<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 2000
REGISTRATION NO. 333-8061
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT 1934
For the transition period from ________________ to ________________
Commission file number 0-29028
AVIATION DISTRIBUTORS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-0715685
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. employer Identification No.)
Incorporation or Organization)
ONE CAPITAL DRIVE LAKE FOREST, CALIFORNIA 92630
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (949) 586-7558
----------------
Indicate by check (X) whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES (X) NO ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 3,344,500 SHARES OF
COMMON STOCK, $.01 PAR VALUE PER SHARE, WERE OUTSTANDING AS OF MAY 15, 2000.
<PAGE>
AVIATION DISTRIBUTORS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Accounts receivable, net of allowance
for doubtful accounts of $250,000 .......................... $ 7,548,474 8,804,066
Other receivables ............................................ 44,739 93,558
Inventories .................................................. 9,008,560 8,375,166
Prepaid expenses ............................................. 85,554 35,079
Deferred tax asset ........................................... 101,000 101,000
------------ ------------
Total current assets .................................... 16,788,327 17,408,869
------------ ------------
PROPERTY AND EQUIPMENT ............................................. 1,016,165 1,067,402
Less - accumulated depreciation .............................. 466,998 514,338
------------ ------------
549,167 553,064
------------ ------------
Notes receivable from founder ...................................... 408,718 408,718
Debt issue costs ................................................... -- 1,984,610
Other assets ....................................................... 131,484 131,484
------------ ------------
540,202 2,524,812
------------ ------------
$ 17,877,696 $ 20,486,745
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Checks issued not yet presented for payment .................. $ 256,957 $ 497,557
Accounts payable ............................................. 2,587,403 2,233,372
Accrued liabilities .......................................... 606,997 392,071
Line of credit, net of discount .............................. 15,677,982 16,555,758
Current portion of long-term debt ............................ 965,388 592,158
Current portion of capital lease obligations ................. 9,828 11,214
------------ ------------
Total current liabilities ............................... 20,104,555 20,282,130
------------ ------------
Long-term debt, net of current portion ............................. 978,304 850,000
Capital lease obligations, net of current portion .................. 19,427 15,656
Promissory note payable ............................................ -- 2,000,000
Deferred tax liability ............................................. 101,000 101,000
STOCKHOLDERS' DEFICIT:
Preferred stock, par value of $.01, 3,000,000
shares authorized; none issued and outstanding .............. -- --
Common stock, par value of $.01, 10,000,000 shares
authorized; 3,387,500 shares issued and 3,344,500 shares
outstanding ................................................. 33,875 33,875
Additional paid in capital ................................... 6,213,749 6,713,749
Accumulated deficit .......................................... (9,499,910) (9,436,361)
Treasury stock, 43,000 shares at cost ........................ (73,304) (73,304)
------------ ------------
Total stockholders' deficit ............................. (3,325,590) (2,762,041)
------------ ------------
$ 17,877,696 $ 20,486,745
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AVIATION DISTRIBUTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 2000
----------- -----------
<S> <C> <C>
NET DISTRIBUTED SERVICES AND INVENTORY SALES .................. $ 7,711,111 $ 8,274,028
COST OF SALES ................................................. 6,040,650 6,216,996
----------- -----------
Gross profit .......................................... 1,670,461 2,057,032
SELLING AND ADMINISTRATIVE EXPENSES ........................... 1,409,710 1,427,821
NON-RECURRING EXPENSES ........................................ 17,743 5,700
----------- -----------
Income from operations ................................ 243,008 623,511
OTHER (EXPENSE) INCOME:
Interest expense ...................................... (425,116) (559,962)
Interest income ....................................... 32,055 --
Other income .......................................... 1,087 --
----------- -----------
Income (loss) before provision
for income taxes ..................................... (148,966) 63,549
PROVISION FOR INCOME TAXES .................................... -- --
----------- -----------
NET INCOME (LOSS) ..................................... $ (148,966) $ 63,549
=========== ===========
Basic and diluted net income (loss) per share ......... $ (0.05) $ 0.02
=========== ===========
Basic and diluted weighted
average shares outstanding ........................... 3,179,000 3,344,500
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AVIATION DISTRIBUTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------------- ------------------------ ADDITIONAL TOTAL
NUMBER NUMBER PAID ACCUMULATED STOCKHOLDERS'
OF SHARES AMOUNT OF SHARES AMOUNT IN CAPITAL DEFICIT DEFICIT
----------- --------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 ............ 3,165,000 31,650 43,000 (73,304) 5,658,099 (7,710,282) (2,093,837)
Stock issued in legal
settlement ..................... 80,000 800 -- -- 479,200 -- 480,000
Fair value of stock options
issued for debt foregiveness ..... -- -- -- -- 42,250 -- 42,250
Stock options exercised ........... 142,500 1,425 -- -- 34,200 -- 35,625
Net loss .......................... -- -- -- -- -- (1,789,628) (1,789,628)
----------- --------- ---------- ----------- ----------- ----------- -----------
Balance at December 31, 1999 .......... 3,387,500 33,875 43,000 (73,304) 6,213,749 (9,499,910) (3,325,590)
Fair value of warrants issued for
debt in connection with
amendment of credit facility .. -- -- -- -- 500,000 -- 500,000
Net Income ........................ -- -- -- -- -- 63,549 63,549
----------- --------- ---------- ----------- ----------- ----------- -----------
Balance at March 31, 2000 ............. 3,387,500 $ 33,875 43,000 $ (73,304) $ 6,713,749 $(9,436,361) $(2,762,041)
=========== ========= ========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AVIATION DISTRIBUTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (loss) .................................................................. $ (148,966) $ 63,549
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Principal payments on note receivable ........................................... 471,251 --
Principal payments on notes payable related to inventory purchases .............. (471,970) --
Reduction in amount due on notes payable related to inventory purchases in
exchange for reduction in accounts receivable ................................. (444,327) --
Depreciation and amortization ................................................... 54,908 68,174
Changes in assets and liabilities:
Accounts receivable, net ................................................... (2,309,568) (1,072,747)
Other receivables .......................................................... (128,651) (48,819)
Inventories ................................................................ 133,054 633,394
Prepaid expenses ........................................................... 185,053 49,198
Other assets ............................................................... (1,216) --
Accounts payable ........................................................... (363,983) (354,031)
Accrued liabilities ........................................................ (236,363) (214,926)
----------- -----------
Net cash used in operating activities .................................... (3,260,778) (876,208)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................................ (1,991) (51,237)
Decrease in restricted cash ........................................................ 709 --
----------- -----------
Net cash used in investing activities ..................................... (1,282) (51,237)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on lines of credit ...................................................... 6,424,512 8,785,187
Principal payments on lines of credit .............................................. (3,584,095) (7,594,423)
Borrowings on long-term debt ....................................................... 100,000 --
Principal payments on long-term debt ............................................... (1,988) (501,534)
Principal payments on capital lease obligations .................................... (4,650) (2,385)
Increase in checks issued not yet presented for payment ............................ 328,281 240,600
----------- -----------
Net cash provided by financing activities ................................. 3,262,060 927,445
----------- -----------
Net change in cash and cash equivalents ............................................... -- --
Cash and cash equivalents at beginning of period ...................................... -- --
----------- -----------
Cash and cash equivalents at end of period ............................................ $ -- $ --
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ........................................................................ $ 424,967 $ 544,753
=========== ===========
Income taxes .................................................................... -- $ --
=========== ===========
Noncash financing activity:
Issuance of 80,000 shares of common stock in settlement of long term liability .. $ 480,000 $ --
=========== ===========
Capitalized loan issue costs, due in the form of a promissory note payable ...... $ -- $ 2,000,000
=========== ===========
Warrants issued in connection with the amendment of the Company's credit facility $ -- $ 500,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
AVIATION DISTRIBUTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated financial
statements of the Company contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of March 31, 2000 and the results of its operations for the three
month periods ended March 31, 2000 and 1999 and cash flows for the three month
periods ended March 31, 2000 and 1999. The results of operations and cash flows
for the three month period ended March 31, 2000 are not necessarily indicative
of the results of operations or cash flows which may be reported for the
remainder of 2000.
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
for reporting on Form 10-Q. Pursuant to such rules and regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The accompanying unaudited interim consolidated financial
statements should be read in connection with the Company's December 31, 1999
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-KSB.
NOTE 2 - REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company sustained a loss from
operations in 1999; has used, rather than provided, cash in its operations; and
has deficits in working capital and stockholders' equity at December 31, 1999
and March 31, 2000. Also, as discussed in note 3, the impact on the Company of
certain governmental investigations cannot be determined at this time.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheets, are dependent upon continued operations of the Company. This in turn is
dependent upon the Company's ability to meet its financing requirements on a
continuing basis, to maintain present financing, and to succeed in its future
operations. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence.
<PAGE>
Management has taken steps to revise its operations and financial
requirements, which it believes are sufficient to provide the Company with
the ability to continue in existence. Ongoing expenses have been reduced by
salary reductions, headcount reductions and other cost saving measures
implemented. The class action lawsuits have been settled. Settlement of
remaining legal issues will also allow management to concentrate on managing,
improving and expanding the business. In addition, as described in Note 4,
the Company has increased its availability under its line of credit and
extended the loan maturity date.
NOTE 3 - CLASS ACTION LAWSUITS AND GOVERNMENT INVESTIGATIONS:
In October 1997, three separate class action lawsuits were filed against the
Company, its founder, directors and certain current and former officers and
directors, and others. In February 1998, a motion was approved to consolidate
all three class action lawsuits in Federal court.
In April 1998, the Company entered into a settlement in principle, which is
memorialized in a Memorandum of Understanding (the M.O.U."), with counsel for
the plaintiffs to settle the suits. Terms of the settlement included cash
consideration of $740,000 and 210,000 shares of the Company's common stock,
of which the Company issued 80,000 shares and the Company's founder, Osamah
S. Bakhit, contributed 130,000 shares. The Company recorded a $620,000 charge
in 1997 related to this settlement, of which $480,000 was attributable to the
issuance of 80,000 shares of common stock and $140,000 represented the
Company's portion of the cash consideration. The Federal Court approved this
settlement agreement on March 15, 1999.
Both the Federal grand jury and the Securities and Exchange Commission
previously commenced investigations into the allegations referred to above.
The investigation by the federal grand jury continues and the Company is
unable, at this time, to evaluate the possible outcome of the investigation
or its impact on the Company.
The Company has entered into a proposed settlement with the SEC staff related to
the ongoing SEC investigation of the Company. Under the terms of the proposed
settlement, the Company would consent to the entry of a federal court
injunction, in which the Company would not admit or deny any allegations made
by the SEC, enjoining it from future violations of the federal securities laws.
The proposed settlement with the SEC's staff must be approved by the Securities
and Exchange Commission. The Company does not know when the proposed settlement
will be presented to the Commission for approval.
<PAGE>
NOTE 4 - DEBT ARRANGEMENTS
On February 23, 2000, the Company amended its Credit Facilty with GMAC to extend
the loan maturity date to December 1, 2010. Additionally, the 126,600 warrants
previously issued to GMAC were increased to provide GMAC with warrants equal to
9.9% of the outstanding stock of the Company or approximately 335,362 warrants.
The exercise price of the previously issued warrants was reduced from $1.00 to
$.25 per share. The additional 208,762 warrants were issued at an exercise price
of $.25 per share. The total warrants issued to GMAC expire on February 28,
2010. The fair value of the new warrants and the repriced warrants issued to
GMAC, estimated at approximately $500,000, is being amortized to interest
expense over the term of the credit facility. The unamortized discount has
been netted against the line of credit in the accompanying balance sheet.
As a condition for the extension of the credit facility, the Company entered
into a $2,000,000 promissory note, due in a balloon payment on the earlier of
February 1, 2010, or if the Company's stock reaches a $6 per share value over 10
consecutive days, or the occurrence of one of several other events, none of
which have occurred. The $2,000,000 is being amortized to interest expense over
the term of the promissory note. The note bears interest at GMAC's Alternate
Base Rate and interest is payable semi-annually.
On April 5, 2000 the Company obtained an additional $3,800,000 increase in
its credit facility for an eighteen month period, at an interest rate of prime
plus 1%, to finance the purchase of inventory.
NOTE 5 - EXPORT SALES
For the quarters ended March 31, 1999 and 2000, approximately 68.9% and 70.8%,
respectively, of the Company's net sales were export sales. Export sales by
region were approximately as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------
1999 2000
---- ----
<S> <C> <C>
Pacific Rim ................................ 18.2% 3.5%
Europe ..................................... 31.8 38.4
Latin/South America ........................ 11.9 21.9
Africa/Middle East ......................... 7.0 7.0
---- ----
68.9% 70.8%
==== ====
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion includes the operations of the Company for each of the
periods discussed. This discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and the related notes
thereto, which are included elsewhere in this document.
OVERVIEW
Net sales consist of gross sales, net of allowance for returns and
other adjustments. Cost of sales consists of product costs, freight
charges and an inventory provision for damaged and obsolete products. Product
costs consist of the acquisition costs of the products and costs associated with
repairs, maintenance and certification.
Net sales and gross profit depend in large measure on the volume and timing of
sales orders received during the period and the mix of aircraft parts contained
in the Company's inventory. The timing of bulk inventory purchases can impact
sales and gross profit. In general, bulk inventory purchases allow the Company
to obtain large inventories of aircraft parts at a lower cost than can
ordinarily be obtained by purchasing such parts on an individual basis. Thus,
these bulk purchases allow the Company to seek larger gross margins on its sale
of aircraft parts since the cost of purchase is reduced.
The following table sets forth certain information relating to the Company's
operations for the three months ended March 31, 1999 and 2000 (dollars in
thousands):
<TABLE>
<CAPTION>
1999 2000
------------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 7,711 100.0% $ 8,274 100.0%
Cost of sales 6,041 78.3 6,217 75.1
------- ------ ------- -----
Gross profit 1,670 21.7 2,057 24.9
Selling and administrative expenses 1,410 18.3 1,428 17.3
Non-recurring expenses 17 0.2 6 0.1
------- ------ ------- -----
Income (loss) from operations 243 3.2 623 7.5
Interest expense, net 393 5.1 560 6.8
Other (income) expense (1) (0.0) 0 --
------- ------ ------- -----
Net (loss) Income $ (149) (1.9)% $ 63 0.8%
------- ------ ------- -----
</TABLE>
NET SALES. Net sales increased from $7.7 million for the three months ended
March 31, 1999 to $8.3 million for the three months ended March 31, 2000, a
increase of $.6 million or 7.8%. This increase was the result of improved
financing arrangements with the Company's lender which gave the Company the
ability to secure additional sales from distributed services.
<PAGE>
Net distributed services represents sales of aircraft parts purchased at the
point of sale through outside parties. Inventory sales represent sales of the
Company's owned inventory. Sales from distributed services (outside sourcing)
represented approximately 93.8% and 86.4% of total net sales for the three
months ended March 31, 1999 and 2000, respectively. Sales of Company-owned
inventory represented approximately 6.2% and 13.6% of total net sales for the
three months ended March 31, 1999 and 2000, respectively.
COST OF SALES. Cost of sales increased from $6.0 million for the three months
ended March 31, 1999 to $6.2 million for the three months ended March 31, 2000,
an increase of $200,000 or 3.3%. This increase was attributable to the increase
in net sales.
GROSS PROFIT. Gross profit increased from $1.7 million or 21.7% of net sales for
the three months ended March 31, 1999 to $2.0 million or 24.9% of net sales for
the three months ended March 31, 2000, an increase of $300,000 or 17.6%. This
increase was a result of the increase in sales from the prior period and gross
profit percent of sales increasing from 21.7% for the three months ended
March 31, 1999 to 24.9% for the three months ended March 31, 2000, due to
increased sales of bulk purchase inventory from prior period.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
consisted primarily of compensation, commission expense, rent expense,
professional fees, consulting expense and travel expense. The Company's selling
and administrative expenses increased from $1.4 million for the three months
ended March 31, 1999 to $1.5 million for the three months ended March 31, 2000,
a increase of $67,000 or 4.8%. This increase was due to the increased sales in
2000.
NON-RECURRING EXPENSES. In the first quarter of 1999 and 2000, the Company
incurred $18,000 and $6,000, respectively, of expenses related to its
investigation of allegations concerning its previously issued financial
statements, restatement of those financial statements, class action lawsuits and
investigations by a Federal grand jury and the Securities and Exchange
Commission. Management expects these expenses to continue to decrease, as the
shareholder lawsuit was settled on March 15, 1999. These expenses primarily
consist of legal, accounting and consulting fees. See "Part II, Item 1 - Legal
Proceedings."
INCOME (LOSS) FROM OPERATIONS. The Company had income from operations of
$243,000 for the three months ended March 31, 1999 compared to income from
operations of $623,500 for the three months ended March 31, 2000. The increase
in income from operations is due to the improved gross profit percent of 24.9%
for the three months ended March 31, 2000.
<PAGE>
INTEREST EXPENSE, NET. Net interest expense increased from $393,000 for the
three months ended March 31, 1999 to $560,000 for the three months ended March
31, 2000. The $167,000 increase in interest expense was due to the Company
obtaining additional term debt and increased borrowings under the working
capital line.
YEAR 2000 COMPLIANCE
To become fully Year 2000 compliant, the Company successfully implemented a new
software system at a cost of approximately $120,000. The Company did not
separately track the internal costs incurred for the Y2K project. The Company
did not incur any systems problems as a result of the successful implementation
of the new systems.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used $3.3 million and $.9 million in the
quarters ended March 31, 1999 and 2000, respectively. The largest cash uses in
the 1999 period were the $2.3 million increase in accounts receivable, the
decreases on notes payable related to inventory purchases and decreases in
accounts payable and accrued liabilities. For the 2000 period, the largest uses
of cash were the $1.1 million increase in accounts receivable and a reduction
of accounts payable, offset by a decrease in inventory.
The 1999 financing activities provided cash of $3.3 million, primarily resulting
from the $2.8 million net increase in line of credit borrowings and the $300,000
increase in checks issued not yet presented for payment. The 2000 financing
activities provided $.9 million of cash due to a net increase in borrowings of
$1.2 million and an increase in checks not yet presented of $.2 million, offset
by a reduction of long term debt of $.5 million.
As of March 31, 2000, the Company had a working capital deficit of $2.9 million.
This was primarily due to the increase in the borrowings on the line of credit
resulting from the cash requirements for increases in accounts receivable,
reduction of accounts payable with an offset of reduced inventory.
As of December 31, 1999, the Company was in default on certain covenants of its
credit facility with GMAC Commercial Credit. On April 7, 2000, the financial
institution issued the Company a waiver of the covenants that were in default
and set new covenants for 2000 with the first measurement date effective for the
quarter ended June 30, 2000.
On February 23, 2000, the Company amended its Credit Facilty with GMAC to extend
the loan maturity date to December 1, 2010. Additionally, the 126,600 warrants
previously issued to GMAC were increased to provide GMAC with warrants equal to
9.9% of the outstanding stock of the Company or approximately 335,362 warrants.
The exercise price of the previously issued warrants was reduced from $1.00 to
$.25 per share. The additional 208,762 warrants were issued at an exercise price
of $.25 per share. The total warrants issued to GMAC expire on February 28,
2010. The fair value of the new warrants and the repriced warrants issued to
GMAC, estimated at approximately $500,000, is being
<PAGE>
amortized to interest expense over the term of the credit facility.
As a condition for the extension of the credit facility, the Company entered
into a $2,000,000 promissory note, due in a balloon payment on the earlier of
February 1, 2010, or if the Company's stock reaches a $6 per share value over 10
consecutive days, or the occurrence of one of several other events, none of
which have occurred. The $2,000,000 is being amortized to interest expense over
the term of the promissory note. The note bears interest at GMAC's Alternate
Base Rate and interest is payable semi-annually.
On April 5, 2000 the Company obtained an additional $3,800,000 increase in
its credit facility for an eighteen month period, at an interest rate of
prime plus 1%, to finance the purchase of inventory.
<PAGE>
The Company's long-term debt consists of the following: (i) term loan of
$1,000,000 at March 31, 2000 to GMAC, due in quarterly principal installments
of $125,000 with an interest rate of 2.0 percent above the lenders alternate
base rate; (ii) note payable of $339,715 at March 31, 2000 to a corporation,
secured by specific inventory; (iii) note payable of $100,000 at March 31,
2000 to the founder of the Company (iv) capital lease obligations of $26,870
and (v) Promissory Note Payable for $2,000,000.
The Company's credit facility with GMAC is an asset based line of credit
secured by account receivable and inventory and is the primary source for the
Company to finance its operations and growth. At March 31, 2000 the balance
on the credit facility was $16,555,758, net of discount related to the
warrants issued. Because of the non-recurring costs associated with the
re-auditing of the Company's financial statements and the ongoing federal
investigations, the Company has used its line of credit to pay these costs.
As a result, the Company may need to increase its capital base in order to
continue to meet its growth objectives. There can be no assurance that such
additional capital will be available on a timely basis or at acceptable terms.
See note 2 to the consolidated financial statements included in this form 10-Q
regarding realization of assets and steps management has taken with respect to
its operations and financing requirements.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in certain legal and administrative proceedings and
threatened legal and administrative proceedings arising in the normal course of
its business. While the outcome of such proceedings and threatened proceedings
cannot be predicted with certainty, management believes the ultimate resolution
of these matters individually or in the aggregate will not have a material
adverse effect on the Company. Also, see Note 3 to the consolidated financial
statements in Part I.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
<PAGE>
2. Exhibits
The following exhibits are being filed with this Annual Report on Form 10-KSB
and/or are incorporated by reference therein in accordance with the designated
footnote references:
<TABLE>
<CAPTION>
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Registrant. (1)
3.2 Bylaws, as amended, of the Registrant. (1)
3.3 Amendment to Amended and Restated Certificate of Incorporation of the Registrant. (1)
4.1 Specimen Common Stock Certificate. (1)
9.1 Voting Trust Agreement, dated November 17, 1997, by and among Osamah Bakhit, Aviation Distributors, Inc.,
and Dirk O. Julander, as trustee. (2)
10.2 1996 Stock Option and Incentive Plan. (1)
10.3 Aircraft Purchase Agreement, dated August 8, 1995, by and between Alia The Royal Jordanian Airlines and
Aviation Distributors, Inc. (1)
10.4 Credit and Security Agreement, dated June 25, 1997, by and between Aviation Distributors, Inc. and BNY
Financial Corporation. (3)
10.5 Amendment dated December 15, 1999 between the Company and GMAC Commercial Credit LLC to June 25, 1997 Credit and
Security Agreement between the Company and BNY Financial Corporation, including related Common Stock Purchase
Warrant for 335,362 shares dated February 28, 2000 issued to GMAC Commercial Credit LLC. (4)
10.6 Amended and Restated Employment Agreement, dated as of July 16, 1996, by and between Osamah S. Bakhit and
Aviation Distributors, Inc. (1)
10.7 Employment Agreement, dated as of January 5, 2000, by and between William D. King and Aviation
Distributors, Inc. (4)
10.8 Employment Agreement, dated as of July 16, 1996, by and between Jeffrey G. Ward and Aviation
Distributors, Inc. (1)
10.9 Amendment to Employment Agreement, dated November 17, 1997, by and between Osamah S. Bakhit and Aviation
Distributors, Inc. (3)
10.10 Amendment to Employment Agreement, dated November 17, 1997, by and between Mark W. Ashton and Aviation
Distributors, Inc. (3)
10.11 Lease, dated as of July 9, 1997, by and between Olen Properties Corp. and Aviation Distributors, Inc. (3)
10.12 Amended and Restated Promissory Note from Osamah S. Bakhit to Aviation Distributors, Inc., dated as of
December 31, 1995. (1)
10.13 Settlement Agreement dated as of November 1, 1996. (1)
10.14 Form of Indemnity Agreement. (1)
10.15 Promissory Note between Aviation Distributors, Inc. and Osamah S. Bakhit, dated December 31, 1996. (1)
10.16 Employment Agreement dated as of June 1, 1998 by and between Gary L. Joslin and Aviation Distributors, Inc. (4)
</TABLE>
(1) Filed with the Company's Registration Statement on Form SB-2
dated March 3, 1997.
(2) Filed with the Company's Current Report on Form 8-K dated
August 29, 1997.
(3) Filed with the Company's Form 10-KSB dated April 20, 1998.
(4) Filed with the Company's Form 10-KSB dated April 11, 2000.
<PAGE>
(b) Reports on Form 8-K.
Date of Report/filing Date Item Reported
- -------------------------- -------------
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date May 15, 2000 AVIATION DISTRIBUTORS, INC.
-----------------------------
By: /s/ William D. King
--------------------------------
William D. King
Chief Executive Officer
Chairman and Director
(Principal Executive Officer)
By: /s/ Gary L. Joslin
--------------------------------
Gary Joslin
Gary L. Joslin
Chief Financial Officer
and Director (Principal
Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 9,054,066
<ALLOWANCES> 250,000
<INVENTORY> 8,375,166
<CURRENT-ASSETS> 17,408,869
<PP&E> 1,067,402
<DEPRECIATION> 514,338
<TOTAL-ASSETS> 20,486,745
<CURRENT-LIABILITIES> 20,282,130
<BONDS> 0
0
0
<COMMON> 33,875
<OTHER-SE> 2,795,916
<TOTAL-LIABILITY-AND-EQUITY> 20,486,745
<SALES> 8,274,028
<TOTAL-REVENUES> 8,274,028
<CGS> 6,216,996
<TOTAL-COSTS> 6,216,996
<OTHER-EXPENSES> 1,433,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559,962
<INCOME-PRETAX> 63,549
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,549
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
