-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fb38KSl1x5aC5SjlN0TPTrrU8Rw1Cmpp1u7C2ntYPJdyxKcOVeAbQ1Tn8GAhocFb ekflh6EhzdIYAldPFZCeJw== 0000943440-98-000040.txt : 19990901 0000943440-98-000040.hdr.sgml : 19990901 ACCESSION NUMBER: 0000943440-98-000040 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19980521 DATE AS OF CHANGE: 19990831 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JETBORNE INTERNATIONAL INC CENTRAL INDEX KEY: 0000811786 STANDARD INDUSTRIAL CLASSIFICATION: 5080 IRS NUMBER: 592768257 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-16039 FILM NUMBER: 98631090 BUSINESS ADDRESS: STREET 1: 8361 NORTHWEST 64TH ST CITY: MIAMI STATE: FL ZIP: 33166 BUSINESS PHONE: 3055912999 MAIL ADDRESS: STREET 1: 8361 NORTHWEST 64TH ST CITY: MIAMI STATE: FL ZIP: 33166 10-K 1 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. 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 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 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 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 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 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 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 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. COMMON STOCK
Period Bid Price Asked Price High Low High Low 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
(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. 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:
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) 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)
Summary Balance Sheet Information
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) 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
(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 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 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 ($486,484), respectively for the two preceding years.
The Company's Earnings (Loss) per Share 1996 1995 1994 1993 1992 From Continuing Operations ($ 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) ($0.15)
(a) Includes an extraordinary item, a gain recognition on discharge of debt, net of income tax ($.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., "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. 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. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a)(b) Identification of Directors and Executive Officers The directors, executive officers, former directors and former executive officers of the Company are identified as follows:
Name Position with Company Age Eles Dobronsky Chairman of the Board, 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)
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. 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. 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.
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 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) -- -- -- --
(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 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. 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
Title of Name and Address Amount and Nature of Percent Class of Beneficial Owner Beneficial Ownership of Class (2)(3) 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
(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 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". 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. (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). (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. 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 EX-1 2 JETBORNE INTERNATIONAL, INC. FINANCIAL STATEMENTS APRIL 30, 1996 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 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 JETBORNE INTERNATIONAL, INC. BALANCE SHEETS APRIL 30, 1996 AND 1995
ASSETS 1996 1995 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
_____________ The accompanying notes are an integral part of these financial statements. F-3 JETBORNE INTERNATIONAL, INC. BALANCE SHEETS APRIL 30, 1996 AND 1995
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 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
_____________ The accompanying notes are an integral part of these financial statements. F-3A JETBORNE INTERNATIONAL, INC.
STATEMENTS OF INCOME (LOSS) FOR THE YEARS APRIL 30, 1996, 1995 AND 1994 1996 1995 1994 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
_____________ The accompanying notes are an integral part of these financial statements. F-4 JETBORNE INTERNATIONAL, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
Number of shares of common stock Issued Treasury Stock 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
__________ The accompanying notes are an integral part of these financial statements. F-5 JETBORNE INTERNATIONAL, INC. STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
Additional Retained Total Common Treasury Paid-in Earnings Stockholders' Stock Stock Capital (Deficit) Equity 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
___________ The accompanying notes are an integral part of these financial statements. F-5A JETBORNE INTERNATIONAL, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
1996 1995 1994 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)
______________ The accompanying notes are an integral part of these financial statements. F-6 JETBORNE INTERNATIONAL, INC. STATEMENTS OF CASH FLOW FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
1996 1995 1994 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
___________ 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 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 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 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 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 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 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 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:
Estimated useful lives/ 1996 1995 depreciation methods 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
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 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)
At April 30, long-term debt consist of: 1996 1995 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
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 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 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 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 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 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 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 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 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 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 EX-27 3
5 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. 12-MOS APR-30-1996 APR-30-1996 113,867 454 175,174 (1,110) 3,033,136 3,332,376 644,786 (225,677) 3,571,599 419,707 0 0 0 188,823 3,003,484 3,571,599 1,533,366 1,595,850 956,655 1,821,306 0 0 4,946 (225,456) 0 (225,456) 0 0 0 (225,456) (.02) (.02)
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