<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                           --------------------------

                                   FORM 10-KSB
(MARK ONE)

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934 [FEE REQUIRED]

                   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 [NO FEE REQUIRED]

                         Commission File Number: 0-29028

                           AVIATION DISTRIBUTORS, INC.
                 (Name of small business issuer in its charter)

             DELAWARE                                     33-0715685
(State or other jurisdiction of              I.R.S. Employer Identification No.)
incorporation or organization)

         ONE CAPITAL DRIVE
      LAKE FOREST, CALIFORNIA                                          92630
(Address of Principal Executive Office)                             (Zip Code)

         ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 586-7558

                     --------------------------------------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                           NAME OF EACH EXCHANGE
  TITLE OF EACH CLASS                                      ON WHICH REGISTERED:
  -------------------                                      ---------------------
                 NONE                                      NONE

  SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                         COMMON STOCK -- $.01 PAR VALUE
                                (TITLE OF CLASS)



Check 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
                  ---        ---

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K 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-KSB.   X
             -----


<PAGE>



Revenues of the registrant for the fiscal year ended December 31, 2000 were
$37,440,151 .

The aggregate market value of the Common Stock held by non-affiliates of the
registrant on March 31, 2001 was approximately $15,676,000, based upon the
average of the bid and asked prices of the Common Stock, as reported by the
Bloomberg Financial Markets.

The number of shares of the Common Stock of the registrant outstanding as of
March 31, 2001 was 3,389,487.

          Transitional Small Business Disclosure Format (check one):

                Yes                        No         X
                   ---------------           ------------------


Documents incorporated by reference:

Items 10, 11, 12 and 13 of Part III are incorporated by reference from a
portion of the Company's Proxy Statement to be filed with the Securities and
Exchange Commission in connection with the Company's 2001 Annual Meeting of
Stockholders and are incorporated by reference into Part III hereof.

<PAGE>


                                     PART I

All statements, other than statements of historical fact, included in this
Form 10-KSB, including without limitation the statements under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," are, or may be deemed to be, "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934
(the "Exchange Act"). Such forward-looking statements involve assumptions,
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of Aviation Distributors, Inc.
(the "Company" or "ADI") to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements contained in this Form 10-KSB. Such potential risks and
uncertainties include, without limitation, competitive pricing and other
pressures from other aviation parts suppliers, aviation industry and economic
conditions generally and in the Company's primary markets, availability of
capital, and other risk factors detailed herein and in other of the Company's
filings with the Securities and Exchange Commission. The forward-looking
statements are made as of the date of this Form 10-KSB and the Company
assumes no obligation to update the forward-looking statements or to update
the reasons that actual results could differ from those projected in such
forward-looking statements. Therefore, readers are cautioned not to place
undue reliance on these forward-looking statements.

ITEM 1.      DESCRIPTION OF BUSINESS

INTRODUCTION

The Company is a leader in providing parts procurement services to major
commercial airlines worldwide. The procurement cycle the Company utilizes in
providing its supply chain management capabilities to its customers is as
follows: 1) the Company, as an approved vendor, receives a request for
quotation for a rotable or non-rotable aircraft part from a customer; 2) a
search is initiated for the part to determine availability and price; 3) a
price and availability quotation is prepared for the customer and 4) upon
receipt of the customer's purchase order, the product is obtained from the
previously identified source. Product sources include Company inventory,
original equipment manufacturers ("OEMs"), other redistributors, overhaulers,
and airlines. Aircraft parts offered by the Company include those
manufactured by Airbus, Boeing (including McDonnell Douglas), General
Electric, Lockheed, Pratt & Whitney and Rolls Royce. In addition, the Company
sometimes engages in consignment and marketing agreements with major
commercial airlines, distributors and OEMs, which allows the Company to offer
a wide range of parts for sale without certain risks and financing costs
associated with owned inventory.

The Company's sales increased from $23.4 million in 1999 to $37.4 million in
2000 as a result of increased financing ability. The Company's sales
increased from $21.3 million in 1995, to $23.9 million in 1996 and $39.0
million in 1997. Due to financing restrictions, 1998 and 1999 sales decreased
to $28.4 million and $23.4 million, respectively.

INDUSTRY OVERVIEW AND TRENDS

The demands customers require of their approved vendors create industry entry
barriers. The Company's customers' demand: 1) CERTIFICATION AND TRACEABILITY.
The Company is NADCAP, ASA, and ISO 9002 certified and employs four, FAA
licensed personnel. 2) COMPETITIVE PRICING AND REFERENCES. The Company
provides unparalleled product inspection and source documentation to
commercial airlines around the world. 3) TIMELY DELIVERY AND FINANCING. The
Company provides competitive payment terms and meets the customer delivery
requirements, whether for Aircraft On the Ground (AOG) or planned FAA
mandated cycle maintenance and aircraft provisioning.

INCREASED EMPHASIS ON TRACEABILITY. Regulatory agencies have increased
documentation requirements for aircraft parts because of concern regarding
unapproved parts. In order for suppliers to trace all aircraft parts back to
their original source, suppliers have invested in sophisticated information
systems technology. The Company has developed and continues to maintain and
upgrade its information systems technology to ensure that all aircraft parts
bought and sold by the Company comply with applicable regulatory requirements.


                                       1
<PAGE>

BUSINESS STRATEGY

The Company's primary objectives are to be a leading quality supplier of
aircraft parts to airlines worldwide and to increase revenue from its
business through the application of a comprehensive business strategy
combining various customer service, marketing, operating and growth
objectives. The Company's marketing approach includes direct marketing to
airlines and manufacturers, advertising in trade directories and attending
industry trade shows. Although the Company concentrates the majority of its
marketing efforts on commercial airlines servicing the passenger market, it
also seeks to foster business from commercial airlines servicing the cargo
market, as well as overhaul facilities and OEMs.

CUSTOMER SERVICE. The Company believes the demand for its procurement
services will continue to expand. Revenue passenger miles and new aircraft
orders will increase and existing aircraft will be kept in service longer
which will increase the demand for parts. Commercial airlines, the Company's
customers, will continue to focus on reducing operating costs, parts
inventory levels and the number of outside vendors whose services they
utilize, which will result in airlines outsourcing more procurement services.
Original Equipment Manufacturers "OEMs" parts are expensive, particularly
versus aftermarket and overhauled parts. An increasingly higher percentage of
airlines' parts requirements are being procured in the aftermarket. The
emphasis by the customer on safety, quality of traceability and service has
never been greater and is ever increasing, and this limits market
participation to qualified vendors like the Company.

EMPHASIS ON QUALITY. The Company continues to emphasize its reputation for
quality, including its track record of consistently meeting and exceeding FAA
regulations by maintaining and, if necessary, introducing safeguards to
ensure the quality of its aircraft parts. In addition, in October 1996 the
Company became a full distributor under the National Aerospace and Defense
Contractors Accreditation Program of the Performance Review Institute. Such
safeguards include employing three FAA-licensed Airframe and Powerplant
Inspectors and contracting with three FAA-licensed Designated Airworthiness
Representatives and an outside quality assurance consultant. Each of these
specialists verifies the airworthiness of aircraft parts bought and sold by
the Company. The Company hired a Quality Consultant in 2000 to provide an
additional perspective and ongoing plan of continuous improvement to the
Company systems, policies and procedures.

In March 1998, the Company attained its ISO 9002 Certification. The Company
has since undergone six surveillance audits, which resulted in the retention
of the certification. The Company is among a select group in its industry to
have achieved this status, which is a well-recognized symbol of quality
operating standards.

FOCUS ON MAJOR COMMERCIAL AIRLINES. The Company plans to continue targeting
major commercial airlines worldwide, many of which are currently customers of
the Company. Such airlines generally have larger aircraft fleets, which
generate a greater demand for aircraft parts than smaller airlines.
Consequently, relationships with major commercial airlines enable the Company
to expend fewer resources to generate comparable sales volume with margins of
profitability comparable to similar sales to several smaller airlines.
Additionally, major commercial airlines typically have greater financial
resources than smaller airlines, resulting in reduced credit risk to the
Company and a greater likelihood of timely payment. The Company's
relationships with major commercial airlines also provide the Company with
increased access to such airlines' aircraft parts inventories.

GLOBAL EXPANSION. The Company's goal is to service customers domestically and
worldwide and to become a major aircraft parts supplier for the
fastest-growing markets. For the year ended December 31, 2000, 61.8% of the
Company's sales were to international customers. The Company plans to
continue to take advantage of the growing international market through the
use of its multilingual sales staff and by maintaining existing relationships
and establishing new relationships in the following regions: Pacific Rim/Far
East/South Pacific, Europe, Latin/South America, Middle East/Africa and North
America.

                                       2
<PAGE>

PRODUCTS AND SERVICES

GENERAL. The Company is in the business of selling a broad range of aircraft
parts from its owned inventory, on behalf of airlines and manufacturers
pursuant to consignment and marketing agreements, and from inventory owned by
outside parties and located by the Company at the time of receiving a
customer order (outside sourcing). For the year ended December 31, 2000,
sales from Company-owned inventory and outside sourcing represented
approximately 9.3% and 90.7%, respectively, of the Company's net sales.

The Company's access to an extensive inventory is a result of its worldwide
relationships with airlines, manufacturers and suppliers of aircraft parts,
numerous consignment and marketing agreements with airlines and
manufacturers, and owned inventory of new and overhauled aircraft parts.

The general categories of aircraft parts are as follows: (i) rotable; (ii)
repairable; and (iii) expendable.

A rotable is a part that is removed periodically as dictated by an operator's
maintenance procedures or on an as-needed basis and is typically repaired or
overhauled and re-used an indefinite number of times. A subset of rotables is
life-limited parts. A life-limited rotable has a designated number of
allowable flight hours and/or cycles (one take-off and landing generally
constitutes one cycle) after which it is rendered unusable.

A repairable is similar to a rotable except that it can only be repaired a
limited number of times before it must be discarded. Typically, rotable and
repairable parts must be removed from an airplane and rebuilt or checked
based upon the number of hours in flight. Rotable and repairable parts must
be repaired at FAA-approved repair facilities.

An expendable is generally a part that is used and not thereafter repaired
for further use. Consequently, all expendable inventory is new. Expendable
inventory cannot be used for less than its useful life and then transferred
to a new airplane; once an expendable part is removed from an airplane, it
must be discarded.

Currently, the Company supplies aircraft parts for Boeing 737, 747, 757 and
767 series, Airbus 300 series, McDonnell Douglas 80, DC and MD series
aircraft. These aircraft parts represent a significant portion of the
aircraft parts used by major airlines, which represent the majority of the
Company's current customers. Although not required by the FAA to do so, the
Company maintains on staff three FAA-licensed Airframe and Powerplant
Inspectors and contracts with three FAA-licensed Designated Airworthiness
Representatives, whose responsibilities are to verify the airworthiness of
aircraft parts bought and sold by the Company. The Company believes that its
strict adherence to FAA and manufacturer guidelines has contributed to the
Company's reputation in the industry. The Company does not repair aircraft
parts, and therefore is generally not subject to the risks associated with
the repair business.

Each sales person employed by the Company is responsible for making an
appraisal of a particular aircraft part's value and makes such appraisal
based on industry experience and practice after considering current
manufacturers' list prices, the condition of the part, the part's
availability and lead time to manufacture the part. The Company's return
policy permits customers to return parts within 10 days of receipt, although,
in certain instances the Company may accept returned parts beyond the 10 day
period. Additionally, the Company's terms to customers are generally 30 days;
the Company may extend payment terms in certain circumstances.

The Company's owned inventory at December 31, 2000 is stored in the Company's
California warehouse. Any party who has entered into a marketing agreement
with the Company owns and is responsible for storing the inventory to which
the Company has access pursuant to such marketing agreement. The Company
ships all inventory to customers via national or international courier
services. If an aircraft part sought by a customer exists in the Company's
owned inventory, inventory on consignment, or inventory available through
exclusive marketing agreements (together, the "Accessible Inventory"), such
part is generally shipped to the customer the day the order is placed. The
turn-around time is generally up to one week from the time the order is
placed if the Company has to acquire a part from an outside party.

CLIENT SERVICES. Client services are conducted through the Company's
California-based multilingual direct sales force, whose primary
responsibility is to sell aircraft parts and manage customers. Sales
personnel travel extensively to develop strong personal relationships with
the Company's customers, improve communications and remain current on
regional market data. Salespeople are assigned to specific airlines and are
supported by a group of regional agents, who assist in countries where local
representation is critical to purchase order processing and timely payment.

                                       3
<PAGE>

Each sales representative is supported by additional personnel who research
and locate parts ordered by the Company's customers. The Company's sales
staff, through its knowledge of the industry and its relationships throughout
the world, is able to develop and implement creative solutions to locate and
deliver hard-to-find aircraft parts, a quality that the Company believes sets
it apart from its competitors.

Upon the Company's receipt of an inquiry for a specific aircraft part from a
customer via telephone, e-mail or fax, the Company first checks its owned
inventory for availability of the part, then checks the Accessible Inventory.
If the part is not owned or part of the Accessible Inventory, the Company
will attempt to source the part through cultivated industry contacts or the
Inventory Locator Service ("ILS"), a domestic, industry-wide database of
aircraft parts. Even if the aircraft part is within the Company's owned or
Accessible Inventory, the Company attempts to achieve full market value for
each part sold by researching alternate sources for availability and
competing prices for the part prior to quoting the end user.

CONSIGNMENT AND MARKETING BUSINESS. In addition to supplying parts from owned
inventory, the Company has supplied parts through (i) consignment agreements,
pursuant to which the Company takes actual possession of a vendor's
inventory, and (ii) exclusive marketing agreements, pursuant to which the
Company markets vendors' inventory which remains in the vendors' possession.
Through consignment or marketing agreements with an aircraft parts supplier,
the Company is able to distribute its aircraft parts to a larger number of
prospective inventory buyers. This allows the Company's vendors to maximize
the value of their inventory while at the same time freeing up resources that
can be focused on their core business. Consignment and marketing arrangements
also enable the Company to offer for sale aircraft parts from a much larger
inventory at minimal capital cost to the Company.

When an inquiry is made with respect to a particular aircraft part, the
Company will query its inventory databases for availability before
researching market value. A party who has entered into a consignment or
marketing agreement with the Company (the "Contract Party") typically
establishes an asking price for each aircraft part subject to the agreement,
but may allow the Company to lower such price to assure a sale. If the
Company feels it must offer a part for below the price established by the
Contract Party, it will first seek the Contract Party's permission. In most
instances, the Contract Party has entered into the relationship with the
Company because it believes the Company has the expertise necessary to
attract the best price for each aircraft part. Further, the Company is paid a
percentage of the sales price as compensation for its consignment and
marketing services. Consequently, the Contract Party, understanding that the
Company's own best interest is in achieving the highest price possible for
the sale of the part, will usually give consideration to a recommendation by
the Company to sell a particular aircraft part at a price below the Contract
Party's established price.

The Company has had consignment and marketing agreements with airlines and
OEMs. No single consignment or marketing agreement has been material to the
Company's business in the aggregate. Although the Company had no marketing or
consignment agreements at December 31, 2000, the Company is considering
potential future consignment and marketing agreements.

INVENTORY PURCHASES. The Company acquires aircraft parts by bidding on the
inventory of, (i) airlines that are eliminating certain portions of their
parts inventory due to retirement of an aircraft type from their fleet,
downsizing of operations, or the dissolution of their businesses and, (ii)
OEMs and overhaul facilities who seek to sell excess inventory. Management
believes that its primary source of aircraft parts for acquisition during the
next few years will be from such purchases.

SYSTEMS

Due to concerns regarding unapproved aircraft parts, regulatory authorities
have increased the level of documentation required for aircraft parts. End
users have in turn, extended this requirement to the suppliers of the parts.
The sophistication required to track the history of an inventory consisting
of thousands of aircraft parts is considerable and has required aircraft
parts suppliers to invest significantly in information systems technology.
The high cost of increased technology has made entry into and survival in the
aircraft parts supply market increasingly difficult and expensive. However,
the Company has previously invested in systems technology and continues to
maintain and improve its information systems to allow it to effectively
compete in the aircraft parts supply market.


                                       4
<PAGE>

The most commonly used database available in the aircraft part supply
industry is ILS. ILS is an inventory locating service that assists in
searching for and locating aircraft parts. Once a potential purchaser locates
a part owned by the Company or available through the Company's Accessible
Inventory, the purchaser contacts the Company to confirm price, condition and
availability information. As of December 31, 2000, the Company listed
approximately 225,000 items on ILS. Additionally, ILS is one of the tools
used by the Company to locate aircraft parts that are not in the Company's
Accessible Inventory.

The Company implemented a new software package during 1999. This new system
is an integrated accounting and business management software package. It will
create requests for quote sheets, quotations, sales orders, purchase orders,
repair orders and invoices. This database has provided improved part number
databases, inventory controls and additional linkage between accounting and
sales.

COMPETITION

The aircraft parts supply industry is highly competitive. The Company
encounters substantial competition from (i) direct competitors, such as The
Ages Group, The Memphis Group, AAR Corp. and Kellstrom Industries, and (ii)
indirect competitors, such as OEMs, which include aircraft manufacturers such
as Boeing (including McDonnell Douglas), and Airbus as well as component
manufacturers such as Bendix, Menasco and Goodrich. Generally, competition is
based on availability of product, reputation, customer service, price and
lead-time. Although many of the Company's competitors have access to
substantially greater financial and other resources than the Company, the
Company believes that by focusing on service, product integrity and the
cultivation of relationships with customers worldwide, it is well equipped to
compete effectively in its industry.

GOVERNMENT REGULATION

Both domestic and foreign entities regulate products sold by the Company. The
following discussion summarizes the required regulatory approvals and
clearances relating to the Company's products and highlights the Company's
specific efforts to conform to such requirements.

The FAA is charged with regulating the manufacture, repair and operation of
all aircraft and aircraft equipment operated within the United States. The
FAA monitors safety by promulgating regulations regarding proper maintenance
of aircraft and aircraft equipment. Similar regulations exist in foreign
countries. All aircraft and aircraft equipment must be monitored on a
continual basis and periodically inspected in order to ensure proper
condition and maintenance. Regulatory agencies specify maintenance, repair
and inspection procedures for aircraft and aircraft equipment. These
procedures must be performed by certified technicians in approved repair
facilities on set schedules. All parts must conform to prescribed regulations
and be certified prior to installation on an aircraft. When necessary, the
Company uses FAA and/or Joint Aviation Authority certified repair shops to
repair or certify parts for distribution. Because regulations are subject to
modification, the Company carefully monitors the FAA and industry trade
organizations in order to assess any potentially adverse impact on the
Company caused by changes in regulations applicable to its operations.

Documentation of spare parts is of paramount importance in the aircraft parts
industry. To ensure that all parts are properly documented and thus traceable
to their original source, the Company requires that its suppliers comply with
all documentation requirements set forth by regulatory agencies.
Documentation may include: (i) an invoice or purchase order from an approved
supplier, (ii) a "teardown" report noting actions taken during the last
repair, (iii) a signed maintenance release from a certified airline or repair
facility that repaired the aircraft spare part and a statement from an
inspector verifying that the part was repaired in accordance with proper
workmanship, and using proper materials and methods.

EMPLOYEES

As of March 15, 2001, the Company had 47 full-time and two part-time
employees in the United States. As of such date, the Company also has agents
in Brazil, Chile, India, Israel, Pakistan, Indonesia, South Africa and
Turkey. None of the Company's employees is covered by a collective bargaining
agreement. The Company considers its relations with its employees to be good.

                                       5
<PAGE>

ITEM 2.      DESCRIPTION OF PROPERTY

In February 1998, the Company leased a 36,079 square foot facility at One
Capital Drive, Lake Forest, California 92630 as its principal executive
offices and primary warehouse for $29,500 per month, with annual increases.
As of March 31, 2001 the rent was $33,345 per month. The facility has
approximately 14,293 square feet allocated to office space and 21,786 square
feet of warehouse. The lease expires January 31, 2005, with an option to
extend the term of the lease for one five-year period at the then market rate
for the equivalent space. The Company believes that its facility is
adequately covered by insurance.

ITEM 3.      LEGAL PROCEEDINGS

In October 1997, the Company, its founder, its directors, certain of its
officers, a former officer and director, its former auditor and its
underwriter were named in three civil suits filed as class actions on behalf
of individuals claiming to have purchased the Company's Common Stock during
the period from March 1997 to September 1997, and seeking damages for
violation of federal securities laws. The federal court approved the
settlement of these three suits in March 1999. In connection with the
settlement, the Company incurred a total expense of $620,000 in 1999, of
which $140,000 was paid in cash and $480,000 was the value of 80,000 shares
of Common Stock issued to the plaintiffs at the time of the settlement.

In May 2000, in connection with an investigation by the Securities and
Exchange Commission (the "SEC") of alleged violations of federal securities
laws by the Company, the Company consented to the entry of a federal court
injunction enjoining the Company from future violations of the federal
securities laws. The Company did not admit or deny any allegations made by
the SEC in the investigation.

In October 2000, the Company entered into a plea agreement with the U.S.
Attorney's Office in Los Angeles, California under which the Company entered
a guilty plea to a three-count criminal information alleging that the Company
conspired to violate Title 15, United States Code, Sections 77q(a) and 77x,
and violated Title 15, United States Code, Sections 77x, 78m(b)(2)(A),
78m(b)(5) and 78ff, and Title 17, Code of Federal Regulations, Section 240.
13b2-1 in connection with the preparation of the Company's financial records
and the filing of the Company's financial statements during the period
through approximately August 1997. As a part of the plea agreement, the
Company agreed to pay a total fine of $750,000 payable $50,000 at the time of
sentencing (which occurred in November 2000), $150,000 on March 31, 2001,
$250,000 on March 31, 2002, and $300,000 on March 31, 2003. In addition the
Company was placed on probation until the fine is paid in full or until
December 31, 2002 whichever is later. The settlement fine has been recorded
as $642,016, in the Company's statement of operations in 2000 based on the
present value on that date of the proposed payments (using a 10% interest
assumption).

The U.S. Attorney's Office in Los Angeles has indicted the Company's founder,
Osamah S. Bakhit, and Mr. Bakhit's trial is pending. Any judgment against Mr.
Bakhit may have a material adverse effect on the Company's business.

The Company is involved in certain legal and administrative proceedings and
threatened legal and administrative proceedings arising in the normal course
of its business. While the outcome of such proceedings and threatened
proceedings cannot be predicted with certainty, management believes the
ultimate resolution of these matters individually or in the aggregate will
not have a material adverse effect on the Company.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.   ANNUAL SHAREHOLDER MEETING 2000

                                     PART II

ITEM 5.      MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

From March 3, 1997 to September 2, 1997, the Company's Common Stock was
quoted on the Nasdaq SmallCap Market under the symbol "ADIN." Effective
September 2, 1997, trading in the Company's Common Stock was halted by
Nasdaq, and on October 1, 1997 the Company's Common Stock was delisted from
the Nasdaq SmallCap Market based on a failure to comply with the requirements
for audited financial statements.


                                       6
<PAGE>

The following table sets forth, for the period from January 20, 1998 through
March 31, 2001, the high and low sales prices for the common stock, as
reported on the Nasdaq Over-The-Counter Bulletin Board. The prices represent
quotations between dealers, without adjustment for retail markup, mark down
or commission, and do not necessarily represent actual transactions.


<TABLE>
<CAPTION>
COMMON STOCK PRICE                HIGH             LOW
------------------                ----             ----
<S>                               <C>             <C>
       1998
    1st Quarter                   7                3
    2nd Quarter                   6 1/4             .95
    3rd Quarter                   2 1/8            5/16
    4th Quarter                   1 7/16           3/16

       1999
    1st Quarter                   1 1/4            9/32
    2nd Quarter                   1 3/16          11/32
    3rd Quarter                     9/16           1/4
    4th Quarter                   2 1/16           3/16


       2000
     1st Quarter                  2 11/16         31/32
     2nd Quarter                  1  9/16          9/16
     3rd Quarter                   2 1/2           7/8
     4th Quarter                   2 3/4         1 3/16

       2001

     1st Quarter                   4 3/4         2 7/16
</TABLE>

The Company has not paid any cash dividends on its Common Stock since its
incorporation and anticipates that, for the foreseeable future, earnings, if
any, will be retained for use in its business. As of March 31, 2000, the
approximate number of record holders of the Company's Common Stock was 32,
however, the Company believes the number of beneficial owners is
approximately 250 persons.

ITEM  6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

The following discussion includes the operations of the Company for each of
the periods discussed. This discussion and analysis should be read in
conjunction with the Company's Consolidated Financial Statements and the
related notes thereto, which are included elsewhere in this document. This
discussion contains "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes
that the expectations reflected in such forward looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Such forward looking statements involve risks and uncertainties and
actual results could differ from those described herein and future results
may be subject to numerous factors, many of which are beyond the control of
the Company.

GENERAL

The Company is a leader in providing parts procurement services to commercial
airlines around the world. The Company's net revenues have increased from
$23.4 million for the year ended December 31, 1999, to $37.4 million for the
year ended December 31, 2000. The increase in revenues is primarily the
result of the Company's internal growth and expansion of market share.

The procurement cycle the company utilizes in providing its supply chain
management capabilities to its customers is as follows: 1). As an approved
vendor, the Company receives a request for quotation for a rotable or
non-rotable aircraft part from a customer; 2). The Company initiates a
search for the part to determine availability and price; 3). The Company
prepares a price and availability quotation for the customer; 4). Upon
receipt of the customer's purchase order, the Company procures the product
from the previously identified product source. Product sources include
company inventory. Original Equipment Manufacturers (OEMs), other
redistributors, overhaulers, and airlines.

The demands of customers from their approved vendors create industry entry
barriers. The Company's customers demand: 1). Certification and traceability;
the Company is NADCAP, ASA and ISO 9002 certified and employs four (4) FAA
licensed personnel; 2). Competitive pricing and references; the Company
provides unparalleled product inspection and source documentation for the
world's major airlines; 3). Timely delivery and financing; the company
addresses and meets the customer delivery requirements, e.g., parts for an
aircraft on the ground, FAA mandated cycle maintenance and aircraft
provisioning, and provides competitive payment terms.

In addition to the above, the Company believes the demand for its procurement
services will continue to expand. Revenue passenger miles and new aircraft
orders will increase and existing aircraft will be kept in service longer
which will increase the demand for parts. Commercial airlines, the Company's
customers, will continue to focus on reducing operating costs, parts
inventory levels and the number of outside vendors whose services they
utilize, which will result in airlines outsourcing more procurement services.
OEMs' parts are expensive, particularly versus after-market and overhauled
parts; and an increasingly higher percentage of airlines' parts requirements
are being procured in the after-market. Last, the emphasis by the customer on
safety, quality of traceability and service has never been greater and is
ever increasing, which limits market participation to qualified vendors like
the Company.

RECENT DEVELOPMENTS IN THE COMPANY'S MARKET ENVIRONMENT

Economic and other factors that are affecting both the airline industry and
competitors, obviously, have not negatively impacted the Company's business.
To the contrary, during an airline industry downturn, customers tend to
outsource the procurement of required aircraft parts which has positively
impacted the revenue growth of the Company. Pricing of the parts 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 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, in part, is a
function of the volume of worldwide air traffic.

                                       7
<PAGE>

The Company was established in October 1988, incorporated in California
in February 1992 and reincorporated in Delaware in July 1996.

The Company's sales have increased from $23.4 million in 1999 to $37.4
million in 2000 as a result of the improved financing ability. Management
believes the Company's revenues will increase in 2001 due to improved
financing capabilities. In years prior to 1998, the Company's sales had
increased from $21.3 million in 1995, to $23.9 million in 1996 and $39.0
million in 1997.

OVERVIEW

Net sales consist primarily of gross sales, net of allowance for returns and
other adjustments. Cost of sales consists primarily of product costs, freight
charges and an inventory provision for damaged and obsolete products. Product
costs consist of the acquisition costs of the products and costs associated
with repairs, maintenance and certification.

Net sales and gross profit depend in large measure on the volume and timing
of sales orders received during the period and the mix of aircraft parts
contained in the Company's inventory. The timing of bulk inventory purchases
can impact sales and gross profit. In general, bulk inventory purchases allow
the Company to obtain large inventories of aircraft parts at a lower cost
than can ordinarily be obtained by purchasing such parts on an individual
basis. Thus, these bulk purchases allow the Company to seek larger gross
margins on its sale of aircraft parts since the cost of purchase is reduced.

RESULTS OF OPERATIONS

The following table sets forth certain information relating to the Company's
operations for the years ended December 31, 1999 and 2000 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                   1999                       2000
                                                        ------------------------   ------------------------
<S>                                                       <C>          <C>           <C>         <C>
Net inventory sales                                       $ 23,361     100.0%        $ 37,440    100.0%
Cost of sales                                               17,607      75.4           28,726     76.7%
                                                        ----------- ------------   ----------- ------------

      Gross profit                                           5,754      24.6            8,714     23.3%
Selling and administrative expenses                          6,003      25.7            7,107     19.0%
Non recurring expenses                                         156       0.7              245      0.7%
Settlement Fine                                                 -         -               642      1.7%
                                                        ---------------------------------------------------

      Income( Loss) from operations                           (405)     (1.7)             720      1.9%
Interest expense, net                                       (1,716)     (7.3)          (3,177)    (8.5%)
Other income                                                     6       0.0                5      0.0%
Benefit for income taxes                                        83       0.4              -        0.0%
Extraordinary gain - payable restructuring                     242       1.0              -        0.0%
                                                        ----------- ------------   ----------- ------------
      Net loss                                             $(1,790)     (7.7)%        $(2,452)    (6.5%)
                                                        =========== ============   =========== ============
</TABLE>



NET INVENTORY SALES. Net inventory sales represents sales of aircraft parts
purchased at the time of sale through outside parties (outside sourcing) and
sales of the Company's owned inventory. Net inventory sales increased from
$23.4 million for the year ended December 31, 1999 to $37.4 million for the
year ended December 31, 2000, a increase of $14.1 million or 60.3%. This
increase was a result of financing capabilities being increased in 2000.

The sales by region data presented below should be read in conjunction with
the Consolidated Financial Statements, and the Notes thereto included
elsewhere in this document. The following data consists of sales by region
for the years ended December 31, 1999 and 2000:


                                       8
<PAGE>

<TABLE>
<CAPTION>
                              1999           2000
                          ------------- -----------------
<S>                           <C>            <C>
Pacific Rim                   10.9 %          4.9 %
Europe                        11.4           30.1
Latin/South America           18.2           18.5
Africa/Middle East             7.8            8.3
                          ------------- -----------------

                              48.3 %         61.8 %
                          ============= =================
</TABLE>


The Company's sales to international customers for the year ended December
31, 2000, increased as a result of increased sales to a major international
customer.

COST OF SALES. Cost of sales increased from $17.6 million for the year ended
December 31, 1999 to $28.7 million for the year ended December 31, 2000, an
increase of $11.1 million or 63.1%. This increase was primarily the result of
the 60.3% increase in net sales. As a percentage of net sales, cost of sales
increased from 75.4% in 1999 to 76.7% in 2000 due to the large increase in
brokered sales which generally are lower margin than sales of owned inventory.

GROSS PROFIT. Gross profit of $5.7 million, or 24.6% of net sales for the
year ended December 31, 1999 compares to $8.7 million or 23.3% of net sales
for the year ended December 31, 2000. The increase in gross margin dollars of
$3.0 million is mainly a result of the increase in sales in 2000. The margin
percent of sales decreased from 24.6% in 1999 to 23.3% in 2000, due to
increased sales of brokered orders.

SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
consisted primarily of compensation, commission expense, professional
fees, consulting expense and travel expense. The Company's selling and
administrative expenses increased from $6.0 million for the year ended
December 31, 1999 to $7.1 million for the year ended December 31, 2000, an
increase of $1.1 million or 18.4%. This increase was principally due to
commission and wage increases resulting from the increase in sales and margin
for 2000.

NONRECURRING EXPENSES. The Company incurred $156,000 and $245,000 during 1999
and 2000, respectively, of expenses related to its investigation of
allegations concerning its previously issued financial statements,
restatement of those financial statements, class action lawsuits and
investigations by a Federal grand jury and the Securities and Exchange
Commission. See "Item 3 - Legal Proceedings". These expenses primarily
consist of legal, accounting and consulting fees.

INCOME/LOSS FROM OPERATIONS. The Company incurred a loss of $405,000 from
operations for the year ended December 31, 1999, compared to income from
operations of $720,000 in 2000. Loss from operations for the 1999 period,
excluding the non-recurring expenses, would have been $249,000. The income
from operations for 2000, excluding the non-recurring expenses and the legal
settlement fine, would have been $1.6 million. The increase in operating
income is due to a 60.3% increase in net sales, and a 51.4% increase in
margin dollars, offset by the 18.4% increase in selling and administrative
expenses.

INTEREST EXPENSES, NET. Net interest expense increased from $1.7 million, or
7.3% of net sales for the year ended December 31, 1999 to $3.2 million, or
8.5% of net sales for the year ended December 31, 2000. The increase in
interest expense was due to the increase in borrowings under the Company's
line of credit during the 2000 period to support the growth in sales.

PROVISION FOR INCOME TAXES. The Company had a benefit from income taxes in
1999 due to income tax refunds received in excess of the benefit recorded in
1998.

YEAR 2000 COMPLIANCE

To become fully Year 2000 compliant, the Company successfully implemented a
new software system at a cost of approximately $120,000. The Company did not
separately track the internal costs incurred for the Y2K project. The company
did not incur any systems problems as a result of the successful
implementation of the new systems.


                                       9
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

In 1999 the Company's operating activities used $3.9 million, comprised
primarily of the $1.8 million net loss, net reductions of $1.1 million in
inventory purchase notes payable and by a $2.8 million net increase in
accounts and notes receivable offset by collections of a note receivable of
$1.3 million and collection of income tax refunds of $.4 million.

In 2000, the Company's operating activities used $3.1 million which was
comprised mainly of the $2.5 million net loss, an increase in accounts
receivable of $3.1 million, and an increase in prepaid assets of $.2 million,
reduced by increases in, checks not presented, accounts payable and accrued
liabilities of $1.4 million and non cash expenses of $1.1 million.

In 1999, investing activities used net cash of $107,000, comprised primarily
of a new system implementation. In 2000, investing activity consisted
primarily of capital expenditures of $115,000.

Financing activities provided cash of $3.9 million in 1999 and $3.2 million
in 2000. Net increases in line of credit borrowings were $2.9 million and
$4.4 million in 1999 and 2000, respectively.

At December 31, 2000, the Company's Credit Facility provided for working
capital loans of up to the lesser of $26,800,000 (facility amount) or the
advance rate against qualified accounts receivable and inventory. Interest is
at the GMAC Commercial Credit LLC, Alternate Base Rate (9.5 percent at
December 31, 2000) plus one percent. The borrowing rate is subject to a
premium of 0.5% per annum when the facility is over advanced and a premium of
2.0% per annum when the Company is out of covenant compliance. The terms of
the credit agreement provide for a facility non-use fee of 0.5% per annum of
the difference between the facility amount and the average monthly balance.
GMAC has a fully perfected security interest against all assets of the
Company, except restricted cash, in addition to a personal guarantee from the
Company's founder and secured by 1,000,000 shares of common stock pledged by
the Company's founder. The Credit Facility matures on June 24, 2010. The
credit facility has general financial covenants related to the Company's
financial condition. At December 31, 2000, the Company was not in compliance
with certain covenants. The Company has received a waiver for the
non-compliance that sets forth, revised tangible net worth, operating ratios,
capital expenditure and working capital requirements for 2001.

The Credit Facility provides for the repayment of all debt and/or termination
of the Credit Facility (i) in the event the Company voluntarily files under
the federal bankruptcy laws or fails to dismiss, within 30 days, any petition
filed against it in any involuntary case under such bankruptcy laws, (ii) if
the lender believes the prospect of payment or performance of the
indebtedness is impaired, or (iii) upon a change of control. The $26.8
million Credit Facility has certain financial covenants that require the
Company to meet the following: a tangible net deficit of no more than $7.5
million at March 31, 2001, $7.4 million at June 30, 2001, $7.3 million at
September 30, 2001, and $ 7.4 million at December 31, 2001. An EBITDA to cash
interest ratio of .86 to 1 at March 31, 2001, .89 to 1 at June 30, 2001, .91
to 1 at September 30,2001, and .87 to 1 at December 31, 2001. Capital
expenditure limitation of no more than $250,000. A working capital deficit of
no more than $7.0 million at March 31, 2001, $7.0 million at June 30, 2001,
$6.9 million at September 30, 2001, and $7.0 million at December 31, 2001.

On February 23, 2000 the Company amended its Credit Facility with GMAC to
extend the loan maturity date to June 24, 2010. In conjunction with this
amendment, GMAC was issued 208,762 warrants. These warrants and 126,600
warrants issued to GMAC in 1998 gave GMAC warrants equal to 9.9% of the
outstanding stock of the Company or 335,362 warrants. The exercise price of
the warrants is $0.25 per share and the warrants expire on February 28, 2010.
The fair value of the total warrants issued to GMAC was determined to be
$818,283 and such warrants are being amortized to interest expense over a ten
year amortization period beginning in 2000. Interest expense relating to the
warrants was $68,190 for the year ended December 31, 2000.

As a condition for the extension of the credit facility; the Company entered
into a $2,000,000 promissory note, due in a balloon payment on the earlier of
February 1, 2010, or if the Company's stock reaches a $6 per share value over
ten consecutive days, or the occurrence of one of several events, none of
which have occurred. The $2,000,000 has been reflected as debt issuance costs
in the accompanying Consolidated balance sheet and is being amortized to
interest expense over the term of the promissory note. The note bears
interest at GMAC's Alternate Base Rate and interest is payable semi-annually.

                                       10
<PAGE>

On September 12, 2000 the Company received approval from GMAC for a $10
million working capital line to finance the purchase of inventory related to
the servicing of the Company's contracts with major foreign airlines. The
Company implemented the use of this line in October, 2000, which is
guaranteed by the export -import credit agency of the U.S. Government, and
which carries an interest rate of prime plus 1%. The working capital line is
used in conjunction with the Company's $26.8 million Credit Facility.

The Company's long-term debt at December 31, 2000, consists of the following:
(i) note payable of $875,000 to GMAC, interest due monthly beginning January
2000, principal due in quarterly installments of $125,000 beginning December
2000, with an interest rate equal to 2% above the GMAC Alternate Base Rate
(ii) promissory note payable of $2,000,000 to GMAC due February 1, 2010,
interest due semi-annually at GMAC's Alternate Base Rate (iii) note payable
to a related party of $100,000 at an interest rate of 6.0%; (iv) Note payable
to vendor for $300,000, secured and due in 2001, (v) Note payable to U.S.
District Court for $590,816 payable in increasing annual payments, and (vi)
other notes payable for $18,236.

ITEM 7.      FINANCIAL STATEMENTS

The financial statements listed in the accompanying Index to Financial
Statements are attached hereto and filed as a part of this Report under Item
13.




                                       11
<PAGE>

                           AVIATION DISTRIBUTORS, INC.

                     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                             <C>
Report of Independent Certified Public Accountants..........................................    F-2
Consolidated Balance Sheets as of December 31, 1999 and 2000................................    F-3
Consolidated Statements of Operations for the Years ended December 31, 1999 and 2000........    F-4
Consolidated Statements of Stockholders' Deficit
   for the years ended December 31, 1999 and 2000...........................................    F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 2000........    F-6
Notes to Consolidated Financial Statements..................................................    F-7
</TABLE>



                                       F-1
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors
Aviation Distributors, Inc.

We have audited the accompanying consolidated balance sheets of Aviation
Distributors, Inc. as of December 31, 1999 and 2000, and the related
consolidated statements of operations, stockholders' deficit and cash flows
for the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aviation
Distributors, Inc. as of December 31, 1999 and 2000, and the consolidated
results of their operations and their consolidated cash flows for the years
then ended, in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $2,452,188 for the year ended
December 31, 2000, and, as of that date, the Company's current liabilities
exceeded its current assets by $5,709,051 and its total liabilities exceeded
its total assets by $5,695,004. These factors, among others, as discussed in
Note 2 to the consolidated financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

/s/ GRANT THORNTON LLP

Irvine, California
April 13, 2001


                                       F-2
<PAGE>


                                AVIATION DISTRIBUTORS, INC.
                                CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                  ----------------------------
                                          ASSETS                                      1999            2000
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>
CURRENT ASSETS:
      Accounts receivable, net of allowance for
       doubtful accounts of $250,000 and $484,995
       at December 31, 1999 and 2000, respectively ............................   $  7,548,474    $ 10,663,927
      Other receivables .......................................................         44,739          33,212
      Inventories, net.........................................................      9,008,560      12,910,520
      Prepaid expenses ........................................................         85,554         192,023
      Deferred tax asset ......................................................        101,000          10,616
                                                                                  ------------    ------------
           Total current assets ...............................................     16,788,327      23,810,298
                                                                                  ------------    ------------
PROPERTY AND EQUIPMENT ........................................................      1,016,165       1,131,228
      Less - accumulated depreciation .........................................        466,998         658,851
                                                                                  ------------    ------------
                                                                                       549,167         472,377
                                                                                  ------------    ------------
Notes receivable from founder .................................................        408,718         408,718
Debt issuance costs ...........................................................             --       2,033,330
Other assets ..................................................................        131,484          43,730
                                                                                  ------------    ------------
                                                                                       540,202       2,485,778
                                                                                  ------------    ------------
                                                                                  $ 17,877,696    $ 26,768,453
                                                                                  ============    ============
                           LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
      Checks issued not yet presented for payment .............................   $    256,957    $    420,393
      Accounts payable ........................................................      2,587,403       3,507,692
      Accrued liabilities .....................................................        606,997         928,650
      Line of credit ..........................................................     15,677,982      23,692,099
      Current portion of long-term debt .......................................        965,388         959,301
      Current portion of capital lease obligations ............................          9,828          11,214
                                                                                  ------------    ------------
           Total current liabilities ..........................................     20,104,555      29,519,349
                                                                                  ------------    ------------
Long-term debt, net of current portion ........................................        978,304       2,922,925
                                                                                  ------------    ------------
Capital lease obligations, net of current portion .............................         19,427          10,567
                                                                                  ------------    ------------
Deferred tax liability ........................................................        101,000          10,616
                                                                                  ------------    ------------
STOCKHOLDERS' DEFICIT:
      Preferred stock, par value of $.01, 3,000,000
       shares authorized; none issued and outstanding .........................             --              --
      Common stock, par value of $.01, 10,000,000
       shares authorized; 3,165,000 and 3,387,500 shares
       issued; 3,387,500 and 3,432,487 shares outstanding
       at December 31, 1999 and 2000, respectively ............................         33,875          34,325
      Additional paid in capital ..............................................      6,213,749       7,046,166
      Unamortized debt discount ...............................................             --        (750,093)
      Accumulated deficit .....................................................     (9,499,910)    (11,952,098)
      Treasury stock, 43,000 shares at cost ...................................        (73,304)        (73,304)
                                                                                  ------------    ------------
           Total stockholders' deficit ........................................     (3,325,590)     (5,695,004)
                                                                                  ------------    ------------
                                                                                  $ 17,877,696    $ 26,768,453
                                                                                  ============    ============
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.


                                       F-3
<PAGE>

                           AVIATION DISTRIBUTORS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                            ----------------------------
                                                                               1999              2000
                                                                               ----              ----
<S>                                                                         <C>             <C>
NET DISTRIBUTED SERVICES AND INVENTORY SALES ............................   $ 23,361,146    $ 37,440,151

COST OF SALES ...........................................................     17,606,921      28,725,851
                                                                            ------------    ------------

       Gross profit .....................................................      5,754,225       8,714,300
SELLING AND ADMINISTRATIVE EXPENSES .....................................      6,002,925       7,107,290
NON-RECURRING EXPENSES...................................................        155,996         244,530
SETTLEMENT FINE .........................................................             --         642,016
                                                                            ------------    ------------
       Earnings (Loss)from operations ...................................       (404,696)        720,464
OTHER (EXPENSE) INCOME:
       Interest expense .................................................     (1,850,661)     (3,219,947)
       Interest income ..................................................        133,866          42,398
       Other income(expense) ............................................         (6,526)          4,897
                                                                            ------------    ------------
       Loss before provision
        for income taxes ................................................     (2,114,965)     (2,452,188)
PROVISION (BENEFIT) FOR INCOME TAXES ....................................        (82,877)             --
                                                                            ------------    ------------

NET LOSS BEFORE EXTRAORDINARY ITEM ......................................     (2,032,088)     (2,452,188)

EXTRAORDINARY ITEM - Gain on debt forgiveness ...........................        242,460              --
                                                                            ------------    ------------
       NET LOSS .........................................................   $ (1,789,628)   $ (2,452,188)
                                                                            ============    ============
Basic and diluted loss per share:
       Loss before extraordinary item ...................................   $      (0.64)   $      (0.73)
       Extraordinary item ...............................................           0.08              --
                                                                            ------------    ------------
       Net loss .........................................................   $      (0.56)   $      (0.73)
                                                                            ============    ============
Weighted average number of shares outstanding,
       basic and diluted ................................................      3,221,000       3,349,527
                                                                            ============    ============
</TABLE>



  The accompanying notes are an integral part of these consolidated statements.

                                       F-4
<PAGE>


                         AVIATION DISTRIBUTORS, INC.


               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31, 1999 AND 2000
                                    ------------------------------------------------------------------------
                                              COMMON STOCK                  TREASURY STOCK
                                       ------------------------      ------------------------   ADDITIONAL
                                         NUMBER                       NUMBER                      PAID
                                       OF SHARES       AMOUNT        OF SHARES      AMOUNT      IN CAPITAL
                                    ------------   ------------   ------------   ------------    ------------
<S>                                    <C>         <C>               <C>         <C>            <C>
Balance at January 1, 1999 ......      3,165,000   $     31,650         43,000   $    (73,304)   $  5,658,099

    Stock issued in
      legal settlement ..........         80,000            800             --             --         479,200

    Fair value of stock
      options issued for debt
      forgiveness ...............             --             --             --             --          42,250

    Stock options exercised .....        142,500          1,425             --             --          34,200

    Net loss ....................             --             --             --             --              --
                                    ------------   ------------   ------------    ------------   ------------

Balance at December 31, 1999 ....      3,387,500         33,875         43,000        (73,304)      6,213,749

    Fair value of warrants issued
       for debt amendment .......             --             --             --             --         818,283

    Stock options exercised .....         44,987            450             --             --          14,134

    Net loss ....................             --             --             --              --             --
                                    ------------   ------------   ------------   ------------    ------------

Balance at December 31, 2000 ....      3,432,487   $     34,325         43,000   $    (73,304)    $ 7,046,166
                                    ============   ============    ============   ============    ============

<CAPTION>


                                      UNAMORTIZED                         TOTAL
                                         DEBT       ACCUMULATED       STOCKHOLDERS'
                                        DISCOUNT       DEFICIT           DEFICIT
                                      ------------    ------------    ------------
<S>                                  <C>             <C>            <C>
Balance at January 1, 1999 ......    $         --    $ (7,710,282)   $ (2,093,837)

    Stock issued in
      legal settlement ..........              --              --         480,000

    Fair value of stock
      options issued for debt
      forgiveness ...............              --              --          42,250

    Stock options exercised .....              --              --          35,625

    Net loss ....................              --      (1,789,628)     (1,789,628)
                                      ------------    ------------     -----------

Balance at December 31, 1999 ....              --      (9,499,910)     (3,325,590)

    Fair value of warrants issued
       for debt amendment .......        (750,093)             --          68,190

    Stock options exercised .....              --              --          14,584

    Net loss ....................              --      (2,452,188)     (2,452,188)
                                      ------------    ------------    ------------

Balance at December 31, 2000 ....    $   (750,093)   $(11,952,098)   $ (5,695,004)
                                       ============    ============    ============

</TABLE>


The accompanying notes are an integral part of these consolidated statements.


                                       F-5
<PAGE>


                                 AVIATION DISTRIBUTORS, INC.
                            CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                      YEAR ENDED DECEMBER 31,
                                                                                                  ----------------------------
                                                                                                      1999             2000
                                                                                                  -----------      -----------
<S>                                                                                              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss .................................................................................    $ (1,789,628)    $ (2,452,188)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
      Settlement Fine .......................................................................              --          642,016
      Principal payments on note receivable .................................................       1,276,750               --
      Borrowings on notes payable related to inventory purchases ............................       1,000,000               --
      Principal payments on notes payable
        related to inventory purchases ......................................................      (1,443,417)              --
      Reduction in amount due on notes payable
        related to inventory purchases in exchange for
        reduction in accounts receivable ....................................................        (643,788)              --
      Depreciation and amortization .........................................................         196,721          426,713
      Immaculate cashless stock option exercise .............................................              --           14,584
      Gain on debt forgiveness .............................................................        (242,460)              --
      Changes in assets and liabilities:
           Accounts receivable, net .........................................................      (2,781,004)      (3,115,453)
           Other receivables ................................................................          24,499           11,527
           Inventories, net .................................................................         347,826          198,040
           Prepaid expenses .................................................................         444,411         (206,469)
           Income tax receivable ............................................................         392,979               --
           Other assets .....................................................................        (102,133)         (12,246)
           Accounts payable .................................................................        (213,216)         920,289
           Checks issued not yet presented for payment ......................................        (121,029)         163,436
           Accrued liabilities ..............................................................        (198,492)         321,653
                                                                                                  -----------      -----------
             Net cash used in operating activities ..........................................      (3,851,981)      (3,088,098)
                                                                                                  -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment ......................................................        (115,425)        (115,063)
   Decrease in restricted cash ..............................................................           8,171               --
                                                                                                   -----------     -----------
            Net cash provided by (used in) investing activities .............................        (107,254)        (115,063)
                                                                                                   -----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings on lines of credit ............................................................      22,144,770       33,174,113
   Principal payments on lines of credit ....................................................     (19,258,327)     (28,768,661)
   Borrowings on long-term debt .............................................................       1,125,000        3,712,611
   Principal payments of long-term debt .....................................................         (32,343)      (4,907,428)
   Principal payments of capital lease obligations ..........................................         (19,865)          (7,474)
                                                                                                  -----------      -----------
            Net cash provided by financing activities .......................................       3,959,235        3,203,161
                                                                                                  -----------      -----------

Net increase (decrease) in cash .............................................................              --               --
Cash at beginning of period .................................................................              --               --

Cash at end of period .......................................................................    $         --     $         --
                                                                                                  ===========      ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest ..............................................................................     $ 1,847,897     $  2,959,111
                                                                                                  ===========     ============
      Income taxes ..........................................................................    $        800     $        800
                                                                                                  ===========      ===========
   Non-cash investing and financing activities:
      During 2000, the Company made a bulk inventory purchase of $4,100,000 and
      financed such purchase through the issuance of $4,100,000 in debt.

      In connection with the Company's amendment to its Credit Facility in
      2000, the Company incurred debt issuance costs of $2,000,000, which
      they financed through the issuance of debt of $2,000,000 with GMAC.
      In addition, the Company issued 335,362 warrants to GMAC valued at
      $818,283, which they have recorded in the accompanying statement of
      stockholders' deficit in 2000.

      During 1999, the Company issued 80,000 shares of its common stock in connection
      with a legal settlement agreed to in 1998 (see Note 8). As a result, the
      Company reduced Other Long Term Liabilities by $480,000, increased Common
      Stock by $800 and Paid in Capital by $479,200.
</TABLE>


The accompanying notes are an integral part of these consolidated statements.

                                       F-6
<PAGE>

                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

NATURE OF BUSINESS

Aviation Distributors, Inc. ("ADI") and its subsidiary (the "Company")
established operations in 1988, incorporated in the state of California in
1992 and reincorporated in the state of Delaware in 1996. The Company is a
supplier, distributor and broker of commercial aircraft parts and supplies.
The Company's customers are located worldwide.

For the years ended December 31, 1999 and 2000, approximately 48.3% and 61.8%
respectively, of the Company's net sales were export sales. These export
sales by region were approximately as follows:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                                      ---------------
                                                      1999      2000
                                                      ----      -----
<S>                                                   <C>      <C>
Pacific Rim ....................................      10.9%     4.9%
Europe .........................................      11.4%    30.1%
Latin/South America.............................      18.2%    18.5%
Africa/Middle East..............................       7.8%     8.3%
                                                      ----     ----
                                                      48.3%    61.8%
                                                      ====     ====
</TABLE>

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary ADI Consignment and Sales, Inc.
The Company's subsidiary is a non-operating entity; therefore, there were no
significant intercompany transactions.

INVENTORIES

Inventories, which consist primarily of aircraft parts, are stated at the
lower of cost or market with cost determined on a specific identification or
first-in first-out basis. Expenditures required for the re-certification of
parts are capitalized as inventory cost as incurred and are expensed with
cost of sales as the parts are sold. Inventory received from a vendor in
exchange for Company owned inventory is recorded at the historical cost of
the items surrendered, after any necessary reduction for impairment.
Inventory received in settlement of receivables is recorded at the lower of
the receivable balance or the fair value of the items received.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation expense is provided
using the straight-line method over the useful lives of the assets, ranging
from five to seven years. Expenditures for repairs and maintenance are
expensed as incurred. Expenditures for major renewals and betterments that
extend the useful lives of property and equipment are capitalized. The
carrying amounts of assets sold or retired are removed from their accounts in
the year of disposal, and any resulting gain or loss is reflected in
operations.

FINANCIAL INSTRUMENTS

At December 31, 2000 and 1999, the carrying value of the Company's financial
instruments (cash, accounts receivable, lines of credit, other liabilities
due in less than one year and notes payable) approximated their fair values
due to the relatively short maturity of the instruments or because the
interest rates on the instruments are comparable to market rates.

                                       F-7
<PAGE>

                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:  (CONTINUED)

REVENUE RECOGNITION

Sales of aircraft parts are recognized as revenues when the product is
shipped and title has passed to the customer. The company provides an
allowance for estimated product returns. Distributed services sales represent
sales of aviation parts obtained from outside sources at the point of sale,
whereas inventory sales represent sales from company owned inventory.
Distributed services sales represented approximately 88.3% and 90.7% of total
net sales for the years ended December 31, 1999 and 2000, respectively. Sales
from Company-owned inventory represented approximately 11.7% and 9.3% of
total net sales for the years ended December 31, 1999 and 2000, respectively.
Net sales on consignment and marketing agreements represent revenue related
to inventories owned by others in which the company has entered into
exclusive marketing and/or consignment agreement to sell the third party
parts.

The Company entered into agreements with certain customers to offset accounts
receivable against accounts payable owed to those customers for approximately
$4,006,000 for the year ended December 31, 2000. Accounts receivable are
offset against accounts payable when the Company and its customers are mutual
debtors and the Company has a valid right of offset.

INCOME TAXES

Deferred tax assets and liabilities are recorded for differences between the
financial statement and tax basis of the assets and liabilities that will
result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense is recorded for the amount of income tax payable
or refundable for the period increased or decreased by the change in deferred
tax assets and liabilities during the period.

BASIC AND DILUTED NET LOSS PER SHARE

Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the assumption
that all convertible shares and stock options were converted or exercised,
unless such assumption would be antidilutive. Dilution is computed by
applying the treasury stock method. Under this method, options and warrants
are assumed to be exercised at the beginning of the period (or at the time of
issuance, if later), and as if funds obtained thereby were used to purchase
common stock at the average market price during the period. The Company's
common stock equivalents were not included in the computation of diluted loss
per share because they are antidilutive, but they could potentially dilute
earnings per share in future years.

STOCK BASED COMPENSATION

The Company accounts for stock-based employee compensation as prescribed by
APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and has adopted
the disclosure provisions of Statement of Financial Accounting Standards 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS 123"). SFAS 123 requires pro
forma disclosures of net income and net income per share as if the fair value
based method of accounting for stock-based awards had been applied. Under the
fair value based method, compensation cost is recorded based on the value of
the award at the grant date and is recognized over the service period. See
Note 11.

NOTE 2  - REALIZATION OF ASSETS

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 Company's Credit Facility and
compliance with the terms and covenants of the Company's Credit Facility.

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company
sustained substantial losses in 1999 and 2000; has used, rather than
provided, cash in its operations; and has deficits in working capital and
stockholders' equity at December 31, 1999 and December 31, 2000.

Economic and other factors that are affecting the airline industry can
negatively impact the Company's business. Pricing of the inventory that the
Company needs for its business is affected to a degree by the overall
economic


                                       F-8
<PAGE>

                           AVIATION DISTRIBUTORS, INC.

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

condition of the airline industry, which has historically been volatile. The
demand for after-market engines and aircraft 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 Company's
gross margin and fair value of inventory could be negatively affected by
these deteriorating conditions.

Recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheets are dependent upon continued operations of the
Company. This in turn is dependent upon the Company's ability to meet its
financing requirements on a continuing basis, to maintain present financing,
and to succeed in its future operations. A breach of any of the financial
covenants in the Company's Credit Facility could result in a default under
this Credit Facility. Upon the occurrence of an event of default under the
Credit Facility, the respective lender could elect to declare all amounts
outstanding, together with accrued interest, to be immediately due and
payable.

Management has taken steps to revise its operations and financial
requirements, which it believes are sufficient to provide the Company with
the ability to continue in existence. In 2000, the Company extended its
Credit Facility due date to February 1, 2010 and the maximum availability
under its line of credit to $26.8 million. The Company has also entered into
an agreement on March 19, 2001 with a financial advisor to use its best
efforts to raise gross proceeds of approximately $3.5 million. No proceeds
have been raised under this agreement. The class action lawsuits against the
Company have been settled.

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 seeking additional capital, selling assets,
or further downsizing of the Company. This could impact the carrying values
and classification of the Company's assets and liabilities. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.

NOTE 3 - NOTES RECEIVABLE FROM FOUNDER:

Mr. Osamah S. Bakhit is the founder of the Company and is currently a
consultant for the Company. The Company loaned $328,718 to Mr. Bakhit in
December 1995 and $80,000 in December 1996. The loans are in the form of
notes, bearing interest at 6 percent, payable in quarterly interest
installments. Interest on the notes has been satisfied through December 1999
through a reduction in a vacation liability due to Mr. Bakhit; the Board of
Directors of the Company has approved the deferral of principal and
additional interest payments to December 31, 2001.

NOTE 4 - INVENTORIES, NET

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

<TABLE>
<CAPTION>

                                                  1999                   2000
                                                  ----                   ----
<S>                                             <C>                   <C>
Rotable, repairable and expendable
  airplane and engine parts                     $9,008,560            $12,910,520

</TABLE>

Inventories, net have been presented above inclusive of allowances for excess
and obsolete inventories of approximately $248,000 and $490,000 at December
31, 1999 and 2000, respectively.

NOTE 5 - PROPERTY AND EQUIPMENT:

Property and equipment, at cost, consists of the following:

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                     ----------------------------
                                                                        1999           2000
                                                                     ----------    ----------
<S>                                                                  <C>           <C>
Computer equipment and software..................................    $  402,624    $  501,315
Furniture and fixtures ..........................................       369,752       378,915
Leasehold improvements ..........................................       107,740       112,469
Machinery and equipment .........................................       100,448       102,928
Autos ...........................................................        35,601        35,601
                                                                     ----------    ----------
                                                                     $1,016,165    $1,131,228
                                                                     ==========    ==========
</TABLE>


                                       F-9
<PAGE>


                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 - LINE OF CREDIT:

At December 31, 2000, the Company's Credit Facility provided for working
capital loans of up to the lesser of $26,800,000 (facility amount) or the
advance rate against qualified accounts receivable and inventory, with
interest due monthly at the GMAC Commercial Credit LLC (GMAC), Alternate Base
Rate (9.5 percent at December 31, 2000) plus one percent. The borrowing rate
is subject to a premium of 0.5% per annum when the facility is over advanced
and a premium of 2.0% per annum when the Company is out of covenant
compliance. The terms of the Credit Facility non-use fee of 0.5% per annum of
the difference between the Credit Facility amount and the average monthly
balance. GMAC has a fully perfected security interest against all assets of
the Company, except restricted cash, and to a personal guarantee and pledge
of 1,000,000 shares of the Company's common stock from the Company's founder.

The Company's Credit Facility 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 Credit
Facility. The Company has obtained a waiver from its lender for its
non-compliance as to prior periods. In addition, the Company has amended the
financial covenants under its Credit Facility for future periods through
December 31, 2001. 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 Credit
Facility, the lender could elect to declare all amounts outstanding, together
with accrued interest, to be immediately due and payable. If the Company were
unable to repay all outstanding amounts under its senior debt, the lender
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
Credit Facility, and thereafter, the Company's other liabilities. In
addition, the Company may be prevented from making new borrowings or drawing
down further on its Credit Facility.

On February 23, 2000 the Company amended its Credit Facility with GMAC to
extend the loan maturity date to June 24, 2010. In conjunction with this
amendment, GMAC was issued 208,762 warrants. These warrants and 126,600
warrants issued to GMAC in 1998 gave GMAC warrants equal to 9.9% of the
outstanding stock of the Company or 335,362 warrants. The exercise price of
the warrants is $0.25 per share and the warrants expire on February 28, 2010.
The fair value of the total warrants issued to GMAC was determined to be
$818,283 and such warrants are being amortized to interest expense over a ten
year amortization period beginning in 2000. Interest expense relating to the
warrants was $68,190 for the year ended December 31, 2000.

In connection with the extension of the Credit Facility, the Company incurred
debt issuance costs of $2,000,000, which they financed by entering into a
$2,000,000 promissory note with GMAC. The note is due in a balloon payment on
the earlier of February 1, 2010 or if the Company's stock reaches a $6 per
share value over 10 consecutive days or the occurrence of one of several
other events, none of which have occurred. The note bears interest at GMAC's
Alternate Base Rate (9.5 percent at December 31, 2000) and interest is
payable semi-annually. The debt issuance costs of $2,000,000 are being
amortized to interest expense over a ten-year period. Interest expense of
$164,126 was amortized during the year-ended December 31, 2000.

Although the Credit Facility expires on June 24, 2010, it is classified as a
current liability due to certain provisions within the agreement related to
the borrowing base being dependent on levels of accounts receivable and
inventory and the fact that the agreement requires the Company to maintain a
lockbox arrangement whereby cash deposits are automatically utilized to
reduce amounts outstanding under the Credit Facility.

                                       F-10
<PAGE>


                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 7 - LONG-TERM DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31,
                                                                                     ------------------------------
                                                                                           1999           2000
                                                                                     --------------    ------------
<S>                                                                                     <C>            <C>
Note payable to a financial institution, principal due in quarterly installments
  of $125,000 beginning December 2000, interest due monthly beginning January
  2000, collateralized by the assets of the Company, with an interest rate equal
  to the GMAC Alternate Base Rate (9.5% at December 31, 2000) plus two percent,
  due December 1, 2002 .........................................................        $ 1,000,000    $  875,000

Non-interest bearing note payable to a corporation, collateralized by specific
  inventory, monthly installments of $166,667, due March 31, 2000 ..............            833,333            --


Note payable to a related party, unsecured, due February 2001,
  with an interest rate of 6%  .................................................            100,000       100,000


Note payable to the U.S. District Court, due in increasing annual
  installments of $150,000 March 31, 2001, $250,000 March 31, 2002 and
  $300,000 March 31, 2003.  ....................................................                 --       590,816


Note payable to a corporation, secured by an automobile, due in monthly
   installments of $485, (principal and interest) to July 2001, with an
   interest rate of 8.15 percent ...............................................              9,038            --

Note payable to a corporation, secured by equipment, due in monthly Installments
   of $347 (principal and interest) to February 2000, with an interest rate
   of 24 percent ...............................................................              1,321            --

Note payable to a financial institution, due February 1, 2010, interest due
   semi-annually at GMAC's Alternate Base Rate (9.5% at December 31, 2000)......                 --     2,000,000

Note payable to vendor, unsecured and due in 2001  .............................                 --       300,000

Other miscellaneous notes, due in 2001 .........................................                 --        16,410
                                                                                       -------------   ----------

                                                                                          1,943,692     3,882,226

Less - Current portion .........................................................            965,388       959,301
                                                                                       -------------   ----------
                                                                                        $   978,304     2,922,925
                                                                                       =============   ==========
</TABLE>

Future annual principal payments on long-term debt at December 31, 2000 are as
follows:

<TABLE>
<CAPTION>
                      YEAR ENDING
                      DECEMBER 31,
<S>                                                                        <C>
                          2001.  .  .  .  .  .  .  .  .  .  .  .  .  .     $  959,301
                          2002.  .  .  .  .  .  .  .  .  .  .  .  .  .        688,752
                          2003.  .  .  .  .  .  .  .  .  .  .  .  .  .        234,173
                          2004.  .  .  .  .  .  .  .  .  .  .  .  .  .              -
                          2005.  .  .  .  .  .  .  .  .  .  .  .  .  .              -
                          Thereafter.  .  .  .  .  .  .  .  .  .  .  .      2,000,000
                                                                           ----------
                                                                           $3,882,226
                                                                           ==========
</TABLE>


                                       F-11
<PAGE>


                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 8 - COMMITMENTS AND CONTINGENCIES:

The Company leases equipment and facilities under noncancelable operating and
capital leases. As of December 31, 2000, the annual minimum lease commitments
are:

<TABLE>
<CAPTION>
                      YEAR ENDING
                      DECEMBER 31,                                                   CAPITAL    OPERATING
                      ------------                                                   -------    ---------
<S>                                                                               <C>           <C>
                      2001.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .           $ 9,143   $ 435,674
                      2002.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .             9,581     424,509
                      2003.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .             3,057     433,295
                      2004   .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .                -      451,873
                      Thereafter.  .  .  .  .  .  .  .  .  .  .  .  .  .  .                -       75,566
                                                                                  -----------  ----------
                                                                                      $21,781  $1,820,917
                                                                                               ==========

                      Less - Current portion.  .  .  .  .  .  .  .                     11,214
                                                                                  -----------
                                                                                      $10,567
                                                                                  -----------

</TABLE>

Rent expense for the years ended December 31, 1999 and 2000 was $376,423 and
$386,036, respectively.

The Company neither manufacturers nor repairs aircraft parts and requires
that all of the parts that it sells are properly documented and traceable to
their original source. Although the Company has never been subject to product
liability claims, there is no guarantee that the Company would not be subject
to liability from its potential exposure relating to faulty aircraft parts in
the future. The Company maintains liability insurance to protect from such
claims, but there can be no assurance that such coverage will be adequate to
fully protect the Company from any liabilities it might incur. A loss above
the Company's policy limit could have a material adverse effect upon the
Company's financial condition.

EMPLOYMENT CONTRACTS

The Company has contracts with certain key employees and the Company's
founder. The contracts provide for all normal employee benefits, incentive
compensation under the Executive Incentive Compensation Plan and options to
purchase shares of common stock at an option price ranging from $0.25 to $5
per share. The agreements expire from December 31, 2001 to December 31, 2002.
All but one contract will automatically renew for additional terms ranging
from three to five years unless cancelled upon 90 days written notice.

CLASS ACTION LAWSUITS AND GOVERNMENT INVESTIGATIONS

In October 1997, the Company, its founder, its directors, certain of its
officers, a former officer and director, its former auditor and its
underwriter were named in three civil suits filed as class actions on behalf
of individuals claiming to have purchased the Company's Common Stock during
the period from March 1997 to September 1997, and seeking damages for
violation of federal securities laws. The federal court approved the
settlement of these three suits in March 1999. In connection with the
settlement, the Company incurred a total expense of $620,000 in 1999, of
which $140,000 was paid in cash and $480,000 was the value of 80,000 shares
of Common Stock issued to the plaintiffs at the time of settlement.

In May 2000, in connection with an investigation by the Securities and
Exchange Commission (the "SEC") of alleged violations of federal securities
laws by the Company, the Company consented to the entry of a federal court
injunction enjoining the Company from future violations of the federal
securities laws. The Company did not admit or deny any allegations made by
the SEC in the investigation.

In October 2000, the Company entered into a plea agreement with the U.S.
Attorney's Office in Los Angeles, California under which the Company entered
a guilty plea to a three-count criminal information alleging that the Company
conspired to violate Title 15, United States Code, Sections 77q(a) and 77x,
and violated Title 15, United States Code, Sections 77x, 78m(b)(2)(A),
78m(b)(5) and 78ff, and Title 17, Code of Federal Regulations, Section 240.
13b2-1 in connection with the preparation of the Company's financial records
and the filing of the Company's financial statements during the period
through approximately August 1997. As a part of the plea agreement, the
Company agreed to pay a total fine of $750,000 payable $50,000 at the time of
sentencing (which occurred in November 2000), $150,000 on March 31, 2001,
$250,000 on March 31, 2002, and $300,000 on March 31, 2003. In addition the
Company was placed on probation until the fine is paid in full or until
December 31, 2002, whichever is later. The settlement fine has been recorded
as $642,016, in the Company's statement of operations in 2000 based on the
present value on that date of the proposed payments (using a 10% interest
assumption).

The U.S. Attorney's Office in Los Angeles has indicted the Company's founder,
Osamah S. Bakhit, and Mr. Bakhit's trial is pending. Any judgment against Mr.
Bakhit may have a material adverse effect on the Company's business.

The Company is involved in certain legal and administrative proceedings and
threatened legal and administrative proceedings arising in the normal course
of its business. While the outcome of such proceedings and threatened
proceedings cannot be predicted with certainty, management believes the
ultimate resolution of these matters individually or in the aggregate will
not have a material adverse effect on the Company.

COMMITMENTS

During 1999, the Company entered into an agreement with a vendor to purchase
spare aircraft inventory from this vendor for $1,000,000. The contract
allowed for the Company to recover the purchaese price of $1,000,000 plus an
additional $100,000 in packaging costs before paying royalties to this
vendor. The Company is obligated to pay 10% of gross sales of the inventory
purchased from this vendor as a royalty to this vendor. At December 31, 2000,
the Company accrued for approximately $7,400 of royalty expense due to this
vendor. The Company is also obligated to sell to this vendor any inventory in
the original listed inventory purchase to this vendor at the Company's cost
plus up to 10%.

In March 2000, the Company entered into an agreement with a vendor to
purchase spare aircraft inventory from this vendor for $4,100,000. The
contract allowed for the Company to recover the purchase price of $4,100,000
over a maximum period of 16 months. Subsequent to this recovery period, the
Company is obligated to make royalty payments to this vendor based on 30% of
all future sales related to this inventory. The Company is also obligated to
sell inventory to this vendor at cost plus 25% during the recovery period of
up to 16 months from the date of purchase. Subsequent to the recovery period,
the Company is obligated to sell inventory to this vendor at the Company's
cost plus 10%.

                                       F-12
<PAGE>


NOTE 9 -  CREDIT RISK AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Substantially all of the Company's sales are to airlines, other aircraft
operators and other aircraft parts suppliers. Credit risk with respect to
trade accounts receivable is generally diversified due to the large number of
customers and their dispersion worldwide. The Company also performs credit
evaluations on its customers throughout the year.

The Company distributes products in the United States and abroad to
commercial airlines, air cargo carriers, distributors, maintenance facilities
and other aerospace companies. The Company's credit risk consists of accounts
receivable denominated in U.S. dollars from customers in the aircraft
industry. The Company performs periodic credit evaluations of its customers'
financial condition and provides an allowance for doubtful accounts as
required. The Company has purchased insurance to reduce the risk of
collection of a portion of amounts receivable from qualifying foreign
customers. The Company, at times, offers extended payments terms.

For the years ended December 31, 1999 and 2000, activity with respect to the
Company's allowance for doubtful accounts is summarized as follows:

<TABLE>
<CAPTION>
                  YEAR ENDING DECEMBER 31,                             1999           2000
                  ------------------------                          ----------      ---------
<S>                                                                  <C>             <C>
                  Beginning balance............................      $620,000       $ 250,000
                  Charged to expense...........................       214,976         310,004
                  Amounts written off..........................      (584,976)        (75,009)
                                                                    ----------      ---------
                  Ending balance...............................     $ 250,000       $ 484,995
                                                                    ==========      =========
</TABLE>

NOTE 10 - INCOME TAXES:

The components of the provision (benefit) for income taxes consist of the
following:

<TABLE>

                                                                         1999         2000
                                                                         ----         ----
<S>                                                                  <C>            <C>
                  Current:
                    Federal....................................       $(44,402)     $        -
                    State......................................        (38,475)              -
                                                                    -----------     ----------

                                                                       (82,877)              -
                                                                    -----------     ----------

                  Deferred:
                    Federal.....................................             -               -
                    State.......................................             -               -
                                                                    -----------     ----------
                                                                                             -
                                                                    -----------     ----------
                                                                      $ (82,877)    $        -
                                                                    ===========     ==========

</TABLE>


                                       F-13
<PAGE>


                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




The reconciliation of income tax expense computed at the U.S. Federal statutory
rate to income tax expense is as follows:

<TABLE>
<CAPTION>

                                                                                   1999              2000
                                                                                   ----              ----
<S>                                                                              <C>           <C>
                  Tax at U.S. Federal statutory rates.........................   $ (636,653)  $ (833,744)
                  State income taxes, net of federal effect...................     (114,223)    (216,773)
                  Change in valuation allowance...............................      694,397    1,061,092
                  Permanent differences.......................................       47,926       78,139
                  Other, net..................................................      (74,324)     (88,714)
                                                                                 ----------    ----------
                                                                                  $ (82,877)   $        -
                                                                                 ==========    ==========
</TABLE>

Deferred income taxes arise as a result of differences in the methods used to
determine income for financial reporting versus income for tax reporting
purposes. Significant components of the Company's deferred tax assets and
liabilities are as follows:

<TABLE>
<CAPTION>

                                                                                1999            2000
                                                                             ---------        ---------
<S>                                                                          <C>              <C>
                  Depreciation.........................................       (101,000)       $ (10,616)
                                                                             ---------        ---------

                    Gross deferred tax liabilities.....................       (101,000)       $ (10,616)
                                                                             ---------        ---------


                  Inventory reserve....................................         87,000          224,000
                  Allowance for doubtful accounts......................        107,000          101,000
                  Operating accruals and capitalized inventory costs           244,000          131,000
                  Net operating loss carryforwards.....................      3,175,000        4,226,000
                                                                             ---------        ---------
                    Gross deferred tax assets..........................      3,711,000        4,682,000

                    Deferred tax assets                                      3,610,000        4,671,384
                                                                             ---------        ---------

                    Deferred tax assets valuation allowance............     (3,610,000)      (4,671,384)
                                                                             ---------        ---------


                           Net deferred tax liability                         $      -         $       -
                                                                             =========         =========
</TABLE>


The Company has federal and state net operating loss carryforwards of
approximately $3,670,000 and $557,000, respectively, which expire between years
2001 and 2014.

         NOTE 11 - STOCK BASED COMPENSATION PLANS

In July 1996 the Company adopted the Aviation Distributors, Inc. 1996 Stock
Option and Incentive Plan (the "Plan"). This plan provides for the granting
of incentive or non-qualified stock options to employees, non-employee
directors and independent contractors at the sole discretion of the board of
directors. Stock appreciation rights, as defined, may accompany options
issued under the Plan. Additionally, the Plan provides for the issuance of
restricted stock, dividend equivalents and other stock and cash based awards
and loans to participants in connection with the options or other plan
provisions at the discretion of the board of directors. Options currently
outstanding become exercisable in zero to four years from the grant date and
expire 5 to 10 years after the grant date. The options are exercisable at not
less than the market value of the Company's stock on the date of the grant.
All options are anti-dilutive due to the Company's loss in the current year.
The initial number of shares available under the Plan for issuance was
264,500. A total of 932,500 non-qualified options have been granted outside
the Plan since the Plan's inception. The board of directors approved an
amendment to the Plan to increase the allowable shares under the Plan to
1,000,000 shares. All options are anti-dilutive due to the Company's loss in
the current year.

                                       F-14
<PAGE>



                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Stock option activity for years ended December 31, 2000 and 1999:
<TABLE>
<CAPTION>
                                                   NUMBER      WEIGHTED AVERAGE
                                                  OF SHARES    EXERCISE PRICE
                                                  ---------    -----------------
<S>                                               <C>          <C>
Outstanding at December 31, 1998.............       230,700     $   5.00
Granted .....................................     1,623,500         0.85
Exercised ...................................      (142,500)        0.25
Forfeited ...................................       (33,650)        5.00
                                                 ----------    ----------
Outstanding at December 31, 1999                  1,678,050     $   1.39
                                                 ==========    ==========

Granted .....................................        75,000     $   1.03
Exercised ...................................       (84,751)        1.18
Forfeited ...................................       (29,333)        1.00
                                                 ----------    ----------

Outstanding at December 31, 2000.............     1,638,966     $   1.46
                                                 ==========     ========



                                                   1999           2000
                                                   ----           ----

Number of options exercisable at year end ...     475,964        978,964
Weighted average exercise price of options
     exercisable at year end ................    $   1.51       $   1.46
Weighted average fair value of options granted
     during the year ........................    $   0.60       $   0.86
</TABLE>


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 used for grants in 2000 and 1999, respectively: dividend yield of
0 percent for all years; expected volatility of 156 and 133 percent;
risk-free interest rate of 6.0 percent for all years; and expected lives of
one to ten years.

Additional information regarding options outstanding at December 31, 2000 is as
follows:

<TABLE>
<CAPTION>
   EXERCISE PRICE                        OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
   ---------------      ---------------------------------------------------  --------------------------------------
                                                WEIGHTED       WEIGHTED                                  WEIGHTED
                          NUMBER                 AVERAGE        AVERAGE        NUMBER                    AVERAGE
                        OUTSTANDING         REMAINING LIFE   EXERCISE PRICE    EXERCISABLE           EXERCISE PRICE
                        --------------      --------------   ------------  ----------------          --------------
<S>                     <C>                 <C>              <C>           <C>                        <C>
          $ 0.25               350,000           9.00           0.25           350,000                    $ 0.25
          $ 1.00               555,000           7.90           1.00           231,667                    $ 1.00
          $ 1.22               531,916           9.00           1.22           231,915                    $ 1.22
          $ 1.44                 5,000           9.80           1.44                 -                         -
          $ 5.00               197,050           6.40           5.00           165,382                    $ 5.00
                        --------------      --------------   ------------  ----------------          --------------
                             1,638,966           8.30        $  1.39           978,964                    $ 1.46
                       ===============      ==============   ============  ================          ==============
</TABLE>


Had compensation cost been determined based on the basis of fair value pursuant
to Statement of Financial Accounting Standards 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (SFAS 123), the Company's net loss and loss per share would have
been increased to the pro forma amounts indicated below.



                                       F-15
<PAGE>



                           AVIATION DISTRIBUTORS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



<TABLE>
                                          Year Ended December 31,
                                       -----------------------------
                                           1999           2000
                                       -------------   -------------
<S>                                    <C>             <C>
Net loss
      As reported                      $ (1,789,628)   $ (2,452,188)
      Pro forma                        $ (2,095,011)   $ (2,899,161)

Basic and diluted loss per share
      As reported                        $    (0.56)     $    (0.73)
      Pro forma                          $    (0.65)     $    (0.87)

</TABLE>


NOTE 12 - EXTRAORDINARY ITEM

During 1999, the Company negotiated a reduction in payables to certain
vendors. Three of the vendors either were granted stock options or warrants
(total of 182,500) in connection with the forgiveness of the payables. The
Company recorded an extraordinary gain in connection with this debt
forgiveness of $242,460 which is net of the value of the options/warrants
issued to the vendors ($42,250), as determined by the Black Scholes option -
pricing model.


                                       F-16
<PAGE>



                                    PART III


ITEM 8. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

<TABLE>
<CAPTION>
      EXECUTIVE                                  AGE                              TITLE
      ---------                                  ---                              -----
<S>                                              <C>   <C>
      William D. King                             58   Chief Executive Officer, Chairman and Director
      Gary L. Joslin                              63   Chief Financial Officer and Director
      Osamah S. Bakhit                            51   Founder, Marketing and Sales Advisor
      Jeffrey G. Ward                             41   Executive Vice President
      Bruce H. Haglund                            49   Secretary, Director, Chairman of the Audit Committee
      John B. Jacobs                              36   Senior Vice President
      William T. Walker, Jr.                      69   Director and Member of the Audit Committee
      Saleem S. Naber                             71   Director and Member of the Audit Committee
</TABLE>

WILLIAM D. KING, CHIEF EXECUTIVE OFFICER, CHAIRMAN AND DIRECTOR. Mr. King
became Chief Executive Officer, Chairman and a Director of the Company in
January 2000. Prior to his involvement with the Company, Mr. King held
various executive positions from 1969 to 1994 when he retired as President of
Electrical and Mechanical groups of JWP, Inc. Mr. King holds an MBA from
Harvard University's Graduate School of Business Administration and a
Bachelor of Science degree from the University of North Carolina. Mr. King is
also a member of the Executive Committee of the Company.

GARY L. JOSLIN, CHIEF FINANCIAL OFFICER AND DIRECTOR. Mr. Joslin, who became
Chief Financial Officer and Director in April 1998, served as a management
and financial consultant prior to joining ADI. Previously, he served as a
senior financial executive in the wholesale and retail segments of the
building materials and equipment industry for companies ranging in size from
$70 million to $450 million, including Prime Source, Inc. He also served in
numerous financial positions with Wickes Companies, a multi-billion-dollar
conglomerate involved in retailing, wholesaling, and manufacturing. Mr.
Joslin holds a Bachelor of Science degree in Accounting from California State
University - Long Beach and is a licensed CPA. Mr. Joslin is also a member of
the Executive Committee of the Company.

OSAMAH S. BAKHIT, MARKETING AND SALES ADVISOR. Mr. Bakhit, the founder of the
Company, was Chief Executive Officer, President, Chairman and a Director of
the Company from its inception until his resignation as an officer and
Director of the Company in November 1997. He is no longer an executive
officer of the Company, but consults with the Company on a full-time basis as
a marketing and sales advisor. Mr. Bakhit has over 16 years of aircraft
experience. Prior to forming the Company in 1988, Mr. Bakhit was CEO of
Bakhit Enterprises, a company that purchased heavy construction vehicles and
material for General Enterprise Company. Mr. Bakhit worked for General
Enterprise Company in Amman, Jordan, where he managed overall construction
operations. His duties included supervising the construction of Queen Alia
International Airport in Jordan. Mr. Bakhit attended the University of
California, Irvine.

JEFFREY G. WARD, EXECUTIVE VICE PRESIDENT. Mr. Ward has over 16 years of
aircraft experience and currently oversees and lends leadership to the
extensive sales team at ADI. Prior to joining the Company in 1993, Mr. Ward
was a sales representative for System Industries. He was a sales consultant
to the aerospace industry with key accounts including the U.S. military and
major aerospace manufacturers. Prior to System Industries, Mr. Ward was a
sales representative for Eastman Kodak Company. Mr. Ward also served in the
United States Marine Corps for seven years as a naval aviator. Mr. Ward has a
B.A. in Economics and German from the University of Virginia.

BRUCE H. HAGLUND, SECRETARY AND DIRECTOR. Mr. Haglund has served as General
Counsel of the Company since 1992 and has served as Secretary and a director
of the Company from June 1996 to present. He has served as a Director of the
Company since 1989. Mr. Haglund is a principal in the law firm of Gibson,
Haglund & Paulsen in Orange County, California where he has been engaged in
the private practice of law since 1980. He is also a member of the Boards of
Directors of Metalclad Corporation, HydroMaid International, Inc.,
Renaissance Golf Products, Inc. and VitriSeal, Inc. Mr. Haglund has a J.D.
from the University of Utah College of Law. Mr. Haglund is also the Chairman
of the Audit Committee of the Board and a member of the Executive Committee
of the Company.

                                       12
<PAGE>



JOHN B. JACOBS, SENIOR VICE PRESIDENT. Mr. Jacobs has over 11 years of
management experience in aircraft material sales and leasing. Prior to
joining the Company in July 1999, he was vice president of Airmotive, Inc.,
an international aircraft parts redistributor, where he held various sales
positions for over nine years. He has been active in the aircraft industry
since 1988. Mr. Jacobs oversees sales, marketing and operations for the
company. Mr. Jacobs holds a Bachelor of Arts degree in International
Marketing and Management from California State University, Fullerton.

WILLIAM T. WALKER, JR., DIRECTOR. Mr. Walker became a director of the Company
in March 1997. Mr. Walker founded Walker Associates, a corporate finance
consulting firm for investment banking, in 1985 and has participated in or
been instrumental in completing over $250 million in public and private
offerings since its inception. Prior to forming Walker Associates, Mr. Walker
served as executive Vice President, Manager of Investment Banking, Member of
the Board and Executive Committee and Chairman of the Underwriting Committee
for Bateman Eichler Hill Richards, a New York Stock Exchange Member firm. Mr.
Walker is also a member of the Board of Directors of Fortune Petroleum
Corporation and Go-Video, Inc., both public companies traded on the American
Stock Exchange. Mr. Walker attended Stanford University. Mr. Walker is also a
member of the Audit Committee of the Board.

SALEEM S. NABER, DIRECTOR. Mr. Naber, who became Chief Executive Officer,
President and a Director of the Company in April 1998. Mr. Naber resigned as
an officer of the Company in January 2000 and is now exclusively a Director
of the Company. Mr. Naber has over 40 years of experience in the aerospace
industry, primarily with Lucas Aerospace and Western Gear Corporation,
acquired by Lucas in 1988. His responsibilities with Lucas ranged from Design
Engineer of Precision Products to President of Lucas Western, Inc., the $400
million U.S. division of Lucas. Mr. Naber's most recent post before joining
the Company was Managing Director of Lucas Aerospace, Aircraft Systems
Division, and the position he held when he resigned in 1996. Mr. Naber
received a Bachelor of Science degree in Electrical Engineering from the
University of California -Berkeley and pursued post-graduate courses at the
University of Southern California and the University of California, Los
Angeles. Mr. Naber is also a member of the Audit Committee.

COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT

Section 16 (a) of the Securities Exchange Act requires the Company's officers,
Directors, and persons who own more than 10% of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the SEC and NASDA. Officers, Directors, and greater than 10%
beneficial owners are required by SEC regulation to furnish the Company with
copies of all Section 16 (a) forms they file. The Company believes that all
filing requirements were complied with applicable to its Officers, Directors,
and greater than 10% beneficial owners.

ITEM 9.      EXECUTIVE COMPENSATION

The Company incorporates herein by reference the information concerning
executive compensation contained in the 1999 Proxy Statement.


ITEM 10.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company incorporates herein by reference the information concerning security
ownership of certain beneficial owners and management contained in the 1999
Proxy Statement.


ITEM 11.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company incorporates herein by reference the information concerning certain
relationships and related transactions contained in the 1999 Proxy Statement.

                                      13
<PAGE>

                                     PART IV

ITEM  13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)    The following documents are filed as part of this report on Form 10-KSB:

         1.  Financial Statements for the periods ended December 31, 1998

                       Reports of Independent Certified Public Accountants
                       Consolidated Balance Sheets
                       Consolidated Statements of Operations
                       Consolidated Statements of Stockholders' Equity (Deficit)
                       Consolidated Statements of Cash Flows
                       Notes to Financial Statements


         2.  Exhibits

The following exhibits are being filed with this Annual Report on Form 10-KSB
and/or are incorporated by reference therein in accordance with the designated
footnote references:

       3.1    Amended and Restated Certificate of Incorporation of the
              Registrant. (1)
       3.2    Bylaws, as amended, of the Registrant. (1)
       3.3    Amendment to Amended and Restated Certificate of Incorporation of
              the Registrant. (1)
       4.1    Specimen Common Stock Certificate. (1)
       9.1    Voting Trust Agreement dated November 17, 1997, by and among
              Osamah Bakhit, Aviation Distributors, Inc., and Dirk O. Julander,
              as trustee. (2)
       10.2   1996 Stock Option and Incentive Plan. (1)
       10.3   Aircraft Purchase Agreement, dated August 8, 1995, by and between
              Alia The Royal Jordanian Airlines and Aviation Distributors, Inc.
              (1)
       10.4   Credit and Security Agreement, dated June 25, 1997, by and between
              Aviation Distributors, Inc. and BNY Financial Corporation. (3)
       10.5   Amendment dated December 15, 1999, between the Company and GMAC
              Commercial Credit LLC to the June 25, 1997 Credit and Security
              Agreement between the Company and BNY Financial Corporation,
              including related Common Stock Purchase Warrant for 335,362 shares
              dated February 28, 2000, issued to GMAC Commercial Credit LLC.(4)
       10.6   Amended and Restated Employment Agreement, dated as of July 16,
              1996, by and between Osamah S. Bakhit and Aviation Distributors,
              Inc. (1)
       10.7   Employment Agreement, dated as of January 5, 2000, by and between
              William D. King and Aviation Distributors, Inc. (4)
       10.8   Employment Agreement, dated as of July 16, 1996, by and between
              Jeffrey G. Ward and Aviation Distributors, Inc. (1)
       10.9   Amendment to Employment Agreement, dated November 17, 1997, by and
              between Osamah S. Bakhit and Aviation Distributors, Inc. (3)
       10.10  Amendment to Employment Agreement, dated November 17, 1997, by and
              between Mark W. Ashton and Aviation Distributors, Inc. (3)
       10.11  Lease, dated as of July 9, 1997, by and between Olen Properties
              Corp. and Aviation Distributors, Inc. (3)
       10.12  Amended and Restated Promissory Note from Osamah S. Bakhit to
              Aviation Distributors, Inc., dated as of December 31, 1995. (1)
       10.13  Settlement Agreement dated as of November 1, 1996. (1)
       10.14  Form of Indemnity Agreement. (1)
       10.15  Promissory Note between Aviation Distributors, Inc. and Osamah S.
              Bakhit dated December 31, 1996. (1)
       10.16  Employment Agreement dated as of June 1, 1998 by and between Gary
              L. Joslin and Aviation Distributors, Inc. (4)

              (1)    Filed with the Company's Registration Statement on Form
                     SB-2 dated March 3, 1997.
              (2)    Filed with the Company's Current Report on Form 8-K dated
                     August 29, 1997.
              (3)    Filed with the Company's Form 10-KSB dated April 20, 1998.

              (4)    Filed with the Company's Form 10-KSB dated April 13, 2000.


                                      14
<PAGE>


(b)      Reports on Form 8-K.

                  None


                            SUPPLEMENTAL INFORMATION

An annual report and an information statement shall be furnished to the
security holders of the Company subsequent to the filing of this Form 10-KSB.
The Company shall furnish copies of the annual report to security holders and
the proxy statement to the Securities and Exchange Commission when it is sent
to the security holder.



                                       15
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                               AVIATION DISTRIBUTORS, INC.

                                               By:    /s/ WILLIAM D. KING
                                                 ------------------------------
                                                          William D. King
                                                      Chief Executive Officer

Date:  April 17, 2000

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

<TABLE>
<CAPTION>
SIGNATURES                                   TITLE                                      DATE
-----------                                -----------------------                    --------------
<S>                                         <C>                                       <C>
         /s/ WILLIAM D. KING                Chief Executive Officer                   April 17, 2000
---------------------------------           Chairman and Director
           William D. King                  (Principal Executive Officer)



         /s/ GARY L. JOSLIN                 Chief Financial Officer                   April 17, 2000
---------------------------------           and Director (Principal
           Gary L. Joslin                   Accounting Officer)



        /s/ BRUCE H. HAGLUND                Director                                  April 17, 2000
---------------------------------
          Bruce H. Haglund
</TABLE>