AVTEAM INC, S-1/A, 1997-10-29

AVTEAM INC
S-1/A, 1997-10-29
INDUSTRIAL MACHINERY & EQUIPMENT

Previous: FARM FAMILY HOLDINGS INC, 8-K, 1997-10-29

Next: SIMULATION SCIENCES INC, 8-K/A, 1997-10-29

<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997.

REGISTRATION NO. 333-23829
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

AMENDMENT NO. 4

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

AVTEAM, INC.
(Exact name of registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
FLORIDA 5088 65-0313187
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

3230 EXECUTIVE WAY
MIRAMAR, FLORIDA 33025
(954) 431-2359
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
DONALD A. GRAW
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AVTEAM, INC.
3230 EXECUTIVE WAY
MIRAMAR, FLORIDA 33025
(954) 431-2359
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
COPIES TO:

<TABLE>
<C> <C>
ANDREW HULSH, ESQ. JEFFREY M. STEIN, ESQ.
NOEL H. NATION, ESQ. KING & SPALDING
BAKER & MCKENZIE 191 PEACHTREE STREET
701 BRICKELL AVENUE, SUITE 1600 ATLANTA, GA 30303-1763
MIAMI, FL 33131-2827 (404) 572-4600
(305) 789-8900
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
promptly as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(C) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(C), MAY DETERMINE.
================================================================================
<PAGE> 2

EXPLANATORY NOTE

This Amendment No. 4 to the Form S-1 Registration Statement of AVTEAM, Inc.
(the "Company") is being filed to correct an error made by the financial printer
in Amendment No. 3 to the Form S-1 Registration Statement of the Company.

<PAGE> 3

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997

4,500,000 Shares

AVTEAM, INC.

Class A Common Stock
[AVTEAM, INC. LOGO] ($.01 par value)

------------------

Of the shares of Class A Common Stock ("Class A Common Stock") offered hereby
(the "Offering"), 3,033,000 shares are being sold by AVTEAM, Inc. ("AVTEAM" or
the "Company") and 1,467,000 shares are being sold by the Selling Shareholder
named herein under "Principal and Selling Shareholders" (the "Selling
Shareholder"). The Company will not receive any of the proceeds of shares sold
by the Selling Shareholder. Prior to the Offering, there has been no public
market for the Class A Common Stock. It is anticipated that the initial public
offering price will be between $10.00 and $12.00 per share. For information
relating to the factors to be considered in determining the initial offering
price to the public, see "Underwriting."

The Class A Common Stock has been approved for listing on The Nasdaq Stock
Market's National
Market under the symbol "AVTM."

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN
INVESTMENT IN THE CLASS A COMMON STOCK, SEE "RISK FACTORS" ON PAGE 7 HEREIN.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS COMPANY(1) SHAREHOLDER
---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share............................ $ $ $ $
Total(2)............................. $ $ $ $
</TABLE>

(1) Before deduction of expenses payable by the Company, estimated at $750,000.
(2) The Company has granted the Underwriters an option, exercisable for 30 days
from the date of this Prospectus, to purchase a maximum of 675,000
additional shares of Class A Common Stock to cover over-allotments of
shares. If the option is exercised in full, the total Price to Public will
be $ , Underwriting Discounts and Commissions will be $ ,
and Proceeds to Company will be $ .

The shares of Class A Common Stock are offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that the shares
of Class A Common Stock will be ready for delivery on or about ,
1997, against payment in immediately available funds.

CREDIT SUISSE FIRST BOSTON SBC WARBURG DILLON READ INC.

Prospectus dated , 1997.
<PAGE> 4

[PHOTOGRAPH]

"AVTEAM" and the circular design logo are service marks of the Company for
which registration has been applied. All other service marks, trademarks or
trade names referred to in this Prospectus are the property of their respective
owners.

------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS,
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 5

PROSPECTUS SUMMARY

The following information is qualified in its entirety by, and should be
read in conjunction with, the more detailed information, including "Risk
Factors" and the Financial Statements and the Notes thereto, appearing elsewhere
in this Prospectus. Unless otherwise indicated, all information in this
Prospectus (i) assumes no exercise of the Underwriters' over-allotment option
and (ii) reflects the automatic conversion upon the closing of the Offering of
all outstanding shares of convertible voting preferred stock ("Class A Preferred
Stock") into an aggregate of 1,974,642 shares of Class A Common Stock and all
outstanding shares of convertible non-voting preferred stock ("Class B Preferred
Stock") into an aggregate of 439,644 shares of Class B Common Stock. See
"Underwriting" and "Description of Capital Stock."

THE COMPANY

GENERAL

AVTEAM is a global supplier of aftermarket aircraft engines, engine parts
and airframe components ("Engines and Components"). The Company has historically
focused on the purchase and resale of Engines and Components for the Pratt &
Whitney JT8D series of engines, which power approximately 40% of the world's
commercial aviation fleet. The Company has recently expanded its product line to
include the CFM56 series of engines, which had the highest production volume of
any engine series in 1996. The Company works with its worldwide network of
industry contacts to identify and evaluate Engines and Components and surplus
aircraft for potential acquisition. Engines and Components are either made
available for immediate resale or repaired by FAA-licensed repair facilities and
then resold. Surplus aircraft are always disassembled and sold as parts by the
Company. The Company resells Engines and Components to other aftermarket
suppliers, independent repair facilities, aircraft operators and original
equipment manufacturers. Since its inception, the Company has substantially
increased its revenue base, broadened the range of products and services offered
and taken consistent steps to ensure the quality of its products and services.
From $3.9 million in 1993, the Company's net sales reached $31.7 million in
1996, when the Company supplied over 600 customers worldwide. The Company had
net sales of approximately $18.9 million for the first six months of 1997
compared to approximately $13.0 million for the first six months of 1996. In
November 1996, the Company became the first aftermarket supplier to receive
quality accreditation from the Airline Suppliers Association, an FAA-recognized
independent quality assurance organization. The Company believes that there are
currently fewer than 25 accredited aftermarket suppliers.

The Company believes that the annual worldwide aftermarket for Engines and
Components is approximately $10 billion, of which approximately $1 billion
represents sales and leases of JT8D Engines and Components. The aftermarket for
Engines and Components is highly fragmented, with a limited number of
well-capitalized companies selling a broad range of products and numerous
smaller competitors serving distinct market niches. The Company believes that
the following factors will contribute to the continued growth of the aftermarket
for Engines and Components and will accelerate the trend towards consolidation
in the industry: (i) growth in air transit activity; (ii) increase in the number
of older commercial aircraft; (iii) aircraft operators' demand for full service
suppliers; and (iv) increased regulatory scrutiny.

BUSINESS STRATEGY

The Company believes that its industry experience and capabilities position
it to expand its market presence in the growing aftermarket for Engines and
Components. The Company intends to build upon its success and exploit favorable
industry dynamics by: (i) capitalizing on its worldwide sourcing network; (ii)
continuing its commitment to quality leadership; (iii) broadening its product
line; (iv) increasing sales to aircraft operators by providing value-added
services; and (v) pursuing strategic acquisitions.

Capitalize on Worldwide Sourcing Network. The Company believes that
purchasing Engines and Components on a timely basis and at favorable prices is
critical. Although there are well-developed channels for distribution of Engines
and Components by aftermarket suppliers, there is no consistent, reliable and
organized market for aftermarket suppliers to acquire their inventory.
Accordingly, the Company has developed a sourcing network of independent agents
operating throughout the world that assists management in identifying available
products and facilitates quick evaluation of products and execution of
purchasing decisions. The Company

3
<PAGE> 6

believes that the Offering will enhance its industry recognition and facilitate
larger purchases on advantageous terms.

Continue Commitment to Quality Leadership. The Company emphasizes
adherence to high quality standards at each stage of its operations (product
acquisition, overhaul, documentation, inventory control and delivery). Of the
approximately 2,500 distributors offering parts to civil aviation purchasers,
the Company was the first aftermarket supplier to meet the voluntary
accreditation quality system standard of the Airline Suppliers Association.

Broaden Product Line. The Company has recently expanded its product line
to include higher thrust models of the JT8D series of engines and other high
thrust engines, such as the CFM56 engine. The Company believes that the Offering
will provide it with the capital to be one of the few aftermarket suppliers able
to compete in this market segment. The CFM56 has been in service since 1982 and
an aftermarket in this engine has begun to emerge. The installed base of these
engines is expected to approximate the size of the current installed base of the
JT8D within the next five years. The Company acquired two CFM56 engines in 1997.
One of these engines is being disassembled to provide the Company with its
initial inventory of CFM56 engine parts. The other engine was sold as a whole
engine. The Company also plans to increase its availability of airframe
components as it continues to acquire surplus aircraft for disassembly and
additional supply of engine inventory.

Increase Sales to Aircraft Operators by Providing Value-Added
Services. The Company believes that aircraft operators' increased demand for
full service creates considerable opportunities for larger, well-capitalized
aftermarket suppliers. The Company intends to take advantage of this trend and
differentiate itself from other aftermarket suppliers by providing a full range
of products and services, including an expanded range of engine field services,
including borescoping and hushkit installations, a full range of on-wing
maintenance services, engine leasing programs and engine management services.
The Company expects the Offering to provide it with sufficient capital to
purchase the inventory and attract the personnel necessary to sell a broader
array of products and services directly to aircraft operators.

Pursue Strategic Acquisitions. The Company's facilities, management
information systems and management structure have been designed to support
future growth and to enable the Company to benefit from the trend towards
industry consolidation. The Company intends to use a portion of the proceeds
from the Offering to selectively acquire companies that complement its existing
business.

RECENT RESULTS (UNAUDITED)

For the three months ended September 30, 1997, the Company's net sales
increased 94% to $13.3 million from $6.8 million for the three months ended
September 30, 1996. The increase in net sales for the third quarter of 1997 was
attributable to the Company's sale of higher thrust JT8D engines, the sale of
the Company's first CFM56 engine and increased airframe component sales. For the
same period, net income and net income per share were $800,000 and $0.10,
respectively, versus a pro forma net loss of $374,000 and $0.05, respectively,
for the comparable period in 1996. The net loss for the third quarter of 1996
was the result of a one-time charge against earnings attributable to the
Company's withdrawn initial public offering. See Financial Statements.

---------------------

The Company began operations in 1992 and is headquartered in southeast
Florida, which provides convenient access to major aviation services companies.
The Company's principal executive offices are located at 3230 Executive Way,
Miramar, Florida 33025, and its telephone number is (954) 431-2359.
4
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by:
The Company........................................ 3,033,000 shares
The Selling Shareholder............................ 1,467,000 shares
-----------
Total(a)................................... 4,500,000 shares
===========
Common Stock to be outstanding
after the Offering:
Class A Common Stock............................... 10,335,414 shares
Class B Common Stock............................... 439,644 shares
-----------
Total(a)(b)................................ 10,775,058 shares
===========
Use of Proceeds...................................... Repayment of outstanding indebtedness, payment
of accrued compensation and for working
capital and general corporate purposes,
including the purchase of surplus aircraft and
Engines and Components for the Company's
inventory and the funding of the acquisition
of complementary businesses.
Voting Rights........................................ Each share of Class A Common Stock is entitled
to one vote on all matters submitted to a vote
of shareholders. The shares of Class B Common
Stock have no voting rights, except with
respect to the right to vote as a class on
amendments to the Company's Articles of
Incorporation as specified under Florida law.
In all other respects, the shares of Class A
Common Stock and Class B Common Stock are
identical. See "Description of Capital Stock."
Nasdaq National Market Symbol........................ AVTM
</TABLE>

- ---------------

(a) In the event the over-allotment option is exercised in full, the total
number of shares of Class A Common Stock and the total number of shares of
Class B Common Stock to be outstanding after the Offering would be
11,010,414 and 439,644, respectively.
(b) Does not include 600,000 shares of Class A Common Stock reserved for
issuance upon the exercise of stock options which may be granted under the
Company's 1996 Stock Option Plan. See "Management -- 1996 Stock Option
Plan."
5
<PAGE> 8

SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Net sales............................ $ 9,062 $ 18,299 $ 31,724 $ 12,974 $ 18,932
Gross profit......................... $ 2,689 $ 6,451 $ 9,083 $ 4,055 $ 5,964
Income from operations............... $ 748 $ 1,289 $ 4,771 $ 2,167 $ 2,977
Income before income taxes........... $ 754 $ 1,098 $ 2,860 $ 1,818 $ 2,508
Provision (credit) for income
taxes(1)........................... -- -- (370) -- 912
---------- ---------- ---------- ---------- ----------
Net income(1)........................ $ 754 $ 1,098 $ 3,230 $ 1,818 $ 1,596
========== ========== ========== ========== ==========
Pro forma net income (historical for
the six months ended June 30,
1997)(2)........................... $ 468 $ 681 $ 1,692 $ 1,157 $ 1,596
========== ========== ========== ========== ==========
Pro forma net income per common
equivalent share (historical for
the six months ended June 30,
1997).............................. $ 0.06 $ 0.09 $ 0.22 $ 0.15 $ 0.21
========== ========== ========== ========== ==========
Weighted average number of common
equivalent shares outstanding(3)... 7,742,058 7,742,058 7,742,058 7,742,058 7,742,058
========== ========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
------- ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................................ $18,334 $23,605 $52,962
Inventory.................................................. 22,348 22,779 22,779
Total assets............................................... 39,373 39,804 59,085
Total debt................................................. 17,976 10,952 210
Total shareholders' equity................................. 16,589 23,884 54,162
</TABLE>

- ---------------

(1) The Company was an S Corporation for federal and state income tax purposes
for the taxable periods from January 1, 1994 through December 6, 1996. As a
result, the net income of the Company was taxed, for federal and state
income tax purposes, directly to the Company's shareholders rather than to
the Company. See Note 5 of Notes to Financial Statements.
(2) Assumes that the Company was subject to federal and state income taxes
during the periods presented (at an effective tax rate of approximately
38%).
(3) Reflects the effect on weighted average shares outstanding of 1,974,642
shares of Class A Preferred Stock and 439,644 shares of Class B Preferred
Stock for all periods presented. All such shares of Class A Preferred Stock
and Class B Preferred Stock will be converted into Class A Common Stock and
Class B Common Stock, respectively, upon consummation of the Offering. See
"Certain Transactions" and Notes 2 and 17 of Notes to Financial Statements.
(4) Pro forma to give effect to the issuance on August 21, 1997 of (a) 494,642
shares of Class A Preferred Stock and 219,644 shares of Class B Preferred
Stock at $7.00 per share and the application of the net proceeds therefrom
and (b) 327,772 shares of Class A Common Stock valued at $7.00 per share in
payment of the Company's outstanding indebtedness to its Chairman of the
Board of Directors and in connection with the termination of an aircraft
engine parts contract with a company owned by the Company's Chairman of the
Board of Directors. See "Certain Transactions" and Note 17 of Notes to
Financial Statements.
(5) Adjusted to reflect the sale of 3,033,000 shares of Class A Common Stock
offered by the Company hereby at an assumed initial public offering price of
$11.00 per share (after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company) and the application of
the net proceeds to the Company from the Offering as set forth herein. See
"Use of Proceeds."
6
<PAGE> 9

RISK FACTORS

An investment in the Class A Common Stock involves a high degree of risk.
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Class A Common Stock offered hereby.
This Prospectus contains forward-looking statements the accuracy of which is
subject to many risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to, the
following risk factors.

DEPENDENCE ON THE JT8D ENGINE

The Company's business, financial condition and results of operations are
dependent upon the aftermarket for JT8D Engines and Components. Approximately
91%, 95% and 87% of the Company's net sales during 1995 and 1996 and the six
months ended June 30, 1997, respectively, consisted of sales of JT8D Engines and
Components and 74% of the Company's inventory at June 30, 1997 consisted of JT8D
Engines and Components. Aircraft utilizing JT8D engines have been in service
since the early 1960s. Aircraft utilizing older engines are generally more
expensive to maintain and to operate, due primarily to higher fuel usage. Noise
and other regulations in many countries also significantly increase the cost of
operating aircraft utilizing older engines. Specifically, most JT8D engines will
need to be hush-kitted or removed from service in the United States and the
European Union by 1999 and 2002, respectively. A decline in passenger confidence
in older aircraft could also lead to a decline in the aftermarket for JT8D
Engines and Components. Any of these factors could cause the unanticipated
retirement of aircraft utilizing JT8D engines. Any significant decline in the
aftermarket for JT8D engines would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
has recently expanded its product line to include the CFM56 series of engines
and has limited experience with respect to the purchase and sale of CFM56
Engines and Components. There can be no assurance that the Company will have the
same level of success with CFM56 Engines and Components that it has had with
JT8D Engines and Components. See "Business -- Regulation."

IMPACT OF GOVERNMENT REGULATION; DEPENDENCE ON THIRD-PARTY REPAIR FACILITIES

The aviation industry is highly regulated by the FAA and similar regulatory
agencies of other countries. Before Engines and Components are installed on an
aircraft, they must meet certain standards as to their condition and have
appropriate documentation, and aircraft must also meet standards with respect to
noise, emissions and maintenance. While the Company's principal operations are
not currently regulated directly by the FAA, both the independent facilities
that repair and overhaul the Company's products and aircraft operators that
ultimately utilize the Company's products are subject to extensive regulation.
In addition, the Company is currently subject to a voluntary accreditation
program recommended by the FAA applicable to aftermarket parts suppliers and has
recently expanded the services that it provides to include activities that
required the Company to obtain FAA certification, which it obtained in April
1997.

The Company is dependent on third-party FAA-licensed repair facilities to
perform repair services to bring aircraft engines held for resale and Engines
and Components into airworthiness condition. The limited number of such repair
facilities has on occasion resulted in long turnaround times for the repair and
overhaul of aircraft engines and parts and such delays may continue to occur. In
addition, the FAA has recently increased its scrutiny of third-party repair
facilities and this increased scrutiny may result in fewer FAA-licensed repair
facilities and longer turnaround times.

The repair facilities utilized by the Company are responsible for
inspecting and certifying Engines and Components to be of serviceable quality.
The Company does not have direct control over the quality of repair performed by
such repair facilities or the accuracy of airworthiness condition designated by
such facilities. It is possible that Engines and Components could pass
inspection by the Company, be sold by the Company and incorporated into an
aircraft, and subsequently be determined to be unsafe or in need of further
repair. In such event, the FAA has the authority to take actions which may
include the grounding of an aircraft which contains such parts. Additionally,
the customer who purchased such Engines or Components could demand a replacement
Engine or Component. While the Company has insurance coverage to cover related
losses, the effect of such a

7
<PAGE> 10

development on passenger confidence and customer relations could have a material
adverse effect upon the Company. See "Business -- Products," "-- Regulation" and
"-- Insurance."

Standards established by the FAA and other regulatory agencies relating to
the operation and maintenance of aircraft have significant effects on aircraft
operators and the composition of their fleets. Noise and emission regulations,
and additional maintenance requirements for older aircraft, may increase the
cost of operating aircraft utilizing JT8D engines, which could lead to a decline
in the demand for the products and services provided by the Company.

The inability of the Company to supply its customers with Engines and
Components on a timely basis, or any occurrence of the Company providing
products subsequently determined unsafe, may adversely affect the Company's
relationships with its customers and have a material adverse effect on its
business, financial condition and results of operations. There can also be no
assurance that new and more stringent government regulations will not be adopted
in the future or that any such new regulations, if enacted, would not have a
direct or indirect adverse impact on the Company. See "Business -- Products" and
"-- Regulation."

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS; DEPENDENCE ON AVIATION INDUSTRY

The Company has a limited operating history upon which an evaluation of the
Company and its prospects can be based. The Company may experience significant
fluctuations in its operating results in the future, both on an annual and a
quarterly basis, caused by various factors, many of which are beyond the control
of the Company. These factors include: general economic conditions; specific
economic conditions affecting the commercial aviation industry; the
availability, timing and price of Engines and Components; the size and timing of
customer sales; the mix of products sold and services provided by the Company;
and unanticipated engine lease terminations or a default by a lessee.

The demand for aftermarket Engines and Components is seasonal, with
increased demand during the summer months. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Seasonality." In
addition, the commercial aviation industry is cyclical and has been subject to
periodic fluctuations in its operating results. The Company has not operated
during a significant downturn in the aviation industry. During such a downturn,
there may be reduced overall demand for Engines and Components, lower selling
prices for the Company's products, and increased credit risk associated with
doing business with industry participants. Factors such as fuel prices may
affect the commercial aviation industry and the aftermarket for older model
Engines and Components. Increases in fuel prices may cause a decline in air
travel, and older, typically less fuel-efficient aircraft (into which the
Company's products are most often placed) become less desirable as fuel prices
increase.

The Company obtains its supply of Engines and Components principally by
purchasing surplus aircraft and parts inventory. There can be no assurance that
Engines and Components required by the Company's customers will be available on
acceptable terms or at the times required by the Company or that economic and
other factors which affect the aviation industry will not have a material
adverse effect on the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations" and
"Business -- Industry Overview."

RISKS ASSOCIATED WITH AIRCRAFT ENGINE LEASES

The Company leases three Pratt & Whitney JT8D engines under operating
leases to three customers. The success of an operating lease depends on the
re-lease of engines on favorable terms on a timely basis and the ability to sell
engines at favorable prices at the end of the lease term. In addition, the
success of an operating lease depends in part upon having aircraft engines
returned to the Company in marketable condition as required by the lease for
such engines. Numerous factors, many of which are beyond the control of the
Company, may

8
<PAGE> 11

have an impact on the Company's ability to re-lease or sell Engines and
Components. These factors include general market conditions, regulatory changes
(particularly those imposing environmental, maintenance and other requirements
on the operation of aircraft engines), changes in the supply or cost of aircraft
engines and technological developments. Consequently, there can be no assurance
that the Company's estimated residual value for aircraft engines will be
realized. If the Company is unable to re-lease or sell its engines on favorable
terms on a timely basis upon expiration of the related lease, its business,
financial condition and results of operations may be adversely affected. All
engines currently leased by the Company are being leased to domestic passenger
airlines which may be affected by numerous factors, including the factors
identified above and factors having an impact on the airline industry generally.
In the event that a lessee defaults in the performance of its obligations, the
Company may be unable to enforce its remedies under a lease. The Company's
inability to collect lease payments when due or to repossess engines in the
event of a default by a lessee could have an adverse effect on the Company's
business, financial condition and results of operations.

MANAGEMENT OF GROWTH

The rapid growth experienced by the Company to date has placed, and could
continue to place, significant demands on the Company's administrative,
operational and financial resources. The Company expects to broaden its product
line and services and may in the future undertake acquisitions that could
present further challenges to and demands upon the Company's resources. There
can be no assurance that the Company will be able to anticipate business demand
accurately, attract and retain the personnel required or manage any such growth
successfully, and the failure to do so could have a material adverse effect on
the Company. The Company's growth strategy includes the acquisition of
complementary businesses. As the aftermarket supply industry continues to
consolidate, the Company expects to face increasing competition from other
companies for available acquisition opportunities. There can be no assurance
that suitable acquisition candidates will be available, that financing for such
acquisitions will be obtainable on terms acceptable to the Company, that such
acquisitions can be consummated or that acquired businesses can be integrated
successfully into the Company's operations. Further, the Company's results of
operations in fiscal quarters immediately following a material acquisition may
be materially adversely affected while the Company integrates the acquired
business into its existing operations. Any acquisition, depending on its size,
could result in the use of a significant portion of the Company's available
cash, or if such acquisition is made utilizing the Company's securities, could
result in significant dilution to the Company's shareholders. There are no
current agreements or negotiations with respect to any material acquisitions.

CUSTOMER CONCENTRATION

The Company's net sales to its five largest customers accounted for 52%,
49% and 47% of net sales during 1995, 1996 and the six months ended June 30,
1997, respectively. Approximately 21%, 9% and 3% of the Company's net sales
during 1995, 1996 and the six months ended June 30, 1997, respectively, were
made to Pratt & Whitney. Dallas Aerospace, a division of Banner Aerospace, has
also been a significant purchaser of aircraft engines and parts, accounting for
13%, 16% and 9% of net sales during 1995, 1996 and the six months ended June 30,
1997, respectively. A third customer accounted for 10% of net sales during the
six months ended June 30, 1996. A fourth and fifth customer accounted for 13%
and 12% of net sales during the six months ended June 30, 1997, respectively.
Customer concentration may fluctuate during the year as a result of the timing
of sales of Engines or Components to the Company's significant customers. The
loss of, or significant curtailments of purchases by, any of the Company's
significant customers could have a material adverse effect upon the Company. See
"Business -- Customers" and "-- Relationship with Pratt & Whitney."

RELATIONSHIP WITH PRATT & WHITNEY

Pratt & Whitney is the manufacturer of the JT8D engine and has significant
influence upon the aviation industry in general and the aftermarket for the JT8D
engine in particular. Accordingly, any adverse development in the Company's
relationship with Pratt & Whitney may be perceived as material and adverse to
the Company. Pratt & Whitney may in the future seek to perform internally
certain or all of the services which the Company performs or to compete with the
Company as a supplier of aftermarket Engines and Components, which could have a
material adverse effect upon the Company. Also, any recall or recommended
grounding by Pratt &

9
<PAGE> 12

Whitney of the JT8D engine could have a material adverse effect on the Company.
See "Business -- Customers" and "-- Relationship with Pratt & Whitney."

PRODUCT LIABILITY

The commercial aviation industry periodically experiences catastrophic
losses which may exceed insurance policy limits. The Company currently has in
force aviation products insurance, with coverage limits for each occurrence and
in the aggregate which it believes to be in amounts and on terms that are
generally consistent with industry practice. To date, the Company has not
experienced any aviation-related claims, and has not experienced any product
liability claims related to its products or services. However, an uninsured or
partially insured claim, or a claim for which third-party indemnification is not
available, could have a material adverse effect upon the Company. See
"Business -- Insurance."

COMPETITION

The aftermarket for Engines and Components is highly fragmented, with a
limited number of well-capitalized companies selling a broad range of products
and numerous smaller competitors serving distinct market niches, and is
characterized by intense competition. Certain of the Company's competitors have
substantially greater financial, marketing and other resources than the Company.
In addition, OEMs, aircraft maintenance providers, leasing companies and
FAA-licensed repair facilities may vertically integrate into the aftermarket
supply industry, thereby significantly increasing competition. There are
established competitors that provide many of the services the Company intends to
offer, many of whom have substantially greater financial, marketing and other
resources than the Company. There can be no assurance that the Company will
continue to compete effectively against present and future competitors or that
competitive pressures will not have a material adverse effect on the Company.
See "Business -- Competition."

DEPENDENCE ON KEY PERSONNEL

The Company's success is substantially dependent on the performance,
contributions and expertise of its executive officers and key employees. The
Company's success to date has been significantly dependent on the contributions
of Donald Graw, its President and Chief Executive Officer, and Jaime Levy, its
Executive Vice President, each of whom has entered into an employment agreement
with the Company expiring December 1999. The Company does not carry substantial
key man life insurance on its executive officers. The Company is also dependent
on its ability to attract, retain and motivate additional personnel, especially
in management. The loss of the services of any of its executive officers or
other key employees or the Company's inability to attract, retain or motivate
the necessary personnel could have a material adverse effect on the Company. See
"Management."

CONTROL BY CERTAIN SHAREHOLDERS

After the Offering, 37.4% of the outstanding shares of Class A Common Stock
will be owned by Leon Sragowicz, Donald Graw, Jaime Levy and Richard Preston
(the "Existing Common Shareholders") (35.1% if the Underwriters' over-allotment
option is exercised in full) and 19.1% of the outstanding shares of Class A
Common Stock will be beneficially owned by The Clipper Group partnerships ("The
Clipper Group") (17.9% if the Underwriters' over-allotment option is exercised
in full). The Existing Common Shareholders and The Clipper Group, if they were
to act together, would have the power to elect all of the members of the
Company's Board of Directors, amend the Articles of Incorporation of the Company
(the "Articles") and the Bylaws of the Company (the "Bylaws") and effect or
preclude fundamental corporate transactions involving the Company, including the
acceptance or rejection of proposals relating to a merger of the Company or the
acquisition of the Company by another entity. Accordingly, the Existing Common
Shareholders and The Clipper Group are able to exert significant influence over
the Company, including the ability to control decisions on all matters on which
shareholders are entitled to vote. See "Principal and Selling Shareholders,"
"Description of Capital Stock" and "Certain Transactions."

10
<PAGE> 13

FACTORS INHIBITING TAKEOVER

Certain provisions of the Articles and Bylaws may delay or prevent a
takeover attempt that a shareholder might consider in its best interest. These
provisions establish certain advance notice procedures for shareholder proposals
to be considered at the shareholders' meetings and provide that only the Board
of Directors may call special meetings of the shareholders. In addition, the
Board of Directors can authorize and issue shares of Preferred Stock with voting
or conversion rights that could adversely affect the voting or other rights of
holders of the Class A Common Stock. The terms of the Preferred Stock that might
be issued could potentially prohibit the Company's consummation of any merger,
reorganization, sale of substantially all of its assets, liquidation or other
extraordinary corporate transaction without the approval of the holders of the
outstanding shares of such stock. Furthermore, certain provisions of the Florida
Business Corporation Act may have the effect of delaying or preventing a change
in control of the Company. See "Description of Capital Stock."

NO PRIOR PUBLIC MARKET; DETERMINATION OF INITIAL PUBLIC OFFERING PRICE;
VOLATILITY OF CLASS A COMMON STOCK PRICE

Prior to the Offering, there has been no public market for the Class A
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained. The initial public offering price will be determined by
negotiations between the Company and the Underwriters based on several factors
and may not be indicative of the market price of the Class A Common Stock after
the Offering. The market price of the Class A Common Stock is likely to be
highly volatile and may be significantly affected by factors such as actual or
anticipated fluctuations in the Company's results of operations and other
factors. In addition, the stock market has from time to time experienced
significant price and volume fluctuations which could affect the market price of
the Class A Common Stock offered hereby. These broad market fluctuations may
adversely affect the market price of the Class A Common Stock. See
"Underwriting."

DILUTION

The initial public offering price of the Class A Common Stock offered
hereby is substantially higher than the net tangible book value per share of the
Class A Common Stock. Therefore, purchasers of Class A Common Stock offered
hereby will incur an immediate and substantial dilution, and may incur
additional dilution upon the future exercise of stock options. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of a substantial number of shares of Class A Common Stock in the
public market following the Offering could adversely affect the market price for
the Class A Common Stock. On the date of this Prospectus, no shares other than
the 4,500,000 shares of Class A Common Stock offered hereby will be eligible for
sale in the public market. The Company, its directors and officers and the
Selling Shareholder have agreed with the Underwriters not to sell or otherwise
dispose of any shares of Class A Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of Credit Suisse First
Boston Corporation ("CSFBC"), except issuances pursuant to the exercise of
employee stock options granted under the Company's 1996 Stock Option Plan (the
"Option Plan") and issuances in connection with acquisitions where the person
receiving the Class A Common Stock agrees not to sell or otherwise dispose of
such shares until 180 days after the date of this Prospectus. Beginning 180 days
after the date of this Prospectus, assuming that CSFBC does not consent to any
sales prior to such time, an additional 5,835,414 shares of Class A Common Stock
will become eligible for sale in the public market, subject to compliance with
the provisions of Rule 144 ("Rule 144") under the Securities Act of 1933, as
amended (the "Securities Act"). Of such 5,835,414 shares, 2,360,772 shares are
held by Mr. Sragowicz, the Company's Chairman of the Board, 500,000 shares are
held by Mr. Graw, the President and Chief Executive Officer and a director of
the Company, 500,000 shares are held by Mr. Levy, the Executive Vice President
and a director of the Company, 500,000 shares are held by Mr. Preston, the
Secretary and a director of the Company, and 1,974,642 shares are held by The
Clipper Group, each of whom are "affiliates" of the Company within the meaning
of Rule 144, and may, therefore, only be sold in the public market in compliance
with the volume limitations and other requirements of Rule 144. See "Shares
Eligible for Future Sale" and "Underwriting."

11
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the Offering are estimated (at an
assumed initial public offering price of $11.00 per share and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company) to be approximately $30.3 million ($37.2 million if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the net proceeds of the Offering as follows: (a) an aggregate of $10.7
million to repay outstanding indebtedness of the Company consisting of (i)
approximately $10.2 million of indebtedness expected to be outstanding under a
$20.0 million revolving credit facility maturing in May 1998 (the "Credit
Facility") with NationsBank, N.A. (South) ("NationsBank"), which bears interest
at NationsBank's prime rate, and (ii) approximately $500,000 of indebtedness
outstanding pursuant to loans and advances from the Existing Common Shareholders
which have been used for working capital and general corporate purposes, of
which approximately $300,000 bears interest at a fluctuating rate tied to the
prevailing rate as established by the Internal Revenue Service, and the
remaining $200,000 is noninterest bearing, all of which indebtedness matures
upon the consummation of the Offering; (b) an aggregate of approximately
$200,000 to pay accrued compensation to certain officers of the Company; and (c)
the balance of approximately $19.4 million for working capital and general
corporate purposes including, among other things, the purchase of surplus
aircraft and Engines and Components for the Company's inventory and the funding
of the acquisition of complementary businesses, although there are no current
agreements or negotiations with respect to any such acquisitions.

Pending use of the net proceeds as described above, the Company will invest
the net proceeds in investment grade, interest-bearing securities. The Company
will not receive any proceeds from the sale of Class A Common Stock by the
Selling Shareholder.

DIVIDEND POLICY

The Company anticipates that following the completion of the Offering
earnings will be retained for use in developing and growing its business and
therefore does not anticipate paying any cash dividends in the foreseeable
future. Any future determination to pay cash dividends will be at the discretion
of the Board of Directors and will be dependent upon the Company's financial
condition, results of operations, capital requirements, restrictions in
financing arrangements and such other factors as the Board of Directors deems
relevant. The Company's ability to pay dividends or make distributions to
shareholders is also restricted by the terms of the Credit Facility.

12
<PAGE> 15

CAPITALIZATION

The following table sets forth the capitalization of the Company (a) as of
June 30, 1997, (b) as of June 30, 1997, on a pro forma basis to give effect to
the issuance on August 21, 1997 of (i) 494,642 shares of Class A Preferred Stock
and 219,644 shares of Class B Preferred Stock at $7.00 per share and the
application of the net proceeds therefrom and (ii) 327,772 shares of Class A
Common Stock valued at $7.00 per share in payment of the Company's outstanding
indebtedness to its Chairman of the Board of Directors and in connection with
the termination of an aircraft engine parts contract with a company owned by the
Company's Chairman of the Board of Directors. See "Certain Transactions" and
Note 17 of Notes to Financial Statements, and (c) as adjusted to give effect to
(i) the sale of 3,033,000 shares of Class A Common Stock offered by the Company
hereby at an assumed initial public offering price of $11.00 per share (after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company) and the application of the net proceeds to the Company
from the Offering as set forth herein and (ii) the conversion of all outstanding
shares of Class A Preferred Stock and Class B Preferred Stock into an aggregate
of 1,974,642 shares of Class A Common Stock and 439,644 shares of Class B Common
Stock, respectively. See "Use of Proceeds." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and Notes thereto
included in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Notes payable to bank and current portion of capital lease
obligation................................................ $15,342 $15,342 $ 69
======= ======= =======
Long-term capital lease obligation.......................... $ 121 $ 121 $ 121
Long-term notes payable -- shareholders..................... 2,513 489 --
Shareholders' equity(1):
Preferred stock, par value $.01 per share; 20,000,000
shares authorized; 1,480,000 shares of Class A
Preferred Stock and 220,000 shares of Class B Preferred
Stock issued and outstanding (actual), 1,974,642 shares
of Class A Preferred Stock and 439,644 shares of Class
B Preferred Stock issued and outstanding (pro forma),
and no shares outstanding (pro forma as adjusted)...... 17 24 --
Class A Common Stock, par value $.01 per share; 77,000,000
shares authorized; 5,000,000 shares outstanding
(actual), 5,327,772 shares outstanding (pro forma), and
10,335,414 shares outstanding (pro forma as
adjusted).............................................. 50 53 103
Class B Common Stock, par value $.01 per share; 3,000,000
shares authorized; no shares outstanding (actual and
pro forma) and 439,644 shares outstanding (pro forma as
adjusted).............................................. -- -- 4
Additional paid-in capital.................................. 14,611 21,896 52,144
Retained earnings........................................... 1,911 1,911 1,911
------- ------- -------
Total shareholders' equity........................ 16,589 23,884 54,162
------- ------- -------
Total capitalization.............................. $19,223 $24,494 $54,283
======= ======= =======
</TABLE>

- ---------------
(1) Does not include 600,000 shares of Class A Common Stock reserved for
issuance upon the exercise of stock options which may be granted under the
Company's 1996 Stock Option Plan. See "Management -- 1996 Stock Option
Plan."

13
<PAGE> 16

DILUTION

Net tangible book value per common equivalent share is equal to the
Company's tangible assets less total liabilities, divided by the total number of
shares of Common Stock outstanding. After giving effect to the conversion of all
outstanding shares of Class A Preferred Stock and Class B Preferred Stock into
an aggregate of 1,480,000 shares of Class A Common Stock and 220,000 shares of
Class B Common Stock, respectively, but not giving effect to the sale of the
shares of Class A Common Stock offered hereby, the net tangible book value of
the Company as of June 30, 1997 is approximately $16.6 million, or $2.48 per
common equivalent share. After giving effect to (i) the sale by the Company of
327,772 shares of Class A Common Stock to the Company's Chairman of the Board of
Directors and 494,642 shares of Class A Preferred Stock and 219,644 shares of
Class B Preferred Stock to The Clipper Group on August 21, 1997 and (ii) the
sale of 3,033,000 shares of Class A Common Stock offered by the Company hereby
at an assumed initial public offering price of $11.00 per share and after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company (resulting in estimated net proceeds of $30.3 million),
the net tangible book value of the Company as of June 30, 1997 would have been
approximately $54.2 million, or $5.03 per share. This represents an immediate
increase of $1.94 per share to existing shareholders and an immediate dilution
of $5.97 per share to purchasers of shares of Class A Common Stock in the
Offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Net tangible book value per common equivalent share at
June 30, 1997.......................................... $2.48
Increase attributable to August 21, 1997 transactions..... .61
Increase attributable to the Offering..................... 1.94
-----
Net tangible book value per share after the Offering........ 5.03
------
Dilution per share to purchasers in the Offering............ $ 5.97
======
</TABLE>

The following table summarizes, on a pro forma basis as of August 21, 1997,
the number of shares of Class A Common Stock acquired from the Company, the
aggregate cash consideration paid and the average price per share paid by the
existing shareholders and to be paid by investors purchasing shares of Class A
Common Stock from the Company in the Offering (at an assumed initial public
offering price of $11.00 per share):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Current Shareholders(1)(2)
Class A............................. 7,302,414 68% $18,894,000 34% $ 2.59
Class B............................. 439,644 4 3,078,000 6 7.00
New investors......................... 3,033,000 28 33,363,000 60 11.00
---------- --- ----------- ---
Total............................... 10,775,058 100% $55,335,000 100%
========== === =========== ===
</TABLE>

- ---------------

(1) Does not include 600,000 shares of Class A Common Stock reserved for
issuance upon the exercise of stock options which may be granted under the
Company's 1996 Stock Option Plan. See "Management -- 1996 Stock Option
Plan."
(2) The donation of 1,467,000 shares by Mr. Sragowicz at the time of the
Offering and the sale of those shares by the recipient in the Offering will
reduce the number of shares held by current shareholders to 6,275,058
shares, or approximately 58% of the total shares of Common Stock
outstanding, and will increase the number of shares held by new investors to
4,500,000 shares, or approximately 42% of the total shares of Common Stock
outstanding after the Offering. See "Principal and Selling Shareholders."

14
<PAGE> 17

SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected financial data for the years ended December 31, 1994,
1995 and 1996 and as of December 31, 1995 and 1996 are derived from the
Financial Statements of the Company, which have been audited by Ernst & Young
LLP, independent certified public accountants, and are included in this
Prospectus. The following selected financial data for the year ended December
31, 1993 and as of December 31, 1993 and 1994 are derived from the Financial
Statements of the Company, which have been audited by Ernst & Young LLP,
independent certified public accountants, and are not included in this
Prospectus. The following selected financial data for the year ended December
31, 1992 and the six months ended June 30, 1996 and 1997 and as of December 31,
1992 and June 30, 1997, are derived from unaudited financial statements prepared
by the Company. The unaudited financial statements include all adjustments,
consisting of normal occurring accruals, which the Company considers necessary
for a fair presentation of the Company's financial position and results of
operations for these periods. Operating results for the six months ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1997. The selected financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements of the Company
and Notes thereto included in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
----------- ------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA:
Net sales............................... $ 2,166(1) $ 3,891 $ 9,062 $ 18,299 $ 31,724 $ 12,974 $ 18,932
Cost of sales........................... 1,558 3,489 6,373 11,848 22,641 8,919 12,968
------- ------- ---------- ---------- ---------- ---------- ----------
Gross profit............................ 608 402 2,689 6,451 9,083 4,055 5,964
Operating expenses:
Selling, general and
administrative(2)................... 599 588 1,081 2,601 3,501 1,623 2,589
Officers' compensation................ -- -- 860 2,561 811 265 398
------- ------- ---------- ---------- ---------- ---------- ----------
Total operating expense................. 599 588 1,941 5,162 4,312 1,888 2,987
------- ------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations........... 9 (186) 748 1,289 4,771 2,167 2,977
Offering expenses(3).................... -- -- -- -- 1,154 -- --
Interest (expense) income, net.......... -- (14) 6 (191) (757) (349) (469)
------- ------- ---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
item.................................. 9 (200) 754 1,098 2,860 1,818 2,508
Extraordinary item(4)................... -- 150 -- -- -- -- --
------- ------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes....... 9 (50) 754 1,098 2,860 1,818 2,508
Provision (credit) for income
taxes(5).............................. -- -- -- -- (370) -- 912
------- ------- ---------- ---------- ---------- ---------- ----------
Net income (loss)(5).................... 9 (50) 754 1,098 3,230 1,818 1,596
Adjustments for pro forma (provision)
credit for income taxes............... (3) 18 (286) (417) (1,538) (661) --
------- ------- ---------- ---------- ---------- ---------- ----------
Pro forma net income (historical for the
six months ended June 30, 1997)(6).... $ 6 $ (32) $ 468 $ 681 $ 1,692 $ 1,157 $ 1,596
======= ======= ========== ========== ========== ========== ==========
Pro forma net income per common
equivalent share (historical for the
six months ended June 30, 1997)(5).... $ 0.06 $ 0.09 $ 0.22 $ 0.15 $ 0.21
========== ========== ========== ========== ==========
Weighted average number of common
equivalent shares outstanding(7)...... 7,742,058 7,742,058 7,742,058 7,742,058 7,742,058
========== ========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------------------------------------- -----------
1992 1993 1994 1995 1996 1997
----------- ------ ---------- ---------- ------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................ $1,010 $ (40) $ 2,433 $ 2,312 $16,930 $ 18,334
Inventory............................................... 3,686 3,304 2,771 8,563 14,505 22,348
Total assets............................................ 4,334 4,149 6,439 13,793 22,417 39,373
Total debt.............................................. 1,000 -- 350 3,287 3,048 17,976
Total shareholders' equity (capital deficiency)......... 10 (40) 2,634 2,613 14,993 16,589
</TABLE>

- ---------------

(1) Includes certain net sales from a joint venture.
(2) From inception and until July 21, 1994, the Company consigned all of its
inventory to Turbine Engine Sales Group, Inc. ("Turbine"), and paid Turbine
compensation equal to one half of the gross profit on consigned materials
sold. The Company had no facilities and limited staffing during this period.
Accordingly, income (loss) from operations prior to 1995 may not reflect the
full level of operating expenses necessary to support the Company's
operations during such periods.
(3) Represents a one-time charge against earnings in the third quarter of 1996
in the approximate amount of $1.2 million for the write-off of the costs
associated with a public offering which was withdrawn in August 1996 due to
market conditions. See Note 4 of Notes to Financial Statements.
(4) Represents gain on the extinguishment of debt to a related party.
(5) The Company was an S Corporation for federal and state income tax purposes
for the taxable periods from January 1, 1994 through December 6, 1996. As a
result, the net income of the Company was taxed, for federal and state
income tax purposes, directly to the Company's shareholders rather than to
the Company. See Note 5 of Notes to Financial Statements.

(6) Assumes that the Company was subject to federal and state income taxes
during the periods presented (at an effective tax rate of approximately
38%).
(7) Reflects the effect on weighted average shares outstanding of 1,974,642
shares of Class A Preferred Stock and 439,644 shares of Class B Preferred
Stock for all periods presented. All such shares of Class A Preferred Stock
and Class B Preferred Stock will be converted into Class A Common Stock and
Class B Common Stock, respectively, upon consummation of the Offering. See
"Certain Transactions" and Notes 2 and 17 of Notes to Financial Statements.

15
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Financial Statements
of the Company and the Notes thereto, and other financial information included
elsewhere in this Prospectus. This Prospectus contains certain statements
regarding future trends, the accuracy of which is subject to many risks and
uncertainties. Such trends, and their anticipated impact on the Company, could
differ materially from those discussed in this Prospectus. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors" and elsewhere in this Prospectus.

OVERVIEW

The Company's net sales and its sales practices have been substantially
affected by the amount of capital available to acquire its inventory of Engines
and Components. In developing its business, the Company has emphasized the rapid
sale of whole engines rather than obtaining maximum profit margins on each
particular sale. The Company anticipates that the Offering will enable it to
continue to build its inventory to support increased sales and to sell its
inventory on a more strategic basis to capitalize on the fluctuations in demand
for Engines and Components caused by seasonal and other factors. See "Risk
Factors" and "-- Seasonality."

In order to enable the Company to sell Engines and Components which it did
not have the capital to acquire, the Company entered into an agreement on
September 5, 1995 with Parati Corporation ("Parati") providing for Parati's
acquisition of new and surplus aircraft engines for disassembly and resale by
the Company (the "Parati Agreement"). The parties acquired Pratt & Whitney
engines under the Parati Agreement. The Parati Agreement provided for an equal
sharing of gross profits between the Company and Parati following the recovery
by Parati of all costs borne by Parati and the recovery by the Company of all
overhaul costs borne by the Company. Accordingly, since such date, the Company's
cost of sales include the portion of the gross profit due Parati from the sale
of engine parts of disassembled aircraft engines subject to the Parati
Agreement. Net sales under the Parati Agreement were approximately $224,000,
approximately $1.9 million and $498,000 in 1995, 1996 and during the six months
ended June 30, 1997, respectively. The cost of the engines acquired by Parati
under the Parati Agreement was approximately $1.7 million and the cost of the
unsold parts owned by Parati was $483,000 as of June 30, 1997. The Company and
Parati terminated the Parati Agreement on August 21, 1997 and the Company does
not intend to utilize similar agreements to acquire Engines or Components in the
future. See "Certain Transactions."

Until July 21, 1994, the Company consigned all of its inventory to Turbine
Engine Sales Group, Inc. ("Turbine"), which procured, managed, warehoused and
sold inventory and collected a fee equal to 50% of the Company's gross profit on
the material. On July 21, 1994, the Company acquired all of the assets and
retained certain personnel formerly employed by Turbine. The Company's operating
expenses for the periods prior to this transaction may not be comparable to
those incurred in periods after this transaction.

The Company records whole engines held for resale at the lower of cost or
market. Gross margin on whole engine sales has fluctuated significantly from
period to period, and can be expected to do so in the future, as a result of the
conditions and circumstances under which whole engines are sold. For example,
the Company may opportunistically sell whole engines at margins lower than those
realized by the Company on its component sales to capitalize on market demand or
to broaden its customer base. See "-- Seasonality."

Engine parts and airframe components acquired by the Company are initially
recorded at cost. Cost of sales relative to engine parts and airframe components
shipped are recorded during an initial period following disassembly of the
related whole engine or aircraft at the Company's historical ratio of cost of
sales to net sales for engine parts from such engine types or at the Company's
estimated ratio of cost of sales to net sales for airframe components.
Thereafter, management evaluates the remaining engine parts and airframe
components, estimates future sales and related overhaul costs and, if necessary,
adjusts the ratio of costs of sales to net sales on a prospective basis.
Thereafter, the Company records the cost of each engine part and airframe
component sold at the time the related net sales are recognized, based on such
ratios.

The Company has recently expanded its product line to include higher thrust
models of the JT8D series of engines and other high thrust engines, such as the
CFM56 engine. These higher thrust engines are more expensive

16
<PAGE> 19

than the engines historically sold by the Company. As the Company's net sales
increase, the Company expects that related operating expenses will increase at a
lower rate, thereby creating higher operating margins.

On December 6, 1996, the Company amended its employment agreements with
Donald Graw and Jaime Levy. The rate of compensation for each of them was
reduced from the prior level of 20% of adjusted net income as defined in such
agreements (approximately $430,000 and $1.3 million, respectively, for each of
them in 1994 and 1995), to provide for annual base salaries of $260,000 and
$220,000 for Messrs. Graw and Levy, respectively, for an initial term of three
years expiring December 1999. See "Management -- Employment Agreements." The
Company also terminated its status as an S Corporation on this date and became
subject to federal and state income taxes. Historically, the Company did not
record a provision for income taxes as a result of its S Corporation status for
1994 and 1995 and recorded a $370,000 net benefit for income taxes in 1996.

RECENT RESULTS (UNAUDITED)

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain items
contained in the Company's statements of operations expressed as a percentage of
net sales:

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------------- ------------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales......................................... 100% 100% 100% 100% 100%
Cost of sales..................................... 70 65 71 69 69
--- --- --- --- ---
Gross profit...................................... 30 35 29 31 31
Operating expenses:
Selling, general and administrative............. 12 14 11 12 14
Officers' compensation.......................... 10 14 3 2 2
--- --- --- --- ---
Total operating expenses................ 22 28 14 14 16
--- --- --- --- ---
Income from operations............................ 8 7 15 17 15
Offering expenses(1).............................. -- -- 4 -- --
Interest expense, net............................. -- 1 2 3 2
--- --- --- --- ---
Income before income taxes........................ 8 6 9 14 13
Provision (credit) for income taxes(2)............ -- -- (1) -- 5
--- --- --- --- ---
Net income(2)..................................... 8 6 10 14 8
Adjustment for pro forma provision for income
taxes........................................... (3) (2) (5) (5) --
--- --- --- --- ---
Pro forma net income (historical for the six
months ended June 30, 1997)(3).................. 5% 4% 5% 9% 8%
=== === === === ===
</TABLE>

- ---------------

(1) Represents a one-time charge against earnings in the third quarter of 1996
in the approximate amount of $1.2 million for the write-off of the costs
associated with a public offering which was withdrawn in August 1996 due to
market conditions. See Note 4 of Notes to Financial Statements.
(2) The Company was an S Corporation for federal and state income tax purposes
for the taxable periods from January 1, 1994 through December 6, 1996. As a
result, the net income of the Company was taxed, for federal and state
income tax purposes, directly to the Company's shareholders rather than to
the Company. See Note 5 of Notes to Financial Statements.
(3) Assumes that the Company was subject to federal and state income taxes
during the periods presented (at an effective tax rate of approximately
38%).

17
<PAGE> 20

Six Months Ended June 30, 1997 compared to Six Months Ended June 30, 1996

Net Sales. Net sales increased 45.9% to $18.9 million during the first six
months of 1997 from $13.0 million during the first six months of 1996. This
increase is primarily due to whole engine sales of $7.2 million during the first
six months of 1997 compared to approximately $700,000 during the first six
months of 1996, an increase of approximately $6.5 million. This was offset by a
decrease in engine part and airframe component sales of approximately $500,000
as a result of a bulk purchase of engine components in the first six months of
1996.

Gross Profit. Gross profit increased 47.1% to $6.0 million during the
first six months of 1997 from $4.1 million during the first six months of 1996.
Gross margin remained approximately the same.

Selling, General and Administrative Expense. Selling, general and
administrative expense increased 59.5% to $2.6 million during the first six
months of 1997 from $1.6 million during the first six months of 1996. As a
percentage of net sales, such expense increased to 13.7% during the first six
months of 1997 from 12.5% during the first six months of 1996. The expense
increase is primarily attributable to increased personnel expense resulting from
additional staffing in the Florida headquarters office, increased insurance
expense as a result of higher inventory levels and volume of shipments and
start-up costs related to the Company's new Texas-based field services
operation.

Officers' Compensation. Officers' compensation increased to $398,000
during the first six months of 1997 from $265,000 during the first six months of
1996. As a percentage of net sales, such expense increased to 2.1% during the
first six months of 1997 from 2.0% during the first six months of 1996. These
increases reflect the effect of the amendment to the employment agreements of
the two senior executives of the Company, which became effective subsequent to
December 6, 1996, and the hiring of a Chief Financial Officer in April 1996 and
the appointment of an executive officer in the fourth quarter of 1996.

Net Interest Expense. Net interest expense increased 34.4% to $469,000
during the first six months of 1997 from $349,000 during the first six months of
1996. As a percentage of net sales, such expense decreased to 2.5% during the
first six months of 1997 from 2.7% during the first six months of 1996. The
increased interest expense is a result of higher borrowing levels in order to
increase the amount of inventory available for sale.

Year Ended December 31, 1996 compared to Year Ended December 31, 1995

Net Sales. Net sales increased 73.4% to $31.7 million in 1996 from $18.3
million in 1995. This increase is primarily due to an increase in sales of
engine components related to a substantial increase in available inventory for
sale. In addition, average unit prices of the 17 whole engines sold in 1996
increased to $550,000, compared with $250,000 for the 22 whole engines sold in
1995. This unit price increase was primarily attributable to a change in the
product mix of whole engines to more expensive, higher thrust JT8D engines.

Gross Profit. Gross profit increased 40.8% to $9.1 million in 1996 from
$6.5 million in 1995. Gross margin decreased to 28.6% in 1996 from 35.3% in
1995. The margin decline is attributable to higher margins from the sale of
engines acquired in a bulk purchase by the Company and sold in 1995 and an
increase in sales of certain engine parts subject to gross profit sharing under
the Parati Agreement.

Selling, General and Administrative Expense. Selling, general and
administrative expense increased 34.6% to $3.5 million in 1996 from $2.6 million
in 1995. This increase is primarily attributable to increased personnel expense
resulting from additional staffing, increased facility expense associated with
the May 1995 relocation to the 50,000 square foot operations center and the
equipping of the disassembly facility during the first quarter of 1996. Selling,
general and administrative expense declined as a percentage of net sales to
11.0% in 1996 from 14.2% in 1995.

Officers' Compensation. Officers' compensation decreased 68.3% to $811,000
in 1996 from $2.6 million in 1995. Such expense decreased as a percentage of net
sales to 2.6% in 1996 from 14.0% in 1995. These changes reflect the effect of
amendments to the employment agreements of Messrs. Graw and Levy on December 6,
1996, and a one-time bonus to Messrs. Graw and Levy in the amount of $1.2
million in 1995. See "Management -- Employment Agreements."

18
<PAGE> 21

Net Interest Expense. Net interest expense increased to $757,000 in 1996
from $191,000 in 1995. Such expense increased as a percentage of net sales to
2.4% in 1996 from 1.0% in 1995. The increase is a result of the Company's
increased borrowing to support the purchase of substantially more inventory.

Year Ended December 31, 1995 compared to Year Ended December 31, 1994

Net Sales. Net sales increased to $18.3 million in 1995 from $9.1 million
in 1994. The Company increased its inventory in 1995 through borrowings under
its former loan facility, which was established in December 1994. Increased
sales also resulted from the commencement of the Pratt & Whitney relationship
and a 57% increase in whole engine sales, coupled with sales of more expensive
series JT8D aircraft engines. See "Business -- Relationship with Pratt &
Whitney" and "-- Customers." The Company also had net sales of consigned Boeing
727 rotable and expendable parts of $2.0 million in 1995 compared with $1.2
million in 1994. See "Business -- Customers."

Gross Profit. Gross profit increased to $6.5 million in 1995 from $2.7
million in 1994. Gross margin increased to 35.3% in 1995 from 29.7% in 1994,
primarily as a result of the sale of engines acquired in a bulk purchase in 1995
partially offset by the increase in lower margin consignment sales and the
commencement of sales under the Parati Agreement.

Selling, General and Administrative Expense. Selling, general and
administrative expense increased to $2.6 million in 1995 from $1.1 million in
1994, and such expense increased as a percentage of net sales to 14.2% in 1995
from 11.9% in 1994. These increases resulted primarily from the full year effect
during 1995 of initiating direct operations (previously performed by Turbine
until July 21, 1994), including increases in personnel costs of $1.0 million and
facility expense of $496,000.

Officers' Compensation. Officers' compensation increased to $2.6 million
in 1995 from $860,000 in 1994, and such expense increased as a percentage of net
sales to 14.0% in 1995 from 9.5% in 1994. This increase primarily resulted from
increased net income which was the basis for determining the compensation of the
two senior executives under the employment agreements then in effect and a
one-time bonus in the fourth quarter of 1995 of $1.2 million in consideration of
the reduction of the rate of compensation for future periods.

Net Interest Expense. Net interest expense was $191,000 in 1995 compared
to $6,000 of interest income in 1994, due to borrowings under bank facilities to
support inventory growth.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company's primary sources of liquidity have been from
financing activities and cash flow generated by operations and, to a lesser
extent, from consignment sales and sales under the Parati Agreement. Net cash
provided by financing activities, derived primarily from bank lines of credit
and advances from shareholders, was $2.3 million, $7.0 million and $14.8 million
during 1995, 1996 and the six months ended June 30, 1997, respectively. The
Company also obtained airframe components on consignment and may enter into
other consignment arrangements in the future. In May 1997, the Company launched
a program in conjunction with third-party financing sources under which the
Company leases aircraft engines to its customers, which is expected to increase
the Company's liquidity and provide working capital for the purchase of
additional aircraft engines.

On February 20, 1997, the Company obtained from NationsBank a Credit
Facility which provides working capital of up to $20.0 million with interest at
either the lender's prime rate or LIBOR plus 2.75% per annum, as determined by
the Company at the time of each advance, subject to an availability calculation
based on the eligible borrowing base. The eligible borrowing base includes
certain receivables and inventories of the Company. The Credit Facility also
permits NationsBank to issue letters of credit on behalf of the Company of up to
$5.0 million, and the aggregate principal amount of any letters of credit so
issued will reduce amounts available under the Credit Facility. The Credit
Facility matures in May 1998 and the term of any letters of credit issued
thereunder must expire prior to May 1999. At July 31, 1997, the Company had
outstanding approximately $12.4 million and additional availability of
approximately $3.3 million under the Credit Facility.

19
<PAGE> 22

The net proceeds of this sale were applied toward the payment of certain
distributions to the Company's shareholders in respect of earnings by the
Company prior to the change in its status from an S Corporation to a C
Corporation for federal and state income tax purposes, the repayment of advances
to the Company from Messrs. Sragowicz and Preston, the repayment of loans from
Barnett Bank of South Florida, N.A. to the Company, accrued bonuses payable to
Messrs. Graw and Levy and the purchase by the Company of surplus aircraft and
Engines and Components. See "Certain Transactions."

On July 25, 1997, the Company entered into an agreement with NationsBanc
Leasing Corporation ("NBLC") whereby the Company sold three Pratt & Whitney JT8D
engines to NBLC for approximately $4.3 million and subsequently leased-back such
engines for a period of five years at fixed monthly payments. The Company, at
its option, may repurchase any of these engines at a predetermined percentage of
the original leased amount beginning in July 1998. The engines subject to this
agreement are currently on lease by the Company to third parties. Payments under
such leases provide sufficient cash flow to exceed the Company's payments to
NBLC. The proceeds from the sale of these engines were used by the Company to
reduce the outstanding balance of its credit facility with NationsBank.

On August 21, 1997, the Company issued and sold Class A Preferred Stock and
Class B Preferred Stock to The Clipper Group for an aggregate purchase price of
approximately $5.0 million, with the proceeds being used to reduce the
outstanding balance of its credit facility with NationsBank. See "Certain
Transactions -- The Clipper Group Private Placements."

Also, on August 21, 1997, the Company issued and sold 327,772 shares of
Class A Common Stock to Mr. Sragowicz for an aggregate purchase price of
approximately $2.3 million as payment for loans made by Mr. Sragowicz to the
Company in the amount of approximately $2.0 million and payment for the
remaining inventory of Pratt & Whitney engine parts under the Parati Agreement
valued at $270,648. See "Certain Transactions."

The Company has established a capital expenditure budget of approximately
$1.3 million during 1997, including approximately $100,000 for additional engine
tooling in the Company's disassembly operations, approximately $300,000 for
enhancements to the Company's management information systems, approximately
$400,000 for warehouse improvements, approximately $200,000 for additional
leasehold improvements related to planned increases in personnel, approximately
$250,000 for additional equipment to be utilized by the Company's field service
subsidiary and $100,000 for additional office furniture and equipment.

The Company's principal working capital requirements relate to the
acquisition of inventory and carrying of receivables. The Company believes that
current levels of working capital, the proceeds to the Company of the Offering
and amounts available under the Credit Facility will enable it to meet its
liquidity requirements for the next twelve months.

SEASONALITY

The Company believes that demand for Engines and Components is seasonal,
with increased demand during the summer months. This seasonality exists because
aircraft engine performance is directly related to ambient temperature (as
temperatures rise it is more difficult for aircraft engines to perform
properly). As a result, certain aircraft engines are removed from service during
the summer months due to the failure of those particular aircraft engines to
comply with exhaust gas temperature limitations. Aircraft engines of the same
type and model can have different performance capabilities. The summer months
also include peak travel periods during which aircraft utilization levels are
high. In addition, the timing of whole aircraft engines sold, which have a
substantially greater purchase price than the installed parts and components,
may cause significant fluctuations in the Company's quarterly operating results.
The Company has in the past and may in the future experience substantial
quarterly fluctuations in sales as a result of these seasonal effects. See "Risk
Factors -- Potential Fluctuations in Operating Results; Dependence on Aviation
Industry."

20
<PAGE> 23

BUSINESS

GENERAL

AVTEAM is a global supplier of aftermarket Engines and Components. The
Company has historically focused on the purchase and resale of Engines and
Components for the Pratt & Whitney JT8D series of engines, which power
approximately 40% of the world's commercial aviation fleet. The Company has
recently expanded its product line to include the CFM56 series of engines, which
had the highest production volume of any engine series in 1996. The Company
works with its worldwide network of industry contacts to identify and evaluate
Engines and Components and surplus aircraft for potential acquisition. Engines
and Components are either made available for immediate resale or repaired by
FAA-licensed repair facilities and then resold. Surplus aircraft are always
disassembled and sold as parts by the Company. The Company resells Engines and
Components to other aftermarket suppliers, independent repair facilities,
aircraft operators and original equipment manufacturers. Since its inception,
the Company has substantially increased its revenue base, broadened the range of
products and services offered and taken consistent steps to ensure the quality
of its products and services. From $3.9 million in 1993, the Company's net sales
reached $31.7 million in 1996, when the Company supplied over 600 customers
worldwide. The Company had net sales of approximately $18.9 million for the
first six months of 1997 compared to approximately $13.0 million for the first
six months of 1996. In November 1996, the Company became the first aftermarket
supplier to receive quality accreditation from the Airline Suppliers Association
an FAA-recognized independent quality assurance organization. The Company
believes that there are currently fewer than 25 accredited aftermarket
suppliers.

INDUSTRY OVERVIEW

Growth in Air Transit Activity. According to Boeing's 1997 Market Outlook,
global air travel will increase approximately 75% by the year 2006, and the
number of passenger and cargo aircraft in service will increase by approximately
48%. The Company believes that growth in air transit activity will continue to
increase the demand for aftermarket Engines and Components.

Increase in the Number of Older Commercial Aircraft. Increased demand for
air travel and the need for aircraft operators to reduce operating and capital
costs have prompted many airlines to extend the useful life of older equipment.
The installation of FAA-approved hush-kits and extended life maintenance
programs have increased the useful life of aircraft utilizing JT8D engines for
many operators. In addition, many second-tier foreign and domestic aircraft
operators are increasing their fleets through the acquisition of less expensive
used aircraft, which typically require more maintenance and replacement parts
than new aircraft.

Aircraft Operators' Demand for Full Service Suppliers. Cost considerations
are causing aircraft operators to reduce the size of their spare parts
inventories, while cost and quality concerns cause them to maintain
relationships with a more limited number of approved suppliers. As a result,
many airlines today require full service suppliers that provide a broad array of
products and services.

Increased Regulatory Scrutiny. Increased regulatory attention to the
aftermarket parts industry has created opportunities for suppliers with the
infrastructure and quality systems to satisfy increased regulatory standards. In
September 1996, the FAA issued an advisory circular recommending voluntary
industry oversight and accreditation of aftermarket parts suppliers. In response
to regulatory scrutiny, aircraft operators have increased their documentation
requirements for products purchased in the aftermarket. The Company believes
that regulatory scrutiny will continue to increase, forcing aftermarket parts
suppliers to meet higher quality standards, which may strain the resources of
smaller competitors.

21
<PAGE> 24

BUSINESS STRATEGY

Broaden Product Line. The Company has recently expanded its product line
to include higher thrust models of the JT8D series of engines and other high
thrust engines, such as the CFM56 engine. The Company believes that the Offering
will provide it with the capital to be one of the few aftermarket suppliers able
to compete in this market segment. The CFM56 has been in service since 1982 and
an active aftermarket in this engine has begun to emerge. The installed base of
these engines is expected to approximate the size of the current installed base
of the JT8D within the next five years. The Company acquired two CFM56 engines
in 1997. One of these engines is being disassembled to provide the Company with
its initial inventory of CFM56 engine parts. The other engine was sold as a
whole engine. The Company also plans to increase its availability of airframe
components as it continues to acquire surplus aircraft for disassembly and
additional supply of engine inventory.

PRODUCTS

The Company's product line includes Engines and Components for all models
of the JT8D series and airframe components for McDonnell Douglas DC-9 and Boeing
707 and 727 aircraft. Although production of most models of the JT8D ceased in
1987, the JT8D engine continues to power approximately 40% of the world's
commercial aircraft. Since there currently is no cost-effective replacement for
the JT8D engine with which to power existing narrow-body aircraft, operators
continue to maintain their older engines. The Company believes that there will
be continuing demand for JT8D products. The Company has recently expanded its
product line to include Engines and Components for higher thrust engines, such
as the CFM56 manufactured by CFM

22
<PAGE> 25

International, which are owned by approximately 210 companies worldwide. The
Company acquired two CFM56 engines in 1997. One of these engines is being
disassembled to provide the Company with its initial inventory of CFM56 engine
parts. The other engine was sold as a whole engine. The following chart
indicates the Company's estimate of the number of JT8D and CFM56 engines
currently in service, as well as the principal types of aircraft utilizing such
engines.

<TABLE>
<CAPTION>
NUMBER
ENGINE TYPE IN SERVICE AIRCRAFT APPLICATION
- ----------- ---------- ----------------------------
<S> <C> <C>
Pratt & Whitney
JT8D-7-17.......................................... 10,300 DC-9, B727, B737
-200............................................... 2,700 B727, MD-80
CFM International
CFM56-3, -5........................................ 5,500 B737, A319, A320, A321, A340
</TABLE>

Engines and Components are classified within the industry as "factory new",
"new surplus", "overhauled", "serviceable" and "as removed". A new engine or
part is one that has never been installed. Factory new Engines or Components are
purchased from manufacturers or their authorized distributors. New surplus parts
are purchased from excess stock of airlines, repair facilities or other
suppliers. An overhauled Engine or Component is one which has been completely
disassembled, inspected, repaired, reassembled and tested by an FAA-licensed
repair facility. An Engine or Component is classified as serviceable if it is
repaired by an FAA-licensed repair facility rather than being completely
disassembled and overhauled. An Engine or Component may also be classified as
serviceable if it is removed by the operator while operating under an approved
maintenance program, is functional and meets the manufacturer's time and cycle
restrictions applicable to the part. A new, overhauled or serviceable
designation indicates that the engine or part can be immediately placed in
service on an aircraft. An Engine or Component in "as removed" condition
requires functional testing, repair or overhaul by an FAA-licensed repair
facility prior to being returned to service in an aircraft and is classified as
"non-serviceable."

Engine Parts. The Company's inventory of engine parts consists primarily
of parts for the JT8D series of engines and includes a broad selection of over
4,000 items. The Company obtains most of its components by purchasing and
disassembling engines. The Company prices individual components based upon their
classification, condition and general level of availability in the aftermarket.
Greater than 80% of the Company's engine parts inventory is purchased in "as
removed" condition and therefore requires repair. FAA-licensed repair facilities
specialize in different inspection and overhaul procedures and the Company has
an approved vendor list consisting of over 50 FAA-licensed repair facilities.
See "Risk Factors -- Impact of Government Regulation; Dependence on Third-Party
Repair Facilities."

Prior to January 1996, third parties disassembled the surplus aircraft
engines purchased by the Company to stock the Company's engine parts inventory,
which often resulted in long delays in receiving the disassembled parts. In
January 1996, the Company designed and equipped a disassembly facility for JT8D
engines, with flexibility to accommodate substantial growth in volume and
expansion into other types of aircraft engines, and hired personnel to conduct
engine disassembly operations. As a result, the Company has significantly
improved aircraft engine disassembly turnaround time.

Whole Engines. The Company purchases either serviceable engines for
immediate resale or non-serviceable engines that are repaired for the Company by
FAA-licensed repair facilities and then resold. In certain cases, the Company
specifies the workscope of repair based on the specifications of its customers.
The Company uses engine parts from its inventory to minimize the repair costs to
benefit its customers. Prices for engines depend on the level of thrust,
availability of the engine type at time of sale and the buyer's circumstances.
In the event that an aircraft requires a replacement engine, a customer may be
willing to pay a premium for a serviceable engine which can be delivered
immediately.

Airframe Components. The Company's sales of airframe components have
consisted primarily of sales of rotable and expendable airframe components for
727 and 707 aircraft consigned to the Company. A rotable is a component which is
removed periodically as mandated by an operator's maintenance procedure or on an
"as needed" basis and is typically repaired or overhauled and reused an
indefinite number of times. Sales of rotable airframe components include
avionics equipment (for example, fuel and altitude indicators) and actuators
(for

23
<PAGE> 26

example, devices that perform certain mechanical functions). The Company also
provides a full range of DC-9 rotable airframe components which it acquired
through the purchase of four DC-9 aircraft in November 1996 and an additional
three DC-9 aircraft in August 1997. An expendable is a part sold as new which
cannot be repaired for further use (for example, a bolt or rivet). The Company
expects to increase its inventory of airframe components as part of its growth
strategy.

SERVICES

Field Services. The Company offers engine borescoping services, a
diagnostic procedure utilizing a video camera attached to the end of a thin tube
which is inserted into engine sections to analyze the condition of an engine
without disassembly. The service is performed by a Company technician certified
by the OEM. The Company also utilizes its borescoping capabilities to evaluate
substantially all engines which the Company has the opportunity to purchase. In
February 1997, the Company, through its newly-formed subsidiary AVTEAM Aviation
Field Services, Inc. ("AAFS"), entered into a 40-month lease of approximately
5,300 square feet in Dallas, Texas, from which it began to conduct expanded
borescope, repair and other service operations. AAFS has received FAA
certification to perform a broad range of on-wing maintenance services,
including the installation of hush-kits on JT8D engines and the repair and
replacement of a limited number of engine parts and components. In March 1997,
AAFS entered into a licensing agreement with Pratt & Whitney pursuant to which
Pratt & Whitney has designated AAFS as an approved source of borescope, repair
and certain on-wing maintenance services for Pratt & Whitney engines (the "Pratt
& Whitney Field Services Agreement"). See " -- Relationship with Pratt &
Whitney." In August 1997, AAFS entered into an agreement with Southwest Airlines
Co. whereby AAFS was engaged on an exclusive basis to install hushkits on its
Pratt & Whitney JT8D-9A engines. As of September 3, 1997, the Company has hired
11 additional employees with an average of 21 years of industry experience to
perform these activities.

Engine Management Services. The Company intends to offer engine management
services to its customers. Services provided by the Company would include
arranging for volume discounts and competitive bids for third party services,
preparing workscopes for the repair of engines, monitoring engines through the
entire repair process and providing cost-effective replacement parts. By
offering engine management services, the Company would be able to leverage the
expertise it has developed in managing the repair of engines which it has
acquired.

Engine Leasing Services. In May 1997, the Company began to offer operating
leases of aircraft engines to airlines. The Company intends to capitalize on the
increasing demand by customers for operating leases which are being used as an
alternative to traditional engine financing arrangements. By entering into such
leases, the Company will be better able to control its future supply of engines
and retain the potential benefit of the residual value of such engines.

QUALITY ASSURANCE

The Company adheres to stringent quality control standards and procedures
in the purchase and sale of its products. In November 1996, the Airline
Suppliers Association, an FAA-recognized independent quality assurance
organization, accredited the Company as an aftermarket supplier after the
completion of an extensive facilities audit and numerous meetings with the
Company's management. The Company was the first aftermarket supplier to receive
such accreditation, and the Company believes that there are currently fewer than
25 accredited aftermarket suppliers, of which five are believed to be direct
competitors of the Company.

Because aircraft operators require a readily available and identifiable
source of inventory meeting regulatory requirements, the Company has implemented
a total quality assurance program. This program consists of numerous quality
procedures, including the following:

- Inspection procedures mandating that procured Engines and Components be
traceable to a source approved by the Company

- Detailed inspections of overhauled Engines and Components

- Training and supervision of personnel to properly carry out the total
quality assurance program

24
<PAGE> 27

- On-going quality review board meetings conducted by senior management to
oversee the total quality assurance program

In addition, as part of its total quality assurance program, the Company
has implemented a repair facility performance monitoring program which requires
each FAA-licensed repair facility used by the Company to perform a self-audit of
its operations on a regular basis and to submit to a facility audit performed by
an independent quality assurance organization retained by the Company.

PURCHASING

The Company's business is substantially dependent on its purchasing
activities because its net sales are directly influenced by the level of
inventory available for sale. Accordingly, senior management of the Company
takes a significant role in identifying, negotiating and acquiring surplus
aircraft and Engines and Components. Because the size of the Company's inventory
is critical to its results of operations and because there is no organized
market to procure surplus inventory, the Company's operations are materially
dependent on the success of management in identifying potential sources of
inventory and effecting timely purchases at acceptable prices. In order to
acquire inventory effectively, the Company's purchasing procedures include:

- Deploying field personnel to identify potentially available surplus
aircraft and Engines and Components

- Appointing representatives domestically and abroad to identify purchase
opportunities

- Purchasing for cash rather than seeking extended payment terms

- Maintaining a streamlined review process in order to make timely offers

- Involving senior management in negotiating and closing purchases

The Company historically acquired its inventories of Engines and Components
primarily through the purchase of surplus aircraft and engines and engine parts
inventories and acquired its airframe component inventory on a consignment
basis. The Company's experience is that, while consignments are a means to
obtain inventory with a minimum commitment of capital, outright purchases
generally result in higher gross margins on sales of such inventory.
Accordingly, the Company is seeking to increase its outright purchase of
airframe components to supplement its consignment inventory. "Bulk" purchase
opportunities often arise when airlines, in order to reduce expenses or change
fleet, sell large amounts of inventory in a single transaction. The Company has
completed three large bulk inventory purchases since 1992 and believes that the
proceeds of the Offering will allow it to aggressively pursue additional bulk
inventory purchase opportunities.

SALES AND MARKETING

The majority of the Company's day-to-day sales are accomplished through its
sales force, which currently consists of 10 employees, supplemented by eight
consultants and representatives worldwide for attracting and maintaining
relationships with customers. The Company is a member of various trade and
business organizations which provides appropriate industry exposure.

The Company advertises its available inventories held for sale on the
Inventory Locator System "ILS," an aviation parts information network which
enables approximately 2,300 buyers, including major airlines and repair
facilities, to access the Company's inventory. The Company is able to market all
available Engines and Components through the ILS and customers can locate the
Company's inventory noting quantities, part numbers, and condition. Customers
may request quotes for any specific part through direct electronic interface
with the Company. Pricing information is not available on the ILS and the
Company bases its pricing for particular parts on its extensive industry
knowledge.

RELATIONSHIP WITH PRATT & WHITNEY

In June 1995, the Company entered into a strategic supply arrangement with
Pratt & Whitney, the manufacturer of the JT8D engine, pursuant to a Surplus
Parts Supply Agreement (the "Pratt & Whitney Supply Agreement"). The Pratt &
Whitney Supply Agreement is a three-year agreement which designates the Company

25
<PAGE> 28

as the worldwide sole-source supplier of aftermarket engine parts for the JT8D
series of engines to Pratt & Whitney for the resale directly to airlines, repair
facilities (including its own repair facilities) and other customers. The
Company believes that it was selected by Pratt & Whitney primarily because of
the Company's extensive JT8D Engine and Components inventory. In 1996, Pratt &
Whitney entered into the aircraft engine maintenance business with the opening
of a new facility dedicated to the repair of JT8D engines. This new 100,000
square foot facility is expected to have the capacity to repair and overhaul up
to 200 JT8D engines per year. The Pratt & Whitney Supply Agreement established
pricing at specified percentages of the current catalog price for new engine
parts, subject to adjustment for cycles expended on life-limited engine parts.
For sales of parts to Pratt & Whitney, the Company's warranty includes the
repair or replacement of such parts at the Company's expense up to the later of
one year after the commencement of the use of the part or 18 months after
delivery of the part to Pratt & Whitney. The Pratt & Whitney Supply Agreement is
subject to termination by either party upon six months' prior written notice or
upon notice of an event of default. See "Risk Factors -- Relationship with Pratt
& Whitney" and "-- Customer Concentration."

In connection with the Pratt & Whitney Field Services Agreement, AAFS is
recognized by Pratt & Whitney as an approved source of borescope, repair and
certain on-wing maintenance services for Pratt & Whitney engines. The Company
believes that AAFS was selected by Pratt & Whitney primarily because of the
significant industry experience of AAFS' employees in performing these field
services. Pratt & Whitney has agreed to list AAFS in engine manuals as an
approved source of such field services, direct inquiries for such field services
to AAFS and provide on going qualification training to AAFS' employees. In
return, Pratt & Whitney is entitled to a fee based on AAFS' revenues related to
such field services. The Pratt & Whitney Field Services Agreement expires
December 1999. As of the date of this Prospectus, the Company was one of only
three companies worldwide recognized by Pratt & Whitney as an approved source of
these field services.

MANAGEMENT INFORMATION SYSTEMS

The Company's management information system includes a customized inventory
information technology system which is fully integrated with the Company's
accounting system and assists management in planning, operating and controlling
its business activities.

The information system contains the most current information regarding each
item in the Company's inventory. By accessing the information system through a
bar code scanner, the Company can document: (i) full traceability to the
FAA-approved point of origin for any part (whether to the OEM, an approved agent
of the OEM or an FAA-licensed repair facility); (ii) the aircraft or engine from
which the part originated; (iii) the availability and condition of parts in the
Company's inventory and, if at an FAA-licensed repair facility, when such parts
are due to be returned; (iv) the sales history regarding the type of parts sold
to the Company's customers (including dates and sales prices); (v) the status of
customer orders; and (vi) any relevant purchase commitments. The information
system also provides time and usage cycles for life-limited parts.

The information system has an automatic interface that transfers sales and
customer accounts receivable transactions to the primary accounting records and
subsidiary ledger. Purchase and sales commitment data, real-time inventory
levels, recording of inventory movements and current assessment of supply and
demand for various parts are the subject of daily reports to management.

The Company is in the process of upgrading its management information
system. The upgrade will include a state-of-the-art document scanning and
retrieval system, thereby allowing for improved accuracy and faster retrieval of
inventory traceability documents that must accompany all sales for regulatory
compliance. The upgrade will also increase the capacity of its management
information system to accommodate higher inventory levels and additional users.

REGULATION

The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar regulatory agencies. These regulations are
designed to insure that all aircraft and aviation equipment are continuously
maintained in proper condition for the safe operation of aircraft. While the
Company's principal operations are not currently regulated directly by the FAA,
both the independent facilities that repair and overhaul

26
<PAGE> 29

the Company's products and the independent operators that purchase the Company's
products are subject to extensive regulation. Accordingly, the Company must
consider the regulatory requirements of its customers and provide them with
Engines and Components that comply with airworthiness standards established by
the FAA and the OEMs, together with required documentation which enables these
customers to comply with other applicable regulatory requirements. The
inspection, maintenance and repair procedures for the various types of aircraft
and aviation equipment are prescribed by regulatory authorities and can be
performed only by FAA-licensed repair facilities utilizing certified
technicians. Compliance with the applicable FAA and OEM standards are required
prior to installation of a part on an aircraft. The Company only utilizes
FAA-licensed repair facilities to repair and certify aircraft engines and parts.
The Company has recently expanded the range of services that it offers to
include on-wing engine maintenance consisting of the installation of hush-kits
on JT8D engines and the repair and replacement of a limited number of engine
parts and components that required the Company to obtain FAA certification,
which it obtained in April 1997.

In June 1996, the FAA articulated a series of changes in the FAA's
inspection policies to enhance its oversight of aircraft operators that rely on
third-party maintenance. The effect on the Company of such changes to the FAA's
inspection policies may be to reduce the number of third-party maintenance
providers that provide services to the Company. To date, the Company's
operations have not been materially adversely effected as a result of such
regulations.

In September 1996, the FAA issued an advisory circular to support the
implementation of a voluntary accreditation program for civil aircraft parts
suppliers. This accreditation program establishes quality standards applicable
to aftermarket suppliers, such as the Company, and designates FAA approved
organizations to perform quality assurance audits for initial accreditation of
aftermarket suppliers. Quality assurance audits are required on an on-going
basis to maintain accreditation. In November 1996, the Airline Suppliers
Association, an FAA-recognized independent quality assurance organization,
accredited the Company as an aftermarket supplier after the completion of an
extensive facilities audit and numerous meetings with the Company's management.
The Company was the first aftermarket supplier to receive such quality
accreditation, and the Company believes that there are currently fewer than 25
accredited aftermarket suppliers. The FAA considers that obtaining civil
aircraft parts through accredited suppliers is a sound safety practice. Parts
procured from an accredited supplier convey assurance to the purchaser that the
quality is as stated and the appropriate documentation is on a file at the
supplier's place of business. Furthermore, accreditation provides assurance that
the supplier has implemented an appropriate quality assurance system and has
demonstrated the ability to maintain that system. The Company believes that
ongoing quality assurance audits and strict adherence to its quality assurance
system is essential to meeting the needs of its existing and future customers.

Because the Company's sales consist largely of older series JT8D engines
and parts, regulations promulgated by the FAA governing noise emission standards
for older aircraft and the FAA's Aging Airplane Program Plan (the "Aging
Airplane Program") have a material impact on the market for the Company's
products. Substantially all of the aircraft powered by the JT8D engine must
install hush-kits pursuant to such noise emission standards or be phased out of
operation in the United States by December 31, 1999 and in the European Union by
April 1, 2002. The Aging Airplane Program requires aircraft operators to perform
structural modifications and inspections to address airframe fatigue and to
implement corrosion prevention and control programs, which increase the
operating and maintenance costs of JT8D-powered aircraft. Furthermore, the EPA
and the various agencies of the European Union have sought the adoption of
stricter standards limiting the emission of nitrous oxide from aircraft engines.
See "Risk Factors -- Dependence on the JT8D Engine." The Company believes that
notwithstanding the substantial costs imposed by noise emission standards and
the Aging Airplane Program on older aircraft powered by JT8D engines, estimated
by the Company to average approximately $4 million per aircraft, certain
aircraft operators will continue to utilize older aircraft due to the
substantially greater cost of acquiring new replacement aircraft.

The core operations of the Company may in the future be subject to FAA or
other regulatory requirements. The Company closely monitors the FAA and industry
trade groups in an attempt to understand how possible future regulations might
impact the Company. See "Risk Factors -- Impact of Government Regulation;
Dependence on Third-Party Repair Facilities" and "-- Quality Assurance."

27
<PAGE> 30

CUSTOMERS

The Company sells its products and provides its services primarily to other
aftermarket suppliers of Engines and Components, repair facilities, OEMs,
aircraft operators and others. While the Company sold Engines and Components to
over 600 different customers during 1996, sales of products representing 21% and
13% of 1995 net sales, 9% and 16% of 1996 net sales and 3% and 9% of net sales
for the six months ended June 30, 1997 were made to Pratt & Whitney and Dallas
Aerospace, a division of Banner Aerospace, respectively. Sales to Dallas
Aerospace during 1996 increased as a percentage of total sales principally due
to an increase in the Company's net sales of whole engines to Dallas Aerospace.
In addition, the Company's five largest customers accounted for 52%, 49% and 47%
of the Company's net sales during 1995, 1996 and the six months ended June 30,
1997, respectively. A third customer accounted for 10% of the Company's net
sales during the six months ended June 30, 1996. A fourth and fifth customer
accounted for 13% and 12% of the Company's net sales during the first six months
ended June 30, 1997, respectively. A small number of customers may account for a
significant portion of the Company's revenues from period to period due to the
substantial cost of acquiring aircraft engines and certain parts and a
significant portion of the Company's sales are expected to continue to be
concentrated in a small number of customers. See "Risk Factors -- Customer
Concentration."

COMPETITION

The aftermarket for Engines and Components is highly fragmented, with a
limited number of well-capitalized companies selling a broad range of products;
and numerous smaller competitors serving distinct market niches and is
characterized by intense competition. The Company believes that range and depth
of inventories, full product traceability, product knowledge, quality, service
and price are the key factors in distinguishing the Company from other
aftermarket suppliers. Certain of the Company's competitors have substantially
greater financial, marketing and other resources than the Company. In addition,
OEMs, aircraft maintenance providers, leasing companies and FAA-licensed repair
facilities may vertically integrate into the supply industry, thereby
significantly increasing competition. There are established competitors that
provide many of the services the Company intends to offer, many of whom have
substantially greater financial, marketing and other resources than the Company.
See "Risk Factors -- Competition."

BACKLOG

The Company's backlog of unfilled orders at June 30, 1997 was approximately
$4.5 million. A substantial portion of the Company's backlog is typically
scheduled for delivery within 60 days. Moreover, variations in the size and
delivery dates of orders received by the Company, as well as changes in
customers' delivery requirements, may result in substantial backlog fluctuations
from period to period. Accordingly, the Company believes that backlog cannot be
considered a meaningful indicator of future financial results.

FACILITIES

The Company's corporate headquarters occupy a facility containing office,
warehouse and other operational space in Miramar, Florida, with an aggregate of
50,000 square feet under a lease with an initial term expiring on December 31,
2002, which may be extended at the Company's option until December 31, 2007. The
Company's engine disassembly operation is located at another facility in the
same office park containing 18,500 square feet of office and warehouse space
with an initial term expiring on December 31, 2000, which may be extended at the
Company's option until July 31, 2005. Monthly rent of $28,599 and $10,261 is
payable under the leases for the Company's headquarters and disassembly
facility, respectively. The Company plans to expand its corporate headquarters
to 96,000 square feet of contiguous space during 1998. Monthly rent for the
96,000 square foot space will be $57,643. The Company's facilities are designed
to allow efficient processing, warehousing, and inventory management of
substantially greater volumes than currently handled.

In February 1997, the Company entered into a 40-month lease of
approximately 5,300 square feet in Dallas, Texas, where AAFS conducts its
borescoping and other field service operations. Monthly rent for this facility
is $3,773. See Note 8 of Notes to the Financial Statements.

28
<PAGE> 31

ENVIRONMENTAL MATTERS

The Company has registered its aircraft engine disassembly facility at
Miramar, Florida with the U.S. Environmental Protection Agency (the "EPA") and
the State of Florida Department of Environmental Protection as a potential small
quantity generator of hazardous materials. During the disassembly of used
aircraft engines, residual oil is removed from aircraft engines and engine parts
are cleaned with a mineral spirits based solvent, resulting in the generation of
certain waste materials which require disposal. An EPA approved laboratory has
reviewed the Company's cleaning operations and determined that the cleaning
solvent and the waste materials generated during the cleaning operations are
non-hazardous substances. The Company is therefore not required to obtain
permits for the generation, handling, storage, transportation or disposal of the
cleaning solvent or the waste materials. The Company believes it is in material
compliance with applicable environmental laws and regulations.

INSURANCE

The Company is a named insured under policies which include the following
coverage: (i) products liability, including grounding, up to $350.0 million
(combined single limit and in the annual aggregate); (ii) personal property,
inventory and business income at the Company's two principal facilities with
blanket coverage up to $23.0 million; (iii) commercial general liability
coverage up to $5.0 million (combined single limit and in the aggregate); (iv)
hangarkeepers' liability (damages due to loss of aircraft occurring while such
aircraft is in the care, custody or control of the Company for safekeeping,
storage, service or repair) up to $100.0 million per aircraft or per occurrence;
(v) comprehensive general liability up to $2.0 million; (vi) employee benefit
liability up to $1.0 million for each claim and in the aggregate; (vii)
international commercial liability (including contractual liability) for bodily
injury or property damage up to $1.0 million; (viii) umbrella liability coverage
up to $4.0 million for each occurrence and in the aggregate; (ix) directors' and
officers' liability coverage up to $3.0 million; and (x) employment practices'
liability coverage up to $5.0 million. The Company believes that these coverages
are consistent with industry standards and adequate to insure against the
various liability risks of its business. See "Risk Factors -- Product
Liability."

EMPLOYEES

As of September 17, 1997, the Company had 52 full-time employees. None of
its employees are represented by a union. The Company has not experienced any
labor-related work stoppage and considers its relations with employees to be
good.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

29
<PAGE> 32

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning each of the
executive officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Leon Sragowicz............................. 66 Chairman of the Board
Donald A. Graw............................. 43 President, Chief Executive Officer and
Director
Jaime J. Levy.............................. 41 Executive Vice President and Director
Bryan Thomas McFarland..................... 44 Vice President -- Business Development
Mark S. Koondel............................ 50 Chief Financial Officer, Treasurer and
Assistant Secretary
Dallas Cobb................................ 53 Vice President -- Operations
Paula Sparks............................... 45 Vice President -- Quality Assurance
Richard Preston............................ 51 Secretary and Director
Robert Munson.............................. 62 Director
Eugene P. Lynch............................ 35 Director
</TABLE>

Leon Sragowicz is a co-founder of the Company and has served as the
Chairman of the Board and a director since its inception in October 1991. For
more than the past five years, he has been an investor in a significant number
of closely-held companies with businesses ranging from the export of
transportation equipment to Latin America to the ownership of real estate.

Donald A. Graw joined the Company in January 1994 and has served as its
Chief Executive Officer, President and a member of its Board of Directors since
that time. From February 1991 to November 1993, Mr. Graw served as Vice
President and Chief Operating Officer of Scamp Auto Rental I, Inc., a subsidiary
of Dollar Rent-A-Car System, Inc., with 42 retail locations throughout Florida.
From July 1982 to October 1990, Mr. Graw was employed by Diversified Services,
Inc., a franchisee of Budget Rent-A-Car, starting as the Chief Financial Officer
and becoming the Executive Vice President in February 1989.

Jaime J. Levy joined the Company in July 1994 and has served as its
Executive Vice President and a member of its Board of Directors since that time.
From February 1991 to July 1994, he served as President of Turbine which was
acquired by Messrs. Sragowicz and Preston in July 1994. From March 1986 to
January 1991, he served as the Director of Sales and Marketing for BET Air,
Inc., an aviation surplus parts company.

Bryan Thomas McFarland joined the Company in July 1994 as the Vice
President -- Technical Operations, and he became Vice President -- Business
Development in February 1997. From August 1992 to July 1994, he served as Vice
President -- Technical Operations of Turbine. Prior thereto, Mr. McFarland
served as the Quality Manager for International Aircraft Associates, a customer
sales manager for Aerothrust Corp. and a purchasing agent for Eastern Airlines,
Inc. He holds an Airframe and Powerplant license issued by the FAA.

Mark S. Koondel joined the Company in April 1996 as the Chief Financial
Officer and Treasurer. From November 1995 to April 1996, he served as the
Controller of AEC One Stop Group, Inc., a pre-recorded music distributor. From
November 1992 to October 1995, Mr. Koondel served as the Vice President of
Finance of Buenos Aires Embotelladora, S.A., a publicly-traded Pepsi-Cola
franchisee. From January 1985 to November 1992, he served as the Controller of
Florida Coca-Cola Bottling Co., Inc. Prior thereto, Mr. Koondel worked in public
accounting with Main Hurdman and Coopers & Lybrand for an aggregate of seven
years.

Dallas Cobb joined the Company in July 1995 as the Director of Airframe
Sales and he became Vice President -- Quality Assurance in September 1996. In
February 1997, Mr. Cobb was named Vice President -- Operations. From February
1980 to July 1995, Mr. Cobb served in various capacities with BET Air, Inc.,
including President, Vice President, General Manager and Marketing Manager. From
April 1968 to February 1980, Mr. Cobb served as Purchasing Agent for Eastern
Airlines, Inc.

30
<PAGE> 33

Paula Sparks joined the Company in March 1997 as Vice President -- Quality
Assurance. For more than 21 years prior thereto, Ms. Sparks was employed by
Pratt & Whitney, most recently as a Quality Assurance Manager. While at Pratt &
Whitney Overhaul and Repair, she was one of two holders of an Organizational
Designated Airworthiness Representative Certificate. Ms. Sparks is an active
member of the Quality Assurance Committee of the Airline Suppliers Association
and the American Society for Quality Control.

Richard Preston is a co-founder of the Company and has served as the
Company's Secretary and a member of its Board of Directors since October 1991
and, until April 1996, as its Treasurer. For more than the past 20 years, he has
served as a partner in the public accounting firm of Gerson, Preston & Company,
P.A., located in Miami, Florida.

Robert Munson joined the Company's Board of Directors in January 1996. From
1992 to the present, Mr. Munson has been an independent consultant to various
companies in the commercial aviation industry. Mr. Munson served for 33 years at
Pratt & Whitney, and was a Vice President of Pratt & Whitney during the period
from 1980 to 1992.

Eugene P. Lynch joined the Company's Board of Directors in December 1996.
Mr. Lynch is a Managing Director of The Clipper Group. He currently serves on
the Board of Directors of Owosso Corp., a corporation whose shares of common
stock are quoted on the Nasdaq National Market, TravelCenters of America, Inc.
and several other privately-held companies.

Directors are elected annually to serve until the next annual meeting of
shareholders and until their successors are elected and qualified. Executive
officers are elected by and serve at the discretion of the Board of Directors.

OTHER KEY PERSONNEL

In addition to the executive officers and directors named above, certain
key personnel also contribute significantly to the management of the Company.

John Wachter joined the Company in August 1995 as Director of Powerplant
Sales. From March 1993 to August 1995, Mr. Wachter served as Senior Account
Executive for the AGES Group, L.P., a provider of aircraft, engine and support
services to the aviation industry. From November 1985 to February 1993, Mr.
Wachter served as Sales Account executive for the Airline Services Division of
Ryder System, Inc. He holds an Airframe and Powerplant license issued by the
FAA.

Efrain Salazar joined the Company in January 1994 as Director of Finance.
From October 1993 to July 1994, Mr. Salazar served as Director of Finance of
Turbine. From March 1991 to July 1993, Mr. Salazar served as Business Manager
for the Latin American Division of Harper Collins Publishing Co.

Michael A. Maier joined the Company as Director of Technical Services and
Engine Management in February 1997. He brings over 15 years of experience in the
aviation industry to the Company. Mr. Maier served as Product Line Engineer of
Aviall, Inc. from October 1990 to November 1995. He also served as Senior Flight
Test Engineer of McDonnell Douglas. Prior thereto, he served as Senior Project
Test Engineer of Pratt & Whitney from July 1982 to September 1988. Mr. Maier is
an active member of the American Society of Mechanical Engineers and the Society
of Flight Test Engineers.

John C. Eslinger joined the Company as President of AAFS in March 1997. He
brings over 31 years of experience in the aviation industry to the Company. Mr.
Eslinger served as Manager of Technical Training of Ryder Airlines Services from
November 1989 to January 1997. Prior thereto, he served as Analyst Aircraft
Maintenance Quality Assurance of AMR Services. Mr. Eslinger also served as
Aircraft Mechanic for NHA Field Services, Bell Helicopter and Beech Aircraft
Corporation.

Julio A. Menendez joined the Company in January 1995 as Field Services
Manager and, in February 1997, he was named Director of Business Development.
From December 1987 to January 1995, Mr. Menendez served as Field Service
Supervisor for Aviall, Inc. He holds an Airframe and Powerplant license issued
by the FAA.

31
<PAGE> 34

COMMITTEES OF THE BOARD OF DIRECTORS

The Company's Board of Directors has established an Executive Committee,
Audit Committee and Compensation Committee. The Executive Committee is
authorized, subject to Florida law, to exercise the power and authority of the
Board of Directors in the management of the business and affairs of the Company
between meetings of the full Board of Directors. The members of the Executive
Committee are Messrs. Graw, Levy, Lynch and Preston.

The Audit Committee is responsible for nominating the Company's independent
auditors for approval by the Board of Directors, reviewing the scope, results
and costs of the audit with the Company's independent auditors, and reviewing
the financial statements and accounting practices of the Company. The members of
the Audit Committee are Messrs. Lynch, Munson and Sragowicz.

The Compensation Committee is responsible for recommending compensation
decisions to the Board of Directors. The Members of the Compensation Committee
are Messrs. Lynch, Munson and Sragowicz.

COMPENSATION OF DIRECTORS

During 1996, directors did not receive compensation for serving as members
of the Board of Directors. Directors of the Company who are not officers or
employees of the Company will receive an annual fee of $10,000. Directors are
reimbursed for travel and other expenses relating to attendance at meetings of
the Board of Directors or committees.

EXECUTIVE COMPENSATION

The following table shows the cash and other compensation earned by Mr.
Graw and each other executive officer of the Company who earned in excess of
$100,000 for services rendered in all capacities to the Company (the "Named
Executive Officers") during 1996.

1996 SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION(S) SALARY BONUS
- ------------------------------ -------- -------
<S> <C> <C>
Donald A. Graw.............................................. $288,737 $ --
President and Chief Executive Officer
Jaime J. Levy............................................... 286,430 --
Executive Vice President
Bryan Thomas McFarland...................................... 80,000 40,000
Vice President -- Technical Operations
</TABLE>

EMPLOYMENT AGREEMENTS

On December 6, 1996, Messrs. Graw and Levy entered into employment
agreements (collectively, the "Employment Agreements") with the Company
providing for employment as the President and Chief Executive Officer and
Executive Vice President, respectively. The Employment Agreements provide that
Messrs. Graw and Levy will receive an annual base salary of $260,000 and
$220,000, respectively, for an initial term of three years expiring December,
1999, as well as the right to participate in the Company's 1996 Stock Option
Plan and the Key Executive Annual Incentive Plan. See "-- Incentive Plan." The
Employment Agreements contain confidentiality and noncompete provisions by
Messrs. Graw and Levy in favor of the Company. Upon termination without cause,
each Employee will be entitled to receive two years' annual base salary paid in
one lump sum.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors, consisting of Messrs.
Lynch, Sragowicz and Munson, did not meet in 1996. The Compensation Committee's
function is to recommend to the Board of Directors compensation decisions for
the Company's executive officers and to administer the Company's 1996

32
<PAGE> 35

Stock Option Plan and the Key Executive Annual Compensation Plan. See
" -- Committees of the Board of Directors."

1996 STOCK OPTION PLAN

The Option Plan became effective on April 15, 1996. As of the date of this
Prospectus, no options have been granted. The purpose of the Option Plan is to
attract and retain qualified personnel, to provide additional incentives to
employees, officers and consultants of the Company and to promote the success of
the Company's business. A reserve of 600,000 shares of the Company's Class A
Common Stock has been established for issuance under the Option Plan. The Option
Plan is administered by the Compensation Committee of the Board of Directors.
The Compensation Committee has complete discretion to determine which eligible
individuals are to receive option grants, the number of shares subject to each
such grant, the status of any granted option as either an incentive stock option
or a non-statutory option, the vesting schedule to be in effect for the option
grant and the maximum term for which any granted option is to remain
outstanding.

Each option granted under the Option Plan has a maximum term of ten years,
subject to earlier termination following the optionee's cessation of service
with the Company. Options granted under the Option Plan may be exercised only
for fully vested shares. The exercise price of incentive stock options and
non-statutory stock options granted under the Option Plan must be at least 100%
and 85% of the fair market value of the stock subject to the option on the date
of grant, respectively (or 110% with respect to incentive stock options granted
to holders of more than 10% of the voting power of the Company's outstanding
stock). The Board of Directors or the Compensation Committee has the authority
to determine the fair market value of the stock. The purchase price is payable
immediately upon the exercise of the option. Such payment may be made in cash,
in outstanding shares of Class A Common Stock held by the participant, through a
promissory note payable in installments over a period of years or any
combination of the foregoing.

The Board of Directors may amend or modify the Option Plan at any time,
provided that no such amendment or modification may adversely affect the rights
and obligations of the participants with respect to their outstanding options or
vested shares without their consent. In addition, no amendment of the Option
Plan may, without the approval of the Company's shareholders: (i) modify the
class of individuals eligible for participation; (ii) increase the number of
shares available for issuance, except in the event of certain changes to the
Company's capital structure; or (iii) extend the term of the Option Plan. The
Option Plan will terminate on March 1, 2006, unless sooner terminated by the
Board of Directors.

INCENTIVE PLAN

The Company has adopted a Key Executive Annual Incentive Plan (the
"Incentive Plan") pursuant to which key executives of the Company may receive
bonus compensation based on the Company's performance during any fiscal year, as
determined by the Compensation Committee. Under the Incentive Plan, the
Company's President and Executive Vice President and other executives designated
by the Compensation Committee are assigned a target award expressed as a
percentage of base salary in varying amounts (not to exceed 100% of base salary
for the President and Chief Executive Officer and the Executive Vice President
and 50% of base salary for the other key executive officers). The actual award
is subject to achievement by the Company of minimum levels of pre-tax income.
The Compensation Committee has the authority to select participants other than
the President and Executive Vice President, to establish target awards and to
determine final awards in the event that the Company's pre-tax income is less
than the levels established under the Incentive Plan during any year the
Incentive Plan remains in effect.

33
<PAGE> 36

CERTAIN TRANSACTIONS

THE CLIPPER GROUP PRIVATE PLACEMENTS

On December 6, 1996, the Company issued and sold to The Clipper Group in a
private sale 1,480,000 shares of Class A Preferred Stock and 220,000 shares of
Class B Preferred Stock for an aggregate purchase price of $11.9 million. On
August 21, 1997, the Company issued and sold to The Clipper Group in a private
sale 494,642 shares of Class A Preferred Stock and 219,644 shares of Class B
Preferred Stock for an aggregate purchase price of approximately $5.0 million.
All of the outstanding shares of Class A Preferred Stock will automatically
convert into an aggregate of 1,974,642 shares of Class A Common Stock and all of
the outstanding shares of Class B Preferred Stock will automatically convert
into an aggregate of 439,644 shares of Class B Common Stock upon the
consummation of the Offering. The Clipper Group has certain rights to require
the Company to register its shares of Common Stock under the Securities Act. See
"Description of Capital Stock -- Registration Rights" and "Shares Eligible for
Future Sale."

PARATI AGREEMENT

On September 5, 1995, the Company entered into the Parati Agreement with
Parati, a corporation wholly-owned by Leon Sragowicz, the majority shareholder
and the Chairman of the Board of Directors of the Company, pursuant to which
Parati purchased Pratt & Whitney engines for disassembly. The Company handled
all of the operational and administrative aspects of the agreement and Parati
remained the owner of the engine parts from the disassembled aircraft engines
purchased by Parati. Any profit remaining after recovery by Parati of its cost
of sales and by the Company of any overhaul costs was divided equally by Parati
and the Company. On August 21, 1997, the Company and Parati terminated the
Parati Agreement and the Company purchased the remaining inventory of engine
parts valued at $270,648 (the "Parati Balance"). On August 21, 1997, the Company
issued and sold 38,664 shares of Class A Common Stock to Mr. Sragowicz as
payment for the Parati Balance. The Company does not intend to utilize similar
agreements to acquire Engines or Components in the future. Management believes
that the agreement with Parati was on terms which were no less favorable to the
Company than those which would have been obtained from independent third
parties.

LOANS MADE BY EXISTING COMMON SHAREHOLDERS TO COMPANY

Mr. Sragowicz has loaned and advanced money to the Company on several
occasions for inventory acquisitions and general corporate purposes. On August
21, 1997, the Company issued and sold 289,108 shares of Class A Common Stock to
Mr. Sragowicz for an aggregate purchase price of approximately $2.0 million as
payment of the indebtedness evidenced by these loans.

Mr. Preston has loaned and advanced money to the Company on several
occasions for inventory acquisitions and general corporate purposes. Immediately
prior to the consummation of the Offering, the Company had outstanding
indebtedness to Mr. Preston in the amount of $288,965, of which (i) $100,182
bears interest at a fluctuating rate tied to the prevailing rate as established
by the Internal Revenue Service and (ii) the remaining $188,783 is non-interest
bearing. Upon the completion of the Offering, these loans will be repaid to Mr.
Preston.

Messrs. Graw and Levy have each loaned and advanced money to the Company on
several occasions for inventory acquisitions and general corporate purposes.
Immediately prior to the consummation of the Offering, the Company had
outstanding indebtedness to each of them in the amount of $100,182 which bears
interest at a fluctuating rate tied to the prevailing rate as established by the
Internal Revenue Service. Upon the completion of the Offering, these loans will
be repaid to Messrs. Graw and Levy.

PAYMENT OF DEFERRED COMPENSATION TO EXECUTIVE OFFICERS

On December 12, 1996, the Company paid to each of Messrs. Graw and Levy a
bonus of $589,718 for services rendered in 1995. See "Management -- Employment
Agreements." Upon completion of the Offering, the Company will pay approximately
$150,000 to Mr. Graw and $82,000 to Mr. Levy for services rendered in 1996.

34
<PAGE> 37

AMOUNTS DUE TO COMPANY

Pursuant to the Employment Agreements, each of Messrs. Graw and Levy
exercised their options to purchase 500,000 shares of Class A Common Stock and,
as a result of the exercise of their options, incurred non-interest bearing
indebtedness to the Company in the aggregate amount of $809,638. All such
indebtedness was repaid in December 1996.

TAX INDEMNIFICATION AGREEMENTS

On December 6, 1996, the Company entered into the AVTEAM Tax Allocation and
Indemnification Agreements (the "Tax Indemnification Agreements") with each of
the Existing Common Shareholders relating to their respective income tax
liabilities and certain related matters. The Tax Indemnification Agreements
generally provide that the Existing Common Shareholders will be indemnified by
the Company with respect to federal and state income taxes (plus interest and
penalties) arising due to taxable income shifted from a C Corporation taxable
year to a taxable year in which the Company was an S Corporation, and that the
Company will be indemnified by the Existing Common Shareholders with respect to
federal and state income taxes (plus interest and penalties) arising due to
taxable income shifted from an S Corporation taxable year to a C Corporation
taxable year; provided, however, that only in the case of the Existing Common
Shareholders' obligation to indemnify the Company, such obligation shall be
limited to the tax benefit (if any) derived by the Existing Common Shareholders
due to the shift of taxable income from a taxable year in which the Company was
an S Corporation to a C Corporation taxable year. Any payment made by the
Company to the Existing Common Shareholders pursuant to the Tax Indemnification
Agreements may be considered by the Internal Revenue Service or the state taxing
authorities to be nondeductible by the Company for income tax purposes.

* * *

Following the Offering, the Company does not intend to enter into any
material transaction with officers or directors, or their family members,
without the approval of a majority of the directors who do not have an interest
in such transaction.

35
<PAGE> 38

PRINCIPAL AND SELLING SHAREHOLDERS

The following table set forth certain information concerning the beneficial
ownership of the Company's capital stock prior to the Offering and as adjusted
to give effect to the sale of shares of Class A Common Stock in the Offering, by
(i) each person known by the Company to own beneficially more than 5% of any
class of the Company's stock, (ii) each Named Executive Officer and director of
the Company, and (iii) all executive officers and directors of the Company as a
group. Unless otherwise specified, the named beneficial owner claims sole
investment and voting power as to the shares indicated. See "Description of
Capital Stock."

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------------------------------
NUMBER OF SHARES % OF CLASS PRIOR NUMBER OF SHARES % OF CLASS
PRIOR TO OFFERING TO OFFERING OFFERED HEREBY AFTER OFFERING
------------------- ----------------- ------------------- -----------------
NAME(1) CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- --------- ------- ------- ------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leon Sragowicz................ 3,827,772 -- 52.4% -- -- -- 22.8%(2) --
Richard Preston............... 500,000 -- 6.8 -- -- -- 4.8 --
Donald A. Graw................ 500,000 -- 6.8 -- -- -- 4.8 --
Jaime J. Levy................. 500,000 -- 6.8 -- -- -- 4.8 --
Bryan Thomas McFarland........ -- -- -- -- -- -- -- --
Mark S. Koondel............... -- -- -- -- -- -- -- --
Robert Munson................. -- -- -- -- -- -- -- --
Dallas Cobb................... -- -- -- -- -- -- -- --
Paula Sparks.................. -- -- -- -- -- -- -- --
Eugene P. Lynch............... -- -- -- -- -- -- -- --
The Clipper Group(3).......... 1,974,642 439,644 27.0 100% -- -- 19.1 100%
All executive officers and
directors as a group (9
persons).................... 5,327,772 -- 72.9 -- -- -- 37.4 --

SELLING SHAREHOLDER
- ------------------------------
Sragowicz Foundation, Inc..... -- -- -- -- (4) -- -- --
</TABLE>

- ---------------

(1) The address of each shareholder is the address of the Company, which is 3230
Executive Way, Miramar, Florida 33025.
(2) Prior to the time of the Offering, Mr. Sragowicz will donate an aggregate of
1,467,000 shares of Class A Common Stock to Sragowicz Foundation, Inc., a
charitable organization, or other charitable organizations so that he will
own 2,360,772 shares of Class A Common Stock after the completion of the
Offering.
(3) Includes shares beneficially owned by Clipper/Merchant Partners, L.P.,
Clipper Equity Partners I, L.P., and Clipper Capital Associates, L.P. (whose
address is 650 Madison Avenue, New York, New York 10022), and
Clipper/Merban, L.P. and Clipper/European Re, L.P. (whose address is c/o
CITCO, De Ruyterkade, 62, P.O. Box 812, Curacao, Netherlands Antilles).
Clipper Capital Associates, L.P. is the general partner of all of The
Clipper Group partnerships. The general partner of Clipper Capital
Associates, L.P. is Clipper Capital Associates, Inc. Robert B. Calhoun is
the sole shareholder and a director of Clipper Capital Associates, Inc. As a
result, each of Mr. Calhoun, Clipper Capital Associates, L.P. and Clipper
Capital Associates, Inc. is deemed to beneficially own all shares of Class A
Common Stock and Class B Common Stock beneficially owned by The Clipper
Group. Merchant Capital, Inc., an affiliate of CSFBC, is a 99% limited
partner of Clipper/Merchant Partners, L.P. Credit Suisse Group, an affiliate
of CSFBC, is an indirect 99% limited partner of Clipper/Merban, L.P. CSFBC
is acting as one of the representatives of the underwriters of the Offering.
None of Merchant Capital, Inc., CSFBC and Credit Suisse Group is an
affiliate of The Clipper Group or Clipper Capital Associates, L.P.
(4) At the time of the Offering, Sragowicz Foundation, Inc., a charitable
organization, or other charitable organizations will have received as a
donation from Mr. Sragowicz an aggregate of 1,467,000 shares of Class A
Common Stock which, if they execute the Underwriting Agreement, will be
offered by them hereby.

36
<PAGE> 39

DESCRIPTION OF CAPITAL STOCK

After giving effect to the amendment of the Articles to be filed upon the
closing of the Offering which will eliminate all authorized Class A Preferred
Stock and Class B Preferred Stock, the authorized capital stock of the Company
will consist of 100,000,000 shares of capital stock, comprised of (i) 77,000,000
shares of Class A Common Stock, (ii) 3,000,000 shares of Class B Common Stock
(together with the Class A Common Stock, the "Common Stock") and (iii)
20,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), issuable in one or more series as hereinafter provided. As of the date
of the Offering, an aggregate of 7,302,414 shares of Class A Common Stock and
439,644 shares of Class B Common Stock were outstanding. No shares of Preferred
Stock will be outstanding upon consummation of the Offering.

The following statements are brief summaries of certain provisions relating
to the Common Stock and Preferred Stock contained in the Articles and Bylaws.

CLASS A COMMON STOCK

The Class A Common Stock has no preemptive rights and no redemption,
sinking fund or conversion provisions. All shares of Class A Common Stock have
one vote on any matter submitted to the vote of shareholders. The Class A Common
Stock does not have cumulative voting rights. Upon any liquidation of the
Company, the holders of Class A Common Stock are entitled to receive, share for
share with the holders of Class B Common Stock on a pro rata basis, all assets
then legally available for distribution after payment of debts and liabilities
and preferences on preferred stock, if any. Holders of Class A Common Stock are
entitled to receive dividends share for share with the holders of shares of
Class B Common Stock on a pro rata basis when, as and if declared by the Board
of Directors out of funds legally available therefor (subject to the prior
rights of preferred stock, if any).

CLASS B COMMON STOCK

The Class B Common Stock has no preemptive rights and no redemption,
sinking fund or conversion provisions. Except as otherwise required by law, the
shares of Class B Common Stock have no voting rights. Under Florida law, holders
of Class B Common Stock are permitted to vote on amendments to the Company's
Articles, if such amendments would, among other things, alter or change powers,
preferences or special rights of such class. Upon any liquidation of the
Company, the holders of Class B Common Stock are entitled to receive, share for
share with the holders of shares of Class A Common Stock on a pro rata basis,
all assets then legally available for distribution after payments of debts of
liabilities and preferences on preferred stock, if any. Holders of Class B
Common Stock are entitled to receive dividends share for share with the holders
of shares of Class A Common Stock on a pro rata basis when, as and if declared
by the Board of Directors out of funds legally available therefor (subject to
the prior rights of preferred stock, if any).

CONVERSION RIGHTS

Conversion of Class A Common Stock. Each holder of Class A Common Stock is
entitled at any time, if such holder has or is reasonably expected to have a
Regulatory Problem (as defined below), to convert any or all of the shares of
such holder's Class A Common Stock into an equal number of shares of Class B
Common Stock. A holder is deemed to have a "Regulatory Problem" when such holder
and such holder's affiliates would own, control or have power over a greater
quantity of securities of any kind of the Company than are permitted under any
applicable requirement of any governmental authority, or would not be able to
hold an investment or provide financing to the Company in compliance with any
applicable requirement of any governmental authority.

Conversion of Class B Common Stock. Each holder of Class B Common Stock is
entitled at any time to convert any or all of the shares of such holder's Class
B Common Stock into an equal number of shares of Class A Common Stock unless, as
a result of such conversion, such holder would have a Regulatory Problem.

Conversion of Class B Common Stock Upon a Conversion Event.

(i) Each share of Class B Common Stock distributed, transferred or sold
in connection with any Conversion Event (as defined below) will, as of the date
of such Conversion Event, automatically be converted

37
<PAGE> 40
into and represent the right to receive, and without any action on the part of
any party, an equal number of shares of Class A Common Stock. As of the
effective date of the Conversion Event, the rights of the holder of the
converted Class B Common Stock as such shall cease and the person or persons in
whose name or names the certificate or certificates for shares of Class A Common
Stock are to be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Class A Common Stock represented
thereby.

(ii) A "Conversion Event" shall mean the sale, distribution or transfer
of Class B Common Stock in connection with and pursuant to the terms of (A) any
public offering or public sale of securities of the Company (including a public
offering registered under the Securities Act and a widely distributed public
sale pursuant to Rule 144 thereunder or any similar rule then in force),
including any sale of such securities to a person or persons acting as
underwriter with respect to such offering, (B) any sale of securities of the
Company to a person or group of persons (within the meaning of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") if, after such sale, such
person or group of persons in the aggregate would own or control securities of
the Company (excluding any securities being converted and disposed of in
connection with such conversion event) which possess in the aggregate the
ordinary voting power to elect a majority of the Company's directors, (C) any
sale of securities of the Company to a person or group of persons (within the
meaning of the Exchange Act) if, after such sale, such person or group or
persons would not, in the aggregate, own, control or have the right to acquire
more than two percent (2%) of the outstanding securities of any class of voting
securities of the Company, or (D) a merger, consolidation or similar transaction
involving the Company if, after such transaction, a person or group of persons
(within the meaning of the Exchange Act) would own or control securities which
possess in the aggregate the ordinary voting power to elect a majority of the
surviving corporation's directors (provided that the transaction has been
approved by the Company's Board of Directors or a committee thereof).

PREFERRED STOCK

The Board of Directors has the authority to issue up to 20,000,000 shares
of Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designation, preferences and
relative participation, optional or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights and dividend
rate, terms of redemption (including sinking fund provisions), redemption price
or prices, conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by the shareholders.
The issuance of Preferred Stock by the Board of Directors could affect the
rights of the holders of Common Stock. For example, such issuance could result
in a class of securities outstanding that would have preferences with respect to
voting rights and dividends, and in liquidation, over the Common Stock, and
could (upon conversion or otherwise) enjoy all of the rights appurtenant to
Common Stock.

The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control of
the Company through merger, tender offer, proxy contest or otherwise by making
such attempts more difficult to achieve or more costly. The Board of Directors
may issue the Preferred Stock with voting and conversion rights that could
adversely affect the voting power of the holders of Class A Common Stock. There
are no agreements or understandings for the issuance of Preferred Stock and the
Board of Directors has no present intention to issue Preferred Stock.

REGISTRATION RIGHTS

Under the terms of a Registration Rights Agreement dated as of December 6,
1996 and subject to certain conditions, The Clipper Group is entitled to certain
transferable registration rights with respect to its 1,974,642 shares of Class A
Common Stock and 439,644 shares of Class B Common Stock (collectively, the
"Registrable Securities"). If the Company proposes to register any of its
securities under the Securities Act, either for its own account or on behalf of
the Company's shareholders, and such holders so request, the Company is required
to use its best efforts to include such holders' Registrable Securities in such
registration and to pay such shareholders' registration expenses, excluding
underwriting discounts and commissions in connection with such registration. If
the managing underwriter advises the Company that the number of securities
requested to be included in such registration would exceed the number which can
be sold in such offering without materially and adversely

38
<PAGE> 41

affecting the offering, the Company must first include the securities the
Company proposes to sell and then the Registrable Securities requested to be
included in such registration by The Clipper Group. If the registration by the
Company is on behalf of the Company's shareholders, then the Company must first
include the securities that the Company's shareholders who requested such
registration propose to sell and then the Registrable Securities requested to be
included in such registration by The Clipper Group. In addition, subject to
certain conditions, the holders of 750,000 or more of the Registrable Securities
may require the Company, on not more than two occasions, to file a registration
statement under the Securities Act with respect to such Registrable Securities.
The Company has agreed to indemnify the holders of the Registrable Securities
against certain liabilities, including liabilities under the Securities Act, in
connection with the registration of their shares. See "Shares Eligible for
Future Sale."

The holders of Registrable Securities have agreed not to include any
Registrable Securities in the Offering and have agreed not to exercise their
respective registration rights for a period of 180 days following the date of
this Prospectus.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF FLORIDA LAW

The Company is subject to (i) the Florida Control Share Act, which
generally provides that shares acquired in excess of thresholds equaling 20%,
33% and more than 50% of a corporation's voting power will not possess any
voting rights unless such voting rights are approved by a majority vote of the
corporation's disinterested shareholders, and (ii) the Florida Fair Price Act,
which generally requires approval by disinterested directors or supermajority
approval by shareholders for certain specified transactions between a
corporation and a holder of more than 10% of the outstanding shares of the
corporation (or its affiliates).

CERTAIN NOTICE AND VOTING PROVISIONS CONTAINED IN THE COMPANY'S ARTICLES OF
INCORPORATION AND BYLAWS

Certain provisions of the Articles and Bylaws summarized in the following
paragraphs may be deemed to have an anti-takeover effect and may delay, defer or
prevent a tender offer or takeover attempt that a shareholder might consider in
its best interest, including those attempts that might result in a premium over
the market price for the shares held by shareholders.

Special Meeting of Shareholders. The Articles provide that special
meetings of shareholders of the Company may be called only by the Board of
Directors or upon the written demand of the holders of not less than fifty
percent of all votes entitled to be cast on any issue proposed to be considered
at a special meeting. This provision will make it more difficult for
shareholders to take actions opposed by the Board of Directors and can only be
amended with the approval of at least two-thirds of the outstanding shares
entitled to be cast on the issue.

Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The Articles provide that shareholders seeking to bring business
before an annual meeting of shareholders, or to nominate candidates for election
as directors at an annual meeting of shareholders, must provide timely notice
thereof in writing. To be timely, a shareholder's notice must be delivered to or
mailed and received at the executive offices of the Company not less than 120
days nor more than 180 days prior to the first anniversary of the date of the
Company's notice of annual meeting provided with respect to the previous year's
annual meeting. The Articles also state that no shareholder actions may be taken
by written consent and specify certain requirements for a shareholder's notice
to be in proper written form. These provisions may preclude some shareholders
from bringing matters before the shareholders at an annual meeting or from
making nominations for directors at an annual meeting and can only be amended
with the approval of at least two-thirds of the outstanding shares entitled to
be cast on the issue.

39
<PAGE> 42

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has not been any public market for securities
of the Company. No prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of Class A Common Stock in the public market could adversely affect the
prevailing market price.

Upon completion of the Offering, the Company will have outstanding
10,335,414 shares of Class A Common Stock and 439,644 shares of Class B Common
Stock. All 4,500,000 shares of Class A Common Stock (5,175,000 shares if the
Underwriters' over-allotment option is exercised in full) sold in the Offering
will be freely tradable without restriction or further registration under the
Securities Act, except that shares owned by "affiliates" of the Company
("Affiliates"), as that term is defined in Rule 144, may generally only be sold
in compliance with applicable provisions of Rule 144. The remaining 5,835,414
shares of Class A Common Stock and 439,644 shares of Class B Common Stock
(collectively, the "Restricted Shares") held by existing shareholders upon
completion of the Offering will be "restricted" securities within the meaning of
Rule 144 and may not be sold except in compliance with the registration
requirements of the Securities Act or an applicable exemption under the
Securities Act, including sales pursuant to Rule 144.

The Company, its directors and officers and the Selling Shareholder have
agreed with the Underwriters not to sell or otherwise dispose of any shares of
Class A Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of CSFBC, except issuances pursuant to the
exercise of employee stock options granted under the Option Plan and issuances
in connection with acquisitions where the person receiving the Class A Common
Stock agrees not to sell or otherwise dispose of such shares until 180 days
after the date of this Prospectus. See "Underwriting." Beginning 180 days after
the date of this Prospectus, assuming that CSFBC does not consent to any sales
prior to such time, an additional 5,835,414 shares will become eligible for sale
in the public market, subject to compliance with the provisions of Rule 144. Of
such 5,835,414 shares, 2,360,772 shares are held by Mr. Sragowicz, the Company's
Chairman of the Board, 500,000 shares are held by Mr. Graw, the President and
Chief Executive Officer and a director of the Company, 500,000 shares are held
by Jaime Levy, the Executive Vice President and a director of the Company,
500,000 shares are held by Mr. Preston, the Secretary and a director of the
Company, and 1,974,632 shares are held by The Clipper Group, each of whom are
"affiliates" of the Company within the meaning of Rule 144, and may, therefore,
only be sold in the public market in compliance with the volume limitations and
other requirements of Rule 144. CSFBC may, in its sole discretion and at any
time without notice, waive the provisions of the lock-up agreements.

In general, under Rule 144, a person (or persons whose shares are
aggregated), including an Affiliate, who has beneficially owned Restricted
Shares for at least one year (including the holding period of certain prior
owners), will be entitled to sell in "restricted brokers' transactions" or to
market makers, within any three-month period commencing 90 days after the
Company becomes subject to the reporting requirements of Section 13 of the
Exchange Act, a number of Restricted Shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Class A Common Stock (approximately
103,354 shares immediately after the Offering) or (ii) the average weekly
trading volume in the Class A Common Stock during the four calendar weeks
immediately preceding such sale, subject, generally, to the filing of a Form 144
with respect to such sales and certain other limitations and restrictions. In
addition, a person (or persons whose shares are aggregated), who is not deemed
to have been an Affiliate at any time during the 90 days immediately preceding
the sale and who has beneficially owned the Restricted Shares proposed to be
sold for at least two years, is entitled to sell such shares under Rule 144(k)
without regard to the limitations described above.

As of the date hereof, the Company has authorized an aggregate of up to
600,000 shares of Class A Common Stock for issuance pursuant to the Option Plan.
See "Management -- 1996 Stock Option Plan." The Company intends to file
registration statements under the Securities Act within approximately 90 days
after the date of this Prospectus to register the shares available for issuance
under the Option Plan. After the effective date of the applicable registration
statement, shares of Class A Common Stock issued under the Option Plan will be
immediately available for sale in the public market, subject in certain cases to
the lock-up restrictions described above and subject, in the case of sales by
Affiliates, to certain limitations and restrictions under Rule 144.

At the completion of the Offering, certain persons and entities will be
entitled to require the Company to register their shares of Common Stock under
the Securities Act under certain circumstances. See "Description of Capital
Stock -- Registration Rights."

40
<PAGE> 43

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 (the "Underwriting Agreement") among the
Company, the Selling Shareholder, Leon Sragowicz and the underwriters named
below (the "Underwriters"), for whom CSFBC and SBC Warburg Dillon Read Inc. are
acting as the representatives (the "Representatives"), the Underwriters have
severally but not jointly agreed to purchase from the Company and the Selling
Shareholder the following respective numbers of shares of Class A Common Stock:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
SBC Warburg Dillon Read Inc.................................
---------
Total............................................. 4,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Class A Common
Stock (other than those shares covered by the over-allotment option described
below) if any are purchased. The Underwriting Agreement provides that, in the
event of a default by an Underwriter, in certain circumstances the purchase
commitments of non-defaulting Underwriters may be increased or the Underwriting
Agreement may be terminated.

The Company has granted to the Underwriters an option exercisable by CSFBC,
expiring at the close of business on the 30th day after the date of this
Prospectus, to purchase up to 675,000 additional shares of Class A Common Stock
at the initial public offering price less underwriting discounts and
commissions, all as set forth on the cover page of this Prospectus. Such option
may be exercised only to cover over-allotments, if any, in the sale of the
shares of Class A Common Stock. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Class A Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.

The Company and the Selling Shareholder have been advised by the
Representatives that the Underwriters propose to offer the shares of Class A
Common Stock to the public initially at the public offering price set forth on
the cover page of this Prospectus and, through the Underwriters, to certain
dealers at such price less a concession of $ per share, and the
Underwriters and such dealers may allow a discount of $ per share on
sales to certain other dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
Representatives.

The Representatives have informed the Company and the Selling Shareholder
that they do not expect discretionary sales by the Underwriters to exceed 5% of
the shares being offered hereby.

The Company, its officers and directors and The Clipper Group have agreed
that they will not offer, sell, contract to sell, announce their intention to
sell, pledge or otherwise dispose of, directly or indirectly, or, in the case of
the Company, file with the Securities and Exchange Commission (the "Commission")
a registration statement under the Securities Act relating to any additional
shares of the Class A Common Stock or securities convertible into or
exchangeable or exercisable for any shares of the Class A Common Stock, without
the prior written consent of CSFBC for a period of 180 days after the date of
this Prospectus (the "Lock-Up"), except issuances by the Company pursuant to the
exercise of employee stock options granted under the Option Plan and issuances
in connection with acquisitions where the person receiving the Class A Common
Stock agrees not to sell or otherwise dispose of such shares until 180 days
after the date of this Prospectus. Notwithstanding the foregoing, the officers
and directors of the Company and The Clipper Group shall be permitted to
transfer shares of Class A Common Stock or other securities convertible into or
exchangeable or exercisable for any shares of Class A Common Stock of which such
persons are the beneficial owner to (i) the Company, (ii) shareholders of the
Company who are bound by the terms of a similar Lock-Up, and (iii) any donee(s)
of such persons who receive such securities of the Company as a bona fide gift
or any Affiliate of such persons provided that such donee(s) or affiliate(s)
agree in writing to be bound by the terms of a similar Lock-Up.

41
<PAGE> 44

The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or to contribute to payments which the Underwriters may be
required to make in respect thereof. For a description of the relationship
between CSFBC and certain limited partners of the partnerships comprising The
Clipper Group, see "Principal and Selling Shareholders."

Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the shares of Class A Common
Stock will be negotiated between the Company and the Representatives. Among the
factors to be considered in determining the initial public offering price of the
Class A Common Stock will be the Company's historic performance, estimates of
the business potential and earnings prospects of the Company and its industry in
general, an assessment of the Company's management, the market valuation of
companies in related businesses, the general condition of the equity securities
market and other relevant factors. There can be no assurance that the initial
public offering price of the Class A Common Stock will correspond to the price
at which the Class A Common Stock will trade in the public market subsequent to
the Offering or that an active public market for the Class A Common Stock will
develop and continue after the Offering.

The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act. Over-
allotment involves syndicate sales in excess of the offering size, which creates
a syndicate short position. Stabilizing transactions permit bids to purchase in
the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Class A Common Stock in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
shares of Class A Common Stock originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the Class A Common Stock to be higher than
it would otherwise be in the absence of such transactions. These transactions
may be effected on the Nasdaq National Market or otherwise and, if commenced,
may be discontinued at any time.

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Class A Common Stock in Canada is being made only
on a private placement basis exempt from the requirement that the Company and
the Selling Shareholder prepare and file a prospectus with the securities
regulatory authorities in each province where trades of the Class A Common Stock
are effected. Accordingly, any resale of the Class A Common Stock in Canada must
be made in accordance with applicable securities laws which will vary depending
on the relevant jurisdiction, and which may require resales to be made in
accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Class A
Common Stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of the Class A Common Stock in Canada who receives a
purchase confirmation will be deemed to represent to the Company, the Selling
Shareholder and the dealer from whom such purchase confirmation is received that
(i) such purchaser is entitled under applicable provincial securities laws to
purchase such Class A Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent, and (iii) such purchaser has reviewed
the text above under "-- Resale Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of

42
<PAGE> 45

action for damages or rescission or rights of action under the civil liability
provisions of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein and the Selling Shareholder may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against the issuer or such persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of Class A Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Class A Common Stock acquired by such purchaser pursuant to the Offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #95/17, a copy of which may be obtained from the
Company. Only one such report must be filed in respect of Class A Common Stock
acquired on the same date and under the same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of Class A Common Stock should consult their own legal
and tax advisors with respect to the tax consequences of an investment in the
Class A Common Stock in their particular circumstances and with respect to the
eligibility of the Class A Common Stock for investment by the purchaser under
relevant Canadian legislation.

LEGAL MATTERS

The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by Baker & McKenzie, Miami, Florida. Certain legal matters in
connection with the Offering will be passed upon for the Underwriters by King &
Spalding, Atlanta, Georgia.

EXPERTS

The financial statements of the Company at December 31, 1995 and 1996, and
for each of the three years in the period ended December 31, 1996, appearing in
this Prospectus and Registration Statement, have been audited by Ernst & Young
LLP, independent certified public accountants, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the shares of Class A
Common Stock offered by this Prospectus. This Prospectus, which constitutes part
of the Registration Statement, does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto, certain
parts of which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company and the
shares of Class A Common Stock offered hereby, reference is hereby made to the
Registration Statement, including the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract, agreement or
any other document referred to herein are not necessarily complete and, where
such contract, agreement or other document is an exhibit to the Registration
Statement, reference is made to such exhibit for a complete description of the
matter involved, and each such statement is qualified in all respects by the
provisions of such exhibit. Copies of the Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W.,

43
<PAGE> 46

Washington, D.C. 20549, and at the Commission's regional offices at Seven World
Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained from the Public Reference Branch of the Commission located at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of fees prescribed by the
Commission. The Registration Statement may also be obtained through the
Commission's URL at "http://www.sec.gov."

The Company intends to furnish its shareholders with annual reports
containing audited financial statements and a report thereon by its independent
public accountants and with quarterly reports for the first three quarters of
each fiscal year containing unaudited interim financial information.

44
<PAGE> 47

AVTEAM, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets.............................................. F-3
Statements of Income........................................ F-4
Statements of Changes in Stockholders' Equity............... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
Report of Independent Certified Public Accountants
Concerning Turbine's Financial Statements................. F-18
Statements of Operations of Turbine......................... F-19
Statements of Cash Flow of Turbine.......................... F-20
Notes to Financial Statements of Turbine.................... F-21
</TABLE>

F-1
<PAGE> 48

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
AVTEAM, Inc.

We have audited the accompanying balance sheets of AVTEAM, Inc. (the
"Company") as of December 31, 1996 and 1995, and the related statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described in Note 2, the accompanying 1996 financial statements have
been restated from amounts previously reported to exclude the sale of certain
aircraft engines which did not meet all of the criteria of the Company's revenue
recognition policy.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AVTEAM, Inc. at December 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Miami, Florida
February 27, 1997

F-2
<PAGE> 49

AVTEAM, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1995 1996* 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ -- $ -- $ 1,664
Trade accounts receivable, less allowance for doubtful
accounts of $114 and $189, and allowance for sales
returns of $669 and $211, in 1995 and 1996,
respectively........................................... 4,661 5,030 8,417
Inventory................................................. 8,563 14,505 22,348
Prepaid expenses.......................................... 185 219 1,024
Deposits.................................................. -- 1,250 4,217
Due from affiliate........................................ -- 343 160
Deferred tax asset........................................ -- 432 654
------- ------- -------
Total current assets.............................. 13,409 21,779 38,484
Property and equipment, net................................. 298 502 821
Other assets................................................ 86 136 68
------- ------- -------
Total assets...................................... $13,793 $22,417 $39,373
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank..................................... $ 3,156 $ 404 $15,253
Accounts payable.......................................... 4,280 2,540 2,991
Accrued expenses.......................................... 487 1,034 1,585
Customer deposit.......................................... -- 510 --
Current portion of capital lease obligations.............. 48 69 89
Due to shareholders and affiliates........................ 3,126 292 232
------- ------- -------
Total current liabilities......................... 11,097 4,849 20,150
Capital lease obligations, net of current portion........... 83 62 121
Notes payable -- shareholders............................... -- 2,513 2,513
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 20,000,000 shares
authorized, no shares issued or outstanding in 1995,
1,480,000 shares of Class A Preferred Stock and 220,000
shares of Class B Preferred Stock issued and
outstanding in 1996.................................... -- 17 17
Class A Common Stock, $.01 par value, 77,000,000 shares
authorized, 5,000,000 shares issued and outstanding.... 50 50 50
Class B Common Stock, $.01 par value, 3,000,000 shares
authorized, no shares issued and outstanding........... -- -- --
Additional paid-in capital................................ 3,271 14,611 14,611
Retained earnings......................................... -- 315 1,911
Notes receivable from officers............................ (708) -- --
------- ------- -------
Total shareholders' equity........................ 2,613 14,993 16,589
------- ------- -------
Total liabilities and shareholders' equity........ $13,793 $22,417 $39,373
======= ======= =======
</TABLE>

* AS RESTATED -- SEE NOTE 2

See accompanying notes.

F-3
<PAGE> 50

AVTEAM, INC.

STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------- ---------------------
1994 1995 1996* 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 9,062 $ 18,299 $ 31,724 $ 12,974 $ 18,932
Cost of sales............................. 6,373 11,848 22,641 8,919 12,968
--------- --------- --------- --------- ---------
Gross profit............................ 2,689 6,451 9,083 4,055 5,964
Operating expenses:
Selling, general and administrative..... 1,081 2,601 3,501 1,623 2,589
Officers' compensation.................. 860 2,561 811 265 398
--------- --------- --------- --------- ---------
1,941 5,162 4,312 1,888 2,987
--------- --------- --------- --------- ---------
Income from operations.................... 748 1,289 4,771 2,167 2,977
Offering expenses......................... -- -- 1,154 -- --
Interest (expense) income, net............ 6 (191) (757) (349) (469)
--------- --------- --------- --------- ---------
Income before provision (credit) for
income taxes............................ 754 1,098 2,860 1,818 2,508
Provision (credit) for income taxes:
Current................................. -- -- 62 -- 1,134
Deferred................................ -- -- (432) -- (222)
--------- --------- --------- --------- ---------
-- -- (370) -- 912
--------- --------- --------- --------- ---------
Net income................................ 754 1,098 3,230 1,818 1,596
Adjustments for pro forma provision for
income taxes............................ (286) (417) (1,538) (661) --
--------- --------- --------- --------- ---------
Pro forma net income (historical for the
six months ended June 30, 1997)......... $ 468 $ 681 $ 1,692 $ 1,157 $ 1,596
========= ========= ========= ========= =========
Pro forma net income per common equivalent
share (historical for the six months
ended June 30, 1997).................... $ 0.06 $ 0.09 $ 0.22 $ 0.15 $ 0.21
========= ========= ========= ========= =========
Weighted average number of common
equivalent shares outstanding........... 7,742,058 7,742,058 7,742,058 7,742,058 7,742,058
========= ========= ========= ========= =========
</TABLE>

* AS RESTATED -- SEE NOTE 2

See accompanying notes.

F-4
<PAGE> 51

AVTEAM, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
CLASS A RETAINED NOTES
PREFERRED CLASS A COMMON ADDITIONAL EARNINGS RECEIVABLE
PREFERRED STOCK COMMON STOCK PAID-IN (ACCUMULATED FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) OFFICERS TOTAL
--------- --------- --------- ------- ---------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993....................... -- $ -- 4,000,000 $40 $ (39) $ (41) $ -- $ (40)
Shareholder advances
contributed to capital... -- -- -- -- 3,040 -- -- 3,040
Net income................. -- -- -- -- -- 754 -- 754
Distributions.............. -- -- -- -- (407) (713) -- (1,120)
--------- ---- --------- --- ------- ------- ----- -------
Balance at December 31,
1994....................... -- -- 4,000,000 40 2,594 -- -- 2,634
Shares issued in connection
with stock option plan... -- -- 1,000,000 10 1,609 -- $(708) 911
Net income................. -- -- -- -- -- 1,098 -- 1,098
Distributions.............. -- -- -- -- (932) (1,098) -- (2,030)
--------- ---- --------- --- ------- ------- ----- -------
Balance at December 31,
1995....................... -- -- 5,000,000 50 3,271 -- (708) 2,613
Issuance of Preferred
Stock, net of issuance
costs of $543............ 1,700,000 17 -- -- 11,340 -- -- 11,357
Cash received for notes
receivable from
officers................. -- -- -- -- -- -- 708 708
Net income*................ -- -- -- -- -- 3,230 -- 3,230
Distributions*............. -- -- -- -- -- (2,915) -- (2,915)
--------- ---- --------- --- ------- ------- ----- -------
Balance at December 31,
1996....................... 1,700,000 17 5,000,000 50 14,611 315 -- 14,993
Net income (unaudited)..... -- -- -- -- -- 1,596 -- 1,596
--------- ---- --------- --- ------- ------- ----- -------
Balance at June 30, 1997
(unaudited)................ 1,700,000 17 5,000,000 $50 $14,611 $ 1,911 $ -- $16,589
========= ==== ========= === ======= ======= ===== =======
</TABLE>

* AS RESTATED -- SEE NOTE 2

See accompanying notes.

F-5
<PAGE> 52

AVTEAM, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------- -----------------
1994 1995 1996* 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................. $ 754 $ 1,098 $ 3,230 $ 1,818 $ 1,596
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization............................ 31 101 158 66 118
Bad debt expense......................................... 69 145 88 8 65
Deferred tax credit...................................... -- -- (432) -- (222)
Changes in operating assets and liabilities net of
effects from purchase of Turbine:
Trade accounts receivable.............................. (2,346) (2,112) (457) (1,173) (3,452)
Inventory.............................................. 747 (5,792) (5,940) (4,517) (7,843)
Prepaid expenses and deposits.......................... (12) (164) (1,284) (833) (3,772)
Due from affiliate..................................... -- -- (343) -- 183
Other assets........................................... (40) (28) (50) 8 68
Accounts payable....................................... 1,591 2,540 (1,740) (1,607) 451
Accrued expenses/Customer deposit...................... 125 362 1,057 796 41
Due to shareholders and affiliates..................... 590 916 (936) 386 (60)
------- ------- ------- ------- -------
Net cash (used in) provided by operating
activities...................................... 1,509 (2,934) (6,649) (5,048) (12,827)
INVESTING ACTIVITY
Purchases of property and equipment........................ (8) (103) (314) (173) (325)
------- ------- ------- ------- -------
Net cash used in investing activity............... (8) (103) (314) (173) (325)
FINANCING ACTIVITIES
Payments on note payable to related party.................. (1,000) -- -- -- --
Payments on capital leases................................. -- (22) (48) (23) (33)
Net proceeds from (payments on) notes payable.............. 350 (350) 1,550 -- --
Net proceeds from (payments on) short-term line of
credit................................................... -- 3,156 (2,752) 4,694 14,849
Advances from shareholders................................. 1,467 4,203 2,250 750 --
Payments of shareholders' advances......................... (467) (2,671) (2,479) (200) --
Net proceeds from sale of preferred stock.................. -- -- 11,357 -- --
Distributions.............................................. (1,120) (2,030) (2,915) -- --
------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities...................................... (770) 2,286 6,963 5,221 14,816
------- ------- ------- ------- -------
Net (decrease) increase in cash................... 731 (751) -- -- 1,664
Cash at beginning of year......................... 20 751 -- -- --
------- ------- ------- ------- -------
Cash at end of year............................... $ 751 $ -- $ -- $ -- $ 1,664
======= ======= ======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid.............................................. $ 1 $ 145 $ 795 $ 360 $ 460
======= ======= ======= ======= =======
SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Transfer of assets from consignee as repayment of
receivable:
Inventory................................................ $ 214 $ -- $ -- $ -- $ --
Property and equipment................................... 166 -- -- -- --
Prepaid expenses......................................... 9 -- -- -- --
Deposits and other assets................................ 18 -- -- -- --
------- ------- ------- ------- -------
$ 407 $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
Notes receivable from officers offset against amounts due
to shareholders.......................................... $ -- $ 912 $ 708 $ -- $ --
======= ======= ======= ======= =======
Shareholder advances converted to notes payable............ $ -- $ -- $ 1,511 $ -- $ --
======= ======= ======= ======= =======
Shareholder advances contributed to capital................ $ 3,040 $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
Office furniture and equipment acquired under capital
leases................................................... $ -- $ 153 $ 48 $ -- $ 112
======= ======= ======= ======= =======
</TABLE>

* AS RESTATED -- SEE NOTE 2

See accompanying notes.

F-6
<PAGE> 53

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Information pertaining to the six months ended
June 30, 1996 and 1997 is unaudited)

1. BUSINESS

AVTEAM, Inc., (the "Company"), was incorporated in Florida in 1991. The
Company is a global supplier of aftermarket aircraft engines, engine parts and
airframe components. The Company supplies its products to other aftermarket
suppliers, independent repair facilities, aircraft operators and original
equipment manufacturers. Beginning in April, 1997 the Company, through its
wholly-owned subsidiary, AVTEAM Aviation Field Services, Inc. ("AAFS"), began
providing certain on-wing maintenance and repair and borescope services. The
accompanying unaudited financial statements as of June 30, 1997 and for the six
months period ending June 30, 1997 include the accounts of the Company and AAFS
after elimination of intercompany accounts and transactions.

Prior to July 21, 1994, pursuant to a consignment agreement with Turbine
Engine Sales Group, Inc. ("Turbine"), Turbine disassembled engines purchased by
the Company and warehoused, managed and sold the parts in exchange for a
commission equal to 50% of the gross profit on the parts sold. On July 21, 1994,
the Company's shareholders acquired all of the capital stock of Turbine and the
consignment agreement was terminated. Also on July 21, 1994, in a purchase
transaction, the Company forgave $407,000 due from Turbine in exchange for
substantially all of Turbine's assets consisting of inventory ($214,000);
property and equipment ($166,000); prepaid expenses ($9,000); and deposits and
other assets ($18,000), at net book value, which approximated fair market value.
Turbine was subsequently dissolved. Turbine's results of operations are included
in the accompanying statement of operations beginning July 22, 1994. Pro forma
results of operations are not materially different from reported results.

2. SIGNIFICANT ACCOUNTING POLICIES

INVENTORY

Inventory of aircraft engines is stated at the lower of specific cost
(including overhaul costs) or market. Initially, cost of sales of engine parts
from disassembled engines are recognized based on margins realized from recently
sold, similar groups of engine parts. Once the remaining parts have been fully
inspected and their condition has been determined, the cost of subsequent sales
of engine parts from that engine are determined using the relationship of the
remaining costs of that engine to estimated sales. Cost of sales for individual
parts purchased for resale are reflected based on the specific identification
method. Cost of sales of airframe components are recognized using margins based
on the relationship of cost to revenue estimates as determined by the Company
through the analysis of the market price of such airframe components.

REVENUE RECOGNITION AND RESTATEMENT OF 1996 FINANCIAL STATEMENTS

Revenues from the sale of engine parts and airframe components are
recognized when shipped.

Revenues from the sale of aircraft engines are recognized when title and
risk of ownership are transferred to the customer, which generally is upon
shipment or customer pick-up. In certain instances prior to shipment or customer
pick-up, certain customers request the Company to hold aircraft engines until
the customer determines the most economical means of taking possession. The
Company records revenues under such circumstances only if: (1) payment is
received or is receivable within 30 days; (2) title and risk of ownership is
transferred to the customer; (3) the customer's request that the transaction be
on a bill-and-hold basis is in writing; (4) there is a fixed schedule for
delivery of the engines that is within 30 days of the sale; (5) the Company does
not have any specific performance obligations; (6) the engines are segregated
from other engines and are not subject to being used to meet other customer's
needs and (7) the engines are ready for shipment.

F-7
<PAGE> 54

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The accompanying 1996 financial statements have been restated from amounts
previously reported to exclude sales of certain aircraft engines which did not
meet all of the criteria of the Company's revenue recognition policy, described
above. These sales were recognized in the first quarter of 1997 when all
criteria of the Company's revenue recognition policy were met.

The effect on the accompanying 1996 financial statements of excluding such
sales on income as previously reported is to decrease the following by the
amounts indicated (in thousands, except per share data):

<TABLE>
<S> <C>
Effect on:
Income before credit for income taxes..... $ (712)
Credit for income taxes................... 60
------
Net income................................ (652)
Adjustments for pro forma provision for
income taxes........................... (198)
------
Pro forma net income...................... $ (454)
======
Pro forma net income per common equivalent
share.................................. $ (.06)
======
</TABLE>

The Company enters into consignment arrangements in which it warehouses
items, determines sales prices, arranges for shipment to customers, and collects
accounts receivable. The Company reflects sales under such arrangements in net
sales and the cost of such sales in cost of sales, since the Company bears the
risk of ownership once the items are sold.

WARRANTIES AND PRODUCT RETURNS

The Company does not provide service warranties in addition to those
provided by overhaul facilities and as a result does not record accruals for
warranties. The Company has established programs which, under specific
conditions, enable its customers to return inventory. The effect of these
returns is estimated based on a percentage of sales and historical experience
and sales are recorded net of a provision for estimated returns.

ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE

The Company buys inventory from certain of its customers and periodically
offsets amounts owed to customers for inventory purchases against the accounts
receivable for sales to such customers. For the years ended December 31, 1995,
1996 and for the six month period ended June 30, 1997, accounts payable totaling
$980,000, $3,175,000 and $617,000, respectively, were offset against accounts
receivable.

PROPERTY AND EQUIPMENT

Property and equipment (including assets under capital leases) is carried
at cost and is depreciated using accelerated and straight-line methods over the
lesser of the lease terms or the estimated useful lives of the assets. The lives
used are as follows:

<TABLE>
<S> <C>
Office furniture and equipment.............................. 3-7 years
Warehouse and transport equipment........................... 5-7 years
Leasehold improvements...................................... 3-5 years
</TABLE>

CONCENTRATION OF CREDIT RISK

Accounts receivable are primarily from domestic and foreign passenger
airlines, freight and package carriers, charter airlines, aircraft leasing
companies and service providers to such companies. The Company

F-8
<PAGE> 55

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

performs ongoing evaluations of its trade accounts receivable customers,
monitors its exposure for credit losses and sales returns and does not require
collateral.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PRO FORMA STATEMENTS OF INCOME INFORMATION

In conjunction with the closing of the private offering of its preferred
stock on December 6, 1996, the Company terminated its status as an S
corporation. Pro forma net income reflects adjustments for income taxes which
would have been recorded if the Company had not been an S corporation for the
years ended December 31, 1994, 1995 and 1996 and for the six months ended June
30, 1996 (see Note 5).

PRO FORMA NET INCOME PER COMMON EQUIVALENT SHARE

Pro forma net income per common equivalent share is calculated using the
weighted average number of common shares and common equivalent shares
outstanding during the periods presented. Pursuant to the requirements of the
Securities and Exchange Commission, common equivalent shares issued at prices
below the estimated public offering price during the 12 months immediately
preceding the date of the initial filing of the registration statement have been
included in the calculation of common equivalent shares, as if they were
outstanding for all periods presented. The preferred shares issued on December
6, 1996 and August 21, 1997 are considered to be common equivalent shares and,
accordingly, have been included in the calculation of weighted average number of
common equivalent shares outstanding for all periods presented.

Pro forma net income per common equivalent share, without including common
equivalent shares prior to their issuance date, is as follows:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Pro forma net income (in
thousands)................. $ 468 $ 681 $ 1,692 $ 1,157 $ 1,596
Pro forma net income per
common equivalent
share(1)................... $ 0.12 $ 0.14 $ 0.33 $ 0.23 $ 0.24
Weighted average number of
common equivalent
shares(1).................. 4,000,000 5,000,000 5,111,475 5,000,000 6,700,000
</TABLE>

- ---------------

(1) Excluding common equivalent shares prior to their issuance date.

INTERIM FINANCIAL DATA

In the opinion of the management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of June 30, 1997, and the results of operations for the six months
ended June 30, 1996 and 1997.

3. ACCOUNTS RECEIVABLE

On November 8, 1995, the Company entered into a Limited Recourse Receivable
Discount Facility Agreement with a bank (the "Agreement") under which the bank
agreed to purchase certain trade receivables

F-9
<PAGE> 56

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

older than 30 days, with a maximum maturity of 100 days, for the principal
amount of the trade receivables less a discount rate of LIBOR plus 1/4% (5.88%
at December 31, 1995). The Agreement provided that the aggregate principal
amount of uncollected purchased receivables could not exceed $10,000,000 at any
one time, provided for the purchase of a maximum of $60,000,000 of receivables
over the term of the Agreement and included certain recourse provisions related
to returned inventory only. The Agreement expired on November 1, 1996.

In 1995, the Company sold trade receivables under the Agreement with a
carrying amount of approximately $714,000 for approximately $704,000. In 1996,
the Company sold trade receivables under the Agreement with a carrying amount of
approximately $5,272,000 for approximately $5,204,000.

Included in accounts receivable at June 30, 1997, is $2.2 million related
to a June 25, 1997 sale of three engines under a bill and hold arrangement.

4. OFFERING EXPENSES

During 1996, the Company initiated a public offering of its common stock.
Due to uncertain market conditions, the Company decided to withdraw the
offering. As a result, the costs associated with the offering were charged
against earnings in 1996.

5. INCOME TAXES

HISTORICAL

Concurrent with the December 6, 1996 private placement (see Note 14), the
Company's S corporation election was terminated, making it subject to corporate
income taxes. The financial statements reflect a net income tax benefit of
approximately $370,000 for the year ended December 31, 1996, comprised of the
following two significant components:

- A net tax benefit of $432,000 representing the net deferred tax asset
recognized for the cumulative temporary differences between the carrying
amounts of assets and liabilities for financial reporting and tax
reporting purposes as of December 6, 1996.

- Current period expense of approximately $62,000 pertaining to the
Company's income before taxes of approximately $203,000 subject to
taxation for the period from December 6, 1996 to December 31, 1996.

Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets as of December 31, 1996 and June 30, 1997 are
as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Allowance for doubtful accounts............................. $ 68 $ 92
Allowance for sales returns................................. 77 84
Depreciation................................................ 11 13
Accrued compensation........................................ 130 130
Uniform inventory capitalization............................ 146 335
---- ----
Net deferred tax benefit.......................... $432 $654
==== ====
</TABLE>

F-10
<PAGE> 57

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of the expected income tax expense (for the period from
December 6 to December 31, 1996 computed on income of approximately $203,000
before taxes) at federal statutory rates is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 6, 1996 TO SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
-------------------- ------------------
<S> <C> <C>
Tax at federal statutory rate.................... 34.00% 34.00%
State & local income taxes, net of federal tax
benefit........................................ 2.19 2.19
Deferred tax benefit recorded in conjunction with
the conversion to a C Corporation.............. (223.28) --
Permanent difference............................. 4.81 .17
-------- ------
(182.28)% 36.36%
======== ======
</TABLE>

For the years ended December 31, 1994 and 1995, the Company elected S
corporation status and was not subject to income tax.

On December 6, 1996, the date of the termination of S corporation status,
the Company declared a cash distribution to the shareholders. The distribution,
paid prior to January 1, 1997, was determined based on the Company's accumulated
adjustment account, as defined in the Internal Revenue Code, calculated through
the date of termination of the Company's S corporation status.

Also on December 6, 1996, the Company entered into a tax allocation and
indemnification agreement with the existing common shareholders relating to
their respective income tax liabilities and certain related matters. The tax
indemnification agreements generally provide that the existing common
shareholders will be indemnified by the Company with respect to federal and
state income taxes (plus interest and penalties) arising due to taxable income
shifted from a C Corporation taxable year to a taxable year in which the Company
was an S Corporation, and that the Company will be indemnified by the existing
common shareholders with respect to federal and state income taxes (plus
interest and penalties) arising due to taxable income shifted from an S
Corporation taxable year to a C Corporation taxable year.

PRO FORMA

The adjustments for pro forma provision for income taxes for the three
years ended December 31, 1996 and the six months ended June 30, 1996, reflect
the adjustments needed to reflect income tax expense as if the Company had been
taxed as a C corporation.

The pro forma provision (credit) for income taxes is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------ SIX MONTHS ENDED
1994 1995 1996 JUNE 30, 1996
---- ------ ------ ------------------
<S> <C> <C> <C> <C>
Current................................ $369 $1,138 $ 827 $652
Deferred............................... (83) (721) 341 9
---- ------ ------ ------
Total............................. $286 $ 417 $1,168 $661
==== ====== ====== ======
</TABLE>

F-11
<PAGE> 58

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Significant components of the Company's pro forma deferred tax assets as of
December 31, 1995 and 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996
---- ----
<S> <C> <C>
Allowance for doubtful accounts............................. $ 43 $ 68
Allowance for sales returns................................. 252 77
Depreciation................................................ 7 11
Accrued compensation........................................ 503 130
Uniform inventory capitalization............................ -- 146
---- ----
$805 $432
==== ====
</TABLE>

The pro forma income tax provision (credit) differs from the amounts
computed by applying the federal statutory rate of 34% to income before income
taxes as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------- SIX MONTHS ENDED
1994 1995 1996 JUNE 30, 1996
----- ----- ----- ----------------
<S> <C> <C> <C> <C>
Tax at federal statutory rate........... 34.00% 34.00% 34.00% 34.00%
State income taxes, net of federal
benefit............................... 3.71 3.69 2.45 2.22
Permanent differences................... .22 .28 4.35 .16
----- ----- ----- ------
37.93% 37.97% 40.80% 36.38%
===== ===== ===== ======
</TABLE>

6. DEPOSITS AND INVENTORY

In March and April 1997, the Company entered into agreements with a third
party to exchange four aircraft engines, with an inventory value of
approximately $3.4 million, and cash of $2.5 million for five aircraft engines
valued at $6.9 million. Since the Company was obligated under these agreements
to complete certain repairs before the exchange was completed, the Company did
not recognize the exchange in sales and cost of sales until the third quarter of
1997 when all specific performance obligations were met and all engines were
physically exchanged. At June 30, 1997, inventory includes approximately $3.4
million representing the cost of the four engines exchanged in the third quarter
of 1997 and deposits includes approximately $2.5 million representing the cash
paid to the third party prior to June 30, 1997 in connection with this
transaction.

7. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1995 1996 1997
---- ---- --------
<S> <C> <C> <C>
Office furniture and equipment.............................. $184 $203 $ 386
Warehouse and transport equipment........................... 209 532 606
Leasehold improvements...................................... 34 54 204
---- ---- -----
427 789 1,196
Less accumulated depreciation and amortization.............. (129) (287) (375)
---- ---- -----
$298 $502 $ 821
==== ==== =====
</TABLE>

F-12
<PAGE> 59

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

8. LEASES

On April 1, 1995, the Company entered into a lease agreement for new
warehouse and office space under an operating lease which expires on June 30,
2000. In addition, effective January 1, 1996, the Company signed a lease
agreement for additional warehouse and office space under an operating lease
which expires on December 31, 2000. Future minimum lease payments by year and in
the aggregate under operating leases are as follows (in thousands):

Rent expense for the years ended December 31, 1994, 1995 and 1996 and the
six month period ended June 30, 1996 and 1997 was approximately $35,000,
$266,000, $390,000, $206,000 and $239,000, respectively.

The Company has entered into various capital leases for office furniture,
computer equipment, and warehouse and transportation equipment expiring in
various years through 1999. Equipment under capitalized lease obligations had an
original cost of approximately $153,000 at December 31, 1995 and June 30, 1996
and $202,000 at December 31, 1996 and $313,000 at June 30, 1997 and accumulated
amortization was approximately $26,000, $47,000, $75,000 and $101,000 at
December 31, 1995, June 30, 1996, December 31, 1996 and June 30, 1997,
respectively.

Future minimum lease payments by year and in the aggregate under these
capital leases were as follows at December 31, 1996 (in thousands):

<TABLE>
<S> <C>
1997........................................................ $ 75
1998........................................................ 55
1999........................................................ 29
----
Total minimum lease payments...................... 159
Less amounts representing interest at 15.8%................. (28)
----
Present value of net minimum lease payments under
capital leases (including current portion of
$69)............................................. $131
====
</TABLE>

9. RELATED PARTY TRANSACTIONS

On September 5, 1995, the Company entered into an agreement (the "Parati
Agreement") with Parati Corporation ("Parati"), a corporation wholly-owned by
the Chairman of the Board of Directors of the Company, which provided that
Parati would purchase up to $10 million of certain aftermarket engines and up to
$40 million of new engines and that the Company would oversee, disassemble and
handle all of the operational and administrative aspects related to such
engines. The Parati Agreement further provided that all proceeds from the sale
of engines or parts would be divided equally between Parati and the Company
after payment to Parati of amounts equal to Parati's investment in such engines
less overhaul costs incurred by the Company on behalf of Parati. Overhaul costs
were incurred on a component basis and were not incurred until a customer was
interested in purchasing a component upon its overhaul. The Company was
reimbursed for overhaul costs through a reduction of the Company's payable to
Parati regardless of whether such parts were sold. In 1995, 1996 and the six
month periods ended June 30, 1996 and 1997, the Company recorded sales under
this agreement of approximately $224,000, $1,925,000, $1,643,000 and $498,000,
respectively, with a gross profit of approximately $45,000, $395,000, $337,000
and $249,000, respectively. As of December 31, 1995 approximately

F-13
<PAGE> 60

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

$169,000 was owed to Parati according to the Parati Agreement and as of December
31, 1996 and June 30, 1997, Parati owed the Company $343,000 and $160,000,
respectively, for unreimbursed overhaul costs. See Note 17.

The Company purchased accounting services totaling $38,000 for each of the
two years ending December 31, 1994 and 1995 and approximately $10,000 for 1996
from a firm that is owned in part by a shareholder of the Company.

Management believes that compensation received from or paid to related
parties under the Parati Agreement and in connection with purchased accounting
services, described above, materially approximate those which would have been
received from or paid to non-affiliated third parties.

At December 31, 1995 and 1996 and June 30, 1997, due to shareholders and
affiliates consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------- --------
1995 1996 1997
------ ----- --------
<S> <C> <C> <C>
Non-interest bearing advances due to shareholder with no
fixed or determinable due dates(a)...................... $1,620 $ -- $ --
Accrued officers' compensation............................ 1,337 292 232
Due to (from) Parati...................................... 169 -- --
------ ----- -----
$3,126 $ 292 $ 232
====== ===== =====
</TABLE>

At December 31, 1996 and June 30, 1997, notes payable-shareholders consist
of the following (in thousands):

<TABLE>
<S> <C>
Non-interest bearing notes payable to shareholders due
within sixty days of the consummation of an initial public
offering or during the second fiscal quarter of 2000,
whichever is earlier(a)................................... $1,511
Notes payable to shareholders bearing interest at 40% of the
original issue discount as calculated under the Internal
Revenue Code (6.57% at December 31, 1996) and due either
within sixty days of the consummation of an initial public
offering or during the second fiscal quarter of 2000,
whichever is earlier(b)................................... 1,002
------
$2,513
======
</TABLE>

- ---------------

(a) On December 6, 1996, in conjunction with the private placement (see Note
16), the Company agreed to convert the outstanding balance of advances due
to shareholders to notes payable. See Note 17.
(b) On December 6, 1996, in conjunction with the private placement (see Note
16), the existing common shareholders agreed to lend a portion of the
previously undistributed S corporation earnings to the Company. See Note
17.

10. NOTES PAYABLE TO BANK

On May 12, 1995, the Company executed a revolving line of credit agreement
with a bank. This line of credit was amended on September 29, 1995 and again on
June 13, 1996. The available borrowing base is generally based upon 75% to 85%
of eligible accounts receivable (depending on age of accounts receivable and the
Company's net worth) and 25% to 50% of eligible inventory (depending on age of
inventory), up to the maximum borrowing facility of $10,000,000. Principal
payments are made upon collection of accounts receivable, which are primarily
due within 30 days, and interest is payable monthly at prime plus 3/4% (9.5%
and 9.0% at December 31, 1995 and 1996, respectively). The loan is guaranteed by
the certain shareholders and is secured by substantially all of the assets of
the Company. At December 31, 1995 and 1996, approximately $2,561,000, and
$7,010,000 was available under this revolving line of credit agreement,
respectively.

F-14
<PAGE> 61

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On February 20, 1997, the Company replaced its existing credit facility
with a new credit facility with a different bank which provides working capital
of up to $20.0 million with interest at either the lender's prime rate or LIBOR
plus 2.75% per annum, as determined by the Company at the time of each advance,
subject to its availability calculation based on the eligible borrowing base.
The eligible borrowing base includes certain receivables and inventories of the
Company. The credit facility also permits the bank to issue letters of credit on
behalf of the Company of up to $5.0 million, and the aggregate principal amount
of any letters of credit so issued will reduce amounts available under the
credit facility. The credit facility matures in May 1998 and the term of any
letters of credit issued thereunder must expire prior to May 1999. At June 30,
1997, approximately $934,000 was available under this credit facility.

11. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash, accounts receivable and short-term borrowings
in the accompanying financial statements approximate their fair value because of
the short-term maturity of these instruments, and in the case of notes payable
because such instruments bear variable interest rates which approximate market.

12. EMPLOYMENT AGREEMENTS

Effective January 1, 1994, the Company entered into employment agreements
with two key employees which were amended on December 31, 1995, as described in
the following paragraph. Under the terms of the original agreements, each
employee received through December 31, 1995 compensation equal to 20% of
Adjusted Net Income, as defined in such agreements. Additionally, each of these
key employees were granted options to purchase shares equivalent to up to 10% of
the Company's outstanding common shares at a price equal to the Company's book
value on the last day of the month subsequent to the exercise of such options.
On January 1, 1995, 33% of the options were exercised in exchange for
noninterest bearing notes receivable from the officers totaling approximately
$259,000.

On December 31, 1995, the employment agreements' terms were amended to (1)
reduce, effective January 1, 1996, the amount of Adjusted Net Income each of
these two officers may receive as compensation from 20% to 5%, effective January
1, 1996; (2) pay an additional aggregate one time bonus of approximately
$1,179,000 to these officers and (3) change the exercise price of the
unexercised options to the fair market value of the Company's Class A Common
Stock as of the exercise date. The employees exercised their remaining options
on December 31, 1995 in return for noninterest bearing notes receivable from the
officers payable on demand at any time after May 31, 1996, totaling
approximately $1,360,000. On the same day, approximately $912,000 of these notes
from officers were offset against amounts due to the officers, resulting in an
outstanding balance on notes receivable from officers totalling $707,000, which
was repaid on December 12, 1996.

On December 6, 1996, the two key employees entered into the Amended and
Restated Employment Agreements (collectively, the "Employment Agreements") with
the Company. The Employment Agreements provide that the two key employees will
receive an annual base salary of $260,000 and $220,000, respectively, for an
initial term of three years expiring December 1999, as well as the right to
participate in the Company's 1996 Stock Option Plan (see Note 16) and the
Incentive Plan (as defined below). Upon termination without cause, the two key
employees will be entitled to receive two years' base salary.

The Company adopted a Key Executive Annual Incentive Plan (the "Incentive
Plan"), pursuant to which key executives of the Company may receive bonus
compensation based on the Company's performance during any fiscal year, as
determined by the Compensation Committee of the Board of Directors (the
"Committee"). Under the Incentive Plan, the Company's President and Chief
Executive Officer and Executive Vice President and other key executives
designated by the Committee are assigned a target award expressed as a
percentage of base salary in varying amounts (not to exceed 100% of the base
salary for the President and Chief Executive Officer and the Executive Vice
President and 50% for other key executives). The actual award is subject to
achievement by the Company of minimum levels of pre-tax income. The Committee
has the authority to select participants other than

F-15
<PAGE> 62

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the President and Chief Executive Officer and the Executive Vice President, to
establish target awards and to determine final awards in the event that the
Company's operating income is less than the level's established under the
Incentive Plan during any year the Incentive Plan remains in effect.

13. SIGNIFICANT CUSTOMERS

Pratt & Whitney accounted for 21%, 9%, 20% and 3% of the Company's net
sales for the years ended December 31, 1995 and 1996 and the six months ended
June 30, 1996 and 1997, respectively. Accounts receivable from Pratt & Whitney
accounted for 28%, 4% and 4% of total accounts receivable at December 31, 1995
and 1996 and the three months ended June 30, 1997, respectively.

Dallas Aerospace accounted for 32%, 13%, 16% and 9% of net sales for the
years ended December 31, 1994, 1995 and 1996 and the six months ended June 30,
1997, respectively, and 42%, 24%, 10% and 3% of total accounts receivable at
December 31, 1994, 1995 and 1996 and the six months ended June 30, 1997,
respectively.

A third customer accounted for 13% of net sales and 15% of total accounts
receivable for the six months ended June 30, 1997.

A fourth customer accounted for 12% of net sales and 26% of total accounts
receivable for the six months ended June 30, 1997.

14. CONSIGNMENT SALES

The Company has an agreement with an airline to sell certain consigned
inventory. Net sales related to this agreement include approximately $733,000,
$2,032,000, $1,295,000, $619,000 and $487,000 for the years ended December 31,
1994, 1995, 1996 and the six months ended June 30, 1996 and 1997, respectively.

15. GEOGRAPHIC AREA INFORMATION

The Company had export sales for the years ended December 31, 1995 and 1996
and the six months ended June 30, 1997 of approximately $2,422,000, $722,000 and
$3,056,000, respectively, primarily to customers in Latin America.

16. STOCKHOLDERS' EQUITY

On March 21, 1996, the Company amended and restated its Articles of
Incorporation pursuant to which each $1 par value outstanding share of Class A
Common Stock was converted to 4,000 shares of Class A Common Stock at a per
share par value of $.01. In addition, the Company authorized 20,000,000 shares
of $.01 per share par value preferred stock and increased the number of
authorized Class A Common Stock to 80,000,000 shares. On December 5, 1996, the
authorized shares of Common Stock was amended to be 77,000,000 shares of Class A
Common Stock and 3,000,000 shares of Class B Common Stock. All references in the
financial statements to number of shares, per share amounts and market prices of
the Company's Common Stock have been retroactively restated to reflect the
effect of the stock conversion and the newly authorized preferred stock and
Class A Common Stock and Class B Common Stock.

On April 12, 1996, the Company adopted the 1996 Stock Option Plan (the
"Option Plan") which allows a maximum of 600,000 shares of the Company's Class A
Common Stock to be available to provide incentives to employees, officers and
consultants of the Company. The exercise price of incentive stock options and
non-statutory stock options are to be determined by the Compensation Committee
of the Board of Directors but will be at least 100% and 85% of the fair market
value of the stock subject to the option on the date of grant, respectively (or
110% with respect to incentive stock options granted to holders of more than 10%
of the voting power of the Company's outstanding stock).

On December 6, 1996, the Company sold to a group of limited partnerships
(the "Clipper Group") in a private placement transaction an aggregate of
1,480,000 shares of Class A Preferred Stock and 220,000 shares of Class B
Preferred Stock for an aggregate purchase price of $11,900,000 pursuant to a
Stock Purchase Agreement. Two of the limited partnerships are affiliates of
Credit Suisse First Boston Corporation. Pursuant to the

F-16
<PAGE> 63

AVTEAM, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Company's Second Amended and Restated Articles of Incorporation, all of such
shares of Class A Preferred Stock will automatically convert into an aggregate
of 1,480,000 shares of Class A Common Stock and all of such shares of Class B
Preferred Stock will automatically convert into an aggregate of 220,000 shares
of Class B Common Stock upon the consummation of an initial public offering. The
Clipper Group has transferable registration rights for their shares of Common
Stock. See Note 17.

At December 31, 1996, Class A Common Stock reserved for issuance under the
Option Plan and for the conversion of Class A Preferred Stock and Class B
Preferred Stock into Class A Common Stock aggregated 2,300,000 shares.

17. SUBSEQUENT EVENTS (UNAUDITED)

On July 25, 1997, the Company entered into a sale/leaseback arrangement in
which three engines were sold for $4,274,000 and leased back by the Company
under a five year lease which requires monthly payments of approximately $56,300
plus applicable fees and taxes. The lease agreement provides the Company with an
option to terminate the lease and to repurchase the engines at any time after
one year at varying rates based on the original sales price. These engines are
presently subleased to airlines. This transaction will be accounted for as a
financing, wherein the aircraft engines will remain on the books of the Company
and be depreciated. The proceeds under the sale/leaseback arrangement will be
recorded as a financing obligation and will be reduced by payments under the
lease.

On August 21, 1997, the Company issued and sold to The Clipper Group in a
private placement transaction an aggregate of 494,642 shares of Class A
Preferred Stock and 219,644 shares of Class B Preferred Stock for an aggregate
purchase price of $5,000,002. Pursuant to the Company's Second Amended and
Restated Articles of Incorporation, all of such shares of Class A Preferred
Stock will automatically convert into an aggregate of 494,642 shares of Class A
Common Stock and all of such shares of Class B Preferred Stock will
automatically convert into an aggregate of 219,644 shares of Class B Common
Stock upon the consummation of an initial public offering. The Clipper Group has
transferable registration rights for their shares of Common Stock.

Also, on August 21, 1997, the Company issued 327,772 shares of Class A
Common Stock valued at $2,294,404 to the Chairman of the Board of Directors of
the Company as payment for a $1,322,479 non-interest bearing note and a $701,278
interest bearing note included in notes payable to shareholders at June 30, 1997
and as payment for the purchase of the remaining inventory valued at $270,647
under the Parati Agreement in connection with the termination of the Parati
Agreement.

F-17
<PAGE> 64

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
AVTEAM, Inc.

We have audited the accompanying statements of operations and cash flows of
Turbine Engine Sales Group, Inc. ("Turbine") for the year ended December 31,
1993 and the period from January 1, 1994 through July 21, 1994. These financial
statements are the responsibility of Turbine's management. Our responsibility is
to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the result of operations and cash flows of Turbine
Engine Sales Group, Inc. for the year ended December 31, 1993 and the period
from January 1, 1994 through July 21, 1994, in conformity with generally
accepted accounting principles.

/s/ ERNST & YOUNG LLP

Miami, Florida
January 30, 1996

F-18
<PAGE> 65

TURBINE ENGINE SALES GROUP, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED 1994 THROUGH
DECEMBER 31, JULY 21,
1993 1994
------------ ------------
<S> <C> <C>
Net sales................................................... $2,147 $846
Cost of sales............................................... 2,417 575
------ ----
(270) 271
Commission revenues......................................... 559 480
------ ----
289 751
Operating expenses:
Selling, general, and administrative...................... 933 664
Officers' compensation.................................... 135 84
------ ----
1,068 748
------ ----
Income (loss) from operations............................... (779) 3
Interest expense, net....................................... (64) (29)
------ ----
Net loss.......................................... $ (843) $(26)
====== ====
</TABLE>

See accompanying notes.

F-19
<PAGE> 66

TURBINE ENGINE SALES GROUP, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED JANUARY 1,
DECEMBER 31, 1994 THROUGH
1993 JULY 21, 1994
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................... $(843) $ (26)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 40 22
Bad debt expense (recovery)............................... 27 (1)
Changes in operating assets and liabilities:
Trade accounts receivable.............................. 197 (489)
Inventory.............................................. 151 205
Prepaid expenses....................................... 32 7
Accounts payable....................................... 571 311
Accrued expenses....................................... 13 2
----- -----
Net cash provided by operating activities......... 188 31
INVESTING ACTIVITY
Purchases of property and equipment......................... (21) (18)
----- -----
Net cash used in investing activity......................... (21) (18)
----- -----
FINANCING ACTIVITIES
Payments on note payable to shareholders.................... (20) (49)
Payments on notes payable................................... -- (119)
----- -----
Net cash used in financing activities....................... (20) (168)
Net (decrease) increase in cash............................. 147 (155)
Cash at beginning of period................................. 36 183
----- -----
Cash at end of period....................................... $ 183 $ 28
----- -----
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid............................................... $ 3 $ 32
===== =====
</TABLE>

See accompanying notes.

F-20
<PAGE> 67

TURBINE ENGINE SALES GROUP, INC.

NOTES TO FINANCIAL STATEMENTS
JULY 21, 1994

1. BUSINESS

Turbine Engine Sales Group, Inc. ("Turbine" or the "Company") was
incorporated in Florida in 1992 and dissolved prior to 1995. Turbine was an
aftermarket supplier of aircraft engines and parts and airframe components to
aircraft maintenance providers, manufacturers and airlines.

On May 4, 1992, Turbine entered into a consignment agreement (the
"Consignment Agreement") with an unrelated company, AVTEAM, Inc., formerly known
as Interstar Trading Corporation, ("AVTEAM"). Under the terms of the agreement,
AVTEAM would purchase aircraft engines and deliver them to Turbine on a
consignment basis and Turbine would disassemble the aircraft engines and sell
the parts. Profits were divided 50% to AVTEAM and 50% to Turbine after repayment
to AVTEAM of its total investment.

On July 21, 1994, the two shareholders of AVTEAM purchased all of the
outstanding common stock of Turbine and Turbine transferred all assets and
liabilities to AVTEAM as repayment of amounts due.

2. SIGNIFICANT ACCOUNTING POLICIES

INVENTORY

Inventory of aircraft engines is stated at the lower of specific cost
(including overhaul costs) or market. Cost of sales for engine parts and
airframe components are determined based on a ratio of expected sales per engine
and components to the purchase cost of the used engines plus overhaul costs.

REVENUE RECOGNITION

Sales are recognized when aircraft engines and parts and airframe
components are shipped or a service is performed.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost and is depreciated using
accelerated methods over the estimated useful lives of the assets. The lives
used are as follows:

<TABLE>
<S> <C>
Office furniture and equipment.............................. 5-7 years
Warehouse and transport equipment........................... 5-7 years
Leasehold improvements...................................... 5 years
</TABLE>

INCOME TAXES

The Company is organized as an S Corporation under the provisions of the
Internal Revenue Code, which provides that the corporation's taxable income is
taxable to the shareholders rather than at the corporate level. Had the Company
been subject to income taxes during the periods presented, no income tax benefit
for the losses incurred would have been reported in any of these periods since
realization of the related deferred tax asset would not have been reasonably
assured. Accordingly, a pro forma provision for income taxes has not been
presented for the periods presented.

CONCENTRATION OF CREDIT RISK

Accounts receivable are primarily from aircraft maintenance providers,
manufacturers and airlines. The Company performs ongoing evaluations of its
trade accounts receivable customers and monitors its exposure for credit losses
and sales returns and does not require collateral.

F-21
<PAGE> 68

TURBINE ENGINE SALES GROUP, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. LEASES

In April 1993, the Company entered into a lease agreement for warehouse and
office space under an operating lease which expires in April 1997. Rent expense
for the year ended December 31, 1993 and the period ended July 21, 1994 was
$92,000 and $47,000, respectively.

4. NOTES PAYABLE TO RELATED PARTIES

Interest expense of $64,000 and $32,000 for the year ended December 31,
1993 and the period ended July 21, 1994, respectively, represents interest on
notes due to shareholders bearing interest at 10% per annum payable
semi-annually.

F-22
<PAGE> 69

- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE SUCH DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 12
Dividend Policy....................... 12
Capitalization........................ 13
Dilution.............................. 14
Selected Financial Data............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 21
Management............................ 30
Certain Transactions.................. 34
Principal and Selling Shareholders.... 36
Description of Capital Stock.......... 37
Shares Eligible For Future Sale....... 40
Underwriting.......................... 41
Notice to Canadian Residents.......... 42
Legal Matters......................... 43
Experts............................... 43
Additional Information................ 43
Index to Financial Statements......... F-1
</TABLE>

------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE SHARES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================

AVTEAM, INC.

[AVTEAM, INC. LOGO]

4,500,000 Shares
Class A Common Stock
($.01 par value)

PROSPECTUS

CREDIT SUISSE FIRST BOSTON

SBC WARBURG DILLON READ INC.
- ------------------------------------------------------
<PAGE> 70

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth an itemized statement of certain estimated
expenses incurred in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 18,818
NASD filing fee............................................. 6,710
Nasdaq National Market listing fee.......................... 50,000
Blue Sky fees and expenses.................................. 15,000
Printing and engraving expenses............................. 100,000
Legal fees and expenses..................................... 350,000
Accounting fees and expenses................................ 200,000
Registrar and Transfer Agent's fees and expenses............ 5,000
Miscellaneous............................................... 4,472
--------
Total............................................. $750,000
========
</TABLE>

All amounts except the Securities and Exchange Commission registration fee,
the NASD filing fee and NASDAQ National Market listing fee are estimated. The
Company intends to pay all expenses of registration with respect to shares being
sold by the Selling Shareholder hereunder, with the exception of underwriting
discounts and commissions.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company has authority under the Florida Business Corporation Act to
indemnify all directors and officers to the extent provided in such statute. The
Company's Amended and Restated Articles of Incorporation provide that the
Company shall indemnify its directors to the fullest extent permitted by law
either now or hereafter. The Company has also entered into an agreement with
each of its directors and certain of its officers wherein it has agreed to
indemnify each of them to the fullest extent permitted by law.

At present, there is no pending litigation or proceeding involving a
director or officer of the Company as to which indemnification is being sought,
nor is the Company aware of any threatened litigation that may result in claims
for indemnification by any officer or director.

Pursuant to the Underwriting Agreement filed as Exhibit 1.01 to this
Registration Statement, the Underwriters have agreed to indemnify the directors,
officers and controlling persons of the Company against certain civil
liabilities that may be incurred in connection with this offering, including
certain liabilities under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On January 1, 1995, pursuant to the terms of certain stock options granted
by the Company, certain executive officers of the Company acquired an aggregate
of 71.35 shares of the then outstanding Class A Common Stock, par value $1.00
per share, for an aggregate as evidenced by certain promissory notes each in the
amount of $259,097. Such securities were issued pursuant to exemptions set forth
in Section 4(2) of the Securities Act. The recipients of the shares of Class A
Common Stock represented their intentions to acquire the securities for
investment only and not with a view to sell the securities in connection with
any distribution thereof and appropriate restrictive legends were affixed to the
share certificates.

On December 31, 1995, pursuant to the terms of certain stock options
granted by the Company, certain executive officers of the Company acquired an
aggregate of 178.65 shares of the then outstanding Class A Common Stock, par
value $1.00 per share, as evidenced by certain promissory notes in the aggregate
amount of

II-1
<PAGE> 71

$1,120,245. Such securities were issued pursuant to exemptions set forth in
Section 4(2) of the Securities Act. The recipients of the shares of Class A
Common Stock represented their intentions to acquire the securities for
investment only and not with a view to sell the securities in connection with
any distribution thereof and appropriate restrictive legends were affixed to the
share certificates.

In March 1996, the Company amended and restated its Articles of
Incorporation, pursuant to which each share of the then outstanding class of
Class A Common Stock, par value $1.00 per share, was converted into 4,000 shares
of the currently outstanding class of Class A Common Stock, par value $.01 per
share. The Company issued an aggregate of 5,000,000 shares of Class A Common
Stock to the shareholders of the Company for no additional consideration in
connection with such share conversion.

On December 6, 1996, the Company issued and sold 1,480,000 shares of Class
A Preferred Stock and 220,000 shares of Class B Preferred Stock to The Clipper
Group for an aggregate purchase price of $11.9 million in reliance upon
Regulation D and Section 4(2) of the Securities Act. On August 21, 1997, the
Company issued and sold 494,642 shares of Class A Preferred Stock and 219,644
shares of Class B Preferred Stock to The Clipper Group for an aggregate purchase
price of $5,000,002 in reliance upon Regulation D and Section 4(2) of the
Securities Act. The Clipper Group represented their intentions to acquire the
securities for investment only and not with a view to sell the securities in
connection with any distribution thereof and appropriate restrictive legends
were affixed to the share certificates. The Clipper Group had adequate access to
information about the Registrant. The Registrant believes that The Clipper Group
were accredited investors as defined in Rule 501 promulgated under the
Securities Act.

On August 21, 1997, the Company issued and sold 327,772 shares of Class A
Common Stock to Leon Sragowicz, the Chairman of the Board of Directors and
majority shareholder of the Company for an aggregate purchase price of
$2,294,404 in reliance upon Regulation D and Section 4(2) of the Securities Act.
Mr. Sragowicz represented his intentions to acquire the securities for
investment only and not with a view to sell the securities in connection with
any distribution thereof and an appropriate restrictive legend was affixed to
the share certificate. Mr. Sragowicz had access to adequate information about
the Registrant. The Registrant believes that Mr. Sragowicz was an accredited
investor as defined in Rule 501 promulgated under the Securities Act.

No underwriting discounts or commissions were paid in connection with any
of the foregoing transactions.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement
3.1 -- Third Amended and Restated Articles of Incorporation of
Registrant
3.2 -- Second Amended and Restated By-Laws of Registrant
4.1 -- Specimen Certificate for the Class A Common Stock
5.1 -- Opinion of Baker & McKenzie
10.1 -- Loan Agreement dated February 19, 1997 between Registrant
and NationsBank, N.A. (South)
10.2 -- Surplus Parts Supply Agreement dated June 12, 1995 between
Registrant and United Technologies Corporation (confidential
treatment of certain portions of Exhibit 10.02 has been
granted by the Commission)
10.3 -- Letter Agreement dated September 5, 1995 between Registrant
and Parati Corporation
10.4 -- Amended and Restated Employment Agreement dated December 6,
1996 between Registrant and Donald A. Graw
10.5 -- Amended and Restated Employment Agreement dated December 6,
1996 between Registrant and Jaime J. Levy
10.6 -- AVTEAM Tax Allocation and Indemnification Agreement dated
December 5, 1996 between Registrant and Donald A. Graw
</TABLE>

II-2
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<C> <S> <C>
10.7 -- Lease Agreement dated December 28, 1994 between Registrant
and Sunbeam Properties, Inc.
10.8 -- Lease Agreement dated November 13, 1995 between Registrant
and Sunbeam Properties, Inc.
10.9 -- Indemnification Agreement between Registrant and Donald A.
Graw effective as of April 12, 1996
10.10 -- Indemnification Agreement between Registrant and Jaime J.
Levy effective as of April 12, 1996
10.11 -- Indemnification Agreement between Registrant and Mark S.
Koondel effective as of April 12, 1996
10.12 -- Indemnification Agreement between Registrant and Leon
Sragowicz effective as of April 12, 1996
10.13 -- Indemnification Agreement between Registrant and Robert
Munson effective as of April 12, 1996
10.14 -- Indemnification Agreement between Registrant and Richard
Preston effective as of April 12, 1996
10.15 -- Indemnification Agreement between Registrant and Dallas Cobb
effective as of March 20, 1997
10.16 -- Indemnification Agreement between Registrant and Bryan
Thomas McFarland effective as of March 20, 1997
10.17 -- Indemnification Agreement between Registrant and Eugene P.
Lynch dated effective as of March 20, 1997
10.18 -- AVTEAM, Inc. 1996 Stock Option Plan
10.19 -- AVTEAM, Inc. Key Executive Annual Incentive Plan
10.20 -- Stock Purchase Agreement dated December 6, 1996 between
Registrant and The Clipper Group
10.21 -- Registration Rights Agreement dated December 6, 1996 between
Registrant and The Clipper Group
10.22 -- AVTEAM Tax Allocation and Indemnification Agreement dated
December 5, 1996 between Registrant and Leon Sragowicz
10.23 -- AVTEAM Tax Allocation and Indemnification Agreement dated
December 5, 1996 between Registrant and Richard Preston
10.24 -- AVTEAM Tax Allocation and Indemnification Agreement dated
December 5, 1996 between Registrant and Jaime J. Levy
10.25 -- Lease Modification Agreement dated August 28, 1997 between
Registrant and Sunbeam Properties, Inc.
10.26 -- Agreement for Purchase of Additional Securities dated August
21, 1997 between Registrant and The Clipper Group
10.27 -- Agreement Dated August 21, 1997 between Registrant, Parati
Corporation and Leon Sragowicz
10.28 -- Indemnification Agreement between Registrant and Paula
Sparks
11.1 -- Statement Regarding Computation of Per Share Earnings
23.1 -- Consent of Baker & McKenzie (included in Exhibit 5.1)
23.2 -- Consent of Ernst & Young LLP*
24.1 -- Powers of Attorney (as set forth on the signature page of
the Registration Statement)
27.1 -- Financial Data Schedule for the Year Ended December 31, 1996
27.2 -- Financial Data Schedule for the Period Ended June 30, 1997
</TABLE>

- ---------------

* Filed herewith

II-3
<PAGE> 73

(b) Financial Statement Schedules:

<TABLE>
<CAPTION>
SCHEDULE
NUMBER SCHEDULE
- ----------- --------
<C> <S> <C>
Schedule II -- Valuation and Qualifying Accounts for the Years Ended
December 31, 1994, 1995 and 1996
</TABLE>

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.

The undersigned Registrant hereby undertakes:

(1) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of the registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared
effective.

(2) That for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.

(4) That insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 hereof, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-4
<PAGE> 74

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Registrant has caused this Amendment No. 4 to Form S-1
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Miramar, Florida, on the 29th day of October,
1997.

AVTEAM, INC.

By: /s/ DONALD A. GRAW
------------------------------------
Donald A. Graw
President and Chief Executive
Officer

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>

/s/ LEON SRAGOWICZ* Chairman of the Board, October 29, 1997
- ----------------------------------------------------- Director
Leon Sragowicz

/s/ DONALD A. GRAW President, Chief Executive October 29, 1997
- ----------------------------------------------------- Officer, Director
Donald A. Graw (Principal Executive
Officer)

/s/ MARK S. KOONDEL* Chief Financial Officer, October 29, 1997
- ----------------------------------------------------- Treasurer, Assistant
Mark S. Koondel Secretary (Principal
Financial and Accounting
Officer)

/s/ JAIME J. LEVY* Executive Vice President, October 29, 1997
- ----------------------------------------------------- Director
Jaime J. Levy

/s/ BRYAN THOMAS MCFARLAND* Vice President -- Business October 29, 1997
- ----------------------------------------------------- Development
Bryan Thomas McFarland

/s/ DALLAS COBB* Vice October 29, 1997
- ----------------------------------------------------- President -- Operations
Dallas Cobb

/s/ RICHARD PRESTON* Secretary, Director October 29, 1997
- -----------------------------------------------------
Richard Preston

/s/ ROBERT MUNSON* Director October 29, 1997
- -----------------------------------------------------
Robert Munson

/s/ EUGENE P. LYNCH* Director October 29, 1997
- -----------------------------------------------------
Eugene P. Lynch
</TABLE>

*By: /s/ DONALD A. GRAW
-------------------------------
Donald A. Graw
Attorney-in-Fact

II-5
<PAGE> 75

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
AVTEAM, Inc.

We have audited the financial statements of AVTEAM, Inc. as of December 31,
1995 and 1996, and for each of the three years in the period ended December 31,
1996, and have issued our report thereon dated February 27, 1997 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Miami, Florida
February 27, 1997

S-1
<PAGE> 76

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

AVTEAM, INC.
DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS YEAR
----------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994
Deducted from asset accounts:
Allowance for doubtful accounts........................ $ -- $ 69 $ 16(1) $ 53
Allowance for sales returns............................ -- 162 -- 162
---- ---- ---- ----
Total........................................... $ -- $231 $ 16 $215
==== ==== ==== ====
Year Ended December 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts........................ $ 53 $145 $ 84(1) $114
Allowance for sales returns............................ 162 669 162(2) 669
---- ---- ---- ----
Total........................................... $215 $814 $246 $783
==== ==== ==== ====
Year Ended December 31, 1996
Deducted from asset accounts:
Allowance for doubtful accounts........................ $114 $ 88 $ 13(1) $189
Allowance for sales returns............................ 669 211 669(2) 211
---- ---- ---- ----
Total........................................... $783 $299 $682 $400
==== ==== ==== ====
</TABLE>

- ---------------

(1) Uncollectible accounts written off, net of recoveries.
(2) Application of credit memos against reserve.

S-2
<PAGE> 77

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- ------- ------- ------------
<C> <C> <S> <C>
23.2 -- Consent of Ernst & Young LLP
</TABLE>

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ERNST & YOUNG LLP

We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our reports dated February 27,
1997, with respect to the financial statements and schedule of AVTEAM, Inc. as
of December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, and our report dated January 30, 1996, with respect to
the statements of operations and cash flows of Turbine Engine Sales Group, Inc.
for the year ended December 31, 1993 and the period from January 1, 1994 through
July 21, 1994, in the Registration Statement and related Prospectus of AVTEAM,
Inc. for the registration of 4,500,000 shares of its Class A Common Stock.

/s/ ERNST & YOUNG LLP

Miami, Florida
October 27, 1997