JETBORNE INTERNATIONAL, INC.
FINANCIAL STATEMENTS
APRIL 30, 1995
JETBORNE INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
Item 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
Financial Statements:
Balance Sheets
April 30, 1995 and 1994
Statements of Income (Loss)
For the years ended April 30, 1995, 1994 and 1993
Statements of Changes in Stockholders' Equity
For the years ended April 30, 1995, 1994 and 1993
Statements of Cash Flows
For the years ended April 30, 1995, 1994 and 1993
Notes to Financial Statements
Financial Statement Schedules (included in Item 14.)
Schedule II - Amounts Receivable From Related
Parties and Underwriters, Promoters and
Employees Other Than Related Parties
Schedule VII - Guarantees of Securities of Other Issuers
Schedule IX - Short-term Borrowings
Exhibit II - Schedule of Computations of Earnings (Loss) per Share
F-1
NORMAN A. ELIOT & CO.
CERTIFIED PUBLIC ACCOUNTANTS
Norman A. Eliot, C.P.A. 9400 South Dadeland Boulevard
Florence L. Krantz, C.P.A. Miami, Florida 33156
John Blumenthal, C.P.A. Phone: (305) 670-4444
---- Fax: (305) 670-0105
Vivian R. Shariff, C.P.A.
Ramesh Singh, C.P.A.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Jetborne International, Inc.
Miami, FL 33142
We have audited the balance sheets of Jetborne International, Inc. as of
April 30, 1995 and 1994, and the related statements of income (loss),
changes in stockholders' equity, and cash flows for the years ended April
30, 1995, 1994 and 1993 and the schedules listed in the Index at Item 14.
These financial statements and schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jetborne
International, Inc. at April 30, 1995 and 1994, and the results of its
operations and its cash flows for the years ended April 30, 1995, 1994
and 1993 in conformity with generally accepted accounting principles, and
the schedules referred to above present fairly, in all material respects,
when read in conjunction with the related financial statements, the
information therein set forth.
The accompanying financial statements, presented on pages F-4, F-5, F-6,
and F-7 have been prepared assuming that the Company will continue as a
going concern. As described in Note 2 to the financial statements, the
Company has experienced significant net cumulative losses and has
incurred significant negative cash flows from operations resulting in the
Company having difficulty meeting its obligations. The continued
existence of the Company is dependent on the ability of the Company to
successfully implement management's plans which are also described in
Note 2. The foregoing conditions raise substantial doubt about the
F-2
Members: American Institute of Certified Public Accountants
Florida Institute of Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
(continued)
Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible
inability of Jetborne International, Inc. to continue as a going concern.
Miami, Florida
June 1, 1995, except
February 29, 1996 as to
certain matters referred to
in Notes 1, 2, 5, 9, and 15
for events that took place
on August 2, 1995, January 9,
1996, January 18, 1996, February /s/Norman A. Eliot & Co.
14, 1996 and February 29, 1996 Norman A. Eliot & Co.
F-3
JETBORNE INTERNATIONAL, INC.
BALANCE SHEETS
APRIL 30, 1995 AND 1994
A S S E T S
-----------
1995 1994
----------- -----------
CURRENT ASSETS:
Cash $ 86,235 $ 301,106
Accounts receivable:
Trade, net of allowance for doubtful
accounts ($3,607 and $15,996 1995
and 1994, respectively)(Notes 1 and 7) 133,567 131,779
Other 3,535 8,036
Stockholder loan receivable 3,000 0
Inventories (Notes 1, 5 and 7) 3,248,136 3,656,051
Prepaid expenses and
other current assets 23,970 19,029
----------- -----------
Total Current Assets $ 3,498,443 $ 4,116,001
----------- -----------
PROPERTY AND EQUIPMENT (Notes 1 and 6) $ 633,816 $ 625,247
Less: Accumulated depreciation and amortization 389,148 375,523
----------- -----------
Net Book Value 244,668 249,724
----------- -----------
OTHER ASSETS:
Security deposits and other assets $ 6,231 $ 42,591
----------- -----------
TOTAL ASSETS $ 3,749,342 $ 4,408,316
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4A
JETBORNE INTERNATIONAL, INC.
BALANCE SHEETS
APRIL 30, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1995 1994
----------- -----------
CURRENT LIABILITIES:
Notes payable (Note 7) $ 15,828 $ 22,619
Current maturities of long-term debt (Note 8) 68,302 51,489
Accounts payable 159,197 90,661
Income taxes payable (Note 11) 0 10,000
Customers' deposits 1,552 0
Accrued expenses 86,383 87,883
----------- -----------
Total Current Liabilities $ 331,262 $ 262,652
----------- -----------
LONG-TERM DEBT, net of current maturities
(Note 8) $ 70,317 $ 96,867
----------- -----------
COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS
(Notes 9, 12, 14, and 15)
STOCKHOLDERS' EQUITY (Notes 1, 9, 10, and 15):
Common stock, $.01 par value (14,000,000
shares authorized; 11,882,280 and 12,635,780
shares issued at April 30, 1995 and 1994) $ 118,823 $ 126,358
Additional paid-in capital 5,097,251 5,093,480
Retained earnings (deficit) (1,868,311) (1,167,277)
Treasury stock, 0 and 753,500
shares at April 30, 1995 and 1994, at cost 0 (3,764)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,347,763 4,048,797
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,749,342 $ 4,408,316
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4B
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1993
1995 1994 (Note 1)
----------- ----------- -----------
NET SALES $ 1,125,279 $ 1,755,763 $ 798,008
COST OF SALES 906,840 1,118,396 430,595
----------- ----------- -----------
GROSS PROFIT $ 218,439 $ 637,367 $ 367,413
SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 1,031,091 830,070 950,963
----------- ----------- -----------
OPERATING LOSS $ (812,652) $ (192,703) $ (583,550)
------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest and other income $ 96,083 $ 316,304 $ 592,843
Interest expense (5,166) (6,943) (77,215)
Recovery of stockholders' notes
and loans receivable (Note 4) 12,500 0 0
----------- ----------- -----------
Net Other Income 103,417 309,361 515,628
----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES (CREDIT) $ (709,235) $ 116,658 $ (67,922)
INCOME TAXES (CREDIT) (Note 11) (8,201) 0 0
----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (FORWARD) $ (701,034) $ 116,658 $ (67,922)
------------ ----------- ------------
The accompanying notes are an integral part of these financial statements.
F-5A
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1993
1995 1994 (Note 1)
----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS (FORWARDED) $ (701,034) $ 116,658 $ (67,922)
------------ ----------- ------------
DISCONTINUED OPERATIONS (Note 3):
Loss from discontinued
operations, net of income taxes $ 0 $ 0 $ (40,332)
----------- ----------- ------------
INCOME (LOSS)
BEFORE EXTRAORDINARY
ITEM AND MINORITY INTEREST $ (701,034) $ 116,658 $ (108,254)
EXTRAORDINARY ITEM:
Gain recognition on discharge of
debt net of $10,000 provision
for income taxes (Note 1) 0 414,033 0
----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY
INTEREST $ (701,034) $ 530,691 $ (108,254)
MINORITY INTEREST (dividend
requirement on preferred
stock of a subsidiary)(Note 10) 0 0 55,900
----------- ----------- -----------
NET INCOME (LOSS) $ (701,034) $ 530,691 $ (164,154)
=========== =========== ===========
EARNINGS (LOSS) PER SHARE (NOTE 1)
Continuing operations $ (0.06) $ 0.01 $ (0.02)
Net income (loss) (0.06) 0.05 (0.03)
WEIGHTED AVERAGE COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING (Note 1) 11,882,280 9,730,636 6,232,280
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-5B
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Number of shares
of common stock Amounts
--------------------- --------
Treasury Common
Issued Stock Stock
---------- --------- --------
BALANCE, APRIL 30, 1992 (Note 1) 6,235,780 3,500 $ 62,358
Net loss - - -
---------- -------- --------
BALANCE, APRIL 30, 1993 (Note 1) 6,235,780 3,500 $ 62,358
Net income - - -
Common stock issued (Notes 1, 9 and 10) 6,400,000 - 64,000
Common stock acquired
on confirmation of plan of
reorganization (Notes 1, 9 and 10) - 750,000 -
---------- -------- --------
BALANCE, APRIL 30, 1994 (Note 1) 12,635,780 753,500 $126,358
Net loss
Common stock retired (753,500) (753,500) (7,535)
---------- -------- --------
BALANCE, APRIL 30, 1995 (Note 1) 11,882,280 0 $118,823
========== ======== ========
The accompanying notes are an integral part of these financial statements.
F-6A
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Amounts
-------------------------------------
Additional Retained
Treasury Paid-in Earnings
Stock Capital (Deficit)
---------- ------------ -----------
BALANCE, APRIL 30, 1992 (Note 1) $ (3,763) $ 4,956,280 $(1,533,814)
Net loss - - (164,154)
-------- ----------- -----------
BALANCE, APRIL 30, 1993 (Note 1) $ (3,763) $ 4,956,280 $(1,697,968)
Net income - - 530,691
Common stock issued (Notes 1, 9 and 10) - 137,200 -
Common stock acquired
on confirmation of plan of
reorganization (Notes 1, 9 and 10) (1) - -
-------- ----------- -----------
BALANCE, APRIL 30, 1994 (Note 1) $ (3,764) $ 5,093,480 $(1,167,277)
Net loss (701,034)
Common stock retired 3,764 3,771
-------- ----------- -----------
BALANCE, APRIL 30, 1995 (Note 1) $ 0 $ 5,097,251 $(1,868,311)
========= =========== ===========
The accompanying notes are an integral part of these financial statements.
F-6B
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Amounts
-------------
Total
Stockholders'
Equity
-------------
BALANCE, APRIL 30, 1992 (Note 1) $ 3,481,061
Net loss (164,154)
------------
BALANCE, APRIL 30, 1993 (Note 1) $ 3,316,907
Net income 530,691
Common stock issued (Notes 1, 9 and 10) 201,200
Common stock acquired
on confirmation of plan of
reorganization (Notes 1, 9 and 10) (1)
------------
BALANCE, APRIL 30, 1994 (Note 1) $ 4,048,797
Net loss (701,034)
Common stock retired 0
------------
BALANCE, APRIL 30, 1995 (Note 1) $ 3,347,763
============
The accompanying notes are an integral part of these financial statements.
F-6C
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1993
1995 1994 (Note 1)
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (701,034) $ 530,691 $ (164,154)
Adjustments to reconcile
net income (loss) to net cash
used in operating activities:
Depreciation and amortization 29,958 33,774 45,269
Provision for losses
on trade accounts receivable 3,607 0 1,325
Write-off of trade accounts
receivable, net of recoveries 12,880 7,848 5,971
Loss on discontinued operations 0 0 40,332
Loss from sale of
property and equipment 0 1,671 18,535
Recognition of deferred income 0 (193,518) (316,667)
Forgiveness of debt (9,300) 0 0
Treasury stock received (nominal value) 0 (1) 0
Changes in certain
assets and liabilities:
(Increase) decrease in
trade accounts receivable (18,275) (6,854) 28,666
Decrease in other
accounts receivable 4,501 8,508 37,961
Increase in
stockholder loan receivable (3,000) 0 0
Decrease in inventories 407,915 11,413 135,076
(Increase) decrease in prepaid
expenses and other current assets (4,941) 190,647 (186,327)
Decrease in net
assets of discontinued operations 0 88,294 17,560
(Increase) decrease in
security deposits and other
assets 36,360 (37,054) 30,384
Increase (decrease)
in accounts payable 68,536 (94,454) 24,430
Increase (decrease) in
indebtedness to stockholder 0 (3,600) 3,600
Increase (decrease)
in income taxes payable (10,000) 6,895 3,500
Increase (decrease)
in customers' deposits 1,552 (15,375) (729)
Decrease in accrued expenses (1,500) (160,912) (71,604)
Decrease in net liabilities
discharged in bankruptcy 0 (414,033) 0
---------- ---------- ----------
Net cash used in
operating activities $ (182,741) $ (46,060) $ (346,872)
---------- ---------- ----------
The accompanying notes are an integral part of these financial statements.
F-7A
JETBORNE INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1993
1995 1994 (Note 1)
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment $ (24,902) $ (2,831) $ (34,595)
Proceeds from sale
of property and equipment 0 0 5,161
---------- ---------- ---------
Net cash used
in investing activities (24,902) (2,831) (29,434)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments received
from notes receivable $ 0 $ 0 $ 650,000
Proceeds from issuance of notes 26,070 20,859 0
Principal
repayments on notes payable (23,561) (25,540) (11,522)
Principal repayments
on long-term debt (9,737) (101,465) (65,499)
Proceeds from private
placement sale of common stock 0 201,200 0
---------- ---------- ---------
Net cash provided by
(used in) financing activities (7,228) $ 95,054 572,979
---------- ---------- ---------
NET INCREASE (DECREASE) IN CASH $ (214,871) $ 46,163 $ 196,673
CASH, BEGINNING 301,106 254,943 58,270
---------- ---------- ---------
CASH, END $ 86,235 $ 301,106 $ 254,943
========== ========== =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,136 $ 6,078 $ 1,990
=========== ========== =========
Income taxes $ 1,799 $ 41,142 $ 0
=========== ========== =========
The accompanying notes to financial statements describe certain non-cash
investing and financing activities (some of which affect the changes in
certain assets and liabilities) and are taken into consideration in the
consolidated statements of cash flows.
F-7B
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
- -------------------------
Jetborne International, Inc. (the "Company") was incorporated January 30,
1987 (under the laws of the State of Delaware) as a holding company in
anticipation of a public offering. On February 2, 1987, the stockholders
of Jetborne, Inc. (incorporated April 24, 1980 under the laws of the
State of Florida) contributed all of the outstanding shares of Jetborne,
Inc. common stock to Jetborne International, Inc. (the Company owned no
other assets at that date) in exchange for 3,123,000 shares of common
stock of the Company and Jetborne, Inc. transferred to the Company its
stock in each of its subsidiary companies. On May 20, 1987, the Company
sold 1,150,000 shares of its common stock to the public, resulting in net
proceeds to the Company of approximately $3,328,000. On September 17,
1993, an order of the United States Bankruptcy Court, Southern District
of Florida was entered confirming the Company's third amended plan of
reorganization. Prior thereto, $201,200 was deposited to the Company
attorneys' trust account as payment for 6,400,000 shares of Company
common stock to be issued in accordance with terms of the plan (see below
and Note 10).
The September 17, 1993 order of the United States Bankruptcy Court was
entered conditioned upon the ability of the Company to maintain the level
of allowed unsecured claims against the Jetborne International, Inc.
estate at a maximum of $2,300,000; accomplished on September 27, 1994
when the Company objection to the claim of a former principal stockholder
of the Company was sustained by the United States Bankruptcy Court. Prior
thereto, on December 10, 1991, creditors of the Company filed with the
United States Bankruptcy Court, placing the Company in an involuntary
Chapter 11 bankruptcy proceeding (converted by the Company to a
voluntary proceeding on December 26, 1991); Jetborne, Inc., the only
then significant operating subsidiary of the Company, filed a voluntary
petition on December 16, 1991; subsequently, the two proceedings were
consolidated. The Company filed, with the Bankruptcy Court, an Amended
Disclosure Statement and Plan dated May 14, 1993 whereby a program was
established for the probable payment to all creditors, over various
periods not to exceed nine years, of all approved sums due to them (the
allowed unsecured claims against the Jetborne, Inc. [see below] estate
are to be paid after the payment of allowed unsecured claims against the
Jetborne International, Inc. estate); payments to the Jetborne
International, Inc. unsecured creditors commenced during January 1995
(thirty days after the December 14, 1994 United States Bankruptcy Court
appointment of the designee for the Unsecured Creditors Committee). The
principal source of the funds to pay the indebtedness is the January 1,
1993 balance on the note received from the sale of Aircraft Modular
Products, Inc. ("AMP")(see Notes 3 and 4). In addition, there are
provisions for:
Merging Jetborne, Inc. into the Company and the cancellation of
the Jetborne, Inc. preferred stock (see Note 10). The Company has,
however, registered the name Jetborne, Inc. under the Fictitious
Name Act of the State of Florida.
F-8
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Organization and Business (continued)
- -------------------------------------
The present stockholders of Jetborne International,
Inc. maintaining their shares of common stock of the Company
(the Company will still be publicly owned).
The sale of 6,400,000 shares of the Company's common stock to two
new principal stockholders of the Company (see Notes 9 and 10) for
$201,200.
The sum of the excess of liabilities transferred to the Unsecured
Creditors' Committee of Jetborne International, Inc., the cancellation of
the preferred stock (and the related assets and liabilities) of Jetborne,
Inc. and the Federal "alternative minimum tax" (see Note 11) (based on
the excess of alternative minimum tax income over the alternative minimum
tax net operating loss carryforward) over the carrying value of the AMP
note ($414,033) is reflected on the statement of income (loss) for the
year ended April 30, 1994 in the category "gain recognition on discharge
of debt, net of $10,000 provision for income taxes (Note 1)".
The Company is primarily engaged in the sale of aircraft parts and also
coordinates maintenance support and management for aircraft, manages
aircraft conversion projects and sells and leases aircraft primarily as a
broker.
General/Pledged Assets/Reclassifications
- ----------------------------------------
The stockholders' equity section of the balance sheets at April 30, 1995
and April 30, 1994 reflect the 6,400,000 shares of Company common stock
as if issued at those dates (in accordance with the confirmed plan of
reorganization; see above)(not issued at February 29, 1996) and the
750,000 shares of Company common stock as if received in the Treasury at
April 30, 1994 (also in accordance with the confirmed plan of
reorganization; see Notes 10 and 15)(the 750,000 shares, and 3,500 shares
of previously acquired stock, were cancelled on August 10, 1994 thereby
reducing the number of shares issued at April 30, 1995). The prior year
financial statements are presented, for comparative purposes, as if the
Company was not, until September 17, 1993, in re-organization under
Chapter 11 of the United States Bankruptcy Code. The statements of
income (loss), changes in stockholders' equity and cash flows for the
period May 1, 1993 through September 16, 1993 and the year ended April
30, 1993 reflect results of operations and cash flows of the Company and
its then wholly owned subsidiaries while it was Debtor-in-Possession. All
material inter-company balances and transactions (through September 16,
1993) have been eliminated.
Prior to its emergence from the bankruptcy proceedings, substantially all
of the Company's assets were pledged as collateral for notes payable and
other debt. Effective September 17, 1993, the Company transferred the
note receivable (from the purchaser of 100% of the common stock of
Aircraft Modular Products, Inc.; see Notes 3 and 4) to the Unsecured
F-9
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Creditors' Committee of Jetborne International, Inc. (in accordance with
the terms of the Company's third amended plan of reorganization [see
above]).
Certain amounts in the April 30, 1994 and April 30, 1993 financial
statements have been reclassified to conform with the April 30, 1995
presentation and the April 30, 1993 financial statements have been
restated to take into consideration the sale/liquidation of subsidiaries
(see Note 3).
New (Recent) Accounting Standards
- ---------------------------------
The Company has adopted all recent accounting standards and
pronouncements issued by the Financial Accounting Standards Board (FASB)
that are applicable (including FASB 109 Accounting for Income Taxes and
FASB 121 Accounting for the Impairment of Long Lived Assets). The
adoption did not cause a material effect on the Company's financial
statements.
Accounts and Notes Receivable, Trade/Allowance for Doubtful Accounts
- --------------------------------------------------------------------
The Company's policy is to establish an allowance for doubtful accounts
when the collectability of the accounts is doubtful and to charge that
account, or income, when the accounts are determined to be uncollectable
($16,487, $4,200 and $2,067 [net of recoveries] for the years ended April
30, 1995, 1994 and 1993, respectively)(see Note 4 regarding the write-off
of certain non-trade notes and loans receivable).
Inventories
- -----------
Inventories are stated at the lower of cost or market with cost
determined using the average cost method (see Note 5).
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Expenditures for major
betterments and additions are charged to the property and equipment
accounts while replacements, maintenance and repairs, which do not
improve or extend the life of the respective asset, are charged to
expense currently. The cost of assets retired or otherwise disposed of
and the accumulated depreciation are relieved from the accounts, and the
resulting gain or loss is included in the statement of income. The
Company's policy is to capitalize, and record as property and equipment,
assets acquired under terms of capital leases.
Depreciation is calculated using the straight line and declining balance
methods over the estimated useful lives of the assets. For income tax
purposes, depreciation is calculated using the accelerated cost recovery
system (MACRS) for certain qualifying assets and the straight-line method
for other assets (see below).
F-10
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
- ------------
The Company filed consolidated income tax returns through the year ended
April 30, 1994 which included the results of its operations and the
operations of its wholly owned U.S. subsidiaries through September 16,
1993. Income tax expense was allocated to the subsidiaries that had net
income, computed as if each subsidiary were filing a separate return. The
subsidiaries' liability, along with other inter-company indebtedness, was
eliminated in consolidation. The income tax returns of the Company for
the period September 17, 1993 through April 30, 1994 and the year ended
April 30, 1995 reflect the results of operations of the Company.
Deferred income taxes (none at April 30, 1995 and 1994) are provided in
amounts sufficient to give effect to the use of net operating loss
carryforwards and timing differences between financial and income tax
reporting (see Note 11). Investment tax and research and development tax
credits are treated as a reduction of income tax expense in the year in
which the related assets are placed in service and when the research and
development expense is incurred.
Earnings (Loss) Per Share
- -------------------------
Earnings (loss) per share have been computed based on the weighted
average number of common shares and common share equivalents
outstanding.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Note 2. LIQUIDITY (see Note 1)
The Company has sustained net cumulative losses of approximately
$3,700,000 since April 30, 1988 (the net income for the two years that
did not reflect losses were generated from either discontinued operations
or extraordinary items) and retained earnings have decreased from
$1,837,681 to retained earnings (deficit) of $(1,868,311) at April 30,
1995. As referred to in Note 1, the Company emerged from a Chapter 11
bankruptcy proceeding (which commenced December 10, 1991) on September
17, 1993 and, as part of the confirmed plan of reorganization, the
Company received $201,200 for the issuance of 6,400,000 shares of Company
common stock.
Since the end of the last fiscal year, the Company's liquidity has
continued to deteriorate, with increasing rapidity, primarily due to a
continuing diminishing stock sales trend caused by a lack of current or
"fresh" inventory, declining consignment inventory, limited brokerage
sales opportunities and excessive professional fees due to previous and
on-going litigation.
F-11
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 2. LIQUIDITY (see Note 1)(continued)
The Company borrowed $30,000 from its Chief Executive Officer on January
18, 1996 (not repaid at February 29, 1996) for the purpose of paying an
obligation due that day (see Note 15) and, at February 29, 1996, is
indebted to the Chairman of its Board of Directors for five months
compensation (see Note 14).
Credit financing is being sought to purchase "fresh" inventory lots
where the purchased inventory will comprise the collateral for the credit
extended. The Company also continues to pursue aircraft parts consignment
agreements and other business opportunities within the expertise of its
executives. Consignments, in effect, provide the Company with additional
inventory without the prior need for purchases which adversely affects
liquidity.
Management of the Company believes that the referred to programs, if
accomplished, will provide sufficient working capital to meet the
Company's obligations as they become due. There can be no assurance,
however, that the Company will be successful in its efforts nor that it
will be able to maintain its operations on a profitable basis even though
substantially all claims and lawsuits have been resolved or adequate
provision has been made for the ultimate liability (see Note 15).
As indicated in Note 3, all operating subsidiaries of the Company were
sold, or operations were terminated, during the past five years except
Jetborne, Inc. which was effectively merged into the Company.
Note 3. SALE/LIQUIDATION OF SUBSIDIARIES
As referred to in Note 1, the Company sold 100% of the common stock of
Aircraft Modular Products, Inc. during the year-end April 30, 1991 and
during the same year sold the operating assets of Alblam Sound
Productions, Inc. In addition, a receiver was appointed, during the year
ended April 30, 1992, for the Company's principal United Kingdom
subsidiary and operations of Advanced Aero Hydraulics, Inc. were
terminated during the year ended April 30, 1993. The then only remaining
subsidiary of the Company (Jetborne, Inc.) was effectively merged into
the Company when the United States Bankruptcy Court entered an order, on
September 17, 1993, confirming the Company's third amended joint plan of
reorganization (see Note 1).
Operations of Advanced Aero Hydraulics, Inc. ("AAH") were terminated on
July 31, 1992 and the Company entered into a contract for the sale of
AAH's equipment for $60,000. The sale was concluded on March 26, 1993 and
the Company received $15,000 with the balance of the contracted amount
payable in $15,000 installments (paid in full by July 23, 1993).
The results of operations of AAH are included in the statements of income
(loss) in the category "loss from discontinued operations, net of income
F-12
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 3. SALE/LIQUIDATION OF SUBSIDIARIES (continued)
taxes". The following is a summary of AAH's results of operations for the
year ended April 30, 1993:
Net sales $137,191
(Loss) before income taxes (40,332)
Income taxes 0
Net income (loss) (40,332)
Note 4. NOTES RECEIVABLE (Non-trade)
The Company had, prior to September 17, 1993, ownership of the remaining
balance on the note receivable from the purchaser of 100% of the common
stock of Aircraft Modular Products, Inc. This note (with the remaining
balance at January 1, 1993 of $2,078,350) has been transferred to the
Unsecured Creditors' Committee of Jetborne International, Inc. (see Notes
1 and 3).
At April 30, 1995 and 1994, the former principal stockholder of the
Company and two terminated officers (see Notes 9, 10 and 15) were
indebted to the Company as follows:
Former principal stockholder $3,310,321 (1)
Former Vice President 572,658 (2)
Former President 43,738 (3)
----------
Total $3,926,717
==========
These amounts had been written off as uncollectible, or an allowance had
been established, based on the then possible offsets and on the probable
uncollectability (see below and Notes 9, 10 and 15).
______
(1) On June 10, 1994 a final default judgement for $4,512,600 was
entered, by the United States Bankruptcy Court, against the former
principal stockholder.
(2) On November 10, 1994 the former Vice President, based on his
petition, obtained an order from the United States Bankruptcy Court
discharging his debts; however, on May 29, 1995, the same Court
determined that $514,212 of his debt to the Company was not
dischargeable and, accordingly,entered a final summary judgement
against him.
(3) The indebtedness of the former President was satisfied on September
8, 1994; the Company received $12,500, the former President withdrew
his claims against the Company, and mutual releases were exchanged.
Note 5. INVENTORIES (see Notes 1 and 7)
Inventories of aircraft parts and supplies total $3,248,136 at April 30,
1995 and $3,656,051 at April 30, 1994, net of a reserve for obsolescence
of $365,000 and $500,000 respectively. These amounts do not include
inventories received on a consignment basis with the Company agreeing to
assume all risks and insure at no charge to the consignors. The
consignment agreements are summarized as follows:
F-13
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 5. INVENTORIES (see Notes 1 and 7)(continued)
Consignment agreement dated January 26, 1990 with a major airline with
the Company agreeing to use its best efforts to sell the inventory at
market value for which it was to receive 35% of the selling price.
From inception through April 30, 1992, the Company had received
approximately $2,150,000 (valued at estimated selling prices) of
parts. As of April 30, 1995 all unsold parts were in the Company's
warehouse, however, based on negotiations with, and instructions from,
the consignor, all parts were returned to the consignor by November 2,
1995. The various remaining unresolved matters between the Company and
the consignor were in progress until January 9, 1996 when a settlement
agreement was entered into cancelling and terminating the original
consignment agreement and the modifications (see Note 15).
Consignment agreement dated December 9, 1992, with a non-related
entity, which required the Company to initially place a $125,000
deposit with the consignor (to be reviewed semi-annually as it relates
to the value of the consigned parts; reduced to $36,629 at April 30,
1994, and $ 0 at April 30, 1995 based on the reduced amount of the
consigned inventory on hand). The Company agreed to use its best
efforts to sell the parts for which it receives 40% of the selling
price. Either party may cancel the agreement with thirty days written
notice. An affiliate of the consignor had guaranteed the deposit.
Consignment agreement dated December 1, 1994, with a non-related
entity. The Company agreed to use its best efforts to sell the parts
for which it receives 40% of the selling price (just prior to each
sale title to the inventory items are transferred from the consignor
to the Company and the Company sells the parts in its own name). In
addition, the Company is to pay a handling fee of 10% of the
consignor's acquisition costs for any consignment parts returned to
the consignor during the period of the agreement; the 10% handling fee
for items returned to the consignor, based on the consignor's request,
is to be charged to the consignor. The agreement was to expire
November 30, 1995, however, it was cancelled by the Company August 2,
1995.
Note 6. PROPERTY AND EQUIPMENT (see Note 1)
At April 30, property and equipment consists of:
Estimated useful lives/
1995 1994 depreciation methods
-------- -------- -------------------------
Machinery 5-10 years/straight-line
and equipment $142,718 $129,196 and declining balance
Leasehold improvements 361,681 361,681 10-25 years/straight-line
Office furniture
and equipment 110,992 115,945 5-8 years/straight-line
Transportation equipment 18,425 18,425 5 year straight-line
-------- --------
Total $633,816 $625,247
======== ========
F-14
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 6. PROPERTY AND EQUIPMENT (see Note 1)(continued)
Depreciation and amortization charged to income was $29,958, $33,774
and $45,269 for the years ended April 30, 1995, 1994 and 1993,
respectively.
Note 7. NOTES PAYABLE (see Notes 1, 4 and 5)
At April 30, notes payable consist of:
1995 1994
-------- ---------
Remaining balance on a $25,000 note, originally
payable on demand, with interest at prime plus
2 points; issued December 11, 1991 with a chattel
mortgage encumbering all inventory, all accounts
receivable and the AMP note (see Note 3) $ 0 $ 9,300
Installment notes payable monthly ($362 to $1,671
including interest at various rates) through
December 15, 1995 15,828 13,319
-------- ---------
Total $ 15,828 $ 22,619
======== =========
Note 8. LONG-TERM DEBT (see Notes 1, 5 and 15)
At April 30, long-term debt consist of:
1995 1994
--------- ---------
Various unsecured tax obligations payable monthly
($1 to $371 plus interest) from October 1993
through February 1996 $ 27,331 $ 27,331
Agreement to pay a creditor in twenty remaining
quarterly installments commencing November 23,
1993 (the first four installments of $5,000
through August 23, 1994 and the remaining sixteen
installments of $2,500 through August 25, 1998),
without interest (see Note 15 regarding the
modification of the amount of the indebtedness
and the payment terms) 60,000 60,000
Income tax obligation to Internal Revenue Service
payable in monthly installments ($1,151 including
interest at 7% per annum) through August 17, 1999 51,288 61,025
-------- --------
Total $138,619 $148,356
Less: Current maturities 68,302 51,489
-------- --------
Long-term debt, net of current maturities $ 70,317 $ 96,867
======== ========
F-15
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 8. LONG-TERM DEBT (see Notes 1, 5 and 15)(continued)
Maturities of long-term debt in each of the next years are as follows:
Year ending April 30, Amount
-------------------- ------------
1996 $ 68,302
1997 24,012
1998 23,359
1999 18,410
2000 and thereafter 4,536
------------
Total $ 138,619
============
Note 9. RELATED PARTY TRANSACTIONS (see Notes 1, 4, 10, 14 and 15)
Prior to March 9, 1991, when a non-related U.K. Limited Liability Company
("U.K. Company") acquired, from the then principal stockholder of the
Company, the rights to 3,130,000 shares of the Company's common stock
(including options to purchase 430,000 shares; the options expired prior
to April 30, 1995), a former employee, officer and chairman of the Board
of Directors was the principal stockholder of the Company. On December
30, 1990, the then principal stockholder of the Company signed a
$1,960,492 note to the Company which note was not paid and, on June 10,
1994, the Company obtained a default final judgement, in the amount of
$4,512,600, against him in connection with the note and related matters.
Reference is made to Note 1 which describes a provision in the bankruptcy
confirmation order for the receipt by the Company of $201,200 for the
issuance of 6,400,000 shares of Company common stock (50% to the Chairman
of the Board of Directors of the Company, as trustee [also the
representative of U.K. Company; see above and Note 10] and 50% to the
Chief Executive Officer of the Company). In connection therewith, and as
subsequently confirmed by the United States Bankruptcy Court, the two
stockholders entered into a shareholder agreement which contains various
provisions including: voting for members of the Board of Directors (as
directed by the United States Bankruptcy Court, the current Board of
Directors consists of the Chairman of the Board, the Chief Executive
Officer and a non-employee who was previously appointed a director by
U.K. Company), disposition of shares (including the first right of
refusal on possible sale and/or transfer), an employment agreement for
the Chief Executive Officer (see Note 14) and compensation for the
Chairman of the Board of Directors of the Company (see Note 14).
On January 18, 1996, the Company borrowed $30,000 from its Chief
Executive Officer (see Note 15)(not repaid at February 29, 1996) and is
indebted to the Chairman of its Board of Directors at February 29, 1996
for five months compensation (totalling $20,000; see Note 14).
F-16
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 10. STOCKHOLDERS' EQUITY (see Notes 1, 9 and 15)
On October 4, 1991, the Company's stock was delisted from NASDAQ.
Effective September 17, 1993, the 5,590 shares of 10% cumulative
redeemable preferred stock of Jetborne, Inc. was cancelled based on the
September 17, 1993 order of the United States Bankruptcy Court, Southern
District of Florida, confirming the Company's third amended plan of
reorganization (see Notes 1 and 3).
In connection with various contractual arrangements, the Company had
committed to register 946,850 shares of its common stock in a
registration statement to be filed with the Securities and Exchange
Commission. Since the commitments were made, significant events have
taken place and, presently, it is uncertain whether any of the
commitments can be, or will have to be, fulfilled.
Stock Option Plans
- ------------------
Since inception, the Company adopted several stock option plans for the
benefit of employees and directors of the Company. The Company believes
that all of the options, as of February 29, 1996, were cancelled or have
expired.
Common Stock Issued
- -------------------
Through May 1, 1991, the Company had issued 6,235,780 shares of its
common stock. The status remained the same, subject to outstanding
options (see above) until September 17, 1993 when 6,400,000 shares of the
Company's common stock were sold to two new principal stockholders of the
Company based on an order of the United States Bankruptcy Court, Southern
District of Florida, confirming the Company's third amended plan of
reorganization (see above and Note 1).
On November 10, 1994 the Company was notified that the 221,850 shares of
Company common stock purchased by U.K. Company (see Note 9) were
transferred to the Chairman of the Board of Directors of the Company, as
Trustee (U.K. Company also confirmed that they conveyed to that person,
as trustee, all of its ownership interest in the 3,200,000 shares of
Company's common stock to be acquired by that person as trustee [see
above and Note 1]). Accordingly, U.K. Company only owns the shares of the
Company's common stock acquired, on March 9, 1991, from the then
principal stockholder of the Company (see Note 9).
Common Stock in Treasury
- ------------------------
Prior to May 1, 1991, the Company had purchased, from non-related
persons, 3,500 shares of its common stock for $3,763. The Company
received 750,000 shares of its common stock from the bank that was
holding the shares as collateral for an obligation of the then principal
stockholder of the Company (see Note 9). The return was negotiated as
part of the settlement with that bank (see Note 15) and accordingly it is
included in the statement of changes in stockholders' equity for the year
ended April 30, 1994 at a nominal value of $1.
On August 10, 1994 the 753,500 shares were cancelled (see Note 1).
F-17
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 11. INCOME TAXES
At May 1, 1992, the Company had, for Federal Income Tax purposes, a net
operating loss carryforward of $2,741,731. The following is a summary of
the components of the net operating loss carryforward to the fiscal year
ending April 30, 1995:
Balance at May 1, 1992 $2,741,731
Loss applied to taxable income
of fiscal year ended April 30, 1993 (125,272)
Loss applied to taxable income
of fiscal year ended April 30, 1994 (2,041,621)
Increase due to reduction in
charitable contributions carryforward 11,698
Loss arising in fiscal year ended April 30, 1995 944,142
----------
Net operating loss carryforward to fiscal years
ending April 30, 1996 through April 30, 2010 $1,530,678
==========
Even though the Company was not required to pay Federal income tax based
on taxable income for the year ended April 30, 1994 (as the taxable
income was offset by the net operating loss carryforward), Federal income
tax of $1,799 was computed based on the "alternative minimum tax"
computation. In the event Federal income tax returns for subsequent years
reflect Federal income taxes due in excess of the alternative minimum
tax, the alternative minimum taxes paid for years ended April 1991
($59,763) and 1994 ($1,799) can be applied against the computed Federal
income tax.
No provision has been made for the difference between financial statement
and income tax reporting of certain items of revenue and expenses, as the
net operating loss carryforward at April 30, 1995 substantially exceeds
the difference; nor has a provision been made for deferred income tax
credits, based on the possible use of the net operating losses being
applied against taxable income in future years (and the use of the
"alternative minimum tax" paid) as there is no assurance that the
Company's future profitability will exceed the difference.
Note 12. LEASES
The Company leases warehouse facilities and office space under a
long-term agreement. On June 30, 1992, the Company concluded a settlement
with Aircraft Modular Products, Inc. ("AMP") which included AMP's
purchasing the building occupied by the Company and entering into a new
lease with the Company (not including the space then occupied by a former
subsidiary [Advanced Aero Hydraulics, Inc.; see Note 3]) covering a
period of five years commencing October 1, 1992 (initially for a six
month period with options for six months and four years [exercised
covering the four years ending September 30, 1997])(with a rent
reduction) and relieving the Company of its $85,387 obligation for prior
unpaid rent.
F-18
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 12. LEASES (continued)
The following is a schedule of future minimum lease payments for the
above described lease:
Year ending April 30
-------------------
1996 $ 85,679
1997 85,679
1998 35,700
Thereafter 0
----------
Total $ 207,058
==========
For the years ended April 30, 1995, 1994 and 1993, rental expense for all
operating leases was approximately $111,496, $104,000 and $101,000 (net
of rent waivers, see above), respectively.
Note 13. MAJOR CUSTOMER
The Company made sales to major unaffiliated customers of approximately
$486,000, $986,000 and $92,000 during the years ended April 30, 1995,
1994 and 1993, respectively.
NOTE 14. EMPLOYMENT AGREEMENTS (see Note 9)
During April 1992, the then financial controller of the Company was
appointed Chief Financial Officer at a salary of $65,000 per annum
(increased to $70,000 when an employment agreement was entered into on
May 1, 1994). The employee resigned on May 31, 1995 effective June 30,
1995. Another employee was appointed financial controller.
On June 15, 1994, modifications to Executive Employment Agreements were
approved by the United States Bankruptcy Court and are summarized as
follows:
A five year employment agreement, effective May 1, 1994, with the
Chief Executive Officer at a salary of $120,000 per annum, plus
fringe benefits (the agreement contains provisions for termination
by the Company and/or the employee and a non-compete clause), and
establishment of $48,000 per year compensation to the Chairman of the
Board of Directors (effective June 15, 1994).
Note 15. LITIGATION (see Notes 4, 9, and 10)
At April 30, 1995 and 1994, the Company was a party to several claims and
lawsuits arising out of the conduct of its business. Substantially all of
the litigation that was unresolved at April 30, 1993 has been resolved by
the United States Bankruptcy Court prior to, or on, September 17, 1993
(when the Company's third amended plan of reorganization was confirmed)
or subsequently by a separate Bankruptcy Court order.
F-19
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9, and 10)(continued)
The following is a summary of the claims and lawsuits that have been
resolved as of February 29, 1996:
On June 10, 1994, a Default Final Judgement was entered against the
former principal stockholder, in the amount of $4,512,600 plus
interest, based on the lawsuit re-filed in the Bankruptcy Court.
Included in the lawsuit were claims against two suspended officers of
the Company (see below) and claims against a third suspended officer
(see below) and a former sales consultant; these claims have been
settled without payment of substantial funds by, or to, the Company
(see Note 4). The former sales consultant had filed a $474,000 claim
(against Jetborne, Inc.) in the Bankruptcy Court and the Company had
disputed it. On September 8, 1994 the Company and the former sales
consultant resolved their disputes and both parties signed a
stipulation of dismissal (however, the sales consultant still had the
right to file a claim in the Bankruptcy Court).
An action to recover damages from the Company, as guarantor, on an
outstanding $750,000 obligation (plus interest and costs) payable to
a bank by the then principal stockholder of the Company. On
September 12, 1991 a judgement was awarded to the bank (against the
stockholder and the Company, as guarantor). The litigation against
the Company was settled on September 17, 1993 when an order was
entered confirming the Company's third amended plan of
reorganization. The settlement includes the payment to the bank of
$100,000 (by the Company), payment to the bank of approximately
$1,078,000 (from the proceeds of collection of the note received from
the purchaser of Aircraft Modular Products, Inc. [see Notes 1 and 3]
and transferred to the Unsecured Creditors' Committee of Jetborne
International, Inc.) and the bank's return to the Company of 750,000
shares of the Company's common stock (previously held by the bank as
partial collateral and subsequently purchased by the bank for $.05
per share)(see Note 10).
A shareholders' derivative suit, on behalf of the Company, commenced
during May 1991, which named the former President of the Company, the
President (effective February 1991), the Vice President and the
Chief Operating Officer as defendants (see above). The complaint
purported to set forth claims for conversion, civil theft, breach of
fiduciary duty, instructive trust and breach of promise to pay.
Injunctive relief was sought, as well as an accounting by the
defendants, for the appointment of a receiver for the Company and the
involuntary dissolution of the Company. At a meeting held May 10,
1991, the newly elected Board of Directors passed a resolution to
investigate the claims and, at the same time, suspended, as officers
and employees, the three officers of the Company. Salaries to the
three former officers were stopped effective May 10, 1991. There has
not been any recent activity and the Company considers the matter
closed. In the opinion of management of the Company, any adverse
decision in connection with this litigation will not have a material
adverse impact on the financial condition of the Company and, if the
F-20
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9, and 10)(continued)
Company is awarded damages, the collectability is doubtful (see Note
4).
During June 1991, the three suspended officers of the Company brought
actions against the Company (and the Company filed a lawsuit in the
United States Bankruptcy Court against the suspended officers) for
breach of employment and indemnity contracts (see above) and alleged
damages as a result of the breaches as well as for reimbursement of
costs incurred. The Board of Directors completed its investigation
in connection with the shareholders' derivative suit (see above) and
terminated the employment of the officers. The actions have been
resolved (see above and Note 4).
During March 1991, the Company was informed that an investigation by
the United States Customs Service (which commenced on March 7, 1990,
when the United States Customs Service visited the offices of the
Company [in the United States and the United Kingdom] and searched
the premises and Company files pursuant to a warrant signed by a
United States Magistrate to determine if there was a possible
violation of the Export Administration Act and the Arms Export
Control Act) had been expanded and the Company, and one of its former
Vice Presidents, were the targets of an investigation by a Federal
Grand Jury for possible criminal violations. The Company had been
informed that charges against the former Vice President were dropped,
the Company was indicted and the trial scheduled for November 1991.
On October 23, 1992, the Company entered into a plea-bargain
agreement, and on December 15, 1992 the Company pleaded guilty to two
counts and paid $25,260 in fines, to settle all pending litigation
and matters in connection with the investigation. During December
1993, the Company was informed that it had been debarred for a period
of three years from December 3, 1992 from participating directly or
indirectly in the export of defense articles or technical data or in
furnishing of defense services for which a license or other approval
is required.
As referred to in Note 5, there were various unresolved matters
between the Company and a major airline in connection with a
consignment agreement dated January 26, 1990. On January 9, 1996, a
settlement agreement was entered into between the Company and the
major airline. The agreement cancelled and terminated the original
consignment agreement, and the modifications thereto, and the Company
agreed to wire transfer to the major airline $30,000 by January 18,
1996 (timely paid) and an additional $7,500 per month commencing
February 20, 1996 (the first payment was paid February 9, 1996) with
a final payment on January 20, 1997. The agreement also provides
that, when the major airline receives the $120,000 they will assign
to the Company their claim filed in the United States Bankruptcy
Court against Jetborne, Inc. ($80,180)(see Note 1).
On February 14, 1996, a lawsuit filed against the Company by one of
its former attorneys was dismissed based on a settlement compromising
the fees sought by the attorney.
F-21
JETBORNE INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
Note 15. LITIGATION (see Notes 4, 9, and 10)(continued)
The following is a summary of the claims and lawsuits that have not been
resolved as of February 29, 1996:
A former attorney for the Company (the escrow agent holding
promissory notes, and collateral therefore [and collateral for the
payment of Federal income taxes that might have been required with
respect to a proposed bonus payable to one former employee], that the
Company received from former executives of the Company [see above
and Notes 4 and 9]) had deposited with the Court the promissory notes
and collateral and had brought an interpleader action requesting that
the Court accept the promissory notes and collateral pending the
outcome of the matters involved. The Company filed an answer and
cross-claim against the issuers of the promissory notes seeking to
claim the escrowed promissory notes and collateral. Counsel for the
Company is presently evaluating the possibility of having the default
final judgement against the former principal stockholder entered into
the litigation in the Circuit Court in order to obtain the release,
and subsequent return to the Company, of 1,000,000 shares of the
Company common stock which were interplead and which were owned by
the former principal stockholder of the Company.
A possible substantial liability of Advanced Aero Hydraulics, Inc.
(see Note 3) as a result of pollution of its business premises. Based
on recent studies made on behalf of the Company, a provision of
$49,500 had been made in a prior year (approximately $10,000 of the
provision was paid by April 30, 1995 and 1994)(included in accrued
expenses in the balance sheets).
F-22
Schedule II
JETBORNE INTERNATIONAL, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Deductions
Balances, Additions (Amounts
Beginning (Including Collected
Name of Debtor of Year Interest) or Credited) Total
- ---------------- ---------- ---------- ------------- --------
1995:
A. Blattner(1) $ 0 $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0 0
D. Blattner (3) 0 0 0 0
A. Alouf 0 3,000 0 3,000
1994:
A. Blattner(1) $ 0 $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0 0
D. Blattner (3) 0 0 0 0
1993:
A. Blattner(1) $ 0 $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0 0
D. Blattner (3) 0 0 0 0
(1) Balance at beginning and end of year ($0) represents a receivable
of $3,310,321 less amounts written-off or for which an allowance
has been established of $3,310,321 (see Note 4 to the Financial
Statements).
(2) Balance at beginning and end of year ($0) represents a receivable
of $572,658 less amounts written-off or for which an allowance has
been established of $572,658 (see Note 4 to the Financial
Statements).
(3) Balance at beginning and end of year ($0) represents a receivable
of $43,738 less amounts written-off or for which an allowance
has been established of $43,738 (see Note 4 to the Financial
Statements).
F-23A
Schedule II
JETBORNE INTERNATIONAL, INC.
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES
OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
Amounts
Written-off
or for Which Balances, End Of Year,
an Allowance Net of Allowances
Has Been ------------------------
Name of Debtor Established Current Non-current
- ----------------- ------------ -------- ------------
1995:
A. Blattner(1) $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0
D. Blattner (3) 0 0 0
A. Alouf 0 3,000 0
1994:
A. Blattner(1) $ 0 $ 0 $ 0
M. Levkovitz(2) 0 0 0
D. Blattner 0 0 0
1993:
A. Blattner $ 0 $ 0 $ 0
M. Levkovitz 0 0 0
D. Blattner 0 0 0
(1) Balance at beginning and end of year ($0) represents a receivable
of $3,310,321 less amounts written-off or for which an allowance
has been established of $3,310,321 (see Note 4 to the Financial
Statements).
(2) Balance at beginning and end of year ($0) represents a receivable
of $572,658 less amounts written-off or for which an allowance has
been established of $572,658 (see Note 4 to the Financial
Statements).
(3) Balance at beginning and end of year ($0) represents a receivable
of $43,738 less amounts written-off or for which an allowance
has been established of $43,738 (see Note 4 to the Financial
Statements).
F-23B
Schedule VII
JETBORNE INTERNATIONAL, INC.
GUARANTEES OF SECURITIES OF OTHER ISSUERS
APRIL 30, 1995
Name of Issuer of Title of Issue of Total Amount
Securities Guaranteed Each Class of Guaranteed and Amount Owed by
by the Company Securities Guaranteed Outstanding the Company
- --------------------- --------------------- -------------- --------------
NONE
F-24A
Schedule VII
JETBORNE INTERNATIONAL, INC.
GUARANTEES OF SECURITIES OF OTHER ISSUERS
APRIL 30, 1995
Nature of Default by
Amount in Issuer of Securities
Treasury Guaranteed in Principal,
of Issuer of Interest, Sinking Fund,
Securities Nature or Redemption Provisions
Guaranteed of Guarantee or Payment of Dividends
- --------------- ------------ ------------------------
NONE
F-24B
Schedule IX
JETBORNE INTERNATIONAL, INC.
SHORT-TERM BORROWINGS
FOR THE YEAR ENDED APRIL 30, 1995
Maximum Amounts Average Amount
Categories of Aggregate Balances at Outstanding Outstanding
Short-term Borrowings End of Year During the Year During the Year
- ----------------------- ----------- --------------- ---------------
Notes payable to:
Banks and other
financial institutions $15,828 $ 26,783 $ 14,574
The average amount outstanding during the year represents the average
principal balances outstanding during the year.
The weighted average interest rates during the year were computed by
dividing the actual interest incurred on short-term borrowings by
the average amount outstanding during the year.
F-25A
Schedule IX
JETBORNE INTERNATIONAL, INC.
SHORT-TERM BORROWINGS
FOR THE YEAR ENDED APRIL 30, 1995
Weighted Average
Categories of Aggregate Interest Rate
Short-term Borrowings During the Year
- ----------------------- ----------------
Notes payable to:
Banks and other
financial institutions 6.92%
The average amount outstanding during the year represents the average
principal balances outstanding during the year.
The weighted average interest rates during the year were computed by
dividing the actual interest incurred on short-term borrowings by
the average amount outstanding during the year.
F-25B
JETBORNE INTERNATIONAL, INC.
Exhibit II
SCHEDULE OF COMPUTATIONS OF EARNINGS (LOSS) PER SHARE
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
1995 1994 1993
----------- ----------- ----------
CONTINUING OPERATIONS:
Income (loss)
from continuing operations $ (701,034) $ 116,658 $ (123,822)
=========== =========== ===========
Weighted average number of common
shares outstanding during the year 11,882,280 9,730,636 6,232,280
========== ========= =========
INCOME (LOSS) PER SHARE -
CONTINUING OPERATIONS $ (0.06) $ 0.01 $ (0.02)
=========== =========== ===========
NET INCOME:
Net income (loss) $ (701,034) $ 530,691 $ (164,154)
=========== =========== ===========
Weighted average number of common
shares outstanding during the year 11,882,280 9,730,636 6,232,280
========== ========= =========
EARNINGS (LOSS)
PER SHARE - NET INCOME (LOSS) $ (0.06) $ 0.05 $ (0.03)
========== ========== ==========
F-26