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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UNITED
      STATES</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SECURITIES
      AND EXCHANGE COMMISSION</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington,
      D.C. 20549</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FORM
      8-K</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">CURRENT
      REPORT PURSUANT</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TO
      SECTION 13 OR 15(d) OF THE</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">SECURITIES
      EXCHANGE ACT OF 1934</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
      of
      report (Date of earliest event reported): </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>September
      1, 2006</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>FBO
      AIR, INC.</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Exact
      Name of Registrant as Specified in Its Charter)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Nevada</u></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(State
      or
      Other Jurisdiction of Incorporation)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<u><font size="2">333-56046</font></u></div>
            </td>
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<u><font size="2">87-0617649</font></u></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<font size="2">(Commission
                File Number)</font></div>
            </td>
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;&#160;<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(I.R.S.
                Employer Identification No.)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td width="50%">&#160;</td>
            <td width="50%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<font size="2">101
                Hangar Road</font></div>
            </td>
            <td width="50%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<font size="2">Wilkes-Barre/Scranton
                International
                Airport</font></div>
            </td>
            <td width="50%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<u><font size="2">Avoca,
                PA</font></u></div>
            </td>
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<u><font size="2">18641</font></u></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<font size="2">(Address
                of Principal Executive
                Offices)</font></div>
            </td>
            <td width="50%">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;&#160;<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Zip
                Code)</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>(570)
      414-1400</u></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Registrant&#8217;s
      Telephone Number, Including Area Code)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>see</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      General
      Instruction A.2 below):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>Written
      communications
      pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><a name="Check2"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>Soliciting
      material
      pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)</font></a></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
      240.14d-d(b))</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><font style="DISPLAY: inline; FONT-FAMILY: Wingdings">o</font>Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
      240.13e-4(c))</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">1</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>INFORMATION
      TO BE INCLUDED IN THE REPORT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      1 - Registrant&#8217;s Business and Operations</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      1.01.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Termination
      of a Material Definitive Agreement.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      September 1, 2006, FBO Air, Inc., a Nevada corporation and the registrant (&#8220;FBO
      Air&#8221;), closed a private placement (the &#8220;Offering&#8221;) pursuant to Rule 506 of
      Regulation D under the Securities Act of 1933, as amended (the &#8220;Securities
      Act&#8221;), and sold 50.25 units (the &#8220;Units&#8221;) at $100,000 per Unit. Each Unit
      consisted of 166,700 shares of the Common Stock, $.001 par value (the &#8220;Common
      Stock&#8221;), of FBO Air and a warrant expiring August 31, 2011 (the &#8220;Investor
      Warrant&#8221;) to purchase 100,000 shares of the Common Stock. FBO Air realized gross
      proceeds of $5,025,000 from the Offering. A copy of a press release relating
      to
      the Offering is filed as Exhibit 10.1 to this Report and is incorporated herein
      by this reference. See Item 3.02 of this Report for additional information
      as to
      the Offering:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      closing of the Offering terminated certain material definitive agreements of
      FBO
      Air as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Certificate
      of Designations of FBO Air:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Certificate of Designations related to the authorization of 1,000 shares of
      FBO
      Air&#8217;s Series A Convertible Preferred Stock, $.001 par value (the &#8220;Series A
      Preferred Stock&#8221;). A copy of the Certificate of Designations is filed (by
      incorporation by reference) as Exhibit 3(i) to this Report and is incorporated
      herein by this reference. As previously reported, FBO Air issued an aggregate
      of
      846 shares of the Series A Preferred Stock to investors as part of units in
      two
      related private placements pursuant to Rule 506 of Regulation D under the
      Securities Act which closed on March 31, April 8 and April 15, 2005. Two of
      the
      investors in these 2005 private placements were William B. Wachtel, who on
      March
      31, 2005 was elected as a director and Chairman of the Board of the Company,
      and
      Jeffrey B. Mendell, a director of FBO Air since September 30, 2004.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      closing of the Offering on September 1, 2006 for more than $5,000,000 in gross
      proceeds constituted a &#8220;Qualified Follow-On Offering&#8221; as such term is defined in
      Section 3(b) of the Certificate of Designations and, as a result, was a
&#8220;Mandatory Conversion Event&#8221; as such term is also defined in Section 3(b). As a
      result, the then outstanding 615 shares of the Series A Preferred Stock were
      automatically converted, in accordance with the Certificate of Designations,
      into 10,250,002 shares of the Common Stock. 231 shares of the Series A Preferred
      Stock had previously been converted into 3,850,002 shares of the Common Stock.
      Each of the holders of the 615 shares of the Series A Preferred Stock has the
      option, instead of accepting shares of the Common Stock in accordance with
      the
      Conversion Price in the Certificate of Designations, to accept Units in the
      Offering, plus an additional 10% of the identical securities as if the holder
      had participated in the Offering. FBO Air has sent a notice to the holders
      to
      such effect, but assumes, for the purpose of this Report, that all of the
      conversions will be on the basis of the Conversion Price, resulting in the
      issuance of the 10,250,002 shares of the Common Stock as reported above. Should
      a holder or holders elect to accept instead, upon conversion, the securities
      in
      the Offering, FBO Air will amend this Report to so report. No additional shares
      of the Series A Preferred Stock may be issued and the 154 shares of the Series
      A
      Preferred Stock which were never issued have been restored as authorized but
      unissued shares of FBO Air&#8217;s Preferred Stock, $.001 par value, not allocated to
      any series. See Item 8.01 of this Report for a description of the shares of
      the
      Common Stock issued as accrued dividends with respect to the converted shares
      of
      the Series A Preferred Stock. The aggregate of 14,100,004 shares of the Common
      Stock issued upon conversion of the 846 shares of the Series A Preferred Stock
      were registered under the Securities Act for resale by the holders in FBO Air&#8217;s
      Registration Statement on Form SB-2, File No. 333-125811 (the &#8220;Registration
      Statement&#8221;). In addition, corporate counsel to FBO Air has advised that the
      holders may seek to sell these &#8220;conversion&#8221; shares by complying with the
      exemption of Rule 144 because the holding period for these shares, pursuant
      to
      paragraph (d)(3)(ii) of Rule 144, dates back to the original acquisition of
      the
      related shares of the Series A Preferred Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">2</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
      Item
      3.03(b)(i) of this Report for a brief description of certain of the restrictive
      covenants and voting and other rights in the Certificate of Designations
      eliminated by the Mandatory Conversion Event caused by consummation of the
      Offering.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
      subsection (a)(1) of this Item 1.02 above for a brief description of the
      material circumstances relating to the termination of the Certificate of
      Designations by its terms as a result of the mandatory conversion of all
      outstanding shares of the Series A Preferred Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(4)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      were no early termination penalties incurred by FBO Air as a result of the
      Mandatory Conversion Event and the resultant termination of the Certificate
      of
      Designations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Term
      Loan
      Agreement dated as of September 23, 2005 (the &#8220;Term Loan
      Agreement&#8221;):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      previously reported, on September 23, 2005, FBO Air, Airborne, Inc., a New
      York
      corporation (&#8220;Airborne&#8221;), and Airport Capital, LLC, a New York limited liability
      company (&#8220;Airport Capital&#8221;), entered into the Term Loan Agreement pursuant to
      which Airport Capital loaned FBO Air the principal amount of $1,500,000 in
      order
      to help finance the acquisition of Airborne, which was engaged in aircraft
      charter management activities, as a subsidiary of FBO Air. A copy of the Term
      Loan Agreement is filed (by incorporation by reference) as Exhibit 10.2 to
      this
      Report and is incorporated herein by this reference. William B. Wachtel, the
      Chairman of the Board and a director of FBO Air, and an entity owned by Alvin
      S.
      Trenk, a director of FBO Air, are the sole members of Airport Capital. As
      collateral for the loan, Airborne granted Airport Capital a security interest
      in
      its accounts receivable, all of its deposit accounts (as such term is defined
      in
      the New York Uniform Commercial Code), all monies now or hereafter in the
      possession or under the control of Airborne or Airport Capital and all products
      and proceeds of the foregoing personal property.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      September 4, 2006, FBO Air, using part of the proceeds from the Offering, paid
      Airport Capital $1,523,568.68 ($1,500,000 in principal amount and $23,568.68
      in
      accrued interest) thereby terminating the Term Loan Agreement, including the
      security interest described in the preceding paragraph. The promissory note
      evidencing the loan was due September 23, 2006 (extended by FBO Air from its
      original 180-day maturity date). Interest was paid monthly at the annual rate
      of
      4&#188;% until the initial maturity date and at the annual rate of 9&#188;%
      thereafter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">3</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition to the security interest described in subsection (b)(1) above, the
      Term
      Loan Agreement required FBO Air to pay the amount by which the then outstanding
      principal amount of the loan exceeded 75% of the Eligible Accounts (as defined)
      of Airborne. Termination of the Term Loan Agreement eliminated the security
      interest and this other potential obligation of FBO Air.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
      subsection (b)(1) of this Item 1.02 for a brief description of the material
      circumstances relating to the termination of the Term Loan Agreement by its
      own
      terms, the obligation thereunder having been paid in full.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(4)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      were no early termination penalties incurred by FBO Air as a result of the
      Term
      Loan Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10%
      Senior Secured Promissory Notes due March 31 or April 8, 2008 (the &#8220;Secured
      Notes&#8221;) and the related General Security Agreement dated as of March 31, 2005
      (the &#8220;General Security Agreement&#8221;):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      previously reported, FBO Air sold units to investors in a private placement
      pursuant to Rule 506 of Regulation D under the Securities Act which closed
      on
      March 31, April 8 and April 15, 2005. Each unit consisted of a Secured Note
      in
      the principal amount of $25,000; ten shares of the Series A Preferred Stock;
      and
      a warrant expiring March 31, 2010, April 8, 2010 or April 15, 2010 (the &#8220;2005
      Investor Warrant&#8221;) to purchase 50,000 shares of the Common Stock. FBO Air issued
      to the investors Secured Notes in the aggregate principal amount of $1,496,324.
      The forms of Secured Note and the 2005 Investor Warrant are filed (by
      incorporation by reference) as Exhibit 4.1 and Exhibit 4.2, respectively, to
      this Report and are incorporated herein by this reference. Jeffrey B. Mendell,
      a
      director of FBO Air, was among the investors in the private placement related
      to
      the Secured Notes. FBO Air and the investors executed the General Security
      Agreement which granted to the investors a security interest in all of the
      assets of FBO Air and its subsidiaries (the &#8220;Company&#8221;), including assets
      acquired in the future. A copy of the General Security Agreement is filed (by
      incorporation by reference) as Exhibit 4.3 to this Report and is incorporated
      herein by this reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      September 6, 2006, FBO Air, using part of the proceeds from the Offering, paid
      the holders of the Secured Notes an aggregate of $1,496,324 in principal amount
      and an aggregate of $211,765 in interest. Absent a default by FBO Air, interest
      on the Secured Notes was not payable until maturity of the Secured Notes. This
      prepayment terminated the General Security Agreement, by its terms, including
      the security interest described in the preceding paragraph.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(2)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
      Item
      3.03(b)(ii) of this Report for a brief description of certain material terms
      and
      conditions of the Secured Notes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(3)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">See
      subsection (c)(1) of this Item 1.02 for a brief description of the material
      circumstances relating to termination of the Secured Notes and the related
      General Security Agreement by their terms as a result of the prepayment of
      the
      Secured Notes.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(4)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      were no early termination penalties incurred by FBO Air as a result of the
      prepayment of the Secured Notes and the resultant termination of the related
      General Security Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      3 - Securities and Trading Markets</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.02.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Unregistered
      Sales of Equity Securities.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      September 1, 2006, as indicated in the introductory paragraph to Item 1.02
      of
      this Report, FBO Air sold 50.25 Units, each Unit consisting of 166,700 shares
      of
      the Common Stock and the Investor Warrant to purchase 100,000 shares of the
      Common Stock. As a result of this closing of the Offering, FBO Air will issue
      an
      aggregate of 8,376,675 shares of the Common Stock and Investor Warrants to
      purchase an aggregate of 5,025,000 shares of the Common Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      was
      no underwriter for the shares. The Offering was conditioned upon investors
      purchasing a minimum of 50 Units for an aggregate purchase price of $5,000,000.
      The Offering was made to &#8220;accredited investors&#8221; (as such term is defined in Rule
      501(a) of Regulation D under the Securities Act). Included among such investors
      were Ronald J. Ricciardi, the President, the Chief Executive Officer and a
      director of FBO Air, William B. Wachtel, the Chairman of the Board and a
      director of FBO Air, John H. Dow, a director and President of the FirstFlight
      Division of FBO Air, and an entity owned by Alvin S. Trenk, a director of FBO
      Air.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Units
      were offered at $100,000 per Unit; however, FBO Air reserved the right to accept
      subscriptions for partial Units and did in fact do so. As a result, the total
      offering price was $5,025,000. There were no underwriting discounts or
      commissions.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FBO
      Air
      claims that the Offering was exempt from the registration requirement of Section
      5 of the Securities Act pursuant to the exemption of Section 4(2) of the
      Securities Act and Rule 506 of Regulation D promulgated thereunder as a
      transaction not involving a public offering. Each investor represented to FBO
      Air that he, she or it was acquiring the Units, and, unless registered under
      the
      Securities Act at that time, the shares of the Common Stock issuable upon the
      exercises of the Investor Warrants, for investment and not with a view toward,
      or in connection with, any distribution of securities of FBO Air (as the term
      &#8220;distribution&#8221; is contemplated under the Securities Act).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following terms are applicable to the exercises of the Investor Warrants, the
      form of which is filed as Exhibit 4.2 to this Report and which is incorporated
      herein by this reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Investor Warrants will be exercisable at $1.00 per share (the &#8220;Exercise Price&#8221;)
      subject to adjustment as provided in subsection (e)(ii) of this Item
      3.02.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Exercise Price will be adjusted on a weighted average basis for (1) all stock
      splits, dividends, recapitalizations, reclassifications, payments made to
      holders of the Common Stock and other similar events and (2) the sale by FBO
      Air
      of additional equity securities at a price below the Exercise
      Price.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Not
      applicable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.03.</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Material
      Modification to Rights of Security Holders.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Not
      applicable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Reference
      is made to Item 1.02 of this Report with reference to termination of the
      Certificate of Designations, the Term Loan Agreement, the Secured Notes and
      the
      General Security Agreement. In addition to terminating the security interests
      granted pursuant to the Term Loan Agreement and the General Security Agreement,
      certain restrictive covenants and other terms and conditions applicable to
      the
      Company were terminated. The following is a brief description of certain
      material terms and conditions which are among those which have been
      terminated:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Rights
      of
      the holders of the Series A Preferred Stock in the Certificate of
      Designations:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Voting
      Rights - In addition to their rights to vote separately as a class on any matter
      which adversely affected their rights or as to which their consent was
      necessary, the holders of the Series A Preferred Stock had the right to vote
      as
      a single class with the holders of the Common Stock on all matters submitted
      to
      a vote of stockholders of the Company, with each share having the number of
      votes equal to the largest whole number of shares of the Common Stock into
      which
      such share of the Convertible Preferred Stock could be converted.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Right
      to
      elect a director - The holders had the right, which was never exercised, to
      elect a director so long as 25% of the aggregate Stated Value (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>i.e.</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      $5,000
      per share) of the shares sold in the related private placements remained
      outstanding. In lieu of the person serving as a director, at the option of
      the
      holders of the Series A Preferred Stock, he or she could have been an observer
      at Board meetings.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Liquidation
      preference per share - Each holder was to receive 115% of the Stated Value
      of
      each share of the Series A Preferred Stock plus any accrued but unpaid dividends
      upon liquidation or dissolution of FBO Air.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dividends
      - Each holder was to receive cumulative dividends of 8% per annum payable
      commencing July 1, 2005, at the option of FBO Air, either in additional shares
      of the Series A Preferred Stock or cash. No dividend on the Common Stock could
      have been paid while FBO Air was in default on payment of accrued but unpaid
      dividends. See Item 8.01 of this Report relating to the payment of accrued
      dividends on the Series A Preferred Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mandatory
      Redemption - FBO Air was obligated to redeem all of the then outstanding shares
      of the Series A Preferred Stock on the third anniversary of their initial
      issuance (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>i.e.</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      on
      March 31, 2008) for an amount equal to their Stated Value plus accrued but
      unpaid dividends. Because of this redemption provision, the Series A Preferred
      Stock was not, for accounting purposes, treated as equity in the Company&#8217;s
      balance sheet.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Required
      Consents - Without the consent of the holders of at least 50.1% of the then
      aggregated Stated Value of the then outstanding shares of the Series A Preferred
      Stock, the Company could not directly or indirectly:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">acquire
      any assets other than certain specified fixed based operators
      (&#8220;Acquisitions&#8221;);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">sell,
      transfer and/or otherwise dispose of (other than in the ordinary course of
      business), any assets (other than a Permitted Asset Sale as such term was
      defined in the Secured Notes), capital stock and/or effectuate any change of
      control transaction;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">incur
      any
      indebtedness for borrowed money other than the Secured Notes (and as otherwise
      expressly permitted in the Secured Notes);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">enter
      into any material agreement that would require disclosure pursuant to Item
      1.01
      of Form 8-K, other than any agreement related to the Acquisitions;
      or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">create
      any subsidiaries other than subsidiaries all of whose capital stock is owned
      by
      the Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Rights
      of
      the holders of the Secured Notes:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      holders of the Secured Notes were granted a security interest in all of the
      assets of the Company, whether then held or thereafter acquired. Unless prepaid,
      the maturity date of the Secured Note was March 31, 2008.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FBO
      Air
      is required to make a prepayment of the Secured Notes from the gross proceeds
      from a sale, lease or other disposition of shares of the capital stock of a
      subsidiary or the property or other assets of FBO Air or a subsidiary other
      than
      sales of their products and/or services in the ordinary course or their business
      as fixed base operators.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
      for the Series A Preferred Stock and the 2005 Investor Warrants, FBO Air (or
      any
      of its subsidiaries) could not redeem or repurchase any outstanding equity
      or
      debt security of FBO Air (or any of its subsidiaries).</font></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 108pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FBO
      Air
      would not, directly or indirectly, (or permit any subsidiary to) incur any
      indebtness unless (a) such indebtedness was subordinated to the Secured Notes
      and, after giving effect to its issuance, FBO Air had a Consolidated EBITDA
      Debt
      Service Coverage Ratio (as defined) of 2.5 times and (b) such indebtedness
      was
      incurred to finance the acquisitions of fixed base operators.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Section
      8 - Other Events</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      8.01</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Other
      Events.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">FBO
      Air
      had not declared any cash dividends on the Common Stock or the Series A
      Preferred Stock for the period from January 2, 2004 through September 3, 2006.
      The Company has had losses since inception and the Nevada General Corporation
      Law, which governs FBO Air, prohibited paying cash dividends because FBO Air&#8217;s
      total assets were, as of each quarterly dividend date for the Series A Preferred
      Stock prior to September 4, 2006, less than the sum of its total liabilities
      and
      the amount that would be needed, if FBO Air were to be dissolved at the time
      of
      the dividend distribution, to satisfy the then liquidation preference of the
      holders of the Series A Preferred Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      a
      result of the Nevada statutory provision, dividends on the Series A Preferred
      Stock which were payable pursuant to the Certificate of Designations at the
      rate
      of 8% per annum per share (at FBO Air&#8217;s option in additional shares of the
      Series A Preferred Stock or cash) accrued instead of being declared and paid.
      On
      September 4, 2006, as a result of the prepayment pursuant to the Term Loan
      Agreement and the Mandatory Conversion Event (see Item 1.02 of this Report),
      the
      total assets of FBO Air exceeded its total liabilities and there was no
      liquidation preference for the Series A Preferred Stock. Accordingly, FBO Air
      became obligated to issue an aggregate of 1,417,936 shares of the Common Stock
      as accrued dividends with respect to the 846 shares of the Series A Preferred
      Stock, including with respect to the dividends which had accrued to the
      respective conversion date on the 231 shares which had been converted prior
      to
      the Mandatory Conversion Event. All of the shares of the Common Stock issued
      as
      dividends were registered under the Securities Act for resale by the holders
      in
      the Registration Statement. In addition, corporate counsel to FBO Air has
      advised that, as with respect to the shares of the Common Stock issued upon
      conversion, the holders may seek to sell these &#8220;dividend&#8221; shares by complying
      with the exemption of Rule 144 because the holding period for these shares,
      pursuant to paragraph (d)(3)(i) of Rule 144, dates back to the original
      acquisition of the related shares of the Series A Preferred Stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Section
      9 - Financial Statements and Exhibits</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01</strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Financial
      Statements and Exhibits</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: ">10</font></div>
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{"company-data": {"conformed-name": "FBO AIR, INC.", "cik": "0001128281", "assigned-sic": "4581", "irs-number": "870617649", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "333-56046", "film-number": "061081670"}, "business-address": {"street1": "101 HANGAR ROAD", "street2": "WILKES-BARRE/SCRANTON INTERN'T'L AIRPORT", "city": "AVOCA", "state": "PA", "zip": "18641", "phone": "570.414.1400"}, "mail-address": {"street1": "101 HANGAR ROAD", "street2": "WILKES-BARRE/SCRANTON INTERN'T'L AIRPORT", "city": "AVOCA", "state": "PA", "zip": "18641"}, "former-company": {"former-conformed-name": "SHADOWS BEND DEVELOPMENT INC", "date-changed": "20010220"}}
Unassociated Document
UNITED
      STATES
SECURITIES
      AND EXCHANGE COMMISSION
Washington,
      D.C. 20549
FORM
      8-K
CURRENT
      REPORT PURSUANT
TO
      SECTION 13 OR 15(d) OF THE
SECURITIES
      EXCHANGE ACT OF 1934
Date
      of
      report (Date of earliest event reported):
September
      1, 2006
FBO
      AIR, INC.
(Exact
      Name of Registrant as Specified in Its Charter)
Nevada
(State
      or
      Other Jurisdiction of Incorporation)
333-56046
87-0617649
(Commission
                File Number)
(I.R.S.
                Employer Identification No.)
101
                Hangar Road
Wilkes-Barre/Scranton
                International
                Airport
Avoca,
                PA
18641
(Address
                of Principal Executive
                Offices)
(Zip
                Code)
(570)
      414-1400
(Registrant's
      Telephone Number, Including Area Code)
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (
see
General
      Instruction A.2 below):
o
Written
      communications
      pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting
      material
      pursuant to Rule 14a-12 under the Exchange Act (17 CFR
      240.14a-12)
o
Pre-commencement
      communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
      240.14d-d(b))
o
Pre-commencement
      communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
      240.13e-4(c))
1
INFORMATION
      TO BE INCLUDED IN THE REPORT
Section
      1 - Registrant's Business and Operations
Item
      1.01.
Termination
      of a Material Definitive Agreement.
On
      September 1, 2006, FBO Air, Inc., a Nevada corporation and the registrant ("FBO
      Air"), closed a private placement (the "Offering") pursuant to Rule 506 of
      Regulation D under the Securities Act of 1933, as amended (the "Securities
      Act"), and sold 50.25 units (the "Units") at $100,000 per Unit. Each Unit
      consisted of 166,700 shares of the Common Stock, $.001 par value (the "Common
      Stock"), of FBO Air and a warrant expiring August 31, 2011 (the "Investor
      Warrant") to purchase 100,000 shares of the Common Stock. FBO Air realized gross
      proceeds of $5,025,000 from the Offering. A copy of a press release relating
      to
      the Offering is filed as Exhibit 10.1 to this Report and is incorporated herein
      by this reference. See Item 3.02 of this Report for additional information
      as to
      the Offering:
The
      closing of the Offering terminated certain material definitive agreements of
      FBO
      Air as follows:
(a)
Certificate
      of Designations of FBO Air:
1.
The
      Certificate of Designations related to the authorization of 1,000 shares of
      FBO
      Air's Series A Convertible Preferred Stock, $.001 par value (the "Series A
      Preferred Stock"). A copy of the Certificate of Designations is filed (by
      incorporation by reference) as Exhibit 3(i) to this Report and is incorporated
      herein by this reference. As previously reported, FBO Air issued an aggregate
      of
      846 shares of the Series A Preferred Stock to investors as part of units in
      two
      related private placements pursuant to Rule 506 of Regulation D under the
      Securities Act which closed on March 31, April 8 and April 15, 2005. Two of
      the
      investors in these 2005 private placements were William B. Wachtel, who on
      March
      31, 2005 was elected as a director and Chairman of the Board of the Company,
      and
      Jeffrey B. Mendell, a director of FBO Air since September 30, 2004.
The
      closing of the Offering on September 1, 2006 for more than $5,000,000 in gross
      proceeds constituted a "Qualified Follow-On Offering" as such term is defined in
      Section 3(b) of the Certificate of Designations and, as a result, was a
"Mandatory Conversion Event" as such term is also defined in Section 3(b). As a
      result, the then outstanding 615 shares of the Series A Preferred Stock were
      automatically converted, in accordance with the Certificate of Designations,
      into 10,250,002 shares of the Common Stock. 231 shares of the Series A Preferred
      Stock had previously been converted into 3,850,002 shares of the Common Stock.
      Each of the holders of the 615 shares of the Series A Preferred Stock has the
      option, instead of accepting shares of the Common Stock in accordance with
      the
      Conversion Price in the Certificate of Designations, to accept Units in the
      Offering, plus an additional 10% of the identical securities as if the holder
      had participated in the Offering. FBO Air has sent a notice to the holders
      to
      such effect, but assumes, for the purpose of this Report, that all of the
      conversions will be on the basis of the Conversion Price, resulting in the
      issuance of the 10,250,002 shares of the Common Stock as reported above. Should
      a holder or holders elect to accept instead, upon conversion, the securities
      in
      the Offering, FBO Air will amend this Report to so report. No additional shares
      of the Series A Preferred Stock may be issued and the 154 shares of the Series
      A
      Preferred Stock which were never issued have been restored as authorized but
      unissued shares of FBO Air's Preferred Stock, $.001 par value, not allocated to
      any series. See Item 8.01 of this Report for a description of the shares of
      the
      Common Stock issued as accrued dividends with respect to the converted shares
      of
      the Series A Preferred Stock. The aggregate of 14,100,004 shares of the Common
      Stock issued upon conversion of the 846 shares of the Series A Preferred Stock
      were registered under the Securities Act for resale by the holders in FBO Air's
      Registration Statement on Form SB-2, File No. 333-125811 (the "Registration
      Statement"). In addition, corporate counsel to FBO Air has advised that the
      holders may seek to sell these "conversion" shares by complying with the
      exemption of Rule 144 because the holding period for these shares, pursuant
      to
      paragraph (d)(3)(ii) of Rule 144, dates back to the original acquisition of
      the
      related shares of the Series A Preferred Stock.
2
(2)
See
      Item
      3.03(b)(i) of this Report for a brief description of certain of the restrictive
      covenants and voting and other rights in the Certificate of Designations
      eliminated by the Mandatory Conversion Event caused by consummation of the
      Offering.
(3)
See
      subsection (a)(1) of this Item 1.02 above for a brief description of the
      material circumstances relating to the termination of the Certificate of
      Designations by its terms as a result of the mandatory conversion of all
      outstanding shares of the Series A Preferred Stock.
(4)
There
      were no early termination penalties incurred by FBO Air as a result of the
      Mandatory Conversion Event and the resultant termination of the Certificate
      of
      Designations.
(b)
Term
      Loan
      Agreement dated as of September 23, 2005 (the "Term Loan
      Agreement"):
(1)
As
      previously reported, on September 23, 2005, FBO Air, Airborne, Inc., a New
      York
      corporation ("Airborne"), and Airport Capital, LLC, a New York limited liability
      company ("Airport Capital"), entered into the Term Loan Agreement pursuant to
      which Airport Capital loaned FBO Air the principal amount of $1,500,000 in
      order
      to help finance the acquisition of Airborne, which was engaged in aircraft
      charter management activities, as a subsidiary of FBO Air. A copy of the Term
      Loan Agreement is filed (by incorporation by reference) as Exhibit 10.2 to
      this
      Report and is incorporated herein by this reference. William B. Wachtel, the
      Chairman of the Board and a director of FBO Air, and an entity owned by Alvin
      S.
      Trenk, a director of FBO Air, are the sole members of Airport Capital. As
      collateral for the loan, Airborne granted Airport Capital a security interest
      in
      its accounts receivable, all of its deposit accounts (as such term is defined
      in
      the New York Uniform Commercial Code), all monies now or hereafter in the
      possession or under the control of Airborne or Airport Capital and all products
      and proceeds of the foregoing personal property.
On
      September 4, 2006, FBO Air, using part of the proceeds from the Offering, paid
      Airport Capital $1,523,568.68 ($1,500,000 in principal amount and $23,568.68
      in
      accrued interest) thereby terminating the Term Loan Agreement, including the
      security interest described in the preceding paragraph. The promissory note
      evidencing the loan was due September 23, 2006 (extended by FBO Air from its
      original 180-day maturity date). Interest was paid monthly at the annual rate
      of
      4¼% until the initial maturity date and at the annual rate of 9¼%
      thereafter.
3
(2)
In
      addition to the security interest described in subsection (b)(1) above, the
      Term
      Loan Agreement required FBO Air to pay the amount by which the then outstanding
      principal amount of the loan exceeded 75% of the Eligible Accounts (as defined)
      of Airborne. Termination of the Term Loan Agreement eliminated the security
      interest and this other potential obligation of FBO Air.
(3)
See
      subsection (b)(1) of this Item 1.02 for a brief description of the material
      circumstances relating to the termination of the Term Loan Agreement by its
      own
      terms, the obligation thereunder having been paid in full.
(4)
There
      were no early termination penalties incurred by FBO Air as a result of the
      Term
      Loan Agreement.
(c)
10%
      Senior Secured Promissory Notes due March 31 or April 8, 2008 (the "Secured
      Notes") and the related General Security Agreement dated as of March 31, 2005
      (the "General Security Agreement"):
(1)
As
      previously reported, FBO Air sold units to investors in a private placement
      pursuant to Rule 506 of Regulation D under the Securities Act which closed
      on
      March 31, April 8 and April 15, 2005. Each unit consisted of a Secured Note
      in
      the principal amount of $25,000; ten shares of the Series A Preferred Stock;
      and
      a warrant expiring March 31, 2010, April 8, 2010 or April 15, 2010 (the "2005
      Investor Warrant") to purchase 50,000 shares of the Common Stock. FBO Air issued
      to the investors Secured Notes in the aggregate principal amount of $1,496,324.
      The forms of Secured Note and the 2005 Investor Warrant are filed (by
      incorporation by reference) as Exhibit 4.1 and Exhibit 4.2, respectively, to
      this Report and are incorporated herein by this reference. Jeffrey B. Mendell,
      a
      director of FBO Air, was among the investors in the private placement related
      to
      the Secured Notes. FBO Air and the investors executed the General Security
      Agreement which granted to the investors a security interest in all of the
      assets of FBO Air and its subsidiaries (the "Company"), including assets
      acquired in the future. A copy of the General Security Agreement is filed (by
      incorporation by reference) as Exhibit 4.3 to this Report and is incorporated
      herein by this reference.
On
      September 6, 2006, FBO Air, using part of the proceeds from the Offering, paid
      the holders of the Secured Notes an aggregate of $1,496,324 in principal amount
      and an aggregate of $211,765 in interest. Absent a default by FBO Air, interest
      on the Secured Notes was not payable until maturity of the Secured Notes. This
      prepayment terminated the General Security Agreement, by its terms, including
      the security interest described in the preceding paragraph.
(2)
See
      Item
      3.03(b)(ii) of this Report for a brief description of certain material terms
      and
      conditions of the Secured Notes.
4
(3)
See
      subsection (c)(1) of this Item 1.02 for a brief description of the material
      circumstances relating to termination of the Secured Notes and the related
      General Security Agreement by their terms as a result of the prepayment of
      the
      Secured Notes.
(4)
There
      were no early termination penalties incurred by FBO Air as a result of the
      prepayment of the Secured Notes and the resultant termination of the related
      General Security Agreement.
Section
      3 - Securities and Trading Markets
Item
      3.02.
Unregistered
      Sales of Equity Securities.
(a)
On
      September 1, 2006, as indicated in the introductory paragraph to Item 1.02
      of
      this Report, FBO Air sold 50.25 Units, each Unit consisting of 166,700 shares
      of
      the Common Stock and the Investor Warrant to purchase 100,000 shares of the
      Common Stock. As a result of this closing of the Offering, FBO Air will issue
      an
      aggregate of 8,376,675 shares of the Common Stock and Investor Warrants to
      purchase an aggregate of 5,025,000 shares of the Common Stock.
(b)
There
      was
      no underwriter for the shares. The Offering was conditioned upon investors
      purchasing a minimum of 50 Units for an aggregate purchase price of $5,000,000.
      The Offering was made to "accredited investors" (as such term is defined in Rule
      501(a) of Regulation D under the Securities Act). Included among such investors
      were Ronald J. Ricciardi, the President, the Chief Executive Officer and a
      director of FBO Air, William B. Wachtel, the Chairman of the Board and a
      director of FBO Air, John H. Dow, a director and President of the FirstFlight
      Division of FBO Air, and an entity owned by Alvin S. Trenk, a director of FBO
      Air.
(c)
The
      Units
      were offered at $100,000 per Unit; however, FBO Air reserved the right to accept
      subscriptions for partial Units and did in fact do so. As a result, the total
      offering price was $5,025,000. There were no underwriting discounts or
      commissions.
(d)
FBO
      Air
      claims that the Offering was exempt from the registration requirement of Section
      5 of the Securities Act pursuant to the exemption of Section 4(2) of the
      Securities Act and Rule 506 of Regulation D promulgated thereunder as a
      transaction not involving a public offering. Each investor represented to FBO
      Air that he, she or it was acquiring the Units, and, unless registered under
      the
      Securities Act at that time, the shares of the Common Stock issuable upon the
      exercises of the Investor Warrants, for investment and not with a view toward,
      or in connection with, any distribution of securities of FBO Air (as the term
      "distribution" is contemplated under the Securities Act).
(e)
The
      following terms are applicable to the exercises of the Investor Warrants, the
      form of which is filed as Exhibit 4.2 to this Report and which is incorporated
      herein by this reference.
5
(i)
The
      Investor Warrants will be exercisable at $1.00 per share (the "Exercise Price")
      subject to adjustment as provided in subsection (e)(ii) of this Item
      3.02.
(ii)
The
      Exercise Price will be adjusted on a weighted average basis for (1) all stock
      splits, dividends, recapitalizations, reclassifications, payments made to
      holders of the Common Stock and other similar events and (2) the sale by FBO
      Air
      of additional equity securities at a price below the Exercise
      Price.
(f)
Not
      applicable.
Item
      3.03.
Material
      Modification to Rights of Security Holders.
(a)
Not
      applicable.
(b)
Reference
      is made to Item 1.02 of this Report with reference to termination of the
      Certificate of Designations, the Term Loan Agreement, the Secured Notes and
      the
      General Security Agreement. In addition to terminating the security interests
      granted pursuant to the Term Loan Agreement and the General Security Agreement,
      certain restrictive covenants and other terms and conditions applicable to
      the
      Company were terminated. The following is a brief description of certain
      material terms and conditions which are among those which have been
      terminated:
(i)
Rights
      of
      the holders of the Series A Preferred Stock in the Certificate of
      Designations:
1.
Voting
      Rights - In addition to their rights to vote separately as a class on any matter
      which adversely affected their rights or as to which their consent was
      necessary, the holders of the Series A Preferred Stock had the right to vote
      as
      a single class with the holders of the Common Stock on all matters submitted
      to
      a vote of stockholders of the Company, with each share having the number of
      votes equal to the largest whole number of shares of the Common Stock into
      which
      such share of the Convertible Preferred Stock could be converted.
2.
Right
      to
      elect a director - The holders had the right, which was never exercised, to
      elect a director so long as 25% of the aggregate Stated Value (
i.e.
,
      $5,000
      per share) of the shares sold in the related private placements remained
      outstanding. In lieu of the person serving as a director, at the option of
      the
      holders of the Series A Preferred Stock, he or she could have been an observer
      at Board meetings.
3.
Liquidation
      preference per share - Each holder was to receive 115% of the Stated Value
      of
      each share of the Series A Preferred Stock plus any accrued but unpaid dividends
      upon liquidation or dissolution of FBO Air.
4.
Dividends
      - Each holder was to receive cumulative dividends of 8% per annum payable
      commencing July 1, 2005, at the option of FBO Air, either in additional shares
      of the Series A Preferred Stock or cash. No dividend on the Common Stock could
      have been paid while FBO Air was in default on payment of accrued but unpaid
      dividends. See Item 8.01 of this Report relating to the payment of accrued
      dividends on the Series A Preferred Stock.
6
5.
Mandatory
      Redemption - FBO Air was obligated to redeem all of the then outstanding shares
      of the Series A Preferred Stock on the third anniversary of their initial
      issuance (
i.e.
,
      on
      March 31, 2008) for an amount equal to their Stated Value plus accrued but
      unpaid dividends. Because of this redemption provision, the Series A Preferred
      Stock was not, for accounting purposes, treated as equity in the Company's
      balance sheet.
6.
Required
      Consents - Without the consent of the holders of at least 50.1% of the then
      aggregated Stated Value of the then outstanding shares of the Series A Preferred
      Stock, the Company could not directly or indirectly:
(a)
acquire
      any assets other than certain specified fixed based operators
      ("Acquisitions");
(b)
sell,
      transfer and/or otherwise dispose of (other than in the ordinary course of
      business), any assets (other than a Permitted Asset Sale as such term was
      defined in the Secured Notes), capital stock and/or effectuate any change of
      control transaction;
(c)
incur
      any
      indebtedness for borrowed money other than the Secured Notes (and as otherwise
      expressly permitted in the Secured Notes);
(d)
enter
      into any material agreement that would require disclosure pursuant to Item
      1.01
      of Form 8-K, other than any agreement related to the Acquisitions;
      or
(e)
create
      any subsidiaries other than subsidiaries all of whose capital stock is owned
      by
      the Company.
(ii)
Rights
      of
      the holders of the Secured Notes:
1.
The
      holders of the Secured Notes were granted a security interest in all of the
      assets of the Company, whether then held or thereafter acquired. Unless prepaid,
      the maturity date of the Secured Note was March 31, 2008.
2.
FBO
      Air
      is required to make a prepayment of the Secured Notes from the gross proceeds
      from a sale, lease or other disposition of shares of the capital stock of a
      subsidiary or the property or other assets of FBO Air or a subsidiary other
      than
      sales of their products and/or services in the ordinary course or their business
      as fixed base operators.
3.
Except
      for the Series A Preferred Stock and the 2005 Investor Warrants, FBO Air (or
      any
      of its subsidiaries) could not redeem or repurchase any outstanding equity
      or
      debt security of FBO Air (or any of its subsidiaries).
7
4.
FBO
      Air
      would not, directly or indirectly, (or permit any subsidiary to) incur any
      indebtness unless (a) such indebtedness was subordinated to the Secured Notes
      and, after giving effect to its issuance, FBO Air had a Consolidated EBITDA
      Debt
      Service Coverage Ratio (as defined) of 2.5 times and (b) such indebtedness
      was
      incurred to finance the acquisitions of fixed base operators.
Section
      8 - Other Events
Item
      8.01
Other
      Events.
FBO
      Air
      had not declared any cash dividends on the Common Stock or the Series A
      Preferred Stock for the period from January 2, 2004 through September 3, 2006.
      The Company has had losses since inception and the Nevada General Corporation
      Law, which governs FBO Air, prohibited paying cash dividends because FBO Air's
      total assets were, as of each quarterly dividend date for the Series A Preferred
      Stock prior to September 4, 2006, less than the sum of its total liabilities
      and
      the amount that would be needed, if FBO Air were to be dissolved at the time
      of
      the dividend distribution, to satisfy the then liquidation preference of the
      holders of the Series A Preferred Stock.
As
      a
      result of the Nevada statutory provision, dividends on the Series A Preferred
      Stock which were payable pursuant to the Certificate of Designations at the
      rate
      of 8% per annum per share (at FBO Air's option in additional shares of the
      Series A Preferred Stock or cash) accrued instead of being declared and paid.
      On
      September 4, 2006, as a result of the prepayment pursuant to the Term Loan
      Agreement and the Mandatory Conversion Event (see Item 1.02 of this Report),
      the
      total assets of FBO Air exceeded its total liabilities and there was no
      liquidation preference for the Series A Preferred Stock. Accordingly, FBO Air
      became obligated to issue an aggregate of 1,417,936 shares of the Common Stock
      as accrued dividends with respect to the 846 shares of the Series A Preferred
      Stock, including with respect to the dividends which had accrued to the
      respective conversion date on the 231 shares which had been converted prior
      to
      the Mandatory Conversion Event. All of the shares of the Common Stock issued
      as
      dividends were registered under the Securities Act for resale by the holders
      in
      the Registration Statement. In addition, corporate counsel to FBO Air has
      advised that, as with respect to the shares of the Common Stock issued upon
      conversion, the holders may seek to sell these "dividend" shares by complying
      with the exemption of Rule 144 because the holding period for these shares,
      pursuant to paragraph (d)(3)(i) of Rule 144, dates back to the original
      acquisition of the related shares of the Series A Preferred Stock.
Section
      9 - Financial Statements and Exhibits
Item
      9.01
Financial
      Statements and Exhibits
(a)
Financial
      Statements of Business Acquired.
Not
      applicable.
(b)
Pro
      Forma
      Financial Information.
8
Not
      applicable.
(c)
Exhibits
Exhibit No.
Description
3(i)
Copy of Certificate of Designations.
              (1)
4.1
Form of 10% Senior Secured Promissory
              Note
              due March 31, 2008 or April 8, 2008. (2)
4.2
Form of Warrant expiring March 31, 2010,
              April 8, 2010 or April 15, 2010. (2)
4.3
Copy of General Security Agreement dated
              as
              of March 31, 2005. (2)
4.4
Form of Investor Warrant.
              (3)
10.1
Copy of press release issued on September
              4,
              2006. (3)
10.2
Copy
              of Term Loan Agreement dated as of September 23, 2005 by and among
              FBO
              Air, Inc., Airborne, Inc. and Airport Capital, LLC. (4)
_________________________
(1)
Incorporated
              by reference to FBO Air's Annual Report on Form 10-KSB for the fiscal year
              ended December 31, 2004.
(2)
Incorporated by reference to FBO Air's
              Current Report on Form 8-K filed on April 6, 2005.
(3)
Filed herewith.
(4)
Incorporated by reference to FBO Air's
              Current Report on Form 8-K filed on September 28,
              2005.
9
Signatures
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      caused this Report to be signed on its behalf by the undersigned hereunto duly
      authorized.
FBO
              Air,
              Inc.
(Registrant)
Dated:
September
              8, 2006
By:
/s/
              Ronald J.
              Ricciardi
Ronald J. Ricciardi
President
              and
              Chief Executive Officer
10
FBO
      Air,
      Inc.
Index
      to
      Exhibits Filed
With
      Current Report on Form 8-K
Exhibit
Number
Description
Page
4.4
Form of Investor Warrant
E-2
10.1
Copy of press release issued on September
              4,
              2006
E-15
11