meeting in
person, please mark, sign, date and return the enclosed proxy so that your
shares will be represented at the meeting. A postage pre-paid, self-addressed
return envelope is enclosed for your convenience in returning the proxy.
PAUL R. SLACK
Secretary
This document is dated September 7, 1999 and is first being mailed to Company
shareholders on or about September 9, 1999.
<PAGE>
PRELIMINARY COPIES
AERO SERVICES INTERNATIONAL, INC.
660 NEWTOWN-YARDLEY ROAD
NEWTOWN, PENNSYLVANIA 18940
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement and accompanying proxy card is furnished on or about
September 8, 1999 to the shareholders of Aero Services International, Inc. (the
"Company") in connection with the solicitation of proxies by the Board of
Directors ("Board") of the Company for use at the Annual Meeting of shareholders
to be held at the Ramada Inn on Market Square, 23 South Second Street,
Harrisburg, Pennsylvania 17101, on Thursday, September 23, 1999 at 9:00 a.m.,
and at any adjournment or adjournments thereof (the "Annual Meeting"). A Notice
of Annual Meeting also is attached hereto. Shares can be voted only if the
shareholder is present in person or is represented by proxy.
When a proxy in the accompanying form is properly executed and returned in
time to be voted at the Annual Meeting, and not subsequently revoked, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions marked thereon. All executed but unmarked proxies that are returned
will be voted FOR the election of each of the director nominees for whom the
shares represented by such proxy are entitled to vote, FOR the ratification of
the amendment of the Company's articles of incorporation, as amended
("Articles") to increase the Company's authorized Common Stock, no par value
("Common Stock") from 15,000,000 to 60,000,000 shares, and FOR the exchange of
the Company's Series A Cumulative Convertible Preferred Stock ("Preferred
Stock") into Common Stock at a rates more particularly described herein, FOR
ratification of the issuance of Common Stock, in consideration of the
forgiveness of certain indebtedness owed by the Company to Transtech Holding
Company, Inc. ("Transtech"), FOR the ratification of the amendment of the
Articles to change the name of the Company from Aero Services International,
Inc. to b-Fast Corp., and FOR the ratification of BDO Seidman, LLP as the
Company's independent certified accountant. If any other matters properly are
brought before the Annual Meeting, the person(s) named in the accompanying proxy
will vote the shares represented by such proxy in accordance with their own
judgment on such matters.
The expense of the solicitation of proxies for the meeting, including the
cost of mailing, will be borne by the Company. In addition to mailing copies of
the enclosed proxy materials to stockholders, the Company may request persons,
and reimburse them for their expenses with respect thereto, who hold stock in
their names or custody or in the names of nominees for others to forward copies
of such materials to those persons for whom they hold stock of the Company and
to request authority for the execution of the proxies. In addition to the
solicitation of proxies by mail, it is expected that some of the officers,
directors, and regular employees of the Company, without additional
compensation, may solicit proxies on behalf of the Board by telephone, telefax,
personal interview, and electronic mail.
Any shareholder giving a proxy has the power to revoke it at any time
before it is voted by submitting a later-dated proxy, by giving written notice
of such revocation to the Secretary of the Company, provided that such written
notice is received by the Secretary prior to the Annual Meeting, or upon request
if the shareholder is present at the Annual Meeting and chooses to vote in
person.
VOTING SECURITIES AND RECORD DATE
The Board has fixed the close of business on July 29, 1999 as the record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting (the "Record Date"). As of the Record Date, there were
outstanding, 7,998,052 shares of the Common Stock, and 144,185 shares of the
Preferred Stock. As of the Record Date, the Company had 7,001,948 shares of
Common Stock and 355,815 shares of Preferred Stock that were authorized but
unissued. As of the Record Date, no shares of the Company's Series B Convertible
Preferred Stock were outstanding. AS OF THE RECORD DATE, TRANSTECH, AN
AFFILIATED ENTITY OF CERTAIN OFFICERS AND DIRECTORS OF THE COMPANY, OWNED 72% OF
THE PREFERRED STOCK AND 50% OF THE COMMON STOCK. AS OF THE DATE OF THIS PROXY
STATEMENT, TRANSTECH HAS INDICATED IT WILL VOTE FOR THE PROPOSALS SET FORTH
HEREIN. Each share of Common Stock is entitled to one vote on all matters to be
presented at the Annual Meeting except the election of two designated directors
as described herein. The holders of Preferred Stock, voting separately as a
class, are entitled to the exclusive right to elect the two directors to serve
as designated directors and will vote as a class with regard to the exchange of
the Preferred Stock. Each share of Preferred Stock (the "Exchange") is entitled
to one vote on these two matters. THE OWNERSHIP PERCENTAGES OF THE COMPANY'S
COMMON STOCK AND PREFERRED STOCK BY TRANSTECH MEAN THAT TRANSTECH'S EXPECTED
APPROVAL OF THE PROPOSALS WILL ASSURE PASSAGE OF THE PROPOSALS.
<PAGE>
ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting to serve terms of
one year or until their successors are duly elected and qualified. The Articles
and Bylaws of the Company provide for holders of Common Stock to elect between
five and eleven regular directors in one election; however, the Board only has
nominated five directors. Holders of Preferred Stock will elect two directors in
a separate election to serve in the designated director positions. The holders
of the Preferred Stock will not vote in the election of the regular directors. A
majority of the votes cast by holders of the Common Stock, in person or by
proxy, is required for election of the regular directors. A majority of the
votes cast by the holders of the Preferred Stock, in person or by proxy, is
required for election of the designated directors. Absent contrary instructions,
shares represented by properly executed proxies in the accompanying form will be
voted FOR the nominees named below. Any shareholder who wishes to withhold
authority from the proxy holders to vote for the election of directors or to
withhold authority to vote for any additional individual nominee may do so by
marking his proxy to that effect.
All persons named herein as nominees for director have consented to serve
and it is not contemplated that any nominee will be unable to serve as a
director. If such event should occur, however, the proxies will be voted by the
proxy holders for such other person or persons as may be designated by the
present Board.
The names of the Board's nominees and certain information about them are
set forth below. All nominees presently are serving as directors of the Company.
Nominees for Regular Directors:
NAME AGE DIRECTOR SINCE
R. Theodore Brant 53 1994
Alice F. Buford 51 1998
Maurice Lawruk 68 1994
Nominees for Designated Directors:
NAME AGE DIRECTOR SINCE
Bobby Ray Adkins 52 1994
James R. Affleck, Jr 58 1998
Bobby Ray Adkins Mr. Adkins has served as Assistant Secretary of Valley
Air Services, Inc. ("Valley Air") since 1989. Mr. Adkins served as Assistant
Secretary of Transportech Corp. ("Transportech") from January 31, 1994 until
July 23, 1998, when Carlyle-Transportech Merger Sub, Inc. was merged into
Transportech. Mr. Adkins owns 50% of the equity interest of a real estate
development/management company, Appalachian Properties, Inc. Mr. Adkins owns
seven percent of the equity and also is Assistant Secretary of Transtech. Mr.
Adkins is Vice President, Secretary and Treasurer of the following companies,
which are described more fully elsewhere in this Proxy Statement: Brant
Motorsports, Inc.; Brant MotorSports, LLC; b-Fast Marketing, LLC; b-Fast
Shopper, LLC; and RTB/AS, L.L.C. Mr. Adkins holds Associate degrees in
Accounting, Business Administration and Law Enforcement, and is a licensed
commercial pilot and certified flight instructor.
James R. Affleck, Jr. Mr. Affleck began his employment with the Company in
September 1987 as Manager of Special Projects. Mr. Affleck's duties have
included investor relations, vendor relations, cash management, and insurance
management. In 1994, Mr. Affleck was elected Assistant Secretary and Assistant
Treasurer. In 1997, Mr. Affleck was appointed Vice President. Mr. Affleck is a
graduate of Princeton University.
R. Theodore Brant Mr. Brant was appointed Chairman and Chief Executive
Officer on May 31, 1994. Mr. Brant is the President and Chief Executive Officer
of Valley Air, a position he has held since Valley Air's inception. Mr. Brant
also served as President and Director of Transportech until July 23, 1998, when
Carlyle- Transportech Merger Sub, Inc. was merged into Transportech. Mr. Brant
also is President and a Director of
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<PAGE>
Transtech, a company in which he has a 40% equity stake. Mr. Brant is the
President of the following companies which are described more fully elsewhere in
this Proxy Statement: Brant Motorsports, Inc; Brant MotorSports, LLC; b-Fast
Marketing, LLC; b-Fast Shopper, LLC; and RTB/AS, L.L.C. Mr. Brant has experience
in industrial construction, and engineering management and holds a B.S. degree
in Mechanical Engineering from West Virginia University. Mr. Brant holds a pilot
license.
Alice F. Buford Ms. Buford is Secretary/Treasurer and owns 50% of the
equity interest in a real estate development/management company, Appalachian
Properties, Inc. Ms. Buford also is a shareholder and Secretary of Valley Air.
Ms. Buford is a shareholder of Transtech. Ms. Buford graduated from Roanoke
Business College. Ms. Buford's duties include administrative support, management
and accounting oversight.
Maurice Lawruk Mr. Lawruk is Vice President of Valley Air, and serves on
the board of Transtech. Mr. Lawruk owns 40% of the equity of Transtech, and 50%
of the equity of Valley Air. Mr. Lawruk served as Vice President and Director of
Transportech until July 23, 1998, when Carlyle-Transportech Merger Sub, Inc. was
merged into Transportech. Mr. Lawruk also serves as Chairman of the construction
company which he founded in 1967. Mr. Lawruk previously served for eight years
on the Board of the Pennsylvania Industrial Development Authority.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
OF THE BOARD'S NOMINEES FOR DIRECTOR.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Composition of the Board of Directors
The Board is constituted by three regular directors and two designated
directors. Regular directors are elected by the holders of the Company's Common
Stock. Designated directors are elected by the holders of the Preferred Stock,
as a result of the Company's failure to pay six quarterly dividends on the
Preferred Stock. See the section of this Proxy Statement entitled, "Exchange of
Preferred Stock" for more information regarding the Preferred Stock. On August
20, 1998, Mr. Affleck was appointed by the Board to fill a vacancy on the Board
created by the resignation of Wallace E. Congdon on November 8, 1995. On
September 3, 1998, Ms. Buford was appointed by the Board to fill a vacancy on
the Board created by the resignation of William R. Dimeling on June 30, 1997.
The Board currently is composed of Messrs. Adkins, Affleck, Brant, and Lawruk,
and Ms. Buford. The designated director positions will cease to exist if the
proposal to exchange the Preferred Stock is approved by the shareholders. The
Board thereafter would be composed of three regular directors until such time as
the Board fills the remaining positions, or the shareholders elect additional
members.
Meetings of the Board of Directors
During the fiscal year ended September 30, 1998, the Company's records
indicate the Board met, or acted by written consent, 8 times. Each director
participated in 100% of the actions by written consent taken, during the period
for which he served as a director. Each director attended more than 75% of the
meetings.
Compensation of Directors
On May 31, 1994, the Board suspended indefinitely any compensation for
directors in their capacity as directors, excluding only Mr. Dimeling, who had
been accruing compensation under a previous arrangement. Since Mr. Dimeling's
resignation, no members of the Board have received any compensation in their
capacity as directors.
Committees of the Board of Directors
The Board has an Executive Committee, a Human Resources/Compensation
Committee, and an Audit Committee.
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<PAGE>
Executive Committee. The Executive Committee is authorized to act in the
absence of the Chief Executive Officer. On May 31, 1994, Mr. Brant was elected
to serve as Chief Executive Officer. On May 31, 1994, Mr. Brant was also
appointed as a member of the Executive Committee which then consisted of Messrs.
Brant and Dimeling. Since Mr. Dimeling's resignation, Mr. Brant has been the
only member of the Executive Committee. The Board has determined that while an
individual serves as Chief Executive Officer the Executive Committee shall be
inactive.
Human Resources/Compensation Committee. The Human Resources/Compensation
Committee advises the Board with respect to human resources and compensation
matters, including compensation of officers and directors. On September 1, 1998
Mr. Brant, who, at that time was the only member of the committee, resigned his
position as a member of this committee and Messrs. Adkins and Affleck were
appointed by the Board. The committee now is comprised of Messrs. Adkins and
Affleck. This committee did not meet during the fiscal year ended September 30,
1998.
Audit Committee. The Audit Committee reviews the Company's financial
statements, financial systems and internal audit controls, reviews the
activities and fees of the Company's independent auditor, and performs such
other activities in connection with the Company's financial controls as may be
directed by the Board. On September 3, 1998, Mr. Lawruk, who, at the time was
the only member of the committee, resigned his position as a member of this
committee and Ms. Buford and Mr. Brant were appointed by the Board. Ms. Buford
and Mr. Brant now constitute the Audit Committee. This committee did not meet
during the fiscal year ended September 30, 1998.
EXECUTIVE OFFICERS OF THE COMPANY
The following information is provided for the current executive officers
of the Company. The executive officers are appointed annually by the Board and
serve at the pleasure of the Board.
Name Age Office
R. Theodore Brant 53 Chief Executive Officer; President
Chairman of the Board of Directors;
Director
Bobby Ray Adkins 52 Chief Operating Officer;
Director
James R. Affleck, Jr. 58 Vice President; Assistant Treasurer;
Assistant Secretary;
Director
Paul R. Slack 58 Treasurer; Secretary;
Chief Accounting Officer;
Controller
Paul R. Slack joined the Company in December 1987 as Senior Internal
Auditor and was named Controller in May 1989. In February 1991, the Board named
Mr. Slack as Chief Accounting Officer and Controller. Subsequently, in November
1991, Mr. Slack was named Assistant Secretary of the Company. On May 31, 1994,
in addition to his other offices, Mr. Slack was named Treasurer and Assistant
Secretary of the Company. On March 5, 1997, Mr. Slack was named Secretary of the
Company. Mr. Slack received his B.S. degree in accounting from Rider College.
For additional information regarding Messrs. Brant, Adkins, and Affleck
please refer to the "Election of Directors" section of this Proxy Statement.
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EXECUTIVE COMPENSATION
The following table sets forth information regarding the annual
compensation for services in all capacities to the Company for the fiscal year
ended September 30, 1998 of the Chief Executive Officer.
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SUMMARY COMPENSATION TABLE
================================================================================
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
- -----------------------------------------------------------------------------------------------------------------------------
Name and Principal Position Year Salary Bonus Other Annual Awards All Other
Compensation Options/SARS Compensation
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R. Theodore Brant, 1998 $53,546 -0- -0- -0- -0-
Chief Executive Officer; President 1997 $12,046 -0- -0- -0- -0-
Chairman of the Board of 1996 $12,046 -0- -0- -0- -0-
Directors; Director
=============================================================================================================================
</TABLE>
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OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
================================================================================
<TABLE>
<CAPTION>
AGGREGATE OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR FISCAL YEAR-END OPTION/SAR VALUE
===================================================================================================================
Number of
Securities Value(1) of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
Name at Fiscal at Fiscal
Shares Year-End (#) Year-End ($)
Acquired on Value Exercisable/ Exercisable/
Exercise (#) Realized ($) Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. Theodore Brant,
Chief Executive Officer; President -0- -0- 0/0 $0.00/$0.00
Chairman of the Board of
Directors; Director
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John L. Pugh,
(former) Chairman, Member of -0- -0- 150,000/0 $0.00/$0.00
Executive Committee (2)
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Larry Ulrich (3) -0- -0- 120,000/0 $0.00/$0.00
(former) Senior Vice President,
Marketing
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</TABLE>
(1) Market Value of underlying securities at exercise, minus the
exercise or base price. "Spread" calculated by subtracting the
exercise or base price ($.1410) from the bid price of underlying
securities ($.10) as of the fiscal year-end of September 30, 1998.
(2) Effective January 1, 1994, the Human Resources/Compensation
Committee authorized the extension of the term of Mr. Pugh's options
for five years. The options expired on January 1, 1999 without
having been exercised.
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(3) Mr. Ulrich, who formerly had been President and Chief Operating
Officer of the Company, resigned in 1992. He thereafter was
appointed as Senior Vice President, Marketing. 20,000 of Mr.
Ulrich's options expired on September 6, 1999. The remaining 100,000
will expire in March, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On September 1, 1998, Mr. Brant resigned from the Company's Human
Resources/Compensation Committee ("Committee"), and the Board appointed Messrs.
Adkins and Affleck. Mr. Brant had been the only member of the Committee. Messrs.
Adkins and Affleck are directors of the Company. Mr. Adkins also is the Airport
Manager at New River Valley Airport, Dublin, Virginia. Neither Mr. Adkins nor
Mr. Affleck receive compensation from the Company by virtue of their positions
as directors or members of the Committee. Mr. Adkins is employed by the Company,
and received compensation in that capacity for the fiscal year ended September
30, 1998. Mr. Affleck is employed by the Company, and received compensation in
that capacity for the fiscal year ended September 30, 1998. No member of the
Committee had any direct or indirect material interest in any transaction or
proposed transaction to which the Company was a party, except that Mr. Adkins
has a equity interest in Transtech and is an officer and principal in certain
entities further described elsewhere in this Proxy Statement. See the sections
of this Proxy Statement entitled, "Related Transactions," "Election of
Directors," and "Fairness Opinion of Howard, Lawson & Co."
COMPENSATION PURSUANT TO PLANS
The Company has an Employees Tax Sheltered Retirement Plan meeting the
requirements of Section 401(k) of the Internal Revenue Code (the "Plan"). All
regular, full time employees with one or more years of service are eligible to
participate in the Plan. The Plan provides for voluntary contributions by a
participant of up to 15% of the participant's salary subject to the maximum
amounts allowable from time to time by the Internal Revenue Service. The Company
makes a matching contribution of 25% of that portion of the participant's
contribution which does not exceed two percent of the participant's salary.
Employee contributions are fully vested. Participants become vested in Company
contributions after one year of participation in the Plan. In general, subject
to provisions permitting hardship withdrawals and certain loans, the vested
amount in a participant's account may only be withdrawn after the participant
reaches age 59 1/2, or upon the participant's death, termination of employment,
disability or retirement. The Company contributed $2,164 to the plan for the
fiscal year ended September 30, 1998.
The Company also has provided for the payment of two types of bonuses to
selected employees of the Company. First, the Company has established an
incentive plan for operating managers, including department managers, and
general managers ("Manager" or "Managers"). Under this plan, each Manager is
eligible to earn incentive payments based on achievement of certain operating
and revenue targets established at the beginning of the fiscal year. For targets
achieved during fiscal year ended September 30, 1998, the Company granted
$14,991 to two Managers. Second, the Board may authorize additional bonuses for
certain executive and selected staff employees based on achievement of specified
operating or programmatic objectives established at the beginning of the fiscal
year. The Company granted $48,255 in bonuses under this plan during fiscal year
ended September 30, 1998, none of which was granted to any Company officer.
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<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following tables set forth, as of the Record Date, information with
respect to stock ownership in the Company by each person known by the Company to
be the beneficial owner of more than five percent of the Company's outstanding
Common Stock or Preferred Stock.
<TABLE>
<CAPTION>
========================================================================================================================
Amount and Amount and Nature of Percent
Nature of Percent Ownership of of Class of
Beneficial of Class Series A Series A
Name and Address Ownership of of Common Preferred Preferred
of Beneficial Owner(1) Common Stock Stock Stock(2) Stock
========================================================================================================================
<S> <C> <C> <C> <C>
Transtech Holding Company, Inc. 4,031,905 50% 103,540 72%
1331 Twelfth Avenue, Suite 109
Altoona, PA 16601
John F. Bricker 401,038 5% -0- -0-
826 Union Street, Suite 300
New Orleans, LA 70112
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Except as otherwise noted, the shareholders listed exercise sole
voting and investment power, subject to community property laws
where applicable. Information with respect to beneficial ownership
is based upon information furnished by each shareholder.
(2) As noted elsewhere herein, on or about June 30, 1988, the holders of
Preferred shares became entitled, pursuant to the Articles, voting
separately as a class to elect two directors to serve on the Board
in designated positions as a result of the Company's failure to pay
six quarterly dividends on the Preferred Stock. Under the Articles,
the holders of Preferred Stock cannot vote their holdings of Common
Stock for the election of the Company's regular directors while
entitled to elect directors to serve in the designated positions.
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, information with
respect to ownership of Common Stock and Preferred Stock by (i) each director
and director-nominee of the Company, and (ii) all officers and directors of the
Company as a group. This information was furnished to the Company by its
officers and directors or is based upon public SEC filings.
<TABLE>
<CAPTION>
========================================================================================================================
Amount and Nature of Percent
Nature of Percent Ownership of of Class of
Beneficial of Class Series A Series A
Ownership of of Common Preferred Preferred
Name of Beneficial Owner(1) Common Stock Stock Stock Stock
========================================================================================================================
<S> <C> <C> <C> <C>
Bobby Ray Adkins 4,446,065(2) 50% 103,540(3) 72%
James R. Affleck, Jr. -0- -0- -0- -0-
R. Theodore Brant 4,446,065(4) 50% 103,540(5) 72%
Alice F. Buford -0- -0- -0- -0-
Maurice Lawruk 4,446,065(6) 50% 103,540(7) 72%
Paul R. Slack 20,000(8) * -0- -0-
All Officers and 4,466,065(9) 50% 103,540(10) 72%
Directors as a group
(includes 6 persons)
</TABLE>
*Denotes ownership of less than one percent (1%) of the indicated class.
- ----------
(1) Except as otherwise noted, the shareholders listed exercise sole
voting and investment power, subject to community property laws
where applicable. With respect to each person or group, the number
of shares and percentages are calculated based on the number of
shares outstanding plus shares that such person or group may acquire
within 60 days upon the exercise of stock options.
(2) Includes 414,160 shares of Common Stock issuable on conversion of
103,540 shares of Preferred Stock owned by Transtech, in which Mr.
Adkins owns a seven percent equity interest. Mr. Adkins disclaims
the beneficial ownership of these shares.
(3) Includes shares of Preferred Stock owned by Transtech, in which Mr.
Adkins owns a seven percent equity interest. Mr. Adkins disclaims
the beneficial ownership of these shares.
(4) Includes 414,160 shares of Common Stock issuable on conversion of
103,540 shares of Preferred Stock owned by Transtech, in which Mr.
Brant owns 40% equity interest. Mr. Brant disclaims the beneficial
ownership of all these shares.
(5) Includes shares of Preferred Stock owned by Transtech, in which Mr.
Brant owns a 40% equity interest. Mr. Brant disclaims the beneficial
ownership of these shares.
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(6) Includes 414,160 shares of Common Stock issuable on conversion of
103,540 shares of Preferred Stock owned by Transtech, in which Mr.
Lawruk owns a 40% equity interest. Mr. Lawruk disclaims the
beneficial ownership of all these shares.
(7) Includes shares of Preferred Stock owned by Transtech, in which Mr.
Lawruk owns a 40% equity interest. Mr. Lawruk disclaims the
beneficial ownership of these shares.
(8) Includes 20,000 shares with respect to outstanding vested stock
options.
(9) Includes 20,000 shares with respect to outstanding vested stock
options for one officer. Includes 4,446,065 shares of Common Stock
owned of record by Transtech, which number includes 414,160 shares
of Common Stock issuable to Transtech on conversion of 103,540
shares of Preferred Stock. Beneficial ownership of these shares is
disclaimed by Management.
(10) Includes 103,540 shares of Preferred Stock owned by Transtech.
Beneficial ownership of these shares is disclaimed by Management.
CERTAIN TRANSACTIONS WITH MANAGEMENT
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of its Common Stock to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than 10% stockholders
are required by the SEC to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of records of the transfer agent, the Company
believes that no reports were required for those persons, during the fiscal year
ended September 30, 1998, and that all filing requirements applicable to its
officers, directors and greater than ten percent stockholders were met.
Related Transactions
For the fiscal year ended September 30, 1998, there were no transactions
between the Company and any executive officer, director, five percent beneficial
owner of the Company's Common Stock, or member of the immediate family of the
foregoing persons in which one of the foregoing persons had an interest of more
than $60,000, except for the following:
During the fiscal year ended September 30, 1998, the Company provided
accounting services to Transportech, a wholly owned subsidiary of Transtech and
operator of a fixed base operation ("FBO") through July, 1998, at which time
the Carlyle-Transportech Merger Sub, Inc. was merged into Transportech. The
Company received a monthly fee of $900 for this service through the date of the
merger.
During the fiscal year ended September 30, 1998, the Board approved a
$500,000 line of credit, later increased to $1,500,000 in March 1999 and to
$1,800,000 in May, 1999, for Brant Motorsports, Inc. ("Brant Sports"), a
Pennsylvania corporation whose directors include Mr. Brant, Robert Brant, who is
Mr. Brant's brother, Mr. Adkins, and Mr. Lawruk The officers of Brant Sports are
Mr. Brant, who is President, Robert Brant, Vice President, and Mr. Adkins, Vice
President, Secretary, and Treasurer. Brant Sports was formed for the purpose of
promoting race cars and selling advertising. Mr. Brant owns 100% of the equity
of Brant Sports. The principal business address of Brant Sports is 190 Hart
Field Road, Morgantown Airport, Morgantown, WV 26505. Brant Sports utilizes
space at the Company's Morgantown, WV FBO. The interest rate for the line of
credit to Brant Sports is the prime rate less one percent. At September 30,
1998, advances against this credit line totaled $405,000; at March 31, 1999
total advances were $1,452,066.
The Company used Brant Sports as a means of advertising and promotion
during calendar 1998, and charged operations $307,000 for the fiscal year ended
September 30, 1998. The balance of $90,453 was recorded in the first quarter,
ended December 31, 1998, of the fiscal year 1999. The total amount of $397,453
was applied as a payment against the line of credit.
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The Company periodically uses an aircraft owned by Valley Air for travel
by its employees, primarily management. Valley Air bills the Company an hourly
rate based on flight time. The President and Chief Executive Officer of Valley
Air is Mr. Brant. For the fiscal year ended September 30, 1998 the Company was
billed $124,000 for use of the aircraft. During the six months ended March 31,
1998, the Company was billed $59,000.
In July 1996 the Company purchased a 1975 Cessna Citation 500 aircraft
from Mr. Brant, the Chairman of the Board and Chief Executive Officer of the
Company for $708,000. As part of the purchase agreement the Company will make
monthly payments directly to Cessna Corporation on the existing loan, the
balance being $636,000 at September 30, 1998. In August 1997 one of the
airplane's engines required an overhaul which cost $240,000. Mr. Brant increased
the note with Cessna by $200,000 and personally paid the additional $40,000,
with the $240,000 being charged to a fixed asset account. At September 30, 1998
the Company owed Mr. Brant $26,000. At March 31, 1999 the Company owed Mr. Brant
$3,408.
In January 1996 the Company purchased 40% interest in a company called
Peakwood, L.L.C. ("Peakwood") for $150,000. Peakwood is a Virginia limited
liability company formed for the purpose of acquiring and operating a Dun &
Bradstreet Receivable Management Services Franchise. See the section of this
Proxy Statement entitled, "Fairness Opinion of Howard, Lawson & Co." for more
information on Peakwood. $115,000 of the amount invested was borrowed from the
following related parties: Transportech, a wholly owned subsidiary of Transtech
that was sold in July 1998, $20,000; Mr. Lawruk, $40,000; Mr. Affleck, $34,000;
Mr. Brant, $15,000; Mr. Adkins, $4,000; and Ms. Buford, $2,000. The Company
issued promissory notes bearing an interest rate of ten percent per annum with
principal and interest due in February 1997, at which time the Company exercised
its option to extend the payment date for one additional year. All interest due
through the renewal date was paid. In January, 1998, all parties agreed to
convert the promissory notes to one year installment loans with unpaid interest
added to the principal and the balance to be paid in 12 monthly installment at
ten percent, the total unpaid balance at September 30, 1998 was $54,000. These
promissory notes were paid in full in February, 1999.
SEE THE SECTION OF THIS PROXY STATEMENT ENTITLED "FAIRNESS OPINION OF
HOWARD, LAWSON & CO." FOR ADDITIONAL INFORMATION RELATING TO TRANSACTIONS
BETWEEN THE COMPANY AND CERTAIN EXECUTIVE OFFICERS, DIRECTORS, OR OWNERS OF FIVE
PERCENT OF THE COMPANY'S COMMON STOCK NOT OTHERWISE COVERED IN THIS SECTION.
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
The Board has considered and approved, and recommends that the
shareholders approve an amendment to the Company's Articles to increase the
authorized shares of the Company's Common Stock from 15,000,000 to 60,000,000
shares. Of the currently authorized Common Stock, 7,998,052 shares were issued
and outstanding as of the Record Date. The Company has 7,001,948 shares of
Common Stock authorized but unissued. If the proposal relating to the Exchange,
discussed below, is approved at the Annual Meeting, at least 739,320 shares will
need to be issued to the holders of the Preferred Stock. In addition, the
Company has proposed to offer Transtech shares of Common Stock in consideration
of the forgiveness of certain indebtedness the Company owes to Transtech
("Forgiveness"). See the section of this Proxy Statement entitled, "Exchange and
Forgiveness" for more information relating to the Exchange and the Forgiveness.
The Exchange would require the Company to issue up to 739,320 shares of Common
Stock to the holders of the Preferred Stock. The Forgiveness would require the
Company to issue up to 12,507,000 shares of Common Stock to Transtech. If the
Exchange of the Preferred Stock and the Forgiveness together are approved by the
shareholders, the Company will not have sufficient authorized but unissued
Common Stock, unless the shareholders approve the proposal to increase the
authorized Common Stock. If the Forgiveness is approved, but the Exchange is not
approved, the Company still will not have sufficient but unissued Common Stock,
unless the shareholders approve the proposal to increase the authorized Common
Stock.
In addition to the need that will arise in the event the proposals
regarding the Preferred Stock and the Forgiveness are approved, the Board
believes the increase in the authorized shares is necessary to provide the
Company with the flexibility to act in the future with respect to financing
programs, acquisitions and other corporate purposes without the delay and
expense incidental to obtaining shareholder approval each time an opportunity
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requiring the issuance of shares may arise. Absent contrary instructions, shares
represented by properly executed proxies in the accompanying form will be voted
FOR the proposal to ratify the amendment to the Articles to increase the number
of authorized shares from 15,000,000 to 60,000,000.
The lack of authorized Common Stock available for issuance would
unnecessarily limit the Company's ability to pursue opportunities for future
financings, acquisitions, mergers and other transactions. The Company would also
be limited in its ability to effectuate future stock splits or stock dividends.
The Board believes that the increase in the authorized share of Common Stock is
necessary in order to have sufficient shares available if the proposals relating
to the Exchange and the Forgiveness are approved by the shareholders, and to
provide the Company with the flexibility to pursue the types of opportunities
described above without added delay and expense.
The availability of authorized but unissued share of Common Stock might be
deemed to have the effect of preventing or discouraging an attempt by another
person to obtain control of the Company, because the additional shares could be
issued by the Board, which could dilute the stock ownership of such person. This
proposal is not being proposed in response to a known effort to acquire control
of the Company.
The additional shares of Common Stock to be authorized by adoption of the
amendment to the Articles would have rights identical to the currently
outstanding shares of Common Stock of the Company. Adoption of the proposed
amendment to the Articles would not affect the rights of the holders of
currently outstanding shares of Common Stock. Adoption of the proposed amendment
to the Articles may have the effect of diluting the ownership of the holders of
the Common Stock if the additional shares are issued.
Adoption of the amendment to the Articles to increase the Company's
authorized Common Stock requires the vote of a majority of voting power present
at the meeting of the Common Stock. As of the Record Date, Transtech owned 50%
of the issued and outstanding Common Stock. Votes, abstentions and broker
non-votes will be counted as shares represented at the Meeting. If the proposal
is approved, the Company intends to file an amendment to the Articles shortly
after the Annual Meeting. The amendment to the Articles will be effective
immediately upon acceptance of filing by the Secretary of the State of
Louisiana. The Board would be free to issue Common Stock without further action
on the part of the shareholders. If the proposal is approved, the Company would
use its best efforts to file a registration statement covering any Common Stock
to be issued in connection with the Recapitalization (as defined herein) within
120 days from the date of the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO INCREASE THE AUTHORIZED COMMON STOCK OF THE COMPANY.
EXCHANGE AND FORGIVENESS
Background
The Company, founded in 1948 under the name "Pan-Air Corporation," has
been a supplier of ground support services to corporate and other general
aviation aircraft at airports in the midwest and eastern United States. The
Company provides line services (including fuel sales, aircraft handling and
storage, and ancillary customer services), and leases hanger and office space.
The Company also supplies ground support services for commercial airlines
(including fueling, aircraft cleaning, and baggage and freight handling).
Collectively, the foregoing services may be referred to herein as the "FBO
Business." The Company changed its name to "Aero Services International, Inc."
in 1980. Over the past several years, the Company has undertaken to sell
underperforming assets, and has invested in several new ventures outside of its
FBO Business, designed to improve the Company's cash flow and strengthen the
balance sheet. The following paragraphs provide a history of several recent
transactions effected in order to achieve these goals, as well as describing the
Company's plan to eliminate a significant amount of long term debt.
The Company is asking shareholders to approve the Exchange, Under the
Company's plan for the Exchange, all of the Preferred Stock will be exchanged
into Common Stock. The Company also is asking the shareholders to approve the
Forgiveness. Under the Company's plan for the Exchange, the shareholders would
ratify the issuance of Common Stock to Transtech, in consideration of the
forgiveness by Transtech of certain
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indebtedness owed to Transtech. These proposals first were discussed in general
terms in December, 1998, when Transtech, a Delaware holding company, owned in
part by Messrs. Brant and Lawruk, approached the Board regarding the conversion
of a portion of Transtech's holdings of the Preferred Stock into Common Stock.
Also in December, Transtech approached the Board and proposed the forgiveness by
Transtech of certain indebtedness owed to Transtech in consideration of the
Common Stock of the Company, and extending the term of the remaining
indebtedness not covered by the proposed conversion.
Transtech at that time was the largest shareholder of the Company's Common
Stock and Preferred Stock, owning 42% and 34% respectively of each class.
Transtech also was the Company's largest creditor. At that time, the Company was
indebted to Transtech in the amount of $15,610,000 in the form of promissory
notes that Transtech had purchased from Triton Energy Corporation. In addition,
as of September 31, 1998, the Company owed Transtech $2,641,000 in accrued but
unpaid interest on these notes. In December, 1998, Transtech converted 125,000
shares of the Preferred Stock it owned into Common Stock at a rate of four
shares of Common Stock for every share of Preferred Stock so converted. The
500,000 shares of Common Stock issued to Transtech are restricted shares.
Transtech received an additional 500,000 shares of restricted Common Stock as a
result of the forgiveness by Transtech of $314,862 of the indebtedness owed to
Transtech. Restricted stock is subject to certain limitations on transfer.
Transtech indicated at that time that it would be willing to convert additional
Preferred Stock and indebtedness into Common Stock. After the foregoing
transactions, Transtech continues to be the largest single shareholder of the
Company. Transtech, as of the Record Date, owned 72% of the Preferred Stock and
50% of the Common Stock. Transtech also continues to be the largest creditor of
the Company.
Over the first few months of 1999, a preliminary plan was developed by the
officers of the Corporation ("Management") whereby the Company would undertake
the Exchange and the Forgiveness (together, the "Recapitalization"), and also
extend the term of the remaining indebtedness owed to Transtech. The Board
engaged the services of Howard, Lawson & Co. ("Howard Lawson"), an investment
banking firm, to assist the Board in preparing the formal plan of
Recapitalization.
Howard Lawson is a nationally recognized investment banking firm and was
selected by the Company based upon Howard Lawson's reputation and general
investment banking experience, including it's experience in rendering fairness
opinions. Howard Lawson, as part of it's investment banking business, is engaged
in the valuation of businesses and their securities in connection with private
placements and valuation for estate, corporate and other purposes, negotiated
underwritings, competitive biddings, reclassifications of securities, and
secondary distributions of listed and unlisted securities. Howard Lawson has had
no prior business relationship with the Company. By an engagement letter dated
June 24, 1999, and executed by the Company on July 12, 1999, the Board retained
Howard Lawson to act as it's financial advisor to provide assistance to the
Board in it's evaluation of the Recapitalization. The Company agreed to pay
Howard Lawson an aggregate fee of $75,000, plus certain out-of-cash pocket
expenses in cash, pursuant to the terms of the engagement letter.
Over the course of several weeks, Management and Howard Lawson worked
together to develop the Exchange Ratios (as hereinafter defined) to be used in
the Recapitalization. Once the general provisions of the Recapitalization were
defined, Management thereafter submitted the Recapitalization to the Board for
the Board's approval, and sought Board authorization for Howard Lawson to issue
a fairness opinion (the "Howard Lawson Opinion") in connection with the
Recapitalization prior to such time as the Recapitalization would be submitted
to the shareholders of the Company for their approval. The Board authorized the
issuance of the Howard Lawson Opinion at a special Board Meeting on August 13,
1999. As of August 18, 1999, Howard Lawson presented the Howard Lawson Opinion
to the Board. The Howard Lawson Opinion was reviewed by the Board at a Special
Meeting convened on August 20, 1999. The Howard Lawson Opinion stated that, as
of August 18, 1999, and based on the matters set forth therein, that the
Exchange Ratios (as hereinafter defined) used in the Recapitalization are fair
from a financial point of view to the shareholders of Aero, other than
Transtech. The Board considered and approved the Howard Lawson Opinion at the
August 20, 1999 Special Board Meeting.
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Fairness Opinion Of Howard, Lawson & Co.
Howard Lawson has consented to the inclusion of the Howard Lawson Opinion,
in this Proxy Statement.
THE FULL TEXT OF THE HOWARD LAWSON OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS EXHIBIT A TO THIS PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE HOWARD LAWSON OPINION SET
FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION. SHAREHOLDERS OF THE COMPANY ARE URGED TO READ THE HOWARD LAWSON OPINION
IN ITS ENTIRETY. THE HOWARD LAWSON OPINION WAS PREPARED FOR AND ADDRESSED TO THE
BOARD ONLY THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIOS
USED IN THE RECAPITALIZATION, AND DOES NOT CONSTITUTE AN OPINION AS TO THE
MERITS OF THE RECAPITALIZATION OR A VOTE IN CONNECTION WITH THE
RECAPITALIZATION. IN ADDITION, THE HOWARD LAWSON OPINION IS NOT DIRECTED TO THE
FAIRNESS OF EXCHANGE RATIOS USED IN THE RECLASSIFICATION AMONG THE VARIOUS
SHAREHOLDERS OF THE COMPANY OR TO ANY INDIVIDUAL SHAREHOLDER.
IN RENDERING IT'S OPINION AS TO THE FAIRNESS OF THE EXCHANGE RATIOS USED
IN THE RECLASSIFICATION, HOWARD LAWSON EXPRESSLY EXCLUDED FROM IT'S OPINION ANY
OF THE INVESTMENTS OR PRIOR TRANSACTIONS COMPLETED BY THE COMPANY OTHER THAN THE
RECAPITALIZATION.
Howard Lawson considered the ownership positions of Aero, including but
not limited to the Company's FBO Business, Brant MotorSports, LLC (which is a
separate entity from Motor Sports), b-Fast Marketing, LLC, b-Fast Shopper, LLC,
and RTB/AS, LLC. Brant MotorSports, LLC is a Delaware limited liability company,
owned 50% by the Company, whose interest is non-voting, and 50% by Mr. Brant
("MotorSports, LLC"). b-Fast Marketing, LLC is a Delaware limited liability
company, owned 50% by the Company, whose interest is non-voting, and 50% by Mr.
Brant ("Marketing, LLC"). b-Fast Shopper, LLC is a Delaware limited liability
company, owned 50% by the Company, whose interest is non-voting, and 50% by Mr.
Brant ("Shopper, LLC"). RTB/AS, L.L.C. is a Delaware limited liability company,
owned 99% by the Company, and 1% by Mr. Brant ("RTB/AS"). Notwithstanding the
relative ownership positions described above, Mr. Brant has 100% of the voting
interest in each of the foregoing companies. Howard Lawson considered the
Company's 40% ownership interest in Peakwood. Howard Lawson further considered
the draft business plan for the Brant Pittsburgh Auto Racing Complex, LLC, a
limited liability company in formation in which Mr. Brant is expected to have an
equity interest ("Brant Pittsburgh").
MotorSports, LLC was formed in June, 1999 for the purpose of engaging in
the business of construction and operation of one or more race tracks and sales
facilities. The principals of MotorSports, LLC include Mr. Brant, Mr. Adkins and
Robert Brant. To date, MotorSports, LLC has had no significant operations. The
Company expects to make an investment in MotorSports, LLC in the near future.
MotorSports, LLC has a principal business address of Corporation Trust Center,
1209 Orange Street, Wilmington, Delaware 19801. While Motorsports, LLC has not
had significant operations to date, it is expected that this entity will expand
operations in the coming months as the Company implements the overall business
plan of the Company to participate in the motor sports business.
RTB/AS was formed in January, 1999 by Mr. Brant and the Company, to pursue
investments in motor sports and has an operating agreement with Mr. Brant
regarding an after-tax economic interest in a motor sports business. The
managers of RTB/AS include Mr. Brant and Mr. Adkins. The Company's initial
investment in RTB/AS was $9,043,000, and ultimately could be $12,500,000. RTB/AS
has a principal business address of Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801.
Marketing, LLC was formed in June, 1999 by Mr. Brant and the Company, and
intends to market licensed products and merchandise related to motor sports. The
principals of Marketing, LLC include Mr. Brant, Mr. Adkins and Robert Brant. To
date, returns on investment in this business have been negligible. The Company
expects to make an investment in Marketing, LLC in the near future. Marketing,
LLC has a principal business address of 1209 Orange Street, Wilmington, Delaware
19801. Marketing, LLC is a component of the overall business plan of the Company
to participate in the motor sports business market.
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Shopper, LLC was formed in June, 1999 by Mr. Brant and the Company in
order to develop a website to: 1) sell motor sports memorabilia and
collectibles, and 2) provide an Internet shopping service. The principals of
Shopper, LLC include Mr. Brant, Mr. Adkins and Robert Brant. To date, returns on
investment in this business have been negligible. The Company expects to make an
investment in Shopper, LLC in the near future. Shopper, LLC has a principal
business address of 1209 Orange Street, Wilmington, Delaware 19801. Marketing,
LLC is a component of the overall business plan of the Company to participate in
the motor sports business market.
Peakwood was formed in January, 1996, for the purpose of acquiring and
managing certain Dun & Bradstreet Receivable Management Services. The principals
of Peakwood include Peakwood Capital Corporation and the Company. For the period
between January and June, 1999 Peakwood had revenues of $101,245. The Company's
initial investment in Peakwood was $150,000. Peakwood has a principal business
address of Crestar Bank Building, Suite 1250, 310 First Street, Roanoke,
Virginia 24011.
Brant Pittsburgh is expected to be formed by Mr. Brant and other
individuals to be named for the purpose of engaging in the Motor Sports
business. Brant Pittsburgh has had no operations to date. It expects to enter
into certain contractual relationships, deemed necessary and appropriate to
execute the draft summary business plan. Brant Pittsburgh is expected to
increase operations as the Company implements the overall business plan of
participating in the motor sports business.
There are significant interrelationships between the entities discussed
above and Management. Contracts may be entered into between the Company and
these entities that may not be the result of arms-length negotiations. In
addition to the foregoing, Management is involved with business ventures in the
racing industry. Management may encounter conflicts of interest in allocating
their time, resources and personnel among the various business activities in
which they are or may become engaged.
In addition to considering the companies discussed above, Howard Lawson,
in connection with rendering the Howard Lawson Opinion, reviewed, without
limitation, (i) the Company's Forms 10-KSB for the periods ending September 30,
1995, 1996, 1997, and 1998; (ii) the Company's Forms 10-QSB for the periods
ending December 31, 1998 and March 31, 1999; (iii) internally prepared financial
statements for the periods ending April 30, 1999 and May 31, 1999; (iv) the
prospectus for the Preferred Stock dated August 11, 1986; (v) Form SC-13D filed
by Transtech on December 18, 1998; (vi) copies of Forms 4 filed by Messrs. Brant
and Lawruk, and by Transtech; (vii) a copy of the Company's Form 8-K, dated
March 11, 1999; (viii) copy of the by-laws of the Company dated December 2, 1980
and the amendments thereto; (ix) the amended and restated Articles, together
with all amendments thereto; (x) Operating Agreement for RTB/AS, together with
the amendment thereto; (xi) Operating Agreement for MotorSports, LLC; (xii)
Operating Agreement for Marketing, LLC; (xiii) Operating Agreement for Shopper,
LLC; (xiv) Operating Agreement of Peakwood; (xv) copies of the notes giving rise
to the indebtedness owed by the Company to Transtech; (xvi) draft Summary
Business Plan for Brant Pittsburgh; (xvii) Memorandum of Understanding between
the County of Allegheny, PA and Motor Sports regarding the proposed development
of a multi-use entertainment facility on property located at the Pittsburgh
International Airport; (xviii) publicly available financial and market
information regarding certain companies which Howard Lawson believed share
valuation characteristics with the Company's FBO Business and motor sports
entities; and (xix) the financial terms, to the extent publicly available, of
certain acquisition transactions deemed comparable and relevant to the Company's
FBO Business and motor sports entities. Howard Lawson also held discussions with
Management and the management of Motor Sports concerning the business, financial
statements, operations and prospects of each of the companies, as well as the
outlook for the Company's investments in the motor sports related businesses.
Specifically, Howard Lawson considered and analyzed the financial data of
the Company and the Company's related entities and performed a variety of
financial and comparative analysis, as described below.
Historical Trading Analysis. Howard Lawson reviewed the recent and
historical stock market performance of the Common Stock and Preferred Stock as
traded on the Over-the-Counter Bulletin Board.
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A review of the historical market price and trading volume relating to the
Common Stock showed that: (i) on August 17, 1999, the closing price was $0.31
per share; (ii) during the during the period from March 8, 1999 to August 17,
1999, the Common Stock traded from a low of $0.01 per share to a high of $0.70
per share; (iii) during the period from July 28, 1997 through August 17, 1999,
the Common Stock traded from a low of $0.01 per share to a high of $0.70 per
share; and (iv) as of August 17, 1999, the 120 day average closing price of the
Common Stock was $0.21 per share and an average of 25,672 shares were traded.
A review of the historical market price and trading volume relating to the
Preferred Stock showed that: (i) on August 17, 1999, the closing price was $2.00
per share; (ii) during the period from March 8, 1999 to August 17, 1999, the
Preferred Stock traded from a low of $0.06 per share to a high of $5.00 per
share; (iii) during the period from July 28, 1997 through August 17, 1999, the
Preferred Stock traded from a low of $0.06 per share to a high of $5.00 per
share; and (vi) the 120 day average closing price of the Preferred Stock was
$1.23 and an average of 2,381 shares were traded.
Exchange Ratio Analysis. Howard Lawson calculated the average quotients of
the closing prices per share of the Preferred Stock to the Common Stock for
various dates over the six-month period from February 1, 1999 to August 17,
1999. The following table presents the historical exchange ratios at various
dates during the period.
Historical Historical
Selected Date Exchange Ratios Selected Date Exchange Ratios
- ------------- --------------- ------------- ---------------
February 1, 1999 4:1 July 16, 1999 8:1
March 1, 1999 4:1 July 23, 1999 8:1
April 1, 1999 12:1 July 30, 1999 8:1
May 3, 1999 7:1 August 6, 1999 4:1
June 1, 1999 6:1 August 11, 1999 6:1
July 1, 1999 9:1 August 17, 1999 6:1
July 8, 1999 8:1
Pro Forma Balance Sheet Analysis. Howard Lawson reviewed a pro forma
balance sheet that reflected the financial impact of the Recapitalization on the
Company's financial condition. The pro forma balance sheet was prepared by
Management and reflected the Company's July 31, 1999 balance sheet after
adjustments for the Recapitalization. The pro forma balance sheet showed that
upon the conversion of $6,253,500 of the accrued interest and principal owed to
Transtech to Common Stock and the conversion of all of the Preferred Stock to
Common Stock, the Company's negative shareholders' equity position will be
reduced. Upon the conversion of a portion of the accrued interest and the
principal owed to Transtech, the Company will owe $12,180,000 in principal to
Transtech, plus interest accrued on the indebtedness from July 31, 1999 until
the conversion.
Selected Aviation Companies Analysis. Howard Lawson also reviewed the
financial and market information of publicly traded airport services companies.
Based on publicly available financial information and Zack's Investment
Research, Inc.'s ("Zack's") consensus earnings estimates, Howard Lawson reviewed
and compared selected financial and operating information relating to the
Company's FBO Business to corresponding financial information, ratios and public
market multiples for three publicly traded companies operating in the airport
services industry (the "Selected Aviation Companies"). The Selected Aviation
Companies are: Aviation Group, Inc. (trading symbol "AVGP"), Mercury Air Group
(trading symbol "MAX"), and Ronson Corp. (trading symbol "RONC"). The multiples
of the Selected Aviation Companies were calculated using closing stock prices as
of August 11, 1999 and based on the most recent publicly available financial
information for the Selected Aviation Companies. The multiples analyzed and
their respective median multiples were price-to-earnings (7.5x), price-to- 2000
forecasted earnings (8.0x), price-to-shareholders' equity (1.7x), total
capitalization-to-revenues (0.5x), total capitalization-to-EBITDA (meaning
earnings before interest, taxes, depreciation and amortization) (5.2x), and
total capitalization-to-EBIT (meaning earnings before interest and taxes)
(7.9x). By comparison, as of the Company's most recent reporting period, the
Company's FBO Business had losses at the EBITDA, EBIT, and net income levels,
and reported a negative shareholders' equity position. Accordingly, the only
relevant comparison was of the Company's latest twelve month revenues to the
median total capitalization-to-revenues multiple of the Selected Aviation
Companies.
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Selected Transactions of Aviation Companies Analysis. Howard Lawson, using
publicly available information, reviewed and analyzed the purchase price and
implied transaction multiples relating to five announced and completed merger or
acquisition transactions involving aviation service company properties beginning
in August, 1998 (the "Selected Aviation Company Sales"). Such analysis indicated
a median multiple of total capitalization-to-latest twelve month revenues from
the transactions of the Selected Aviation Company Sales of 12.2x (ranging from a
low of 1.3x to a high of 23.2x) and the total capitalization-to-latest twelve
month EBIT multiple was 10.5x. Howard Lawson also reviewed the implied multiples
of total capitalization-to-latest twelve-month revenues and total
capitalization-to-latest twelve-month EBITDA for the Company's sale in March
1999 of its FBO at the Chicago Midway Airport. See the section of this Proxy
Statement entitled, "Financial Disclosure" for more information on the sale of
the Chicago Midway FBO. The implied multiples from this transaction were a total
capitalization-to latest twelve month revenues multiple of 1.9x and a total
capitalization-to-latest twelve month EBITDA multiple of 11.8x.
No company, transaction, or business used in the publicly traded aviation
services company analysis and selected transactions analysis as a comparison is
identical to the Company's FBO Business. Accordingly, an analysis of the results
of such comparison is not purely mathematical; rather it involves complex
considerations and judgments concerning differences in historical and projected
financial and operating characteristics and other factors that could affect the
values indicated by the analysis of the comparable companies.
In arriving at its opinion, Howard Lawson also considered the results of
its analysis of financial and market data for selected motor sports related
businesses and recent mergers and acquisitions of companies involved in motor
sports related businesses. This analysis was conducted in order to compare the
financial and operating results of the motor sports related entities in which
the Company has recently made investments.
Selected Motor Sports Companies Analysis. Howard Lawson reviewed the
financial and market information of publicly traded motor sports companies.
Based on publicly available financial information and Zack's consensus earnings
estimates, Howard Lawson reviewed and compared selected financial and operating
information relating to the Company's motor sports entities to corresponding
financial information, ratios and public market multiples for three publicly
traded companies operating in the motor sports industry (the "Selected Motor
Sports Companies"). The Selected Motor Sports Companies are: Championship Auto
Racing Teams, Inc. (trading symbol "MPH"), International Speedway Corp. (trading
symbol "ISC"), and Speedway Motorsports, Inc. (trading symbol "TRK"). The
multiples of the Selected Motor Sports Companies were calculated using closing
stock prices as of August 11, 1999 and based on the most recent publicly
available financial information for the Selected Motor Sports Companies. The
multiples analyzed and their respective median multiples were price-to-earnings
(35.1x), price-to-2000 forecasted earnings (27.3x), price-to-shareholders'
equity (5.5x), total capitalization-to-revenues (7.7x), total
capitalization-to-EBITDA (18.7x), and total capitalization-to-EBIT (21.5x).
These multiples were then compared to the financial and operating information of
the Company's various motor sports related entities.
Selected Transactions of Motor Sports Companies Analysis. Using publicly
available information Howard Lawson reviewed and analyzed the purchase price and
implied transaction multiples relating to six announced or completed merger and
acquisition transactions involving motor sports and motor racing companies
beginning in March, 1998 (the "Selected Motor Sports Company Sales"). Such
analysis indicated an average multiple of total capitalization-to-latest twelve
month EBIT from the transactions of the Selected Motor Sports Company Sales of
28.5x (ranging from a low of 23.8x to a high of 31.6x), a total
capitalization-to-latest twelve month EBITDA average multiple of 19.0x (ranging
from a low of 15.8x to a high of 21.5x), and a purchase price-to-latest twelve
month earnings average multiple of 52.3x (ranging from a low of 41.1x to a high
of 63.9x). The average multiples implied by the transactions analyzed by Howard
Lawson were then compared to the financial and operating results of the
Company's motor sport related entities and an indicated value for the Company's
interests in these entities was determined.
No company, transaction, or business used in the publicly traded motor
sports company analysis and selected transaction analysis as a comparison is
identical to the Company's motor sports related entities. Accordingly, an
analysis of the results of such comparison is not purely mathematical; rather it
involves complex
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considerations and judgments concerning differences in historical and projected
financial and operating characteristics and other factors that could affect the
values indicated by the analysis of the comparable companies.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set above, without considering the
analyses as a whole, could create an incomplete view of the processes underlying
the Lawson Opinion. In arriving at its fairness determination, Howard Lawson
considered the results of each of these analyses in their totality. No company
or transaction used in the above analyses as a comparison is directly comparable
to the Company's FBO Business or its motor sports entities. The analyses were
prepared solely for the purpose of Howard Lawson's providing its opinion to the
Board as to the fairness, from a financial point of view, of the Exchange Ratios
(as defined herein) used in the Recapitalization and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold.
Howard Lawson did not verify independently the foregoing information which
was provided to Howard Lawson by the Company or which was publicly available
through sources such as the SEC's EDGAR system. Howard Lawson did rely upon the
accuracy of the foregoing and completeness of the foregoing information. Where
the Company provided Howard Lawson with unaudited information, Howard Lawson
relied upon the representations of Management regarding the accuracy and
completeness of those unaudited financial statements. Howard Lawson was not
provided any financial forecasts by or on behalf of the Company or for any of
the investments the Company has made. Howard Lawson did not make any independent
appraisals or evaluations of the assets of the Company or any of the underlying
assets of the motor sports investments, nor has Howard Lawson contacted any
prospective acquirer or investor on behalf of the Company.
The Howard Lawson Opinion concluded that the exchange of 103,540 shares of
Preferred Stock held by Transtech for 414,160 shares of Common Stock, which
equates to a ratio of four shares of Common Stock for every share of Preferred
Stock owned by Transtech; the exchange of 40,645 shares of Preferred Stock held
by shareholders other than Transtech for 325,160 shares of Common Stock, which
equates to a ratio of eight shares of Common Stock for every share of Preferred
Stock so owned; and the exchange of $6,253,500 of the indebtedness due to
Transtech for Common Stock at a ratio of two shares of Common Stock for each
$1.00 of the indebtedness so converted (together, the "Exchange Ratios") was,
when taken as a whole fair, from a financial point of view, to the Company's
stockholders other than Transtech.
Recommendation of the Board
The Board believes that the Recapitalization is fair and in the best
interests of the Company and its stockholders. In light of the foregoing, the
Board, at a Special Meeting on August 20, 1999, unanimously recommended that the
Company's stockholders vote "FOR" the Recapitalization. In evaluating the
Recapitalization, the Board considered a variety of factors, including financial
and operating information relating to the Company and reports from, and
presentations by Howard Lawson, legal counsel, and the Chairman of the Board.
The factors considered by the Board, all of which were deemed material but were
given varying priorities by the individual directors, included, but were not
limited to the foregoing: (i) the effect of the Recapitalization on the
Company's balance sheet; (ii) the exchange ratio for Transtech for Transtech's
Preferred Stock (iii) the exchange ratio for the holders of the Preferred Stock
other than Transtech; (iv) the exchange ratio for the conversion of the
indebtedness into Common Stock; (v) a comparison of financial data for publicly
traded motor sports companies; and (vi) the financial history of Peakwood; and
(vii) historical financial statements from the Company's Harrisburg and
Morgantown FBOs.
The Recapitalization will eliminate a significant amount of the long-term
debt of the Company and eliminate more than $3,528,000 of accrued but unpaid
dividends on the Preferred Stock. The Recapitalization will assist management in
exploring new business opportunities, in part, by making the Company more
attractive to third parties. The Company is unaware of any third party that has
any interest in acquiring control of the Company.
The Board concluded, in light of these factors, that the Recapitalization
of the Preferred Stock is in the best interests of the Company and its
stockholders. The Board did not attempt to weigh the factors considered and no
poll of the directors was taken to determine which of the factors considered
they deemed most important in arriving
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at their ultimate conclusion. The individual components of the Recapitalization,
the Exchange and the Forgiveness are discussed in more detail in the following
sections of this Proxy Statement.
EXCHANGE OF PREFERRED STOCK
The Board has considered and unanimously approved, and recommends that the
shareholders approve the exchange of its Preferred Stock for Common Stock. The
vote on the Exchange requires approval by 2/3 of the holders of the Company's
Preferred Stock, and thereafter, by a majority of the voting power present at
the Annual Meeting of the holders of the Common Stock. For purposes of the vote
by the holders of the Preferred Stock, the Preferred Stock holders will be
entitled to one vote for each share they own. As of the Record Date, Transtech,
an affiliated entity of certain officers and directors of the Company, owned 72%
of the Preferred Stock and 50% of the Common Stock. Absent contrary
instructions, shares represented by properly executed proxies in the
accompanying form will be voted FOR conversion consistent with the terms
outlined below. Any shareholder who wishes to withhold authority from the proxy
holders to vote for the conversion of the Preferred Stock to Common Stock or to
withhold authority to vote for any additional initiatives of the Board may do so
by marking his proxy to that effect.
There are 144,185 shares of Preferred Stock outstanding as of the Record
Date. The Company proposes that the Preferred Stock will be exchanged for Common
Stock at the rate of eight shares for every one share of Preferred Stock,
excepting only Transtech, whose Preferred Stock will be converted at a rate of
four shares of Common Stock for every share of Preferred Stock owned by
Transtech. At the ratios set forth in the Howard Lawson Opinion, Transtech will
own 79.8% of the Common Stock upon completion of the Exchange and Forgiveness.
Upon completion of the Exchange, there will be no outstanding Preferred Stock.
The Louisiana Corporations and Associations Law does not provide for appraisal
rights in connection with the proposed share exchange for holders of the
Company's Stock who vote against this proposal at the Annual Meeting. See the
text of Chapter 131, Title 12, of Louisiana Revised Statutes, which is attached
hereto and made a part hereof as if more fully set forth herein. Shareholders
who vote against this proposal would not be prohibited from pursuing alternative
legal remedies under the Louisiana Corporations and Associations Law, including,
but not limited to derivative actions. It is unclear whether an individual
shareholder who votes "FOR" this proposal or the Forgiveness would be precluded
from bringing a direct action against the Company. An individual shareholder who
wishes to preserve a direct action against the Company may wish to vote
"AGAINST" the proposals relating to the Exchange and Forgiveness.
The Company will not have sufficient shares both for the Exchange and the
Forgiveness if the shareholders do not ratify the amendment to the Company's
Articles to increase the number of authorized shares from 15,000,000 to
60,000,000, discussed above. Additionally, if the shareholders do not ratify the
proposal with regard to the amendment to increase the number of authorized
shares, the Company would have sufficient authorized but unissued shares of
Common Stock for the Exchange alone. In the event the shareholders to do not
ratify the amendment increasing the number of authorized shares of Common Stock,
but approve either or both of the Exchange and Forgiveness the Company will make
a determination whether to proceed with either the Exchange or Forgiveness at
that time. The basis of the Exchange is set forth in this Proxy Statement in the
section entitled "Fairness Opinion of Howard, Lawson & Co."
The Preferred Stock
The Preferred Stock was sold as units, coupled with two Common Stock
Purchase Warrants in an offering in August, 1986 at a price per unit of $13.50.
The proceeds of the offering were used by the Company to reduce bank debt. The
Warrants expired on August 1, 1990, without any having been exercised. Each
share of Preferred Stock is convertible into four shares of Common Stock at the
option of the shareholder. The Preferred Stock also was subject to mandatory
redemption, beginning in 1996, at the rate of not fewer than seven and one-half
percent per year, with all remaining shares to be redeemed on August 1, 2006. As
a result of a failure to meet certain financial benchmarks and the overall
financial condition of the Company, the Company has not redeemed any Preferred
Stock. There was no sinking fund for the Preferred Stock. In the event of any
liquidation, dissolution or winding up of the Company, the holders of the
Preferred Stock are entitled to receive $13.50 per share, plus accrued and
unpaid dividends to the date of payment, before any distribution of assets may
be made to the holders of Common Stock or any other class of stock of the
Company or series thereof ranking junior to the Preferred Stock.
The holders of the Preferred Stock are entitled to receive, when, as and
if declared by the Board out of funds legally available therefore, cumulative
cash dividends at a rate of $.96 per annum per share of Preferred
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Stock. Dividends are cumulative from the date of original issuance and are
payable to holders of Record on the 15th day of the month immediately preceding
the dividend payment date. Dividends are payable quarterly on the first day of
January, April, July and October each year or the next business day, if such
first day falls on a weekend or holiday. At September 30, 1998, the Company had
accrued in unpaid dividends totaling $3,036,000. At March 31, 1999 the accrued
but unpaid dividends were $3,578,000.
The Company proposes to exchange the Preferred Stock for Common Stock,
among other reasons, in order to improve the Company's balance sheet by
eliminating the dividend arrearage. The affect upon the holders of the Preferred
Stock will include the loss of a right to their pro rata share of the accrued
but unpaid dividends, which, as of March 31, 1999 was $3,578,000. The holders of
the Preferred Stock also will lose the right to receive, when, as, and if
declared by the Board out of funds legally available therefor, cumulative cash
dividends at a rate of $.96 per annum per share of Preferred Stock. The holders
of the Preferred Stock further would lose the ability to elect the two
designated directors, which right was afforded to them as the Company failed to
pay six quarterly dividends on the Preferred Stock. The holders wold lose their
preferential position in the event of any liquidation, dissolution or winding up
of the Company. The holders of the Preferred Stock also would lose any
preference they may have regarding the creation of any stock ranking junior to
them.
Certain Federal Income Tax Consequences to Holders of Preferred Stock
The following is a summary of certain Federal income tax consequences of
the Exchange to holders of Preferred Stock and is based on the Federal income
tax law now in effect, which is subject to change, possibly retroactively. This
summary does not discuss all aspects of Federal income taxation which may be
important to particular holders of Preferred Stock in light of their individual
investment circumstances, including holders who hold, directly or indirectly,
10% or more of Preferred Stock and certain types of holders subject to special
tax rules (e.g., financial institutions, broker-dealers, insurance companies,
tax-exempt organizations, and foreign taxpayers). In addition, this summary does
not address state, local or foreign tax consequences. Holders of Preferred Stock
are urged to consult their tax advisors regarding the specific Federal, state,
local and foreign income and other tax consequences of the Exchange.
The receipt of Common Stock in exchange for shares of Preferred Stock
pursuant to the Exchange will be a non-taxable transaction for Federal income
tax purposes. In general, a holder of Preferred Stock will not recognize gain or
loss for Federal income tax purposes. A holder who receives shares of Common
Stock in exchange for Preferred Stock will have a basis in the shares of Common
Stock received equal to the basis of the Preferred Stock and the holding period
of such shares of Common Stock will include the holding period of the Preferred
Stock.
In connection with the rules of the Securities and Exchange Commission
("SEC"), financial statements, including the Company's Forms 10-QSB for the
periods ending March 31, 1999, and June 30, 1999 are attached hereto and made a
part hereof. The Company's Form 10-KSB for the period ending September 30, 1998
will be provided to shareholders with this Proxy Statement as part of the
Company's Annual Report. In addition, the
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Company incorporates by reference the following periodic reports filed with the
SEC as if more fully set forth herein:
1. Forms SC-13D, filed by R. Theodore Brant, Maurice Lawruk, and Transtech
on December 28, 1998;
2. Form 8-K, filed by the Company on March 3, 1999; and
3. Form 10-QSB for the period ending December 31, 1998, filed by the
Company on June 18, 1999.
SHAREHOLDERS STRONGLY ARE URGED TO READ THE COMPANY'S PERIODIC REPORTS
ATTACHED TO THIS PROXY STATEMENT. THE REPORTS CONTAIN IMPORTANT DISCLOSURE AND
DISCUSSION OF THE CONDITION OF THE COMPANY. THIS INFORMATION IS IMPORTANT TO
CONSIDER IN A DETERMINATION WHETHER TO VOTE FOR THE PROPOSED EXCHANGE.
SHAREHOLDERS ALSO ARE ENCOURAGED TO READ THE FOREGOING SECTION ENTITLED,
"FAIRNESS OPINION OF HOWARD, LAWSON & CO." AND THE FULL TEXT OF THE HOWARD
LAWSON OPINION, ATTACHED HERETO. NOTHING IN THE HOWARD LAWSON OPINION SHOULD BE
CONSTRUED AS LEGAL OR INVESTMENT ADVICE TO AN INDIVIDUAL SHAREHOLDER.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO EXCHANGE THE COMPANY'S
PREFERRED STOCK FOR COMMON STOCK
FORGIVENESS
The Board has considered and unanimously approved, and recommends the
shareholders approve, the issuance of 12,507,000 shares of Common Stock in
consideration of the Forgiveness of $6,253,500 of indebtedness owed to
Transtech. The Board Members who are affiliated with Transtech participated in
this vote. Those affiliated Board Members believed that they were able to
discharge their fiduciary obligations to the Company, which, when combined with
the Howard Lawson Opinion, required a vote in favor of this proposal by the
Board. This proposal will be submitted to all of the Company's shareholders,
including Transtech. If the shareholders do not approve the proposal with regard
to amendment of the Articles to increase the number or authorized shares of
Common Stock, the Company will not have sufficient shares to issue to Transtech
if the shareholders approve this proposal. SHAREHOLDERS ARE URGED TO READ THE
FOREGOING SECTION OF THIS PROXY STATEMENT, ENTITLED "FAIRNESS OPINION OF HOWARD,
LAWSON & CO." PRIOR TO MAKING ANY DECISION REGARDING THE FORGIVENESS. The vote
to ratify the Forgiveness requires a majority of the voting power present of the
Common Stock at the Annual Meeting. As of the Record Date, Transtech, an
affiliated entity of certain officers and directors of the Company, owned 50% of
the Common Stock. If the Forgiveness is not approved by the shareholders, the
Company will not issue the 12,507,000 shares of Common Stock to Transtech in
consideration of the forgiveness of $6,253,500 of indebtedness. Absent contrary
instructions, shares represented by properly executed proxies in the
accompanying form will be voted FOR the Forgiveness. Any shareholder who wishes
to withhold authority from the proxy holders to vote for the Forgiveness may do
so by marking his proxy to that effect.
Certain Federal Income Tax Consequences to the Company
As a result of the Forgiveness, the Company is expected to recognize
cancellation of indebtedness income in an amount equal to the aggregate face
amount of the promissory notes exchanged for Common Stock. The Company believes
that it has net operating loss carryforwards in an amount exceeding such
cancellation of indebtedness income and that its net operating loss
carryforwards will not, as a result of consummation of the Exchange and
Forgiveness and the limitation on allowance of losses set forth in Section 382
of the Internal Revenue Code, be unavailable to offset such cancellation of
indebtedness income and the Company's other current and future taxable income.
The amount of the Company's net operating loss carryforwards, however, will be
reduced by the amount of the cancellation of indebtedness income.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE FORGIVENESS
CHANGE OF COMPANY NAME
The Board has considered and approved, and recommends the shareholders
approve, the changing of the corporate name from Aero Services International,
Inc. to b-Fast Corp. The Board recognizes that the business model of the Company
has changed, and the name Aero Services International, Inc. no longer reflects
the current intent of that model or the Company's management. Accordingly, the
officers of the Company already have changed the trading symbol for the Common
Stock to "BFST," and the trading symbol for the Preferred Stock to "BFSTP." The
Board now wants to change the name of the Company to match the business model
for the Company, and to
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agree with the trading symbols for Common Stock and the Preferred Stock. The
vote to change the Company name requires an amendment to the Company's Articles.
The vote to amend the Articles requires a majority of the voting power present
of the Common Stock at the Annual Meeting. As of the Record Date, Transtech, an
affiliated entity of certain officers and directors of the Company, owned 50% of
the Common Stock. Absent contrary instructions, shares represented by properly
executed proxies in the accompanying form will be voted FOR amendment of the
Articles to change the name of the Company. Any shareholder who wishes to
withhold authority from the proxy holders to vote for the amendment of the
Company's Articles to change the Company name or to withhold authority to vote
for any additional initiatives of the Board may do so by marking his proxy to
that effect.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THE AMENDMENT TO THE
ARTICLES TO CHANGE THE COMPANY'S NAME
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
In September, 1998, the Company retained BDO Seidman, LLP as the
independent certified accountant to examine the financial statements of the
Company and to perform the annual audit.
APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BDO Seidman, LLP audited the Company's financial statements for the fiscal
year ended September 30, 1998 and the Board expects to reappoint BDO Seidman,
LLP as the independent certified public accountants to examine the financial
statements and to perform the annual audit for the year ending September 30,
1999, such appointment to continue at the pleasure of the Board. Absent contrary
instructions, shares represented by properly executed proxies in the
accompanying form will be voted FOR the ratification of BDO Seidman, LLP as the
independent certified accounting firm for the Company.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF
BDO SEIDMAN, LLP AS THE INDEPENDENT ACCOUNTANTS FOR THE COMPANY.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company changed its independent accountant on November 14, 1997. The
Company is unaware of any disagreements with BDO Seidman, LLP on accounting and
financial disclosure. In addition, the rules of the SEC require the Company to
inform you that:
KPMG Peat Marwick, LLP audited the Company's financial statements for the
fiscal years ended September 30, 1994 through 1996. On November 14, 1997 the
Company (i) advised KPMG Peat Marwick, LLP that its engagement would not be
renewed by the Company, and (ii) engaged BDO Seidman, LLP as the independent
certified public accountant to examine the financial statements and to perform
the annual audit for the year ending September 30, 1997. The initial engagement
of BDO Seidman, LLP was authorized by the Company's Board of Directors on
November 14, 1997. The Company selected BDO Seidman as part of the Company's
ongoing efforts to reduce costs. The Company expects the retention of BDO
Seidman, LLP to reduce the costs of auditing its financial statements.
On November 14, 1997, the Company informed KPMG Peat Marwick, LLP of its
selection of BDO Seidman, LLP as the certified independent accountant for the
Company. The reports of KPMG Peat Marwick, LLP on the Company's financial
statements for the fiscal year ending September 30, 1996 did contain a
disclaimer of opinion. In its report to the Stockholders and Board of Directors
of the Company, KPMG Peat Marwick, LLP cited the Company's recurring losses from
operations and net capital deficiencies at September 30, 1996 as factors that
raised substantial doubt about the Company's ability to continue as a going
concern.
This qualification was due to factors expressed in Note "B" of the audited
financial statements of the Company for the period ending September 30, 1996.
Note "B" indicated, in paragraph 12, entitled "Concentration of Credit Risk and
Fair Value of Financial Instruments" that the "fair value of the Industrial Bond
is also impractical
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to determine." The Company was obligated on two industrial bonds: (1) the
Arapahoe County, Colorado Floating Rate Monthly Demand Industrial Bonds (CSX
Beckett Aviation, Inc.) ("CO Bonds"); and (2) City of Chicago Floating Rate
Monthly Demand Airport Special Facility Revenue Bonds (CSX Beckett Aviation,
Inc. Project ("Chicago Bonds").
The liability in connection with the payment of principal, interest, and
related fees on the CO Bonds was contractually assumed by the purchaser of the
Company's Denver, CO FBO operation in February, 1994. The purchaser is a
privately held company, and KPMG was unable to review the purchaser's financial
records to determine its ability to fulfill its payment obligations. As a
result, KPMG was unable to determine the extent of liability, if any, that
accrued to the Company as a result of the CO Bonds. The CO Bonds have been
retired. See the section of this Proxy Statement entitled, "Financial
Disclosure," below.
Other than as described above, the reports of KPMG Peat Marwick, LLP did
not contain an adverse opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles.
During the two most recent fiscal years of the Company and the subsequent
period prior to engagement of BDO Seidman, LLP there were no disagreements with
KPMG Peat Marwick, LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure or "reportable
events" as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
During the two most recent fiscal years of the Company and the subsequent
period prior to the engagement of BDO Seidman, LLP, neither the Company nor
anyone acting on its behalf has consulted BDO Seidman, LLP regarding either the
application of accounting principles to any transaction or the type of audit
opinion that might be rendered on the Company's financial statements.
Representatives of BDO Seidman, LLP neither are expected to be present at
the annual meeting nor to be available to respond to shareholders questions at
the annual meeting. Representatives of BDO Seidman, LLP will have the
opportunity to make a statement at the annual meeting if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
FINANCIAL DISCLOSURE
Attached hereto is a copy of the Company's Form 10-KSB, without exhibits,
for the fiscal year ended September 30, 1998 and copies of the Company's Forms
10-QSB for the periods ending March 31, 1999 and June 30, 1999. Shareholders
strongly are encouraged to read these Forms 10-KSB and 10-QSB. The forms contain
information on the Company's operations, markets, products and services, as well
as the Company's audited financial statements.
In addition, the rules of the SEC require the Company to report any
disposals of segments of its business and extraordinary, unusual, or
infrequently occurring items within the two (2) most recent fiscal years.
On March 11, 1999, the Company sold its FBO at Chicago's Midway Airport to
Atlantic Aviation Flight Support, Inc. for $17,750,000 plus the assumption of
certain debt of approximately $1,013,000. From the proceeds of the sale, three
escrow funds were established. One was for $3,511,000 to retire the Chicago
Bonds, including interest, on or about April 15, 1999. Another $3,020,000 is for
payment of real estate taxes in arrears. The Company has disputed this amount
and has legal representation negotiating a settlement with Cook County and the
State of Illinois. Resolution of this matter is expected within six months. A
third escrow of $390,000 is being held for possible EPA compliance when the
underground fuel storage tanks are removed within 18 to 24 months. $9,043,000 of
the proceeds of the sale were invested in RTB/AS. See the section of this Proxy
Statement entitled, "Exchange and Forgiveness," above. Management is continuing
its search for business opportunities that could produce profits whereby the
approximately $34,000,000 of net operating loss carryforward could be utilized
to produce maximum cash flow. However, there can be no assurance the Company can
be returned to profitability or maintained as a going concern.
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On May 10, 1996 the Company sold to Jason IV, owner of a competitor FBO on
the airport, its leasehold interest at New Orleans' Lakefront Airport for
$900,000. The Company received $300,000 cash at settlement and two promissory
notes for the balance. A note in the amount of $100,000, bearing interest at the
rate of eight percent per annum was due and paid on April 30, 1997. A note in
the amount of $500,000 bearing interest at the rate of nine percent per annum
was due and payable on March 31, 1999, but was paid in November 1998.
The regulatory environment, particularly in terms of environmental
regulation, has changed dramatically over the last five to ten years for all
operators in the industry. At September 30, 1998, the Company's financial
statements included accruals of $360,000 for any known clean-up and remediation
liabilities associated with complying with EPA regulations. In addition, the
Company established an escrow in connection with the sale of the Company's
Chicago Midway FBO, discussed above.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Annual Meeting, and, so far as is known to the Board, no matters are to be
brought before the Annual Meeting except as specified in the notice of the
Annual Meeting. As to any business that may properly come before the Annual
Meeting, however, it is intended that proxies, in the form enclosed, will be
voted in respect thereof in accordance with the judgment of the persons voting
such proxies.
MISCELLANEOUS INFORMATION
Shareholder Proposals
Proposals that shareholders desire to have included in the Company's proxy
statement for the 2000 annual meeting should be received by the Company at its
offices at 660 Newtown-Yardley Road, Newtown, PA 18940 on or before December 1,
1999. Any such proposal must comply with Rule 14a-8 of Regulation 14A of the
Proxy Solicitation Rules of the Securities and Exchange Commission.
Expense of Solicitation of Proxies
The cost of soliciting proxies in the accompanying form, including any and
all professional fees paid to attorneys and accountants in connection with the
preparation and filing with the SEC of these proxy materials and the financial
statements and information included herein and the cost of printing and mailing
these proxy materials, will be borne solely by the Company. To the extent
necessary, in order to assure sufficient representation, directors, officers and
regular employees of the Company may request the return of proxies personally,
or by mail, telephone, telegraph, or otherwise, but such persons will not be
compensated for such services. Brokerage firms, banks, fiduciaries and other
nominees will be requested to forward the soliciting material to each beneficial
owner of stock held of record by them. The Company will also reimburse brokerage
firms, banks, and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in furnishing proxy materials to certain beneficial
owners of the Company's voting stock.
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Form 10-KSB and 10-QSB Exhibits
COPIES OF EXHIBITS TO THE SEC FORMS 10-KSB AND 10-QSB ARE AVAILABLE FOR A
REASONABLE CHARGE. REQUESTS SHOULD BE ADDRESSED TO AERO SERVICES INTERNATIONAL,
INC., 660 NEWTOWN-YARDLEY ROAD, NEWTOWN, PENNSYLVANIA 18940.
BY ORDER OF THE BOARD OF DIRECTORS
PAUL R. SLACK
Secretary
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE. THANK YOU FOR YOUR PROMPT
ATTENTION TO THIS MATTER.
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EXHIBIT A
FAIRNESS OPINION OF HOWARD LAWSON & CO.
Howard, Lawson & Co.
Two Penn Center Plaza Investment Banking
Philadelphia, PA 19102 Corporate Finance
215-988-0010
215-568-0029-FAX
August 18, 1999
The Board of Directors
Aero Services International, Inc.
660 Newtown Yardley Road
Newtown, PA 18940
To the Members of the Board of Directors:
We understand that you intend to complete a proposed plan of
recapitalization (the "Recapitalization") of Aero Services International, Inc.
(the "Company" or "Aero Services") by:
1. Exchanging 103,540 shares of the Company's Series A Preferred Stock
(the "Series A Stock") held by Transtech Holding Company, Inc.
("Transtech") for 414,160 shares of the Company's common stock,
which is a ratio of four shares of common stock for each share of
Series A Preferred Stock held by Transtech (the "Transtech Series A
Exchange Ratio");
2. Exchanging 40,645 shares of the Company's Series A Preferred Stock
held by shareholders other than Transtech for 325,160 shares of the
Company's common stock, which is a ratio of eight shares of common
stock for each share of Series A Preferred Stock held by
shareholders other than Transtech (the "Other Series A Exchange
Ratio"); and,
3. Exchanging up to $6,253,500 in face amount of certain Promissory
Notes and accrued interest due thereon due to Transtech (the
"Transtech Notes") to common stock of the Company at a ratio of two
shares of common stock of the Company for each $1 of Transtech Notes
(the "Note Exchange Ratio").
Collectively, the Transtech Series A Exchange Ratio, the Other Series A
Exchange Ratio, and the Note Exchange Ratio are referred to as the Exchange
Ratios. You have asked us whether, in our opinion, the proposed Exchange Ratios
taken as a whole are fair to the Company's stockholders, other than Transtech,
from a financial point of view.
Materials Reviewed and Activities Conducted
In arriving at our opinion, we reviewed and analyzed materials we deemed
relevant regarding the Recapitalization and the Exchange Ratios, including the
following:
1. The Company's Forms 10KSB for the fiscal years ending September 30,
1995, September 30, 1996, September 30, 1997, and September 30,
1998;
1
<PAGE>
Materials Reviewed and Activities Conducted (continued)
2. The Company's Forms 10QSB for the quarters ended December 31, 1998
and March 31, 1999;
3. The Company's management prepared financial statements for the
periods ended April 30, 1999 and May 31, 1999;
4. Aero Services International, Inc. Prospectus dated August 22, 1986
offering 375,000 units of Series A Cumulative Convertible Preferred
Stock;
5. A copy of the Form SC 13D filed by Transtech Holding Company, Inc.
on December 18, 1998;
6. A copy of the Form 4s, as filed with the SEC as of January 8, 1999
by R. Ted Brant, Maurice Lawruk, and Transtech Holding Company,
Inc.;
7. A copy of the Company's Form 8K, dated March 11, 1999 which was
filed with the SEC in connection with the Company's sale of its
Chicago Mid-Way Airport FBO;
8. A copy of the By-laws of Aero Services International, Inc. dated
December 2, 1980 and the By-laws amendments;
9. Amended and Restated Articles of Incorporation of Aero Services
International, Inc. (formerly Pan-Air Corporation), dated December
2, 1980;
10. First Amendment to the Amended and Restated Articles of
Incorporation of Aero Services International, Inc., dated August 22,
1986;
11. Second Amendment to the Amended and Restated Articles of
Incorporation of Aero Services International, Inc., dated April 23,
1987;
12. Third Amendment to the Amended and Restated Articles of
Incorporation of Aero Services International, Inc., dated August 26,
1987;
13. Fourth Amendment to the Amended and Restated Articles of
Incorporation of Aero Services International, Inc., dated June 29,
1988;
14. Fifth Amendment to the Amended and Restated Articles of
Incorporation of Aero Services International, Inc., dated December
16, 1988;
15. Articles of Amendment to the Articles of Incorporation of Aero
Services International, Inc., dated March 29, 1990;
16. Comparative unaudited, management-prepared income statements for the
Harrisburg, PA facility for the twelve months ended September 30,
1998 and the nine months ended June 30, 1999;
17. Comparative unaudited, management-prepared income statements for the
Morgantown, WV facility for the twelve month periods ended September
30, 1995, 1996, 1997, and 1998, and the nine month period ended June
30, 1999;
2
<PAGE>
Materials Reviewed and Activities Conducted (continued)
18. Weekly reports from National Quotation Bureau LLC concerning prices
of Aero Services' common and preferred stock for January 1999
through July 1999;
19. The descriptive Summary of Operations, Brant Motorsports, Inc.;
20. Unaudited, management-prepared income statements for Brant
Motorsports, Inc. for the twelve months ended December 31, 1998 and
the six months ended June 30, 1999, and the unaudited,
management-prepared balance sheet for Brant Motorsports as of June
30, 1999;
21. Operating agreement of RTB/AS, L.L.C., dated January 5, 1999;
22. RTB/AS, L.L.C. Amendment to Operating Agreement, dated March 18,
1999;
23. Option Agreement, dated March 1, 1999 between R. Ted Brant and the
venture engaged in automobile racing (the "Motor Sports Business");
24. Agreement Relating to Primary Option Equity, dated January 5, 1999;
25. Amendment to Agreement Relating to Primary Option Equity, dated
March 18, 1999;
26. Operating Agreement for Brant Motorsports, LLC;
27. Operating Agreement of b-Fast Marketing, LLC; and,
28. Operating Agreement of b-Fast Shopper, LLC;
29. Operating Agreement of Peakwood LLC, dated January 11, 1996,
unaudited, management-prepared profit and loss statement for
Peakwood LLC for the period January 1, 1999 through March 31, 1999,
and the unaudited, management-prepared balance sheet of Peakwood LLC
as of March 31, 1999;
30. Debt and Note Modification Agreement dated May 20, 1994 by and
between Aero Services International, Inc. and Transtech Holding
Company, Inc.;
31. Addendum to Debt and Note Modification Agreement dated December 1,
1994 by and between Aero Services International, Inc. and Transtech
Holding Company, Inc.;
32. Second Addendum to Debt and Note Modification between Aero Services
International, Inc. and Transtech Holding Company, Inc. dated March
10, 1999;
33. Third Addendum to Debt and Note Modification between Aero Services
International, Inc. and Transtech Holding Company, Inc. to be
entered into in connection with the Recapitalization;
34. A copy of the Assignment by Triton Energy Corporation ("Triton") to
Transtech Holding Company, Inc. dated May 20, 1994 of Triton's
rights, title and interest in and to the Whitney National Bank Note
and Triton Notes;
3
<PAGE>
Materials Reviewed and Activities Conducted (continued)
35. Copies of various promissory notes dated from May 3, 1990 to June
28, 1993 between Aero Services International, Inc. and Triton and a
copy of the promissory note dated May 26, 1993 for the loan in the
amount of $7,210,000 between Aero Services International, Inc. and
Whitney National Bank;
36. The unaudited, management-prepared Consolidated Statements of Income
and Consolidated Balance Sheets for the fiscal years ended December
31, 1997 and December 31, 1998 for the Motor Sports Business;
37. Draft Summary Business Plan for the Brant Pittsburgh Auto Racing
Complex, LLC;
38. Memorandum of Understanding between the County of Allegheny, PA and
Brant Motorsports, Inc. regarding the proposed development of a
multi-use entertainment facility on property located at the
Pittsburgh International Airport;
39. Publicly available financial and market information regarding
certain companies which we believe would share valuation
characteristics with the business of the Company's fixed-base
operations (the "FBO Guideline Companies");
40. Publicly available financial and market information regarding
certain companies which we believe would share valuation
characteristics with the Motor Sports Business (the "Motor Sports
Guideline Companies");
41. Publicly available financial and market information regarding
acquisitions of companies that had a primary Standard Industrial
Classification ("SIC") Code 4581 (airports, flying fields and
services) occurring between September 18, 1998 and July 31, 1999;
and,
42. Publicly available financial and market information regarding
acquisitions of companies that had a primary SIC Code 7948 (services
- racing, including track operations) occurring between March 27,
1998 and July 31, 1999.
We also met with certain members of the management of the Company to
discuss the operations, historical results, financial condition, and future
prospects of the business of the Company and to discuss certain investments in
the motor sports industry made by the Company,
Limiting Conditions
In rendering our opinion, we have not independently verified any of the
foregoing information which was provided to us by the Company or which was
publicly available and we have relied on its completeness and accuracy in all
respects. We have not made independent appraisals or evaluations of the assets
of the Company or any of the underlying assets of the motor sports investments
nor have we contacted any prospective acquirer or investor on behalf of the
Company. We have relied on management's representations that the Transtech Notes
have a perfected security interest in the assets of the Company and are in full
force and affect.
We have relied on management's representations concerning the Company and
the motor sports investments and the financial statements provided to us.
Several of the financial statements of the motor sports and other investments
made by the Company are unaudited, and we have relied solely on the
representations of management of the Company regarding the accuracy and
completeness of these financial statements. We have not been provided any
financial forecasts for the Company or for any of the investments the Company
has made. We assumed that information relating to the current operations or
prospects of the Company and the
4
<PAGE>
Limiting Conditions (continued)
motor sports investments furnished to us by the Company reflects the best
currently available estimates and judgments of the management of the Company and
have relied upon the Company to advise us promptly if any information previously
provided became inaccurate or was required to be updated during the period of
our review. The Recapitalization is intended to preserve substantially all of
the tax loss carryforwards of the Company and we have assumed such in our
analysis. Our analysis also assumes that the Company and all of the motor sports
investments continue as going concerns. Our opinion is necessarily based upon
economic, market, and other conditions, and the information made available to
us, as of the date hereof.
With respect to any pro forma financial statements of the Company
furnished to us by the Company, we have assumed in each case they have been
reasonably prepared and reflect the best currently available estimates and
judgment of the management of the Company.
Our opinion is limited solely to the Recapitalization and the Exchange
Ratios and is not related to any of the investments or prior transactions
completed by the Company. Our opinion expressed herein is provided for the
information of the Board of Directors of Aero Services, and our opinion is not
intended to be and does not constitute a recommendation to any shareholder as to
how such shareholder should vote on any matter in connection with the proposed
Recapitalization. Our opinion may not be published or otherwise used or referred
to, nor shall any public reference to Howard, Lawson & Co. be made, without our
prior written consent; provided, that our opinion may be included in its
entirety as an exhibit to the proxy statement of Aero Services related to the
proposed recapitalization.
Statement of Disclosure
Howard, Lawson & Co. is independent of all parties related to the Company
and any of its affiliates, has no present or contemplated future interest in the
Company or its affiliates.
Opinion
Based upon and subject to the foregoing, it is our opinion that the
Exchange Ratios are fair, from a financial point of view, to the shareholders of
Aero Services, other than Transtech.
Howard, Lawson & Co.
5
<PAGE>
EXHIBIT B
LOUISIANA REVISED STATUTES, SECTION 12:131
RIGHTS OF SHAREHOLDER DISSENTING FROM CERTAIN CORPORATE ACTIONS
ss. 131. Rights of a shareholder dissenting from certain corporate actions
A. Except as provided in subsection B of this section, if a corporation
has, by vote of its shareholders, authorized a sale, lease or exchange of all of
its assets, or has, by vote of its shareholders, become a party to a merger or
consolidation, then, unless such authorization or action shall have been given
or approved by at least eighty per cent of the total voting power, a shareholder
who voted against such corporate action shall have the right to dissent. If a
corporation has become a party to a merger pursuant to R.S. 12:11(H), the
shareholders of any subsidiaries party to the merger shall have the right to
dissent without regard to the proportion of the voting power which approved the
merger and despite the fact that the merger was not approved by vote of the
shareholders of any of the corporation involved.
B. The right to dissent provided by this Section shall not exist in the
case of:
(1) A sale pursuant to an order of a court having jurisdiction in the
premises.
(2) A sale for cash on terms requiring distribution of all or
substantially all of the net proceeds to the shareholders in accordance with
their respective interests within one year after the date of the same.
(3) Shareholders holding shares of any class of stock which, at the record
date fixed to determine shareholders entitled to receive notice of and to vote
at the meeting of shareholders at which a merger or consolidation was acted on,
were listed on a national securities exchange, or were designated as a national
market system security on an inter-dealer quotation system by the National
Association of Securities Dealers, unless the articles of the corporation were
not converted by the merger or consolidation solely into shares of the surviving
or new corporation.
C. Except as provided in the last sentence of this subsection, any
shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than eighty
per cent of the total voting power, and the merger, consolidation or sale, lease
or exchange of assets authorized thereby be effected, the corporation shall
promptly thereafter give written notice thereof, by registered mail, to each
shareholder who filed such written objection to, and voted his shares against,
such action, at such shareholder's last address on the corporation's records.
Each such shareholder may, within twenty days after the mailing of such notice
to him, but not thereafter, file with the corporation a demand in writing for
the fair cash value of his shares as of the day before such vote was taken;
provided that he state in such demand the value demanded, and a post office
address to which the reply of the corporation may be sent, and at the same time
deposit in escrow in a chartered bank or trust company located in the parish of
the registered office of the corporation, the certificates representing his
shares, duly endorsed and transferred to the corporation upon the sole condition
that said certificates shall be delivered to the corporation upon payment of the
value of the shares determined in accordance with the provisions of this
section. With his demand the shareholder shall deliver to the corporation, the
written acknowledgment of such bank or trust company that it so holds his
certificates of stock. Unless the objection, demand and acknowledgment aforesaid
be made and delivered by the shareholder within the period above limited, he
shall conclusively be presumed to have acquiesced in the corporate action
proposed or taken. In the case of a merger pursuant to R.S. 12:112(H), the
dissenting shareholder need not file an objection with the corporation nor vote
against the merger, but need only file with the corporation, within twenty days
after a copy of the merger certificate was mailed to him, a demand in writing
for the cash value of his shares as of the day before the certificate was filed
with the secretary of state, state in such demand the value demanded and a post
office address to which the corporation's reply may
1
<PAGE>
be sent, deposit the certificates representing his shares in escrow as
hereinabove provided, and deliver to the corporation with his demand the
acknowledgment of the escrow bank or trust company as hereinabove prescribed.
D. If the corporation does not agree to the value so stated and demanded,
or does not agree that a payment is due, it shall, within twenty days after
receipt of such demand and acknowledgment, notify in writing the shareholder, at
the designated post office address, of its disagreement, and shall state in such
notice the value it will agree to pay if any payment should be held to be due;
otherwise it shall be liable for, and shall pay to the dissatisfied shareholder,
the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to whether
any payment is due, after compliance by the parties with the provisions of
subsections C and D of this section, the dissatisfied shareholder, within sixty
days after receipt of notice in writing of the corporation's disagreement, but
not thereafter, may file suit against the corporation, or the merged or
consolidated corporation, as the case may be, in the district court of the
parish in which the corporation or the merged or consolidated corporation, as
the case may be, has its registered office, praying the court to fix and decree
the fair cash value of the dissatisfied shareholder's shares as of the day
before such corporate action complained of was taken, and the court shall, on
such evidence as may be adduced in relation thereto, determine summarily whether
any payment is due, and, if so, such cash value, and render judgment
accordingly. Any shareholder entitled to file such suit may, within such
sixty-day period but not thereafter, intervene as a plaintiff in such suit filed
by another shareholder, and recover therein judgment against the corporation for
the fair cash value of his shares. No order or decree shall be made by the court
staying the proposed corporate action, and any such corporate action may be
carried to completion notwithstanding any such suit. Failure of the shareholder
to bring suit, or to intervene in such a suit, within sixty days after receipt
of notice of disagreement by the corporation shall conclusively bind the
shareholder (1) by the corporation's statement that no payment is due, or (2) if
the corporation does not contend that no payment is due, to accept the value of
his shares as fixed by the corporation in its notice of disagreement.
F. When the fair value of the shares has been agreed upon between the
shareholder and the corporation, or when the corporation has become liable for
the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the emerged or consolidated corporation, as the
case may be, shall, in its notice of disagreement, have offered to pay to the
dissatisfied shareholder on demand an amount in cash deemed by it to be the fair
cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as the
case may be; otherwise the costs of the proceeding shall be taxed against such
shareholder.
H. Upon filing a demand for the value of his shares, the shareholder shall
cease to have any of the rights of a shareholder except the rights accorded by
this section. Such a demand may be withdrawn but the shareholder at any time
before the corporation gives notice of disagreement, as provided in subsection D
of this section. After such notice of disagreement is given, withdrawal of a
notice of election shall require the written consent of the corporation. If a
notice of election is withdrawn, or the proposed corporate action is abandoned
or rescinded, or a court shall determine that the shareholder is not entitled to
receive payment for his shares, or the shareholder shall otherwise lose his
dissenter's rights, he shall not have the right to receive payment for his
shares, his share certificates shall be returned to him (and, on his request,
new certificates shall be issued to him in exchange for the old ones endorsed to
the corporation), and he shall be reinstated to all his rights as a shareholder
as of the filing of his demand for value, including any intervening preemptive
rights, and the right
2
<PAGE>
to payment of any intervening dividend or other distribution, or, if any such
rights have expired or any such dividend or distribution other than in cash has
been completed, in lieu thereof, at the election of the corporation, the fair
value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
3
<PAGE>
EXHIBIT C
FORM 10-QSB FOR THE PERIOD ENDING MARCH 31, 1999
- --------------------------------------------------------------------------------
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
|_| TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ___________to _________
Commission file number 0-10190-0
---------
AERO SERVICES INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as
specified in its charter)
LOUISIANA 72-0385274
- ------------------------------------ -------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
660 Newtown-Yardley Road, Newtown, PA 18940
- --------------------------------------------------------------------------------
(Address of principal executive offices
(215) 860-5600
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of
7,998,052 shares.
Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|
<PAGE>
AERO SERVICES INTERNATIONAL, INC. & SUBSIDIARIES
INDEX
PART I - Financial Information Page Number
-----------
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
March 31, 1999 (unaudited) 2
Consolidated Statement of Earnings
three months and six months ended March 31, 1999
and 1998 (unaudited) 3
Condensed Consolidated Statement of Cash Flows
six months ended March 31, 1999 and 1998
(unaudited) 4
Notes to Condensed Consolidated Financial Statements
(unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 8
PART II - Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash $ 596
Customers receivables, less allowance for
doubtful accounts of $31 290
Escrow funds 6,531
Notes receivable - affiliate 1,479
Inventories 36
Prepaid expenses and other current assets 159
Sinking fund 471
--------
TOTAL CURRENT ASSETS 9,562
PROPERTY AND EQUIPMENT, NET 1,348
OTHER ASSETS 10,374
--------
TOTAL ASSETS $ 21,284
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $ 11
Current maturities of long term debt-affiliate 8,132
Current maturities of long term debt-other 45
Accounts payable-trade 465
Accrued expenses
Property, payroll, and other taxes 1,717
Other 533
Affiliate 3,156
Notes payable - Industrial Revenue Bond 3,500
Property taxes - Chicago 3,024
--------
TOTAL CURRENT LIABILITIES 20,583
--------
LONG-TERM DEBT, less current maturities
Affiliate 7,684
Other 225
--------
TOTAL LONG-TERM DEBT 7,909
--------
OTHER LONG TERM LIABILITIES 214
REDEEMABLE PREFERRED STOCK 3,578
STOCKHOLDERS' DEFICIT
Common stock 10,400
Additional paid-in capital 4,769
Accumulated deficit (25,932)
--------
(10,763)
Less: Common stock in treasury 237
--------
TOTAL STOCKHOLDERS' DEFICIT (11,000)
--------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 21,284
========
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF EARNINGS
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
March 31, March 31,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 2,308 $ 2,728 $ 5,143 $ 5,303
COST AND EXPENSE
Cost of sales 842 1,089 1,865 2,208
Departmental costs 1,091 1,072 2,303 2,035
Administrative costs 409 238 784 505
Interest expense - other 137 37 232 94
Interest expense - affiliate 322 377 668 750
----------- ----------- ----------- -----------
(493) (85) (709) (289)
Gain on sale of certain FBO
operations 17,070 -- 17,070 --
Other income, net 20 20 516 41
----------- ----------- ----------- -----------
Income (loss) before taxes 16,597 (65) 16,877 (248)
Income tax expense 5,000 -- 5,000 --
----------- ----------- ----------- -----------
NET INCOME (LOSS) 11,597 (65) 11,877 (248)
Preferred dividends (35) (64) (70) (129)
Accretion of preferred stock (10) (8) (21) $ (16)
----------- ----------- ----------- -----------
Net income (loss) applicable
to common shareholders 11,552 $ (137) $ 11,786 $ (393)
=========== =========== =========== ===========
Net income (loss) per share
Basic $ 1.44 $ (0.02) $ 1.56 $ (0.06)
=========== =========== =========== ===========
Dilutive $ 1.35 $ (0.02) $ 1.46 $ (0.06)
=========== =========== =========== ===========
Weighted average shares
outstanding:
Basic 7,998,052 6,998,052 7,569,481 6,998,052
=========== =========== =========== ===========
Dilutive 8,574,792 6,998,052 8,146,221 6,998,052
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
AERO SERVICES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
----------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 11,877 $ (248)
-------- --------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 184 186
Provision for losses on accounts receivable 5 5
Provision for obsolete inventory 3 --
Gain on sale of certain FBO operations (17,138) --
Change in assets and liabilities:
(Increase) decrease in accounts receivable 98 (228)
Increase in escrow funds (6,531) --
Decrease in notes receivable 500 --
Increase in notes receivable - affiliate (1,381) --
Increase in inventory (2) (56)
(Increase) decrease in other current assets 112 (177)
Decrease in assets held for sale 1,452 --
Increase in sinking fund (141) --
Decrease in deferred taxes 5,000 --
Increase in other assets (10,264) (89)
Increase (decrease) in accounts payable (84) 191
Increase (decrease) in property,
payroll, and other taxes (42) 114
Decrease in other current liabilities (745) (86)
Increase in other liabilities - affiliate 489 492
Increase in property taxes - Chicago 4 --
Other (106) (3)
-------- --------
Total adjustments (28,587) 349
-------- --------
Net cash (used in) provided by operating activities (16,710) 101
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of certain FBO operations 17,750 --
Purchases of property and equipment (518) (114)
-------- --------
Net cash (used in) provided by investing activities 17,232 (114)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds form issuance of notes payable-affiliate 234 100
Proceeds from issuance of notes payable 1,215 75
Principal payments of notes payable-affiliate (436) (185)
Principal payments of long-term debt (1,180) (15)
-------- --------
Net cash used in financing activities (167) (25)
-------- --------
Net increase (decrease) in cash & cash equivalents 355 (38)
Cash and cash equivalents at beginning of year 241 131
-------- --------
Cash and cash equivalents at end of second fiscal
quarter $ 596 $ 93
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 386 $ 285
Income taxes -- --
</TABLE>
4
<PAGE>
See Notes to Condensed Consolidated Financial Statements
5
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
MARCH 31, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of March 31, 1999, consolidated
statement of earnings for the six month and three month periods ended March 31,
1999 and 1998, and the condensed consolidated statement of cash flows for the
six month periods then ended were prepared by the Company, without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows at March 31, 1999 and for all periods presented have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's September 30, 1998 annual report on Form
10-KSB. The results of operations for the periods ended March 31, 1999 and 1998
are not necessarily indicative of the operating results for the full year.
NOTE 2: CASH AND SHORT-TERM SECURITIES
The Company considers cash on hand and deposits in banks as cash and cash
equivalents. All items in this category have maturities of less than three
months.
NOTE 3: INVENTORIES
Inventories are classified as follows:
MARCH 31
1999
----
Aircraft parts and accessories, oil and
supplies less provisions for obsolete
and slow-moving, and excess quantity
of $20 $12
Fuel 24
---
$36
===
NOTE 4: ESCROW FUNDS
On March 11, 1999 the Company sold its FBO at Chicago's Midway Airport for
$17,750. From the proceeds of the sale, $3,511 was held in escrow for the
payment of the industrial revenue bond, including interest. The bond was paid in
full on April 15. Another $3,020 was held in escrow for the payment of real
estate taxes in arrears. These taxes are in dispute.
NOTE 5: NOTES RECEIVABLE - AFFILIATE
The total of $1,479 in this category is the outstanding balance including
interest, against a $1,500 line-of-credit given to Brant Motor Sports, Inc.,
whose principals include R. Ted Brant and Bobby Adkins, both members of the
Company's Board of Directors and Company employees. The interest rate on this
loan is prime less 1%.
6
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
MARCH 31, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
NOTE 6: SINKING FUND
The sinking fund was established pursuant to an agreement with PHH Corporation
(PHH), a guarantor of the letter-of-credit supporting the industrial revenue
bond with Cook County, Illinois, whereby the Company would make certain
agreed-to monthly payments into the fund. The purpose of the fund was to provide
for payment of the $3,500 bond due in 2014. However, with the sale of the
Chicago FBO, the $3,500 bond was paid in full on April 15, 1999. Under the
agreement with PHH, however, the Company will continue to make monthly payments
into the fund for three months after the bonds are paid, at which time the
balance will be returned to the Company.
NOTE 7: OTHER ASSETS
Included in this category is $9,875, the Company's investment in a limited
liability company named RTB/AS, L.L.C. The other investor in this company is R.
Ted Brant, Jr., the Company's President and Chairman of the Board of Directors.
The express purpose of RTB/AS, L.L.C. is to invest in the auto racing industry.
NOTE 8: ACCRUED EXPENSES
The major component of the $1,717 accrued for property, payroll, and other taxes
is an accrual of $1,668 for a New York motor fuels tax assessment which has been
appealed.
Of the $3,156 of accrued expenses - affiliate, $3,153 is interest on the notes
due Transtech Holding Company.
NOTE 9: FINANCING ARRANGEMENTS
Notes Payable - Industrial Revenue Bond
This $3,500 bond was due for redemption in 2014, but was paid in full in
April 1999 from the proceeds of the sale of the Company's Chicago FBO. It
was reclassified to short term at September 30, 1998.
Long Term Debt-Affiliate
Included in this category are $7,984 of various demand loans due to Transtech
Holding Company, (Transtech), the Company's principle shareholder. These notes,
classified as current maturities of long term debt, provide for interest at 2%
above the prime rate. Also included is a note due Transtech in the amount of
$6,910, bearing a prime interest rate. The note is collateralized by a first
priority interest on the fixed assets, inventory, and accounts receivable of the
Company. Also, this category includes $774, the balance due on the purchase of
an airplane in July 1996 from R. Ted Brant, the Chairman of the Board and Chief
Executive Officer of the Company. The note is due Cessna Corporation but remains
in the name of Mr. Brant. The Company makes payments directly to Cessna.
Long Term Debt-Other
In October 1998, the Company entered into a fuel supply agreement with Avfuel
Corporation (Avfuel) whereby Avfuel will be the exclusive fuel provider at the
Company's FBOs for a period of seven years. In addition, the Company borrowed
$1,000 from Avfuel. Under the terms of the note, Aero must make monthly payments
equal to $0.045 per gallon for each gallon of jet aviation fuel delivered by
Avfuel to Aero under the fuel supply agreement during the preceding month. Each
of the monthly payments shall be funded by means of a financing rebate issued by
Avfuel at the rate of $0.045 per gallon of jet aviation fuel delivered to Aero
during the previous month. The note carries an interest rate of prime plus 1.75%
and has a maturity date of September 15,
7
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
MARCH 31, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
2006. In March 1999, the buyer of the Company's Chicago FBO assumed $750 of this
debt. At March 31, 1999 the outstanding balance of $220, less the current
portion of $45, is included in long term debt.
NOTE 10: INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per share includes no dilution and is calculated by
dividing net income by the weighted average number of common shares outstanding
for the period. Dilutive net income (loss) per share reflects the potential
dilution of securities that could share in the net income of the Company through
the exercise of stock options and the conversion of preferred stock.
NOTE 11: RELATED PARTIES TRANSACTIONS
The Company is indebted to its major shareholder Transtech (holder of 50.4% of
common stock and 71.8% of preferred) in the amount of $14,894. Relative to this
debt, the Company had accrued interest of $3,153 at March 31. During the six
months ended March 31, 1999 the Company paid $157 of interest and $6 of
principal to Transtech. In December 1998 the Company issued 500,000 shares of
common stock to Transtech in exchange for $315 of debt forgiveness.
The Company periodically uses an aircraft owned by Valley Air Services, Inc.
(Valley Air) for travel by its employees, primarily management. Valley Air bills
the Company an hourly rate based on flight time. The President and Chief
Executive Officer of Valley Air is R. Ted Brant. During the six months ended
March 31, 1999 the Company was billed $59 for use of the aircraft.
During fiscal year 1998, the Company's Board of Directors approved a $500
line-of-credit, later increased to $1,500 in March 1999, for a company called
Brant Motor Sports, Inc. (See Note 5 for details.)
NOTE 12: CONTINGENT LIABILITIES
A. Environmental Matters
The Company's business involves the storage, handling and sale of fuel, and the
provision of mechanical maintenance and refurbishing services which involve the
use of hazardous chemicals. Accordingly, the Company is required to comply with
federal, state and local provisions which have been enacted to regulate the
discharge of material into the environment or otherwise relate to the protection
of the environment.
The Company is presently responsible for ongoing remediation of underground
contamination at one previously owned location in Milwaukee, Wisconsin. At
another previously owned location on the Raleigh-Durham Airport in North
Carolina, the Company is one of several former operators of fuel tanks at the
facility responsible for sharing remediation costs. The Company reached a
settlement agreement with the airport authority there during fiscal year 1996
which limits the Company's liability to $85 with payments to the authority not
to exceed $20 in any calendar year. The Company has been billed and paid $38
through March 31, 1999.
At March 31, 1999 the Company has included in its financial statements an
accrual for environmental remediation of $344. Based on estimates by the
engineering firms conducting the remediation projects, the Company has
sufficient reserves should any additional problems arise during remediation. The
Company, in addition, is reimbursed by the Wisconsin Petroleum Environmental
Cleanup Fund in excess of 95% of remediation expenses. The accrual of $344 has
not been reduced by any expected future reimbursements from Wisconsin.
8
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
MARCH 31, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
B. Litigation
Please refer to Part II, Item 1 on page 10 for a discussion of current
litigation matters.
9
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
Results of Operations:
The following table presents as a percentage of total sales certain selected
financial data for the Company for the periods indicated.
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1999 1998 1999 1998
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 36.5 39.9 36.3 41.6
Departmental costs 47.3 39.3 44.8 38.4
Administrative costs 17.7 8.7 15.3 9.5
Interest expense (Net) 19.9 15.2 17.5 16.0
Other income 740.5 0.7 342.0 0.8
Income tax 216.6 -- 97.2 --
Net income (loss) 502.5 (2.4) 230.9 (4.7)
Sales for the six month period ended March 31, 1999 decreased $160 (3%) as
compared to the same period in 1998. This decrease resulted from the sale of the
Chicago FBO on March 11. During the three months ended March 31, 1999 sales
decreased $421 as compared to the same period in 1998, again resulting from the
sale of the Chicago FBO.
Cost of sales for the six month period in 1999 has been reduced by 5.3% of sales
to 36.3% as compared to 41.6% in 1998. This decrease is due to a change in sales
mix and an increase in fuel margins. Cost of sales for the three month period
decreased by 3.4% of sales to 36.5%. The sale of Chicago had a greater effect on
the quarterly margins than on the year-to-date margins.
Departmental costs increased by $268 (13%) during the six month period ended
March 31, 1999 as compared to 1998. Payroll and related costs increased $148 and
repairs and maintenance costs increased by $95. Most of the increases came in
the first quarter of the years, because for the three month period ended March
31, departmental costs only increased $19 in 1999 as compared to 1998.
Administrative costs increased by $279 (56%) during the six month period in 1999
as compared to 1998. The causes of this increase were increased legal fees
($153), advertising expense ($99) and depreciation expense ($23). During the
three month period ended March 31, 1999, administrative costs increased $171
(72%) with $153 of the increase in legal fees.
10
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
LIQUIDITY AND CAPITAL RESOURCES
Working capital deficiency at March 31, 1999 decreased by $2,075 to ($11,021)
from September 30, 1998. Current assets increased by $1,240, with the major
changes being increases in escrow funds of $6,531, notes receivable-affiliate of
$1,381, and cash of $355 being reduced by decreases in deferred taxes of $5,000,
assets held for sale of $1,452 and notes receivable of $500. Current liabilities
decreased by $835 to $20,583 with the majority of the decrease ($745) in accrued
expense-other.
Operations during the six months ended March 31, 1999 used $16,710 of cash. Cash
of $19,199 was provided by the sale of the Chicago FBO ($17,750) and the
issuance of notes payable ($1,449). Cash of $518 was used to purchase fixed
assets and $1,616 was used to reduce the principal amount of notes payable.
In January 1999, the Company and R. Ted Brant formed a limited liability company
named RTB/AS, L.L.C. to invest in the auto racing industry. The Company's total
investment in RTB/AS, L.L.C. to date is approximately $10 million and could
eventually be approximately $12.5 million. The Company continues to explore
other business opportunities not related to the aviation industry. One such
opportunity under consideration is a joint venture for the construction and
operation of an indoor motor speedway and exhibition center. Management is
continuing to search for business opportunities that could produce profits
whereby the approximately $34 million of net operating loss carry forward could
be utilized to produce cash flow. However, there can be no assurance that the
Company can be returned to profitability or maintained as a going concern.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
11
<PAGE>
PART II - OTHER INFORMATION
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
ITEM 1. - LEGAL PROCEEDINGS
The Company is subject to several complaints filed over the last several
years in different courts or administrative agencies on a variety of grounds.
These claims are encountered in the ordinary course of business, and in the
opinion of management, the resolution of these matters, either individually or
in the aggregate, will not have a material adverse effect on the Company's
financial position, cash flow, and operations in excess of accruals already
recorded. Management believes that it has established adequate reserves for all
of these claims. Management also believes it has strong defenses and intends to
vigorously defend its position.
The Company is also exposed to a number of asserted and unasserted potential
claims encountered in the normal course of business. In the opinion of
management, the resolution of these matters, as well as those discussed above or
referenced elsewhere in this report, will not have a material adverse effect on
the Company's financial position in excess of what has already been recorded.
Management believes that it has established adequate reserves for all of these
claims.
ITEM 5. - OTHER INFORMATION
The Company has reviewed the potential impact of Year 2000 issues on its
business operations and has determined the following:
The main computers used by Aero and the software operated on the computer
require only minor corrections to become year 2000 compliant. Aero is
considering changing its computer operations to a PC based system using new
software that is year 2000 compliant. If Aero elects not to pursue the PC based
and year 2000 compliant software, Aero will cause its present system to be year
2000 compliant by the Fall of 1999.
Aero has contacted its principal insurers and suppliers, especially the supplier
of aviation fuel to ascertain that those suppliers will be able to deliver
product in a timely fashion. The Company has received written confirmation from
the majority of its insurers and fuel suppliers that they are year 2000
compliant.
Aero has also been in contact with the managers of the airports where it
operates FBOs to determine that they will be able to continue to operate and
will be year 2000 compliant. The Company has not yet received written
confirmation.
The Company's main banks and its utility companies have confirmed in writing of
their compliance and or compliance status. At the time of the filing of this
report, the Company has no contingency plan relating to potential year 2000
issues. Aero does not expect to incur any significant expense in becoming year
2000 compliant, except the expense of converting its computer system if in fact
it determines that it should convert that system to a PC based system.
12
<PAGE>
EXHIBIT D
FORM 10-QSB FOR THE PERIOD ENDING JUNE 30, 1999
- --------------------------------------------------------------------------------
U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
|_| TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ________________ to _________________
Commission file number 0-10190-0
---------
AERO SERVICES INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as
specified in its charter)
LOUISIANA 72-0385274
- ------------------------------------ ------------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
660 Newtown-Yardley Road, Newtown, PA 18940
- --------------------------------------------------------------------------------
(Address of principal executive offices
(215) 860-5600
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of
common equity, as of July 31, 1999: Common stock (without par value) 7,998,052
shares.
<PAGE>
AERO SERVICES INTERNATIONAL, INC. & SUBSIDIARIES
INDEX
PART I - Financial Information Page Number
-----------
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
June 30, 1999 (unaudited) 2
Consolidated Statement of Earnings
three months and nine months ended June 30, 1999
and 1998 (unaudited) 3
Condensed Consolidated Statement of Cash Flows
nine months ended June 30, 1999 and 1998
(unaudited) 4
Notes to Condensed Consolidated Financial Statements
(unaudited) 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 8
PART II - Other Information
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
ASSETS
CURRENT ASSETS
Cash $ 30
Customers receivables, less allowance for
doubtful accounts of $31 97
Escrow funds 3,046
Notes receivable - affiliate 1,801
Inventories 50
Prepaid expenses and other current assets 145
Sinking fund 476
--------
TOTAL CURRENT ASSETS 5,645
PROPERTY AND EQUIPMENT, NET 1,307
OTHER ASSETS
Investments 9,875
Other 499
--------
TOTAL ASSETS $ 17,326
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes payable $ 11
Current maturities of long term debt-affiliate 8,124
Current maturities of long term debt-other 46
Accounts payable-trade 668
Accrued expenses
Property, payroll, and other taxes 1,700
Other 503
Affiliate 3,483
Property taxes - Chicago 3,099
--------
TOTAL CURRENT LIABILITIES 17,634
--------
LONG-TERM DEBT, less current maturities
Affiliate 7,667
Other 218
--------
TOTAL LONG-TERM DEBT 7,885
--------
OTHER LONG TERM LIABILITIES 212
REDEEMABLE PREFERRED STOCK 3,624
STOCKHOLDERS' DEFICIT
Common stock 10,400
Additional paid-in capital 4,724
Accumulated deficit (26,916)
--------
(11,792)
Less: Common stock in treasury 237
--------
TOTAL STOCKHOLDERS' DEFICIT (12,029)
--------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 17,326
========
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF EARNINGS
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
June 30, June 30,
------------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 579 $ 3,167 $ 5,722 $ 8,470
COST AND EXPENSE
Cost of sales 271 1,311 2,136 3,519
Departmental costs 506 1,191 2,809 3,226
Administrative costs 499 308 1,283 813
Interest expense - other 24 35 256 129
Interest expense - affiliate 328 409 996 1,159
----------- ----------- ----------- -----------
(1,049) (87) (1,758) (376)
Gain on sale of certain FBO
operations -- -- 17,070 --
Other income, net 67 22 583 63
----------- ----------- ----------- -----------
Income (loss) before taxes (982) (65) 15,895 (313)
Income tax expense -- -- 5,000 --
----------- ----------- ----------- -----------
NET INCOME (LOSS) (982) (65) 10,895 (313)
Preferred dividends (34) (65) (104) (194)
Accretion of preferred stock (11) (8) (32) $ (24)
----------- ----------- ----------- -----------
Net income (loss) applicable
to common shareholders (1,027) $ (138) $ 10,759 $ (531)
=========== =========== =========== ===========
Net income (loss) per share
Basic $ (0.13) $ (0.02) $ 1.40 $ (0.08)
=========== =========== =========== ===========
Dilutive $ (0.11) $ (0.02) $ 1.31 $ (0.08)
=========== =========== =========== ===========
Weighted average shares
outstanding:
Basic 7,998,052 6,998,052 7,712,388 6,998,052
=========== =========== =========== ===========
Dilutive 8,574,792 6,998,052 8,289,078 6,998,052
=========== =========== =========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
AERO SERVICES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 31,
-----------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 10,895 $ (313)
-------- --------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 226 296
Provision for losses on accounts receivable 6 7
Provision for obsolete inventory 4 3
Gain on sale of certain FBO operations (17,138) --
Change in assets and liabilities:
(Increase) decrease in accounts receivable 290 (231)
Increase in escrow funds (3,046) --
Decrease in notes receivable 500 --
Increase in notes receivable - affiliate (1,703) --
Increase in inventory (17) (24)
(Increase) decrease in other current assets 126 (80)
Decrease in assets held for sale 1,452 --
Increase in sinking fund (146) --
Decrease in deferred taxes 5,000 --
Increase in investments (9,875) --
Increase in other assets (389) (137)
Increase in accounts payable (119) 9
Increase (decrease) in property,
payroll, and other taxes (59) 210
Decrease in other current liabilities (775) (100)
Increase in other liabilities - affiliate 816 712
Increase in property taxes - Chicago 79 --
Decrease in other long term liabilities (20)
Other (106) (5)
-------- --------
Total adjustments (24,636) 640
-------- --------
Net cash (used in) provided by operating activities (13,743) 327
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of certain FBO operations 17,750 --
Purchases of property and equipment (520) (167)
-------- --------
Net cash (used in) provided by investing activities 17,230 (167)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds form issuance of notes payable-affiliate 234 100
Proceeds from issuance of notes payable 1,215 75
Principal payments of notes payable-affiliate (467) (234)
Principal payments of long-term debt (4,680) (20)
-------- --------
Net cash used in financing activities (3,698) (79)
-------- --------
Net increase (decrease) in cash & cash equivalents (211) 81
Cash and cash equivalents at beginning of year 241 131
-------- --------
Cash and cash equivalents at end of third fiscal
quarter $ 30 $ 212
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 456 $ 547
Income taxes -- --
</TABLE>
See Notes to Condensed Consolidated Financial Statements
4
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
NOTE 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of June 30, 1999, consolidated
statement of earnings for the nine month and three month periods ended June 30,
1999 and 1998, and the condensed consolidated statement of cash flows for the
nine month periods then ended were prepared by the Company, without audit. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows at June 30, 1999 and for all periods presented have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's September 30, 1998 annual report on Form
10-KSB. The results of operations for the periods ended June 30, 1999 and 1998
are not necessarily indicative of the operating results for the full year.
NOTE 2: CASH AND SHORT-TERM SECURITIES
The Company considers cash on hand and deposits in banks as cash and cash
equivalents. All items in this category have maturities of less than three
months.
NOTE 3: INVENTORIES
Inventories are classified as follows:
JUNE 30
1999
----
Aircraft parts and accessories, oil and
supplies less provisions for obsolete
and slow-moving, and excess quantity
of $20 $12
Fuel 38
---
$50
===
NOTE 4: ESCROW FUNDS
On March 11, 1999 the Company sold its FBO at Chicago's Midway Airport for
$17,750. From the proceeds of the sale, $3,511 was held in escrow for the
payment of the industrial revenue bond, including interest. The bond was paid in
full on April 15. Another $3,020 was held in escrow for the payment of real
estate taxes in arrears. These taxes are in dispute. The balance of $3,046
includes interest earned through June 30.
NOTE 5: NOTES RECEIVABLE - AFFILIATE
$1,744 of this category is the outstanding balance against a $1,800
line-of-credit given to Brant Motor Sports, Inc., whose principals include R.
Ted Brant and Bobby Adkins, both members of the Company's Board of Directors and
Company employees. The interest rate on this loan is prime less 1%. The
remainder of the balance is accrued interest on the debt.
5
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
NOTE 6: SINKING FUND
The sinking fund was established pursuant to an agreement with PHH Corporation
(PHH), a guarantor of the letter-of-credit supporting the industrial revenue
bond with Cook County, Illinois, whereby the Company would make certain
agreed-to monthly payments into the fund. The purpose of the fund was to provide
for payment of the $3,500 bond due in 2014. However, with the sale of the
Chicago FBO, the $3,500 bond was paid in full on April 15, 1999. Under the
agreement with PHH, however, the Company will continued to make monthly payments
into the fund for three months after the bonds were paid. The balance of the
fund was returned to the Company on July 20.
NOTE 7: INVESTMENTS
This amount represents the Company's investment in a limited liability company
named RTB/AS, L.L.C. The other investor in this company is R. Ted Brant, Jr.,
the Company's President and Chairman of the Board of Directors. The express
purpose of RTB/AS, L.L.C. is to invest in the auto racing industry.
NOTE 8: ACCRUED EXPENSES
The major component of the $1,700 accrued for property, payroll, and other taxes
is an accrual of $1,668 for a New York motor fuels tax assessment which has been
appealed.
Of the $3,483 of accrued expenses - affiliate, $3,427 is interest on the notes
due Transtech Holding Company.
NOTE 9: FINANCING ARRANGEMENTS
Long Term Debt-Affiliate
Included in this category are $7,981 of various demand loans due to Transtech
Holding Company, (Transtech), the Company's principle shareholder. These notes,
classified as current maturities of long term debt, provide for interest at 2%
above the prime rate. Also included is a note due Transtech in the amount of
$6,910, bearing a prime interest rate. The note is collateralized by a first
priority interest on the fixed assets, inventory, and accounts receivable of the
Company. Also, this category includes $757, the balance due on the purchase of
an airplane in July 1996 from R. Ted Brant, the Chairman of the Board and Chief
Executive Officer of the Company. The note is due Cessna Corporation but remains
in the name of Mr. Brant. The Company makes payments directly to Cessna.
Long Term Debt-Other
In October 1998, the Company entered into a fuel supply agreement with Avfuel
Corporation (Avfuel) whereby Avfuel will be the exclusive fuel provider at the
Company's FBOs for a period of seven years. In addition, the Company borrowed
$1,000 from Avfuel. Under the terms of the note, Aero must make monthly payments
equal to $0.045 per gallon for each gallon of jet aviation fuel delivered by
Avfuel to Aero under the fuel supply agreement during the preceding month. Each
of the monthly payments shall be funded by means of a financing rebate issued by
Avfuel at the rate of $0.045 per gallon of jet aviation fuel delivered to Aero
during the previous month. The note carries an interest rate of prime plus 1.75%
and has a maturity date of September 15, 2006. In March 1999, the buyer of the
Company's Chicago FBO assumed $750 of this debt. At June 30, 1999 the
outstanding balance of $216, less the current portion of $45, is included in
long term debt.
6
<PAGE>
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 1999
(UNAUDITED: DOLLAR AMOUNTS IN THOUSANDS)
NOTE 10: INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per share includes no dilution and is calculated by
dividing net income by the weighted average number of common shares outstanding
for the period. Dilutive net income (loss) per share reflects the potential
dilution of securities that could share in the net income of the Company through
the exercise of stock options and the conversion of preferred stock.
NOTE 11: RELATED PARTIES TRANSACTIONS
The Company is indebted to its major shareholder Transtech (holder of 50.4% of
common stock and 71.8% of preferred) in the amount of $14,891. Relative to this
debt, the Company had accrued interest of $3,427 at June 30. During the nine
months ended June 30, 1999 the Company paid $157 of interest and $9 of principal
to Transtech. In December 1998 the Company issued 500,000 shares of common stock
to Transtech in exchange for $315 of debt forgiveness.
The Company periodically uses an aircraft owned by Valley Air Services, Inc.
(Valley Air) for travel by its employees, primarily management. Valley Air bills
the Company an hourly rate based on flight time. The President and Chief
Executive Officer of Valley Air is R. Ted Brant. During the nine months ended
June 30, 1999 the Company was billed $72 for use of the aircraft.
During fiscal year 1998, the Company's Board of Directors approved a $500
line-of-credit, later increased to $1,500 in March 1999, and to $1,800 in May
1999, for a company called Brant Motor Sports, Inc. (See Note 5 for details.)
NOTE 12: CONTINGENT LIABILITIES
A. Environmental Matters
The Company's business involves the storage, handling and sale of fuel, and the
provision of mechanical maintenance and refurbishing services which involve the
use of hazardous chemicals. Accordingly, the Company is required to comply with
federal, state and local provisions which have been enacted to regulate the
discharge of material into the environment or otherwise relate to the protection
of the environment.
The Company is presently responsible for ongoing remediation of underground
contamination at one previously owned location in Milwaukee, Wisconsin. At
another previously owned location on the Raleigh-Durham Airport in North
Carolina, the Company is one of several former operators of fuel tanks at the
facility responsible for sharing remediation costs. The Company reached a
settlement agreement with the airport authority there during fiscal year 1996
which limits the Company's liability to $85 with payments to the authority not
to exceed $20 in any calendar year. The Company has been billed and paid $38
since reaching the settlement.
At June 30, 1999 the Company has included in its financial statements an accrual
for environmental remediation of $342. Based on estimates by the engineering
firms conducting the remediation projects, the Company has sufficient reserves
should any additional problems arise during remediation. The Company, in
addition, is reimbursed by the Wisconsin Petroleum Environmental Cleanup Fund in
excess of 95% of remediation expenses. The accrual of $342 has not been reduced
by any expected future reimbursements from Wisconsin.
B. Litigation
Please refer to Part II, Item 1 on page 10 for a discussion of current
litigation matters.
7
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
Results of Operations:
The following table presents as a percentage of total sales certain selected
financial data for the Company for the periods indicated.
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1999 1998 1999 1998
---- ---- ---- ----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 46.8 41.4 37.3 41.5
Departmental costs 87.4 37.6 49.1 38.1
Administrative costs 86.2 9.7 22.4 9.6
Interest expense (Net) 60.8 14.0 21.9 15.2
Other income 11.6 0.7 308.5 0.7
Income tax -- -- 87.4 --
Net income (loss) (169.6) (2.0) 190.4 (3.7)
Sales for the nine month period ended June 30, 1999 decreased $2,748 (32%) as
compared to the same period in 1998. This decrease resulted from the sale of the
Chicago FBO on March 11. During the three months ended June 30, 1999 sales
decreased $2,620 as compared to the same period in 1998, again resulting from
the sale of the Chicago FBO.
Cost of sales for the nine month period in 1999 has been reduced by 4.2% of
sales to 37.3% as compared to 41.5% in 1998. This decrease is due to a change in
sales mix and an increase in fuel margins. Cost of sales for the three month
period increased by 5.4% of sales to 46.8%. This change is also a result of the
sale of Chicago.
Departmental costs decreased by $417 (13%) during the nine month period but when
Chicago is excluded from the comparison, these costs increased by $256, with the
major increase of $120 in payroll and related costs. For the third quarter
alone, departmental costs are up $67 (16%) after adjusting for the sale of
Chicago.
Administrative costs increased by $470 (58%) during the nine month period with
the major increases in legal expense ($278) and professional fees ($198), both
resulting from tax and investment planning that was required by the sale of
Chicago. During the three month period ended June 30, these costs increased by
$191.
8
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
LIQUIDITY AND CAPITAL RESOURCES
Working capital deficiency at June 30, 1999 decreased by $1,107 to ($11,989)
from September 30, 1998. Current assets decreased by $2,677, with the major
changes being increases in escrow funds of $3,046 and notes receivable-affiliate
of $1,703, being reduced by decreases in deferred taxes of $5,000, assets held
for sale of $1,452 and notes receivable of $500. Current liabilities decreased
by $3,784 to $17,634 with the majority of the decrease ($3,500) from the payment
of the Chicago Industrial Revenue Bond.
Operations during the nine months ended June 30, 1999 used $13,743 of cash. Cash
of $19,199 was provided by the sale of the Chicago FBO ($17,750) and the
issuance of notes payable ($1,449). Cash of $520 was used to purchase fixed
assets and $5,147 was used to reduce the principal amount of notes payable.
In January 1999, the Company and R. Ted Brant formed a limited liability company
named RTB/AS, L.L.C. to invest in the auto racing industry. The Company's total
investment in RTB/AS, L.L.C. to date is approximately $10 million and could
eventually be approximately $12.5 million. The Company continues to explore
other business opportunities not related to the aviation industry. One such
opportunity under consideration is a joint venture for the construction and
operation of an indoor motor speedway and exhibition center. Management is
continuing to search for business opportunities that could produce profits
whereby the approximately $34 million of net operating loss carry forward could
be utilized to produce cash flow. However, there can be no assurance that the
Company can be returned to profitability or maintained as a going concern.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
9
<PAGE>
PART II - OTHER INFORMATION
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
ITEM 1. - LEGAL PROCEEDINGS
The Company is subject to several complaints filed over the last several
years in different courts or administrative agencies on a variety of grounds.
These claims are encountered in the ordinary course of business, and in the
opinion of management, the resolution of these matters, either individually or
in the aggregate, will not have a material adverse effect on the Company's
financial position, cash flow, and operations in excess of accruals already
recorded. Management believes that it has established adequate reserves for all
of these claims. Management also believes it has strong defenses and intends to
vigorously defend its position.
The Company is also exposed to a number of asserted and unasserted potential
claims encountered in the normal course of business. In the opinion of
management, the resolution of these matters, as well as those discussed above or
referenced elsewhere in this report, will not have a material adverse effect on
the Company's financial position in excess of what has already been recorded.
Management believes that it has established adequate reserves for all of these
claims.
ITEM 5. - OTHER INFORMATION
The Company has reviewed the potential impact of Year 2000 issues on its
business operations and has determined the following:
The main computers used by Aero and the software operated on the computer
require only minor corrections to become year 2000 compliant. Aero is
considering changing its computer operations to a PC based system using new
software that is year 2000 compliant. If Aero elects not to pursue the PC based
and year 2000 compliant software, Aero will cause its present system to be year
2000 compliant by the Fall of 1999.
Aero has contacted its principal insurers and suppliers, especially the supplier
of aviation fuel to ascertain that those suppliers will be able to deliver
product in a timely fashion. The Company has received written confirmation from
the majority of its insurers and fuel suppliers that they are year 2000
compliant.
Aero has also been in contact with the managers of the airports where it
operates FBOs to determine that they will be able to continue to operate and
will be year 2000 compliant. The Company has not yet received written
confirmation.
The Company's main banks and its utility companies have confirmed in writing of
their compliance and or compliance status. At the time of the filing of this
report, the Company has no contingency plan relating to potential year 2000
issues. Aero does not expect to incur any significant expense in becoming year
2000 compliant, except the expense of converting its computer system if in fact
it determines that it should convert that system to a PC based system.
10
<PAGE>
PART II - OTHER INFORMATION
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.0 Financial Data Schedule
(b) Reports on Form 8-K: None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AERO SERVICES INTERNATIONAL, INC.
---------------------------------
(Registrant)
- ------------------------------------
(Signature)
Paul R. Slack
Chief Accounting Officer
and Controller
- ------------------------------------
(Signature)
R. Ted Brant
Chairman of the Board
Date: August 17, 1999
12
<PAGE>
PART II - OTHER INFORMATION
AERO SERVICES INTERNATIONAL, INC. AND SUBSIDIARIES
(DOLLAR AMOUNTS IN THOUSANDS)
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.0 Financial Data Schedule
(b) Reports on Form 8-K: A report on Form 8-K was filed on March 31,
1999 reporting the sale of the Company's facility at Chicago's Midway Airport
for $17,750.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AERO SERVICES INTERNATIONAL, INC.
---------------------------------
(Registrant)
- ------------------------------------
(Signature)
Paul R. Slack
Chief Accounting Officer
and Controller
- ------------------------------------
(Signature)
R. Ted Brant
Chairman of the Board
Date: June 7, 1999
14
<PAGE>
COMMON & SERIES A
PROXY AERO SERVICES INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS -- SEPTEMBER 23, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R. Theodore Brant and Maurice Lawruk as
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Aero Services International, Inc. standing in the
name of the undersigned with all the powers which the undersigned would possess
if present at the Annual Meeting of Stockholders of the Company to be held on
September 23, 1999, or any adjournment thereof.
PLEASE FILL IN, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID RETURN ENVELOPE.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
^ FOLD AND DETACH HERE ^
[MAP OMITTED]
Directions to the Ramada Inn on Market Square:
From East (Philadelphia) PA Turnpike (I-76) to Exit 19 (Harrisburg/Capitol).
Follow Rt. 283 North to I-83 South. Follow I-83 South to Exit 23 (Second
Street/Capitol). Proceed to 3rd traffic light; 1st building on right.
From West (Pittsburgh) PA Turnpike (I-76) to Exit 18 (Harrisburg/York). Follow
I-83 North to Exit 23 (Second Street/Capitol). Proceed to 3rd traffic light; 1st
building on right.
From I-81 (North/South) Take Front Street Exit to Front Street South. Follow
Front Street South to Chestnut Street (5th traffic light). Proceed 1 block to
light at Second Street. Turn left at light; 1st building on immediate right.
From New York Take I-95 South to I-78 West to I-81 South to I-83 South. Get off
at Exit 23 (Second Street/Capitol). Proceed to 3rd traffic light; 1st building
on right.
From Washington/Baltimore I-83 North toward Harrisburg. Exit 23 (Second
Street/Capitol). Proceed to 3rd light. We are 1st building on right OR 11/15
North to 581 East/83 North. Exit 23 (Second Street/Capitol). Proceed to 3rd
light. We are the 1st building on right.
<PAGE>
COMMON
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED Please mark
FOR PROPOSALS 1, 2, 3, 4, 5 AND 6. your votes as
indicated in |X|
this example
The Board of Directors recommends a vote FOR Items 1 - 6
WITHHELD
ITEM 1 - ELECTION OF DIRECTORS FOR FOR ALL
Nominees:
R. Ted Brant, Alice F. Buford |_| |_|
Maurice Lawruk
WITHHELD FOR: (Write that nominee's name or name in the space provided below):
_______________________________________________________________________________
FOR AGAINST ABSTAIN
ITEM 2 - AMENDMENT OF ARTICLES OF INCORPORATION |_| |_| |_|
TO INCREASE THE AUTHORIZED COMMON STOCK
FROM 15,000,000 TO 60,000,000
ITEM 3 - EXCHANGE OF PREFERRED STOCK FOR COMMON |_| |_| |_|
STOCK
ITEM 4 - ISSUANCE OF COMMON STOCK IN |_| |_| |_|
CONSIDERATION OF FORGIVENESS OF
INDEBTEDNESS
ITEM 5 - CHANGE OF NAME FROM AERO SERVICES |_| |_| |_|
INTERNATIONAL, INC. TO b-FAST, CORP.
ITEM 6 - APPOINTMENT OF INDEPENDENT ACCOUNTANTS |_| |_| |_|
MARK HERE MARK HERE
FOR ADDRESS |_| IF YOU PLAN |_|
____ CHANGE AND TO ATTEND
| NOTE AT LEFT. THE MEETING.
|
IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF.
Signature(s)__________________________________________ Dated:__________________
Please sign exactly as name appears hereon. If the stock is registered in the
names of two or more persons, each should sign. When signing as an executor,
administrator, trustee, guardian, or attorney, please give full title as such.
If a corporation, please sign in full corporate name by an authorized officer.
If a partnership, please sign in full partnership name by an authorized person.
^ FOLD AND DETACH HERE ^
<PAGE>
SERIES A PREFERRED
IF NO DIRECTION IS MADE, THIS PROXY WILL BE Please mark
VOTED FOR PROPOSALS 1 AND 2. your votes as
indicated in |X|
this example
The Board of Directors recommends a vote FOR Items 1 and 2
WITHHELD
ITEM 1 - ELECTION OF DESIGNATED DIRECTORS FOR FOR ALL
Nominees:
Bobby Ray Adkins |_| |_|
James R. Affleck, Jr.
WITHHELD FOR: (Write that nominee's name or name in the space provided below):
_______________________________________________________________________________
FOR AGAINST ABSTAIN
ITEM 2 - EXCHANGE OF PREFERRED STOCK FOR COMMON |_| |_| |_|
STOCK
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
MARK HERE IF YOU PLAN TO |_|
ATTEND THE MEETING.
____
| MARK HERE FOR ADDRESS
| CHANGE AND NOTE AT LEFT. |_|
Signature(s)__________________________________________ Dated:__________________
Please sign exactly as name appears hereon. If the stock is registered in the
names of two or more persons, each should sign. When signing as an executor,
administrator, trustee, guardian, or attorney, please give full title as such.
If a corporation, please sign in full corporate name by an authorized officer.
If a partnership, please sign in full partnership name by an authorized person.
^ FOLD AND DETACH HERE ^
