SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended April 30, 1995
0-16039
(Commission File Number)
JETBORNE INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 59-2768257
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4010 Northwest 36th Avenue
Miami, Florida 33142
(Address of Principal Executive Offices)
(305) 635-6060
(Registrant's Telephone Number)
None
(Former Name, Former Address and former Fiscal Year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
None None
(Title of Each Class) (Name of Each Exchange
on which Registered)
Securities registered pursuant to Section 12(g) of the Act
Common Stock, None
par value $.01 per share (Name of Each Exchange
(Title of Each Class) on which Registered)
Indicate by check mark whether the Registrant (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 for such 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 NO X
Registrant has not been able to file its Annual Report for the year ended
April 30, 1995 despite a filing due date of July 28, 1995 and a prior expired
extension on Form 12(b)(25) until the date of this filing. All other periodic
reports due during the period of Annual Report delinquency have also not been
filed.
The Registrant is unable to determine any aggregate market value of the voting
stock held by non-affiliates of the Registrant as of September 1, 1997. The
Company emerged from Chapter 11 bankruptcy on September 17, 1993. There has
been no market for the Registrant's voting stock since approximately the
Fourth Quarter of 1991. See Item 5. herein.
The number of shares of Common Stock, $.01 par value, of the Registrant issued
as of September 1, 1997, was 11,822,280 shares.
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
Jetborne International, Inc. (the "Company") was incorporated in the
State of Delaware on January 30, 1987. The Company was organized for the
purpose of capital formation through an initial public offering to develop and
expand the business of Jetborne, Inc., a Florida corporation incorporated on
or about April 24, 1980 and generally engaged in the sale of aircraft parts
and aircraft components. On February 2, 1987, shortly after the Company's
inception, the stockholders of Jetborne, Inc. transferred all of its issued
and outstanding common stock to the Registrant, Jetborne International, Inc.,
in exchange for 3,123,000 shares of the Company's Common Stock. In addition,
Jetborne, Inc. transferred all of its ownership interest in its subsidiary
companies to the Company. The Company owned no other assets at its inception
and intended to operate the business of Jetborne, Inc. and its subsidiaries
with net proceeds to be raised from an initial public offering of its own
securities.
On May 20, 1987, the Company sold 1,150,000 shares of its Common Stock
through a public offering for net proceeds to the Company of approximately
$3,328,000. Prior to the public offering, the Company issued 3,150,000 shares
of Common Stock to five stockholders, including the Company's management and
directors, in exchange for stock in its subsidiaries and nominal cash.
On December 10, 1991, the Company was placed in an involuntary, Chapter
11 Federal Bankruptcy proceeding, and on December 16, 1991, Jetborne, Inc.,
the Company's only significant remaining subsidiary at the time, filed a
voluntary petition in the same Bankruptcy Court. After the Company converted
the original proceeding from involuntary to a voluntary bankruptcy, the
bankruptcy cases were consolidated. The Company emerged from bankruptcy
protection on September 17, 1993 by entry of the Bankruptcy Court's order
confirming its third amended plan of reorganization.
The Company continues to be engaged in the sale of aircraft parts from
inventory and through brokerage and consignment arrangements. On occasion,
the Company also engages in purchase and sale transactions as an agent for the
purchaser or the seller. From late 1991 until September 17, 1993, the Company
operated as Debtor-In-Possession under Chapter 11 Bankruptcy protection, Case
No. 91-16169-BKC-AJC, U.S. Bankruptcy Court Southern District of Florida. See
Item 3., "Legal Proceedings" and Item 8., "Financial Statements".
Background
The Company was originally formed as a holding company for the purpose of
consolidating operating subsidiaries and undertaking and completing a public
<PAGE>
offering of its securities to finance the subsequent commercial activities of
its subsidiaries. The Company was frequently unable to timely file its
periodic reports under the Securities and Exchange Act of 1934 and has never
complied with the Proxy and Annual Report requirements of Rule 14 promulgated
under The Securities Act of 1933. As a result, the Company's Common Stock was
delisted from the NASDAQ Market Automated Quotation System on October 4, 1991
and can now only be traded, if traded, Over-The-Counter, Bulletin Board. To
the Company's knowledge and belief, at September 1, 1997, there are no
securities dealers making a market in its Common Stock.
The Company continues to be engaged in purchasing aircraft parts for
resale and acts as an intermediary for parts not contained in its inventory.
In general the Company maintains a declining inventory of parts for various
commercial jet aircraft. Much of the Company's revenues are derived from the
Company's sale or "brokerage" of aircraft parts - transactions in which the
Company seeks and purchases parts for cash in response to specific orders from
credit customers. The Company deals in an array of airframe and accessory
parts, including hydraulic, pneumatic, electronic and electrical systems,
navigation and communication avionics, instrumentation and engines. It's
inventory includes parts purchased and then overhauled by contract repair
stations for resale. Most of the Company's inventory has been acquired in
bulk from large fleet operators.
Aircraft parts received are inspected, repaired or overhauled, as
necessary, and recertified to Federal Aviation Administration standards.
Throughout the receipt-to-resale process the parts and their current status
are recorded and catalogued in the Company's computerized inventory control
system. Resale prices are determined considering the original manufacturer's
list price, the parts' aftermarket value, the customer's required delivery
date, the level of availability of the particular part in the aftermarket and
the specific relationship that the purchasing customer has with the Company.
The Company participates in the Airline Inventory Redistribution System
("AIRS") which provides a comprehensive computerized listing of aircraft parts
and material available for sale in the marketplace. Numbered among AIRS
subscribers are most major commercial airlines and many parts vendors and
suppliers. The System is accessible through the Aeronautical Radio, Inc. or
Societé International De Telecommunications Aeronautique networks for
domestic and foreign transactions respectively. The Company also subscribes
to the Inventory Locator Services, Inc. ("ILS") a computerized aircraft parts
availability system. In the Company's view, AIRS is primarily used by
aircraft operators to purchase parts and ILS is primarily used by aircraft
part vendors and suppliers.
<PAGE>
The Company also occasionally undertakes an exchange transaction in which
it acquires one or more items specifically for the purpose of exchanging
specific parts with an airline or other aircraft operator. In these
transactions, the Company supplies a replacement part for its customer's
unusable part which, in turn, is received and repaired at the customer's cost
by an appropriate repair station. The repaired part is then included in
general inventory with the overall transaction being supported by an exchange
fee paid to the Company by the exchanging customer.
Competition
The Company's aircraft parts business competes with other independent
companies, one or more unaffiliated companies operated by former officers and
directors of the Company, as well as directly with air fleet operators and
parts manufacturers. Customers for aircraft parts have complete access
through computer-generated inventory catalogues to a broad array of competing
suppliers, many of which have far greater financial resources; larger and more
varied inventories and far more elaborate source networks than the Company.
The Company's effectiveness in this highly competitive market depends upon its
ability to identify, locate and purchase parts and equipment at favorable
prices; to assure that the parts and equipment meet stringent industry quality
standards; to deliver promptly and to price competitively.
In spite of significant persistent difficulties, the Company continues to
believe that it can compete against larger companies offering similar services
by emphasizing and focusing on a capacity to rapidly deliver reliable parts
and services at favorable prices. See Item 7., Management's Discussion and
Analysis of Financial Condition and Results of Operations. Many of the
Company's competitors however have far greater financial and personnel
resources and have been operating over a longer period of time without the
Company's prior Bankruptcy protection and therefore have competitive advantage
over the Company.
Government Regulation
Most of the Company's aviation activities and materials are subject to
licensing, certification, and other requirements imposed by the FAA, the U.S.
Department of Commerce and regulatory agencies in foreign countries.
Inspection, maintenance and repair procedures for the various types of
equipment are prescribed by the FAA and can be performed only by certified
repair facilities ("station"), certified repairmen or, under certain
conditions, manufacturers. Normally this is accomplished in the context of
quarterly and annual inspections. The Company is not a FAA station but rather
uses various FAA stations as needed. The Company believes that it has all
otherwise required aviation related licenses and certifications necessary to
the conduct of its current business. The unanticipated loss of any such
<PAGE>
license or certification would have had a material adverse effect on the
Company's business.
The operations of the Company are also subject to regulation, other than
aviation regulation, normally incident generally to business operations,
including occupational safety and health and environmental disposal
regulations. Previous subsidiaries of the Company were allegedly in violation
of the Metro Dade County Environmental Protection Ordinance and the Florida
Administrative Code with regard to these areas. The Company has certain
potential liabilities for these alleged violations. Any environmental
proceedings regarding the operation of those previous subsidiary companies may
have an adverse liability effect upon the Company, directly and through prior
agreements as previously reported. The Company was a number of years ago
notified by the Dade County Department of Environmental Resource Management
("DERM") of an alleged environmental violation. The Company long ago
submitted a correction plan and remains committed to cleanup at an estimated
remaining cost of approximately $40,000 if its plan is ultimately accepted by
DERM. The Company continues to await, now years later, acceptance of its
plan.
Employees
The Company currently (September 1, 1997) employs approximately five (5)
full-time employees. The Company's only officer devotes approximately ten
(10%) percent of his time to the Company's affairs.
ITEM 2. PROPERTIES
The Company's principal offices are located at 4010 N.W. 36th Avenue,
Miami, Florida 33142. The Company has been leasing offices and facilities
from its former subsidiary, Aircraft Modular Products, Inc. ("AMP"). The
Company occupies its premises pursuant to a triple net lease at an annual
aggregate rental of $72,000. In addition to monthly rental, the lessee is
responsible for its pro-rata share of taxes, insurance and utilities, all
services provided to the premises and repairs to the interior of the buildings
(including but not limited to all windows, doors, electrical, heating,
plumbing and air conditioning systems). In the Company's view, the terms of
its leasehold were very competitive with comparable facilities in the local
area. The Company's telephone number at that location is (305) 635-6060. The
Company leases approximately 18,000 square feet, consisting of 6,000 square
feet of offices and 12,000 square feet of warehousing. The lease expires on
September 30, 1997. The Company is currently seeking relocation space in the
same general area.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company was a party to the following material legal proceedings in
this reporting period (year ended April 30, 1995):
1. United States of America vs. Jetborne International, Inc., Case No.
91-199-CR-MARENO, United States District Court for the Southern
District of Florida.
This was a previously reported criminal action in which a judgment
reflecting a concluded settlement agreement was entered against Jetborne, Inc.
on December 3, 1992.
During the third week of March, 1994, however the Company was informed by
the Export Controls Division of the U.S. Department of State that it is
debarred (prohibited) from certain export activities by applicable federal
statute as a result of its entry into the settlement agreement. The Company
intends to seek reinstatement as an Export Control licensee at some
undetermined point in the future. Preparation and subsequent consideration of
any such petition and application once prepared and filed will require a
further significant period of time before determination of reinstatement is
made.
2. Department of Environmental Resources Management ("DERM")
The Company was notified of environmental violations on the Company's
premises by Dade County Department of Environmental Resources Management
("DERM"). The Company has certain potential liabilities for these alleged
violation areas. Any environmental proceedings regarding the operation of the
Company's previous subsidiaries will have an adverse liability effect upon the
Company directly and through prior agreement in the case.
The alleged violations stem from the discharge of waste waters containing
metals, hydrocarbons, oil and grease to the ground and groundwaters in the
vicinity of the Company's facilities by prior tenants, including AMP's
predecessor. The Dade County Department of Environmental Resources Management
("DERM") ordered a hook-up into the city sewer system, abandonment of an
underground storage tank and removal of allegedly contaminated soil and
sludge. Although the owner of the property (then, Allen Blattner, the
Company's former president and principal shareholder, later, Finstock
Investments, Ltd., the Company's principal stockholder, and now, following
mortgage foreclosure, and subsequent acquisition, AMP) is theoretically
responsible for the environmental cleanup of pre-existing conditions, the
Company nevertheless hired and partially paid for environmental firms to
assist it in remedying the alleged violations. Remedial plans were developed
and approved by DERM and the sewer hook-up was completed. A certificate of
completion of construction was submitted. A remedial plan for clean-up of
<PAGE>
violations, estimated at a remaining cost of approximately $40,000, was also
submitted to DERM for approval which is, now years later, still pending. See
Item 13., "Certain Relationships and Related Transactions". See Item 1.,
"Business - Government Regulation".
3. Jetborne International, Inc. vs. Allen Blattner, et al
The Company holds a Final Judgment against its former officer and
director, Allen Blattner in the original principal amount of $4,512,600. The
Company also holds a Final Judgment against its former officer and director
Michael Levkovitz in the original principal amount of $514,212. As in the
case of Allen Blattner, the company considers Michael Levkovitz to be
uncollectable.
4. Jetborne International, Inc. vs. Deutsche Lufthansa Aktiengesellschaft,
Case No. 91-16169-BKC-AJC.
During April, 1992, Lufthansa canceled a consignment agreement due to the
Company's bankruptcy filing the previous December. The Company contested the
termination and in September, 1993, the consignment agreement was renewed by
an Addendum to the original agreement. As a condition of the Addendum,
Jetborne agreed to a payment plan regarding the pre-petition debt, paid
$20,000 to reduce that debt and placed $10,000 on deposit. In addition, in
September, 1993 the Company brought Lufthansa post-petition debt current
through May, 1993. The Company then became concerned about non-performance on
the part of Lufthansa and withheld further payment pending receipt of
additional consignment inventory as set out in the amended agreement.
Lufthansa once again notified the Company in November, 1993 that the agreement
was to be terminated, this time for non-payment. As a direct consequence of
that termination Jetborne filed suit against Lufthansa in the Bankruptcy Court
on three counts: (1) Breach of the Consignment Agreement; (2) Willful
violation of the automatic stay; and (3) Breach of the Addendum to the
Consignment Agreement. On January 9, 1996, the Company entered into an
agreement with Lufthansa in settlement of the on-going litigation. Under the
settlement agreement, the consignment agreement and its modifications were
terminated. The Company agreed to pay a total of $120,000 to Lufthansa by
January 20, 1997 pursuant to an agreed schedule in exchange for assignment by
Lufthansa to the Company of a bankruptcy court claim against Jetborne, Inc. in
the amount of $80,180.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None. The Company has never distributed an annual report to shareholders
or filed or distributed proxy statement materials in connection with an Annual
Meeting. Since completion of its initial public offering, the Company has
never held an Annual Meeting (through September 1, 1997).
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a)(1)(i) Market Information. The Company's Common Stock was first
offered to the public on May 20, 1987, at a price of $3.75 per share. Trading
in the Common Stock began on the National Market Quotation System (NASDAQ)
shortly thereafter.
On October 4, 1991, due to the Company's extended record of delinquency
with regard to periodic filings required under the Securities & Exchange Act
of 1934 and its continuing failure to comply with the proxy and shareholder
disclosure requirements of Rule 14 promulgated under the Securities Act of
1933, the Company's Common Stock was delisted from quotation on the NASDAQ
system. Since delisting, there has been (and now is) no established public
trading market for the Company's Common Stock. To the Registrant's knowledge
and belief, there are no broker/dealers making a market in its securities at
present (September 1, 1997).
(a)(1)(iii) The following table sets forth the range of bid and asked
prices for the Common Stock on the Over-The-Counter Market for the periods
indicated, as reported by the National Quotation Bureau, Inc. The figures
shown represent inter-dealer quotations without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
COMMON STOCK
<TABLE>
<CAPTION>
Period Bid Price Asked Price
High Low High Low
<S> <C> <C> <C> <C>
First Quarter, 1991 $0.75 $0.31 $0.88 $0.44
Second Quarter, 1991 $0.75 $0.38 $0.81 $0.38
Third Quarter, 1991 $0.44 $0.13 $0.56 $0.13
Fourth Quarter, 1991 $0.19 $0.19 $0.28 $0.28
First Quarter, 1992 No Market No Market
Second Quarter, 1992 No Market No Market
Third Quarter, 1992 No Market No Market
Fourth Quarter, 1992 No Market No Market
First Quarter, 1993 No Market No Market
Second Quarter, 1993 No Market No Market
Third Quarter, 1993 No Market No Market
Fourth Quarter, 1993 No Market No Market
First Quarter, 1994 No Market No Market
Second Quarter, 1994 No Market No Market
Third Quarter, 1994 No Market No market
Fourth Quarter, 1994 No Market No market
First Quarter, 1995 No Market No Market
</TABLE>
<PAGE>
Continued..
COMMON STOCK
<TABLE>
<CAPTION>
Period Bid Price Asked Price
High Low High Low
<S> <C> <C> <C> <C>
Second Quarter, 1995 No Market No Market
Third Quarter, 1995 No Market No market
Fourth Quarter, 1995 No Market No market
First Quarter, 1996 No Market No market
Second Quarter, 1996 No Market No Market
Third Quarter, 1996 No Market No market
Fourth Quarter, 1996 No Market No market
First Quarter, 1997 No Market No market
Second Quarter, 1997 No Market No Market
July 1, 1997 through No Market No Market
September 1, 1997
</TABLE>
(b) Holders. As of September 1, 1997, the approximate number of
record holders of Common Stock of the Registrant was 250. This number does
not include individual stockholders whose shares are held in brokerage name.
See Item 8., "Financial Statements".
(c) Dividends. Registrant has paid no dividends since inception and
does not now anticipate payment of dividends at any time in the future. See
Item 7., Management's Discussion and Analysis of Financial Condition and
Results of Operations.
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is the historical selected financial data with respect to
the Company for the years ended April 30, 1991 through 1995, adjusted for the
Company's sale of its subsidiary Aircraft Modular Products, Inc. in December,
1990 and of the assets of its former subsidiary, Ablam, Inc., in November,
1990, the shutdown of its former subsidiary, Jetborne, U.K., Ltd. during
January, 1992 and the discontinued operations of its former subsidiary,
Advanced Aero Hydraulics, Inc. during July, 1992:
<PAGE>
<TABLE>
<CAPATION>
Summary Income Statement:
As of As of As of As of As of
04/30/95 04/30/94 04/30/93 04/30/92 04/30/91
(3)
<S> <C> <C> <C> <C> <C>
Net Sales $1,125,279 $1,755,763 $ 798,008 $1,109,431 $1,682,481
Net Income(Loss) ($ 701,034) $ 530,691 ($ 164,154) ($ 953,799) $1,235,750
Operating(Loss) ($ 812,652) ($ 192,703) ($ 583,550) ($1,167,573) ($1,635,003) (1)
Profit(Loss) per
Common Share
from continuing
operations ($ 0.06) $ 0.01 ($ 0.02) ($ 0.08) ($ 0.85)
Net Income(Loss)
per Common Sh. ($ 0.06) $ 0.05 ($ 0.03) ($ 0.15) $ 0.22
</TABLE>
<TABLE>
<CAPTION>
Summary Balance Sheet Information
As of As of As of As of As of
04/30/95 04/30/94 04/30/93 04/30/92 04/30/91
(3)
<S> <C> <C> <C> <C> <C>
Total Assets $3,749,342 $4,408,316 $7,326,009 $7,813,277 $8,628,296
Inventories (Net) $3,248,136 $3,656,051 $3,667,464 $3,802,540 $4,120,822
Stockholders' loans
receivable
(payable) $ 3,000 $ -0- $ -0- $ -0- $ -0-
(2)
Notes payable -
current $ 15,828 $ 22,619 $ 318,504 $ 330,026 $ 337,412
Long-Term Liab. $ 138,619 $ 148,356 $ 232,113 $ 297,612 $ 374,005
Minority Interest
in Subsidiary $ -0- $ -0- $ 559,000 $ 559,000 $ 559,000
Stockholders'
Equity $3,347,763 $4,048,797 $3,316,907 $3,481,061 $4,434,860
</TABLE>
(1) The Registrant sustained losses from continuing operations for the year
ended April 30, 1991. Net Income realized results primarily from sale of the
Company's subsidiary, Aircraft Modular Products, Inc. ("AMP") in December,
1990.
(2) Effective April 30, 1991, in keeping with its auditor's recommendation,
the Company wrote-off as uncollectable a total of $3,511,470 of loans and
notes receivable from shareholders who were former officers including Allen
Blattner, David Blattner and Michael Levkovitz. Nevertheless, the Company, on
June 10, 1994, secured entry of a Final Default Judgment against Allen
Blattner for $4,512,600 in the U.S. Bankruptcy Court in Miami, Florida.
However, the Company considers the judgment debt to be uncollectible. See
<PAGE>
Item 3., "Legal Proceedings" and Item 13., "Certain Relationships and Related
Transactions".
(3) The effects of the Registrant's Plan of Reorganization, which was
confirmed by the U.S. Bankruptcy Court at hearing on August 24, 1993, were
reflected in the fiscal year ended April 30, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Sales of $1,125,279 for the fiscal year ended April 30, 1995 represented
a decrease of $630,484 (36%) over the same period a year earlier. Sales of
$1,755,763 for the 12 month period ended April 30, 1994 represented an
increase of $975,755 (220%) over the year ended April 30, 1993. For the year
ended April 30, 1993, sales were $798,008, a decrease of $311,423 (28%) over
the comparable period ended April 30, 1992. For the year ended April 30,
1992, sales were $1,109,431, a decrease of $573,050 (34%) over the comparable
period ended April 30, 1991. For the year ended April 30, 1991, sales were
$1,682,481, a decrease of $5,031,237 (75%) over the comparable period ended
April 30, 1990. Parts sales were $1,125,279 in 1995 as compared to $1,755,763
in 1994, $798,008 in 1993, $1,109,431 in 1992 and $1,682,481 in 1991. Sales
in fiscal 1992, 1991 and, to a lesser extent, in 1993, were adversely affected
by cash shortages and increased competition. The increase in sales in 1994
was due primarily to increased brokerage activity. Despite continuing
brokerage transactions in 1995, sales were down by some 36% due once again to
inventory depletion, cash shortages and more difficult competition.
Gross margins on sales of the Company were 19.4% in 1995 as compared to
36.3% in 1994, 46% in 1993, 40.7% in 1992 and 48.2% in 1991. Fiscal 1995
margins continued to be reduced due to increased brokerage activity which tend
to yield a lower markup than stock sales.
Selling, general and administrative expenses for the Company were
$1,031,091 for the year ended April 30, 1995 as compared to $830,070 for the
year ended April 30, 1994, $950,963 for the year ended April 30, 1993,
$1,619,039 for the year ended April 30, 1992 and $2,446,064 for the year ended
April 30, 1991.
Net (losses) from continuing operations for the year ended April 30, 1995
were ($701,034) as compared to net profit from continuing operations for the
year ended April 30, 1994 of $116,658, and net (losses) of ($67,922),
($486,484) and ($4,739,434), respectively for the three preceding years.
<PAGE>
<TABLE>
<CAPTION>
The Company's Earnings (Loss) per Share
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
From Continuing Operations ($ .06) $ .05(a) ($ .01) ($ .07) ($ .84)
From Discontinued Operations $ .00 $ .00 ($ .01) ($ .07) $1.07
From Minority Interest $ .00 $ .00 ($ .01) ($ .01) ($ .01)
Net Income (Loss) per
Share $( .06) $ .05 ($ .03) $( .15) $ 0.22
</TABLE>
(a) Includes an extraordinary item, a gain recognition on discharge of
debt, net of income tax ($.04 per share); See Note 1., "Notes to Financial
Statements".
(1) Liquidity
The Company's liquidity continues to be critically poor. Sales in fiscal
1995 have decreased and expenses have increased. There is no foreseeable
trend or event which will improve the situation at April, 1996. At April 30,
1994, the Company had emerged reorganized from its status as
Debtor-In-Possession in Chapter 11 Bankruptcy by order of the U.S. Bankruptcy
Court. For the year ended April 30, 1994, the Company realized a net profit
in the amount of $530,691, or $0.05 per share, due primarily however only to
the gain resulting from discharge of debts under the confirmed bankruptcy
reorganization plan.
After May 1, 1990, significant increases in the shareholder loan account
of the Company's former president, Allen Blattner, worsened and intensified
the Company's cash flow difficulties. The Company's auditors and management
and directorship came to consider these amounts due to the Company to be
uncollectable. The Company wrote off more than $3,926,716 at that time in
loans to shareholders, all of whom are former officers and directors.
Notwithstanding subsequent efforts, which resulted in the entry of a final
judgments in the aggregate principal amount of $5,026,812, it continues to be
unlikely, since the Company views them as uncollectible, that those debts will
ever have a positive effect on the Company's future cash flow. See Item 8.,
"Notes to Financial Statements"; Item 13., "Certain Relationships and Related
Transactions" and Item 3., "Legal Proceedings".
In October, 1992, the Company's former subsidiary, Jetborne, Inc.,
entered into a plea bargain agreement with the United States Customs Service
to settle charges stemming from violations of the Export Administration Act
and the Arms Export Control Act pursuant to an investigation which began in
March, 1990. Jetborne, Inc. pleaded guilty to two counts and paid a fine of
$25,260 in order to end the criminal matter and to avoid additional extensive
litigation costs and the possibility of substantially higher fines and
<PAGE>
penalties. A judgment reflecting the settlement agreement was entered against
Jetborne, Inc. in December, 1992. During March, 1994, however, the Company
was initially informed by the Export Controls Division of the U.S. Department
of State that it is "debarred" (prohibited) from certain export activities by
applicable federal statute as a result of the settlement agreement. The
Company still plans to petition for relief from debarment and for
reinstatement as a permissible Export Controls licensee at some indeterminate
time in the future. Preparation and subsequent consideration of the Company's
petition and application when undertaken will require a number of months. The
Company has not been engaged in the export of controlled materials so the
debarment is believed as having no immediate adverse effect on its business.
The Plan was confirmed by the Bankruptcy Court at hearing in Miami on
August 24, 1993 and by the Court's order of confirmation entered September 17,
1993. On August 28, 1993, Messrs. Dobronsky, Trustee and Alouf entered into a
voting trust agreement governing their combined 53.8% ownership interest in
the Company. See Item 12., Security Ownership of Certain Beneficial Owners
and Management. The Company emerged from bankruptcy as a publicly-held entity
consolidated with its former subsidiary, Jetborne, Inc., and is now operating,
albeit with difficulty from poor cash flow and liquidity, free of prior
restraints.
The Company was unsuccessful seeking a line of credit in order to have
funds available primarily for brokerage transactions in addition to trade
credit which has been attained. The Company is also working with other
companies on a commission basis to increase brokerage sales so that costs
involved will be transaction driven. Financing is also being sought to be
able to purchase fresh inventory lots where the inventory will act as the
security for the financing. These efforts too were unsuccessful. There was
no present assurance whatsoever that any such credit or financing would be
available or obtained. At April 30, 1996 there was no assurance that the
Company's persistent liquidity problems would be otherwise improved. On
August 10, 1997 Messrs. Dobronsky and Alouf completed transfer of a total of
6,400,000 shares of the Company's restricted Common Stock, approximately 54%
of the Company's issued and outstanding capital stock to Bodstray Company
Limited, a Hong Kong corporation. With transfer of control in this
transaction, Bodstray intended to assist with funding the Company's operations
as required, in its discretion, with debt financing.
The Company continued to seek additional parts consignment arrangements.
Consignment, in effect, provides the Company with additional inventory without
purchases adversely affecting its liquidity, although markups are lower than
those generally realized from sales from owned stock.
<PAGE>
(2) Capital Resources
In December, 1996, the Company acquired an additional $2,700,000 in parts
inventory from ADAR, a subsidiary of RADA Electronic Industries, Ltd., an
Israeli corporation ("RADA"). RADA extended credit to the Company for the
purchase but during the ensuing eight (8) months, the Company was unable to
pay for the newly acquired inventory.
On August 15, 1997, following a period of negotiation and discussion, the
Company and RADA agreed to satisfy the unpaid RADA receivable through the
issuance of restricted Common Stock to RADA, effectively transferring
forty-nine (49%) percent of the ownership interest in the Company to RADA in
full and final satisfaction of the $2,700,000 parts inventory receivable.
On August 10, 1997, the Company's Board of Directors determined to
reverse-split the Company's Common Stock on a one share for ten shares basis,
effective September 30, 1997. In addition to improving the Company's position
with respect to re-establishment of a trading market in its securities, the
one-for-ten reverse-split would enable the Company to issue sufficient new
shares from its authorized but previously unissued Common Stock to satisfy the
acquisition of forty-nine (49%) percent ownership by RADA, as agreed. The
Company's majority control shareholder, Bodstray Company, Ltd. consented to
the reverse-split at once and while the Company is in the process of seeking
the consent of its shareholders, Bodstray's approval insures implementation of
the reverse-split, effective September 30, 1997. Following its completion,
the Company will issue 1,141,630 (post-reverse-split) shares to RADA
Electronic Industries, Ltd. to complete the agreed stock for inventory
transaction.
Other Considerations
In February, 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes". Implementation of this statement is required for fiscal years
beginning after December 15, 1992. The Company accounts for income taxes in
accordance with this statement; there has been no corresponding effect on the
Company's financial statements at April 30, 1995, April 30, 1994 or April 30,
1993.
Inflation has had a minimal impact on the operations and finances of the
Company in this reporting period.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Pages F-1 through F-26, attached.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the Registrant's two most recent fiscal years and during the
subsequent interim period (through September 1, 1997), there have been no
disagreements on any matter of accounting principles or practices.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)(b) Identification of Directors and Executive Officers
The directors, executive officers, former directors and former executive
officers of the Company are identified as follows:
Name Position with Company Age
Eles Dobronsky Chairman of the Board, 55
Chief Executive Officer
Amos Alouf Former President/Treasurer/ 63
Director
(Appointed June 15, 1994;
Resigned March 10, 1997)
Raymond Harkus Director 47
Until March 10, 1997, Mr. Alouf was the Company's only officer. Mr.
Alouf resigned on March 10, 1997. The Company's former Treasurer/Chief
Financial Officer, Stephen G. Martin resigned in June of 1995. Through March
10, 1997, management of the Company's affairs in this reporting period were
accomplished primarily through Mr. Alouf's efforts augmented by those of Mr.
Dobronsky. Mr. Alouf devoted 100% of his time to the Company's affairs. Mr.
Dobronsky devotes approximately 10% of his time to the Company's affairs. The
Company considers that its management resources are more than strained with
this single officer, minimal attention circumstance. The "thin" management
situation (at September, 1997) will be alleviated in the near future with the
arrival of RADA Electronic Industries, Ltd. as a principal stockholder. On
September 15, 1997, RADA entered into an agreement to acquire an additional
twenty-six (26%) percent of the Company's Common Stock from Bodstray Company
Limited for 700,000 shares of RADA's ordinary shares. When completed, the
<PAGE>
RADA purchase from Bodstray will bring RADA's ownership interest in the
Company to seventy-five (75%) percent. RADA Electronic Industries, Ltd. Is a
publicly-held Israeli corporation listed on the NASDAQ Small Cap Market.
Directors of the Company are to be elected at the Company's annual
meeting of stockholders to serve three year terms or until their successors
are elected and qualified. Since completion of its initial public offering,
all of the Company's directors have however, been appointed to vacancies by
the then existing Board. The Company has not held an annual stockholders
meeting since completion of its initial public offering. The Company plans to
solicit proxies for, and hold an Annual Meeting as soon as practicable. In
theory, the Company has a staggered board of directors - when the term of each
director expires, successors are to be elected to respective three-year
terms. Officers are appointed by the Board of Directors and serve at its
discretion and pleasure.
(e) Business Experience. The following information is supplied with
regard to the Company's directors, executive officers, former directors and
former officers.
Eles Dobronsky was appointed Chairman of the Company's Board of Directors
on May 6, 1991 and President, Secretary/Treasurer of the Company on March 10,
1997. Mr. Dobronsky is an affiliate of the Company's previous controlling
shareholder, Finstock Investments, Inc. Mr. Dobronsky is, in addition, an
Israeli lawyer who has been a practicing attorney in the city of Tel Aviv in
his own firm for more than five years. Mr. Dobronsky holds the L.L.B. degree
from Hebrew University in Jerusalem.
Amos Alouf was employed by Jetborne International, Inc. from a point
prior to 1987 through February, 1991 in a non-officer, non-director position.
On May 10, 1991, Mr. Alouf was re-employed by Jetborne International, Inc. as
its Acting President. The position was later converted to President and
director and is the position that Mr. Alouf occupied until his resignation on
March 10, 1997. From March, 1991 through May 10, 1991, Mr. Alouf was employed
by Jets & Aerospace, Inc. a Miami corporation engaged in essentially the same
business as Jetborne International, Inc. On Mr. Alouf's information and
belief, 25% of Jets & Aerospace was owned by Allen Blattner, the former
President and director of Jetborne International, Inc. with the majority
control of Jets & Aerospace, Inc. being held, again on Mr. Alouf's information
and belief, by a non-affiliate of Jetborne International, Inc. Mr. Alouf made
loans to Jets & Aerospace, Inc. in the aggregate principal amount of
approximately $34,000 and relates that he was to be a 25% owner of that
corporation but that he never received any stock or other evidence of such
ownership and does not now consider himself as ever having been an owner of
stock in Jets & Aerospace, Inc. The aggregate loan to Jets & Aerospace, Inc.
is a demand loan which was outstanding and unpaid at March 10, 1997. Mr.
<PAGE>
Alouf is not engaged, directly or indirectly, in the operations, if any, of
Jets & Aerospace, Inc. Mr. Alouf was employed by the Company pursuant to an
employment agreement as its sole officer. See Item 11., "Executive
Compensation", Note 2.
Mr. Alouf attended the Hebrew University in Tel Aviv where he took courses in
its economics and foreign affairs programs.
Raymond Harkus was appointed a director of the Company in May of 1991 in
connection with the assumption of management of the Company by its then
controlling shareholder, Finstock Investments, Ltd. Mr. Harkus is also a fund
raising and investment consultant who owns and operates his own fund raising
and investment consulting Company in the United Kingdom.
ITEM 11. EXECUTIVE COMPENSATION
Compensation
Until his resignation on March 10, 1997, Mr. Amos Alouf devoted 100% of
his time to the Company's affairs. The Company's Chairman, and sole officer
since Mr. Alouf's departure, Mr. Eles Dobronsky, devotes only approximately
10% of his time to the Company's affairs. As reflected in the following Cash
Compensation Table, the total compensation received by Executive Officers
during the year ended April 30, 1995 was $196,231.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Other Restricted All
Name and Annual Stock Options/ LTIP Other
Principal Position Year Salary Bonus Compensation Awards SARS Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eles Dobronsky (4) 1992 $ -0- -- -- -- -- -- --
Chairman of the 1993 $ -0- -- -- -- -- -- --
Board 1994 $ -0- -- $22,400(4) -- -- -- --
1995 $ -0- -- $46,500(4) -- -- -- --
Amos Alouf(1)(2) 1992 $ 88,563 -- -- -- -- -- --
President/ 1993 $ 93,871 -- -- -- -- -- --
Secretary 1994 $ 93,770 -- -- -- -- -- --
1995 $122,308
Stephen G. Martin 1992 $ 63,544 -- -- -- -- -- --
Treasurer (3) 1993 $ 66,351 -- -- -- -- -- --
1994 $ 66,567 -- -- -- -- -- --
1995 $ 73,923
All Executive 1992 $152,107 -- -- -- -- -- --
Officers as a 1993 $160,222 -- -- -- -- -- --
Group (Two 1994 $160,337 -- $22,400(4) -- -- -- --
Persons) 1995 $196,231 -- $46,500(4) -- -- -- --
</TABLE>
<PAGE>
(1) Does not include the automobile allowance or other personal benefits
received. Mr. Alouf was reimbursed by the Company for costs incurred in his
personal lease of an automobile in the aggregate amount of $10,004 in 1994 and
$11,426 in 1995.
(2) Mr. Alouf was appointed President and Director by order of the
Bankruptcy Court on June 15, 1994. He was appointed acting President and
Secretary of the Company on May 10, 1991. He was previously employed by the
Company in a non-officer capacity and was terminated in February, 1991 prior
to the change of control of the Registrant which occurred in June of the same
year. Mr. Alouf has been closely associated with Allen Blattner, the
Company's former president, chairman and principal stockholder and against
whom the Company now holds a Final Judgment in excess of $5,000,000. See
Item 13. "Certain Relationships and Related Transactions" and Item 3., "Legal
Proceedings". From March, 1991 through May 10, 1991, Mr. Alouf was employed
by Jets & Aerospace, Inc. a Miami corporation engaged in essentially the same
business as Jetborne International, Inc. On Mr. Alouf's information and
belief, 25% of Jets & Aerospace was owned by Allen Blattner, the former
President and director of Jetborne International, Inc. with the majority
control of that corporation being held, again on Mr. Alouf's information and
belief, by a non-affiliate of Jetborne International, Inc. Mr. Alouf made
loans to Jets & Aerospace, Inc. in the aggregate principal amount of
approximately $34,000 and relates that he was to be a 25% owner of that
corporation; but that he never received any stock or other evidence of such
ownership and does not now consider himself as ever having been an owner of
stock in Jets & Aerospace, Inc. The aggregate Alouf loan to Jets & Aerospace,
Inc. is a demand loan which remained outstanding and unpaid at March 10, 1997,
the date of Mr. Alouf's resignation as President and director of the Company.
The employment contract between the Company and Mr. Alouf, ordered by
the Bankruptcy Court on June 15, 1994 for five years at $120,000 per annum
plus benefits, was voluntarily transmitted on March 10, 1997 by Mr. Alouf.
(3) Mr. Martin was appointed Treasurer of the Company in April, 1992. He
was previously employed by the Company as its Comptroller, a non-officer
capacity. Mr. Martin left the Company's employ in June, 1995 as the Company's
Chief Financial Officer. Mr. Martin's employment was governed by a contract
which provided for annual salary review and one months prior notice in the
event of termination of the contract by either party. Mr. Martin gave the
requisite notice prior to his departure.
<PAGE>
(4) Mr. Eles Dobronsky, the Company's Chairman since May, 1991, was approved
by the Board of Directors on January 17, 1994 to be remunerated for services
at the rate of $3,000 per month, effective September 17, 1993. On June 15,
1994, his remuneration was increased to $48,000 per annum by order of the
Bankruptcy Court.
Stock Option Plans
Since inception, the Company had adopted several stock option plans for
the benefit of employees and directors of the Company. The Company believes,
that all of the options, as of September 1, 1997, were canceled or have
expired.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 10, 1997, the number of
shares of the Company's Common Stock beneficially owned by each director of
the Company; by each person known by the Company to own beneficially more than
five percent of the Common Stock of the Company outstanding as of such date
and; by the executive officers and directors of the Company as a group. See
Note (5).
(a) Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
(2)(3)
<S> <C> <C> <C>
Common Stock Finstock Investments, Ltd.
4010 N.W. 36th Ave. 2,892,000(1) 24.3%
Miami, Florida 33412
(1)(2)(3)
Common Stock Bodstray Company Limited 6,400,000(4) 53.9%
c/o Secretaries Limited
5th Floor, Wing On Centre
111 Connaught Road Central
Hong Kong
Common Stock RADA Electronic Industries, Ltd. (5)
80 Express Street
Plainview, NY 11803
</TABLE>
<PAGE>
(b) Security Ownership of Management
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
(2)(3)
<S> <C> <C> <C>
Common Stock Eles Dobronsky, 221,850 (4) 1.9%
Trustee
4010 N.W. 36th Avenue
Miami, FL 33412
Common Stock Amos Alouf -0- (4) 0.0%
4010 N.W. 36th Avenue
Miami, FL 33142
Common Stock Stephen G. Martin -0- 0.0%
4010 N.W. 36th Avenue
Miami, FL 33142
</TABLE>
(1) Finstock Investments, Ltd. owns 1,302,650 shares, and holds proxies
for an additional 1,589,350 shares as reported in its filing of 1991 Form
13(d), Amendment No. 5. By virtue of its reported total voting power,
Finstock controlled the Registrant from May, 1991 through August, 1993.
(2) Based upon 11,882,280 (pre-reverse split) shares being issued and
outstanding.
(3) BankAtlantic had been deemed by the Company to be the beneficial owner
of 750,000 shares of the Company's Common Stock registered in Allen
Blattner's name since those shares were previously held by BankAtlantic
pursuant to the terms of a pledge agreement, with sole power to vote the
shares, and later held by BankAtlantic pursuant to a final judgement entered
against Allen Blattner. Under the terms of a subsequent bankruptcy settlement
agreement, BankAtlantic returned the 750,000 shares to the Company following
confirmation by the Bankruptcy Court of the Company's reorganization Plan and
the returned shares were subsequently canceled.
(4) As an aspect of the Company's Bankruptcy Plan of Reorganization which
was confirmed by a court order entered September 17, 1993, the Company's
Chairman, Eles Dobronsky, as trustee, and the Company's President, Amos Alouf,
each acquired 3.2 Million shares of the Company's authorized but unissued
Common Stock. The acquisition placed Messrs. Dobronsky, Trustee and Alouf in
control of approximately 54% of the Company's voting Common Stock. The stock
acquired was subject to and governed by a certain voting trust agreement
<PAGE>
entered into by Messrs. Dobronsky, Trustee and Alouf. The stock in question
was transferred to Bodstray Company Limited in transactions completed during
August, 1997 and the voting trust was mutually terminated.
(5) On August 15, 1997, RADA Electronic Industries, Ltd. acquired forty-
nine (49%) percent of the Company's ownership in a transaction to be completed
after the Company's reverse one-for-ten stock split is implemented on
September 30, 1997. The Company had purchased $2,700,000 of parts inventory
from a subsidiary of RADA in December, 1996 and through June, 1997 was unable
to satisfy the RADA receivable due to poor liquidity. Following negotiation
and discussion, the Company and RADA agreed to satisfy the parts inventory
purchase obligation through issuance of new common stock to RADA representing
a forty-nine (49%) percent ownership interest in the Company. Completion of
the transaction required implementation of a one-for-ten reverse split of the
Company's Common Stock, an action deemed appropriate by the Board for purposes
of improving the prospects for re-establishment of a trading market for the
Company's securities in any event. The one-for-ten reverse split is to be
effective September 30, 1997 as approved, among others, by the Company's
majority control shareholder, Bodstray Company Limited. On September 12,
1997, RADA entered into a certain capital stock purchase agreement with
Bodstray Company Limited pursuant to which RADA acquires an additional
twenty-six (26%) percent ownership interest in the Company with Bodstray
retaining a minor amount of its shares in the Company's restricted Common
Stock. When all is completed, RADA Electronic Industries, Ltd. will own
seventy-five (75%) percent of the Company's issued and outstanding Common
Stock. RADA Electronic Industries, Ltd. is listed on the NASDAQ Small Cap
Market.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
The Company's former subsidiary, Aircraft Modular Products, Inc. ("AMP")
leased its offices and manufacturing facilities from Finstock, the Company's
then controlling stockholder and subsequently acquired the property itself.
The Company's current lease with AMP commenced October 1, 1992 and expires in
September, 1997 at an aggregate annual rental of $72,000. The Company is
currently seeking new leased space in the same general vicinity.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements:
Independent Auditor's Report dated June 1, 1995, except as to later
matters reflected therein.
Balance Sheets - April 30, 1995 and 1994.
Statements of Income (Loss) - Years ended April 30, 1995, 1994 and
1993.
Statements of Changes in Stockholders' Equity - Years ended April
30, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows - Years ended April 30, 1995,
1994 and 1993.
Notes to Financial Statements.
2. Schedules:
Schedule II - Amounts Receivable from Related Parties, Underwriters,
Promoters and Employees Other Than Related Parties for Years Ended
April 30, 1995, 1994 and 1993.
Schedule VII - Guarantees of Securities of Other Issuers April 30,
1995.
Schedule IX - Short-term Borrowings for the Year Ended April 30,
1995.
Exhibit II - Schedule of Computations of Earnings (Loss) per Share
for the Years ended April 30, 1995, 1994 and 1993.
(a)(3) Exhibits:
(b)(3) Certificate of Incorporation and By-Laws:
Articles of Incorporation, as amended, and By-Laws, as amended,
incorporated by reference to the filing of the original registration
statement on Form S-18, Amendment No. 2.
<PAGE>
(b)(4) Instruments defining the rights of security holders, including
indentures:
Stockholder's Agreement dated February 2, 1987 incorporated by
reference to the filing of the amended registration statement on
Form S-18 and to the Registrant's Form 10-K for the fiscal year
ended 4/30/87.
(b)(9) Voting Trust Agreement:
Voting trust letter agreement dated August 28, 1993 between Eles
Dobronsky, Trustee and Amos Alouf - Incorporated by reference to
Form 10-K for the fiscal year ended April 30, 1992.
(b)(10) Material Contracts:
1987 Incentive Stock Option Plan - Incorporated by reference to
Registration Statement on Form S-18.
1989 Stock Option Plan - Incorporated by reference to Form 10-K for
fiscal year ended April 30, 1990.
Directors' Stock Option Plan - Incorporated by reference to Form
10-K for fiscal year ended April 30, 1990.
Amendment to 1987 Incentive Stock Option Plan - Incorporated by
reference to Form 10-K for fiscal year ended April 30, 1990.
(b)(11) Statement Re: Computation of per share income (loss):
See Note 1., Notes to Consolidated Financial Statements and
Statements of Income (Loss) Years Ended April 30, 1995, 1994 and
1993.
(b)(12) Statements Re: Computation of Ratios:
Not applicable.
(b)(13) Annual Report to Security Holders, Form 10-Q or quarterly report to
security holders:
Not applicable. The Registrant has never submitted an Annual Report
to its Stockholders.
<PAGE>
(b)(18) Letter re: Change in accounting principles:
Not applicable.
(b)(19) Previously unfiled documents:
Not applicable.
(b)(21) Other Documents or Statements to Security Holders:
Not applicable.
(b)(22) Subsidiaries of the Registrant: Not Applicable;
Former subsidiaries Jetborne, Inc. (eliminated in the Company's
confirmed plan of bankruptcy reorganization on September 17, 1993);
Jetborne UK Limited (ceased operations and wound up under U.K.
Insolvency Act in January, 1992); AAH (ceased operations July 31,
1992); Aircraft Modular Products, Inc. (Sold December, 1990);
Ablam Sound Productions, Inc. (ceased operations November 26, 1990).
(b)(23) Published report regarding matters submitted to vote of Security
Holders:
Note applicable. No matters have ever been submitted by the
Registrant for a shareholder vote.
(b)(24) Consents of experts and counsel:
Not applicable
(b)(25) Power of Attorney:
Not applicable
(b)(28) Additional Exhibits:
(b) The Registrant filed no reports on Form 8-K during the third quarter
of 1995 or through the subsequent period ended July 31, 1997. On
September 25, 1997, the Company filed a Current Report on Form 8-K
reporting a capital stock for inventory transaction with RADA
Electronic Industries, Ltd. and the September 30, 1997 one share for
ten shares reverse-split of its Common Stock.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of
Florida, on the 19th day of September, 1997.
JETBORNE INTERNATIONAL, INC.
BY:/s/Eles Dobronsky
Eles Dobronsky, Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signatures Title Date
i. Principal Executive Officers
President/
/s/Eles Dobronsky Chairman 09/19/97
Eles Dobronsky
ii. Principal Financial and
Accounting Officer
/s/Eles Dobronsky Treasurer/CFO 09/19/97
Eles Dobronsky
iii. A Majority of the Board of
Directors
Director __/__/97
Raymond Harkus
/s/Eles Dobronsky Director 09/19/97
Eles Dobronsky
JETBORNE INTERNATIONAL, INC.
FINANCIAL STATEMENTS
APRIL 30, 1995
<PAGE>
JETBORNE INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
Item 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
Financial Statements:
Balance Sheets
April 30, 1995 and 1994
Statements of Income (Loss)
For the years ended April 30, 1995, 1994 and 1993
Statements of Changes in Stockholders' Equity
For the years ended April 30, 1995, 1994 and 1993
Statements of Cash Flows
For the years ended April 30, 1995, 1994 and 1993
Notes to Financial Statements
Financial Statement Schedules (included in Item 14.)
Schedule II - Amounts Receivable From Related
Parties and Underwriters, Promoters and
Employees Other Than Related Parties
Schedule VII - Guarantees of Securities of Other Issuers
Schedule IX - Short-term Borrowings
Exhibit II - Schedule of Computations of Earnings (Loss) per Share
F-1
<PAGE>
NORMAN A. ELIOT & CO.
CERTIFIED PUBLIC ACCOUNTANTS
Norman A. Eliot, C.P.A. 9400 South Dadeland Boulevard
Florence L. Krantz, C.P.A. Miami, Florida 33156
John Blumenthal, C.P.A. Phone: (305) 670-4444
---- Fax: (305) 670-0105
Vivian R. Shariff, C.P.A.
Ramesh Singh, C.P.A.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jetborne International, Inc.
Miami, FL 33142
We have audited the balance sheets of Jetborne International, Inc. as of
April 30, 1995 and 1994, and the related statements of income (loss),
changes in stockholders' equity, and cash flows for the years ended April
30, 1995, 1994 and 1993 and the schedules listed in the Index at Item 14.
These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and schedules 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.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jetborne
International, Inc. at April 30, 1995 and 1994, and the results of its
operations and its cash flows for the years ended April 30, 1995, 1994
and 1993 in conformity with generally accepted accounting principles, and
the schedules referred to above present fairly, in all material respects,
when read in conjunction with the related financial statements, the
information therein set forth.
The accompanying financial statements, presented on pages F-4, F-5, F-6,
and F-7 have been prepared assuming that the Company will continue as a
going concern. As described in Note 2 to the financial statements, the
Company has experienced significant net cumulative losses and has
incurred significant negative cash flows from operations resulting in the
Company having difficulty meeting its obligations. The continued
existence of the Company is dependent on the ability of the Company to
successfully implement management's plans which are also described in
Note 2. The foregoing conditions raise substantial doubt about the
F-2
Members: American Institute of Certified Public Accountants
Florida Institute of Certified Public Accountants
<PAGE>
INDEPENDENT AUDITORS' REPORT
(continued)
Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible
inability of Jetborne International, Inc. to continue as a going concern.
Miami, Florida
June 1, 1995, except
February 29, 1996 as to
certain matters referred to
in Notes 1, 2, 5, 9, and 15
for events that took place
on August 2, 1995, January 9,
1996, January 18, 1996, February /s/Norman A. Eliot & Co.
14, 1996 and February 29, 1996 Norman A. Eliot & Co.
F-3
<PAGE>
JETBORNE INTERNATIONAL, INC.
BALANCE SHEETS
APRIL 30, 1995 AND 1994
A S S E T S
-----------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 86,235 $ 301,106
Accounts receivable:
Trade, net of allowance for doubtful
accounts ($3,607 and $15,996 1995
and 1994, respectively)(Notes 1 and 7) 133,567 131,779
Other 3,535 8,036
Stockholder loan receivable 3,000 0
Inventories (Notes 1, 5 and 7) 3,248,136 3,656,051
Prepaid expenses and
other current assets 23,970 19,029
----------- -----------
Total Current Assets $ 3,498,443 $ 4,116,001
----------- -----------
PROPERTY AND EQUIPMENT (Notes 1 and 6) $ 633,816 $ 625,247
Less: Accumulated depreciation and amortization 389,148 375,523
----------- -----------
Net Book Value 244,668 249,724
----------- -----------
OTHER ASSETS:
Security deposits and other assets $ 6,231 $ 42,591
----------- -----------
TOTAL ASSETS $ 3,749,342 $ 4,408,316
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4A
<PAGE>
JETBORNE INTERNATIONAL, INC.
BALANCE SHEETS
APRIL 30, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable (Note 7) $ 15,828 $ 22,619
Current maturities of long-term debt (Note 8) 68,302 51,489
Accounts payable 159,197 90,661
Income taxes payable (Note 11) 0 10,000
Customers' deposits 1,552 0
Accrued expenses 86,383 87,883
----------- -----------
Total Current Liabilities $ 331,262 $ 262,652
----------- -----------
LONG-TERM DEBT, net of current maturities
(Note 8) $ 70,317 $ 96,867
----------- -----------
COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
(Notes 9, 12, 14, and 15)
STOCKHOLDERS' EQUITY (Notes 1, 9, 10, and 15):
Common stock, $.01 par value (14,000,000
shares authorized; 11,882,280 and 12,635,780
shares issued at April 30, 1995 and 1994) $ 118,823 $ 126,358
Additional paid-in capital 5,097,251 5,093,480
Retained earnings (deficit) (1,868,311) (1,167,277)
Treasury stock, 0 and 753,500
shares at April 30, 1995 and 1994, at cost 0 (3,764)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,347,763 4,048,797
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,749,342 $ 4,408,316
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4B
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1993
1995 1994 (Note 1)
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $ 1,125,279 $ 1,755,763 $ 798,008
COST OF SALES 906,840 1,118,396 430,595
----------- ----------- -----------
GROSS PROFIT $ 218,439 $ 637,367 $ 367,413
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 1,031,091 830,070 950,963
----------- ----------- -----------
OPERATING LOSS $ (812,652) $ (192,703) $ (583,550)
------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest and other income $ 96,083 $ 316,304 $ 592,843
Interest expense (5,166) (6,943) (77,215)
Recovery of stockholders' notes
and loans receivable (Note 4) 12,500 0 0
----------- ----------- -----------
Net Other Income 103,417 309,361 515,628
----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES (CREDIT) $ (709,235) $ 116,658 $ (67,922)
INCOME TAXES (CREDIT) (Note 11) (8,201) 0 0
----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (FORWARD) $ (701,034) $ 116,658 $ (67,922)
------------ ----------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5A
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1993
1995 1994 (Note 1)
----------- ----------- -----------
<S> <C> <C> <C>
INCOME (LOSS) FROM
CONTINUING OPERATIONS (FORWARDED) $ (701,034) $ 116,658 $ (67,922)
------------ ----------- ------------
DISCONTINUED OPERATIONS (Note 3):
Loss from discontinued
operations, net of income taxes $ 0 $ 0 $ (40,332)
----------- ----------- ------------
INCOME (LOSS)
BEFORE EXTRAORDINARY
ITEM AND MINORITY INTEREST $ (701,034) $ 116,658 $ (108,254)
EXTRAORDINARY ITEM:
Gain recognition on discharge of
debt net of $10,000 provision
for income taxes (Note 1) 0 414,033 0
----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY
INTEREST $ (701,034) $ 530,691 $ (108,254)
MINORITY INTEREST (dividend
requirement on preferred
stock of a subsidiary)(Note 10) 0 0 55,900
----------- ----------- -----------
NET INCOME (LOSS) $ (701,034) $ 530,691 $ (164,154)
=========== =========== ===========
EARNINGS (LOSS) PER SHARE (NOTE 1)
Continuing operations $ (0.06) $ 0.01 $ (0.02)
Net income (loss) (0.06) 0.05 (0.03)
WEIGHTED AVERAGE COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING (Note 1) 11,882,280 9,730,636 6,232,280
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5B
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Number of shares
of common stock Amounts
--------------------- --------
Treasury Common
Issued Stock Stock
---------- --------- --------
<S> <C> <C> <C>
BALANCE, APRIL 30, 1992 (Note 1) 6,235,780 3,500 $ 62,358
Net loss - - -
---------- -------- --------
BALANCE, APRIL 30, 1993 (Note 1) 6,235,780 3,500 $ 62,358
Net income - - -
Common stock issued (Notes 1, 9 and 10) 6,400,000 - 64,000
Common stock acquired
on confirmation of plan of
reorganization (Notes 1, 9 and 10) - 750,000 -
---------- -------- --------
BALANCE, APRIL 30, 1994 (Note 1) 12,635,780 753,500 $126,358
Net loss
Common stock retired (753,500) (753,500) (7,535)
---------- -------- --------
BALANCE, APRIL 30, 1995 (Note 1) 11,882,280 0 $118,823
========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6A
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Amounts
-------------------------------------
Additional Retained
Treasury Paid-in Earnings
Stock Capital (Deficit)
---------- ------------ -----------
<S> <C> <C> <C>
BALANCE, APRIL 30, 1992 (Note 1) $ (3,763) $ 4,956,280 $(1,533,814)
Net loss - - (164,154)
-------- ----------- -----------
BALANCE, APRIL 30, 1993 (Note 1) $ (3,763) $ 4,956,280 $(1,697,968)
Net income - - 530,691
Common stock issued (Notes 1, 9 and 10) - 137,200 -
Common stock acquired
on confirmation of plan of
reorganization (Notes 1, 9 and 10) (1) - -
-------- ----------- -----------
BALANCE, APRIL 30, 1994 (Note 1) $ (3,764) $ 5,093,480 $(1,167,277)
Net loss (701,034)
Common stock retired 3,764 3,771
-------- ----------- -----------
BALANCE, APRIL 30, 1995 (Note 1) $ 0 $ 5,097,251 $(1,868,311)
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6B
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Amounts
-------------
Total
Stockholders'
Equity
-------------
BALANCE, APRIL 30, 1992 (Note 1) $ 3,481,061
Net loss (164,154)
------------
BALANCE, APRIL 30, 1993 (Note 1) $ 3,316,907
Net income 530,691
Common stock issued (Notes 1, 9 and 10) 201,200
Common stock acquired
on confirmation of plan of
reorganization (Notes 1, 9 and 10) (1)
------------
BALANCE, APRIL 30, 1994 (Note 1) $ 4,048,797
Net loss (701,034)
Common stock retired 0
------------
BALANCE, APRIL 30, 1995 (Note 1) $ 3,347,763
============
The accompanying notes are an integral part of these financial statements.
F-6C
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1993
1995 1994 (Note 1)
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (701,034) $ 530,691 $ (164,154)
Adjustments to reconcile
net income (loss) to net cash
used in operating activities:
Depreciation and amortization 29,958 33,774 45,269
Provision for losses
on trade accounts receivable 3,607 0 1,325
Write-off of trade accounts
receivable, net of recoveries 12,880 7,848 5,971
Loss on discontinued operations 0 0 40,332
Loss from sale of
property and equipment 0 1,671 18,535
Recognition of deferred income 0 (193,518) (316,667)
Forgiveness of debt (9,300) 0 0
Treasury stock received (nominal value) 0 (1) 0
Changes in certain
assets and liabilities:
(Increase) decrease in
trade accounts receivable (18,275) (6,854) 28,666
Decrease in other
accounts receivable 4,501 8,508 37,961
Increase in
stockholder loan receivable (3,000) 0 0
Decrease in inventories 407,915 11,413 135,076
(Increase) decrease in prepaid
expenses and other current assets (4,941) 190,647 (186,327)
Decrease in net
assets of discontinued operations 0 88,294 17,560
(Increase) decrease in
security deposits and other
assets 36,360 (37,054) 30,384
Increase (decrease)
in accounts payable 68,536 (94,454) 24,430
Increase (decrease) in
indebtedness to stockholder 0 (3,600) 3,600
Increase (decrease)
in income taxes payable (10,000) 6,895 3,500
Increase (decrease)
in customers' deposits 1,552 (15,375) (729)
Decrease in accrued expenses (1,500) (160,912) (71,604)
Decrease in net liabilities
discharged in bankruptcy 0 (414,033) 0
---------- ---------- ----------
Net cash used in
operating activities $ (182,741) $ (46,060) $ (346,872)
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7A
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1993
1995 1994 (Note 1)
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment $ (24,902) $ (2,831) $ (34,595)
Proceeds from sale
of property and equipment 0 0 5,161
---------- ---------- ---------
Net cash used
in investing activities (24,902) (2,831) (29,434)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments received
from notes receivable $ 0 $ 0 $ 650,000
Proceeds from issuance of notes 26,070 20,859 0
Principal
repayments on notes payable (23,561) (25,540) (11,522)
Principal repayments
on long-term debt (9,737) (101,465) (65,499)
Proceeds from private
placement sale of common stock 0 201,200 0
---------- ---------- ---------
Net cash provided by
(used in) financing activities (7,228) $ 95,054 572,979
---------- ---------- ---------
NET INCREASE (DECREASE) IN CASH $ (214,871) $ 46,163 $ 196,673
CASH, BEGINNING 301,106 254,943 58,270
---------- ---------- ---------
CASH, END $ 86,235 $ 301,106 $ 254,943
========== ========== =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,136 $ 6,078 $ 1,990
=========== ========== =========
Income taxes $ 1,799 $ 41,142 $ 0
=========== ========== =========
</TABLE>
The accompanying notes to financial statements describe certain non-cash
investing and financing activities (some of which affect the changes in
certain assets and liabilities) and are taken into consideration in the
consolidated statements of cash flows.
F-7B
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
- -------------------------
Jetborne International, Inc. (the "Company") was incorporated January 30,
1987 (under the laws of the State of Delaware) as a holding company in
anticipation of a public offering. On February 2, 1987, the stockholders
of Jetborne, Inc. (incorporated April 24, 1980 under the laws of the
State of Florida) contributed all of the outstanding shares of Jetborne,
Inc. common stock to Jetborne International, Inc. (the Company owned no
other assets at that date) in exchange for 3,123,000 shares of common
stock of the Company and Jetborne, Inc. transferred to the Company its
stock in each of its subsidiary companies. On May 20, 1987, the Company
sold 1,150,000 shares of its common stock to the public, resulting in net
proceeds to the Company of approximately $3,328,000. On September 17,
1993, an order of the United States Bankruptcy Court, Southern District
of Florida was entered confirming the Company's third amended plan of
reorganization. Prior thereto, $201,200 was deposited to the Company
attorneys' trust account as payment for 6,400,000 shares of Company
common stock to be issued in accordance with terms of the plan (see below
and Note 10).
The September 17, 1993 order of the United States Bankruptcy Court was
entered conditioned upon the ability of the Company to maintain the level
of allowed unsecured claims against the Jetborne International, Inc.
estate at a maximum of $2,300,000; accomplished on September 27, 1994
when the Company objection to the claim of a former principal stockholder
of the Company was sustained by the United States Bankruptcy Court. Prior
thereto, on December 10, 1991, creditors of the Company filed with the
United States Bankruptcy Court, placing the Company in an involuntary
Chapter 11 bankruptcy proceeding (converted by the Company to a
voluntary proceeding on December 26, 1991); Jetborne, Inc., the only
then significant operating subsidiary of the Company, filed a voluntary
petition on December 16, 1991; subsequently, the two proceedings were
consolidated. The Company filed, with the Bankruptcy Court, an Amended
Disclosure Statement and Plan dated May 14, 1993 whereby a program was
established for the probable payment to all creditors, over various
periods not to exceed nine years, of all approved sums due to them (the
allowed unsecured claims against the Jetborne, Inc. [see below] estate
are to be paid after the payment of allowed unsecured claims against the
Jetborne International, Inc. estate); payments to the Jetborne
International, Inc. unsecured creditors commenced during January 1995
(thirty days after the December 14, 1994 United States Bankruptcy Court
appointment of the designee for the Unsecured Creditors Committee). The
principal source of the funds to pay the indebtedness is the January 1,
1993 balance on the note received from the sale of Aircraft Modular
Products, Inc. ("AMP")(see Notes 3 and 4). In addition, there are
provisions for:
Merging Jetborne, Inc. into the Company and the cancellation of
the Jetborne, Inc. preferred stock (see Note 10). The Company has,
however, registered the name Jetborne, Inc. under the Fictitious
Name Act of the State of Florida.
F-8
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Organization and Business (continued)
- -------------------------------------
The present stockholders of Jetborne International,
Inc. maintaining their shares of common stock of the Company
(the Company will still be publicly owned).
The sale of 6,400,000 shares of the Company's common stock to two
new principal stockholders of the Company (see Notes 9 and 10) for
$201,200.
The sum of the excess of liabilities transferred to the Unsecured
Creditors' Committee of Jetborne International, Inc., the cancellation of
the preferred stock (and the related assets and liabilities) of Jetborne,
Inc. and the Federal "alternative minimum tax" (see Note 11) (based on
the excess of alternative minimum tax income over the alternative minimum
tax net operating loss carryforward) over the carrying value of the AMP
note ($414,033) is reflected on the statement of income (loss) for the
year ended April 30, 1994 in the category "gain recognition on discharge
of debt, net of $10,000 provision for income taxes (Note 1)".
The Company is primarily engaged in the sale of aircraft parts and also
coordinates maintenance support and management for aircraft, manages
aircraft conversion projects and sells and leases aircraft primarily as a
broker.
General/Pledged Assets/Reclassifications
- ----------------------------------------
The stockholders' equity section of the balance sheets at April 30, 1995
and April 30, 1994 reflect the 6,400,000 shares of Company common stock
as if issued at those dates (in accordance with the confirmed plan of
reorganization; see above)(not issued at February 29, 1996) and the
750,000 shares of Company common stock as if received in the Treasury at
April 30, 1994 (also in accordance with the confirmed plan of
reorganization; see Notes 10 and 15)(the 750,000 shares, and 3,500 shares
of previously acquired stock, were cancelled on August 10, 1994 thereby
reducing the number of shares issued at April 30, 1995). The prior year
financial statements are presented, for comparative purposes, as if the
Company was not, until September 17, 1993, in re-organization under
Chapter 11 of the United States Bankruptcy Code. The statements of
income (loss), changes in stockholders' equity and cash flows for the
period May 1, 1993 through September 16, 1993 and the year ended April
30, 1993 reflect results of operations and cash flows of the Company and
its then wholly owned subsidiaries while it was Debtor-in-Possession. All
material inter-company balances and transactions (through September 16,
1993) have been eliminated.
Prior to its emergence from the bankruptcy proceedings, substantially all
of the Company's assets were pledged as collateral for notes payable and
other debt. Effective September 17, 1993, the Company transferred the
note receivable (from the purchaser of 100% of the common stock of
Aircraft Modular Products, Inc.; see Notes 3 and 4) to the Unsecured
F-9
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Creditors' Committee of Jetborne International, Inc. (in accordance with
the terms of the Company's third amended plan of reorganization [see
above]).
Certain amounts in the April 30, 1994 and April 30, 1993 financial
statements have been reclassified to conform with the April 30, 1995
presentation and the April 30, 1993 financial statements have been
restated to take into consideration the sale/liquidation of subsidiaries
(see Note 3).
New (Recent) Accounting Standards
- ---------------------------------
The Company has adopted all recent accounting standards and
pronouncements issued by the Financial Accounting Standards Board (FASB)
that are applicable (including FASB 109 Accounting for Income Taxes and
FASB 121 Accounting for the Impairment of Long Lived Assets). The
adoption did not cause a material effect on the Company's financial
statements.
Accounts and Notes Receivable, Trade/Allowance for Doubtful Accounts
- --------------------------------------------------------------------
The Company's policy is to establish an allowance for doubtful accounts
when the collectability of the accounts is doubtful and to charge that
account, or income, when the accounts are determined to be uncollectable
($16,487, $4,200 and $2,067 [net of recoveries] for the years ended April
30, 1995, 1994 and 1993, respectively)(see Note 4 regarding the write-off
of certain non-trade notes and loans receivable).
Inventories
- -----------
Inventories are stated at the lower of cost or market with cost
determined using the average cost method (see Note 5).
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Expenditures for major
betterments and additions are charged to the property and equipment
accounts while replacements, maintenance and repairs, which do not
improve or extend the life of the respective asset, are charged to
expense currently. The cost of assets retired or otherwise disposed of
and the accumulated depreciation are relieved from the accounts, and the
resulting gain or loss is included in the statement of income. The
Company's policy is to capitalize, and record as property and equipment,
assets acquired under terms of capital leases.
Depreciation is calculated using the straight line and declining balance
methods over the estimated useful lives of the assets. For income tax
purposes, depreciation is calculated using the accelerated cost recovery
system (MACRS) for certain qualifying assets and the straight-line method
for other assets (see below).
F-10
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
- ------------
The Company filed consolidated income tax returns through the year ended
April 30, 1994 which included the results of its operations and the
operations of its wholly owned U.S. subsidiaries through September 16,
1993. Income tax expense was allocated to the subsidiaries that had net
income, computed as if each subsidiary were filing a separate return. The
subsidiaries' liability, along with other inter-company indebtedness, was
eliminated in consolidation. The income tax returns of the Company for
the period September 17, 1993 through April 30, 1994 and the year ended
April 30, 1995 reflect the results of operations of the Company.
Deferred income taxes (none at April 30, 1995 and 1994) are provided in
amounts sufficient to give effect to the use of net operating loss
carryforwards and timing differences between financial and income tax
reporting (see Note 11). Investment tax and research and development tax
credits are treated as a reduction of income tax expense in the year in
which the related assets are placed in service and when the research and
development expense is incurred.
Earnings (Loss) Per Share
- -------------------------
Earnings (loss) per share have been computed based on the weighted
average number of common shares and common share equivalents
outstanding.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Note 2. LIQUIDITY (see Note 1)
The Company has sustained net cumulative losses of approximately
$3,700,000 since April 30, 1988 (the net income for the two years that
did not reflect losses were generated from either discontinued operations
or extraordinary items) and retained earnings have decreased from
$1,837,681 to retained earnings (deficit) of $(1,868,311) at April 30,
1995. As referred to in Note 1, the Company emerged from a Chapter 11
bankruptcy proceeding (which commenced December 10, 1991) on September
17, 1993 and, as part of the confirmed plan of reorganization, the
Company received $201,200 for the issuance of 6,400,000 shares of Company
common stock.
Since the end of the last fiscal year, the Company's liquidity has
continued to deteriorate, with increasing rapidity, primarily due to a
continuing diminishing stock sales trend caused by a lack of current or
"fresh" inventory, declining consignment inventory, limited brokerage
sales opportunities and excessive professional fees due to previous and
on-going litigation.
F-11
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 2. LIQUIDITY (see Note 1)(continued)
The Company borrowed $30,000 from its Chief Executive Officer on January
18, 1996 (not repaid at February 29, 1996) for the purpose of paying an
obligation due that day (see Note 15) and, at February 29, 1996, is
indebted to the Chairman of its Board of Directors for five months
compensation (see Note 14).
Credit financing is being sought to purchase "fresh" inventory lots
where the purchased inventory will comprise the collateral for the credit
extended. The Company also continues to pursue aircraft parts consignment
agreements and other business opportunities within the expertise of its
executives. Consignments, in effect, provide the Company with additional
inventory without the prior need for purchases which adversely affects
liquidity.
Management of the Company believes that the referred to programs, if
accomplished, will provide sufficient working capital to meet the
Company's obligations as they become due. There can be no assurance,
however, that the Company will be successful in its efforts nor that it
will be able to maintain its operations on a profitable basis even though
substantially all claims and lawsuits have been resolved or adequate
provision has been made for the ultimate liability (see Note 15).
As indicated in Note 3, all operating subsidiaries of the Company were
sold, or operations were terminated, during the past five years except
Jetborne, Inc. which was effectively merged into the Company.
Note 3. SALE/LIQUIDATION OF SUBSIDIARIES
As referred to in Note 1, the Company sold 100% of the common stock of
Aircraft Modular Products, Inc. during the year-end April 30, 1991 and
during the same year sold the operating assets of Alblam Sound
Productions, Inc. In addition, a receiver was appointed, during the year
ended April 30, 1992, for the Company's principal United Kingdom
subsidiary and operations of Advanced Aero Hydraulics, Inc. were
terminated during the year ended April 30, 1993. The then only remaining
subsidiary of the Company (Jetborne, Inc.) was effectively merged into
the Company when the United States Bankruptcy Court entered an order, on
September 17, 1993, confirming the Company's third amended joint plan of
reorganization (see Note 1).
Operations of Advanced Aero Hydraulics, Inc. ("AAH") were terminated on
July 31, 1992 and the Company entered into a contract for the sale of
AAH's equipment for $60,000. The sale was concluded on March 26, 1993 and
the Company received $15,000 with the balance of the contracted amount
payable in $15,000 installments (paid in full by July 23, 1993).
The results of operations of AAH are included in the statements of income
(loss) in the category "loss from discontinued operations, net of income
F-12
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 3. SALE/LIQUIDATION OF SUBSIDIARIES (continued)
taxes". The following is a summary of AAH's results of operations for the
year ended April 30, 1993:
Net sales $137,191
(Loss) before income taxes (40,332)
Income taxes 0
Net income (loss) (40,332)
Note 4. NOTES RECEIVABLE (Non-trade)
The Company had, prior to September 17, 1993, ownership of the remaining
balance on the note receivable from the purchaser of 100% of the common
stock of Aircraft Modular Products, Inc. This note (with the remaining
balance at January 1, 1993 of $2,078,350) has been transferred to the
Unsecured Creditors' Committee of Jetborne International, Inc. (see Notes
1 and 3).
At April 30, 1995 and 1994, the former principal stockholder of the
Company and two terminated officers (see Notes 9, 10 and 15) were
indebted to the Company as follows:
Former principal stockholder $3,310,321 (1)
Former Vice President 572,658 (2)
Former President 43,738 (3)
----------
Total $3,926,717
==========
These amounts had been written off as uncollectible, or an allowance had
been established, based on the then possible offsets and on the probable
uncollectability (see below and Notes 9, 10 and 15).
______
(1) On June 10, 1994 a final default judgement for $4,512,600 was
entered, by the United States Bankruptcy Court, against the former
principal stockholder.
(2) On November 10, 1994 the former Vice President, based on his
petition, obtained an order from the United States Bankruptcy Court
discharging his debts; however, on May 29, 1995, the same Court
determined that $514,212 of his debt to the Company was not
dischargeable and, accordingly,entered a final summary judgement
against him.
(3) The indebtedness of the former President was satisfied on September
8, 1994; the Company received $12,500, the former President withdrew
his claims against the Company, and mutual releases were exchanged.
Note 5. INVENTORIES (see Notes 1 and 7)
Inventories of aircraft parts and supplies total $3,248,136 at April 30,
1995 and $3,656,051 at April 30, 1994, net of a reserve for obsolescence
of $365,000 and $500,000 respectively. These amounts do not include
inventories received on a consignment basis with the Company agreeing to
assume all risks and insure at no charge to the consignors. The
consignment agreements are summarized as follows:
F-13
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 5. INVENTORIES (see Notes 1 and 7)(continued)
Consignment agreement dated January 26, 1990 with a major airline with
the Company agreeing to use its best efforts to sell the inventory at
market value for which it was to receive 35% of the selling price.
From inception through April 30, 1992, the Company had received
approximately $2,150,000 (valued at estimated selling prices) of
parts. As of April 30, 1995 all unsold parts were in the Company's
warehouse, however, based on negotiations with, and instructions from,
the consignor, all parts were returned to the consignor by November 2,
1995. The various remaining unresolved matters between the Company and
the consignor were in progress until January 9, 1996 when a settlement
agreement was entered into cancelling and terminating the original
consignment agreement and the modifications (see Note 15).
Consignment agreement dated December 9, 1992, with a non-related
entity, which required the Company to initially place a $125,000
deposit with the consignor (to be reviewed semi-annually as it relates
to the value of the consigned parts; reduced to $36,629 at April 30,
1994, and $ 0 at April 30, 1995 based on the reduced amount of the
consigned inventory on hand). The Company agreed to use its best
efforts to sell the parts for which it receives 40% of the selling
price. Either party may cancel the agreement with thirty days written
notice. An affiliate of the consignor had guaranteed the deposit.
Consignment agreement dated December 1, 1994, with a non-related
entity. The Company agreed to use its best efforts to sell the parts
for which it receives 40% of the selling price (just prior to each
sale title to the inventory items are transferred from the consignor
to the Company and the Company sells the parts in its own name). In
addition, the Company is to pay a handling fee of 10% of the
consignor's acquisition costs for any consignment parts returned to
the consignor during the period of the agreement; the 10% handling fee
for items returned to the consignor, based on the consignor's request,
is to be charged to the consignor. The agreement was to expire
November 30, 1995, however, it was cancelled by the Company August 2,
1995.
Note 6. PROPERTY AND EQUIPMENT (see Note 1)
At April 30, property and equipment consists of:
<TABLE>
<CAPTION>
Estimated useful lives/
1995 1994 depreciation methods
-------- -------- -------------------------
<S> <C> <C> <C>
Machinery 5-10 years/straight-line
and equipment $142,718 $129,196 and declining balance
Leasehold improvements 361,681 361,681 10-25 years/straight-line
Office furniture
and equipment 110,992 115,945 5-8 years/straight-line
Transportation equipment 18,425 18,425 5 year straight-line
-------- --------
Total $633,816 $625,247
======== ========
</TABLE>
F-14
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 6. PROPERTY AND EQUIPMENT (see Note 1)(continued)
Depreciation and amortization charged to income was $29,958, $33,774
and $45,269 for the years ended April 30, 1995, 1994 and 1993,
respectively.
Note 7. NOTES PAYABLE (see Notes 1, 4 and 5)
At April 30, notes payable consist of:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
<S> <C> <C>
Remaining balance on a $25,000 note, originally
payable on demand, with interest at prime plus
2 points; issued December 11, 1991 with a chattel
mortgage encumbering all inventory, all accounts
receivable and the AMP note (see Note 3) $ 0 $ 9,300
Installment notes payable monthly ($362 to $1,671
including interest at various rates) through
December 15, 1995 15,828 13,319
-------- ---------
Total $ 15,828 $ 22,619
======== =========
Note 8. LONG-TERM DEBT (see Notes 1, 5 and 15)
At April 30, long-term debt consist of:
1995 1994
--------- ---------
Various unsecured tax obligations payable monthly
($1 to $371 plus interest) from October 1993
through February 1996 $ 27,331 $ 27,331
Agreement to pay a creditor in twenty remaining
quarterly installments commencing November 23,
1993 (the first four installments of $5,000
through August 23, 1994 and the remaining sixteen
installments of $2,500 through August 25, 1998),
without interest (see Note 15 regarding the
modification of the amount of the indebtedness
and the payment terms) 60,000 60,000
Income tax obligation to Internal Revenue Service
payable in monthly installments ($1,151 including
interest at 7% per annum) through August 17, 1999 51,288 61,025
-------- --------
Total $138,619 $148,356
Less: Current maturities 68,302 51,489
-------- --------
Long-term debt, net of current maturities $ 70,317 $ 96,867
======== ========
</TABLE>
F-15
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 8. LONG-TERM DEBT (see Notes 1, 5 and 15)(continued)
Maturities of long-term debt in each of the next years are as follows:
Year ending April 30, Amount
-------------------- ------------
1996 $ 68,302
1997 24,012
1998 23,359
1999 18,410
2000 and thereafter 4,536
------------
Total $ 138,619
============
Note 9. RELATED PARTY TRANSACTIONS (see Notes 1, 4, 10, 14 and 15)
Prior to March 9, 1991, when a non-related U.K. Limited Liability Company
("U.K. Company") acquired, from the then principal stockholder of the
Company, the rights to 3,130,000 shares of the Company's common stock
(including options to purchase 430,000 shares; the options expired prior
to April 30, 1995), a former employee, officer and chairman of the Board
of Directors was the principal stockholder of the Company. On December
30, 1990, the then principal stockholder of the Company signed a
$1,960,492 note to the Company which note was not paid and, on June 10,
1994, the Company obtained a default final judgement, in the amount of
$4,512,600, against him in connection with the note and related matters.
Reference is made to Note 1 which describes a provision in the bankruptcy
confirmation order for the receipt by the Company of $201,200 for the
issuance of 6,400,000 shares of Company common stock (50% to the Chairman
of the Board of Directors of the Company, as trustee [also the
representative of U.K. Company; see above and Note 10] and 50% to the
Chief Executive Officer of the Company). In connection therewith, and as
subsequently confirmed by the United States Bankruptcy Court, the two
stockholders entered into a shareholder agreement which contains various
provisions including: voting for members of the Board of Directors (as
directed by the United States Bankruptcy Court, the current Board of
Directors consists of the Chairman of the Board, the Chief Executive
Officer and a non-employee who was previously appointed a director by
U.K. Company), disposition of shares (including the first right of
refusal on possible sale and/or transfer), an employment agreement for
the Chief Executive Officer (see Note 14) and compensation for the
Chairman of the Board of Directors of the Company (see Note 14).
On January 18, 1996, the Company borrowed $30,000 from its Chief
Executive Officer (see Note 15)(not repaid at February 29, 1996) and is
indebted to the Chairman of its Board of Directors at February 29, 1996
for five months compensation (totalling $20,000; see Note 14).
F-16
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 10. STOCKHOLDERS' EQUITY (see Notes 1, 9 and 15)
On October 4, 1991, the Company's stock was delisted from NASDAQ.
Effective September 17, 1993, the 5,590 shares of 10% cumulative
redeemable preferred stock of Jetborne, Inc. was cancelled based on the
September 17, 1993 order of the United States Bankruptcy Court, Southern
District of Florida, confirming the Company's third amended plan of
reorganization (see Notes 1 and 3).
In connection with various contractual arrangements, the Company had
committed to register 946,850 shares of its common stock in a
registration statement to be filed with the Securities and Exchange
Commission. Since the commitments were made, significant events have
taken place and, presently, it is uncertain whether any of the
commitments can be, or will have to be, fulfilled.
Stock Option Plans
- ------------------
Since inception, the Company adopted several stock option plans for the
benefit of employees and directors of the Company. The Company believes
that all of the options, as of February 29, 1996, were cancelled or have
expired.
Common Stock Issued
- -------------------
Through May 1, 1991, the Company had issued 6,235,780 shares of its
common stock. The status remained the same, subject to outstanding
options (see above) until September 17, 1993 when 6,400,000 shares of the
Company's common stock were sold to two new principal stockholders of the
Company based on an order of the United States Bankruptcy Court, Southern
District of Florida, confirming the Company's third amended plan of
reorganization (see above and Note 1).
On November 10, 1994 the Company was notified that the 221,850 shares of
Company common stock purchased by U.K. Company (see Note 9) were
transferred to the Chairman of the Board of Directors of the Company, as
Trustee (U.K. Company also confirmed that they conveyed to that person,
as trustee, all of its ownership interest in the 3,200,000 shares of
Company's common stock to be acquired by that person as trustee [see
above and Note 1]). Accordingly, U.K. Company only owns the shares of the
Company's common stock acquired, on March 9, 1991, from the then
principal stockholder of the Company (see Note 9).
Common Stock in Treasury
- ------------------------
Prior to May 1, 1991, the Company had purchased, from non-related
persons, 3,500 shares of its common stock for $3,763. The Company
received 750,000 shares of its common stock from the bank that was
holding the shares as collateral for an obligation of the then principal
stockholder of the Company (see Note 9). The return was negotiated as
part of the settlement with that bank (see Note 15) and accordingly it is
included in the statement of changes in stockholders' equity for the year
ended April 30, 1994 at a nominal value of $1.
On August 10, 1994 the 753,500 shares were cancelled (see Note 1).
F-17
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 11. INCOME TAXES
At May 1, 1992, the Company had, for Federal Income Tax purposes, a net
operating loss carryforward of $2,741,731. The following is a summary of
the components of the net operating loss carryforward to the fiscal year
ending April 30, 1995:
Balance at May 1, 1992 $2,741,731
Loss applied to taxable income
of fiscal year ended April 30, 1993 (125,272)
Loss applied to taxable income
of fiscal year ended April 30, 1994 (2,041,621)
Increase due to reduction in
charitable contributions carryforward 11,698
Loss arising in fiscal year ended April 30, 1995 944,142
----------
Net operating loss carryforward to fiscal years
ending April 30, 1996 through April 30, 2010 $1,530,678
==========
Even though the Company was not required to pay Federal income tax based
on taxable income for the year ended April 30, 1994 (as the taxable
income was offset by the net operating loss carryforward), Federal income
tax of $1,799 was computed based on the "alternative minimum tax"
computation. In the event Federal income tax returns for subsequent years
reflect Federal income taxes due in excess of the alternative minimum
tax, the alternative minimum taxes paid for years ended April 1991
($59,763) and 1994 ($1,799) can be applied against the computed Federal
income tax.
No provision has been made for the difference between financial statement
and income tax reporting of certain items of revenue and expenses, as the
net operating loss carryforward at April 30, 1995 substantially exceeds
the difference; nor has a provision been made for deferred income tax
credits, based on the possible use of the net operating losses being
applied against taxable income in future years (and the use of the
"alternative minimum tax" paid) as there is no assurance that the
Company's future profitability will exceed the difference.
Note 12. LEASES
The Company leases warehouse facilities and office space under a
long-term agreement. On June 30, 1992, the Company concluded a settlement
with Aircraft Modular Products, Inc. ("AMP") which included AMP's
purchasing the building occupied by the Company and entering into a new
lease with the Company (not including the space then occupied by a former
subsidiary [Advanced Aero Hydraulics, Inc.; see Note 3]) covering a
period of five years commencing October 1, 1992 (initially for a six
month period with options for six months and four years [exercised
covering the four years ending September 30, 1997])(with a rent
reduction) and relieving the Company of its $85,387 obligation for prior
unpaid rent.
F-18
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 12. LEASES (continued)
The following is a schedule of future minimum lease payments for the
above described lease:
Year ending April 30
-------------------
1996 $ 85,679
1997 85,679
1998 35,700
Thereafter 0
----------
Total $ 207,058
==========
For the years ended April 30, 1995, 1994 and 1993, rental expense for all
operating leases was approximately $111,496, $104,000 and $101,000 (net
of rent waivers, see above), respectively.
Note 13. MAJOR CUSTOMER
The Company made sales to major unaffiliated customers of approximately
$486,000, $986,000 and $92,000 during the years ended April 30, 1995,
1994 and 1993, respectively.
NOTE 14. EMPLOYMENT AGREEMENTS (see Note 9)
During April 1992, the then financial controller of the Company was
appointed Chief Financial Officer at a salary of $65,000 per annum
(increased to $70,000 when an employment agreement was entered into on
May 1, 1994). The employee resigned on May 31, 1995 effective June 30,
1995. Another employee was appointed financial controller.
On June 15, 1994, modifications to Executive Employment Agreements were
approved by the United States Bankruptcy Court and are summarized as
follows:
A five year employment agreement, effective May 1, 1994, with the
Chief Executive Officer at a salary of $120,000 per annum, plus
fringe benefits (the agreement contains provisions for termination
by the Company and/or the employee and a non-compete clause), and
establishment of $48,000 per year compensation to the Chairman of the
Board of Directors (effective June 15, 1994).
Note 15. LITIGATION (see Notes 4, 9, and 10)
At April 30, 1995 and 1994, the Company was a party to several claims and
lawsuits arising out of the conduct of its business. Substantially all of
the litigation that was unresolved at April 30, 1993 has been resolved by
the United States Bankruptcy Court prior to, or on, September 17, 1993
(when the Company's third amended plan of reorganization was confirmed)
or subsequently by a separate Bankruptcy Court order.
F-19
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9, and 10)(continued)
The following is a summary of the claims and lawsuits that have been
resolved as of February 29, 1996:
On June 10, 1994, a Default Final Judgement was entered against the
former principal stockholder, in the amount of $4,512,600 plus
interest, based on the lawsuit re-filed in the Bankruptcy Court.
Included in the lawsuit were claims against two suspended officers of
the Company (see below) and claims against a third suspended officer
(see below) and a former sales consultant; these claims have been
settled without payment of substantial funds by, or to, the Company
(see Note 4). The former sales consultant had filed a $474,000 claim
(against Jetborne, Inc.) in the Bankruptcy Court and the Company had
disputed it. On September 8, 1994 the Company and the former sales
consultant resolved their disputes and both parties signed a
stipulation of dismissal (however, the sales consultant still had the
right to file a claim in the Bankruptcy Court).
An action to recover damages from the Company, as guarantor, on an
outstanding $750,000 obligation (plus interest and costs) payable to
a bank by the then principal stockholder of the Company. On
September 12, 1991 a judgement was awarded to the bank (against the
stockholder and the Company, as guarantor). The litigation against
the Company was settled on September 17, 1993 when an order was
entered confirming the Company's third amended plan of
reorganization. The settlement includes the payment to the bank of
$100,000 (by the Company), payment to the bank of approximately
$1,078,000 (from the proceeds of collection of the note received from
the purchaser of Aircraft Modular Products, Inc. [see Notes 1 and 3]
and transferred to the Unsecured Creditors' Committee of Jetborne
International, Inc.) and the bank's return to the Company of 750,000
shares of the Company's common stock (previously held by the bank as
partial collateral and subsequently purchased by the bank for $.05
per share)(see Note 10).
A shareholders' derivative suit, on behalf of the Company, commenced
during May 1991, which named the former President of the Company, the
President (effective February 1991), the Vice President and the
Chief Operating Officer as defendants (see above). The complaint
purported to set forth claims for conversion, civil theft, breach of
fiduciary duty, instructive trust and breach of promise to pay.
Injunctive relief was sought, as well as an accounting by the
defendants, for the appointment of a receiver for the Company and the
involuntary dissolution of the Company. At a meeting held May 10,
1991, the newly elected Board of Directors passed a resolution to
investigate the claims and, at the same time, suspended, as officers
and employees, the three officers of the Company. Salaries to the
three former officers were stopped effective May 10, 1991. There has
not been any recent activity and the Company considers the matter
closed. In the opinion of management of the Company, any adverse
decision in connection with this litigation will not have a material
adverse impact on the financial condition of the Company and, if the
F-20
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9, and 10)(continued)
Company is awarded damages, the collectability is doubtful (see Note
4).
During June 1991, the three suspended officers of the Company brought
actions against the Company (and the Company filed a lawsuit in the
United States Bankruptcy Court against the suspended officers) for
breach of employment and indemnity contracts (see above) and alleged
damages as a result of the breaches as well as for reimbursement of
costs incurred. The Board of Directors completed its investigation
in connection with the shareholders' derivative suit (see above) and
terminated the employment of the officers. The actions have been
resolved (see above and Note 4).
During March 1991, the Company was informed that an investigation by
the United States Customs Service (which commenced on March 7, 1990,
when the United States Customs Service visited the offices of the
Company [in the United States and the United Kingdom] and searched
the premises and Company files pursuant to a warrant signed by a
United States Magistrate to determine if there was a possible
violation of the Export Administration Act and the Arms Export
Control Act) had been expanded and the Company, and one of its former
Vice Presidents, were the targets of an investigation by a Federal
Grand Jury for possible criminal violations. The Company had been
informed that charges against the former Vice President were dropped,
the Company was indicted and the trial scheduled for November 1991.
On October 23, 1992, the Company entered into a plea-bargain
agreement, and on December 15, 1992 the Company pleaded guilty to two
counts and paid $25,260 in fines, to settle all pending litigation
and matters in connection with the investigation. During December
1993, the Company was informed that it had been debarred for a period
of three years from December 3, 1992 from participating directly or
indirectly in the export of defense articles or technical data or in
furnishing of defense services for which a license or other approval
is required.
As referred to in Note 5, there were various unresolved matters
between the Company and a major airline in connection with a
consignment agreement dated January 26, 1990. On January 9, 1996, a
settlement agreement was entered into between the Company and the
major airline. The agreement cancelled and terminated the original
consignment agreement, and the modifications thereto, and the Company
agreed to wire transfer to the major airline $30,000 by January 18,
1996 (timely paid) and an additional $7,500 per month commencing
February 20, 1996 (the first payment was paid February 9, 1996) with
a final payment on January 20, 1997. The agreement also provides
that, when the major airline receives the $120,000 they will assign
to the Company their claim filed in the United States Bankruptcy
Court against Jetborne, Inc. ($80,180)(see Note 1).
On February 14, 1996, a lawsuit filed against the Company by one of
its former attorneys was dismissed based on a settlement compromising
the fees sought by the attorney.
F-21
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9, and 10)(continued)
The following is a summary of the claims and lawsuits that have not been
resolved as of February 29, 1996:
A former attorney for the Company (the escrow agent holding
promissory notes, and collateral therefore [and collateral for the
payment of Federal income taxes that might have been required with
respect to a proposed bonus payable to one former employee], that the
Company received from former executives of the Company [see above
and Notes 4 and 9]) had deposited with the Court the promissory notes
and collateral and had brought an interpleader action requesting that
the Court accept the promissory notes and collateral pending the
outcome of the matters involved. The Company filed an answer and
cross-claim against the issuers of the promissory notes seeking to
claim the escrowed promissory notes and collateral. Counsel for the
Company is presently evaluating the possibility of having the default
final judgement against the former principal stockholder entered into
the litigation in the Circuit Court in order to obtain the release,
and subsequent return to the Company, of 1,000,000 shares of the
Company common stock which were interplead and which were owned by
the former principal stockholder of the Company.
A possible substantial liability of Advanced Aero Hydraulics, Inc.
(see Note 3) as a result of pollution of its business premises. Based
on recent studies made on behalf of the Company, a provision of
$49,500 had been made in a prior year (approximately $10,000 of the
provision was paid by April 30, 1995 and 1994)(included in accrued
expenses in the balance sheets).
F-22
<PAGE>
Schedule II
JETBORNE INTERNATIONAL, INC.
<TABLE>
<CAPTION>
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Deductions
Balances, Additions (Amounts
Beginning (Including Collected
Name of Debtor of Year Interest) or Credited) Total
- ---------------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C>
1995:
A. Blattner(1) $ 0 $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0 0
D. Blattner (3) 0 0 0 0
A. Alouf 0 3,000 0 3,000
1994:
A. Blattner(1) $ 0 $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0 0
D. Blattner (3) 0 0 0 0
1993:
A. Blattner(1) $ 0 $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0 0
D. Blattner (3) 0 0 0 0
</TABLE>
(1) Balance at beginning and end of year ($0) represents a receivable
of $3,310,321 less amounts written-off or for which an allowance
has been established of $3,310,321 (see Note 4 to the Financial
Statements).
(2) Balance at beginning and end of year ($0) represents a receivable
of $572,658 less amounts written-off or for which an allowance has
been established of $572,658 (see Note 4 to the Financial
Statements).
(3) Balance at beginning and end of year ($0) represents a receivable
of $43,738 less amounts written-off or for which an allowance
has been established of $43,738 (see Note 4 to the Financial
Statements).
F-23A
<PAGE>
Schedule II
JETBORNE INTERNATIONAL, INC.
<TABLE>
<CAPTION>
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Amounts
Written-off
or for Which Balances, End Of Year,
an Allowance Net of Allowances
Has Been ------------------------
Name of Debtor Established Current Non-current
- ----------------- ------------ -------- ------------
<S> <C> <C> <C>
1995:
A. Blattner(1) $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0
D. Blattner (3) 0 0 0
A. Alouf 0 3,000 0
1994:
A. Blattner(1) $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0
D. Blattner 0 0 0
1993:
A. Blattner $ 0 $ 0 $ 0
M. Levkovitz 0 0 0
D. Blattner 0 0 0
</TABLE>
(1) Balance at beginning and end of year ($0) represents a receivable
of $3,310,321 less amounts written-off or for which an allowance
has been established of $3,310,321 (see Note 4 to the Financial
Statements).
(2) Balance at beginning and end of year ($0) represents a receivable
of $572,658 less amounts written-off or for which an allowance has
been established of $572,658 (see Note 4 to the Financial
Statements).
(3) Balance at beginning and end of year ($0) represents a receivable
of $43,738 less amounts written-off or for which an allowance
has been established of $43,738 (see Note 4 to the Financial
Statements).
F-23B
<PAGE>
Schedule VII
JETBORNE INTERNATIONAL, INC.
<TABLE>
<CAPTION>
GUARANTEES OF SECURITIES OF OTHER ISSUERS
APRIL 30, 1995
Name of Issuer of Title of Issue of Total Amount
Securities Guaranteed Each Class of Guaranteed and Amount Owed by
by the Company Securities Guaranteed Outstanding the Company
- --------------------- --------------------- -------------- --------------
<S> <C> <C> <C>
NONE
</TABLE>
F-24A
<PAGE>
Schedule VII
JETBORNE INTERNATIONAL, INC.
<TABLE>
<CAPTION>
GUARANTEES OF SECURITIES OF OTHER ISSUERS
APRIL 30, 1995
Nature of Default by
Amount in Issuer of Securities
Treasury Guaranteed in Principal,
of Issuer of Interest, Sinking Fund,
Securities Nature or Redemption Provisions
Guaranteed of Guarantee or Payment of Dividends
- --------------- ------------ ------------------------
<S> <C> <C>
NONE
</TABLE>
F-24B
<PAGE>
Schedule IX
JETBORNE INTERNATIONAL, INC.
<TABLE>
<CAPTION>
SHORT-TERM BORROWINGS
FOR THE YEAR ENDED APRIL 30, 1995
Maximum Amounts Average Amount
Categories of Aggregate Balances at Outstanding Outstanding
Short-term Borrowings End of Year During the Year During the Year
- ----------------------- ----------- --------------- ---------------
<S> <C> <C> <C>
Notes payable to:
Banks and other
financial institutions $15,828 $ 26,783 $ 14,574
</TABLE>
The average amount outstanding during the year represents the average
principal balances outstanding during the year.
The weighted average interest rates during the year were computed by
dividing the actual interest incurred on short-term borrowings by
the average amount outstanding during the year.
F-25A
<PAGE>
Schedule IX
JETBORNE INTERNATIONAL, INC.
SHORT-TERM BORROWINGS
FOR THE YEAR ENDED APRIL 30, 1995
Weighted Average
Categories of Aggregate Interest Rate
Short-term Borrowings During the Year
- ----------------------- ----------------
Notes payable to:
Banks and other
financial institutions 6.92%
The average amount outstanding during the year represents the average
principal balances outstanding during the year.
The weighted average interest rates during the year were computed by
dividing the actual interest incurred on short-term borrowings by
the average amount outstanding during the year.
F-25B
<PAGE>
JETBORNE INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Exhibit II
SCHEDULE OF COMPUTATIONS OF EARNINGS (LOSS) PER SHARE
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Income (loss)
from continuing operations $ (701,034) $ 116,658 $ (123,822)
=========== =========== ===========
Weighted average number of common
shares outstanding during the year 11,882,280 9,730,636 6,232,280
========== ========= =========
INCOME (LOSS) PER SHARE -
CONTINUING OPERATIONS $ (0.06) $ 0.01 $ (0.02)
=========== =========== ===========
NET INCOME:
Net income (loss) $ (701,034) $ 530,691 $ (164,154)
=========== =========== ===========
Weighted average number of common
shares outstanding during the year 11,882,280 9,730,636 6,232,280
========== ========= =========
EARNINGS (LOSS)
PER SHARE - NET INCOME (LOSS) $ (0.06) $ 0.05 $ (0.03)
========== ========== ==========
</TABLE>
F-26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in Part I, Item 8. of this Form 10-K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> APR-30-1995
<CASH> 86,235
<SECURITIES> 0
<RECEIVABLES> 143,709
<ALLOWANCES> 3,607
<INVENTORY> 3,248,136
<CURRENT-ASSETS> 3,498,443
<PP&E> 633,816
<DEPRECIATION> 389,148
<TOTAL-ASSETS> 3,749,432
<CURRENT-LIABILITIES> 331,262
<BONDS> 0
0
0
<COMMON> 118,823
<OTHER-SE> 3,228,940
<TOTAL-LIABILITY-AND-EQUITY> 3,749,342
<SALES> 1,125,279
<TOTAL-REVENUES> 1,233,862
<CGS> 906,840
<TOTAL-COSTS> 1,943,097
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,166
<INCOME-PRETAX> (709,235)
<INCOME-TAX> (8,201)
<INCOME-CONTINUING> (701,034)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (701,034)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
