# •

•

• Application of 

## BEFORETHE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

TWIN AIR CALYPSO LIMITED, Inc for authority to conduct scheduledpassengeroperations as a commuter air carrierunder49 U.S.C. 41738



## APPLICATION OF TWIN AIR CALYPSO LIMITED Inc
Communications withrespect to this document should be sent to: Clayton I. Gamber President 

### I Director ofMaintenance TWIN AIR CALYPSO LIMITED Inc. 700 S.W. 34th Street Suite 100 Ft. Lauderdale, Florida 33315 Phone 954-359-8266 Fax 954-862-8902 E-Mail cgamber@f1ytwinair.com
Date ofApplication July 20, 2011 DOCKET 

## j)

## ~

# r- t1 

### 5

## r~ 

# t 0( 

## I**~** 0

## I c.(

# 3

Notice: Any person who wishes to support oroppose this application must file an answer by August 08, 

### 2011 and serve that answer on all persons served withthis filing
.

# •

•

• Application of 

## BEFORETHE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

TWIN AIR CALYPSO LIMITED, Inc for authority to conduct scheduledpassenger operations as a commuter air carrier under49 U.S.C. 41738



## APPLICATION OF TWIN AIR CALYPSO LIMITED Inc DOCKET

Twin Air Calypso Limited, Inc. submits this application for authority to operate scheduled passenger service as a commuter air carrier under section 41738 ofTitle 49 of the United States Code. In support ofits application Twin Air Calypso Limited, Inc. states the following: Applicant is a Florida corporation organized on August 15, 2010 under the laws ofthe state ofFlorida and is a subsidiary ofAvstarAviation Group Inc. a Colorado corporation, publicly traded in the OTC market. The company address, telephone, fax numbers and email address are; TWIN AIR CALYPSO LIMITED Inc. 700 S.W. 34th Street Suite 100 Ft. Lauderdale, Florida 33315 Phone 954-359-8266 Fax 954-862-8902 E-Mail cgamber@f1ytwinair.com

# •

•

• Applicant is a citizen of the United States as defined in section 40102(a)(l5) of the statute. Twin Air Calypso Limited, Inc. is a wholly owned subsidiary ofAvstar Aviation Group Inc. a Colorado Corporation listed onthe OTC

- BB. All voting stock resides with A vstar Aviation Group Inc. The following individuals are officers, directors and personnel ofAvstar Aviation Group Inc.; ChiefExecutive officer and President Clayton I. 

### Gamber Henry A. 

### Schulle Vice President and Treasurer Twin Air Calypso Limited Inc. is a Florida Corporation The following individuals are officers, directors and personnel ofTwin Air Calypso Inc.; President Clayton I. 

### Gamber U.S. Citizen Director ofOperations ChiefPilot Arthur L. 

### Stevenson South African. Citizen Luciano Horna U.S. Citizen Director ofMaintenance Clayton I. 

### Gamber U.S. Citizen Clayton Gamber, Luciano Horna are United States citizens. Arthur L. 

### Stevenson is a permanent resident of the United States since 04/01103. 

### See Exhibits Q,R,S,T for additional information. Twin Air Calypso is currently operates as an on-demand air carrier. It 

### is registered under 298 ofthe Department's regulations and possesses an Air Carrier Certificate issued by the FAA under part 135. See Exhibit H. Twin Air Calypso offers four or less round trip flights per week to Treasure Cay with continuing service to Marsh Harbour. Twin Air also offers four round trips orless per week to North Eleuthera with continuing service to Governors Harbour and Rock Sound. Twin Air Calypso requests authority to engage in scheduled passenger operations as a commuter air carrierunderthe following proposal: Commencing in Decemberber, 2011, Twin Air Calypso will operate as follows, 1. Seven weekly round trip flights between Fort Lauderdale and Treasure Cay with continuing service to Marsh Harbour, Bahamas. 2. Seven weekly round trip flights between Fort Lauderdale and North Eleuthera. 3. Seven weekly round trip flights between Fort Lauderdale and Governors Harbour with continuing service to Rock Sound, Bahamas Information in support of the applicant's fitness to conduct the proposed air transportation operation is contained in Section - A thru X

# •

•

• The contents ofthis application and the attached exhibits are true and correct to the best of my knowledge and belief. Pursuant to Title 18 United States Code Section 1001. I Clayton 1. 

### Gamber who is the President and a major shareholder of Avstar Aviation Group Inc. and Twin Air Calypso Limited, Inc., in my individual capacity and as the authorized representative of the applicant, have not in any manner knowingly and willfully falsified, concealed or failed to disclose any material fact or made any false, fictitious, or fraudulent statement or knowingly use any documents which contain such statements in connection with the preparation, filing or prosecution ofthe application. I understand that an individual that has been found to have violated the provisions of 18 U.S.C. section 1001 

### shall be fined or imprisoned not more than five years, orboth.
Submitted by,**L..Jrt'k~~~~~~~~f-_.Date:** 

### July 20, 2011 

### Avs Aviation Group Inc. / T in Air Calypso limited, Inc President and CEO / resident
Attachments Certificate ofService, and Exhibits and information required under section 204.3

# •

•

• Twin Air Calypso Limited, Inc. 700 

### SW 34th 

### Street, Suite 100 Ft 

### lauderdale, Florida 33315



### CERTIFICATE OF SERVICE 

### I hereby certify that onthis day served the foregoing application for commuter air carrier authority by first class mail, postage prepaid, upon the persons shown in the following service list.

Date ofservice; 

# J 1Ji..

# Y 2 I, 

## 20l \



### Federal Aviation Administration 

## Mr. Sergio Lopez

- Office managerSERVICE LIST



### South Florida Flight Standards District Office 19 2895 SW 145th 

### Avenue Miramar Florida 33027 Broward County Aviation 

## Mr. Kent George, Airport Director Ft Lauderdale-Hollywood International Airport 100 Aviation Boulevard Fort Lauderdale Florida 33315

------**~---------~--** 

## I .'

# •

•

• TWIN AIR CALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 100 FT. LAUDERDALE, FLORIDA 33315 

## RESPONSES TO FILING REQUIREMENTS FOR COMMUTER AUTHORITY FOR TWIN AIR CALYPSO LIMITED, INC Section 204.3 (a) 

### TWINAIR CALYPSO LIMITED, INC 700 SW 34th Street, Suite 100 Ft. Lauderdale, Florida 33315 (P) 954-359-8989 (F) 954-862-8902 Clayton 

### I. Gamber, President and CEO cgamber@f1ytwinair.com Section 204.3 (b), Twin AirCalypso Limited, Inc is a corporation Section 204.3 (c), Twin Air Calypso Limited, Inc is a corporation; incorporated under the laws ofthe state ofFlorida See Exhibit Section 0 Section 204.3 (d), Statement from Secretary ofState ofFlorida, certifying corporation in Good Standing is attached with this application See Exhibit

- Section

- P

# •

•

• STATE OF FLORIDA Twin Air Calypso Limited, Inc. 700 

### SW 34th 

### Street, Suite 100 Ft Lauderdale, Florida 33315



### AFFIDAVIT OF CITIZENSHIP



### COUNTY OF BROW ARD Clayton I. 

### Gamberbeing first duly sworn, deposes and says: 1 That he is the duly elected, qualified, and serving as President of TWIN AIR CALYPSO LIMITED Inc. and that he is authorized to and does make this affidavit for it. 2. AVSTAR AVIATION GROUP Inc. is a citizen ofthe United States within the meaning of49 U.S.C. 40102 (a)(15)
. 3. TWIN AIR CALYPSO LIMITED Inc. is a citizen ofthe United States within the meaning of49 U.S.C. 40102 (a)(15).

Subscribed and sworn before me this 20th day ofJuly, 2011.TWIN AIR CALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 100 FT. LAUDERDALE, FLORIDA 33315 

### • Section 204.3 (f)



# •

• List of

### Key

### Personnel employed with the company. President, ChiefExecutive Officerand Director ofMaintenance Clayton I. 

### Gamber, , US Citizen 5330 SW 87th 

### Avenue, Apartment 112 

### Miami, Florida 33178 

### See Exhibit

- Section

- 

### Q for duties, responsibilities, voting stock, employment summary and nationality. Director ofOperations Arthur Stevenson 1601 SW 22nd 

### Avenue Fort Lauderdale, Florida 33312 See Exhibit

- Section - R for duties, responsibilities, voting stock, employment summary and nationality. 

### ChiefPilot Luciano Roma, 4411 SW 150th 

### Ct Miami, Florida 33185 See Exhibit

- Section

- S for duties, responsibilities, voting stock, employment summary and nationality. Director ofMaintenance Clayton I. 

### Gamber, 5330 SW 87th 

### Avenue, Apartment 112 

### Miami, Florida 33178 

### See Exhibit

- Section - T for duties, responsibilities, voting stock, employment summary and nationality. Section 204.3 

### (f) (5) A vStar Aviation Group See Exhibit

- Section

- U is the holding company for Twin Air Calypso limited Inc. also has interests in other aeronautical entities. AvStar Aviation Group is the holding company ofTwin Air Calypso Services Inc. an FAA Part 145 Repair Station located in Pembroke Pines, Florida. See Exhibit-Section-V Section 204.3 (g) All persons ofsubstantial interest are identified in 204.3 

### (f) responses. See Exhibit

- Section - WTWIN AIR CALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 100 FT. LAUDERDALE, FLORIDA 33315 

### • Section 204.3 (h)



# •

• Twin Air Calypso Limited Inc. is a wholly owned subsidiary ofAvStar Aviation Group a Colorado public company. There are no subsidiaries ofTwin Air Calypso Limited Inc. Section 204.3 (i) Twin Air Calypso Limited Inc. owns no shares of stock in any company. (AvStar Aviation Group is also the parent company ofTwin Air Services Inc. a FAA part 145 repair station based at (HWO) North Perry Airport, Florida.) Section 204.3 (j) 

### (1) See Exhibit

- Section

- X Section 204.3 (j) 

### (2) See Exhibit

- Section

- X Section 204.3 (k) Not applicable Section 204.3 (1) 

### Judgments ofmore than $5,000.00

- None Section 204.3 (m) Judgments ofless than $5,000.00

- None Section 204.3 (n)(1,2) l. 

### Aircraft Fleet a. PA-31-350 N350MJ b. PA-31-350 N146DC c. Cessna402C N44LP d. Cessna402C N767PA e. Cessna402C N528FA 1+9 Seating 1+9 Seating 1+9 Seating 1+9 Seating 1+9 Seating All aircraft are owned by Aircraft Charters, LLC (Kenneth Langston) and Fountainhead (BAH) LLC (KennethFarino) 2. No additional aircraft or financing will be required for the authority anticipated with this application. Section 204.3 (n)(3) See Exhibit

- Section

- ITWIN AIR CALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 

### lOO FT. LAUDERDALE, FLORIDA 33315 

### • Section 204.3 (0)



# •

• There is pending action from the FAA as regard a possible FARpart 135.299 checkride violation against Twin AirCalypso pilot Kenneth Kronheim. There is no pending action from the DOT onthe applicant or any ofthe personnel employedbythe applicant. Section 204.3 (P) 

### There are no charges of unfair, deceptive, or anticompetitive business practices against the applicant or any ofits employees. Section 204.3 (q) There are no accidents or incidents within the last 12 months nor are there any such matters under investigations by the FAA orNTSB orby Twin AirCalypso Limited Inc. Section 204.3 (r) Twin Air Calypso Limited, Inc. History Twin Air was founded in 1978 as the aircraft operating arm of Red Aircraft Services in Ft Lauderdale, Florida. Red Aircraft was an aircraft services organization founded in 1954. Initially the main source of business was to lease aircraft to government units and avionics suppliers. The customer list included the Naval Shipyard in Connecticut, the United States Air Force, the city of Ft Lauderdale and RCA Avionics. The operation for the United States Navy, transported personnel and equipment to the Bahamas in support ofSubmarine warfare associated research. The United States Air Force contract moved high priority freight throughout the southeastern United States. The City ofFt Lauderdale leased two aircraft for surveillance work. The RCA Avionics leased an aircraft for avionics demonstration purposes. Aircraft operated for these contracts ranged from Cessna 172'sto Douglas DC-3's. As our exposure to the Bahamas increased the nature ofthe business turned first to freight and then also to passenger operations. In 

### the mid 1980's Twin Air began to operate a high priority freight service to the out islands of the Bahamas. Our main focus was to support the local businessmen, hoteliers, residents and vacation home owners. As the reputation and the reliability ofour operation grew we were encouraged to introduce passenger service. Our business is now mainly passenger with freight supplementing unused capacity. Our aircraft fleet grew from one Piper Navajo Chieftain to six by the end of2004 with flight hours approaching five thousand per year.

In the fall of 2004 we began supplying service to another operator known as Calypso Air. Calypso's market was primarily the Abaco's while the Twin Air market was primarily the Eleuthera's. By early 2005 Twin Air was the main source ofliftfor Calypso and it was decided to

# •

•

• TWIN AIR CALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 100 FT. LAUDERDALE, FLORIDA 33315 

### have Twin Air absorb the operation and aircraft ofCalypso. By combining the operation ofTwin Air and Calypso the fleet grew to nine aircraft and annual flight hours to approximately 8000 with revenues in excess of3.5 million dollars. Calypso's only stockholder, Doctor Kenneth Langston, became a minority partner in the combined business which was now called Twin Air Calypso Limited, Inc. Clayton Gamber and his wife Robin Gamber were the majority shareholders. In early 20lOAvStar Aviation Group, a public company previously in the fixed base operation and aircraft maintenance business were seeking business acquisitions. During this time and while planning for the sale of Twin Air Calypso all ofthe aircraft were placed in a separate entity owned entirely by Dr. Langston. This corporation was known as Aircraft Charters LLC. This "Sub-S" entity was formed solely for the ownership ofthe aircraft and to be the Lessorto Twin Air Calypso Limited, Inc. Business MarketingPhilosophy 

## A: Bahamas 

### The business to the Bahamas is divided into two geographical sectors and two types of traveller. Geographically, there are two major destinations. The population centers of Nassau and Freeport and the remaining portion ofthe archipelago, known as the "Family Islands". The destination of Nassau and Freeport account for over 90 percent of the population of the country and are served well by the major airlines using traditional airline equipment. The "Family Islands" have small population centers supplemented by "boutique hotels", second homes for foreigners and marina infrastructure. Our philosophy from the inception is to cater to the "Family Island" market. In this particularly seasonal market, frequency with reliability is certainly more important than capacity. The smaller aircraft we utilize are the most efficient for these parameters. However, smaller aircraft makes the control of "load factor" imperative. Twin Air Calypso exercises control of load factors by supplementing freight for any unused capacity. In Summary Twin Air Calypso caters to the local Bahamians, businesses, second home owners and boaters to minimize the seasonal market fluctuations. Supplementing freight for passengers allows us to maintain the frequency and reliability the market requires while operatingthe aircraft efficiently
.. B: Cuba 

### Twin Air Calypso Limited. Inc. believes that person to person family contact is a basic human right. We believe the vast Cuban American population living within the United States who are eager to travel to Cuba for visits with family have limited options. The amount ofcharter flights available for smaller groups business people and families who wish to travel together is small. New United States governmenttravel and business
policies affecting travel and contact ofpersons travelling to and dealing with Cuba have further expanded the need for charter flights between the United States and Cuba.TWIN AIRCALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 100 FT. LAUDERDALE, FLORIDA 33315 

### • Management



# •

• All key employees and managers have worked in the aircraft charter business serving the southern United States, the Bahamas and Cuba in excess oftwelve years. Business OperatingPhilosophy 

### While maintaining cost controls in all facets ofthe business is important, the variable aircraft operating costs are the most important. To control these variable costs a vertically integrated organization is necessary. Our sister company under the AvStar Aviation Group, Twin Air Calypso Services Inc. is a FAA approved FAR part 145 repair station which also has fuel service, based at North Perry Airport (HWO), Florida, five miles from our base at Ft Lauderdale International Airport (FLL), Florida. As a fully certified repair station and fuel vendor, we are also able to offer services to retail customers and other operators therefore reducing the allocation ofoverhead to Twin Air Calypso Limited, Inc. a significant cost advantage overthe competition. FutureExpansion for Destinations and Capacity 

### Due to the downturn in the economy Twin Air Calypso has suffered a reduction in revenue. This reduction in income has attributed to the reduction of our flying fleet. A fleet refurbishment program is now underway as the economy recovers and service returns to a previous level. The return to service of existing aircraft will provide a 50% to 70% increase in capacity on the existing route structure Additional aircraft will be available for opening the West Palm Beach to Abaco market. This is a very active market due to the ocean shipping from the port ofPalm Beach. There is significant passenger seats needed for individuals that carry out purchasing, maintain business relationships and utilize the shipping resources. A facility for our new presence in West Palm Beach has already been identified that will allow for both passengers and freight operations at the West Palm Beach Airport (PBI). The refurbishment also enables Twin Air Calypso Limited, Inc. to dedicate specific aircraft and personnel to freight, scheduled service and charter operations. The freight aircraft will allow the ability to offer scheduled freight service, a new revenue source for Twin Air Calypso Limited, Inc. The dedication of scheduled service and charter aircraft will increase customer appeal and acceptance for personal services. Twin Air Calypso Limited, Inc. a wholly owned subsidiary ofAvStar Aviation Group will utilize the services of Twin Air Calypso Services, Inc. Twin Air Calypso Services, Inc. is our sister Company and a certified FAA repair station, Certificate number DN4R134M based at North Perry Airport (HWO) approximately 5 miles from Ft Lauderdale International Airport (FLL). The address ofTwin Air Calypso Services, Inc. is 1620 SW 75th 

### Avenue, Pembroke Pines, Florida 33023.


### In the latter part of 1977 Twin Town Leasing Company d/b/a TWIN AIR was founded as the aircraft operation division ofRed Aircraft Service, Inc a fixed base operation 

### in south

# •

•

• TWIN AIR CALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 100 FT. LAUDERDALE, FLORIDA 33315 

### In the latter part of 1977 Twin Town Leasing Company d/b/a TWIN AIRwas founded as the aircraft operation division ofRed Aircraft Service, Inc a fixed base operation in south Florida. TWIN AIR has operated continuously as an on-demand FAA Part 135 carrier since thattime. In the early 1980's we operated several aircraft including two DC-3's for the use of several hotels in the Bahamian "family islands". As our experience and exposure grew in the Bahamas we identified a need for small package service to the islands. In the late 1980's we began a freight service catering principally to the island homeowners, businesses and local residents. This service grew considerably and the users asked us to begin offering passenger service. The passenger service has operated up to four times per week since that time to several destinations in the "family islands". Our fleet ofaircraft has evolved into five PiperNavajo aircraft. Treasure Cay, Marsh Harbour, from both Ft Lauderdale and West Palm Beach. North Eleuthera, Governors Harbour and Rock Sound, including Harbour Island and Spanish Wells, is a major destination from Ft 

### Lauderdale, for both freight and passengers. TWIN AIR CALYPSO is now ready to add additional flights to that destination which is the reason for this filing. Section 204.3 (s) TWIN AIR CALYPSO LIMITED Inc. currently holds an FAA Part 135 Air Carrier Certificate with our local FAA office FSDO-19 in Miramar, Florida. See Exhibit

- Section- H James R. Piccoli William (Bill) Hanson Roger McGlen Section 204.3 (t) Principle Operation Inspector Principle Maintenance Inspector Principle Avionics Inspector

TWIN AIR CALYPSO LIMITED Inc. will offer once daily, seven days per week passenger/freight service between; 1. Ft. Lauderdale-Hollywood Airport (FLL), Treasure Cay airport (TCB) and Marsh Harbour airport (MHH). 2. Ft. Lauderdale-Hollywood Airport (FLL) andNorth Eleuthera airport (ELH). And once daily flights between, 3. Ft. Lauderdale-Hollywood Airport (FLL), Governors Harbour (GHB) and Rock Sound airport (RSD). See attached financial information for forecasts See Exhibit

- F, G

# •

•

• Section 204.3 (u) See Exhibit

- Section- E Section 204.3 (v) TWIN AIR CALYPSO LIMITED, INC 700 S.W. 34th STREET, SUITE 100 FT. LAUDERDALE, FLORIDA 33315



### Pursuant to title 18 United States Code section 1001, I Clayton 1. 

### Gamber, President, in my individual capacity and as the authorized representative ofthe applicant, have not in any manner knowingly and willfully falsified, concealed or covered up any material fact or made any false, fictitious, or fraudulent statement or knowingly used any documents which contain such statements in connection with the preparation, filing or prosecution of the application. I understand that the individual who is found to have violated the provisions of 18 U.S.C. section 1001 shall be fined no more than $10.000.00 orimprisoned not more than five years orboth.

on I.. Gamber, Presi

# o .U.S.Department ofTransportation Office ofthe Secretary ofTransportation 

### Docket OST 95-236 

## AGREEMENT



# • The undersigned carriers (hereinafter referred to as "the Carriers") hereby agree as follows: 1. Each ofthe Carriers shall, effective May 16, 1966, include the following in its conditions ofcarriage, including tariffs embodying conditions ofcarriage filed by it with any government: "The Carrier shall avail itself ofthe limitation of liability provided in the Convention for the Unification ofCertain Rules Relating to International Carriage by Air signed atWarsaw October 12th, 1929, or provided in the said Convention as amended by the Protocol signed atThe Hague September 28th, 1955. However, in accordance with Article 22(1) ofsaid Convention, orsaid Convention as amended by said Protocol, the Carrier agrees that, as to all international transportation by the Carrier as defined in the said Convention or said Convention as amended by said Protocol, which, according to the contract ofCarriage, includes a pOint in the United States ofAmerica as a point oforigin, point ofdestination, or agreed stopping place (1) The limit of liability for each passengerfor death, wounding, or other bodily injury shall be the sum of US $75,000 inclusive of legal fees and costs, except that, in case ofa claim brought in a State where provision is made for separate award of legal fees and costs, the limit shall be the sum of US $58,000 exclusive of legal fees and costs. (2) The Carrier shall not, with respect to any claim arising out ofthe death, wounding, orother bodily injury ofa passenger, avail itself of any defense underArticle 20(1) ofsaid Convention or said Convention as amended by said Protocol. Nothing herein shall be deemed to affect the rights and liabilities ofthe Carrierwith regard to any claim brought by, on behalf of, or in respect ofany person who haswillfully caused damage which resulted in death, wounding, or other bodily injury ofa passenger." 2. Each Carrier shall, at the time ofdelivery ofthe ticket, furnish to each passengerwhose transportation is governed by the Convention, orthe Convention as amended by the Hague Protocol, and by the special contract described in paragraph 1, the following notice, which shall be printed in type at least as large as 10 point modern type and in ink contrasting with the stock on (i) each ticket; (ii) a piece ofpapereither placed in the ticket envelope with the ticket orattached to the ticket; or (iii) on the ticket envelope: "ADVICE TO INTERNATIONAL PASSENGER ON LIMITATION OF LIABILITY Passengers on a journey involving an ultimate destination ora stop in a country otherthan the country oforigin are advised that the provisions ofa treaty known as the Warsaw Convention may be applicable to the entirejourney, including any portion entirely within the country oforigin or destination. For such passengers on ajourney to, from, orwith an agreed stopping place in the United States ofAmerica, the Convention and special contracts ofcarriage embodied in applicable tariffs provide that the liability of [certain ]* [(name ofcarrier) and certain other] carriers parties to such speCial contracts for death oforpersonal injury to passengers is limited in most cases to proven damages notto exceed US $75,000 perpassenger, and thatthis liability up to such limit shall not depend on negligence on the part ofthe carrier. For such passengers traveling by a carrier not a party to such special contracts or on ajourney not to, from, or having an agreed stopping place in the United States ofAmerica, liability ofthe carrier for death or personal injury to passengers is limited in most cases to approximately US $10,000 or US $20,000. The names ofCarriers parties to such special contracts are available at all ticket offices ofsuch carriers and may be examined on request. Additional protection can usually be obtained by purchasing insurance from a private company. Such insurance is not affected by any limitation ofthe carrier's liability underthe Warsaw Convention or such special contracts ofcarriage. Forfurther information please consult your airline or insurance company representative." 3. [This Agreement was filed with the Civil Aeronautics Board ofthe United States. The Board approved it by Order E-23680, adopted May 13, 1966. The Agreement (Agreement 18900) became effective May 16, 1966. On January 1, 1985, this Agreement became the responsibility ofthe Department ofTransportation (DOT) by operation of law.] 4. This Agreement may be signed in any numberofcounterparts, all ofwhich shall constitute oneAgreement. Any Carrier may become a party to this Agreement by signing a counterpart hereof and depositing itwith DOT. 5. Any Carrier party hereto may withdraw from this Agreement by giving 

### tw (12) months' thdrawal to DOT and the other Carriers parties to the Agreement. ·Either altemative may be used. (Signature and**Date,""-~~~:z....::::.......::L:>.....L=--=-":'--=;,A-** ______**--,~** (Printed Name and Title) (Name and Address ofCarrier) _-"'::-'-''--_;::;.....;....::---'''-.>--=-
_______ _ • 08T Form 4523 (Formerly CAB Form 263)

# •

Cost of Operation 

# • of Cessna 402C and Piper PA31-350 Between Once daily, seven days perweek round trip passenger/freight service between; 1. Ft. Lauderdale-Hollywood Airport (FLL), Marsh Harbour (MHH) and Treasure Cay airport (TCB). 2. Ft. Lauderdale-Hollywood Airport (FLL) and North Eleuthera airport (ELH). Once daily, seven days per week passenger/freight service between; 1. Ft. Lauderdale-Hollywood Airport (FLL), Governors Harbour (GHB) and Rock Sound airport (RSD). also Three times perweek Air Charter service to various destinations throughout our areas ofoperation
. 

# •

# •

•

• Cessna 402C Operating Cost Per Hour C-402 - Fuel cost per hour @ 

## 40 gal per hourx $5.31 pergallon C-402 - Maintenance per hour C-402 - Engine reserve costs per hour plus interior 

## & exterior C-402 - Insurance cost per month C-402 - Pilot cost per hour C-402 - Aircraft Lease cost per month Flight Fuel Maintenance Reserves Pilot cost Insurance Aircraft hours Cost cost per cost per per Hour cost per Lease cost per per Hour Hour Hour per Month Month Hour 20 212.40 40.00 40.00 45.00 104.15 107.50 25 212.40 40.00 40.00 45.00 83.32 86.00 30 212.40 40.00 40.00 45.00 69.43 71.67 35 212.40 40.00 40.00 45.00 59.52 61.43 40 212.40 40.00 40.00 45.00 52.08 53.75 45 212.40 40.00 40.00 45.00 46.29 47.78 50 212.40 40.00 40.00 45.00 41.66 43.00 55 212.40 40.00 40.00 45.00 37.88 39.09 60 212.40 40.00 40.00 45.00 34.71 35.83 65 212.40 40.00 40.00 45.00 32.05 33.08 70 212.40 40.00 40.00 45.00 29.76 30.71 75 212.40 40.00 40.00 45.00 27.78 28.67 80 212.40 40.00 40.00 45.00 26.04 26.88 

## $ $ 

# $ 212.40 40.00 40.00 $ 2,083.00 

# $ 45.00 

# $ 2,150.00

Total cost per Hour

549.05 506.72 478.50 458.40 443.23 431.47 422.06

. 414.37

407.94 402.53 397.87 393.85 390.32

# • Trip Cost based on flyingthe Cessna 402C 80 hours per month Fort Lauderdale to Marsh Harbour,Treasure Cay returningto Ft lauderdale From To Flight Cost per Total Round FLL Landing Total Time Hour Hours Trip landing Fees Trip Fee Cost Ft Lauderdale - FLL MHH 1.2 390.32 1.2 468.38 Marsh Harbour-MHH TCB .2 390.32 .2 78.06 Treasure Cay - TCB FLL 1.1 390.32 1.1 429.35 2.5 975.79 10.00 16.00 1001.79
Break Even Price Analysis FLL- Round Round 2 pax 3 pax 4 pax 5 pax 6 pax 7 pax 8 pax 9 pax MHH- Trip cost Trip break break break break break break break break TeB- of Ticket even even even even even even even even FLL operation cost price price price price price price price price 1001.79 284.00 500.90 333.93 250.45 200.36 166.97 143.11 125.22 111.31 

# • Profitand Loss Breakdown Round 2 Pax 3 Pax 4 Pax 5 Pax 6 Pax 7 Pax 8 Pax 9 Pax Trip Revenue! Revenue! Revenue! Revenue! r,nue! Revenue! Revenue! Revenue! Revenue! Income Income Income Income lome Income Income Income Income Operational cost 1001.79 1001.79 1001.79 1001.79 1001.79 1001.79 1001.79 1001.79 1001.79 per R/Tflight Round TripTicket 284.00 568.00 852.00 1136.00 1420.00 1704.00 1988.00 2272.00 2556.00 Price Profit/ Loss -433.79 -149.79 134.21 418.21 702.21 986.21 1270.21 1554.21 Breakdown 

# •

# • Fort Lauderdale to North Eleuthera - Round Trip Flight From To Flight Cost per Total Round FLL MHH Total Time Hour Hours Trip landing Landing Trip Fee Fee Cost Ft Lauderdale - FLl ELH 1.3 390.32 2.6 1014.83 10.00 8.00 1032.83 North Eleuthera
Break Even Price Analysis FLL- Round Round 2 pax 3 pax 4 pax 5 pax 6 pax 7 pax 8 pax 9 pax ELH Trip cost Trip break break break break break break break break of Ticket even even even even even even even even operation cost price price price price price price price price 1032.83 306.00 516.42 344.28 258.21 206.57 172.14 147.55 129.10 114.76 

# • Profit and Loss Breakdown Round 2 Pax 3 Pax 4 Pax 5 Pax 6 Pax 7 Pax 8 Pax 9 Pax Trip Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Income Income Income Income Income Income Income Income Income Operational cost 1032.83 1032.83 1032.83 1032.83 1032.83 1032.83 1032.83 1032.83 1032.83 perflight Round TripTicket 306.00 612.00 918.00 1224.00 1530.00 1836.00 2142.00 2448.00 2754.00 Price Profit/ Loss -420.83 -114.83 191.17 497.17 803.17 1109.17 1415.17 1721.17 Breakdown 

# •

# •

Fort Lauderdale to Governors Harbour, Rock Sound - returningto Ft lauderdale From To Flight Cost per Total Round FLL MHH Total TIme Hour Hours Trip landing Landing Trip Fee Fee Cost Ft Lauderdale - FLL GHB 1.4 390.32 1.4 546.45 10.00 16.00 1235.99 Govrnrs Harbr - GHB RSD .2 390.32 .2 78.06 Rock Sound- RSD FLL 1.4 390.32 1.5 585.48 3.1 1209.99
Break Even Price Analysis FLL- Round Round 2 pax 3 pax 4 pax 5 pax 6 pax 7 pax 8 pax 9 pax GHB Trip cost Trip break break break break break break break break RSD of Ticket even even even even even even even even FLL operation cost price price price price price price price price 

# • 1235.99 355.00 618.00 412.00 309.00 247.20 206.00 176.57 154.50 137.34
Profit and Loss Breakdown Round 2 Pax 3 Pax 4 Pax 5 Pax 6 Pax 7 Pax 8 Pax 9 Pax Trip Revenue/ Revenue/ Revenue/ Revenue/ Revenue/ Revenue/ Revenue/ Revenue/ Revenue/ Income Income Income Income Income Income Income Income Income Operational cost 1235.99 1235.99 1235.99 1235.99 1235.99 1235.99 1235.99 1235.99 1235.99 perflight Round TripTicket 355.00 710.00 1065.00 1420.00 1775.00 1836.00 2485.00 2840.00 3195.00 Price Profit 

### I Loss -525.99 -170.66 184.01 539.01 600.01 1249.01 1340.01 1959.01 Breakdown 

# •

# •

•

• Piper PA31-350 Operating Cost Per Hour PA31-350 - Fuel cost per hour @ 

## 40 gal per hourx $5.31 pergallon $ 238.95 50.00 40.00 2,083.00 45.00 2,150.00 PA31-350 - Maintenance per hour PA31-350 - Engine reserve costs per hour plus interior 

## & exterior PA31-3S0 - Insurance cost per month PA31-350 - Pilot cost per hour PA31-350 - Aircraft Lease cost per month Flight Fuel Maintenance Reserves Pilot cost hours Cost cost per cost per per Hour per per Hour Hour Month Hour 20 238.95 50.00 40.00 45.00 25 238.95 50.00 40.00 45.00 30 238.95 50.00 40.00 45.00 35 238.95 50.00 40.00 45.00 40 238.95 50.00 40.00 45.00 45 238.95 50.00 40.00 45.00 50 238.95 50.00 40.00 45.00 55 238.95 50.00 40.00 45.00 60 238.95 50.00 40.00 45.00 65 238.95 50.00 40.00 45.00 70 238.95 50.00 40.00 45.00 75 238.95 50.00 40.00 45.00 80 238.95 50.00 40.00 45.00 Insurance Aircraft cost per Lease cost Hour per Month
104.15 107.50

83.32 86.00 69.43 71.67 59.52 61.43 52.08 53.75 46.29 47.78 41.66 43.00 37.88 39.09 34.71 35.83 32.05 33.08 29.76 30.71 27.78 28.67 26.04 26.88 

## $ $ $ $ $

Total cost per Hour

585.60 543.27 515.05 494.90 479.78 468.02 458.61 450.92 444.49 439.08 434.42 430.40 426.87

# • Trip Cost based on flyingthe Piper PA31-3S0, 80 hours per month Fort Lauderdale to Marsh Harbour,Treasure Cay returningto Ft lauderdale From To Flight Cost per Total Round FLL Landing Total Time Hour Hours Trip landing Fees Trip Fee Cost Ft Lauderdale - FLL MHH 1.2 426.87 1.2 512.24 Marsh Harbour-MHH TCB .2 426.87 .2 85.37 Treasure Cay - TCB FLL 1.1 426.87 1.1 469.56 2.5 1067.17 10.00 16.00 1093.17
Break Even Price Analysis FLL- Round Round 2 pax 3 pax 4 pax 5 pax 6 pax 7 pax 8 pax 9 pax MHH- Trip cost Trip break break break break break break break break TeB- of Ticket even even even even even even even even FLL operation cost price price price price price price price price 1093.17 284.00 546.59 364.39 273.29 218.63 182.20 156.17 136.65 121.46 

# • Profit and Loss Breakdown Round 2 Pax 3 Pax 4 Pax 5 Pax 6 Pax 7 Pax 8 Pax 9 Pax Trip Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Income Income Income Income Income Income Income Income Income Operational cost 1093.17 1093.17 1093.17 1093.17 1093.17 1093.17 1093.17 1093.17 1093.17 per R/Tflight Round TripTicket 284.00 568.00 852.00 1136.00 1420.00 1704.00 1988.00 2272.00 2556.00 Price Profit/ Loss -525.17 -241.17 42.83 326.83 610.83 894.83 1178.83 1462.83 Breakdown 

# •

# • Fort Lauderdale to North Eleuthera - Round Trip Flight From To Flight Cost per Total Round FLL MHH Total Time Hour Hours Trip landing Landing Trip Fee Fee Cost Ft Lauderdale - FLL ELH 1.3 426.87 2.6 1109.86 10.00 8.00 1127.86 North Eleuthera Break Even Price Analysis FLL - Round Round 2 pax 3 pax 4 pax 5 pax 6 pax 7 pax 8 pax 9 pax ELH Trip cost Trip break break break break break break break break of Ticket even even even even even even even even operation cost price price price price price price price price 1127.86 306.00 563.93 375.95 281.97 225.57 187.98 161.12 140.98 125.32
Profit and Loss Breakdown 

# • Round 2 Pax 3 Pax 4 Pax 5 Pax 6 Pax 7 Pax 8 Pax 9 Pax Trip Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Income Income Income Income Income Income Income Income Income Operational cost 1127.86 1127.86 1127.86 1127.86 1127.86 1127.86 1127.86 1127.86 1127.86 perflight Round TripTIcket 306.00 612.00 918.00 1224.00 1530.00 1836.00 2142.00 2448.00 2754.00 Price Profit 

## I Loss -515.86 -209.86 96.14 402.14 708.14 1014.14 1320.14 1626.14 Breakdown 

# •

# •

Fort Lauderdale to Governors Harbour, Rock Sound - returningto Ft lauderdale From To Flight Cost per Total Round FLL MHH Total Time Hour Hours Trip landing Landing Trip Fee Fee Cost Ft Lauderdale - FLL GHB 1.4 426.87 1.4 597.62 10.00 16.00 1349.30 Govrnrs Harbr- GHB RSD .2 426.87 .2 85.37 Rock Sound- RSD FLL 1.4 426.87 1.5 640.31 3.1 1323.30
Break Even Price Analysis FLL- Round Round 2 pax 3 pax 4 pax 5 pax 6 pax 7 pax 8 pax 9 pax GHB Trip cost Trip break break break break break break break break RSD of Ticket even even even even even even even even FLL operation cost price price price price price price price price 

# • 1349.30 355.00 618.00 412.00 309.00 247.20 206.00 176.57 154.50 137.34
Profit and Loss Breakdown Round 2 Pax 3 Pax 4 Pax 5 Pax 6 Pax 7 Pax 8 Pax 9 Pax Trip Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Revenue! Income Income Income Income Income Income Income Income Income Operational cost 1349.30 1349.30 1349.30 1349.30 1349.30 1349.30 1349.30 1349.30 1349.30 perflight Round TripTIcket 355.00 710.00 1065.00 1420.00 1775.00 2130.00 2485.00 2840.00 3195.00 Price Profit

### I Loss -639.30 -284.30 70.70 425.70 780.70 1135.70 1490.70 1845.70 Breakdown 

# •

# • TWIN AIR CALYPSO LIMITED INC. General Expenses 12 month Projection

Chief Pilot 

### 25,000.00 Administration Labor 

### 75,000.00 Casual Labor 

### 25,000.00 Advertising 

### 20,000.00 Automobile 

### 5,000.00 Bank Charges 

### 75,000.00 Dues/ Subs 

### 20,000.00 Equipment Rental 

### 3,000.00 Other Insurance 

### 5,500.00 Interest 

### 4,000.00 Licenses 

### 3,000.00 Printing Postage 

### 4,000.00 Office Supplies 

### 4,000.00 

# • Legal 

### 3,000.00 Rent 

### 96,000.00 Repairs 

### 20,000.00 Communications 

### 30,000.00 Travel! Entertainment 

### 4,000.00 Utilities 

### 12,000.00 Payroll Expenses 

### 60,000.00 Bahamas Agents and Counters 

### 100,000.00 Ft Lauderdale Ramp and Reservation Agents 

### 144,000.00 OtherAircraft 

### 12,000.00 Other 

### 50,000.00 TOTAL GENERAL EXPENSES OVERHEAD 

### 820,500.00 

# •

# •

• TWIN AIR CALYPSO LIMITED INC. Aircraft Operation Income Projection QUARTERLY PROFIT/ LOSS REPORT Twin Air Calypso projected Income Statement by quarter with estimated date of start being December 2011 being from all commuter operations destinations, 100 pounds of cargo per flight @ a minimum of $1.00 per pound and 15 hours ofcharter perweek @ a min of$800.00 per hour. Scheduled Service Income Quarter Daily No Daily Scheduled Freight Scheduled Freight Total Scheduled Per quarter numberof of average passenger daily passenger Income per Scheduled flights cost Profit from Passengers Days aircraft daily Income quarterly quarter flights per quarter Scheduled per cost income income income passenger Qtr including flights freight per quarter 1-12 thru 2 40 92 5547.80 6,140.00 500.00 510,324.00 46,000.00 556,324.00 510,324.00 46,000 2-03 thru 05 70 92 5547.80 10,745.00 500.00 988,540.00 46,000.00 1,034,540.00 510,324.00 524,216.00 3-06 thru 08 60 92 5547.80 8,916.00 500.00 820,272.00 46,000.00 866,272.00 510,324.00 355,948.00 4-09 thru 11 50 92 5547.80 7,675.00 500.00 706,100.00 46,000.00 752,100.00 510,324.00 241,776.00

Totals 3,025,236.00 184,000.00 3,209,236.00 2,041,296.00 1,167,940.00 Charter Service Income Quarter Weekly 13 Number Average Average Average Total Average Average quarterly Per quarter Profit number weeks of hours of minimum charter charter aircraft charter aircraft cost from of per Charters charter hourly cost income per hourly Charter Flights Charters Qtr per cost of quarter cost charters

TOTAL INCOME FOR FIRST NORMAL YEAR OF SCHEDULED OPERATIONS 3,209,236.00 TOTAL INCOME FOR FIRST NORMAL YEAR OF CHARTER OPERATIONS 287,040.00 TOTAL INCOME FOR FIRST NORMAL YEAR OF SCHEDULED 

### & CHARTER OPERATIONS 3,496,276.00 TOTAL D 

### & I COST OF OPERATION FOR FIRST NORMAL YEAR OF AIRCRAFT OPERATION 2,187,904.68 TOTAL PROFIT FROM FIRST NORMAL YEAR OF AIRCRAFT OPERATION 1,308,371.32 GENERAL COST OF OPERATION OTHER THAN AIRCRAFT 920,500.00 TOTAL NETI PROFIT FROM FIRST NORMAL YEAR OF OPERATION 387,871.32
Note; 

### 0 & I, notates Direct and Indirect.

### • s**Depanme~1** f Transportation Federal Aviation Administration 

# Air Carrier Certificate This certifies that TWIN AIR CALVPSO LIMITED, INC. 700 S.W. 34tb STREET, SUITE 100 FORT LAUDERDALE, FLORIDA 33315 has met the requirements ofthe Federal Aviation Act of 1958, as amended, and the rules, regulations, and standards prescribed thereunder for the issuance of this certificate and is hereby authorized to operate as an air carrier and conduct common carriage operations in accordance with said Act and the rules, regulations, and standards prescribed thereunder and the terms, conditions, and limitations contained in the approved operations specmcations
. 

# • This certificate is not transferable and, unless sooner surrendered, suspended, or revoked, shall continue in effect indefinitely.

Certificate 

### number: EYLA853M 

### Effective Date: AUGUST 

### 12.20 I0 RE·ISSUED: FEBRUARY 17.2011 

### Issued at: _. SO FL ESDO-SO 19

FAA F()(m 8430·18 (6-$7) 

# • By Direction of the**~strator**

# ~~ ! . 

# ! SERGIO I.OPEZ**~-.J** (Signature)
. __. MANAGER (Title) 

### SO FL

### LS..I2.O:SD19....._

(Region/Office)

# •

•

• THIS APPROVED REGISTRATION SUPERSEDES ALL OTHER REG:STRATiONS PREViOUSLY FILED. AGENCY DlSPAY OF ESTIMATED BURDEN Approved by OMB OMB No. 2120-0633 Expires: 2128109

The public reporting burden forthe collection of information is estimated to aVerage 30 minutes perresponse. Ifyou wish to comment on the accuracy ofthe estimate or make suggestions for reducing the burden. pleasedirect your commentsto the**~** DeoartmentofT!i!JJS!X!I'tati. Office QfAviation**&:!i!~, x-~.** **~** -,JJ Street S,W" washinaton**D.~.** 20590 PAPERWORK REDUCTION ACT OF 1995 Underthe PapefWOfk Reduction Ad. of 1995. no persons are required to respond to a collection ofinlbrmation unless it displays a valid OMB control number. The OMB control number is displayed in the**u~** right-hand comer ofthisform. 

# 0 FOR USE BY DOT ONLY AIR TAXI OPERATOR REGISTRATION u.s.a..--aI AND AMENDMENTS UNDER**T~** PART298 OF THE REGULATIONS OF 0IIIce altha**~** THE DEPARTMENTOF TRANSPORTATION 

# - alT.........- 

# 0 Wheretoflle: Submitthisform. In duplicate. along with a Certificate of Insurance (OST Form 6410) evidencing required liability insurancecowrageforthe&ira-aft listed in Block 6 ofthis registration. to the

# I~**~,** Federal Aviation Administration (FAA). AirTransportation Division. AF5-200, Room 831. 800 Independence Avenue. S.W., washington, D.C. 20591. Exception' ForairtaxiS located in the**~**

## ~ t::J Alaska. submitthis form andthe OST Form 6410to the FederalAviation Administration (FAA), Alaskan Region Headquarters, ML-230, 222

# West"" Avenue, Box 14, Anchorage, Alaska 99513. Fe.: Thefeeforthe**~** registration ofan airtaxi is $8. There is nofiling feefor amendmentsto registrations previouslyfiled. EtrediW
_ ofregioItationIam 

## OCT 13 2010 1a. Name (andDBA. if applicable) and Mailing Address ofthe Registering Carrier: la. FederaI
..._**Mnirisllation~-** 

## 7WIAJ 

## /f1J(' eft-

# 'f flS**~** "'--IM I

### T£'2),1 

### /4 

### C. ,**NJ...A?-g~D** 31>. I\dchsaatlocal

# FAA aIIice: 

## 340b 

# SW 

# 9 ,I¥J.**sov~ ~l,t)A.\\)j\** **F~1)D-\** 

## '1**+T~** LA-lJh£12..1)A-L£; 

# +1-**3~31S 29~S**  

### $w 

## 145 A'I
1b. Telephone

## No.9S'l1-3S<7-

# g2-bb 

## 9.sL/-

## gb2- 

## 6902 '5'v /Te 12.0 FaxNo. 

### M 

## lI<PrMA-A,**~L** 

### "33021- 2a. Address ofprincipal place ofbusiness (If**~:**

## ~O,\,\~13,,~**3c.FAA9S~~'~",**

# _ b/II 

### tbfb "
...

# ,,:fI 

# :.J\ lQ 

# AFB-200;' 3d.

# FAA PrindpaI OperationsImpedor:**~** 'PICCO). I 2b. Telephone No. c-)**_.~.** 4. This filing isthe carrier's: l**~** 

# Air.....;. IFJ Inilial

# Reg~ 0,.

# rtQ~portQHmt**~~?YT** IIto reflect changes since previous filing (Complete item 9) TVISIOI) 

# S If initial registration, give proposed

### d~**~::'::'''''''''":'.=.!7.**T 7
. ':' 

### C"'P T

### ~**~e ~**  -:;?

### S I 

### :l.0 \.. 0 5. Checktype ortypes ofservice the carrier**~CUf1Ull** commencement ofoperations, or, for amendments, setVice the carrier is a.urentIy

perfonning: 

# o Scheduled passenger- aOn-demand passenger 

# o Air ambulance 

# o Scheduled cargo 

### S On-demand cargo 

# o Seasonal 

## o Mall under a U.S. Postal SeIVice contract 

## o Other (Please specify)'" * Check only H service Is limitedto lessthanfive (5) round tripe perweek onat leastoneroute betweentwo ormont pointsand Is operated pursuantto publlafledflight scheduleswhich specifythetimes. days oftheweek. and places between which suchflIgh1s are performed. Companies proposing oroperating scheduled passengerservices offive (5) or more roundtrips perweek onat least oneroute between two or more points pursuantto published flight scheduleswhich specifythe times. days ofthe week, and places between which such flights are perbmed may notconductsuch operations underthis registration. Instead, such companies must befound "fit, willing. and able'to provide such services as a commuter air carrier. See 14 CFR 298, Subpart E.

... Forexample, ifthe carrierperforms otherservices such asfire fighting operations for the U.S. Forest Service, itshould be indicIIted here. OST Form 4507 (Rev. 2-(6)/
amendments, AircraftMaIre 8IldModel P8SSenQ8f Seats InstaIfed* 

### lQYES ONO

## 1.L!~vA**02~** 

# 9 1:l!!I!: ,.., airIiDi orC>lRIfnUIIor**~** underPart21M!
_ be a ciIizM oflie**~** Slates. 411 USC40102(11)(15)
.....a U.S.**~** _ (a)
...inIhidu8Iwho '- • U.S. dIimr (b) 8**~** ofwt*:heedllIIMIberi& 8 UAcmz.t;or (e) 8 COfJlOf1IIion orMIOtieIian**~** undor !he
_ ofhiUniIed Slides ora_,\tie DiIIri<:I ofColumbia, orateniDry or po-.of!he URIed Staas. ofwhichhipn>IidentSId III _1MHI'rdsof\tie
_ ofdiNCIors SIdoilierIIIIWJ8Qi1g 2. 

### Ce5$V/I- ljllU 3. 

# p,p[?/2. Ptf-"3I-'3S0
4. 

# ?IPef2 P,A--31**~D** 

### IJ

### 3S0Jt.l.'3'"
5.
________ _ (AddtJdcIttonaIsheetsifnec8SSiIIY) • Thisa:- not include aeatsoccupied bythe pilotor c:o-piIot unlessthe IaIterIs availableb'

passenger use. 

# 9

oIIicars
..**~** ofhi**~** S-,which is under lie

__CIlO'IIrtII ofciIianIofthe U1iIIed $fales, MId in which at _75pIOfCII1I ofhiwting
__'-
_ oroonII'oIIed by peI-.s!hat "'"
__ofhi UriIIId $tiles. carried passengers in foreign airtransportation, that is, between any point intheUnited States and any point outside thereof, during thepast 12 monIhs: 

### ilYES DNO 9. REPORT CHANGES OR AMENDMENTS TO INFORMATION PREVlOULSl Y FILED WITHIN 30 DAYS OF THE EFFECTlVE DATE: a. Cha1ge in Caniel'sNaneand/orAddress (Ptease specify): FormerNtJIOO andAddress: 

### /tVIN

### -r~tVN 

# Li?A-5/ tJ 

# 4 

# 4. 

# cJ.,h(a.. 

# -rw/ tJ f11£ 

# -r W

jA.) 

## Ih/2.. 

## Cih'f JJS2)

b.

# Descri~**~ ~** **~= ~** **~~ ~**  ordeletions ofaIrr;raft, change in type ofoperatials, mgi$lJ'alion IIUIOOers, etc.}:

I certify that the information contained in this application is complete and accurate tothe best ofmy knowledge, 

### The carrier subscribesto the lATA IntercarrierAgreement; 

### the lATAAgreement on Measures to Implement

### the lATA IntercarrierAgreement. andthe AT A Agreement on Provisions Implementing the lATA IntercarrierAgreement to be Included in Conditions ofcarriage and Tariffs (see OST Form 4523-A). and in accordance with thoseAgreements agrees under

### Article 22(1) 

### ofthe Warsaw Convention orthe Warsaw Convention as amended bythe Hague Protocol that the liability limitsfor passenger injury or death in international transportation as defined in

### the Convention are waived in their entirety.

PIIK:e:

# ...c,. L+vQ£a.)).A-l.E I

# +L. (City8IIdState) (Pleasetype)

### T~ ___

### P~~~~L~~_~~_\~

# _____________ Note: Tm**~** mustbesignedbyB responsible oIfictK; suchasthe PreSIidBnt. VICe PrMidant, Sacmtaty orT--. orparlnerorowner ofthecanier, TO ENSURE PROPER PROCESSING OFTHIS REGISTRATION, PlEASE COMPLETETHIS FORM IN ITS ENTIRETY.

# •

•

• Twin Air Calypso limited, Inc. 700 SW 34th Street, Suite 100 

### Ft Lauderdale, Florida 33315

AFFIDAVIT OF AIRCRAFT CONFORMITY/COMPLIANCE

STATE OF FLORIDA COUNTY OF BROWARD Clayton 

### I. Gamber being first duly sworn, deposes and says: 1. That he is duly elected, qualified and serving as President and Chief Executive Officer ofthe Avstar Aviation Group. 2. That he is duly elected, qualified and serving as President and Chief Executive Officer of Twin Air Calypso Limited, Inc. 3. That he is the Director of Maintenance forTwin Air Calypso Limited, Inc., a FAR part 135 certificate holder. 4. That the following aircraft; 

### a. PA-31-350 N350MJ 1+9 Seating b. PA-31-350 N146DC 1+9 Seating c. Cessna 402C N44lP 1+9 Seating d. Cessna 402C N767PA 1+9 Seating e. Cessna 402C N528FA 1+9 Seating Have been certified by the FAA and comply with all applicable FAA safety standards.

Subscribed and Sworn before me this 20fu day of

# J~I/..&tf

# •

•

• STATE OF FLORIDA COUNTY OF BROWARD 

## Twin Air Calypso Limited, Inc. 700 SW 34th Street, Suite 100 

### Ft Lauderdale, Florida 33315



## AFFIDAVIT OF SAFETY COMPLIANCE

Clayton Gamber being first duly sworn, deposes and says: 

### 1. That he is duly elected, qualified, and serving as President and Chief Executive Officer of Twin Air Calypso Limited Inc. and that he is authorized to and does make Affidavit for it. 2. That all aircraft owned and leased by Twin Air Calypso Limited Inc. have been certified by the Federal Aviation Administration and currently comply with all Federal Aviation Administration safety standards under part 135 as well as the noise standards of part 36, ofthe Federal Aviation regulations.

Subscribed and sworn to before me this 20th 

### day ofJuly 2011.

# •

•

• Aircraft Maintenance Twin Air Calypso Limited, Inc. 700 SW 34th Street, Suite 100 Ft Lauderdale, Florida 33315

Twin Air Calypso Limited, Inc. a wholly owned subsidiary ofAvstar Aviation Group will utilize the services ofTwin Air Calypso Services, Inc. Twin Air Calypso Services, Inc. is our sister Company and a certified FAA repair station, Certificate number DN4R134M based at North Perry Airport (HWO) approximately 5 miles from 

### Ft Lauderdale International Airport (FLL). The address ofTwin Air Calypso Services, Inc. is 1620 SW 75th Avenue, Pembroke Pines, Florida 33023.

# •

•

• Twin Air Calypso Limited, Inc. History 

### Twin Air Calypso limited, Inc. 700 SW 34th 

### Street, Suite 100 Ft Lauderdale, Florida 33315

Twin Air was founded in 1978 as the aircraft operating arm of Red Aircraft Services in 

### Ft Lauderdale, Florida. Red Aircraft was an aircraft services organization founded in 1954. Initially the main source of business was to lease aircraft to government units and avionics suppliers. The customer list included the Naval Shipyard in Connecticut, the United States Air Force, the city of 

### Ft lauderdale and RCA Avionics. The operation for the United States Navy, transported personnel and equipment to the Bahamas in support of Submarine warfare associated research. The United States Air Force contract moved high priority freight throughout the southeastern United States. The City of Ft Lauderdale leased two aircraft for surveillance work. The RCA Avionics leased an aircraft for avionics demonstration purposes. Aircraft operated for these contracts ranged from Cessna 172's to Douglas DC3's. As our exposure to the Bahamas increased the nature of the business turned first to freight and then also to passenger operations. In the mid 1980'sTwin Air began to operate a high priority freight service to the out islands of the Bahamas. Our main focus was to support the local businessmen, hoteliers, residents and vacation home owners. As the reputation and the reliability of our operation grew we were encouraged to introduce passenger service. Our business is now mainly passenger with freight supplementing unused capacity. Our aircraft fleet grew from one Piper Navajo Chieftain to six by the end of2004 with flight hours approaching five thousand per year. In the fall of 2004 we began supplying service to another operator known as Calypso Air. Calypso's market was primarily the Abaco's while the Twin Air market was primarily the Eleuthera's. By early 2005 Twin Air was the main source of lift for Calypso and it was decided to have Twin Air absorb the operation and aircraft of Calypso. By combining the operation ofTwin Air and Calypso the fleet grew to nine aircraft and annual flight hours to approximately 8000 with revenues in excess of 3.5 million dollars. Calypso's only stockholder, Doctor Kenneth Langston, became a minority partner in the combined business which was now called Twin Air Calypso Limited, Inc. Clayton Gamber and his wife Robin Gamber were the majority shareholders. In early 2010 Avstar Aviation Group, a public company previously in the fixed base operation and aircraft maintenance business were seeking business acquisitions. During this time and while planning for the sale ofTwin Air Calypso all ofthe aircraft were placed in a separate entity owned entirely by Dr. langston. This corporation was known as Aircraft Charters llC.This 

### "Sub-S" entitywas formed solely for the ownership ofthe aircraft and to be the Lessor toTwin Air Calypso Limited, Inc.

# •

•

• Business Marketing Philosophy A: Bahamas 

## Twin Air Calypso Limited, Inc. 700 

### SW 34th 

### Street, Suite 100 Ft Lauderdale, Florida 33315

The business to the Bahamas is divided into two geographical sectors and two types oftraveller. Geographically, there are two major destinations. The population centers of Nassau and Freeport and the remaining portion of the archipelago, known as the "Family Islands". The destination of Nassau and Freeport account for over 90 percent ofthe population ofthe country and are served well by the major airlines using traditional airline equipment. The "Family Islands" have small population centers supplemented by "boutique hotels", second homes for foreigners and marina infrastructure. Our philosophy from the inception is to cater to the "Family Island" market. In this particularly seasonal market, frequency with reliability is certainly more important than capacity. The smaller aircraft we utilize are the most efficient for these parameters. However, smaller aircraft makes the control of "load factor" imperative. Twin Air Calypso exercises control of load factors by supplementing freight for any unused capacity. In Summary Twin Air Calypso caters to the local Bahamians, businesses, second home owners and boaters to minimize the seasonal market fluctuations. Supplementing freight for passengers allows us to maintain the frequencyand reliability the market requires while operating the aircraft efficiently.

B: Cuba Twin Air Calypso Limited. Inc. believes that person to person family contact is a basic human right. We believe the vast Cuban American population living within the United States who are eager to travel to Cuba for visits with family have limited options. The amount of charter flights available for smaller groups business people and families who wish to travel together is small. New United States government travel and business policies affecting travel and contact of persons travelling to and dealing with Cuba have further expanded the need for charter flights between the United States and Cuba. Management All key employees and managers have worked in the aircraft charter business serving the Bahamas and Cuba in excess oftwelve years.

# •

•

• Business Operating Philosophy 

### Twin Air Calypso Limited, Inc. 700 SW 34th 

### Street, Suite 100 Ft Lauderdale, Florida 33315

While maintaining cost controls in all facets ofthe business is important, the variable aircraft operating costs are the most important. To control these variable costs a vertically integrated organization is necessary. Our sister company under the Avstar Aviation Group, Miami Air is an FAA approved FAR part 145 repair station which also has fuel service, based at North Perry Airport (HWO), Florida, five miles from our base at Ft Lauderdale International Airport (FLL), Florida. As a fully certified repair station and fuel vendor, we are also able to offer services to retail customers and other operators therefore reducing the allocation ofoverhead ti Twin Air Calypso Limited, Inc. a significant cost advantage over the competition. Future Expansion for Destinations and Capacity Due to the downturn in the economy Twin Air Calypso has suffered a reduction in revenue. This reduction in income has attributed to the reduction of our flying fleet. A fleet refurbishment program is now underway as the economy recovers and service returns to a previous level. The return to service of existing aircraft will provide a 50% to 70% increase in capacity on the existing route structure Additional aircraft will be available for opening the West Palm Beach to Abaco market. This is a very active market due to the ocean shipping from the port of Palm Beach. There is significant passenger seats needed for individuals that carry out purchasing, maintain business relationships and utilize the shipping resources. A facility for our new presence in West Palm Beach has already been identified that will allow for both passengers and freight operations at the West Palm Beach Airport (PBI). The refurbishment also enables Twin Air Calypso Limited, Inc. to dedicate specific aircraft and personnel to freight, scheduled service and charter operations. The freight aircraft will allow the ability to offer scheduled freight service, a new revenue source for Twin Air Calypso Limited, Inc. The dedication of scheduled service and charter aircraft will increase customer appeal and acceptance for personal services. Twin Air Calypso Limited, Inc. a wholly owned subsidiary ofAvstar Aviation Group will utilize the services ofTwin Air Calypso Services, Inc. Twin Air Calypso Services, Inc. is our sister Company and a certified FAA repair station, Certificate number DN4R134M based at North Perry Airport (HWO) approximately 5 miles from Ft Lauderdale International Airport (FLL). The address ofTwin Air Calypso Services, Inc. is 1620 SW 75th 

### Avenue, Pembroke Pines, Florida 33023.

# •

•

This Section is NOT USED 

# •

# •

•

This Section is NOT USED 

# •

### TWIN AIR CALYPSO TICKET JACKET GENERAL INFORMATION AND REQUIREMENTS TIckets are non-refundable, valid for one year from date of purchase and may be transferred to another person. Connecting Flights; Allow a two hour window between connections for US Customs, Luggage and transfer to I from main terminal. Check-in; is required one hour prior to scheduled flight departure time. International Flights; proof of citizenship is required using a valid passport. For permanent U.S. residence a valid alien card and or passport with other valid State Department / INS documentation is required. Foreign passport; (other than U.S.) a valid visa is required. The passenger is responsible for knowing the requirements ofthe visa fortravel to and from the United States. Baggage; Up to 35 pounds ofbaggage "Including carry-on" items, is allowed per passenger. All items above the 35 pound limit will be assessed at $1.00 per pound and travel on a space available basis. Animals: less than 50 pounds must travel in an approved kennel / dog I cat carrier. Dogs under 50 pounds will be charged at 50 percent seat/ticket price. Larger dogs will be charged at full seat / ticket price and must be on a leash and controlled by the owner seated at rear ofaircraft. Surfboards; travel on a space available basis unless prior arrangements are made and will be charged according to size. Open TIckets; are considered "space available" unless confirmed at least 24 hours prior to desired departure/travel time. Smoking; All flights are non-smoking flights. Hazardous Materials; federal regulations restrict the carriage of items classified as Hazardous Materials. Acid, matches, lighter fluid, explosives, flammable, solid/liquids, oxidizing materials, corrosive materials, compressed gasses, poisons, etiologic agents, radioactive materials, irritating or incapacitating sprays must not be carried in baggage. Checked baggage is subject to inspection and passengers are required to show identification. Firearms; Federal Regulations require that firearms can only be carried in checked baggage, be unloaded and declared. Electronic Devices; Federal Regulations prohibit the in-flight operation of electronic devices other than portable computers, portable dictation recorders, electronic calculators and games, electronic watches, hearing aids, heart pacemakers and electronic shavers. Other electronic devices (including AM and FM transmitters and receivers, portable telephones and remote controlled toys) may interfere with communications and navigation systems on the aircraft and are therefore prohibited. Advice to Passengers on limitations of Liability Refusal to Transport; Twin Air Calypso may refuse to transport and or remove any passenger forvarious reasons as set forth in its Contract for carriage. Liability of twin Air calypso Limited Inc.; Purchase of a ticket does not guarantee transportation. Twin Air calypso shall not be liable for any indirect, special or consequential damages resulting from its performance or delay in performance of, or failure to perform, transportation of passengers and or other services inCidental thereto (except baggage liability as provided below). Personal liability; The Warsaw convention and tariffs provisions in the case of travel to and from a foreign country may limit Airline Liability for death or personal injury. Baggage liability; liability for loss, delay or damage is limited as follows. (unless a higher value is declared and an extra charge is paid) 1. International; for most international travel including domestic portions of international journeys, maximum liability is $9.07 or approximately $20.00 per kilo. 2. Domestic; Maximum liability is $1,250.00 per passenger for most carriers. Under no circumstances is twin Air Calypso limited Inc. liable for loss or damage to valuables or electroniCS, currency, jewelry, documents, photographic, computer equipment, art objects, antiques, commercial effects, furs, precious metals, negotiable instruments, gold dust and silverware. No action shall be initiated for any loss, delay or damage to checked baggage unless a preliminary written notice is given to a Twin Air Calypso limited Inc. employee or representative before leaving the airport where the loss delay or damage is not obvious in nature and within 4S days in writing (21 days where any part of travel is international) after date of the incident and unless action is commenced within one year from date oftrave. Baggage; Identify your baggage with your name and address both inside and outside. Lock your bags and always carry cash, jewelry cameras and antiques, negotiable instruments, medications, important papers, liquids or fragile articles in carry-on baggage (see note about carry on baggage) or on your person as Twin Air Calypso Limited Inc. assumes no liability for these items. Damage to or loss of baggage must be reported to Twin Air Calypso immediately upon termination ofyour flight. TWIN AIR CALYPSO 

### NAME:
________________________ _ Date:
____ Flight 

### #
_____Date:
____ _ Reliable Flight Service between Florida and the Bahamas

# •

•

• TWIN AIR CALYPSO Rear ofTicket
NOTICE If the passengers journey involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of the carriers for death or personal injury and in the respect of loss or damage to baggage. See also Advise to International Passengers on Limitation of Liability. CONDITIONS OF CONTRACT 1. As used in this contract "ticket" means this passengerticket and baggage check, of which these conditions of notice form part, "carriage" is equivalent to "transportation", "carrier" means all air carriers that carry or undertake to carry the passenger or his baggage hereunder or perform any other service incidental to such to such air carriage. "WARSAW CONVENTION" means the Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed atWarsaw, 12th October 1929, or that Convention as amended atthe Hague, 2Sth September 1955, whichever maybe applicable. 2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw Convention unless such carriage Is not "internationalcarriage" as defined by thatconvention. 3. To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to the (i) provisions contained in this ticket. (ii) applicable tariffs. (iii) carriers condition of carriage and related regulations which are made part hereof (and are available on application at officeyfcarrier) except in transportation between a place in the United Sta'"tes or Canada and any place outside thereoftowhich tariffs in force in those countries apply. 4. Carriers name may be abbreviated in the ticket, the full name and its abbreviation being set forth in Carriers tariffs, condition of carriage, regulation ortimetables, carriers address shall bethe airport ofthedepartureshown oppositethefirst abbreviation ofcarriers name in the ticket, the agreed stopping places are those set forth in this ticketoras shown In carriers timetable as scheduled stoppingplaces on the passenger's route; Carriage to be performed hereunder be several successful carriersis regarded as a single operation. 5. Carrier Is not liable for any expenses incurred by passengers for Hotels, meals, ground transportation or any other expense due to cancellation ofanyflightfor any reason, including tariffs and fees. 6. Any exclusion or limitation orliability ofcarrier shall apply to and befor the benefit of agent, servants and representative's of carrier and any person whose aircraft is used by carrier for carriage and It's agents, servants and representatives. 7. Checked baggage will be delivered to bearer ofthe baggage check. in case of damage to baggage moving in international transportation complaint mustbe madein writingtothecarrierforthwith after discovery ofdamage and, at the latest within 7 days from receipt; In case of delay complaint must be made within 21 days from date the baggage was delivered. See tariffs or conditions ofcarrier regarding non-international transportation. S. This ticket is good for carriage for 1 year from date of issue, except as otherwise provided in this ticket, in carrier's tariffs, conditions ofcarriage, and related regulations. The fare for carriage hereunderis subjecttochange priorto commencement ofcarriage. Carrier may refuse transportation ifthe applicable fare has notbeen paid
. 9. Carrier undertakes to use best efforts to carry the passengers and baggage with reasonable dispatch. Times shown in timetable or elsewhere are not guaranteed and form no part ofthis contract. Carrier may without notice substitute alternate carrier or aircraft and may also alter or omit stopping places shown on the ticket in cases of necessity. Schedules are subject to change without notice. Carrier assumes no responsibility for making corrections. 10. Passengers shall comply with government travel requirements, present exit, entry and other required documents and arrive atairports within thetime fixed by carrier, or if no time is fixed, early enough to complete departure procedures. 11. No Agent, servant or representative of carrier has authority to alter, modify orwaiver a provision ofthiscontract. S CARRIER RESERVES THE RIGHT TO REFUSE CARRIAGE TO ANY PERSON WHO HAS ACQUIRED A TICKET IN VIOLATION OF APPLICABLE LAW OR CARRIERS TARIFFS, RULES OR REGULATIONS. ISSUED BY Carrier whose name is in the "Issued By" section on the face ofthe Passenger Ticket and Baggage Check. Additional protection can usually be obtained by purchasing insurance from a private company. Such insurance is not affected by any limitation ofthe carrier's liability under the Warsaw Convention. For further information please consult your airline orinsurance company representative
.



# ------------------------------------------------------

# •

• Electronic Articles ofIncorporation For TWIN AIR CALYPSO LIMITED, INC. 

## P09000092838 FILED 

## November 12, 2009 Sec. Of State jshivers



## The undersigned incorporator, for the purpose offonning a Florida profit corporation, hereby adopts the following Articles ofIncorporation: 

# Article I The name ofthe corporation is: TWIN AIR CALYPSO LIMITED, INC. 

# Article II The principal place ofbusiness address: 3406 SW 9TH AVENUE FT LAUDERDALE, FL. 33315 

## The mailing address ofthe corporation is: 3406 SW 9TH AVENUE FT LAUDERDALE, FL. 33315 

# Article III The purpose for which this corporation is organized is: ANY AND ALL LAWFUL BUSINESS.


# Article IV The number ofshares the corporation is authorized to issue is: 1000 

# Article V The name and Florida street address ofthe registered agent is: 

# • PLANE LAW, P.A. 11199 69TH STREET NORTH LARGO, FL. 33773

## I certify that I am familiar with and accept the responsibilities of registered agent.

• Registered Agent Signature: DOUGLAS 1. 

### BARNARD 

# Article VI The name and address ofthe incorporator is: DOUGLAS 1. 

### BARNARD, ESQUIRE 11199 69TH STREETNORTH LARGO, FLORIDA 33773 Incorporator Signature: DOUGLAS J. BARNARD 

# Article VII The initial officer(s) and/or director(s) ofthe corporation is/are: Title: PD CLAYTON I GAMBER 9324 NW 50 DORAL CIRCLE N DORAL, FL. 33178 Title: SD ROBIN V GAMBER 9324 NW 50 DORAL CIRCLE N DORAL, FL. 33178 

# Article VIII .Theeffective date for this corporation shall be: 1111012009



# • P09000092838 

## FILED November 12, 2009 Sec. Of State jshivers

# State of Florida Departmentof State

I certify from the records of this office that TWIN AIR CALYPSO LIMITED, INC. is a corporation organized under the laws ofthe State ofFlorida, filed onNovember 12, 2009, effective November 10,2009. The document number ofthis corporation is P09000092838. I further certify that said corporation has paid all fees due this office through December 31, 2011, that its most recent annual report was filed on February 7, 2011, and its status is active. I further certify that said corporation has not filed Articles of Dissolution.

Given undermyhandandthe GreatSeal of Florida, at Tallahassee, the Capital, this the Eighth day of July, 2011

# ~C5 Secretary of State

Authentication ID: 100209755031-070811-P09000092838 To authenticate this certificate,visit the following site, enterthis ID, and then follow the instructions displayed. 

### https:llefile.sunbiz.orglcertauthver.html

# •

•

• Twin Air Calypso Limited, Inc. FAR Part 135 Organizational Chart ·PRE$IDENT

..

. .

. .



## .. CLAYTON·;). GAMBER 

# DIRJ;CfOR**OF:Q~EQAjIONS**.



## .ARTHUR 

# I..STEVENS0N 

# ···cAiEF:PILQl'
.. [U¢14N(tHORNA

Clayton I. Gamber is the President and CEO ofAVSTAR Aviation Group, a public company and the parent company ofTwin Air Calypso Limited, Inc. Mr. Gamber is a United States citizen and holds less than 10 percent of the AVSTAR Aviation Group stock and has no Twin Air Calypso stock. He holds the position of President and Director of Maintenance for Twin Air Calypso Limited, Inc. and has also served as Director ofOperations since August 2010 till April 2011. Arthur L. 

### Stevenson has been with Twin Air Calypso Limited, Inc since January of2011 where he has served as a line pilot and the Director of Operations. Mr. Stevenson is a South African citizen. He does not hold any stock in AVSTAR Aviation Group norTwin Air Calypso Limited Inc. Luciano Horna has been with Twin Air Calypso Limited, Inc. since February 2011 where has has served as a line pilot and Chief Pilot. Mr. Horna is a United States citizen. He does not hold any stock in AVSTAR Aviation Group norTwin Air Calypso Limited Inc. Key Personnel Statement: Clayton Gamber, Arthur Stevenson and Luciano Horna meet the qualifications set forth in sections 119.65 and 119.67 of the Fedreral Aviation Regulations (14 CFR 119.65 and 119.67.

# •

•

• TWIN AIR CALYPSO LIMITED, INC. AIR CARRIER OPERATIONS MANUAL SECTION FOUR

PERSONNEL

4.3 PRESIDENT-DUTIES AND RESPONSIBILITIES The President is responsible for the overall safety and efficiency ofthe company. The President is responsible for the selection and employment ofall employees and subcontractors ofthe company. He is responsible for the appointment ofstaffthat meets the qualifications of FAR Part 119 and 135. The President is responsible for maintaining the continuity ofoperational control for all of Twin Air Calypso Limited, Inc. operations. The President is responsible for operating the company in a manner that will not allow the operational control offlights to be transferred, or perceived to be transferred, to any other entity or person. The President is responsible for the company's compliance with FAA/DOT mandated drug and alcohol testing programs. The President must be knowledgeable ofthe entire content ofthe Twin Air Calypso Limited, Inc. "operations Manual", "Operations Specifications", and all applicable Federal Aviation Regulations. The President may delegate functions to properly trained and qualified personnel but will retain responsibility for their actions.

REVISION: 2011-1 

### DATE:7/1/2011 PAGE 4-4

### • PRESIDENT



# •

• Clayton 

### I. Gamber

- BSc, Industrial Engineering and Operations Research - ATP

- MEL

- A&P Duties and Responsibilities The President is responsible for the overall safety and efficiency ofthe company. ThePresident is responsible for the selection and employment ofall employees and subcontractors ofthe company. He is responsible for the appointment ofstaffthat meetsthe qualifications ofFARPart 119 and 135. The President is responsible for maintainingthe continuity ofoperational control for all ofTwin Air Calypso Limited, Inc. operations. ThePresident is responsible for operatingthe company in a mannerthat will not allowthe operational control offlights to be transferred, orperceived to be transferred, to any otherentity orperson. The President is responsible for the company's compliance with FAAJDOT

### mandated drug and alcohol testing programs. ThePresidentmust beknowledgeable ofthe entire content ofthe Twin Air CalypsoLimited, Inc. "operations Manual", "Operations Specifications", and all applicable Federal Aviation RegUlations. ThePresident may delegate functions 

### to properly trained and qualified personnel but 

### will retain responsibility for their actions. 

### Experience 1970-1996 Red Aircraft Service, Inc FtLauderdale, FI DirectorofMaintenance FAA Part 145 Repair Station 1996-2001 Miami Aviation Corporation Miami, Florida Presidentand DirectorofMaintenance FAAPart 145 Repair Station AccountableManager European Aviation Safety Agency EASA-145 Repair Station 2002-2007 Miami Aviation Maintenance Company FtLauderdale, Florida PresidentDirectorofMaintenance FAAPart 145 Repair Station

# •

Education 

# •

• Accountable Manager EASA-145 Repair Station European Aviation SafetyAgency 1978-2011 TwinAirCalypso Ft. Lauderdale, Florida PresidentandDirectorofOperations FAA Part 135 AirCarrier
1968-1971 VirginiaTech Blacksburg,VA BachelorofScienceIndustrial Engineeringand Operations Research FAA Airline TransportPilotLicense Over 8000flighthours DC-3 TypeRating FAAAirframe and PowerplantLicense

# •

•

• Stock Ownership

Twin Air Calypso Limited Inc. is a wholly owned subsidiary ofAvstar Aviation Group Inc. All Twin Air Calypso Inc. voting stock rests with Avstar Aviation Group Inc. Clayton Gamber has zero voting stock in Twin Air Calypso Limited Inc. Clayton Gamber has 4.2 percent voting stock in Avstar Aviation Group Inc. Clayton Gamber is a United States citizen
.

# •

•

• TWIN AIR CALYPSO LIMITED, INC. AIR CARRIER OPERATIONS MANUAL

4.4 DIRECTOR OF OPERATIONS SECTION FOUR PERSONNEL

The Director of Operations reports to the President and must be knowledgeable ofthe contents ofthe Operations Manual, Operations Specifications, and federal Aviation Regulations pertaining to the company's activities. The Director of Operations advises the Chief Pilot ofany changes in Ops Specs or company policies that may effect his or other pilot's duties. Ensures that all flight operations are conducted safely and in compliance with all Federal Aviation regulations, Operations Specifications, and Company policies. Has the authority to act for Twin Air Calypso Limited, Inc., including the signing of FAA correspondence and operations specifications. Ensures that all aircraft are properly equipped for applicable operations. Prepares and maintains proficiency records and pilot files. Communicates with the FAA Flight Standards District Office and the National Transportation Safety Board. Files all required reports and documents. Devises revisions to this manual as needed, submits the proposed revisions to the FSDO, receives confirmation from the FSDO that the revisions are acceptable, and then distributes those revisions to all manual holders. Keeps the aircraft copies ofthis Operations Manual current. Coordinates with the director of Maintenance the timely correction of mechanical irregularities and discrepancies. Manages the MEL program, These duties and responsibilities may be delegated to other personnel, but the responsibility remains with the Director of Operations.

REVISION: 2011-1 DATE:7/1/2011 

### PAGE 4-5

# •

• REfUME
Arthur Stevenson 1601 SW 2200 

### Avenue Ft Lauderdale, Florida 33312 Phone:- 954-661-1518 arthurglobaldo@yahoo.com Objective: 

### Chief Pilot Director of Operations or line pilot for an innovative and service oriented company. Using my knowledge and skills to provide an on-time, safe and secure flight experience. Skills and Experience:


### • Airline Transport Pilot 11,070 hrs 142 aircrafttypes, 1 st 

### class physical and current part 135 IFR 135.293, 297, 299 line check, part135 company ground and flight instructor, check airman. • Visionary, with ability to motivate, enthuse and see projects to completion.
• Problem solver with more than 11 years experience as point of contact with FAA, overcoming bureaucratic roadblocks and developing solutions for flight operations and aircraft certification
• Excellent interpersonal skills and customer relations expert • Above average writing skills, developed many operations, maintenance and crew training manuals. Book author.
• Ground and flight planningllegal requirementslflight followinglflight conductlflight safety/crew debriefings • Maintenance coordination while developing and maintaining vendor relationships
• Hiring and firing offlight, ground and office staff. • Annual operating budget projections / assessment of demands and acquisition of additional aircraft. 

# • Director of Operations and Line Pilot, part 135 instructor and check airman, Gulfstream Connection Inc. 11/06 till present.
• Director of Operations Global Sky Aircharter dba Trauma Star, developed only single pilot IFR part 135 helicopter EMS operation in Page 1 of 3 Arthur Stevenson Dir ofOps Resume

# •

•


# • • •


# • • 

# REfUME

state of Floridafor entire Florida Keys (Monroe County SheriffOffice) 

## 03/05thru 

## 06/07. Wrote operations, maintenance and first responder manuals. Arranged flight training program and certification of the latest HEMS/HEMES operation protocol. Check Airman (ground). Successfully managed flight staff consisting offormer military, coast guard and law enforcement pilots into certification. Founder, Sky limo Aircharter Corporation 08-06-1999 thru 12-11- 2002. Developed companyfrom atwo aircraftsingle and Multiengine operation to a nine aircraft, piston and turboprop fleet. Supervised proving runs while adding a 19-passenger seat Sweringen Metro aircraft, also acquired ICAO call sign. Managed staff of32. FounderGlobal SkyAircharterCorporation DirectorofOperationsand line pilot, 10-31-02 thru 

## 07/07. Carried out name and certificate numberchangewhile adding additional aircrcraft, acquired ICAO call sign. WingsAir Charter - Chief Pilot - 3-03 thru Jan 04 Carried out Manual re-write. Island Air Charters - line Pilot, rewrote general operations manual and 135 compliance statement, acquired ICAO call sign, developed Bahamas security program. Extensive experience dealing and cooperating with the FAA has built up an excellent working and personal relationships allowing for expedited and personal service. 18 years experience as US government Jaw enforcement contractor leading 52 overseas aviation and marine operations. Complete restoration and modification of PiperVagabond. Management and Flight Experience 

### Director of Operations, Gulfstream Connection Inc. Director of Operations Global Sky Aircharter dba Trauma Star. Two presidential flights, Uruguay and Haiti. Owned, operated and managed Global Sky Aircharter Corporation, a FAA part 135 air charter certificate. Initiated a start-up FAA part 135 air charter certificate Sky Limo Aircharter Corporation Founder of Start-up - developed and managed 9 aircraftfleet, including turbo prop and 10 or more SW-3 Metro passenger aircraft, managed proving flights, also line pilot and general manager. Partnership purchase of Caribe Air Cargo FAA part 135 certificate. Page 2 of 3 Arthur Stevenson Dir ofOps Resume

# •

Education Languages 

# .. 

# REfUME

Directed name and certificate number change to Global Sky Aircharter Corporation expanding areas ofoperation while flying as line pilot and carrying out the duties ofGeneral Manager and Director of Operations. Wings Air Charter - Chief Pilot. World Jet Charters - Dir of Operations. Skybus Inc (FAA part 91) SIC Falcon Jet and British Aerospace HS125. Area of Operations ranges from the entire Continental United States, the Caribbean, Central and South America, including Cuba, Africa and Europe. Additional experience undertaking trans Atlantic Flight Operations to Europe, Central and South America, also extensive African operations.

• Telecommunications Engineering

• English, Afrikaans & knowledge of Spanish

Page 3 of 3 Arthur Stevenson Dir ofOps Resume

# •

•

• Stock Ownership

Twin Air Calypso Limited Inc. is a wholly owned subsidiary ofAvstar Aviation Group Inc. All Twin Air Calypso Inc. voting stock rests with Avstar Aviation Group Inc. Arthur Stevenson has zero voting stock in Twin Air Calypso Limited Inc. Arthur Stevenson has zero percentvoting stock in Avstar Aviation Group Inc. Arthur Stevenson is a South African citizen and a legal United States resident.

# •

•

• TWIN AIR CAL VPSO LIMITED, INC. AIR CARRIER OPERATIONS MANUAL SECTION FOUR

PERSONNEL**-.----.--~----.----.---** ..

## - 4.5 CHIEF PILOT The Chief Pilot reports to the Director ofOperations and must be knowledgeable ofthe contents ofthe Operations Manual, Operations Specifications, and federal Aviation Regulations pertaining to the company's activities. The Chief Pilot supervises flight crew personnel and advises them ofany changes in Ops Specs or company policies that may affect their duties. The Chief Pilot conducts or supervises all training activities offlight crew personnel and advises appropriate personnel oftheir status for flight operations Disseminates information to all crewmembers pertaining to routes, airports, NOTAMS, NAVAlOS, regulations, checklists, and aircraft manuals. Maintains proficiency as Pilot-In Command. Ensures that all flight crew personnel are certified and supervised according to the requirements specified in the Federal Aviation regulations.

REVISION:2011-1 

### DATE:7/1/2011 PAGE 4-6

# •

•

• RESUME

MajorAccomplishments: 

### Luciano Horna February 2011

As an Airline Transport Pilot, carrying out domestic and international scheduled and ad-hoc charter flights with passengers and cargo. Areas ofoperation include the Caribbean, Central and South America. Duties encompass supervising initial training and qualification, routine pilot proficiency checks and pilot evaluations. Total Flight Time 28,000 hours Professional Experience: Twin Air Calypso Limited 

### Inc. - Jan 2011- present - Line Pilot, Chief Pilot Airborne 

### Inc. 2010 Line Pilot, Chief Pilot Cessna 402C - Fort Lauderdale, Florida Florida Coastal 

### Line Pilot Cessna 402C. - Fort Lauderdale, Florida Chardan Aero Corporation - 

### Fort Lauderdale, Florida - June 2008 to February 2010 - Co-pilot Is operationally responsible to the Pilot in Command on all flights. Performs all flight duties as assigned by the PIC. Island Express Airlines - 

### Fort Lauderdale, Florida - February 1999 thru June 2008 - Director of Operations, Chief Pilot, Cessna 402C. Responsible forthe operation, training and record keeping ofthe flight department. Responsible for the safe operation of all aircraft operated by the company ensuring proper maintenance and record keeping. New World Aviation - 

### Miami, Florida, Chief Pilot - 1988 thru 1998 Responsible for adequately training flight crews to ensure pilots are available for all flight needs. Diverlandia, Aviones de Panama. Chiricana de Aviacion - 

### Panama, Panama - 1975 thru 1985 Chief Pilot and Flight School Chief Instructor Responsible forthe scheduling and efficient utilization ofthe aircraft Total Flight Hours to date: Total Time: 29,850.0 hours MEL 21,000.0 hours SEL 8,850.0 hours Instrument 4.620.0 hours

# •

•

• Stock Ownership

Twin Air Calypso Limited Inc. is a wholly owned subsidiary ofAvstar Aviation Group Inc. All Twin Air Calypso Inc. voting stock rests with Avstar Aviation Group Inc. Luciano Horna has zero voting stock in Twin Air Calypso Limited Inc. Luciano Horna has zero percent voting stock in Avstar Aviation Group Inc. Luciano Horna is a United States citizen
.

# •

•

• lWlNAIR CALYPSO LIMITED, INC. AIR CARRIER OPERATIONS MANUAL SECTION FOUR

PERSONNEL DIRECTOR OF MAINTENANCE**.~** ....

# _"

..

# _---

The Director of Maintenance must be knowledgeable on the aircraft's maintenance manual, inspection program, and airworthiness requirements. Additional he must be knowledgeable of applicable FAR's, the Twin Air Calypso Limited, Inc. Operations Manual, and the programs that Twin Air Calypso Limited, Inc. utilizes. The Director of Maintenance is responsible for communication with appropriate FAA personnel. Is responsible for selecting appropriate agencies or personnel for the performance of maintenance on Twin Air Calypso Limited, Inc. aircraft. Responsibilities for the selection include but are not limited to determining proper FAA certification for the work antiCipated, a DOT approved anti-drug plan is in effect, and scheduling availability. Reviews the reliability ofTwin Air Calypso Limited, Inc. issued airworthiness directives and information to determine applicability to the Twin Air Calypso Limited, Inc. fleet ofaircraft. Reviews the reliability ofthe Twin Air Calypso Limited, Inc. fleet and any new maintenance requirements that may be mandated by either the manufacturer of FAA and makes recommendations to the Director of Operations for further action. Incorporates required changes into any Twin Air Calypso Limited, Inc. AAIP
. Reviews the records ofTwin Air Calypso Limited, Inc. aircraft to forecast and schedule work to be performed, and informs the scheduling personnel ofaircraft availability. Coordinates the progress ofwork while the maintenance activity is being performed and informs appropriated personnel ofthe current status and estimated down time ofeach aircraft. Reviews the documentation provided for the work performed, ascertains that it is appropriately entered into the aircraft permanent records, and the aircraft is returned to service. Maintains a listing by aircraft of all repetitive airworthiness directives and their compliance. Submit SDR form (on-line at FAA website) and MIS reports (form on page 8-12) as required. The Director of Maintenance may delegate functions to other personnel but retains the responsibility
.



# ------------_._._._---_
.. REVISION: ORIGINAL DATE: 

### 11/20/2009 PAGE 4-7

# • Clayton 1. 

## Gamber

- BSc, Industrial Engineering and Operations Resear h - A TP

- MEL

- A&P Duties and Responsibilities The President is responsible for the overall safety and efficiency fthe company. The President is responsible for the selection and employment 0 

### all employees and subcontractors ofthe company. He is responsible for the appointme ofstaffthat meets the qualifications ofFAR Part 119 and 135.

, 

### The President is responsible for maintainingthe continuity ofoptrational control for all ofTwin Air Calypso Limited, Inc. operations. i 

# i The President is responsible for operating the company in a manferthat 

### will not allow the operational control offlights to be transferred, or perceived to b4transferred, to any other entity or person. I i 

### The President is responsible for the company's compliance with rAAIDOT mandated drug and alcohol testing programs. The President must be knowledgeable ofthe entire content 

### ofthlTwin Air Calypso Limited, Inc. "operations Manual", "Operations Specifications", and all

# appli~able Federal Aviation Regulations. 

# I I 

### The President may delegate functions 

### to properly trained and

# ~ualified personnel but will retain responsibility for their actions. I 

## I Experience 

## I 1970-1996 Red Aircraft Service, Inc Ft Lauder4ale, Fl Director ofMaintenance FAA Part 145 Repair Station 1996-2001 Miami Aviation Corporation President and DirectorofMaintenance FAA Part 145 Repair Station I I 

# I I 

### Miamij Florida 

### !

I 

### Accountable Manager 

# I European Aviation Safety AgencyEASA-145

### Re~'airStation 2002-2007 Miami Aviation Maintenance Company Ft Lauderdale, Florida President Director ofMaintenance FAA Part 145 Repair Station

### Education



# • Accountable Manager EASA-145 Repair Station European Aviation SafetyAgency 

### i 1978-2011 Twin Air Calypso Ft. Lauderdale,

## FIOri~a President and DirectorofOperations FAAPart 135 AirCarrier
1968-1971 VirginiaTech I 

### Blacksburg,VA BachelorofScienceIndustrial Engineeringand

## ~rations Research FAA Airline Transport PilotLicense Over 8000 flight 

### hours DC-3 Type Rating FAA Airframe and PowerplantLicense 

## I 

# I

# •

•

• Stock Ownership

Twin Air Calypso Limited fnc. is a wholly owned subsidiary of Avstar Aviation Group Inc. All Twin Air Calypso Inc. voting stock rests with Avstar Aviation Group Inc. Clayton Gamber has zero voting stock in Twin Air Calypso Limited Inc. Clayton Gamber has 4.2 percent voting stock in Avstar Aviation Group Inc. Clayton Gamber is a United States citizen
.

# •

•

• OFFICE OF THE SECRETARY OF STATE OF THE STATE OF COLORADO 

# CERTIFICATE I, 

### Scott Gessler, as the Secretary ofState ofthe State ofColorado, hereby certify that, according to the records ofthis office, AvStarAviation Group, Inc. is a Corporation fonned orregistered on 0311111997 under the law ofColorado, has complied with all applicable requirements ofthis office, and is in good standing with this office. This entity has been assigned entity identificationnumber 19971037266. This certificate reflects facts established ordisclosedby documents delivered to this office onpaper through 07/19/2011 

### that have been posted, and by documents delivered to this office electronically through 07/20/2011 

### @ 

### 12:22:55. 

### I have affixed hereto the Great Seal ofthe State ofColorado and duly generated, executed, authenticated, issued, delivered and communicated this official certificate at Denver, Colorado on 0712012011 @ 

### 12:22:55 pursuantto and in accordance with applicable law. This certificate is assigned Confirmation Number 7998588
.

Secretary ofState ofthe State ofColorado 

### *********************************************EndofCertificate******************************************** Notice: A certificate issuedelectronicallyfrom the Colorado Secretary orState 's Web site is fully andimmediately validandeffective. However, as an option, the issuance andvalidity of a certificate obtainedelectronically may be establishedby visiting the Certificate Corifirmation Page of the Secretary ofState's Web sile, hllp:llwww.sos.state.co.uslbizICertificateSearchCriteria.do entering the certificate's confirmation number displayed on the certificate, and following the instructions displayed. Confirming the issuance ora certificate is merely optional and is not necessary to the validandeffective issuance ora certificate. For more iriformation, visit our Web site, htlp:llwww.sos.state.co.us!c1ickBusiness Center andselect "FrequentlyAskedQuestions. "

CERT_GS _D Revised0812012008

# •

•

• Document processing fee Ifdocument is filed on paper Ifdocument is filed electronically Fees & 

### fonns/cover sheets

are subject to change. To file electronically, access instructions

for this form/cover sheet and other infonnationorprint copies offiled documents, visit www.sos.state.co.us and selectBusiness Center. $125.00 $ 

### 25.00 

### Colorado Secretary ofState Date and Time: 09/17/2009 09:05 AM ID Number: 19971037266 Document number: 20091490943 Amount Paid: $25.00

Paperdocuments must be typewritten or machine printed. ABOVE SPACEFOR OFFICE USE ONl..Y 

### Amended and Restated Articles ofIncorporation filed pursuant to §7-90-301, et seq. and §7-11O-107 and §7-90-304.5 ofthe ColoradoRevised Statutes (C.R.S.) ID number: 

## 19971037266 1. Entity name: 

### PANGEA PETROLEUM CORP. (If

changing the name of the corporation, indicate name BEFORE the name change) 

### 2. New Entity name: (ifapplicable) 

### 3. Use ofRestricted Words (ifanyofthese terms are containedin an entityname, true name of an entity, trade name ortrademark stated in this document, markthe applicable box): 

### 4. Ifthe corporation's period ofduration as amended is less than perpetual, state the date on which the period ofduration expires: 

### OR 

### AvStar Aviation Group, Inc. 

# D "bank" or "trust" or any derivative thereof 

# D "credit union" 

# D "savings and loan" 

# o "insurance", "casualty", "mutual", or"surety"

(mm/ddlyyyy)


### Ifthe corporation's period ofduration as amended is perpetual, mark this box: [{] 5. The amended and restated constituent filed document is attached. 6. Ifthe amendment provides for an exchange, reclassification orcancellation ofissued shares, the attachment states the provisions for implementing the amendment. 

### 7. (Optional) Delayed effective date:
Notice: 

### 09/21/200901 

### :00 AM (mm/dd/yyyy )


### Causing this document to be delivered to the secretary ofstate for filing shall constitute the affinnation or acknowledgment ofeach individual causing such delivery, under penalties ofperjury, thatthe document isthe individual's act and deed, orthat the individual in good faith believes the document is the act and deed ofthe person on whose behalfthe individual is causing the document to be delivered for filing, taken in confonnity with the requirements ofpart 3 ofarticle 90 oftitle 7, C.R.S., the constituent documents, and the organic statutes, and that the individual in good faith believes the facts stated in the document are true and the document complies with the requirements ofthat Part, the constituent documents, and the organic statutes.
Page 10f2 Rev. 11116/2005

# •

•

• This perjury notice applies to each individual who causes this document to be delivered to the secretary of state, whether or not such individual is named in the document as one who has caused it to be delivered. 8. Name(s) and addressees) ofthe individual(s) causing the document to be delivered for filing: 

### Heinrich Randall Wayne ---=-.-.---**-----~-------** (Lasl) (First) (Middle) (Suffix) 

### 8 Greenway Plaza, Suite 818 (Street name andnumberorPost Office Box ir!formation) 

### Houston 

## TX 77046 (City) (State) (Postal/Zip Code) 

### Umted States (Province

- if applicable) (Country- ifnot US) (The document neednolstate the true name andaddress of more than one individual. However, if youwish to state the name andaddress of

anyadditional individuals causing the documenlto be delivered for filing, mark this box 

## 0 andincludean attachmentstaling the name andaddress of such individuals.) 

### Disclaimer: 

### This form, and any related instructions, are not intended to provide legal, business ortax advice, and are offered as a public service without representation or warranty. While this form is believed to satisfy minimum legal requirements as ofits revision date, compliance with applicable law, as the same may be amended from time to time, remains the responsibility ofthe user ofthis form. Questions should be addressedto the user's attorney.

AMDRST]C Page 20f2 Rev. 11/16/2005

# •

•

•**\"Ull-'Ul(lUVU~.** 

### ARTICLE III 

### The total number of shares of stock that the Corporation shall have authority to issue is Five Hundred Ten Million (510,000,000) consisting of Five Hundred Million (500,000,000) shares of Common Stock, par value $0.001 per share ("Common Stock"), and Ten Million (10,000,000) shares ofPreferred Stock, par value $0.001 per share ("Preferred Stock"). Shares ofPreferred Stock ofthe Corporation may be issued from time to time in one or more series, each ofwhich shall have such distinctive designation or title as shall be determined by the Board ofDirectors ofthe Corporation ("Board ofDirectors") prior to the issuance ofany shares thereof. Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, p'articipating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series ofPreferred Stock as maybe adopted from time to time by the Board of Directors prior to the issuance of any shares thereof. The number ofauthorized shares ofPreferred Stock may be increased or decreased (but not below the number ofshares thereofthen outstanding) by the affirmative vote ofthe holders ofa majority of the voting power ofall the then outstanding shares ofthe capital stock ofthe corporation entitled to vote generally in the election ofthe Directors (the "Voting Stock"), voting together as a single

# •

•

• In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: (a) 

### To manage and govern the corporation by majority vote of members present at any regular or special meeting at which a quorum shall be present unless the act of a greater number is required by the laws ofthe state ofincorporation, these Articles ofIncorporation, or the Bylaws ofthe Corporation. (b) To make, alter, or amend the Bylaws ofthe corporation at any regular or special meeting. (c) To fix the amount to be reserved as working capital over and above its capital stock paid in. (d) To authorize and cause to be executed mortgages and liens upon the real and personal property ofthis corporation. (e) To designate one or more committees, each committee to consist oftwo or 

## 2

# •

•

• least a majority ofthe shares entitled to vote thereon at a meeting called for that purpose, or when authorized or ratified by the written consent ofthe shareholders. The corporation shall revoke voluntary dissolution proceedings upon the affirmative vote ofthe shareholders ofat least a majority ofthe shares entitled to vote at a meeting called for that purpose, or when authorized or ratified by the written consent ofthe shareholders. ARTICLE VI The following provisions are inserted for the management of the business and for the conduct ofthe affairs ofthe corporation, and the same are in furtherance ofand not in limitation ofthe powers conferred by law. No contract or other transactions of the corporation with any other person, firm or corporation, or in which this corporation is interested, shall be affected or invalidated by (a) the fact that anyone or more ofthe directors orofficers ofthis corporation is interested in or is a director or officer of such other firm or corporation; or (b) the fact that any director or officer of this corporation, individually orjointly with others, may be a party to or may be interested in any such contract or transaction, so long as the contract ortransaction is authorized, approved 

## orratified at a 

## 3

# •

•

• (a) The corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right ofthe corporation), by reason of the fact that he, or she, is or was a director, officer, employee or agent of the corporation, or is or was serving at the request ofthe corporation as a director, officer, employee or agent ofanother corporation, partnership,joint venture, trust or other enterprise, against expenses (including attorneys' fees),judgments, fines and amounts paid in settlement, actually and reasonably incurred by him, or her,in connection with such action, suit or proceeding, ifhe, or she, acted in good faith and in a manner he, or she, reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The tennination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not ofitselfcreate a presumption that the person did not act in good faith and in a manner he reasonably believed to be in, ornot opposed to, the best interests ofthe corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.



## 4

# •

•

• independent legal counsel in a written opinion, or (iii) by the affirmative vote ofthe holders ofa majority ofthe shares ofstock entitled to vote and represented ata meeting called for such purpose. (e) Expenses (including attorneys' fees) incurred in defending a civil orcriminal action, suit or proceeding may be paid by the corporation in advance ofthe final disposition ofsuch action, suit orproceeding, as authorized in Section (d) ofthis Article, upon receipt ofan undertakingby or on behalfofthe director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Article. (f) The Board of Directors may exercise the corporation's power to purchase and maintain insurance on behalfofany person who is or was a director, officer, employee or agent of the corporation, or is orwas serving at the request ofthe corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, orarising outofhis status as such, whether or not the corporation would have the power to indemnify him against such liability under this Article. (g) The indemnification provided by this Article shall not be deemed exclusive ofany other rights to which those seeking indemnification may be entitled under these Articles of 

## 5

# •

•

• corporation, as a consequence of such compromise or arrangement, the said compromise or arrangement andlor the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding upon all the creditors or class ofcreditors, andlor on all the shareholders or class of shareholders of said corporation, as the case may be, and also on said corporation. 

### ARTICLE X No shareholder in the corporation shall have the preemptive right to subscribe to any or all additional issues ofstock andlor other securities ofany or all classes ofthiscorporation or securities convertible into stock or carrying stock purchase warrants, options or privileges. 

### ARTICLEXI Meetings ofshareholders may be held at any time and place as the Bylaws shall provide. At all meetings ofthe shareholders, one-third ofall shares entitled to vote shall constitute a quorum.



### 6

# •

•

• damages for breach offiduciary duty as a director, except for any matter in respect ofwhich such director shall be liable under Section 7-5-114 ofthe Colorado Revised Statutes, or any amendment thereto or successor provision thereto and except for any matter in respect ofwhich such director shall be liable by reason that he (i) has breached his duty of loyalty to the corporation or its shareholders, (ii) has not acted in good faith or, in failing to act, has not acted in good faith, (iii) has acted in a manner involving intentional misconduct or a knowing violation oflaw or, in failing to act, has acted in a manner involving intentional misconduct or a knowing violation oflaw, or (iv) has derived an improper personal benefit. Neither the amendment nor repeal ofthis Article XV, nor the adoption of any provision of the Articles of Incorporation inconsistent with this Article XV, shall eliminate or reduce the effect of this Article XV in respect of any matter occurring, or any cause ofaction, suit or claim that, but for this Article XV would accrue or arise prior to such amendment, repeal oradoption ofan inconsistent Provisi/on) Signed onAugust 19, 2009

# BY:_-tT--~_I/=--}-_~Jr--________ _**~ussell** IvyrPresident



### 7

# • UNITED STATES OF AMERICA 

### DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION



# !Ylt:.1-**~** 

# a e44ued tp. TWIN AIR CALYPSO SERVICES, INC.

## ~~~~M 1620 SE 75th A,'enue Pembroke Pines, Florida 33023

# ~n**;1'n~:,,?** 

# tkt**t:~. ~~** **~,** Ub 

# d/ 1fe.YWC,(d 

# aH.:th 

# de 'MfUU?ce'WI.£dJ.

# ~

# ute.**:7;~4ta.1 ~~** **~.e:~y~j.**

# M!~:n,**~** 

# de**~ ~** **~ ~** **~,** 

# and t:d. 

# •

# ~JCP.a!~cyu~o:#z..~ REPAIRSTATION



# • t:Q-t::d

# de**~~?,? ~.,**  AIRFRAME RADIO (l1l06/1995) LIMITED POWERPLANT (03/1811976) LIMITED RADIO (1111912001) LIMITED INSTRUMENT (10101/2003) 

## •

# 37~**c€?t£~de"** u-n/e.J4. c.a-?u..e-w.

# ~~ c.-1<.

# ~**~II c~t~:n.ae**  

# m.

# #<'£ I

### NDEFINITELY

Re-issucd MAY 03,2010**~**

### Utffkatt.not**~lt.** AND ANY MAJOR CHAHGE IN THE BASIC FACft.ITIES, OR IN 11ft! LOCATION llffRI:OF. SlW.L BE IMMEDIATE!.Y REPORTED TO THE APPROPRIATE REGlONAl. OFFICE OF THE FEOERAI. AVIATION ADMINISTRATION AJlY il/t.l'ralioll 0.(this**ct!'rt~riclltt'** is pUlIisllllb/cby Ilfint' ofnoll'xcullillg51,000, orimlm!iolltllrll' Iwtt'xcu,Ii"S J !fI'IIN, or//(1tll
FAA Form 80004 (1-671 SUPERSEDES FAA FORM 390.

# • Twin Air Calypso limited Inc. All persons ofsubstantial interest

Name Date of Birth Citizenship Address 

### 1. Henry Shulle 03/08/1963 United States 13100 South Ridge Circle VIP

- Secretary

- Director Leander Texas, 78641 2. Clayton GamberJr. 12/23/1949 United States 5330 SW 87th 

### Avenue, President

- Director Apartment 112 Miami, Florida 33178 

# •

•

# EDGARbrume 

# • AVSTAR AVIATION GROUP, INC.

FORM 10-KlA

(Amended Annual Report)



# • Filed 04/21/11 for the Period Ending 12/31/10



# • Address Telephone CIK Symbol SIC Code Industry

Sector Fiscal Year 3600 GESSNER STE 220 HOUSTON, TX 77063 2817107103 0001077319 AAVG 4581 - Airports, Flying Fields, and Airport Terminal Services Misc. Transportation Transportation 

## 12/31

P()werecl Bv

## EDGARbnIine http:/twww.edgar-online.com © Copyright 2011, EDGAR Online, Inc. All Rights Reserved. Distribution and use ofthis document restricted under EDGAR Online, Inc. Terms of Use.

# •

• UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 

# FORM to-KIA
Amendment No.1

(MARK ONE) IX] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Forthe fiscal yearended December 31, 2010 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitionperiod from to Commissionfile number 0-30503 AVSTAR AVIATION GROUP, INC. (Exact name ofregistrant as specified in its charter)
Colorado 76-0635938 (State or other jurisdiction (I.R.S. Employer Identification No.) of incoroporation or organization) 3600 Gessner, Suite 220, Houston, Texas (Address of principal executive offices) 77063 (Zip Code) Isuer's telephone number: (713) 965-7582 Securities registered under Section 12(b) ofthe Exchange Act: NONE Securities registered under Section 12(g) ofthe Exchange Act: Common Stock. parvalue $.001 per share (Title ofClass) Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act. Yes [] No [X] Indicate by checkmark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act. Yes []No [X] 

# •Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorterperiod that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

• teby check mark whetherthe registrant has submitted electronically andposted on its corporate Web site, ifany, every Interactive Data " quiredto be submitted and posted pursuant to Rule 405 ofRegulation S-T (232.405 ofthis chapter) during the preceding 12 months (or L .ilch shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ] Indicate by checkmark ifdisclosure ofdelinquent filers pursuant to Item 405 ofRegulation S-K (229.405 ofthis chapter) is not contained herein, and will not be contained, to the bestofregistrant's knowledge, in definitive proxy orinformation statements incorporated byreference in Part III ofthis Form 10-Kor any amendment to this Form 10-K. [] Indicate by checkmark whetherthe registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of"large accelerated filer," "accelerated filer" and "smallerreporting company" in Rule 12b-2 ofthe Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Nan-accelerated filer [ ] Smaller reporting company [X] (Do not check if smaller reporting company) Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 oftheAct) Yes [] No [X] State the aggregate market value ofthe voting and non-voting common equity held by non-affiliates computedby reference to the price at which the common equity was last sold, orthe average bid and asked price ofsuch common equity, as ofthe lastbusiness day ofthe registrant's most recently computed secondfiscal quarter: $385,781. State the number ofshares outstanding ofeach ofthe issuer's classes ofcommon equity, as ofthe latestpracticable date:208,270,834 as of April 14,2011 

# •
1**~e**

### . DOCUMENTS INCORPORATED BY REFERENCE



# •EXPLANATORY NOTE This Amendment to Form 10-K is being filed solely to include (a) our auditor's letter for our 2010 fmancial statements that was inadvertently omitted from the Form 10-K, (b) revised fmancial statements to correct certain incorrect figures that were inadvertently included in the

• cial statements contained in the Form 10-K, and (c) revised footnotes to the financial statements to include additional footnote information as inadvertently omitted from the footnotes to the financial statements contained in the Form 10-K. Otherthan for the preceding, no other (,,_ Jges are being made to the Form 10-K. CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K includes forward-looking statements within the meaning ofSection 27A ofthe Securities Act of 1933, as amended, and Section 2lE ofthe Securities Exchange Act of 1934, as amended. We have basedthese forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels ofactivity, performance orachievements to be materially different from any future results, levels ofactivity, performance orachievements expressed or implied by such forward-looking statements. In some cases, you can identifY forward-looking statements by terminology such as "may," "will," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," orthe negative ofsuch terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in this Annual Report onForm 1O-K and in ourother Securities and Exchange Commission filings. PART I ITEM 1. BUSINESS. GENERAL DEVELOPMENT OF BUSINESS Our company, AvStarAviation Group, Inc., is a Colorado corporation that was organized onMarch 11, 1997. For a number ofyears, we conductedbusiness as an independent energy company focused on exploration and development ofoil and natural gas reserves under the name "Pangea Petroleum Corp." Forreasons given hereinafter, in early 2009 we adopted a significant change in our corporate direction. We decided to focus ourefforts on acquiring aviation-related businesses and developing these businesses to their commercial potential. 

# • INITIAL AVIATION-RELATED BUSINESS On February 20,2009,we entered into ourfirst aviation-related business when we acquired all ofthe outstanding common stock in San Diego Airmotive ("SDA"), which (through its predecessor entity) hadbeen providing maintenance, repair and overhaul ("MRO") services in California since 1987. In connection with this acquisition, we issued to the prior owner ofSDA 1.0 million shares ofournewly-created series A preferred stock. These shares ofpreferred stock eventually converted into 50.0 million shares ofour common stock, which constituted in the aggregate over90% ofoutstanding shares ofourcommon stock immediately afterthe conversion. Furthermore, in connection with the acquisition ofSDA, we expanded ourBoard ofDirectors and elected a new slate ofofficers. We eventually changed our corporate name from "Pangea Petroleum Corp." to "AvStar Aviation Group, Inc." to reflect ournew business focus, and effected a one-for-I00 reverse split ofour common stockto improve our capital structure. On March 31, 2010, the Hangar Sublease dated May 1,2007between SDA and French Valley Aviation, Inc. ("French Valley") terminated. The original term ofthis Hangar Sublease had already expired, and the parties had continued the sublease on a month-to-month basis. French Valley decided that it did not want to continue this arrangement beyond March 31, 2010, and accordingly this arrangement terminated on such date. We decided not to seek alternative space to continue SDA's services at French Valley Airport in Southern California, but continued such services in Florida, perthe proposed transaction described immediately below. We intend to maintain in force and effect SDA's licenses and permits so that we can return to provide services in California in the future, ifit elects to do so. 

# •FORMATION OF MRO SUBSIDIARY OnApril 8, 2010, (a) Twin Air Calypso Services, Inc., a newly-formed, indirect wholly-owned Florida subsidiary (the IfMRO Subsidiarylf) of ours, and (b) Miami AviationMaintenance Co. (lfMAMCOlf) executed a bill ofsale whereby MAMCO assigned to the MRO Subsidiary certain o.assets used to provide aviation MRO services. Atthe time ofthis transaction, MAMCO was owned by Clayton I. Gamber, Kenneth W. 

### J ·on and Robin V. Gamber. Mr. Gamberbecame a director and the President ofthe MRO Subsidiary after the completion ofthe t, J ction. The assigned assets included general shop equipment. No liabilities were assumed in connection with the transaction. These assets were assigned in consideration of750,000 shares ofour common stock, which had an aggregate market value of$20,250 based on the closing price ofour common stock on the date ofthe transaction. In connection with the organization ofthe MRO Subsidiary, SDA hadpreviously assigned all ofits assets to the MRO Subsidiary in consideration ofall ofthe shares ofthe common stock ofthe MRO Subsidiaryto be outstanding for the foreseeable future. The MRO Subsidiary was formed to provide aviation MRO services, as well as airline support services. The services are offered out ofNorth Perry Field in Pembroke Pines, Florida in Broward County. The impetus for the transaction was the then recent termination ofSDA's Hangar Sublease at French Valley Airport in Southern California and the perceptionthat the continuation ofthe business historically conducted by SDA in Florida was advisable in view ofthe perceived greater strength ofthe local Florida economy relative to the local California market in which SDAhadhistorically provided services. The consideration for the acquisition ofthe interests in the MAMCO assets (including the number ofshares issuedto MAMCO) was determined in arms-length negotiations between ourmanagement and MAMCO's management. The factors addressedby us in negotiating this consideration included ourneed to [md a location to continue the business historically conducted by SDA; the perceived greater strength ofthe local Florida economy relative to the local Californiamarket in which SDA has historicallyprovided services; the future prospects for a business using the combined assets ofMAMCO and SDA inFlorida in terms ofrevenues and earnings; an assessment ofthe ability ofa particularmemberofMAMCO's management who would serve as the MRO Subsidiary's president to contribute to the management ofthe MRO Subsidiary's business; anticipated ability ofourbusiness to grow and take advantage ofnew business opportunities using the combined assets ofMAMCO and SDA in Florida; andthe restricted nature ofthe stock consideration issued in connectionwith the acquisition. Prior to the consummation ofthe acquisition ofthe MAMCO assets, we had explored with the shareholders ofMAMCO our acquisition ofall ofthe outstanding stock in MAMCO and a brother-sister corporation. In this connection, we had entered into a stock purchase agreement with the shareholders ofMAMCO in 2007 to acquire the outstanding stock in MAMCO and the brother-sister corporation. This transaction did not close timely, and the stock purchase agreement expired
.



# •

•ACQUISITION OF FAA AIR CARRIER On August 19,2010, we completed a transaction in which we acquired all ofthe outstanding stock in Twin Air Calypso Limited, Inc. ("TAC Limited"). TAC Limited operates a charter air service from SouthFlorida to the Bahamas with access to eight aircraft:s. We acquired TAC**.** ed in exchange for 18.0 million shares ofourcommon stock and some cash payments in the approximate aggregate amount of$275,000 aid in a small number offuture installments in the fairly near future. Because ofamounts previously paid, we were not required to make**~** ,payment at closing. The 18.0 million shares ofour common stock had an aggregate market value of$270,000 based on the closing price ofour common stock on the date ofthe transaction. The stock in TAC Limited was acquired from Clayton 

### 1. Gamber, Kenneth W. Langston and Robin V. Gamber. The acquired assets consisted primarily ofthe rights ofTAC Limited under an aircraft lease agreement covering seven aircraft and an FAA Certified Part 135 permit. The only liabilities in effect assumed in connection with the acquisition were the liabilities and obligations ofthe lessee under the preceding aircraft lease agreement. The agreement governing the acquisition ofTAC Limited (the "Stock Agreement") contained a non-competition agreement, prohibiting the stockholders ofTAC Limited from competing with us. This non-competition agreement lasts for aperiod offive years commencing on the date ofclosing ofthe acquisition. The Stock Agreement also contained fairly customary representations, warranties and indemnifications, as well as other general terms and conditions typically governing stock sales and purchases. In connection with the acquisition ofTAC Limited and in orderto effectuate a verbal agreement and understanding that they had made some time ago, we and the stockholders ofTAC Limited entered into certain option agreements (the "Option Agreements"). The Option Agreements permit us to repurchase a portion ofthe 18.0 million shares ofcommon stock issued in connection with the acquisition for an aggregate purchase price of$1.75 million. The number ofshares depends on the per-share "Market Value" ofour common stock, which is basically the 20-day trading average priorto the time ofexercise. The portion ofsuch 18.0 million shares that may berepurchased generally equals the quotient obtained by dividing $1.25 million by the Market Value; provided, however, that the stockholders ofTAC Limited may retain a maximum of7.353 million shares and a minimum of625,000 shares. Moreover, the Option Agreements require us to repurchase the portion of shares determined in accordance with the preceding whenever we complete aprivate placement ofour securities for an aggregate purchase price ofat least $3.0 million. Prior to the consummation ofthe acquisition ofTAC Limited, Clayton 

### 1. Gamber, a stockholder in, and the chiefexecutive officer of, TAC Limited, was also serving as a director and the President ofthe MRO Subsidiary. Otherthan for the foregoing, there were no material relationships between TAC Limited, and its former officers, directors, affiliates, associates or shareholders, and us, and our officers, directors, affiliates, associates or shareholders
. 

# •

•The consideration for the acquisition ofall ofthe outstanding stock in TAC Limited assets (including the number ofshares issued to the stockholders ofTACLimited) was detennined in anns-length negotiations between our management and TAC Limited's stockholders. The factors addressedby us in negotiating this consideration included the financial history ofcharter flights from South Florida to the Bahamas; the future prospects for the business ofTAC Limited in tenns ofrevenues and earnings; the synergies that might be realized between the businesses ofTAC Limited and the MRO Subsidiary; an assessment ofthe ability ofaparticularmember ofTAC Limited's management who

• erve as our ChiefExecutive Officer and President to contribute to the management ofourbusiness; anticipated ability ofourbusiness \ and expand using TAC Limited as a base for future acquisitions; and the restricted nature ofthe stock consideration issued in connection with the acquisition
.



# •

•Our Business General

• Siness plan is to acquire, consolidate and grow businesses in the general aviation industry. Due to acquisitions, we are now in two r n sectors, the maintenance, repair and overhaul ("MRO") ofaircraft providing products and services for the general aviation sector, and**11,~** .;harter air service business. Weare primarily focusing on stabilizing ourtwo existing businesses in view ofthe difficult economy overthe past few years. Once these are stabilized, ourbusiness plan will be to acquire, consolidate and grow businesses in the general aviation industry, as capital is available to us. We have adjusted ourfuture goals and will place ourprimary focus on the acquisition ofa portfolio offixed base operations ("FBOs") at airports that support lightjettraffic along with turbine powered and piston engine aircraft. We believe that now is the time to invest in this sector. A combination ofthe economic trends, valuation levels, and technological innovations has impacted this sector, making ourprospects ofgrowing a portfolio ofFBObusinesses compelling. These facilities will be supported by our existing MRO business. We believe that after September 11,2001, both private air transportation andthe numberofaircraft owned by both individuals and business dramatically increased, although such increase has beentempered in recent years due to unfavorable economic conditions. Each ofthese sectors, in addition to routine maintenance, has mandated a number ofinspections by the FAA that are commonly included intraditional MRO services. MAINTENANCE, REPAIRAND OVERHAUL BUSINESS Twin Air Calypso Services, Inc., ourindirect, wholly-owned Florida subsidiary (the "MRO Subsidiary") conducts ourbusiness ofproviding maintenance, repair and overhaul ("MRO") products and services for aircraft in the general aviation sector. The MRO Subsidiary was the result ofthe consolidation on April 8, 20I0 ofour subsidiary San Diego Airmotive ("SDA") and Miami AviationMaintenance Co. ("MAMCO"). SDA (through its predecessor entity) had been conducting MRO services in California since 1987, while MAMCO commenced its operations in 2001 and continued them until the time ofthe consolidation, but for an approximately 18-monthperiod during which MAMCO ceased providing services. The services are being offered out ofNorth Perry Airport in Pembroke Pines, Florida in Broward County. The MRO Subsidiary has the following features andprovides the following services: * FAA Certified Part 145 Repair Station including avionics * Major& MinorAirframe Repairs on all aircraft 12,500 pounds and less * Annual Inspections *euterizedAircraft Weight and Balance ne Maintenance, Repair & Overhaul including custom installations and refurbishment. * rtITcraft Modifications and STC kit installations * Routine Maintenancellnsurance and Accident Repairs * Composite Airframe Repairs * Pre-purchase Inspections/Log BookAnalysis * Oxygen Service/Nitrogen Service * Service Parts * lanitrol/Southwind Heater Service/AD compliance inspections * DyelFluorescent Penetrant Inspection Service * Aircraft Exterior & InteriorDetailing Services * ACES Dynamic propellerbalancing service *Avionics installations and repairs * Minorpaintrepairs and detailing * Instrument Panel upgrades and Component installs * Engine Scanners and Monitor installation * EGT/CHT calibration 

# •Afterthe April move ofour MRO business from southern Californiato the Florida market, we "jump started" ourtransition by establishing an exclusive maintenance, fueling and ground support contract with the Charter Air Subsidiary, a company discussed in the next section that we eventually acquired in August 2010. We are in the process ofdeveloping new customerrelationships, and thus far we have had limited success.

• RO Subsidiary recently commenced a focused, direct marketing program ofits services and is starting to see an increased interest from ·al customers. Moreover, the MRO Subsidiary currently has the only avionics shop at North Perry Field, providing services for the l
. nic systems on aircraft that provide communications, navigation and guidance, display systems, flight management systems, sensors and indicators, weatherradars, electrical systems, and various onboard computers. Finally, the MRO Subsidiary has recently entered into lease negotiations regarding a fuel truck, pursuantto whichthe MRO Subsidiary could offer to sell fuel to thirdparties. This truckwill also provide fuel to the CharterAir Subsidiary (discussed immediately below) at discounted rates, enabling the other subsidiary to realize fuel cost savings. All training regarding the operation ofthe fuel truck and the fire inspector's inspection have been completed, and commencement ofsales by this truck is contingent solely upon the completion ofnegotiations regarding its lease to the MRO Subsidiary. We have no assurance that we will be able to complete the lease ofthe fuel truck and commence sales offuel with it. AIR CARRIER SERVICE BUSINESS TwinAir Calypso Limited, Inc., ourwholly-owned Florida subsidiary (the "Air Carrier Subsidiary"), conducts ouraircarrier service business. We acquired the AirCarrier Subsidiary on August 19,2010. The Air Carrier Subsidiary operates a air carrier service from South Florida to the Bahamas with eight leased aircraft. Ithas regular flights ofbothpassengers and cargo to two destinations on the island ofAbaco and three destinations on the island ofEleuthera. The Air Carrier Subsidiary also flies to other destinations in the Bahamas on a chartered basis. Currently, only three ofthe Air Carrier Subsidiary'S leased aircraft are flying, as five ofthese aircraft are currently down for refurbishing. We expect that a fourth aircraft will be in the airby the end ofApril 2011. However, we will need to raise about $350,000 to complete the refurbishing ofour remaining aircraft. Our goal is to raise this amount, and complete the refurbishing, so that all aircraft will be operational by the fall of20 11. Although we are now seeking to raise this amount, we have no assurance that we will be able to do so. We are striving to get all eight aircraft operational in order to fill the voids in the market caused by the challenging economy in the market. This challenging market has caused some ofour competitors to suspend orcease flying, creating a void in certain routes that we believe we can fill in a mannerpositive to ourfinancial performance. The additional aircraft will allow the West Palm Beachmarket to be opened and new destination in the Bahamas started. We lease seven aircraft pursuantto an aircraft lease agreement (the "Lease Agreement") with Aircraft Charters, LLC, and entity controlledby Kenneth W. Langston, who was a equity owner ofMAMCO andTAC Limited. The start date on the Lease Agreement was February 2010, and

_ ase Agreement has a term offive years, subjectto earlier termination upon lessee default. Ourmonthly rental rate per aircraft is $2,150. craft are being leased on an "AS IS, WHERE IS" basis. The Lease Agreement contains customary representations and warranties on our 

### 1- ustomary affirmative and negative covenants onourpart, and customary events ofdefault that entitle the lessorto terminate the Lease Agreement. We are leasing our eighth aircraft for a one-yeartermthat will end on June 30, 2011 ifthe term is not extended. Ourmonthly rental rate is $2,150, plus reserves of$35.00 perhour. We have an option to purchase this aircraft at a price of$315,000, with a credit of$I,OOO.OO per each month oflease payments made
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# •Since August 19,2010, a review ofexisting acquisition plans has been completed, a new "affiliate" program has been developed, and strategies for obtaining airframe and avionic dealerships have been implemented. Several companies have been identified as acquisition targets for the first quarter of20 11. The "affiliate" program will expand our capabilities while decreasing operating costs for the Air Carrier Subsidiary. The Air Carrier Subsidiary recently moved to a new facility onthe FtLauderdale-Hollywood International Airport that will lower rental and fuel 

# c.while providing a more efficient operation and better amenities for the passengers. LOCATION The business ofourMRO Subsidiary is located at North Perry Field in Hollywood, Florida in Broward County, Florida. The MRO operates from this facility pursuant to a written lease agreement for a renewable period ofone year. The sub-leased hangar for the MRO business ofour MRO Subsidiary is located on a lease of 10.3 acres and has parking area for over 80 aircraft. The floor space is approximately 5,000 square feet with an additional 350 square feet ofavionic test benches andparts storage. The hangar is ofconcrete, block, and steel construction with a clear span opening of 100' by 20'. The aircraft population onNorth Perry Field is approximately 275. There are two otherFAA Part 145 Certified Repair Stations on North Perry Field; one specializes in rotor-wing aircraft only, and the otheris a factory-owned support facility for Socata Aircraft. We are the only FAA approvedPart 145 airframe, engine, and avionics repair facility catering to the local and transient general aviation fixed-wing owners. Additionally, we can provide avionics installations for the manufacturers we currently represent, AVIDYNE, NAT Avionics, andPS Engineering. We expect to apply soon for additional dealerships, such as GARMIN. We will also beproviding AVGAS fueling services for based and transient customers. There are approximately 20 aircraft currently based at our facility. With the availability of fuel the number ofbased aircraft should increase quickly and significantly. There is only one otherfull-service and one self-service fueling facility on North PerryField. COMPETITION AIR CARRIER SERVICES The airline industry is highly competitive, primarily due to the effects ofthe Airline Deregulation Act of 1978. The Transportation Act substantially eliminated government authority to regulate domestic routes and fares, and has increased the ability ofairlines to compete with respect to destination, flight frequencies and fares. Most ofour competitors have a combination oflarger customerbases, greaterbrand recognition in other airline markets and significantly greater fmancial and marketing resources than we do. Competition is generally based on price, schedule, quality ofservice and convenience. Eitheraggressive marketing tactics ora prolonged fare warinitiatedby these competitors could impact our limited fmancial resources and adversely affect our ability to compete in these markets. Vigorous price competition exists in

_ ine industry, with competitors frequently offering reduced discount fares and otherpromotions to stimulate traffic during weakertravel ! , generate cash flow orincrease relative market share in selected markets. The introduction ofwidely available, deeply discounted fares b) ...ny significant airline couldresult in loweryields forthe entire industry and could have a material adverse effect on ourfmancial condition and operatingresults. The commencement ofor increase in service on ourroutes by existing ornew carriers couldnegatively impact our operating results. Where we seek to expand our service by adding routes orfrequency, competing airlines may respondwith intenseprice and schedule competition. In addition, when otherairlines seek to establish apresence overnew routes, they may engage in significantprice discounting. Because ofour size and financial resources relative to some ofthe major airlines, we are less able to absorb losses from these activities than many ofour competitors. We cannot assure anyone that competitive pressures will not materially adversely affect ourbusiness, financial conditions orresults ofoperations orthat we will ever attain any competitive position within ourmarket. MRO SERVICES The market for our MRO services is extremely competitive, and we face competition from a numberofsources. Our competitors include aircraft service companies and othercompanies providing MRO services. We believe that ourexperienced staff, facility amenities, scope of services, availability ofparts, and focus on customer service increase the competitiveness ofthe MRO Subsidiary. Most ofour competitors, however, have substantially greater financial and otherresources than are available to us. We cannot assure anyone that competitive pressures will not materially adversely affect ourbusiness, financial conditions orresults ofoperations orthat we will ever attain any competitive position within our market.



# •--------------------------------------------------- GOVERNMENT REGULATION The Air Carrier Subsidiary is operating pursuant to a Federal Aviation Administration FAR Part 135 certificate. The MRO Subsidiary is providing services pursuant to a Federal Aviation Administration FAR Part 145 certificate. Although not now active from a business**~.tive,** our California subsidiary, SDA, holds a Federal Aviation Administration FARPart 145 certificate, which we will maintain in the**~e** decide to re-enter the California market. The aviation industry in the United States is highly regulatedby the Federal Aviation Administration (the "FAA") and the Department of Transportation (the "DOT"). Specifically, our charter air service business is heavily regulatedbythese agencies. Moreover, our operations must comply with numerous security and environmental laws, ordinances and regulations. We believe that our operations are in material compliance with all ofthese laws, rules and regulations. Theremainder ofthis section briefly discusses some ofthe regulations to which we are subject. 

### FAA REGULATION The FAA regulates aircraft safety and flight operations generally, including equipment, ground facilities, maintenance, repair, flight dispatch, training, communications, the carriage ofhazardous materials and othermatters affecting air safety. FAAregulations are designed to ensure that all aircraft and aircraft equipment are continuously maintained in proper condition to ensure safe operation ofthe aircraft. The FAA issues operating certificates and operations specifications to carriers that possess the technical competence to conduct air carrier operations. In addition, the FAA issues certificates ofairworthiness to each aircraft that meets the requirements for aircraft design and maintenance. We believe the 

### Air Carrier Subsidiary holds all airworthiness and otherFAA certificates and authorities required for the conduct ofits business and the operation ofits aircraft, although the FAA has the power to suspend, modify orrevoke such certificates for cause, or to impose civil penalties for any failure to comply with federal law and FAA regulations. Incompliance with FAA regulations, the Air Carrier Subsidiary's aircraft are subject to various levels ofscheduled maintenance or "checks" and periodically go through phased overhauls. All aircraft must be maintained under a continuous condition-monitoringprogram and must periodically undergo thorough inspection and maintenance. The inspection, maintenance and repairprocedures for the various types ofaircraft and aircraft equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities using certified technicians. The FAAmonitors closely our aircraft maintenance efforts. It also conducts safety checks on aregular basis. The FAA has the authority to issue maintenance directives and other mandatory orders relating to, among otherthings, the inspection and maintenance ofaircraft and the replacement ofaircraft structures, components andparts, based onthe age ofthe aircraft and otherfactors. Ifthe

• ere to determine that the aircraft structures orcomponents are not adequate, it could order operators to take certain actions, including but 1 ited to, grounding aircraft, reducing cargo loads, strengthening any structure or component shown to be inadequate, ormaking other modifications to the aircraft. New mandatory directives could alsobe issuedrequiring the Air Carrier Subsidiary to inspect and replace aircraft components based on their age or condition. In the future, the Air Carrier Subsidiary could be required to comply at considerable cost with new mandatory directives as part ofits aircraft maintenance program.



# •DOT REGULATION The DOTmaintains authority over certain aspects ofdomestic air transportation, such as requiring a minimum level ofinsurance and the requirementthat a person be "fit" to hold a certificate to engage in air transportation. In addition, the DOT continues to regulate many aspects

• rnational aviation, including the award ofinternational routes. In reliance on exemptions, we currently do not maintain any DOT 'ates. However, we are in the process ofapplying for a Part 298 certificate for commuter air carrier operations, which will enable us to c, .tlct an unlimited number ofweekly flights to specified locations. Prior to issuing such certificates, and periodically thereafter, the DOT examines a company's managerial competence, financial resources and plans, compliance, disposition and citizenship in order to determine whether the carrieris fit, willing and able to engage in the transportation services it has proposed to undertake. The DOThas the authority to impose civil penalties, orto modify, suspend orrevoke for cause certificates issued byit, including failure to comply with federal law or DOT regulations. No certificate confers proprietary rights onthe holder, and the DOT may impose conditions orrestrictions on such certificates. We believe we possess all necessary DOT-issued certificates and authorities to conduct our current operations. SECURITY The Air Carrier Subsidiary is required to comply with various security procedures ofFAA and TSAregulations and directives outlined in the federal Domestic Security Integration Program. The airline subsidiaries' customers are required to inform them in writing ofthe nature and composition ofany freight which is classified as "Dangerous Goods" by the DOT. In addition, we conduct background checks on employees of the Air Carrier Subsidiary, restrict access to aircraft, inspect aircraft for suspicious persons or cargo, and inspect all dangerous goods. Notwithstanding these procedures, the Air Carrier Subsidiary could unknowingly transport contraband orundeclared hazardous materials for customers, which could result in fmes andpenalties and possible damage to the aircraft. SAFETY AND ENVIRONMENTAL Our operations are also subjectto a variety ofworker and community safety laws. The Occupational Safety and Health Act ("OSHA") mandates general requirements for safe workplaces for all employees. Specific safety standards have been adopted for workplaces engaged in the treatment, disposal and storage ofhazardous waste. We are also subject to various environmental laws. Undercurrent federal, state and local environmental laws, ordinances and regulations, a current orprevious owner oroperator ofreal property may be liable for the costs of removal or clean-up ofhazardous or toxic substances on, under, orin such property. Such laws often impose liability whether ornot the owner or operatorknew of, or was responsible ,for, the presence ofsuch hazardous ortoxic substances. In addition, the presence ofcontamination from hazardous ortoxic substances, or the failure to properly clean up such contaminated property, may adversely affectthe ability ofthe**~**ofthe property to use such property as collateral for a loan or to sell suchproperty. Environmental laws also may impose restrictions on**t~er** in which a property may be used ortransferred orin which businesses may be operated and may impose remediation or compliance c,-,_.,;.



# •

### OTHER REGULATIONS Various regulatory authorities havejurisdiction over significant aspects ofourbusiness, and new laws orregulations orchanges in existing laws orregulations or the interpretations thereofcould have a material adverse effect on our operations. In addition to the above, other laws and r.tionsto which we are subject, and the agencies responsible for compliance with such laws andregulations, include the following:

oj. '- .C). Customs and BorderProtection inspects cargo imported from foreign countries; 

## * We must comply with U.S. Citizenship and Immigration Services regulations regarding passengers and the citizenship ofour employees; 

## *We must comply with wage, work conditions and otherregulations ofthe Department ofLabor regarding our employees. 

### PRODUCT LIABILITY Our MRO business exposes us to possible claims for personal injury ordeath that may result from the failure ofan aircraft or an aircraft part repaired ormaintainedby us orfrom our negligence in the repair ormaintenance ofan aircraft oraircraft part. We do not now carry any product liability insurance on ourMRO business, which we believe is a common practice among smaller shops with the level ofthird party business that we are now undertaking. We expect that, ifthe volume ofourMRObusiness and funds are available therefor, we will explore the possibility ofprocuringproduct liability insurance on our MRO business. However, we have no assurance that we will be able to procure or maintain such insurance at an acceptable cost, or that such insurance will fully protect us from all claims. Any liability ofthis type that is not covered by adequate insurance could materially adversely affect ourbusiness and operations. 

### EMPLOYEES As ofApril 14, 2011, we had eight full-time and four part-time employees. 

### OUR HISTORICAL BUSINESS Ourhistorical business involved the exploration and production ofoil and gas. The importance ofthis segment ofbusiness to ourbusiness as a whole is greatly diminished. Management is currently exploring options for the future ofthis business, which may include a sale ofit or a spinoffofitto shareholders, so that management can devote its entire attention to ourbusiness. 

### I.IA.RISK FACTORS. An investment in shares ofourcommon stock is highly speculative and involves a high degree ofrisk. You should carefully consider all ofthe risks discussedbelow, as well as the other information contained in this Annual Report. Ifany ofthe following risks develop into actual events, ourbusiness, financial condition orresults ofoperations could be materially adversely affected andthe trading price ofour common stock coulddecline
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# •RISKS RELATING TO OUR COMPANY WE HAVE LIMITED HISTORY OF OPERAnONS AND WE CANNOT ASSURE YOU THAT OURBUSINESS MODEL WILL BE SUCCESSFUL IN THE FUTURE OR THAT OUROPERAnONS WILL BE PROFITABLE. ,eugedourbusiness focus near the end ofFebruary 2009 when we acquired the operations ofSan Diego Airmotive (ltSDA"). Although Sur\. (through its predecessor entity) has been providing maintenance, repair and overhaul (ltMROlt) services in California since 1987, we are fairly new to this business. During 2010, we acquired two additional businesses, one offering MRO services and the other offering air carrier services. Investors have a limited history ofoperations upon which to evaluate ourbusiness. There can be no assurances whatsoever that we will be able to successfully implement ourbusiness model, identify and close acquisitions ofoperating companies, penetrate ourtarget markets orattain a wide following for our services. We are subject to all the risks inherent in an early stage enterprise whichhas experienced rapid growth through acquisitions and ourprospects must be considered in light ofthe numerous risks, expenses, delays, problems and difficulties frequently encountered in those businesses
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### WE HAVE HAD A HISTORY OFLOSSES, AND WE HAVE AWORKING CAPITAL DEFICITAND AN ACCUMULATED DEFICIT. WE MAY NEVER REPORT PROFITABLE OPERATIONS. We have incurred net losses since our inception, and we had a working capital deficit ofapproximately $847,956, an accumulated deficit of a.imatelY$21,950,097, and ourtotal liabilities exceeded ourtotal assets by $1,140,772, all as ofDecember 31, 2010. There can be no**~** ce that we will become profitable. Ourbusiness has had a history oflosses as well. Unless we are able to raise additional capital to fund o. J erating expenses, pay our obligations as they become due and implement ourbusiness model, we may not be able to continue as a going concern, and we could be forced to discontinue some or all ofouroperations ifour capital resources become exhausted by losses or expenditures. WE MAYBE UNABLE TO OBTAIN ADDITIONAL CAPITALWHEN NECESSARY OR ON TERMS THAT ARE ACCEPTABLE TO US, IF AT ALL. IF WE ARE SUCCESSFUL IN RAISING ADDITIONAL CAPITAL AS NECESSARY, THESE ADDITIONAL FINANCING TRANSACTIONS WILL BE DILUTIVE TO OUR SHAREHOLDERS AND COULD INCREASE OURINTEREST EXPENSE. We expect that we will need significant additional cash resources to operate and expand ourbusiness in the future. Our future capital requirements will depend on many factors, including our ability to significantly increase ourrevenues, maintain orreduce our operating expenses and execute ourbusiness and strategic plans as currently conceived. Ifwe raise additional funds through the issuance ofequity or convertible debt securities, the percentage ownership ofour company heldby existing shareholders willbereduced and those shareholders may experience significant dilution. In addition, new securities may contain certain rights, preferences orprivileges that are senior to those ofour common stock. There can be no assurance that acceptable financing can be obtained on suitable terms, ifat all. Ifwe are unable to raise additional working capital as needed, our ability to continue our current business will be adversely affected and may be forced to curtail some or all ofour operations. 

### OURAUDITOR HAS GIVEN TO US A "GOING CONCERN" QUALIFICATION,WHICH QUESTIONS OURABILITY TO CONTINUE AS A GOING CONCERN WITHOUT ADDITIONAL FINANCING. Our independent certified public accountant has added an emphasis paragraph to its report on our consolidated financial statements for the year endedDecember 31, 2010 regarding ourability to continue as a going concern. Key to this determination is ourhistorical losses of$1,106,664 in 2010 and $988,990 in 2009. Management plans to try to fund our company partially through the raising ofcapital through the sale ofour equity instruments or issuance ofdebt, although there can be no assurance ofsuccess in this regard. Moreover, managementplans on additional re.sfrom operations from ourbusiness as a source to finance ourcompany, although there can be no assurance ofthat these revenues will J lize at the expected rates. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or clJ
.....muing ourbusiness without eithera temporary interruption or apermanent cessation
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### THE GEOGRAPHICAL CONCENTRATION OF OUR MRO OPERATIONS AND OURFLIGHTS COULD MATERIALLY HARM OURBUSINESS. Our MRO services are provided from a single facility located in south Florida. Ifthis facility was damaged or our access to it was limited (for _Ie,due to security concerns, severe weather ornatural disaster), our operations and financial conditions could be adversely affected
. • pect that the growth ofour charter air services will focus on, adding flights to and from ourprimary base ofoperations in south Florida and the Bahamas. Ourbusiness would be harmed by any circumstances causing a reduction in airtransportation to orfrom these two locations, such as adverse changes in local economic conditions, negative public perceptions ofthese destinations, a change in customerpreferences in these areas or significantprice increases linked to increases in airport access costs and fees imposed onpassengers. 

### THE PROFITABILITY OF OUROPERATIONSIS INFLUENCED BY ECONOMIC CONDITIONS AS DEMAND FORLEISURE TRAVEL DIMINISHES DURING ECONOMIC DOWNTURNS. The profitability ofour operations is influenced by the condition ofthe United States. A substantial portion ofour charter air business is leisure travel. Because leisure travel is discretionary, we expect to experience somewhat weaker financial results during economic downturns. OUR QUARTERLY RESULTS ARE SIGNIFICANTLY AFFECTED BY MANY FACTORS, AND OUR RESULTS OF OPERATIONS FORANY ONE QUARTER ARE NOTNECESSARILY INDICATIVE OF OURANNUAL RESULTS OF OPERATIONS. Our operations are subject to a variety offactors that frequently cause considerable volatility in our earnings, including: 

## *Changes in fuel, security and insurance costs; 

## * Seasonal variations in demand, affecting revenues earned; and 

## *Increases in personnel, marketing and other operating expenses. In addition, seasonal variations in air traffic andexpenditures affect our operating results from quarter to quarter. Historically, wehave experienced reduced demand during the fourth quarter, as demand for leisure airline services during this period is lowerrelative to othertimes o.ear.Given our high proportion offixed costs, seasonality can affect ourprofitability from quarterto quarter. Several ofour areas of ons experience bad weather conditions in the winter, causing increased costs associated with deicing aircraft, canceled flights and accommodating displacedpassengers. Dueto the factors described above, ourresults ofoperations in anyone quarter are not necessarily indicative ofour annual results ofoperations
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# •IF WE GROW OURBUSINESS AS PLANNED, WE MAY NOT BE ABLE TO MANAGE PROPERLY OUR GROWTH, AND WE EXPECT OPERATING EXPENSES TO INCREASE, WHICH MAY IMPEDE OUR ABILITY TO ACHIEVE PROFITABILITY. Ifwe are successful in growing ourbusiness as we plan, our operations may expand rapidly and significantly. Any rapid growth couldplace a s.· cant strain on ourmanagement, operational and fmancial resources. In orderto manage the growth ofour operations, we will berequired t ove and expand existing operations; to implement new operational, financial and inventory systems, procedures andcontrols, including i•. _ vement ofour financial and other internal management systems; and to train, manage and expand ouremployee base. Ifwe are unable to manage growth effectively, ourbusiness, results ofoperations and financial condition will be materially adversely affected. In addition, ifwe are successful in growing ourbusiness as weplan, we expect operating expenses to increase, and as a result, we will needto generate increased quarterly revenue to achieve and maintain profitability. Inparticular, as we grow ourbusiness, we would incur additional costs and expenses relatedto: * The expansion ofour sales force and distribution channels * The expansion ofourproduct and services offerings * Development ofrelationships with strategic business partners * The expansion ofmanagement and infrastructure * Brand development, marketing and other promotional activities. These additional costs and expenses could delay our ability to achieve profitability. 

### FUTURE ACQUISITIONS COULD EXPOSE US TO NUMEROUS RISKS. As part ofourbusiness strategy, we may acquire complementary companies, products, services ortechnologies. Any acquisition would be accompanied by the risks commonly encountered in a transaction. Such risks include the following: * Difficulty ofassimilating the operations andpersonnel ofthe acquired companies * Potential disruption ofour ongoing business * Inability ofmanagement to maximize our financial and strategic position through the successful incorporation ofacquired businesses and technologies *Additional expenses associated with amortization ofacquired intangible assets * Maintenance ofuniform standards, controls, procedures andpolicies *.·rmentofrelationships with employees, customers, vendors and advertisers as a result ofany integration ofnew managementpersonnel

- tial unknown liabilities associated with acquired businesses There can be no assurance that we would be successful in overcoming these risks or any otherproblems encountered in connection with such acquisitions. Due to all ofthe foregoing, any future acquisition may materially and adversely affect ourbusiness, results ofoperations, financial condition and cash flows. Although we do not expectto use cash for acquisitions, we may be required to obtain additional financing ifwe choose to use cash in the future. There can be no assurance that such fmancing will be available on acceptable terms. In addition, ifwe issue stock to complete any future acquisitions, existing stockholders will experience further ownership dilution. 

### RISKS RELATING TO OUR INDUSTRY THE OPERAnON OF AIRCRAFT DEPENDS ON THE PRICE AND AVAILABILITY OF FUEL, AND CONTINUED PERIODS OF HISTORICALLY HIGH FUEL COSTS MAY MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS. Fuel is a major expense for all aircraft. Historically, fuel costs have been subject to wide price fluctuations based on supply and demand, and geopolitical issues, such as political disruptions orwars involving oil-producing countries, changes in governmentpolicy, changes in fuel production capacity, environmental concerns and otherunpredictable events may result in fuel supply shortages and additional fuel price increases inthe future. Fuel availability is also subjectto periods ofmarket surplus and shortage and is affected by demand for both home heating oil and gasoline. Because ofthe effect ofthese events onthe price and availability offuel, we cannot predict the future cost and availability offuel with any degree ofcertainty. In the event ofa fuel supply shortage, higher fuel prices orthe curtailment ofoperations could result. We cannot assure you that we would be able to offset any increases in the price offuel by higher fares. We have not entered into any fuel hedging arrangements to reduce our exposure to fluctuations in fuel prices. As a result, we have significant exposure to the risk of increases in the price offuel due to inadequate fuel supplies or otherwise, and any such increase could have a material adverse effect on our financial condition and results ofoperations
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# •

### OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A FAILURE TO ATTRACT AND RETAIN QUALIFIED PILOTS AND OTHEROPERAnONS PERSONNEL. Our ability to attract and retain qualifiedpilots, mechanics, and otherhighly trained personnel will be an important factor in determining our nasuccess. The market for experienced and highly trained personnel is extremely competitive. Ifwe are unable to attract and retain such**r~,** flight operations may be disrupted, which could have a negative effect on our operating and financial results. 

### AIRCRAFT OWNERSHIP AND OPERAnON IS VERY CAPITAL-INTENSIVE. The airline business is highly capital-intensive. Although we currently lease our aircraft, we expect that in the future we may needto make significant capital investments to acquire the aircraft, ground and cargo handling equipment, and an inventory ofspareparts necessary for the operation ofourbusiness. Our aircraft are older andtend to require more maintenance than newer aircraft. Olderaircraft tend to be subject to more Airworthiness Directives ("ADs") promulgatedby the FAA than newer aircraft, and are required to undergo extensive structural inspections on an ongoing basis. An AD requiring significantmodifications to our aircrafttype could require us to invest significant additional funds in the aircraft or ground our fleet pending compliance with the AD. We cannot predict when and whethernew ADs covering our aircraft will bepromulgated, and there can be no assurance that compliance with ADs will not adversely affect tour business, fmancial condition or results ofoperations. 

### WE COULD FACE SHORTAGES OFADDITIONAL AIRCRAFT AND AIRCRAFT PARTS. Although we are currently focused on stabilizing our existing businesses, once we have successfully completedthis task (ifat all), our growth will depend in large part upon our ability to acquire additional aircraft to increase our lift capacity. Our strategy will most likely be the acquisition ofused aircraft. The market for used aircraft can be affected by a number offactors, including increased demand from other carriers, which could limit the number ofavailable aircraft and increase the acquisition cost thereof. Moreover, certain parts and components required for the operation ofourexisting aircraft may not be readily available in the marketplace when we require them, and our inability to obtain necessary components orparts in a timely mannercould adversely affect our operations. OURINDUSTRY IS HEAVILY REGULATED AND WE MAY FAIL TO COMPLYWITH ALL SUCH REGULATIONS. ANY FAILURE BY US COULD REQUIRE US TO INCUR SUBSTANTIAL COSTS IN COMPLYING WITH SUCH REGULATION, AND WE COULD BEFORCED TO CEASE OUR OPERATIONS. '. subject to a wide range ofgovernmental regulation by U.S. Federal, state and foreign governmental agencies, including: 

## * U.S. Department ofTransportation; 

## *U.S. Federal Aviation Administration (the "FAA"); 

## *U.S. National Mediation Board, with respect to labor matters; 

### * U.S. Federal Communications Commission, with respect to use ofradio facilities; 

## *U.S. Environmental Protection Agency and similar state and local authorities, primarily with respect to the use, discharge and disposal of hazardous materials at or from ourmaintenance and airport facilities; and 

## * Similar authorities in foreign countries with respect to our international and charter operations
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# •Compliance with all applicable laws and regulations could result in significant costs. Although we believe that we are presently in material compliance with applicable laws and regulations, there is no assurance that we are correct or that our operations will be deemed to be in compliance in the future. Additional laws, regulations and charges have been proposed, from time to time, that could significantly increase the cost ofour operations orreduce overall revenue. To the extent thatnew regulations are adopted, we will berequired to conform our activities in**o~to** comply with such regulations. We may be required to incur substantial costs in order to comply. We cannotprovide assurance that 

### I regulations enacted in the future will not adversely affect ourrevenue and future profitability. Moreover, we may not be able to comply

, ent laws and regulations, orany future laws and regulations. Our failure to complywith applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls orseizures, as well as potential criminal sanctions which could have a material and adverse effect on ourbusiness operations and finances and we could be forced to cease our operations. WE ARE SUBJECT TO ENVIRONMENTAL LAWS THAT COULD IMPOSE SIGNIFICANT COSTS ON US AND THE FAILURE TO COMPLY WITH SUCH LAWS COULD SUBJECT US TO SANCTIONS AND MATERIAL FINES AND EXPENSES. We are subject to a variety offederal, state and local environmental laws and regulations, including those governing the discharge ofpollutants into the air orwater, the management and disposal ofhazardous substances and wastes and the responsibility to investigate and clean-up contaminated sites that are or were owned, leased, operated orused byus or ourpredecessors. Some ofthese laws and regulations require us to obtain permits, which contain terms and conditions that impose limitations on our ability to emit and discharge hazardous materials into the environment and periodically may be subject to modification, renewal andrevocation by issuing authorities. Fines andpenalties may be imposed for non-compliance with applicable environmental laws and regulations and the failure to have orto comply with the terms and conditions ofrequired permits. We intend to comply with these laws and regulations, however, from time to time, our operations may not be in full compliance with the terms and conditions ofourpermits. We periodically review ourprocedures and policies for compliance with environmental laws and requirements. We believe that our operations generally are in material compliance with applicable environmental laws, requirements andpermits and that any lapses in compliance would not be expected to result in us incurring material liability orcost to achieve compliance. Historically, the costs ofachieving and maintaining compliance with environmental laws, and requirements and permits have not been material; however, the operation ourbusiness entails risks in these areas, and a failure by us to comply with applicable environmental laws, regulations, orpermits could result in civil or criminal fmes, penalties, enforcement actions, thirdparty claims for property damage and personal injury, requirements to clean up property or to pay for the costs ofcleanup, orregulatory orjudicial orders enjoining or curtailing operations orrequiring corrective measures. Moreover, ifapplicable environmental laws and regulations, orthe interpretation or enforcement thereof, become more stringent in the future, we could incur capital or operating costs beyond those currently anticipated
.



# •

•

### THE SUSPENSION OR REVOCATION OF FAA CERTIFICATIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION. Our airline operations are subject to regulations ofthe FAA. The FAA can suspend orrevoke the authority ofair carriers ortheir licensed 

# li e nnel for failure to comply with its regulations and can ground aircraft ifquestions arise concerning airworthiness. The FAA also has to suspend or revoke for cause the certificates it issues and to institute proceedings for imposition and collection offines for violation of 1. 1aviation regulations. Our airline subsidiary operates under FAA certifications. The suspension orrevocation ofanyoneofthese certifications could have a material adverse effect on ourbusiness, results ofoperations and fmancial position. The suspension or revocation of all ofthese certifications would have a material adverse effect on ourbusiness, results ofoperations and financial position. 

### OURREPUTATION AND FINANCIAL RESULTS COULD BE HARMED IN THE EVENT OFAN ACCIDENT ORINCIDENT INVOLVING ONE OFOURAIRCRAFT, ORAIRCRAFT OFTHE SAME TYPE. We may incur substantial losses in the event ofan aircraft accident. These losses may include the repair orreplacement ofa damaged aircraft, and the consequent temporary orpermanent loss ofthe aircraft from service, as well as claims ofinjured passengers and otherpersons. Although we believe our insurance coverage for our charter air service is adequate, we cannot assure anyone that the amount ofourinsurance coverage will not be changed or that we will not be forced to bear substantial losses from accidents. Substantial claims resulting from an accident could have a material adverse effect on ourbusiness, operations and fmancial results. Moreover, any aircraft accident orincident, even iffully insured, could cause a public perception that we are less safe orreliable than other airlines, which wouldmaterially harm ourbusiness. 

### In addition, any accident involving the type ofaircraft that we operate, even ifthe aircraft involved is not operatedby us, could also cause a public perception that our aircraft is less safe orreliable than other competitors, which would harm ourbusiness. We do not now carry any product liability insurance on ourMRO business, which we believe is a common practice among smaller shops with the level ofthird party business that we are now undertaking. We expect that, ifthe volume ofourMRO business and funds are available therefore, we will explore the possibility ofprocuringproduct liability insurance on ourMRO business. However, we have no assurance that we will be able to procure such insurance, orthat such insurance will fully protect us from all claims. 

### WE MAY NOT HAVE SUFFICIENT INSURANCE COVERAGE TO PROTECT US FROMLIABILITY CLAIMS. 

### In addition to the above, ourbusiness exposes us to possible claims for personal injury ordeath that may result ifwe were negligent in repairing an airplane. We cannot assure you that claims will not arise in the future orthat ourinsurance coverage will be adequate to protect us in all circumstances. Additional, we cannot assure you that we will be able to maintain adequate insurance coverage in the future at an a.ablecost. Any liability claim not coveredby adequate insurance will adversely affect ourbusiness, financial condition and results of ons. 

### OURFINANCIAL PERFORMANCE MAYBE ADVERSELY AFFECTED BY COMPETITION. We expect ourmarketto be intensely competitive. The majority ofouranticipated competitors will be more established, benefit from greater market recognition and have substantially greater financial, marketing and other resources than we do. In addition, larger competitors maybe able to absorb the burden ofany changes in federal, state and local laws and regulations more easily than we can, which would adversely affect our competitive position. Moreover, some ofourcompetitors have been operating in our core area for a long time and have demonstrated the ability to operate through industry cycles. Intense competition could materially adversely affect ourbusiness, results ofoperations and financial condition
.



# •AIRLINES ARE OFTEN AFFECTED BY FACTORS BEYOND THEIR CONTROL, INCLUDING TRAFFIC CONGESTION AT AIRPORTS, WEATHER CONDITIONS AND INCREASED SECURITY MEASURES, ANY OF WHICH COULD HARM OUR OPERATING RESULTS AND FINANCIAL CONDITION. L.· other airlines, we are subject to delays causedby factors beyond ourcontrol, including air traffic congestion at airports, adverse weather C ·ons and increased security measures. Delays disservice passengers, reduce aircraft utilization and increase costs, all ofwhich in turn 

### a. _. profitability. During periods offog, snow, rain, storms orother adverse weatherconditions, traffic control problems couldharm our operatingresults and financial condition. WE COULD BE LIABLE FOR OUR INADVERTENT TRANSPORTATION OF CONTRABANDS. Customers may not inform us, despite the requirement to do so, when their cargo includes hazardous materials. In addition, our own checks and searches for hazardous materials, weapons, explosive devices and illegal freight may notreveal the presence ofsuch materials orsubstances in its customers' cargo. The transportation ofunmanifested hazardous materials or ofcontraband could result in fmes, penalties, flight bans or possible damage to ouraircraft. There can be no assurance we will not be subject to fmes, penalties orflight bans in the future, any ofwhich couldhave a material adverse effect on ourbusiness, financial condition and results ofoperations. RISKS RELATING TO OURMANAGEMENT WE HIGHLY DEPEND ON OUR CURRENT MANAGEMENT. THE LOSS OF ANY MEMBER OFOURCURRENT MANAGEMENT COULD HARM OUR ABILITY TO EXECUTE OUR BUSINESS PLAN. Our success depends heavily upon the continued contributions ofcurrentmanagement. The loss ofthe services ofone ormore ofourmembers ofmanagement could materially adversely affect ourbusiness, operatingresults and fmancial condition. We cannot guarantee that we will be able to retain ourkey personnel. Moreover, wecurrently have nokeyperson insurance on any members of management. OUR CURRENT MANAGEMENT RESOURCES MAYNOT BE SUFFICIENT FORTHE FUTURE,AND WE HAVE NO ASSURANCE THAT WE CAN ATTRACT ADDITIONAL QUALIFIED PERSONNEL.

, .anbe no assurance that the current level ofmanagement is sufficient toperform all responsibilities necessary orbeneficial for mrulagement to perform. Ourfuture success also depends on ourcontinuing ability to attract, assimilate andretain highly qualified sales, technical and managerial personnel. Competition for these individuals is intense, and there can be no assurance that we can attract, assimilate or retain necessary personnel in the future. OURMANAGEMENT OWNS A LARGE PERCENTAGE OF OURVOTING STOCK, AND CUMULATIVE VOTING IS NOT AVAILABLE TO STOCKHOLDERS. Ourmanagement owns approximately 21.1% ofour outstanding voting stock. Cumulative voting inthe election ofDirectors is notprovided for. This fairly large percentage ownership interest couldhelp ourmanagement maintain theirpositions onourBoard ofDirectors
.



# •

### WE WILL BE REQUIRED TO COMPLY WITH SECTION 404 

### OF THE SARBANES OXLEY ACT OF 2002. Pursuant to Section 404 ofthe Sarbanes-Oxley Act of2002, in connection with this Annual Report and future Annual Reports, we are and will b.iredto furnish a reportby management on ourinternal controls over financial reporting which will contain, among othermatters, an I ent ofthe effectiveness ofour internal control over financial reporting, including a statement as to whether ornot our internal control {,.
.. mancial reporting is effective. This assessment must include disclosure ofanymaterial weaknesses in ourinternal control over financial reporting identified by ourmanagement. During the evaluation and testing process, ifwe identify one ormore material weaknesses in our internal control over financial reporting, we will be unable to assert that such internal control is effective. Ifwe are unable to assert that our internal control over financial reporting is effective, we could lose investorconfidence in the accuracy and completeness ofourfinancial reports. Furthermore, we expect that our compliance with the regulatory requirements described herein will likely increase ourprofessional expenses. 

### RISKS RELATING TO OURCOMMON STOCK WE HAVE ENTERED INTO LOAN TRANSACTIONS INVOLVING CONVERTIBLEPROMISSORY NOTES, WHICH HAVE BEEN, AND MAY IN THE FUTURE BE,DILUTIVE. During 2010, we entered into a series oftransactions in which we issued five convertible promissory notes (the "Notes"). This series of transactions is described in "Item 7 - Management's Discussion and Analysis ofFinancial Condition and Results ofOperations

- Liquidity and Capital Resources

- Convertible Debt." The Notes have a floating conversion price that entitles the holder to convertthe Notes into a larger number ofshares ofour common stock as the trading price ofourcommon stock goes down. As ofApril 1, 2011, part ofthe Notes have been converted into 49,871,292 shares ofour common stock. Because ofthe floating conversionprice and limitations on the holder's ability to convert the Notes, we are unable to determine at any time that number ofshares into which the remainder ofthe Notes can be converted. Future issuance ofadditional shares upon conversion ofthe Notes would further dilute the percentage ownership in ourcompany held by existing stockholders and could cause immediate and substantial dilution to the net tangible book value ofthose shares ofcommon stock that are issued and outstanding immediately prior to such transaction. Any future decrease in the net tangible book value ofsuch issued and outstanding shares could have a material effect on the market value ofthe shares. The terms on which we could obtain additional capital during the life ofthe Notes may be adversely affected because ofsuch potential dilution. Formore information about the Notes, see "Item 7 - Management's Discussion and Analysis ofFinancial Condition and Results ofOperations

- Liquidity and Capital Resources

- Convertible Debt."**~**VE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF

.**~,** SHAREHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CV1"FLICTS OF INTEREST AND SIMILARMATTERS. Recent Federal legislation, including the Sarbanes-Oxley Act of2002, has resulted in the adoption ofvarious corporate governance measures designed to promote the integrity ofthe corporate management and the securities markets. Some ofthese measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements ofnational securities exchanges, such as the NYSE orThe NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules ofnational securities exchanges are those that address board ofdirectors' independence, audit committee oversight, and the adoption ofa code ofethics. Although wehave adopted a Code ofEthics, we have notyet adopted any ofthese othercorporate governance measures and, since our securities are not yet listed on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an audit or other independent committees ofourboard ofdirectors as we presently do not have any independent directors. Ifwe expand ourboard membership in future periods to include additional independent directors, we may seekto establish an audit and othercommittees ofourboard ofdirectors. It is possible that ifwe were to adopt some orall ofthese corporate governance measures, shareholders wouldbenefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies hadbeen implemented to define responsible conduct. Forexample, in the absence ofaudit, nominating and compensation committees comprised ofat least a majority ofindependent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority ofdirectors who have an interest in the outcome ofthe matters being decided. Prospective investors should bear in mind our current lack ofcorporate governance measures in formulating their investment decisions
.



# •

### PROVISIONS OF OURCERTIFICATE OF INCORPORATION AND BYLAWS MAY DELAY ORPREVENTA TAKEOVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR SHAREHOLDERS. Provisions ofour certificate ofincorporation and bylaws may be deemed to have anti-takeover effects, which include when andby whom

• . Imeetings ofour shareholders maybe called, and may delay, defer orprevent a takeover attempt. In addition, certainprovisions of o law also may be deemed to have certain anti-takeovereffects which include that control ofshares acquired in excess ofcertain 5J: ,ledthresholds will not possess any voting rights unless these voting rights are approvedby a majority ofa corporation's disinterested shareholders. In addition, our certificate ofincorporation authorizes the issuance ofup to 10,000,000 shares ofpreferred stock with such rights and preferences, as may be determined by ourboard ofdirectors. Ofthis authorized preferred stock, no shares are currently issued and outstanding. Ourboard ofdirectors may, witlIout shareholder approval, issue up to 10,000,000 preferred stock with dividends, liquidation, conversion or voting rights that could adversely affect tlIe votingpower orotlIerrights ofour common shareholders. 

### OURCOMMON STOCKHAS EXPERIENCED ONLY EXTREMELY LIMITED TRADING. During the prior fiscal year, our common stock was quoted and traded on the Pink Sheets under the symbol "AAVG." Frequently, the volume oftrading in ourcommon stock has been light, and the prices and volumes at which our common stock has traded have fluctuated fairly widely on apercentage basis. Until shares ofour common stock become more broadly held and orderly markets develop and even thereafter, tlIe prices ofour common stock may fluctuate significantly. Prices for our common stock will be determined in tlIe marketplace and may be influencedby many factors, including tlIe following: 

## * The depth and liquidity ofthe markets for ourcommon stock; 

## * Investorperception ofus and the industry in which we participate; 

## * General economic and market conditions; 

## *Responses to quarter-to-quarter variations in operating results; 

## * Failure to meet securities analysts' estimates; 

## * Changes in financial estimates by securities analysts; 

## * Conditions, trends orannouncements in ourindustry; 

## * Announcements ofsignificant acquisitions, strategic alliances,jointventures or capital commitmentsbyus orour competitors; 

## * Additions or departures ofkey personnel; 

# *.

ofourcommon stock; f unting pronouncements orchanges in accounting rules that affect our financial statements; and

,.**~**iller factors and events beyond ourcontrol. The market price ofour common stock could experience significant fluctuations umelated to our operating performance. As a result, a stockholder (due to personal circumstances) may be required to sell such stockholder's shares ofourcommon stock at a time when our stock price is depressed due to random fluctuations, possibly based on factors beyond our control.



# •THE TRADING PRICE OF OUR COMMON STOCKMAY ENTAIL ADDITIONAL REGULATORY REQUIREMENTS, WHICH MAY NEGATIVELY AFFECT SUCH TRADING PRICE. The trading price ofourcommon stockhistorically has been below $5.00 per share. As a result ofthis price level, trading in our common stock**.**s .ectto the requirements ofcertainrules promulgated underthe Securities Exchange Act of 1934. These rules require additional disclosure er-dealers in connection with any trades generally involving any non-NASDAQ equity security that has a market price ofless than**~.** per share, subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, ofa disclosure schedule explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons otherthan established customers and accredited investors (generally institutions). Forthese types oftransactions, the broker-dealer must determine the suitability ofthe penny stock for the purchaser and receive the purchaser's written consent to the transaction before sale. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock. As a consequence, the market liquidity ofour common stock could be severely affected or limited by these regulatory requirements. STOCKHOLDERSHAVE NO GUARANTEE OF DIVIDENDS. The holders ofour Common Stock are entitled toreceive dividends when, as and ifdeclared by the Board ofDirectors out offunds legally available therefore. To date, we have paid no cash dividends. The Board ofDirectors does not intend to declare any dividends in the foreseeable future, but instead intends to retain all earnings, ifany, for use in ourbusiness operations. Ifwe obtain additional financing, our ability to declare any dividends will probablybe limited contractually. ITEM 

### IB. UNRESOLVED STAFF COMMENTS. Not applicable. ITEM 2. PROPERTIES. Ourprincipal executive offices are located in approximately 1,500 square feet ofexecutive office space. Persons with whom ourmanagement has otherbusiness relationships are providing this space to us on a gratuitous, at-will basis. Ifthis arrangement were to end, we would be required to start paying rent, orfind alternative space, orboth. F,-ormationabout our operational facilities, see "Item I - Business

- Location." 1

# ~3. LEGAL PROCEEDINGS. We are notpresently a party to any pending legal proceeding
.



# •

### PART II ITEM 5. MARKET FORREGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES.

• . the prior fiscal year, ourcommon stock was quoted and traded on the Pink Sheets under the symbol "AAVG." The following table sets rtain information as to the high and low bid quotations quoted onthe Pink Sheets for the fiscal years endedDecember 31, 2009 and L Jmber 31, 2010. Information with respect to over-the-counterbid quotations represents prices between dealers, does not include retail mark-ups, mark-downs or commissions, andmay not necessarily represent actual transactions. Prices in the table take into account the one-for100 reverse split ofourcommon stock that occurred inthe fall of2009.
COMMON STOCK



### ------------ 2009 HIGH LOW First Quarter $0.14 $0.05 Second Quarter $0.20 $0.06 Third Quarter $0.12 $0.022 Fourth Quarter $0.13 $0.0125 COMMON STOCK



### ------------ 2010 HIGH LOW First Quarter $.055 $.01 Second Quarter $.055 $.0025 Third Quarter $.021 $.0014 Fourth Quarter $.014 $.0043 As ofApril 13, 2011, we had approximately 384 common shareholders ofrecord and 208,270,834 common shares outstanding. We have not paid any cash dividends onthe common stock, and we do not intend to pay any dividends prior to the consummation ofabusiness combination
. 

# •

•

### EQUITY COMPENSATION PLANS We currently do nothave any equity compensationplans under which ourequity securities are authorized for issuance. 

# 1.6. SELECTED FINANCIAL DATA. Not applicable. 

### ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL We have historically been an independent energy company focused on exploration and development ofoil and natural gas reserves. With the level ofoil prices and ourproduction oil nearthe beginning of2009, none ofwells were producing sufficient to support ouroperations. To that end, in 2009 we adopted a significant change in our corporate direction. We then decided to focus our efforts on acquiring aviation related businesses and developing these businesses to their commercial potential. In this connection, we entered into a Share Exchange Agreement fully by and between AvStarAviation Services, Inc. ("AvStar Services") and us, providing for our acquisition ofall ofthe outstanding common stock in San Diego Airmotive ("SDA"), which (through its predecessor entity) has been providing maintenance, repair and overhaul ("MRO") services in California since 1987. Ourcurrent business plan is to acquire, consolidate and grow businesses in the general aviation industry. We placed ourinitial focus on MRO ofaircraftproviding products and services for the general aviation sector. We believe that since September 11, 2001, both private air transportation and the number ofaircraft owned by both individuals and business have dramatically increased. Each ofthese sectors, in addition to routine maintenance, has mandated a number ofinspections by the FAA that are commonly included in traditional MRO services. In 2010, we expanded ourbusiness through the acquisition a charter air service that operates from South Florida to the Bahamas. As capital is available to us, we intend to grow ourbusiness through the expansion ofourexisting MRO business as well as by acquisitions ofexisting MRO's, fixed base operations (FBO), charteroperations and other operational aircraft related businesses. 

### CRITICALACCOUNTING POLICIESAND ESTIMATES

• cussion and analysis ofits financial condition and results ofoperations as ofDecember 31, 2010 are based upon its consolidated
J al statements, which have beenprepared in accordance with generally accepted accounting principles in the United States. The pleparation ofthese fmancial statements requires us to make estimates andjudgments that affect the reported amounts ofassets, liabilities, revenue and expenses, and related disclosure ofcontingent assets and liabilities. On an ongoing basis, we evaluate our estimates. We base the estimates on historical experience and onvarious other assumptions that are believed to be reasonable underthe circumstances. These estimates and assumptions provide a basis for makingjudgments about the carrying values ofassets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions orconditions, and these differences may be material. We believe the following critical accounting policies affect its more significantjudgments and estimates used in the preparation ofits consolidated financial statements.



# •

### Aviation Revenue Generation Thru Twin Air Calypso Limited, Inc. AvStar derives revenue from scheduled and charterpassenger and freight air carrier services to 5 destinations in the "Family Islands" ofthe Bahamas. The other islands ofthe Bahamas and destinations in the United States are provided on a

• r basis. Atthe present time all ofthese flights originate form FtLauderdale, Florida. Customers on the scheduled flights are charged on a t basis and charter customers are charged for the entire aircraft. Freight customers are charged on a perpoundbasis adjusted by ',,,nsionalweight", an industry wide accepted policy. Additional charges are levied for priority handling. Otherincome is derived form excess luggage, pets and special handling requests. Fluctuations in this revenue are principally causedby the seasonality ofthe vacation tourist. Wehave taken steps to minimize this effect by heavily promoting the business ofthe local resident, second homeowners and local businesses, Thru Twin Air Calypso Services, Inc. AvStar derives revenue by providing the labor and parts needed for the continued maintenance ofgeneral aviation aircraft. Labor is charged on a per-hourbasis and parts are charged on a cost-plus basis. By providing maintenance services to Twin Air Calypso Limited, Inc. fluctuations in this revenue is minimized. We are marketing our services heavily to the retail general aviation community to supplement ourincome and thereby lowering the costs to ourotheroperating divisions. Essentially all ofourrevenue is either ona COD basis orpaidby credit card. Ourrisk ofbad debt is minimal. 

### OperatingExpenses Overview Our consolidated cost ofsales expenses consist primarily ofaircraft leases, insurance, fuel, parts, repair labor, crew labor, ground logistic services, and labor for reservation agents. The general and administrative expenses consist primarily ofpropertyrentals, administrative labor, communication costs and employee associated costs. Due to the unpredictable nature ofthe energy industry the cost offuel is the most variable ofall the expenses. Forthis reason we have introduced fuel surcharges in an effort to mitigate the effect ofthese fluctuations on ourprofits. We have not experienced any difficulty in the supply orpricing ofthe needed parts for the continued airworthiness ofour aircraft. While the market for aircraft insurance is limited there has notbeen any significantprice changes for the past several years. We are presently receivingproposals for ourupcoming insurance renewal. TiIIf"t"entproposals are consistent with expiring terms. The availability ofskilled and unskilled labor force in SouthFlorida is adequate to 

## r**~** stable laborcosts. 

### Estimates. Assumptions. andJudgments The operation ofour business requires us to make estimates, assumption, andjudgments that affect our assets, liabilities, revenues and expenses. Onan on-going basis we evaluate ourestimates, assumptions, andjudgments andtheir applicability on ouroperations. Webase our estimates onhistorical experience and on various other assumptions webelieve to be reasonable underthe circumstances. We considerthe following policies and theirrelation to ouroperatingresults to be most critical: 

## *The availability offuel and our ability to control its cost; 

## *The continued support ofthe aircraft we operate by its respective manufacturer, 

## *Thepolicies ofthe Bahamian government regarding tourism, 

## *The policies ofthe United States government regarding international travel, 

## *The ability ofmanagement to identify the need to enternew markets and expand existing ones, 

## *The ability ofmanagement to interrelate with the various government agencies which effect ouroperations. 

### Oil and Gas Producing Activities We follow the "successful efforts" method ofaccounting for our oil and gas properties. Underthis method ofaccounting, all property acquisition costs (cost to acquire mineral interests in oil and gas properties) and costs (to drill and equip) ofexploratory and development wells are capitalizedwhen incurred, pending determination ofwhether the well has found provedreserves. Ifan exploratorywell has not found proved reserves in commercial quantities, the costs associated with the well are charged to expense. The costs ofdevelopment wells are capitalized whetherproductive ornonproductive. Geological and geophysical costs and the costs ofcarrying and retaining undeveloped properties are expensed as incurred. Management estimates the future liability for plugging and abandonment ofthe related wells. ueedoil and gas properties that are individually significant are periodically assessed for impairment ofvalue, and a loss is recognized at t! ofimpairment by providing an impairment allowance. Other unprovedproperties are amortized based on the average holdingperiod. C"t',mlized costs ofproducing oil and gas properties after considering estimated dismantlement and abandonment costs and estimated salvage values are depreciated and depleted by the unit-of-production method. On the sale orretirement ofa complete unit ofa proved property, the cost and related accumulated depreciation, depletion, and amortization are eliminated from the property accounts, and the resultant gain or loss is recognized. On the retirement or sale ofa partial unit ofprovedproperty, the cost is charged to accumulated depreciation, depletion, and amortization with a resulting gain or loss recognized in the statement ofoperations.Onthe sale ofan entire interest in an unproved property for cash or cash equivalent, gain or loss on the sale is recognized, taking into considerationthe amount ofany recorded impairment ifthe property had been assessed individually. Ifa partial interest in an unproved property is sold, the amount received is treated as a reduction ofthe cost ofthe interest retained. 

# • Oil 

### and Gas Revenues 01' dnd gas revenues are recorded under the sales method. We recognize oil and gas revenues as production occurs. As a result, we accrued revenue relating to production for which we have not receivedpayment. RESULTS 

### OFOPERATION Comparison ofYearEnded December 31,2010 to YearEnded December31,2009 Financial results for the year ended December 31, 2010 are not directly comparable to financial results for the year ended December 31, 2009. During August 2010, we completed the acquisition ofTwin Air Calypso Limited, Inc. ("TAC Limited"). TAC Limited operates an air carrier service. This acquisition appreciably affected the financial results for the year ended December 31, 2010 compared to the financial results for the year ended December 31, 2009. REVENUES. Revenues were $1,480,627 in 2010 consisting of$1,478,273 revenues from aviation operations and $2,354 from oil and gas operations compared to revenues of$666,196 in 2009 consisting of$660,947 in revenues from aviation operations from SDA and $5,249 in revenues from oil and gas operations. Theserevenues represent an increase from revenues from 2009 to 2010, largely due to to the acquisition ofTAC Limited during August 2010. The decrease in oil and gas revenues from 2009 to 2010 resulted from a decrease in production. 

# •

•EXPENSES. Costs and expenses increased to $2,964,736 in 2010 from $1,609,598 in 2009. This increase in costs and expenses reflects the following: 

## * $1,172,565 in costs ofgoods sold in the 2010 from SDA's operation compared to $460,581 in costs ofgoods sold in 2009, with the

_ tial increase in costs ofgoods resulting from the increase in activity due to the acquisition ofTAC Limited 9,330 in selling, general and administrative expenses in 2010 compared to $380,264 in these expenses in 2009, with the substantial i. e in SGA resulting from the increase in activity due to the acquisition ofTAC Limited 

## *$31,841 in depletion and depreciation in 2010 compared to $137,613 in these expenses in 2009, with the substantial decrease in depletion and depreciationresulting from a lower asset base, whichhad been written down in 2009 LOSS FROM OPERATIONS. Because ofthe increase in activity due to the acquisition ofTACLimited, the Company's loss from operations increased to $1,484,109 in 2010 from $943,402 in 2009. INTEREST EXPENSE. Interest expense declined slightly to $43,840 in 2010 comparedto $45,588 in 2009. NETLOSS. Aftertaking into account interest expense, the Company's net loss increased to $1,527,949 (or $0.013 per share) in 2010 from $988,990 in 2009 (or $0.042 per share)
. 

# •

•KNOWN TRENDS From our fifty plus years ofexperience in the Bahamian and general aviation markets we have observed many trends and customs. The general downturn ofthe world economy in 2008 caused many real estate development ventures in the Bahamas to close operations. At the present time**~fthese.**developments are planning to resume operations in the near future. We will be offering both passenger and freight services to t wompanles. The Bahamas government is making the ownership ofreal estate and the building ofhomes easierand more secure for non-Bahamians than at any time in theirhistory. This is ofgreat importance to AvStar because it expands the non-seasonal portion ofour market. The number and nature ofcompetitors in ourmarkets have changed in the past year. The difficult economic times ofthe past two years have eliminated several ofour competitors and caused the larger air carriers to reduce their operations into the small population centers we serve. This gives AvStar a window oftime to reinforce ourposition in the market. The price offuel, our largest operational cost component, will continue to be volatile and require continual monitoring by management. We will be submitting our application to the DOT for commuter authority in early May with expected approval by the 2011 falI/winter season. With this approval our customerbase and marketing exposure will significantly increase. The general aviation market will continue to be affected by fuel prices and other increased operating costs. We have positioned ourselves to offer fuel, labor and parts to the general aviation owner atreduced prices due to our overhead being sharedbetween two entities. LIQUIDITY AND CAPITAL RESOURCES As ofDecember 31,2010, we had a working capital deficiency ofapproximately $874,956. Currently, we have limited financial ability to pursue ournew business plan. 

### In addition to stabilizing ourtwo existing businesses, our immediate fmancial goal is to raise approximately $350,000 to complete the scheduled maintenance and refurbishing ofourremaining eight aircraft. Although we are now seeking to raise this amount, we have no assurance that we will be able to do so. We believe that, once these aircraft are flying again, our goal ofstabilizing our existing business can be accomplished, and we can start considering the resumption ofour original business plan ofacquiring otherbusinesses. Once the stabilization is accomplished (ifat all), we begin trying to determine the scope ofthe business activities that we will pursue in the ii.ablefuture. The amount ofcapital that we will need depends on the scope ofthe business activities that we ultimately decide to pursue.

, ope is uncertain at this time. However, we know that we must obtain additional financing to pursue ourbusiness plan at any level that \h, .ire likely to pursue. We are currently searching for sources offinancing, butwe currently do not have any binding commitments for, or readily available sources of, fmancing. We cannot assure anyone that financing will be available to us when needed or, ifavailable, that such financing can be obtained on commercially reasonably terms. Ifwe do not obtain financing we will be constrained to contract the scope ofour business plan. Under certain circumstances, we may be constrainedto attempt to sell some ofour assets. However, we cannot assure anyone that we will be able to find interested buyers or that the funds received from any such sale wouldbe adequate to fund ouractivities. Under certain circumstances, we could be forced to cease our operations and liquidate ourremaining assets, ifany. Our independent certified public accountant has added an emphasis paragraph to its report on ourconsolidated fmancial statements for the year ended December 31,2010regarding ourability to continue as a going concern. Key to this determination is ourhistorical losses of$I,016,664 in 2010 and $988,990 in 2009. Management plans to try to fund our company partially through the raising ofcapital through the sale ofour equity instruments orissuance ofdebt, although there can be no assurance ofsuccess in this regard. Moreover, management plans on additional revenues from operations from ourbusiness as a source to finance our company, although there can be no assurance ofthat these revenues will materialize at the expected rates. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing ourbusiness without either a temporary interruption or apermanent cessation
.



# •Convertible Debt Commencing on April 19, 2010, we entered into a series oftransactions in which we issued five convertible promissory notes (singly a "Note" and collectively the "Notes") to Asher Enterprises, Inc. ("Holder") in consideration ofcertain amounts loaned by Holder to us. The following

• ives the designations to which the Notes are referred hereinafter, the dates ofthe Notes, the original principal amounts ofthe Notes, and t eduledmaturity dates ofthe Notes:
DESIGNATION ISSUANCE ORIGINAL PRINCIPAL MATURITY OF NOTE DATE OF NOTE AMOUNT OF NOTE DATE OF NOTE

------- ------------ -------------- ------------ First 4/19/2010 $50,000 1/21/2011 Second 6/1/2010 $25,000 3/31/2011 Third 8/31/2010 $40,000 6/2/2011 Fourth 10/21/2010 $35,000 7/25/2011 Fifth 12/20/2010 $45,000 9/22/2011 TOTAL $195,000 While the tenns ofthe Notes vary somewhat, these terms are generally the same from Note to Note. The following is a description ofthe terms ofthe Notes. Each ofthe Notes bears regular interest at a rate of8%per annum, with a default rate of22%per annum. The Notes are unsecured, and each of them is due and payable on orbefore theirrespective maturity dates. At any timepriorto the payment in full ofthe entire balance ofa Note, Holder has the option ofconverting all orany portion ofthe unpaid balance ofthe Note into shares ofourcommon stock at a conversionprice discussed hereafter. Nevertheless, Holder is not entitled to convert any portion ofa Note to the extent that the shares to be issued in connection therewith would cause Holder's beneficial ownership ofour common stock to exceed 4.99% ofthe outstanding shares ofour common stock. Each conversionprice for the Notes features a "variable" conversion price, and the First and Second Notes also feature a "fixed" conversion price of$.002, which will apply ifit is less than the related variable conversion price. The variable conversion price is apercentage discount from an average ofthe three lowest closingbidprices ofour common stock for the 10 most recent trading days preceding the date ofexercise. The percentage discounts for the variable conversion prices provided for in the Notes range from 42% for the FirstNote, 50% for the Second, Third and Fourth Notes, and 55% for the Fifth Note. Because ofthe operation ofthe floating conversionprice and the limitation on the ability ofHolderto convert as described above, we are unable to determine atany time thatnumberofshares into which Holdercouldconvert one or more ofthe Notes. ·.tes(and related documentation) contain customary representations and warranties, customary affirmative andnegative covenants, c...**~.omary** anti-dilution provisions, and customary events ofdefault that entitle Holderto accelerate the due date ofthe unpaid principal amount of, and all accrued and unpaid interest on, the Notes. A default on any ofthe Notes could lead to certainpenalties, including an obligation to (a) pay all ofthe following, plus an additional 50% of(i) default interest, (ii) other monetary penalties, and (iii) the outstanding balance on the related Note, and (b) to issue shares ofour common stock to satisfy the amount computed in accordance with (a) immediatelypreceding
.



# •Commencing October25,2010, Holderbeganconverting some ofthe Notes. As ofthe date ofthe Report, Holder had converted an aggregate principal amount ofthe Notes equal to $87,000 into 49,871,292 shares ofour common stock, leavingan aggregate outstandingprincipal amount ofthe Notes equal to $108,000 as ofApril 1, 2011. The First and Second Notes have been fully converted, while the Third Note has beenpartially converted. 

# • Legacy Debt We have outstanding the following notes that became due and payable on December 1,2008. These notes have an aggregateprincipal amount totaling $624,771 plus aggregate accrued interest of$99,197 as ofAprill3, 2011. We are currently exploring ways to satisfy these amounts. (a) Notepayable to Mary Pollock Merritt, daughter ofour fonner chiefexecutive officer. This note bears interest at rates of 12% peryear and became due on December 31, 2008. This note is not collateralized. The current outstanding balance on this note as ofApril 13, 2011 was $111,691, plus accrued interest. (b) Notepayable to Charles Pollock, our fonner chiefexecutive officer and a significant stockholder ofours. This note bears interest of 12% peryear and became due on December 31, 2008. This note is not collateralized. The current outstanding balance on this note as ofApril 13, 2011 was $400,911, plus accrued interest. (c) Note payable to Mark Weller, our fonnerpresident and a significant stockholder ofours. This note bears interest of 12% peryear and became due onDecember 31, 2008. This note is not collateralized. The outstanding balance on this note as ofApril l3, 2011 was $112,169, plus accrued interest. 

### Off-balance Sheet Arrangements During the year ended December 31, 2010, we had no offbalance sheet arrangements. 

### Oil and Gas Assets Management is currently exploring options for ourremaining oil and gas assets, which may include a sale ofit or a spin-offofthem to shareholders, so that management can devote its entire attention to our current aviation business. 

# •

•ITEM 7 A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Not applicable. 

# 1.8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ru.;PORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board ofDirectors AvStar Aviation Group, Inc. Houston, Texas

To the Board ofDirectors AvStarAviation Group, Inc. Houston, Texas REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ihave auditedthe accompanying consolidated statements offmancial position ofA vStar AviationGroup, Inc. as ofDecember 31, 20lO and 2009, and the related consolidated statements ofoperations, consolidated statement ofshareholders' deficit and consolidated statements ofcash flows for the years then ended. These financial statements are the responsibility ofthe Company's management. Myresponsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with standards ofthe Public Company Accounting Oversight Board (United States). Those standards require that I plan andperformthe audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement. The Company is not required to have, norwas I engaged to perform, an audit ofits internal control over fmancial reporting. My audit included consideration ofinternal control overfinancial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness ofthe Company's internal control over financial reporting. Accordingly, I express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessingthe accountingprinciplesused and significant estimates madeby management, as well as e.ing the overall financial statementpresentation. I believe that my auditprovides a reasonable basis for my opinion. In lny opinion, the financial statements referred to above present fairly, in all material respects, the consolidated fmancial position ofAvStar Aviation Group, Inc. as ofDecember 31, 2010 and 2009, and the results ofits operations and its cash flows for the yearthen ended in conformity with accountingprinciples generally accepted in the United States ofAmerica. The accompanying financial statements havebeenprepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the fmancial statements, the Companyhas suffered significant losses and will require additional capital to develop its business until the Company either (1) achieves a level ofrevenues adequate to generate sufficient cash flows from operations; or (2) obtains additional financing necessary to support its working capital requirements. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The fmancial statements do not include any adjustments that might result from the outcome ofthis uncertainty.
Clay Thomas, P.e. www.claythomaspc.com Houston, Texas April 15, 2011



# • Clay Thomas, P.C.

# •

•

• AVSTARAVIATlON GROUP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION For the Years Ended December31, 2010 and 2009

Current Assets Cash ASSETS

Accounts Receivable Parts and Inventory Prepaid Expenses
Total Current Assets Property and Equipment Proven Oil and Gas Properties, Net of Accumulated Depletion of $303,794 and $299,766 in 2010 and 2009, respectively) Unproven Oil and Gas Properties Furniture and Equipment, Net of Accumulated Depreciation of $43,313 Investment in subsidiary Total Other Assets Total Assets
LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Accounts Payable Accrued Interest Payable to Related Parties Notes Payable to Related Parties Accrued Liabilities
Total Current Liabilities Long-Term Debt to Related Parties Asset Retirement Obligation
Total Liabilities
Stockholders' Deficit Common Stock at $.001 par value; 500,000,000 shares authorized; and 176,899,542 and 65,728,490 issued and outstanding in 2010 and 2009, respectively Additional Paid in Capital Accumulated Deficit
Total Stockholders' Deficit Total Liabilities and Stockholders' Deficit 2010 5,648 146,826

4,858 11,008 168,340

5,280 4,540 781,841 791,661 959,999

83,189 99,197 477,336 383,574 1,043,296 1,057,477
2,100,773

176,900 21,441,852 (22,759,526)

(1,140,774) 959,999 2009 4,565 23,950 27,916

8,301 64,732

37,121 19,537 56,658 121,388

163,389

99,197 11,900 115,978 390,464 659,771
1,050,235

65,729 20,237,001 (21,231,577) (928,847) 121,388

# •

•

• AVSTARAVIATION GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009

Revenue From Aviation Operations Oil and Gas Revenue
Costs and Expenses: Costs of Goods Sold Production Tax Selling, General and Administrative Depletion and Depreciation Stock Based Compensation
Total Costs and Expenses Loss From Operations Other Income (and Expenses) Interest Expense
Net Loss Weighted Average Common Shares Outstanding Basic and Diluted Net Loss Per Share 2010 1,478,273 2,354 1,480,627 1,172,565 1,129,330 31,841 631,000 2,964,736 (1,484,109) (43,840) (1,527,949) 116,218,621 (0.013) 2009 660,947

5,249 666,196 460,581 140 380,264 137,613 631,000 1,609,598

(943,402)

(45,588) (988,990) 23,315,439 (0.042)

# •

Issuance of AVSTAR AVIATION GROUP, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

Balances as of December 31 2008 Stock Issued For Services Common Preferred Stock Shares Shares Amount Additional Paid-in Capital Accumu- Total lated Stockholders' Deficit Deficit
365,499,544365,50018,521,904 (19,522,753) (635,350) 125,000,000 125,000 360,594 485,594


### Preferred Shares 1,000,000



# • Reverse Split 100 for 1 Stock Issued For Service Post-Split (485,594,446) (485,594)
235 Conversion of Preferred Shares (1,000,000) 50,000,000 50,000 Stock issued for compensation Stock Issue for Repayment of loan HLS issue 12-04-09 Imputed Interest Net Income (Loss) Balances as of 10,100,000 10,100
723,157 723 709,907 (719,834) 482,439
136,676

25,481 (988,990)
December 31 2009 65,728,490 65,729 20,237,001(21,231,577) Stock issued for Compensation 15,000,000 15,000 435,500 Stock issued for Services 36,721,052 36,721 177,630 Stock issued for Forbearance 1,600,000 1,600 37,340 Stock issued for Reduction of Debt 14,000,000 14,000 21,000 Stock issued for Debt Conversion 25,500,000 25,500 221,500 Stock issued for Acquisition 18,350,000 18,350 271,040 Imputed Interest 40,841 Net Income (Loss) (1,527,949) Balances as of 

### December 312010 -176,899,542176,90021,441,852 (22,759,526) (1,140,774)



# • (485,594)

40,073 492,439
137,399

25,481 (988,990) (928,847) 450,500 214,351

38,940 35,000 247,000 289,390

40,841 (1,527,949)

# •

•

• AVSTAR AVIATION GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Cash Flows From Operating Activities: Net Loss Adjustments to Reconcile Net Loss to Net Cash (used in) Operating Activities: Depletion and Depreciation Expense Impairment of Oil and Gas Properties Stock Based Compensation Accrued liabilities Accounts Receivable Accounts Payable and Accrued Liabilities Other
Net Cash (used in ) Operating Activities Cash Flows (used in) Investing Activities: Investment in Subsidiary Capital and Exploratory Expenditures Net Cash (used in) Investing Activities Cash Flows From Financing Activities: Proceeds From Sale of Common Stock Proceeds From Notes Payable
Net Cash Provided By (used in) Financing Activities Net Change in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year

Cash and Cash Equivalents at End of Year 2010 (1,527,949)
46,520 780,524 150,411 (104,702) 561,647 (15,241) (108,790) (739,662)

(4,540) (744,202)
854,075
854,075

1,083 4,565 5,648 2009 (988,990)
137,613 655,741

5,694 141,746

38,007 (10,189)

5,726 5,726

(4,463) 9,028 4,565AVSTAR AVIATION GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS I.ANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AvStar Aviation Group, Inc. (the "Company") is a Colorado corporation that has historically engaged in oil and gas exploration and development. The Company was originally incorporated in 1997 as Zip Top, Inc. and subsequently adopted a name change to Pangea Petroleum Corporation. OnApril 26, 2000, the Company was recapitalized when the Company acquired the non-operatingpublic shell, Segway II Corporation. Segway II Corporation had no significant assets or liabilities at the date ofacquisition and, accordingly, the transaction was accounted for as a recapitalization. In February 2009, the Company adopted a significant change in its corporate directionby deciding to focus its efforts on acquiring aviation relatedbusinesses and developing these businesses to theircommercial potential. The Company subsequently changed its name to AvStar Aviation Group, Inc. on September 21, 2009. Our company, AvStarAviation Group, Inc., is a Colorado Corporation that was organized on March II, 1997. For a number ofyears, we conductedbusiness as an independent energy company focused on exploration and development ofoil andnatural gas reserves. For reasons given hereinafter, in early 2009 we adopted a significant change in our corporate direction. We decided to focus our efforts on acquiring aviation related businesses and developing these businesses to their commercial potential. In connection with the change in ourbusiness focus, we undertook the following activities: We entered into a Share Exchange Agreement fully executed on February 20, 2009 (the "Exchange Agreement") by and between us and AvStar Aviation Services, Inc. ("AvStar Services"), providing for our acquisition ofall ofthe outstanding common stock in San Diego Airmotive ("SDA"), which (through its predecessor entity) has beenprovidingmaintenance, repair and overhaul ("MRO") services in California since 1987. Formore information about the business ofSDA, see "OurBusiness" below. In connection with this acquisition, we issued to AvStar Services, the prior owner ofSDA, 1.0 million shares ofour newly-created series A preferred stock ("Series A Preferred Stock"), which shares constituted in the aggregate over 90% ofoutstanding economic interest and voting power in us. qaril 8,2010, (a) Twin Air Calypso Services, Inc., a newly-formed, indirect wholly-owned Florida subsidiary (the "MRO Subsidiary") of**~d** (b) Miami Aviation Maintenance Co. ("MAMCO") executed a bill ofsale whereby MAMCO assignedto the MRO Subsidiary certain o. lLS assets used to provide aviation MRO services. The assigned assets included general shop equipment. No liabilities were assumed in connection with the transaction. These assets were assigned in consideration of750,000 shares ofour common stock, which had an aggregate market value of$20,250 based on the closing price ofour common stock on the date ofthe transaction. In connection with the organization of the MRO Subsidiary, SDA had previously assigned all ofits assets to the MRO Subsidiary in consideration ofal! ofthe shares ofthe common stock ofthe MRO Subsidiary to be outstanding for the foreseeable future. The MRO Subsidiary was formed to provide aviation MRO services, as well as airline support services. The services have been offered out ofNorth Perry Field in Pembroke Pines, Florida in Broward County. The impetus for the transaction was the then recent termination ofSDA's Hangar Sublease at French Valley Airport in Southern California and the perception that the continuation ofthe business historically conductedby SDA inFlorida was advisable in view ofthe perceived greater strength ofthe local Florida economy relative to the local California market in which SDAhad historically provided services. On August 19,2010, we completed a transaction in which we acquired all ofthe outstanding stock in Twin Air Calypso Limited, Inc. ("TAC Limited"). TAC Limited operates an air carrier service from South Florida to the Bahamas with access to eight aircraft. We acquired TAC Limited in exchange for 18.0 million shares ofourcommon stock and some cashpayments in the approximate aggregate amount of$275,000 to bepaid in a small numberoffuture installments overthe near future. Because ofamounts previously paid, we were notrequired to pay any cash at closing. The 18.0 million shares ofourcommon stock had an aggregate market value of$270,000 based on the closing price ofour common stock on the date ofthe transaction. The acquired assets consisted primarily ofthe rights ofTACLimited under an aircraft lease agreement covering seven aircraft and anFAA Certified Part 135 permit. The only liabilities in effect assumed in connection with the acquisition were the liabilities and obligations ofthe lessee underthe preceding aircraft lease agreement. The agreement governing the acquisition ofTAC Limited (the "Stock Agreement") contained a non-competition agreement, prohibiting the stockholders ofTACLimited from competing with us. This non-competition agreement lasts for a period commencing on the closing ofthe acquisition and ending on the later to occur offive years. The Stock Agreement also contained fairly customary representations, warranties and indemnifications, as well as other general terms and conditions typically governing stock sales andpurchases. Prior to the consummation ofthe Exchange, there were no material relationships between us, and ourformer officers, directors, affiliates, a.tesor shareholders, and AvStar Services, and its officers, directors, affiliates, associates or shareholders. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Effective January 1,2009,AvStar Aviation adopted the authoritative guidance for Derivative Values and Hedging. This guidance resolves issues addressed in Statement 133 Implementation Issue No. DI, "Application ofStatement 133 to Beneficial Interests in Securitized Financial Assets". This Statement permits fair value re-measurement for any hybrid fmancial instrument that contains an embedded derivative thatotherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives orthat are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations ofcredit risk in the form ofsubordination are not embedded derivatives, amends Statement 140 to eliminate the prohibition on a qualifying special-purpose

_

nti from holding a derivative fmancial instrument that pertains to a beneficial interest other than another derivative fmancial instrument. This

, ent is effective for fiscal years beginning after September 15,2006. Its adoption did nothave a material impact on the Company's
> ial condition or results ofoperations. Effective January 1,2009,AvStarAviation adopted the authoritative guidance forFair Value Measurements and Disclosures which establishes a formal framework for measuring fair value underGAAP. Itdefines and docifies the many defmitions offair value included among various other authoritative literature, clarifies and, in some instances, expands on the guidance for implementing fair value measurements, and increases the level ofdisclosure required for fair value measurements. Although SFAS 157 applies to and amends the provisions ofexisting FASB and AICPA pronouncements, it does not, ofitself, require any new fair value measurements, nor does itestablish valuation standards. SFAS 157 applies to all otheraccounting pronouncements requiring orpermitting fair value measurements, except for SFAS No. 123 (F), share-based payment andrelated pronouncements, the practicability exceptions to fair value determinations allowed byvarious other authoritative pronouncements, and AICPA Statements ofPosition 97-2 and 98-9 that deal with software revenue recognition. This statement is effective for fmancial statements issued for fiscal years begirming afterNovember 15,2007, and interim periods within those fiscal years. Management does not believe the adoption ofSF AS 157 will have a material impact on the Company's financial condition or results of operations. Effective January 1,2009, AvStarAviation adopted the authoritative guidance for Financial Instruments which is an elective, irrevocable election to measure eligible financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. The election may only be applied at specified election dates and to instruments in their entirety rather than to portions ofinstruments. Upon initial election, the entity reports the difference between the instruments' carrying value and their fair value as a cumulative-effect adjustmentto the opening balance ofretained earnings. At each subsequentreporting date, an entity reports in earnings, unrealizedgains and losses on items for which the fair value option has been elected. SFAS 159 is effective for financial statements issued for fiscal years begirming after November 15,2007, and is applied on a prospective basis. Early adoption ofSFAS 159 is permittedprovided the entity also elects to adopt the provisions ofSFAS 157 as ofthe early adoption date selected for SFAS 159. The Company has elected not to adopt the provisions ofSFAS 159 at this time. Effective January 1,2009, AvStarAviation adopted the authoritative guidance for Income Taxes which clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with FASB 109, "Accounting for IncomeTaxes". FIN 48 prescribes a r.itionthreshold and measurement attribute for the fmancial statementrecognition andmeasurement ofa tax position taken orexpected to I n in a tax return. The provisions ofFIN 48 are effective for fiscal years beginning afterDecember 15,2006,with the cumulative effect ofthe change in accounting principle recorded as an adjustment to opening retained earnings. The adoptions ofthis pronouncement did not have a material effect on the financial position orresults ofoperations ofthe Company. Effective January 1, 2009, AvStarAviation adopted the authoritative guidance for Business Combinations to increase the relevance, representational faithfulness, and comparability ofthe information a reporting entity provides in its fmancial reports about a business combination andits effects. SFAS 141Rreplaces SFAS 141, "Business Combinations" but, retains the fundamental requirements ofSFAS 141 that the acquisition method ofaccounting beused and an acquirerbe identified for all business combinations. SFAS 141R expands the definition ofa business and ofa business combination and establishes how the acquirer is to: (1) recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired company; (2) recognize and measure the goodwill acquired in the business combination or a gain from a bargainpurchase; and (3) determine what information to disclose to enable users ofthe financial statements to evaluate the nature and fmancial effects ofthe business combination. SFAS 141R is applicable to business combinations for which the acquisition date is on or afterthe begirming ofthe first annual reporting periodbeginning on or after December 15,2008, and is to be appliedprospectively. Early adoption is prohibited. SFAS 141Rwill impact the Company only ifitelects to enter into a business combination subsequent to December 31, 2008. Effective January 1,2009, AvStarAviation adopted the authoritative guidance for Non-Controlling Interests to improve the relevance, comparability, and transparency ofthe financial information a reportingentityprovides in its consolidated fmancial statements. SFAS 160 amends ARB 51 to establish accounting and reporting standards for noncontrolling interests in subsidiaries and to make certain consolidation procedures consistent with the requirements ofSF AS 141R. It defmes a noncontrolling interest in a subsidiary as an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 changes the way the consolidated income statement is presentedby requiring consolidated net income to include amounts attributable to the parent and the noncontrolling interest. SF AS 160 establishes a single method ofaccounting for changes in a parent's ownership interest in a subsidiary which does not result in deconsolidation. SFAS 160 also requires expanded disclosures that clearly identify and distinguishbetween the interests ofthe parent and the interests ofthe noncontrolling owners ofa subsidiary. SFAS 160 is effective for financial statements issued for fiscal years beginning on or aftl[ecember 15,2008, and interim periods within those fiscal years. Early adoption is prohibited. SFAS 160 shall be applied prospectively, Wi exception ofthe presentation and disclosure requirements which shall be applied retrospectively for all periods presented. The (
. y does not believe thatthe adoption ofSFAS 160 would have a material effect on its consolidated fmancial position, results of operations orcash flows. 

### ACCOUNTINGESTIMATES The preparation ofconsolidated financial statements in conformitywith accountingprinciples generally accepted in the United States ofAmerica requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities at the date ofthe consolidated financial statements and the reported amounts ofrevenue and expenses during the reportingperiod. Actual results could differ from those estimates. These estimates mainly involve the useful lives ofproperty and equipment, the impairment ofunproved oil and gas properties, the valuation ofdeferred tax assets andthe realizability ofaccounts receivable. 

# (_AND CASH EOUIVALENTS Forpurposes ofreporting cash flows, the Company considers all short-term investments with an original maturity ofthree months or less when purchased to be cash equivalents. 

### MAINTENANCE & 

### REPAIRAND AIRCARRIERACTIVITIES Twin AirCalypso Services, Inc., ourindirect, wholly-owned Florida subsidiary (the "MRO Subsidiary") conducts ourbusiness ofproviding maintenance, repair andoverhaul ("MRO") products and services for aircraft in the general aviation sector. The MRO Subsidiary was the result ofthe consolidation on April 8, 2010 ofour subsidiary SanDiego Airmotive ("SDA") and Miami Aviation Maintenance Co. ("MAMCO"). SDA (through its predecessor entity) had beenproviding MRO services in California since 1987, while MAMCO commenced its operations in 200I and continuedthem until the time ofthe consolidation, but for an approximately I8-monthperiod during which MAMCO ceased providing services. The services are being offered outofNorth Perry Airport in Pembroke Pines, Florida in Broward County. After the move ofour MRO business from southern Californiato Florida, we "jump started" ourtransition by establishing an exclusive maintenance, fueling and ground support contract with the Air Carrier Subsidiary, a company discussed in the next section that we eventually acquired in August 2010. We are in the process ofdeveloping new customer relationships, and thus far wehave had limited success. The MRO Subsidiary recently commenced a focused, direct marketing program ofits services and is starting to see an increasedinterest from potential customers. Moreover, the MRO Subsidiary currently has the only avionics shop atNorthPerry Field,providing services for the electronic systems on aircraft that provide communications, navigation and guidance, display systems, flight management systems, sensors and indicators, weatherradars, electrical systems, and various onboard computers. Finally, the MRO Subsidiary has recently entered into lease negotiations regarding a fuel truck, pursuant to which the MRO Subsidiary could offer to sell fuel to thirdparties. This truck will also provide fuel to the AirCarrier Subsidiary (discussed immediately below) at discounted rates, enabling the subsidiary to realize fuel cost savings. All training regarding the operation ofthe fuel truck and the fire inspector's inspection have been completed, and commencementofsales by this**~s** contingent solely upon the completion ofnegotiations regarding its lease to the MRO Subsidiary. We have no assurance that we will be • complete the lease ofthe fuel truck and commence sales offuel with it. Twin Air Calypso Limited, Inc., ourwholly-owned Florida subsidiary (the "Charter Air Subsidiary"), conducts our charter air service business. We acquired the AirCarrier Subsidiary on August 19,2010. The AirCarrier Subsidiary operates an air carrier service from South Florida to the Bahamas utilizing eight leased aircraft. Ithas regular flights ofbothpassengers and cargo to two destinations on the island ofAbaco and three destinations on the island ofEleuthera. The Air Carrier Subsidiary also flies to other destinations in the Bahamas on a charterbasis. We lease seven aircraft pursuant to an aircraft lease agreement (the "Lease Agreement") with Aircraft Charters, LLC, an entity controlled by Kenneth W. Langston, who was an equity owner ofMAMCO and TAC Limited. The start date ofthe Lease Agreement was February 2010, and the Lease Agreementhas a term offive years, subject to earlierterminationupon lessee default. Ourmonthly rental rate peraircraft is $2,150. The aircraft are being leased on an "AS IS, WHERE IS" basis. The Lease Agreement contains customary representations and warranties on ourpart, customary affIrmative and negative covenants on ourpart, and customary events ofdefault that entitle the lessor to terminate the Lease Agreement. 

### OILAND GAS PRODUCING ACTIVITIES The Company follows the "successful efforts" method ofaccounting for its oil and gas properties. Underthis method ofaccounting, all property acquisition costs (cost to acquire mineral interests in oil and gas properties) and costs (to drill and equip) ofexploratory and development wells are capitalized when incurred, pending determination ofwhether the well has found proved reserves. Ifan exploratory well has not found proved reserves in commercial quantities, the costs associated with the well are charged to expense. The costs ofdevelopment wells are capitalized whetherproductive ornonproductive. Geological and geophysical costs and the costs ofcarrying and retaining undeveloped properties are expensed as incurred. 

### OTHERPROPERTY AND EQUIPMENT p.yand equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of3 to 5 years ce furniture and equipment and transportation and other equipment. Additions or improvements that increase the value orextend the life L.**~** asset are capitalized. Expenditures for normal maintenance and repair are expensed as incurred. Disposals are removed from the accounts at cost less accumulated depreciation and any gain or loss from disposition is reflected in operations. 

### OIL AND GAS REVENUES Oil and gas revenues are recorded underthe sales method. We recognize oil and gas revenues as production occurs. As a result, we accruedrevenue relating to production for which we have not received payment. 

### IMPAIRMENT OF LONG-LIVED ASSETS

• event facts and circumstances indicate the carrying value ofa long-lived asset, including associated intangibles, may be impaired, an ( tion ofrecoverability is performedby comparing the estimated future undiscounted cash flows associated with the asset to the asset's chujing amount to determine ifa write-down to fair market value ordiscounted cash flow is required. Basedupon arecent evaluationby management, an impairment write-down ofthe Company's long-lived assets was recorded to write such assets down to their estimatednet realizable value resulting in an impairment expense of$137,613 and $42,926 in 2009 and 2008, respectively. 

### STOCK BASED COMPENSATION Effective January 1,2009,AvStarAviation adopted the authoritative guidance for Stock Compensation which established financial accounting and reporting standards for stockbased employee compensation plans. Itdefines a fair value based method ofaccounting for an employee stock option or similar equity instrument. In January 2006, the Company implemented SFAS No. 123R, and accordingly, the Company accounts for compensation cost for stock option plans in accordance with SFAS No. 123R. 

### CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS Financial instruments which subject the Companyto concentrations ofcreditrisk include cash and cash equivalents and accounts receivable. The Company has concentrated its credit risk by maintaining deposits in a fmancial institution, which may at times exceed the amounts covered by insurance provided by the United States Federal Deposit Insurance Corporation ("FDIC") The Company has not experienced any losses on deposits. 

### INCOME TAXES The Company uses the liability method in accounting for income taxes. Underthis method, deferred tax assets and liabilities are determined based on differences between financial reporting and income tax carrying amounts ofassets and liabilities and are measured using the enacted tax rates and laws that will be in effectwhenthe differences are expected to reverse. A valuation allowance, ifnecessary, is provided against deferred tax assets, basedupon management's assessment as to theirrealization. 

### 1. AND DILUTED NET LOSS PER SHARE Basic loss pershare is computed using the weighted average number ofshares ofcommon stock outstanding during each period. Diluted loss per share includes the dilutive effects ofcommon stock equivalents on an "as ifconverted" basis. Forthe years endedDecember 31, 2010 and 2009, potential dilutive securities had an anti-dilutive effect and were not included in the calculation ofdiluted net loss percommon share. 

### RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company does not expectthe adoption ofrecently issued accountingpronouncements to have a significant impact onthe Company's results ofoperations, fmancial position or cash flow. 2. GOING CONCERN CONSIDERATIONS Since its inception, the Company has suffered recurring losses from operations andhas been dependent on existing stockholders and new investors to provide the cash resources to sustain its operations. During the years ended December31, 2010 and 2009, the Company reported losses of$(1,527,949) and $ (988,990), respectively. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. The Company developed a multi-step plan and during 2009 and 2010 took actions to improve its financial position and deal with its liquidity problems. The fmal steps ofthe plan are still being developed, but may include additional private placements ofthe Company's common stock, and efforts to raise additional debt financing orequity offerings. The Company's long-term viability as a going concern is dependent on certain key factors, as follows:- The Company's ability to obtain adequate sources ofoutside financing to support nearterm operations and to allow the Company to continue forward with current strategic 

# p.

1...**~ompany's** ability to ultimately achieve adequate profitability and cash flow to sustain operations. The consolidated fmancial statements do not include any adjustments that mightbe necessary ifthe Company is unable to continue as a going concern.3. OIL AND GAS PROPERTIES Oil and gas properties consist consisted ofthe following at December 31, 2009: 

# • Oil and gas properties 309,074 Less accumulated depletion (271,953) Net oil and gas properties $ 37,121 During the years ended December 31, 2009 and 2008, the Companyrecorded dry hole, abandonment and impairment charges of$137,613 and $42,926, respectively. AtDecember 31,2009,the Company had working interests in two wells. 4. PROPERTY AND EOUIPMENT Property and equipment consists ofthe following at December 31,2009:

5. INCOME TAXES Office equipment Furniture and fixtures

Less accumulated depreciation Net property and equipment 3 to 5 years 3 to 5 years $33,174 33,174 (13,638) $19,536

The Company has incurred losses since its inception and, therefore, has notbeen subject to federal income taxes. As ofDecember31, 2009, the Companyhad net operating loss ("NOL") carryforwards for income tax purposes ofapproximately $8,240,528, which expire in various tax**y~ough** 2027. Additionally, because United States tax law limits the time during which NOL carryforwards may be applied against future**;~** income, the Company will, in all likelihood, be unable to take full advantage ofits NOLs for federal income tax purposes should the**L~**...lpany generate taxable income. The composition ofdeferred tax assets and the related tax effects at December 31, 2010 are as follows:
Net operating losses $3,081,173 Less valuation allowance (3,081,173) Net deferred tax asset $
6. COMMITMENTS AND CONTINGENCIES 

### LEASE Ourprincipal executive offices are located in approximately 2,000 square feet ofexecutive office space. Entities with whom ourmanagement has otherbusiness relationships are providingthis spaceto us on a gratuitous, at-will basis. Ifthis arrangement were to end, we would be required to startpaying rent, orfmd alternative space, orboth. 

### EMPLOYMENT AGREEMENT The Company currently has employment agreements now in effect with two ofourNamed Executive Officers. We have an employment agreement dated May 5,2010 between our subsidiary Twin Air Calypso Limited, Inc. (the "AirCarrier Subsidiary") aeyton I. Gamber, ourpresident and ChiefExecutive Officer (the "GamberEmployment Agreement"). The Gamber Employment / ent provides for a term offive years that commenced in May 20I0, subject to earliertermination by the MRO Subsidiary upon certain**ct.~,vmary** events. Itprovides that Mr. Gamberwill receive a weekly salary of$1,250, and will be entitled to participate in any and all employeebenefitplans now existing orhereafter established for the MRO Subsidiary'S employees, provided that he meets the eligibility criterion therefor, and provided further that Mr. Gamber will be entitled to appropriate medical insurance in all cases. Ifwe are successful in raising additional funds or improving significantly our financial performance, management expects that Mr. Gamber and the Company will renegotiate the Gamber Employment Agreement with a salary closer to market levels, consistent with anyrestrictions on salaries imposed by any investors providing the additional funds.We have an employment agreement dated September 1, 2010 with Henry A. Schulle, a Vice President and the Corporate Secretary (the "Schulle Employment Agreement"). The Schulle Employment Agreement Provides for a term offive years that commenced in September 2010, subject to earlier termination bythe Company upon certain customary events. Itprovides that Mr. Schulle will receive a monthly salary of$4,350.00, and will be entitled to participate in any and all employee benefitplans now existing orhereafter established for the Subsidiary's

• 10yeeS, provided that he meets the eligibility criterion therefor, andprovided further that Mr. Schulle will be entitled to appropriate medical

. ce in all cases. Ifwe are successful in raising additional funds orimproving significantly ourfinancial performance, management l s thatMr. Schulle and the Company will re-negotiate the Schulle Employment Agreement with a salary closerto market levels, consistentwith any restrictions on salaries imposed by any investors providing the additional funds. During a part offiscal 2010, we had in effect an employment agreement dated March 17, 2010 with Russell Ivy, our former president and Chief Executive Officer (the "Ivy Employment Agreement"). The Ivy Employment Agreement had a one-year term, possibly subject to earlier termination by either Mr. Ivy or the Company upon notice to the other. Under the Ivy EmploymentAgreement, Mr. Ivy was to receive an annual salary of$37,500, which represented a significantreduction from a salary that Mr. Ivy had heretofore been receivingpursuant to a verbal employment agreement. Furthermore, perthe Ivy Employment Agreement, we agreed to issue to Mr. Ivy, 15.0 million shares ofour common stock as an inducement to Mr. Ivy to enter into the written employment agreement. Mr. Ivy was also entitled to participate in any and all employee benefit plans now existing orhereafter established for our employees, provided that he met the eligibility criterion therefor. The Ivy Employment Agreement replaced a verbal employment agreement with Mr. Ivy, pursuantto which Mr. Ivy was toreceive a salary in the amount of$15,000per month. Because ofour lack offunds, Mr. Ivy received none ofhis salary in 2009, but all ofhis salarywas accrued. In addition, Mr. Ivy received 4.0 million shares ofour common stock as a sign-on bonus at a time when these shares had a value of$240,000 based onthe closing price ofour shares on the date ofgrant. The Ivy Employment Agreement terminated in September 2010. 7. STOCKHOLDERS' EQUITY PREFERRED STOCK The Company's articles ofincorporation authorize the issuance ofup to 10,000,000 shares ofseries preferred stock, with aparvalue of$.001 and other characteristics determined bythe Company's board ofdirectors. As ofDecember 31,2010,there was no preferred stock issued or outstanding. COMMON STOCK

• the yearended December 31, 2010, the Company issued shares as compensation to employees and consultants. During January 2010 the Company issued 600,000 shares ofits common stock to CMS Capital to resolve temporarily certain disagreements between this firm and the Company. During February 2010, the Company issued 521,052 shares ofits common stock to SMTTrust in cancellation ofdebt in the amount of$99,000 owedbythe Company to Henry L. Schulle. OnMarch 19,2010,the Company issued 15.0 million shares ofits common stockto Russell Ivy, then ourpresident and ChiefExecutive Officer, in connection with the re-negotiation ofthis officer's verbal employment agreement (including a salary reduction) and the memorialization ofthis agreement in writing. These shares were issued as an inducement to Mr. Ivy to enterinto the written employment agreement. Moreover, the Company issued an aggregate of21.0 million shares ofits common stock to three persons holding interests in a convertible promissory note in exchange for an aggregate of$52,500 ofthe indebtedness represented by this note. Ofthese shares, 14.0 million were issued nearthe end ofMarch 2010, and 7.0 million were issued about the third week ofApril 2010. During June 2010, the Company issued 750,000 shares ofits common stock to Miami Aviation Maintenance Company in connection with the sale ofits assets to TwinAir Calypso Services, Inc. During June 2010, the Company issued4,000,000 shares ofits common stock to an attorney for legal services previouslyprovided having a value to be determined. During July 2010, the Company issued an aggregate of 10.0 million shares ofits common stockto an investors' relations firm for services to be provided, and 5.0 million shares ofour common stock to a person holding interest in a convertible promissory note in exchange for a deduction 0.500ofthe indebtedness represented by this note. D
...._llg August 2010, the Company issued an aggregate of23 million shares ofits common stock for the following purposes: *5 million shares ofits COmmon stock to Henry A. Schulle for services as a founder ofthe Company and as an incentive for him to sign an employment agreement*11.3 million shares ofits common stock to Clayton I. Gamber and Robin V. Gamber JTTEN in connection with the acquisition ofTwin Air Calypso Limited, Inc. and Twin Air Calypso Services, Inc. *6.3 million shares ofits common stock to Kenneth W. Langston in connectionwith the a.tionofTwin Air Calypso Limited, Inc. and Twin Air Calypso Services, Inc. L
.....ng October 2010, the Company issued 12.0 million shares ofits common stock, to a person holding a convertible note, in exchange for the payment of$12,500 ofthe indebtedness representedby the note. STOCK OPTIONS The Company periodically issues incentive stock options to key employees, officers, and directors toprovide additional incentives to promote the success ofthe Company's business and to enhance the ability to attract and retain the services ofqualifiedpersons. The Board ofDirectors approves the issuance ofsuch options. The exercise price ofan option granted is determined by the fair market value ofthe stock on the date of grant. A summary ofthe Company's stock option activity and related information for the years ended December 31, 2010 and 2009 follows:

Balance outstanding at: December 31, 2009 Balance outstanding at: December 31, 2010 NUMBER OF SHARES UNDER OPTION
350,000

1,000 EXERCISE PRICE

$0.20-$1. 00 $0.50 WEIGHTED AVERAGE EXERCISE

PRICE
$0.56 $0.50 All outstanding stock options are exercisable at December 31,2010. A summary ofoutstanding stock options at December 31,2010 follows:



# • REMAINING EXPIRATION NUMBER OF COMMON DATE STOCK EQUIVALENTS
1,000 January 2010 REMAINING CONTRACTED

LIFE (YEARS)

0.08 EXERCISE PRICE

$0.50 In connectionwith the acquisition ofTwin AirCalypso Limited, Inc. ("TAC Limited"), and in orderto effectuate a verbal agreement and understanding that they had made some time ago, we and the stockholders ofTAC Limited entered into certain option agreements (the "Option Agreements"). The Option Agreements permit us to repurchase aportion ofthe 18.0 million shares ofcommon stock issued in connection with the acquisition for an aggregate purchase price of$1.75 million. The number ofshares depends onthe per-share "Market Value" ofour common stock, which is basically the 20-day trading average priorto the time ofexercise. The portion ofsuch 18.0 million shares that may be repurchased generally equals the quotient obtained by dividing $1.25 million by the Market Value; provided, however, that the stockholders of TAC Limited may retain a maximum of7.353 million shares and a minimum of625,000 shares. Moreover, the Option Agreements require us to repurchase the portion ofshares determined in accordance with the preceding whenever we complete aprivate placement ofour securities for an aggregatepurchase price ofat least $3.0 million. Effective June 1, 2005, the Company adoptedthe 2005 Equity Compensation Plan (the "Plan") underwhich stock in lieu ofcash compensation awards may be granted from time to time to employees and consultants ofthe Company. The Plan allows for grants to other individuals contributing to the success ofthe Company at the discretion ofthe Company's board ofdirectors. The purpose ofthe Plan is to provide additional incentives to promote the success ofthe Company and to enhance the Company's ability to attract and retain the services ofqualified individuals. The Company reserved 25,000,000 shares ofstock for issuance under the Plan. No further shares are currently available for issuance pursuant to the Plan. There are no non-vested shares at December 31, 2010. STOCK WARRANTS Tempanydid not grant any warrants in 2009 or 2010. STOCKWARRANTS A summary ofthe Company's stock warrant activity and related information for the years ended December 31, 2010 and 2009 follows:

# • Warrants outstanding at: December 31, 2008 Issued Exercised Expired Warrants outstanding at: December 31, 2009 Issued Exercised Expired Warrants outstanding at: December 31, 2010 NUMBER OF SHARES UNDER WARRANT

21,935,387 

# ° ° 10,910,387 11,025,000 0 0 2,025,000 90,000 EXERCISE PRICE AVERAGE WEIGHTED

PRICE
$0.008-$0.015 $0.01

$0.01-$0.015 $0.014

All stock warrants are exercisable at December 31, 2010. A summary ofoutstanding stock warrants at December 31,2010follows:
REMAINING NUMBER OF COMMON STOCK EQUIVALENTS EXPIRATION DATE REMAINING EXERCISE CONTRACTED PRICE

LIFE (YEARS) 20,000 January 2012 1.08 $0.01 70,000 February 2012 1.17 $0.015 8. SUBSEQUENTEVENTS**OUrth** quarter of2010 the Company entered discussions with Aircraft Charters, LLC ("Aircraft Charters") for the acquisition ofathirtyf cent interest in the LLC. A Letter ofIntenthas been presented to Aircraft Charters, and the transaction is proposed for closing in late 1\ "' 011. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no changes in or disagreements with accountants on accounting and fmancial disclosure. ITEM 9A(T). CONTROLS AND PROCEDURES. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES As ofthe end ofthe period ofthis report, ourprincipal executive andprincipal fmancial officer carried out an evaluation ofthe effectiveness of the design and operation ofour disclosure controls and procedures. This evaluation was carried out underthe supervision and with the participation ofourmanagement, including our ChiefExecutive Officerand Principal Financial Officer. We have concluded, based on that evaluation, that, as ofsuch date, the disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including its ChiefExecutive Officer and ChiefFinancial Officer, as appropriate to allow timely decisions regarding required disclosure. Management identified significant deficiencies with respect to the timely public reporting ofevents requiring such reporting. During 2010, these deficiencies caused us to file late five Current Reports on Form 8-K. Some ofthese instances resulted from the failure ofrelevant company personnel to understand the need for prompt disclosure. As funds are available therefore, we intend to institute the following corrective action to ensure that such events are timely reported publicly:
. 

## *Adopting a disclosure policy requiring ourpersonnel to communicate to a designated committee for evaluation any information potentially material and thereby requiring public disclosure; 

## * Developing abasic program to educate management as to the events requiring expedited disclosure; 

## *

# .Oid late disclosure ofevents requiring expedited disclosure, adopting certainprocedures, such as required consultation with securities ( before issuing any equity shares, entering into any agreement that may be material, taking any action at a Board ofDirectors meeting 01**~le** like; and 

## *To avoid late filings ofdocuments having regular due dates (such as Annual Reports on Form 10-K and Quarterly Reports on Form 1O-Q), establishing timelines within which ourprofessional personnel will strive to work. Because the implementation ofthe preceding corrective action will begin after the end ofthe period ofthis report, the significant deficiencies that we identified still existed as ofthe end ofthe period ofthis report.Notwithstanding management's assessment that our disclosure controls and procedures were not effective as ofDecember 31, 2010, and the significant deficiencies described above, we believe that this Annual Report onForm 10-K and the consolidated financial statements included in this Annual Report on Form 10-Kcorrectlypresent our financial condition, results ofoperations and cash flows for the fiscal years covered thereby in all material respects.



# •

•

•LIMITATIONS ON EFFECTIVENESS OF CONTROLS AND PROCEDURES Ourmanagement, including our ChiefExecutive Officer and ChiefFinancial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can 

# PI'e only reasonable, not absolute, assurance that the objectives ofthe control system are met. Further, the design ofa control system must J the fact that there are resource constraints and the benefits ofcontrols must be considered relative to their costs. Because ofthe inherent Ii tions in all control systems, no evaluation ofcontrols can provide absolute assurance that all control issues and instances offraud, ifany, within our company have been detected. These inherent limitations include, but are not limited to, the realities thatjudgments in decisionmakingcan be faulty and that breakdowns can occurbecause ofsimple errorormistake. Additionally, controls can be circumvented by the individual acts ofsome persons, by collusion oftwo ormore people, orby management override ofthe control. The design ofany system of controls also is based in part upon certain assumptions about the likelihood offuture events and there canbe no assurance that any design will succeed in achieving its stated goals under all potential future conditions; overtime, control maybecome inadequate because ofchanges in conditions, orthe degree ofcompliance with the policies orprocedures may deteriorate. MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Ourmanagement is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15( t) underthe Exchange Act). Our internal control overfinancial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation offinancial statements for external purposes using accounting principles generally accepted in the United States. Because ofits inherent limitations, internal control overfmancial reporting may not prevent ordetect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance ofachieving their control objectives. There were no adjustments at year-end and so management considers the controls inplace are adequate for us. Management uss a separation offunction approach to insure adequate controls. There was no material weakness identified during the preparation ofyear-end financial statements. This annual report does not include an attestation report ofourregistered public accounting firm regarding internal controls over fmancial reling

. C GES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING During the fourth fiscal quarter of20l0,there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect ourinternal control overfmancial reporting. ITEM 9B. OTHER INFORMATION. Not applicable
.



# •

### PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS,PROMOTERS,CONTROL PERSONS AND CORPORATE WRNANCE; COMPLIANCE WITH SECTION 16{A) OFTHEEXCHANGE ACT. DIRECTORSAND EXECUTIVE OFFICERS Ourcurrent directors and executive officers are as follows: NAME Clayton I. Gamber Henry A. Schulle Stephen Wood James H. Short Russell Ivy Robert Wilson AGE 61 46 41 67 44 53 The following is the background ofourofficers and directors: POSITIONS Chief Executive Officer, President and

director Vice President, Secretary, and director Chief Technology Officer and director Director Director Vice President and Chief Financial Officer

CLAYTON I. GAMBER. Mr. Gamberhas served as one ofour directors and our ChiefExecutive Officer andPresident since August 2010. He has been involved in the aviation business in SouthFlorida since 1970, serving in capacities that have included DirectorofMaintenance, Director ofOperations, Accountable Manager, executive officer, director and owner. Formore than the pastfive years, he has served as a director and an executive officerofaviation companies in which he has been a part owner. One ofthese companies, Twin TownLeasing Co., d/b/a "Twin Air Calypso," filed forprotection under Federal bankruptcy laws in June 2010 due to a single liability. Mr. Gamberholds a BachelorofScience in Industrial Engineering and Operations Research from Virginia Tech. He also holds an FAAAirline Transport Pilot License, has over8000 flight hours and a DC-3 Type Rating, and holds a FAA Airframe and PowerplantLicense. Priorto his election as an office and a director, Mr. Gamberwas serving as a director and the President ofTwin Air Calypso Services, Inc., a recently-formed, whollyowned subsidiary ofours.**y** A. SCHULLE. Mr. Schulle has served as one ofourdirectors and our Vice President and Secretary since February 2009. Mr. Schulle 1 ed as AvStar Services' Vice President and a memberofAvStar Services' Board ofDirectors since July 2006; from July 2006 until**J~** 2008 he also served as AvStar Services' Presidentand Chairman ofthe Board ofDirectors. Since January 8, 2004 he has served as Chairman ofthe Board ofDirectors and a principal ofMarte x Trading Company, a privately held company active in the oil andgas industry as well as real estate investments and development. Martex Trading Company was the controlling member ofAuroraFinancial Services, LLC, a FINRA-registeredbrokerdealerthat has acted as a placement agent for AvStar Services. From December2003 until July 2004 Mr. Schulle served as a member ofthe Board ofDirectors ofTexCom, Inc. (Pink Sheets: TEXC). AvStar Services acquired San Diego Airmotive from TexCom, Inc. From January 1997 to November 2003, he was President and a Director ofTexas Commercial Resources, Inc. (Pink Sheets: TCRl) from its inception as a privately held companythat mergedwith EZUtilities in 2001. Mr. Schulle continued as an officerand director of Texas Commercial Resources, Inc. through its subsequent successful combination with Petrosearch Energy Corporation (OTCBB: PTSG), a Houston based energy company. He served as Chairman ofthe Board ofUnicorp, Inc., which was quoted onthe OTC Bulletin Board from November 1991 until January 1998. Mr. Schulle negotiated the mergerofUnicorp, Inc. with United States Refining Company, a diversified, vertically integrated petroleum refming andpetrochemical company that was acquired by HoustonAmerican Energy Corp. in April 2001. From January 1998 to July 2004, Mr. Schulle was employedbyDell Computer Corporation as a database support specialist working on international assignments
. 

# •STEPHEN WOOD. Mr. Woodhas served as one ofourdirectors and our ChiefTechnology Officer since September 2010. Foroverthe past five years, Mr. Wood has acted as an entrepreneur. In addition to his work on ourbehalf, Mr. Wood will continue to holdpositions in three corporations, AmeriMovers Group, Inc. (CEO), Local Media Group, Inc. (CEO), and AmeriBusiness Products, Inc. (CFO/COO). In 2001 he launched his first Internet site, AmeriMovers, ofmore than 150 presently owned. Shortly thereafter AmeriMovers developed the first movers bl.· g tool in the world. During 2006 Local Media Group was formed to become the marketing armfor AmeriMovers and other Internet

, s. While continuing to make acquisitions for the AmeriMovers Brand, Mr. Wood established AmeriBusiness Products in 2007. Ai.. usiness Products, formerly known as AmeriBusiness Forms, holds a large buyers group contract with more than 20,000 members and clients within major industries. As our CTO, Mr. Woodplans to incorporate technology into ourcurrentbusiness model, streamlining it and expanding it into our future acquisitions. JAMES H. SHORT. Mr. Short has served as one ofourdirectors since February 2009. Hehas been a member ofAvStar Services' Board of Directors sinceJuly 2006. Since December2003 he has served as a memberofthe Board ofDirectors ofTexCom, Inc. (pink Sheets: TEXC). AvStar Services acquired San Diego Airmotive from TexCom, Inc. He also served as a member ofthe Board ofDirectors ofTexas Commercial Resources, Inc. (pink Sheets: TCRI) from 2001 until 2003. Mr. Short is currently a principal and Vicepresident ofFinance & Administration for Sabine Storage & Operations, Inc., an engineering and a consulting firm specializing inthe design, engineering, permitting, construction management, and operations ofhydrocarbon storage facilities in subsurface salt dome formations. In addition, he is a principal and Vice President ofMarketing for Sabine Resources, Inc., a surface andmineral owner ofproperty having hydrocarbon storagepotential in a salt dome formation. Mr. Short was previously associated with Energy Consultants, Inc., a natural gas marketing entity serving municipalities in South Illinois and Indiana, on an independent contractorbasis, from 1984 until 200I.From 1979 to 1984, he was SeniorVice President and a directorofCoronado Transmission Companywith responsibilities for gas acquisition, transportation, and sales throughout the Southern States and Rocky Mountain area. Mr. Short served as Vice President ofCorporate Planning and Vice President ofGas Supply, Transportation and Sales ofLovaca Gathering Company from 1972 to 1979. He was an employee ofCities Service Oil Company from 1966 to 1972. Mr. Short holds a B.S. degree from the University ofTennessee RUSSELL NY. Mr. Ivy has served as one ofour directors since April 2009, and he was our ChiefExecutive Officer and President from April 2009 to August 2010. Mr. Ivy served as President and ChiefExecutive Officer ofAvStar Aviation Services, Inc., our controlling stockholder from January 2009 to August 2010. From January 1996 through the present, he has been a principal ofthe Ivy Companies, several companies thatprovided various merger and acquisition consulting services for various operating entities bothprivate andpublic. From September 2002to May 2004, Mr. 

### Ivy was a principal ofSeafood Anywhere, LLC., a Houston-based startup seafood distribution company supplying various types ofseafood to restaurants in the Houston, Austin, San Antonio, and Dallas areas. He earned a Bachelors Degree in International Trade/Economics in 1991 from Texas Tech University. 

# r.RTWILSON. Mr. Wilson has served as ourVice President and ChiefFinancial Officer since April 2008. Hehas also served as AvStar**~~_** es' Vice President and ChiefFinancial Officer since July 2004. Mr. Wilson also serves as the ChiefFinancial Officerand Operations Principal for several brokerdealers and investmentbanking firms where his duties include compliance with FINRA, SEC andNYSErules and regulations, the design and implementation ofaccounting and operations control procedures, representing firms as an expert witness andwith FINRA examinations. He currently serves as a director and audit committee chairman for American SecurityResources, Inc. and American Enterprise Development Corporation and as a consultant with The Professional Directors Institute. Mr. Wilson is a CPA andhas over 15 years ofexperience as the ownerofa certifiedpublic accounting firm, was previously a member ofthe FINRA Board ofArbitrators andhas several FINRA andNYSE licenses. Mr. Wilson has previously served as operations compliance manager ofthe AIM Management Group, Vice President Compliance/lnternal Audit ofthe Kemper Securities Group and an auditorwith Price Waterhouse. Mr. Wilson is a 1977 graduate of Houston BaptistUniversity and pursued additional studies at Georgetown University
.


# •Our Board ofDirectors has five members. Each director serves a one-yearterm that expires at the following annual meeting ofstockholders. Executive officers are appointed by the Board ofDirectors and serve until their successors are appointed. There are no family relationships among our directors orexecutive officers. 

### 1IIJORATEGOVERNANCE Our Board ofDirectors has not established any standing committees, including an Audit Committee, Compensation Committee or a Nominating Committee. The Board ofDirectors as a whole undertakes the functions ofthose committees. The Board ofDirectors may establish one ormore ofthese committees whenever it believes that doing so would benefitus. 

### CODE OF ETHICS We adopted a Code ofEthics for our Principal Executive and Senior Financial Officers on February 6, 2005. Anyone can obtain a copy ofthe Code ofEthics by contacting us at the following address: 3600 Gessner, Suite 220, Houston, Texas 77063, attention: ChiefExecutive Officer, telephone: (713) 914-9193. The first such copy will be provided without charge. 

### COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Section 16(a) ofthe Securities Exchange Act of 1934, as amended, requires our directors, executive officers and persons who are the beneficial owners ofmore than tenpercent ofour common stock (collectively, the "Reporting Persons") to file reports ofownership andchanges in ownership with the Securities and Exchange Commission and to furnish us with copies ofthese reports. To the best ofourknowledge based solely on information available to us, the following persons have failed to file, on a timely basis, the identified reports required by Section 16 (a) ofthe Exchange Act during fiscal yearendedDecember 31,2010: Russell Ivy failed to file a Form4 regarding a March 2010 grant to him ofshares for re-negotiating his employment agreement and a Form 5 to correct the failure to file the Form4. AvStarAviation Services, Inc. failed to file a Form 4 regarding company shares spun-offby itto its shareholders, and a Form 5 to correct the failure to file the Form 4. Henry A. Schulle failed to file (i) a Form 4 regarding anAugust 2010 grant to him ofshares for agreeing to serve as an employee and a Form 5 to correct the failure to file the Form4, and (ii) a Form 4 regarding company shares spun-offto him by AvStar Aviation Services, Inc. and a Form 5 to correct the failure to file the Form 4. James H. Short failed to file a Form 4 regarding company shares spun-offto him by AvStar Aviation Services, Inc. and a Form 5 to correct the failure to file the Form 4. Robert Wilson failed to file a Form 4 regarding anApril 2010 grant to him ofshares for services provided and a Form 5 to correct the failure to file the Form 4. Stephen Wood failed to file a Form 3 regarding whenhe wllectedto the Board ofDirectors and a Form 5 to correct the failure to file the Form 3.**L.~** 

### 11. EXECUTIVE COMPENSATION. The following table sets forth the compensation wepaidduring the fiscal years ended December 31, 2010 and 2009 to ourprincipal executive officer and any other executive officer whose total compensation exceeded $100,000. The executive officers listed in the table below are referred to as the "NamedExecutive Officers." 

### SUMMARY COMPENSATION TABLE (1)
Name and Year Salary ($) Bonus ($) Stock Total Principal position Awards ($) (a) (b) (c) (d) (e) (j) Clayton I. Gamber Chief Executive Officer (2) 2010 43,750 (3 ) $-0- $-0- Russell Ivy, Chief Executive Officer (4) 2010 28,125 (5) $345,000(6) $-0- 2009 $120,000 (5) $240,000(7) $6,000(8) $366,000 Gregory H. Noble, Interim Chief Executive Officer and Vice President (9) 2009 $ -0- $ -0- $150,000(10)$150,000 Thomas Mathew, Chief Executive Officer (11) 2009 $ -0- $ -0- $ -0- $ -0- {.Columns designatedbythe Securities and Exchange Commission for the reporting ofoption awards, non-equity incentive plan compensation, nonqualified deferred compensation earnings or all other compensation have been eliminated as no such awards, compensation orearnings were made to, earned by, orpaid to orwithrespect to any person named inthe table during any fiscal year covered by the table. (2) Mr. Gamberwas elected ChiefExecutive Officer and President effective August 19,2010. (3) Ofthis amount, $30,655.07 was paid, and $13,094.93 was accrued andnotpaid. (4) Mr. Ivy was elected ChiefExecutive Officer and President effective April 30, 2009, and he served as such until August 19,2010. (5) All ofthis amount was accrued and not paid.-- --------- (6) The figure in the table is based on a contractre-negotiation bonus comprised of 15.0 million shares ofourcommon stock multiplied by $.023, the closing price ofourcommon stock on the date ofgrant. These 15.0 million shares had a value of$49,500 as ofMarch 18,2011, based on the $.0033 closing price ofourcommon stock on that date. (7) The figure in the table is based on a sign-on bonus comprised of4.0 million shares ofourcommon stockmultiplied by $.06, the closing price ofourcommon stock on the date ofgrant. These 4.0 million shares had a value of$13,200 as ofApril 12, 2010, basedonthe $.0033
• price ofourcommon stock on that date. ( e figure in the table is based on a stock award for services as a director comprised of 100,000 shares ofourcommon stock multiplied by $.06, the closing price ofour common stock on the date ofgrant. (9) 

### Mr. Nobel was elected Interim ChiefExecutive Officer effective April 3, 2009, and he served as such until April 30, 2009. He was elected Vice President effective February 20,2009, and he served as such until October 5, 2009. (10) The figure in the table is based on an issuance of2.5 million shares ofourcommon stockto settle claims for compensationmultiplied by $.06, the closingprice ofour common stock onthe date ofgrant. These 2.5 million shares had a value of$87,500 as ofApril 12, 2010, based on the $.035 closingprice ofourcommon stock on that date. (11) Mr. Mathew was elected President effective December 31,2008, and he served as such until February 27, 2009. No options orunvested stock awards hadbeen granted in favor ofourNamed Executive Officers as ofDecember31,2010. 

### EMPLOYMENT AGREEMENTS The Company currentlyhas employment agreement in effect with one ofourNamedExecutive Officers. We have an employment agreement dated May 5, 2010 between our subsidiary TwinAir Calypso Limited, Inc. ("TAC Limited") and Clayton I. Gamber, ourpresident and ChiefExecutive Officer (the "Gamber Employment Agreement"). The GamberEmployment Agreementprovides for a term offive years that commenced in May 2010, subject to earlier termination bythe TAC Limited upon certain customary events. It provides that Mr. Gamberwill receive a weekly salary of$1 ,250, and will be entitled to participate in any and all employee benefitplans now existing orhereafter established for the TAC Limited's employees, provided that he meets the eligibility criterion therefore, and provided further that Mr. Gamber will be entitled to appropriate medical insurance in all cases. Ifwe are successful inraising additional funds or improving significantly our fmancial performance, management expects that Mr. Gamber andwe will re-negotiate the GamberEmployment Agreement to pay a salary closer to market levels, consistent with any restrictions on salaries imposedby any investors providing the additional funds. 

# '1 ve an employment agreement dated September 1, 2010 with Henry A. Schulle, a Vice President andthe Corporate Secretary (the

, Ie Employment Agreement"). The Schulle Employment Acreement Provides for a term offive years that commenced in September 20 ,subjectto earlier termination by the Companyupon certain customary events. Itprovides that Mr. Schulle will receive a monthly salary of$4,350.00, and will be entitled to participate 

### inany and all employeebenefitplans now existing orhereafter established for the MRO Subsidiary's employees, provided thathemeets the eligibility criterion therefore, and provided further that

### Mr. Schulle will be entitledto appropriate medical insurance in all cases. Ifwe are successful in raising additional funds orimproving significantly ourfinancial performance, management expects that

### Mr. Schulle andthe Company will re-negotiate the Schulle Employment Agreement topay a salary closerto market levels, consistent with any restrictions on salaries imposedby any investors providing the additional funds. During a part offiscal 2010, we had in effect an employment agreement dated March 17, 2010 with Russell Ivy, our former president and Chief Executive Officer (the "Ivy Employment Agreement"). The Ivy Employment Agreement had a one-yearterm, possibly subjectto earlier termination by eitherMr. Ivy or us uponnotice to the other. Underthe Ivy EmploymentAgreement, Mr. Ivy was to receive an annual salary of $37,500, which represented a significantreduction from a salary that 

### Mr. Ivy had heretofore been receiving pursuant to a verbal employment agreement. Furthermore, perthe Ivy EmploymentAgreement, we agreed to issue to Mr. Ivy, 15.0 million shares ofourcommon stock as an inducement to Mr. Ivy to enter into the written employment agreement. Mr. Ivy was also entitled to participate in any and all employee benefit plans now existing orhereafter established for our employees, provided that he met the eligibility criterion therefor. The Ivy Employment Agreementreplaced verbal employment agreementwith Mr. Ivy, pursuant to which Mr. Ivy was to receive a salary in the amount of$15,000 permonth. Because ofourlack offunds, Mr. Ivy receivednone ofhis salary in 2009, but all ofhis salary was accrued. In addition, 

### Mr. Ivy received 4.0 million shares ofourcommon stock as a sign-on bonus at a time when these shares had a value of$240,000 based on the closing price ofour shares onthe date ofgrant. The Ivy EmploymentAgreement terminated in September 2010. DIRECTOR COMPENSATION Ourdirectors received no compensation for their services as such during the fiscal year endedDecember 31,2010. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SIKHOLDERMATTERS. Th able sets forth below contains certain information as ofMarch 13, 2011 concerning the beneficial ownership ofourvoting stock by: 

## *eachperson known by us to be the ownerofmore than 5% ofour outstanding shares ofcommon stock; 

## *each ofour executive officers and directors; and 

## *all ourexecutive officers and directors as a group.

### We know ofno person outside ofmanagement who owns more than % ofour outstanding shares ofcommon stock. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares, except to the extent that authority is shared by spouses under applicable law, and (ii) record andbeneficial ownership with respect to their shares. Shares n.standing but deemed beneficially owned by virtue ofthe right ofa person ormember ofa group to acquire them within 60 days of**~** 

### 13, 2011 are treated as outstanding only for determination ofthe number and percent owned by such group orperson. Except as o ise indicted, the address for all persons indicated in the table is 3600 Gessner, Suite 220, Houston, Texas 77063
.



# •

•Amount and Nature of Beneficial Ownership 

# • Name of Beneficial Owner DIRECTORS AND EXECUTIVE OFFICERS Russell Ivy Clayton I. Gamber Henry A. Schulle Robert Wilson James A. Short All directors and executive officers as a group (five persons) Number
22,100,000 11,300,000

8,643,334 1,600,000

300,000 43,943,334



### ---------- Percent

10.6% (1) 5.4% 4.2%



### * *
21.1% (1) These shares are heldby Mr. Gamber in his name and in the name ofhis wife, Robin V. Gamber, asjointtenants with right ofsurvivorship. Mr. Gamber disclaims beneficial ownership ofone-halfthese shares to the extent thathis wife has an interest in such one-half. Mr. Gamber holds (with Ms. Gamber) sharedvotingpower andinvestmentpowerwith respectto these shares. 

## *Less than onepercent 

### ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE. Except as described below, none ofthe following persons has any direct orindirect material interest in any transactionto which wewere orare a party since the beginning ofthe last fiscal year, or in any proposed transaction to which wepropose to be a party: (a) any ofourdirectors or executive officers; (b) any nominee for election as one ofour directors; (c) any person who is known byus to beneficially own, directly orindirectly, shares carrying more than 5% ofthe votingrights attached to our common stock; or (d) any member ofthe immediate family (including spouse, parents, children, siblings and in-laws) ofany ofthe foregoing persons named in paragraph (a), (b) or (c) above.**~.·18,** 

### 2010, (a) Twin Air Calypso Services, Inc., a newly-formed, indirectwholly-owned Florida subsidiary (the "MRO Subsidiary") of l d (b) Miami Aviation Maintenance Co. ("MAMCO") executed a bill ofsale wherebyMAMCO assigned to the MRO Subsidiary certain ofIts assets used to provide aviation MRO services. Atthe time ofthis transaction, MAMCO was owned in partby Clayton I. Gamber, who became one ofourdirectors and our ChiefExecutive Officer andPresident in August 

### 2010. Afterthe completion ofthis transaction, Mr. Gamber was hired as an officer ofthe MRO Subsidiary. Formore information about this transaction, see "Item 1. Business

- General Development ofBusiness

- Formation ofMRO Subsidiary." On August 

### 19,2010, we completed a transaction in which we acquired all ofthe outstanding stock in TwinAir Calypso Limited, Inc. ("TAC Limited"). Atthe time ofthis transaction, TAC Limited was owned in partby Clayton I. Gamber, who at the time was an officerofthe MRO Subsidiary and as a result ofthe transaction became one ofourdirectors and our ChiefExecutive Officer and President. Formore information aboutthis transaction, see "Item 1. Business

- General Development ofBusiness

- Acquisition ofFAA Air Carrier." 

### INDEPENDENCE OFDIRECTORS The rules ofthe American Stock Exchange (the "AMEX") generally require that a listed company's BoardofDirectors be composed ofa majority ofindependent directors. However, these rules provide that a "smaller reporting company" need only maintain a Board ofDirectors comprised ofat least 50% independent directors. Although we are not listed on the AMRX, we use the standard.;; established by the AMEX for determining whether ornot each ofour directors is "independent." Wehave determined that, as ofApril 

### 13, 2011, James H. Short is an "independent" director in accordance withthe AMEX independence standards. 

### ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. During 

### 2010 and 

### 2009, the aggregate fees that we paid to Clay Thomas, P.C., our independent auditors, for professional services were as follows:



# •

Audit Fees (1) Audit-Related Fees Tax Fees All Other Fees 

### YEAR ENDED DECEMBER31,
$ 2010 35,000 N/A N/A N/A $ 2009 47,000(2)

N/A N/A N/A(1) Fees for audit services include fees associated with the annual audit and the review ofourquarterly reports on Form 10-Q. (2) Includes $15,000 for the audit ofthe 2008 financial statements ofSan Diego Airmotive, which was acquired during 2009.**~** 

### COMMITTEE PRE-APPROVAL OFAUDIT AND PERMISSIBLE NON-AUDIT SERVICES OFINDEPENDENT**J~TERED** 

### PUBLIC ACCOUNTING FIRM. We do not have an audit committee, but ourentire Board ofDirectors functions as such. OurBoard ofDirectors pre-approves the engagement ofClay Thomas, 

### P.C. for all audit andpermissible non-audit services. OurBoardofDirectors annually reviews the audit andpermissible nonaudit services performed by Clay Thomas, P.e., andreviews and approves the fees chargedby Clay Thomas, P.C. OurBoard ofDirectors has considered the role ofClay Thomas, P.e. in providing tax and audit services and otherpermissible non-audit services to us andhas concluded that the provision ofsuch services was compatible with the maintenance ofClay Thomas, P.e.'s independence inthe conduct ofits auditing functions. 

### PARTIV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. (a) The following Exhibits are filed as part ofthis report. ExhibitDescription No. 2.1 StockAcquisition and Reorganization Agreement between us and Segway II Corp. dated April 26, 2000 is incorporated herein by reference to ourCurrent Report onForm 8-K (SEC File No. 0-30503) filed withthe SEC on April 28, 2000, Exhibit2.1. 2.2 Share Exchange Agreement by and betweenus and AvStar Aviation Services, Inc. is incorporated herein byreference to our Current Report onForm 8-K (SEC File No. 0-30503) filed withthe SEC on February 25, 2009, Exhibit 2.1. 3.1 FirstAmended and Restated Articles ofIncorporation are incorporated herein byreference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on September 22,2009, Exhibit 3.1. 3.2 By-laws are incorporated herein by reference to ourCurrent Report onForm 8-K (SECFileNo. 0-30503) filed with the SEC onApril 28, 2.xhibit3.2.



# • 10.1 Bill of Sale dated April 8, 2010 by and between Twin Air Calypso Services, Inc. and Miami Aviation Maintenance Co. is incorporated herein by reference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on April 13, 2010, Exhibit 10.1. 10.2 Modification agreement regarding promissory note dated November 22, 2006 is incorporated herein by reference to our Annual Report on Form 10-K (SEC File No. 0-30503) filed with the SEC on May 15, 2009, Exhibit 10.2. 10.3 Pledge of Shares of Stock dated November 17, 2006 is incorporated herein by reference to our Annual Report on Form 10-K (SEC File No. 0-30503) filed with the SEC on May 15, 2009, Exhibit 10.3. 10.4 Employment Agreement dated March 17, 2010 with Russell Ivy is incorporated herein by reference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on May 19, 2010, Exhibit 10.1. 10.5 Stock Sale and Purchase Agreement dated effective as of June 27, 2010 by and between us, on the one hand, and Clayton I. Gamber, Kenneth W. Langston and Robin V. Gamber, on the other hand, is incorporated herein by reference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on August 16, 2010, Exhibit 10.1. 10.6 First Amendment to Stock Sale and Purchase Agreement dated effective as of July 11, 2010 is incorporated herein by reference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on August 16, 2010, Exhibit 10.2. 10.7 Stock Option Agreement dated August 19, 2010 between us and Clayton I. Gamber and Robin V. Gamber is incorporated herein by reference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on August 25, 2010, Exhibit 10.1. 10.8 Stock Option Agreement dated August 19, 2010 between us and Kenneth W. Langston is incorporated herein by reference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on August 25, 2010, Exhibit 10.2. 10.9 Employment Agreement dated May 5, 2010 between Twin Air Calypso Limited, Inc. and Clayton I. Gamber is incorporated herein by reference to our Current Report on Form 8-K (SEC File No. 0-30503) filed with the SEC on August 25, 2010, Exhibit 10.3. 10.10 Aircraft Lease dated February 1, 2010 by and between Air Charters, LLC and Twin Air Calypso Limited

- previously filed 14.1 Code of Ethics is incorporated herein by reference to Annual Report on Form 10-KSB for the year ended December 31, 2005 (SEC File No. 0-30503),21.1 Exhibit 14.1. Subsidiaries filed herewith. 31.01 Sarbanes Oxley Section 302 Certifications - filed herewith 

# 3.

Sarbanes Oxley Section 906 Certifications - filed herewith



# •

•SIGNATURES In accordance with Section 13 or 15(d) ofthe Exchange Act, the registrant caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. 

# •

>


# •

• AVSTARAVIATION GROUP, INC. By: /s/ Clayton I. Gamber Clayton I. Gamber Chief Executive Officer & President Date: April 20, 2011Exhibit 31.01 CERTIFICATIONS 

# I.on 1. Gamber, certify that: 1. 1have reviewed this Annual Report onForm lO-KiA ofAvStarAviation Group, Inc.; 2. Based on my knowledge, this Annual Report does not contain any untrue statement ofa material fact oromit to state a material fact necessary to make the statements made, in light ofthe circumstances under which such statements were made, notmisleading with respect to the period coveredby this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included inthis Annual Report, fairly present in all material respects the fmancial condition, results ofoperations and cash flows ofthe registrant as of, and for, the periods presented in this Annual Report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-l5(e) and l5d-l5(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13al5(f)) for the registrant and have: a) Designed such disclosure controls and procedures, orcaused such disclosure controls andprocedures to be designed under our supervision, to ensure that material information relating tothe registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over fmancial reporting, or caused such internal control overfinancial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability offinancial reporting andthe preparation offmancial statements for external purposes in accordance with generally accepted accountingprinciples; c) Evaluated the effectiveness ofthe registrant's disclosure controls and procedures andpresented in this report ourconclusions about the effectiveness ofthe disclosure controls andprocedures, as ofthe end ofthe period coveredby this reportbased on such evaluation; and l.closedin this report any change in the registrant'S internal control over fmancial reporting that occurred during the registrant'S most recent fiscal quarter (the registrant's fourth fiscal quarter in the case ofan annual report) thathas materially affected, oris reasonably likely to materially affect, the registrant's internal control overfinancial reporting; and 5. The registrant's othercertifying officers and I have disclosed, based on ourmost recent evaluation ofinternal controls, to the registrant's auditors and the audit committee ofregistrant's Board ofDirectors: a) all significant deficiencies and material weaknesses in the design or operation ofinternal controls which are reasonably likely to adversely affect registrant'S ability to record, process, summarize and report financial information; and b) any fraud, whether ornot material, that involves management or other employees who have a significantrole in the registrant's internal controls.

Date: April 20, 2011



# • /s/ Clayton I. Gamber Clayton I. Gamber, Chief Executive OfficerExhibit 3l.02 I, Robert Wilson, certify that:**~.ve** reviewedthis Annual Report onForm 10-KfAofAvStar Aviation Group, Inc.; 2. tlasedon myknowledge, this Annual Report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make the statements made, in light ofthe circumstances underwhich such statements were made, not misleading with respect to the period coveredby this Annual Report; 3. Basedonmy knowledge, the financial statements, and other financial information included inthis Annual Report, fairly present in all material respects the fmancial condition, results ofoperations and cash flows ofthe registrant as of, and for, the periods presented in this Annual Report; 4. The registrant's othercertifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e» and internal control over financial reporting (as defined in Exchange Act Rules l3a15(t)) for the registrant and have: a) Designed such disclosure controls and procedures, orcaused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control overfinancial reporting, or caused such internal control over fmancial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability offmancial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness ofthe registrant's disclosure controls and procedures andpresented in this report our conclusions about the effectiveness ofthe disclosure controls andprocedures, as ofthe end ofthe period covered bythis report basedon such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most r<afiscal quarter (the registrant's fourth fiscal quarter in the case ofan annual report) that has materially affected, oris reasonably likely to 1wally affect, the registrant's internal control overfinancial reporting; and 5. The registrant's othercertifying officers and I have disclosed, based on ourmost recent evaluation ofinternal controls, to the registrant'S auditors and the audit committee ofregistrant's BoardofDirectors: a) all significant deficiencies and material weaknesses in the design or operation ofinternal controls which are reasonably likely to adversely affect registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether ornot material, that involves management or other employees who have a significant role in the registrant's internal controls. lsi Robert Wilson Robert Wilson, Date: April 20, 2011 Chief Financial Officer 

# •Exhibit 32.01 

# • CERTIFICATION PURSUANT TO 18 U.S.c. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002 Inconnection with the Annual Report ofAvStar Aviation Group, Inc. (the "Company") on Form 10-KJ A for the period endedDecember 31, 2010, as filed with the Securities and Exchange Commission on the date hereof(the "Report"), the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuantto Section 906 ofthe Sarbanes Oxley Act of2002, that: (1) The Report fully complies with the requirements ofSection 13(a) or 15(d) ofthe Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the fmancial condition and results ofoperations ofthe Company. April 20, 2011 By: /s/ Clayton I. Gamber Clayton I. Gamber Chief Executive Officer 

# •

•Exhibit 32.02 

# • CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002 Inconnectionwith the Annual Report ofAvStar Aviation Group, Inc. (the "Company") on Form 10-K/ A for the period endedDecember 31, 20lO, as filed with the Securities and Exchange Commission on the date hereof(the "Report"), the undersigned certifies, pursuant to 18 U.S.c. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes Oxley Act of2002, that: (1) TheReport fully complies with the requirements ofSection 13(a) or 15(d) ofthe Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations ofthe Company. April 20, 2011 By: /s/ Robert Wilson Robert Wilson, Chief Financial Officer 

# •

•

# •

.**,A",-=,~,** ',_:"**~i",t;;"".~';~"'3. '..r~L.+-,**  

# •

# EDGARhnline 

# • AVSTAR AVIATION GROUP, INC.

FORM 10-0 (Quarterly Report)



# • Filed 05/16/11 for the Period Ending 03/31/11



# • Address Telephone CIK Symbol SIC Code Industry

Sector Fiscal Year 3600 GESSNER STE 220 HOUSTON, TX 77063 2817107103 0001077319 AAVG 4581 - Airports, Flying Fields, and Airport Terminal Services Misc. Transportation Transportation 12/31

Pl>wered '" 

## EDGA.Rbruine http://www.edgar-online.com © Copyright 2011, EDGAR Online, Inc. All Rights Reserved. Distribution and use ofthis document restricted under EDGAR Online, Inc. Terms of Use.

# UNITED STATES SECURITIES AND EXCHANGE COMMISSION • WASHINGTON, D.C. 20549



# • FORM 

# lO-Q (MARK ONE) [Xl QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2011 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to Commission file number 0-30503 AVSTAR AVIATION GROUP, INC. (Exact Name ofRegistrant as Specified in Its Charter) Colorado 76-0635938 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation of organization)

3600 Gessner, Suite 220, Houston, Texas 77063 (Address ofprincipal executive offices) (713) 965-7582 (Registrant's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) ofthe Exchange Act during the past 12 months (or for such shorterperiodthat the registrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark whetherthe registrant has submitted electronically andposted on its corporate Web site, ifany, every Interactive Data File required to be submitted andposted pursuant to Rule 405 ofRegulation S-T (232.405 ofthis chapter) during the preceding 12 months (or for such shorterperiod that the registrant was requiredto submit and post such files). Yes [ ]No [ ] Indicate by checkmark whetherthe Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of"large accelerated filer," "acceleratedfiler" and "smallerreporting company" in Rule 12b-2 ofthe Exchange Act (Check one).



# •

### Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] (Do not checkifsmallerreporting company) leeby checkmark whether the registrant is a shell company (as defined in Rule 12b-2 ofthe Exchange Act). Yes [] No [X] State the number ofshares outstanding ofeach ofthe issuer's classes ofcommon equity, as ofthe latestpracticable date: 236,270,834 common shares as ofMay 13,2011



# •

•PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS.



# •

•

• BALANCE SHEET AVSTARAVIATION GROUP, INC. Period End: March 31, 2011

Current assets Cash ASSETS

Accounts receivable Prepaid expenses Inventory Total Current Assets Property and equipment: Proven oil and gas properties (successful efforts method), net of accumulated depletion of $144,723 Unproven oil and gas properties (successful efforts method)

Total Fixed Assets Investment in subsidiary Total assets March 31, 2011
25,214 161,075

11,757 55,937 253,983

46,840

46,840 810,938 1,111,761
AVSTARAVIATION GROUP, INC. 

### BALANCE SHEET Period End: March 31, 2011

LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable Credit card payable Other current liabilities March 31, 2011

140,689 0 304,166 Accrued interest payable to related Notes payable to related parties Notes payable parties 99,197
Stock payable Total current liabilities Long term debt to related parties Asset retirement obligations Total liabilities
Stockholders' deficit: Preferred stock: $.001 par value; 1,000,000 shares authorized, none issued and outstanding Common stock: $.001 par value;

500,000,000 shares authorized; 236,270,834 shares issued and outstanding Additional paid-in capital Accumulated deficit Total stockholders' deficit Total liabilities and stockholders' deficit 571,900 3,713 1,119,665 1,050,577 

### o 2,170,242

208,271 21,471,591 (22,738,343)

(1,058,481) 1,111,761 December 31, 2010
5,648 146,826

11,007 4,858 168,339

5,280 4,540
9,820 781,840 959,999

December 31, 2010

83,189 0 383,574

99,197 477,336
1,043,296 1,057,477 

### o 2,100,773

176,900 21,441,852 (22,759,526)

(1,140,774) 959,999

# • AVSTAR AVIATION GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS 

### (unaudited)

Oil and gas revenue Income from subsidiary operations Total revenue Costs and expenses: Cost of goods sold by subsidiary Lease operating expenses Production taxes Dry hole costs Depreciation and depletion Selling, general and administrative, including stock based compensation
Total costs and expenses Income (Loss) from operations Other (expenses): Interest expense Net income (loss) Three Months Ended Three Months March 31 March 31 2011 2010 $1,293 $1,090 584,442 100,428 585,735 101,518 417,220 60,619

260 3,540 135,962 638,800 553,442 702,959

32,293 (42,513) 11,110 $ 21,183 $ (601,441)


### Basic and diluted net loss per common share $(0.00) $(0.00)



# •

• Ended

# •

•

• AVSTARAVIATION GROUP, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS 

### for the three months ended March 31, 2011 and 2010 (Unaudited)
Three Months Ended March 31
Cash flows from operating activities: Net income (loss) $ Adjustments to reconcile net loss to net cash used in operating activities Accounts receivable Accounts payable Payable to shareholder Net cash used in operating activities Cash flows from investing activities: Capital and exploratory expenditures Investment in subsidiary Furniture and equipment Net cash used in investing activities Cash flows from financing activities: Repayment of debt Paid in capital Common stock Net cash used in financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental Disclosures: Cash paid for interest Cash paid for income taxes Noncash investing and financing activities: Oil and gas property acquired with common stock issuance 2011 21,183 (17,624) (12,899) 75,805

4,739 71,204
260 (58,063) (36,935) (94,738)

(6,900) 31,371 18,629 43,100 19,566

5,648 $ 25,214
$- Three Months Ended March 31 2010 $(601,441) 120,646
(480,795) 3,540
3,540

(475,524) 3,731 $ 2,000
$-

$32,000

# • AVSTARAVIATION GROUP, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT For the Three Months ended March 31, 2011

Balances as of

December 31, 2010 Debt reduction Imputed interest Net income Balance at March Preferred Stock Shares Additional Total Common Stock Paid-In Accumulated Stockholders' Shares Amount Capital Deficit Deficit
178,899,542 176,900 21,441,852 (22,759,526) (1,140,774) 31,371,292 31,371 18,629 50,000 11,110 11,110 21,183 21,183
31,2011208,270,834208,27121,471,591 

### (22,738,343) (1,058,481) 

# •

•AVSTAR AVIATION GROUP, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 

# 1.IS OF PRESENTATION Toe accompanying unaudited interim consolidated financial statements ofAvStar Aviation Group, Inc. (the "Company"), a Colorado corporation formerly known as "PangeaPetroleum Corp.," have been prepared in accordance with accounting principles generally accepted in the United States ofAmerica and the rules ofthe Securities and Exchange Commission (the "SEC") and shouldbe read in conjunction with the audited financial statements and notes thereto contained in the Company's latest Annual Report onForm 10-Kfiled withthe SEC. In the opinion ofmanagement, all adjustments, consisting ofnormal recurring adjustments, necessary for a fair presentation offmancialposition and the results ofoperations for the interim periods presented have been reflected herein. Theresults ofoperations for interim periods are not necessarily indicative ofthe results to be expected for the full year. Notes to the consolidated fmancial statements that would substantially duplicate the disclosure contained in the audited fmancial statements for the mostrecent fiscal year, December 31,2010, as reported in the Company's latest Annual Report on Form lO-K, have been omitted. 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Effective January 1,2009,AvStarAviation adopted the authoritative guidance for Derivative Values and Hedging. This guidance resolves issues addressed in Statement 133 ImplementationIssue No. Dl, "Application ofStatement 133 to Beneficial Interests in Securitized Financial Assets". This Statementpermits fair valuere-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips andprincipal-only strips are not subjectto the requirements of Statement 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives orthat are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations ofcreditrisk in the form ofsubordination are not embedded derivatives, amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest otherthan another derivative financial instrument. This statement is effective for fiscal years beginning after September 15, 2006. Its adoption did not have a material impact on the Company's fmancial condition orresults ofoperations. Ef.tiveJanuary 1,2009,AvStarAviation adopted the authoritative guidance for FairValue Measurements andDisclosures which establishes**~** I framework for measuring fair value underGAAP. It defines and docifies the many defmitions offair value included among various L uthoritative literature, clarifies and, in some instances, expands on the guidance for implementing fair value measurements, and increases the level ofdisclosure required for fair value measurements. Although SFAS 157 applies to and amends theprovisions ofexisting FASB and AICPApronouncements, it does not, ofitself, require any new fair value measurements, nor does it establish valuation standards. SFAS 157 applies to all otheraccounting pronouncements requiring orpermitting fair value measurements, exceptfor SFAS No. 123 (F), share-basedpayment and related pronouncements, the practicability exceptions to fair value determinations allowed by various other authoritative pronouncements, and AICPA Statements ofPosition 97-2 and 98-9 that deal with software revenue recognition. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interimperiods within those fiscal years. Management does notbelieve the adoption ofSFAS 157 will have a material impact onthe Company's fmancial condition orresults of operations. Effective January 1,2009,AvStarAviation adopted the authoritative guidance for Financial Instruments which is an elective, irrevocable electiontomeasure eligible financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. The election may only be applied at specified election dates and to instruments in their entiretyratherthan to portions ofinstruments. Upon initial election, the entity reports the difference between the instruments' carrying value and theirfair value as a cumulative-effect adjustment to the opening balance ofretained earnings. At each subsequent reporting date, an entity reports in earnings, unrealized gains and losses on items for which the fair value optionhasbeen elected. SFAS 159 is effective for fmancial statements issued for fiscal years beginning afterNovember 15,2007, and is applied on a prospective basis. Early adoption ofSFAS 159 is permittedprovided the entity also elects to adoptthe provisions ofSFAS 157 as ofthe early adoption date selected for SFAS 159. The Companyhas elected not to adopt the provisions of SF AS 159 atthis time. Effective January 1,2009,AvStarAviation adopted the authoritative guidance for Income Taxes which clarifies the accounting for uncertainty in income taxes recognized in fmancial statements in accordance with FASB 109, "Accounting for Income Taxes". FIN 48 prescribes a recognition threshold and measurement attribute for the fmancial statementrecognition and measurement ofa tax position taken orexpectedto be taken in a tax return. Theprovisions ofFIN 48 are effective for fiscal years beginning after December 15, 2006, with the cumulative effect ofthe change in accountingprinciple recorded as an adjustment to opening retained earnings. The adoptions ofthis pronouncement did not have a material effect on the fmancial position orresults ofoperations ofthe Company. E.·veJanuary 1,2009,AvStarAviation adopted the authoritative guidance for Business Combinations to increase the relevance, rr tational faithfulness, and comparability ofthe information a reporting entity provides in its fmancial reports about a business CL. , ation andits effects. SFAS 141Rreplaces SFAS 141, "Business Combinations" but, retains the fundamental requirements ofSF AS 141 that the acquisition method ofaccounting be used and an acquirerbe identified for all business combinations. SF AS 141Rexpands the defmition ofa business and ofa business combination and establishes how the acquirer is to: (1) recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquired company; (2) recognize and measure the goodwill acquired in the business combination or a gain from a bargain purchase; and (3) determine what information to disclose to enable users ofthe financial statements to evaluate the nature and financial effects ofthe business combination. SFAS 141R is applicable tobusiness combinations for which the acquisition date is on or afterthe beginning ofthe first annual reporting period beginning on or after December 15,2008, and is to be appliedprospectively. Early adoption is prohibited. SFAS 141R will impact the Company only ifit elects to enter into a business combination subsequent to December 31, 2008. E.· ve January 1, 2009, AvStar Aviation adopted the authoritative guidance for Non-Controlling Interests to improve the relevance, ( ability, and transparency ofthe financial information a reporting entityprovides in its consolidated financial statements. SFAS 160 

### a. .<10S ARB 51 to establish accounting andreporting standards for noncontrolling interests in subsidiaries and to make certain consolidation procedures consistent with the requirements ofSFAS 141R. Itdefines a noncontrolJing interest in a subsidiary as an ownership interest in the consolidated entity that shouldbe reported as equity inthe consolidated fmancial statements. SFAS 160 changes the way the consolidated income statement is presentedby requiring consolidatednet income to include amounts attributable to theparent and the noncontrolling interest. SFAS 160 establishes a single method ofaccounting for changes in aparent's ownership interest in a subsidiary which does not result in deconsolidation. SFAS 160 also requires expanded disclosures that clearly identify and distinguish between the interests ofthe parent and the interests ofthe noncontrolling owners ofa subsidiary. SFAS 160 is effective for [mancial statements issued for fiscal years beginning on or after December 15,2008, and interim periods within those fiscal years. Early adoption is prohibited. SFAS 160 shall be applied prospectively, with the exception ofthe presentation and disclosure requirements that shall be appliedretrospectively for all periods presented. The Company does not believe that the adoption ofSFAS 160 would have a material effect on its consolidated financial position, results ofoperation or cash flows. 

### ACCOUNTING ESTIMATES The preparation ofconsolidated financial statements in conformity with accounting principles generally accepted in the country-region place United States ofAmerica requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities at the date ofthe consolidated financial statements and the reported amounts ofrevenue and expenses during the reporting period. Actual results could differ from those estimates. These estimates mainly involve the useful lives ofproperty and equipment, the impairment ofunproved oil and gas properties, the valuation ofdeferred tax assets and the realizability ofaccounts receivable. 

### CASH AND CASH EQUIVALENTS Forpurposes ofreporting cash flows, the Company considers all short-term investments with an original maturity ofthree months or less when purchasedto be cash equivalents
.



# • STOCK BASED COMPENSATION Effective January 1,2009, AvStarAviation adopted the authoritative guidance for Stock Compensation, which establishedfinancial accounting and reporting standards for stock based employee compensation plans. Itdefmes a fair value based method ofaccounting for an employee stock option or similar equity instrument. In January 2006, the Company implemented SFAS No. 123R, and accordingly, the Company accounts for compensation cost for stock optionplans in accordance with SFAS No. 123R. 

### CONCENTRATION OF CREDITRISK Financial instruments which subject the Company to concentrations ofcredit risk include cash and cash equivalents and accounts receivable. The Company has concentrated its credit risk for cashbymaintaining deposits in a financial institution, which may at times exceed the amounts coveredby insurance provided by the United States Federal Deposit Insurance Corporation ("FDIC"). The Company has not experienced any losses on deposits. 

### INCOME TAXES The Company uses the liability method in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between fmancial reporting and income tax carrying amounts ofassets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance, ifnecessary, is provided against deferred tax assets, based upon management's assessment as to theirrealization. 

### BASIC AND DILUTED NET LOSS PER SHARE Basic loss per share is computed using the weighted average number ofshares ofcommon stock outstanding during eachperiod. Diluted loss per share includes the dilutive effects ofcommon stock equivalents on an "as ifconverted" basis. Forthe years ended December 31, 2010 and 2.otentialdilutive securities had an anti-dilutive effect and were not included in the calculation ofdiluted net loss per common share. 

### RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Company does not expect the adoption ofrecently issued accounting pronouncements to have a significant impact on the Company's results ofoperations, financial position orcash flow.3. GOING CONCERN CONSIDERAnONS Since its inception, the Company has suffered recurring losses from operations and has been dependent on existing stockholders and new investors to provide cash resources to sustain its operations. During the three months ended March 31, 2011 and 2010, the Company reported**.~e** of$21,183 and net loss of$601,441 respectively. These conditions raise substantial doubt about our ability to continue as a going
The Company has developed a multi-step plan and has taken actions to improve its financial position and deal with its liquidityproblems. The final steps ofthe plan are still being developed, but may include additional privateplacements ofour common stock, and efforts to raise additional debt financing or equity investments. There canbe no assurance that any ofthe plans developedby the Company will produce cash flows sufficient to ensure its long-term viability as a going concern. Our long-term viability as a going concern is dependent on certain key factors, as follows: 

## *our ability to obtain adequate sources ofoutside financing to supportnearterm operations andto allow the Company to continue forward with current strategicplans. 

## *our ability to ultimately achieve adequate profitability and cash flows to sustain continuing operations. 4. STOCKHOLDERS' EQUITY During January 2011 the Company issued an aggregate of 16,029,412 shares ofits common stock in three issues to AsherEnterprises for the partial conversion ofa convertible promissory note. During February 2011 the Company issued 6,Ill,III shares ofits common stock to Asher Eneterprises for a partial conversion ofa convertible promissory note. During March 2100 the Company issued 9,230,769 shares ofits common stock to Asher Enterprises for a partial conversion ofaconvertible promissory note. 

# fA.:May 2011 the Company issued 8,000,000 shares ofits common stock to aperson holding a convertible promissory note in exchange for

### ,~tion of$40,000 ofthe indebtedness representedbythis note.



# •

### ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS. CAUTIONARY STATEMENT FORFORWARD-LOOKING STATEMENTS

• uarterlYReport on Form 10-Q includes forward-looking statements within the meaning ofSection 27A ofthe Securities Act of 1933, as ; ed, and St"non 2lE ofthe Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels ofactivity, performance or achievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identifY forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative ofsuch terms orother similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission filings. The following discussion shouldbe read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report. 

### GENERAL Until February 2009, we had historically been an independent energy company focused on exploration and development ofoil and natural gas reserves, whose core business was directed to the development ofoil and gas prospects in proven onshore production areas. In February 2009, we adopted a significant change in our corporate direction. Atthat time, we decided to focus our efforts on acquiring aviation related businesses and developing these businesses to their commercial potential. Due to acquisitions, we are now in two aviation sectors, the maintenance, repair and overhaul ("MRO") ofaircraft providing products and services for the general aviation sector, and the charter air service business. Currently, we are striving to stabilize ourtwo existing businesses in view ofthe difficult economy over the past few years. Once these are stabilized, ourbusiness plan will be to acquire, consolidate and grow businesses in the general aviation industry. We have adjusted our future goals and will place ourprimary focus on the acquisition ofa portfolio offixed base operations ("FBOs") at airports that support lightjettraffic along with turbine powered and piston engine aircraft. Webelieve that the time is here to invest in this sector. A combination ofthe economic trends, valuation levels, and technological innovations has impacted this sector, making ourprospects ofgrowing aportfolio ofFBO businesses compelling. These facilities will be supported by our existing MRO business. We believe that after September 11, 2001, both private air transportation and the number ofaircraft ownedby both individuals and business dramatically increased, although such increase has been tedin recent years due to the recentunfavorable economy. Each ofthese sectors, in addition to routine maintenance, has mandated a 1 ofinspections by the FAAthat are commonly included in traditional MRO services. In February 2009, we acquired San Diego Airmotive ("SDA"), which hadbeen operating (through its predecessorentity) as an MRO since 1987. SDA historicallyprovided MRO services for single and multi-engine aircraft. OnMarch 31, 2010, the Hangar Sublease dated May 1, 2007 between SDA andFrenchValley Aviation, Inc. ("French Valley") terminated. The original term ofthis Hangar Sublease had already expired, and the parties had continued the sublease on a month-to-month basis. French Valley decided that it did not want to continue this arrangement beyond March 31, 2010, and accordingly this arrangement terminated on such date. We decided not to seek alternative space to continue SDA's services at French Valley Airport in Southern California, but we are continuing such services in Florida, perthe transaction described immediately below. We intend to maintain in force and effect SDA's licenses and permits so that we can return to provide services in California in the future, ifwe elect to do so. On April 8, 2010, (a) Twin Air Calypso Services, Inc., a newly-formed, indirect wholly-owned Florida subsidiary (the "MRO Subsidiary") of ours, and (b) Miami Aviation Maintenance Co. ("MAMCO") executed a bill ofsale whereby MAMCO assigned to the MRO Subsidiary certain ofits assets used to provide aviation MRO services. These assets were assigned in consideration of750,000 shares ofour common stock. In connection with the organization ofthe MRO Subsidiary, SDA had previously assigned all ofits assets to the MRO Subsidiary in consideration ofall ofthe shares ofthe common stock ofthe MRO Subsidiary to be outstanding for the foreseeable future. The MRO Subsidiary was formed to provide aviation MRO services, as well as airline support services. The services are being offered out ofNorth Perry airport in Pembroke Pines, Florida in Broward County, Florida. The impetus for the transaction was the recent termination ofSDA's Hangar Sublease at French Valley Airport in Southern California and the perception that the continuation in Florida ofthe business historically conducted by SDA was advisable in view ofthe perceived greater strength ofthe local Florida economy relative to the local California market in which SDA has historically provided services. The MRO Subsidiary has the following features and provides the following services: 

## *

# .1
Inspections 

## * uterized Aircraft Weight and Balance 

## * cugine Maintenance, Repair & Overhaul including custom installations and refurbishment. 

## *Aircraft Modifications and STC kit installations 

## *Routine Maintenance/Insurance and Accident Repairs 

## *Composite Airframe Repairs 

## *Pre-purchase Inspections/Log Book Analysis 

## *Oxygen ServiceiNitrogen Service

## * Service Parts 

## *JanitroliSouthwind Heater Service/AD compliance inspections 

## *DyelFluorescent Penetrant Inspection Service 

## * Aircraft Exterior & Interior Detailing Services 

# *IS Dynamic propeller balancing service 

## * nics installations and repairs

, orpaint repairs and detailing 

## *Instrument Panel upgrades and Component installs 

## *Engine Scanners and Monitor installation 

## * EGT/CHT calibration The MRO Subsidiary recently commenced a focused, directmarketing program ofits services and is starting to see an increased interest from potential customers. Moreover, the MRO Subsidiary currently has the only avionics shop at North Perry Field, providing services for the electronic systems on aircraft that provide communications, navigation and guidance, display systems, flight management systems, sensors and indicators, weatherradars, electrical systems, and various onboard computers. Finally, the MRO Subsidiary recently completedthe lease ofa fuel truck, pursuant to which it will offerto sell fuel to thirdparties. This truck will also provide fuel to the AirCarrier Subsidiary (discussed immediately below) atdiscountedrates, enablingthis other subsidiary to realize fuel cost savings. All trainingregarding the operation ofthe fuel truckhas been completed, and commencement ofsales by this truck is contingent solely upon the completion ofthe fIre inspector's inspection, which is expected by the end ofNovember 2010, butwe have no assurance inthis regard. On August 19,2010, we completed a transaction in which we acquired all ofthe outstanding stock in Twin AirCalypso Limited, Inc. (the "Air Carrier Subsidiary"), a company related to MAMCO. We acquired the Air Carrier Subsidiary in exchange for 18.0 million shares ofour common stock and some cash payments in the approximate aggregate amount of$275,000 to be paid in a small number offuture installments over the fairly near future. Because ofamounts previously paid, we were not required to pay any cash down payment at closing. In connection with the completion ofthis transaction, Clayton I. Gamber, a stockholder in and the chiefexecutive officerofthe Air Carrier Subsidiary, was elected to ourBoard ofDirectors and as our ChiefExecutive Officerand President. In connection with the acquisition ofthe Air Carrier Subsidiary and in orderto effectuate a verbal agreement and understanding that they had made some time ago, we and the prior stockholders ofthe Air Carrier Subsidiary entered into certain option agreements (the "Option Agreements"). The Option Agreements permit us to repurchase a portion ofthe 18.0 million shares ofcommon stock issued in connection with the acquisition for an aggregate purchase price of$1.75 million. The number ofshares depends on the per-share "Market Value" ofour coWn stock, which is basically the 20-day trading average priorto the time ofexercise. The portion ofsuch 18.0 million shares that may be rasedgenerally equals the quotient obtainedby dividing $1.25 million by the Market Value; provided, however, that the stockholders of L Carrier Subsidiary may retain a maximum of7.353 million shares and a minimum of625,000 shares. Moreover, the OptionAgreements require us to repurchase the portion ofshares determined in accordance with the precedingwheneverwe complete a privateplacement ofour securities for an aggregate purchase price ofat least $3.0 million. The Air Carrier Subsidiary operates air service from SouthFloridato the Bahamas with eight leased aircraft. Ithas regular flights ofboth passengers and cargo to two destinations onthe island ofAbaco and three destinations on the island ofEleuthera. The Air Carrier Subsidiary also flies to otherdestinations in the Bahamas ona charteredbasis. Currently, only three ofthe Air Carrier Subsidiary's leased aircraft are flying, as fIve ofthese aircraft are currently down for routine maintenance and refurbishing. However, we will need to raise about $350,000 to complete this maintenance and refurbishing. Our goal is to raise this amount, and complete the maintenance and refurbishing, so that all eight planes will be phased into operation. Although we are now seeking to raise this amount, we have no assurance that we will be able to do so. We are striving to get all eight aircraft operational in order to fIll the voids in the market caused by the challenging economy in the market. This challenging market has caused some ofour competitors to suspend or cease flying, creating a void in certain routes that we believe we can fIll in a mannerpositive to our fInancial performance. The additional aircraft will allow the West Palm Beachmarket to be opened and new destination in the Bahamas started. As capital is available to us, we intend to grow ourbusiness through the expansion ofour existingMRO business as well as by acquisitions of fIxed base operations ("FBOs"), expansion ofourexisting maintenance, repair and overhaul operations ("MROs"), and charter operations. Several companies have been identifIed as acquisition targets as capital is available to us. In February 2011, the Air Carrier Subsidiary relocated both its passenger and freight operations to a newly constructed facility at the Sheltair North complex at the Ft. Lauderdale-Hollywood International Airport. With this move the passenger and freight facilities are separated, giving the passengers more ofan "airline terminal" atmosphere, while maintaining the perks offree parking and easy luggage handling, withoutthe "big terminal" inconveniences. The customer acceptance has been overwhelmingly good and ourground support operations are operating much more efficiently. Beingto this new facility we also lowered our fuel costs by approximately 15%. This price reduction (along with a fuel surcharge ii d in February) has mitigated the fuel price increases ofthe market considerably. With fuel being our largest single cost by far, the relocation has contributed greatly to our operations being profItable for the fIrst quarter. While refurbishment ofthe aircraft has not progressed as quickly as scheduled, we were able to return one aircraft to service in late March. Revenues received from the addition ofthis aircraft will berecognized beginning in the second quarter. We expect to return another aircraft to service in June. Efforts are continuing, to secure fInancing that will allow us to accelerate the return to service ofadditional aircraft.During the frrstquarter the Air Carrier Subsidiary's personnel have been preparing our application to the Department ofTransportation to upgrade our authorities to "Commuter" status. This new authority will allow us to increase our frequency to each destination and advertise our schedule in the traditional airline venues. We expect this authority to become effective in the fourth quarter ofthis year allowing us to take full advantage ofthe 2011-2012 winter season. Additionally, the Air Carrier Subsidiary's personnel have been designing and implementing a new s.uling and reservation software. The scheduling module became operational in March of2011, the reservation module will be installed in 

### I y and the freight module will be installed in early June. The full implementation ofthese modules will give better internal controls over )
. anagement and freight management and will allow booking ofreservations over the internet. The fmal module will be to fully integrate the operational systems into the accounting system required for the DOT commuter requirements. With the increased fuel costs oflate 2010 and early 2011, the general aviation segment continues to suffer. We are continuing to search for opportunities to acquire aviation maintenance and service organizations. At this time we feel thatmore favorable opportunities will be available during the fall and early winter of20 11. Weare currently negotiating sources ofcapital to be in a position to pursue these opportunities as they are identified. Since ourinception, we have recurring losses from operations and have depended on existing stockholders andnew investors to provide the cash resources to sustain its operations. During the tlrree months ended March 31, 2011, we reported a net income of$ 21,183 compared to a loss of$ 601,441 reported for the tlrree months ended March 31, 2010. Our long-term viability as a going concern depends on certain key factors, as follows: 

## * Our ability to continue to obtain sources ofoutside fmancing to allow us to continue ourbusiness operations. 

## * Our ability to increase profitability and sustain a cash flow level that will ensure support for continuing operations. 

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES Ourdiscussion and analysis ofthe fmancial condition and results ofoperations are based upon our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation ofthese financial statements requires us to make estimates andjudgments that affect the reported amounts ofassets, liabilities, revenue and expenses, and related disclosure ofcontingent assets and liabilities. On an ongoing basis, we evaluate estimates. We base our estimates on historical experience and on various other assumptions that are believed to bereasonable under the circumstances. These estimates and assumptions provide abasis for making j.entsabout the carrying values ofassets and liabilities that are not readily apparent from other sources. Actual results may differ from t timates under different assumptions or conditions, and these differences may be material. Critical accounting policies that affect our 1. ignificantjudgments and estimates used in the preparation ofourconsolidated financial statements are discussed in the footnotes to the financial statements comprising a part ofthis report. 

### RESULTS OF OPERATIONS Financial results for the quarter ended March 31, 2011 are not directly comparable to financial results for the quarter ended March 31,2010. During August 2010, we completed the acquisition ofTwin Air Calypso Limited, Inc. ("TAC Limited"). TAC Limited operates air carrier amd air charter services. This acquisition appreciably affected the financial results for the quarter ended March 31, 2011compared to the financial results for the quarter ended March 31, 20I

### O. QUARTER ENDED MARCH 31, 2011 COMPARED TOTHE QUARTERENDED MARCH 31, 2010 REVENUES. Revenues for the first quarter 2011 were $585,735 (consisting of$584,442 in revenues from aviation operations and $1,293 in revenues from oil and gas operations) compared to revenues of$101,518 for the first quarter 2010 (consisting of$100,428 in revenues from aviation operations and $1,090 in revenues from oil and gas operations). The increase in aviation operations in the first quarter of2011 from the first quarter of2010 resulted from the acquisition ofTwin Air Calypso Limited and additional business for Twin Air Calypso Services. EXPENSES. Costs and expenses for the frrst quarter 2011 were $ 553,442 comparedto costs and expenses of$702,959 for the first quarter 2010. This decrease in costs and expenses reflects the following: 

## *$417,220 in costs ofgoods sold in the frrst quarter 20II compared to $60,619 in costs ofgoods sold in the first quarter 2010 as the volume of services provided increased. 

## *.962in selling, general and administrative expenses including stock based compensation in the first quarter 2011 comparedto $638,800 i; expenses in the frrst quarter 2010; ofthe $638,800, $450,000 relates to the issuance of 15.0 million shares ofour common stock to our fOlIller President and ChiefExecutive Officer in connection with the re-negotiation ofthis officer's verbal employment agreement. NET INCOME. As a result ofaviation related revenues, the net income of$21,183 for the first quarter 2011 represents a swing of$622,624 from the net loss of$601,441 for the first quarter 2010.

### LIQUIDITY AND CAPITAL RESOURCES As ofMarch 31, 2011, we had a working capital deficiency ofapproximately $865,682. Currently, we have limited financial ability to pursue our new businessplan. In addition to stabilizing our two existing businesses, our immediate financial goal is to raise approximately $350,000 to c.etethe scheduled maintenance and refurbishing ofourremaining eight aircraft. Although we are now seeking to raise this amount, we ) 0 assurance that we will be able to do so. We believe that, once these aircraft are flying again, our goal ofstabilizing our existing**b~** .**~** ess can be accomplished, and we can start considering the resumption ofour original business plan ofacquiring other businesses. Once the stabilization is accomplished (ifat all), we begin trying to determine the scope ofthe business activities that we will pursue in the foreseeable future. The amount ofcapital that we will need depends onthe scope ofthe business activities that we ultimately decide topursue. This scope is uncertain at this time. However, we know that wemust obtain additional financing to pursue ourbusiness plan at any level that we are likely to pursue. We are currently searching for sources offinancing, butwe currently do not have any binding commitments for, or readily available sources of, fmancing. We cannot assure anyone that financing will be available to us when needed or, ifavailable, that such fmancing can be obtained on commercially reasonably terms. Ifwe do not obtain financing we will be constrained to contract the scope ofour business plan, Under certain circumstances, we may be constrainedto attempt to sell some ofour assets. However, we cannot assure anyone that we will be able to find interestedbuyers orthat the funds received from any such sale would be adequate to fund ouractivities. Under certain circUIIlstances, we could be forced to cease our operations and liquidate ourremaining assets, ifany. Our independent certified public accountant has added an emphasis paragraph to its report on our consolidated financial statements for the year ended December31, 2010 regarding ourability to continue as a going concern. Key to this determination is ourhistorical losses of$1,016,664 in 2010 and $988,990 in 2009. Management plans to try to fund our company partially through the raising ofcapital through the sale ofour equity instruments or issuance ofdebt, although there can be no assurance ofsuccess in this regard. Moreover, managementplans on additional revenues from operations from ourbusiness as a source to finance our company, although there can be no assurance ofthat these revenues will materialize at the expected rates. There can be no assurance that we will be successful in achieving these objectives, becoming profitable or continuing ourbusiness without either a temporary interruption or a permanent cessation. 

### Recent ConvertibleDebt Asher Notes. Commencing on April 19, 2010, we entered into a series oftransactions in which we issued five convertible promissory Asher Notes (singly a "Asher Note" and collectively the "AsherNotes") to Asher Enterprises, Inc. ("Asher") in consideration ofcertain amounts loaned by Asherto us. The following table gives the designations to whichthe Asher Notes are referred hereinafter, the dates ofthe Asher Notes, the original principal amounts ofthe AsherNotes, and the scheduled maturity dates ofthe AsherNotes:



# • DESIGNATION ISSUANCE ORIGINAL PRINCIPAL MATURITY OF NOTE DATE OF NOTE AMOUNT OF NOTE DATE OF NOTE

------- 

### ------------ -------------- ------------ First 4/19/2010 $50,000 1/21/2011 Second 6/1/2010 $25,000 3/31/2011 Third 8/31/2010 $40,000 6/2/2011 Fourth 10/21/2010 $35,000 7/25/2011 Fifth 12/20/2010 $45,000 9/22/2011

------- TOTAL $195,000 While the terms ofthe Asher Notes vary somewhat, these terms are generally the same from note to note. The following is a description ofthe terms ofthe AsherNotes. Each ofthe Asher Notes bears regular interest at arate of8%per annum, with a default rate of22%per annum. The AsherNotes are unsecured, and each ofthem is due and payable on orbefore theirrespective maturity dates. At any time prior to the payment in full ofthe entire balance ofan AsherNote, Asherhas the option ofconverting all or any portion ofthe unpaidbalance ofthe AsherNote into shares of our common stock at a conversion price discussedhereafter. Nevertheless, Asher is notentitled to convert any portion ofan Asher Note to the extent that the shares to be issued in connection therewith would cause Asher's beneficial ownership ofourcommon stock to exceed 4.99% of the outstanding shares ofour common stock. Each conversion price for the AsherNotes features a "variable" conversion price, and the First and Second Asher Notes also feature a "fixed" conversion price of$.002, which will apply ifit is less than the related variable conversion price. The variable conversion price is a percentage discount from an average ofthe three lowest closing bid prices ofourcommon stock for the 10 most recent trading days preceding the date ofexercise. The percentage discounts for the variable conversion prices provided for in the Asher Notes range from 42% for the First AsherNote, 50% for the Second, Third and Fourth Asher Notes, and 55% for the Fifth Asher Note. BAeofthe operation ofthe floating conversion price and the limitation on the ability ofAsher to convert as described above, we are unable tt**~ine** at any time that numberofshares into which Asher could convert one or more ofthe Asher Notes. Nevertheless, based on the "fIx.ed" conversion price of$.002, Asher could convert the remaining outstanding balance ofthe AsherNotes indicated below into at least 50.0 million shares ofthe Company's common stock The Asher Notes (and related documentation) contain customary representations and warranties, customary affirmative and negative covenants, customary anti-dilution provisions, and customary events ofdefault that entitle Asherto accelerate the due date ofthe unpaid principal amount of, and all accrued and unpaid interest on, the AsherNotes. A default on any ofthe Asher Notes could lead to certain penalties, including anobligation to (a) pay all ofthe following, plus an additional 50% of(i) default interest, (ii) othermonetary penalties, and (iii) the outstanding balance on the related AsherNote, and (b) to issue shares ofour common stock to satisfy the amount computed in accordance with (a) immediately preceding.

_ encing October 25,2010, Asherbegan converting some ofthe Asher Notes. As ofthe date ofthe Report, Asherhad converted an

. ate principal amount ofthe Asher Notes equal to $95,000 into 59,871,292 shares ofour common stock, leaving an aggregate outstanding p. .v pal amount ofthe AsherNotes equal to $100,000 as ofMay 6, 2011. The First and Second AsherNotes have been fully converted, while the Third Asher Note has been partially converted. SchulleNotes. OnJuly 1,2010,we issued a convertible promissory note inthe original principal amount of$70,000 (the "First Schulle Note") to Henry L. Schulle, a consultant to us ("Schulle"), in lieu ofcash for consulting services provided by Schulle to us. On January 31, 2011, we issued a second convertible promissory note in the original principal amount of$60,000 (the "Second Schulle Note") to Schulle, in lieu ofcash for consulting services provided by Schulle to us. We believes thatthe execution and delivery ofthe First Schulle Note was probably not material enough to require the filing ofthis Report, but that upon the execution and delivery ofthe Second Schulle Note, the First Schulle Note and the Second Schulle Note (taken as a whole) were material enough to require the filing ofthis Report. While the terms ofthe two notes vary somewhat, these terms are generally the same from note to note. The following is a description ofthe terms ofthe two notes. Each ofthe Schulle Notes bears regular interest ata rate of8 and 

### 1/2% per annum. The Schulle Notes are unsecured, and each ofthem is due and payable oneyear after the date oftheir respective issuances. At any time prior to the payment in full ofthe entire balance ofa Schulle Note, Schulle has the option, upon a 65-days notice, ofconverting all or any portion ofthe unpaid balance ofthe Schulle Note into shares ofour common stock at a conversion price discussed hereafter. Each conversion price for the Schulle Notes features a "variable" conversion price and also a "fixed" conversionprice of$.04, which will apply ifit is less than the related variable conversion price. The variable conversion price is the closing tradingprices ofour common stock for the mostrecent trading days preceding the date ofexercise; provided, however, that the variable conversion price has a minimum floor of$.005 per share. Inview ofour most recent closing trading prices and the minimum variable conversion price, Schulle could convert the two Schulle Notes into an aggregate of26.0million shares. The Schulle Notes contain customary representations and warranties, registration rights, customary anti-dilution provisions, and customary events ofdefault that entitle Schulle to accelerate the due date ofthe unpaid principal amount of, and all accrued and unpaid interest on, the Schulle Notes. On May 2, 2011, Schulle converted $40,000 oftheprincipal amount ofthe First Schulle Notes into 8.0 million shares ofour common stock, leaving an aggregate outstanding principal amount ofthe Schulle Notes equal to $90,000.



# e LegacyDebt We have outstanding the following notes that became due andpayable on December 1,2008. These notes have an aggregateprincipal amount totaling $624,771plus accrued interest ofas ofApril 13, 2011. We are currently exploring ways to satisfy these amounts. (a) Note payable to Mary Pollock Merritt, daughter ofour former chiefexecutive officer. This note bears interest at rates of 12% peryear and became due on December 31,2008. This note is not collateralized. The current outstanding balance on this note as ofApril 13, 2011 was $103,683, plus accrued interest. 

### (b) Notepayable to Charles Pollock, ourformer chiefexecutive officerand a significant stockholder ofours. This note bears interest of 12% peryear andbecame due on December 31, 2008. This note is not collateralized. The current outstanding balance on this note as ofApril 13, 2011 was $400,911, plus accrued interest. (c) Notepayable to Mark Weller, ourformer president and a significant stockholderofours. This note bears interest of 12% peryear and became due on December 31,2008. This note is not collateralized. The outstandingbalance onthis note as ofApril 13,2011 was $112,169, plus accrued interest. OFF-BALANCE SHEET ARRANGEMENTS We have no offbalance sheet arrangements. OIL AND GAS ASSETS Management is currently exploring options for ourremaining oil and gas assets, which may include a sale ofit or a spin-offofthem to shareholders, so that management can devote its entire attention to our current aviation business. re4T. CONTROLS AND PROCEDURES. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES As ofthe end ofthe period ofthis report, ourprincipal executive and principal financial officer carried out an evaluation ofthe effectiveness of the design and operation ofour disclosure controls and procedures. This evaluation was carried out under the supervision and with theparticipation ofourmanagement, including our ChiefExecutive Officer and ChiefFinancial Officer. We have concluded, based on that evaluation, that, as ofsuch date, the disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is accumulated and communicated to our management, including our ChiefExecutive Officer and ChiefFinancial Officer, as appropriate to allow timely decisions regarding required 

# E i osure. Management identified significant deficiencies with respect to the timely public reporting ofevents requiring such reporting. During ese deficiencies causedus to file late five Current Reports on Form 8-K, and during 2011 thus far they have caused us to file late three \.**~** t Reports onForm 8-K. Some ofthe late filings resulted from the failure ofrelevant company personnel to understand the need for prompt disclosure. We are trying to institute the following corrective action to ensure that such events are timely reported publicly: 

## *The adoption ofa disclosure policy requiring ourpersonnel to communicate to a designated committee for evaluation any information potentially material and thereby requiring public disclosure; 

## *The development ofa basic program to educate management as to the events requiring expedited disclosure; 

## *To avoid late disclosure ofevents requiring expedited disclosure, the adoption ofcertain procedures, such as required consultation with securities counsel before issuing any equity shares, entering into any agreement that may be material, taking any action at a Board ofDirectors meeting orthe like; and 

## *To avoid late filings ofdocuments having regular due dates (such as Annual Reports on Form 10-K and Quarterly Reports onForm lO-Q), the establishment oftimelines within which ourprofessional personnel will strive to work. Budgetlimitations have impaired our ability to institute the corrective action described above. Because the implementation ofsuch corrective action was not completed as ofthe endofthe period ofthis report, the significant deficiencies that we identified still existed as ofthe end ofthe period ofthis report. LIMITATIONS ON EFFECTIVENESS OF CONTROLS AND PROCEDURES Ourmanagement, including our ChiefExecutive Officer and ChiefFinancial Officer, does not expect that our disclosure controls and procedures orour internal controls will prevent all error and all fraud. A control system, no matterhow well conceived and operated, can provide only reasonable, not absolute, assurance thatthe objectives ofthe control system are met. Further, the design ofa control system must reflect the fact that there are resource constraints and the benefits ofcontrols must be considered relative to theircosts. Because ofthe inherent limitations in all control systems, no evaluation ofcontrols canprovide absolute assurance that all control issues and instances offraud, ifany, within our company have been detected. These inherent limitations include, but are not limited to, the realities thatjudgments in decisionmaking can be faulty and thatbreakdowns can occurbecause ofsimple error ormistake. Additionally, controls canbe circumvented by the**~ual** acts ofsome persons, by collusion oftwo ormore people, orby management override ofthe control. The design ofany system of**(~s** also is based inpart upon certain assumptions aboutthe likelihood offuture events and there can be no assurance that any design will s..._veed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because ofchanges in conditions, orthe degree ofcompliance with the policies orprocedures may deteriorate. CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There have not been any changes in ourinternal control over financial reporting, as such term is defined in Rules 13a-15(t) and 15d-15(t) under the Exchange Act, during the period ofthis report that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. PART II OTHERINFORMATION ITEM 6. EXHIBITS. (a) The following exhibits are filed with this Quarterly Report or are incorporated herein by reference: Exhibit NumberDescription
10.01 31.01 31.02 

# • 32.01 32.02 Form of 8% Convertible Note made payable by us to Asher Enterprises,

. Inc.

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934. Certification Pursuant to 18 U.S.C. Section 1350, as pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Certification Pursuant to 18 U.S.C. Section 1350, as pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant hasduly caused this Report to be signed on its behalfby the undersigned, thereunto duly authorized. 

# •

May 16, 2011 

# •

• AVSTARAVIATION GROUP, INC. (Registrant) By: /s/ Clayton I. Gamber Clayton I. Gamber, Chief Executive Officer (Principal Executive Officer) By: /s/ Robert Wilson Robert Wilson, Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NORTHE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ORAPPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED ORASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FORTHE

• TIES UNDERTHE SECURITIES ACT OF 1933, AS AMENDED, OR 

### (B) AN OPINION OF COUNSEL (WHICH COUNSEL

, BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLEFORM, THATREGISTRATION IS NOTREQUIRED \. R SAID ACT OR (II) UNLESS SOLD PURSUANTTO RULE 144 ORRULE 144A UNDER SAID ACT. NOTWITHSTANDING THEFOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDEMARGIN ACCOUNT OROTHER LOAN ORFINANCING ARRANGEMENT SECURED BY THE SECURITIES. Principal Amount: $
_____Issue Date:
_____ _ ,201 Purchase Price: $
____ _ CONVERTIBLE PROMISSORY NOTE FORVALUEDECEIVED, AVSTARAVIATION GROUP, INC., a Colorado corporation (hereinafter called the "Borrower"), hereby promises to payto the order ofASHERENTERPRISES, INC., a Delaware corporation, orregistered assigns (the "Holder") the sum of $ together with any interest as set forth herein, on ,201_(the "Maturity Date"), and to pay interest onthe unpaidprincipal balance hereofatthe rate of percent**~%)** (the "Interest Rate") per annum from the date hereof(the "Issue Date") until the same becomes due andpayable, whether at maturity or upon acceleration orbyprepayment orotherwise. This Note may notbe prepaid in whole orin part. Any amount ofprincipal orinterest on this Note which is not paidwhen due shall bear interest at the rate of

________percent ( %)per annum from the due date thereofuntil the same is paid ("Default Interest"). Interest shall commence accruing on the Issue Date, shall be computed onthe basis ofa 365-day yearand the actual number ofdays elapsed. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money ofthe United States ofAmerica. All payments shall be made at such address as the Holder shall hereafter give to the Borrowerby written notice made in accordance with the provisions ofthis Note. Whenever any amount expressed to be due by the terms ofthis Note is due on any day which is not a business day, the same shall insteadbe due onthe next succeeding day which is a business day and, in the case ofany interest payment date which is not the date on which this Note is paidin full, the extension ofthe due date thereofshall not be taken into account for purposes ofdetermining the amount ofinterest due on such date. As used in this Note, the term "business day" shall mean any day otherthan a Saturday, Sunday or a day onwhich commercial banks in the city ofNew York, New York are authorized orrequired by law or executive orderto remain closed. Each capitalized term used herein, and not otherwise defmed, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued**(~urchase** Agreement"). '1

# ~ote is free from all taxes, liens, claims and encumbrances with respect to the issue thereofand shall not be subject to preemptive rights or other similarrights ofshareholders ofthe Borrower and will not impose personal liability upon the holder thereof. The following terms shall apply to this Note: ARTICLE I. CONVERSION RIGHTSIARTICLE I. CONVERSION RIGHTS 1.1 Conversion Right. The Holder shall have the right from time to time, and at any time during the periodbeginning onthe date ofthis Note and ending on the later of: (1) the Maturity Date and (ii) the date ofpayment ofthe Default Amount (as defined in Article III) pursuant to Section 1.6(a) orArticle III, each in respect ofthe remaining outstanding principal amount ofthis Note to convert all or any part ofthe outstanding andunpaidprincipal amount ofthis Note into fully paid and non-assessable shares ofCommon Stock, as such Common Stock exists onthe Issue Date, or any shares ofcapital stock orother securities ofthe Borrowerinto which such Common Stock shall hereafterbe changed orreclassified atthe conversion price (the "Conversion Price") determined as provided herein (a "Conversion"); provided however that in no event shall the Holder be entitled to convert any portion ofthis Note in excess ofthatportion ofthis Noteupon conversion ofwhich the sum of(1) the number ofshares ofCommon Stock beneficially owned by the Holder and its affiliates (otherthan shares ofCommon Stock which maybe deemed beneficially ownedthrough the ownership ofthe unconverted portion ofthe Notes orthe unexercised orunconverted portion ofany other security ofthe Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number ofshares ofCommon Stock issuable upon the conversion ofthe portion ofthis Note with respectto which the determination ofthis proviso is being made, wouldresult in beneficial ownership by the Holder and its affiliates ofmore than 4.99% ofthe outstanding shares ofCommon Stock. Forpurposes ofthe proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) ofthe Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13DG thereunder, except as otherwise provided in clause 

### (1) ofsuch proviso, provided, further, however, that the limitations on conversion maybe waived by the Holderupon, at the election ofthe Holder, not less than 61 days' prior notice to the Borrower, and the provisions ofthe conversion limitation shall continue to apply until such 61 st day (or such laterdate, as determined by the Holder, as maybe specified in such notice ofwaiver). The number ofshares ofCommon Stock to be issued upon each conversion ofthis Note shall be determined by dividing the CAsion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice ofconversion, in t1

# Wn attached hereto as Exhibit A (the "Notice ofConversion"), delivered to the Borrowerbythe Holder in accordance with Section 1.4 below; provided that the Notice ofConversion is submittedby facsimile (orby othermeans resulting in, orreasonably expected to result in, notice) to the Borrowerbefore 6:00 p.m., New York, New York time on such conversion date (the "Conversion Date"). The term "Conversion Amount" means, with respect to any conversion ofthis Note, the sum of

### (1) the principal amount ofthis Note to be converted in such conversion plus (2) atthe Borrower's option, accrued and unpaid interest, ifany, on suchprincipal amount at the interestrates provided in this Note to the Conversion Date, provided, however, that the Company shall have the rightto pay any orall interest in cashplus (3) atthe Borrower's option, Default Interest, ifany, on the amounts referred to in the immediately preceding clauses 

### (1) and/or (2) plus (4) at theHolder's option, any amounts owed to the Holderpursuant to Sections 1.3 and 1.4(g) hereof. 1.2 ConversionPrice
.

• cutation ofConversion Price. The Conversion Price shall be the lesser of: 

### (1) the Variable Conversion Price (as defined herein) and (ii) 1 ed Conversion Price (as defined herein) (subject, in each case, to equitable adjustments for stock splits, stock dividends orrights Olu;rings by the Borrowerrelating to the Borrower's securities orthe securities ofany subsidiary ofthe Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall meanthe Applicable Percentage (as defined herein) multiplied bythe Market Price (as defined herein). "Market Price" means the average ofthe lowest three (3) TradingPrices (as defined below) for the Common Stock during the ten (lO) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sentby the Holder to the Borrower via facsimile (the "Conversion Date"). "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the "OTCBB") as reported by a reliable reporting service ("Reporting Service") mutually acceptable to Borrower and Holder andhereafter designated by Holders ofa majority in interest ofthe Notes and the Borrower or, ifthe OTCBB is not the principal trading market for such security, the closing bidprice ofsuch security on the principal securities exchange or trading market where such security is listed ortraded or, ifno closing bidprice ofsuch security is available in any ofthe foregoing manners, the average ofthe closingbidprices ofany marketmakers for such security that are listed in the "pink sheets" by the National Quotation Bureau, Inc. Ifthe Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders ofa majority in interest ofthe Notes being converted for which the calculation ofthe TradingPrice is required inorder to determine the ConversionPrice of suchNotes, "Trading Day" shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. "Applicable Percentage" shall mean __ 

### %. "Fixed Conversion Price" shaH mean $0.
__. (b) ConversionPrice During MajorAnnouncements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes apublic announcement that it intends to consolidate ormerge with any other corporation (otherthan a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all ofthe assets ofthe Borroweror(ii) any person, group orentity (including the Borrower) publicly announces a tender offerto purchase 50% or more ofthe Borrower's Common Stock (or any othertakeover scheme) (the date ofthe announcement referred to in clause (1) or (ii) is hereinafter referred to as the "Announcement Date"), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defmed below), be equal to the lower of (x. Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion P at would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the ConversionPrice shall be (. ined as set forth in this Section 1.2(a). Forpurposes hereof, "Adjusted Conversion Price Termination Date" shaH mean, with respect to any proposedtransaction or tender offer (ortakeover scheme) for which apublic announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case ofclause (i) above) orthe person, group or entity (in the case ofclause (ii) above) consummates orpublicly announces the termination or abandonment ofthe proposed transaction ortender offer (or takeover scheme) which caused this Section 1.2(b) to become operative. 1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrowerwill reserve from its authorized andunissued Common Stock a sufficient number ofshares, free from preemptive rights, toprovide for the issuance ofCommon Stock upon the full conversion ofthis Note issued pursuant to the Purchase Agreement. The Borroweris required at all times to have authorized and reserved three times the number ofshares that is actually issuable upon full conversion ofthe Note (based on the Conversion Price ofthe Notes in effect from time to time) (the "Reserved Amount"). The Reserved Amount shall be increased from time to time in accordance with the Borrower's obligations pursuant to Section4(g) ofthe Purchase Agreement. The Borrowerrepresents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, ifthe Borrower shall issue any securities ormake any changeto its capital structure which would change the number ofshares ofCommon Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make properprovision so that thereafter there shall be a sufficient number ofshares ofCommon Stock authorized and reserved, free from preemptive rights, for conversion ofthe outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion ofthis Note, and (ii) agrees that its issuance ofthis Note shall constitute full authority to its officers and agents who are charged with the duty ofexecuting stock certificates to execute and issue the necessary certificates for shares ofCommon Stock in accordance with he terms and conditions ofthis Note. If, at any time a Holder ofthis Note submits a Notice ofConversion, and the Borrower does not have sufficient authorized but unissued shares ofCommon Stock available to effect such conversion in accordance with the provisions ofthis Article I (a "Conversion Default"), the Borrower shall issue to the Holder all ofthe shares ofCommon Stock which are then available to effect such conversion. The portion ofthis Note which the Holder included in its Conversion Notice and which exceeds the amount which is then convertible into available shares of co.nStock (the "Excess Amount") shall, notwithstanding anythingto the contrary contained herein, not be convertible into Common Stock 

### ir dance with the terms hereofuntil (and atthe Holder's option at any time after) the date additional shares ofCommon Stock are at. ,zedby the Borrowerto permit such conversion, at which time the ConversionPrice in respect thereofshall be the lesser of(i) the Conversion Price on the Conversion Default Date (as definedbelow) and (ii) the Conversion Price onthe Conversion Date thereafter elected by the Holder in respect thereof. 

### In addition, the Borrower shall pay to the Holderpayments ("Conversion Default Payments") for a Conversion Default in the amount of(x) the sum of(1) the then outstanding principal amount ofthis Note plus (2) accrued and unpaid interest on the unpaidprincipal amount ofthis Note throughThe Authorization Date (as defined below) plus (3) Default Interest, ifany, on the amounts referred to in clauses 

### (1) and/or (2), multiplied by (y) ._'multiplied by (z) (N/365), where N = the number ofdays from the day the holdersubmits a Notice ofConversion giving rise to a Conversion Default (the "Conversion Default Date") to the date (the "Authorization Date") that the Borrowerauthorizes a sufficient number ofshares ofCommon Stock to effect conversion ofthe full outstanding principal balance ofthis Note. The Borrower shall use its best efforts to authorize a sufficient number ofshares ofCommon Stock as soon as practicable following the earlier of(i) such time that the Holdernotifies the Borrower orthat the Borrower otherwise becomes aware that there are or likely will be insufficient authorized and unissued shares to allow full conversion thereofand (ii) a Conversion Default. The Borrower shall sendnotice to telderofthe authorization ofadditional shares ofCommon Stock, the Authorization Date and the amount ofHolder's accrued Conversion 1 t Payments. The accrued Conversion Default Payments for each calendarmonth shall be paid in cash or shall be convertible into Common Stock (at such time as there are sufficient authorized shares ofCommon Stock) at the applicable Conversion Price, at the Borrower's option, as follows: (a) Inthe event Holder elects to take such payment in cash, cash payment shall be made to Holder by the fifth (5th) day ofthe month following the month in which ithas accrued; and (b) Inthe event Holder elects to take such payment in Common Stock, the Holdermay convert suchpayment amount into Common Stock at the ConversionPrice (as in effect at the time ofconversion) at any time after the fifth day ofthe month following the month in which ithas accrued in accordance with the terms ofthis Article I (so long as there is then a sufficient number ofauthorized shares ofCommon Stock). The Holder's election shall be made in writing to the Borrower at any time prior to 6:00 p.m.,New York, New Yorktime, on the third day of the month following the month in which Conversion Defaultpayments have accrued. Ifno election is made, the Holder shall be deemed to have elected to receive cash. Nothing herein shall limit the Holder's right to pursue actual damages (to the extent in excess ofthe Conversion Default Payments) for the Borrower's failure to maintain a sufficientnumber ofauthorized shares ofCommon Stock, and each holder shall have the right to pursue all remedies available at law or in equity (including degree ofspecific performance and/or injunctive relief). 1.4 Method ofConversion. (a) Mechanics ofConversion. Subject to Section 1.1, this Note maybe convertedby the Holder iii whole orinpart at any time from time to time afterthe Issue Date, by (A) submitting to the Borrowera Notice ofConversion (by facsimile orotherreasonable means ofcommunication dispatched onthe Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subjectto Section 1.4(b), surrenderingthis Note at the principal office ofthe Borrower. (b) Surrender ofNote Upon Conversion. Notwithstanding anything to the contrary setforth herein, upon conversion ofthis Note in accordance \\eeterms hereof, the Holder shall not be required to physically surrender this Note to the Borrowerunless the entire unpaidprincipal t ofthis Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates ofsuch conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender ofthis Note upon each such conversion. In the event ofany dispute or discrepancy, such records ofthe Borrower shaH, primafacie, be controlling and determinative in the absence ofmanifest error. Notwithstanding the foregoing, ifany portion ofthis Note is converted as aforesaid, the Holdermay not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrowerwill forthwith issue and deliver upon the order ofthe Holder a new Note oflike tenor, registered as the Holder (upon paymentby the Holder ofany applicable transfer taxes) may request, representing in the aggregate the remaining unpaidprincipal amount ofthis Note. The Holder and any assignee, by acceptance ofthis Note, acknowledge and agree that, by reason ofthe provisions ofthis paragraph, following conversion ofa portion ofthis Note, the unpaid andunconvertedprincipal amount ofthis Note represented by this Note may be less than the amount stated on the face hereof. (c) Payment ofTaxes. The Borrower shall not be required to pay any tax which may bepayable in respect ofany transfer involved in the issue and delivery ofshares ofCommon Stock orother securities orproperty on conversion ofthis Note in a name otherthan that ofthe Holder (orin street name), andthe Borrower shall not be required to issue or deliver any such shares orother securities orproperty unless and until the person orpersons (otherthan the Holder orthe custodian in whose street name such shares are to be held for the Holder's account) requesting the issnance thereofshall have paid to the Borrowerthe amount ofany such tax or shall have established to the satisfaction ofthe Borrowerthat such tax has been paid. (d) Delivery ofCommon Stock Upon Conversion. Uponreceiptby the Borrower from the Holder ofafacsimile transmission (or other reasonable means ofcommunication) ofa Notice ofConversion meetingthe requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order ofthe Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after suchreceipt (and, solely in the case ofconversion ofthe entire unpaid principal amount hereof, surrender ofthis Note) (such second business day being hereinafterreferred to as the "Deadline") in accordance with the terms hereofand the Purchase Agreement (including, without limitation, in accordance with the requirements of[Section 2(g)] ofthe Purchase Agreement that certificates for shares ofCommon Stock issued on or afterthe effective date ofthe Registration Statementupon co.ionofthis Note shall notbear any restrictive legend). (e.gationofBorrower to Deliver Common Stock. Upon receipt by the Borrower ofaNotice ofConversion, the Holder shall be deemed to be the holder ofrecord ofthe Common Stockissuable upon such conversion, the outstandingprincipal amount and the amount ofaccrued and unpaid interest onthis Note shall be reduced to reflect such conversion, and, unless the Borrowerdefaults on its obligations under this Article I, all rights with respect to the portion ofthis Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash orother assets, as herein provided, on such conversion. Ifthe Holder shall have given a Notice ofConversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective oftheabsence ofany action by the Holder to enforce the same, any waiver or consent withrespect to anyprovision thereof, the recovery ofany judgmentagainst anyperson or any action to enforce the same, any failure or delay in The enforcement ofany other obligation ofthe Borrower to the holder ofrecord, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or allegedbreachby the Holder ofany obligation to the Borrower, and irrespective ofany other circumstance which might otherwise limit such obligation ofthe Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice ofConversion shall be the Conversion Date so long as tetice ofConversion is received bythe Borrowerbefore 6:00 p.m., New York, New York time, on such date. (f) Delivery ofCommon Stockby Electronic Transfer. In lieu ofdelivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request ofthe Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversionto the Holderby creditingthe account ofHolder's Prime Brokerwith DTC through its DepositWithdrawal Agent Commission ("DWAC") system. (g) Failure to Deliver Common StockPriorto Deadline. Without in any way limiting the Holder's right to pursue otherremedies, including actual damages and/or equitable relief, the parties agree that ifdelivery ofthe Common Stock issuable upon conversion ofthis Note is more than three (3) business days after the Deadline (other than a failure dueto the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 perday in cash, for each day beyondthe Deadline that the Borrower fails to deliver suchCommon Stock. Such cash amount shall be paid to Holderby the fifth day ofthemonth following the month in which it has accrued or, atthe option ofthe Holder (by written noticeto the Borrowerbythe first day ofthe month following the month in which ithas accrued), shall be added to the principal amount ofthis Note, in which event interest shall accrue thereon in accordance with the terms ofthis Note and such additional principal amount shallbe convertible into Common Stock 

### in accordance with the terms ofthis Note. 1.5 Concerning the Shares. The shares ofCommon Stock issuable upon conversion ofthis Note maynotbe sold ortransferredunless (i) such shares are sold pursuant to an effective registration statementunderthe Act or (ii) the Borrower orits transfer agent shall have been furnished with an opinion ofcounsel (which opinion shallbe in form, substance andscope customary for opinions ofcounsel in comparable transactions) to the effect that the shares to be sold ortransferred may be sold ortransferred pursuant to an exemption from suchregistration or(iii) such shares are sold ortransferred pursuant to Rule 144 under the Act (or a successorrule) ( Rule 144") or (iv) such shares are transferred to an "affiliate" (as defined in Rule 144) ofthe Borrowerwho agrees to sell orotherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided 

### in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares ofCommon Stockissuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the numberof securities as ofa particular date that canthen be immediately sold, each certificate for shares ofCommon Stock issuable upon conversion of tetethat has not been so included in an effective registration statement orthat has not been soldpursuant to an effective registration !> ent or an exemption thatpermits removal ofthe legend, shall bear a legend substantially in the following form, as appropriate: "NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATENORTHE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLEHAVE BEEN REGISTERED UNDERTHE SECURITIES ACT OF 1933, AS AMENDED, ORAPPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAYNOTBE OFFERED FOR SALE, SOLD, TRANSFERRED ORASSIGNED

# en IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENTFORTHE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THEHOLDER), IN A GENERALLY ACCEPTABLEFORM. THATREGISTRATION IS NOTREQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 ORRULE 144AUNDER SAID ACTNOTWITHSTANDING THEFOREGOING,THE SECURITIES MAY BEPLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OROTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES." The legend set forth above shall be removed andthe Borrower shall issue to the Holder a new certificate therefore free ofany transfer legend if (1) the Borrower or its transfer agent shall have received an opinion ofcounsel, in form, substance and scope customary for opinions ofcounsel in comparable transactions, to the effect that a public sale ortransfer ofsuch Common Stock may be made without registrationunderthe Act and the shares are so sold ortransferred, (ii) such Holderprovides the Borrower orits transfer agent withreasonable assurances that the Common Stockissuable upon conversion ofthis Note (to the extent such securities are deemed to have becn acquired onthe same date) can be soldpursuantto Rule 144 or (iii) in the case ofthe Common Stockissuable upon conversion ofthisNote, such security is registered for saleby the Holderunder an effective registration statement filed underthe Act orotherwise may be soldpursuant to Rule 144 without any restriction as to the numberofsecurities as ofa particular date tat canthen be immediately sold. 1.6. Effect ofCertain Events. (a) Effect ofMerger, Consolidation. Etc. Atthe option ofthe Holder, the sale, conveyance ordisposition ofall or substantially all ofthe assets of

• orr ower, the effectuation bythe Borrower ofa transaction or series ofrelated transactions in which more than 50% ofthe voting power o orrOwer is disposed of, or the consolidation, mergerorotherbusiness combination ofthe Borrowerwith orinto any other Person (as dermed below) or Persons when the Borroweris not the survivor shall either: (i) be deemed tobe an Event ofDefault (as defined in Article III) pursuant to which the Borrowershall be required to pay to the Holder upon the consummation ofand as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. "Person" shall mean any individual, corporation, limited liability company, partnership, association, trust orother entity or organization.(b) Adjustment Due to Merger. Consolidation. Etc. If, at any time when this Note is issued and outstanding andprior to conversion ofall ofthe Notes, there shall be any merger, consolidation, exchange ofshares, recapitalization, reorganization, orother similar event, as aresult ofwhich shares ofCommon Stock ofthe Borrower shall be changed into the same or a different number ofshares ofanother class or classes ofstock or securities ofthe Borrower or another entity, or in case ofany sale or conveyance ofall or substantially all ofthe assets ofthe Borrower other than in connection with a plan ofcomplete liquidation ofthe Borrower, then the Holder ofthis Note shall thereafterhave the right to receive

• onversion ofthis Note, upon the basis andupon the terms and conditions specified herein and in lieu ofthe shares ofCommon Stock i. tiiately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately priorto such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests ofthe Holder ofthis Note to the end that the provisions hereof(including, without limitation, provisions for adjustment ofthe Conversion Price and ofthe number ofshares issuable upon conversion ofthe Note) shall thereafter be applicable, as neatly as may bepracticable in relation to any securities or assets thereafter) deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extentpracticable, thirty (30) days prior written notice (but in any event at least fifteen (15) days priorwritten notice) ofthe record date ofthe special meeting of shareholders to approve, orifthere is no such record date, the consummation of, such merger, consolidation, exchange ofshares, recapitalization, reorganization orother similar event or sale ofassets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor oracquiring entity (ifnot the Borrower) assumes by written instrument the obligations ofthis Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges. (c) Adjustment Due to Distribution. Ifthe Borrower shall declare ormake any distribution ofits assets (orrights to acquire its assets) to holders ofCommon Stock as a dividend, stock repurchase, by way ofreturn ofcapital or otherwise (including any dividend ordistribution to the Borrower's shareholders in cash or shares (orrights to acquire shares) ofcapital stock ofa subsidiary (i.e., a spin-oft» (a "Distribution"), then the Holder ofthis Note shall be entitled, upon any conversion ofthis Note after the date ofrecord for determining shareholders entitledto such Distribution, to receive the amount ofsuch assets which would have been payable to the Holder with respect to the shares ofCommon Stock issuable upon such conversion had such Holderbeen the holder ofsuch shares ofCommon Stock on the record date for the determination of shareholders entitled to such Distribution. (d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrowerissues or sells, orin accordance with this Section 1.6(d) hereofis deemed to have issued or sold, any shares ofCommon Stock for no consideration or for a consideration per share (before deduction ofreasonable expenses or commissions orunderwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date ofsuch issuance (or deemed issuance) ofsuch shares ofCommon Stock (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount ofthe consideration per seeceivedby the Borrower in such Dilutive Issuance. The Borrower shall be deemedto have issued or sold shares ofCommon Stock ifthe Borrowerin any manner issues orgrants any warrants, rights oroptions (not including employee stock option plans), whetherornot immediately exercisable, to subscribe for orto purchase Common Stock orother securities convertible into or exchangeable for Common Stock ("Convertible Securities") (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafterreferred to as "Options") and the price per share for which Common Stockis issuable upon the exercise ofsuch Options is less than the Conversion Price then in effect, then the Conversion Price shallbe equal to such price pershare. Forpurposes ofthe preceding sentence, the "price per share for which Common Stock is issuable upon the exercise ofsuch Options" is determined by dividing (i) the total amount, ifany, received orreceivable by the Borroweras consideration for the issuance or granting ofall such Options, plus the minimum aggregate amount ofadditional consideration, ifany, payable to the Borrowerupon the exercise ofall such Options, plus, in the case ofConvertible Securities issuable upon the exercise ofsuch Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereofat the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number ofshares ofCommon Stock issuable upon the exercise ofall such Options (assuming the conversion ofConvertible Securities, ifapplicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise ofsuch Options or upon the conversion or exchange ofConvertible Securities issuable upon exercise of such Options. Additionally, the Borrower shall be deemed to have issued or sold shares ofCommon Stock ifthe Borrowerin any manner issues or sells any Convertible Securities, whether or not immediately convertible (otherthan where the same are issuable upon the exercise ofOptions), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. Forthe purposes ofthe preceding sentence, the "price per share for which Common Stock is issuable upon such conversion orexchange" is determinedby dividing (i) the total amount, ifany, received orreceivable by the Borrower as consideration for the issuance or sale ofall such Convertible Securities, plus the minimum aggregate amount ofadditional consideration, ifany, payable to the Borrowerupon the conversion or exchange thereofat the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number ofshares ofCommon Stock issuable upon the conversion or exchange ofall such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance ofsuch Common Stockupon conversion orexchange ofsuch Convertible Securities. (.chaseRights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities orrights to purchase stock, warrants, securities or other property (the "Purchase Rights") pro rata to the record holders ofany class ofCommon Stock, then the Holder ofthis Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired ifsuch Holderhad held the number ofshares ofCommon Stock acquirable upon complete conversion ofthis Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale ofsuch Purchase Rights or, ifno such record is taken, the date as ofwhich the record holders ofCommon Stock are to bedetermined for the grant, issue or sale ofsuch Purchase Rights. (f) Notice ofAdjustments. Upon the occurrence ofeach adjustment orreadjustment ofthe Conversion Price as a result ofthe events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment orreadjustment andprepare and furnish to the Holder 0llrtificate setting forth such adjustment orreadjustment and showing in detail the facts upon which such adjustment orreadjustment is l The Borrower shall, upon the written request at any time ofthe Holder, furnish to such Holder a like certificate setting forth (i) such al.J ment orreadjustment, (ii) the Conversion Price at the time in effect and (iii) the number ofshares ofCommon Stock and the amount, ifany, ofother securities or property which at the time wouldbereceived upon conversion ofthe Note. 1.7 Trading Market Limitations. Unless permittedby the applicable rules and regulations ofthe principal securities market on which the Common Stock is then listed or waded, in no event shall the Borrower issue upon conversion ofor otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreementmore than the maximum numberofshares ofCommon Stock that the Borrowercan issue pursuant to any rule ofthe principal United States securities market on which the Common Stock is thentraded (the "Maximum Share Amount"), which shall be 4.99% ofthe total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subjectto equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount has been issued (the date ofwhich is hereinafterreferred to as the "Maximum Conversion Date"), ifthe Borrower fails to eliminate any prohibitions under applicable law orthe rules orregulations ofany stock exchange, interdealer quotation system orother self-regulatory organization withjurisdiction over the Borrowerorany ofits securities on the Borrower's ability to issue shares ofCommon Stock in excess ofthe Maximum Share Amount (a "Trading Market Prepayment Event"), in lieu ofany further right to convert this Note, and in full satisfaCtion ofthe Borrower's obligations underthis Note, the Borrower shallpay to the Holder, within fifteen (15) business days ofthe Maximum Conversion Date (the "Trading Market Prepayment Date"), an amount equal to 150% times the sum of(a) the then outstanding principal amount ofthis Note immediately following the Maximum Conversion Date, plus (b) accrued and unpaid interest on the unpaid principal amount ofthis Note to the Trading Market Prepayment Date, plus (c) Default Interest, if any, on the amounts referred to in clause (a) and/or (b) above, plus (d) any optional amounts that may be added thereto at the Maximum Conversion Date by the Holder in accordance with the terms hereof(the then outstanding principal amount ofthis Note immediately following the Maximum Conversion Date, plus the amounts referred to in clauses (b), (c) and (d) above shall collectively be referred to as the "Remaining Convertible Amount"). In the event that the sum of(x) the aggregate number ofshares ofCommon Stock issued upon conversion ofthis Note and the otherNotes issued pursuant to the Purchase Agreement plus (y) the aggregate number ofshares ofCommon Stock thatremain issuable upon conversion ofthis Note and the otherNotes issuedpursuant to the Purchase Agreement, represents at least one hundredpercent (100%) of the Maximum Share Amount (the "Triggering Event"), the Borrowerwill use its best efforts to seek and obtain ShareholderApproval (or obtain such otherreliefas will allow conversions hereunder in excess ofthe Maximum Share Amount) as soon as practicable following the 

# 'f..ring Event and before the Maximum Conversion Date. As used herein, "ShareholderApproval" means approval by the shareholders of t rrower to authorize the issuance ofthe full number ofshares ofCommon Stock which would be issuable upon full conversion ofthe then outstandingNotes but for the Maximum Share Amount. 1.8 Status as Shareholder. Upon submission ofa Notice ofConversion by a Holder, (i) the shares covered thereby (otherthan the shares, ifany, which cannotbe issued because their issuance would exceed such Holder's allocated portion ofthe Reserved Amount or Maximum Share Amount) shall be deemed converted into shares ofCommon Stock and (ii) the Holder's rights as a Holder ofsuch convertedportion ofthis Note shall cease and terminate, excepting only the right to receive certificates for such shares ofCommon Stock and to any remedies provided herein or otherwise available at law orin equity to such Holderbecause ofa failure by the Borrowerto comply with the terms ofthis Note. Notwithstanding the foregoing, ifa Holderhas not received certificates for all shares ofCommon Stockpriorto the tenth (10th) business day afterthe expiration ofthe Deadline with respect to a conversion ofany portion ofthis Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder ofCommon Stockby so notifying the Borrower) the Holder shall regain the rights ofa Holder ofthis Note with respect to such unconverted portions ofthis Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, ifthe Note has not been surrendered, adjust its records to reflect that such portion ofthis Note has notbeen converted. In all cases, the Holder shall retain all ofits rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower's failure to convert this Note. ARTICLE II. CERTAIN COVENANTS 2.1 Distributions on Capital Stock. So long as the Borrower'shall have any obligation under this Note, the Borrower shall not without the Holder's written consent (a) pay, declare or set apart for suchpayment, any dividend orother distribution (whether in cash, property or other securities) on shares ofcapital stock otherthan dividends on shares ofCommon Stock solely in the form ofadditional shares ofCommon Stock or (b) directly orindirectly or through any subsidiary make any otherpayment or distribution in respect ofits capital stock except for distributions pursuant to any shareholders' rights plan which is approved by a majority ofthe Borrower's disinterested directors. 2.trictionon Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the HUIUer's written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property orother securities or otherwise) in anyone transaction or series ofrelated transactions any shares ofcapital stock ofthe Borrower or any warrants, rights or options to purchase or acquire any such shares. 2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, create, incur, assume or suffer to exist any liability for borrowed money, except (a) borrowings in existence orcommitted onthe datehereofand ofwhich the Borrowerhas informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors orfinancial institutions incurred in the ordinary course ofbusiness or (c) borrowings, the proceeds ofwhich shall be used to repay this Note. 2.4 Sale ofAssets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder's written 

# c.t sell, lease or otherwise dispose ofany significant portion ofits assets outside the ordinary course ofbusiness. Any consent to the c ition ofany assets maybe conditioned on a specified use ofthe proceeds ofdisposition. 2.5 Advances and Loans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder'S written consent, lend money, give credit ormake advances to any person, firm, jointventure orcorporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates ofthe Borrower, except loans, credits or advances (a) in existence or committed on the date hereofand which the Borrower has informed Holderin writing prior to the date hereof, (b) made in the ordinary course ofbusiness or (c) not in excess of$100,000. 2.6 Contingent Liabilities. So long as the Borrower shall have any obligation underthis Note, the Borrowershall not, withoutthe Holder's written consent, which shall not be unreasonably withheld, assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation ofany person, firm, partnership,jointventure or corporation, except by the endorsement ofnegotiable instruments for deposit orcollection and except assumptions, guarantees, endorsements and contingencies (a) in existence orcommitted on the date hereof and which the Borrowerhas informed Holder inwriting prior to the date hereof, and (b) similar transactions in the ordinary course ofbusiness. ARTICLE III. EVENTS OF DEFAULT Ifany ofthe following events ofdefault (each, an "Event ofDefault") shall occur: 3.1 Failure to Pay Principal or Interest. The Borrowerfails to pay the principal hereofor interest thereon when due on this Note, whether at maturity, upon a Trading Market Prepayment Event pursuant to Section 1.7, upon acceleration or otherwise; 3.2 Conversion and the Shares. The Borrowerfails to issue shares ofCommon Stock to the Holder (or announces orthreatens that it will not honor its obligation to do so) upon exercise by the Holder ofthe conversion rights ofthe Holder in accordance with the terms ofthis Note, fails to transfer or cause its transfer agent to transfer (electronically orin certificated form) any certificate for shares ofCommon Stock issued to the Holder upon conversion oforotherwise pursuant to this Note as and when required by this

### Note, orfails to remove any restrictive legend (orto 

## w.· aw any stop transfer instructions in respect thereof) on any certificate for any shares ofCommon Stockissuedto the Holderupon c ion oforotherwise pursuant to this Note as and when required by this Note (ormakes any announcement, statement orthreat that it Q\.. J ot intend to honorthe obligations described in this paragraph) and any such failure shall continue uncured (or any announcement, statement orthreat not to honor its obligations shall not be rescinded in writing) for three (3) days afterthe Borrower shall have been notified thereofin writing by the Holder; 3.3 Breach ofCovenants. The Borrowerbreaches any material covenant or othermaterial term orcondition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period often (10) days after written notice thereofto the Borrowerfrom the Holder; 3.4 Breach ofRepresentations and Warranties. Any representation or warranty ofthe Borrowermade herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach ofwhich has (or with the passage oftime will have) a material adverse effect on the rights ofthe Holder with respect to this Note or the Purchase Agreement; 3.5 Receiver orTrustee. The Borrower or any subsidiary ofthe Borrower shall make an assignment for thebenefit ofcreditors, orapply for or consent to the appointment ofa receiver ortrustee for it or for a substantial part ofits property orbusiness, or such a receiver ortrustee shall otherwise be appointed; 3.6 Judgments. Any moneyjudgment, writ or similarprocess shall be entered orfiled against the Borrower or any subsidiary ofthe Borrower or any ofits property orother assets for more than $50,000, and shall remain unvacated, unbonded orunstayed for aperiod oftwenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld; 3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or otherproceedings, voluntary orinvoluntary, for relief under any bankruptcy law or any law for the reliefofdebtors shall be instituted by or against the Borrower or any subsidiary ofthe Borrower; 3 .• ·sting ofCommon Stock. The Borrower shall fail to maintain the listing ofthe Common Stock on at least one ofthe OTCBB or an e' nt replacement exchange, the Nasdaq National Market, the Nasdaq Smallcap Market, the New York Stock Exchange, orthe American Stu"J( Exchange; 3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements ofthe Exchange Act; andlor the Borrower shall cease to be subject to the reporting requirements ofthe Exchange Act; or3.10 Liquidation. Any dissolution, liquidation, orwinding up ofBorrower or any substantial portion ofits business. 3.11 Cessation ofOperations. Any cessation ofoperations by BorrowerorBorrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure ofthe Borrower's ability to continue as a "going concern" shall notbe an a_ionthat the Borrower cannot pay its debts as they become due.

# 3~aintenance ofAssets. The failure byBorrowerto maintain any material intellectual property rights, personal, real property orother assets which are necessary to conduct its business (whethernow or in the future). 3.13 Financial Statement Restatement. The restatement ofany fmancial statements filed bythe Borrowerwith the SEC for any date orperiod from two years prior to the Issue Date ofthis Note and until this Note is no longer outstanding, ifthe result ofsuch restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights ofthe Holderwithrespectto this Note or the Purchase Agreement. 3.14 Reverse Splits. The Borrower effectuates a reverse split ofits Common Stock without twenty (20) days priorwritten notice to the Holder. Upon the occurrence and during the continuation ofany Event ofDefault specified in Section 3.1 (solely withrespect to failure to pay the principal hereofor interest thereon when due at the Maturity Date), the Borrower shall payto the Holder, in full satisfaction ofits obligations hereunder, an amount equal to the Default Stun (as defined herein). Upon the occurrence and during the continuation ofany Event ofDefault specified in Sections 3.1 (solely with respect to failure to pay the principal hereofor interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3,2, 3.3, 3.4, 3.6, or 3.8 exercisable through the delivery ofwritten notice to the Borrowerby such Holders (the "DefaultNotice"), and upon the occurrence ofan Event ofDefault specified the remaining sections ofArticles III (otherthan failure to pay the principal hereoforinterest thereon at the Maturity Date specified in Section 3,1 hereof), theNote shall become immediately due and payable and the Borrower shall pay to the Holder, in the satisfaction ofits obligations hereunder, an amount equal to the greaterof(i) 150%times the sum of(w) the then outstanding principal amount ofthis Note plus (x) accrued and unpaid interest on the unpaid principal amount ofthis Note to the date ofpayment (the "Mandatory PrepaymentDate") plus (y) DefaultInterest, ifany, onthe amounts referred to in clauses (w) and/or (x) plus (z) any amounts owedto the Holderpursuant to Sections 1.3 and 1.4(g) hereof(the then outstanding principal amount ofthis Note to the date ofpaymentplus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) the "parity value" ofthe Default Sum to be prepaid, where parity value means (a) the highestnumber of shares ofCommon Stock issuable upon conversion ofor otherwise pursuant to such Default Sum in accordancewith Article I, treating the Trading Day immediately preceding the Mandatory PrepaymentDate as the "Conversion Date" for purposes ofdetermining the lowest**ble** Conversion Price, unless the Default Event arises as a result ofa breach in respect ofa specific Conversion Date inwhich case such ( sion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stockduring the periodbeginning on t e date offirst occurrence ofthe Event ofDefault and ending one day priorto the Mandatory PrepaymentDate (the "Default Amount") and all other amounts payable hereunder shall immediately become due andpayable, all without demand,presentmentornotice, all ofwhich hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, ofcollection, and the Holder shall be entitled to exercise all otherrights andremedies available at law or in equity. Ifthe Borrower fails to pay the Default Amountwithin five (5) business days ofwritten notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrowerremains in default (and so long andto the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu ofthe Default Amount, the number ofshares of Common Stock ofthe Borrowerequal to the Default Amount divided by the Conversion Price then in effect. 

### ARTICLE IV. MISCELLANEOUS

I 4.1 Failure or Indulgence NotWaiver. No failure or delay on the part ofthe Holderin the exercise ofanypower, right orprivilege hereunder shall operate as a waiverthereof, nor shall any single orpartial exercise ofany suchpower, right orprivilege preclude other orfurther exercise

, thereoforofany otherrightpower orprivileges. All rights andremedies existing hereunderare cumulativeto, and not exclusive of, anyrights or remedies otherwise available. 4.2 Notices. All notices. demands, requests, consents, approvals, and othercommunicationsrequired orpermitted hereunder shall be inwriting and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered orcertified, return receipt requested, postageprepaid, (iii) deliveredby reputable air courier service with charges prepaid, or (iv) transmittedby hand delivery, telegram, or facsimile, addressed as set forth below orto such other address as such party shall have specified most recently by written notice. Any notice or other communication required orpermitted to be given hereunder shall be deemed effective (a) upon hand delivery ordelivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address ornumber designated below (ifdelivered on a business day during normal business hours where such notice is to be received), orthe fustbusiness day following such delivery (ifdelivered 

# 0':
on a business day during normal business hours where such notice is to be received) or 

### (b) on the secondbusiness day following the d ailing by express courier service, fully prepaid, addressed to such address, orupon actual receipt ofsuch mailing, whichever shall first**o(,~_.** he addresses for such communications shall be: 

### Ifto the Borrower, to: 

### AVIATION GROUP, INC.

3600 Gessner

- Suite 220Attn: RUSSELL IVY, President facsimile: 516-466-3555 Houston, TX 77063

• copy by fax only to (which copy shall not constitute notice): [enter name oflaw fIrm] Attn: [attorney name] (enter address line 1] [enter city, state, zip] facsimile: [enter fax number]

Attn: Curt Kramer, President facsimile: 516-498-9894 Ifto the Holder: ASHER ENTERPRISES, INC. 1Linden PI., Suite 207 Great Neck, NY. 11021

With a copy by fax only to (which copy shall not constitute notice): Naidich Wurmall Birnbaum & Maday LLP 80 Cuttermill Road. Suite 410 GreatNeck, NY 11021 Attn: Bernard S. Feldman, Esq. facsimile: 516-466-3555 4.3 Amendments. This Note and any provision hereofmay only be amended by an instrument in writing signed by the Borrowerand the Holder. The tenIl "Note" and all reference thereto, as used throughoutthis instrument, shall mean this instrument (and the otherNotes issued pursuant to the Purchase Agreement) as originally executed, oriflateramended or supplemented, then as so amended or supplemented
.

• signability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefIt ofthe Holder successors and assigns. Each transferee ofthis Note must be an "accreditedinvestor" (as defmed inRule 501(a) ofthe 1933 Act). Notwithstanding anything inthis Note to the contrary, this Note may be pledged as collateral in connection with abona fIde margin account or other lending arrangement. 4.5 Cost ofCollection. Ifdefault is made in the payment ofthis Note, the Borrower shall pay the Holderhereofcosts ofcollection, including reasonable attorneys' fees. 4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws ofthe State ofNew York without regard to principles ofconflicts oflaws. Any action broughtby eitherparty against the otherconcerning the transactions contemplated by this Note shall be brought only 

### in the state courts ofNew York orin the federal courts located in the state and county ofNassau. The parties to this Note hereby irrevocably waive any objection tojurisdiction and venue ofany action instituted hereunder and shall not assert any defense based on lack of jurisdiction orvenue orbased upon forum non conveniens. The Borrower and Holder waive trial byjury. The prevailingparty shall be entitledto recover from the otherparty its reasonable attorney's fees and costs. In the event that any provision ofthis Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute orrule oflaw, then such provision shall be deemed inoperative to the extentthat it may conflicttherewith and shall be deemed modifiedto conformwith such statute orrule oflaw. Any suchprovision which may prove invalid orunenforceable under any law shall not affect the validity or enforceability ofany otherprovision of any agreement. Each party hereby irrevocably waives personal service ofprocess and consents to process being served in any suit, action or proceeding in connection with this Agreement orany otherTransaction Documentbymailing a copy thereofvia registered orcertifIed mail or overnight delivery (with evidence ofdelivery) to such party at the address in effect for notices to it underthis Agreement and agrees that such service shall constitute good and suffIcient service ofprocess and notice thereof. Nothing contained herein shall be deemedto limit in any way any right to serve process in any other manner permittedby law. 4.7 Certain Amounts. Wheneverpursuant to this Note the Borrower is required to pay an amount in excess ofthe outstandingprincipal amount (or the portion thereofrequired to be paid at that time) plus accrued and unpaid interestplus Default Interest on such interest, the Borrower and the Holderagree that the actual damages to the Holder from the receipt ofcash payment on this Note maybe diffIcult to detenIline and the

• to be so paid by the Borrowerrepresents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss opportunityto convert this Note and to earn a return from the sale ofshares ofCommon Stock acquired upon conversion ofthis Note at a pn m excess ofthe price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount ofstipulated damages is notplainly disproportionate to the possible loss to the Holderfrom the receipt ofa cashpaymentwithoutthe opportunity to convert this Note into shares ofCommon Stock. 4.8 Purchase Agreement. By its acceptance ofthis Note, each party agrees to be bound by the applicable tenIlS ofthe Purchase Agreement.4.9 Notice ofCorporate Events. Except as otherwise provided below, the Holder ofthis Note shall have no rights as a Holder ofCommon Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with priornotification ofany meeting ofthe Borrower's shareholders (and copies ofproxy materials and other information sent to shareholders). In the event ofany taking by the Borrower ofa record ofits shareholders for the purpose ofdetermining shareholders who are entitled to receive payment ofany di";dend orotherdistribution, any right to subscribe for, purchase orotherwise acquire (including by way ofmerger, consolidation,

• ification orrecapitalization) any share ofany class or any other securities orproperty, orto receive any otherright orfor the purpose of ining shareholders who are entitled to vote in connection with any proposed sale, lease orconveyance ofall orsubstantially all ofthe assets ofthe Borrower orany proposed liquidation, dissolution orwinding up ofthe Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (orthirty (30) days priorto the consummation ofthe transaction or event, whichever is earlier), ofthe date on which any suchrecord is to be taken for the purpose ofsuch dividend, distribution, right or other event, and abriefstatement regarding the amount and character ofsuch dividend, distribution, right orother event to the extent known at such time. The Borrower shall make a public announcement ofany eventrequiring notification to the Holderhereunder substantially simultaneously withthe notification to the Holder in accordance with the terms ofthis Section4.10. 4.10 Remedies. The Borrower acknowledges that a breachby it ofits obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose ofthe transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach ofits obligations underthis Note will be inadequate and agrees, in the event ofabreach orthreatenedbreach by the Borrowerofthe provisions ofthis Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach ofthis Note and to enforce specifically the terms and provisions thereof, without the necessity ofshowing economic loss and without anybond orother securitybeing required. IN WITNESS WHEREOF, Borrowerhas caused this No to e signed in its name by its duly authorized officerthis
_______ _

__ ,201 

### AVSTARAVIATION GROUP, INC. By:.
__________ _ CK.NO.
__________ _ 

### DATE
_________ _ 

# •

•NOTICE OF CONVERSION 

### (To be Executed by the Registered Holder in order to Convert the Notes)**derSigned** 

### hereby irrevocably elects to convert 

### $ principal amount ofthe Note (definedbelow) into shares ofcommon stock, par value per share ("Common Stock"), ofAVSTAR AVIAnON GROUP, INC., a Colorado corporation (the "Borrower") according to tli nditions ofthe convertible note ofthe Borrower dated as of (the "Notes"), as ofthe date written below. Ifsecurities are to be issued in the name ofa person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates. No fee will be chargedto the Holder for any conversion, except for transfer taxes, ifany. A copy ofeach Note is attached hereto (or evidence ofloss, theft ordestruction thereof). The Borrowershall electronically transmit the Common Stock issuable pursuant to this Notice ofConversion to the account ofthe undersigned or its nominee with DTC through its DepositWithdrawal Agent Commission system ("DWAC Transfer"). Name ofDTCPrime Broker: Account



### --------------------------------- Number:
______________________________ ___ In 

### lieu ofreceiving shares ofCommon Stock issuable pursuant to this Notice ofConversion by way ofa DWAC Transfer, the undersigned hereby requests that the Borrower issue a certificate orcertificates for the number ofshares ofCommon Stock set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below or, ifadditional space is necessary, on an attachment hereto: Name:
_______________________Address:
________________________ _ Theundersignedrepresents and warrants that all offers and salesby theundersigned ofthe securities issuable to the undersigned upon conversion ofthe Notes shall be madepursuant to registration ofthe securities underthe Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption from registration under the Act. Date ofConversion: Applicable Conversion Price:
_________________Number ofShares ofCommon Stock to be Issued Pursuant to Conversion ofthe Notes: Signature:
______________________ _ }T



# A Address: ThWc,rrower shall issue and deliver shares ofCommon Stockto an overnight courier not later than three business days following receipt of the original Note(s) to be converted, and shall make payments pursuant to the Notes for the number ofbusiness days such issuance and delivery is late
.



# •EXHIBIT 31.01 CERTIFICATIONS 

# won I. Gamber, certify that: 1. I have reviewed this quarterly report on Fonn lO-Q ofAvStarAviation Group, Inc.; 2. Basedon my knowledge, this report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make the statements made, in light ofthe circumstances under which such statements were made, not misleading with respect to the period coveredby this report; 3. Based on my knowledge, the financial statements, and other financial infonnation included in this report, fairly present in all material respects the financial condition, results ofoperations and cash flows ofthe Company as of, and for, the periods presented in this report; 4. The Company's other certifying officerand I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-IS(e) and lSd-lS(e» and internal control over fmancial reporting (as defined in Exchange Act Rules 13a-lS(f) and ISd-15(f) for the Company and have: (a) Designed such disclosure controls andprocedures, or caused such disclosure controls andprocedures to be designed under our supervision, to ensure that material infonnationrelating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control overfinancial reporting, orcaused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offmancial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accountingprinciples; (c) Evaluated the effectiveness ofthe Company's disclosure controls andprocedures andpresented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as ofthe end ofthe period covered by this report based on such evaluation; and

• closed in this report any change in the company's internal controls over financial reporting that occurred during the Company's most rt fiscal quarter (the company's fourth fiscal quarter in the case ofan annual report) that has materially affected, oris reasonably likely to materially affect, the company's internal controls over fmancial reporting; and S. The Company's other certifying officer(s) and I have disclosed, based on our mostrecent evaluation ofinternal controls over fmancial reporting, to the company's auditors and the audit committee ofthe company's Board ofDirectors (orpersons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation ofinternal controls overfinancial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize andreportfinancial infonnation; and (b) Any fraud, whether ornot material, that involves management or other employees who have a significantrole in the Company's internal controls over fmancial reporting.
Date: May 16, 2011 

# • /s/ Clayton I. Gamber Clayton I. Gamber, Chief Executive OfficerEXHIBIT31.02 CERTIFICATIONS 

# .ert Wilson, certify that: 1. I have reviewed this quarterly report on Fonn IO-Q ofAvStar Aviation Group, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement ofa material fact oromit to state a material fact necessary to make the statements made, in light ofthe circumstancesunderwhich such statements were made, not misleading withrespect to the period coveredbythis report; 3. Based on my knowledge, the fmancial statements, and other fmancial infonnation included inthis report, fairly present in all material respects the financial condition, results ofoperations and cashflows ofthe Company as of, and for, the periods presented in this report; 4. The Company's other certifying officerand I are responsible for establishing and maintaining disclosure controls and procedures (as defmed in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over fmancial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: (a) Designed such disclosure controls andprocedures, orcaused such disclosure controls andprocedures to be designedunder our supervision, to ensure that material infonnation relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over fmancial reporting, or caused such internal control overfmancial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness ofthe Company's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness ofthe disclosure controls and procedures, as ofthe end ofthe period covered by this report based on such evaluation; and .sclosedin this report any change in the Company's internal controls over fmancial reporting that occurred during the Company's most

## ~ fiscal quarter (the Company's fourth fiscal quarter in the case ofan annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal controls overfmancial reporting; and 5. The Company's other certifying officer(s) and I have disclosed, based on ourmost recent evaluation ofinternal controls over financial reporting, to the Company's auditors and the audit committee ofthe company's Board ofDirectors (orpersons perfonning the equivalent functions): (a) All significant deficiencies and material weaknesses in the design oroperation ofinternal controls overfinancial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial infonnation; and (b) Any fraud, whether ornot material, that involves management or other employees who have a significant role in the Company's internal controls over fmancial reporting.
Date: May 16, 2011 /s/ Robert Wilson Robert Wilson, Chief Financial Officer 

# •EXHIBIT 32.01 CERTIFICATION PURSUANT TO 18 U.S.c. SECTION 1350 AS ADOPTED PURSUANT TO 

# _ION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report ofAvStarAviation Group, Inc. (the "Company") on Form lO-Q for the quarter ended March 31, 2011 as filed with the Securities and Exchange Commission onor about the date hereof("Report"), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuantto 18 U.S.C. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes-OxleyAct of 2002, that to his knowledge: 1. The Report fully complies with the requirements ofSection 13(a) or l5(d) ofthe Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, inall material respects, the financial condition and results ofoperations ofthe Company. Dated: May 16, 2011 

# •

• /s/ Clayton I. Gamber Clayton I. Gamber, Chief Executive Officer

### EXHIBIT32.02 CERTIFICATION PURSUANT TO 18 U.S.c. SECTION 1350 AS ADOPTED PURSUANT TO aION 906 OF THE SARBANES-OXLEY ACT OF 2002 Inconnection with the Quarterly Report ofAvStar Aviation Group, Inc. (the "Company") on Fonn lO-Q for the quarter ended March 31, 2011 as filed with the Securities and Exchange Commission onor about the date hereof("Report"), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuantto 18 U.S.c. Section 1350, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002, that to his knowledge: 1. The Report fully complies with the requirements ofSection 13(a) or 15(d) ofthe Securities Exchange Act of 1934; and 2. The infonnation contained in the Report fairly presents, in all material respects, the financial condition andresults ofoperations ofthe Company. Dated: May 16, 2011 /s/ Robert Wilson Robert Wilson, Chief Financial Officer 

# •

•