1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 17, 1996
Date of Report (Date of earliest event reported)
FIELDS AIRCRAFT SPARES
(Exact name of Registrant as specified in its charter)
Utah 0-27100 95-4218263
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
Incorporation)
2251-A Ward Avenue
Simi Valley, CA 93005
(Address of principal executive offices)
(Zip Code)
(805) 583-0050
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On April 17, 1996 the Securities and Exchange Commission
("Commission") notified the Company that it had no further comments
on the Form 10-SB that had been filed with the Commission on
October 30, 1995. Based on that event, McDonnell Douglas
Corporation ("MDC") filed a Form 3 and Schedule 13-D with the
Commission claiming beneficial ownership in 355,626 common shares
of the Company based on its right to convert the Series A
Convertible Preferred Stock of Fields Aircraft Spares Incorporated,
a California corporation and wholly owned subsidiary of the Company
(the "Preferred Stock"), owned by MDC for 25% of the common shares
of the Company on a fully-diluted basis. The Company had stated to
the Commission in writing that upon MDC's filing of the Schedule 13-
D or similar filing indicating beneficial ownership in the Company,
the Company's financial statements would thereafter reflect the
acquisition of the minority interest, which represents MDC's
investment in the Preferred Stock. Accordingly, while no common
shares have been issued to MDC in conversion of the Preferred
Stock, the Company is filing as an Exhibit to this Form 8-K, its
financial statements modified to reflect the acquisition of the
minority interest in anticipation of 355,626 common shares of the
Company being issued upon the conversion of the Preferred Stock to
common shares of the Company. Common shares will be issued
approximately ten (10) days following the earlier of: (I) the date
on which MDC gives written notice to the Company of its intention
to exchange the Preferred Stock for common shares; or (ii) the date
on which the common shares are approved for quotation on, and are
quoted for trading on, the Nasdaq SmallCap Market.
As of April 30, 1996, the Company reached a final settlement
with its insurance company with respect to the Company's warehouse
in Fillmore, California that was damaged by earthquake in January
1994. The settlement has resulted in a casualty gain of $909,000.
The financial statements, attached as Exhibit A, for the four
months ended April 30, 1996, reflect the non-recurring gain
recorded as a result of this settlement.
Item 7. Exhibits and Financial Statements.
The following financial statements are filed herewith.
Title of Documents
Unaudited Consolidated Balance Sheet at April 30, 1996
and December 31, 1995.
Unaudited Consolidated Statement of Operations for
the four months ended April 30, 1996.
Unaudited Consolidated Statement of Cash Flows for
four months ended April 30, 1996.
Unaudited Statement of Shareholders' Equity for the
four months ended April 30, 1996.
Notes to Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
FIELDS AIRCRAFT SPARES, INC.
Date June 3, 1996 By s/s Alan M. Fields
Alan M. Fields, President
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FIELDS AIRCRAFT SPARES INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1996 AND DECEMBER 31, 1995
ASSETS
1996 1995
CURRENT ASSETS:
Cash $ 100,000 $ 111,000
Accounts and other receivables,
less allowance for doubtful
accounts of $10,000 2,300,000 1,281,000
Inventory 7,838,000 7,652,000
Prepaid expenses 105,000 146,000
------------ ------------
Total current assets $10,343,000 $ 9,190,000
LAND, BUILDINGS AND EQUIPMENT:
Land $ 210,000 $ 210,000
Building and building improvements 1,061,000 1,132,000
Furniture and equipment 538,000 536,000
------------ -------------
Totals $ 1,809,000 $ 1,878,000
Less accumulated depreciation and
amortization 655,000 635,000
------------ -------------
Land, building and
equipment, net $ 1,154,000 $ 1,243,000
------------ -------------
OTHER ASSETS:
Debt issuance costs, net of accumulated
amortization $ 369,000 $ 420,000
Other assets 170,000 81,000
------------ --------------
Total other assets $ 539,000 $ 501,000
------------ --------------
Total assets $12,036,000 $10,934,000
============ ==============
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FIELDS
AIRCRAFT SPARES INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
1996 1995
CURRENT LIABILITIES:
Accounts payable $ 857,000 $ 488,000
Other accrued liabilities 369,000 139,000
Income taxes payable 1,000
Current portion of notes payable 7,819,000 7,905,000
Total current liabilities $ 9,045,000 $ 8,533,000
MINORITY INTEREST $ - $ 2,050,000
SHAREHOLDERS' EQUITY
Common stock $ 297,000 $ 297,000
Additional paid-in capital 3,426,000 1,376,000
Retained deficit (732,000) (1,322,000)
Total shareholders' equity $ 2,991,000 $ 351,000
Total liabilities and
shareholders' equity $12,036,000 $ 10,934,000
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FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
SALES $1,793,000
COST OF SALES 870,000
-----------
GROSS PROFIT $ 923,000
-----------
OPERATING EXPENSES:
General and administrative $ 834,000
Interest, net 405,000
------------
Total operating expenses $1,239,000
------------
LOSS FROM OPERATIONS $ (316,000)
------------
OTHER INCOME:
Casualty gain $ 909,000
------------
INCOME BEFORE PROVISION
FOR INCOME TAXES $ 593,000
PROVISION FOR INCOME TAXES 3,000
------------
NET INCOME $ 590,000
============
NET INCOME PER SHARE (fully-diluted) $ .51
============
NET INCOME PER SHARE (primary) $ .60
============
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FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 590,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 40,000
Amortization of debt issuance costs 52,000
Loss on sale of assets 51,000
Increase in accounts and other receivables (1,019,000)
Increase in inventory (186,000)
Decrease in prepaid expenses 41,000
Increase in other assets (89,000)
Increase in accounts payable 369,000
Increase in other accrued liabilities 230,000
Decrease in income taxes payable (1,000)
------------
Net cash provided by operating activities $ 78,000
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land, building and equipment $ (3,000)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on line of credit $ (76,000)
Principal payments on notes payable (10,000)
-------------
Net cash used in financing activities $ (86,000)
-------------
NET DECREASE IN CASH (11,000)
CASH, December 31, 1995 $ 111,000
-------------
CASH, April 30, 1996 $ 100,000
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FIELDS AIRCRAFT SPARES, INC.
(Formerly known as Fields Industrial Group, Inc.)
UNAUDITED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE FOUR MONTHS ENDED APRIL 30, 1996
COMMON STOCK
Number of
Shares Additional Total
Outstanding Amount Paid-in Retained Shareholder
Capital Deficit Equity
BALANCE, December 31, 1995 984,352 $ 297,000 $ 1,376,000 $(1,322,000) $ 351,000
Conversion of Minority Interest 2,050,000 2,050,000
Net Income 590,000 590,000
BALANCE, April 30, 1996 984,352 $ 297,000 $ 3,426,000 $ (732,000) $2,991,000
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1. Summary of significant accounting policies
In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for the fair
presentation of the financial statements have been included.
a. Principles of consolidation and company background
The consolidated Group financial statements include the accounts
of Fields Aircraft Spares, Inc., a Utah corporation, formerly
known as Fields Industrial Group, Inc., hereafter referred to as
FASI, and its majority-owned subsidiary Fields Aircraft Spares
Incorporated, a California corporation, (FASC) and its wholly-
owned subsidiary Fields Aero Management, Inc. All significant
intercompany accounts and activity have been eliminated.
In 1995, Fields Industrial Group, Inc. changed its name to
Fields Aircraft Spares, Inc.
The Group distributes new aircraft parts and equipment for use
on international and domestic commercial and military aircraft and
purchases and sells parts on a brokerage basis.
b. Concentration of credit risk
Substantially all of the Group's trade accounts receivables are
due from companies in the airline industry located throughout the
United States and internationally. The Group performs periodic
credit evaluations of its customers' financial condition and does
not require collateral. Credit losses relating to customers in
the airline industry have consistently been insignificant and
within management's expectations.
c. Concentration of sales
The Group had sales to foreign companies that amounted to 28%
of total sales for the four months ended April 30, 1996.
For the four months ended April 30, 1996, one customer accounted
for $273,000 of sales and another customer accounted for $217,000
of sales.
d. Inventory
Inventory is valued at the lower of cost or market value using
the first-in, first-out method. Where a group of parts have been
purchased together as a lot, the cost of the lot is allocated to
the individual parts by management, where possible, pro rata to
the list selling price at the time of purchase. Consistent with
industry practice, inventory is carried as a current asset but all
inventory is not expected to be sold within one year.
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1. Summary of significant accounting policies (continued):
e. Land, building and equipment
Land, building and equipment are recorded at cost. Depreciation
and amortization are computed using the straight-line method over
the estimated useful lives of the assets which range from 3 to 25
years.
The cost and related accumulated depreciation and amortization
of assets sold or otherwise retired are eliminated from the
accounts and any gain or loss is included in the statement of
operations. The cost of maintenance and repairs is charged to
income as incurred, whereas significant renewals and betterments
are capitalized. Depreciation and amortization expense for the
four months ended April 30, 1996 amounted to $40,000.
f. Debt issuance costs
The debt issuance costs relate to the issuance of the new
financing. Amortization of debt issuance costs for the four
months ended April 30, 1996 amounted to
$52,000.
g. Revenue recognition
The Group recognizes revenue from all types of
sales under the accrual method of accounting when title transfers.
Title transfers at the Group's facility.
h. Earnings per share
In March 1995, FASI's shareholders authorized the reverse split
of its common stock on the basis of fifty old shares for one new
share. This reverse split was effective as of November 1995. All
references herein to the number of shares are after the reverse
split.
Earnings per share is based on the following
weighted average number of shares on a fully-diluted basis which
was 1,155,783 shares at April 30, 1996.
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1. Summary of significant accounting policies (continued):
I. Income taxes
The Group files consolidated income tax returns. Deferred
income taxes relate to temporary differences between financial
statement and income tax reporting of certain accrued expenses,
state income taxes, bad debts, inventory, and depreciation.
In 1992, the Group adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes". SFAS 109 requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of
temporary differences between tax basis and financial reporting
basis of other assets and liabilities. The income tax effect of
the temporary differences as of April 30, 1996 and December 31,
1995 consisted of the following:
1996 1995
Deferred tax liability resulting from
taxable temporary differences for
accounting for inventory $ (314,000) $ (314,000)
Deferred tax asset resulting from
deductible temporary differences
for allowance for uncollectables 4,000 20,000
Deferred tax asset resulting from
deductible temporary differences
for other accrued liabilities 60,000
Deferred tax asset resulting from
deductible temporary differences
for utilization of net operating loss
carryforwards for income tax
purposes. 991,000 729,000
Valuation allowance resulting from the
potential nonutilization of net operating
loss carryforwards for income tax
purposes (681,000) (495,000)
Total deferred income taxes $ 0 $ 0
j. Employee benefit plan
FASC has a 401(k) Plan under Section 401(k) of the
Internal Revenue Code. The Plan allows all employees who are not
covered by a collective bargaining agreement to defer up to 25% of
their compensation on a pre-tax basis through contributions to the
Plan. Contributions to the Plan by FASC are discretionary and are
determined by the Board of Directors. No contributions were made
to the Plan during the four months ended April 30, 1996.
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2. Shareholders' equity
FASI has 50,000 shares authorized of its $.001 par value
preferred stock. At April 30, 1996 and December 31, 1995, there
were no shares of preferred stock issued or outstanding. The
preferred shares, if issued, may be granted the right to convert
into common shares. On liquidation, the preferred shares may be
entitled to share in the liquidation proceeds after satisfaction
of creditors and prior to any distribution to the common
shareholders to the extent of the preference determined by the
Board of Directors at the time of issuance.
FASI has the following common stock as of April 30, 1996
and December 31, 1995:
April 30, 1996 December 31, 1995
Authorized 2,000,000 2,000,000
Issued and outstanding 984,352 984,352
Par value $.05 $.05
All of the common shares have equal voting rights. The
common shares have no pre-emptive or conversion rights, no
redemption or sinking provisions, and are not liable for further
call or assessment. Each common share is entitled to share
ratably in any assets available for distribution to the common
shareholders upon liquidation of the Group.
On February 7, 1995, the Group owed $7,658,000 to
McDonnell Douglas Corporation (MDC). MDC cancelled the debt in
exchange for $850,000 plus 586,862 shares of Series A convertible
preferred stock of FASC. This constituted full and complete
satisfaction of the MDC debt. The agreement provided for the
mandatory exchange of the Series A convertible preferred stock of
FASC for 25% of the total common stock of FASI on a fully-diluted
basis within 10 days following the date the common stock is
approved for quotation on, and is quoted for trading on, the
Nasdaq Stock Market as a Small Cap Market Security. The Series A
convertible preferred stock carries a liquidation preference of
$5,000,000; which, in the event of a liquidation of the Group,
would be paid pro rata to the holders of the Series A shares. On
April 17, 1996 the Securities and Exchange Commission
("Commission") notified FASI that it had no further comments on
the Form 10-SB that had been filed with the Commission on October
30, 1995. MDC was notified of such event and accordingly filed a
Form 3 and Schedule 13-D with the Commission claiming beneficial
ownership in 355,626 common shares of FASI based on its right to
convert Series A convertible preferred stock for 25% of the common
stock of FASI on a fully-diluted basis. FASI had stated to the
Commission in writing that upon MDC's filing of the Schedule 13-D
or similar filing indicating beneficial ownership in FASI, FASI's
financial statements would thereafter reflect the acquisition of
the minority interest. Accordingly, while no common shares have
been issued to MDC in conversion of the Series A convertible
preferred stock of FASC, the financial statements have been
modified to reflect the acquisition of the minority interest in
anticipation of the 355,626 common shares of FASI being issued
upon conversion of the Series A convertible preferred stock of
FASC to common shares of FASI.
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2. Shareholders' equity (continued)
In January 1995, FASI sold 40,000 shares of common stock
for $250,000 ($6.25 per share). FASI then paid $250,000 to FASC
as additional paid-in capital.
The exchange of the MDC debt for the preferred stock of
FASC was accounted for as a minority interest. A gain of
$4,759,000 was recorded in the financial statements in 1995 as a
result of these transactions.
On February 9, 1995, FASC obtained new financing from
Norwest Business Credit, Inc., (Norwest). FASC has a line of
credit in the maximum amount of $10,000,000 with interest payable
monthly at prime plus 2.5%. Although due on demand, it expires in
February, 1998. The line of credit was partially used to pay the
note payable to the prior lending bank and to pay $850,000 to MDC.
All assets of the Group are pledged as collateral.
On February 9, 1995, FASI sold 100% of the outstanding
common stock of Fields Industrial Supply, Inc. to an unrelated
party.
As of April 30, 1996 the Group had reached a final
settlement with its insurance company. Management has elected to
record a casualty gain as a result of the January 1994 earthquake.
A gain of $909,000 has been recorded in the financial statements
for the four months ended April 30, 1996 as a result of this
transaction.
3. Notes payable
The notes payable at April 30, 1996 and December 31,
1995 consisted of the following:
1996 1995
Line of credit from Norwest, secured by all assets
of the Group, interest at prime plus 2.5% (10.25%
at April 30, 1996 and 10.5% at December 31, 1995)
payable monthly $ 7,288,000 $ 7,427,000
Note payable to bank, secured by land and
building, payable monthly at $2,396 plus interest
at prime plus 2% (9.75% at April 30, 1996
and 10.0% at December 31, 1995), due in 1996 447,000 457,000
Other notes payable $ 84,000 $ 21,000
------------ -----------
Total notes payable $ 7,819,000 $ 7,905,000
Less current portion 7,819,000 7,905,000
------------ -----------
Notes payable, net of current portion $ - $ -
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3. Notes payable (continued):
Principal payment requirements on all notes payable based
on terms and rates in effect at April 30, 1996 are as follows:
YEAR ENDING
MARCH 31, AMOUNT
1997 $7,819,000
Thereafter -
Total interest expense for the four months ended April
30, 1996 amounted to $405,000. Total interest paid for the four
months ended April 30, 1996 amounted to $342,000.
4. Provision for income taxes
The provision for income taxes for the four months ended
April 30, 1996 consisted of the following:
CURRENT:
State $ 3,000
--------
Total provision for income taxes $ 3,000
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Total income taxes paid in 1996 and 1995 amounted to
$2,400 each year. The Group has net operating loss carryovers
available to offset future taxable income. The amount and
expiration date of the carryovers are as follows:
YEAR ENDING
DECEMBER 31, FEDERAL STATE
2007 $ $ 221,000
2008 349,000 750,000
2009 1,161,000 580,000
2010 255,000 126,000
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5. Commitments
The Group leases vehicles and equipment and office
facilities under operating leases. The Minimum lease payments
required under operating leases as of April 30, 1996 are as
follows:
YEAR ENDING
APRIL 30, AMOUNT
1996 $ 32,000
1997 16,000
1988 12,000
Thereafter -
Lease expense for the four months ended April 30, 1996
was $32,000.
The Group has a contract with a financial advisor
whereby the financial advisor will provide consulting services to
the Group. The minimum payments required under the contract as of
April 30, 1996 are as follows:
YEAR ENDING
APRIL 30, AMOUNT
1996 $ 67,000
1997 55,000
Thereafter -
6. Related party transactions
The Group leases an office facility on a month to month
basis from an entity owned by certain officers of the Group.
In November 1995 FASI issued options to 25 employees to
the Group to acquire up to 82,525 common shares of FASI at a
purchase price of $3.00 per share subject to certain requirements.
The options must vest by November 1998.