-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Td6wvIaR9f/UhdhSB1t9mSGtu7+Xyrw//5XMkx39y6aBTLHv08a7ZowdExy2i0Jz 1AOt9U3aZJ5U+QPabJ8Zxg== 0001002334-01-000002.txt : 20010122 0001002334-01-000002.hdr.sgml : 20010122 ACCESSION NUMBER: 0001002334-01-000002 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20010105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALBION AVIATION INC CENTRAL INDEX KEY: 0001123580 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 330619254 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SB-2/A SEC ACT: SEC FILE NUMBER: 333-46672 FILM NUMBER: 1502119 BUSINESS ADDRESS: STREET 1: 24351 PASTO ROAD #B CITY: DANA POINT STATE: CA ZIP: 92629 BUSINESS PHONE: 9494892400 MAIL ADDRESS: STREET 1: 24351 PASTO ROAD #B CITY: DANA POINT STATE: CA ZIP: 92629 SB-2/A 1 0001.txt AMENDMENT NO. 1 As filed with the Securities and Exchange Commission on January 4, 2001 Registration No. 333-46672 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM SB-2 REGISTRATION STATEMENT Under The Securities Act of 1933 ALBION AVIATION, INC. (Name of registrant as specified in its charter) Delaware 4512 33-0619254 (State or Jurisdiction of Primary SIC Code (IRS Employer incorporation or organization) Identification No.) 24351 Pasto Road, #B Jehu Hand, President Dana Point, California 92629 24351 Pasto Road, #B (949) 489-2400 Dana Point, California 92629 (Address, including zip code, and telephone number, including area code (949) 489-2400 of Registrant's principal executive offices) (Name, address, including zip code, and telephone number, including area code, of agent for service COPY TO: Jehu Hand, Esq. Hand & Hand 24351 Pasto Road, Suite B Dana Point, California 92629 (949) 489-2400 Facsimile (949) 489-0034 Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effective date of this registration statement. If the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box: [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box:[ ]
CALCULATION OF REGISTRATION FEE Proposed Maximum Proposed Maximum Title of Each Class of Amount to Offering Price Aggregate Amount of Securities to be Registered Be Registered Per Share(1) Offering Price Registration Fee Common Stock offered by the Company.... 50,000 $5.00 $ 250,000 $ 73.75 Total.................................. 50,000 $ 250,000 $ 73.75 (2)
(1) Estimated solely for purposes of calculating the registration fee. (2) Minimum fee of $100.00 paid with initial filing. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION PROSPECTUS ALBION AVIATION, INC. 50,000 Shares of Common Stock (par value $.001) The 50,000 shares of common stock, par value $.001 of Albion Aviation, Inc., a Delaware corporation ("Albion") are offered by Albion at $5.00 per share. See "Plan of Distribution." The expenses of the offering, estimated at $10,000, will be paid by Albion. There is currently no trading market for the common stock. Albion has applied for trading of the common stock on the Electronic Bulletin Board under the proposed symbol "ALAV". There can be no assurance that the Electronic Bulletin Board will accept the common stock for trading nor that there will ever exist a broad trading market for the common stock. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PURCHASE OF THESE SECURITIES INVOLVES RISKS. See "Risk Factors" on page 4.
Underwriting Discounts and Proceeds Price to Public Commissions (1)to Company(2) Per Unit $ 5.00 $ .50 $ 4.50 Total(2) $ 250,000 $ 5,000 $ 225,000 (Footnotes on following page)
(1) Does not reflect additional compensation to be received by the form of a non-accountable expense allowance of $7,500 ($.15 per share). In addition, Albion has agreed to indemnify the selected broker dealers against certain civil liabilities, including liabilities under the Securities Act of 1933. See "Plan of Distribution." (2) Before deducting approximately $20,000 ($.40 per unit) in estimated expenses of the offering payable by Albion, including the non-accountable expense allowance. Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. The date of this prospectus is January __,2001. 1 No person has been authorized in connection with this offering to give any information or to make any representation other than as contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by Albion. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities covered by this prospectus in any state or other jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such state or jurisdiction. Neither the delivery of this prospectus nor any sales made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of Albion since the date hereof. PROSPECTUS SUMMARY The following is only a summary of the information, financial statements and the notes included in this prospectus. Albion Albion Aviation, Inc. ("Albion") intends to engage in the business of a charter air carrier under Part 135 of the Federal Aviation Regulations. Part 135 is similar to the rules which scheduled airlines must follow but less stringent. Albion owns one aircraft, a Cessna 421 B ("aircraft"). The tail identification number is N3AJ. This aircraft can carry 8 passengers. The Cessna 421 B is widely used for charter and corporate services. It is pressured to fly in altitudes over 30,000 feet. We think we will base the aircraft at Orange County Airport in Orange County California. With time we hope to acquire other aircraft if business grows. Orange County is benefitting from a strong and growing economy. There are 5 other charter airlines operating out of Orange County, as well as 10 commercial airlines and two commuter airlines. The market for charter services primarily consists of business executives and wealthy individuals who do not wish to be bound by airline schedules. The cost of chartering an aircraft similar to the aircraft is about $500 per hour. This compares to hourly jet aircraft charter cost of $1,000 or $2,000 or more. If several passengers are flown the cost per passenger can be less than business or first class tickets. Although the aircraft is slower than a jet airliner's typical speed of over 500 nautical miles per hour, on flights of one or two hours duration the time differential is not material. The primary flight market expected to be served is California, (San Diego, Los Angeles, Palm Springs, Mammoth, San Francisco, Santa Barbara), Arizona (Phoenix) and Nevada (Las Vegas.) Albion has never received revenues and will not receive revenues until it begins operations. Until we receive Part 135 authority (which is subject to government approval) we can't begin operations. Although we think this will take about 6 months, and start-up will require $90,000 from the proceeds of this offering, it's difficult to predict when if at all this will happen and so we may never receive revenues or make a profit. The Offering We are seeking to sell 50,000 shares to raise up to $250,000 of which $20,000 will go for expenses and $25,000 for sales commissions, resulting in proceeds of $205,000. If we sell less than this amount our president will purchase shares to provide funding. Although he has agreed in writing to do so, he has not and is not obligated to place any amounts in escrow. Later on we will need more funds and expect to sell more shares or incur debt. We don't know on what terms future sales of shares or debt will be made, if at all. This would depend on what future investors and we might agree upon. The corporate offices of Albion are located at 24351 Pasto Road, Suite B, Dana Point, California 92629, and its telephone number is (949) 489-2400. Securities Offered:............................ 50,000 shares of common stock. Risk Factors. The securities offered hereby involve a high degree of risk and immediate substantial dilution and should not be purchased by investors who cannot afford the loss of their entire investment. See "Risk Factors." 2 Common Stock Outstanding(1) Before Offering:..... 1,000,000(1) shares Common Stock Outstanding After Offering:......... 1,050,000(1) shares NASD Electronic Bulletin Board Symbol (proposed)ALAV (1) Based on shares outstanding as of September 30, 2000. Risk Factors The securities offered hereby are highly speculative and very risky. Some of these risk factors follow. Before you buy consider the following risk factors and the rest of this prospectus. RISK FACTORS The shares are a speculative investment and very risky. You should especially consider these risk factors. No operating history to evaluate, and start up costs. We have not done any business. Albion's only activity to date is buying the aircraft and developing a business plan. There is no operating history for an investor to evaluate. It might take several months to obtain our 135 permit. Although we think there will be strong demand for our charter services, no one really knows for sure. We will try to minimize overhead by hiring pilot and maintenance people on an as needed basis, similar to other small charter airlines. Even if we can obtain business, it can't be predicted when we will be profitable, if ever. Best efforts offering may mean insufficient proceeds. The offering is made on a best efforts basis with no minimum offering. If less than 20,000 shares are sold Albion will not have sufficient funds to commence operations, and investors will not legally be entitled to receive a refund of their investment. We might need more capital to continue business. We may need significant capital for the expansion of our operations. We believe that the net proceeds from this offering should be sufficient to fund operations at least until April 30, 2002. However, we might need additional funds before then. If additional funds are required, but cannot be raised, it will have an adverse effect upon operations. To the extent that additional funds are obtained by the sale of equity securities, the stockholders may sustain significant dilution. If adequate capital is not available Albion will have to reduce or eliminate planned activities, which could otherwise ultimately provide significant revenue to Albion. Even if such additional financing is available on satisfactory terms, it, nonetheless, could entail significant additional dilution of the equity ownership of Albion to existing shareholders and the book value of their outstanding shares. There is lots of competition in the business. The domestic airline industry is fiercely competitive. Currently, any carrier deemed fit by the U.S. Department of Transportation (DOT) is free to operate chartered or scheduled passenger service between any two points within the U.S. and its possessions. To most of its destinations Albion will face competing service from at least one, and sometimes more than one, major domestic airline including: America West Airlines, Continental Airlines, Delta Air Lines, Southwest Airlines, Skywest Airlines, American Airlines and their affiliated regional carriers as well as innumerable charter operators. There are five charter operators known to Albion at Orange County Airport and they all are longer established and might be better financed. Albion also competes, particularly on shorter segments, with ground transportation. Competition could make it difficult or impossible for us to obtain customers or to charge enough for our services to earn an operating profit. 3 Government regulation significantly controls our operations and we must deal with it. The Airline Deregulation Act of 1978, as amended, eliminated most domestic economic regulation of passenger and freight transportation. However, the DOT and the Federal Aviation Administration (FAA) still exercise certain regulatory authority over air carriers. The DOT maintains jurisdiction over the approval of international codeshare agreements, international route authorities and certain consumer protection matters, such as advertising, denied boarding compensation, baggage liability and computer reservations systems. The FAA regulates flying operations generally, including establishing personnel, aircraft and security standards. As part of that oversight, the FAA has implemented a number of requirements that Albion must incorporate into its business. These matters relate to, among other things, inspection and maintenance of aircraft, pilot training, and supervision. Albion must prove to the FAA that it complies with Part 135 and other regulations before it can begin operations. Noise restrictions exist at many airports including Orange County. The aircraft complies with these restrictions if operated correctly. The FAA and local airports can modify existing regulations or impose additional regulations. If we don't comply with all regulations, the aircraft could be grounded, Albion could be fined, or its operating activities could be significantly restricted or our costs of operations would be too high to be competitive, if we can operate at all. Management will in all likelihood make mistakes due to inexperience, and this could affect the operating results. We may never receive operating authority. The DOT and FAA have discretion over persons to whom operating authority under Part 135 is given. We may never obtain operating authority. If this happens we won't be able to operate our business and investors may not realize any return on their investment. No cash dividends have or will be paid. Albion has not paid any cash dividends on its capital stock. Albion anticipates that its future earnings, if any, will be retained for use in the business, or for other corporate purposes, and it is not anticipated that any cash dividends on its common stock will be paid in the foreseeable future. Investors cannot expect to receive any dividends or other periodic income on their investment. See "Dividend Policy" and "Description of Securities." Nasdaq Stock Market rules could make it hard to resell your shares. Albion's common stock does not meet the current Nasdaq listing requirements for the SmallCap(R) Market. Until Albion is able to satisfy Nasdaq's requirements for listing, trading, if any, of the common stock will be conducted on the NASD's OTC Bulletin Board, established for securities that do not meet the Nasdaq SmallCap(R) Market listing requirements. Consequently, the liquidity of Albion's securities could be impaired, not only in the number of securities which could be bought and sold, but also through delays in the timing of transactions, reduction in security analysts' and the news media's coverage of Albion, and lower prices for Albion's securities than might otherwise be attained. In addition, the "penny stock" rules limit trading of securities not traded on NASDAQ or a recognized stock exchange, or securities which do not trade at a price of $5.00 or higher, in that brokers making trades in those securities must make a special suitability determination for purchasers of the security, and obtain the purchaser's consent prior to sale. The application of these rules may make it difficult for purchasers in this offering to resell their shares. We could issue more shares in the future without your permission. Albion's board of directors has the power, without the consent of the shareholders, to issue additional shares of common stock or preferred stock for such consideration as may be permitted under the Delaware General Corporation Law. Preferred stock may be issued with preferences or rights as to dividends, voting or liquidation which are superior to those of holders of common stock. In view of the large number of authorized but unissued shares of common stock (19,000,000 Shares as of the date of this prospectus) current shareholders are subject to significant potential dilution in their ownership interest in Albion. See "Description of Securities." 4 Economic conditions can affect our business. The airline industry is affected by changes in international, national, regional and local economic conditions as they impact the need and financial ability to travel. Southern California is an international travel destination since charter air travel is discretionary even for business travelers, adverse economic conditions can be expected to affect demand for charter services more than commercial carriers. War or political instability, abroad or in the United States, can lead to terrorism (or the threat thereof). Like any other air carrier, we might be the target of terrorist attacks. Travelers might reduce air travel in response to actual or threatened acts of terrorism against other air carriers as well. Your investment will be diluted on a book-value basis. Investors will pay $5.00 per share. However, the net tangible book value of Albion as of September 30, 2000 was $(.008) per share. After giving effect to the deduction of expenses, and if all the offered shares are sold, net tangible book value after the offering will be $.19 per share, or dilution of $4.81 per share to public investors, and an increase of $.19 per share in tangible book value attributable to investors. See "Dilution." Management control discourages takeovers and affects value. Management owns 893,850 shares. Even after the offering is sold management will be able to elect all the board of directors and otherwise control Albion and its operations, and investors will have little, if any control over Albion's management. The concentration of control in management will discourage takeover attempts and the purchase of shares by persons who wish to acquire control of Albion. See "Management." Management has limited experience and may make lots of mistakes. Management has very limited experience in managing aviation enterprises, and is not expected to work full time and will not receive any compensation for the near future. Instead management intends to hire qualified personnel. We may not be able to find such personnel, especially in an expanding economy. or we might not be able to afford to pay market rate salaries or hourly compensation. Management will in all likelihood make mistakes due to inexperience, and this could affect the operating results. High gasoline prices can make our costs increase. Due to the competitive nature of the airline industry, in the event of any increase in the price of fuel, there can be no assurance that we would be able to pass on increased fuel prices to its customers by increasing charter prices. We don't plan to engage in hedging for fuel prices when we only operate one aircraft. We could change the strategy we outline in this prospectus. Although it has no current plan to do so, we may change our business strategy in the future and may not pursue some of the goals stated herein. USE OF PROCEEDS The proceeds from this offering will be used to obtain the Part 135 license ($20,000) debt service ($27,500) marketing ($4,000) other operating expenses ($26,000) and the rest (up to $122,500) for working capital. If less than all offered shares are sold the amount allocated to working capital shall be reduced. See "Plan of Operation." ADDITIONAL INFORMATION Albion has filed a registration statement under the Securities Act with respect to the securities offered hereby with the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. This prospectus, which is a part of the registration statement, does not contain all of the information contained in the registration statement and the exhibits and schedules thereto, certain items of which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to Albion and the securities offered, reference is made to the registration statement, including all exhibits and schedules thereto, which may be 5 inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices located at 7 World Trade Center, New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 at prescribed rates during regular business hours. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete, and in each instance reference is made to the copy of such contract or document filed as an exhibit to the registration statement, each such statement being qualified in its entirety by such reference. Albion will provide, without charge upon oral or written request of any person, a copy of any information incorporated by reference herein. This request should be directed to Albion at 24351 Pasto Road, Suite B, Dana Point, California 92629, telephone (949) 489-2400. Upon effectiveness of the registration statement Albion will be required to file reports and other information with the Commission. All of such reports and other information may be inspected and copied at the Commission's public reference facilities described above. The Commission maintains a web site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. The address of such site is http://www.sec.gov. In addition, Albion intends to make available to its shareholders annual reports, including audited financial statements and such other reports as Albion may determine. DIVIDEND POLICY Albion has not paid any dividends on its common stock. Albion currently intends to retain any earnings for use in its business, and therefore does not anticipate paying cash dividends in the foreseeable future. MARKET PRICE OF COMMON STOCK Our common stock has never been traded. As of September 30, 2000, there were approximately 110 record holders of common stock. There are no warrants or options outstanding and no registration rights have been granted. At the present time all 1,000,000 shares outstanding are eligible to be sold under Rule 144, subject to volume limitations (10,000 shares each 90 days) by each individual who is an "affiliate" such as any director or executive officer, or otherwise as defined under Rule 144. DILUTION If you purchase shares in this offering you will suffer immediate dilution in the book value of your shares. As of September 30, 2000 our tangible book value (deficit) was $(7,819), or $(.008) per share. The price per share you will pay is $5.00. If all the shares offered are sold net proceeds will be $200,000, and net tangible book value on a pro forma basis would be $197,181 or $.19 per share. The per share dilution to investors would be $4.81 per share, or 96%, while current shareholders would receive an increase in net tangible book value of their shares of $.19. The following table illustrates the dilution: Price per share $5.00 Net tangible book value before offering (.008) Net tangible book value (pro forma) after offering .19 Dilution to public investors 4.81 Increase to current shareholders .19 6 PLAN OF OPERATION We have made a plan of operations for the first 12 months after receiving funding from the offering. We hope to receive net proceeds of $205,000. Obtaining the 135 permit will cost $20,000, primarily for consultants to write manuals for operating procedures. We plan to market our charter services primarily to charter brokers or via the internet. Although using brokers reduces our profitability, its more cost effective than employing our own marketing department, and most charter operations rely on brokers. However, $1,000 will be spent on brochures and $4,000 on other marketing expenses. The remaining $180,000 will be budgeted as follows: One year's debt service on airplane $ 27,500 Pilot training; initial and recurrent 8,000 Insurance 6,000 Tie down rent 2,000 Marketing 4,000 Maintenance 10,000 Working capital reserve 117,500 If less than the maximum proceeds are received working capital will be reduced. The president of Albion has agreed in writing to purchase up to 20,000 shares which will be invested without sales commissions so that at least $90,000 in net proceeds are received, but no amounts have been escrowed by him to fulfill this obligation. See "Plan of Distribution." The proceeds of the sale of 20,000 shares will cover the estimated fixed costs for eighteen months with each additional $6,000 in proceeds providing for one month's fixed costs. The variable costs of operation include fuel, oil and crew labor, which will be paid solely from charter revenues. Crew will be hired on an hourly basis, as needed when flights commence. The Cessna 421 is widely used for charter work and the hourly operating costs are widely understood to be as follows: Crew 2 pilots (only one needed) $ 40 Fuel - 40 gallons per hour at $2.00 per gallon 80 Oil - 2 quarts per hour at $2.00 per quart 4 Air frame and Avionics - Parts Reserve 50 Engine Reserve (2 engines) 100 TOTAL $ 274 The price of charter flights are based upon hourly usage. In Southern California the hourly charter rate for pressurized turbo props such as the Aircraft is about $500.00, less a brokerage commission of 10%. The resulting operating profit per hour is $176.00. Since annual fixed costs are estimated to be $53,500 per year, the projected break even point is 303 hours flown per year. The above assumptions are based upon current prices. The most volatile cost is fuel. Fuel prices are at a record high as of September 30, 2000 but they could go still higher. If they do our profitability could be adversely affected. We don't intend to engage in hedging for fuel prices while we only operate one aircraft. Another assumption we have made is on maintenance expenses. These expenses since the acquisition of the aircraft in October 1998 have been $17,953, incurred $6,238 in fiscal 1998 and $11,715 in fiscal 1999. We have budgeted only $10,000 for annual maintenance. We think that maintenance expenses were higher than they will be in the future because in management's experience any used airplane will incur high maintenance expenses when first purchased, equal to 10-15% of the purchase price. Its commonly believed the initial high expenses are due to deferred maintenance items on aircraft. However, we can't forecast future maintenance expenses. Other factors can also adversely affect operations. Heretofore there has been an abundant supply of pilots. However, many airline pilots are near retirement age and a pilot shortage could develop as commuter airlines hire qualified pilots. Mechanical problems can delay or ground flights. Waiting for parts or maintenance personnel can also ground the aircraft. Weather is generally good in the our planned area of operations but bad weather can delay or cancel flights. Also, currently Orange County Airport is closed to takeoffs and landings from 11:00 pm to 7:00 am. This could limit flights. 7 We are a development stage company as that term is defined in paragraphs 8 and 9 of SFAS No. 7. Our activities to date have been limited to selection and purchase of an aircraft, aircraft maintenance, and development of a business plan. Our auditors have included an explanatory paragraph in their report on our financial statements, relating to the uncertainty of our business as a going concern. [discuss factors] 8 BUSINESS General Albion's business plan is to offer aircraft charter service based at Orange County Airport in Southern California. In early 1997 Albion commenced the search for an appropriate aircraft. The Cessna 421B (Golden Eagle) was selected because of its familiarity to the charter community, its pressurization and speed. After some months of search Albion's current aircraft was acquired. The aircraft then underwent a substantial maintenance program which required one year. Finally, at the commencement of calendar 2000, the aircraft was ready to be utilized. In the meantime Albion officers met with charter brokers and aviation professionals to evaluate probable operating expenses, charter rates and consumer demand. The aircraft is owned by a subsidiary, "Svetlana Aviation". We plan to obtain our operating permit and conduct all operations in the name of this subsidiary. Charter Services Orange County Airport served more than 7.4 million passengers in 1998, according to airport management, and is the principal airport for Orange County with more than 3 million population. Orange County enjoys a growing economy and is also a popular tourist destination featuring Disneyland and some of California's best beaches. We think that there is a growing market for aircraft charter services in Orange County. The area is affluent. Pursuant to airport rules the number of commercial and commuter flights is limited. Growing consumer dissatisfaction with airline service, we think, will cause more and more travelers to consider charter service. The cost of charter aircraft for flights of one to two hour flights can be equivalent to the cost of first or business class tickets, but the convenience and prestige of charter services can outweigh the cost factor. Charter can be especially attractive for business travelers with a busy schedule. Operations More detail on the operations aspects of a charter airline is provided under the caption "Plan of Operations." You should read that section if you have not already. We plan to commence service approximately six months after receipt of proceeds of this offering. In brief, aircraft charter operations have to be carefully managed. The aircraft does not generate any revenue unless it is flying for hire. Most charter airlines don't engage in much advertising, but rely on charter brokers or customer referrals. A potential customer usually requests information from a charter broker on price, availability and types of aircraft, when the need for services arises. Aircraft brokers receive a negotiable percentage of the charter fee. Fees are based on hourly flight time, usually with a one or two hour minimum. Fixed expenses such as debt service, insurance, tiedown rental and some minimum level of maintenance are incurred regardless of the hours flown. However, most of the expenses are incurred only when the aircraft is being operated, and include fuel and oil, crew expenses, maintenance and engine reserves. Engine life is limited by FAA rules to fixed hours of total operation, after which an engine must be replaced or overhauled. Maintenance expenses can arise at any time and although difficult to predict are generally consistent with each type of aircraft. With each hour of operation we are going to set aside a fixed amount of cash for future engine overhauls, and another amount for maintenance expenses. Employees As is typical in the industry we will pay pilots and maintenance personnel on any hourly basis. We think we can find personnel without difficulty, but it's possible that it will be increasingly difficult to find experienced pilots if commercial airlines continue to expand hiring. The rate of compensation is subject to pilot availability and could increase to an amount we can't afford. The president serves without compensation at this time and will only devote part time to the business until warranted by business. 9 Properties It is not necessary for us to have dedicated office space. We are using the office space of our president. Since sales will be effected through brokers, all that is needed is telephone availability and a place to keep records and a checkbook. The amount of space is minimal. MANAGEMENT Directors and Executive Officers The member of the Board of Directors of Albion serve until the next annual meeting of stockholders, or until his successors have been elected. The officer serves at the pleasure of the Board of Directors. The following is the director and executive officer of Albion. Jehu Hand, age 44, has been President and Chief Financial Officer of Albion since its inception. Mr. Hand has been engaged in corporate and securities law practice and has been a partner of the law firm of Hand & Hand since 1992. Hand & Hand incorporated as a law corporation in May 1994. From January 1992 to December 1992 he was the Vice President-Corporate Counsel and Secretary of Laser Medical Technology, Inc., which designs, manufactures and markets dental lasers and endodontics equipment. He was a director of Laser Medical from February 1992 to February 1993. From January to October, 1992 Mr. Hand was Of Counsel to the Law Firm of Lewis, D'Amato, Brisbois & Bisgaard. From January 1991 to January 1992 he was a shareholder of McKittrick, Jackson, DeMarco & Peckenpaugh, a law corporation. From January to December 1990 he was a partner of Day, Campbell & Hand, and was an associate of its predecessor law firm from July 1986 to December 1989. From 1984 to June 1986 Mr. Hand was an associate attorney with Schwartz, Kelm, Warren & Rubenstein in Columbus, Ohio. Jehu Hand received a J.D. from New York University School of Law and a B.A. from Brigham Young University. He is a registered principal (Series 7, 24 and 63) of SoCal Securities, a broker-dealer and member of the National Association of Securities Dealers, Inc. SoCal Securities will not participate in the offering of the common stock, does not make a market in the securities of any company and will not make a market in the Company's common stock. Mr. Hand was formerly a director and president of Las Vegas Airlines, Inc., a Delaware corporation. In 1998 Las Vegas Airlines purchased a controlling interest in Las Vegas Airlines, Inc., a Nevada corporation, engaged in Part 135 operations in Las Vegas. Shortly after the acquisition Mr. Hand discovered that significant liabilities of the Nevada company had not been disclosed that its liabilities greatly exceeded its assets, and that its costs of doing business exceeded market price for its flights and decided it was necessary to discontinue operations. Accordingly, in mid December 1998 Las Vegas Airlines, Inc. notified the FAA that it would discontinue all flight operations effective immediately. At this time the fleet of leased planes was returned to the lessor, and receivables were used to pay obligations to employees. Mr. Hand was never involved in the day to day operations of the Nevada subsidiary. Kimberly Peterson, age 34, has been corporate secretary since October 2000. She is self employed as a legal secretary. Prior to July 1999 she was employed by Hand & Hand for more than five years. 10 Executive Compensation The following table sets forth the cash compensation of Albion's executive officers and directors during each of the last three fiscal years. The remuneration described in the table does not include the cost to Albion of benefits which may be furnished to the named executive officers, including premiums for health insurance and other benefits provided to such individual that are extended in connection with the conduct of Albion's business. The value of such benefits cannot be precisely determined, but the executive officers named below did not receive such other compensation in the years set forth below.
Summary Compensation Table ANNUAL COMPENSATION LONG TERM COMPENSATION Name and Other Annual Awards Payouts All Principal Position Year Salary Bonus Compensation Other Restricted Options/ LTIP Stock ($)SARs(#) Payouts ($) Jehu Hand 1999 $0 0 0 0 0 0 0 President and CFO 1998 0 0 0 0 0 0 1997 0 0 0 0 0 0 0
11 PRINCIPAL SHAREHOLDERS The following table sets forth information relating to the beneficial ownership of Company common stock as of the date of this prospectus by (I) each person known by Albion to be the beneficial owner of more than 5% of the outstanding shares of common stock (ii) each of Albion's directors and executive officers, and (iii) the Percentage After Offering assumes the sale of the maximum offering of 50,000 shares.
Percentage Percentage Name and Address(1) Common Stock Before Offering After Offering Jehu Hand 800,000 80.0% 76.2% 24351 Pasto Road, #B Dana Point, California 92629 Kimberly Peterson 93,850 9.4% 9.2% 18776 Fairfax Lane Huntington Beach, California 92648 All officers and directors as a group (1 person) 893,850 89.4% 85.4%
(1) Unless otherwise noted below, Albion believes that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. For purposes hereof, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereof upon the exercise of warrants or options or the conversion of convertible securities. Each beneficial owner's percentage ownership is determined by assuming that any warrants, options or convertible securities that are held by such person (but not those held by any other person) and which are exercisable within 60 days from the date hereof, have been exercised. 12 CERTAIN TRANSACTIONS From time to time Mr. Hand has advanced operating expenses of Albion. The cumulative expenses related to general administrative expenses of Albion were $1,249, $1,101 and $468 as of September 30, 2000, December 31, 1999 and December 31, 1998, respectively, and have been classified as related party payables. No advances were made after September 30, 2000. The amount of $1,249 will be contributed to capital by Mr. Hand upon completion of the offering. Those expenses related to the purchase and maintenance of the aircraft and other expenses of the operating subsidiary, Svetlana Aviation, have been accounted for as contributions to capital, and were $30,063, $41,770 and $30,909, for the nine months ended September 30, 2000 and the years ended December 31, 1999 and 1998, respectively. No amounts were contributed after September 30, 2000. Mr. Hand's contributions have consisted only of cash. The aircraft was acquired on October 23, 1998 from an unrelated party, an aircraft broker in Mississippi. The purchase price was $159,400, paid $16,000 in cash and $143,900 in debt financing from Greentree Financial. The loan is payable over 7 years in monthly installments of $2,297, and the interest rate is 8.75%. Mr. Hand guaranteed the loan which financed the purchase of the aircraft. As of September 30, 2000 the amount owed on the loan was $114,244. In the event Albion defaults on the loan, Mr. Hand would be personally liable for any unpaid balance, and he might have the right as guarantor to take posession of or sell the aircraft. PLAN OF DISTRIBUTION The Shares are being offered for sale on a "best efforts," no minimum, 50,000 Share maximum basis, by Albion or selected broker dealers, who will receive a sales commission of $.50 per share and a non-accountable expense allowance of $.15 per Share. Officers and directors may purchase shares. Ms. Peterson will not be paid any commission or other remuneration for her selling efforts. In the event shares are sold on behalf of the Company by her, such commissions will be less and proceeds to Albion will be greater. Mr. Hand will not make any selling efforts. The Company anticipates other offering expenses to be $10,000. Neither Jehu Hand, Albion's President, nor SoCal Securities, an NASD broker-dealer of which he is a principal, will participate in the offering. No escrow account will be established to receive offering proceeds. The offering will close on [four months from date of prospectus] unless sooner terminated by Albion. Albion has the unconditional right to accept or reject any subscription. If Albion rejects any subscription, it will promptly notify the subscriber and return all subscription funds. The offering price and terms of the shares has been determined by Albion based on its financial condition, prospects and conditions in the aviation industry. Regulation M and Market Making. Albion's president, Jehu Hand, has agreed to purchase up to 20,000 shares without deduction for commission, to the extent required to ensure no less than $90,000 in offering proceeds. This would probably happen towards the end of the offering period. He agreed to do so in order to ensure a minimum level of funding for the business plan. Even though they were purchased in the offering, Mr. Hand has agreed he will take these shares as "restricted" securities and resell only in accordance with Rule 144. As affiliates of Albion, no officer or director of Albion, or Socal Securities (a broker-dealer affiliated with Albion's president) may bid for, purchase, or attempt to induce any person to bid for or purchaser securities of Albion. In light of the foregoing, and since Mr. Hand's potential purchase of up to 20,000 shares will be made directly from Albion, and not through any exchange or interdealer quotation system, Albion believes that his investment will comply with Regulation M promulgated under the Securities Exchange Act of 1934. We don't know who will make a market in Albion's common stock, but SoCal Securities does not make a market in securities. Neither SoCal Securities nor Mr. Hand will have any role in the after market for Albion's securities. 13 DESCRIPTION OF SECURITIES Common Stock Albion's Articles of Incorporation authorizes the issuance of 20,000,000 shares of common stock, $.001 par value per share, of which 1,000,000 shares were outstanding as of September 30, 2000. Albion has no plans to sell additional shares of common stock at this time, but reserves the right to do so to meet future operating requirements. Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock have no cumulative voting rights. Holders of shares of common stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors in its discretion, from funds legally available therefor. In the event of a liquidation, dissolution or winding up of Albion, the holders of shares of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities and the liquidation preference to holders of Preferred Stock. Holders of common stock have no preemptive rights to purchase Albion's common stock. There are no conversion rights or redemption or sinking fund provisions with respect to the common stock. The shareholders have already approved a reverse or forward stock split as may be also approved by the board of directors, but no such stock split is contemplated. Preferred Stock Albion's Articles of Incorporation authorize the issuance of 1,000,000 shares of preferred stock, $.001 par value, of which no shares of Preferred Stock are outstanding. Albion's Board of Directors has authority, without action by the shareholders, to issue all or any portion of the authorized but unissued preferred stock in one or more series and to determine the voting rights, preferences as to dividends and liquidation, conversion rights, and other rights of such series. Albion considers it desirable to have preferred stock available to provide increased flexibility in structuring possible future acquisitions and financings and in meeting corporate needs which may arise. If opportunities arise that would make desirable the issuance of preferred stock through either public offering or private placements, the provisions for preferred stock in Albion's Articles of Incorporation would avoid the possible delay and expense of a shareholder's meeting, except as may be required by law or regulatory authorities. Issuance of the preferred stock could result, however, in a series of securities outstanding that will have certain preferences with respect to dividends and liquidation over the common stock which would result in dilution of the income per share and net book value of the common stock. Issuance of additional common stock pursuant to any conversion right which may be attached to the terms of any series of preferred stock may also result in dilution of the net income per share and the net book value of the common stock. The specific terms of any series of preferred stock will depend primarily on market conditions, terms of a proposed acquisition or financing, and other factors existing at the time of issuance. Therefore, it is not possible at this time to determine in what respect a particular series of preferred stock will be superior to Albion's common stock or any other series of preferred stock which Albion may issue. The Board of Directors may issue additional preferred stock in future financings, but has no current plans to do so at this time. The issuance of Preferred Stock could have the effect of making it more difficult for a third party to acquire a majority of the outstanding voting stock of Albion. Albion intends to furnish holders of its common stock annual reports containing audited financial statements and to make public quarterly reports containing unaudited financial information. Transfer Agent The transfer agent for the common stock is Colonial Stock Transfer Corporation, 455 East 400 South, Suite 100, Salt Lake City, Utah 84111 and its telephone number is (801) 355-5740. LEGAL MATTERS The legality of the Shares offered hereby will be passed upon for Albion by Hand & Hand, a law corporation, Dana Point, California. The principal of Hand & Hand owns 800,000 shares of common stock. 14 EXPERTS The audited financial statements included in this Prospectus as of December 31, 1999 and 1998 have been audited by Tanner & Co., independent certified public accountants, to the extent and for the periods set forth in their report thereon and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. INDEMNIFICATION Albion has adopted provisions in its articles of incorporation and bylaws that limit the liability of its directors and provide for indemnification of its directors and officers to the full extent permitted under the Delaware General Corporation Law ("DGCL"). Under Albion's articles of incorporation, and as permitted under the Delaware General Business Act, directors are not liable to Albion or its stockholders for monetary damages arising from a breach of their fiduciary duty of care as directors. Such provisions do not, however, relieve liability for breach of a director's duty of loyalty to Albion or its stockholders, liability for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, liability for transactions in which the director derived as improper personal benefit or liability for the payment of a dividend in violation of Delaware law. Further, the provisions do not relieve a director's liability for violation of, or otherwise relieve Albion or its directors from the necessity of complying with, federal or state securities laws or affect the availability of equitable remedies such as injunctive relief or recision. At present, there is no pending litigation or proceeding involving a director, officer, employee or agent of Albion where indemnification will be required or permitted. Albion is not aware of any threatened litigation or proceeding that may result in a claim for indemnification by any director or officer. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of Albion pursuant to the foregoing provisions, or otherwise, Albion has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Albion of expenses incurred or paid by a director, officer or controlling person of Albion in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Albion will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 15 ALBION AVIATION, INC. (A Development Stage Company) Consolidated Financial Statements December 31, 1999 and 1998 (audited) and September 30, 2000 (unaudited)
ALBION AVIATION, INC. (A Development Stage Company) Index - ------------------------------------------------------------------------------------------------------------------- Page Independent auditors' report F-2 Consolidated Balance sheet F-3 Consolidated Statement of operations F-4 Consolidated Statement of stockholders' equity F-5 Consolidated Statement of cash flows F-6 Notes to consolidated financial statements F-7 - -------------------------------------------------------------------------------------------------------------------
F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Albion Aviation, Inc. We have audited the accompanying consolidated balance sheet of Albion Aviation, Inc., (a development stage company) as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for the years then ended and the cumulative amounts from April 20, 1994 (date of inception) to December 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Albion Aviation, Inc., (a development stage company) at December 31, 1999 and 1998 and the results of their operations and their cash flows for the years then ended and cumulative amounts from April 20, 1994 (date of inception) to December 31, 1999 in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses and has an accumulated deficit. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. TANNER & CO. Salt Lake City, Utah June 9, 2000 F-2
ALBION AVIATION, INC. (A Development Stage Company) Consolidated Balance Sheet - ------------------------------------------------------------------------------------------------------------------- September 30, 2000 December 31, --------------------------------------------- Assets (Unaudited) 1999 1998 --------------------------------------------- Current assets - cash $ 2,297$ $ - Aircraft, net of accumulated depreciation of $54,523 and $34,534, and $4,442, respectively 105,377 125,366 155,458 --------------------------------------------- Total assets $ 107,674$ 125,366$ 155,458 --------------------------------------------- - ---------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' (Deficit) Equity Current liabilities: Related party payables $1,249 $ 1,101$ 468 Current portion of long-term debt 18,290 17,132 15,702 --------------------------------------------- Total current liabilities 19,539 18,233 16,170 --------------------------------------------- Long-term debt 95,954 109,819 126,950 --------------------------------------------- Stockholders' (deficit) equity: Preferred stock; $.001 par value; 1,000,000 shares - - - authorized; no shares issued and outstanding Common stock; $.001 par value; 20,000,000 shares authorized; 1,000,000 shares issued and outstanding 1,000 1,000 1,000 Additional paid-in capital 102,757 72,694 30,924 Deficit accumulated during the development stage (111,576) (76,380) (19,586) --------------------------------------------- Total stockholders' (deficit) equity (7,819) (2,686) 12,338 --------------------------------------------- Total liabilities and stockholders' (deficit) equity $ 107,674$ 125,366$ 155,458 --------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-3
ALBION AVIATION, INC. (A Development Stage Company) Consolidated Statement of Operations - ------------------------------------------------------------------------------------------------------------------- Cumulative Nine Amounts Months Ended September 30, Years Ended Since ------------------------------ 2000 1999 December 31, Inception -------------------------- (Unaudited) (Unaudited) 1999 1998 (Unaudited) --------------------------------------------------------------------- Revenue $ $ - $ - $ - $ - - --------------------------------------------------------------------- Costs and expenses: General and administrative expenses 26,312 34,828 44,932 17,076 79,455 Interest expense 8,884 9,981 11,862 1,394 32,121 --------------------------------------------------------------------- 35,196 44,809 56,794 18,470 111,576 --------------------------------------------------------------------- Loss before income taxes (35,196) (44,809) (56,794) (18,470) (111,576) Income taxes - current - - - - - --------------------------------------------------------------------- Net loss $ (35,196$ (44,809$ (56,794$ (18,470$ (111,576) --------------------------------------------------------------------- Loss per share - basic and diluted $ $ (.02) $ (.04) $(.06) (.02) --------------------------------------------------------------------- Weighted average common shares - basic and diluted 1,000,000 1,000,000 1,000,000 1,000,000 --------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-4
ALBION AVIATION, INC. (A Development Stage Company) Consolidated Statement of Stockholders' (Deficit) Equity April 20, 1994 (Date of Inception) Through September 30, 2000 (Unaudited) - ------------------------------------------------------------------------------------------------------------------- Additional Preferred Stock Common Stock Paid-In Accumulated ------------------------------------------- Shares Amount Shares Amount Capital Deficit Total -------------------------------------------------------------------------------- Balance, April 20, 1994 -$ - -$ $ - $ - $ - - Shares issued for cash - - 1,000,000 1,000 15 - 1,015 Net loss - - - - - (144) (144) -------------------------------------------------------------------------------- Balance, December 31, 1994 - - 1,000,000 1,000 15 (144) 871 Net loss - - - - - (338) (338) -------------------------------------------------------------------------------- Balance, December 31, 1995 - - 1,000,000 1,000 15 (482) 533 Net loss - - - - - (320) (320) -------------------------------------------------------------------------------- Balance, December 31, 1996 - - 1,000,000 1,000 15 (802) 213 Net loss - - - - - (314) (314) -------------------------------------------------------------------------------- Balance, December 31, 1997 - - 1,000,000 1,000 15 (1,116) (101) Contributions to capital - - - - 30,909 - 30,909 Net loss - - - - - (18,470) (18,470) -------------------------------------------------------------------------------- Balance, December 31, 1998 - - 1,000,000 1,000 30,924 (19,586) 12,338 Contributions to capital - - - - 41,770 - 41,770 Net loss - - - - - (56,794) (56,794) -------------------------------------------------------------------------------- Balance, December 31, 1999 - - 1,000,000 1,000 72,694 76,380 2,686 Contributions to capital (unaudited) - - - - 30,063 - 30,063 Net loss (unaudited) - - - - - (35,196) (35,196) -------------------------------------------------------------------------------- Balance, September 30, 2000 (unaudited) -$ -1,000,000$ 1,000$ 102,757$ (111,576$ (7,819) -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-5
ALBION AVIATION, INC. (A Development Stage Company) Consolidated Statement of Cash Flows - ------------------------------------------------------------------------------------------------------------------- Nine Cumulative Months Ended Amounts September 30, Years Ended Since --------------------------- 2000 1999 December 31, Inception -------------------------- (Unaudited) (Unaudited) 1999 1998 (Unaudited) ------------------------------------------------------------------ Cash flows from operating activities: Net loss $ (35,196$ (44,809$ (56,794$ (18,470$ (111,576) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 19,989 19,989 30,092 4,701 55,538 Increase in related party payables 148 633 633 108 1,249 ------------------------------------------------------------------ Net cash used in operating activities (15,059) (24,187) (26,069) (13,661) (54,789) ------------------------------------------------------------------ Cash flows from investing activities: Purchase of aircraft - - - (16,000) (16,000) Organization costs - - - - (1,015) ------------------------------------------------------------------ Net cash used in investing activities - - - (16,000) (17,015) ------------------------------------------------------------------ Cash flows from financing activities: Principal payments on long-term debt (12,707) (12,989) (15,701) (1,248) (29,656) Contributions to capital 30,063 37,176 41,770 30,909 102,742 Issuance of common stock - - - - 1,015 ------------------------------------------------------------------ Net cash provided by financing activities 17,356 24,187 26,069 29,661 74,101 ------------------------------------------------------------------ Net increase in cash 2,297 - - - 2,297 Cash, beginning of period - - - - - ------------------------------------------------------------------ Cash, end of period $ 2,297$ $ - $ - $ - 2,297 ------------------------------------------------------------------ - -------------------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-6 ALBION AVIATION, INC. (A Development Stage Company) Notes to Consolidated Financial Statements 1. Organization and Summary of Significant Accounting Policies Organization The Company was organized under the laws of the state of Delaware on April 18, 1994 (date of inception). The Company has not commenced planned principal operations and purposes to seek business ventures which will allow for long-term growth. Further, the Company is considered a development stage company as defined in SFAS No. 7. Its principal activities since inception have consisted of the offer and sale of common stock and the purchase of a commercial airplane, financed by long-term debt. The Company intends to engage in the charter air carrier business. The Company has, at the present time, not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors. Unaudited Information In the opinion of management, the accompanying unaudited financial statements for the nine month periods ended September 30, 2000 and 1999 contain all adjustments (consisting only of normal recurring items) necessary to present fairly the results of operations and cash flows for the Company for the nine month periods ended September 30, 2000 and 1999. Principles of Consolidation The consolidated financial statements include the accounts of the Company, and its consolidated subsidiary. All significant intercompany balances and transactions have been eliminated. Cash and Cash Equivalents Cash equivalents are generally comprised of certain highly liquid investments with maturities of less than three months. Aircraft The Company's aircraft is carried at cost. Maintenance and repairs, including overhauls, were charged to operating expenses as they are incurred. The aircraft is depreciated on a straight-line basis over the estimated useful life of 6 years. - --------------------------------------------------------------------------- F-7 ALBION AVIATION, INC. (A Development Stage Company) Notes to Consolidated Financial Statements Continued - ------------------------------------------------------------------------------ 1. Organization and Summary of Significant Accounting Policies Continued Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Going Concern The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates profitable operations and the satisfaction of liabilities in the normal course of business. There are uncertainties that raise substantial doubt about the ability of the Company to continue as a going concern. As shown in the consolidated statement of operations, the Company has had no revenues from operations, and reported a net losses in all periods since inception. The Company intends to fund start-up costs during the next twelve months with the capital contributions from related parties, however, such related parties are not obligated under any agreement to contribute such funds. The Company's ability to continue as a going concern is dependent upon management's ability to secure additional debt or equity financing. The Company is currently seeking to sell 50,000 shares of common stock for $250,000 of which $50,000 will be used to pay commissions and expenses of the offering. There is no guarantee that the Company will be successful in securing this equity financing or other forms of financing. There is also no guarantee that, if successful, such financing will be sufficient to fund necessary start up costs and sustain operations upon commencement of such operations. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. - ----------------------------------------------------------------------------- F-8 ALBION AVIATION, INC. (A Development Stage Company) Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 3. Long-term Debt In October 1998, the Company entered into a note agreement, with a financing company, in the amount of $143,900, due in monthly installments of $2,297, including interest at 8.75%, secured by aircraft and personal guarantee of an officer of the Company, and maturing in November 2005. The total proceeds and cash of $16,000 were used to purchase used aircraft for a total purchase price of $159,900. The note balance outstanding at December 31, 1999 and 1998 was $126,951 and $142,652, respectively. Future maturities of the note payable are as follows: Years Ending December 31: Amount ----------------- 2000 $ 17,132 2001 18,693 2002 20,396 2003 22,254 2004 24,281 Thereafter 24,195 ----------------- $ 126,951 ----------------- 4. Income Taxes The difference between income taxes at statutory rates and the amount presented in the financial statements is a result of the following: Cumulative Years Ended Amounts December 31, Since ------------------------- 1999 1998 Inception --------------------------------------- Income tax benefit at statutory rate $ 8,000$ 3,000$ 14,000 Change in valuation allowance (8,000) (3,000) (14,000) --------------------------------------- $ $ $ - --------------------------------------- - ------------------------------------------------------------------------------- F-9 ALBION AVIATION, INC. (A Development Stage Company) Notes to Consolidated Financial Statements Continued - ---------------------------------------------------------------------------- 4. Income Taxes Continued Deferred tax assets are as follows: December 31, ----------------------------------- 1999 1998 ----------------------------------- Operating loss carryforwards $ 14,000$ 6,000 Valuation allowance (14,000) (6,000) ----------------------------------- $ $ - - ----------------------------------- The Company has net operating loss carryforwards of approximately $76,000, which begin to expire in the year 2009. The amount of net operating loss carryforward that can be used in any one year will be limited by significant changes in the ownership of the Company and by the applicable tax laws which are in effect at the time such carryforwards can be utilized. 5. Related Party Transactions At December 31, 1999 and 1998, the Company owed the Company's president and majority shareholder $1,101 and $468, respectively. The advances are unsecured, non-interest bearing and have no specific repayment terms. During the years ended December 31, 1999 and 1998 the Company's president/majority shareholder made capital contributions of cash of $41,770 and $30,909, respectively. 6. Supplemental Cash Flow Information During the year ended December 31, 1998, the Company acquired aircraft in exchange for long-term debt of $143,900. Actual amounts paid for interest and income taxes are as follows: Nine Months Ended Cumulative September 30, Years Ended Amounts ------------------------ 2000 1999 December 31, Since -------------------- (Unaudited) (Unaudited) 1999 1998 Inception ------------------------------------------------------- Interest $ 8,884$ 9,981$ 11,862$ 1,394$ 19,348 ------------------------------------------------------- Income taxes $ $ - $ - $- $ - - ------------------------------------------------------- - ----------------------------------------------------------------------------- F-10 ALBION AVIATION, INC. (A Development Stage Company) Notes to Consolidated Financial Statements Continued - ------------------------------------------------------------------------------- 7. Recent Accounting Pronounce- ments In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective date of FASB Statement No. 133." SFAS 133 establishes accounting and reporting standards for derivative instruments and requires recognition of all derivatives as assets or liabilities in the statement of financial position and measurement of those instruments at fair value. SFAS 133 is now effective for fiscal years beginning after June 15, 2000. The Company believes that the adoption of SFAS 133 will not have any material effect on the financial statements of the Company. 8. Sale of Stock The Company is seeking to sell 50,000 shares of common stock for $250,000 of which $50,000 will be used to pay commissions and expenses of the offering. - ------------------------------------------------------------------------------ F-11 No dealer, salesman or other person is authorized to give any information or to make any representations not contained in this Prospectus in connection with the offer made hereby, and, if given or made, such information or representations must not be relied upon as having been authorized by Albion. This Prospectus does not constitute an offer to sell or a solicitation to an offer to buy the securities offered hereby to any person in any state or other jurisdiction in which such offer or solicitation would be unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof. TABLE OF CONTENTS Page Prospectus Summary.......................... 2 Risk Factors................................ 3 Use of Proceeds............................. 5 Additional Information...................... 6 Dividend Policy............................. 6 Market Price of Common Stock................ 7 Plan of Operation........................... 8 Business.................................... 9 Management.................................. 10 Principal Shareholders...................... 12 Certain Transactions........................ 13 Plan of Distribution........................ 13 Description of Securities................... 14 Legal Matters............................... 15 Experts..................................... 16 Financial Statements........................ 17 ALBION AVIATION, INC. 50,000 SHARES PROSPECTUS January __, 2001 ALBION AVIATION, INC. PART II Item 24. Indemnification of Directors and Officers. Albion has adopted provisions in its articles of incorporation and bylaws that limit the liability of its directors and provide for indemnification of its directors and officers to the full extent permitted under the Delaware General Corporation Law. Under Albion's articles of incorporation, and as permitted under the Delaware General Corporation Law, directors are not liable to Albion or its stockholders for monetary damages arising from a breach of their fiduciary duty of care as directors. Such provisions do not, however, relieve liability for breach of a director's duty of loyalty to Albion or its stockholders, liability for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, liability for transactions in which the director derived as improper personal benefit or liability for the payment of a dividend in violation of Delaware law. Further, the provisions do not relieve a director's liability for violation of, or otherwise relieve Albion or its directors from the necessity of complying with, federal or state securities laws or affect the availability of equitable remedies such as injunctive relief or recision. At present, there is no pending litigation or proceeding involving a director, officer, employee or agent of Albion where indemnification will be required or permitted. Albion is not aware of any threatened litigation or proceeding that may result in a claim for indemnification by any director or officer. Item 25. Other Expenses of Issuance and Distribution.
Filing fee under the Securities Act of 1933 $ 100.00 Printing and engraving(1) $ 300.00 Blue Sky Fees $ 3,500.00 Auditing Fees(1) $ 5,000.00 NASD Filing Fees $ 500.00 Non-accountable expenses $ 7,500.00 Miscellaneous(1) $ 3,100.00 TOTAL $ 20,000.00
(1) Estimates Item 26. Recent Sales of Unregistered Securities. Not Applicable. Item 27. Exhibits and Financial Schedules 3. Certificate of Incorporation and Bylaws 3.1. Articles of Incorporation(1) 3.2 Articles of Amendment(1) 3.3 Bylaws(1) 5. Opinion of Hand & Hand as to legality of securities being registered.(2) 10. Material Contracts 10.1 Loan Agreement with Greentree Financial(2) 10.2 Funding Agreement between Jehu Hand and the Issuer(2) 21. Subsidiaries of the small business issuer-Svetlana Aviation, a Nevada corporation, is the only subsidiary. It does business under the name Svetlana Aviation. 23. Consents of Experts and Counsel 23.1 Consent of Tanner & Co.(2) 23.2 Consent of Hand & Hand included in Exhibit 5 hereto 27. Financial Data Schedule(2) All other Exhibits called for by Rule 601 of Regulation S-B are not applicable to this filing. (b) Financial Statement Schedules All schedules are omitted because they are not applicable or because the required information is included in the financial statements or notes thereto. (1) Filed with original registration statement. (2) Filed herewith. Item 28. Undertakings. (a) The undersigned small business issuer hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (I) Include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) Reflect in the prospectus any facts or events which, individually or together represent a fundamental change in the information in the registration statement; (iii) Include any material or changed information the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities as at that time to be the initial bona fide offering thereof. (3) File a post effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (d) To provide to the underwriter at the Closing specified in the underwriting agreement certificates in such denominations and registered in such names as may be required by the underwriter to permit prompt delivery to each purchaser. (e) Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel that matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (f) The undersigned small business issuer hereby undertakes that it will: (1) For purposes of determining any liability under the Securities Act that the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a part of this registration statement as of the time the Commission declared it effective. (2) For the purpose of determining any liability under the Securities Act, that each post-effective amendment that contains a form of prospectus as a new registration statement for the securities offered in the registration statement, and that offering of the securities at that time as the initial bona fide offering of those securities. SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it meets all the requirements for filing on Form SB-2 and has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Dana Point, State of California on December 30, 2000. ALBION AVIATION, INC. By: /s/ Jehu Hand Jehu Hand President In accordance with the requirements of the Securities Act of 1933, this amendment to Registration Statement has been signed by the following persons in the capacities indicated on December 30, 2000. By: /s/ Jehu Hand President, Chief Financial Officer and Director Jehu Hand (principal executive officer and principal accounting and financial officer) December 28, 2000 Albion Aviation, Inc. Re:Registration Statement on Form S-1 (the "Registration Statement") Gentlemen: You have requested our opinion as to the legality of the issuance by you (the "Corporation") of 50,000 shares of common stock ("Shares"), all as further described in the Registration Statement in the form to be filed with the U.S. Securities and Exchange Commission. As your counsel, we have reviewed and examined: 1. The Articles of Incorporation of the Corporation; 2. The Bylaws of the Corporation; 3. A copy of certain resolutions of the corporation; and 4. The Registration Statement. In giving our opinion, we have assumed without investigation the authenticity of any document or instrument submitted us as an original, the conformity to the original of any document or instrument submitted to us as a copy, and the genuineness of all signatures on such originals or copies. Based upon the foregoing, we are of the opinion that the Shares to be offered pursuant to the Registration Statement, if sold as described in the Registration Statement (and as to shares issuable upon options if the options are exercised in accordance with their terms), will be legally issued, fully paid and nonassessable, provided that no less than par value is paid for any Shares. No opinion is expressed herein as to the application of state securities or Blue Sky laws. We consent to the reference to our firm name in the Prospectus filed as a part of the Registration Statement and the use of our opinion in the Registration Statement. In giving these consents, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities and Exchange Commission promulgated thereunder. Very truly yours, HAND & HAND EX-10 2 0002.txt 10.1 LOAN DOCUMENTS-GREENTREE Exhibit 10.1 COMMERCIAL AIRCRAFT PROMISSORY NOTE I promise to pay you, at your address listed above, the PRINCIPAL sum of One Hundred Forty Three Thousand Nine Hundred and No/100 Dollars $ 143,900.00 . INTEREST: I agree to pay interest on the outstanding principal balance from the date of this Note at the rate of 8.75% % per year until Paid in Full . Variable Rate: This rate may then change as stated below. Index Rate: The future rate will be N/A the following index rate: N/A N/A No Index: The future rate will not be subject to any internal or external index. It will be entirely in your control. Frequency and Timing: The rate on this Note may change as often as N/A . A change in the interest rate will take effect N/A . Limitations: During the term of this loan, the applicable annual interest rate will not be more than N/A % or less than N/A %. Effect of Variable Rate: A change in the interest rate will have the following effect on the payments: The amount of each scheduled payment will change. The amount of the final payment will change. ACCRUAL METHOD: You will calculate interest on a 365 Day basis. PAYMENTS: I agree to pay this Note on 084 payments. The first payment will be $ 2,297.00 and will be due December 05, 1998 . A payment of $ 2,297.00 will be dye monthly thereafter . The final payment of the entire unpaid balance of principal and interest will be due November 05,2005 . ORIGINATION FEE: I have agreed to pay you an origination fee of $ 200.00 , which will either be paid in cash upon execution of this Note, or be financed as a portion of the Principal. RETURNED CHECK CHARGE: To the extent not prohibited by law, I agree to pay you $20.00 for each check presented for payment and dishonored because of insufficient funds or no account. EFFECT OF PREPAYMENT: I may prepay this Note in full. However, no partial prepayment shall excuse or defer my subsequent payments of entitle me to a release of any collateral. Interest will cease to accrue on the amounts prepaid on the day actually credited by you. PAYMENTS APPLIED: All payments, including but not limited to regular payments or prepayments, received by you shall be applied first to costs, then to accrued interest and the balance, if any, to Principal except as otherwise required by law. LATE CHARGE: If any installment payment under this Note is not paid within 10 days after the date of its scheduled due date, I agree to pay you a late charge of 5% of the late payment. SECURITY: This Note is secured by the following type(s) (or items) of property (Collateral): 1972 CESSNA 421B N3AJ SERIAL #421B-0230 ALONG WITH DUAL COLLINS VHF20'S W/DUAL HEAD #1 COMS, DUAL COLLINS 51R-7A NAVS DUAL GS/VOR/LOC, KING KN 64 COUPLED BOTH NAVS DME, KING 800 ADF W/REMOTE HEAD RMI, TRIMBLE 2000 APPROACH GPS PLUS IFR CERTIFIED COUPLED HSI, COLLINS PN 101 HSI FULLY COUPLED, WILCOX 1012A W/ENCODER XPNDR, RCA WEATHER SCOUT II DIGITAL RADAR, MONROY ATD-100 AIR TRAFFIC DETECTOR TCAD, BENDIX M4C SYSTEM AUTOPILOT SLAVED HSI FULLY COUPLED, PS ENGINEERING INTERCOM PM 1000 SYSTEM INTERCOM. The term "Collateral" further includes, but is not limited to, the following property, whether now owned or hereafter acquired, ad whether or not held by a bailee for the benefit of the Owner or owners, all: accessions, accessories, additions, fittings, increases, insurance benefits and proceeds, parts, products, profits, renewals, rents, replacements, special tools and substitutions, together with all books and records pertaining to the Collateral and access to the equipment containing such books and records including computer stored information and all software relating thereto, plus all cash and non-cash proceeds and all proceeds of proceeds arising from the type(s) (items) of property listed above. A security interest in granted in the Collateral by the security agreement dated the same date as this Note. EVENTS OF DEFAULT:I shall be in default upon the occurrence of any of the following events, circumstances or conditions (Events of Default): A. Failure by any party obligated on this Note or any other obligations I have with you to make payment when due; or B. A default or breach by me or any co-signer, endorser, surety, or guarantor under any of the terms of this Note or other loan agreement, any security agreement, mortgage, deed to secure debt, deed of trust, trust deed, or any other document or instrument evidencing, guarantying, securing or otherwise relating to this Note or any other obligations I have with you; or C. The making or furnishing of any verbal or written representation, statement or warranty to you which is or becomes false or incorrect in any material respect by or on behalf of me, or any one of us, or any co-signer, endorser, surety or guarantor of this Note or any other obligations I have with you; or D. Failure to obtain or maintain the insurance coverages required by you, or insurance as is customary and proper for any collateral (as herein defined); or E. The death, dissolution or insolvency of, the appointment of a receiver by or on behalf of, the voluntary or involuntary termination of existence by, or the commencement of any proceeding under any present or future federal or state insolvency, bankruptcy, reorganization, composition or debtor relief law by or against me, or any one of us, or any co-signer, endorser, surety or guarantor of this Note or any other obligations I have with you; or F. A good faith belief by you at any time that you are insecure with respect to me, or any co-signer, endorser, surety or guarantor, that the prospect of any payment is impaired or that any collateral (as herein defined) is impaired; or G. Failure to pay or provide proof of payment of any tax, assessment, rent, insurance premium, escrow or escrow deficiency on or before its due date; or H. A material adverse change in my business, including ownership, management, and financial conditions, which in your opinion, impairs any collateral or repayment of the Obligations; or I. A transfer of a substantial part of my money or property. REMEDIES ON DEFAULT: On or after the occurrence of an Event of Default, at the option of you, all or any part of the Principal and accrued interest on this Note, the Loan and all other obligations which I woe you shall become immediately due and payable without notice or demand. You may exercise all rights and remedies provided by law, equity, this Note, any security agreement, any mortgage, deed of trust or similar instrument and any other security, loan, guaranty or surety agreements pertaining to this Note and all other obligations of me to you. You are entitled to all rights and remedies provided at law or equity whether or not expressly stated in this Note. By choosing any remedy, you do not waive your right to an immediate use of any other remedy if the event of default continues or occurs again. ATTORNEYS' FEES: Upon default of this Note, you may recover from me reasonable attorneys' fees incurred by you and the expenses to collect, enforce, and realize upon any Collateral. Such reasonable attorneys' fees shall include, without limitation, paralegal fees. Any such reasonable attorneys' fees shall be added to the principal amount of this Note and shall accrue interest at the same rate as this Note. Such recovery will be to the extent not prohibited by law. WAIVER AND CONSENT BY BORROWER AND OTHER SIGNERS: Regarding this Note, to the extent not prohibited by law, I and any other signers: A. Waive protest, presentment for payment, demand, notice of acceleration, notice of intent to accelerate and notice of dishonor. B. Consent to any renewals and extensions for payment on this Note, regardless of the number of such renewals or extensions. C. Consent to your release of any borrower, endorser, guarantor, surety, accommodation maker or any other co-signer. JOINT AND SEVERAL: I, and any one of us, or any other signers shall be jointly and severally liable under this Note. ARBITRATION: All disputes, claims or controversies arising from or relating to this Loan or the relationships which result from this Loan or the validity of this arbitration clause or the entire Loan shall be resolved by binding arbitration by one arbitrator selected by you with my consent. This Arbitration agreement is made pursuant to a judgment upon the award rendered may be entered in any court having jurisdiction. The parties agree and understand that they choose arbitration instead of litigation to resolve disputes. The parties understand that they have a right or opportunity to litigate disputes through a court, but that they prefer to resolve their disputes through arbitration, except as provided herein. THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL, EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A COURT ACTION BY YOU (AS PROVIDED HEREIN). The parties agree and understand that all disputes arising under case law, statutory law and all other laws including, but not limited to, all contract, tort and property disputes will be subject to binding arbitration in accord with this Arbitration agreement. The parties agree ad understand that the arbitrator shall have all powers provided by the law and the agreement of the parties. These powers shall include all legal an equitable remedies including, but not limited to, money damages, declaratory relief and injunctive relief. Notwithstanding anything hereunto the contrary, you retain an option to use judicial or non-judicial relief to enforce a security agreement relating to any collateral secured in a transaction underlying this Arbitration agreement to enforce the monetary obligation secured by any collateral or to replevy any Collateral. Such judicial relief would take the form of a lawsuit. The institution and maintenance of an action for judicial relief in a court to replevy any security or collateral, to obtain a monetary judgment or enforce the security agreement shall not constitute a waiver of the right of any party to compel arbitration regarding any other dispute or remedy subject to arbitration in this agreement, including the filing of a counterclaim in a suit brought by you pursuant to this provision. GENERAL PROVISIONS: A. NO WAIVER BY LENDER. Your course of dealing, or your forbearance from, or delay in, the exercise of any of this Note, or other loan documents, shall not be construed as a waiver by you, unless any such waiver is in writing and is signed by you. B. AMENDMENT. The provisions contained in this Note may not be amended, except through a written amendment which is signed by you and me. C. INTEGRATION CLAUSE. This written Note and all documents executed concurrently herewith, represent the entire understanding between the parties as to the Obligations and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. D. FURTHER ASSURANCES. Upon your request I agree to execute, acknowledge, deliver and record or file such further instruments or documents as may be required by you to secure this Note or confirm any lien. E. GOVERNING LAW. This Note shall be governed by the laws of the State of Minnesota, provided that such laws are not otherwise preempted by federal laws and regulations. This Note has been delivered to Lender and accepted by Lender in the State of Minnesota. F. FORUM AND VENUE. In the event of litigation pertaining to this Note, the exclusive forum, venue and place of jurisdiction shall be in the State of Minnesota, unless otherwise designated in writing by you or otherwise required by law. G. NOTICE. All notices under this Note must be in writing. Any notice given by you to me, hereunder will be effective upon personal delivery or 24 hours after mailing by first class United States mail, postage prepaid, addressed to me at the address indicated below my name on page one of this Note. Any notice given by me to you hereunder will be effective upon receipt by you at the address indicated below your name on page one of this Note. Such addresses may be changed by written notice to the other party. SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE OF PAGES 1, 2 AND 3). I have received a copy of today's date. Date: For:SVETLANA AVIATION (Individual Borrower) (Corporation, Partnership or Limited Liability Company Borrower - Legal Name) By: (Individual Borrower) JEHU HAND Its:PRESIDENT (Authorized Officer, General Partner or member) COMMERCIAL AIRCRAFT SECURITY AGREEMENT OBLIGATIONS DEFINED: The term "Obligations" is defined as and includes the following: A. A Note, Loan No. , (Note) dated the same date as this Security Agreement and executed by Svetlana Aviation (Debtor) payable in monthly payments to your order, which evidences a loan (Loan) to me in the amount of $ 143,900.00 , plus interest, and all extensions, renewals, modifications or substitutions thereof. B. All future advances by you to me, to any one of us or to any one of us and others (and all other obligations referred to in the subparagraph(s) below, whether or not this Agreement is specifically referred to in the evidence of indebtedness with regard to such future and additional indebtedness). C. All additional sums advanced, and expenses incurred, by you for the purpose of insuring, preserving or otherwise protecting the Collateral (as herein defined) and its value, and any other sums advanced, and expenses incurred by you pursuant to this Agreement, plus interest at the same rate provided for in the Note computed on a simple interest method. COLLATERAL: To secure the Obligations and in consideration of the Loan, I hereby grant, convey and transfer to you a continuing security interest to secure the Obligations in the following type(s) (or items) of property (Collateral), whether now owner or hereafter acquired: 1972 CESSNA 421B N3AJ SERIAL #421B-0230 ALONG WITH DUAL COLLINS VHF20'S W/DUAL HEAD #1 COMS, DUAL COLLINS 51R-7A NAVS DUAL GS/VOR/LOC, KING KN 64 COUPLED BOTH NAVS DME, KING 800 ADF W/REMOTE HEAD RMI, TRIMBLE 2000 APPROACH GPS PLUS IFR CERTIFIED COUPLED HSI, COLLINS PN 101 HSI FULLY COUPLED, WILCOX 1012A W/ENCODER XPNDR, RCA WEATHER SCOUT II DIGITAL RADAR, MONROY ATD-100 AIR TRAFFIC DETECTOR TCAD, BENDIX M4C SYSTEM AUTOPILOT SLAVED HSI FULLY COUPLED, PS ENGINEERING INTERCOM PM 1000 SYSTEM INTERCOM. The term "Collateral" further includes, but is not limited to, the following property, whether now owned or hereafter acquired, and whether or note held by a bailee for my benefit, all" accessions, accessories, additions, fittings, increases, insurance benefits and proceeds, parts, products, profits, renewals, rents, replacements, special tools and substitutions, together with all books and records pertaining to the Collateral and access to the equipment containing such books and records including computer stored information and all software relating thereto, plus all cash and non-cash proceeds and all proceeds of proceeds arising from the type(s) (items) of property listed above. Pertaining to the portion of the Collateral that is titled under federal or state law, the term Collateral" shall further include, wherever located, the original evidences of title or ownership, whether evidenced by a certificate of title or ownership, registration, a manufacturer's statement of origin or otherwise. I agree to surrender such evidences of title and to properly execute all documents as necessary to reflect your security interest in such portion of the Collateral. LOCATION OF THE COLLATERAL: The location of the Collateral is given for the purpose of aiding in my identity and, only to the extent necessary, aiding in the identification of the Collateral. It does not in any way limit the scope of the security interest granted to you. I shall notify you in writing prior to any change in location of any of the Collateral. Except as otherwise provided in this Agreement, the Collateral will be located at : JOHN WAYNE AIRPORT SANTA ANA, CA 92707 COUNTY - ORANGE . So long as I am not in default under this Agreement, the aircraft portion of the Collateral may be moved as necessary during ordinary use; however, it may not be removed or taken out of state permanently or out of the United States of America without your prior written consent. USE OF THE COLLATERAL: I represent and warrant that the Collateral will be used solely (or primarily) for Business Use . OTHER CLAIMS: Except for the security interest granted in this Agreement, I represent, warrant and covenant that I am the exclusive owner of the Collateral which now is and will continue to be free from any disclosed in writing to you, prior to any advance on the Loan; and A. I have the right and authority to make this Agreement. B. I will defend the Collateral against all claims of all persons claiming any interest in it. C. The execution and delivery of this Agreement will not violate any agreement governing me or to which I am a party. TRANSFER OF COLLATERAL: I will not sell, offer to sell, lease, or otherwise transfer or encumber the Collateral or any interest in the Collateral without your prior written consent which I agree may be reasonably withheld without regard to the creditworthiness of any buyer or transferee. I agree further that I will not sell, offer to sell, lease, or otherwise encumber the Collateral or any interest in the Collateral, to insiders, principals, competitors, and dealers in the same line of goods or business, without your prior written consent. I will not permit the Collateral to be the subject of any court order affecting my rights to the Collateral in any action by any person other than you. TAXES: I will pay when due all taxes and assessments which may be levied or assessed against me or against the Collateral, including but not limited to sales taxes, use taxes, personal property taxes, documentary stamp taxes, franchise taxes, income taxes, withholding taxes, FICA taxes and unemployment taxes. I covenant that I will provide timely proof of payment of such taxes and assessments, at least quarterly and also upon your request. INSURANCE: I will keep the insurable portion of the Collateral at all times insured against risk of loss or damage by fire (including so-called extended coverage), theft and all other casualties, all in such amounts, under such forms of policies, upon such terms, for such periods, and written by such companies as you may approve. I shall arrange for you to be named and endorsed as lender loss payee on any such policy. Losses in all cases shall be payable to you, as Lender, and me as both of our interests may appear on this policy. You may collect the proceeds (or rebates of unearned premiums) on any insurance policy insuring the Collateral. You will apply such proceeds toward what is owed on the Obligations. In the event of any loss, you may require additional security or assurance of payment of the secured obligation as a condition of permitting any insurance benefits to be used for repair or replacement of the Collateral. I shall maintain the insurance required hereunder until the Obligations are paid in full. All such policies of insurance shall provide for at least thirty (30) days prior written notice to you of amendment or cancellation and shall contain a standard breach of warranty endorsement in your favor. I shall furnish you with certifications of such insurance or other evidence satisfactory to you as to compliance with the provisions of this section. I hereby authorize you to act, at your option, as attorney-in-fact for me in acquiring, making, adjusting, or settling claims under or canceling such insurance and endorsing my name on any drafts, checks or other instruments drawn by insurers of the Collateral. AIRCRAFT INSURANCE: In addition to the above insurance requirements and provisions, I will procure and maintain hull and liability insurance on the aircraft portion of the Collateral in amounts and with insurers acceptable to you. All such insurance shall be written under the standard "all risks, ground and flight" form, shall provide for at least thirty (30) days prior written notice to you of any amendment of cancellation and shall contain a standard breach of warranty endorsement in your favor. CONDITION OF THE COLLATERAL: I represent, warrant and covenant that the Collateral is in good condition. I agree that I will immediately notify you of any loss or damage to the Collateral. I will not cause or permit waste or destruction of the Collateral. I hereby authorize you to examine the Collateral wherever located at any time during ordinary business hours, upon reasonable notice or at any other reasonable time. Pertaining to the aircraft portion of the Collateral, I shall maintain the aircraft in good repaid and airworthy maintenance, overhauls, condition, use and operation of the aircraft. Pertaining to the tangible property portions of the Collateral, I, at my expense, will keep it in good condition and replace and repair, in a timely manner, all parts of the Collateral as may be worn out or damaged without allowing any lien to be created upon the Collateral. LENDER'S DUTY TO ACT: Your duty, with reference to the Collateral and any books and records pertaining to the Collateral, shall be solely to use reasonable care in the custody and preservation of the Collateral and such books and records in your possession, which shall not include any steps necessary to preserve rights against prior parties nor the duty to send notices, perform services or take any action in connection with the management of the Collateral nor the duty to protect, preserve or maintain any security interest given to others by me or other parties. You shall be under no duty to exercise or to withhold the exercise or to withhold the exercise of any of the rights, remedies, powers, privileges and options expressly or impliedly granted to you in this Agreement, and you shall not be responsible or liable for any delay or failure to exercise such rights. POSSESSION: Until default, I may have possession of any Collateral not delivered or to be delivered to you and use it in any lawful manner not inconsistent with this Agreement or any policy of insurance. Upon default you shall have immediate right to possession of such Collateral. VIOLATIONS OF LAW: I shall not use the Collateral in violation of any municipal, state or federal law or regulation nor in violation of any order of any governmental regulatory agency. CORPORATE WARRANTIES AND REPRESENTATIONS: If I am a corporation, I make to you the following warranties and representations which shall continue so long as the Obligations remain outstanding: A. I am a corporation which is duly organized and validly existing in the state of incorporation as represented in the Debtor's box on page one. I am in good standing under the laws of all states in which I transact business. I have corporate power and authority to own the Collateral and to carry on my business as now being conducted. I am qualified to do business in every jurisdiction in which the nature of my business or my property make such qualification necessary. I am in compliance with all laws, regulations, ordinances and orders of public authorities applicable to me. B. The execution, delivery and performance of this Agreement by me and the borrowing evidenced by the Note: (1) are within my corporate powers; (2) have been duly authorized by all requisite corporation action; (3) have received all necessary governmental approval; (4) will not violate any provision of law, any order of any court or other agency of government or my Articles of Incorporation or Bylaws; and (5) will not violate any provision of any indenture, agreement or other instrument to which I am a party or to which I am or any of my property is subject, including but not limited to any provision prohibiting the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of my property or assets. The Note and this Agreement when executed and delivered by me will constitute my legal, valid and binding obligations, and the legal, valid and binding obligations of the other obligors named therein, if any, in accordance with their respective terms. C. All other information, reports, papers and data given to you with respect to me or to others obligated under the terms of this Agreement are accurate and correct in all material respects and complete insofar as completeness may be necessary to give you a true and accurate knowledge of the subject matter. D. I have not changed my name within the last six years, unless otherwise disclosed in writing; other than the trade names or fictitious names actually disclosed to you prior to execution of this Agreement, I use no other names; and until the Obligations shall have been paid in full, I hereby covenant and agree to preserve and keep in full force and effect my existing name, corporate existence, rights, franchises and trade names, and to continue the operation of my business in the ordinary course. CHANGE OF NAME OR ADDRESS: I shall notify you in writing prior to any change in my name or, if any organization, any change in identity or structure. I also will notify you in writing prior to any change in my address. EVENTS OF DEFAULT: I shall be in default upon the occurrence of any of the following events, circumstances or conditions (Events of Default): A. Failure by any party obligated on the Obligations to make payment when due; or B. A default or breach by me or any co-signer, endorser, surety, or guarantor under any of the terms of this Agreement, the Note, or the loan agreement, any security agreement, mortgage, deed to secure debt, deed of trust, trust deed, or any other document or instrument evidencing, guarantying, securing or otherwise relating to the Obligations; or C. The making or furnishing or any verbal or written representation, statement or warranty to you which is or becomes false or incorrect in any material respect by or on behalf of me, any one of us, or any co-signer, endorser, surety or guarantor of the Obligations; or D. Failure to obtain or maintain the insurance coverages required by you or on behalf of, the assignment for the benefit of creditors by or on behalf of, the voluntary or involuntary termination of existence by, or the commencement of any proceeding under any present or future federal or state insolvency, bankruptcy, reorganization, composition or debtor relief law by or against me, any one of us, or any co-signer, endorser, surety or guarantor of the Obligations; or F. A good faith belief by you at any time that you are insecure with respect to me, or any co-signer, endorser, surety or guarantor, that the prospect of any payment is impaired or that the Collateral (as herein defined) is impaired; or G. Failure to pay or provide proof of payment of any tax, assessment, rent, insurance premium, escrow or escrow deficiency on or before its due date; or H. A material adverse change in my business, including ownership, management, and financial conditions, which in your opinion, impairs the Collateral or repayment of the Obligations; or I. A transfer of a substantial part of my money or property. REMEDIES ON DEFAULT: At your option, all or any part of the principal and accrued interest on the Note and the Obligations shall become immediately due and payable without notice or demand, upon the occurrence of an Event of Default or at any time thereafter. In addition, upon the occurrence of any Event of Default, you shall be entitled to all of the remedies provided by law, the Note and any related loan documents. You are entitled to all rights and remedies provided at law or equity whether or not expressly stated in this Agreement. By choosing any remedy, you do not waive your right to an immediate use of any other remedy if the event of default continues or occurs again. You shall have all the remedies of a secured party under Article 9 of the Minnesota Uniform Commercial Code; all other Minnesota laws; this Agreement; any instrument evidencing the Obligations; and any other applicable security, loan, guaranty or surety agreements pertaining to the Obligations. You may require me to assemble all or any portion of the Collateral and make it available to you at a place to be designated by you which is reasonably convenient to both parties. You shall have the right to enter and/or remain upon my premises, or any other place where any of the Collateral is located and kept to: A. Remove Collateral therefrom to the premises chosen by you or any agent of yours for such time as you may desire in order to maintain, sell the Collateral and/or liquidate the Collateral; or B. Use such premises together with my materials, supplies, books, and records to maintain possession and/or the condition of the Collateral and to prepare the Collateral for selling, liquidating, or collecting and to conduct the selling, liquidating or collecting. But in doing so you may not breach the peace or unlawfully enter onto my premises. EXPENSES ARISING FROM DEFAULT: The following reasonable expenses relating to default and collection shall be secured by this Agreement and added to the Obligations: A. Expenses for taking, holding, preparing for sale, or selling the Collateral, or similar expenses: B. Advances made for the above purposes and advances relating to the Collateral made on my behalf as permitted herein; and C. Reasonable attorneys' fees, paralegal fees and other legal expenses to the extent not prohibited by law, including, but not limited to, any such fees, costs, and expenses incurred in or related to the collecting, protecting and enforcing of liabilities, any negotiations or legal proceedings, including, but not limited to, any bankruptcy proceedings, or any actions in or related to any bankruptcy proceedings. RESTRICTIONS ON SALE OR DISPOSITION: I acknowledge that a state or federal law or regulation may restrict your sale or disposition of certain portions of the Collateral. As a result, such restriction may cause the Collateral to have less value than it otherwise would have had. In all cases, however, any such sale or disposition will be held in accordance with applicable Minnesota and federal laws and regulations. PROTECTION OF COLLATERAL: You are hereby appointed as the attorney-in-fact for me to do anything, at your option, you deem reasonably necessary to perfect your security interest in the Collateral and to protect the Collateral and to continue your security interest in the Collateral, including, but not limited to, the following: A. Pay and discharge taxes, liens, security interests or other encumbrances at any time levied or placed on the Collateral; B. Pay any rents or other charged under any lease affecting the Collateral; C. Place and pay for insurance on the Collateral (which insurance may be limited to single interest insurance at your sole discretion); D. Order and pay for the repair, maintenance and preservation of the Collateral; or E. To sign, when permitted by law, and file any financing statements on my behalf and to pay for filing, registration and recording fees at my expense, pertaining to the Collateral. DURATION OF SECURITY INTEREST: This Agreement shall continue in full force and effect and the security interest granted herein and all of my representations, warranties, covenants and agreements and all of the terms, conditions and provisions relating thereto shall continue to be fully operative until (a) I shall have paid or caused to be paid, or otherwise discharged, all of the Obligations to you and (b) there shall be no remaining obligation of you to advance funds to me under any loan agreement or credit agreement or otherwise. RELEASES BY LENDER: I agree that you may, without notice and without releasing any of the obligations of any of the remaining parties: A. Release any security interest for the Obligations; or B. Release and of the Collateral; or C. Release any party to the Obligations, any guaranty or this Agreement. GENERAL WAIVER BY OWNER: I hereby waive and release you from all claims for loss or damage caused by any act or omission of you, your officers, directors, employees or agents. GENERAL PROVISIONS: A. NO WAIVER BY LENDER. Your course of dealing, or your foreberance from, or delay in, the exercise of any of your rights, remedies, privileges or right to insist upon my strict performance of any provisions contained in this Agreement, or other loan documents, shall not be construed as a waiver by you, unless any such waiver is in writing and is signed by you. The execution of this Agreement shall not impair any other security you may have or acquire in the future for the Obligations. The taking of any other security or the releasing of any security for the Obligations shall not impair this Agreement. You may resort to any security you may have for the Obligations in any order you may deem proper. B. AMENDMENT. The provisions contained in this Agreement may not be amended, except through a written amendment which is signed by me and you. C. INTEGRATION CLAUSE. This written Agreement and all documents executed concurrently herewith, represent the entire understanding between the parties as to the Obligations and may not be contradicted represent the entire understanding between the parties as to the Obligations and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. D. FURTHER ASSURANCES. I, upon your request, agree to execute, acknowledge, deliver and record or file such further instruments or documents as may be required by you to secure the Note or confirm any lien. E. GOVERNING LAW. This Agreement shall be governed by the laws of the State of Minnesota, provided that such laws are not otherwise preempted by federal laws and regulations. This Agreement has been delivered to Lender and accepted by Lender in the State of Minnesota. F. FORUM AND VENUE. In the event of litigation pertaining to this Agreement, the exclusive forum, venue and place of jurisdiction shall be in the State of Minnesota, unless otherwise designated in writing by you or otherwise required by law. G. NOTICE. All notices under this Agreement must be in writing. Any notice given by you to me hereunder will be effective upon personal delivery or 24 hours after mailing by first class United States mail, postage prepaid, addressed to me at the address indicated below my name on page one of this Agreement. Any notice given by me to you hereunder will be effective upon receipt by you at the address indicated below your name on page one of this Agreement. Such addresses may be changed by written notice to the other party. SIGNATURES: I AGREE TO THE TERMS OF THIS SECURITY AGREEMENT. I have received a copy on today's date. Date:October 23, 1998 For:SVETLANA AVIATION (Individual Borrower) (Corporation, Partnership or Limited Liability Company Borrower - Legal Name) By: (Individual Borrower) JEHU HAND Its:PRESIDENT (Authorized Officer, General Partner or member) INDIVIDUAL GUARANTY TO: GREEN TREE FINANCIAL SERVICING CORPORATION or its subsidiary (hereinafter "Green Tree") RE: SVETLANA AVIATION (hereinafter "Buyer") 3336 Harrison Avenue, Suite 121 Butte, MT 59101 To induce Green Tree to provide financing as set forth in the Commercial Aircraft Promissory Note and Commercial Aircraft Security Agreement ("Contract") dated OCTOBER 23, 1998 (the "Contract"), between MISSISSIPPI EXECUTIVE AIRCRAFT COMPANY as Seller, and SVETLANA AVIATION as Buyer, I the undersigned Guarantor, hereby guarantee to Green Tree performance of all debts or obligations of which the Buyer owe Green Tree under the Contract. Each Guarantor agrees that should the Buyer breach any or all terms and conditions contained in the Contract, all duties and obligations of the Buyer for said breach shall apply to the Guarantor. The liability of each Guarantor hereunder is direct and unconditional in the case of a breach by the Buyer and may be enforced without requiring Green Tree first to resort to any right, remedy or security. Nothing shall discharge or satisfy the liability of the Guarantor hereunder except the full payment and performance of all of the Buyer's debts and obligations to Green Tree. Each Guarantor agrees that none of the Guarantor can avail himself/herself of any defense whatsoever which Buyer may have against Green Tree other than the payment of the debts or obligations. Each Guarantor hereby for himself/herself, his/her heirs, guarantors at law or in equity other than the payment of said Contract. Notice of acceptance of this Guaranty, of any adverse change in Buyer's financial condition or of any other fact which might materially increase the Guarantor's risk is hereby waived. The extension of time of payment, performance of agreements or obligations or any other indulgence may be granted to Buyer without notice to Guarantor, and all settlements and compromises made in good faith with Buyer shall be binding upon each Guarantor. Each Guarantor hereby waived any and all right to a trial by jury in any action or proceeding arising out of or based upon this Guaranty. In the event of default in the performance of this Guaranty, the Guarantor agree to pay all reasonable court costs, attorneys' fees and other expenses paid or incurred by Green Tree in the enforcement hereof. This Guaranty constitutes the entire agreement and no waivers or modification shall be valid unless in writing and signed by Green Tree and the Guarantor. This Guaranty shall be binding upon the heirs, executors, administrators, successors and assigns of each of the undersigned and shall inure to the benefit of Green Tree's successors and assigns. Dated: OCTOBER 23, 1998 JEHU HAND (Guarantor's Signature) EX-10 3 0003.txt 10.2 FUNDING AGREEMENT BY HAND Exhibit 10.2 Funding Agreement I, Jehu Hand, agree with Albion Aviation, Inc. in connection with its public offering pursuant to Registration Statement 333-46672, as follows: On or prior to the end of the offering period described in the prospectus which is a part of the Registration Statement, I will purchase up to 20,000 shares at the offering price of $5.00, to the extent required to ensure net proceeds of no less than $90,000. These shares will be sold without sales commission or non-accountable expense being paid to any person. I agree that these shares will be "restricted" securities as provided in Rule 144, and to resell them only in compliance with Rule 144. December 28, 2000 Jehu Hand EX-23 4 0004.txt ACCOUNTANTS' CONSENT CONSENT AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use in this Registration Statement of our report dated June 9, 2000, relating to the consolidated financial statements of Albion Aviation, Inc., and subsidiaries, and to the reference to our Firm under the caption "Experts" in the Prospectus. TANNER & CO. Salt Lake City, Utah December 27, 2000 EX-27 5 0005.txt FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND AS OF SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001123580 ALBION AVIATION, INC. 1 US dollars 9-MOS Dec-31-2000 Jan-01-2000 Sep-30-2000 1 2,297 0 0 0 0 0 105,377 54,523 107,674 19,539 0 0 0 103,757 (111,576) (7,819) 0 0 0 35,196 0 0 0 (35,196) 0 (35,196) 0 0 0 (35,196) (.02) (.02)
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