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, 1996
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.)
8361 Northwest 64th Street
Miami, Florida 33166
(Address of Principal Executive Offices)
(305) 591-2999
(Registrant's Telephone Number)
4010 Northwest 36th Avenue
Miami, Florida 33142
(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 $.10 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, 1996 despite a filing due date of July 28, 1996 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 Common
Stock held by non-affiliates of the Registrant as of April 15, 1998. The
Company emerged from voluntary Chapter 11 bankruptcy on September 17, 1993.
There has been no market for the Registrant's Common Stock since approximately
the Fourth Quarter of 1991. See Item 5. herein.
The number of shares of Common Stock, $.10 par value, of the Registration,
issued and outstanding as of April 15, 1998, was 2,329,858 shares. An
additional 1,961 shares are recorded as issued but the Registrant disputes
those items as issued in error.
<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 then 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 an 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. 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".
On September 30, 1997, the Registrant effected a reverse split of its
Common Stock on a one (1) share for ten (10) shares basis with shareholder
<PAGE>
approval. Accordingly, at April 15, 1998, there were 2,329,858 (post-reverse
split) shares issued.
Background
The Company was originally formed for the purpose of consolidating
operating subsidiaries and undertaking and completing a public 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 December 4, 1991 and can
now only be traded, if traded, Over-The-Counter, Bulletin Board. To the
Company's knowledge and belief, at December 4, 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 an inventory of parts for various commercial
jet aircraft. Some 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. On October 1,
1997, the Company satisfied most of a $2,900,000 inventory payable to a
subsidiary of RADA Electronic Industries, Ltd. in the amount of $2,700,000
with the issuance of 1,141,630(post-reverse split) shares of Common Stock of
the Company representing forty-nine (49%) percent of its ownership interest,
in order to retain the inventory purchased from a subsidiary of RADA
Electronic Industries, Ltd. in December, 1996 despite a continuing inability
to pay the full purchase price in the amount of $2,900,000.
The $2,900,000 of aircraft partes inventory purchased in the process is
located in Canada and Holland and is being held for sale on consignment, by a
Canadien sales agent, Kaycom, with exclusive rights to sell the inventory in
Canada, as individual parts or in bulk, at prices as agreed upon between the
<PAGE>
Company and the sales agent. The consignment agreement is for a term of two
years from December 10, 1996 and will be extended for one year automatically
unless a thirty day written notice for either party cancels the agreement.
The sales agent is responsible for all expenses incurred for shipping the
inventory from Holland (where it was originally located) to Canada (the
location of the warehouses of the sales agent) and all costs of insurance,
storage and subsequent management of the inventory. The sales agent initially
deposited with the Company the sum of $25,000 which, together with the
shipping costs from Holland to Canada, shall be repaid to the sales agent from
either sales proceeds or directly. Proceeds of sales to customers located in
Canada and worldwide sales by the sales agent, are to be divided fifty percent
(50%) to the sales agent and fifty percent (50%) to the Company; sales made by
others outside of Canada will be divided ten percent (10%) to the sales agent
with the balance to the Company. All packing and shipping costs are to be
paid by the Company.
RADA acquired an additional twenty-six (26%) percent ownership interest
in the Registrant through purchase from the Company's principal shareholder,
Bodstray Company Limited with RADA Common Stock.
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 Bcomm International, Inc. which provides a
comprehensive computerized listing of aircraft parts and material available
for sale in the marketplace. The Company also subscribes to the Inventory
Locator Services, Inc. ("ILS") a computerized aircraft parts availability
system.
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 the
<PAGE>
Company's general inventory with the overall transaction being supported by an
exchange fee paid to the Company by the exchanging customer.
During September, 1997, the Company's Board of Directors adopted a
resolution confirming and approving management's decision to provide for a
$1,000,000 write-down of all inventory at that time owned by the Company based
upon a re-evaluation of all of the inventory.
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.
The Company believes 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 history of 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
<PAGE>
otherwise required aviation related licenses and certifications necessary to
the conduct of its current business. The unanticipated loss of any such
license or certification would have 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 notified a number of years
ago 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 (April 15, 1998) employs approximately five (5)
full-time employees and one (1) part time employee. The Company's single
officer devotes only approximately ten (10%) percent of his time to the
Company's affairs.
ITEM 2. PROPERTIES
Until approximately October 31, 1997, the Company's principal offices
were located at 4010 N.W. 36th Avenue, Miami, Florida 33142. The Company had
been leasing offices and facilities from its former subsidiary, Aircraft
Modular Products, Inc. ("AMP"). The Company now occupies its new leased
premises at 8361 N.W. 64th Street, Miami, Florida 33166 pursuant to a lease at
an annual aggregate rental for the first year of $98,763 plus sales tax. In
addition to monthly rental, the lessee is responsible for certain repairs, a
portion of taxes, insurance and utilities. In the Company's view, the terms
of its leasehold are competitive with comparable facilities in the local
area. The Company now leases approximately 18,812 square feet, consisting of
<PAGE>
offices and warehousing. The new lease expires on October 31, 2002. See Item
8. "Financial Statements - Note 16. The Company intends to share its
leasehold premises with one or more subsidiaries of its parent, RADA
Electronic Industries, Ltd. RADA guaranteed the Company's new lease.
ITEM 3. LEGAL PROCEEDINGS
The Company was a party to the following material legal proceedings in
this reporting period (fiscal year ended April 30, 1996):
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 any determination of reinstatement
is made.
2. Department of Environmental Resources Management ("DERM")
The Company was notified long ago of alleged environmental violations by
its previous subsidiaries 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 premises.
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
<PAGE>
sludge. Although the owner of the property (then, Allen Blattner, the
Company's former president and former principal shareholder, later, Finstock
Investments, Ltd., the Company's former 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 violations, estimated at a remaining cost of
approximately $40,000, was also submitted to DERM for approval which is, now
years later, presumably 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
<PAGE>
settlement agreement, the consignment agreement and its modifications were
terminated. The Company agreed to pay a total of $120,000 to Lufthansa
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. The agreed obligation to Lufthansa was paid in full.
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 April 15, 1998).
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, however 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 (April 15, 1998).
(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.
<PAGE>
COMMON STOCK
<TABLE>
<CAPTION>
Period Bid Price Asked Price
High Low High Low
<S> <C> <C> <C> <C>
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
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
Third Quarter, 1997 No Market No Market
Fourth Quarter, 1997 No Market No Market
First Quarter, 1998 No Market No Market
</TABLE>
(b) Holders. As of April 15, 1998, 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.
<PAGE>
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, 1992 through 1996.
Summary Income Statement:
<TABLE>
<CAPTION>
As of As of As of As of As of
04/30/96 04/30/95 04/30/94 04/30/93 04/30/92
(2)
<S> <C> <C> <C> <C> <C>
Net Sales $1,533,366 $1,125,279 $1,755,763 $ 798,008 $1,109,431
Net Income(Loss) ($ 225,456) ($ 701,034) $ 530,691 ($ 164,154) ($ 953,799)
Operating(Loss) ($ 282,994) ($ 812,652) ($ 192,703) ($ 583,550) ($1,167,573)
Profit(Loss) per
Common Share
from continuing
operations ($ 0.02) ($ 0.06) ($ 0.01) ($ 0.02) ($ 0.08)
Net Income(Loss)
per Common Sh. ($ 0.02) ($ 0.06) $ 0.05 ($ 0.03) ($ 0.15)
</TABLE>
Summary Balance Sheet Information
<TABLE>
<CAPTION>
As of As of As of As of As of
04/30/96 04/30/95 04/30/94 04/30/93 04/30/92
(2)
<S> <C> <C> <C> <C>
Total Assets $3,571,599 $3,749,342 $4,408,316 $7,326,009 $7,813,277
Inventories (Net) $3,033,136 $3,248,136 $3,656,051 $3,667,464 $3,802,540
Stockholders' loans
receivable
(payable)(1) $ -0- $ 3,000 $ -0- $ -0- $ -0-
Notes payable -
current $ 1,691 $ 15,828 $ 22,619 $ 318,504 $ 330,026
Long-Term Liab. $ 29,585 $ 65,825 $ 148,356 $ 232,113 $ 297,612
Minority Interest
in Subsidiary $ -0- $ -0- $ -0- $ 559,000 $ 559,000
Stockholders'
Equity $3,122,307 $3,347,763 $4,048,797 $3,316,907 $3,481,061
</TABLE>
(1) 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
<PAGE>
Miami, Florida. However, the Company considers the judgment debt to be
uncollectable. See Item 3., "Legal Proceedings" and Item 13., "Certain
Relationships and Related Transactions".
(2) 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 $1,533,366 for the fiscal year ended April 30, 1996 represented
an increase of $408,087 (36%) over the same period a year earlier. Sales of
$1,125,279 for the fiscal year ended April 30, 1995 represented a decrease of
$630,484 (36%) over the year ended April 30, 1994. Sales of $1,755,763 for
the 12 month period ended April 30, 1994 represented an increase of $957,755
(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. Parts sales were $1,533,366 in 1996 as compared to $1,125,279
in 1995, $1,755,763 in 1994, $798,008 in 1993 and $1,109,431 in 1992. Sales
in fiscal 1992 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.
Gross margins on sales of the Company were 37.6% in 1996 as compared to
19.4% in 1995, 36.3% in 1994, 46% in 1993 and 40.7% in 1992. The 1995 gross
margin was somewhat decreased due to a $181,383 reserve established during
that fiscal year for obsolete inventory.
Selling, general and administrative expenses for the Company were
$859,705 for the year ended April 30, 1996 as compared to $1,031,091 for the
year ended April 30, 1995, $830,070 for the year ended April 30, 1994,
$950,963 for the year ended April 30, 1993 and $1,619,039 for the year ended
April 30, 1992.
Net (losses) from continuing operations for the year ended April 30, 1996
were ($225,456) as compared to net (losses) of ($701,034)for the year ended
<PAGE>
April 30, 1995 and as compared to net profit from continuing operations for
the year ended April 30, 1994 of $116,658, and net (losses) of ($67,922) and
($486,484), respectively for the two preceding years.
<TABLE>
<CAPTION>
The Company's Earnings (Loss) per Share
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
From Continuing Operations ($ 0.02) ($ .06) $ .05(a) ($ .01) ($ .07)
From Discontinued Operations $ .00 $ .00 $ .00 ($ .01) ($ .07)
From Minority Interest $ .00 $ .00 $ .00 ($ .01) ($ .01)
Net Income (Loss) per
Share ($ 0.02) ($ .06) $ .05 ($ .03) ($0.15)
</TABLE>
(a) Includes an extraordinary item, a gain recognition on discharge of
debt, net of income tax ($.04 per share); See Note 1., "Notes to
Financial Statements".
(1) Liquidity
The Company's liquidity continues to be critically poor. Sales in fiscal
1996 increased and expenses decreased somewhat. There was no foreseeable
trend or event which would have improved 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 (pre-reverse split), 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.,
<PAGE>
"Notes to Financial Statements"; Item 13., "Certain Relationships and Related
Transactions" and Item 3., "Legal Proceedings".
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 was 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 the Company's officer and
former officer, respectively, completed transfer of a total of 6,400,000
shares (pre-reverse split) of the Company's restricted Common Stock,
approximately fifty-four (54%) percent of the Company's issued and outstanding
capital stock, to Bodstray Company Limited, a Hong Kong corporation. On
September 15, 1997, Bodstray sold 6,057,630 of its Jetborne shares (pre-reverse
split) to RADA Electronic Industries, Ltd., an Israel corporation. On August
18, 1997, RADA purchased forty-nine (49%) percent of the Company for
satisfaction of $2,700,000 of the Company's $2,900,000 payable to RADA's
subsidiary. With the acquisition of seventy-five (75%) percent control of the
Registrant in these transactions, RADA intends to assist with funding the
Company's operations as required, in its discretion, with debt financing. See
"Capital Resources" below.
The Company continues to seek additional parts consignment arrangements.
Consignment, in effect, provides the Company with additional inventory without
purchases adversely affecting its liquidity, although markups are generally
lower than those realized from sales from owned stock.
(2) Capital Resources
In December, 1996, the Company purchased an additional $2,900,000 in
parts inventory from a subsidiary of RADA Electronic Industries, Ltd., an
Israel 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.
<PAGE>
On August 18, 1997, following a period of negotiation and discussion, the
Company and RADA agreed to satisfy the $2,700,000 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 exchange for $2,700,000 of the parts inventory receivable.
On August 12, 1997, the Company's Board of Directors determined to
reverse-split the Company's Common Stock on a one (1) share for ten (10)
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 enabled 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 then majority control shareholder, Bodstray Company,
Ltd. consented to the reverse-split at once. Bodstray's approval insured
implementation of the reverse-split, on September 30, 1997. Following its
completion, the Company issued 1,141,630 (post-reverse-split) shares to RADA
Electronic Industries, Ltd. to complete the August 18, 1997
stock-for-inventory Agreement 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, 1996, April 30, 1995, April 30,
1994 or April 30, 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Pages F-1 through F-23, 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 April 15, 1998), there have been no
disagreements on any matter of accounting principles or practices.
<PAGE>
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:
<TABLE>
<CAPTION>
Name Position with Company Age
<S> <C> <C>
Eles Dobronsky Chairman of the Board, President 55
and Chief Executive Officer
Chaim Zimet Director 50
Raymond Harkus Director 47
Amos Alouf Former President/Treasurer/ 63
Director
(Appointed June 15, 1994;
Resigned March 10, 1997)
</TABLE>
Until March 10, 1997, Mr. Alouf was the Company's only officer. Mr.
Alouf resigned on March 10, 1997 and was replaced by Mr. Dobronsky as the
Company's sole officer. 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 including this reporting period were
accomplished through Mr. Alouf's efforts, augmented by those of Mr.
Dobronsky. Mr. Alouf devoted 100% of his time to the Company's affairs until
March 10, 1997. Mr. Dobronsky devotes approximately only ten (10%) percent 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) was
somewhat alleviated 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 RADA purchase from Bodstray brought RADA's
ownership interest in the Company to seventy-five (75%) percent. RADA
Electronic Industries, Ltd. Is a publicly-held Israel corporation listed on
the NASDAQ Small Cap Market.
<PAGE>
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. and a member of the Board of Directors
of RADA Electronic Industries, Ltd. 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.
Chaim Zimet has been a director of the Company since 1994 having been
appointed to a vacancy on the Board at the recommendation of the Company's
Chairman, Eles Dobronsky. Mr. Zimet is also the managing director of several
financial holding companies headquartered in Europe. Prior to 1991, Mr. Zimet
was the managing director of a private institute in the City of Amsterdam for
the treatment of children with learning and behavioral difficulties. Mr.
Zimet studied at the University of Amsterdam and worked as a specialist in the
behavioral field, including service as principal of an elementary school in
Amsterdam prior to embarking, in 1991, upon a career in financial management.
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.
<PAGE>
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 management 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 informed the Company that he 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. 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.
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. Mr. Alouf deceased during January, 1998.
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,
1996 was $198,568.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Name and Other Restricted All
Principal Annual Stock Options/LTIP Other
Position Year Salary Bonus Compensation Awards SARS Payouts Compensation
<S> <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) -- -- -- --
1996 $ -- $48,000(4) -- -- -- --
Amos Alouf(1)(2) 1992 $ 88,563 -- -- -- -- -- --
President/ 1993 $ 93,871 -- -- -- -- -- --
Secretary 1994 $ 93,770 -- -- -- -- -- --
1995 $122,308 -- -- -- -- -- --
1996 $120,279 -- -- -- -- -- --
Stephen G. Martin 1992 $ 63,544 -- -- -- -- -- --
Treasurer (3) 1993 $ 66,351 -- -- -- -- -- --
1994 $ 66,567 -- -- -- -- -- --
1995 $ 73,923 -- -- -- -- -- --
1996 $ 30,289 -- -- -- -- -- --
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) -- -- -- --
1996 $198,568 -- $48,000(4) -- -- -- --
</TABLE>
(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, $11,426 in 1995 and $13,416 in 1996.
(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
<PAGE>
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 terminated 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.
(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. All of the options, as
of April 15, 1998, were canceled or have expired.
<PAGE>
On December 20, 1996, the Company issued options to purchase 285,036
shares of the Company's restricted (post-reverse split) Common Stock to Mr.
Eles Dobronsky, the Company's Chairman, exercisable at the rate of $.842 per
share. If exercised in full, the total aggregate exercise price will amount
to $240,000. At April 15, 1998, Mr. Dobronsky's options represented a
potential ownership of twelve (12%) percent of the Company. None of Mr.
Dobronsky's options have been exercised at April 15, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 15, 1998, the number of
shares of the Company's Common Stock (post-reverse split) 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 RADA Electronic Industries, Ltd. 1,747,393(5) 75.0%
80 Express Street
Plainview, NY 11803
(b) Security Ownership of Management
Title of Name and Addres Amount and Nature of Percent
Class of Beneficial Owner Beneficial Ownership of Class
(2)(3)
Common Stock Eles Dobronsky, 289,200 (1)(4) 12.4%
Trustee
8361 N.W. 64th Street
Miami, FL 33166
Common Stock Amos Alouf -0- (4) 0.0%
8361 N.W. 64th Street
Miami, FL 33166
Common Stock Stephen G. Martin -0- 0.0%
8361 N.W. 64th Street
Miami, FL 33166
</TABLE>
<PAGE>
(1) Eles Dobronsky, Trustee holds 130,265 (post-reverse split) shares, and
proxies for an additional 158,935 (post-reverse split) shares.
(2) Based upon 2,329,858 (post-reverse split) shares being issued and
outstanding.
(3) BankAtlantic had been deemed by the Company to be the beneficial owner
of 75,000 (post-reverse split) 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 75,000 (post-reverse split) 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 (pre-reverse split)
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 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. See Note (5) below.
(5) On August 18, 1997, RADA Electronic Industries, Ltd. acquired forty-nine
(49%) percent of the Company's ownership in a transaction completed
after the Company's reverse one-for-ten stock split was implemented on
September 30, 1997. The Company had purchased $2,900,000 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 $2,700,000 of 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 also deemed appropriate
<PAGE>
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 was effective September 30,
1997 as approved, among others, by the Company's then majority control
shareholder, Bodstray Company Limited. On September 15, 1997, RADA
entered into a certain capital stock purchase agreement with Bodstray
Company Limited pursuant to which RADA acquired 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. At April 15, 1998, RADA Electronic
Industries, Ltd. owns 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 lease with AMP commenced October 1, 1992 and expired on
September 30, 1997 at an aggregate annual rental of $72,000. The Company
recently acquired new leased space, leased from a non-affiliate, in the same
general vicinity. See Item 2. "Properties".
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a)1. Financial Statements:
Independent Auditor's Report dated August 16, 1996, except as to
later matters reflected therein.
Balance Sheets - April 30, 1996 and 1995.
Statements of Income (Loss) - Years ended April 30, 1996, 1995 and
1994.
Statements of Changes in Stockholders' Equity - Years ended April
30, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows - Years ended April 30, 1996,
1995 and 1994.
Notes to Financial Statements.
(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.
(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.
<PAGE>
(b)(10) Material Contracts:
Not applicable.
(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, 1996, 1995 and
1994.
(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.
(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).
<PAGE>
(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 1996 or through the subsequent period ended July 31, 1997. On
September 25, 1997, the Company filed a Current Report on Form 8-K
reporting the 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 24th day of April, 1998.
JETBORNE INTERNATIONAL, INC.
BY:/s/Eles Dobronsky
Eles Dobronsky, Chief Executive
Officer/President
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 Officer
President/
Eles Dobronsky Chairman 04/24/98
Eles Dobronsky
ii. Principal Financial and
Accounting Officer
Eles Dobronsky Treasurer/CFO 04/24/98
Eles Dobronsky
iii. A Majority of the Board of
Directors
Director __/__/98
Raymond Harkus
Eles Dobronsky Director 04/24/98
Eles Dobronsky
Director 04/ /98
Chaim Zimet
JETBORNE INTERNATIONAL, INC.
FINANCIAL STATEMENTS
APRIL 30, 1996
<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, 1996 and 1995
Statements of Income (Loss)
For the years ended April 30, 1996, 1995 and 1994
Statements of Changes in Stockholders' Equity
For the years ended April 30, 1996, 1995 and 1994
Statements of Cash Flows
For the years ended April 30, 1996, 1995 and 1994
Notes to Financial Statements
<PAGE>
Norman A. Eliot & Co.
Certified Public Accountants
NORMAN A. ELIOT, C.P.A. 9400 SOUTH DADELAND BOULEVARD
FLORENCE L. KRANTS, C.P.A. MIAMI, FLORIDA 33156
JOHN BLUMENTHAL, C.P.A. PH: (305)670-4444
FAX: (305)670-0105
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jetborne International, Inc.
Mimai, FL 33166
We have audited the balance sheets of Jetborne International,
Inc. as of April 30, 1996 and 1995, and the related statements
of income (loss), changes in stockholders' equity, and cash
flows for the years ended April 30, 1996, 1995 and 1994.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in 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, 1996 and
1995, and the results of its operations and its cash flows for
the years ended April 30, 1996, 1995 and 1994 in conformity
with generally accepted accounting principles.
Miami, Florida
August 16, 1996, except
October 14, 1997, as to
certain matters that took
place during December 1996,
March 1997, August 1997 and
September 1997 and as /s/Norman A. Eliot
described in Note 16 Norman A. Eliot & Co.
F-2
<PAGE>
JETBORNE INTERNATIONAL, INC.
BALANCE SHEETS
APRIL 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash $ 113,867 $ 86,235
Accounts receivable:
Trade, net of allowance for doubtful
account ($1,110, and $3,607 1996
and 1995, respectively) (Note 1) 174,064 133,567
Other 2,447 3,535
Stockholder loan receivable 0 3,000
Inventories (Notes 1 and 5) 3,033,136 3,248,136
Prepaid expenses and other
current assets 8,862 23,970
Total Current Assets $3,332,376 $3,498,443
PROPERTY AND EQUIPMENT (Notes 1 and 6) $ 644,786 $ 633,816
Less: Accumulated depreciation and
amortization 419,109 389,148
Net Book Value 225,677 244,668
OTHER ASSETS:
Security deposits and other assets $ 13,546 $ 6,231
TOTAL ASSETS $3,571,599 $3,749,342
</TABLE>
_____________
The accompanying notes are an integral part of these financial
statements.
F-3
<PAGE>
JETBORNE INTERNATIONAL, INC.
BALANCE SHEETS
APRIL 30, 1996 AND 1995
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable (Note 7) $ 1,691 $ 15,828
Current maturities of long term debt
(Note 8) 78,740 45,463
Accounts payable 182,519 159,197
Stockholder loan payable 34,774 0
Customers' deposits 0 1,552
Accrued Expenses 121,983 113,714
Total Current Liabilities $ 419,707 $ 335,754
LONG TERM DEBT, Net of current maturities
(Note 8) $ 29,585 $ 65,825
COMMITMENTS, CONTINGENCIES AND
SUBSEQUENT EVENTS
(Notes 9, 12, 14, 15 and 16)
STOCKHOLDERS' EQUITY (Notes 1, 9, 10, 15
and 16):
Common stock, $.01 par value
(14,000,000 shares authorized;
11,882,280 shares issued at
April 30, 1996 and 1995) $ 118,823 $ 118,823
Additional paid in capital 5,097,251 5,097,251
Retained earnings (deficit) (2,093,767) (1,868,311)
TOTAL STOCKHOLDERS' EQUITY $ 3,122,307 $3,347,763
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $3,571,599 $3,749,342
</TABLE>
_____________
The accompanying notes are an integral part of these financial
statements.
F-3A
<PAGE>
JETBORNE INTERNATIONAL, INC.
<TABLE>
<CAPTION>
STATEMENTS OF INCOME (LOSS)
FOR THE YEARS APRIL 30, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
NET SALES $1,533,366 $1,125,279 $1,755,763
COST OF SALES 956,655 906,840 1,118,396
GROSS PROFIT $ 576,711 $ 218,439 $ 637,367
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 859,705 1,031,091 830,070
OPERATING LOSS $ (282,994) $ (812,652) $ (192,703)
OTHER INCOME (EXPENSES):
Interest and other income $ 62,484 $ 96,083 $ 316,304
Interest expense (4,946) (5,166) (6,943)
Recovery of stockholders'
notes and loans receivable
(Note 4) 0 12,500 0
Net Other Income 57,538 103,417 309,361
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES (CREDIT) $ (225,456) $ (709,235) $ 116,658
INCOME TAXES (CREDIT)
(Note 11) 0 (8,201) 0
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $ (225,456) $ (701,034) $ 116,658
EXTRAORDINARY ITEMS:
Gain recognition on
discharge of debt net
of $10,000 provision for
income taxes (Note 1) 0 0 414,033
NET INCOME (LOSS) $ (225,456) $ (701,034) $ 530,691
EARNINGS (LOSS) PER SHARE
(Note 1) $ (0.02) $ (0.06) $ 0.05
WEIGHTED AVERAGE COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING
(Note 1) 11,882,280 11,882,280 9,730,636
</TABLE>
_____________
The accompanying notes are an integral part of these financial
statements.
F-4
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Number of shares
of common stock
Issued Treasury
Stock
<S> <C> <C>
BALANCE,
APRIL 30, 1993
(Note 1) 6,235,780 3,500
Net income - -
Common stock
issued (Notes 1, 9
and 10) 6,400,000 -
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
Net Loss - -
Common stock
retired (753,500) (753,000)
BALANCE,
APRIL 30, 1995
(Note 1) 11,882,280 0
Net Loss - -
BALANCE
APRIL 30, 1996
(Note 1) 11,882,280 0
</TABLE>
__________
The accompanying notes are an integral part of these financial
statements.
F-5
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Additional Retained Total
Common Treasury Paid-in Earnings Stockholders'
Stock Stock Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
BALANCE,
APRIL 30, 1993
(Note 1) $ 62,358 $ (3,763) $4,956,280 $(1,697,968) $3,316,907
Net income - - - 530,691 530,691
Common stock
issued (Notes 1, 9
and 10) 64,000 - 137,200 - 201,200
Common stock
acquired on
confirmation
of plan of
reorganization
(Notes 1, 9,
and 10) - (1) - - (1)
BALANCE,
APRIL 30, 1994
(Note 1) $126,358 $ (3,764)$5,093,480 $(1,167,277) 4,048,797
Net Loss - - - (701,034) (701,034)
Common stock
retired (7,535) 3,764 3,771 0 0
BALANCE,
APRIL 30, 1995
(Note 1) $118,823 0 $5,097,251 $(1,868,311) $3,347,763
Net Loss - - - (225,456) (225,456)
BALANCE
APRIL 30, 1996
(Note 1) $118,823 0 $5,097,251 $(2,093,767) $3,122,307
</TABLE>
___________
The accompanying notes are an integral part of these financial
statements.
F-5A
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $(225,456) $(701,034)$ 530,691
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation & amortization 29,961 29,958 33,774
Provision for losses on
trade accounts receivable (2,497) 3,607 0
Net write-off(net recovery)
of trade accounts receivable (190) 12,880 7,848
Loss from sale of property
and equipment 0 0 1,671
Recognition of deferred income 0 0 (193,518)
Forgiveness of debt 0 (9,300) 0
Treasury Stock received
(nominal value) 0 0 (1)
Changes in certain
assets and liabilities:
Increase in trade
accounts receivable (37,810) (18,275) (6,854)
Decrease in other
accounts receivable 1,088 4,501 8,508
(Increase)decrease in
stockholder loan receivable 3,000 (3,000) 0
Decrease in inventories 215,000 407,915 11,413
(Increase)decrease in
prepaid expenses and
other current assets 15,108 (4,941) 190,647
Decrease in net assets of
discontinued operations 0 0 88,294
(Increase)decrease in security
deposits and other assets (7,315) 36,360 (37,054)
Increase (decrease) in
accounts payable 23,322 68,536 (94,454)
Increase (decrease) in
indebtedness to stockholder 34,774 0 (3,600)
Increase (decrease) in
income taxes payable 0 (10,000) 6,895
Increase (decrease) in
customers' deposits (1,552) 1,552 (15,375)
Increase (decrease) in
accrued expenses 8,269 (1,500) (160,912)
Decrease in net liabilities
discharged in bankruptcy 0 0 (414,033)
Net cash provided by (used
in) operating activities $ 55,702 $(182,741) $(46,060)
</TABLE>
______________
The accompanying notes are an integral part of these financial
statements.
F-6
<PAGE>
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property
and equipment $(10,970) $ (24,902) $ (2,831)
Net cash used in
investing activities (10,970) (24,902) (2,831)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from issuance
of notes $ 74,700 $ 26,070 $ 20,859
Principal repayments on
notes payable (28,837) (23,561) (25,540)
Principal repayments on
long-term debt (62,963) (9,737) (101,465)
Proceeds from private
placement sale of
common stock 0 0 201,200
Net cash provided by (used
in) financing activities (17,100) $ (7,228) 95,054
NET INCREASE (DECREASE)
IN CASH $ 27,632 $(214,871) $ 46,163
CASH, BEGINNING 86,235 301,106 254,943
CASH, END $ 113,867 $ 86,235 $301,106
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest $ 4,424 $ 5,136 $ 6,078
Income Taxes $ 10,462 $ 1,799 $ 41,142
</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 statements of cash flows.
___________
The accompanying notes are an integral part of these financial
statements.
F-6A
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business (see Note 16 regarding subsequent
events)
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 Notes 9 and 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 December 11, 1990 sale of 100% of the common
stock of Aircraft Modular Products, Inc. ("AMP") (see Note 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-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JETBORNE INTERNATIONAL, INC.
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Organization and Business (see Note 16 regarding subsequent
events)
(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 (see above and Note 4) ($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.
General/Pledged Assets/Reclassifications
The stockholders' equity section of the balance sheets at
April 30, 1996 and April 30, 1995 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) (issued March 7, 1997; see Note 10) and the 750,000
shares of Company common stock as if received in the Treasury
at April 30, 1995 (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 and April 30, 1996). 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 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 above and Note 4) to the
Unsecured Creditor's Committee of Jetborne International, Inc.
(in accordance with
F-8
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
General/Pledged Assets/Reclassifications (continued)
the terms of the Company's third amended plan of
reorganization ?see above?).
Certain amounts in the April 30, 1995 and April 30, 1994
financial statements have been reclassified to conform with
the April 30, 1996 presentation.
New (Recent)Accounting Standards
The Company has adopted all applicable recent accounting
standards and pronouncements issued by the Financial
Accounting Standards Board (FASB). The adoption did not cause
a material effect on the Company's financial statements.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
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 ($2,795, $16,487 and $7,848
(net of recoveries) for the years ended April 30, 1996, 1995
and 1994, 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-9
<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 including the period September 17, 1993
through April 30, 1994 and the years ended April 30, 1995 and
April 30, 1996 reflect the results of operations of the
Company.
Deferred income taxes (none at April 30, 1996 and 1995) are
provided in amounts sufficient to five 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 and Note 16 regarding
subsequent events including the December 30, 1996
purchase of aircraft parts inventory totaling
$2,900,000 (subject to a consignment agreement) and the
September 1997 $1,000,000 writedown of inventories)
The Company has sustained net cumulative losses of
approximately $3,930,000 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 (2,093,767) at April 30, 2996.
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,
declining consignment inventory and limited brokerage sales
opportunities.
F-10
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 2. LIQUIDITY (see Note 1 and Note 16 regarding
subsequent events including the December 30, 1996 purchase of
aircraft parts inventory totalling $2,900,000 (subject to a
consignment agreement) and the September 1997 $1,000,000
writedown of inventories) (continued)
The Company borrowed $30,000 from its Chief Executive Officer
on January 18, 1996 (repaid March 7, 1997; see Note 16) for
the purpose of paying an obligation due that day (see Note 15)
and, at September 30, 1997, is indebted to the Chairman of its
Board of Directors for 18 months compensation ($72,000; see
Note 14) and advances totalling $19,895.
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
continued 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 six years except Jetborne, Inc. which was effectively
merged into the Company September 17, 1993.
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 ended
April 30, 1991. Subsequently, and through the year ended
April 30, 1993, the operations of three other subsidiaries
were sold or terminated. 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 or reorganization (see Notes 1 and 2).
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).
F-11
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 4. NOTES RECEIVABLE (Non-trade) (continued)
At April 30, 1996 and 1995, 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 9 and Note 16 regarding
subsequent events including the December 30, 1996 purchase of
aircraft parts inventory totalling $2,900,000 (subject to a
consignment agreement) and the September 1997 $1,000,000
writedown of inventories).
Inventories of aircraft parts and supplies total $3,033,136
and $3,248,136 at April 30, 1996 and 1995 respectively, net of
a reserve for obsolescence of $365,000 at both dates. 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:
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).
F-12
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 5. INVENTORIES (see Notes 1 and 9 and Note 16 regarding
subsequent events including the December 30, 1996 purchase of
aircraft parts inventory totalling $2,900,000 (subject to a
consignment agreement) and the September 1997 $1,000,000
writedown of inventories)(continued)
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 ($0 at April 30, 1996 and
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% handing 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/
1996 1995 depreciation methods
<S> <C> <C>
Machinery
and equipment $150,038 $142,718 5-10 years/straight line
and declining balance
Leasehold improvements 361,681 361,681 10-25 years/straight line
Office furniture
and equipment 114,642 110,992 5-7 years/straight-line
Transportation
equipment 18,425 18,425 5 year straight-line
Total $644,786 $633,816
</TABLE>
Depreciation and amortization charged to income was $29,961,
$29,958 and $33,774 for the years ended April 30, 1996, 1995,
and 1994, respectively.
F-13
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 7. NOTES PAYABLE
At April 30, notes payable ($1,691, 1996 and $15,828, 1995)
are for insurance premium contracts and are payable in monthly
installments ($1,523 to $1,706 including interest at various
rates) through May 18, 1996 and December 15, 1995,
respectively. The weighted average interest rate on short
term borrowings was 14.56% and 6.92% for the years ended April
30, 1996 and 1995, respectively.
Note 8. LONG-TERM DEBT (see Notes 1 and 15)
<TABLE>
<CAPTION>
At April 30, long-term debt consist of:
1996 1995
<S> <C> <C>
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). $ 67,000 $ 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 40,000 51,288
Total $108,325 $111,228
Less: Current maturities 78,740 45,463
Long-term debt, net of current maturities $ 29,585 $ 65,825
</TABLE>
Maturities of long-term debt in each of the next years are as
follows:
Year ending April 30, __Amount__
1997 $ 78,740
1998 12,076
1999 12,974
2000 4,535
2001 and thereafter 0
Total $ 108,325
Note 9. RELATED PARTY TRANSACTIONS (see Notes 1, 4, 10, 14,
and 15 and Note 16 regarding subsequent events)
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
F-14
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 9. RELATED PARTY TRANSACTIONS (see Notes 1, 4, 10, 14 and
15 and Note 16 regarding subsequent events)(continued)
purchase 430,000 shares; the options expired prior to April
30, 1996), 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 against him, in the amount of
$4,512,600, 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)(see Note 16 regarding the December 18,
1996 issuance of common stock purchase warrants to the
Chairman of the Board of Directors, the March 7, 1997
agreements for the sale and transfer of 6,400,000 shares of
Company's common stock and the subsequent (September 15, 1997)
resale of 6,057,630 of the shares to an Israeli company that,
on December 30, 1996, sold to the Company $2,900,000 of
inventory (subject to a consignment agreement) and on August
18, 1997 agreed that $200,000 of the purchase price would be
on open account and further agreed to accept shares of the
Company's common stock in payment for the remainder of the
inventory ($2,700,000; equivalent to 11,416,300 April 30, 1996
shares) and thereby owning approximately 75% of the Company's
common stock at September 15, 1997). 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 member of the Board of Directors (as directed by the
United States Bankruptcy Court, the Board of Directors at
April 30, 1996 consists of the Chairman of the Board, the
Chief Executive Officer and non-employee who was previously
appointed a director by U.K. Company; see Note 16 regarding
subsequent changes to the composition of the Board of
Directors), disposition of shares (including the first right
of refusal of possible sale and/or transfer) an employment
agreement for the Chief Executive Officer (see Note 14 and
Note 16 regarding the March 7, 1997 termination of the
employment agreement) 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) (repaid at March 7,
1997; see above and Note 16) and is indebted to the Chairman
of its Board of Directors at September 30, 1997 for 18 months
compensation (totalling $72,000; see Note 14) and advances
totalling $19,895.
As indicated in Notes 12 and 16, the Company entered into a
five year lease for new premises (with occupancy commencing
during the month of October 1997). The premises will be co-
occupied with subsidiaries of the Israeli company referred to
above (also a guarantor on the lease) with an allocation of
the rental and related charges to be made based on use.
F-15
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 10. STOCKHOLDERS' EQUITY (see Notes 1, 9 and 15 and Note 16
regarding subsequent events)
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, as of April 30, 1996, all
of the options were cancelled or have expired (see Notes 9 and
16 regarding the December 18, 1996 issuance of common stock
purchase warrants to the Chairman of the Board of Directors).
Common Stock Issued/To Be 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 Notes 1, 9 and 16).
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).
The following is a summary of the common stock issued as of
April 30, 1996 and the common stock to be issued based on the
agreements entered into subsequent to April 30, 1996 and
through August 18, 1997 as if the reverse split of the
Company's common stock, as approved by the Board of Directors
on August 12, 1997, had taken place:
F-16
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 10. STOCKHOLDERS' EQUITY (see Notes 1, 9 and 15 and Note 16
regarding subsequent events)(continued)
Common Stock Issued/To Be Issued (continued)
Post-split
Shares
Shares issued at April 30, 1996 (11,882,280) 1,188,228
Agreement entered into
on August 18, 1997 (for the partial payment
of the December 30, 1996 inventory
purchase) 1,141,630
Total 2,329,858
As described in Notes 9 and 16, an Israeli company became the
owner of 1,747,393 post-split shares (75% of the issued common
stock) based on the agreements entered into on August 18, 1997
and September 15, 1997.
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).
Note 11. INCOME TAXES (see Note 1 and Note 16 regarding
subsequent events)
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, 1997:
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
Loss arising in fiscal year ended April 30, 1996 288,252
Net operating loss carryforward to fiscal
years ending April 30, 1997 through April 30, 2011 $1,818,930
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
F-17
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 11. INCOME TAXES (see Note 1, and 16 regarding subsequent
events)(continued)
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 (see below).
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, 1996 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 (see below).
The amount of the net operating loss carryforward that can be
applied against taxable income, if any, in future years will
be subject to an annual limitation (based on formulas in the
Internal Revenue Code and regulations; and not presently
determinable)due to the significant change in ownership of
common stock referred to in Note 16. The amount of the
alternative minimum tax credit (see above) available is also
subject to similar limitations.
On September 15, 1997, the Company was notified that the
Internal Revenue Service would be examining the Company's
Federal income tax return for the fiscal year ended April 30,
1995.
Note 12. LEASES (see Note 16 regarding subsequent events)
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)
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 (see
Note 16 which describes the lease entered into on September
15, 1997 for new warehouse facilities and office space).
The following is a schedule of future minimum lease payments
for premises (including the lease entered into on September
15, 1997) and office equipment with initial remaining lease
terms in excess of one year:
Year ending April 30,
1997 $ 94,362
1998 111,409
1999 113,718
2000 111,578
2001 116,041
Thereafter 171,953
Total $ 719,061
F-18
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 12. LEASES (see Note 16 regarding subsequent
events)(continued)
For the years ended April 30, 1996, 1995 and 1994, rental
expense for all operating leases was approximately $130,019,
$111,496 and $104,000, respectively.
Note 13. MAJOR CUSTOMERS
The Company made sales to major unaffiliated customers of
approximately $566,730, $486,000 and $986,000 during the
years ended April 30, 1996, 1995 and 1994, respectively.
Note 14. EMPLOYMENT AGREEMENTS (see Note 9 and Note 16
regarding subsequent events)
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 (see Note 16 regarding the March 7, 1997
termination of the employment agreement) 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, 1996 and 1995, 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.
The following is a summary of the claims and lawsuits that
have been resolved as of April 30, 1996:
On June 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.
F-19
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9 and 10)(continued)
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 approximately
$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).
During March 1991, the Company was informed that an
investigation by the United States Customs Service (which
commenced on March 7, 1990) had been expanded and the Company
was a target of an investigation by a Federal Grand Jury for
possible criminal violations. The Company was indicted and on
October 23, 1992, the Company entered into a plea-bargain
agreement; 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. Accordingly, should the Company so desire, it would
be required to apply for reinstatement.
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
F-20
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9 and 10)(continued)
payment on January 20, 1997 (paid February 17, 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).
The following is a summary of the claims and lawsuits that
have not been resolved as of April 30, 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 (pre-split; see
Notes 10 and 16) 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 a former subsidiary (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,
1996 and 1995)(included in accrued expenses in the balance
sheets).
Note 16. SUBSEQUENT EVENTS
On December 18, 1996 the Board of Directors of the Company
unanimously adopted a resolution for the issuance, to the
Chairman of its Board of Directors, of restricted common stock
purchase warrants exercisable (to the close of business on
June 30, 2001) for the purchase of 24% of the then outstanding
shares of common stock of the Company for $240,000 (equivalent
to 285,174 post-split (see below) shares).
On December 30, 1996, the Company purchased from a United
States subsidiary of an Israeli corporation for $2,900,000,
one lot of aircraft parts (subject to a consignment agreement;
see below) based on a purchase order issued by the Company on
December 25, 1996. On August 18, 1997, the Company entered
into an agreement with the Israeli corporation whereby the
Company issued 1,141,630 (post-split); see below) shares of
its common stock in payment of $2,700,000 of the $2,900,000
indebtedness for the December 30, 1996 purchase (see Note 9).
As an integral part of the
F-21
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 16. SUBSEQUENT EVENTS (continued)
agreement, the Company committed to cause a one (1) for ten
(10) reverse split of its common stock (see below).
The $2,900,000 of aircraft parts referred to in the preceding
paragraph is located in Canada and Holland and is being held
for sale, on a consignment basis, by a Canadian sales agent
who has been given exclusive rights to sell the inventory in
Canada, as individual parts or in bulk, at prices as agreed
upon between the Company and the sales agent. The agreement
is for two years from December 10, 1996 and will be extended
for one year automatically unless a thirty day written notice
from either party cancels the agreement. The sales agent is
responsible for all expenses incurred for shipping of the
inventory from Holland (where it was originally located) to
Canada (the location of the warehouses of the sales agent),
all costs of insurance, storage and subsequent management of
the inventory at the sales agent's facility. The sales agent
initially deposited with the Company $25,000 which, along with
the shipping costs from Holland to Canada, shall be repaid to
the sales agent from the sales proceeds or directly. Proceeds
of sales to customers located in Canada and worldwide sales by
the sales agent, shall be divided 50% to the Company; sales
made by others outside of Canada shall be divided 10% to the
sales agent and the balance to the Company. All packing and
shipping costs are to be paid by the Company.
On March 7, 1997, an agreement was entered into between the
then President of the Company (also a member of the Board of
Directors) and the owner of 3,200,000 shares of the Company's
common stock (acquired pursuant to the Company's Confirmed
Plan of Reorganization, see Notes 1, 9 and 10), whereby he
would sell to a then non-affiliated Hong Kong corporation (see
below)(the transaction closed on August 10, 1997) the
3,200,000 shares of stock for $150,000. In connection
therewith, he resigned as President of the Company (and a
member of the Board of Directors) and the Company agreed to
pay him three months vacation pay and the remaining balance of
the indebtedness due to him (approximately $50,000). As part
of the agreement, the Company agreed, and the Board of
Directors (prior to his resignation) approved the appointment
of the then Director of the Hong Kong Corporation as a member
of the Board of Directors of the Company.
On March 7, 1997, an agreement was entered into between the
Chairman of the Board of Directors, as trustee, and the owner
of 3,200,000 shares of the Company's common stock (acquired
pursuant to the Company's Confirmed Plan of Reorganization,
see Notes 1, 9 and 10), whereby the shares would be
transferred to the same then non-affiliated Hong Kong
corporation (the transaction was closed on August 10, 1997;
see above). In connection with the agreement the Company
agreed to pay to the Chairman of the Board of Directors the
accumulated unpaid fees for services rendered to the Company
totalling approximately $52,000 at that date).
On August 12, 1997, the Board of Directors unanimously adopted
a resolution to reverse split the Company's common stock on
the basis of one share for ten shares effective September 30,
1997 in accordance with the Company's shareholder record on
August 15, 1997 and subject to stockholder approval (already
approved
F-22
<PAGE>
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 16. SUBSEQUENT EVENTS (continued)
by in excess of 50% of the issued shares of common stock)
On September 15, 1997, the Israeli corporation (see above)
entered into an agreement with the Hong Kong corporation (see
above) whereby the Israeli corporation agreed to purchase from
the Hong Kong corporation 605,763 (post-split)shares of
Jetborne common stock for 700,000 ordinary shares of the
Israeli corporation. After this purchase, the Israeli
corporation owns 1,747,393 (post-split) shares of Jetborne
common stock (approximately 75% of the issued and outstanding
shares).
On September 15, 1997, the Company entered into a 5-year lease
expiring October 31, 2002 with a non-related company for
18,812 rentable square feet for warehouse facilities and
office space at a new location. The monthly rental commencing
November 1, 1997 is $8,230.25 plus sales tax for the first
year with annual increases until the 5th year when the rental
is $9,628.22 plus sales tax. In addition to the base rental,
the Company is obligated to maintain the premises (except for
the structure, exterior paint, landscaping and maintenance of
the roof) and to pay annual expenses of operating the premises
in excess of the expenses for the base year (calendar year
1998). The lease terms include one 5-year option (with an
increase in rental of 4% over the rate of the last year of the
initial term) and a first right of refusal to purchase the
premises in the event a third party desires to purchase the
premises.
The premises will be shared with subsidiaries of the Israeli
corporation (see above; a guarantor of the terms of the lease
(see Notes 9 and 12; an allocation of the rental and related
charges will be made based on use).
During September 1997, the Board of Directors adopted a
resolution confirming management's decision to provide for a
$1,000,000 writedown of all inventory owned at that date based
on a re-evaluation of the inventories.
On September 15, 1997, the Company was notified that the
Internal Revenue Service would be examining the Company's
Federal income tax return for the fiscal year ended April 30,
1995.
F-23
<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 this Form 10-K and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> APR-30-1996
<CASH> 113,867
<SECURITIES> 454
<RECEIVABLES> 175,174
<ALLOWANCES> (1,110)
<INVENTORY> 3,033,136
<CURRENT-ASSETS> 3,332,376
<PP&E> 644,786
<DEPRECIATION> (225,677)
<TOTAL-ASSETS> 3,571,599
<CURRENT-LIABILITIES> 419,707
<BONDS> 0
0
0
<COMMON> 188,823
<OTHER-SE> 3,003,484
<TOTAL-LIABILITY-AND-EQUITY> 3,571,599
<SALES> 1,533,366
<TOTAL-REVENUES> 1,595,850
<CGS> 956,655
<TOTAL-COSTS> 1,821,306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,946
<INCOME-PRETAX> (225,456)
<INCOME-TAX> 0
<INCOME-CONTINUING> (225,456)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225,456)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
