UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] For the fiscal year ended December 31, 1994 or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required] For the transition period from to
Commission file number: 0-16836
JETSTREAM, L.P.
Exact name of registrant as specified in its charter
Delaware 84-1053359
State or other jurisdiction of incorporation I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor, New York, New York 10285
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP DEPOSITORY UNITS (the "Units")
LIMITED PARTNERSHIP INTERESTS (underlying the Units)
Title of Class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: Not applicable
DOCUMENTS INCORPORATED BY REFERENCE:
Prospectus of the registrant dated September 10, 1987, as filed pursuant to
rule 424(c) of the Securities Act of 1933, as amended (Portions of Parts I, II,
III and IV).
Annual Report to Unitholders for the year ended December 31, 1994 (Portions of
Parts I, II, III & IV).
PART I
Item 1. Business.
General Development of Business
JetStream, L.P. (the "Partnership") is a limited partnership organized under
the laws of the State of Delaware on April 16, 1987. The general partners of
the Partnership (the "General Partners") are CIS Aircraft Partners, Inc., the
Managing General Partner ("CAP"), a Delaware corporation that is an affiliate
of Continental Information Systems Corporation, and Jet Aircraft Leasing, Inc.,
the Administrative General Partner, a Delaware corporation that is an affiliate
of Lehman Brothers Inc. ("Lehman") (See Item 10).
Although the Partnership was organized on April 16, 1987, the Partnership
conducted no activities and recognized no revenues, profits or losses prior to
October 28, 1987, at which time the Partnership commenced operations. During
the period between October 29, 1987 and November 4, 1987, the Partnership
acquired for cash nine used commercial aircraft (together, the "Aircraft").
For a description of the investments in the Aircraft, please refer to the
"Portfolio Review" section on page 3 and Note 4 to the Financial Statements on
pages 8 - 10, respectively, of the Partnership's Annual Report to Unitholders
for the year ended December 31, 1994, which is filed as an exhibit under Item
14 and incorporated herein by reference.
On September 10, 1987, the Partnership commenced an offering (the "Offering")
on a "best efforts basis" of $97,900,000 of limited partnership depositary
units ("Units"). The closing of the offering occurred on October 28, 1987,
with a total of 4,895,005 Units being sold at a price of $20.00 per Unit, for a
total of approximately $97,900,000 of Units. The net proceeds of the offering
after payment of offering and organization costs and acquisition fees
aggregated $85,747,510.
Narrative Description of Business
The Partnership is engaged in the business of managing a portfolio of used
commercial aircraft subject to triple net operating leases with commercial air
carriers. The Partnership is required to dissolve and distribute all of its
assets not later than December 31, 2027. The Partnership may reinvest the
proceeds of sales of Aircraft occurring prior to October 28, 1998; thereafter,
the net proceeds of sales of Aircraft will be distributed to the partners,
after deductions of amounts necessary for working capital and certain reserves.
The Partnership's investment objectives are to:
(1) generate quarterly cash distributions to holders of Units (the
"Unitholders"), substantially tax-sheltered during the initial years of
the Partnership's operations, initially at a rate of approximately 12%,
subject to conditions stated in the prospectus pursuant to which the
Units were offered and sold (the "Prospectus"), dated September 10,
1987;
(2) preserve and protect the value of the Partnership's assets.
The following table describes the Partnership's portfolio of aircraft as of
December 31, 1994. This table provides certain operational statistics and
estimated market values for the aircraft in the portfolio. The estimated
market values of the Aircraft are affected by, and subject to future changes in
a variety of factors, including, but not limited to, the Aircrafts' usage, age
and lease rate, the credit worthiness of the lessee, government noise
regulation and the supply and demand of aircraft in the market place with
similar lift capacity. Reference is made to the "Portfolio Review" section on
page 3 and Note 4 to the Financial Statements on pages 8 - 10, respectively, of
the Partnership's Annual Report to Unitholders for the year ended December 31,
1994, for a discussion of the lease terms for each aircraft. Reference is also
made to page 1 of the Partnership's Annual Report to Unitholders for the year
ended December 31, 1994, for an overview of the aircraft leasing industry.
<TABLE>
<CAPTION> <CAPTION> <CAPTION> <CAPTION> <CAPTION> <CAPTION> <CAPTION> <CAPTION> <CAPTION>
Estimated Cumulative Cumulative
Aircraft Model Acquisition Net Book Market Lease Noise Flight Flight
Year Delivered Lessee Cost(1) Value(2) Value(3) Expiration(4) Compliance Cycles(5) Hours (5)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MD-80 Series Continental $27,396,997 $12,658,564 $17,500,000 3/15/98 Stage 3 12,060 23,790
1986
B-737-200 USAir $ 7,601,999 $ 833,336 $ 700,000 5/01/95 Stage 2 65,680 56,660
1971
B-737-200 USAir $ 7,601,999 $ 833,336 $ 700,000 5/01/95 Stage 2 65,350 57,030
1971
B-737-200 ADV Delta $15,222,609 $ 4,229,792 $ 4,500,000 12/2/96 Stage 2 31,000 48,100
1979
B-727-200 N/A(6) $ 5,448,499 $ 523,500 $ 500,000 N/A Stage 2 43,380 63,600
1969
B-727-200 TWA $ 5,448,499 $ 523,500 $ 500,000 4/30/95 Stage 2 43,000 63,510
1969
B-727-200 TWA $ 5,448,499 $ 507,496 $ 500,000 4/30/95 Stage 2 42,760 62,500
1969
TOTALS $74,169,101 $20,109,524 $24,900,000
<FN>
_________________
NOTES:
(1) Includes a 1.5% fee paid to the Managing General Partner at the
acquisition of the Aircraft. Totals do not include aircraft which have
been sold.
(2) At December 31, 1994, the total net book value includes a $18,266,022
decrease from the net book value at December 31, 1992, primarily as a
result of the General Partners' decision to write down such value.
It is the General Partners' belief that the highly competitive and weakened
conditions in the airline industry have had a significant and negative
impact on the aircraft leasing industry and on the residual value of the
Partnership's fleet of Aircraft. It is also the General Partners' belief
that the total value has declined substantially.
(3) Estimated market values for the Aircraft are based upon several
factors including independent appraisals, third party publications,
the General Partners' own experience and the unique circumstances
regarding the equipment and the lessees. These estimates are subject to
a variety of assumptions. Additionally, there can be no assurance that the
Partnership would receive an amount equal to the market shown above upon
the sale of any of the Aircraft.
(4) Lease expiration dates do not include renewal options.
(5) As of February 2, 1995.
(6) Trans World Airlines returned this aircraft to the Partnership
subsequent to its lease expiration on November 30, 1994.
</TABLE>
Aging Aircraft Maintenance - The Federal Aviation Administration (the "FAA"),
acting on recommendations from industry trade groups, has adopted a series of
Airworthiness Directives ("AD's") for certain Boeing and McDonnell Douglas
aircraft models. AD's are mandates requiring the airline to perform a specific
maintenance task within a specified period of time. The FAA imposes strict
requirements governing aircraft inspection and certification maintenance,
equipment requirements, corrosion control, noise levels and general operating
and flight rules. In addition to mandating more intensive inspections of
certain structural components, including the fuselage, wing and tail sections,
certain of these AD's mandate that structural modifications to certain aircraft
be completed within specified periods, generally not less than 48 months from
the effective date of the relevant AD. Aircraft are generally subject to these
structural modification requirements based on flight cycle, flight hou r and
chronological age thresholds. Five of the Partnership's seven Aircraft are
subject to AD's mandating structural modification, specifically the three B-727
aircraft, two of which are currently leased to TWA, and the two B-737 aircraft
leased to USAir. AD's presently applicable to the Boeing aircraft owned by the
Partnership require extensive repetitive inspections of such aircraft. There
can be no assurance that such inspections will not lead to mandatory structural
modifications similar to those noted above.
The Partnership's existing leases require the lessees to maintain the
Partnership's aircraft in accordance with FAA approved maintenance programs
during the lease term. At the end of the leases, each lessee is required to
return the aircraft in airworthy condition, including compliance with all AD's
for which action is mandated by the FAA during the lease term. Thus, certain
of the modifications required by the new AD's may not be effected by the
Partnership's lessees prior to the expiration of the current leases since, in
many cases, the relevant AD will not require action before the expiration of
the lease term.
In negotiating future leases or in selling aircraft now owned by the
Partnership, the Partnership may be required to bear some or all of the costs
of compliance with future AD's or AD's that have been issued but which did not
mandate action during the previous lessee's lease term or in respect of which
the previous lessee failed to comply. The ultimate effect on the Partnership
of compliance with these standards is not determinable at this time and will
depend upon a variety of factors, including, but not limited to, the state of
the commercial aircraft market, the status of availability of capable repair
facilities and the effect, if any, that such compliance may have on the service
lives of the affected aircraft. As described above, the cost to the
Partnership of such compliance may be reduced to the extent that current or
future lessees of the Partnership's aircraft effect such modifications under
the terms of the current or future operating leases.
Aircraft Noise - Beginning in 1985, the FAA and various airport industry task
forces released reports suggesting various alternatives for reducing the number
of Stage 2 aircraft operating in the United States, including a proposed
requirement to bring all aircraft operating in the United States into
compliance with Stage 3 requirements in the 1990s or shortly thereafter. The
FAA has categorized aircraft types according to engine noise decibel levels.
Stage 1 aircraft, which have the highest noise level, are no longer allowed to
operate from civil airports in the United States. Stage 2 aircraft meet
current FAA requirements. Stage 3 aircraft are the most quiet and will be the
future standard of all aircraft. Only one of the aircraft owned by the
Partnership is Stage 3, the remainder are Stage 2 aircraft.
Effective November 6, 1990, Congress passed the Airport Noise and Capacity Act
of 1990 (the "Act") which required the development of a National Noise Policy.
On September 25, 1991, final regulations (the "Regulations") were announced and
became effective immediately. The Regulations provide, among other things,
phase-out and non-addition rules under which the number of Stage 2 aircraft
operated by domestic carriers would be limited to 75% of 1990 base levels by
the end of 1994, 50% of 1990 base levels by the end of 1996, and 25% of 1990
base levels by the end of 1998. The Regulations would allow the issuance of
transferable Stage 2 operating rights that expire in increments over the life
of the phase-out period. These transferable rights would allow an operator
that at any time reduced its Stage 2 fleet below that required by the phase-out
schedule to transfer the "unused" base level to another operator.
Several modification programs to hush-kit or re-engine an aircraft to meet
Stage 3 requirements have been announced, including programs for the B-727 and
the B-737 series. Hush-kitting is a procedure for retrofitting existing
engines to comply with Stage 3 requirements. Re-engining is the replacement of
existing engines with technologically-advanced engines complying with Stage 3
requirements. The decision whether to hush-kit or re-engine an aircraft will
depend upon a variety of factors, including, without limitation, the
differential effects of the two approaches on the operating costs of the
aircraft, the relative costs and feasibility of the two approaches and the
General Partners' assessment of the remaining useful life and fair market value
of the aircraft. Where available, hush-kits currently cost up to $3.0 million
per aircraft while the costs of re-engining programs are significantly higher.
No assurances are possible in respect of the actual cost which the Partnership
wo uld be required to pay in order to effect a hush-kit or re-engining
modification as now available or as may be developed in the future. The
General Partners will continue to evaluate the potential benefits of
hush-kitting or re-engining some or all of the Partnership's Stage 2 aircraft.
In addition to FAA activity in noise abatement, other countries have adopted or
are considering adopting noise compliance standards which would have a similar
effect of reducing the ability of an airline to operate Stage 2 aircraft in
such jurisdictions. In 1989, the European Economic Community adopted a
non-addition rule which directed each member country to pass the necessary
legislation to prohibit airlines from adding Stage 2 aircraft to their fleets
after November 1, 1990. The rule has specific exceptions for leased aircraft
and does allow the continued use of Stage 2 aircraft which were in operation
before November 1, 1990, although adoption of rules requiring eventual
phase-out of Stage 2 aircraft in the member countries is anticipated. The
Partnership does not currently have any aircraft on lease to airlines outside
the United States. The effect of these regulations on the ability of the
Partnership to re-lease or remarket its aircraft in the future is not
determinable at this time.
Competition
The aircraft leasing industry is highly competitive and the success of any
lessor is largely dependent upon the nature of the aircraft within its
portfolio. The Partnership competes with aircraft manufacturers, distributors,
airlines, and other operators, equipment managers, leasing companies, financial
institutions and other parties engaged in leasing, managing, and marketing
aircraft. Such competitors may lease or sell aircraft at lower rates or prices
than the Partnership and provide benefits, such as direct maintenance crews,
and support services which the Partnership cannot provide. Competition may
include certain affiliates of the General Partners.
Since the Partnership's aircraft are subject to operating leases, the
Partnership will be required to re-lease or sell such aircraft after the
expiration of the current lease terms. Conditions in the market for commercial
aircraft have remained intensely competitive in recent years as the number of
Stage 2, narrow-body commercial aircraft which are being offered for sale or
re-lease has remained in excess of demand.
Within this intensely competitive environment, the General Partners' ability to
renew leases or to sell the aircraft owned by the Partnership is dependent
upon, among other factors: (a) general economic conditions and economic
conditions affecting the airline industry in particular; (b) the current
operating profile of the aircraft, encompassing the age of the aircraft and the
number of hours and cycles flown and compliance with all issued AD's as well as
the general maintenance conditions of the aircraft; (c) the current fleet plans
of the major end-users of the aircraft type; (d) any costs required to
refurbish aircraft and to reconfigure aircraft to comply with all issued AD's
and to conform with similar aircraft within a potential lessee's fleet; (e) any
cost required to conform the aircraft to future Stage 3 noise restrictions; (f)
the availability to the lessee or potential lessee of other similar aircraft
from the Partnership's competition; and (g) the ability of the Managing Ge
neral Partner to effectively market the aircraft. It is possible that any
future lease renewals might be at lower lease rates than the Partnership
currently receives, adversely impacting revenue.
Employees
The Partnership has no employees. The officers, directors and employees of the
General Partners and their affiliates perform services on behalf of the
Partnership. The General Partners are entitled to certain fees and
reimbursement of certain out-of-pocket expenses incurred in connection with the
performance of these management services. Reference is made to Note 6 to the
Financial Statements on page 10 of the Partnership's Annual Report to
Unitholders for the year ended December 31, 1994, for a discussion of the fees
and reimbursable expenses paid to the General Partners.
Item 2. Properties
Incorporated by reference to the "Portfolio Review" section on page 3 and Note
4 to the Financial Statements on pages 8 - 10, respectively, of the
Partnership's Annual Report to Unitholders for the year ended December 31,
1994.
Item 3. Legal Proceedings
The Partnership filed an administrative claim against Pan American World
Airways, Inc. ("Pan Am") in the Bankruptcy Court as a result of Pan Am's return
of the Partnership's aircraft in November 1991. The aircraft was subsequently
sold in February 1992. The Partnership is seeking to recover certain rent and
maintenance costs associated with Pan Am's failure to comply with the return
provisions of its lease. Given the status of Pan Am's estate, the General
Partners are doubtful that the Partnership will obtain a significant recovery.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders, through the solicitation
of proxies or otherwise, during the fourth quarter of 1994.
PART II
Item 5. Market for the Partnership's Limited Partnership Interests and Related
Security Holders Matters
The Units represent the economic rights attributable to limited partnership
interests in the Partnership.
There is no established public trading market for the purchase and sale of
Units. As of December 31, 1994, the number of Unitholders was approximately
7,353.
Information concerning the quarterly cash distributions paid per limited
partnership unit is incorporated herein by reference to the "Table of Contents"
page and the Message to Investors and Note 5 of the Notes to Financial
Statements on page 10 of the Partnership's Annual Report to Unitholders for the
year ended December 31, 1994.
Item 6. Selected Financial Data
Incorporated by reference to the "Financial Results" section on page 2 of the
Partnership's Annual Report to Unitholders for the year ended December 31,
1994.
Item 7. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Liquidity and Capital Resources
As of December 31, 1994, the Partnership had six of its seven aircraft on
lease. Two aircraft were on lease to USAir, Inc. ("USAir"), two aircraft were
on lease to Trans World Airlines Inc. ("TWA"), one aircraft was on lease to
Delta Air Lines, Inc. ("Delta") and one aircraft was on lease to Continental
Airlines ("Continental"). The Partnership's remaining aircraft, previously on
lease with TWA, is currently in storage. At December 31, 1994, all airlines
were current on their lease obligations.
The General Partners reached an agreement with TWA to extend the leases for two
of the Partnership's three 727-200 aircraft, which were previously scheduled to
expire in October and November 1994. Both leases were extended at a monthly
lease rate of $32,500 per aircraft and will expire in April 1995, with TWA
retaining the option of leasing the aircraft thereafter on a month to month
basis. While the new lease rate represents a decrease from the prior monthly
rate of $40,000, it is in line with prevailing market rates. TWA returned the
third aircraft to the Partnership subsequent to its lease expiration on
November 30, 1994. The General Partners are pursuing efforts to re-lease the
aircraft with another airline. However, in light of the continued difficulties
in the aircraft leasing industry and limited leasing opportunities for Stage 2
aircraft, there can be no assurance that such efforts will be successful. In
the event that efforts to re-lease the aircraft are unsuccessful, th e General
Partners will pursue other alternatives including the possible sale of the
aircraft.
Pursuant to the terms of the lease agreement executed with Continental in
February 1994, the Partnership agreed to provide up to $600,000 of financing to
the airline to perform modification work on the Partnership's MD-80 Series
aircraft, including advanced avionics, interior furnishings and exterior paint.
On June 7, 1994, the Partnership made its first advance to Continental in the
amount of $278,203. The modification financing is repayable over the life of
the lease at an interest rate of 8% per annum for advances made before February
1, 1996, and, with respect to advances made after February 1, 1996, a rate per
annum equal to the yield to maturity of United States Treasury Notes having a
maturity closest to the remaining terms of the lease, plus 4.25 percent. As of
December 31, 1994, Continental had made principal payments on the loan
totalling $38,209.
The Partnership currently has two 737-200 aircraft on-lease with USAir at a
quarterly lease rate of $105,000 per aircraft. USAir has notified the
Partnership that it will exercise its option under the current lease agreements
to terminate the leases for both aircraft on May 1, 1995 and return the
aircraft to the Partnership soon thereafter. While the General Partners will
attempt to find a replacement lessee for the aircraft, there can be no
assurance that such efforts will be successful.
The Partnership is faced with an intensely competitive environment in the
aircraft leasing industry which has had an immediate and material impact on
the business of the Partnership. In particular, the large oversupply of
aircraft available for lease has resulted in significant reductions in market
lease rates thereby impacting the lease rates obtained by the Partnership as
leases for the aircraft have been either renewed or extended.
At December 31, 1994, the Partnership had cash and cash equivalents of
$2,785,283, as compared to $1,089,805 at December 31, 1993. The $1,695,478
increase in cash and cash equivalents is attributable to the proceeds from the
sale of the aircraft, formerly on lease with Carnival Airlines ("Carnival"), in
February 1994, and the transfer of $1,460,656 from restricted cash to operating
cash in the fourth quarter of 1994. The Partnership's restricted cash totalled
$321,797 at December 31, 1994, as compared to $3,048,884 at December 31, 1993.
The $2,727,087 decrease is due to: (i) $750,000 paid to Continental in February
1994 in accordance with their new lease agreement; (ii) $121,000 paid to
Carnival in February 1994 to reimburse their security deposit and a portion of
maintenance costs incurred while leasing the Partnership's aircraft; (iii)
$117,228 which was transferred from restricted to operating cash and included
in the first quarter 1994 distribution; (iv) $278,203 loaned to Continental on
June 7, 1994; and (v) $1,460,656 which was transferred from restricted cash to
operating cash in the fourth quarter of 1994. At December 31, 1994, the
Partnership's restricted cash was comprised of aircraft maintenance reserves.
At December 31, 1993, the Partnership's restricted cash was comprised of: (i)
$2,968,884 of aircraft maintenance reserves; and (ii) an $80,000 security
deposit from Carnival, which was subsequently returned to Carnival in February
1994, as a result of the termination of its lease.
The aforementioned payment of $750,000 to Continental in February 1994 is the
primary reason for the decrease in the Partnership's maintenance payable
balance from $791,000 at December 31, 1993 to $0 at December 31, 1994.
During the year ended December 31, 1994, the Partnership paid distributions to
the Unitholders for the period from October 1, 1993 to December 31, 1993 and
the first three quarters of 1994, in the amounts of $939,805 and $3,775,824,
respectively, which represent approximately $.19 and approximately $.76 per
Unit, respectively. At December 31, 1994, the Partnership had a distribution
payable of $1,174,627 or approximately $.24 per Unit. This amount reflects the
1994 fourth quarter cash distribution which was funded from cash flow from
operations. This distribution was subsequently paid on February 2, 1995.
Future cash distributions will be determined on a quarterly basis after an
evaluation of the Partnership's current and expected financial position.
At December 31, 1994, deferred revenue totalled $90,000 as compared to $150,000
at December 31, 1993. The decrease is primarily attributable to the expiration
of the lease agreement with TWA on November 30, 1994 for one of the
Partnership's 727-200 aircraft, and to the change in the timing of the TWA
lease rental payments on the remaining two aircraft in accordance with the
amended lease agreements. The decrease was partially offset by the timing of
the Continental rental payments in accordance with the new lease agreement.
Results of Operations
Substantially all of the Partnership's revenue was generated from the leasing
of the Partnership's aircraft to commercial air carriers under triple net
operating leases. The balance of the Partnership's revenue consisted of
interest income.
1994 compared to 1993
For the twelve months ended December 31, 1994, the Partnership reported a net
loss of $783,993 as compared to a net loss of $17,876,870 for the corresponding
period in 1993. The decrease in net loss is primarily attributable to the
write-down of the net book values of the Partnership's aircraft in December
1993. Excluding the writedown, the Partnership would have realized net income
of $389,152 for the year ended December 31, 1993.
Rental income for the twelve months ended December 31, 1994, was $5,067,500 as
compared to $4,979,382, respectively, for the corresponding period in 1993.
The increase is due to the new lease agreement with Continental which became
effective on March 15, 1994, partially offset by a reduction in income
resulting from the new lease agreement with TWA and the absence of revenue from
the aircraft formerly leased to Carnival that was sold in February 1994.
Interest income for the twelve months ended December 31, 1994 totalled $112,523
as compared to $104,832 for the corresponding period in 1993. The increase is
mainly attributable to an increase in interest rates on the Partnership's cash
accounts, and interest income recorded on the loan to Continental.
Other income for the twelve months ended December 31, 1994 was $13,228 as
compared to $2,177,884 for the corresponding period in 1993. Upon the
expiration of the previous lease with Continental in April 1993, $2,060,656
remaining in the maintenance reserve previously established to provide funding
for maintenance on the Partnership's MD-80 Series aircraft was retained by the
Partnership in accordance with the terms of the lease agreement and recognized
as other income.
Depreciation expense totalled $5,224,476 for the twelve months ended December
31, 1994 as compared to $6,135,828 for the corresponding period in 1993. The
decrease is primarily attributable to the write-down of the net book values of
the Partnership's aircraft in December 1993.
Management fees for the twelve months ended December 31, 1994, were $448,305 as
compared to $360,017 for the corresponding period in 1993. Management fees are
based on rental income and operating cash flow. The increase is attributable
to higher rental income during 1994 as a result of the new lease agreement with
Continental.
For the twelve months ended December 31, 1994, operating expenses were $71,789
as compared to $170,071 for the corresponding period in 1993. Operating
expenses were higher in 1993 primarily as a result of storage, maintenance and
insurance costs incurred as a result of the idle status of the Partnership's
MD-80 Series aircraft.
1993 compared to 1992
For the twelve months ended December 31, 1993, the Partnership reported a net
loss of $17,876,870 as compared to net income of $672,078 for the corresponding
period in 1992. The decrease is primarily attributable to the write-down of
the net book values of the Partnership's aircraft in December 1993 and, to a
lesser extent, lower rental income from the Partnership's operating leases.
Excluding the write-down, the Partnership would have recorded net income of
$389,152 for the year ended December 31, 1993. The write-down is also the
primary reason for the $17,957,472 increase in total expenses to $25,138,968 at
December 31, 1993 from $7,181,496 at December 31, 1992.
After adding back non-cash expenses, including depreciation and the write-down
of the total carrying value of the Partnership's aircraft in 1993, Partnership
operations generated net cash flow of $3,979,973 and $6,516,611 for the years
ended December 31, 1993 and 1992, respectively.
Rental income for the twelve months ended December 31, 1993, was $4,979,382 as
compared to $7,696,005 for the corresponding period in 1992. The decreases are
primarily the result of: (i) Delta, TWA and USAir paying lower rental rates
pursuant to the airlines' amended lease agreements; and (ii) the expiration of
the previous lease with Continental on April 28, 1993.
Interest income for the twelve months ended December 31, 1993 of $104,832 was
virtually unchanged from $105,069 for the corresponding period in 1992.
Other income for the twelve months ended December 31, 1993, was $2,177,884 as
compared to $52,500 for the corresponding period in 1992. The increase is
primarily attributable to the expiration of the previous lease with Continental
in April 1993. In accordance with the terms of the lease agreement, upon the
expiration of the lease, $2,060,656 remaining in the maintenance reserve
previously established to provide funding for maintenance on the Partnership's
MD-80 Series aircraft were retained by the Partnership and recognized as other
income in 1993.
Depreciation of $6,135,828 for the twelve months ended December 31, 1993, was
virtually unchanged from $6,161,965, for the corresponding period in 1992
Management fees for the twelve months ended December 31, 1993, were $360,017 as
compared to $444,211 for the corresponding period in 1992. Management fees are
based on rental income and operating cash flow. The decreases are primarily
the result of lower rental income due to the amended lease agreement with
Delta, TWA and USAir and the expiration of the lease with Continental.
Partially off-setting the decreases, effective April 28, 1992, the incentive
management fee rate paid to the Managing General Partner increased to 4.5% of
operating cash flow from 1.5% of operating cash flow, and a re-lease fee of
3.5% of revenue generated by renewed leases is paid to the General Partners, in
accordance with the Partnership Agreement.
General and administrative expenses for the twelve months ended December 31,
1993, were $207,030 as compared to $503,493 for the corresponding period in
1992. The decreases are primarily due to lower legal expenses. Substantial
legal fees were incurred during 1992 in connection with the Continental and TWA
bankruptcies and litigation with Continental regarding whether certain repairs
were reimbursable from the Maintenance Reserves.
For the twelve months ended December 31, 1993, operating expenses were $170,071
as compared to $71,827 for the corresponding period in 1992. During 1993, the
Partnership incurred substantial costs for storage, maintenance and insurance
for the MD-80 Series aircraft put in storage in May 1993.
Inflation and Changes in Prices
Inflation has had no material impact on the operations or financial condition
of the Partnership from inception through December 31, 1994. However, inflation
and changing prices in addition to other factors, such as the solvency of the
Partnership's lessees, may affect leasing rates and the eventual selling price
of the Aircraft.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to pages 4 through 12 of the Partnership's Annual
Report to Unitholders for the year ended December 31, 1994.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Partnership
The Partnership has no officers or directors. The General Partners jointly
manage and control the affairs of the Partnership and have general
responsibility and authority in all matters affecting its business.
Information concerning the directors and executive officers of the
General Partners are as follows:
Jet Aircraft Leasing Inc.
Name Office
Moshe Braver Director and President
John Stanley Vice President and Chief Financial Officer
Andrew Falk Vice President
Certain officers and directors of Jet Aircraft Leasing, Inc. are now serving
(or in the past have served) as officers or directors of entities which act as
general partners of a number of limited partnerships which have sought
protection under the provisions of the Federal Bankruptcy Code. The
partnerships sought the protection of the bankruptcy laws to protect the
partnerships' assets from the loss through foreclosure.
Moshe Braver, 41, is currently a Managing Director of Lehman Brothers and has
held such position since October 1985. During this time, he has held positions
with the Business Analysis Group, International and Capital Markets
Administration and currently, with the Diversified Asset Group. Mr. Braver
joined Shearson Lehman Brothers in August 1983 as Senior Vice President. Prior
to joining Shearson, Mr. Braver was employed by the accounting firm of Coopers
& Lybrand from January 1975 through August 1983 as an Audit Manager. He
received a Bachelor of Business Administration degree from Bernard Baruch
College in January 1975 and is a Certified Public Accountant.
John D. Stanley, 32, Vice President, has worked with the Diversified Asset
Group since October 1988. Mr. Stanley received a B.A. in Economics from the
University of Wisconsin-Madison in 1984 and a Master of Management Degree in
Finance and Marketing from Northwestern University in 1988. From 1984 to 1986,
Mr. Stanley worked as a Financial Analyst for Kidder, Peabody and Co.
Andrew Falk, 28, is an Assistant Vice President of Lehman Brothers Inc. in its
Diversified Asset Group and has been employed by Lehman since March of 1991.
From July of 1989, Mr. Falk was employed by GA/Partners, the real estate
consulting and advisory unit of Arthur Andersen & Company, as a Research
Analyst. Mr. Falk earned a Master of Science degree in Real Estate Investment
from New York University in 1993 and a B.A. degree in Economics from Duke
University in 1989.
CIS Aircraft Partners, Inc.
Name Office
Thomas J. Prinzing Director and President
Frank J. Corcoran Director, Vice President and Treasurer
Daniel L. Wieneke Director, Vice President and Secretary
Robin A. Konicek Vice President
As reported on the Partnership's Current Report on Form 8-K, dated February 28,
1989, on Friday, January 13, 1989, Continental Information Systems Corporation,
and certain of its subsidiaries, including CIS Corporation, filed voluntary
petitions for reorganization under Chapter 11 of the Federal Bankruptcy Code.
As described below, various directors and executive officers of CAP hold
similar positions for Continental Information Systems Corporation, CIS
Corporation and such subsidiaries.
On November 29, 1994, the Bankruptcy Court for the Southern District of New
York confirmed the Trustee's Proposed Joint Plan of Reorganization. The
approved Plan became effective on December 21, 1994. As a result of the
reorganization, the Directors and Officers of CAP resigned from and took on
various directorships for Continental Information Systems Corporation, CIS
Corporation, and their subsidiaries.
Thomas J. Prinzing, 49, is President of CIS Aircraft Partners, Inc. From 1989
to 1991, Mr. Prinzing was Senior Vice President of the CIS Capital Equipment
Group. Mr. Prinzing was Chief Financial Officer of Continental Information
Systems Corporation from November 1984 until January 1989. Mr. Prinzing, a
Certified Public Accountant, received a Bachelor of Commerce degree from the
University of Windsor.
Frank J. Corcoran, 44, joined CIS Corporation in November 1994 as Senior Vice
President and Chief Financial Officer. From 1992 until joining CIS
Corporation, Mr. Corcoran was Vice President and General Manager of Unisys
Finance Corporation, an equipment leasing and finance subsidiary of Unisys
Corporation. Previously, he served as Chief Financial Officer and Controller
of Unisys Finance Corporation. Prior to that, Mr. Corcoran held positions of
Corporate Tax Manager at Unisys Corporation; Controller, U.S. Operations of
Lucas Industries, Inc.; Financial Analyst with Detroit Edison Company; and a
Senior Accountant with KPMG Peat Marwick. Mr. Corcoran holds a B.S. in
Business Administration from Wayne State University, an M.S. in Taxation from
Walsh College, and is a Certified Public Accountant.
Daniel L. Wieneke, 49, is Senior Vice President, General Counsel and Secretary
of CIS Corporation. He has been employed at CIS Corporation since January 1992
and prior to that was Senior Vice President, General Counsel and Secretary of
MetLife Capital Credit Corporation. Mr. Wieneke received a B.A. Degree from
St. Mary's College and his Juris Doctor from William Mitchell College of Law.
Robin A. Konicek, 38, is a Vice President of CIS Aircraft Partners, Inc. and is
responsible for domestic and international aircraft marketing. She has been
active in the financing, trading and management of aircraft since 1982. Prior
to joining CIS in 1986, Ms. Konicek was a Vice President of Crocker Bank
Airlines and Aerospace Group, with major responsibility for developing the U.S.
market. She holds an A.B. from Stanford University and an M.B.A. from the
University of California, Los Angeles.
Item 11. Executive Compensation
No compensation was paid by the Partnership to the officers and directors of
the General Partners. See Item 13 below for a description of the compensation
and fees paid to the General Partners and their affiliates by the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners As of the date hereof,
no person is known by the Partnership to be the beneficial owner of more than
five percent of the Units of the Partnership.
(b) Security ownership of management The Partnership has no directors or
officers, and neither of the General Partners of the Partnership owns any
Units. The Assignor Limited Partners for the Partnership, CIS Assignor L.P.A.,
Inc. (an affiliate of CIS), owns 5 Units.
None of the directors or officers of the General Partners owned any
Units as of December 31, 1994.
(c) Changes in control Other than as described herein, the Partnership
knows of no arrangements, the operation of the terms of which may at a
subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
The General Partners and their affiliates received or will receive certain
types of compensation, fees, or other distributions in connection with the
operation of the Partnership. The fees and compensation were not determined
by, and may not necessarily reflect, arm's length negotiations. None of the
officers and directors of the General Partners received any compensation from
the Partnership. The Shareholder Services Group provides partnership
accounting and investor relations services for the Partnership. Prior to May
1993, these services were provided by an affiliate of a general partner.
Transfer agent services and certain tax reporting services are provided by
Service Data Corporation, an unaffiliated company. For additional information
on fees paid to the General Partners and affiliates, refer to Note 6 of the
Notes to the Financial Statements on page 10 of the Partnership's Annual Report
to Unitholders for the year ended December 31, 1994.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
Page
Number
Balance Sheets - December 31, 1994 and 1993 (1)
Statements of Operations - For the years ended
December 31, 1994, 1993 and 1992 (1)
Statements of Partners' Capital (Deficit) -
For the years ended December 31, 1994, 1993 and 1992 (1)
Statements of Cash Flows - For the years ended
December 31, 1994, 1993 and 1992 (1)
Notes to Financial Statements (1)
Report of Independent Public Accountants (1)
(1) Incorporated by reference to pages 4 - 12 of the
Partnership's Annual Report to Unitholders for the year
ended December 31, 1994.
2. Financial Statement Schedules
No schedules are presented because the information is not
applicable or is included in the Financial Statements or the
notes thereto.
3. Exhibits
(3) Articles of Incorporation and bylaws (Incorporated by
reference to the Partnership's Prospectus filed with the
Commission on April 17, 1987.)
(4) Depositary Agreement (Incorporated by reference to
Exhibit 4.5 to the Partnership's Registration Statement on Form
S-1 filed with the Commission on April 17, 1987.)
(10) Escrow Agreement (Incorporated by reference to Exhibit
10.12 to the Partnership's Registration Statement on Form S-1
filed with the Commission on April 17, 1987.)
(13.1) Annual Report to Unitholders for the year ended
December 31, 1994.
(b) The Partnership filed no current reports on Form 8-K during the last
quarter of the period covered on this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JETSTREAM, L.P.
BY: Jet Aircraft Leasing Inc.
Administrative General Partner
Date: March 28, 1995 BY: /s/ Moshe Braver
Name: Moshe Braver
Title: Director and President
BY: CIS Aircraft Partners, Inc.
Managing General Partner
Date: March 28, 1995 BY: /s/ Thomas J. Prinzing
Name: Thomas J. Prinzing
Title: Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
CIS AIRCRAFT PARTNERS, INC.
A General Partner
Date: March 28, 1995
BY: /s/ Thomas J. Prinzing
Thomas J. Prinzing
Director and President
Date: March 28, 1995
BY: /s/ Frank J. Corcoran
Frank J. Corcoran
Director, Vice President
and Treasurer
Date: March 28, 1995
BY: /s/ Daniel L. Wieneke
Daniel L. Wieneke
Director, Vice President
and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
JET AIRCRAFT LEASING INC.
A General Partner
Date: March 28, 1995
BY: /s/ Moshe Braver
Moshe Braver
Director and President
Date: March 28, 1995
BY: /s/ John Stanley
John Stanley
Vice President and
Chief Financial Officer
Date: March 28, 1995
BY: /s/ Andrew Falk
Andrew Falk
Vice President
JetStream, L.P.
EXHIBIT 13.1
JetStream L.P. 1994 Annual Report
JetStream, L.P. commenced operations in 1987, and was formed to acquire
used commercial aircraft subject to triple net operating leases with
commercial aircraft carriers. Since inception, limited partners have
received cash distributions totalling approximately $13.48 per $20.00
limited partnership unit ("Unit"). The following table provides the
quarterly cash distributions per Unit paid by the Partnership for the
years ended December 31, 1994 and 1993.
Quarter Declared 1994 1993
1st Quarter $ .255 $ .300
2nd Quarter .261 .290
3rd Quarter .247 .133
4th Quarter .237 .190
TOTAL $ 1.00 $ .913
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers The Shareholder Services Group
Service Data Corporation P.O. Box 157
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144 Attn: Chris Irrera -
Financial Communications
(800) 223-3464 (800) 223-3464
Contents
1 Message to Investors
3 Portfolio Review
4 Financial Statements
7 Notes to Financial Statements
12 Report of Independent Public Accountants
Message to Investors
Presented for your review is the 1994 Annual Report for JetStream, L.P. (the
"Partnership"). In this report, we provide a discussion of conditions in the
airline industry and an update on the leasing status of the Partnership's
aircraft.
Industry Overview
Intense competition continued to dominate the U.S. airline industry during
1994. Ongoing fare wars and increased operating and maintenance costs
inhibited any significant improvement in overall operating results for the
industry which, despite showing some improvement from 1993, remained weak. The
competitive environment and years of heavy losses have forced the major U.S.
airlines to implement cost-cutting measures, including employee layoffs and the
elimination of unprofitable routes, in an effort to improve cash flow, restore
profitability and compete more effectively against low-cost, short-haul air
carriers. While many industry analysts believe that conditions in the U.S.
airline industry will improve gradually in the coming year as a result of the
airlines' efforts to streamline operations, the level of improvement is
expected to be modest. Additionally, efforts to increase passenger traffic,
which was up approximately 3% in 1994 as compared to 1993, could be hindered by
conc erns over flight safety and aircraft maintenance as well as the advent of
new communications technologies, such as video conferencing, which have reduced
the need for many business travelers to fly.
The leasing market for Stage 2 aircraft, such as the Partnership's, has also
been severely impaired in recent years by the 1991 implementation of noise
compliance regulations developed in accordance with the Airport Noise and
Capacity Act of 1990. These regulations provide, among other things, phase-out
and non-addition rules under which the number of Stage 2 aircraft operated by
domestic carriers would be limited to 75% of 1990 base levels by the end of
1994, 50% of 1990 base levels by the end of 1996, and 25% of 1990 base levels
by the end of 1998. Furthermore, opportunities for leasing Stage 2 aircraft
abroad are limited primarily due to the age of the existing fleet and
non-compliance with noise regulations. For example, Stage 2 aircraft are
precluded from operating in many European countries which have implemented
stringent Stage 3 noise regulations.
These conditions, combined with the recent trend of decreasing capacity in the
domestic commercial aircraft fleet and the lingering oversupply of aircraft
available for lease, have had a substantial and long lasting impact on the
aircraft leasing industry and on residual aircraft values. These factors have
also led to declines in market lease rates for aircraft in recent years,
particularly older narrow-body Stage 2 models.
Portfolio Update
As we have discussed in recent reports, leases for four of the Partnership's
six aircraft currently on-lease are scheduled to expire during the second
quarter of 1995. Specifically, USAir has notified the Partnership that it
will exercise its option under the current lease agreements to terminate the
leases for both of the Partnership's 737-200 aircraft in May 1995. USAir
currently makes quarterly lease payments to the Partnership in the amount of
$105,000 per aircraft. In addition, the leases with Trans World Airlines
("TWA") for two of the Partnership's 727-200 aircraft will expire in April
1995. TWA currently pays a monthly lease rate of $32,500 per aircraft. While
TWA retains the option of leasing the aircraft on a month-to-month basis
subsequent to the lease expirations, it is uncertain at present whether the
airline will exercise this option. TWA returned the Partnership's third
727-200 aircraft after its lease expired in November 1994 and the General
Partners are currently attempting to locate a replacement lessee.
In the event efforts to re-lease any or all of the aforementioned aircraft are
unsuccessful, the Partnership's future cash flow and, consequently, the level
of cash available for distribution to limited partners would be significantly
reduced. Furthermore, even if the planes are re-leased, it will likely be at
lower rates which would also have a negative impact on cash flow. Please refer
to the Portfolio Review section on page 3 of this report for information on the
leasing status of the Partnership's remaining aircraft.
Financial Results
The following table summarizes the Partnership's financial results for the
years ended December 31, 1994, 1993, 1992, 1991 and 1990. For additional
information, please refer to the financial statements and notes to the
financial statements beginning on page 4 of this report.
1994 1993 1992 1991 1990
Rental
Revenues $ 5,067,500 $ 4,979,382 $ 7,696,005 $10,829,114 $12,746,937
Write-down
of Aircraft - 18,266,022 - - -
Total Expenses 5,977,244 25,138,968 7,181,496 10,446,082 7,664,453
Net Income (Loss) (783,993) (17,876,870) 672,078 647,877(1) 5,498,465
Net Income (Loss)
per Limited
Partnership
Unit(2) (0.16) (3.62) .14 .13(1) 1.11
Total Assets 23,457,496 29,886,833 55,476,952 64,522,301(1) 74,099,275
Partners'
Capital 21,939,577 27,674,021 50,067,951 57,554,215(1) 68,573,800
Net cash
provided by
operating
activities 6,301,101 3,979,973 6,516,611 10,566,761 11,385,154
Cash
distributions
per Unit(2)(3) 1.00 .91 1.65 2.30 2.40
(1) Includes a provision for loss of $2,897,697 on disposition of assets
reflecting the February 13, 1992 sale of the Boeing 727-200 previously on lease
to Pan Am.
(2) 4,895,005 Units outstanding.
(3) Distribution amounts are reflected in the year for which they are
declared. The Partnership's fourth quarter cash distribution is paid in
January of the following year.
- Rental revenues for the year ended December 31, 1994 increased by
approximately 2% from the year ended December 31, 1993, primarily due to the
lease executed with Continental Airlines in February 1994.
- The highly competitive and weakened conditions in the aircraft leasing
industry have had a significant negative impact on the residual value of the
Partnership's fleet of aircraft. It is the General Partners' belief that the
total value has declined substantially. Accordingly, as of December 31, 1993,
the General Partners reduced the carrying value of the aircraft by $18,266,022.
Excluding the write-down, the Partnership would have recorded net income of
$389,152 for the year ended December 31, 1993. The write-down is also the
primary reason for the increase in total expenses during 1993.
Summary
The Partnership continues to be faced with an extremely difficult and
competitive environment in the aircraft leasing industry. The General
Partners' strategy is to try and maintain the Partnership's aircraft on-lease
and generating revenue. Accordingly, our primary focus at this time is
re-leasing the TWA and USAir aircraft subsequent to the expirations of their
respective leases. However, in light of the limited leasing opportunities for
Stage 2 aircraft as discussed above, there can be no assurances that such
efforts will be successful. In the event efforts to re-lease the aircraft are
unsuccessful, the General Partners will pursue other alternatives including the
possible sale of the aircraft.
Since the total return from your investment in the Partnership is dependent
upon the aircrafts' ultimate selling prices, declines in residual values have
had an adverse impact on your investment. The future performance of the
Partnership will be dependent upon the General Partners' ability to keep the
remaining aircraft on-lease, which, in turn, is dependent on the strength of
the airline industry and the stabilization of the supply and demand for
aircraft. We will update you on the status of our efforts to re-lease the
Partnership's aircraft in forthcoming reports.
Very truly yours,
Jet Aircraft Leasing Inc. CIS Aircraft Partners, Inc.
A General Partner A General Partner
/s/Moshe Braver /s/Thomas J. Prinzing
Moshe Braver Thomas J. Prinzing
President President
March 28, 1995
Portfolio Review
Following is a review of leasing activity during 1994:
- Continental Airlines - In February 1994, an agreement was
reached to re-lease the Partnership's MD-80 Series aircraft with
Continental for a term of four years. The lease agreement, which
commenced March 15, 1994, requires Continental to make monthly lease
payments to the Partnership of $180,000. In conjunction with the
execution of the lease agreement, the Partnership agreed to loan the
airline up to $600,000 to perform modification work on the aircraft.
On June 7, 1994, the Partnership made its first advance to Continental,
in the amount of $278,203. The financing is repayable on a monthly
basis over the life of the lease at an interest rate of 8% per annum.
- Delta Airlines - In May 1994, Delta extended its lease for the
Partnership's 737-200 advanced aircraft through December 1996. Delta
pays the Partnership a monthly lease rate of $95,000. Under the terms
of the lease, Delta has the option of returning the aircraft prior to
the lease expiration provided it gives the Partnership seven months
notice. To date, Delta has not given the Partnership notice of its
intent to return the aircraft. As a result, the aircraft will remain
on lease with Delta through at least October 1995.
TWA - Leases with TWA for two of the Partnership's three
727-200 aircraft, which were scheduled to expire in October and
November of 1994, were extended through April 1995 at a monthly lease
rate of $32,500. While this rate represents a decline from the
previous rate of $40,000 per month, it is in line with prevailing
market rates. TWA returned the third aircraft subsequent to its lease
expiration in November 1994. The General Partners are continuing
efforts to re-lease the aircraft, however, there can be no assurance
that such efforts will be successful.
The following table highlights the Partnership's portfolio of aircraft as of
December 31, 1994 and includes estimated market values as of that date. As
discussed, the Partnership has four leases that will be expiring over the
remainder of 1995.
Estimated
Aircraft Model Acquisition Market Lease Noise
Year Delivered Lessee Cost(1) Value(2) Expiration(3) Compliance
MD-80 Series Continental $27,396,997 $17,500,000 3-15-98 Stage 3
1986
B-737-200 USAir 7,601,999 700,000 5-01-95 Stage 2
1971
B-737-200 USAir 7,601,999 700,000 5-01-95 Stage 2
1971
B-737-200 ADV Delta 15,222,609 4,500,000 12-2-96 Stage 2
1979
B-727-200 N/A(4) 5,448,499 500,000 N/A Stage 2
1969
B-727-200 TWA 5,448,499 500,000 4-30-95 Stage 2
1969
B-727-200 TWA 5,448,499 500,000 4-30-95 Stage 2
1969
(1) Includes a 1.5% fee paid to the Managing General Partner at the
acquisition of the aircraft.
(2) Estimated market values for the aircraft are based upon several factors
including independent appraisals, third party publications, the General
Partners' own experience and the unique circumstances regarding the equipment
and the lessees. These estimates are subject to a variety of assumptions.
Additionally, there can be no assurance that the Partnership would receive an
amount equal to the market value shown above upon the sale of any of the
aircraft.
(3) Lease expiration dates do not include renewal options.
(4) Reference is made to the discussion above regarding the idle status of
the aircraft previously on-lease with TWA.
Financial Statements
Balance Sheets
December 31, 1994 and 1993
Assets 1994 1993
Aircraft, at cost $ 25,334,000 $ 25,684,000
Less-accumulated depreciation 5,224,476 -
20,109,524 25,684,000
Cash and cash equivalents 2,785,283 1,089,805
Restricted cash 321,797 3,048,884
Rent receivable - 20,000
Loan receivable 239,994 -
Interest receivable 898 7,303
Prepaid expenses - 36,841
Total Assets $ 23,457,496 $ 29,886,833
Liabilities and Partners' Capital
Liabilities:
Accounts payable
and accrued expenses $ 253,292 $ 252,007
Maintenance payable - 791,000
Distribution payable 1,174,627 939,805
Deferred revenue 90,000 150,000
Security deposit - 80,000
Total Liabilities 1,517,919 2,212,812
Partners' Capital (Deficit):
General Partners (758,616) (701,271)
Limited Partners
(4,895,005 units
outstanding) 22,698,193 28,375,292
Total Partners' Capital 21,939,577 27,674,021
Total Liabilities
and Partners' Capital $23,457,496 $29,886,833
Statements of Partners' Capital (Deficit)
For the years ended December 31, 1994, 1993 and 1992
Limited General Total
Partners' Partners' Partners'
Capital (Deficit) Capital
Balance at
January 1, 1992 $57,956,684 $ (402,469) $57,554,215
Net income 665,357 6,721 672,078
Cash distributions (8,076,758) (81,584) (8,158,342)
Balance at
December 31, 1992 50,545,283 (477,332) 50,067,951
Net loss (17,698,101) (178,769) (17,876,870)
Cash distributions (4,471,890) (45,170) (4,517,060)
Balance at
December 31, 1993 28,375,292 (701,271) 27,674,021
Net loss (776,153) (7,840) (783,993)
Cash distributions (4,900,946) (49,505) (4,950,451)
Balance at
December 31, 1994 $22,698,193 $ (758,616) $21,939,577
Statements of Operations
For the years ended December 31, 1994, 1993 and 1992
Income 1994 1993 1992
Rental $ 5,067,500 $ 4,979,382 $ 7,696,005
Interest 112,523 104,832 105,069
Other (Note 4) 13,228 2,177,884 52,500
Total Income 5,193,251 7,262,098 7,853,574
Expenses
Depreciation 5,224,476 6,135,828 6,161,965
Management fees 448,305 360,017 444,211
General and administrative 212,674 207,030 503,493
Operating 71,789 170,071 71,827
Bad debt expense 20,000 - -
Write-down of aircraft
(Note 2) - 18,266,022 -
Total Expenses 5,977,244 25,138,968 7,181,496
Net Income (Loss) $ (783,993) $(17,876,870) $ 672,078
Net Income (Loss)
Allocated:
To the General Partners $ (7,840) (178,769) $ 6,721
To the Limited Partners (776,153) (17,698,101) 665,357
$ (783,993) $(17,876,870) $ 672,078
Per limited
partnership unit
(4,895,005
outstanding) $ (0.16) $ (3.62) $ 0.14
Statements of Cash Flows
For the years ended December 31, 1994, 1993 and 1992
Cash Flows from
Operating Activities: 1994 1993 1992
Net income (loss) $ (783,993) $(17,876,870) $ 672,078
Adjustments to
reconcile net income
(loss) to net cash
provided by
operating activities:
Depreciation 5,224,476 6,135,828 6,161,965
Write-down
of aircraft - 18,266,022 -
Restricted cash 2,727,087 (160,311) 595,000
Increase (decrease)
in cash arising
from changes
in operating assets
and liabilities:
Rent receivable 20,000 45,000 75,000
Interest receivable 6,405 (3,463) 11,362
Prepaid expenses 36,841 (20,796) 5,228
Accounts payable
and accrued
expenses 1,285 (39,144) 32,612
Maintenance
payable (791,000) (2,017,573) -
Deferred revenue (60,000) (348,720) (1,036,634)
Security deposit (80,000) - -
Net cash provided by
operating activities 6,301,101 3,979,973 6,516,611
Cash Flows from
Investing Activities:
Loan receivable (239,994) - -
Proceeds from
sale of
aircraft - net 350,000 - 630,500
Net cash provided by
investing activities 110,006 - 630,500
Cash Flows from
Financing Activities:
Cash
distributions (4,715,629) (5,307,812) (8,900,010)
Net cash used for
financing activities (4,715,629) (5,307,812) (8,900,010)
Net increase (decrease)
in cash and cash
equivalents 1,695,478 (1,327,839) (1,752,899)
Cash and cash
equivalents at
beginning of period 1,089,805 2,417,644 4,170,543
Cash and cash
equivalents at end of
period $ 2,785,283 $ 1,089,805 $ 2,417,644
See accompanying notes to financial statements.
Notes to Financial Statements
December 31, 1994, 1993 and 1992
1. Organization
JetStream, L.P. (the "Partnership"), a Delaware limited partnership, was formed
on April 16, 1987 for the purpose of acquiring and leasing used commercial
aircraft. The Managing General Partner of the Partnership is CIS Aircraft
Partners, Inc. ("CIS"), a third-tier, wholly owned subsidiary of Continental
Information Systems Corporation. The Administrative General Partner is Jet
Aircraft Leasing, Inc. ("JAL"), formerly Hutton Aircraft Leasing, Inc., an
affiliate of Lehman Brothers Inc.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman
Brothers Inc. changed its name to Lehman Brothers Inc. ("Lehman Brothers").
The transaction did not affect the ownership of the General Partners. However,
the assets acquired by Smith Barney included the name "Hutton." Consequently,
effective October 22, 1993, the Hutton Aircraft Leasing, Inc. General Partner
changed its name to delete any reference to Hutton.
Upon formation of the Partnership, the General Partners each contributed $500
and the initial Limited Partner contributed $100 for five limited partner
units. An additional 4,895,000 limited partnership depositary units were then
sold at a price of $20.00 per unit. The Partnership had a closing for these
additional units on October 28, 1987 and received gross offering proceeds of
$97,900,000.
The Partnership is required to dissolve and distribute all of its assets no
later than December 31, 2027. The Partnership may reinvest the proceeds from
sales of aircraft occurring prior to October 28, 1998. Thereafter, the net
proceeds of any sales of aircraft will be distributed to the partners.
Title to the leased aircraft owned by the Partnership is held by nonaffiliated
trusts of which the Partnership is the beneficiary. The purpose of this method
of holding title is to satisfy certain registration requirements of the Federal
Aviation Administration.
2. Significant Accounting Policies
Accounting Method. The Partnership maintains its accounting records, prepares
its financial statements and files its tax returns on the accrual basis of
accounting.
Cash and Cash Equivalents. Cash equivalents consist of short-term, highly
liquid debt instruments purchased with an original maturity of three months or
less.
Restricted Cash. Restricted cash consists of funds the General Partners believe
will be incurred by the Partnership to comply with maintenance requirements, as
well as security deposits held by the Partnership.
Maintenance Reserve Funds. Two of the Partnership's former operating
leases with Continental Airlines, Inc. ("Continental") and Carnival Air
Lines, Inc. ("Carnival") required the lessees to make specified payments to
maintenance reserve funds administered by the Partnership. The Partnership
reimbursed the lessees for specified maintenance costs out of the reserve
funds. The Partnership paid interest earned on the balance of Continental's
reserve fund at a specified rate (90 day Chase Rate) to the lessee. This
interest rate was 3.0% at December 31, 1992. Interest earned on the
Carnival reserve fund was deposited into the fund and applied in the same
manner as other deposits to the fund.
Aircraft and Depreciation. The aircraft were recorded at cost, which includes
acquisition costs. Through December 31, 1993, depreciation to an estimated
salvage value of 10% was computed using the straight-line method over an
estimated average economic life of 12 years for all aircraft owned by the
Partnership. Beginning in 1994, depreciation was computed using the
straight-line method over an estimated remaining economic life of two to six
years for all aircraft owned by the Partnership.
The highly competitive and weakened conditions in the aircraft leasing industry
have had a significant and negative impact on the residual value of the
Partnership's fleet of aircraft. It is the General Partners' belief that the
total value of the Partnership's fleet of aircraft has declined substantially.
The General Partners' estimated market values for the aircraft, as of December
31, 1993, was based on independent appraisals, third party publications, the
General Partners' own experience and the unique circumstances regarding the
equipment and the lessee. In 1993, the General Partners reduced the carrying
value of the Partnership's fleet by $18,266,022 and, therefore, established a
new cost basis of $25,684,000 at December 31, 1993. In February 1994, the
General Partners sold the aircraft formerly on lease with Carnival, reducing
the total remaining carrying value to $25,334,000 at December 31, 1994.
Improvements to aircraft required to comply with regulatory requirements will
be capitalized when incurred and depreciated over the useful life of the
improvement.
Operating Leases. The aircraft leases are accounted for as operating leases.
Lease revenues are recognized over the terms of the related leases.
Deferred Revenue. Some of the Partnership's operating leases require rental
payments to be paid in advance. Rental payments received in advance are
deferred and then recognized as income when earned.
Income Taxes. No provision for income taxes has been made in the accompanying
financial statements since such taxes are the responsibility of individual
partners rather than the Partnership (Note 7).
3. Partnership Allocations
The Partnership Agreement ("Agreement") substantially provides the following:
Cash Distributions. Cash flow from operations, at the discretion of the General
Partners, will be distributed on a quarterly basis, 99% to the Limited Partners
and 1% to the General Partners. Cash flow is defined in the partnership
agreement as including cash receipts from operations and interest income
earned, less expenses incurred and paid in connection with the operation and
ownership of the aircraft. Distributable proceeds from sales of aircraft in
liquidation of the Partnership will be distributed in accordance with the
partners' capital accounts after all allocations of income and losses.
Allocation of Income and Losses. Generally, income and losses for any year are
allocated 99% to the Limited Partners and 1% to the General Partners. Gains on
sale of aircraft shall first be allocated to the General Partners until they
have been allocated an amount of gain equal to the lesser of their respective
deficit account balances or 1.01% of all capital contributions by Limited
Partners. Any additional gain recognized by the Partnership upon the sale of
aircraft shall be allocated 99% to the Limited Partners and 1% to the General
Partners.
Dissolution of Partnership. If, upon dissolution of the Partnership, the
General Partners have a negative capital account, they shall contribute capital
equal to the lesser of their respective capital deficit account balances or
1.01% of all capital contributed by the Limited Partners.
4. Aircraft under Operating Leases
USAir, Inc. On October 30, 1987, the Partnership acquired three Boeing 737-200
nonadvanced aircraft for a total purchase price of $22,805,997. These aircraft
were subject to an operating lease with Piedmont Aviation, Inc. (now USAir,
Inc.) ("USAir"). The first lease expired in July 1990 and the aircraft was
returned to the Partnership. On December 15, 1991, the lease periods for the
second and third aircraft were extended from May 1992 to May 1997, with the
lessee having the option to terminate the lease on or after May 1, 1995. The
lessee has exercised its option to terminate its lease on May 1, 1995.
Effective May 15, 1992, the quarterly rental for each aircraft was reduced to
$105,000.
Delta Air Lines, Inc. On November 2, 1987, the Partnership acquired a Boeing
737-200 advanced aircraft for a total purchase price of $15,222,609. This
aircraft is subject to an operating lease with Delta Air Lines, Inc. ("Delta").
Under the terms of the original lease, rental payments in the amount of
$170,000 per month were required to be paid monthly in advance through June,
1992. In June 1992, the General Partners and Delta agreed to amend the
original lease agreement. The amendment provided for a reduction of rent to
$95,000 per month through the new expiration date in December 1994. In early
May 1994, Delta exercised its option to extend the lease for a term of two
years from the previous expiration date, with the remaining terms of the lease
unchanged. Under the terms of the lease, Delta has the option of returning the
aircraft prior to the lease expiration provided it gives the Partnership seven
months notice. To date, Delta has not given the Partnership notice of its int
ent to return the aircraft. As a result, the aircraft will remain on lease
with Delta through at least October 1995.
Trans World Airlines, Inc. On November 2, 1987, the Partnership acquired three
Boeing 727-200 aircraft for a total purchase price of $16,345,497. These
aircraft are subject to an operating lease with Trans World Airlines, Inc.
("TWA"), the term of which was amended on May 31, 1991. The original leases
required monthly payments in advance, which were equal to $82,000 through July
1, 1989 and $100,000 through the remainder of the lease. The amendment
provided for a reduction of rent to $55,000 per month (subject to certain
required maintenance checks) commencing June 1, 1991 and continuing through
September 30, 1993 for two aircraft and August 31, 1993 for the third aircraft.
The amendment further required that rent for the period June 1, 1991 through
May 31, 1992 be prepaid using a discount rate of 6% and thereafter payments are
to be made quarterly in advance.
The operating leases with TWA expired as of September 30, 1993 for two aircraft
and August 31, 1993 for the third aircraft. In August 1993, the General
Partners and TWA agreed to amend the original leases. As a result, TWA paid
the Partnership rent of $40,000 per month per aircraft in advance quarterly.
The amended leases expired November 30, 1994 for two aircraft and October 31,
1994 for the third aircraft.
On September 30, 1994, TWA agreed to extend the leases on two of the aircraft
to April 30, 1995. Thereafter, TWA may continue to lease the two aircraft on a
month-to-month basis. Pursuant to the lease extension agreement, the rental
rates have been reduced to $32,500 per month per aircraft paid in advance. The
third aircraft was returned to the Partnership in December 1994.
Continental Airlines, Inc. On October 29, 1987, the Partnership acquired a
McDonnell Douglas MD-80 Series aircraft for a total purchase price of
$27,396,997. This aircraft was subject to an operating lease with Continental
Airlines, Inc., the term of which expired on April 28, 1993. Rental payments
were required to be made in advance, with adjustments (upward or downward) made
semiannually based on the six-month London Interbank Offered Rate ("LIBOR") at
the time of adjustment. The base rental payment was initially $210,000 per
month and decreased to $190,000 per month in May 1991. Monthly rental amounts
were $168,720 as of April 28, 1993 and December 31, 1992.
The prior lease agreement with Continental provided that upon the expiration of
the lease, the amounts remaining in the maintenance reserve funds are to be
retained by the Partnership. Therefore, $2,060,656 was recognized as Other
Income in the accompanying Statements of Operations during 1993, with the
balance of $750,000 to be distributed to Continental in accordance with the
terms of a new lease dated February 1994.
On February 9, 1994, Continental entered into a new lease agreement. The
agreement between Continental and the Partnership provides for Continental to
lease the plane for a term of four years. Effective March 15, 1994, Continental
shall pay $180,000 per month in advance. In addition, the Partnership made a
one-time payment of $750,000 in March 1994 to perform various maintenance work
on the plane. Also, the Partnership has agreed to provide up to $600,000 of
financing to Continental to perform modification work on the aircraft,
including advanced avionics, interior furnishings and exterior paint. The
modification financing is repayable over the life of the lease at an interest
rate of 8% per annum for advances made before February 1, 1996, and with
respect to advances made after February 1, 1996, a rate per annum equal to the
yield to maturity of United States Treasury Notes having a maturity closest to
the remaining term of the lease, plus 4.25 percent. On June 7, 1994, the Part
ership made its first advance to Continental in the amount of $278,203.
Carnival Air Lines, Inc. In December 1993, Carnival returned the Boeing 737-200
and informed the Partnership that it was terminating the lease in accordance
with the provisions of the lease agreement. On February 23, 1994, the
Partnership sold the aircraft for a total of $360,250. Accordingly, the
General Partners reduced the carrying value of the aircraft from $3,775,409 to
$350,000 at December 31, 1993, which is equal to the sale proceeds less the
resale fee of 3% payable to the Managing General Partner.
Funds in the Carnival maintenance reserve in the amount of $117,228 were
recognized as Other Income during 1993, in accordance with the Carnival lease
agreement.
Pan American World Airways, Inc. On February 13, 1992, the Partnership sold the
Boeing 727-200 (with one spare engine) previously on lease to Pan Am. The
gross proceeds from the sale totaled $650,000, which resulted in a loss of
$2,897,697. This loss was reflected as a reserve for loss on disposition of
aircraft as of December 31, 1991.
The aircraft leases are triple net operating leases, requiring the lessees to
pay substantially all expenses associated with the aircraft during the term of
the leases.
Revenues from each of the airlines as a percentage of the
Partnership's total rental revenues are as follows:
Percent of Rental Revenues
Airline 1994 1993 1992
USAir 16.6% 16.9% 18.9%
TWA 27.2 36.8 25.7
Continental 33.7 13.5 27.9
Delta 22.5 22.9 20.8
Carnival - 9.9 6.7
The following is a schedule, by year, of future minimum rental income under the
leases as of December 31, 1994.
Year Amount
1995 3,840,000
1996 3,205,000
1997 2,160,000
1998 450,000
Total $9,655,000
The above schedule of future minimum rental income is based on the existing
terms of the leases and does not include the rental income that may result from
the renewal of existing leases or the re-leasing of the aircraft, if any.
5. Distributions
Distributions paid or payable aggregated $4,950,451 (approximately $1.00 per
unit), $4,517,060 (approximately $0.91 per unit) and $8,158,342 (approximately
$1.65 per unit) for the years ended December 31, 1994, 1993 and 1992,
respectively, of which $360,250 in 1994 and $650,000 in 1992 represented
proceeds from sale of aircraft. As of December 31, 1994, the Partnership had
declared a distribution of $1,174,627, of which $1,162,881 (approximately $.24
per unit) was paid to the Limited Partners and $11,746 was paid to the General
Partners on February 2, 1995.
6. Transactions with Affiliates
Cash. Cash reflected on the Partnership's balance sheet at December 31, 1994
was on deposit with an affiliate of the General Partner. Cash reflected on the
Partnership's balance sheet at December 31, 1993 was on deposit with an
unaffiliated party.
Base Management Fee. The General Partners receive a quarterly fee subordinated
to the Limited Partners receiving their Preferred Return (8% simple interest
per annum cumulative, but not compounded), in an amount equal to 1.5% of gross
aircraft rentals. Of this amount, 1.0% is payable to CIS and .5% is payable to
JAL. During the years ended December 31, 1994, 1993 and 1992, the General
Partners earned base management fees of $73,352, $73,182 and $114,059,
respectively. Of these fees, $19,288, $13,320, and $24,177 were unpaid at
December 31, 1994, 1993 and 1992, respectively.
Incentive Management Fee. CIS receives a quarterly fee of 4.5% of quarterly
cash flow (prior to April 28, 1992 the fee was 2.15%), subordinated to the
Limited Partners receiving their Preferred Return. During the years ended
December 31, 1994, 1993 and 1992, CIS earned incentive management fees of
$197,590, $186,228, and $238,070, respectively. Of these fees, $55,431,
$43,718, and $61,750 were unpaid at December 31, 1994, 1993 and 1992,
respectively.
Re-lease Fee. The General Partners receive a quarterly fee subordinated to the
Limited Partners receiving their Preferred Return, for re-leasing aircraft or
renewing a lease in an amount equal to 3.5% of the gross rentals from such
re-lease or renewal for each quarter for which such payment is made. Of this
amount, 2.5% is payable to CIS and 1.0% is payable to JAL. During the years
ended December 31, 1994, 1993 and 1992, the general partners earned re-lease
fees of $177,363, $100,607, and $92,082, respectively. These fees are included
in management fees in the accompanying statements of operations. Of these
fees, $46,637, $32,207 and $21,926 were unpaid at December 31, 1994, 1993 and
1992, respectively.
Resale Fee CIS will receive a subordinated fee with respect to each aircraft
sold by the Partnership in an amount equal to the lesser of (i) 3% of the
contract sales price of the aircraft or (ii) an amount that is competitive with
fees charged by nonaffiliates rendering comparable services. Such fees will be
reduced (but not below zero) for any resale fees or commissions payable to
third parties. During 1994, $30,308 was accrued based on 3% of the sale
proceeds totalling $1,010,250 from the sale of two Boeing 727-200 aircraft.
During 1992, $19,500 was accrued based on 3% of the sale proceeds totalling
$650,000 from the sale of one Boeing 727-200 with one spare engine. The resale
fee is subordinate to the Limited Partners receiving a priority return equal to
their contribution plus their preferred return. No resale fees were earned
during 1993.
General and Administrative Expenses. Under the terms of the Partnership
Agreement, the Partnership reimburses the Administrative General Partner,
at cost, for the performance of certain administrative services provided
by a third party. For the years ended December 31, 1994, 1993 and 1992,
costs of such services were $46,022, $48,170 and $53,450, respectively.
At December 31, 1994, 1993 and 1992, $22,759, $23,985 and $25,400,
respectively, were due to the Administrative General Partner for the
performance of these services.
7. Reconciliation of Difference between Net Income (Loss) in the Financial
Statements (Accrual Basis - Generally Accepted Accounting Principles) and Net
Income (Loss) in the Partnership's Tax Return
1994 1993 1992
Net income (loss), as reported $ (783,993) $(17,876,870) $ 672,078
Adjustments-
Write-down of Aircraft - 18,266,022 -
Prepaid insurance 36,841 (20,796) 5,228
Deferred revenue (60,000) (348,720) (1,036,634)
Maintenance reserve fund (791,000) (2,017,573) 186,605
Loss on sale of asset (1,413,850) - (420,824)
Gain on sale of equipment - - (32,838)
Depreciation differential
between the Modified
Accelerated Cost
Recovery System and
deprec. for financial
reporting purposes (1,424,742) (1,202,462) (1,432,206)
Legal fee expense (5,976) (29,208) 18,416
Total adjustments (3,658,727) 14,647,263 (2,712,253)
Net loss, per the
Partnership's tax return $(4,442,720) $ (3,229,607) $(2,040,175)
The net loss determined on the income tax basis is allocated to the partners
as follows:
Limited partners
(4,895,005 units) $(4,398,293) $(3,197,311) $(2,019,774)
General partners (44,427) (32,296) (20,401)
$(4,442,720) $(3,229,607) $(2,040,175)
Taxable loss per
limited partner unit $ (0.90) $ (0.65) $ (0.41)
Report of Independent Public Accountants
To the Partners of JetStream, L.P.:
We have audited the accompanying balance sheets of JetStream, L.P. (a Delaware
limited partnership) as of December 31, 1994 and 1993, and the related
statements of operations, partners' capital (deficit) and cash flows for each
of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of JetStream, L.P. as of December
31, 1994 and 1993, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,107,080
<SECURITIES> 000
<RECEIVABLES> 240,892
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 3,347,972
<PP&E> 25,334,000
<DEPRECIATION> (5,224,476)
<TOTAL-ASSETS> 23,457,496
<CURRENT-LIABILITIES> 1,517,919
<BONDS> 000
<COMMON> 000
000
000
<OTHER-SE> 21,939,577
<TOTAL-LIABILITY-AND-EQUITY> 23,457,496
<SALES> 000
<TOTAL-REVENUES> 5,193,251
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 5,977,244
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 000
<INCOME-PRETAX> (783,993)
<INCOME-TAX> 000
<INCOME-CONTINUING> (783,993)
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (783,993)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> 000
</TABLE>
