**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-KSB**

 

| **ý**                                                                                                                                                                 | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF  1934** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|
|                                                                                                                                                                       |                                                                                           |
| **for the fiscal year ended November 30, 2002**                                                                                                                            |
|                                                                                                                                                                       |                                                                                           |   |   |   |
| **o**                                                                                                                                                                      | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**        |
|                                                                                                                                                                       |                                                                                           |   |   |   |
| **For the transition period from                        to** |

 

**Commission FileNumber:   000-32969**

 

**L.Air Holding Inc.**

(Name of small business issuer in its charter)

 

| **Nevada**                                                              |   | **98-0339543**                                |
|-------------------------------------------------------------------------|--------|-----------------------------------------------|
| (State or other jurisdiction of  incorporation or organization)         |   | (I.R.S. Employer Identification No.)          |
|                                                                    |   |                                          |
| **130 King Street West, Suite 3670, Toronto,  Ontario M5X 1B1, Canada** |
| (Address of principal executive offices)                                |
|                                                                    |   |                                          |
| Issuer’s telephone number: **(416) 863-0101**                      |
|                                                                    |   |                                          |
| Securities registered under Section 12(b)  of the Exchange Act:         |
|                                                                    |   |                                          |
| **Title of each class**                                                 |   | **Name of each exchange on which registered** |
| N/A                                                                     |   | N/A                                           |
|                                                                    |   |                                          |
| Securities registered under Section 12(g)  of the Exchange Act:         |
|                                                                    |   |                                          |
| **Common Stock, par value $.001**                                       |

 

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.  Yes ý  Noo

 

Check if there is no disclosure of delinquent filers in response to Item405 of Regulation S-B is not contained in this form, and no disclosure will becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form10-KSB or any amendment to this Form 10-KSB. o

 

State issuer’s revenues for its most recent fiscal year: $ 0

 

The aggregate market value of voting and non-voting common equity heldby non-affiliates of the registrant as of March 11, 2003:

Common stock, $.001 par value: $3,088,800

 

The number of shares of the registrant’s common stock outstanding as ofthe latest practical date, March 11, 2003:

36,539,267 shares.

 

Documents incorporated by reference: None

 

Transitional Small Business Disclosure Format:

 

Yes o           Noý

 

 

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**TABLE OF CONTENTS**

 
| **PART I**                                                                                                                       |
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|                                                                                                                             |
| Item 1.  Description of Business                                                                                            |
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| Item 2.  Description of Property                                                                                            |
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| Item 3.  Legal Proceedings                                                                                                  |
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| Item 4.  Submission of Matters to Vote of Security Holders                                                                  |
|                                                                                                                             |
| **PART II**                                                                                                                      |
|                                                                                                                             |
| Item 5.  Market Price of and Dividends on the Registrant's Common Equity  and Other Stockholder Matters                     |
|                                                                                                                             |
| Item 6.  Managements Discussion and Analysis and Plan of Operations                                                         |
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| Item 7.  Financial Statements                                                                                               |
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| Item 8.  Changes in and Disagreements with Accountants on Accounting and  Financial Disclosure                              |
|                                                                                                                             |
| **PART III**                                                                                                                     |
|                                                                                                                             |
| Item 9.   Directors, Executive Officers, Promoters and Control Persons;  Compliance with Section 16(a) of the Exchange Act. |
|                                                                                                                             |
| Item 10. Executive Compensation                                                                                                  |
|                                                                                                                             |
| Item 11. Security Ownership of  Certain Beneficial Owners and Management                                                         |
|                                                                                                                             |
| Item 12. Certain Relationships  and Related Transactions                                                                         |
|                                                                                                                             |
| Item 13. Exhibits and Reports on  Form 8-K                                                                                       |
|                                                                                                                             |
| Financial  Statements                                                                                                            |
|                                                                                                                             |
| Signatures                                                                                                                       |
|                                                                                                                             |
| Exhibits                                                                                                                         |

 

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**PART I**

 

**Item 1****.   Description of Business**

 

General

 

L.Air Holding Inc. (“L.Air”) was incorporated under the laws of theState of Nevada on May 24, 2000.  Itsformer corporate name was Superior Networks, Inc. until October 2002.

 

L.Air is in the development stage and is presently seeking to acquire along-distance discount airline operation with its principal hub to be locatedin Brussels, Belgium.  L.Air has not yetacquired or leased any aircraft or aircraft equipment, nor has it obtained anygate assignments or aircraft licenses.

 

Establishmentof Airline Operations

 

L.Air is presently seeking to acquire a 49% ownership interest ofBelgium Universal Airways (“BUA”) through a new wholly owned subsidiary inBelgium and is seeking to acquire other aircraft assets to establish itsproposed long-distance discount international airline operations.  There is no assurance that the currentnegotiations to acquire 49% of BUA will be successful, or that L.Air will besuccessful in completing its necessary capitalization efforts to finance itsproposed business plan to establish its discount airline.

 

Upon completion of its capitalization efforts, L.Air intends to causeBUA to initially lease five Boeing Airbus Model A340-300 planes.  The aircraft will be configured with 220 Yeconomy seats, 30C business class seats with full comfort pitch, and 10F firstclass sleeperette seats.  The planeswill each be equipped with four International Model CFM 56-5C4 engines.  It is expected that the lease of each planewill be for a term of 120 months at a rental of $535,000 per month.

 

For the foreseeable future, BUA will acquire only this model ofaircraft for its international operations in order to minimize its operatingcosts.  It is expected that this singlefleet engine strategy will reduce its costs because each type of enginerequires specialized training in engineering and maintenance, as well asdifferent licenses and permits.  Inaddition, newer planes consume less fuel per hour of flight, are more efficientand cost less to maintain.  Because ofits anticipated lower competitive operating costs, BUA will operate with lowerfares than most of its anticipated principal competitors.

 

ProposedRoutes

 

L.Air intends to establish long-haul destination routes with BUA whichit believes to be under-served where its competitive discount prices will bemost advantageous to a low-cost carrier.

 

L.Air is considering initial routes from Brussels to Los Angeles, theDominican Republic, Toronto, New Delhi, Montreal, Mauritious, Mombassa,Lumbumbashi, and Bangkok.

 

CharterService

 

BUA is expected to enter into a charter lease agreement with VGAA N.Vand other charter carriers.  Itsdiscussions with VGAA N.W presently provides for a lease of one plane  (including crew, maintenance and insurance)covering 45 hours per week with monthly rental revenues of approximately$1,440,000.

 

BusinessStrategy

 

L.Air’s strategy is to maximize profitability and cash flow bycapitalizing on key competitive strengths of BUA  while maintaining financial flexibility.  The principal elements of its strategy areto establish its proposed lines of business, to maintain its strategic costadvantage and to ensure financial flexibility.

 

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Upon the commencement of BUA’s airline operations, the tenets of itsbusiness strategy will be to:

 

•                                          Stimulate demand with aggressive marketing,promotion and advertising;

•                                          Emphasize low operating costs, withoutsacrificing passengers’ comfort and convenience;

•                                          Offer point-to-point flights to overpriced,under-served markets;

•                                          Differentiate products and services;

•                                          Operate only one type of aircraft - thetechnologically advanced Airbus A340-300;

•                                          Efficient utilization of aircraft, utilizinga minimum of 14 hours a day, six days a week;

•                                          Train and maintain a highly productiveworkforce, while outsourcing most ground and catering operations to highlyqualified suppliers in Belgium; and

•                                          Emphasize low distribution costs.

 

Upon establishing its operations in its initial core markets, BUA willbe considering alliances and code sharing arrangements with otherairlines.  These alliances would allowBUA to expand its passenger base without significant increases in capital oroperating expense and in some cases achieve cost savings through the reductionof redundant labor and facilities. L.Air believes that alliances are an efficient means of developing newmarkets and increasing travel opportunities for its customers and plans to pursuesuch relationships with both domestic and international carriers.

 

FrequentFlyer Program

 

Most major airlines have established frequent flyer programs toencourage travel on that particular carrier. BUA will offer its Fast-Miles program which will allow members to earnmileage credits by flying BUA, by using the services of other programparticipants such as hotels, car rental firms and other specialty services andby flying certain partner carriers. Through alliance agreements with other airlines, frequent flyer membersmay earn reciprocal rights in other airlines’ programs.  When a Fast-Miles member accumulates mileagecredits of 20,000 miles, BUA will issue mileage award certificates that can beredeemed for various travel awards, including first class upgrades and ticketson BUA or other airlines participating in its frequent flyer program.  Most travel awards are subject to blackoutdates and capacity controlled seating. Mileage award certificates automatically expire after three years.  Travel is valid up to one year from the dateof ticketing.  BUA will be required topurchase space on other airlines to accommodate such award redemption.

 

BUA will account for the Fast-Miles program under the incremental costmethod whereby travel awards are valued at the incremental cost of carrying oneadditional passenger based on expected redemptions.   Costs including passenger food, beverages, supplies, fuel,liability insurance, purchased space on other airlines and denied boardingcompensation are accrued as frequent flyer program participants accumulatemileage to their accounts.  Such unitcosts are based on expenses expected to be incurred on a per passengerbasis.  No profit or overhead marginwill be included in the accrual for these incremental costs.  L.Air does not believe that the usage offree travel awards will result in any significant displacement of revenuepassengers due to BUA’s ability to manage frequent flyer travel.

 

TravelClub Operations

 

L.Air intends to organize a wholly owned subsidiary to be called VIPTravel Services Inc. which will arrange and sell vacation packages and businesstravel packages that include hotel accommodation, airfare, groundtransportation and a variety of entertainment options.  Its focus will be to provide a customerfriendly combination of low price and high quality travel products by combiningfor sale packages that include hotel accommodations, rental cars and specialservices such as amusement park admissions, golf tee times and ski lifttickets.

 

VIP Travel Services Inc. is also expected to promote special charterflights for sports events and teams, and for large tour groups.

 

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Employees

 

At November 30, 2002, L.Air employed only two employees who have beenengaged in the initial start-up operations of L.Air.

 

BUA’s business will be labor intensive.  Wages, salaries and benefits are expected to represent at least30% of BUA’s consolidated operating expenses for the year ending November 30,2003.  To encourage increasedproductivity by its workforce, BUA is expected to award performance bonuses toeligible non-executive, non-union employees provided certain annuallyestablished operating income and operating performance targets areattained.  The awards of performancebonuses will range from 5% to 25% of base pay. In each case, eligibility is determined at the time of distribution.

 

LaborRelations

 

L.Air expects attempts by unions to organize BUA’s employees in thefuture.  No negotiations for initialcollective bargaining agreements are in progress.  L.Air cannot predict at this time the outcome or the terms of anyfuture collective bargaining agreement and therefore the effect, if any, onBUA’s operations or financial performance. See “Risk Factors – Labor Relations”.

 

Competitionand Marketing

 

The airline industry is highly competitive.  BUA will compete with a number of major airlines on medium andlong-haul routes through its proposed hub in Brussels.  BUA will compete with other major fullservice airlines based on price and, due to its low cost structure, is expectedto be able to compete with other low costs carriers in its markets.  The entry of additional carriers in itsproposed markets (as well as increased competition from or the introduction ofnew services by established carriers) could negatively impact its results ofoperations.

 

Most tickets for travel on BUA are expected to be sold by travelagents.  Travel agents generally receivecommissions based on the price of tickets sold.  Airlines often pay additional commissions in connection withspecial revenue programs.  Accordingly,airlines compete not only with respect to the price of tickets sold but alsowith respect to the amount of commissions paid.  Unlike the majority of its competitors, BUA does not expect tocap travel agency commissions at $50 per ticket.

 

Most tickets sold by travel agents are sold through computerreservations systems that are controlled by airlines.  Those computer reservations systems have, from time to time,significantly increased the cost of making reservations, which costs are borneby airlines.  To address these issues,BUA will take a number of actions.  Itwill establish an electronic or paperless ticketing system to respond tocustomer needs and to reduce distribution costs for tickets booked directlythrough BUA.  BUA will have the abilityfor customers to book tickets directly through its Internet site located atwww.BUA.com, thus avoiding the more expensive computer reservations systems.  U.S. Federal regulations have beenpromulgated that are intended to diminish preferential schedule displays andother practices with respect to the computer reservation systems that place BUAand other similarly situated users at a competitive disadvantage to theairlines controlling the systems.

 

VIP Travel Services, Inc.’s business will also be highlycompetitive.  It will compete primarilywith vacation packagers and wholesalers who use multiple airlines and offerdiversified products lines, and tour operators that distribute their productdirectly to the consumer as well as through travel agents.  See “Risk Factors – Competition; IndustryConditions”.

 

Facilities

 

The principal executive office of L.Air is located at 130 King StreetWest, Suite 3670, Toronto, Province of Ontario M5X 1B1, Canada; telephone number(416) 863-0101.  The offices arecomprised of approximately 500 square feet which are leased for approximately$1,250 per month on a month-to-month lease.

 

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Upon the commencement of BUA’s airline operations, BUA intends to leasecorporate administrative and operations offices in Brussels, Belgium.  The facilities may also accommodate theheadquarters for VIP Travel Services Inc. which will allow consolidating its operationsand marketing functions.

 

Space for ticket counters, gates and back offices will also be obtainedat each of the other airports served by BUA, either by lease from the airportoperator or by sublease from another airline. Pursuant to alliance agreements with other airlines, certain of thestation operations for both carriers will be consolidated in an effort toreduce operating expenses.

 

BUA expects to lease 10,000 square feet of space at the Brusselsairport for pilot training and cargo and ground service facilities, and formaintenance and technical support, which is expected to include two hangarbays, hangar shops, one flight simulator bay, pilot training facilities andwarehouse and commissary facilities.

 

GovernmentRegulation

 

Airline operations are subject to numerous laws and governmentalregulations covering certificates and licenses for airline operations, airporttaxes, gate taxes, fuel taxes, gate allocations, reservation systems, slotrestrictions, noise abatement, engine maintenance, pilot certifications,security and safety measures, environmental matters, and other operationalissues.

 

Presently, the vacation package and business package industry issubstantially unregulated.

 

AncillaryAirline Activities

 

Cargo.  BUA’s cargo business will be operated as anindependent contribution center.  Themajority of its cargo will be carried in the holds of passenger aircraft, thebalance on leased or part-chartered freighter aircraft where market conditionsallow their deployment.  This will allowBUA to maximize the use of its scheduled route network to provide a worldwidecargo service.  In Europe, BUA willutilize trucks to feed cargo from continental Europe to Brussels-basedintercontinental services.  Theoperating environment in Belgium offers both excellent handling customer serviceand significant throughput capacity.

 

Other services.  BUA may provide a variety of services toother airlines.  The most important ofthese are cargo handling at airports, maintenance, computer and communicationsservices and consultancy services.

 

Regulation

 

The international airline industry is subject to a high degree ofEuropean and Belgium governmental regulation covering most aspects of airlines’operations.  This framework governscommercial activity (for example route flying rights, fare setting, access toairport slots) as well as operational standards (relating to areas such assafety, security, aircraft noise, immigration and passenger rights).  Belgium airlines are also affected by widerEU and Belgium policies, laws and regulations, particularly in relation tocompetition, airports, air traffic control, and labor.

 

The Belgium civil aviation industry is regulated by the DirectionGenerale de l’Aviation Civile (“DGAC”), an independent statutory body.  Under the Belgium law and various statutoryinstruments, the DGAC has a wide range of functions in relation to Belgiumairlines, including supervision of many aspects of their financial condition,management and operations.  Europeanairlines are also subject to a number of EU regulations, drawn up under theprovisions of the European Treaty (chiefly Article 71).  Responsibility for enforcement is sharedbetween the European Commission and the relevant Member States.

 

The present basis for international regulation of airline operationsderives from the Chicago Convention of 1944, to which nearly all countries areparties.  The Convention alsoestablished the International Civil Aviation Organization (“ICAO”), aspecialized agency of the United Nations, to foster the planning anddevelopment of international air transport. Under the auspices of ICAO, rules establishing minimum operationalstandards are normally agreed on a

 

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multilateralbasis.  Airlines’ rights to fly over, orto make stops in, foreign countries for technical reasons in operating theirinternational scheduled services are generally derived from the InternationalAir Services Transit Agreement of 1944, to which most countries areparties.  However, rights to carrytraffic between countries and the regulation of fares are normally agreed on abilateral basis between governments.  Anotable exception is the multilateral single market arrangements that applywithin the European Union.

 

RouteFlying Rights

 

BUA’s traffic rights to carry scheduled passengers and cargo onparticular international routes generally derive from air services agreementsbetween the Belgium Government and the governments of foreign statesconcerned.  Under these agreements, eachgovernment grants to the other the right to designate an airline or airlines ofits state to operate scheduled services between specified points in theirrespective countries, and sometimes to or from points in third countries,although this also requires the agreement of the third country’sgovernment.  The Belgium government’spolicy regarding the granting of route rights to other airlines is referred tounder “Competition” below.

 

Once an agreement has been reached, it is for the Belgium government todesignate the airline or airlines which will operate the agreed services.  As well as being designated, an airline mustobtain the necessary operating permits from the foreign governmentsconcerned.  These are unlikely to bewithheld so long as BUA meets the required international safety standards.  A contracting government usually has theright to prevent a designated airline from operating the agreed services is ifit is not satisfied that the airline is substantially owned and effectivelycontrolled by the other government or its nationals.  For this reason, BUA’s Memorandum and Articles of Association(the “Articles) contain provisions (including proposed amendments) that maylimit the rights of Non-Belgium and Non-European nationals to own shares inBUA.

 

In the European Union (the “EU”), there is a single internal market forair transportation.  The mostsignificant elements of the single market legislation are a liberal pricingregime, free access to all routes within the EU for airlines and a carrierlicensing procedure.  Certain constraintscontinue to apply for infrastructure reasons. Under a separate agreement, EU single market policies have been extendedto the European Economic Area (“EEA”) comprising all the countries of the EUand the countries of the European Free Trade Area (“EFTA”).

 

Specific route licenses are no longer required with respect to routesto, from and within the EU.

 

Charter operations are not generally covered by air servicesagreements.  Within the EEA, nodistinction is drawn between charter and scheduled operations.

 

FareSetting

 

It is a provision of most air services agreements that the fares, ratesand charges for scheduled services on the agreed routes must be filed with, andapproved by, both governments concerned or their agencies.  It is generally a condition of the air transport and route licenses that thetariffs to be charged for international carriage and the commissions to be paidby the airline to any agent shall be filed with and pre-approved.  Under some air services agreements, airlinesare required to coordinate fares.

 

Notwithstanding this regulatory position, it is a widespread practiceamong airlines to sell a substantial proportion of their seats and cargo spacein many parts of the world at tariffs lower than the approved levels or on otherunapproved special terms.  BUA willrespond competitively to market conditions and a large proportion of itsrevenue may be derived from such sales. BUA does not anticipate any changes in the regulatory environment whichwould undermine its ability to respond competitively.  Tariffs for charter services are not so regulated.

 

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Safety

 

Safety standards are generally agreed on a multilateral basis under theauspices of ICAO.  The country ofregistration of an aircraft is generally responsible for ensuring that theaircraft and its crew meet these guidelines. Certification of compliance by the state of registry is normallyrecognized by all other members of ICAO.

 

Belgium airlines are required, except in limited circumstances, tooperate Belgium registered aircraft. The DGAC is the body responsible for Belgium registered aircraft, and itmaintains and enforces a comprehensive system of operational safety and technicalstandards which, in common with those of many other countries, are morestringent than the internationally agreed minimum standards.

 

All Belgium airlines are required to hold a DGAC air operator’scertificate relating to the competence of the holder to operate and maintainits aircraft safely.  Each aircraftoperated under an air operator’s certificate may only be flown if it has acertificate of airworthiness.  Theaircraft’s engines, equipment and all maintenance procedures must also becertificated, and flight crew and certain maintenance staff must be licensed.

 

To establish high safety standards is a primary objective of BUA.  All departments, especially engineering andflight operations, will pay continual attention to operational safety and thehealth and safety of employees. Specific responsibility for advising on safety matters rests with aseparate department under the Director of Safety, Security andEnvironment.  A comprehensive monitoringsystem will be established within BUA to ensure that incidents are reported andaction is taken whenever appropriate.

 

Security

 

In Belgium, the DGAC has the power to direct the aviation industry totake measures to prevent acts of criminal violence.  The measures so directed usually follow, but sometimes exceed,the international standards developed by the ICAO.  Responsibility for implementing the measures and meeting theircosts falls on both airlines and airport authorities.  A number of foreign countries have also developed aviationsecurity programs which will place the burden on BUA to meet laid down securitystandards.  BUA’s own securitydepartment will continuously assesses the threat to its operations, developpolicies for the protection of its operations and assets, and direct its staffor agents to implement appropriate countermeasures while monitoring theireffectiveness.

 

EnvironmentalRegulation and Noise

 

BUA’s environmental management system will be working constructivelywith those concerned for the environment and to observe rules and regulationsaimed at protection of the environment. BUA’s activities will be covered by a comprehensive network ofregulations at local, national and international levels, affecting emissions tothe atmosphere, disposal of solid waste and aqueous effluents, aircraft noiseand other relevant parameters.  Thestrategy takes compliance at the baseline of environmental performance and aimsbeyond standards and regulations.

 

BUA’s fleet will meet existing noise standards and will be subject torestrictions.  Aircraft are categorizedby the ICAO into “Chapters” which represent noise certification standards.  European and US regulations prohibit the useof Chapter 2 aircraft after March 2002. None of BUA’s fleet will be Chapter 2. In 2001, ICAO approved a new noise standard, “Chapter 4”, to apply tonew aircraft designs after 2006.  BUAwill be proactively involved in other efforts to mitigate the effect ofaircraft noise, including minimizing movements at night and, with otherstakeholders, will develop a code of conduct for arriving aircraft to reducenoise on approach to airports.

 

Competition

 

Most of the markets in which BUA intends to operate are highlycompetitive.  It will face competitionfrom other airlines on the same city-pair routes, from indirect flights, fromcharter services and from other forms of transport.  The intensity of the competition varies from route to route,depending on the number and nature of the competitors, particularly whether ornot they are state-owned or state-supported, and on the regulatory environmentand other factors.  At one extreme,there are relatively few international routes on which competition is largelylimited to the other state’s designated airline and fares are regulated.  At the other extreme, there are some routeson which both governments adopt

 

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aliberal attitude to fare approval and to multiple designation of a number ofairlines from several countries competing for the available traffic.

 

On many of the routes with multiple carriers, BUA’s pricing decisionswill be affected by competition from other airlines, some of which may havecost structures that may be lower than BUA or other competitive advantages andcould therefore operate at lower fare levels.

 

TariffCoordination

 

Certain air services agreements require airlines to coordinate faresbefore approval by the governments concerned. IATA, the trade association for international airlines, provides a forumfor tariff coordination on international routes by convening trafficconferences.  Many internationalairlines take part in these conferences although, partly reflecting theincrease in competition, fewer than in the past.  There is also less adherence to tariffs coordinated with IATAthan there once was.

 

BUA intends to attend traffic conferences and discuss tariffsbilaterally when it is lawful to do so and tariff coordination is requiredunder the relevant air services agreement or is commercially necessary.  However, where it is free to do so, BUA willset its tariffs unilaterally.  This isthe case for fares on domestic and some international routes.

 

CommercialArrangements

 

BUA expects to enter into commercial arrangements with other airlinescovering scheduled passenger and cargo services on a small number of itsinternational routes.  Some of these maybe necessary under relevant air services agreements.  Commercial arrangements can govern, among other things, capacityoffered by each airline over flight approvals, the apportionment of revenuesbetween airlines and to coordination of schedules.

 

Commercial arrangements of this sort are not allowed on routes to orfrom the United States, and such arrangements as existed with the EU have beengenerally withdrawn to promote a more competitive environment.

 

Europe

 

Since 1987, EU competition rules have applied to commercial agreementsbetween airlines operating intra-EU routes. The European Commission is empowered to grant block exemptions fromcertain cooperative arrangements between airlines such as slot allocation,joint planning of capacity, tariff consultations, and the common purchase,development and operation of computer reservations systems.  Block exemptions were made in all thesecases and were renewed alongside with the liberalization measures that cameinto force on January 1, 1993.  Theblock exemption in respect of joint planning capacity has been withdrawn.

 

The EU regime for aviation has been extended to the EEA.  The powers and duties of the EuropeanCommission are shared with the EFTA Control Authority with responsibility forany particular action lying with one or the other of them.

 

UnitedStates

 

While the US domestic airline industry has been largely deregulated,routes between Belgium and the United States are still subject to regulation ofmarket access, capacity and fares under an air services agreement known asBermuda 2.  However, both countries haveadopted a relatively liberal approach to fare approval and other regulatorymatters.  The market has seensubstantially increased competition over the last decade with major airlinesand new market entrants offering a wide range of services and fare types.  In addition, BUA will face furthercompetition from airlines operating other routes between the United States andcontinental Europe.  BUA will respondwith both price and service initiatives.

 

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A modification of Bermuda 2 was agreed between the US and Belgiumliberalizing codeshare arrangements and access to Belgium airports fromairports in the United States.

 

**RISK FACTORS**

 

This section describes some of the risks that could affect L.Air’s andBUA’s business and results of operations. These factors should be considered in conjunction with the cautionarystatement regarding forward-looking statements contained in this Form 10-KSBannual report.

 

The commercial airline industry is highly competitive and hasexperienced significant changes.  BUA’sfuture performance is subject to a variety of factors over which it has littleor no control, including adverse governmental regulation, fluctuations in jetfuel prices, adverse changes in economic conditions, adverse changes in demandfor air travel, the availability of financing and fluctuations in currencyrates.  There may be other risks thatBUA has not identified in this report that could have a material adverse effecton its future business, revenues, operating income, net assets and liquidityand capital resources.

 

Competitionin the Airline Industry

 

Most of the markets in which BUA will operate are highlycompetitive.  BUA will face competitionfrom other airlines on its routes, as well as from indirect flights, charterservices and from other forms of transport. Its pricing decisions will be affected by many factors, includingcompetition from other airlines, some of which have cost structures that may beeven lower than BUA’s or have other competitive advantages and therefore may beable to operate at lower fare levels. Fare discounting by competitors may have a negative effect on itsfinancial results because BUA will generally be required to respond tocompetitors’ fares to maintain passenger traffic.  There can be no assurance that the adverse effects of any futurefare reduction would be offset by increases in passenger traffic, reductions incosts or changes in the mix of traffic that improve yields.

 

Availabilityof Future Financing

 

In the wake of the events of September 11, 2001 and in response to theresulting adverse operating environment and uncertainty, L.Air must raisesubstantial funds to increase its liquidity.  Although  L.Air believesthat it would be able to raise to raise the necessary funds, there can be noassurance that the airline industry, fleet and other assets will continue to beas attractive to lenders.  If L.Air’sability to raise funds in the financial markets is restricted, its financialand operating results could be materially and adversely affected.

 

InterestRate and Other Financing Risks

 

Most of L.Air’s and BUA’s debt is expected to be asset related,reflecting the capital intensive nature of the airline industry and theattractiveness of aircraft as security to lenders and other financiers. Some ofthese debts will be subject  to floatinginterest rates.  To manage interest raterisks, L.Air and BUA may enter into swap and other hedging arrangements.  Nonetheless, they can experience adverse orbeneficial effects from interest or currency rate volatility.  In addition, their ability to finance itsoperations may be affected by adverse financial market conditions.  For example, there can be no assurance thataircraft will continue to be an attractive security to lenders.  The financing activities also are subject toexchange risks as borrowings and related expenditures may not be denominated inthe same currency.

 

CapitalCommitments

 

No capital expenditures have been authorized or contracted for butsubstantial commitments are expected during fiscal 2003.

 

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CommodityPrices

 

Jet fuel prices will be a significant component of BUA’s cost structureand have been and could be highly volatile. While BUA may endeavor to hedge part of the jet fuel price volatility,due to the competitive nature of the airline industry and other factors,including the price-sensitivity of demand for air travel, in the event of anyincrease in the price of jet fuel, there can be no assurance that itsoperations and financial performance would not be adversely affected.

 

OperationalRisks

 

BUA’s operations, including its ability to deliver customer service,will be dependent on the effective operations of its equipment, including itsaircraft, maintenance systems and reservations systems, and the commitment ofits personnel.  Operations are alsodependent on the effective operation of the Belgium air traffic control services  and the air control problems, and otherfactors that could interrupt operations could adversely affect its operatingand financial results and its reputation.

 

Effectsof Terrorist Activities and Similar Events

 

The events of September 11, 2001 will have an adverse effect on L.Air’sand BUA’s operating and financial results. During the week of the terrorist attacks, the closure of US airspace,which will be important market for BUA, resulted in a significant fall in passenger traffic and a revenue lossfor airlines.  Following these eventsthe airlines experienced significant decreases in operating revenues, increasesin security and other costs, higher ticket refunds, lower yield and loadfactors and higher insurance costs.  Theeffects of the events of September 11, 2001, the threat or occurrence of otherterrorist attacks or the commencement or escalation of hostilities (or thethreat thereof) is expected to continue to have an adverse effect on the demandfor air travel and our future.

 

Uncertaintyin International Operations

 

A substantial portion of BUA’s business will be international.  In addition to the effects of terrorism andincreased hostilities, BUA’s future international activities and prospectscould be adversely affected by factors such as reversals or delays in theopening of foreign markets, exchange controls, currency and political risks,tax and changes in international government regulation of its operations.

 

Economicand Other Conditions

 

The demand for air travel and, accordingly, BUA’s future operating andfinancial results may be affected by changes in local, regional, national andinternational economic conditions. Significant and prolonged downturns in economic conditions would belikely to have an adverse effect.  Inaddition, other demand-related factors such as health concerns, foot and mouthdisease, perceptions of airline safety, and adverse weather conditions couldhave an adverse effect on the operations and financial results.

 

GovernmentRegulation

 

BUA’s operations are subject to a high degree of Belgium and foreigngovernment regulation covering most aspects of its operations, including routeflying rights, fare setting, operational standards (the most important relatingto safety, security and aircraft noise), airport access and slotavailability.  Furthermore, Belgiumairlines are affected by more general Belgium and foreign governmental policiesand their implementation, particularly in relation to competition and airports.  Future operating and financial results mayvary based upon the effects of such regulation, including the granting andtiming of certain governmental approvals needed for alliances, codesharingagreements and other arrangements with other airlines, restrictions oncompetitive practices, and the costs of meeting customer service standards andaircraft noise restrictions.

 

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Uncertaintyof Future Collective Bargaining Agreements and Events

 

BUA’s operations could be adversely affected in the event that it doesnot reach agreement with any labor union representing its employees or by anagreement with a labor union representing its employees that contains termsthat would prevent it from competing effectively with other airlines.  As in most labor intensive industries,strikes, work stoppages and other organized labor activities can havesignificant adverse effects on operating and financial results.

 

EnvironmentalMatters

 

BUA’s proposed operations are covered by a vast network ofenvironmental regulations at local, national and international levels.  These regulations cover, among other things,emissions to the atmosphere, disposal of solid waste and aqueous effluents,aircraft noise and other activities incident to its business.  Future operations and financial results mayvary as a result of such regulations. Compliance with these regulations is costly and new regulations couldincrease the cost base and adversely effect its operating and financialresults.  In addition, failure to complywith these regulations could adversely effect BUA in a variety of ways,including adverse effects to its reputation.

 

Seasonand Other Variations

 

BUA expects to make most of its operating income between April andOctober each year as demand is higher during this period, while the majority ofits costs are incurred more evenly throughout the year.  Accordingly, as a result of seasonality ofdemand, operating results are expected to vary significantly from period toperiod within the financial year.  Inaddition, various factors, including the factors discussed in this section, cancause operating results to vary significantly from period to period and year toyear.  These variations in results andother factors may cause the price of its Common Stock to fluctuate significantlyin the stock market.

 

Limitationson Foreign Ownership

 

Governmental law limits the right of non-Belgium persons and the rightsof non-EEA persons to hold or exercise votes in relation to Ordinary Shares ofa Belgium airline such as BUA.  As aresult, it is expected that BUA will be a 49% owned subsidiary of L.Air incircumstances where not limiting such holding or voting rights would adverselyaffect its current or future operating rights. Non-EEA persons or entities who are not nationals of a State in theEuropean Economic Area (comprising all the countries of the European Union andof the European Free Trade Area) (“Non Europeans”).

 

**Item 2****.   Descriptionof Property**

 

L.Air leases its executive offices at 130 King Street West, Suite 3670,Toronto, Ontario, Canada.  See “Business– Facilities”.

 

**Item 3****.   LegalProceedings**

 

L.Air is not the subject of any threatened or pending litigation.

 

**Item 4****.   Submissionof Matters to a Vote of Security Holders**

 

None

 

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**PART II**

 

**Item 5****.   MarketPrice of and Dividends on the Registrant’s Common Equity and Other ShareholderMatters**

 

General

 

The Common Stock of L.Air is traded on the NASD  Electronic Bulletin Board over-the-countermarket (“OTCBB”), and is quoted under the symbol “LAIR”.

 

MarketPrice

 

The following table sets forth the range of high and low closing bidprices per share of the Common Stock of L.Air (reflecting inter-dealer priceswithout retail mark-up, mark-down or commission and may not represent actualtransactions) as reported by Pink Sheets for the periods indicated.

 
|                             |   | **HIGH  CLOSING(1)  BID PRICE** |   | **LOW  CLOSING(1)  BID PRICE** |   |
|----------------------------------|--------|---------------------------------|--------|--------------------------------|--------|
| **Year Ended December 31, 2001** |   |                            |   |                           |   |
|                             |   |                            |   |                           |   |
| 4th Quarter(1)                   |   | $                               | 0.90   |                           | $      | 0.01 |   |
|                             |   |                            |   |                           |   |   |   |
| **Year Ended December 31, 2002** |   |                            |   |                           |   |
|                             |   |                            |   |                           |   |
| 1st Quarter(2)                   |   | $                               | 5.50   |                           | $      | 2.00 |   |
| 1st Quarter(3)                   |   | $                               | 1.40   |                           | $      | 0.35 |   |
| 2nd Quarter                      |   | $                               | 0.97   |                           | $      | 0.02 |   |
| 3rd Quarter                      |   | $                               | 0.68   |                           | $      | 0.03 |   |
| 4th Quarter                      |   | $                               | 0.22   |                           | $      | 0.03 |   |
|                                  |        |                                 |        |                                |        |  |  |  |

 

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(1)           The Common Stock of L.Air begantrading in October 2001.

(2)           Reflects pre-split trading in theCommon Stock of L.Air in the first quarter of 2002.

(3)           Reflects trading in the Common Stockof L.Air after a 3-for-1 stock split during March 2002.

 

The closing sales price of the Common Stock of L.Air on March 11, 2003,was $.16 per share.

 

Saleof Unregistered Securities

 

On October 21, 2002, L.Air issued 12,000,000 shares of restrictedCommon Stock in connection with the acquisition of Aeroplus S.A.S. in relianceupon Regulation S under the Securities Act of 1933.  This acquisition and the issuance of these 12,000,000 shares isbeing cancelled by L.Air.

 

**Item 6****.   Management’sDiscussion and Analysis and Plan of Operations**

 

The following discussion of the financial condition, changes infinancial position and results of operations of L.Air for the years endedNovember 30, 2002 and 2001 should be read in conjunction with, and is qualifiedin its entirety by, the financial statements of L.Air including the attachednotes.  Historical results of operations,percentage relationships and any trends that may be inferred there from are notnecessarily indicative of the operating results of any future period.

 

ForwardLooking Statements

 

WHEN USED IN THIS ANNUAL REPORT ON FORM 10-KSB AND IN OUR OTHER FILINGSWITH THE SEC, IN OUR PRESS RELEASES AND IN ORAL STATEMENTS MADE WITH THEAPPROVAL OF ONE OF OUR AUTHORIZED EXECUTIVE OFFICERS, THE WORDS OR PHRASES“WILL LIKELY RESULT”, “PLANS”, “WILL CONTINUE”, “IS ANTICIPATED”, “ESTIMATED”,“EXPECT”, “PROJECT” OR “OUTLOOK” OR SIMILAR EXPRESSIONS (INCLUDINGCONFIRMATIONS BY ONE OF OUR AUTHORIZED EXECUTIVE OFFICERS OF ANY SUCHEXPRESSIONS MADE BY A THIRD PARTY WITH RESPECT TO US) ARE INTENDED TO IDENTIFY“FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIESLITIGATION REFORM ACT OF 1995. WE CAUTION READERS NOT TO PLACE UNDUE RELIANCEON ANY SUCH STATEMENTS, EACH OF WHICH SPEAKS ONLY AS OF

 

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THEDATE MADE. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES,INCLUDING BUT NOT LIMITED TO OUR HISTORY OF LOSSES, OUR LIMITED OPERATINGHISTORY, OUR NEED FOR ADDITIONAL FINANCING, RAPID TECHNOLOGICAL CHANGE, AND ANUNCERTAIN MARKET, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROMHISTORICAL EARNINGS AND THOSE PRESENTLY ANTICIPATED OR PROJECTED. FACTORS THATMAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCHFORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FACTORS DESCRIBED BELOWAND IN THE DESCRIPTION OF BUSINESS SECTION OF THIS ANNUAL REPORT. WE UNDERTAKENO OBLIGATION TO RELEASE PUBLICLY REVISIONS WE MADE TO ANY FORWARD-LOOKINGSTATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE OF SUCHSTATEMENTS. ALL WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS MADE AFTER THE DATEOF THIS ANNUAL REPORT AND/OR ATTRIBUTABLE TO US OR PERSONS ACTING ON OUR BEHALFARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THIS DISCUSSION.

 

SignificantAccounting Estimates and Policies

 

The discussion and analysis of our financial condition and results ofoperations is based upon our financial statements which have been prepared inaccordance with accounting principles generally accepted in the UnitedStates.  The preparation of thesefinancial statements requires us to make estimates and judgments that affectthe reported amounts of assets, liabilities, revenue and expenses, and relateddisclosure of contingent assets and liabilities.  On an on-going basis, we will evaluate our estimates includingthe allowance for doubtful accounts, the saleability and recoverability ofinventory, income taxes and contingencies. We will base our estimates on historical experience and on various otherassumptions that we believe to be reasonable under the circumstances, theresults of which form our basis for making judgments about the carrying valuesof assets and liabilities that are not readily apparent from othersources.  Actual results may differ fromthese estimates under different assumptions or conditions.

 

As part of the process of preparing our  financial statements, we are required to estimate our incometaxes.  This process involves estimatingour current tax exposure together with assessing temporary differencesresulting from differing treatment of items for tax and accounting purposes.  These differences result in deferred taxassets and liabilities.  We must thenassess the likelihood that our deferred tax assets will be recovered fromfuture taxable income, and, to the extent we believe that recovery is notlikely, we must establish a valuation allowance.  To the extent that we establish a valuation allowance or increasethis allowance in a period, we must include a tax provision or reduce our taxbenefit in the statements of operations. We will use our judgment to determine our provision or benefit forincome taxes, deferred tax assets and liabilities and any valuation allowancerecorded against our net deferred tax assets. However, various factors may cause those assumptions to change in thenear term.

 

We cannot predict what future laws and regulations might be passed thatcould have a material effect on our results of operations.  We will assess the impact of significantchanges in laws and regulations on a regular basis and update the assumptionsand estimates used to prepare our financial statements when we deem itnecessary.

 

We have determined the significant principles by considering accountingpolicies that involve the most complex or subjective decisions orassessments.  Our most significantaccounting policies are those related to revenue recognition and accounting forstock-based compensation.

 

*Revenue Recognition*.  Ourrevenue recognition policies are based on the requirements of SEC StaffAccounting Bulletin No. 101, *RevenueRecognition in Financial Statements.*

 

Revenue from sales of services is generally recognized during theperiod when the services are rendered.

 

*Accounting for Stock-Based Compensation.*  Weintend to apply the disclosure-only provisions of SFAS No. 123, *Accounting for Stock-Based Compensation*.  In accordance with the provisions of SFAS123, we will apply Accounting Principles Board Opinion No. 25, *Accounting for Stock Issued to Employees*,and will use related interpretations in accounting for stock option plans.  We will account for stock issued tonon-employees in accordance with the provisions of SFAS 123 and the EmergingIssues Task Force consensus in Issue No. 96-18, *Accounting for Equity Instruments That are Issued to Other ThanEmployees for Acquiring or in Conjunction with Selling, Goods or Services.*  Generally, under APB 25, if the optionexercise price for a fixed award to an employee is equal to the fair value

 

14

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ofthe common stock at the date of the grant of the stock option, no compensationexpense is recorded.  Under SFAS 123 andEITF 96-18, the amount of compensation expense that is recorded is based on anoption pricing model which incorporates such factors as the expected volatilityof future movements in the price of the underlying stock, risk-free interestrates, the term of the options and any dividends expected to be paid.  As a result, under SFAS 123 and EITF 96-18,we would generally expect to record a greater amount of compensation expensethan under APB 25.

 

*Segment Reporting*.  Wehave adopted SFAS No. 131, “*DisclosuresAbout Segments of an Enterprise and Related Information*.”  SFAS 131 requires companies to disclosecertain information about reportable segments. Based on the criteria within SFAS 131, we have determined that wecurrently have only one reportable segment, airline operations and relatedservices.

 

Planof Operations

 

L.Air is in the development stage; therefore recovery of its assets isdependent upon future events, the outcome of which is indeterminable.  In addition, successful completion of itsbusiness plan and its transition, ultimately to the attainment of profitableoperations is dependent upon obtaining adequate financing to fulfill itsdevelopment activities and achieve a level of sales adequate to support itscost structure.  L.Air will need substantialadditional working capital to be successful in its planned activity and toservice its current debt for the coming year and, therefore, continuation ofL.Air  as a going concern is dependentupon obtaining the additional working capital necessary to accomplish itsobjective.  Management has developed astrategy, which it believes will accomplish this objective, and is presentlyengaged in seeking various sources of additional working capital including equityfunding through a private placement, conversion of existing debt into shares ofour Common Stock, and long term financing. On February 5, 2003 L.Air announced that it executed a consultingagreement with Geneva Equities, Ltd. to contribute to funding, analyzingstructuring, negotiating and financing business acquisitions, joint ventures,alliances and other projects for L.Air.

 

L.Air had previously intended to offer specialized training programsincluding a comprehensive driver training program to seniors interested inacquiring discounts from insurance companies and in improving their drivingability.  This line of business has beenterminated.  No revenues were generatedfrom its website for Superioronlinetraining.com. At year-end this activity wasterminated and wrote off $4,807 representing the software development for thisventure.

 

L.Air has changed its business strategy.  In this regard on October 18, 2002, L.Air entered into a shareexchange agreement whereby it issued 12,000,000 common shares in exchange for49% interest in Altitude Plus S.A.S., a French company owning airline assetsand operating as “L.Air”.  Subsequent tothe year-end, L.Air cancelled this agreement due to regulatory problems inFrance with this airline, which is in receivership, which will result in thecancellation of the original 12,000,000 common shares previously issued forthis acquisition.

 

During the year L.Air purchased 300,000 class G shares of Societe deRecyclage Polymerix Canda Inc. for $200,000. These shares have since been sold back to Recyclage for gross proceedsof $1 resulting in a net loss on the sale of $199,999.

 

L.Air has recently announced that is intending to enter into anagreement to acquire a 49% interest in Belgium Universal Airways, a Belgiumbased discount airline operation.

 

Resultsof Operations

 

L.Air had no revenues during its fiscal years ended November 30, 2002or 2001.

 

Operating expenses increased approximately 68% to $79,445 for the yearended November 30, 2002 compared to $47,224 for the same period in 2001.  This was due to an increase in legal andother professional fees.

 

For the year ended November 30, 2002, L.Air wrote off $4,807representing part of its investment in the software development of itsabandoned online training program, and wrote off $199,999 pertaining to an investment  in Societe de Recyclage Polymerix CanadaInc.  There were no write offs in theprevious fiscal year.

 

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Accounts payable increased 468% to $24,297 from $5,196 for the yearsended November 30, 2002 and 2001, respectively.  The increase in accounts payable is reflected in the increase inlegal and professional expenses.

 

Loans payable for the year ended November 30, 2002 amounted to $268,112advanced by Universal Capital Partners Corp, which is presently the largeststockholder of L.Air.  The notes werenon-interest bearing, with no specified maturity date and with no collateralpledged as security.  Subsequently onFebruary 28, 2003, this debt was exchanged and converted into 2,234,267 sharesof Common Stock of L.Air.

 

L.Air has incurred an accumulated deficit of $339,159 from the date ofinception through November 30, 2002. Failure to raise the necessary capital inthe immediate future will, at a minimum, prevent or delay L.Air from  developing its business plan and, in theworst case, cause the business to fail.

 

Even though L.Air does not at the present time have any understandingsor agreements with any persons or entities to provide such funding,shareholders having an interest in seeing that L.Air remains a viable businessentity have been willing to provide funds in the past either through purchasingadditional stock or by loaning money to L.Air. L.Air has had no revenues and its need for capital may changedramatically if it acquires an interest in a business opportunity.  It should also be noted that L.Air isobligated to satisfy the costs associated with filing the required reportsunder the Securities and Exchange Act of 1934, as amended.  It appears at the present time that thesecosts will also have to be met through the sale of stock or by borrowingadditional funds.  L.Air’s currentoperating plan is to (i) handle the administrative and reporting requirementsof a public company; and (ii) conclude the proposed acquisition of airlineassets in Belgium, as described above.

 

YearEnded November 30, 2002, compared to November 30, 2001

 

The following table sets forth certain operating information regardingL.Air.

 
|                           |   | **Year Ended  November 30, 2001** |   | **Year Ended  November 30, 2002** |   |
|--------------------------------|--------|-----------------------------------|--------|-----------------------------------|--------|
|                           |   |                              |   |                              |   |
| Revenues                       |   | $                                 | 0      |                              | $      | 0 |   |
|                           |   |                              |   |                              |   |   |   |
| General and administrative     |   | $                                 | 750    |                              | $      | 5,636 |   |
| Professional Fees              |   | $                                 | 46,316 |                              | $      | 73,764 |   |
| Interest                       |   | $                                 | 158    |                              | $      | 45 |   |
| Loss on disposal of investment |   | $                                 | 0      |                              | $      | 199,999 |   |
| Write-down of software costs   |   | $                                 | 0      |                              | $      | 4,807 |   |
| Net Loss                       |   | $                                 | 47,224 |                              | $      | (284,251 | ) |
| Net Loss Per Share             |   | $                                 | (.01   | )                                 | $      | (.01 | ) |

 

NetLoss

 

The net loss of L.Air increased approximately 602% to $(284,251) duringthe fiscal year ended November 30, 2002 compared to $(47,224) during the fiscalyear ended November 30, 2001.  Theincrease in the net loss of L.Air is attributable primarily to an increase inits operating costs, professional fees, and its general and administrativeexpenses during the fiscal year ended November 30, 2002.

 

Liquidityand Capital Resources

 

At November 30, 2002, L.Air had negative working capital ofapproximately $(292,409), compared to negative working capital of $(12,965) atNovember 30, 2001.

 

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The ability of L.Air to satisfy its obligations will depend in partupon its ability to raise funds through the sale of additional shares of itsCommon Stock, increasing borrowings, and in part upon its ability to reach aprofitable level of operations.

 

L.Air’s capital resources have been provided primarily by capitalcontributions from stockholders and stockholders’ loans.

 

RecentAccounting Pronouncements

 

SFAS No. 133, Accounting for Derivative Instruments and HedgingActivities, became effective January 1, 2001. This statement establishesaccounting and reporting standards requiring that every derivative instrument,including certain derivative instruments imbedded in other contracts, berecorded in the balance sheet as either an asset or liability measured at itsfair value. The statement also requires that changes in the derivative’s fairvalue be recognized in earnings unless specific hedge accounting criteria aremet. We believe the adoption of SFAS No. 133 will not have an effect on ourfinancial statements because we have not engaged in derivative or hedging activities.

 

In December 1999, the Securities and Exchange Commission released StaffAccounting Bulletin No. 101, Revenue Recognition in Financial Statements, whichprovides guidance on the recognition, presentation and disclosure of revenuehaving a material impact on our financial statements.

 

**Item 7****.   FinancialStatements**

 

The financial statements of L.Air for its fiscal years ended November30, 2002 and 2001, are provided with this Form 10-KSB.

 

**Item 8****.   Changesin and Disagreements with Accountants on Accounting and Financial Disclosure**

 

There have been no disagreements regarding accounting and financialdisclosure matters with the independent certified public accountants of L.Air.

 

For the fiscal year ended November 30, 2001, and the subsequent interimperiods through November 20, 2002, there were no disagreements between L.Airand its former independent auditors, Morgan & Company on any matter ofaccounting principles or practice, financial statement disclosure, or auditingscope or practices which if not resolved to the satisfaction of Morgan &Company would have caused them to make reference to the subject matter of thedisagreement in connection with its reports. Morgan & Company, the independent certified public accountants andauditors of L.Air for fiscal 2001 were dismissed by L.Air from their auditengagement with L.Air.  During thefiscal year ended November 30, 2001, the financial statements of L.Air did notcontain an adverse opinion or a disclaimer of opinion, nor were they qualifiedor modified as to any uncertainty, audit scope, or accounting principles,except that their report dated February 12, 2002 of Morgan & Company forsuch fiscal year indicated conditions which raised substantial doubt aboutL.Air’s ability to continue as a going concern.

 

On February 21, 2002, S F Partnership, LLP, located at 4950 YongeStreet, Suite 400, Toronto, Ontario M2N 6K1, Canada was engaged by L.Air toaudit its financial statements as of November 30, 2002, and the relatedstatements of operations, stockholders’ equity, and cash flows for the yearthen ended.  During the two most recentfiscal years or any subsequent interim period, the new independent accountanthad not been engaged as either the principal accountant of L.Air to audit itsfinancial statements or of any significant subsidiary, nor has L.Air consultedwith it regarding any accounting issue, auditing or financial reporting issueregarding such financial statements or reportable event.

 

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**PART III**

 

**Item 9****.   Directors,Executive Officers, Promoters and Control Persons; Compliance with Section16(a) of the Exchange Act**

 

The directors and officers of L.Air are as follows:

 
| **Name**           |   | **Age** |   | **Position**            |
|--------------------|--------|---------|--------|-------------------------|
| Alexander  Goldman |   | 39      |   | Director  and President |

 

 

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**Item 10****.  Executive Compensation**

 

All executive officers for services in all capacities to L.Air receivedthe following compensation during the fiscal year ended November 30, 2002.

 
|                                              |   |     |   |                       |   |       |   |                               |   | **Long-term Compensation(2)**    |   |                                       |   |
|---------------------------------------------------|--------|----------|--------|----------------------------|--------|------------|--------|------------------------------------|--------|----------------------------------|--------|--------------------------------------------|--------|
|                                              |   |     |   | **Annual compensation(1)** |   | **Awards** |   | **Payouts**                        |   |                             |   |
| **Name and Principal Position**                   |   | **Year** |   | **Salary**                 |   | **Bonus**  |   | **Other  Annual  Compen-  sation** |   | **Restricted  Stock  Awards(3)** |   | **Securities  Underlying  Options/  Sars** |   | **LTIP  Payouts** |   | **All Other  Compen-  sation** |   |
| Alex  GoldmanPresident                            |   | 2002     |   | $                          | 0      |       | $      | 0                                  |   | $                                | 0      |                                       | $      |   |   | $ | 0 |   | $ | 0 |   | $ | 0 |   |
|                                              |   |     |   |                       |   |       |   |                               |   |                             |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Laurent  Pfeiffer  former Chief Financial Officer |   | 2002     |   | $                          | 0      |       | $      | 0                                  |   | $                                | 0      |                                       | $      | 0 |   | $ | 0 |   | $ | 0 |   | $ | 0 |   |
|                                              |   |     |   |                       |   |       |   |                               |   |                             |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Jean  Marie Gras  former Secretary                |   | 2002     |   | $                          | 0      |       | $      | 0                                  |   | $                                | 0      |                                       | $      | 0 |   | $ | 0 |   | $ | 0 |   | $ | 0 |   |
|                                              |   |     |   |                       |   |       |   |                               |   |                             |   |                                       |   |   |   |   |   |   |   |   |   |   |   |
| Robert  W. Rosnerformer President and Secretary   |   | 2002     |   | $                          | 0      |       | $      | 0                                  |   | $                                | 0      |                                       | $      | 0 |   | $ | 0 |   | $ | 0 |   | $ | 0 |   |
|                                              |   |     |   |                       |   |       |   |                               |   |                             |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Randy  Whiteformer President                      |   | 2002     |   | $                          | 0      |       | $      | 0                                  |   | $                                | 0      |                                       | $      | 0 |   | $ | 0 |   | $ | 0 |   | $ | 0 |   |
|                                              |   |     |   |                       |   |       |   |                               |   |                             |   |                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Mark  McLeanformer Treasurer and Secretary        |   | 2002     |   | $                          | 0      |       | $      | 0                                  |   | $                                | 0      |                                       | $      | 0 |   | $ | 0 |   | $ | 0 |   | $ | 0 |   |
|                                                   |        |          |        |                            |        |            |        |                                    |        |                                  |        |                                            |        |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)                                  Personalbenefits received by L.Air’s executive officers are valued below the levelswhich would otherwise require disclosure under the rules of the U.S. Securitiesand Exchange Commission.

(2)                                  L.Airdoes not currently provide any contingent or deferred forms of compensationarrangements, annuities, pension or retirement benefits.

 

Committees of the Board of Directors

 

L.Air does not have an audit committee,compensation committee, nominating committee, or an executive committee of theBoard of Directors.  The Board ofDirectors plans to establish various committees in the future.

 

Compliance with Section 16(a) of the Securities Exchange Act

 

Section 16(a) of the Exchange Act requiresL.Air’s executive officers and directors, and persons who beneficially own morethan ten percent of L.Air’s equity securities, to file reports of ownership andchanges in ownership with the Securities and Exchange Commission.  Officers, directors and greater than 10%percent shareholders are required by SEC regulation to furnish L.Air withcopies of all Section 16(a) forms they file.

 

Based on its review of the copies of suchforms received by it, L.Air believes that during the year ended November 30,2002, all such filing requirements applicable to its officers and directorswere complied with, except that Alex Goldman filed a Form 4 dated October 4,2002, instead of a Form 3, and did not file a Schedule 13D, and LaurentPfeiffer, the former Chief Financial Officer, and Jean Marie Gras, the formersecretary of L.Air, did not file a Form 3 with the commission. UniversalCapital Partners Corp., a 10% beneficial owner, has not filed a Form 3 orSchedule 13D Report.

 

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Benefit Plans

 

L.Air does not have any pension plan, profitsharing plan,  or similar plans for thebenefit of its officers, directors or employees.  However, L.Air may establish such plans in the future.

 

Board Compensation  

 

Directors of L.Air have not received anycompensation in their capacity as directors during its fiscal year endedNovember 30, 2002.

 

Director and Officer Indemnification and Limitations on Liability

 

Article XI of our Bylaws limits the liabilityof directors, officers and employees to the fullest extent permitted by theNevada Corporation Law.  Consequently,our directors and officers may not be personally liable for monetary damagesfor breach of their fiduciary duties.

 

Section 78.7502 of the Nevada corporation law[Title 7, Section 78 NRS] authorizes a corporation to indemnify directors andofficers who were or are a party or is threatened to be made a party to anythreatened, pending or completed action, suit or proceeding, whether civil,criminal, administrative or investigative, except an action by or in the rightof the corporation, by reason of the fact that he is or was a director,officer, employee or agent of the corporation, or is or was serving at therequest of the corporation as a director, officer, employee or agent of anothercorporation, partnership, joint venture, trust or other enterprise, againstexpenses, including attorneys’ fees, judgments, fines and amounts paid insettlement actually and reasonably incurred by him in connection with theaction, suit or proceeding if he acted in good faith and in a manner which hereasonably believed to be in or not opposed to the best interests of thecorporation, and, with respect to any criminal action or proceeding, had noreasonable cause to believe his conduct was unlawful. The termination of anyaction, suit or proceeding by judgment, order, settlement, conviction or upon aplea of nolo contendere or its equivalent, does not, of itself, create apresumption that the person did not act in good faith and in a manner which hereasonably believed to be in or not opposed to the best interests of thecorporation, and that, with respect to any criminal action or proceeding, hehad reasonable cause to believe that his conduct was unlawful.

 

A corporation may indemnify any person whowas or is a party or is threatened to be made a party to any threatened,pending or completed action or suit by or in the right of the corporation toprocure a judgment in its favor by reason of the fact that he is or was adirector, officer, employee or agent of the corporation, or is or was servingat the request of the corporation as a director, officer, employee or agent ofanother corporation, partnership, joint venture, trust or other enterpriseagainst expenses, including amounts paid in settlement by attorneys’ feesactually and reasonably incurred by him in connection with the defense orsettlement of the action or suit if he acted in good faith and in a mannerwhich he reasonably believed to be in or not opposed to the best interests ofthe corporation. Indemnification may not be made for any claim, issue or matteras to which such a person has been adjudged by a court of competentjurisdiction, after exhaustion of all appeals therefrom, to be liable to thecorporation or for amounts paid in settlement to the corporation, unless andonly to the extent that the court in which the action or suit was brought orother court of competent jurisdiction determines upon application that in viewof all the circumstances of the case, the person is fairly and reasonablyentitled to indemnity for such expenses as the court deems proper.

 

These limitations of liability do not applyto claims arising under federal securities laws and does not affect the availabilityof equitable remedies such as injunctive relief or rescission.

 

Insofar as indemnification for liabilitiesarising under the Securities Act may be permitted to directors, officers, andcontrolling persons of L.Air pursuant to the foregoing provisions, orotherwise, L.Air has been advised that in the opinion of the Commission suchindemnifications is against public policy as expressed in the Securities Actand, is, therefore, unenforceable.

 

We have no indemnification agreements withpersons who are directors, officers or employees of L.Air.

 

20

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**Item 11****.  SecurityOwnership of Certain Beneficial Owners and Management**

 

The total number of shares of Common Stock ofL.Air beneficially owned by each of the officers and directors, and all of suchdirectors and officers as a group, and their percentage ownership of theoutstanding shares of Common Stock of L.Air as of November 30, 2002, are asfollows:

** **
| **Management   Shareholders(1)**                                            |   | **Shares  Beneficially  Owned(1)** |   | **Percent of  Common Stock** |   |
|-----------------------------------------------------------------------------|--------|------------------------------------|--------|------------------------------|--------|
|                                                                        |   |                               |   |                         |   |
|                                                                        |   |                               |   |                         |   |
| Alex Goldman                                                                |   | 15,000,000                         |   | 43.7                         | %      |
| 95 Rue de Tocoueville                                                       |   |                               |   |                         |   |
| Paris, France 75017                                                         |   |                               |   |                         |   |
|                                                                        |   |                               |   |                         |   |
| Directors and officers as a  group   (1 person, including the above person) |   | 1                                  |   | 43.7                         | %      |

 

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(1)                                  Except as otherwisenoted, it is believed by L.Air that all persons have full voting and investmentpower with respect to the shares indicated. Under the rules of the Securitiesand Exchange Commission, a person (or group of persons) is deemed to be a“beneficial owner” of a security if he or she, directly or indirectly, has orshares the power to vote or to direct the voting of such security, or the powerto dispose of or to direct the disposition of such security. Accordingly, morethan one person may be deemed to be a beneficial owner of the same security. Aperson is also deemed to be a beneficial owner of any security which thatperson has the right to acquire within 60 days, such as options or warrants topurchase the Common Stock of L.Air.

 

The following table sets forth informationwith respect to the beneficial ownership of L.Air’s Common Stock by eachshareholder who beneficially owns more than five percent (5%) of its CommonStock, the number of shares beneficially owned by each and the percent ofoutstanding Common Stock so owned of record as of November 30, 2002. It isbelieved by L.Air that all persons listed have sole voting and investment powerwith respect to their shares, except as otherwise indicated.

 
| **Names and Addresses** |   | **Title of   Class** |   | **Shares of   Outstanding   Common Stock** |   | **Percent   Beneficially   Owned** |
|-------------------------|--------|----------------------|--------|--------------------------------------------|--------|------------------------------------|
|                    |   |                 |   |                                       |   |                               |   |
| Alex Goldman            |   | Common               |   | 15,000,000                                 |   | 43.7                               | % |
| 95 Rue de Tocoueville   |   |                 |   |                                       |   |                               |   |
| Paris, France 75017     |   |                 |   |                                       |   |                               |   |
|                    |   |                 |   |                                       |   |                               |   |
| AeroPlus S.A.S.         |   | Common               |   | 12,000,000                                 |   | 35.0                               | %(1) |
| 29 BD cle la Ferrage    |   |                 |   |                                       |   |                               |   |
| 06400 Cannes            |   |                 |   |                                       |   |                               |   |
| France                  |   |                 |   |                                       |   |                               |   |

 

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(1)                                  L.Air previouslyissued 12,000,000 shares of its Common Stock to AeroPlus S.A.S. (“AeroPlus”) toacquire an ownership interest in AeroPlus S.A.S. which was inreceivership.  L.Air has terminated thisproposed acquisition and intends to cancel the issuance of such Common Stock toAeroPlus.

 

21

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**Item 12****.  CertainRelationships and Related Transactions**

 

L.Air borrowed $268,112 from Universal Capital Partners Corp, thelargest current stockholder of  L.Air,during the fiscal year ended November 30, 2002.  The loan was non-interest bearing and had no due date.  This loan was converted into 2,234,267shares of the Common Stock of L.Air effective February 28, 2003, in relianceupon Regulation S under the Securities Act of 1933.

 

**Item 13****.  Exhibits and Reports on Form 8-K**

 

Reports on Form 8-K:

 

L.Air filed a current report on Form 8-K dated March 27, 2002 (Item 1)regarding a change in control based upon the purchase of shares of Common Stockby Robert Rosner from Randy White and also reported a change in the managementof L.Air, and to report a 3 for 1 stock split of its outstanding Common Stock.

 

L.Air filed a current report on Form 8-K dated September 5, 2002 (Item1, Item 5, and Item 6) regarding the resignation of Robert Rosner as a directorand officer, and the election of Alex Goldman as a director and President andTreasurer; to report the appointment of Interwest Transfer Company, Inc. ofSalt Lake City, Utah as the new transfer agent of L.Air; and to report a changeof its principal executive office to 130 King Street West, Suite 3670, Toronto,Province of Ontario, Canada.

 

L.Air filed a current report on Form 8-K dated October 11, 2002 (Item 2and Item 4) to report the proposed acquisition of AltitudePlus, S.A.A. forstock, and to report a change of independent auditors to S F Partnership,L.L.P. of Toronto, Canada.

 

Exhibits

 
| **Exhibit**                                                        |   | **Description**                                                                                                                                                          |
|--------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                               |   |                                                                                                                                                                     |
| 1.1  Articles of Incorporation of L.Air                       |   | The  Articles of Incorporation of L.Air are incorporated  herein by reference to Exhibit 3.1 to the Form SB-2  registration statement of L.Air (File No. 333-54658) |
|                                                               |   |                                                                                                                                                                     |
| 1.2   Certificate of Amendment to Articles of   Incorporation |   | Certificate  of Amendment to the Articles of Incorporation of L.Air dated October 21, 2002                                                                               |
|                                                               |   |                                                                                                                                                                     |
| 1.3   Certificate of Amendment to Articles of   Incorporation |   | Certificate  of Amendment to the Articles of Incorporation of L.Air dated January 28, 2003                                                                               |
|                                                               |   |                                                                                                                                                                     |
| 1.4  By-Laws of L.Air                                         |   | By-Laws  of L.Air are incorporated herein by reference to Exhibit 3.2 to the Form SB-2  registration statement of L.Air (File No. 333-54658)                             |
|                                                               |   |                                                                                                                                                                     |
| 1.5  Amendment to By-Laws of L.Air                            |   | By-Laws  as Amended of L.Air dated July 9, 2001                                                                                                                          |
|                                                               |   |                                                                                                                                                                     |
| 10.  Material Contracts                                       |   |                                                                                                                                                                     |
|                                                               |   |                                                                                                                                                                     |
| 10.1                                                               |   | Share  Exchange Agreement dated October 18, 2002, regarding AeroPlus, S.A.S.                                                                                             |

 

22

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| 10.2                                                          |   | Consulting  Agreement with Geneva Equities Ltd. dated February 5, 2003                                                     |
|---------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------|
|                                                          |   |                                                                                                                       |   |   |
| 10.3                                                          |   | Wet  Lease & Blocked Space Agreement between L.Air and VGAA dated January 29,  2003                                    |
|                                                          |   |                                                                                                                       |   |   |
| 11.  Statement re: computation of per share  earnings    |   | Reference  is made to the Statements of Operations of the financial statements which are  incorporated by reference herein |
|                                                          |   |                                                                                                                       |   |   |
| 23.1 Consent of S F Partnership, L.L.P.   independent auditor |   | Consent  of S F Partnership, L.L.P.                                                                                        |
|                                                          |   |                                                                                                                       |   |   |
|                                                          |   |                                                                                                                       |   |   |
| 23.2 Consent of Morgan & Company   independent auditor    |   | Consent  of Morgan & Company                                                                                           |
|                                                          |   |                                                                                                                       |   |   |
|                                                          |   |                                                                                                                       |   |   |
| 27   Financial Data Schedule                        |   | Not  applicable                                                                                                            |
|                                                          |   |                                                                                                                       |   |   |
| 99.1  Certification of Alex Goldman                           |   | Certification  of Alex Goldman                                                                                             |
|                                                          |   |                                                                                                                       |   |   |
| 99.2  Certification of Alex Goldman                           |   | Certification  of Alex Goldman                                                                                             |

 

23

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Securities Exchange Act,the registrant caused this report to be signed on its behalf by theundersigned, hereunto duly authorized.

 
| March  14, 2003 | L.Air  Holding Inc. |
|-----------------|---------------------|
|            |                |
|            | By:/s/ Alex Goldman |   |
|            |                |   |
|            |                | Alex  Goldman |
|            |                | President,  Chief Financial and Accounting Officer |
|                 |                     |  |  |

 

In accordance with the Exchange Act, this report has been signed belowby the following persons on behalf of the registrant and in the capacities andon the dates indicated.

 

 
| March  14, 2003 |                |
|-----------------|---------------------|
|            |                |
|            | By:/s/ Alex Goldman |   |
|            |                |   |
|            |                | Alex  Goldman |
|            |                | President,  Treasurer and Director |
|                 |                     |  |  |

 

24

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EXHIBIT INDEX

 
| 1.2    |   | Certificate  of Amendment to Articles of Incorporation dated October 21, 2002                |
|--------|--------|----------------------------------------------------------------------------------------------|
|   |   |                                                                                         |
| 1.3    |   | Certificate  of Amendment to Articles of Incorporation dated January 28, 2003                |
|   |   |                                                                                         |
| 1.5    |   | By-Laws  as Amended of L.Air dated July 9, 2001                                              |
|   |   |                                                                                         |
| 10.1   |   | Share  Exchange Agreement dated October 18, 2002, regarding AeroPlus, S.A.S.                 |
|   |   |                                                                                         |
| 10.2   |   | Consulting  Agreement with Geneva Equities Ltd. dated February 5, 2003                       |
|   |   |                                                                                         |
| 10.3   |   | Wet  Lease & Blocked Space Agreement between L.Air and VGAA N.V. dated January  29, 2003 |
|   |   |                                                                                         |
| 23.1   |   | Consent  of S F Partnership, L.L.P, independent auditor                                      |
|   |   |                                                                                         |
| 23.2   |   | Consent  of Morgan & Company, independent auditor                                        |
|   |   |                                                                                         |
| 99.1   |   | Certification  of Alex Goldman                                                               |
|   |   |                                                                                         |
| 99.2   |   | Certification  of Alex Goldman                                                               |

 

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