<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-K/A

                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                                   (Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934

                   For the fiscal year ended December 31, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                   For the transition period from ____ to ____

                         Commission file number 0-23764

                           KELLSTROM INDUSTRIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)

           DELAWARE                                             13-3753725
           --------                                             ----------
 (State or Other Jurisdiction                                (I.R.S. Employer
of Incorporation or Organization)                           Identification No.)


                           1100 INTERNATIONAL PARKWAY
                             SUNRISE, FLORIDA 33323
               (Address of Principal Executive Offices) (Zip Code)

                                 (954) 845-0427
               (Registrant telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

        Common Stock, $.001 par value per share (Nasdaq National Market)
            Preferred Stock Purchase Rights (Nasdaq National Market)
                              (Title of Each Class)

     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 [x] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     As of June 6, 2001, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $21,352,014 based on the
closing price on that date of $2.20 per share. As of that date, there were
11,910,981 shares of the registrant's Common Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Certain exhibits listed in Part IV of this Annual Report on Form 10-K are
incorporated by reference from prior filings made by the registrant under the
Securities Act of 1934, as amended.



<PAGE>   2

                                Explanatory Note

This Amendment on Form 10-K/A to Kellstrom Industries, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 2000 is being filed to amend in its
entirety Item 14(a)(1) of Kellstrom's Annual Report on Form 10-K in order to
provide audited guarantor/non-guarantor financial statements and to comply with
formal requirements regarding the presentation of certain pro forma information.
<PAGE>   3

                           Kellstrom Industries, Inc.
                               Amendment No. 1 to
                          Annual Report on Form 10-K/A

                                      Index



<TABLE>
<CAPTION>
                                                                                                         PAGE NUMBER
                                                                                                         -----------
<C>             <S>                                                                                      <C>

                                     PART IV

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K ...................          3
</TABLE>



                                       2

<PAGE>   4
                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) The following consolidated financial statements are filed as part of this
       Form 10-K:

         Kellstrom Industries, Inc. Consolidated Financial Statements:

         Independent Auditors' Report

         Consolidated Balance Sheets at December 31, 2000 and 1999

         Consolidated Statements of Earnings for the years ended December 31,
           2000, 1999 and 1998

         Consolidated Statements of Stockholders' Equity and Comprehensive
            Income for the years ended December 31, 2000, 1999 and 1998

         Consolidated Statements of Cash Flows for the years ended December 31,
            2000, 1999 and 1998

         Notes to Consolidated Financial Statements





                                       3
<PAGE>   5



The following Consolidated Financial Statements are attached hereto:

<TABLE>
<CAPTION>

                                                                                 Page
                                                                                 ----
<S>                                                                             <C>
Kellstrom Industries, Inc. Consolidated Financial Statements:

Independent Auditors' Report                                                     F-1

Consolidated Balance Sheets at December 31, 2000 and 1999                        F-2

Consolidated Statements of Operations for the years ended December 31, 2000,
  1999 and 1998                                                                  F-3

Consolidated Statements of Stockholders' Equity and Comprehensive Income
  (Loss) for the years ended December 31, 2000, 1999 and 1998                    F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2000,
  1999 and 1998                                                                  F-5

Notes to Consolidated Financial Statements                                       F-7


</TABLE>
<PAGE>   6


                          Independent Auditors' Report

The Board of Directors and Stockholders
Kellstrom Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Kellstrom
Industries, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income (loss), and cash flows for each of the years in the three
year period ended December 31, 2000. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule of valuation and qualifying accounts for the years ended December 31,
2000, 1999 and 1998. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kellstrom
Industries, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

                                                  KPMG LLP

Ft. Lauderdale, Florida
March 28, 2001





                                      F-1
<PAGE>   7


ITEM I. FINANCIAL STATEMENTS

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (In thousands, except par value amounts)

<TABLE>
<CAPTION>

                                                                              December 31,
                                                                       ---------------------------
                                                                          2000              1999
                                                                       ---------         ---------
<S>                                                                    <C>               <C>
      ASSETS

Current Assets:
      Cash and cash equivalents                                        $       0         $     272
      Trade receivables, net of allowances for returns and
          doubtful accounts of $8,868 and $8,576
          for 2000 and 1999, respectively                                 80,315            60,675
      Inventories                                                        195,640           194,491
      Property and plant held for sale                                    19,932                --
      Prepaid expenses                                                     2,673             5,199
      Income tax receivable                                                3,928                --
      Deferred tax assets                                                 40,718             8,280
                                                                       ---------         ---------

             Total current assets                                        343,206           268,917

Notes Receivable                                                           3,435                --
Equipment under operating leases, net                                     98,555           150,137
Property, plant and equipment, net                                        19,896            25,340
Goodwill, net                                                             95,766            87,825
Deferred financing charges                                                 5,403             6,798
Other assets                                                               7,214             2,428
                                                                       ---------         ---------

             Total Assets                                              $ 573,475         $ 541,445
                                                                       =========         =========

      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
      Short-term debt                                                  $ 167,277         $ 165,774
      Notes payable                                                           --             2,146
      Current maturities of long-term debt                                   200               200
      Accounts payable                                                    36,343            17,713
      Accrued expenses                                                    31,459            18,134
      Capital lease obligations                                            9,597                --
                                                                       ---------         ---------

             Total current liabilities                                   244,876           203,967

Long-term debt, less current maturities                                   34,937            17,720
Convertible subordinated notes                                           140,250           140,250
Deferred tax liabilities                                                  11,944             8,295
                                                                       ---------         ---------

             Total Liabilities                                           432,007           370,232

Stockholders' Equity:
      Common stock, $ .001 par value; 50,000 shares authorized;
             11,911 shares issued and outstanding
             in 2000 and 1999                                                 12                12
      Additional paid-in capital                                         122,871           121,104
      Retained earnings                                                   20,338            51,668
      Loans receivable from directors and officers                        (1,734)           (1,573)
      Accumulated other comprehensive income                                 (19)                2
                                                                       ---------         ---------

             Total Stockholders' Equity                                  141,468           171,213
                                                                       ---------         ---------

             Total Liabilities and Stockholders' Equity                $ 573,475         $ 541,445
                                                                       =========         =========

</TABLE>

See accompanying notes to consolidated financial statements



                                      F-2
<PAGE>   8



                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                                                    ------------------------------------------
                                                                       2000           1999            1998
                                                                    ---------       ---------       ----------
<S>                                                                 <C>             <C>             <C>
Sales revenues, net                                                 $ 332,255       $ 288,912       $ 148,902
Rental revenues                                                        21,728          42,032          31,147
                                                                    ---------       ---------       ----------

     Total revenues                                                   353,983         330,944         180,049

Cost of goods sold                                                   (247,413)       (200,889)       (100,221)
Cost of goods sold - inventory write-down                             (45,469)             --              --
Depreciation of equipment under operating leases                      (18,070)        (27,114)        (16,688)
Selling, general and administrative expenses                          (49,241)        (41,150)        (19,052)
Depreciation and amortization                                          (6,859)         (5,398)         (3,058)
Restructuring, impairment of assets and other charges                  (8,462)         (2,200)             --
                                                                    ---------       ---------       ----------

     Total operating expenses                                        (375,514)       (276,751)       (139,019)

Operating (loss) income                                               (21,531)         54,193          41,030

Interest expense                                                      (27,071)        (22,009)        (10,260)

Interest income                                                           691             741             487
                                                                    ---------       ---------       ----------

 (Loss) income before income taxes and extraordinary item             (47,911)         32,925          31,257

Income tax benefit (expense)                                           17,930         (12,390)        (11,679)
                                                                    ---------       ---------       ----------

(Loss) income before extraordinary item                               (29,981)         20,535          19,578

Extraordinary loss on early extinguishment of debt, net of
$803 tax benefit                                                       (1,349)             --              --
                                                                    ---------       ---------       ----------
     Net (loss) income                                              $ (31,330)      $  20,535       $  19,578
                                                                    =========       =========       ==========


Basic (loss) earnings before extraordinary item per common
share                                                               $   (2.52)      $    1.73       $     1.94
                                                                    =========       =========       ==========
Basic loss from extraordinary item per common share                 $   (0.1l)      $      --       $       --
                                                                    =========       =========       ==========
Basic (loss) earnings per common share                              $   (2.63)      $    1.73       $     1.94
                                                                    =========       =========       ==========

Diluted (loss) earnings before extraordinary item per
common share                                                        $   (2.52)      $    1.48       $     1.53
                                                                    =========       =========       ==========
Diluted loss from extraordinary item per common share               $   (0.11)      $      --       $       --
                                                                    =========       =========       ==========
Diluted (loss) earnings per common share                            $   (2.63)      $    1.48       $     1.53
                                                                    =========       =========       ==========

Weighted average number of common shares outstanding - basic           11,911          11,855          10,087
                                                                    =========       =========       ==========

Weighted average number of common shares outstanding - diluted         11,911          16,674          15,061
                                                                    =========       =========       ==========

</TABLE>


           See accompanying notes to consolidated financial statements



                                      F-3
<PAGE>   9

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                     Loans    Accumulated
                                                           Common Stock                           Receivable      Other
                                              Compre-   -----------------                             from       Compre-    Total
                                              hensive   Number               Additional            Directors     hensive    Stock-
                                              Income      of                   Paid-in   Retained     and        Income    holders'
                                              (Loss)    Shares     Amount      Capital   Earnings   Officers     (Loss)     Equity
                                            ---------   ------     ------    ----------  --------   --------  -----------  --------
<S>                                         <C>          <C>        <C>       <C>         <C>       <C>          <C>       <C>
Balances, December 31, 1997                              7,879      $  8      $ 39,027    $11,555   $  (362)     $(316)    $ 49,912

Issuance of common stock                                 3,883         4        78,424         --        --         --       78,428

Issuance of warrants related to the
  Aerocar and Solair acquisition                            --        --         2,556         --        --         --        2,556

Net income                                  $   19,578      --        --            --     19,578        --         --       19,578

Unrealized gain on investment
securities, net of reclassification
  adjustments (net of taxes of ($191)              316      --        --            --         --        --        316          316

                                            ----------
     Comprehensive income                   $   19,894
                                            ==========

Borrowings on loans receivable                              --        --            --         --    (1,031)        --       (1,031)
                                                        ------      ----      --------    -------   -------      -----     --------

Balances, December 31, 1998                             11,762        12       120,007     31,133    (1,393)        --      149,759

Issuance of common stock                                   149        --         1,097         --        --         --        1,097

Net income                                  $   20,535      --        --            --     20,535        --         --       20,535

Cumulative translation
adjustment                                           2      --        --            --         --        --          2            2

                                            ----------
     Comprehensive income                   $   20,537
                                            ==========

Borrowings on loans receivable                              --        --            --         --      (180)        --         (180)
                                                        ------      ----      --------    -------   -------      -----     --------

Balances, December 31, 1999                             11,911        12       121,104     51,668    (1,573)         2      171,213

Issuance of warrants related to the
Key Senior Subordinated Debt                                --        --         1,333         --        --         --        1,333

Issuance of warrants related to the
AVSDC acquisition                                           --        --           434         --        --         --          434

Net loss                                    $  (31,330)     --        --           --     (31,330)       --         --      (31,330)

Cumulative translation
adjustment                                         (21)     --        --           --          --        --        (21)         (21)

                                            ----------
     Comprehensive loss                     $  (31,351)
                                            ==========


Borrowings on loans receivable, net                         --        --            --         --      (161)        --         (161)
                                                        ------      ----      --------    -------   -------      -----     --------
Balances, December 31, 2000                             11,911      $ 12       122,871    $20,338   $(1,734)     $ (19)    $141,468
                                                        ======      ====      ========    =======   =======      =====     ========

</TABLE>


           See accompanying notes to consolidated financial statements




                                      F-4
<PAGE>   10



                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)



<TABLE>
<CAPTION>
                                                                                                 Years Ended December 31,
                                                                                       -------------------------------------------
                                                                                          2000             1999            1998
                                                                                       ---------        ---------        ---------
<S>                                                                                    <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income                                                                      $ (31,330)       $  20,535        $  19,578
Adjustments to reconcile net income to net cash
 provided by (used in) operating activities:
     Write-down of inventory                                                              45,469               --               --
     Depreciation of equipment under operating leases                                     18,070           27,114           16,688
     Depreciation and amortization                                                         6,859            5,398            3,058
     Restructuring, impairment of assets and other charges                                 8,462               --               --
     Amortization of deferred financing costs                                              2,103            2,043            1,377
     Deferred income taxes                                                               (18,821)             892            1,722
     Loss on early retirement of debt                                                      2,152               --               --
     Loss on sales of investment securities                                                   --               --              119
     Gain on sales of property, plant and equipment                                           --               --             (102)

Changes in operating assets and liabilities:
     Increase in trade receivables, net                                                   (3,965)         (25,109)          (2,922)
     Increase in inventories                                                             (23,002)         (33,213)         (46,122)
     Decrease (increase) in prepaid expenses                                               2,454           (1,579)            (309)
     Increase in income tax receivable                                                    (3,722)              --               --
     Decrease (increase) in equipment under operating leases                               5,081          (36,727)         (91,948)
     (Increase) decrease in other assets                                                     (74)            (951)           2,493
     Increase (decrease) in accounts payable                                              10,212             (279)          (5,114)
     Increase (decrease) in accrued expenses                                               5,115           (5,514)          11,175
     (Decrease) increase in income taxes payable                                              --           (1,203)           1,312
                                                                                       ---------        ---------        ---------
           Net cash provided by (used in) operating activities                            25,063          (48,593)         (88,995)
                                                                                       ---------        ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Investment in note receivable                                                        (2,236)              --              812
     Purchase of property, plant and equipment                                            (6,944)         (11,065)         (10,730)
     Proceeds from sales of property, plant and equipment                                     --               72              105
     Acquisitions, net of cash acquired                                                  (28,234)         (20,090)        (120,253)
     Acquisition earn-out payments                                                        (3,619)          (5,059)              --
     Other                                                                                    --               --              (24)
                                                                                       ---------        ---------        ---------
           Net cash used in investing activities                                         (41,033)         (36,142)        (130,090)
                                                                                       ---------        ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under line of credit agreement                                         1,303           88,494           79,879
     Proceeds from the issuance of debt                                                   30,000               --               --
     Proceeds from the issuance of subordinated debentures                                    --               --           86,250
     Debt repayment                                                                      (14,302)          (5,037)         (18,680)
     Proceeds from the issuance of common stock                                               --            1,097           78,428
     Net loans to directors and officers                                                    (161)            (180)          (1,031)
     Payment of deferred financing costs                                                  (1,142)            (474)          (5,117)
                                                                                       ---------        ---------        ---------
           Net cash provided by financing activities                                      15,698           83,900          219,729
                                                                                       ---------        ---------        ---------

NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS                                          (272)            (835)             644

CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD                                                 272            1,107              463
                                                                                       ---------        ---------        ---------
CASH & CASH EQUIVALENTS, END OF PERIOD                                                 $       0        $     272        $   1,107
                                                                                       =========        =========        =========

</TABLE>

                                   (continued)
           See accompanying notes to consolidated financial statements


                                      F-5
<PAGE>   11


                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

<TABLE>
<CAPTION>

                                                                                       Years Ended December 31,
                                                                                --------------------------------------
                                                                                  2000           1999           1998
                                                                                --------       --------       --------
<S>                                                                             <C>            <C>            <C>
Supplemental disclosures of non-cash investing and financing
activities:

                   Aerocar assets acquired for warrants                         $     --       $     --       $  1,405
                                                                                ========       ========       ========
                   Solair assets acquired for warrants                          $     --       $     --       $  1,152
                                                                                ========       ========       ========
                   AVSDC assets acquired for warrants                           $    434       $     --       $     --
                                                                                ========       ========       ========
                   Key Note Warrants issued                                     $  1,333       $     --       $     --
                                                                                ========       ========       ========
                   Unrealized gain on investment securities, net                $     --       $     --       $    316
                                                                                ========       ========       ========

Supplemental disclosures of cash flow information:
                  Cash paid during the period for:

                   Interest                                                     $ 25,158       $ 19,198       $  8,482
                                                                                ========       ========       ========


                   Income taxes                                                 $    647       $ 13,789       $  8,645
                                                                                ========       ========       ========

Supplemental disclosures of fair value of assets acquired and liabilities
assumed in connection with acquisitions:

                  Cash                                                          $     --       $     --          1,069
                  Receivables                                                     14,323          3,571         18,256
                  Notes receivable                                                 1,199             --             --
                  Inventory                                                           --         13,014         68,021
                  Prepaid expenses and other assets                                   --            454            211
                  Equipment under operating leases                                    --             --         25,332
                  Property, plant and equipment                                   11,988             --          1,597
                  Deferred tax asset                                                  --             --          4,520
                  Goodwill                                                        21,381         13,330         40,888
                  Other assets                                                     5,224             85            159
                                                                                --------       --------       --------
                                    Total                                       $ 54,115       $ 30,454       $160,053
                                                                                ========       ========       ========


                  Accrued expenses                                                 7,474            368          4,543
                  Capital lease obligation                                         9,596             --             --
                  Accounts payable                                                 8,377          4,658         12,265
                  Income taxes payable                                                --            424             --
                  Notes payable                                                       --          2,727         19,367
                  Deferred tax liabilities                                            --          2,187             --
                                                                                --------       --------       --------
                                    Total liabilities                           $ 25,447       $ 10,364       $ 36,175
                                                                                ========       ========       ========


                  Net acquisition cost                                            28,668         20,090        123,878
                  Less warrants issued                                               434             --          2,557
                                                                                --------       --------       --------
                  Cash paid to seller at closing                                  28,234         20,090        121,321
                  Less cash acquired                                                  --             --          1,068
                                                                                --------       --------       --------
                                    Net cash used in acquisition                $ 28,234       $ 20,090       $120,253
                                                                                ========       ========       ========

</TABLE>

          See accompanying notes to consolidated financial statements




                                      F-6
<PAGE>   12
                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2000, 1999 AND 1998
                    (In thousands, except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Kellstrom Industries, Inc.'s (the "Company") principle business is the
purchasing, overhauling (through subcontractors), reselling and leasing of
aircraft parts, aircraft engines and engine parts. The Company's customers
include major domestic and international airlines, engine manufacturers, engine
part distributors and dealers and overhaul service suppliers throughout the
world.

PRINCIPLES OF CONSOLIDATION

The Company has ownership in wholly-owned subsidiaries as well as a 50%
ownership in KAV Inventory LLP ("KAV"), a joint-venture formed on December 1,
2000 with Aviation Sales Company. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries; however, because
the Company does not exercise control over KAV, they do not consolidate the
accounts of KAV. All significant intercompany transactions have been eliminated.
The Company does not recognize equity method gains and losses in KAV based
solely on its percentage ownership but rather on the Company's claim on KAV's
book value.

REVENUE RECOGNITION

Revenue is recognized when the product is shipped and the risks of ownership
transfer to the customer. Revenue from equipment under operating leases is
recognized as rental revenue on a straight-line basis over the lease term,
except for fees related to the usage of the equipment. Fees charged related to
the usage of the equipment is recognized at the time of usage. Revenue from the
sale of inventory consigned to the Company is recorded gross with revenue
recognized upon shipment of the product, with the associated cost of sales equal
to revenue less the agreed upon consignment fee.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost or net realizable value. Cost is
primarily determined using the specific identification method for individual
part purchases and whole engines and on an allocated cost basis for dismantled
engines and aircraft and bulk inventory purchases. Inventories are made up
primarily of new, refurbished and as removed engines, engine parts, rotables and
expendables.

NOTES RECEIVABLE

Notes receivable are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the note receivable may not
be recoverable. Recoverability of notes receivable is determined based upon the
Company's assessment as to whether the maker of the note has the ability to make
the required payments. If notes receivable are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
value exceeds management's estimated amount to be collected.



                                      F-7
<PAGE>   13

EQUIPMENT UNDER OPERATING LEASES

The cost of equipment under operating leases is the original purchase price plus
overhaul costs. Depreciation of the cost is computed based on a usage-variable
method, which adjusts straight-line depreciation to reflect the usage levels of
the equipment.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment (including assets acquired under capital leases)
are stated at cost. Depreciation on property, plant and equipment is calculated
on the straight-line method over the following estimated useful lives: building
and improvements - 25 years, machinery and equipment - 3 to 10 years and
furniture and fixtures - 7 years.

GOODWILL

Goodwill represents the excess of purchase price over fair value of net assets
acquired, which is amortized on a straight-line basis over the expected periods
to be benefited, generally 15 to 35 years. Amortization expense of goodwill was
$3.5 million, $3.2 million and $2.2 million for the years ended December 31,
2000, 1999 and 1998, respectively. The Company assesses the recoverability of
the carrying value of goodwill by determining whether the carrying value can be
recovered through undiscounted future operating cash flows. The amount of
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate commensurate with the risks of the acquired
operation. The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved. Accumulated amortization
of goodwill was $10.4 million and $6.9 million at December 31, 2000 and 1999,
respectively.

DEFERRED FINANCING COSTS

The costs associated with obtaining financing are included in the accompanying
balance sheets as deferred financing costs and are being amortized on a
straight-line basis over the life of the related debt, which currently ranges
from one to seven years. Amortization expense was $2.1 million, $2.0 million,
and $1.4 million for the years ended December 31, 2000, 1999 and 1998,
respectively.

INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments, consisting of cash and cash
equivalents, trade accounts receivables, other current assets, equipment under
operating leases, trade accounts payables, accrued expenses, capital lease
obligations and notes payable to banks, is based on the short maturity of these
instruments which approximates book value at December 31, 2000 and 1999. The
book value of the notes receivable approximates its fair value due to what
management believes to be adequate reserves for collectibility and due to the
stated interest rate approximating market rates. The Key Notes' book value
approximates fair value.  The fair value of the convertible subordinated debt,
which is estimated by the current market price, was approximately as follows at
December 31, 2000 (in thousands):

5 1/2% Convertible Subordinated Notes
Recorded value........................................................ $86,250
Fair value............................................................ $34,500

5 3/4%  Convertible Subordinated Notes
Recorded value........................................................ $54,000
Fair value............................................................ $21,600

                                      F-8

<PAGE>   14

COMMITMENTS AND CONTINGENCIES

The Company records liabilities for loss contingencies, including those arising
from claims, assessments, litigation, fines and penalties, and other sources
when it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated.

USE OF ESTIMATES

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

EARNINGS (LOSS) PER SHARE

The Company computes earnings (loss) per share in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 established standards for computing and presenting basic
and diluted earnings per share and applies to entities with publicly held common
stock or potential common stock. Basic earnings (loss) per share ("EPS") is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Common equivalent shares assume the exercise of all dilutive stock options and
warrants. Quarterly and year-to-date computations of per share amounts are made
independently; therefore, the sum of per share amounts for the quarters may not
equal per share amounts for the year.

IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF

Long-lived assets, including intangible assets, used in the Company's operations
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to appraisals in conjunction with future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.

STOCK-BASED COMPENSATION

Stock-based compensation is recognized in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. As such, compensation expense is
recorded on the date of grant only if the current market price of the underlying
stock exceeds the exercise price. For disclosure purposes, pro forma net income
and pro forma earnings per share are provided as if the fair value based method
defined in SFAS No. 123, "Accounting for Stock-Based Compensation," had been
applied.

ACCOUNTING CHANGES

In December 1999, the SEC issued SAB 101, "Revenue Recognition in Financial
Statements" which establishes criteria for revenue recognition and disclosure.
The Company adopted the provisions of SAB 101 in the fourth quarter of fiscal
2000. The adoption of SAB 101 did not have an impact on the Company's
consolidated financial position, results of operations or cash flows.



                                      F-9
<PAGE>   15
In March 2000, the FASB issued FIN No. 44, "Accounting for Certain Transactions
Involving Stock Compensation." FIN No. 44 clarifies the application of APB No.
25, "Accounting for Stock Issued to Employees." The provisions of FIN No. 44
were effective July 1, 2000. The adoption of FIN No. 44 did not have an impact
on the Company's consolidated financial position, results of operations or cash
flows.

RECENT ACCOUNTING PRONOUNCEMENTS

In June, 1998 the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"), as amended, which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The adoption of SFAS No. 133 on January 1, 2001, did not have an impact on the
Company's consolidated financial position, results of operations or cash flows.

RECLASSIFICATIONS

Certain 1998 and 1999 financial statement amounts have been reclassified to
conform with the 2000 presentation.

2.  LIQUIDITY

The Company is highly leveraged. Furthermore, the Company's liquidity and
ability to meet its obligations as they become due in 2001 are subject to, among
other things, continued access to the Senior Revolving Credit Facility
and compliance with the terms and covenants of the Company's debt agreements.

The Company's senior debt requires it to maintain specified financial ratios and
satisfy certain financial tests. At December 31, 2000, the Company was not in
compliance with the financial covenants relating to net worth, debt to EBITDA,
fixed charge coverage and net income contained in the Senior Credit Facility and
the Key Notes. The Company has obtained waivers from its lenders for its
non-compliance as to prior periods. In addition, the Company has amended the
financial covenants under its Senior Credit Facility and the Key Notes for
future periods. A breach of any of the financial covenants in the Company's debt
instruments could result in a default under these debt instruments. Upon the
occurrence of an event of default under the senior debt, the respective lenders
could elect to declare all amounts outstanding, together with accrued interest,
to be immediately due and payable. Substantially all of the Company's assets are
pledged as collateral security for the Senior Credit Facility. If the Company
were unable to repay all outstanding amounts under its senior debt, the lenders
could proceed against the collateral granted to them to secure that
indebtedness, and any proceeds realized upon the sale of this collateral would
be used first to satisfy all amounts outstanding under the Company's Senior
Credit Facility, and thereafter, any of the Company's other liabilities. In
addition, the Company may be prevented from making new borrowings or drawing
down further on its Senior Credit Facility.

The Company does not currently believe that it will have sufficient available
liquid resources to repay the principal balance of the Convertible Subordinated
Notes at maturity. Other than cash flow from operations, the Company's primary
source of cash is its Senior Credit Facility. The commitments under the Senior
Credit Facility expire on the earlier of December 14, 2003 or six months before
the first maturity of the Convertible Subordinated Notes if the Company has not
secured a commitment to refinance the Convertible Subordinated Notes
satisfactory to the lenders under the Senior Credit Facility. The Convertible
Subordinated Notes mature in October 2002 ($54.0 million) and June 2003 ($86.3
million). Furthermore, the Senior Credit Facility prohibits prepayment of the
Convertible Subordinated Notes. In addition, the Company believes that there is
uncertainty regarding its ability to refinance the Convertible Subordinated
Notes. The Company's ability to repay or refinance any Convertible Subordinated
Notes and to meet its other financial obligations, depends on the availability
of new sources of funding, which will in turn depend on the Company's operating
performance, the state of the financial markets and other factors at the time
that the Company wants to repay or refinance these outstanding notes.
Accordingly, the Company makes no assurance that it will be able to meet its
obligations to repay or refinance the Convertible Subordinated Notes, and the
Senior Credit Facility indebtedness, when they become due. If the Company is
unable to repay or refinance the Convertible Subordinated Notes, the Company
will be forced to adopt an alternative strategy that may include actions such as
reducing or delaying planned acquisition activity, selling assets, restructuring
or refinancing its indebtedness or seeking additional capital.





                                      F-10
<PAGE>   16
The Company has commenced an exchange offer for all $54.0 million of its
outstanding series of 5 3/4% convertible subordinated notes due October 15, 2002
and all $86.3 million of its outstanding series of 5 1/2% convertible
subordinated notes due June 15, 2003 (collectively, the "old notes"). Under the
offer, holders can elect to exchange their old notes for either new 8 1/2%
senior subordinated notes due 2008 or new 6% convertible subordinated notes due
2008 (collectively, the "new notes"). Holders will receive $1,000 principal
amount of new notes for each $1,000 principal amount of their old notes, and
will receive accrued and unpaid interest on their old notes in cash.

The new 8 1/2% senior subordinated notes will rank equal in right of payment to
the Company's existing senior subordinated notes, which were issued in November
2000. Both the new 8 1/2% senior subordinated notes and the 6% convertible
subordinated notes will rank senior in right of payment to any old notes
remaining outstanding after completion of the offer. No more than $30 million
principal amount of new 8 1/2% senior subordinated notes will be issued in
exchange for old notes. If the 8 1/2% note option is oversubscribed, the $30
million of 8 1/2% notes will be issued in exchange for old notes of either
series tendered for the 8 1/2% note option, depending on the total participation
of that series in the offer. The balance of the old notes tendered for the 8
1/2% note option over $30 million will be exchanged for new 6% convertible
subordinated notes. There can be no assurance that the exchange offer will be
successful.

Economic and other factors that are affecting the airline industry have
negatively impacted, and may continue to negatively impact, the Company's
business. Pricing of the inventory the Company needs for its business is
affected to a degree by the overall economic condition of the airline industry,
which has historically been volatile. The demand for after-market engines and
aircraft and engine parts is driven primarily by flying hours or cycles. These
parts must be serviced or replaced at scheduled intervals. As a result, the
demand for after-market parts is a function of the volume of worldwide air
traffic. Additionally, factors such as the price of fuel affect the aircraft
parts market, since older aircraft (into which repaired or overhauled aircraft
parts are most often placed) become less economically viable as the price of
fuel increases. During a downturn in the aviation industry, there may be reduced
overall demand for the equipment the Company provides, lower selling prices for
its products and increased credit risk associated with doing business with
industry participants. The airframe and engine parts after-market has
experienced a downturn during the latter part of 2000, which has continued into
2001. A number of companies in the industry have encountered financial
difficulties as a result of it. Consequently, many companies within the industry
have been forced to sell inventory at reduced prices in order to generate cash.
The Company's gross margin and fair value of inventory have been negatively
affected by these deteriorating conditions. Additionally, according to reports
by a few large airlines, during the first quarter of 2001, the airline industry
has began to experience a slowdown in overall traffic, which the Company's
management believes has reduced demand for after-market parts. As a result,
during the fourth quarter of 2000, the Company recorded inventory write-down and
impairment of equipment under operating lease of $50.6 million.

The Company's ability to maintain compliance with the covenants and terms of its
debt agreements, and its ability to service its debt and to satisfy its other
obligations will depend upon, among other factors, the Company's operating
performance, including its ability to implement its business strategy, which
will be affected by prevailing economic conditions and financial, business and
other factors, many of which are beyond its control. If the Company is unable to
maintain compliance with its debt agreements or service its indebtedness, it
will be forced to adopt an alternative strategy that may include actions such as
reducing or delaying planned acquisition activity, selling assets, restructuring
or refinancing its indebtedness or seeking additional capital. This could impact
the carrying values and classification of the Company's assets and liabilities.

3. CONCENTRATION OF CREDIT RISK

The Company's business is impacted by the general economic conditions of the
commercial aviation industry. Airlines and other operators recognize the need to
cut costs, shift inventory requirements, and conserve capital to sustain
profitability. The Company's industry is also subject to regulation by various
governmental agencies with responsibilities over civil aviation. Increased
regulations imposed by organizations such as the Federal Aviation Administration
may significantly affect industry operations. Accordingly, economic and
regulatory changes in the marketplace may significantly affect management's
estimates and future performance.

The Company estimates an allowance for doubtful accounts based on the credit
worthiness of its customers as well as general economic conditions.
Consequently, an adverse change in those factors could affect the Company's
estimate of its bad debts.

For the years ended December 31, 2000, 1999 and 1998, the Company's five largest
customers collectively accounted for approximately 34%, 36% and 42%,
respectively, of the Company's consolidated revenues. For the year ended
December 31, 2000, one customer accounted for approximately 10% of the Company's
consolidated revenue.

4.  ACQUISITIONS

On April 1, 1998, the Company, through a wholly-owned subsidiary, completed the
acquisition of substantially all of the assets and assumed certain liabilities
of Integrated Technology Corp. ("ITC") for $20.5 million in cash, plus up to
$10.0 million cash consideration which may be paid in the form of an earn-out
payable over three years based on certain specified criteria, of which $1.1
million, $1.1 million and $3.3 million was earned during 2000, 1999 and 1998,
respectively. In addition, the Company received a three-year option to purchase
a 49% interest in a related FAA-approved overhaul facility.

On June 17, 1998, the Company completed the acquisition of the outstanding
capital stock of Aerocar Aviation Corp. ("Aerocar Aviation") and Aerocar Parts,
Inc. ("Aerocar Parts," and together with Aerocar Aviation, "Aerocar") for $42.3
million in cash, warrants to purchase an aggregate of 250,000 shares of the
Company's common stock, exercisable at $26.00 per share, expiring on June 17,
2001 plus an additional $5.0 million note, payable within a two-year period
after closing, either in cash, or at the option of the Company, in shares of
common stock having an equivalent value as of the date of acquisition, such note
was fully paid in cash in 1999 and 2000.

On December 31, 1998, the Company acquired all of the outstanding capital stock
of Solair, Inc. ("Solair"), a wholly-owned subsidiary of Banner Aerospace, Inc.
for $57.4 million in cash and a warrant to purchase 300,000 shares of common
stock at an exercise price of $27.50 per share, expiring on December 31, 2002.

On April 29, 1999, the Company acquired all of the outstanding capital stock of
Certified Aircraft Parts, Inc. ("Certified") for $16.7 million in cash and
assumed $2.7 million in debt.

On December 1, 2000, the Company acquired the aircraft and engine parts resale
business of Aviation Sales Company ("AVS"), which had been operated through AVS'
subsidiary, Aviation Sales Distribution Company ("AVSDC"). AVSDC was a leading
provider of aviation inventory and inventory management services. AVSDC sold
aircraft spare parts and provided inventory management services to commercial
passenger airlines, air cargo carriers, maintenance and repair facilities and
other redistributors throughout the world.

                                      F-11
<PAGE>   17
The aggregate purchase (net of assumed liabilities) paid by the Company to AVSDC
for the assets was approximately $21.7 million (which included $13.7 million for
a subordinated note issued by the JV described below) and warrants which the
Company may issue to other entities to purchase up to 220,000 shares of the
Company's common stock. In connection with the transaction, the Company acquired
a portion of AVSDC's non-inventory assets and assumed a portion of AVSDC's
accounts payable and accrued expenses. Also, in connection with the acquisition,
the Company and AVS established an off-balance sheet joint venture, KAV
Inventory LLC ("KAV"), which acquired substantially all of the inventory of
AVSDC for an aggregate purchase price of approximately $148.6 million, of which
approximately $105.5 million was paid in cash, $27.4 million was paid by
delivery of two 14% five-year senior subordinated notes (each in the original
principal amount of $13.7 million) and approximately $15.7 million which was
paid by delivery of a 14% five-year subordinated note. One of the $13.7 million
senior subordinated notes was purchased by the Company as part of the
acquisition.

The inventory purchase was funded by KAV through a senior credit facility
provided by Bank of America, N.A. and through seller-financing. Each of AVS and
the Company have agreed to share equally the operational expenses of KAV beyond
the amount which KAV is permitted to pay under its senior credit facility. AVS
and the Company posted letters of credit in favor of Bank of America, N.A., as
agent under KAV senior credit facility, in the amounts of $8.5 million and $6.5
million, respectively. The letters of credit may be drawn upon by Bank of
America if there shall occur an event of default under KAV senior credit
facility.

In connection with the inventory purchase, KAV entered into an exclusive
arrangement with the Company pursuant to which the Company will have the right
to sell the inventory acquired by KAV (the "Consignment Agreement"). The
Consignment Agreement provides for a consignment fee to the Company of 20% of
net sales until all amounts outstanding under KAV's senior credit facility and
the senior subordinated notes issued by KAV in connection with the inventory
purchase have been paid, and 35% thereafter. The Consignment Agreement generally
terminates on the later to occur of December 1, 2005 or the date on which all
amounts outstanding under the KAV's senior credit facility and the subordinated
notes issued by the KAV in connection with the inventory purchase have been
paid.

In addition to the leases discussed in note 5, the Company leased the 545,000
square foot corporate headquarters and redistribution warehouse of AVSDC for a
period of five years at a monthly rental rate of the lesser of $384,000 or the
actual monthly lease payments paid by the lessor on the facility. The Company
has the option to renew the term of the headquarters and redistribution
warehouse lease for five consecutive five year periods, at the then fair market
value rental rate.

Pursuant to the terms of a Cooperation Agreement entered into in connection with
the acquisition of assets and the inventory purchase, the Company and AVS
entered into a supply arrangement pursuant to which AVS will purchase parts
inventory for its maintenance repair and overhaul operations through the Company
and will sell any excess parts inventory through the Company. Pursuant to the
terms of a Non-Competition Agreement entered into in connection therewith, AVS
is restricted for up to five years from engaging in the business of purchasing
for resale, exchange or lease aircraft for disassembly, aircraft engines,
aircraft parts and aircraft engine parts.

Each of the companies acquired are in the business of purchasing, overhauling
(through subcontractors), reselling or leasing of aircraft, avionics and
aircraft rotables, or engines and engine parts. Each of these acquisitions were
accounted for using the purchase method of accounting for business combinations
and accordingly, the consolidated financial statements reflect the results of
operations of the acquired businesses from the dates of acquisition.

The following table sets forth selected pro forma information of the Company for
the 12 months ended December 31, 2000 and 1999. The pro forma information is
based on historical financial statements of the Company and has been adjusted to
reflect the acquisition of AVSDC as though the companies had combined at the
beginning of the periods being reported. The pro forma information is based on
certain assumptions and does not purport to be indicative of results that would
have occurred had the acquisition been in effect for the periods presented, nor
does it purport to be indicative of the results that will be obtained in the
future.

                                                      Years Ended December 31,
                                                      ------------------------
                                                         2000         1999
                                                      ----------  ------------
                                                       (In Thousands, except
                                                         per share amounts)

Revenues                                              $  527,282  $  558,838

(Loss) income before extraordinary items                 (29,192)     11,743

Net (loss) income                                        (30,541)     11,743

(Loss) income per share - basic                            (2.56)        .99

(Loss) income per share - diluted                          (2.56)        .86



5. CAPITAL LEASE OBLIGATIONS

In connection with the AVSDC acquisition, the Company entered into a lease with
AVSDC pursuant to which the Company agreed to lease certain furniture, fixtures
and equipment of AVSDC ("FF&E") for a period of one year at a monthly rental
rate of approximately $77,000. The Company has the option to purchase the FF&E,
which consists primarily of computer systems, computer equipment and furniture,
at any time during the term and for a period of sixty days thereafter and AVSDC
may require the Company to purchase the FF&E at any time during the sixty days
following the term, in each case, for a purchase price of approximately $7.7
million. The Company may defer its obligation to purchase the FF&E (and extend
the term of the lease) for up to six months under certain circumstances. The
FF&E is included in the Company's property, plant and equipment, net on the
accompanying consolidated balance sheet.

Also in connection with the AVSDC acquisition, the Company also agreed to lease
AVS' parts distribution facility in Pearland, Texas. The lease provides for a
term of one year at a monthly rental of approximately $16,000. During the term
of the lease and for a period of sixty days thereafter, the Company may purchase
the facility and AVSDC may require the Company to purchase the facility at any
time during the sixty days following the term for a purchase price of
approximately $1.6 million. The Company may defer its obligation to purchase the
facility (and extend the term of the lease) for up to six months under certain
circumstances. The property is included in property, plant and equipment, net in
the accompanying consolidated balance sheet.

                                      F-12
<PAGE>   18

6. RESTRUCTURING, IMPAIRMENT OF ASSETS AND OTHER CHARGES

The Company is restructuring its operations in conjunction with the acquisition
of AVSDC. The Company is in the process of reorganizing its operations and
organization structure from four product-oriented divisions to two
customer/market focused business units: the Commercial Business Unit and the
Defense Business Unit. The Company will continue to have four reportable
segments within the new structure since management will continue to monitor its
business by product orientation. In connection with the restructuring plan
committed to in the fourth quarter of 2000, the Company plans to eliminate
approximately 220 positions ranging from warehouse staff to vice president, of
which 120 positions were eliminated prior to December 31, 2000 and 100 positions
will be eliminated in the first quarter of 2001. Employee termination costs
related to those positions eliminated in 2000 are reflected in the charges
summarized in the table below.

Additionally, in connection with the restructuring plan the Company is moving
all of its inventory and most of the operations into the new 545,000 square foot
facility in Miramar, Florida which was leased as part of the acquisition of
AVSDC. Therefore, the Company is actively pursuing the disposition of seven
facilities, which it either owns or leases by selling or subleasing the
facilities. The facilities owned by the Company that are to be disposed of are
shown as property and plant held for sale in the balance sheet with a net book
value of $19.9 million. The Company recorded restructuring charges, which are
included in restructuring, impairment of assets and other charges in the
accompanying consolidated financial statements, of $3.0 million in 2000, of
which $1.2 million represents assets written-down as a result of the
restructuring.

The following table displays the activity and balances of the accrued
restructuring and other charges for the year ended December 31, 2000 (in
thousands):

                                            Charges          Amount    Payments
                                            Accrued           Paid     Remaining
                                            -------          ------    ---------
Employee termination costs                   $  107           $-0-      $   107
Facilities exit costs                         1,262             --        1,262
Other                                           381             96          285
                                             ------            ---      -------
     Total                                   $1,750           $ 96      $ 1,654
                                             ======           ====      =======

The Company recorded an impairment charge in connection with the write-down of
certain equipment held for lease in the whole engine and aircraft segment. The
total amount of the impairment charge recorded during the fourth quarter of 2000
was $5.1 million which was determined by a comparison of the carrying amount of
the assets to future net cash flows expected to be generated by the asset. The
impairment was caused by the downturn the airframe and engine parts after-market
has experienced during the latter part of 2000. This charge is included in
restructuring, impairment of assets and other charges in the accompanying
consolidated financial statements.

In addition, the Company recorded an impairment charge during the fourth quarter
of 2000 of $0.4 million for the write-off of capitalized software development
costs related to an inventory system that was not implemented. These charges are
included in restructuring, impairment of assets and other charges in the
accompanying consolidated financial statements.

On July 7, 1999, the Company settled a lawsuit brought by the Estate of the late
Mr. Joram Rosenfeld (a former Director of the Company) with respect to, among
other things, a claim alleging entitlement to a stock option grant in late 1996.
The settlement was entered into in order to limit the expense of litigating the
suit as well as the protracted use of management's time and related corporate
resources. The Company recorded a one-time pre-tax charge of approximately $2.2
million during the second quarter of 1999 to fulfill its obligation under the
settlement and for accrued legal expenses. This charge is included in
restructuring, impairment of assets and other charges in the accompanying
consolidated financial statements.

7. INVENTORIES

At December 31, 2000 and 1999, inventories consist of the following:

                                                 2000            1999
                                               --------        --------
Engine parts                                   $108,897        $122,093
Whole engines                                    13,199           8,849
Airframe avionics and aircraft rotables          73,544          63,549
                                               --------        --------
                                               $195,640        $194,491
                                               ========        ========




                                      F-13
<PAGE>   19
During the fourth quarter of 2000, the Company recorded an adjustment to the
carrying value of inventory of $45.5 million. The adjustment was required as a
result of a rapid decline in the value of the Company's inventory due to several
significant changes in the commercial aviation market and specifically in the
commercial aviation aftermarket industry. Most notably, during the latter part
of 2000 and continuing into 2001, some of Kellstrom's competitors experienced
significant financial difficulties. These companies were forced to liquidate
inventories in order to generate the necessary cash to reduce debt levels. As a
result of these factors, certain of Kellstrom's inventory was affected by a
rapid decline in pricing and increases in the supply of those inventory types,
which in turn resulted in lower of cost or market adjustments recorded by the
Company.

8.  EQUIPMENT UNDER OPERATING LEASES, NET

At December 31, 2000 and 1999, equipment under operating leases, primarily
aircraft and engines, consists of the following (in thousands):

                                          2000               1999
                                        ---------         ---------
Equipment under operating leases        $ 127,056         $ 179,610
Accumulated depreciation                  (28,501)          (29,473)
                                        ---------         ---------
                                           98,555           150,137
                                        =========         =========

The Company recorded an impairment of $5.1 million during the fourth quarter of
2000 related to equipment under operating leases considered to be impaired due
to factors described above in note 7 - Inventories. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.

9.  PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment at December 31, 2000 and 1999 consists of the
following (in thousands):

                                                 2000             1999
                                               --------         --------
Land                                           $     --         $  5,261
Building and Improvements                         2,827           13,921
Machinery and Equipment                          17,402            7,206
Furniture and Fixtures                            5,329            3,299
                                               --------         --------
                                                 25,558           29,687
Accumulated Depreciation                         (5,662)          (4,402)
                                               --------         --------
                                                 19,896           25,285
Construction in Progress                             --               55
                                               --------         --------
                                               $ 19,896         $ 25,340
                                               ========         ========

10.  INVESTMENT IN SECURITIES

In December 1996, the Company exercised warrants to purchase 400,000 shares of
common stock of Rada Electronic Industries, Inc. upon payment of $1.2 million.
During the year ended December 31, 1998, the Company sold all the remaining
shares of its investment in Rada for $812,553 and recorded a realized loss of
$119,472.

Reclassification adjustments related to the investment in Rada included in
comprehensive income for the year ended December 31, 1998 are as follows (in
thousands):

                                                                     1998
                                                                   ---------
Unrealized holding gains (losses) arising during the year          $   386.8

Plus: reclassification adjustment for losses included in
     net income                                                        119.5
                                                                   ---------
Net unrealized gains (losses) on securities                        $   506.3
                                                                   =========




                                      F-14
<PAGE>   20

11.  ACCRUED EXPENSES

Accrued expenses at December 31, 2000 and 1999 consists of the following (in
thousands):

                                                2000           1999
                                               -------        -------
Employee bonuses                               $ 1,247        $ 1,255
Acquisition costs and earn-out payments          5,078          3,088
Accrued inventory purchases                     11,165          4,256
Accrued interest                                 2,040          2,530
Customer deposits                                2,647          4,666
Commissions                                      1,170            307
Restructuring and other charges                  1,648             --
Other                                            6,464          2,032
                                               -------        -------
                                               $31,459        $18,134
                                               =======        =======


12. LONG-TERM DEBT AND CONVERTIBLE SUBORDINATED NOTES

Long-term debt and convertible subordinated notes at December 31, 2000 and 1999
consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                                              2000               1999
                                                                            ---------         ---------
<S>                                                                         <C>               <C>
LONG-TERM DEBT:

Senior secured revolving credit facility expiring 2003 at
  10.00% and 8.75% as of December 31, 2000 and 1999,
  respectively                                                              $ 167,277         $ 165,774
Notes payable - variable rate demand note at 6.45% and 6.25% in 2000
and 1999, respectively                                                          6,470             6,670
Senior subordinated notes due 2007 at 13.00% less unamortized
discount of $1,333                                                             28,667                --
Senior subordinated notes due 2002 - 2004 at 11.75%                                --            11,250
Notes payable due 1999 - 2000 at 8.25%                                             --             2,146
                                                                            ---------         ---------
Total debt obligations                                                        202,414           185,840
Less short-term notes payable                                                      --            (2,146)
Less current maturities on long-term debt                                    (167,477)         (165,974)
                                                                            ---------         ---------
Long-term debt less current maturities                                      $  34,937         $  17,720
                                                                            =========         =========

CONVERTIBLE SUBORDINATED NOTES:

5 3/4% Convertible Subordinated Notes due October 2002                      $  54,000         $  54,000
5 1/2% Convertible Subordinated Notes due June 2003                            86,250            86,250
                                                                            ---------         ---------
Total convertible subordinated notes                                        $ 140,250         $ 140,250
                                                                            =========         =========

</TABLE>

In December 1998, the Company entered into a five-year, $256.7 million senior
syndicated credit facility consisting of a $250.0 million revolving credit
facility and a letter of credit in the amount of up to $6.7 million, with an
option by the Company to increase the revolving credit facility by an additional
$50.0 million, subject to approval from the agent bank and the satisfaction of
certain conditions, for a total of $306.7 million. The credit facility bears
interest ranging from the banks prime rate plus 0 to 50 basis points, or at the
Company's option, LIBOR plus 150 to 250 basis points and is secured by
substantially all of the Company's assets. The total amount available to the
Company under the revolving credit facility is determined by applying certain
advance rate factors to eligible receivables, inventories and equipment under
operating leases. The letter of credit component of the $256.7 million
syndicated credit facility was specifically committed to the permanent financing
of the Company's former headquarters. The $6.7 million financing was completed
by the Company in February 1999. No compensating balances are required under the
revolving credit facility but the agreement contains restrictions on the
Company's ability to pay dividends, among other things. At December 31, 2000,
borrowings of $173.7 million were outstanding under the revolving credit
facility and the Company had $28.5 million available under the revolving
facility. The commitments under the Senior Credit Facility expire on the earlier
of December 14, 2003 or six months before the first maturity of the Convertible
Subordinated Notes if the Company has not secured a commitment to refinance the
Convertible Subordinated Notes satisfactory to the lenders under the Senior
Credit Facility. Furthermore, the Senior Revolving Credit Facility prohibits
prepayment of the Convertible Subordinated Notes. Although the Senior Credit
Facility expires in 2003, it is classified as a current liability due to certain
provisions within the agreement related to subjective acceleration clauses and
the fact that the agreement requires the Company maintain a lockbox arrangement
whereby cash deposits are automatically utilized to reduce amounts outstanding
under the facility.



                                      F-15
<PAGE>   21
In November 2000, the Company sold $30 million of senior subordinated notes to
Key Principal Partners, L.L.C., an affiliate of Key Corporation of Cleveland,
Ohio ("Key Notes"). The Key Notes are due on November 13, 2007, bear interest at
13% and are subordinated to the Company's senior credit facility. In connection
with the Key Notes, the Company issued warrants to purchase 368,381 shares of
the Company's common stock for $0.01 per share which are still outstanding at
December 31, 2000. The warrants are immediately exercisable and expire on
November 13, 2007. The value of the warrants as determined using the
Black-Scholes method at $1.3 million has been recorded as a discount which will
be amortized over the life of the loan to interest expense using the
straight-line method which approximates the effective interest method.

In November 2000, approximately $12.7 million of the proceeds from the Key Notes
was used to prepay the Company's 11.75% senior subordinated notes (including
accrued interest and prepayment fees) held by The Equitable Life Assurance
Society, of which $5.0 million in principal was due in January 2002, $5.0
million in principal was due in January 2003 and $1.25 million in principal was
due in January 2004. The prepayment resulted in an extraordinary loss of $1.3
million, net of the tax benefit.

The Company's senior debt requires it to maintain specified financial ratios and
satisfy certain financial tests. At December 31, 2000, the Company was not in
compliance with the financial covenants contained in the senior credit facility
and the Key Notes. The Company has obtained waivers from its lenders for its
non-compliance as to prior periods. In addition, the Company has amended the
financial covenants under its senior credit facility and senior subordinated
notes for future periods. A breach of any of the financial covenants in the
Company's debt instruments could result in a default under these debt
instruments. Upon the occurrence of an event of default under the senior debt,
the respective lenders could elect to declare all amounts outstanding, together
with accrued interest, to be immediately due and payable. Substantially all of
the Company's assets are pledged as collateral security for the senior credit
facility. If the Company were unable to repay all outstanding amounts under its
senior debt, the lenders could proceed against the collateral granted to them to
secure that indebtedness, and any proceeds realized upon the sale of this
collateral would be used first to satisfy all amounts outstanding under the
Company's senior credit facility, and thereafter, any of the Company's other
liabilities. In addition, the Company may be prevented from making new
borrowings or drawing down further on its senior credit facility.

During October 1997, the Company completed the offering and sale in a private
placement transaction of $50.0 million of 5 3/4% Convertible Subordinated Notes
(the "5 3/4% Notes") maturing in October 2002. In November 1997, the
underwriters of the 5 3/4% Notes exercised their over-allotment option for $4.0
million. The principal amount is convertible into shares of common stock at the
option of the holders at a conversion price equal to $27.50, subject to
adjustment in certain events. In addition, the Company may at any time on or
after October 2000, 2001, and 2002 redeem all or any part of the 5 3/4% Notes at
prices (expressed in percentages of the principal amount) of 102.30%, 101.15%,
and 100%, respectively. Interest on the 5 3/4% Notes is payable semi-annually.

During June 1998, the Company completed a public offering of $75.0 million of 5
1/2% Convertible Subordinated Notes (the "5 1/2% Notes") maturing in June 2003.
In July 1998, the underwriters of the 5 1/2% Notes exercised their
over-allotment option for $11.3 million. The principal amount is convertible
into shares of common stock at the option of the holders at a conversion price
equal to $32.50, subject to adjustment in certain events. In addition, the
Company may at any time on or after June 2000, 2001, and 2002 redeem all or any
part of the 5 1/2% Notes at prices (expressed in percentages of the principal
amount) of 102.30%, 101.15%, and 100%, respectively. Interest on the 5 1/2%
Notes is payable semi-annually.




                                      F-16
<PAGE>   22
To provide the Company with greater flexibility in connection with the
integration of the AVSDC business, four investors (the "LOC Lenders") posted
letters of credit in the aggregate amount of $8.0 million for the benefit of
Bank of America, as agent under the Company's Senior Credit Facility. Under the
original terms of this agreement Bank of America had the right to draw upon the
letters of credit in the event that the Company defaulted under its Senior
Credit Facility. Because the Company was not in compliance with the financial
covenants contained in its Senior Credit Facility for the fiscal year ended
December 31, 2000, Bank of America is presently entitled to draw down on the
letters of credit. The letters of credit by their terms expire on June 1, 2001.
The Company is presently in discussions with the LOC Lenders to extend the
expiration of the letters of credit. The Company believes that Bank of America
will draw on such letters of credit prior to their expiration if the maturities
of such letters of credit are not extended or the Company's headquarters
facility in Sunrise, Florida is not sold prior to expiration of the letters of
credit. The amounts of such draws are deemed term loans from the LOC Lenders to
the Company and bear interest at the rate of 18% per annum until paid. Such term
loans mature upon the earlier to occur of December 1, 2001 or the sale by the
Company of its headquarters facility; provided, however, that the Company is not
obligated to repay the principal of any such term loans until the sale of its
Sunrise facility is completed. In the event that a sale of the headquarters
facility is not completed by the time a draw has been made on the letters of
credit, the LOC Lenders have the right to acquire the Company's Sunrise facility
and lease such facility to the Company.

Contractual debt maturities for each of the five years subsequent to December
31, 2000 are as follows (in thousands):

         Year ending
         December 31,
         ------------
             2001                            $    200
             2002                              54,000
             2003                             253,527
             2004                                  --
             2005                                  --
             Thereafter                        36,270
                                             --------
                                             $343,997
                                             ========

13.  LEASES

OPERATING LEASES AS LESSOR. One of the Company's product offerings is the
leasing of aircraft and engines. These lease agreements have typical lease terms
of 3 to 60 months and provide for a fixed time charge plus a usage charge based
on flight hours and cycles. Contingent rentals included in income during 2000,
1999 and 1998 were $6.9 million, $10.8 million and $8.3 million, respectively.

OPERATING LEASES AS LESSEE. The Company has several operating leases, primarily
for transportation equipment and facilities that expire over the next five
years. These leases generally require the Company to pay all executory costs
such as maintenance and insurance and provide for early termination at
stipulated values. Total rent expense for all operating leases for the years
ended December 31, 2000, 1999 and 1998 amounted to $1.6 million, $1.5 million
and $0.6 million, respectively.

CAPITAL LEASES AS LESSEE. In connection with the acquisition of AVSDC, the
Company entered into leases with AVSDC pursuant to which the Company agreed to
lease certain assets including facilities, furniture, fixtures and equipment for
a period of one year. AVSDC may require the Company to purchase the leased
assets at any time during the sixty days following the term of the lease. See
Note 5 - Capital Lease Obligations for more information on these leases.




                                      F-17
<PAGE>   23

LEASE PAYMENTS.  At December 31, 2000, future minimum lease payments, including
                 imputed interest on capital leases of $1.1 million, are as
                 follows (in thousands):

                                    Operating Leases             Capital Leases
                             -------------------------------     --------------
                             As Lessor             As Lessee        As Lessee
                             ---------             ---------     --------------

      2001                    $11,304              $ 5,498         $10,657
      2002                      6,019                5,610              --
      2003                      4,202                5,034              --
      2004                      2,965                4,771              --
      2005                        108                4,744              --
      Thereafter                   --                1,059              --
                              -------              -------         -------
                              $24,598              $26,716         $10,657
                              =======              =======         =======

The lease income amounts in the previous table are based upon the assumption
that equipment will remain on lease for the length of time specified by the
respective lease agreements. This is not a projection of future lease revenue;
no effect has been given to renewals, new business, cancellations, contingent
rentals, sales of equipment under lease or future rate changes.

14.  INCOME TAXES

Income tax expense (benefit) for the years ended December 31, 2000, 1999 and
1998 is summarized as follows (in thousands):

                                    2000             1999             1998
                                  --------         --------        --------
Current:
       Federal                    $    662         $ 10,471        $  8,795
       State and local                 229            1,027           1,162
                                  --------         --------        --------
                                       891           11,498           9,957
Deferred                           (18,821)             892           1,722
                                  --------         --------        --------
Provision for income taxes        $(17,930)        $ 12,390        $ 11,679
                                  ========         ========        ========


The actual tax expense differs from the "expected" tax expense for the years
ended December 31, 2000, 1999 and 1998 (computed by applying the U.S. federal
corporate tax rate of 35% for the years ended December 31, 2000, 1999 and 1998
to income before income taxes), as follows (in thousands):

<TABLE>
<CAPTION>

                                                             2000            1999             1998
                                                          --------         --------         --------
<S>                                                       <C>              <C>              <C>
Computed "expected" tax expense (benefit)                 $(16,769)        $ 11,509         $ 10,940
State income tax (benefit), net of federal benefit          (1,333)             849              846
Foreign sales corporation benefit                              (86)            (258)            (155)
Other                                                          258              290               48
                                                          --------         --------         --------
Actual tax expense (benefit)                              $(17,930)        $ 12,390         $ 11,679
                                                          ========         ========         ========

</TABLE>

Total income tax expense for the years ended December 31, 2000, 1999 and 1998
was allocated as follows (in thousands):

<TABLE>
<CAPTION>

                                                           2000             1999            1998
                                                         --------         --------        --------
<S>                                                      <C>              <C>             <C>
Income (loss) from continuing operations                 $(17,930)        $ 12,390        $ 11,679
Income tax benefit from extraordinary items                  (803)              --              --
Stockholders' equity, for unrealized
   gain/(loss) on investment securities                        --               --             190
                                                         --------         --------        --------
                                                         $(18,733)        $ 12,390        $ 11,869
                                                         ========         ========        ========
</TABLE>





                                      F-18
<PAGE>   24

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2000 and
1999 are presented below (in thousands):

<TABLE>
<CAPTION>

                                                                                2000             1999
                                                                              --------         --------
<S>                                                                              <C>              <C>
Deferred tax assets:
              Accounts receivable, principally due to allowance for
                 doubtful accounts                                            $  2,978         $  3,184
              Inventories, principally due to additional costs
                 inventoried for tax purposes pursuant to the Tax
                 Reform Act of 1986 and Reserves                                35,998            4,165
              Accrued liabilities, principally for financial reporting
                 Purposes                                                        1,075              310
              Deferred rental and leasing revenue                                  574              739
              State net operating losses                                            93              365
              Other                                                                 --               14
                                                                              --------         --------
Total gross deferred tax assets                                                 40,718            8,777
Less valuation allowance                                                            --               --
                                                                              --------         --------
Deferred tax assets                                                             40,718            8,777


Deferred tax liabilities:
              Property, plant and equipment                                     (1,620)            (222)
              Equipment under operating leases                                  (9,060)          (7,403)
              Intangible assets                                                 (1,264)          (1,167)
                                                                              --------         --------
Deferred tax liabilities                                                       (11,944)          (8,792)
                                                                              --------         --------
Net deferred tax (liabilities) assets                                         $ 28,774         $    (15)
                                                                              ========         ========

</TABLE>

The Company's management believes that it is more likely than not that the
results of future operations will generate sufficient taxable income to realize
the deferred tax assets. As such, no valuation allowance has been established.
On December 31, 1998 and April 29, 1999, the Company acquired all of the
outstanding stock of Solair, Inc. and Certified Aircraft Parts, Inc.,
respectively. The Company files a consolidated income tax return which will
include both Solair and Certified. Thus, deferred taxes were calculated on a
consolidated basis as of the acquisition dates. Therefore, the Company, as a
result of the acquisitions, has recognized net deferred tax assets of $4.5
million and $10.0 million from Solair in 1998 and 2000, respectively and net
deferred tax liabilities of $2.2 million from Certified in 1999 which are
included in the consolidated net deferred tax asset position of $28.8 million
for December 31, 2000.

15.  STOCKHOLDERS' EQUITY

The Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.

The Company is authorized to issue 50,000,000 shares of common stock, $.001 par
value. In June 1998, the Company completed a secondary public offering of
2,750,000 shares of common stock at $26.00 per share, resulting in net proceeds
of $67.4 million. In July 1998, the Company's underwriters exercised their
over-allotment option to purchase an additional 412,500 shares of common stock
at $26.00, resulting in additional net proceeds of $10.2 million. The Company
had 11,910,981 shares of common stock outstanding at December 31, 2000 and 1999.

In January 1997, the Company's Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of common
stock. Each right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Cumulative
Preferred Stock ("Series Preferred Stock") at an exercise price of $80.00.




                                      F-19
<PAGE>   25

The Rights are not exercisable, or transferable apart from the common stock,
until the earlier to occur of (i) ten days following a public announcement that
a person or group of affiliated or associated persons have acquired beneficial
ownership of 20% or more of the outstanding common stock of the Company or (ii)
ten business days (or such later date, as defined) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer,
the consummation of which would result in the beneficial ownership by a person
or group of 19% or more of the outstanding common stock of the Company.
Furthermore, if the Company enters into a consolidation, merger, or other
business combination, as defined, each Right would entitle the holder upon
exercise to receive, in lieu of shares of Series A Preferred Stock, that number
of shares of common stock of the acquiring company having a value of two times
the exercise price of the Right, as defined. The Rights contain antidilutive
provisions, are redeemable at the Company's option, subject to certain defined
restrictions, for $.01 per Right, and expire in January 2007.

As a result of the Rights dividend, the Board designated 200,000 shares of
preferred stock as Series A Preferred Stock. Series A Preferred Stockholders
will be entitled to a preferential cumulative quarterly dividend of the greater
of $1.00 per share or 100 times the per share dividend declared on the Company's
common stock. The Series A Preferred Stock has a liquidation preference, as
defined. In addition, each share will have 100 votes and will vote together with
the shares of common stock.

During 2000 and 1999, the Board of Directors of the Company approved loans in
the aggregate amount of $0.4 million and $0.3 million, respectively, to certain
officers and directors of the Company for the purposes of purchasing shares of
common stock in the open market. The loans will be unsecured and payable over
four years for employees or five years for directors at an interest rate based
on the applicable federal rate, as defined by the agreement, at the time of the
loan. The average interest rate for these loans at December 31, 2000 and 1999
was 6.3% and 5.9%, respectively. Interest will be paid annually by officers and
will accrue and be paid at maturity by directors. As of December 31, 2000 and
1999, the outstanding balance on the loans receivable was $1.7 million and $1.6
million, respectively.

Upon consummation of the acquisitions of Aero Support, Aerocar and Solair, the
Company issued warrants to purchase an aggregate of 800,000 shares of the
Company's common stock at stated prices of $19.00-$27.50, expiring three to five
years from the dates of issuance. The amounts recorded by the Company as a
result of the issuance of the warrants was determined based on the fair value of
the warrants on the closing date of the acquisitions.

In connection with certain advisory services performed in connection with the
acquisition of assets from AVSDC, on December 1, 2000, the Company issued
warrants to Deutsche Banc Alex. Brown Inc. to purchase up to 100,000 shares of
the Company's Common Stock at an exercise price of $3.59 per share. The
warrants become exercisable on March 1, 2002 and expire on December 1, 2007.

In connection with the acquisition of assets from AVSDC, on November 30, 2000,
the Company issued warrants to purchase up to 10,000 shares of the Company's
Common Stock at an exercise price of $3.59 per share to each of the four
investors ("the LOC Lenders") who posted letters of credit in the aggregate
amount of $8.0 million for the benefit of Bank of America, as agent under the
Company's Senior Credit Facility. The LOC Lenders are entitled to receive
additional warrants to purchase up to 80,000 shares of Common Stock if the
letters of credit remain outstanding. All warrants issued to the LOC Lenders
are exercisable at any time within five years after the applicable date of
issuance.

In connection with the Key Notes, the Company issued warrants to purchase
368,381 shares of the Company's common stock for $0.01 per share which are still
outstanding at December 31, 2000. The warrants are immediately exercisable and
expire on November 13, 2007.

The Company had 1,281,291 and 1,147,030 warrants outstanding at December 31,
2000 and 1999, respectively. Each warrant entitles the holder to the purchase of
one share of the Company's common stock at various stated prices. These warrants
are exercisable at various times. The Company has reserved 5.0 million common
shares for the exercise of these warrants.

16.  EMPLOYEE STOCK OPTION PLANS

The 1995 Stock Option Plan provides for the granting of stock options to
purchase up to 250,000 shares of common stock to key employees, with no
individual granted options to purchase more than 100,000 shares of common stock
during the ten-year period commencing on June 22, 1995, at a price which will
not be less than the fair market value of common stock on the date of grant.
These options will be exercisable at such times, in such amounts and during such
intervals as determined on the date of grant. However, no option will be
exercisable during the first six months after the date of grant or more than 10
years after the date of grant.

The 1996 Stock Option Plan (the "1996 Plan") provides for the granting of
incentive stock options to purchase shares of common stock at not less than the
fair market value on the date of the option grant or the granting of




                                      F-20
<PAGE>   26

nonqualified options and stock appreciation rights ("SARs") with any exercise
price. SARs granted in tandem with an option have the same exercise price as the
related option. The total number of shares with respect to which options and
SARs may be granted under the 1996 Plan is currently 1,100,000. No option or SAR
may be granted under the 1996 Plan after July 9, 2006, and no option or SAR may
be outstanding for more than ten years after its grant.

The 1997 Stock Option Plan (the "1997 Plan") provides for the granting of
incentive stock options to purchase shares of common stock at not less than the
fair market value on the date of the option grant and the granting of
nonqualified options. The total number of shares with respect to which options
may be granted under the 1997 Plan is currently 1,000,000. No option may be
granted under the 1997 Plan after October 27, 2007, and no option may be
outstanding for more than ten years after its grant.

The 1998 Stock Option Plan (the "1998 Plan") provides for the granting of stock
options to purchase shares of common stock at not less than the fair market
value on the date of the option grant. The total number of shares with respect
to which options may be granted under the 1998 Plan is 175,000. No option may be
granted under the 1998 Plan after November 15, 2008, and no option may be
outstanding for more than ten years after its grant. The Company intends to only
grant options under the 1998 Plan to newly hired executives and employees as an
inducement to enter into employment arrangements with the Company, and to
outside members of the Board, in lieu of cash compensation, as an incentive for
their service on the Board.

In October 1998, the Company's Board of Directors approved the extension of the
vesting schedule and repricing of all outstanding employee stock options with an
exercise price above $10.125. Employees who accepted the Company's repricing
offer were subject to, in general, a 50% extension to the vesting term for that
option. All other terms of the existing options remained unchanged. As a result,
1,170,998 employee stock options were cancelled and reissued by the Company at
the new exercise price of $10.125. The new exercise price was determined based
on the closing market price of the Company's common stock on October 8, 1998.



                                      F-21
<PAGE>   27

The following table summarizes the status of the Company's stock option plans:

                                                              Weighted
                                            Shares         Average Option
                                         (in thousands)    Exercise Price
                                          ------------     --------------

Outstanding at December 31, 1997            2,064            $ 11.12
     Granted                                1,819              15.33
     Exercised                                (80)              7.46
     Expired or Canceled                   (1,181)             21.47
                                           ------              -----
Outstanding at December 31, 1998            2,622               9.51
     Granted                                  407              18.74
     Exercised                               (149)              7.38
     Expired or Canceled                       (6)             21.37
                                           ------              -----
Outstanding at December 31, 1999            2,874              10.90
     Granted                                  535               4.69
     Exercised                                 --                 --
     Expired or Canceled                     (385)             13.00
                                           ------              -----
Outstanding at December 31, 2000            3,024            $  9.53
                                           ======              =====
At December 31, 2000:

Shares Available for Future Grant              87                 --

EXERCISABLE OPTIONS:

December 31, 1998                             749            $  7.32
December 31, 1999                           1,855               9.66
December 31, 2000                           2,135               9.95


The following table summarizes the status of stock options outstanding and
exercisable as of December 31, 2000, by range of exercise price:


<TABLE>
<CAPTION>
                                                  Remaining         Weighted
                                 Options         Contractual         Average                                  Weighted
 Range of Exercise             Outstanding           Term           Exercise                Options            Average
       Prices                 (in thousands)      (in years)          Price               Exercisable       Exercise Price
---------------------          -----------       -----------        ---------             -----------       ---------------
<S>                                <C>               <C>              <C>                      <C>               <C>
$3.00 - $7.00                      522               8.4              $ 4.35                   122               $5.00
$7.01 - $10.00                   1,147               6.4              $ 8.13                   991               $8.17
$10.01 - $15.00                    992               7.2              $10.21                   786              $10.18
$15.01 - $25.75                    363               8.1              $19.56                   236              $19.15
                                 -----                                                       -----
                                 3,024                                                       2,135
                                 =====                                                       =====

</TABLE>

The weighted average per share fair values of options granted under the
Company's stock option plans during 2000, 1999 and 1998 were $3.99, $14.11 and
$18.13, respectively. Had the fair value of the grants under these plans been
recognized as compensation expense over the vesting period of the awards, the
Company's net earnings (loss) and earnings (loss) per share would have reflected
the pro forma amounts shown below (in thousands, except per share amounts):

<TABLE>
<CAPTION>

                                               2000                  1999               1998
                                             ----------           ---------         -----------
<S>                                          <C>                  <C>               <C>
Net (loss) earnings:
     As reported                             $  (31,330)          $  20,535         $    19,578
     Pro forma                                  (32,350)             14,594              15,053

(Loss) earnings per share - basic:
     As reported                                  (2.63)               1.73                1.94
     Pro forma                                    (2.72)               1.23                1.49

(Loss) earnings per share - diluted:
     As reported                                  (2.63)               1.48                1.53
     Pro forma                                    (2.72)               0.89                1.02

</TABLE>





                                      F-22
<PAGE>   28
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0% in 2000, 1999 and 1998; expected volatility of
80% in 1999 and 2000 and 59% in 1998; a risk-free interest rate of 6.13% in 2000
and 5.35% in 1999 and 1998; and an expected holding period of 10 years.

17.  (LOSS) EARNINGS PER SHARE

Diluted earnings (loss) per share for the years ended December 31, 2000, 1999
and 1998 were calculated as follows (in thousands):

<TABLE>
<CAPTION>

                                                                 2000               1999              1998
                                                               --------           --------          --------
<S>                                                            <C>                <C>               <C>
Net (loss) income                                              $(31,330)          $ 20,535          $ 19,578
Income adjustment relating to reduction of debt based
     on the if converted method                                      --              4,155             3,423
                                                               --------           --------          --------
Net (loss) income available to common and common
     equivalent shares                                          (31,330)            24,690            23,001
                                                               ========           ========          ========

Weighted average number of common shares
     outstanding - basic                                         11,911             11,855            10,087
Dilutive common stock equivalents from stock
     options and warrants based on the treasury
     stock method                                                    --                865             3,543
Dilutive convertible subordinated notes based
     on the if converted method                                      --              3,954             1,431
                                                               --------           --------          --------
Weighted average number of common shares
     outstanding - diluted                                       11,911             16,674            15,061
                                                               ========           ========          ========

</TABLE>

At December 31, 1998, 1999 and 2000, options and warrants to purchase 726,000,
2,807,000 and 4,306,000 shares of common stock, respectively were outstanding
but were not included in the computation of diluted EPS because their exercise
price was greater than the average market price of the common shares during the
period. Conversion of the Convertible Subordinated Notes were not assumed in
2000 due to the Company's net loss position.

18.  SEGMENT REPORTING

The Company has four reportable segments: (i) Commercial Engine Parts, (ii)
Defense, (iii) Whole Engine and Aircraft and (iv) Airframe Avionics and
Rotables. The Commercial Engine Parts segment is involved in the business of
purchasing, overhauling (primarily through subcontractors), reselling and
leasing of engine parts for large turbo-fan engines manufactured by CFM
International, General Electric, Pratt & Whitney and Rolls Royce. The Defense
segment is an after-market reseller of aircraft parts and turbojet engines and
engine parts for helicopters and large transport aircraft. The segment's primary
focus is on the Lockheed Martin C-130 Hercules aircraft, a widely used military
transport aircraft, the Allison (Rolls Royce) T56/501 engine, which powers this
aircraft and the Allison 250, with approximately 16,000 units actively in use by
helicopters. The Company entered the small engine segment in 1997 with the
acquisition of Aero Support. The acquisition of Certified on April 29, 1999
enhanced the Company's presence in this market segment. The Whole Engine and
Aircraft segment leases and resells whole engines and aircraft. The Airframe
Avionics and Rotables segment is engaged in the sale of a wide variety of
aircraft rotables and expendable components including flight data recorders,
electrical and mechanical equipment and radar and navigation systems. The
Company entered the avionics and rotables segment in 1998 with the acquisition
of Solair and expanded it's presence with the acquisition of AVSDC in 2000.





                                      F-23
<PAGE>   29

The Commercial Engine Parts, Whole Engine and Aircraft, and Airframe Avionics
and Rotables segments operate as the Commercial business unit. The Defense
segment operates independently as the Defense business unit. The Company has not
historically allocated selling, general and administrative expenses,
depreciation and amortization, interest expense or income taxes to its business
segments. Rather, the Company has evaluated performance of the business segments
based on revenue and gross margins. The accounting policies of the segments are
the same as those described in the summary of significant accounting policies.



<TABLE>
<CAPTION>
                                                                 (in thousands)
                                                  2000                1999               1998
                                               ---------           ---------          ---------
<S>                                            <C>                 <C>                <C>
REVENUES
Commercial Engine Parts                        $  92,099           $  75,021          $  41,529
Defense                                           76,261              47,977             24,186
Whole Engine and Aircraft                        113,873             153,904            114,334
Airframe Avionics and Rotables                    71,750              54,042                 --
                                               ---------           ---------          ---------
   Total revenue                               $ 353,983           $ 330,944          $ 180,049
                                               =========           =========          =========

GROSS MARGIN
Commercial Engine Parts                        $  (9,729)          $  25,577          $  14,425
Defense                                           26,406              16,998              8,389
Whole Engine and Aircraft                         14,531              46,600             40,326
Airframe Avionics and Rotables                    11,823              13,766                 --
                                               ---------           ---------          ---------
   Total gross margin                          $  43,031           $ 102,941          $  63,140
                                               =========           =========          =========

INVENTORIES AND EQUIPMENT UNDER LEASE
Commercial Engine Parts                        $  74,781           $ 108,513          $  84,278
Defense                                           47,891              40,594             19,870
Whole Engine and Aircraft                        126,779             150,137            144,962
Airframe Avionics and Rotables                    44,744              45,384             41,372
                                               ---------           ---------          ---------
   Total inventories and equipment
      under lease                              $ 294,195           $ 344,628          $ 290,482
                                               =========           =========          =========

GEOGRAPHIC REVENUE INFORMATION

Revenue from domestic customers                  244,499             210,911            120,633
Revenue from international customers             109,484             120,033             59,416
                                               ---------           ---------          ---------
   Total revenue                               $ 353,983           $ 330,944          $ 180,049
                                               =========           =========          =========

</TABLE>

19.  OTHER MATTERS

At December 31, 2000 there were no material legal proceedings pending against
the Company or any of its property. However, the Company may become party to
various claims, legal actions and complaints arising in the ordinary course of
business or otherwise. The Company cannot determine whether such actions would
have a material impact on the financial condition, results of operations or cash
flows of the Company.



                                      F-24
<PAGE>   30

The Company has certain employment agreements with officers with terms of up to
five years. The employment agreement provides that such officers may earn
bonuses, based on the Company achieving certain target net income levels.
Further, each of the employment agreements provide that in the event of
termination without cause, the employment agreement shall be terminable by the
mutual agreement between the Company and the officers, or by either party upon
sixty days notice and provides for certain levels of severance compensation.

In February 1998, the Company established a defined contribution savings plan
that covers substantially all eligible employees. Company contributions to the
plan are based on employee contributions and the level of company match. Company
contributions to the plan totaled approximately $310,000, $172,000 and $32,000
in 2000, 1999 and 1998, respectively.

20.  RELATED PARTY TRANSACTIONS

In March 1997, the Company engaged Helix Management Company II, LLC ("Helix"), a
company owned by Yoav Stern, Chairman of the Company's Board of Directors, and
Zivi Nedivi, President, Chief Executive Officer and a Director of the Company,
to act as the Company's exclusive financial advisor with respect to merger and
acquisition transactions and as principal financial advisor with respect to
other transactions for an initial term of eighteen months beginning January 1,
1997, renewable for additional 12 month terms (as amended, the "Helix Engagement
Agreement"). As discussed below, on March 24, 1999, the Company entered into a
termination agreement with Helix, pursuant to which the Company agreed to
terminate the Helix Engagement Agreement.

Under the terms of the agreement, Helix received a monthly retainer of $25,000.
In addition, under the terms of the agreement, a success fee was to be paid by
the Company on a per transaction basis, based upon the aggregate consideration
in connection with the applicable transaction. During the years ended December
31, 2000, 1999 and 1998, the Company paid $44,000, $1.5 million and $2.0
million, respectively, and issued warrants for the purchase of 7,250 shares in
1998 of the Company's common stock at exercise prices between $19.00 and $27.50
per share, expiring in three to five years, to Helix relating to such agreement.

On March 24, 1999, the Company entered into a Termination Agreement (the "Helix
Termination Agreement") with Helix, pursuant to which the Company agreed to
terminate the Helix Engagement Agreement dated as of March 28, 1997. Under the
terms of the Helix Termination Agreement, the Company will only be required to
pay Helix success fees on those transactions procured by Helix which have either
been consummated or signed prior to the date of termination. Helix has waived
all other fees which it is entitled to under the terms of the Helix Engagement
Agreement, including monthly retainer fees on account of the ninety-day period
following termination and success fees on account of transactions procured by
Helix which are undertaken by the Company within one year of termination. Helix
has also agreed that it will, for no additional consideration, provide the
Company such assistance (including access to its members and employees and
copies of its records and files) as is necessary to assure an orderly transition
in the services provided by Helix.

At December 31, 2000, the Company had notes receivable from KAV totaling $3.4
million. In addition, under the terms of the Consignment Agreement with KAV, at
December 31, 2000, the Company was obligated to pay KAV $7.8 million for KAV
inventory which was sold by the Company during the year ended December 31, 2000.


                                      F-25
<PAGE>   31

21. SUBSEQUENT EVENT

As more fully disclosed in Note 2, on March 8th, 2001, the Company commenced an
exchange offer for all $54 million of its outstanding 5-3/4% notes and all $86.3
million of its outstanding 5-1/2% notes.

The following consolidating financial information presents balance sheet, income
statement and cash flow information related to the Company's business. Each
Guarantor, as defined, is a direct or indirect wholly owned subsidiary of the
Company and will fully and unconditionally guarantee the 8 1/2% senior
subordinated notes to be issued by the Company, on a joint and several basis.
The Non-Guarantors are the Company's foreign subsidiaries. Separate financial
statements and other disclosures concerning the Guarantors have not been
presented because management believes that such information is not material to
investors.



                                      F-26
<PAGE>   32


                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                           BALANCE SHEET INFORMATION
                                December 31, 2000
                                 (In thousands)


<TABLE>
<CAPTION>
                                           Kellstrom
                                          Industries,      Guarantor       Non Guarantor
                                             Inc         Subsidiaries      Subsidiaries      Eliminations     Consolidated
                                        -------------    -------------     -------------     ------------     -------------
<S>                                    <C>               <C>               <C>               <C>               <C>
                      ASSETS

Current asset:
   Cash and cash equivalents           $     (12,012)    $       9,683     $          83     $       2,246     $          --
   Trade receivables                          16,857            63,426                32                              80,315
   Intercompany receivable                   267,086           (10,352)              (41)         (256,693)               --
   Inventories                                75,215           120,425                --                             195,640
   Property held for sale                     12,601             7,331                --                              19,932
   Prepaid expenses and other
     current assets                            2,225               354                94                               2,673
   Income tax receivable                       3,928                --                --                               3,928
   Deferred tax assets                         7,082            33,636                --                              40,718
                                       -------------     -------------     -------------     -------------     -------------
      Total current assets                   372,982           224,503               168          (254,447)          343,206

Equipment under operating
 leases, net                                      --            98,555                --                              98,555
Property, plant and equipment,
   net                                        10,197             9,596               103                              19,896
Goodwill, net                                 50,528            45,238                --                              95,766
Notes receivables                                 --             3,435                --                               3,435
Deferred financing charges                     5,403                --                --                --             5,403
Other assets                                   1,928             5,286                --                               7,214
                                       -------------     -------------     -------------     -------------     -------------
      Total Assets                     $     441,038     $     386,613     $         271     $    (254,447)    $     573,475
                                       =============     =============     =============     =============     =============

      LIABILITIES AND STOCKHOLDERS'
       EQUITY

Current liabilities:
   Short-term debt                     $     167,277     $          --     $          --                       $     167,277
   Current maturities of
    long-term debt                               200                --                --                                 200
   Accounts payable                           10,937            24,666                 5               735            36,343
   Accrued expenses                            8,042            23,367                50                              31,459
   Income tax payable                             --                --                --                                  --
Other current liabilities-current                 --             9,597                --                               9,597
Intercompany payable                         124,696           130,889              (403)         (255,182)               --
                                       -------------     -------------     -------------     -------------     -------------
      Total current liabilities              311,152           188,519              (348)         (254,447)          244,876

Long-term debt, less current
 maturities                                   34,937                --                --                              34,937
Convertible subordinated notes               140,250                --                --                             140,250
Deferred tax liabilities-non
 current                                       2,819             9,125                --                              11,944
                                       -------------     -------------     -------------     -------------     -------------
      Total Liabilities                      489,158           197,644              (348)         (254,447)          432,007

Stockholders' Equity:
   Common stock                                   10                 1                 1                --                12
   Additional paid-in capital                  3,148           119,172               551                --           122,871
   Retained earnings/(Accumulated
    deficit)                                 (49,544)           69,757               125                --            20,338
   Loans receivable from directors
    and officers                              (1,734)               --                --                              (1,734)
   Foreign currency translation
    adjustment                                    --                39               (58)                                (19)
                                       -------------     -------------     -------------     -------------     -------------
      Total Stockholders' Equity             (48,120)          188,969               619                --           141,468
                                       -------------     -------------     -------------     -------------     -------------
      Total Liabilities and
        Stockholders' Equity           $     441,038     $     386,613     $         271     $    (254,447)    $     573,475
                                       =============     =============     =============     =============     =============



</TABLE>



                                      F-27
<PAGE>   33
                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      STATEMENT OF OPERATIONS INFORMATION
                      For the Year Ended December 31, 2000
                                 (In thousands)


<TABLE>
<CAPTION>
                                      Kellstrom
                                     Industries,         Guarantor         Non Guarantor                             Ending
                                        Inc            Subsidiaries         Subsidiaries         Eliminations        Balance
                                   -------------       -------------       -------------         ------------     -------------
<S>                                <C>                 <C>                 <C>                        <C>         <C>
Sales of aircraft and
 engine parts, net                  $  92,099            $ 239,056             $1,100                $  --          $ 332,255
Rental revenues                            --               21,728                 --                   --             21,728
                                    ---------            ---------             ------                -----          ---------
   Total revenues                      92,099              260,784              1,100                   --            353,983

Cost of goods sold                     63,679              183,733                  1                   --            247,413
Cost of goods sold -
 inventory write-down                  37,716                7,753                 --                   --             45,469
Depr. of equip. under
 operating leases                          --               18,070                 --                   --             18,070
SG&A                                   22,574               25,685                982                   --             49,241
Depreciation and amortization           3,354                3,460                 45                   --              6,859
Restructuring, impairment of
 assets and other charges                 495                7,967                 --                   --              8,462
                                    ---------            ---------             ------                -----          ---------
   Total operating expenses           127,818              246,668              1,028                  --             375,514

   Operating (loss) income            (35,719)              14,116                 72                   --            (21,531)

Interest expense - net of
 interest income                       26,591                 (211)                --                   --             26,380
                                    ---------            ---------             ------                -----          ---------
   Income (loss) before taxes         (62,310)              14,327                 72                   --            (47,911)

Income taxes (benefit)                (23,319)               5,362                 27                   --            (17,930)
                                    ---------            ---------             ------                -----          ---------
Income (loss) from Continuing
 Operations                           (38,991)               8,965                 45                   --            (29,981)

Extraordinary Loss, Ext.
  of Debt, net of tax                  (1,349)                  --                 --                                  (1,349)
                                    ---------            ---------             ------                -----          ---------
   Net (loss) income                $ (40,340)           $   8,965             $   45                $  --          $ (31,330)
                                    =========            =========             ======                =====          =========


</TABLE>




                                      F-28
<PAGE>   34

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      STATEMENT OF CASH FLOWS INFORMATION
                      FOR THE YEAR ENDED DECEMBER 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>


                                               Kellstrom                      Non
                                              Industries,    Guarantor      Guarantor    Elimina-     Consoli-
                                                 Inc.       Subsidiaries  Subsidiaries    tions        dated
                                             ------------  ------------  ------------  ------------  ------------
<S>                                          <C>           <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                            $    (40,341) $      8,966  $         45  $         --  $    (31,330)
Adjustments to reconcile net income to
 net cash provided by operating activities:
     Depreciation and amortization                  3,354         3,460            45            --         6,859
     Depreciation of equipment under
      operating leases                                 --        18,070            --            --        18,070
     Restructuring, impairment of assets
      and other charges                               495         7,967                                     8,462
     Write-down of inventory                       37,717         7,752                                    45,469
     Amortization of deferred
      financing costs                               2,103            --            --            --         2,103
     Deferred income taxes                        (18,821)           --            --            --       (18,821)
     Loss on early retirement of debt               2,152            --            --            --         2,152
     Loss on sales of investment
      securities                                       --            --            --            --            --

Changes in operating assets and
 liabilities:
     (Increase) decrease in trade
       receivables, net                            18,376       (22,309)          (32)           --        (3,965)
     (Increase) decrease in inventories            18,764       (41,766)           --            --       (23,002)
     Increase in equipment under
       operating leases                                --         5,081            --            --         5,081
     Decrease in prepaid expenses and
       other current assets                           530           391            22         1,511         2,454
     Increase in income tax receivable             (3,722)                                                 (3,722)
     Decrease (increase) in other assets            3,585        (3,659)           --            --           (74)
     Increase (decrease) in accounts payable       (5,033)       14,506             4           735        10,212
     Increase (decrease) in accrued expenses       (9,878)       14,978            15            --         5,115
                                             ------------  ------------  ------------  ------------  ------------
           Net cash provided by operating
            activities                              9,281        13,437            99         2,246        25,063
                                             ------------  ------------  ------------  ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisitions, net of cash acquired           (28,234)                         --            --       (28,234)
     Acquisition earn-out payments                 (2,286)       (1,333)                                   (3,619)
     Purchase of property, plant and
       equipment                                   (4,277)       (2,667)                                   (6,944)
     Investment in KAV receivable                  (2,236)                                                 (2,236)
                                             ------------  ------------  ------------  ------------  ------------
           Net cash used in investing
             activities                           (37,033)       (4,000)           --            --       (41,033)
                                             ------------  ------------  ------------  ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under line of
      credit agreement                              1,303                                                   1,303
     Advances to/from Parent                                                                                   --
     Debt repayment, including capital
      lease obligation                            (14,302)                                                (14,302)
     Proceeds from the issuance of debt            30,000                                                  30,000
     Proceeds from the issuance of
      convertible subordinated notes                                                                           --
     Proceeds from repayment of loans
      to directors and officers                      (161)                                                   (161)
     Payment of deferred financing
      costs                                        (1,142)                                                 (1,142)
                                             ------------  ------------  ------------  ------------  ------------
           Net cash provided by
             financing activities                  15,698            --            --            --        15,698
                                             ------------  ------------  ------------  ------------  ------------

NET INCREASE IN CASH & CASH EQUIVALENTS           (12,054)        9,437            99         2,246          (272)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD           42           246           (16)           --           272
                                             ------------  ------------  ------------  ------------  ------------
CASH & CASH EQUIVALENTS, END OF PERIOD       $    (12,012) $      9,683  $         83  $      2,246            --
                                             ============  ============  ============  ============  ============
</TABLE>

                                      F-29
<PAGE>   35

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                           BALANCE SHEET INFORMATION
                               December 31, 1999
                                 (In thousands)



<TABLE>
<CAPTION>
                                                Kellstrom
                                                Industries,      Guarantor      Non Guarantor
                                                   Inc          Subsidiaries     Subsidiaries      Eliminations    Consolidated
                                             -------------     -------------    -------------     -------------    -------------
<S>                                          <C>               <C>               <C>               <C>               <C>
                      ASSETS
Current asset:
   Cash and cash equivalents                    $      42         $     246      $     (16)        $       --        $     272
   Trade receivables                               35,233            25,442             --                 --           60,675
   Intercompany receivable                        303,959                 1              1           (303,961)              --
   Inventories                                    108,513            85,978             --                 --          194,491
   Prepaid expenses and other
    current assets                                  2,828               745            115              1,511            5,199
   Deferred tax assets-current                      5,103             3,177             --                 --            8,280
                                                ---------         ---------      ---------          ---------        ---------
      Total current assets                        455,678           115,589            100           (302,450)         268,917

Equipment under operating leases, net                  --           150,137             --                             150,137
Property, plant and equipment, net                 18,174             7,040            126                              25,340
Goodwill, net                                      50,261            37,564             --                              87,825
Other assets                                          801             1,627             --                               2,428
Deferred financing charges                          6,798                --             --                 --            6,798
Deferred tax assets-noncurrent                         --                --             --                 --               --
                                                ---------         ---------      ---------          ---------        ---------
      Total Assets                              $ 531,712         $ 311,957      $     226          $(302,450)       $ 541,445
                                                =========         =========      =========          =========        =========

      LIABILITIES AND STOCKHOLDERS'
       EQUITY

Current liabilities:
   Short-term debt                              $ 165,774         $      --      $      --          $      --        $ 165,774
   Notes payable                                    2,146                --             --                 --            2,146
   Current maturities of long-term
     debt                                             200                --             --                 --              200
   Accounts payable                                 7,554            10,159             --                 --           17,713
   Accrued expenses                                11,614             6,483             37                 --           18,134
   Income tax payable                              (1,511)               --             --              1,511               --
Deferred tax liability-current                         --                --             --                 --               --
Intercompany payable                              169,848           134,002           (385)          (303,465)              --
                                                ---------         ---------      ---------          ---------        ---------
      Total current liabilities                   355,625           150,644           (348)          (301,954)         203,967

Long-term debt, less current
  maturities                                       17,720                --             --                              17,720
Convertible subordinated notes                    140,250                --             --                             140,250
Deferred tax liabilities-non current                  892             7,403             --                 --            8,295
                                                ---------         ---------      ---------          ---------        ---------
      Total Liabilities                           514,487           158,047           (348)          (301,954)         370,232

Stockholders' Equity:
   Common stock                                        11                 1              1                 (1)              12
   Additional paid-in capital                      27,770            92,793            550                 (9)         121,104
   Retained earnings                               (8,983)           61,110             27               (486)          51,668
   Loans receivable from directors
     and officers                                  (1,573)               --             --                              (1,573)
   Foreign currency translation
    adjustment                                         --                 6             (4)                                  2
                                                ---------         ---------      ---------          ---------        ---------
      Total Stockholders' Equity                   17,225           153,910            574               (496)         171,213
                                                ---------         ---------      ---------          ---------        ---------
      Total Liabilities and Stockholders'
       Equity                                   $ 531,712         $ 311,957      $     226          $(302,450)       $ 541,445
                                                =========         =========      =========          =========        =========

</TABLE>



                                      F-30
<PAGE>   36

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      STATEMENT OF OPERATIONS INFORMATION
                      For the Year Ended December 31, 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                                      Kellstrom
                                     Industries,         Guarantor         Non Guarantor                             Ending
                                        Inc            Subsidiaries         Subsidiaries         Eliminations        Balance
                                   -------------       -------------       -------------         ------------     -------------
<S>                                <C>                 <C>                 <C>                        <C>         <C>
Sales of aircraft and
 engine parts, net                 $      81,626       $     207,286       $         778      $        (778)      $     288,912
Rental revenues                               --              42,032                  --                 --              42,032
                                   -------------       -------------       -------------      -------------       -------------
   Total revenues                         81,626             249,318                 778               (778)            330,944

Cost of Goods Sold                        54,795             146,094                  --                 --             200,889
Depr. of equip. under
 operating leases                             --              27,114                  --                 --              27,114
SG&A                                      26,120              14,338                 692                 --              41,150
Depreciation and amortization              3,465               1,896                  37                 --               5,398
Restructuring, impairment of
 assets and other charges                  2,200                  --                  --                 --               2,200
                                   -------------       -------------       -------------      -------------       -------------
   Total operating expenses               86,580             189,442                 729                 --             276,751

   Operating income                       (4,954)             59,876                  49               (778)             54,193

Interest expense - net
 of interest income                       21,550                (282)                 --                 --              21,268
                                   -------------       -------------       -------------      -------------       -------------
   Income before taxes                   (26,504)             60,158                  49               (778)             32,925

Income taxes                              (9,974)             22,638                  18               (292)             12,390
                                   -------------       -------------       -------------      -------------       -------------
   Net income                      $     (16,530)      $      37,520       $          31     $         (486)      $      20,535
                                   =============       =============       =============      =============       =============
</TABLE>






                                      F-31
<PAGE>   37


                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      STATEMENT OF CASH FLOWS INFORMATION
                      For the Year Ended December 31, 1999
                                 (In thousands)

<TABLE>
<CAPTION>


                                               Kellstrom                      Non
                                              Industries,    Guarantor      Guarantor   Elimina-       Consoli-
                                                 Inc.       Subsidiaries  Subsidiaries   tions          dated
                                             ------------  ------------  ------------  ------------  ------------
<S>                                          <C>           <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                   $    (16,530) $     37,520  $         31  $       (486) $     20,535
Adjustments to reconcile net income to
 net cash used in operating activities:
     Depreciation and amortization                  3,465         1,896            37            --         5,398
     Depreciation of equipment under
      operating leases                                 --        27,114            --            --        27,114
     Amortization of deferred
       financing costs                              2,043            --            --            --         2,043
     Deferred income taxes                          1,692          (800)           --            --           892
     Loss on sales of investment
      securities                                       --            --            --            --            --

Changes in operating assets and
 liabilities:
     Increase in trade receivables,
       net                                        (19,950)       (5,159)           --            --       (25,109)
     Increase in inventories                      (19,498)      (13,715)           --            --       (33,213)
     Increase in equipment under
      operating leases                                 --       (36,727)           --            --       (36,727)
     Decrease (increase) in prepaid
      expenses and other current assets              (363)          411          (116)       (1,511)       (1,579)
     Decrease (increase) in other assets             (209)         (743)            1            --          (951)
     Increase (decrease) in accounts
       payable                                      1,574        (1,853)           --            --          (279)
     Increase (decrease) in accrued
      expenses                                     (7,084)        1,534            36            --        (5,514)
     Increase in income taxes payable              (1,203)           --            --            --        (1,203)
                                             ------------  ------------  ------------  ------------  ------------
           Net cash used in operating
            activities                            (56,063)        9,478           (11)       (1,997)      (48,593)
                                             ------------  ------------  ------------  ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisitions, net of cash acquired            (3,316)      (16,774)           --            --       (20,090)
     Acquisition earn-out payments                 (1,700)       (3,359)                                   (5,059)
     Purchase of property, plant and
      equipment                                    (7,067)       (3,998)                                  (11,065)
     Proceeds from sales of property,
       plant and equipment                             72                                                      72
     Proceeds from sales of investment
       securities                                                                                              --
                                             ------------  ------------  ------------  ------------  ------------
           Net cash used in investing
            activities                            (12,011)      (24,131)           --            --       (36,142)
                                             ------------  ------------  ------------  ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under line of credit
       agreement                                   88,494                                                  88,494
     Advances to/from Parent                      (16,564)       14,578           (11)        1,997            --
     Debt repayment, including
      capital lease obligation                     (5,037)                                                 (5,037)
     Proceeds from the issuance
       of common stock                              1,097                                                   1,097
     Proceeds from the issuance of
      convertible subordinated notes                                                                           --
     Proceeds from repayment of loans
       to directors and officers                     (180)                                                   (180)
     Payment of deferred financing costs             (474)                                                   (474)
                                             ------------  ------------  ------------  ------------  ------------
           Net cash provided by financing
             activities                            67,336        14,578           (11)        1,997        83,900
                                             ------------  ------------  ------------  ------------  ------------

NET INCREASE IN CASH & CASH EQUIVALENTS              (738)          (75)          (22)           --          (835)
CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD          780           321             6            --         1,107
                                             ------------  ------------  ------------  ------------  ------------
CASH & CASH EQUIVALENTS, END OF PERIOD       $         42  $        246  $        (16) $         --  $        272
                                             ============  ============  ============  ============  ============

</TABLE>




                                      F-32
<PAGE>   38

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      STATEMENT OF OPERATIONS INFORMATION
                      For the Year Ended December 31, 1998
                                 (In thousands)


<TABLE>
<CAPTION>
                                      Kellstrom
                                     Industries,         Guarantor         Non Guarantor                         Ending
                                        Inc.           Subsidiaries         Subsidiaries     Eliminations        Balance
                                   -------------       -------------       -------------     ------------     -------------
<S>                                 <C>                 <C>                 <C>                <C>              <C>
Sales of aircraft and
 engine parts, net                    $ 90,303           $ 58,599           $     --             $ --            $148,902
Rental revenues                             --             31,147                 --               --              31,147
                                      --------           --------           --------             ----            --------
   Total revenues                       90,303             89,746                 --               --             180,049

Cost of Goods Sold                      60,993             39,228                 --               --             100,221
Depr. of equip. under
  operating leases                          --             16,688                 --               --              16,688
SG&A                                    15,578              3,471                  3               --              19,052
Depreciation and amortization            2,437                621                 --               --               3,058
                                      --------           --------           --------             ----            --------
   Total operating expenses             79,008             60,008                  3               --             139,019

   Operating income                     11,295             29,738                 (3)              --              41,030

Interest expense - net of
 interest income                         9,761                 11                  1               --               9,773
                                      --------           --------           --------             ----            --------
   Income before taxes                   1,534             29,727                 (4)              --              31,257

Income taxes                               573             11,107                 (1)              --              11,679
                                      --------           --------           --------             ----            --------
   Net income                         $    961           $ 18,620           $     (3)            $ --            $ 19,578
                                      ========           ========           ========             ====            ========




</TABLE>







                                      F-33
<PAGE>   39

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
                      STATEMENT OF CASH FLOWS INFORMATION
                      For the Year Ended December 31, 1998
                                 (In thousands)



<TABLE>
<CAPTION>


                                               Kellstrom                      Non
                                              Industries,     Guarantor      Guarantor        Elimina-     Consoli-
                                                 Inc.        Subsidiaries  Subsidiaries         tions       dated
                                              ------------   ------------  ------------      ---------   ------------
<S>                                          <C>           <C>              <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                    $    961        $  18,620       $  (3)            $ --      $  19,578
Adjustments to reconcile net income to
 net cash used in operating activities:
     Depreciation and amortization               2,437              621          --               --          3,058
     Depreciation of equipment under
      operating leases                              --           16,688          --               --         16,688
     Amortization of deferred
       financing costs                           1,377               --          --               --          1,377
     Deferred income taxes                       1,130              592          --               --          1,722
     Loss on sales of investment
      securities                                   119               --          --               --            119
     Gain on sale of property,
      plant and equipment                         (102)              --          --               --           (102)

Changes in operating assets and
   liabilities:
     Increase in trade receivables,
        net                                     (1,823)          (1,099)         --               --         (2,922)
     Increase in inventories                   (44,254)          (1,868)         --               --        (46,122)
     Increase in equipment under
      operating leases                              --          (91,948)         --               --        (91,948)
     Decrease (increase) in prepaid
      expenses and other current assets           (172)            (137)         --               --           (309)
     Decrease (increase) in other assets           754            1,740          (1)              --          2,493
     Increase (decrease) in accounts
       payable                                  (1,836)          (3,278)         --               --         (5,114)
     Increase (decrease) in accrued
       expenses                                 10,417              758          --               --         11,175
     Increase in income taxes payable            1,312               --          --               --          1,312
                                              --------        ---------       -----             ----      ---------
           Net cash used in operating
            activities                         (29,680)         (59,311)         (4)              --        (88,995)
                                              --------        ---------       -----             ----      ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisitions, net of cash acquired        (20,520)         (99,733)         --               --       (120,253)
     Acquisition earn-out payments                  --               --                                          --
     Purchase of property, plant and
      equipment                                 (7,618)          (3,112)                                    (10,730)
     Proceeds from sales of property,
      plant and equipment                           74               31                                         105
     Proceeds from sales of investment
      securities                                   812                                                          812
     Other                                         (24)                                                         (24)
                                              --------        ---------       -----             ----      ---------
           Net cash used in investing
            activities                         (27,276)        (102,814)         --               --       (130,090)
                                              --------        ---------       -----             ----      ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under line
       of credit agreement                      79,879                                                       79,879
     Advances to/from Parent                  (162,324)         162,314          10               --             --
     Debt repayment, including capital
      lease obligation                         (18,680)                                                     (18,680)
     Proceeds from the issuance of
       common stock                             78,428                                                       78,428
     Proceeds from the issuance of
      convertible subordinated notes            86,250                                                       86,250
     Proceeds from repayment of loans
      to directors and officers                 (1,031)                                                      (1,031)
     Payment of deferred financing costs        (5,117)                                                      (5,117)
                                              --------        ---------       -----             ----      ---------
           Net cash provided by financing
            activities                          57,405          162,314          10               --        219,729
                                              --------        ---------       -----             ----      ---------

NET INCREASE IN CASH & CASH EQUIVALENTS            449              189           6               --            644
CASH & CASH EQUIVALENTS,
  BEGINNING OF PERIOD                              331              132          --               --            463
                                              --------        ---------       -----             ----      ---------
CASH & CASH EQUIVALENTS,
  END OF PERIOD                               $    780        $     321       $   6             $ --      $   1,107
                                              ========        =========       =====             ====      =========

</TABLE>



                                      F-34
<PAGE>   40


22. SUPPLEMENTAL FINANCIAL DATA

(A) QUARTERLY DATA - UNAUDITED

<TABLE>
<CAPTION>

                                                               Quarters
                                              (in thousands, except per share amounts)
                                         --------------------------------------------------
                                           First        Second         Third        Fourth
                                         --------      --------      --------      --------
<S>                                      <C>           <C>           <C>           <C>
Total revenues:
2000                                     $ 74,471      $ 82,247      $101,026      $ 96,239
1999                                     $ 79,056      $ 88,227      $ 70,731      $ 92,930

Earnings (loss) from continuing
operations:
2000                                     $    664      $  1,392      $  1,520      $(33,557)
1999                                     $  7,148      $  6,033      $  3,411      $  3,943

Net earnings (loss):
2000                                     $    664      $  1,392      $  1,520      $(34,906)
1999                                     $  7,148      $  6,033      $  3,411      $  3,943

Earnings (loss) from continuing
operations per common share -
diluted:
2000                                     $   0.06      $   0.12      $   0.13      $  (2.82)
1999                                     $   0.47      $   0.41      $   0.27      $   0.31

Net earnings (loss) per common
share - diluted:
2000                                     $   0.06      $   0.12      $   0.13      $  (2.93)
1999                                     $   0.47      $   0.41      $   0.27      $   0.31

</TABLE>



                                      F-35
<PAGE>   41

(B) PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

The condensed consolidated statement of operations of the Company for the 12
months ended December 31, 2000 is based on historical financial statements of
the Company and has been adjusted to reflect the acquisition of AVSDC as though
the companies had combined at the beginning of the periods being reported.

The pro forma consolidated financial information does not purport to be
indicative of results that would have occurred had the acquisitions been in
effect for the period presented, nor does it purport to be indicative of the
results that will be obtained in the future. The pro forma consolidated
financial information is based on certain assumptions and adjustments described
in the notes hereto and should be read in conjunction therewith.


                                      F-36
<PAGE>   42
(B)               KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
           Pro Forma Condensed Consolidated Statements of Operations
                      Twelve Months Ended December 31, 2000
                    (In thousands, except per share amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                                 Historical
                                                      ---------------------------------          Pro Forma           Pro Forma
                                                        Kellstrom            AVSDC            Adjustments(A)        Combined
                                                      -------------       -------------       --------------      -------------
<S>                                                     <C>                 <C>                 <C>                 <C>
Sales of aircraft and engine parts, net                 $ 332,255           $ 176,822           $  (3,523)          $ 505,554
Rental revenues                                            21,728                  --                  --              21,728
                                                        ---------           ---------           ---------           ---------
   Total revenues                                         353,983             176,822              (3,523)            527,282

Cost of goods sold                                       (247,413)           (163,447)              2,745            (389,519)
                                                                                                   18,596
Cost of goods sold - Inventory write-down                 (45,469)                                                    (45,469)
Depreciation of equipment under operating leases          (18,070)                  --                 --             (18,070)
Selling, general and administrative expenses              (49,241)            (30,576)              8,647             (71,170)
Restructuring, impairment of assets and other
 charges                                                   (8,462)                  --                 --              (8,462)
Depreciation and amortization                              (6,859)            (11,878)               (883)            (19,620)
                                                        ---------           ---------           ---------           ---------
   Total operating expenses                              (375,514)           (205,901)             29,105            (552,310)

Operating (loss) income                                   (21,531)            (29,079)             25,582             (25,028)

Interest expense, net of interest income                  (26,380)            (30,346)             (3,282)            (29,662)

                                                                                                   30,346
                                                        ---------           ---------           ---------           ---------

(Loss) income before income taxes                         (47,911)            (59,425)             52,646             (54,690)

Income tax benefit (expense)                               17,930               5,090               2,478              25,498
                                                        ---------           ---------           ---------           ---------

(Loss) income from continuing operations                  (29,981)            (54,335)             55,124             (29,192)

Extraordinary loss on early extinguishment
  of debt, net of tax                                      (1,349)                 --                  --              (1,349)
                                                        ---------           ---------           ---------           ---------
Net (loss) income                                       $ (31,330)          $ (54,335)          $  55,124           $ (30,541)
                                                        =========           =========           =========           =========

Loss per common share before
 extraordinary item - basic                             $   (2.52)                                                  $   (2.45)
                                                        =========                                                   =========

Loss from extraordinary item
 per common share - basic                               $   (0.11)                                                  $   (0.11)
                                                        =========                                                   =========

Loss per common share - basic                           $   (2.63)                                                  $   (2.56)
                                                        =========                                                   =========

Loss per common share before
 extraordinary item - diluted                           $   (2.52)                                                  $   (2.45)
                                                        =========                                                   =========
Loss from extraordinary item
 per common share                                       $   (0.11)                                                  $   (0.11)
                                                        =========                                                   =========

Loss per common share - diluted                         $   (2.63)                                                  $   (2.56)
                                                        =========                                                   =========

Weighted average number of common shares
   outstanding - basic                                     11,911                                                      11,911
                                                        =========                                                   =========
Weighted average number of common shares
   outstanding - diluted                                   11,911                                                      11,911
                                                        =========                                                   =========

</TABLE>


                 Unaudited - See accompanying notes to pro forma
                 condensed consolidated statement of operations


                                      F-37
<PAGE>   43

                  KELLSTROM INDUSTRIES, INC. AND SUBSIDIARIES
        Notes to Pro Forma Condensed Consolidated Statements of Operations
                      Twelve Months Ended December 31, 2000
                                 (In thousands)
                                   (Unaudited)

Note (A)  For the purpose of presenting the pro forma condensed consolidated
          statement of operations, the following adjustments have been made for
          the AVSDC acquisition (in thousands):

<TABLE>
<CAPTION>

      <S>                                                                             <C>
          Increase (decrease) in income:
          Reversal of sales between Kellstrom and AVSDC                                   $ (3,523)
          Reversal of cost of goods sold between Kellstrom and AVSDC                         2,745
          Adjustment to reflect terms under the consignment agreement between
            Kellstrom and KAV (i)                                                           18,596
          Elimination of redundant personnel (iv)                                            8,647
          Amortization of goodwill and deferred financing costs (ii)                          (883)
          Interest expense on debt incurred to finance the acquisition                      (3,282)
          Reduction in interest expense due to pay-off of AVSDC debt                        30,346
                                                                                          --------
                                                                                            52,646
          Tax effect of pro forma adjustments and impact of acquisition on the
            provision for income taxes (iii)                                                 2,478
                                                                                          --------
          Net adjustments                                                                 $ 55,124
                                                                                          ========

</TABLE>

(i)       Adjustment to reflect terms under the consignment agreement between
          Kellstrom and KAV was calculated based on historical sales and
          adjusting the gross margin to arrive at an 18% margin based on the 20%
          consignment fee stipulated in the consignment agreement adjusted for
          estimated repair and overhaul costs.

(ii)      Amortization period for goodwill is 30 years. Amortization period for
          deferred financing costs is over the remaining life of the debt
          instrument.

(iii)     Pro forma income tax expense adjusted to reflect Kellstrom
          consolidated effective tax rate.

(iv)      In connection with the acquisition, the Company implemented several
          initiatives designed to reduce the operating costs of the combined
          Company. These initiatives resulted in the identification of
          approximately 220 employees whose jobs were terminated and seven
          facilities which will be closed.

Note (B)  In connection with the acquisition, the Company is expected to incur
          expenses associated with the acquisition of approximately $1.9
          million, net of tax, and expenses associated with the prepayment of
          the ELAS note of $1.3 million, net of tax benefit.

Note (C)  Pro forma weighted average number of common shares outstanding -
          diluted excludes the 368,381 of warrants which were issued in
          connection with the Key Notes and all of the warrants related to the
          assumed conversion of the Convertible Subordinated Notes due to the
          fact that their inclusion would be anti-dilutive.



                                      F-38
<PAGE>   44


                                   SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment on Form
10-K/A to be signed on its behalf by the undersigned thereunto duly authorized.

Date: June 7, 2001                          KELLSTROM INDUSTRIES, INC.
                                                       (Registrant)

                                            By: /s/ Zivi R. Nedivi
                                            ------------------------------------
                                            Title: Chief Executive Officer and
                                            President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                                      Title                                        Date
---------                                      -----                                        ----
<S>                                            <C>                                          <C>



/s/ Zivi R. Nedivi                             President and Chief Executive                June 7, 2001
------------------------------------           Officer and Director
Zivi R. Nedivi                                 (principal executive officer)


/s/ Yoav Stern                                 Chairman of the Board of Directors           June 7, 2001
------------------------------------
Yoav Stern

/s/ Oscar E. Torres                            Chief Financial Officer                      June 7, 2001
-------------------                            (principal financial and
Oscar E. Torres                                accounting officer)


/s/ David Jan Mitchell                         Director                                     June 7, 2001
------------------------------------
David Jan Mitchell

/s/ Niv Harizman                               Director                                     June 7, 2001
------------------------------------
Niv Harizman

/s/ Ted S. Webb, Jr.                           Director                                     June 7, 2001
------------------------------------
Ted S. Webb, Jr.

/s/ Admiral William J. Crowe, Jr.              Director                                     June 7, 2001
------------------------------------
Admiral William J. Crowe, Jr.
</TABLE>




                                       5