PROSPECTUS CCAIR, INC.
500,000 Shares of Common Stock
This Prospectus relates to an aggregate of 500,000 shares (the "Shares") of
Common Stock, par value $.01 per share (the "Common Stock"), of CCAIR, Inc., a
Delaware corporation (the "Company"), being sold by Lynrise Air Lease, Inc., a
Delaware corporation (the "Selling Shareholder"). See "Selling Shareholder." The
Selling Shareholder has acquired the Shares from the Company in partial or
complete settlement of an obligation in the principal amount of $1,595,000 of
the Company to the Selling Shareholder. For the period from the date of this
Prospectus to September 25, 1998, the Selling Shareholder will sell the Shares
and apply the net proceeds of such sales to reduce the obligation. The Company
will be required to pay in cash any portion of the obligation remaining
outstanding by September 30, 1998. In the event that all Shares are not sold by
the Selling Shareholder on or before September 25, 1998, remaining Shares shall
be returned to the Company.
The Company has registered the Shares under the Securities Act of 1933, as
amended (the "Securities Act"), for sale by the Selling Shareholder. The Selling
Shareholder has advised the Company that they may from time to time sell all or
part of the Shares in one or more transactions (which may involve block
transactions) in the over-the-counter market, on the Nasdaq SmallCap Market (or
any exchange on which the Shares may then be listed), in negotiated
transactions, through the writing of options on the Shares (whether such options
are listed on an options exchange or otherwise), or a combination of such
methods of sale, at market prices prevailing at the time of such sales or at
negotiated prices. The Selling Shareholder may effect such transactions by
selling the Shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholder or purchasers of the Shares for whom
they may act as agent (which compensation may be in excess of customary
commissions). The Selling Shareholder may also pledge the Shares as collateral
for margin accounts or loans and the Shares could be resold pursuant to the
terms of such accounts or loans. In connection with such sales, the Selling
Shareholder and any participating brokers and dealers may be deemed to be
"underwriters" as defined in the Securities Act. Neither the Company nor the
Selling Shareholder can presently estimate the amount of commissions or
discounts, if any, that will be paid by the Selling Shareholder on account of
their sale of the Shares. The Company will pay all expenses, estimated to be
approximately $24,000, in connection with this offering, other than underwriting
and brokerage commissions, discounts, fees and counsel fees and expenses
incurred by the Selling Shareholders.
The Company's Common Stock is listed on the Nasdaq SmallCap Market under the
symbol ("CCAR"). On September 1, 1998, the last reported sale price for the
Common Stock was $4.00 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 2, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Northeast Regional Office, 7 Word Trade
Center, Suite 1300, New York, NY 10048 and at the Midwest Regional Office, 500
West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such materials may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Copies of each
document may also be obtained through the Commission's Internet address at
http://www.sec.gov. The Common Stock of the Company is quoted on the Nasdaq
SmallCap Market. Reports, proxy statements and other information concerning the
Company may also be inspected at the offices of the Nasdaq Stock Market, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form S-2
(the "Registration Statement") under the Securities Act with respect to the
Shares offered hereby. This Prospectus, which is a part of the Registration
Statement, does not contain all the information set forth in, or annexed as
exhibits to, the Registration Statement, certain portions of which have been
omitted pursuant to rules and regulations of the Commission. For further
information with respect to the Company and the Shares, reference is made to the
Registration Statement, including the exhibits thereto. Copies of the
Registration Statement, including the exhibits, may be obtained from the Public
Reference Section of the Commission at the aforementioned address upon payment
of the fee prescribed by the Commission. Copies of each document may also be
obtained through the Commission's internet address at http://www.sec.gov. The
summaries contained in this Prospectus of additional information included in the
Registration Statement or any exhibit thereto are qualified in their entirety by
reference to such information or exhibit.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents which have been filed by the Company with the Commission
pursuant to the Exchange Act or the Securities Act are incorporated by reference
in this Prospectus:
(i) The Company's Current Report on Form 8-K, dated August 31, 1998, as
filed with the Commission on September 2, 1998 (File No. 0-17846);
(ii) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, as filed with the Commission on July 29, 1998 (File
No. 0-17846);
(iii) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, as filed with the Commission on May 15, 1998 (File
No. 0-17846);
(iv) The Company's Transition Report on Form 10-K for the six-month
period ended December 31, 1997, as filed with the Commission on May
11, 1998 (File No. 0-17846); and
(v) The Company's Current Report on Form 8-K, dated February 9, 1998, as
filed with the Commission on February 10, 1998 (File No.
0-17846).
A copy of the Company's Transition Report and the Company's most recent
quarterly report on Form 10-Q is being provided to each person to whom this
Prospectus is delivered. Any information contained herein or in a document
incorporated by reference herein shall be deemed to be modified or replaced for
purposes of this Prospectus to the extent that information contained herein or
in any other subsequently filed document which also is incorporated by reference
herein modifies or replaces such information. Any such information so modified
or replaced shall not be deemed, except as so modified or replaced, to
constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which are not represented or
delivered herewith. These documents are available, without charge, upon written
or oral request addressed to the Secretary, CCAIR, Inc., P. O. Box 19929,
Charlotte, North Carolina 28219-0929, telephone number (704) 359-8990.
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THIS OFFERING
THE COMPANY
CCAIR, Inc. (the "Company") is a Charlotte, North Carolina based regional air
carrier providing regularly scheduled passenger service to 26 cities in Georgia,
Kentucky, Ohio, North Carolina, South Carolina, Virginia, and West Virginia, as
well as Washington, D.C., primarily from a hub at the Charlotte/Douglas
International Airport. The Company currently operates a fleet of 27 turboprop
passenger aircraft with approximately 1,482 weekly scheduled departures over a
route system covering approximately 270,000 miles. The Company was incorporated
under Delaware law in July 1984 under the name Sunbird Airlines 1984, Inc., for
the purpose of purchasing substantially all of the assets of Sunbird Airlines,
Inc. The Company changed its name to CCAIR, Inc., in January 1986. The mailing
address and telephone number of the Company are:
CCAIR, Inc.
P. O. Box 19929
Charlotte, NC 28219-0929
(704) 359-8990
The Company's business has principally involved providing service for business
travelers from small- and medium-sized communities in its market area to
connecting flights of major carriers, principally US Airways, Inc. ("US
Airways"), at a hub operation of US Airways at the Charlotte/Douglas
International Airport. In addition, the Company operates a small number of
flights into Raleigh, North Carolina. In order to market the Company's services,
the Company has an agreement with US Airways that permits the Company to operate
under the name "US Airways Express" and to charge their joint passengers on a
combined basis with US Airways. (See discussion under "Risk Factors -
Relationship With US Airways" below). The Company believes that its use of US
Airways' "US" flight designator code continues to be the most significant factor
contributing to its ability to compete for passengers and to its historical
growth.
The Company has changed its fiscal year-end from the twelve month period ended
June 30 to the twelve months ended December 31. The financial statements set
forth in the Transition Report cover the period from July 1, 1997 through
December 31, 1997 (the "Transition Period").
THE SELLING SHAREHOLDER
The Selling Shareholder f/k/a Shorts Air Lease, Inc. was lessor to the Company
under nine separate leases of nine Shorts 360 aircraft, originally acquired
under a series of lease agreements between 1987 and 1989. These lease agreements
were assumed by the Company as part of its Revised and Amended Plan of
Reorganization that was confirmed in 1991. In accordance with that Plan, the
Company made annual installment payments to the Selling Shareholder, in one
circumstance with shares of Common Stock, through 1994. In 1994, the Company and
the Selling Shareholder restructured the annual installment payments, the lease
payments and certain other amounts due the Selling Shareholder. In March 1998,
the Company and the Selling Shareholder entered into a settlement agreement for
the return of the nine aircraft, cancellation of the leases and settlement of
the Company's obligations to the Selling Shareholder. As evidence of the
Company's indebtedness
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to the Selling Shareholder, the Company issued a short-term note in the amount
of $9,725,012 due on September 30, 1998 and received from the Selling
Shareholder the option to convert the short-term note to a subordinated
convertible debenture. In order to exercise the right to convert, the Company is
obligated to pay, by September 30, 1998, to the Selling Shareholder, $1,595,000
plus interest in cash or through the net proceeds from the sale of Shares. See
"Use of Proceeds" and "Selling Shareholder."
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RISK FACTORS
The Shares offered hereby involve a high degree of risk. Prospective investors
should carefully consider, among other things, the factors discussed herein
before a decision is made to purchase any shares. This Prospectus contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934 and the
Company intends that such forward-looking statements be subject to the safe
harbors for such statements under such sections. The forward-looking statements
herein are based on current expectations that involve a number of risks and
uncertainties. Such forward-looking statements are based on numerous
assumptions, including, but not limited to, the assumptions that the US Airways
Agreement (as defined below) will be extended, the introduction of new aircraft
to the fleet will yield improved operating results and a reduction in costs per
available seat mile, and the Company will obtain markets under an extended
Agreement that will provide continued opportunities for profitable operations.
The foregoing assumptions are based on judgments with respect to, among other
things, future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the Company's control. Accordingly, although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any such assumption could prove to be inaccurate and, therefore,
there can be no assurance that the results contemplated in forward-looking
statements will be realized. The forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ materially from
those set forth in or implied by the forward-looking statements, including, but
not limited to, the risk of increases in the cost of fuel or the lack of
availability of fuel, the Company's inability to maintain improved performance
with new aircraft, downturn in general economic conditions and in the operating
condition of US Airways in particular and the availability of pilots and other
personnel necessary for current or expanded operations.
RELATIONSHIP WITH US AIRWAYS. Substantially all of the Company's passenger
revenue is generated by passengers who are connecting with US Airways flights
and is determined under an Agreement for the sharing of joint passenger fares
and division of revenue with US Airways (the "Agreement"). The Agreement expires
on October 31, 1998. The Agreement provides that it may be terminated upon 180
days prior written notice for any reason by either US Airways or the Company or
upon ten (10) days prior written notice by US Airways under certain conditions,
including if: (i) the Company fails to maintain at least a minimum required
operating schedule; (ii) during any one month the Company's flight completion
percentage is less than 96% due to cancellations attributable to maintenance or
operational deficiencies within the Company's control; (iii) the Company fails
to comply with the trademark licensing provisions of the Agreement; (iv) the
initiation of a bankruptcy or similar proceeding for the Company or its assets;
or (v) there is a change of control or ownership of 51% or more of the Company's
Common Stock without the consent of US Airways.
The Agreement provides that US Airways will set joint fares and the method of
proration of joint fares between US Airways and the Company. The Agreement also
provides that US Airways can establish the charges for handling passengers and
reservations for passengers carried by the Company. The Company consults with US
Airways in regard to changes in fares, proration and
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charges, but US Airways does not need the consent of the Company to implement
those fares, prorations or charges. While US Airways requires the connecting
passengers provided by the Company for its operations, the Company's only method
to object to those fares, prorations or charges is to seek to cancel the
Agreement. Cancellation of the Agreement would require the Company to seek a new
service agreement with another major carrier, because its operations are not
viable as a stand-alone carrier.
The Agreement does not prevent US Airways from serving markets that the Company
currently serves. If US Airways chose to serve a substantial number of routes
presently served by the Company or chose to replace Company flights with its own
flights or flights of its wholly owned regional carriers, there would be a
material adverse effect on the Company's business and the Company may have to
terminate its passenger operations as these presently exist. Although there is
no assurance that US Airways will not take any such actions or that the
Agreement will not be terminated or amended prior to the expiration date, the
Company believes that the Agreement is beneficial to both the Company and US
Airways and that there are significant incentives for the continuation of the
Agreement.
The Company and US Airways have begun negotiations for an extension of the
Agreement. The principal focus of these negotiations has been the locations that
the Company would service under the extended Agreement and the aircraft that the
Company would use to provide the service. As described below, the Company has
substantially completed a change of the composition of its fleet of aircraft.
During the last nine-month period, the Company has consistently exceeded US
Airways' performance goals. Thus, the Company believes that its relationship
with US Airways is good and that the Agreement will be extended for a minimum of
five (5) years. However, the extension of the Agreement is within the discretion
of US Airways. The Company can offer no assurances that an extension of the
Agreement will ultimately be obtained.
Because of the Company's relationship with US Airways, the Company's business
also could be adversely affected by events that adversely affect US Airways or
by changes in business strategies of US Airways. For example, if US Airways were
adversely affected by work stoppages or other labor difficulties, the Company's
connecting passenger traffic from US Airways would be reduced and the Company's
ability to provide service to passengers desiring US Airways connecting flights
likewise would be adversely affected. If US Airways were to decide to curtail
growth at its Charlotte hub or reduce its operations in Charlotte, the Company's
operations and prospects for continued growth would be adversely affected. The
Company is not aware of any such developments.
NATURE OF THE AIRLINE INDUSTRY. The commercial airline industry in the United
States has undergone major structural changes since it was deregulated by
Congress in the latter part of 1978. In the ensuing period, there has been
substantial consolidation and integration of both major and regional carriers,
including the acquisition or association of most regional carriers by or with
major carriers. Such consolidation and integration, together with automated
computer reservation systems, "hub and spoke" route systems and marketing
programs such as frequent flyer programs have substantially influenced
competitive conditions. The Company believes that it has properly positioned
itself to benefit from these structural realities. However, any event which
causes a material change in the Company's ability to benefit from these factors,
such as termination or
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modification of its relationship with US Airways could cause these forces to
work against the Company and have a material adverse effect on its results.
HIGH OPERATING AND FINANCIAL LEVERAGE. As is characteristic of the airline
industry, the Company is subject to a high degree of financial and operating
leverage. Due to high fixed costs, the expenses of each flight do not vary
proportionately with the number of passengers carried, but the revenues
generated from a particular flight are directly related to the number of
passengers carried. Accordingly, while a decrease in the number of passengers
carried would cause a corresponding decrease in revenue if not offset by higher
fares, it may result in a disproportionately greater decrease in profits.
The airline industry is also sensitive to cyclical downturns in the general
economy. Because a substantial portion of airline travel, both personal and to a
lesser extent business, is discretionary, the industry has historically tended
to experience weaker financial results during economic downturns. The operating
and financial results of the Company may be negatively impacted by any downturn
in national or regional economic conditions.
AIRCRAFT FUEL COSTS. The cost of fuel is a major component of operating expense
for all airlines. In the last two fiscal years, the Company experienced
significant increases in fuel expense as the price of fuel rose from 67.1(cents)
per gallon to 93.8(cents) per gallon. While the price per gallon has dropped to
approximately 59.7(cents) per gallon in June 1998, there can be no assurance
that increases in fuel costs will not be substantial, or that supplies will
remain plentiful. Substantial increases in the cost of fuel, or a reduction in
fuel supplies, can have an adverse effect on the Company's income and growth
prospects if increases are not passed on to its passengers through higher fares,
or adequate fuel cannot be acquired to support operations.
PILOT TURNOVER. In addition, in certain areas of the country, pilot turnover has
become a significant issue among regional carriers as major carriers have
satisfied their expanding demand for experienced commercial pilots by hiring
increasing numbers of regional pilots. To date, pilot turnover has not been a
major problem for the Company since there has been a ready supply of candidates
in the Company's operating area and the Company has been able to hire and train
sufficient numbers of new pilots to maintain its operations. However, no
assurance can be given that pilot turnover will not become a major problem in
the future, particularly as major carriers expand and require significant
additional pilots. Similarly, there can be no assurance that sufficient numbers
of new pilots will be available to support any future growth even if pilot
turnover does not become a major problem for the Company.
MAINTENANCE PERSONNEL TURNOVER. Aircraft maintenance personnel turnover is
becoming an important matter in the regional and major carrier airlines. As the
commercial aviation industry grows, with resulting expansion of aircraft fleets,
the demand for qualified and experienced maintenance personnel will also
increase. To date, the Company has been able to retain sufficient numbers of
aircraft mechanics. However, no assurance can be given that turnover and
recruitment will not become a major difficulty in the future, especially if the
industry continues to experience prosperity and growth.
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NEW AIRCRAFT TYPES; CHANGE IN FLEET PLAN. On July 1, 1997, the start of the
Transition Period, the Company's passenger aircraft fleet consisted of nine (9)
Shorts 360 aircraft, fourteen (14) Jetstream 31 aircraft and four (4) de
Havilland Dash 8 aircraft. In anticipation of an extension of the Agreement with
US Airways and as a means to reduce operating expense, the Company restructured
its fleet. The Shorts 360 aircraft were not compatible with the anticipated
service requirements under an extended Agreement and maintenance expense for
these aircraft had dramatically increased due to age and the availability of
parts. As a result, these leases were terminated pursuant to an agreement with
the lessor as discussed above under the heading, "The Selling Shareholder." The
Jetstream 31 aircraft had limitations that were causing the profitability of
those aircraft to be restricted. The Company has also entered into an agreement
with the lessor for the Jetstream 31 aircraft whereby the Company has exchanged
its fleet of 14 Jetstream 31 aircraft for 20 newer and more powerful Jetstream
Super 31 aircraft. The Company believes that these acquisitions will reduce
operating expense and improve performance measures, such as on-time departures
and arrivals, denied boardings and cancellations; however, there can be no
assurance that improved operating results will continue or that the Agreement
will be extended as a result by US Airways.
FINANCIAL EFFECTS OF CHANGE IN FLEET PLAN. The change in fleet plan described
above resulted in a charge to earnings of $9,881,000 relating to the settlement
of obligations for the returned aircraft and to a reduction in value of all
assets and leasehold improvements related to the returned aircraft. In addition,
the Company adopted a change in accounting principle with respect to overhauls
for engines, propellers, and landing gear. The Company implemented this change
so that the method of accounting would more closely emulate the requirements and
expenses of overhauls for those components under its new lease agreements.
Implementation of this change necessitated the write-off of previously
capitalized items in an amount of $12,982,000. As a result, the Company reported
a working capital deficit of approximately $14,624,000 as of June 30, 1998,
meaning that the Company does not have sufficient current assets to retire its
current liabilities. The Company plans to reduce this deficit by increasing its
current assets, by reducing current liabilities and by converting current
liabilities into long-term liabilities. The restructuring of the aircraft fleet
is expected to reduce operating costs and provide cash flow to reduce current
liabilities. However, the Company's ability to achieve increases in cash flow is
dependent upon many factors outside of its control, such as fare discounting
that would adversely impact revenues, and increases in fuel costs that would
increase expenses. The Company intends to replace $7,920,000 of the $9,725,000
short-term note referred to above with a long-term obligation. The Company's
ability to change the nature of its obligation will depend upon the net proceeds
achieved from sales by the lessor of the Company's common stock and the payment
by the Company of any deficiencies in the net proceeds achieved. The Company can
offer no assurances that cash flow increases will result in a significant
reduction of its working capital deficit.
LIQUIDITY. The Company's ability to meet its liquidity requirements is dependent
upon its ability to obtain sufficient cash flow from operations. At June 30,
1998, the Company had cash and cash equivalents of $5,450. In addition to the
normal operating expenses incurred in scheduled airline operations, the Company
anticipates incurring expenditures related to the return of the Jetstream
aircraft. The return conditions entail performing certain engine overhauls and
other major component overhaul and repair per the original leases. These
expenditures are currently estimated to be approximately $750,000 in the
aggregate.
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The key element to the operating results of the Company is the level of the
yield per revenue per passenger mile. While the yield for March through June,
1998 has met Company projections, the future yield could be affected by fare
discounting beyond the control of the Company. If operating cash flows and the
Company's $4,000,000 line of credit with an affiliate of British Aerospace are
insufficient to meet obligations, the Company may issue shares of Common Stock,
secure short-term loans from officers and directors or extend terms with trade
creditors. To the extent that the Company uses equity financing, shareholders'
interest in the Company will be diluted.
COMPETITION. The principal competition for the Company is the air service
provided by major and other regional air carriers operating from hub airports in
Atlanta, Cincinnati, and Raleigh/Durham. From these hub airports, Delta Air
Lines ("Delta"), Midway Airlines ("Midway") and their affiliates offer service
to some destinations also served by US Airways through its hub operations at the
Charlotte/Douglas International Airport. The Company competes with Delta and
Midway and with regional air carriers that have joint marketing agreements with
them for passengers traveling to destinations served through hub airports. The
principal customers for these services are business travelers and competition is
based upon scheduling and flight connections, reliability and, to a lesser
extent, pricing. The Company constantly reviews its scheduling and the frequency
of its flights to reduce the layover time experienced in connecting with a US
Airways flight, in order to minimize the length of the combined trip and to
compete with similar service offered by Delta or Midway.
RELIANCE ON KEY EMPLOYEE. The Company's operations are dependent upon the
services of its President, Mr. Kenneth W. Gann. The loss of Mr. Gann's services
could have a material adverse effect on the Company. The Company maintains a
$600,000 key-man life insurance policy on Mr. Gann, the proceeds of which are
payable to the Company. Mr. Gann serves the Company under a three-year renewable
employment agreement.
DILUTION. The consummation of the offering made hereby will not result in
substantial dilution of existing shareholders of the Company. However, the
Company is not able to predict the effect, if any, this offering will have on
the market price for the Company's Common Stock.
ISSUANCE OF ADDITIONAL SHARES. The Company will continue to use shares of its
common stock to satisfy obligations and to provide cash flow. The Company has
issued rights to acquire shares of common stock as additional consideration for
loans, for services rendered to the Company and in connection with certain lease
arrangements. While the Company has issued those rights with exercise prices
equivalent to the market value of the shares on the date of issue, the rights
will generally be exercised only if the exercise price is less than the current
market price. These transactions will increase the number of shares of the
Company's common stock that are held for sale and may adversely affect the
market price and the liquidity of the Company's common stock.
NO DIVIDENDS. The Company has not paid any dividends on its Common Stock and
does not intend to pay dividends in the foreseeable future.
NASDAQ SMALLCAP MARKET LISTING; "PENNY STOCK" RULES. Although the Common Stock
is listed on the Nasdaq SmallCap Market, there can be no assurance that such
listing will be maintained.
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Although the Company currently does meet the Nasdaq listing maintenance
requirements, the Company is relying upon the value of its market capitalization
(approximately $36.3 million as of July 29, 1998) to maintain its listing. If
the value of its market capitalization falls below $35 million, the Company
would not meet the listing maintenance requirements. In that circumstance, the
Company would request a temporary exception to those requirements, based upon
its net income in 1998 ($2.65 million for the six-month period ended June 30,
1998 as compared to a listing requirement of $500,000 in annual net income).
There can be no assurance that Nasdaq will grant the exception.
If no exception is granted by Nasdaq, the Common Stock would be subject to the
rules promulgated under the Securities Exchange Act of 1934 relating to "penny
stocks" which apply to non-Nasdaq Companies whose stock trades at less than $5
per share or whose tangible net worth is less than $2,000,000. These rules
require brokers who sell securities subject to such rules to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning the risks of trading in the security. These
rules may restrict the ability of brokers to sell the Company's Common Stock and
may affect the ability of purchasers in this offering to sell such Common Stock
in the secondary market.
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USE OF PROCEEDS
The Company has delivered the Shares to the Selling Shareholder in accordance
with an Option Agreement dated March 31, 1998, as amended as of August 15, 1998,
between the Selling Shareholder and the Company (the "Option"). The Option gave
the Company the right to prepay by September 30, 1998, a Short-Term Note in the
amount of $9,725,012 held by the Selling Shareholder.
The prepayment will consist of (i) cash or fully registered Common Stock having
a value of $1,595,000 plus interest of seven percent (7%) per annum on the
Short-Term Note (the "Option Payment") and (ii) a 7% convertible subordinated
note due 2004 in the original principal amount of $7,920,000. The cash portion
of the prepayment was established on March 31, 1998 at $1,805,012, but that
amount has been reduced by credits allowed by the Selling Shareholder in the
amounts of $130,000 for spare parts and $80,000 for spare parts documentation
delivered to the Selling Shareholder by the Company. The Company has elected in
accordance with the terms of the Option to use fully registered Common Stock to
make the prepayment. Under the terms of the Option, the Company has delivered
the Shares to the Selling Shareholder for resale.
The Selling Shareholder will sell the Shares (as described below under heading
"Selling Shareholder") and apply the net proceeds of such sale to the
outstanding indebtedness. Between September 25, 1998 and September 29, 1998, the
Selling Shareholder will provide to the Company with an accounting of the net
proceeds from the sale of the Shares and return any unsold Shares. If any amount
of the Option Payment remains unpaid, the Company will be required to pay the
remaining amount, in cash, on or before September 30, 1998.
SELLING SHAREHOLDER
The offer and sale by the Company of the Shares to the Selling Shareholder
pursuant to the Option and the resale of the Shares by the Selling Shareholder
is being made pursuant to a Registration Statement on Form S-2, of which this
Prospectus forms a part.
The following table sets forth the number of shares of Common Stock owned
beneficially by the Selling Shareholder as of July 30, 1998 and the number of
shares which may be offered to this Prospectus. This information is based upon
information provided by the Selling Shareholder.
Shares Beneficially Owned Shares Beneficially Owned
Prior to Offering After The Offering(1)
Name of ------------------------- -------------------------
Selling Shareholder Shares Percentage(2) Shares Percentage(2)
- ------------------- ------ ------------- ------ -------------
Lynrise Air Lease, Inc. 500,000 5.6% 0 --%
- --------------
(1)All Shares registered hereby will be sold by the Selling Shareholder or
returned to the Company.
(2)The total number of shares of common stock outstanding on September 2, 1998
was 8,921,195.
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PLAN OF DISTRIBUTION
The Selling Shareholder has advised the Company that it will sell all or part of
the Shares in one or more transactions (which may involve block transactions) in
the over-the-counter market, on the Nasdaq SmallCap Market (or any exchange on
which the Shares may then be listed), in negotiated transactions, through the
writing of options on the Shares (whether such options are listed on an options
exchange or otherwise), or a combination of such methods of sale, at market
prices prevailing at the time of such sales or at negotiated prices. The Selling
Shareholder may effect such transactions by selling the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Shareholder
or purchasers of the Shares for whom they may act as agent (which compensation
may be in excess of customary commissions). In connection with such sales, the
Selling Shareholder and any participating brokers and dealers may be deemed to
be "underwriters" as defined in the Securities Act. Neither the Company nor the
Selling Shareholder can presently estimate the amount of commissions or
discounts, if any, that will be paid by the Selling Shareholder on account of
their sale of the Shares from time to time.
Under the securities laws of certain states, the Shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the Shares may not be sold unless the Shares have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
The Selling Shareholder and other persons participating in the distribution of
the Shares offered hereby are subject to the applicable requirements of
Regulation M promulgated under the Exchange Act in connection with the sale of
the Shares. Under Rule 101 of Regulation M, the Selling Shareholder and other
persons participating in the distribution may not engage in market activities
with respect to the Common Stock for the applicable period thereunder prior to
the commencement of the distribution. In addition, Rule 102 of Regulation M will
prohibit Selling Shareholder and their affiliated purchasers from bidding for,
purchasing or attempting to induce any person to bid for or purchase shares of
Common Stock until the Selling Shareholder' participation in the distribution is
completed.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock, $0.01 par
value per share. As of September 2, 1998, there were 8,921,195 shares of Common
Stock outstanding held of record by approximately 2,700 shareholders. The Common
Stock is not divided into classes, and there are no dividend rights, terms of
conversion, redemption provisions, preemptive rights or other relative rights,
preferences or limitations established with respect to the Common Stock.
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INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Bylaws mandate that expenses incurred by a director in defending a
civil or criminal action arising by reason of his/her status as a director of
the Company will be advanced by the Company, provided the director commits to
repay the advanced amount if it is ultimately determined that such individual is
not entitled to indemnification under the Delaware General Corporation Law.
Accordingly, the Company will provide indemnity protection to its directors in
all cases other than those in which the actions of a director may be considered
clear violations of his/her duties to the Company.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby has been passed upon
for the Company by Rayburn, Moon & Smith, P.A., Charlotte, North Carolina.
EXPERTS
The financial statements for the Transition Period incorporated by reference in
this Prospectus and registration statement have been audited by Arthur Andersen
LLP, independent public accountants and are incorporated herein by reference, in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
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Available Information ................................................ 2
Incorporation of Certain Information by Reference .................... 3
This Offering ........................................................ 5
Risk Factors ......................................................... 7
Use of Proceeds ...................................................... 13
Selling Shareholder .................................................. 13
Plan of Distribution ................................................. 14
Description of Capital Stock .......................................... 14
Indemnification of Officers and Directors ............................. 15
Legal Matters ......................................................... 15
Experts ............................................................... 15
500,000 SHARES
CCAIR, INC.
COMMON STOCK
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PROSPECTUS
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September 2, 1998
