As Filed with the Securities and Exchange Commission on July 28, 2005

Registration No. 333-               

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

TIMCO AVIATION SERVICES, INC.

(Exact name of registrant as specified in its charter)

623 Radar Road

Greensboro, North Carolina 27410

(336) 668-4410 (x8010)

(Address, including Zip Code, and telephone number,

including area code, of registrant’s principal executive offices)

Roy T. Rimmer, Jr.

Chairman and Chief Executive Officer

TIMCO Aviation Services, Inc.

623 Radar Road

Greensboro, North Carolina 27410

(336) 668-4410 (x8010)

(Name, address, including Zip Code, and telephone number,

including area code, of agent for service)

     Approximate date of commencement of the proposed sale of the securities to the public: As soon as is practicable after this Registration Statement becomes effective in connection with the rights offering described in the prospectus contained in this registration statement.

      If any of the securities being registered under this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check this following box.     o

      If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering     o

      If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering     o

      If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box     o

CALCULATION OF REGISTRATION FEE

PRELIMINARY PROSPECTUS

TIMCO AVIATION SERVICES, INC

             Rights Offering of Post-Reverse Split Shares of Common Stock at $4.80 per Share

      If you held our common stock as of 5:00 p.m., New York City time on                     , 2005 (the “record date”), TIMCO Aviation Services, Inc. has granted you rights to purchase additional shares of our post-reverse split (defined below) common stock for a subscription price of $4.80 per share ($0.12 per pre-reverse split share). You have been granted 1.25 rights for every post-reverse split share (40 pre-reverse split shares) of our common stock that you held on the record date. This is your “basic subscription privilege.”

      We will not issue fractional rights or fractional shares. If the number of shares of common stock you held on the record date would result in your receipt of fractional rights, the number of rights issued to you is being rounded up to the nearest whole right.

      Simultaneously with the closing of the rights offering, we intend to effect a one-new-share-for-40-old shares reverse split.

      Our common stock is quoted on the OTC Bulletin Board maintained by the NASD under the symbol “TMAS.” On July 21, 2005, our pre-reverse split common stock closed at $0.22 per share.

      The rights expire on                     , 2005, at 5:00 p.m., New York City Time. We have the option of extending the expiration date. We may cancel or terminate the rights offering at any time prior to the expiration date. If we terminate or cancel this offering, we will return your subscription price, but without any payment of interest.

      If you fully exercise your rights and other stockholders do not fully exercise their rights, you may elect to purchase additional shares on a pro rata basis. This is your “oversubscription privilege.”

      You may transfer your rights to immediate family members or entities wholly-owned or controlled by you. Otherwise, the rights are non-transferable.

      We intend to use the proceeds from this rights offering to continue the growth of our business in line with the strategic goals and objectives that are set forth in this prospectus.

      The rights offering is subject to a number of conditions, including our obtaining the approval of, among other matters (as described herein), this offering from the holders of more than a majority of our outstanding common shares. In that regard, we have filed a preliminary proxy statement with the U.S. Securities and Exchange Commission with respect to a stockholders meeting to be held on August 26, 2005. Lacy J. Harber, our principal stockholder, who holds approximately 57% of our outstanding common stock, has advised us that he intends to vote in favor of all of the proposals to be considered at the stockholders’ meeting.

       Both acceptance and rejection of the rights offering involves a high degree of risk. You should consider carefully the risk factors discussed on page 12 of this prospectus in evaluating the rights offering.

      NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE RIGHTS OFFERING IS NOT BEING MADE, NOR WILL TIMCO AVIATION SERVICES, INC. ACCEPT SUBSCRIPTIONS FOR COMMON SHARES FROM ANY PERSON, IN ANY JURISDICTION IN WHICH THE RIGHTS OFFERING OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR “BLUE SKY” LAWS OF SUCH JURISDICTION.

The date of this prospectus is                     , 2005.

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING

	Historical Data:

																Three Months Ended
				Years Ended December 31,												March 31,
				2002				2003				2004				2004				2005
																(Unaudited)
Statements of Operations Data:
	Operating revenues			$	181,973			$	242,514			$	323,488			$	83,532			$	90,682
	Cost of sales				179,705				226,331				294,199				77,239				81,264
		Gross profit			2,268				16,183				29,289				6,293				9,418
	Operating expenses				15,574				14,761				22,636				5,502				6,454
		(Loss) Income from operations			(13,306	)			1,422				6,653				791				2,964
	Interest expense and other(1)				(12,779	)			6,712				7,320				1,644				2,150
		(Loss) Income before income taxes and discontinued operations			(527	)			(5,290	)			(667	)			(853	)			814
	Income tax benefit(2)				(3,800	)			(986	)			—				—				(337	)
		Income (Loss) from continuing operations			3,273				(4,304	)			(667	)			(853	)			1,151
	Income from discontinued operations, net of income taxes				3,749				4,043				1,580				971				55
	Net income (loss)				7,022				(261	)			913				118				1,206
Basic Income (Loss) Per Share:
	Income (Loss) from continuing operations			$	0.13			$	(0.14	)		$	(0.02	)		$	(0.03	)		$	0.02
	Income from discontinued operations				0.14				0.13				0.05				0.03				—
	Net income (loss)			$	0.27			$	(0.01	)		$	0.03			$	—			$	0.02
Diluted Income (Loss) Per Share:
	Income (Loss) from continuing operations			$	0.01			$	(0.14	)		$	(0.02	)		$	(0.03	)		$	—
	Income from discontinued operations				0.02				0.13				0.05				0.03				—
	Net income (loss)			$	0.03			$	(0.01	)		$	0.03			$	—			$	—

			December 31,				March 31,
			2004				2005
							(Unaudited)
Balance Sheet Data:
	Accounts receivable			49,721				47,746
	Inventories			22,244				23,350
	Working capital			13,895				16,136
	Total assets			137,368				136,380
	Total debt and capitalized lease obligations			180,694				118,744
	Stockholders’ deficit			(94,852	)			(36,410	)

(1)	Includes for 2002 a $27,279 gain related to debt extinguishment.
(2)	Represents for 2002 a tax benefit from favorable tax legislation that temporarily extended the number of years that net operating losses could be carried back to offset taxable income.

	Pro Forma Data:

			March 31, 2005
			(1)								(2)								(3)
			Actual				Adjustments				Pro Forma				Adjustments				Pro Forma
			(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
			(Table in thousands)
Revolving loan			$	5,662			$	—			$	5,662			$	—			$	5,662
Notes payable to financial institutions				13,818				—				13,818				—				13,818
Capital lease obligation				4,778				—				4,778				—				4,778
Related party term loan				15,862				(15,862	)(A)			—				—				—
Old senior subordinated notes due 2008				16,247				—				16,247				—				16,247
New senior subordinated convertible PIK notes due 2006				61,437				—				61,437				(61,437	)(B)			—
Junior subordinated convertible PIK notes due 2007				940				—				940				(940	)(B)			—
	Total debt		$	118,744			$	(15,862	)		$	102,882			$	(62,377	)		$	40,505
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none outstanding, 15,000 shares designated series A junior participating			$	—			$	—			$	—			$	—			$	—
Common Stock, $0.001 par value, 100,000,000 shares authorized, 6,413,979 post-reverse split shares issued and outstanding on March 31, 2005, 10,177,938 post-reverse split shares issued and outstanding pro forma, and 15,381,632 post-reverse split shares issued and outstanding pro forma				6				4	(A)			10				5	(C)			15
Additional paid in capital				239,350				15,858	(A)			255,208				62,434	(C)			317,642
Accumulated deficit				(275,766	)			—				(275,766	)			—				(275,766	)
Total stockholders’ (deficit) equity			$	(36,410	)		$	15,862			$	(20,548	)		$	62,439			$	41,891
Total capitalization			$	82,334			$	—			$	82,334			$	62			$	82,396

(A)		Represents the use of the LJH Note to purchase shares in the rights offering in the manner described above.
(B)		Represents the conversion of the outstanding New Senior Notes and the outstanding Junior Notes into shares of common stock at their maturity.
(C)		Reflects: (i) the issuance of 3,642,572 (post-reverse split) shares to the holders of the New Senior Notes and Junior Notes upon the maturity of such Notes; and (ii) the issuance of 1,561,122 (post-reverse split) shares to our principal stockholder upon the complete exercise of the LJH Warrant. Upon the maturity of the New Senior Notes and Junior Notes, upon the complete exercise of the LJH Warrant, and upon the use of the LJH Note within the rights offering, we will have 15,381,632 (post-reverse split) shares of common stock outstanding.

Subscription Ratio; Basic Subscription Privilege		Each stockholder will receive 1.25 rights for every one post-reverse split share (40 pre-reverse shares) of our common stock owned by such stockholder as of the record date. Each whole right entitles you to purchase one share of our post-reverse split common stock for the subscription price. We are not issuing any fractional rights or fractional shares. If the number of shares of common stock you held on the record date would result in your receipt of fractional rights, the number of rights issued to you is being rounded up to the nearest whole right. Although you may not purchase fractional shares, you may subscribe for any whole number of shares exercising less than all of your rights.
Record Date		, at 5:00 p.m., New York City time. Only our stockholders as of the record date will receive rights to subscribe to new shares of common stock in the rights offering.
Expiration Date		The rights expire on                     at 5:00 p.m., New York City time. Rights not exercised by the expiration date will be null and void. We have the option of extending the expiration date for any reason.
Subscription Price		$4.80 per post-reverse split share (or the equivalent of $0.12 per pre-reverse split share), payable in cash. All payments must be cleared on or before the expiration date. The price of our common stock on the Bulletin Board maintained by the NASD on July 21, 2005, was $0.22. See “Determination of Subscription Price.”
Oversubscription Privilege		If you fully exercise the basic subscription privilege, you may also purchase additional shares of common stock at the subscription price that are not purchased by other stockholders. If there are not enough shares available to fill all subscriptions for additional shares, the available shares will be allocated pro rata based on the number of shares each subscriber for additional shares has purchased under the basic subscription privilege.
Use of Proceeds		We will use the net proceeds of this rights offering to continue the growth of our business in line with our strategic goals and objectives.

Restricted Transferability of Rights		The rights may be exercised only by the persons to whom they are granted. However, you may transfer your rights to your immediate family members, to entities wholly-owned or controlled by you, or to other similar affiliates. For information on the persons to whom you can transfer your rights, as well as how the rights can be transferred, see “The Rights Offering — Transferability of Rights.”
No Board Recommendation		Our Board of Directors does not make any recommendation to stockholders regarding the exercise of rights in this offering. Stockholders who do exercise rights risk investment loss on new money invested. We cannot assure you that the subscription price will remain below any trading price for our common stock or that its trading price will not decline to below the subscription price during or after the rights offering. For more information regarding some of the risks inherent in this rights offering, please see “Risk Factors” beginning on page 16.
Subscription Commitment of Our Controlling Stockholder		Lacy Harber, who on the record date beneficially owned 57% of our currently outstanding common stock, has agreed to use amounts due to him under a note issued to him by us to purchase shares under this Rights Offering. Mr. Harber has no obligation to purchase shares over and above those that he may purchase using the proceeds of his note.
Conditions to the Rights Offering		This rights offering is subject to the following conditions:
		• We must change the number of authorized shares to 100 million shares of our common stock by means of an amendment to our certificate of incorporation;
		• We must reduce the number of our issued and outstanding shares by reducing every forty old shares into one new share through the reverse stock split;
		• This rights offering and Mr. Harber’s use of the LJH Note to purchase shares in the rights offering must be approved by a majority vote of our stockholders;
		• This rights offering must comply with applicable laws and applicable interpretations of the staff of the SEC;
		• This rights offering must comply with all applicable state securities or “blue sky” laws;
		• No litigation may have been instituted or threatened or law enacted that could prohibit this rights offering, materially adversely affect our business, or materially impair the benefits to us of this rights offering; and
		• No event may have occurred affecting our business that would reasonably be expected to prohibit, prevent, or significantly delay this rights offering.
No Revocation		If you exercise any rights, you are not allowed to revoke or change the exercise or request a refund of monies paid.

Certain Federal Income Tax Consequences		For United States federal income tax purposes, we believe that a stockholder will not recognize taxable income upon the receipt or exercise of rights. See “Material United States Federal Income Tax Considerations” beginning on page 96. You should consult your own tax adviser concerning the tax consequences of this offering under your own tax situation. This prospectus does not summarize tax consequences arising under state tax laws, non-US tax laws, or any tax laws relating to special tax circumstances or to particular types of taxpayers.
Extension, Withdrawal, Cancellation, and Amendment		We may extend the expiration date of the rights offering, although we do not presently intend to do so. We also reserve the right to withdraw, cancel, or amend the rights offering at any time for any reason. In the event the rights offering is withdrawn or cancelled, or any submitted subscriptions no longer comply with the amended terms of the offering, we will return all funds received from such subscriptions (without interest). If we extend, withdraw, or cancel the rights offering, we will provide you with notice by a public announcement of such extension, withdrawal, or cancellation. If we materially amend the rights offering, we will provide you notice by supplement to this prospectus or by public announcement.
Procedure for Exercising Rights		To exercise rights, you must complete the subscription warrant and deliver it to the subscription agent, Continental Stock Transfer & Trust Company, together with full payment for all the rights you elect to exercise. Continental Stock Transfer & Trust Company must receive the proper forms and payments on or before the expiration date. You may deliver the documents and payments by mail or commercial courier. If regular mail is used for this purpose, we recommend using insured, registered mail. You may also use an alternative “Guaranteed Delivery Procedure” if you are unable to deliver the subscription warrant before the expiration date, subject to the requirements of this procedure, described under “The Rights Offering — Special Procedure” under “Notice of Guaranteed Delivery Form.”
Shares Outstanding Before the Rights Offering		256,559,172 shares of pre-reverse split common stock were outstanding as of the date of this prospectus (6,413,979 shares of post-reverse split common stock).
Risk Factors		Stockholders considering making an investment in the rights offering should consider the risk factors described in “Risk Factors” on page 16.
Fees and Expenses		We will bear the expenses relating to the rights offering. However, if you exercise rights through the record holder of your shares and such record holder charges you a fee, you will be responsible for paying any such fees that such person may charge.
Information Agent		Questions regarding the rights offering should be directed to our information agent, Morrow & Co., Inc., at (800) 607-0088.

RISK FACTORS

      Exercising your rights granted in this offering and purchasing our common stock involves a high degree of risk. In addition to the other information contained in or incorporated by reference into this prospectus, you should carefully consider the following risk factors and other information contained in this prospectus.

      All numbers in this section, except share and per-share numbers, are expressed in thousands (000).

Risks Associated With Our Business

      For the year ended December 31, 2004, we incurred losses from continuing operations of $667. We also had a net stockholders’ deficit as of December 31, 2004 and March 31, 2005, and in 2004 we continued to require additional cash flow above amounts currently being provided from operations to meet our working capital requirements. During the first quarter ended March 31, 2005, while not necessarily indicative of the results of operations and cash flows which may be reported for the year ended December 31, 2005, we reported income from continuing operations of $1,151 and cash flow from operations of $7,106. Additionally, as a result of operating activities, we were not in compliance at certain times during 2002 and the first quarter ended March 31, 2003 with respect to debt covenant requirements under our previous senior credit facilities. We, however, obtained a waiver of non-compliance with all such financial covenants and cured all of these covenant violations.

      Our ability to service our debt and note obligations as they come due, including maintaining compliance with the covenants and provisions under our current and future debt instruments, is and will continue to be dependent on our future financial and operating performance. This performance, in turn, is subject to various factors, including certain factors beyond our control, such as changes in conditions affecting the airline industry and changes in the overall economy. Additionally, our customer base has been adversely impacted in the past by various factors such as the state of the general economy, fluctuations in the price of jet fuel, declines in passenger airline travel, the war on terrorism, the outbreak of the SARS virus in Asia and competitive price reductions in airline fares. These and other factors may adversely affect our customers in the future.

      Cash flow from operations is used to service our debt and note obligations, thereby reducing funds available for other purposes. Even if we are able to meet our debt service and other obligations when due, we may not be able to comply with the covenants and other provisions under our debt and note obligations. A failure to comply, unless waived by the lenders and noteholders, would be an event of default and would allow our lenders and noteholders to accelerate the maturity of these debt and note obligations. It would also permit them to terminate their commitments to extend credit under the financing agreements. Our senior credit facilities also limit our ability to continue to borrow additional funds in the event of a material adverse change in our business, as defined. If we were unable to repay the debt to the lenders or obligations to our noteholders, or otherwise obtain a waiver, the lenders and holders could proceed against the collateral securing the financing obligations and notes, and exercise all other rights available to them. While we expect to be in a position to continue to meet our obligations in future periods, there can be no assurance we will be able to do so.

      The condition of the airline industry has a substantial effect on our business, since our customers consist of passenger airlines and freight carriers, aircraft leasing companies, maintenance and repair facilities that service airlines, and original equipment manufacturers. Generally, when economic factors adversely affect the airline industry, they tend to reduce the overall demand for maintenance and repair services, causing downward pressure on pricing and increasing the credit risks associated with doing business with airlines. In addition, the price of jet fuel affects the maintenance and repair markets, because older aircraft, which consume more fuel and which currently account for a significant portion of our MRO services business, become less viable as the price of fuel increases.

      The September 11, 2001 terrorist attacks against the United States of America and the resulting increase in airline insurance costs, additional government mandated passenger taxes and fees, and increased airport security costs, have had a severe impact on the aviation industry. These factors, in conjunction with an overall slowdown in the U.S. economy, a reduction in passenger levels from fiscal 2001 through fiscal 2003, and the overall instability in the Middle East (including the war on terrorism) have resulted in operating losses for U.S. airline carriers in excess of $10.3 billion for 2001, $8.6 billion for 2002, $3.6 billion for 2003, and an estimated $5.0 billion for 2004. In addition to these adverse factors, fiscal 2003 was also adversely impacted by the outbreak of the SARS virus in Asia and fiscal 2004 was impacted by significantly increased fuel costs due to the high price of oil. As a result of these factors, many commercial passenger airlines and air cargo carriers reported significant reductions in their capacity and have taken out of service upwards of 20% of their aircraft. This reduction in capacity has lessened the aircraft maintenance required by such airlines (and thereby the amount of maintenance being outsourced to companies like TIMCO). These factors have also caused several carriers to file for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. The most notable for us has been the filing for protection from creditors under Chapter 11 by United Air Lines on December 9, 2002 (United has been our largest customer during the last three fiscal years). As of the date of this report, United Air Lines has not emerged from protection under the Bankruptcy Court. In addition to those that have already filed, other carriers have publicly discussed the potential of seeking protection from creditors through a voluntary bankruptcy filing. As related to us, current exposures to carriers that are at risk of filing for protection are being continuously evaluated and monitored, though we have in the past, and may in the future, experience losses relating to these credit exposures. Additionally, the Company is positioning itself for potential favorable implications of these Chapter 11 filings and resurgence of the airlines as it is anticipated that additional maintenance outsourcing opportunities could materialize as these airlines look to reduce their operating costs.

      We believe that all of the above factors could continue to have a negative impact on our business in the foreseeable future. These terrorist attacks and related aftermath events and the overall slowdown in the U.S. economy have also impacted our competition, with several of our competitors exiting the MRO business.

      Our ten largest customers accounted for approximately 78% and 76% of our total revenues for 2004 and 2003, respectively. Of these ten customers, three represented approximately 28%, 14%, and 12% of our total revenues, respectively, for the year ended December 31, 2004. No other customer represented more than 10% of our consolidated revenues for 2004. Our largest customer, United Air Lines, is currently in reorganization under Chapter 11 of the United States Bankruptcy Code. While the relative significance of customers varies from period to period, the loss of, or significant curtailments in purchases of our services by, one or more of our significant customers at any time has in the past and may in the future adversely affect our revenue and cash flow.

      We incurred losses from continuing operations of $667, $4,304, and $24,006 (excluding a gain from debt extinguishment), respectively, during the 2004, 2003, and 2002 fiscal years. If we incur losses in the future, we will likely limit our ability to obtain sufficient working capital for our operations and our ability to execute our business strategy. In addition, our ability to service our indebtedness may be harmed because we may not generate sufficient cash flow from operations to pay principal or interest when due.

      A large portion of our operating expenses are relatively fixed and cancellations, reductions or delays in orders by a customer or group of customers has in the past and could in the future have a material adverse effect on our business, financial condition or results of operations.

      We are highly leveraged. This could have important consequences to us, including:

      We are primarily dependent on cash flow from operations and borrowings to meet our working capital requirements.

      While we had positive cash flow from operations in the first quarter of 2005, there can be no assurance this will continue. We also expect that our expansion of operations into CFM engine maintenance will require additional working capital. We cannot assure you that additional financing will be available to us in the future, if required, for these purposes.

      Our senior credit facilities and the indenture relating to our 8% senior subordinated convertible paid-in-kind (PIK) interest notes due 2006 impose significant operating and financial restrictions on us. These restrictions may significantly limit our ability to incur additional indebtedness, pay dividends, repay indebtedness prior to its stated maturity, sell assets or engage in mergers or acquisitions. In addition, our failure to comply with these restrictions could result in an event of default which, if not cured or waived, could materially adversely affect our business, financial condition or results of operations.

      The aviation industry is highly regulated by the Federal Aviation Administration in the United States and by similar agencies in other countries. We must be certified by the FAA in order to repair aircraft and aircraft components.

      We cannot assure you that new and more stringent government regulations will not be adopted in the future or that any such new regulations, if enacted, would not materially adversely affect our business, financial condition or results of operations.

      The airline industry and the markets for our products and services are extremely competitive, and we face competition from a number of sources. Our competitors include aircraft manufacturers, aircraft part manufacturers, airline and aircraft service companies and other companies providing maintenance, repair and overhaul services. Certain of our competitors are currently experiencing financial difficulties similar to or worse than our own and several of our competitors have ceased operations or substantially curtailed their operations during the last few years. Many of these competitors have responded to their financial difficulties

by reducing prices on their services to increase or retain market share. Any material deterioration in our financial condition is likely to affect our ability to compete with price-cutting by our competitors. Some of our competitors have substantially greater financial and other resources than we do. We cannot assure you that competitive pressures will not materially adversely affect our business, financial condition or results of operations.

      Our business exposes us to possible claims for personal injury or death which may result if we were negligent in repairing an airplane. We cannot assure you that claims will not arise in the future or that our insurance coverage will be adequate to protect us in all circumstances. Additionally, we cannot assure you that we will be able to maintain adequate insurance coverages in the future at an acceptable cost. Any liability claim not covered by adequate insurance could materially adversely affect our business, financial condition or results of operations.

      Our continued success depends significantly upon the services of our executive officers and upon our ability to attract and retain qualified personnel in all of our operations. While we have employment agreements with all of our executive officers and certain of our key employees, most of our employees are employed on an at-will basis. The loss of one or more of our executive officers and of a significant number of our other employees without capable replacements could materially adversely affect our business, financial condition or results of operations.

      Our airframe heavy maintenance business (which constitutes approximately 80% of our current business) requires qualified mechanics and other personnel to provide services requested by our customers, and our ability to meet customer requirements depends on our ability to attract and retain the mechanics and other qualified personnel necessary to provide services at the physical locations of our operations. In that regard, we utilize outside contractors to provide personnel when we cannot otherwise hire required personnel. While we have been able to obtain sufficient mechanics and other required personnel to date, there can be no assurance we will be able to obtain all personnel required in the future. This may constrain our ability to grow our operations from their current levels.

Risks Associated with our Common Stock

      Lacy Harber, our principal stockholder, currently owns approximately 57% of our outstanding common stock. Mr. Harber is able to control the vote on all matters submitted to the vote of our stockholders and therefore, able to direct our management and policies, including, but not limited to, the election of our entire board of directors.

      In addition, under such circumstances, we will not, without Mr. Harber’s approval, be able to consummate transactions involving an actual or potential change in our control, including transactions in which the holders of our common stock might otherwise receive a premium for their shares over then current market prices.

      On March 8, 2005, we completed a tender offer to the holders of our New Senior Notes and Junior Notes. As a result of our tender offer, we now have 256,559,172 shares of our common stock outstanding. Further, upon the maturity of our remaining New Senior Notes and Junior Notes at the end of 2006 and the beginning of 2007, respectively, we will issue additional shares of our common stock, and at such time, we will have 464,706,934 shares of our common stock outstanding. Finally, we have outstanding common stock

purchase warrants to purchase 10,100,000 pre-reverse split shares of our common stock at an exercise price of $5.16 per share and under our 2003 Stock Incentive Plan we may grant options or warrants to purchase up to 5,800,000 pre-reverse split shares of our common stock to our officers, directors and employees.

      The price of our common stock fell below $1.00 per share in September 2001. If the market price for our common stock remains below $1.00 per share (as it has since the fourth quarter of 2002), our common stock will continue to be deemed to be a penny stock. So long as our common stock is considered a penny stock, it will be subject to rules that impose additional sales practices on broker-dealers who sell our securities. For example, broker-dealers must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. Also, a disclosure schedule must be prepared before any transaction involving a penny stock, and disclosure is required about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Monthly statements are also required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Because of these additional obligations, some brokers may not effect transactions in penny stocks. This could have an adverse effect on the liquidity of our common stock. The proposed one-new-share-for-40-old-shares reverse stock split could have the effect of causing our stock price to exceed $1.00, which, contingent on our meeting other guidelines, might enable us to relist our stock on the NASDAQ stock market or on a national securities exchange and no longer be deemed a penny stock.

      As a result of the thin trading market for our common stock, its market price may fluctuate significantly more than the stock market as a whole or the stock prices of similar companies. Of the 256,559,172 shares of our common stock currently outstanding, approximately 57% are held by Lacy Harber, our principal stockholder. A second holder, Loeb Partners, owns approximately 16% of our outstanding common stock. Without a larger float, our common stock will be less liquid than the stock of companies with broader public ownership, and, as a result, the trading prices for our common stock may be more volatile. Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price for our stock than would be the case if our public float were larger. In addition, sales of a substantial amount of common stock in the public market, or the perception that these sales may occur, could adversely affect the market price of our common stock. Possible or actual sale of any of these shares, particularly by Mr. Harber, may decrease the market price of our common stock.

      Future sales of our common stock, or the perception that these sales could occur, could adversely affect the market price of our common stock. We cannot assure you as to when, and how many of, the shares of our common stock will be sold and the effect these sales may have on the market price of our common stock. In addition, we may issue additional shares of common stock in connection with possible future acquisitions or other transactions. Although these securities may be subject to regulatory or contractual resale restrictions, as these restrictions lapse or if these shares are registered for sale to the public, they may be sold to the public. In the event we issue a substantial number of shares of our common stock, which subsequently become available for unrestricted resale, there could be a material adverse effect on the prevailing market price of our common stock.

      We have outstanding common stock purchase warrants to purchase approximately 10,100,000 pre-reverse split shares of our common stock at an exercise price of $5.16 per share until February 28, 2007. While we presently have no intent to take any of these actions, we may, in our sole discretion, and in accordance with the terms of the warrant agreements with the warrant agents, reduce the exercise price of the common stock

purchase warrants and/or extend the time within which the warrants may be exercised, depending on such things as the current market conditions, the price of the common stock and our need for additional capital. Further, in the event that we issue certain securities or make certain distributions to the holders of our common stock, the exercise price of the warrants may be reduced. Any such price reductions (assuming exercise of the warrants) will provide less money for us, higher incremental expense and possibly adversely affect the market price of our securities.

      In the event of the exercise of a substantial number of warrants within a reasonably short period of time after the right to exercise commences, the resulting increase in the amount of our common stock in the trading market could substantially affect the market price of our common stock.

      Our certificate of incorporation and bylaws contain provisions that may have the effect of discouraging transactions involving an actual or threatened change of control. In addition, our board of directors has the authority to issue up to 1,000,000 shares of preferred stock in one or more series and to fix the preferences, rights and limitations of any of these series without stockholder approval. Our ability to issue preferred stock could discourage unsolicited acquisition proposals, or make it difficult for a third party to gain control of us, which could adversely affect the market price of our common stock.

Risks Associated with the Rights Offering

      The subscription price in this rights offering ($4.80 per post-reverse split share of common stock, or the equivalent of $0.12 per pre-reverse split share) represents a discount to the market price of our common stock on the date it was determined. The trading price of our common stock may decline to below the subscription price. We cannot assure you that the subscription price will remain below any trading price for our common stock or that the trading price of our common stock will not decline to below the subscription price during or after this offering.

      Future prices of our common stock may be affected positively or negatively by our future revenues and earnings, changes in the estimates by analysts and our ability to meet such estimates, speculation in the trade or business press about our company, and overall conditions affecting our business, economic trends and the securities markets.

      You are not permitted to revoke or change your exercise of rights after you send in your subscription forms and payment. If we cancel this offering, we are obligated only to refund payments actually received, without interest.

      Stockholders who desire to purchase shares in this rights offering must act promptly to ensure that all required forms and payments are actually received by the subscription agent, prior to the expiration date. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or otherwise fail to follow the subscription procedures that apply to your desired transaction, we may, depending on the circumstances, reject your subscription to the extent of your payment received. Neither we nor the subscription agent undertakes to contact you concerning, or attempt to correct, an incomplete or incorrect

subscription form or payment. We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedure.

      Any personal check used to pay for shares must clear prior to the expiration date, and the clearing process may require five or more business days.

      If you choose not to exercise your subscription rights in full, your relative ownership interest will likely be diluted and your voting power will likely be reduced. In addition, because the subscription price represents a discount from the prevailing market price of our common stock, stockholders who do not exercise their full subscription rights will experience a dilution of their economic interest in the Company.

      Generally, only our stockholders of record as of the record date may exercise the rights. You may not sell, give away, or otherwise transfer your subscription rights, except to your immediate family members, to entities wholly-owned or controlled by you, or to other similar affiliates.

FORWARD LOOKING STATEMENTS

      This Prospectus contains forward looking statements. You can identify these statements by the fact that they use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These include forward looking statements on, among other matters:

      These forward looking statements are based on our current expectations and are subject to a number of risks, uncertainties and assumptions relating to our operations and results of operations, including, among others, the risks described under “Risk Factors” above and the following:

      Should one or more of the assumptions underlying our forward looking statements impact us to a greater or lesser degree or prove to be incorrect, or should future events occur that change the landscape of our industry and our customers, the forward looking statements contained in this report or the future financial results described in this report may not ultimately come true. We are not obligated, nor do we undertake the obligation, to revise these forward looking statements to reflect future events or circumstances.

MARKET PRICE AND DIVIDENDS ON COMMON STOCK

      The following information relates to the trading of our common stock, par value $0.001 per share. At December 31, 2004, we believe that there were approximately 4,000 beneficial holders of our common stock. The high and low last sales prices of our common stock for each quarter during our two most recent fiscal years as well as the first quarter, second quarter and third quarter (to date) of 2005, as reported by the OTC bulletin board, are set forth below:

No Cash Dividends

      We have never declared any cash dividends on our common stock, and we do not expect to pay cash dividends in the future. There are also restrictions in our credit agreements limiting our ability to pay cash dividends.

CAPITALIZATION

      The following table sets forth, after giving effect to the proposed reverse split, (1) our actual capitalization as of March 31, 2005, (2) our pro forma capitalization as of March 31, 2005 as if the LJH Note had been used on that date to purchase shares in the rights offering as set forth above (and such purchase was the only purchase of shares made in the rights offering), and (3) our pro forma capitalization as of March 31, 2005 as if on that date: (a) the LJH Note had been used to purchase shares in the rights offering as set forth in (2) and (b) the remaining New Senior Notes and Junior Notes had automatically converted into common stock and the LJH Warrant had been exercised in full. This presentation represents the minimum level of committed participation in the rights offering and the eventual conversion of the New Senior Notes and Junior Notes into equity. Actual participation in the rights offering could be greater, which would increase our working capital, stockholders’ equity and total capitalization to the extent of additional participation.

BACKGROUND AND REASONS FOR THE RIGHTS OFFERING

      The rights offering and our decision to allow Mr. Harber to use the LJH Note to purchase shares of our common stock in the rights offering are part of our ongoing effort to clean up and deleverage our balance sheet. The rights offering also provides us with an opportunity to raise working capital to continue the growth of our business in line with our strategic goals and objectives.

      Our board of directors has unanimously approved the rights offering and the use of the LJH Note to purchase shares in the rights offering. In making its determination, our board considered a number of factors, including the following:

      In connection with its deliberations regarding the rights offering and the use the LJH Note to purchase shares in the rights offering, the Board was advised by our financial advisor, Houlihan Lokey Howard & Zukin Capital (Houlihan Lokey Howard & Zukin Capital makes no recommendation as to whether or not the shareholders should participate in the rights offering).

      In approving the rights offering and the decision to allow the LJH Note to be used as payment for the purchase of shares in the rights offering, the board weighed its costs and risks, including the transaction costs associated with the rights offering, the dilution to stockholders who do not participate in the rights offering, and the potential adverse impact of the rights offering and the transactions that will occur in conjunction with the rights offering on the trading market for our common stock. However, the board determined that the benefits of the rights offering and allowing the LJH Note to be used as payment for shares purchased in the rights offering outweighed these costs and risks.

      The foregoing discussion is not intended to be exhaustive. It is intended to address the principal factors upon which the board based its decision to approve the rights offering and the decision to allow Mr. Harber to use the LJH Note to purchase shares in the rights offering. As a part of their decision process, our board considered all factors as a whole and did not assign specific weight to specific factors.

      Given the approval of our full board, six members of which are “disinterested” with respect to Mr. Harber under Delaware law, our board did not appoint a committee of independent directors or retain an independent representative to negotiate the terms of the rights offering. Further, the rights offering offer does

not require the approval of the holders of our senior debt or the holders of our New Senior Notes or Junior Notes, and given the voluntary nature of the rights offering, we do not believe that any such approvals are necessary or appropriate.

Determination of Rights Offering Subscription Price

      The subscription price of the shares to be issued in the rights offering rights was determined by our board of directors without any independent valuation or appraisal of the value of our common stock. The subscription price is not necessarily related to our assets, book value or net worth or any other established criteria of value and may not be indicative of the fair value of the securities offered. In determining the subscription price, the board of directors considered, among other things, our earnings and prospects, issues currently affecting the aviation industry and the markets in which we operate, our stock price and the general conditions of the securities markets, as well as our need for capital.

Use of Proceeds

      We will use the net proceeds of the rights offering to continue the growth of our business in line with our strategic goals and objectives. We have determined that, given current market conditions, this rights offering is the most appropriate means of raising equity capital because it affords our existing stockholders the preferential opportunity to subscribe for new shares of common stock and to maintain their proportionate ownership interest in the Company.

Federal Tax Consequences of Rights Offering to the Company

      We will not incur any Federal income tax liabilities on the issuance of the rights and the sale of the shares of common stock in the rights offering.

Plans of TIMCO Aviation Services following the Rights Offering

      Following the consummation of the rights offering, we intend to continue to conduct our business and operations substantially in the same manner as they are currently being conducted. Although we continually evaluate the merits of potential commercial and strategic transactions, we currently have no plans, proposals or negotiations that would result in:

SELECTED FINANCIAL DATA

      The following table represents our selected consolidated financial information. The selected financial data set forth below should be read in conjunction with the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations which contains a description of the factors that materially affect the comparability, from period to period, of the information presented herein. Operating results from continuing operations reflect the results of operations from our MRO and leasing operations, including Caribe Aviation (sold in May 2001) and Aerocell Structures (sold in July 2002). Discontinued operations includes the results of operations of our redistribution operations, new parts distribution operation and our manufacturing operations, all of which were sold in 2000, and the results of operations of our former office and warehouse facility located in Miramar, Florida, which was sold in March 2004. All numbers in the tables in this section, except for per-share numbers, are in thousands (’000s).

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

      All numbers in this section, except share and per-share numbers, are expressed in thousands (‘000s).

Overview

      In January 2005, we announced an offering and consent solicitation referring to our 8% Senior Subordinated Convertible PIK Notes due December 31, 2006 (the “New Senior Notes”) and our 8% Junior Subordinated Convertible PIK Notes due January 2, 2007 (the “Junior Notes”). We offered the holders of the New Senior Notes and Junior Notes the right to receive a 15% premium payable in shares of our common stock if the holders agreed to an early conversion of their New Senior Notes and Junior Notes into common stock during a special conversion period. We completed the offer on March 8, 2005 and accepted tenders from the holders of 47.0% of our outstanding New Senior Notes and 75.2% of our outstanding Junior Notes. At the closing of the offer on March 15, 2005, we issued 224,918,557 shares of our authorized but unissued common stock, including shares issued to LJH Ltd. upon the partial exercise of the LJH Warrant.

      For the year ended December 31, 2004, we incurred losses from continuing operations of $667. We also had a net stockholders’ deficit as of December 31, 2004, and continued to require additional cash flow above amounts currently being provided from operations to meet our working capital requirements. During the first quarter ended March 31, 2005, while not necessarily indicative of the results of operations or cash flows which may be reported for the year ended December 31, 2005, we reported income from continuing operations of $1,151 and cash flow from operations of $7,106. Additionally, as a result of operating activities, we were not in compliance at certain times during 2002 and during the first quarter ended March 31, 2003 with debt covenant requirements under our previous revolving credit and term loan facilities and our TROL financing arrangement. We, however, obtained a waiver of non-compliance with all such financial covenants and thereby cured these covenant violations.

      Our ability to service our debt and note obligations, as they come due, including maintaining compliance with the covenants and provisions under our debt instruments, is and will be dependent upon our future financial and operating performance. This performance, in turn, is subject to various factors, including certain factors beyond our control, such as changes in conditions affecting the airline industry and changes in the overall economy. Additionally, our customer base has been adversely impacted in the past by various factors, such as the state of the general economy, fluctuations in the price of jet fuel, the war on terrorism, the war in Iraq, and competitive price reductions in airfare prices. These and other factors may adversely affect our customers in the future.

      Cash flow from operations is used to service our debt and note obligations, thereby reducing funds available for other purposes. Even if we are able to meet our debt service and other obligations when due, we may not be able to comply with the covenants and other provisions under our debt and note obligations. A failure to comply, unless waived by the lenders and noteholders, would be an event of default and would permit the lenders and noteholders to accelerate the maturity of these debts and note obligations. It would also permit them to terminate their commitments to extend credit under their financing agreements. If we were unable to repay the debt to the lenders or obligations to the noteholders, or otherwise obtain a waiver, the lenders and holders could proceed against the collateral securing the financing obligations and notes, and exercise all other rights available to them. While we expect to be in a position to continue to meet our obligations in future periods, there can be no assurance we will be able to do so.

Results of Operations

      Operating revenues consist primarily of service revenues and sales of materials consumed while providing services, net of allowances for any reworks, discounts, or returns. Cost of sales consists primarily of labor, materials, overhead and freight charges.

      Our operating results have fluctuated in the past and may fluctuate significantly in the future. Many factors affect our operating results, including the following:

      Large portions of our operating expenses are relatively fixed. Since we typically do not obtain long-term commitments from our customers, we must anticipate the future volume of orders based upon the historic patterns of our customers and upon discussions with our customers as to their future requirements. Cancellations, reductions or delays in orders by a customer or group of customers have in the past and could in the future have a material adverse effect on our business, financial condition and result of operations.

Three Months Ended March 31, 2005 and 2004

      The following table sets forth certain information relating to our operations for the periods indicated:

      Operating revenue for the three month period ended March 31, 2005 increased $7,150 or 8.6% to $90,682, from $83,532 for the same period in 2004. The increase in revenues for the quarter ended March 31, 2005 compared to the revenues for the quarter ended March 31, 2004 can primarily be attributed to additional revenue in our airframe heavy maintenance operations, in our engine center operation due to an expanded customer base and the addition of JT8D-200 overhaul capabilities, and in our Brice seat manufacturing and overhaul operation, which has benefited from the cross sales of our other service offerings and from an expanded customer base, including its first major U.S. carrier for aircraft sales.

      During 2005, particularly within our airframe MRO facilities, we have continued to expand our customer base and, in some instances, we have increased our share of outsourced maintenance from our existing customers. The impact on revenue for the 2005 first quarter was an increase in revenue for our airframe MRO facilities over the 2004 first quarter of approximately $11,000 or 17.7%. This increase in revenues from the operation of our airframe MRO facilities, coupled with the increased revenue for our engine center operation ($2,800 quarter-over-quarter increase), for our line maintenance operation ($1,000 quarter-over-quarter increase), and our Brice operation ($870 quarter-over-quarter increase), accounted for the significant increase in revenue for the 2005 first quarter over the 2004 first quarter. These quarter-over-quarter revenue increases were partially offset by lower revenue for our engineering services as substantial customer programs were completed during the first quarter of 2004.

      While significantly improved over 2004, our revenue and gross profit for 2005 continued to be unfavorably impacted by general economic conditions affecting the airline industry, including increased jet fuel prices, and by increased competition in the MRO markets in which we operate. These factors forced us to reduce our pricing and take fixed price work at lower rates, which adversely impacted revenues and gross margins. Additionally, instability in the Middle East and the global war on terrorism have unfavorably impacted airline passenger levels during 2004 and 2005, which has equated to further delays of maintenance service by some of our customers. Finally, delays and changes in customer maintenance schedules have impacted us in the past and are likely to further impact us in the future.

      Gross profit increased to $9,418 for the quarter ended March 31, 2005 compared with a gross profit of $6,293 for the quarter ended March 31, 2004; a 50.0% improvement. Gross profit as a percentage of revenue increased to 10.4% for the first quarter of 2005, compared to 7.5% for the same period of 2004. The increased gross profit for the three month period ended March 31, 2005 over the same period for 2004 was spurred by long-term repetitive customer maintenance programs (referred to in the industry as “nose-to-tail lines”), where greater efficiencies can be reached, and by higher revenues, particularly within our airframe MRO operations and our engine center operation, which allowed us to better leverage the fixed portion of our cost of sales. Also, partially deteriorating the gross profit results for the first quarter of 2004 were ramp-up/learning curve issues relating to services for a major new customer within our Greensboro airframe facility.

      Gross profit levels are affected by sales volume in that many of the costs of operating our facilities are relatively fixed and therefore revenues above a certain level have a more than proportional impact on gross margins. Further, gross margins during any particular period are dependent upon the number and type of aircraft serviced, the contract terms under which services are performed and the efficiencies that can be obtained in the performance of such services. Significant changes in any one of these factors could have a material impact on the amount and percentage of our gross profits in any particular period and from period to period. Additionally, gross profit could be impacted in the future by considerations as to the value of our inventory. We continue to evaluate market and industry exposures in connection with the establishment of appropriate inventory valuation levels. While we believe that we have appropriately valued our inventory at the lower of cost or market, additional allowances may be required in the future, depending on the market for aircraft parts during any particular period and the applicability of the parts in our inventory compared to the types of aircraft for which we are performing maintenance procedures.

      Operating expenses for the three month period ended March 31, 2005 were $6,454 compared to $5,502 for the three month period ended March 31, 2004. Operating expenses as a percentage of revenues were 7.1% and 6.6% for the 2005 and 2004 first quarters, respectively.

      As a result of these factors, income from operations was $2,964 for the quarter ended March 31, 2005 compared to income from operations of $791 for the quarter ended March 31, 2004.

      Interest expense (excluding amortization of deferred financing fees) for the three month period ended March 31, 2005 increased by $287 to $1,832, from $1,545 for the three month period ended March 31, 2004. The increase over 2004 is primarily attributable to interest expense on our restructured related party term loan (established April 8, 2004) and the additional interest expense on our $8,000 Hilco Term Loan (established April 8, 2004). For the quarter ended March 31, 2005, our non-cash PIK interest expense increased $87 while our cash interest expense increased $200 over 2004.

      Amortization of deferred financing costs for the first quarter of 2005 was $300, compared to $264 for the first quarter of 2004. The slight increase over 2004 is primarily attributable to higher deferred financing fees incurred in conjunction with our CIT Group Credit Facility and Hilco Term Loan (both completed in April of 2004) as compared to our previously outstanding senior credit facilities with an original maturity date of January 31, 2004 and minimal additional financing fees incurred related to the short-term extension of our previously outstanding senior credit facilities through July 2004.

      During the first quarter ended March 31, 2005, we completed an offering and consent solicitation relating to our New Senior Notes and our Junior Notes. As a result of this tender offer, we recognized an inducement charge of $160 relating to the value of the premium shares issued as a part of the offering. Additionally, we incurred transaction fees related to the offering of $240.

      Other income net was $381 and $165 for the first three months of 2005 and 2004, respectively. Other income net for the first quarter of 2005 included a $250 gain from the receipt of life insurance proceeds on a former key employee.

      As a result of the above factors, our income from continuing operations before income taxes and discontinued operations for the quarter ended March 31, 2005 was $814, compared to our loss from continuing operations before income taxes and discontinued operations of $853 for the quarter ended March 31, 2004.

      During the first quarter of 2005, we recognized a $337 income tax benefit as a result of income tax refunds for the overpayment of state taxes for our Oscoda, Michigan operations.

      For the reasons set forth above, our income from continuing operations for the three month period ended March 31, 2005 was $1,151, or $0.02 per basic share and $0.00 per diluted share, compared to a loss of $853, or $0.03 per basic share and diluted share, for the three month period ended March 31, 2004.

      Income from discontinued operations for the quarter ended March 31, 2005 was $55, or $0.00 per basic and diluted share, compared to income of $971, or $0.03 per basic and diluted share, for the quarter ended March 31, 2004. Income from discontinued operations for 2004 includes an $825 gain on the disposition of our office and warehouse facility located in Miramar, Florida and net rental income and expenses associated with this office and facility received prior to its disposition. Results for both quarterly periods include collections on receivables retained from the sale of our redistribution operations that had been fully reserved and the sale of residual inventory that remains after the sale of our redistribution operation and new parts bearings operation. Since our collections on assets from discontinued operations are winding down, we do not expect that our income from discontinued operations will be significant in future periods.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

      The following table sets forth certain information relating to our operations for the periods indicated:

      Operating revenue for the year ended December 31, 2004 increased $80,974 or 33.4% to $323,488, from $242,514 for the same period in 2003. Operating revenue in 2004 included $38,062 from our Goodyear, Arizona facility, which became operational in April 2003, compared to revenue from this facility of $21,335 in 2003.

      The increase in revenues for the year ended December 31, 2004 compared to the revenues for the year ended December 31, 2003 can primarily be attributed to additional revenue in our airframe heavy maintenance operations (described below), in our engine center operation due to an expanded customer base and the addition of JT8D-200 overhaul capabilities, in our Goodyear, Arizona facility (as discussed above), in our engineering service group due to several significant interior modification programs, and in our Brice seat manufacturing and overhaul operation, which has benefited from the cross sales of our other service offerings and from an expanded customer base, including its first major U.S. carrier for its aircraft seats.

      Adverse market conditions during the first half of fiscal 2003 resulted in delays of maintenance service work by several of our significant customers and adversely impacted our 2003 results of operations. Many of these delayed maintenance programs, however, were inducted for service during the second half of 2003 and have continued through all of fiscal 2004. In addition, during 2004 we have expanded our customer base and, in some instances, increased our share of outsourced maintenance from our existing customers. The impact on revenue for the 2004 fiscal year was an increase in revenue for our airframe MRO facilities, including Goodyear, over the 2003 fiscal year of approximately $61,200 or 31.9%. This increase in revenues from the operation of our airframe MRO facilities, coupled with the increased revenue for our engineering services group ($12,300 year-over-year increase), for our engine center operation ($2,800 year-over-year increase) and our Brice operation ($4,800 year-over-year increase), accounted for the significant increase in revenue for the 2004 fiscal year over the 2003 fiscal year.

      While significantly improved over 2003, our revenue and gross profit for 2004 continued to be unfavorably impacted by general economic conditions affecting the airline industry, including increased jet fuel prices, and by increased competition in the MRO markets in which we operate. For most of fiscal 2004, these unfavorable impacts caused increased price competition and continued downward pricing pressures from airline customers. These factors forced us during fiscal years 2004 and 2003 to reduce our pricing and take fixed priced work at lower rates, which adversely impacted revenues and gross margins. Additionally, instability in the Middle

East, the war on terrorism, and the war in Iraq have unfavorably impacted airline passenger levels during fiscal 2003, which has equated to further delays of maintenance service by some of our customers. Finally, changes in customer maintenance schedules have impacted us in the past and are likely to impact us in the future.

      Gross profit increased to $29,289 for the year ended December 31, 2004 compared with a gross profit of $16,183 for the year ended December 31, 2003. Gross profit as a percentage of revenue increased to 9.1% for fiscal 2004, compared to 6.7% for fiscal 2003. The increased gross profit for the 2004 fiscal year over the same period for 2003 was spurred by the receipt of long-term repetitive customer maintenance programs (referred to in the industry as “nose-to-tail lines”), where greater efficiencies can be achieved, and by higher revenues which allowed us to better leverage the fixed portion of our cost of sales.

      Since we did not have significant nose-to-tail lines during most of 2003, we were forced to take a higher proportion of single-visit customers which resulted in a deterioration of gross margins due to lower productivity. In addition to the increase in nose-to-tail maintenance programs in 2004, an overall increase in sales levels, particularly for our engineering services group, our engine center operation and our Brice operation, resulted in an improved gross margin. Partially offsetting the improved gross margin results for the 2004 fiscal year were inventory obsolescence charges that we recorded in fiscal 2004, as discussed below. Fiscal 2004 results were also adversely impacted by ramp-up/learning curve issues relating to services for a major new customer. In addition to the lower productivity impact on gross margins during 2003 as described above, gross margins were adversely impacted during the 2003 fiscal year due to increased training costs associated with new customer programs and aircraft types, as well as, ramp up costs, particularly at our Goodyear facility. Partially offsetting the 2003 margin deterioration was a $463 benefit recognized when we settled disputes relating to one of our leased facilities.

      Gross profit levels are affected by volume in that many of the costs of operating our facilities are relatively fixed and therefore revenues above a certain level have a more than proportional impact on gross margins. Further, gross margins during any particular period are dependent upon the number and type of aircraft serviced, the contract terms under which services are performed and the efficiencies that can be obtained in the performance of such services. Significant changes in any one of these factors could have a material impact on the amount and percentage of gross profits in any particular period and from period to period. Additionally, gross profit could be impacted in the future by considerations as to the value of our inventory. During 2004, we continued to evaluate market and industry exposures in connection with the establishment of appropriate inventory valuation levels. Based on our valuation methodology, we recorded an additional inventory charge of $1,936 for the year ended December 31, 2004 and $265 for the year ended December 31, 2003. While we believe that we have appropriately valued our inventory at the lower of cost or market value, additional allowances may be required in the future, depending on the market for aircraft parts during any particular period and the fleet types of the parts in our inventory compared to the types of aircraft for which we are performing maintenance procedures.

      Operating expenses for the year ended December 31, 2004 were $22,636 compared to $14,761 for the year ended December 31, 2003. Operating expenses as a percentage of revenues were 7.0% and 6.1% for the 2004 and 2003 fiscal years, respectively.

      Operating expenses were favorably impacted throughout 2003 as a result of eliminating several exposures and the recovery of a significant bad debt. During 2003, as a result of revised environmental estimates from our environmental consultants for our Lake City facility, we were able to reverse $400 of our environmental accrual. Also, during 2003, we resolved a long standing customer dispute and collected $925 of accounts receivable that was previously fully reserved. As well, during the twelve month period ended December 31, 2003, we terminated a lease agreement with a third party for an abandoned facility in Burnsville, Minnesota. As a result of this lease termination, we eliminated a $300 accrual previously established for our operating lease commitment. Additionally, we eliminated a $264 environmental accrual that had been established for property sold in a prior year, as it was determined in 2003 that we no longer had any environmental exposures for this property. Also, during 2003, we entered into an operating agreement with a third party vendor. As a result of this agreement and modifications made to an accounts receivable balance due from this vendor within the operating agreement, we eliminated the need for a reserve of $300 against this receivable balance. In

addition, during 2003 we were able to extend a sublease agreement with a third party for a facility that we currently lease in Opa Locka, Florida. As a result of this sublease extension, we eliminated a $300 accrual previously established for the shortfall in the operating lease commitment and the amount of the original sublease income. Finally, as a result of a revised estimate of retrospective premiums for workers’ compensation insurance, we reduced our accrual for workers’ compensation by $400 during 2003. These reductions in exposures are reflected as an offset to operating expenses of $2,889 for the year ended December 31, 2003. Had all of these offsets to operating expenses not occurred, the 2003 fiscal year operating expenses as a percentage of revenues would have been 7.3%.

      The combination of these offsets to operating expenses during 2003, coupled with increased expenses required to support increased revenues for the year ended December 31, 2004 compared to the year ended December 31, 2003, resulted in the significant increase in operating expenses reflected above.

      As a result of these factors, income from operations was $6,653 for the year ended December 31, 2004, compared to income from operations of $1,422 for the year ended December 31, 2003.

      Interest expense (excluding amortization of deferred financing fees) for the year ended December 31, 2004 increased by $2,179 or 44.4% to $7,085, from $4,906 for the year ended December 31, 2003. The increase over 2003 is primarily attributable to non-cash interest expense on our related party term loan (which was substantially funded in July 2003 and interest was paid-in-kind), the cash interest and non-cash interest expense on our restructured $14,412 related party term loan (established April 8, 2004), the additional cash interest and non-cash interest expense on our newly established $8,000 Hilco Term Loan (established April 8, 2004) and by increased borrowing levels, year-over-year, under our revolving credit facility. For the year ended December 31, 2004, our non-cash PIK interest expense increased $1,110 as compared to the same period of 2003, while our cash interest expense in 2004 increased $1,069 over 2003.

      Amortization of deferred financing costs was $1,317 in 2004 as compared to $2,867 for 2003. The decrease from 2003 is primarily attributable to deferred financing fees related to our July 2002 financing being fully amortized at the end of January 2004 (the original maturity date for our Amended Credit Facility and BofA Term Loan) with minimal additional financing fees incurred related to the extension of the Amended Credit Facility through July 2004. Partially offsetting this reduction is amortization of deferred financing fees incurred in conjunction with our newly established CIT Group Credit Facility and Hilco Term Loan, completed in April 2004, and deferred financing fees incurred in conjunction with the warrant that was extended to our majority stockholder in conjunction with obtaining a portion of our related party term loan. During the second quarter of 2004 we wrote-off $145 of deferred financing fees that related to the short-term extension of our amended credit facility.

      Other income — net was $1,082 and $1,061 for 2004 and 2003, respectively. Other income — net for 2004 included a gain on the settlement relating to our warrant repurchase obligation ($209) and a gain relating to a job creation incentive program established with the State of Florida ($284). Other income — net for 2003 was primarily comprised of a gain on the settlement of outstanding issues related to the July 2002 sale of our Aerocell Structure operations ($570).

      As a result of the above factors, our loss from continuing operations before income taxes and discontinued operations for the year ended December 31, 2004 was $667 compared to our loss from continuing operations before income taxes and discontinued operations of $5,290 for the year ended December 31, 2003.

      During 2003, we recognized a $789 income tax benefit as a result of the Internal Revenue Service (“IRS”) completing audits of our 1996, 1997, 1998 and 1999 federal income tax returns. Based on the findings in the IRS agent’s report, we eliminated a $1,000 accrual for tax exposure matters and established an income tax receivable for $177. This benefit was partially offset by a $388 provision for state income taxes. Additionally, during 2003, we recognized a tax benefit of $197 for the receipt of miscellaneous federal and state carryback refunds. The aggregate income tax benefit of these events was $986.

      As of December 31, 2004, we had net operating loss carryfowards of $52,246, $1,806 relating to pre-restructuring activities and $50,440 relating to post-restructuring activities. After the carryback of net operating losses to prior years and the completion of the note exchange and rights offering, the amount of

pre-restructuring net operating loss carryforwards available for use after February 28, 2002 was limited to $1,806, which may be utilized at a rate of approximately $90 per year, plus net operating losses generated from March 1, 2002 through December 31, 2002 and those net operating losses generated in fiscal years 2003 and 2004. As of December 31, 2004, we have established a valuation allowance for the full balance of these net operating loss carryforwards due to the uncertainty that we will be able to utilize these net operating loss carryforwards in future periods.

      For the reasons set forth above, our loss from continuing operations for the year ended December 31, 2004 was $667, or $0.02 per basic share and diluted share, compared to a loss of $4,304, or $0.14 per basic share and diluted share, for the year ended December 31, 2003.

      Income from discontinued operations for the year ended December 31, 2004 was $1,580, or $0.05 per basic share and diluted share, compared to income of $4,043, or $0.13 per basic share and diluted share, for the year ended December 31, 2003. Income from discontinued operations for 2004 is comprised of a gain of $825 on the disposition of our office and warehouse facility located in Miramar, Florida, net rental income and expenses totaling $75 associated with this office and warehouse facility received prior to its disposition, and collections on receivables retained from the sale of our redistribution operations that had been fully reserved and the sale of residual inventory that remains after the sale of our redistribution operation and new parts bearings operation. Income from discontinued operations for 2003 includes net rental income and expenses totaling $336 associated with our Miramar facility, collections on receivables retained from the sale of our redistribution operations that had been fully reserved and the sale of residual inventory that remains after the sale of our redistribution operation and new parts bearings operation. Additionally, income from discontinued operations for 2003 includes $2,770 resulting from the elimination and settlement of contingency exposures and obligations relating to our redistribution operations and new parts bearing operations, based on a current evaluation of those exposures.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      The following table sets forth certain information relating to our operations for the periods indicated:

      Operating revenue for the year ended December 31, 2003 increased $60,541 or 33.3% to $242,514, from $181,973 for the same period in 2002. Operating revenue for 2002 included $3,892 in revenues from the operation of Aerocell, which was sold in July 2002. Operating revenue for 2003, however, included $34,543 in combined revenues from the operations of two facilities (Brice Manufacturing acquired in October 2002 and the Goodyear, Arizona facility which began operations in April 2003) that were not in operation during most of 2002. Without the revenue from these facilities, comparative 2002 revenues would have been $178,081 and comparative 2003 revenues would have been $207,971.

      The increase in revenues for the year ended December 31, 2003 compared to the revenues for the year ended December 31, 2002 can primarily be attributed to additional revenues in our aircraft heavy maintenance operations (described below), in our engine center operation due to a strategic relationship that was entered into during the second quarter of 2003 with one of our vendors, in our Goodyear, Arizona facility (which serviced its first aircraft in May 2003), and in our Brice operation, which was acquired in October 2002, somewhat offset by the loss of sales volume from our Aerocell operation, which was sold in July 2002.

      Revenues for 2003 were favorably impacted by a significant influx of airframe heavy maintenance work to our MRO operations. Adverse market conditions, which resulted in severe financial problems for several of our customers (including our largest customer for fiscal years 2003 and 2002), resulted in delays of maintenance service work by several of our significant customers and adversely impacted our results of operations, particularly for the second half of 2002 and for the first six months of 2003. Many of these delayed maintenance programs, however, were inducted for service during the third quarter of 2003. The impact on revenues for the second half of 2003 was an increase in revenues for our airframe MRO facilities, including Goodyear, over the prior year final six month period of 2002 of approximately $50,025. This increase within our airframe MRO facilities, coupled with the increased revenues for our engine center operation, resulted in a $56,190 improvement in revenues in the second half of 2003 over the prior year final six month period of 2002.

      While significantly improved over revenues for the year ended December 31, 2002, our revenues for the year ended December 31, 2003 continued to be unfavorably impacted by numerous general economic conditions, several of which continued to impact us into 2004. These include a reduction in market opportunities due to unfavorable financial conditions, which have caused many of our customers to delay maintenance or park older aircraft maintained by us due to fluctuations in fuel prices and reduced passenger levels. Our revenue also continued to be adversely impacted during 2003 by increased price competition and downward pricing pressures from airline customers. These factors forced us during 2002 and 2003 to reduce pricing and take fixed priced work at lower rates, which adversely impacted revenues and gross margins. Additionally, instability in the Middle East, the war on terrorism, the war in Iraq, and the outbreak of the SARS virus in Asia, unfavorably impacted airline passenger levels during 2003, which equated to further delays of maintenance service by some of our customers. Finally, future changes in customer maintenance schedules, similar to those described above, have impacted us in the past and are likely to impact us in the future.

      Gross profit increased to $16,183 for the year ended December 31, 2003 compared with a gross profit of $2,268 for the year ended December 31, 2002. The improvement of the gross margin results for the year ended December 31, 2003 compared to the year ended December 31, 2002 was spurred by the receipt of long-term repetitive customer maintenance programs (referred to in the industry as “nose-to-tail lines”, where greater efficiencies are generally achieved), particularly during the later half of 2003. The first six months of 2002 were also favorably impacted by a higher proportion of nose-to-tail lines. However, during the last half of 2002 and the first six months of 2003, because we did not have significant nose-to-tail lines during these periods, we were forced to take a higher proportion of single-visit customers (which result in a deterioration of gross margin results do to lower productivity). At the end of the second quarter and throughout the final six months of 2003, however, the increase in nose-to-tail maintenance programs resulted in a significant improvement to gross margins for the year ended December 31, 2003. The gross margin results for this increased work was adversely impacted, in part, by training costs associated with bringing on these programs and general ramp up costs, particularly at our Goodyear facility. In addition to these maintenance programs, an overall increase in sales levels, particularly for our engine center operation, resulted in an improved gross margin. Also, during the third quarter of 2003 we settled various disputes relating to one of our leased facilities. As part of this

settlement, we were partially alleviated from paying disputed utility charges. These charges, which were fully accrued, resulted in a benefit of $463. This benefit is reflected as a reduction to cost of sales for the year ended December 31, 2003. Finally, as noted below, 2002 was unfavorably impacted by an increase in inventory write-downs of $8,334. Gross profit as a percentage of revenues increased to 6.7% for the year ended December 31, 2003, from 1.2% for the year ended December 31, 2002.

      Gross profit levels are impacted by the fact that many of the costs of operating our facilities are relatively fixed and therefore revenues above a break-even level have a more than proportional favorable impact on gross margins. Further, gross margins during any particular period are dependent upon the number and type of aircraft serviced, the contract terms under which services are performed and the efficiencies that can be obtained in the performance of such services. Significant changes in any one of these factors could have a material impact on the amount and percentage of gross profits. Additionally, gross profit could be impacted in the future by considerations as to the value of our inventory. While we believe that we have appropriately valued our inventory at the lower of cost or market value, additional allowances may be required in the future, depending on the market for aircraft parts and the fleet types of the parts in our inventory compared to the types of aircraft for which we are performing maintenance procedures. Due to the then current market conditions for our aircraft parts, during 2002, we increased the valuation allowances for our inventory by $8,334. During 2003, we continued to evaluate all market and industry exposures in connection with our adjustments to inventory valuations. Based on these current evaluations, we recorded an inventory charge of $265 for the year ended December 31, 2003.

      Operating expenses decreased $813 or 5.2% to $14,761 for the year ended December 31, 2003, compared with $15,574 for the year ended December 31, 2002. Operating expenses as a percentage of revenues were 6.1% for the year ended December 31, 2003 compared to 8.6% for the year ended December 31, 2002. For the most part, reductions in operating expenses achieved through the sale of Aerocell in July 2002 and from economies of scale due to increased revenues were offset by operating expenses recognized in the operation of Brice Manufacturing Company, that was acquired in October 2002, and expenses incurred in the start-up and conducting of operations at the Goodyear facility.

      In addition to the fluctuations in operating expenses that were the result of changes, year-over-year, in our operating units, we recognized several offsets to operating expenses in 2003. As a result of revised environmental estimates from our environmental consultants, for our Lake City facility, we were able to reverse $400 of our environmental accrual. Also, during 2003, we resolved a long standing customer dispute and collected $925 of accounts receivable that was previously fully reserved. As well, during the twelve month period ended December 31, 2003, we terminated a lease agreement with a third party for an abandoned facility in Burnsville, Minnesota. As a result of this lease termination, we eliminated a $300 accrual previously established for our operating lease commitment. Additionally, we eliminated a $264 environmental accrual that had been established for property sold in a prior year, as it was determined in 2003 that we no longer had any environmental exposures for this property. Also, during 2003, we entered into an operating agreement with a third party vendor. As a result of this agreement and modifications made to an accounts receivable balance due from this vendor within the operating agreement, we eliminated the need for a reserve of $300 against this receivable balance. In addition, during 2003 we were able to extend a sublease agreement with a third party for a facility that we currently lease in Opa Locka, Florida. As a result of this sublease extension, we eliminated a $300 accrual previously established for the shortfall in the operating lease commitment and the amount of the original sublease income. Finally, as a result of a revised estimate of retrospective premiums for workers’ compensation insurance, we reduced our accrual for workers’ compensation by $400 during 2003. All of these offsets are reflected as reductions in operating expenses for the year ended December 31, 2003.

      Operating expenses for the year ended December 31, 2002, however, were unfavorably impacted by a $1,150 settlement charge with former Oscoda, Michigan employees. This settlement was the result of a suit against us for alleged violations of the Worker Adjustment and Retraining Notification Act. Additionally, during the twelve month period ended December 31, 2002, we recorded accounts receivable valuation allowances of approximately $1,300 for customers with identified credit exposures, including our largest customer.

      As a result of these factors, income from operations was $1,422 for the year ended December 31, 2003, compared to a loss from operations of $13,306 for the year ended December 31, 2002.

      Interest expense (excluding amortization of deferred financing fees) for the year ended December 31, 2003 decreased by $1,506 or 23.5% to $4,906, from $6,412 for the year ended December 31, 2002. The decrease for 2003 as compared to 2002 is primarily attributable to completion of the Note Exchange and Rights Offering which eliminated interest expense on $149,000 of notes since the end of February 2002, on average a lower outstanding debt balance as a result of selling Aerocell and using a substantial portion of the proceeds to reduce our debt, completion of our previous senior debt restructuring and slightly lower interest rates from period to period. This reduction was partially offset by non-cash interest expense (since the note is a PIK instrument) of $764 on our $8,250 related party loan with our majority stockholder (which was substantially funded by July 3, 2003) and by the accretion of our Junior Notes to their redemption value. This accretion, which approximated $450 for 2003 as compared to $113 for 2002, is a non-cash item (since the note is a PIK instrument), and is included as a component of interest expense within the accompanying consolidated results of operations.

      Amortization of deferred financing costs was $2,867 for the twelve months ended December 31, 2003 compared to $5,527 for the twelve months ended December 31, 2002. The decrease for 2003 as compared to 2002 is primarily attributable to the completion of amortization of deferred financing costs associated with our previous senior credit facility, which was refinanced in July 2002. Additionally, deferred financing fees related to the July 2002 credit facility were significantly less then those of the previous credit facility. Amortization of deferred financing fees incurred in conjunction with our May 14, 2003 amendment to our July 2002 credit facility and TROL financing arrangement, in addition to deferred financing fees incurred in conjunction with the warrant that was extended to our majority stockholder in conjunction with securing our related party term loan, partially offset the reduced fees from our senior debt refinancing. The warrant valuation, as determined by an independent business valuation specialist through a fair market value assessment of the Company, was recorded at $1,258 as of May 14, 2003 and was being amortized over the initial three year period of the term loan. As a result of the related party term loan refinancing, effective April 8, 2004 we have reset the amortization period for the unamortized deferred financing balance and will amortize this amount over the term of the newly established related party term loan (January 31, 2008).

      During 2002, we recorded a charge related to an agreement to settle a then-outstanding class action securities lawsuit. The ultimate charge recognized in 2002 related to this settlement, adjusted for gains that resulted through revaluations of the securities to be issued in this settlement up through the effective date of September 20, 2002, totaled $4,410.

      During 2002, we recognized a $27,279 extraordinary gain relating to the note exchange. On January 1, 2003, we adopted SFAS No. 145, “Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. As a result of adoption of SFAS No. 145, we have reclassified the $27,279 gain on debt extinguishment to be included within continuing operations.

      Other income — net was $1,061 for the twelve month period ended December 31, 2003 compared with $1,849 for the same period in 2002. Other income — net for 2003 was primarily comprised of a gain on the settlement of outstanding purchase price adjustments and other obligations and funds held in escrow related to the sale of Aerocell (approximately $570). Other income — net for 2002 was primarily comprised of a portion of the gain on the global settlement with Kellstrom (approximately $700) and the gain on sale of the Aerocell operations (approximately $300).

      As a result of the above factors, our loss before income taxes and discontinued operations for the year ended December 31, 2003 was $5,290, compared to our loss before income taxes and discontinued operations of $527 for the year ended December 31, 2002. Without the $27,279 gain on debt extinguishment relating to the note exchange (which as a result of adopting SFAS No. 145 we have reclassified to be included within continuing operations), the comparative 2002 loss before income taxes and discontinued operations would have been $27,806 (we believe that comparison of our twelve month loss before income taxes and discontinued operations of 2003 to the comparable period of 2002 loss before income taxes and discontinued

operations without the effect of the above-described gain on extinguishment of debt provides a useful measure for investors to compare our period-to-period results of operations).

      During 2003, we recognized a net $789 income tax benefit as a result of the Internal Revenue Service (“IRS”) completing audits of our 1996, 1997, 1998 and 1999 federal income tax returns. Based on the findings in the IRS agent’s report, we eliminated a $1,000 accrual for tax exposure matters and established an income tax receivable for $177. This benefit was partially offset by a $388 provision for state income taxes. Additionally, during 2003, we recognized an income tax benefit of $197 for the receipt of miscellaneous federal and state carryback refunds. The aggregate income tax benefit of these events was $986.

      We recorded a $3,800 tax benefit during 2002 as a result of the passage of legislation which permits businesses to carry net operating losses back to offset taxable income from the previous five years (compared to two years under prior law). Prior to the passage of this legislation, these net operating losses were fully reserved due to the uncertainty that we would generate taxable income in the near future sufficient to benefit from these net operating losses.

      For the reasons set forth above, loss from continuing operations for the twelve months ended December 31, 2003 was $4,304, or $0.14 per basic share and diluted share, compared to income of $3,273, or $0.13 per basic share and $0.01 per diluted share, for the twelve months ended December 31, 2002.

      Income from discontinued operations for the year ended December 31, 2003 was $4,043, or $0.13 per basic share and per diluted share, compared to income of $3,749, or $0.14 per basic share and $0.02 per diluted share for the year ended December 31, 2002. Income from discontinued operations for 2003 includes approximately $2,770 resulting from the elimination and settlement of contingency exposures and obligations relating to our redistribution operations and new parts bearings operations, based on a current evaluation of those exposures, a gain on the sale of our Covington facility of approximately $410, and net rental income and expenses associated with our Miramar facility ($336). Income from discontinued operations for 2002 includes net rental income and expenses associated with our Miramar facility ($419), a portion ($900) of the gain on the gain of the Kellstrom settlement and the lease of equipment to Kellstrom for a portion of the year ($540). Additionally, income from discontinued operations for 2003 and 2002 contains collections on receivables retained from the sale of our redistribution operations that had been fully reserved and the sale of residual inventory that remains from the sale of our redistribution operation and new parts bearings operation.

Liquidity and Capital Resources

      For the year ended December 31, 2004, we incurred losses from continuing operations of $667. We also had a net stockholders deficit as of December 31, 2004 and March 31, 2005. Further, during 2004 we required additional cash flow above amounts currently being provided from operations to meet our working capital requirements. During the first quarter ended March 31, 2005, while not necessarily indicative of the results of operations and cash flows which may be reported for the year ended December 31, 2005, we reported income from continuing operations of $1,151 and cash flow from operations of $7,016.

      Our ability to service our debt and note obligations as they come due, including compliance with the covenants and provisions under our current and future debt instruments, is and will continue to be dependent on our future financial and operating performance. This performance, in turn, is subject to various factors, including certain factors beyond our control, such as changes in conditions affecting the airline industry and changes in the overall economy. Additionally, our customer base has been adversely impacted in the past by various factors, such as the state of the global economy, fluctuations in the price of jet fuel, the ongoing global war on terrorism, the outbreak of the SARS virus in Asia and competitive price reductions in airfare prices. These and other factors may adversely affect our customers in the future.

      Cash flow from operations is used to service our debt and note obligations, thereby reducing funds available for other purposes. Even if we are able to meet our debt service and other obligations when due, we may not be able to comply with the covenants and other provisions under our debt and note obligations. A failure to comply, unless waived by the lenders and the noteholders, would be an event of default and would permit our lenders and noteholders to accelerate the maturity of these debt and note obligations. It would also

permit them to terminate their commitments to extend credit under the financing agreements. Additionally, our senior credit facilities limit our ability to continue to borrow additional funds in the event of a material adverse change in our business. If we were unable to repay the debt to the lenders or obligations to the noteholders, or otherwise obtain a waiver, the lenders and holders could proceed against the collateral securing the financial obligations and notes, and exercise all other rights available to them. While we expect to be in a position to continue to meet our obligations in future periods, there can be no assurance we will be able to do so.

      At May 4, 2005, the outstanding aggregate borrowed on the CIT Group Revolving Line of Credit was $4,597, the outstanding CIT Term Loan was $5,527, outstanding letters of credit under the CIT Group Revolving Line of Credit was $12,064 and $15,364 was available for additional borrowing under the CIT Group Revolving Line of Credit.

      Additionally, the degree to which we are leveraged could have important consequences to us, including:

      In addition, subject to the limitations set forth in the indenture for the New Senior Notes, we and our subsidiaries may incur substantial amounts of additional indebtedness. Finally, our senior credit facilities are secured by a lien on substantially all of our assets.

      We believe we will meet our working capital requirements during 2005 from funds available under our revolving credit agreement, our new term loans from Monroe Capital, and our operations. We may also sell assets or our equity securities, or borrow additional funds, to the extent required and available. While we expect that required financing will be available to meet our working capital requirements, there can be no assurance of this expectation.

Source and Use of Cash

      Net cash provided from our continuing operating activities during the first quarter of 2005 was $7,016, compared to net cash used in continuing operations activities during the first quarter of 2004 of $4,564. Cash earnings, adjusted for non-cash charges, from continuing operations in the first quarter of 2005 were $3,575, decreases in accounts receivable of $1,833, and increases in amounts payable and other liabilities of $3,074 and $788, respectively, were used primarily to fund increases in inventories and other assets of $1,106 and $761, respectively, for the purchase of fixed assets of $699, and to reduce our senior debt and capital obligations by $6,463 in the aggregate. Cash of $55 was provided by our discontinued operations.

Senior Credit Facilities

      On April 8, 2004, we closed on a refinancing of all of our senior debt as contemplated by a financing agreement dated April 5, 2004 between the Company and the CIT Group. Under this financing agreement, we obtained the CIT Group Revolving Line of Credit, which is a $35,000 senior secured revolving line of credit, and the CIT Group Term Loan, which is a $6,400 senior secured term loan. We used the proceeds from the CIT Group Credit Facility to repay in full amounts outstanding under its previously outstanding senior credit facility, to repay a warrant repurchase obligation due to a previous lender and for working capital.

      The CIT Group Revolving Line of Credit is due December 31, 2007 and bears interest, at our option, at (a) Prime plus an advance rate ranging from 0.00% to 0.75%, or (b) LIBOR plus an advance rate ranging from 2.50% to 4.00%, with the advance rates contingent on the Company’s leverage ratio. We have currently

elected both Prime and LIBOR options for portions of the outstanding revolving line of credit. Also, in accordance with the requirements of EITF 95-22, we have presented this revolving line of credit as a short-term obligation. The CIT Group Term Loan is due in quarterly installments of $291, which commenced on October 1, 2004, with the final quarterly installment due on December 31, 2007. The CIT Group Term Loan bears interest at the prevailing rate of the CIT Group Revolving Line of Credit plus one percent. Also, the CIT Group Credit Facility contains certain financial covenants regarding our financial performance and certain other covenants, including limitations on the incurrence of additional debt, and provides for the termination of the CIT Group Credit Facility and repayment of all debt in the event of a change in control, as defined. In addition, an event of default under the Hilco Term Loan (described below) and the recently established Monroe Capital Loans (see below) will also result in a default under the CIT Group Credit Facility. Borrowings under the CIT Group Credit Facility are secured by a lien on substantially all of our assets. Borrowings under the CIT Group Revolving Line of Credit are based on a borrowing base formula that takes into account the level of our receivables and inventory. Further, the amounts that we can borrow under the CIT Group Revolving Line of Credit are affected by various availability reserves that are established by the lenders under the financing agreement, and our borrowings under the CIT Group Revolving Line of Credit are limited based on the ratio of our debt to EBITDA. Finally, the agreement relating to the CIT Group Revolving Line of Credit requires that at the time of each additional borrowing, we must make various representations and warranties to its lenders regarding its business (including several reaffirming that there have been no changes in the status of specific aspects of our business that could reasonably be expected to have a material adverse effect upon the business operation, assets, financial condition or collateral of TIMCO Aviation Services and its subsidiaries taken as a whole), and be in compliance with various affirmative and negative covenants, all as more particularly set forth in the agreement. As of March 31, 2005, the outstanding aggregate amount borrowed under the CIT Group Revolving Line of Credit was $5,662, the outstanding CIT Group Term Loan was $5,818, the amount of outstanding letters of credit under the CIT Group Revolving Line of Credit was $12,064, and $11,755 was available for additional borrowing under the CIT Group Revolving Line of Credit.

      Simultaneous with the inception of the CIT Group Credit Facility, we obtained the Hilco Term Loan, which was an $8,000 term loan, from Hilco Capital LP (which loan has now been assigned to Monroe Capital; see below). We used the proceeds from the Hilco Term Loan to repay amounts outstanding under its previously outstanding senior credit facility. The Hilco Term Loan matures on December 31, 2007 and bears interest at Prime plus an advance rate ranging from 3.00% and 6.00% with the advance rate contingent upon meeting (from time to time) a ratio of our secured debt to EBITDA. In addition, the Hilco Term Loan bears PIK interest ranging from 2.00% to 5.00% with the prevailing rate also being contingent upon the ratio of our level of our secured debt to EBITDA. At no time during the term of this loan, however, is the combined cash and PIK interest rate to be less then 9.00% nor greater then 18.00% per annum. Also, the Hilco Term Loan contains certain financial covenants regarding our financial performance and certain other covenants, including limitations on the incurrence of additional debt, and provides for the termination of the Hilco Term Loan and repayment of all debt in the event of a change in control, as defined. In addition, an event of default under the CIT Group Credit Facility (described above) would also result in a default under the Hilco Term Loan. Borrowings under the Hilco Term Loan are secured by a lien on substantially all of our assets. On April 12, 2005, we entered into a financing arrangement in which Monroe Capital acquired all rights and obligations related to this term loan from Hilco Capital. In that agreement, the terms of the Hilco Term Loan were modified.

      On April 12, 2005, we closed on a financing arrangement with Monroe Capital Advisors LLC in which we obtained a $7,000 senior secured term loan and a $3,000 delayed draw term loan designated for capital expenditures. Additionally, Monroe Capital acquired the $8,000 senior secured term loan previously made to us by Hilco Capital LP. The original $8,000 term loan due to Hilco Capital (and acquired by Monroe Capital as part of this financing) and the new $7,000 term loan (collectively the “Term Loans”) mature on December 31, 2007. The Term Loans bear cash interest at the annual rate of LIBOR (which for purposes of the Term Loans shall never be lower than 2.25%) plus 6.00% and PIK interest at the rate of 2.00% per annum. Borrowings for capital expenditures made under the $3,000 delayed draw term loan (the “Monroe Capital Line of Credit” and together with the Term Loans the “Monroe Capital Loans”) are payable in monthly

installments (as set forth in the financing agreement) with the balance due on December 31, 2007. The Monroe Capital Line of Credit bears cash interest at the per annum rate of LIBOR (which for purposes of the Monroe Capital Line of Credit shall never be lower than 2.25% nor greater than 5.00%) plus 6.00% and PIK interest at the rate of 1.00% per annum.

      The financing agreement related to the Monroe Capital Loans contain certain financial covenants regarding the Company’s financial performance and certain other covenants, including limitations on the incurrence of additional debt, and provide for the termination of the Monroe Capital Loans and the repayment of all debt in the event of a change in control, as defined in the agreement relating to the Monroe Capital Loans. In addition, an event of default under the Company’s CIT Group Credit Facility (described above) will also result in a default under the Monroe Capital Loans. Borrowings under the Monroe Capital Loans are secured by: (i) a first lien on the assets that we acquire or refinance with the Monroe Capital Line of Credit, and (ii) a second lien on substantially all of our other assets.

Subordinated Notes

      In January 2005, we extended an offering and consent solicitation relating to the New Senior Notes and the Junior Notes. Under the contractual terms of the New Senior Notes and the Junior Notes (collectively, the “Notes”), the Notes will automatically convert at their maturity into a fixed number of shares of the Company’s authorized but unissued common stock unless, prior to their maturity, the Notes are redeemed in accordance with their terms for cash and additional shares of common stock.

      In the offer, we offered holders of the Notes the right to receive a 15% premium payable in shares of our common stock if the holders agreed to an early conversion of their Notes into common stock during the conversion period, which expired as of March 8, 2005. We also solicited consents from the holders of its New Senior Notes and Junior Notes to remove all material covenants contained in the indentures, including the covenant restricting the amount of senior debt that we may incur and the covenant requiring us to redeem the Notes upon a change of control. If the holders tendered their Notes, they were automatically consenting to the proposed amendments to the indentures. To become effective for each class of Notes, the amendments required the consent of a majority of the holders of the Notes (excluding from this computation the Notes held by our principal stockholder).

      We received tenders and related consents from holders of 47.0% in aggregate principal amount of the New Senior Notes and tenders and related consents from holders of 75.2% in aggregate principal amount of the Junior Notes. Based on the level of premium shares that have been issued (see below), for the first quarter ended March 31, 2005, the Company recorded an inducement charge of $160 and incurred related transaction expenses of $240.

      At the closing of the offer, we issued 145,916,118 shares of its authorized but unissued common stock to the holders of the New Senior Notes who tendered in the offer (including 19,032,539 premium shares), 8,060,219 shares of its authorized but unissued common stock to the holders of the Junior Notes who tendered in the offer (including 1,051,362 premium shares), and 70,942,220 shares to LJH Ltd. (an entity controlled by the Company’s principal stockholder) in connection with its partial exercise of the LJH Warrant. After the closing of the offer, we have 256,559,172 shares outstanding and our principal stockholder holds approximately 57% of the outstanding common stock.

      In accordance with the terms of the offer, all Notes that were properly tendered were accepted for early conversion. We received consents representing a majority in aggregate principal amount of the outstanding Junior Notes in the consent solicitation, and accordingly, the proposed amendments to the indentures governing the Junior Notes have become effective. Since we did not receive consents representing a majority in aggregate principal amount of the outstanding New Senior Notes in the consent solicitation, the indentures governing the New Senior Notes were not amended.

      As of March 31, 2005, $61,437 of New Senior Notes and $940 of Junior Notes remain outstanding. All such Notes will convert at their maturity into an aggregate of 145,702,888 shares of the Company’s authorized but unissued common stock. Further, upon the conversion of the remaining New Senior Notes and Junior

Notes into shares of common stock at their maturity, LJH Ltd. will have the right to exercise the amended LJH Warrant to receive an additional 62,444,874 shares of common stock. At such time, we will have 464,706,934 shares of common stock outstanding and LJH Ltd. will own approximately 45% of the outstanding common stock. The Company believes that the remaining New Senior Notes and Junior Notes will convert into common stock at their maturity, since the Company does not expect to be in a position to redeem the remaining New Senior Notes and Junior Notes in accordance with their terms. Further, management does not believe that a “change of control”, as defined in the indenture relating to the New Senior Notes, will occur at any time prior to the maturity of the Notes. As such and although generally accepted accounting principles require the remaining Notes to be treated as a debt instrument, the Company believes that the remaining Notes should be considered a common stock equivalent.

Other Matters

      On April 15, 2005, we entered into an operating lease agreement with Maxus Leasing Group for tooling and other equipment to be used for the repair and overhaul of CFM-56 engines. The initial term of the lease is 48 months with a cancellation option, contingent on payment of a cancellation fee, after the first 12 months. Rental payments approximate $1,320 per year, with the Company also responsible for insurance, taxes, and other upfront expenses

      In August 2004, a settlement agreement for unsecured claims was reached with the entity (Kitty Hawk, Inc.) from which we had acquired our Oscoda, Michigan engine and airframe maintenance facilities in 1999. In April 2005, pursuant to this entity’s plan of reorganization under Chapter 11 of the United States Bankruptcy Code, we received 1,363,746 shares of the new common stock in the reorganized company in settlement of our claim against that entity’s bankruptcy estate. Based on the stock price of the reorganized company on April 21, 2005, which approximated $1.30 per share, we will record, in accordance with SFAS No. 5, “Accounting for Contingencies”, a gain of $1,773 in the second quarter of 2005.

QUALITATIVE AND QUANTITATIVE DISCUSSION OF MARKET RISK

      We are exposed to market risk for changes in interest rates. We have no exposure to foreign currency exchange rates or to commodity price risk. We do not hold or issue any financial instruments for trading or other speculative purposes.

      Our obligations under our CIT Group Revolving Credit Facility and our $8,000 Hilco Term Loan bear interest at floating rates and therefore, we are impacted by changes in prevailing interest rates. However, our $14,412 term loan from our principal stockholder, and our New Senior Notes, Old Senior Notes, and Junior Notes all bear fixed interest rates and therefore we are not subject to the risk of interest rate fluctuations. A 10% change in market interest rates that affect our financial instruments would impact earnings during 2004 by approximately $173 before taxes and would change the fair value of our financial instruments by approximately $5,761.

      The table below provides information about our market sensitive financial instruments and constitutes a “forward-looking statement.” Our major market risk exposure is changing interest rates in the United States and fluctuations in the London Interbank Offered Rate. Our policy is to manage interest rates through use of a combination of fixed and floating rate debt. The table below assumes the December 31, 2004 interest rates remain constant.

      All numbers in the following table are expressed in thousands (‘000s):

BUSINESS

General

      TIMCO Aviation Services, Inc. is among the world’s largest providers of aviation maintenance, repair and overhaul (MRO) services for major commercial airlines, regional air carriers, aircraft leasing companies, government and military units and air cargo carriers. We primarily provide MRO services through our subsidiaries: Triad International Maintenance Corporation (known in the industry as TIMCO), with four active locations, is one of the largest independent providers of aircraft heavy maintenance services in the world and also provides aircraft storage and line maintenance services; Brice Manufacturing specializes in the sale of new aircraft seats and aftermarket parts and in the refurbishment of aircraft interior components; TIMCO Engineered Systems provides engineering services both to our MRO operations and our customers; and TIMCO Engine Center refurbishes JT8D engines and performs on-wing repairs for both JT8D and CFM-56 series engines. Visit TIMCO online at www.timco.aero.

      Our goal is to be the vendor of choice to our customers, providing aircraft maintenance solutions to meet our customers’ MRO requirements. The services that we offer allow our customers to reduce their costs by outsourcing some of their MRO functions.

      At present, approximately 80% of our business is airframe heavy maintenance, and we are one of the largest independent providers of these services in the world. We have begun expansion into line maintenance and hope to significantly expand that business, believing it to be a service that airlines will seriously consider outsourcing in the future. We also plan on expanding our engine overhaul and repair business, including the potential establishment of a repair operation for CFM-56 engines. There can be no assurance we can successfully expand in these areas.

      We were incorporated in Delaware in 1996 under the name “Aviation Sales Company.” We changed our corporate name to “TIMCO Aviation Services, Inc.” in February 2002. Our principal operating business, TIMCO, commenced operations in 1990. Our principal executive offices are at 623 Radar Road, Greensboro, North Carolina 27410, and our telephone number is (336) 668-4410.

Industry Overview

      An industry study published by AeroStrategy in April 2004 estimated the total worldwide MRO market at $35.7 billion, as follows: