UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

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

For the Quarterly Period ended May 31, 2005

Commission File Number: 333-109667-04


EVERGREEN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Oregon	91-1797880
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

3850 Three Mile Lane, McMinnville, Oregon	97128-9496
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (503) 472-9361

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 12 preceding months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( )

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ( ) No (X)

As of July 15, 2005, there were 10,054,749 outstanding shares of no par value common stock of the registrant.

PAGE

PART I.

FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operation	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	51

PART II.

OTHER INFORMATION

	Item 1.	Legal Proceedings	52
	Item 6.	Exhibits	53

SIGNATURES

EXHIBIT INDEX

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PART I - FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS.

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

					May 31, 2005
					(unaudited)		February 28, 2005


ASSETS
Current assets:
	Cash and cash equivalents			$	1,144	$	2,718
	Accounts receivable, less allowance of $1,661 for				70,074		62,355
		doubtful accounts
	Accounts receivable from affiliates, net				496		447
	Inventories				20,877		29,060
	Prepaid expenses and other				2,997		2,612
	Current portion notes receivable from affiliates				2,022		1,473
	Deferred tax asset and income taxes receivable				4,173		4,294

		Total current assets			101,783		102,959

Property and equipment, net					548,396		543,562
Assets held for sale					6,797		6,831
Notes receivable from affiliates					11,653		14,093
Capitalized loan acquisition costs					10,112		11,015
Other assets					13,677		11,757
Goodwill					5,494		5,494

			Total assets	$	697,912	$	695,711

(continued on the next page)

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CONSOLIDATED BALANCE SHEETS — continued
At May 31, 2005 and February 28, 2005
(in thousands, except share data)

					May 31, 2005
					(unaudited)		February 28, 2005


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	84,657	$	72,834
	Accrued liabilities				24,007		24,975
	Accrued interest				1,563		8,032
	Affiliate trade and notes payable				1,639		3,267
	Current portion of long-term debt				12,575		14,245

		Total current liabilities			124,441		123,353

Long-term debt					286,805		292,860
Deferred rentals payable					78		80
Deferred tax liabilities					97,983		95,151

		Total liabilities			509,307		511,444

		Minority interest			989		655


Stockholders' equity:
	Common stock, no par value; 20,000,000 shares authorized				7,568		7,568
		10,054,749 shares issued and outstanding
	Retained earnings				180,048		176,044

		Total stockholders' equity			187,616		183,612

			Total liabilities, minority interest, and stockholders' equity	$	697,912	$	695,711

See condensed notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands)


				For the Three Months Ended May 31,

				2005			2004

Operating revenues:
	Flight revenue		$	118,482		$	87,269
	Sales of aircraft, parts, and other property and equipment			11,204			2,286
		(including sales to affiliates of $7,400 during the three months ended May 31, 2005)
	Ground handling and logistics services revenue			29,795			25,610
	Support services and other revenue			16,815			10,988

		Total operating revenues		176,296			126,153

Operating expenses:
	Flight costs			19,417			17,538
	Fuel			39,737			25,423
	Maintenance			17,922			17,723
	Aircraft and equipment			12,383			12,058
	Cost of sales of aircraft, parts, and other property and equipment			8,880			1,008
		(including cost of sales to affiliates of $7,400 during the three months ended May 31, 2005)
	Cost of ground handling and logistics services			24,787			21,755
	Cost of support services and other support costs			18,601			10,726
	Selling, general, and administrative expense			18,597			17,468

		Total operating expenses		160,324			123,699

		Income from operations		15,972			2,454

Non-operating income (expense):
	Interest expense			(9,373	)		(8,959	)
	Other non-operating income (expense), net			547			(3,569	)

Income (loss) before minority interest and income taxes				7,146			(10,074	)

		Minority interest		(334	)		(307	)

Income (loss) before income taxes				6,812			(10,381	)

		Income tax (expense) benefit		(2,808	)		3,721

Net income (loss)			$	4,004		$	(6,660	)

See condensed notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)


						For the Three Months Ended May 31,

						2005			2004

Cash flows from operating activities:
	Net income (loss)				$	4,004		$	(6,660	)
	Adjustments to reconcile net income (loss) to
			net cash provided by operating activities:
		Depreciation and amortization				16,846			16,369
		Deferred income taxes				2,832			(3,714	)
		Gain on disposal of property and equipment				(260	)		(323	)
		Deferred income and foreign currency exchange gain				(109	)		(25	)
		Write-off of unamortized loan acquisition costs				-			3,464
		Minority interest				334			307
	Changes in operating assets and liabilities:
		Accounts receivable				(7,718	)		(4,398	)
		Receivables from affiliates				(598	)		422
		Inventories				8,183			549
		Prepaid expenses and short-term notes receivable				(385	)		749
		Accounts payable and accrued liabilities				2,866			(4,341	)
		Income taxes payable				121			(78	)

			Net cash provided by operating activities			26,116			2,321


Cash flows from investing activities:
	Purchases of property, equipment, and overhauls					(21,179	)		(11,360	)
	Proceeds from disposal of property and equipment					538			605
	Payments received on notes receivable from affiliates					2,440			1,585
	Other assets					(1,763	)		(3,624	)

			Net cash used in investing activities			(19,964	)		(12,794	)


Cash flows from financing activities:
	Proceeds from long-term debt					355			222,247
	Payments on long-term debt and notes payable to affiliates					(8,081	)		(208,849	)

			Net cash (used in) provided by financing activities			(7,726	)		13,398

				Net (decrease) increase in cash		(1,574	)		2,925

Cash and cash equivalents, beginning of period						2,718			4,071

Cash and cash equivalents, end of period					$	1,144		$	6,996

See condensed notes to unaudited consolidated financial statements.

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CONDENSED NOTES TO
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — OVERVIEW

Evergreen Holdings, Inc. ("Holdings") is the parent company of Evergreen International Aviation, Inc. ("Aviation"), a leading provider of integrated air cargo transportation and aviation support services. Holdings, Aviation, and their consolidated subsidiaries (collectively, "Company", "we", "us", or "our") provide global air cargo shipping, ground handling and logistics services, helicopter transportation services, small aircraft charters, and aircraft maintenance and repair services.

Business Segments

We conduct business in six major business segments through our wholly-owned subsidiaries:

	•	Evergreen International Airlines, Inc. ("Airlines") provides air cargo services for both international and domestic markets;

	•	Evergreen Aviation Ground Logistics Enterprise, Inc. ("EAGLE") provides full-service aviation ground handling and logistics services, including mail handling, aviation hub management, aircraft handling, cargo handling, ground system management, ground equipment maintenance, ground equipment sales and leasing, aircraft line maintenance, terminal services, aircraft de-icing and washing, check-in and ticketing, baggage acceptance and seat selection, and passenger cabin cleaning;

	•	Evergreen Helicopters, Inc. ("Helicopters") provides helicopter and small fixed-wing aircraft services throughout the world in connection with activities such as forest fire fighting, health services, aerial spraying, heavy lift construction, law enforcement, helicopter logging, petroleum support services, search and rescue, peacekeeping and relief support, helicopter skiing, and agriculture;

	•	Evergreen Air Center, Inc. ("the Air Center" or "Air Center") an unlimited Class IV airframe repair station certified by the FAA, performs aircraft maintenance, repair and overhaul services, and aircraft storage services;

	•	Evergreen Aircraft Sales and Leasing Co. (“EASL”) selectively buys, sells, leases, and brokers commercial aircraft, helicopters, and aircraft spare parts; and

	•	Evergreen Agricultural Enterprises, Inc. (“Agriculture”) conducts farming operations, nursery and horticulture operations, and delivers nursery and processed agricultural products to wholesale and retail customers.

Trust Created February 28, 1986

Aviation also holds an approximate two-thirds beneficial interest in the Trust Created February 25, 1986 (the "Trust"). The Trust was created pursuant to the Trust Agreement, dated as of February 25, 1986, as amended and restated pursuant to the Amended and Restated Trust Agreement, dated as of August 31, 1987, as amended on August 31, 1988, and as amended and restated pursuant to the Second Amended and Restated Trust Agreement, dated as of September 29, 1995, as amended by the First Amendment thereto as of May 8, 2003, as amended by the Second Amendment thereto as of January 14, 2004, and as amended by the Third Amendment thereto as of May 10, 2004, among Evergreen International Aviation, Inc. (an assignee of Evergreen Holdings, Inc., as successor to 747, Inc. and King Christian, Inc.) and Mr. Delford M. Smith, as Beneficiaries, and Wilmington Trust Company, not in its individual capacity, but solely as Owner Trustee. The Trust assets consist primarily of one Boeing 747 aircraft and three McDonnell Douglas DC-9 ("DC-9") aircraft. The Trust leases these aircraft to Airlines.

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Controlling Shareholder and Related Parties

Mr. Delford M. Smith, our founder and the chairman of our board of directors, has control, either directly or indirectly, over 85.1% of the outstanding shares of Holdings common stock. In addition, Mr. Smith owns or controls other entities, or does business under other trade names, including, but not limited to, the following:

	•	Ventures Acquisition Company LLC ("Ventures Acquisition Company");
	•	Ventures Holding, Inc. ("Ventures Holding");
	•	DMS Properties; and
	•	Greenpatch Farms.

From time to time, we engage in transactions with Mr. Smith and the entities owned by, or controlled by, Mr. Smith. See "Note 11 - Related Party Transactions" below.

Selected financial results by business segment are found in "Note 2 - Business Segments" below.

BASIS FOR PRESENTATION

The interim consolidated financial statements included in this quarterly report have been prepared by Holdings and its subsidiaries, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC"). Certain information and note disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the SEC.

In the opinion of management, the interim consolidated financial statements included in this quarterly report contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows of the Company for the periods indicated. Such adjustments, other than adjustments that have been separately disclosed, are of a normal recurring nature.

Seasonality

Certain aspects of our business are seasonal in nature. Flight revenue generated from contracts with commercial airlines and freight forwarders has historically been higher from September through December of each year as the levels of flight activity increase with the build-up of inventories by retailers in anticipation of the holiday season. Revenues in our EAGLE segment also reflect similar seasonal fluctuations, predominantly as a result of increased volumes of mail and packages being processed by the U.S. Postal Service and United Parcel Service in the lead-up to the holiday season. In comparison, our Helicopters segment experiences higher revenues during the summer months as a result of increased fire-fighting activities, while our Agriculture segment generates higher revenues during the peak shipping periods for nursery products and Christmas trees.

Because certain aspects of our business are seasonal, the interim results presented in this report are not necessarily indicative of operating results for a full year. The interim consolidated financial statements included in this report should be read in conjunction with our consolidated financial statements and the accompanying notes that were included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2005, which was filed with the SEC on June 14, 2005.

Reclassifications

Certain amounts in the Company’s prior period's financial statements and notes have been reclassified to conform to the current period presentation. Previously reported net loss or net cash flows were not affected by these reclassifications.

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RECENT ACCOUNTING PRONOUNCEMENT

In December 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities - An Interpretation of ARB No. 51” (“FIN 46-R”). FIN 46-R addresses how a company should apply the provisions of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain variable interest entities. In particular, FIN 46-R will apply in those situations in which i) the company does not have a controlling financial interest in the variable interest entity or ii) the variable interest entity does not have sufficient equity at risk for the variable interest entity to finance its activities without additional subordinated financial support. In those situations, FIN 46-R requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the variable interest entities do not effectively disperse risks among the parties involved.

The Company adopted FIN 46-R as of March 1, 2005. In connection with the adoption of FIN 46-R, management completed an assessment to determine if there were any variable interest entities ("VIE" or "VIEs") that the Company was required to consolidate. Management's assessment included an evaluation of leases, consisting primarily of building and aircraft leases, between the Company and certain related party entities including, but not limited to, Ventures Holding and Ventures Acquisition Company. As a result of the assessment, management determined that there were no VIEs that the Company was required to consolidate for the period ended May 31, 2005.

As discussed in the section "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" below, on July 11, 2005, Holdings, as Guarantor, and Ventures Acquisition Company, as Borrower, entered into a $32.0 million loan agreement with Landsbanki Íslands hf., as Lender, for the purpose of financing Ventures Acquisition Company's purchase of two Boeing 747 aircraft. As discussed in the section "Lease Transactions" in "Note 11 - Related Party Transactions" below, the two Boeing 747 aircraft will be leased by Ventures Acquisition Company to Airlines. Management is currently evaluating this transaction pursuant to the requirements of FIN 46-R, and believes that this transaction could result in a VIE transaction which may require consolidation by the Company.

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NOTE 2 — SELECTED FINANCIAL RESULTS BY BUSINESS SEGMENT

The following charts present selected financial information of the Company, as further segregated by each of the major business segments.


Selected Financial Results by Business Segment - Unaudited
(in thousands)

				For the Three Months Ended May 31,

				2005		2004

Operating revenues:
	Airlines		$	106,222	$	80,504
	EAGLE			29,984		25,610
	Helicopters			14,464		8,413
	Air Center			14,075		7,749
	EASL			9,205		1,590
	Agriculture			2,346		2,287

		Total	$	176,296	$	126,153


Intercompany revenues: (1)
	Airlines		$	3,958	$	2,603
	EAGLE			594		346
	Helicopters			877		682
	Air Center			3,104		6,914
	EASL			1,291		394
	Agriculture			7		25

		Total	$	9,831	$	10,964

(1) Amounts are eliminated in consolidation


Operating expenses:
	Airlines		$	94,849	$	78,053
	EAGLE			27,691		24,361
	Helicopters			14,231		10,976
	Air Center			13,225		6,563
	EASL			8,463		1,531
	Agriculture			1,865		2,215

		Total	$	160,324	$	123,699

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Selected Financial Results by Business Segment - Unaudited
(in thousands)

				For the Three Months Ended May 31,

				2005		2004

Income (loss) from operations:
	Airlines		$	11,375	$	2,451
	EAGLE			2,293		1,249
	Helicopters			233		(2,563	)
	Air Center			849		1,186
	EASL			742		59
	Agriculture			480		72

		Total	$	15,972	$	2,454


Interest expense:
	Airlines		$	9,194	$	8,862
	EAGLE			106		51
	Helicopters			47		-
	Air Center			15		26
	EASL			5		8
	Agriculture			6		12

		Total	$	9,373	$	8,959


Depreciation and amortization:
	Airlines		$	14,083	$	14,297
	EAGLE			585		612
	Helicopters			1,713		999
	Air Center			332		311
	EASL			17		23
	Agriculture			116		127

		Total	$	16,846	$	16,369


Capital expenditures:
	Airlines		$	16,475	$	8,414
	EAGLE			205		156
	Helicopters			4,030		2,655
	Air Center			167		130
	EASL			-		-
	Agriculture			302		5

		Total	$	21,179	$	11,360

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Total Assets by Business Segment

(in thousands)

May 31, 2005

(unaudited)

February 28, 2005

Total assets:

Airlines

512,935

507,200

EAGLE

50,128

52,040

Helicopters

70,551

65,831

Air Center

25,252

23,314

EASL

11,775

20,854

Agriculture

27,271

26,472

Total

697,912

695,711

NOTE 3 – LIQUIDITY

Risk of Default on Debt Obligations

We finance a portion of our capital expenditures and operations through long-term debt obligations. In particular, Aviation has obtained long-term financing by means of i) the issuance of $215.0 million of 12% senior second secured notes (the "Indenture Notes") and ii) a $100.0 million three-year senior secured credit facility financing agreement (the "Secured Credit Facility"). In addition, we have various other long-term debt instruments which consist primarily of equipment purchase notes.

Substantially all of our assets are pledged as collateral under our various debt agreements. Furthermore, the Indenture Notes and the Secured Credit Facility both contain cross-default provisions whereby certain events of default under one or more of the our debt obligations will result in an event of default under either, or both, the Indenture Notes and the Secured Credit Facility. See "Note 4 - Long-Term Debt Obligations" below. In the event that we are unable to cure such defaults or obtain waivers with respect to such defaults, we are at risk that our payment obligations under either, or both, the Indenture Notes and the Secured Credit Facility will be accelerated, thereby forcing us to either obtain alternative financing or seek legal protection from our creditors.

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NOTE 4 — LONG-TERM DEBT OBLIGATIONS

Indenture Notes

The Indenture Notes were issued by Aviation on May 16, 2003, pursuant to an indenture agreement which was executed by Aviation, as issuer, by Holdings and substantially all of the subsidiaries of Aviation, as guarantors, and by J.P. Morgan Trust Company, N.A., as successor trustee to Bank One, N.A., as trustee.

The Indenture Notes are secured by a second priority lien, subject to certain permitted liens, on substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of Agriculture and Evergreen Vintage Aircraft, Inc. ("Vintage"), a wholly-owned subsidiary of Holdings. The Indenture Notes are designated as senior second secured obligations. As a result, the Indenture Notes rank equally with all of Aviation’s existing senior, or unsubordinated, debt, and are senior to any of Aviation’s future senior subordinated or unsubordinated debt.

To the extent of assets securing both the Indenture Notes and the Secured Credit Facility (as defined in "Secured Credit Facility" below), the Indenture Notes are effectively second in priority to our indebtedness under the Secured Credit Facility. However, to the extent of the assets securing the Indenture Notes, the Indenture Notes are senior to our unsecured debt obligations. In addition, the Indenture Notes are fully and unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviation’s subsidiaries, and the Trust. The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Agriculture, Vintage, and the foreign subsidiaries of the Company.

The Indenture Notes bear interest at an annual fixed rate of 12%. Payments of interest are due semi-annually on May 15 and November 15 of each year.

On May 13, 2005, we made the semi-annual payment of accrued interest on the Indenture Notes in the amount of
$12.9 million. Payment of the accrued interest was funded from our operations.

The next semi-annual payment of accrued interest on the Indenture Notes, in the amount of $12.9 million, is due and payable on November 15, 2005. We intend to fund payment of the accrued interest from our operations.

Optional Redemption The Indenture Notes will mature on May 15, 2010, at which time the outstanding principal of the Indenture Notes, plus all accrued and unpaid interest, will become due. However, we may elect to redeem the Indenture Notes prior to the maturity date. The Indenture Notes are redeemable after the dates and at the prices (expressed in percentages of principal amount on the redemption date) as set forth below:

If redeemed during the 12-month period commencing:

Redemption Price

	May 15, 2007	106 %
	May 15, 2008	103 %
	May 15, 2009 and thereafter	100 %

In addition, at any time prior to May 15, 2006, we may redeem, on one or more occasions, up to 35% of the principal amount of the Indenture Notes with the net cash proceeds from sales of certain kinds of capital stock at a redemption price of 112%, plus accrued and unpaid interest at the redemption date.

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Repurchase of Notes Upon Certain Asset Sales or a Change in Control. If an Asset Sale or a Change in Control (as defined in the Indenture Notes) occurs, each holder of Indenture Notes will have the right to require us to repurchase all or part of the holder's Indenture Notes at the price set forth in the Indenture Notes.

Covenant Compliance. The Indenture Notes impose certain financial and non-financial covenant restrictions on Aviation and its restricted subsidiaries. Such covenant restrictions include, but are not limited to, restrictions on our ability to:

•		incur additional debt or create liens;
•		pay dividends or acquire shares of capital stock;
•		make payments on subordinated debt or make investments;
•		make distributions from restricted subsidiaries;
•		issue or sell capital stock of restricted subsidiaries;
•		issue guarantees;
•		sell or exchange assets, or make capital expenditures;
•		enter into transactions with shareholders and affiliates; and
•		effect mergers and other changes of control.

As of May 31, 2005, we were in compliance with these covenants.

If Aviation or any of its restricted subsidiaries violates any of these covenants and are unable to obtain waivers, we would be in default under the Indenture Notes and the debt could be accelerated.

Secured Credit Facility

On May 13, 2004, Aviation and certain of its subsidiaries entered into the Secured Credit Facility with Wells Fargo Foothill, Inc. and Ableco Finance LLC (collectively, “the Wells Fargo Lenders”). The Secured Credit Facility consists of two loans - a $50.0 million term loan and a $50.0 million revolving loan. The Secured Credit Facility is secured by substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of Agriculture and Vintage.

Interest Rates. The term loan bears interest at an annual rate of either LIBOR plus 5.5% or prime plus 3.0%, and the revolving loan bears interest at an annual rate of either LIBOR plus 3.0% or prime plus 0.5%. So long as we are not in default under the Secured Credit Facility, we may elect at any time to have interest on all or a portion of the advances on the revolving loan or the term loan calculated under the applicable LIBOR interest rate option. LIBOR interest rate elections are available for LIBOR periods of 1, 2, 3, or 6 months. Interest on a LIBOR rate loan is payable on the last day of the LIBOR period (if the elected LIBOR period is less than three months) or on the last day of each three month interval (if the elected LIBOR period is six months). For any portion of the term loan or revolving loan which is not covered by a LIBOR interest rate election, monthly payments of accrued interest are due on the first day of each month.

Term Loan Advances. The $50.0 million term loan was fully funded at the closing of the Secured Credit Facility. No additional advances are permitted under the term loan at any time, and any principal amount of the term loan which is repaid or prepaid may not be reborrowed. We are required to make payments of principal on the term loan in monthly installments of $0.5 million. Payment of the monthly principal installments commenced on June 1, 2004 and will continue on the first day of each succeeding calendar month throughout the term of the Secured Credit Facility. Then, unless paid in full earlier, all outstanding principal and accrued and unpaid interest of the term loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

Revolving Loan Advances. During the term of the Secured Credit Facility, we may receive advances of principal on the revolving loan at any time. However, the outstanding principal of the revolving loan may not at any time be greater than an amount which is determined by reference to certain eligible receivables and eligible inventory of the Company. See “Loan Balance and Availability” below. We may also make payments of principal on the revolving loan at any time. All outstanding principal and all accrued and unpaid interest of the revolving loan will be due and payable in full when the Secured Credit Facility terminates in May 2007.

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Loan Balance and Availability. As of May 31, 2005, the outstanding balance of the Secured Credit Facility was
$74.0 million. Taking into consideration the limitations on our ability to obtain additional advances of principal from the revolving loan (see “Revolving Loan Advances” above) and the Minimum Availability Requirement (see "Covenant Compliance" below), as of May 31, 2005, our availability under the Secured Credit Facility was $0.8 million.

Covenant Compliance. We are subject to certain financial and non-financial covenants under the Secured Credit Facility. In addition to other requirements that are set forth in such covenants, we are required to maintain: i) either a qualified cash reserve balance or an undrawn availability on the revolving loan of not less than $5.0 million ("Minimum Availability Requirement"), ii) minimum thresholds with respect to certain consolidated and non-consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”), and iii) a minimum ratio with respect to fixed charge coverages.

The following are the required covenant thresholds under the Secured Credit Facility for the twelve-month period ended May 31, 2005:

Consolidated EBITDA Covenant — The covenant requires a consolidated EBITDA in a minimum amount of $100.0 million. As of May 31, 2005, we were in compliance with this covenant.

Airlines EBITDA Covenant — The covenant requires an EBITDA for Airlines in a minimum amount of $85.0 million. As of May 31, 2005, Airlines was in compliance with this covenant.

Fixed Charge Coverage Covenant — The covenant requires a fixed charge coverage in a minimum ratio of 1.15 to 1.00. As of May 31, 2005, we were in compliance with this covenant.

In addition, the amount of capital expenditures that may be made by us in any fiscal year is limited to $75.0 million, of which at least $10.0 million must be financed from sources other than the Secured Credit Facility. As of May 31, 2005, we were in compliance with the capital expenditures covenant.

If Aviation or any of its restricted subsidiaries violates these covenants and are unable to obtain waivers from the Wells Fargo Lenders, we would be in default under the Secured Credit Facility and the debt could be accelerated.

Notice and Waiver of Specified Events of Default under Secured Credit Facility. On June 1, 2005, the Wells Fargo Lenders notified us that the Wells Fargo Lenders believed that we were in violation of certain covenants of the Secured Credit Facility (the "Specified Events of Default"), as follows:

	i)		occurrence of a default at the final maturity, on April 29, 2005, of the obligations under the FINOVA Note (defined below);

	ii)		failure to maintain insurance on the Collateral (as defined in the Secured Credit Facility);

	iii)		making an unpermitted investment toward the purchase of two Boeing 747 airplanes (the "Designated 747s"); and

	iv)		unauthorized use of the proceeds from advances under the Secured Credit Facility to renovate the Designated 747s.

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The Wells Fargo Lenders further notified us that, as a result of the Specified Events of Default, the Wells Fargo Lenders had elected to charge the default rate of interest, which, as set forth in the Secured Credit Facility, is a per annum rate equal to 2 percentage points above the per annum rate otherwise applicable. The default rate of interest was charged from April 29, 2005, the date on which the Wells Fargo Lenders asserted that a default had occurred under the FINOVA Note, until June 14, 2005, the date on which the Wells Fargo Lenders, by execution of the Amendment Number Two (as defined below) waived the Specified Events of Default. At April 29, 2005, the per annum rates of interest on the Secured Credit Facility ranged from 6.09% to 8.75%.

On June 14, 2005, we entered into an Amendment Number Two and Waiver to Loan and Security Agreement (the "Amendment Number Two") with the Wells Fargo Lenders whereby the Wells Fargo Lenders agreed to waive the Specified Events of Default, and both parties agreed to amend the Secured Credit Facility to allow the Company to maintain only all-risk ground insurance coverage for aircraft that the Company has grounded and taken out of service.

Amendment Number Three to Secured Credit Facility. On July 11, 2005, Ventures Acquisition Company purchased the Designated 747s. See "Landsbanki Loan Agreement" below. On the same day, we entered into an Amendment Number Three and Consent (the "Amendment Number Three") with the Wells Fargo Lenders. Amendment Number Three amends the Secured Credit Facility to allow Airlines to i) lease the Designated 747s from Ventures Acquisition Company (see "Lease Transactions" in "Note 11 - Related Party Transactions" below) and ii) reimburse Ventures Acquisition Company for certain out-of-pocket transaction costs incurred by Ventures Acquisition Company in connection with the purchase of the Designated 747s. In exchange, Mr. Smith pledged to Wells Fargo Foothill, Inc., as administrative agent and for the benefit of the Wells Fargo Lenders, all of his rights, title, and interest in Ventures Acquisition Company.

WCMA Loan Agreement

On August 12, 2003, EASL entered into Working Capital Management Account Loan Agreement No. 54F-07164
(the “WCMA Loan”) with Merrill Lynch Business Financial Services, Inc. (“Merrill Lynch”) for the purpose of obtaining an
$8.0 million reducing revolver credit facility. The WCMA Loan provides for a reducing revolver loan which is funded from a line of credit. EASL may repay the loan balance in whole or in part at any time without penalty, and may request a
re-borrowing of amounts repaid on a revolving basis. The WCMA Loan does not require monthly payments of principal. However, on the last business day of each calendar month, the maximum amount of the line of credit will be reduced by an amount equal to 1/60th of the loan amount. The WCMA Loan bears interest at the variable rate of LIBOR plus 3.0% and monthly payments of accrued interest are due and payable on the first business day of each calendar month. The WCMA Loan shall terminate on August 31, 2008, at which time all outstanding unpaid principal and all accrued and unpaid interest shall be due and payable in full.

An amendment letter from Merrill Lynch, dated May 12, 2004, established certain financial covenants for the WCMA Loan that are consistent with the financial covenants contained in the Secured Credit Facility. The amendment letter established i) a schedule for fixed charge coverage ratios to be measured on a quarter-end basis, ii) a $75.0 million maximum limit on capital expenditures of which at least $10.0 million must be funded by indebtedness, and iii) a minimum consolidated EBITDA that must be achieved by the Company on a quarter-end basis. Specifically, the amendment letter adjusted the fixed charge coverage ratios and minimum consolidated EBITDA requirements of the WCMA Loan to correspond with the fixed charge coverage ratios and consolidated EBITDA requirements of the Secured Credit Facility. See “Secured Credit Facility” above.

Covenant Compliance. As of May 31, 2005, we were in compliance with the covenants contained in the WCMA Loan. See “Secured Credit Facility” above.

FINOVA Note

In May 1997, the Trust entered into a $30.0 million Secured Loan Agreement with FINOVA Capital Corporation
(the "FINOVA Note"), with interest at the annual rate of 10.44%. Monthly installments of principal and interest were payable through April 2005, at which time the FINOVA Note matured with a final payment of approximately $2.5 million in principal, plus accrued interest, due upon maturity.

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Effective April 29, 2005, the Trust and FINOVA executed a Third Amendment Agreement to amend and extend the FINOVA Note (the "Third Amendment"). The Third Amendment extends the maturity date of the FINOVA Note to September 29, 2005, with the annual rate of interest remaining at 10.44%. Monthly installments of principal and interest in the amount of $471,650 are scheduled through the extended maturity date, resulting in a full amortization of the remaining outstanding principal balance. All outstanding principal and accrued, but unpaid interest, will be due upon maturity, as extended.

The FINOVA Note is secured by means of a first priority security interest granted to FINOVA in one Boeing 747 aircraft and three DC-9 aircraft owned by the Trust.

Intervest Note

On December 30, 2004, Vintage entered into a Construction Loan Agreement with Intervest-Mortgage Investment Company ("Intervest") whereby Intervest agreed to loan to Vintage a total of $9.0 million for the purpose of financing Vintage's construction of an IMAX theater on the Evergreen Museum Land. The Construction Loan Agreement is further evidenced by a Promissory Note from Vintage to Intervest in the principal sum of $9.0 million (the "Intervest Note"). At May 31, 2005, the outstanding principal balance of the Intervest Note was $0.2 million.

The Intervest Note provides for an annual rate of interest equal to 1% in excess of the rate established for a Bank Prime Loan, as published in the Federal Reserve Statistical Release H.15 (the "Index"). The interest rate on all sums advanced under the Intervest Note shall be adjusted on the first day of each month following the date that the Bank Prime Loan rate changes in the Index, with such interest rate to be equal to 1% in excess of the week-ending average rate established for the Bank Prime Loan, as published in the Index. However, the interest rate shall never be less than 5.75% per annum. Accrued interest on the outstanding balance of sums advanced under the Intervest Note shall be due and payable on the first day of each month. In addition, following any default in the payment of interest under the Intervest Note, or any default under any of the other documents executed in connection with or to secure the Intervest Note (the "Loan Documents") and expiration of the applicable cure period, Intervest may elect to (i) declare the Intervest Note due and payable, and/or (ii) increase the rate of interest payable under the Intervest Note by three percent (3.00%) per annum.

The entire principal balance and any accrued, but unpaid, interest on the Intervest Note shall be due and payable on January 1, 2006. However, so long as Vintage is not in default under the provisions of the Construction Loan Agreement, Vintage may elect to extend the maturity date of the Intervest Note to July 1, 2006. Vintage may exercise its right to extend the maturity date by providing Intervest with at least 30 days prior written notice and paying to Intervest the amount of $67,500 in consideration for the extension period. In addition, Vintage may, at any time, prepay the whole or any part of the Intervest Note without penalty.

Vintage's obligations under the Intervest Note and Construction Loan Agreement are secured by a security interest in i) the Evergreen Museum Land, the Evergreen Aviation Museum Building, and the tangible personal property owned by Vintage which is located on or in the Evergreen Museum Land and the Evergreen Aviation Museum Building, ii) a pledge of all rents arising out of the operation of the Evergreen Museum Land and the Evergreen Aviation Museum Building, and iii) the aircraft owned by Vintage. In addition, Mr. Smith has guaranteed payment of the amounts due under the Intervest Note and Construction Loan Agreement.

The Construction Loan Agreement includes certain events of default, including: i) the filing of certain mechanics' liens against the Evergreen Museum Land, ii) failure to comply with the Construction Loan Agreement, the Intervest Note, the Loan Documents or any requirement of any governmental authority, iii) certain events of bankruptcy, iv) impairment of the security interest in the Evergreen Museum Land, and v) failure to construct the theater in accordance with written plans and specifications or within specified time periods.

Intervest has agreed, subject to certain conditions, to provide permanent financing for the theater following the completion of the theatre's construction.

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Landsbanki Loan Agreement

On July 11, 2005, Holdings, as Guarantor, and Ventures Acquisition Company, as Borrower, entered into a $32.0 million Loan Agreement (the "Landsbanki Loan Agreement") with Landsbanki Íslands hf., as Lender, for the purpose of financing Ventures Acquisition Company's purchase of the Designated 747s.

The Landsbanki Loan Agreement bears interest at an annual rate of LIBOR plus 2.3%. The applicable LIBOR rate is determined by reference to LIBOR periods of 30 days. Interest shall accrue daily and is payable monthly, with the applicable LIBOR rate being determined at the beginning of each monthly payment period. However, if an Event of Default (as defined in the Landsbanki Loan Agreement) has occurred and continuing, then the Landsbanki Loan Agreement shall bear interest at a rate that is 2% per annum higher than the otherwise applicable rate. Monthly installments of principal and accrued interest in the amount of $680,000 per installment are due and payable on the 11th day of each month through the maturity date. The Landsbanki Loan Agreement will mature on July 11, 2010, at which time all outstanding principal and accrued, but unpaid, interest will be due and payable.

The Landsbanki Loan Agreement contains certain restrictions on Holdings' ability to i) effect mergers and other changes of control and ii) enter into transactions with its affiliates. In addition, the Landsbanki Loan Agreement provides that, among other events, a default under either of the leases of the Designated 747s (see "Lease Transactions" in "Note 11 - Related Party Transactions" below) shall consitute a default under the Lanksbanki Loan Agreement.

As Guarantor, Holdings has guaranteed all obligations of Ventures Acquisition Company under the Landsbanki Loan Agreement. Holdings' obligations as Guarantor under the Landsbanki Loan Agreement are absolute and unconditional.

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NOTE 5 — PREPAID EXPENSES AND OTHER

Prepaid expenses and other at May 31, 2005 and February 28, 2005 consisted of the following:

			May 31, 2005
*(in thousands)*			(unaudited)		February 28, 2005


Prepaid expenses		$	2,786	$	2,442
Notes receivable - current portion			211		170

	Total	$	2,997	$	2,612

NOTE 6 — OTHER ASSETS

Other assets at May 31, 2005 and February 28, 2005 consisted of the following:

			May 31, 2005
*(in thousands)*			(unaudited)		February 28, 2005


Non-current agricultural assets		$	4,358	$	3,762
Deposits			7,347		5,933
Notes receivable			1,043		1,204
Finance fees, net of amortization			477		481
Other assets			452		377

	Total	$	13,677	$	11,757

NOTE 7 — SUPPORT SERVICES AND OTHER REVENUE

Support services and other revenue for the three months ended May 31, 2005 and May 31, 2004 consisted of the following:


			For the Three Months Ended May 31,

*(in thousands - unaudited)*			2005		2004

Support services - Airlines		$	912	$	343
Support services - Helicopters			928		700
Support services - Air Center			12,613		7,658
Sales of agricultural products			2,346		2,287
Support services - other			16		-

	Total	$	16,815	$	10,988

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NOTE 8 — COST OF SUPPORT SERVICES AND OTHER SUPPORT COSTS

Cost of support services and other revenue for the three months ended May 31, 2005 and May 31, 2004 consisted of the following:


			For the Three Months Ended May 31,

*(in thousands - unaudited)*			2005		2004

Cost of support services and other support costs - Airlines		$	6,258	$	4,200
Cost of support services - Helicopters			568		141
Cost of support services - Air Center			10,371		4,720
Cost of sales of agricultural products			1,365		1,601
Cost of support services - other			39		64

	Total	$	18,601	$	10,726

NOTE 9 — OTHER NON-OPERATING INCOME (EXPENSE), NET

Other non-operating income (expense), net for the three months ended May 31, 2005 and May 31, 2004 consisted of the following:


			For the Three Months Ended May 31,

*(in thousands - unaudited)*			2005		2004

Gain on sale of property and equipment			260		323
Foreign currency exchange gain			107		25
Other non-operating gain (loss)			180		(124	)
Write-off of unamortized loan acquisition costs			-		(3,463	)
Penalties and legal fees on loan prepayment			-		(330	)

	Total	$	547	$	(3,569	)

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NOTE 10 — CASH FLOWS FROM INVESTING ACTIVITIES - OTHER ASSETS

Cash flows from investing activities - other assets during the three months ended May 31, 2005 and 2004 were as follows:


			For the Three Months Ended May 31,

*(in thousands - unaudited)*			2005			2004

Deposits on aircraft		$	(1,414	)	$	(512	)
Aircraft and parts held for sale			34			(16	)
Non-current agricultural assets			(596	)		-
Minority interest applied against note receivable from affiliate			-			(307	)
Payments received on notes receivable			140
Advances made on notes receivable			-			(454	)
Capitalized loan acquisition costs			(17	)		(3,464	)
Other			93			1,129

	Total	$	(1,763	)	$	(3,624	)

	•	Ventures Acquisition Company LLC ("Ventures Acquisition Company");
	•	Ventures Holding, Inc. ("Ventures Holding");
	•	DMS Properties; and
	•	Greenpatch Farms.

Transactions Under Mr. Smith's Employment Agreement

During the three months ended May 31, 2005, the board of directors granted a $2.9 million bonus to Mr. Smith. Payment of the bonus was recorded by us as a part of selling, general, and administrative expenses. In accordance with the terms of the Employment Agreement, Mr. Smith utilized $2.0 million of the bonus to pay $1.4 million of principal and $0.6 million of accrued interest on obligations owed to us by Mr. Smith or his affiliates, and the remaining portion of the bonus was utilized to satisfy taxes payable by Mr. Smith or his affiliates as a result of the receipt of the bonus.

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Lease Transactions

We rent aircraft and buildings from entities that are owned by, or controlled by, Mr. Smith. During the three months ended May 31, 2005 and May 31, 2004, we incurred rent expense for these leases in the aggregate amounts of $1.5 million and $1.7 million, respectively.

On July 11, 2005, Airlines, as lessee, entered into two three-year Aircraft Leases with Ventures Acquisition Company, as lessor, for the Designated 747s. Rental payments of $345,000 per aircraft are due on the 11th day of each month throughout the terms of the leases. The Aircraft Leases are subject and subordinate to the terms of the Landsbanki Loan Agreement (see "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" above), and Airlines' right to possession and use of the Designated 747s is subject to the right of Landsbanki Íslands hf., as the secured lender, to repossess the Designated 747s.

In addition, Aviation and Mr. Smith are co-beneficiaries of the Trust, which leases certain aircraft to Airlines. Specifically, Aviation and Mr. Smith share a beneficial interest in one of the assets of the Trust, a Boeing 747 aircraft. Mr. Smith holds a one-third beneficial interest in the Boeing 747, while Aviation holds the remaining two-thirds beneficial interest. Airlines leases the Boeing 747 from the Trust.

During each of the three-month periods ended May 31, 2005 and May 31, 2004, Airlines incurred aircraft lease expense on the Boeing 747 in the amount of $1.8 million. Of these amounts in each three-month period, $0.6 million was attributable to Mr. Smith's one-third beneficial interest in the aircraft.

Sale and Lease of Aircraft

Sale and Lease of Puma Aircraft. During May 2005, EASL sold two Aerospatiale Model SA 330J rotor-wing aircraft, with corresponding aircraft parts (collectively, the "Puma Aircraft"), to Ventures Acquisition Company for an aggregate sales price of $5.0 million. EASL's cost for the Puma Aircraft was also $5.0 million, thus EASL did not recognize any profit from the sale. Immediately upon its purchase of the Puma Aircraft from EASL, Ventures Acquisition Company agreed to lease the Puma Aircraft to Helicopters under a three-year lease agreement at a lease rate of $55,000 per month, per aircraft.

Sale and Lease of Sikorsky CH-54 Aircraft. During May 2005, EASL sold a Sikorsky CH-54 rotor-wing aircraft, with corresponding aircraft parts (collectively, the "CH-54 Aircraft") to Ventures Acquisition Company for an aggregate sales price of $2.4 million. EASL's inventory cost for the CH-54 Aircraft was also $2.4 million, thus EASL did not recognize any profit from the sale. Ventures Acquisition Company has agreed to lease the CH-54 Aircraft to Helicopters under a three-year lease agreement at a lease rate of $120,000 per month.

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Notes Receivable from Affiliates and Notes Payable to Affiliates

We also have a number of notes receivable from Mr. Smith, Ventures Holding, and Ventures Acquisition Company. The chart below summarizes the various notes receivable from Mr. Smith, Ventures Holdings, Inc., or Ventures Acquisition Company at May 31, 2005 and February 28, 2005:


			May 31, 2005
*(in thousands)*			(unaudited)		February 28, 2005

Notes receivable from Ventures Holdings		$	8,590	$	9,777
	due in annual installments of $1,134 through March 31, 2013, with an annual interest rate of 4%

Notes receivable from Ventures Acquisition Company			991		1,128
	due in annual installments of $146 through March 31, 2013, with an annual interest rate of 4%

Note receivable from Mr. Smith			4,094		4,661
	due in ten annual installments of $802 through March 31, 2013, with an annual interest rate of 4%

	Net notes receivable from affiliates	$	13,675	$	15,566

Notes Receivable from Affiliates— During the three months ended May 31, 2005, the principal balances of our notes receivable from affiliates increased by $0.1 million of accrued interest receivable. During the same time period, we received $1.4 million of principal payments and $0.6 million of accrued interest payments. See "Transactions Under Mr. Smith's Employment Agreement" above.

NOTE 12 — CONTINGENCIES AND COMMITMENTS

LEGAL PROCEEDINGS

We are currently involved in a number of legal proceedings. While the results of these proceedings cannot be predicted with certainty, we believe, based on our examination of the subject matter of the proceedings, experience with similar proceedings, and discussion with legal counsel regarding possible outcomes, that the final outcome of such proceedings will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows. As material developments related to pending litigation occur, we will reassess our potential liability and revise any estimates accordingly.

Banc of America

We are a defendant in Banc of America Securities LLC v. Evergreen International Aviation, Inc. et al., which was filed on May 22, 2003 in the Superior Court of the County of Meeklenburg in the State of North Carolina. Banc of America has alleged claims for breach of contract and quantum meruit, arising out of agreements in which Banc of America agreed to act as our financial agent in exchange for the payment of certain fees. The plaintiff has not yet specified an amount for damages.

We filed a motion to dismiss for lack of jurisdiction, but both the trial court and the North Carolina Court of Appeals have denied the motion. We are currently evaluating further appellate and trial options.

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Asiana Airlines

On January 28, 2000, we entered into a contract with Asiana Airlines (“Asiana”) whereby we agreed to provide air freight services to Asiana in exchange for minimum payments to be made by Asiana throughout the term of the contract. The minimum payments were based on guaranteed block hour utilization and the contract was to continue through February 28, 2003. On August 28, 2001, Asiana notified us that Asiana would not make any further payments under the contract.

On September 19, 2001, we filed proceedings in the United States District Court for the District of Oregon against Asiana to recover amounts owed by Asiana to us pursuant to the contract. On February 28, 2003, a jury returned a verdict in our favor and awarded damages of $16.6 million, and Asiana subsequently filed a motion for judgment as a matter of law. The district court denied the motion and Asiana appealed the judgment to the United States Ninth Circuit Court of Appeals.

On June 20, 2005, a three-judge panel of the United States Court of Appeals for the Ninth Circuit affirmed in all respects the judgment of the district court. In its decision, the Ninth Circuit rejected Asiana's arguments that the damage award should be reversed, holding that the District Court properly instructed the jury on the measure of Evergreen's damages and that Evergreen provided extensive evidence of its damages in accordance with Oregon law.

On July 11, 2005, the Ninth Circuit issued a mandate returning the action to the District Court. It is anticipated that the District Court will, upon conclusion of proceedings, order the disbursement to Evergreen of the full amount of damages, in addition to costs and interest, from the amount that Asiana previously deposited in the District Court's bank account.

Ducor Express Airlines

On February 25, 2005, Ducor Express Airlines, Inc. ("Ducor") filed a claim against Airlines for breach of contract (the "Action") in the Supreme Court of New York, County of Queens (the "Court"). Ducor sought damages of $41.7 million against Airlines in regard to certain agreements between the parties wherein Airlines was to provide charter cargo flights from Hong Kong, China to Los Angeles, California during September 2004 through November 2004 (collectively, the "Charter Agreements"). On March 21, 2005, Airlines filed a counterclaim against Ducor in regard to the Charter Agreements.

On July 6, 2005, the parties executed a Settlement Agreement whereby Ducor and Airlines i) agreed to file with the Court a stipulation of discontinuance of the Action with prejudice and ii) agreed to release and discharge the other from any and all claims and liabilities with respect to the Action.

Claim for Losses under the Air Transportation Safety and System Stabilization Act

We may be asked to return all or a portion of the $7.2 million that we received in fiscal year 2002 for claims pursuant to the Air Transportation Safety and System Stabilization Act. As of May 31, 2005, we have not received any further correspondence and have not participated in any further negotiations regarding this matter. Currently, we do not anticipate that we will be required to return any of $7.2 million. To the extent we need to actually pay any of these amounts, we believe that cash on hand and amounts expected to be available under our Secured Credit Facility will be sufficient.

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AIRCRAFT PURCHASE COMMITMENTS

As of May 31, 2005, we had entered into agreements to purchase the following aircraft:


*(in thousands)*
				Purchase		Deposit
	Aircraft	Quantity		Price		Paid
Boeing 747-230SF aircraft		2	$	32,000	$	2,000
Bell AB139 helicopter		1		7,950		1,500
Bell AB139 helicopters		3		25,000		-
Bell 206 L-4 helicopter		1		1,310		196
Bell 412EP IFT helicopter		2		12,670		2,534

Total			$	78,930	$	6,230

On July 11, 2005, Ventures Acquision Company purchased the Boeing 747-230SF aircraft for $32.0 million. The purchase of the aircraft was financed through a $32.0 million Loan Agreement between Ventures Acquisition Company, as Borrower, Holdings, as Guarantor, and Landsbanki Íslands hf., as Lender. See "Landsbanki Loan Agreement" in "Note 4 - Long-Term Debt Obligations" above.

Subject to finalization of financing or leasing arrangements, we expect to take delivery of one Bell AB139 helicopter, the Bell 206 L-4 helicopter, and the two Bell 412EP IFT helicopters during fiscal year 2006, with the remaining three Bell AB139 helicopters to be delivered in fiscal year 2007. In addition, we anticipate that upon taking delivery, we will simultaneously sell and lease back the aircraft under operating lease agreements for lease terms not greater than three years.

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NOTE 13 —	SUPPLEMENTAL FINANCIAL INFORMATION FOR GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES

The Indenture Notes that were issued by Aviation are fully and unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviation’s subsidiaries (the “Guarantor Subsidiaries”), and the Trust (the “Non-Wholly Owned Guarantor Subsidiary”). The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Evergreen Agricultural Enterprises, Inc., Evergreen Vintage Aircraft Inc., and the foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”).

The Company accounts for all investments in its subsidiaries utilizing the equity method of accounting. As a result, the net income and loss of each of the Company’s subsidiaries is reflected on the books of the Company as either an increase in, or reduction of, the Company’s equity in the earnings of each such subsidiary. For the purposes of reporting on a consolidated basis, eliminating entries are made by the Company at the holding company level in order to eliminate the balances of the Company’s investments in its subsidiaries against all intercompany balances and intercompany transactions.

The following supplemental consolidated financial statements separately present the results of operations for Evergreen Holdings, Inc., Evergreen International Aviation, Inc., the wholly-owned Guarantor Subsidiaries on a combined basis, the Non-Wholly Owned Guarantor Subsidiary, and the Non-Guarantor Subsidiaries on a combined basis, with consolidating adjustments and total consolidated amounts.


SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS - UNAUDITED
For the Three Months Ended May 31, 2005
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Operating revenues		$	-		$	3,750		$	178,178		$	1,846		$	2,353		$	(9,831	)	$	176,296
Operating expenses			-			-			145,563			93			1,365			(5,294	)		141,727
Selling, general, and administrative expenses			6			6,269			16,434			8			766			(4,886	)		18,597

Operating (loss) income			(6	)		(2,519	)		16,181			1,745			222			349			15,972

Interest income (expense)			130			(2	)		(9,423	)		(68	)		(10	)		-			(9,373	)
Other non-operating income (expense), net			-			-			559			-			(12	)		-			547

Income (loss) before minority interest,			124			(2,521	)		7,317			1,677			200			349			7,146
	income taxes, and equity in
	subsidiary earnings

Equity in earnings of subsidiaries			3,880			5,546			-			-			-			(9,426	)		-

Income (loss) before minority interest			4,004			3,025			7,317			1,677			200			(9,077	)		7,146
	and income taxes

Minority interest			-			(334	)		-			-			-			-			(334	)

Income (loss) before income taxes			4,004			2,691			7,317			1,677			200			(9,077	)		6,812

Income tax benefit (expense)			-			994			(3,718	)		-			(84	)		-			(2,808	)

	Net income (loss)	$	4,004		$	3,685		$	3,599		$	1,677		$	116		$	(9,077	)	$	4,004

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SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS - UNAUDITED
For the Three Months Ended May 31, 2004
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Operating revenues		$	-		$	2,598		$	130,320		$	1,887		$	2,312		$	(10,964	)	$	126,153
Operating expenses			-			-			112,230			93			1,601			(7,693	)		106,231
Selling, general, and administrative expenses			15			5,811			14,549			-			658			(3,565	)		17,468

Operating (loss) income			(15	)		(3,213	)		3,541			1,794			53			294			2,454

Interest expense			144			(71	)		(8,823	)		(197	)		(12	)		-			(8,959	)
Other non-operating income, net			-			(3,794	)		25			-			200			-			(3,569	)

Income (loss) before minority interest,			129			(7,078	)		(5,257	)		1,597			241			294			(10,074	)
	income taxes, and equity in subsidiary earnings

Equity in earnings of subsidiaries			(6,789	)		(2,445	)		-			-			-			9,234			-

(Loss) income before minority interest			(6,660	)		(9,523	)		(5,257	)		1,597			241			9,528			(10,074	)
	and income taxes

Minority interest			-			-			(307	)		-			-			-			(307	)

(Loss) income before income taxes			(6,660	)		(9,523	)		(5,564	)		1,597			241			9,528			(10,381	)

Income tax benefit (expense)			-			2,571			1,358			-			(96	)		(112	)		3,721

	Net (loss) income	$	(6,660	)	$	(6,952	)	$	(4,206	)	$	1,597		$	145		$	9,416		$	(6,660	)

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SUPPLEMENTAL CONSOLIDATING BALANCE SHEET - UNAUDITED
At May 31, 2005
(in thousands)


									Non-
								100%		Wholly
								Owned		Owned
				Holdings		Evergreen		Guarantor		Guarantor		Non						Consolidated
				(Parent)		(Issuer)		Subsidiaries		Subsidiary		Guarantors			Eliminations			Total

ASSETS
	Current assets:
		Cash and cash equivalents	$	-	$	61	$	1,032	$	-	$	51		$	-		$	1,144
		Accounts receivable, net		-		12		68,049		639		1,374			-			70,074
		Other current assets		236		1,149		19,910		-		9,270			-			30,565

	Total current assets			236		1,222		88,991		639		10,695			-			101,783

	Properties, net			1,722		3,213		491,360		11,639		41,919			(1,457	)		548,396
	Notes receivable from affiliates			12,700		5,217		220		-		(6,484	)		-			11,653
	Investment in subsidiaries			204,338		259,712		-		-		-			(464,050	)		-
	Other assets including goodwill			-		12,139		19,307		17		4,617			-			36,080

Total assets			$	218,996	$	281,503	$	599,878	$	12,295	$	50,747		$	(465,507	)	$	697,912


LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
		Accounts payable	$	-		$	5,748		$	78,425		$	-	$	484	$	-		$	84,657
		Accrued liabilities and payables to affiliates		-			5,704			19,598			18		326		-			25,646
		Accrued interest		-			1,508			40			-		15		-			1,563
		Current portion long-term debt		-			6,516			3,012			2,035		1,011		1			12,575

	Total current liabilities			-			19,476			101,075			2,053		1,836		1			124,441

	Long-term debt			76,967			64,622			121,300			-		23,917		(1	)		286,805
	Deferred rentals and other payables to affiliates			-			-			(5,379	)		5,457		-		-			78
	Deferred tax liabilities			(45,587	)		(1,204	)		142,334			-		2,440		-			97,983

	Total liabilities			31,380			82,894			359,330			7,510		28,193		-			509,307

	Minority interest			-			989			-			-		-		-			989

	Stockholders' equity			187,616			197,620			240,548			4,785		22,554		(465,507	)		187,616

Total liabilities and stockholders' equity			$	218,996		$	281,503		$	599,878		$	12,295	$	50,747	$	(465,507	)	$	697,912

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SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
At February 28, 2005
(in thousands)


									Non-
								100%		Wholly
								Owned		Owned
				Holdings		Evergreen		Guarantor		Guarantor		Non						Consolidated
				(Parent)		(Issuer)		Subsidiaries		Subsidiary		Guarantors			Eliminations			Total

ASSETS
	Current assets:
		Cash and cash equivalents	$	-	$	1,228	$	1,390	$	-	$	100		$	-		$	2,718
		Accounts receivable, net		-		9		60,861		639		846			-			62,355
		Other current assets		1,580		1,004		27,559		-		7,743			-			37,886

	Total current assets			1,580		2,241		89,810		639		8,689			-			102,959

	Properties, net			1,729		3,306		488,089		11,732		40,514			(1,808	)		543,562
	Notes receivable from affiliates			13,127		3,110		245		-		(2,389	)		-			14,093
	Investment in subsidiaries			200,406		254,503		-		-		-			(454,909	)		-
	Other assets including goodwill			-		12,909		18,007		-		4,181			-			35,097

Total assets			$	216,842	$	276,069	$	596,151	$	12,371	$	50,995		$	(456,717	)	$	695,711


LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities:
		Accounts payable	$	-		$	5,327		$	66,484		$	-	$	1,021	$	2		$	72,834
		Accrued liabilities and payables to affiliates		-			4,790			22,642			-		810		-			28,242
		Accrued interest		-			7,961			28			29		14		-			8,032
		Current portion long-term debt		-			6,515			3,734			3,370		626					14,245

	Total current liabilities			-			24,593			92,888			3,399		2,471		2			123,353

	Long-term debt			78,640			57,320			133,169			-		23,731		-			292,860
	Deferred rentals and other payables to affiliates			-			-			(5,098	)		5,178		-		-			80
	Deferred tax liabilities			(45,410	)		(387	)		138,592			-		2,356		-			95,151

	Total liabilities			33,230			81,526			359,551			8,577		28,558		2			511,444

	Minority interest			-			655			-			-		-		-			655

	Stockholders' equity			183,612			193,888			236,600			3,794		22,437		(456,719	)		183,612

Total liabilities and stockholders' equity			$	216,842		$	276,069		$	596,151		$	12,371	$	50,995	$	(456,717	)	$	695,711

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SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS - UNAUDITED
For the Three Months Ended May 31, 2005
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Net cash (used in) provided by		$	(46	)	$	(2,838	)	$	33,719		$	1,352		$	(859	)	$	(5,212	)	$	26,116
	operating activities

Cash flows from investing activities:
	Purchases of property, equipment,		-			(11	)		(19,633	)		-			(1,535	)		-			(21,179	)
	and overhauls
	Proceeds from disposal of property		-			-			538			-			-			-			538
	and equipment
	Notes receivables & other assets		-			(2,867	)		(1,276	)		(17	)		(375	)		5,212			677

Net cash provided by (used in)			-			(2,878	)		(20,371	)		(17	)		(1,910	)		5,212			(19,964	)
	investing activities

Cash flows from financing activities:
	Proceeds from long-term debt		-			-			-			-			355			-			355
	Payments on long-term debt		-			(5,315	)		(1,431	)		(1,335	)		-			-			(8,081	)
	Other financing sources		46			9,864			(12,275	)		-			2,365			-			-

Net cash provided by (used in)			46			4,549			(13,706	)		(1,335	)		2,720			-			(7,726	)
	financing activities

Net (decrease) increase in cash			-			(1,167	)		(358	)		-			(49	)		-			(1,574	)

Cash, beginning of period			-			1,228			1,390			-			100			-			2,718

	Cash, end of period	$	-		$	61		$	1,032		$	-		$	51		$	-		$	1,144

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SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS - UNAUDITED
For the Three Months Ended May 31, 2004
(in thousands)


											Non-
									100%			Wholly
									Owned			Owned
			Holdings			Evergreen			Guarantor			Guarantor			Non						Consolidated
			(Parent)			(Issuer)			Subsidiaries			Subsidiary			Guarantors			Eliminations			Total

Net cash (used in) provided by		$	2,248		$	(14,030	)	$	10,235		$	1,445		$	(31	)	$	2,454		$	2,321
	operating activities

Cash flows from investing activities:
	Purchases of property, equipment,		-			(10	)		(11,025	)		-			(325	)		-			(11,360	)
	and overhauls
	Proceeds from disposal of property		-			-			605			-			-			-			605
	and equipment
	Notes receivables & other assets		-			1,223			(573	)		(227	)		(9	)		(2,453	)		(2,039	)

Net cash provided by (used in)			-			1,213			(10,993	)		(227	)		(334	)		(2,453	)		(12,794	)
	investing activities

Cash flows from financing activities:
	Proceeds from long-term debt		-			222,247			-			-			-			-			222,247
	Payments on long-term debt		-			(205,553	)		(3,149	)		-			(147	)		-			(208,849	)
	Other financing sources		(2,248	)		1,059			2,192			(1,218	)		216			(1	)		-

Net cash provided by (used in)			(2,248	)		17,753			(957	)		(1,218	)		69			(1	)		13,398
	financing activities

Net (decrease) increase in cash			-			4,936			(1,715	)		-			(296	)		-			2,925

Cash, beginning of period			-			1,002			2,723			-			346			-			4,071

	Cash, end of period	$	-		$	5,938		$	1,008		$	-		$	50		$	-		$	6,996

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ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements, which to the extent they are not recitations of historical fact, constitute "forward-looking statements" as defined in Section 21E of the Securities Exchange Act of 1934, as amended. Statements and assumptions with regard to future revenues, income and cash flows, program performance, the outcome of litigation, and planned dispositions of assets are examples of forward-looking statements. Wherever possible, we have identified these forward-looking statements by words such as "anticipates", "believes", "could", "may", "intends", "estimates", "expects", "projects", and similar phrases.

Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or our present expectations. The risks and uncertainties to which our business is subject include, but are not limited to, those risks and uncertainties included under the heading "Risk Factors Relating to the Company" in our Annual Report on Form 10-K for the fiscal year ended February 28, 2005. Such risks and uncertainties include:

	•	the financing agreements of Evergreen Aviation which include financial covenants that impose substantial restrictions upon us;
	•	our access to additional financing;
	•	volatility in aircraft values which may affect our ability to obtain financing secured by our aircraft;
	•	the age of our aircraft fleet;
	•	our dependence upon utilization of our Boeing 747 aircraft fleet to generate the majority of our flight revenue;
	•	the price and availability of aircraft fuel;
	•	our dependence upon revenue from the United States Air Force ("USAF") Air Mobility Command and the United States Postal Service ("U.S. Postal Service"); and
	•	government regulation.

For further information regarding the risks and uncertainties associated with our business, please see the Company's other reports and filings with the SEC, including, but not limited to, our Annual Report on Form 10-K for the fiscal year ended February 28, 2005.

Readers of this Quarterly Report on Form 10-Q are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We assume no obligation to publicly update or revise our forward-looking statements included in this report, whether as a result of new information future events or otherwise, except as required by law.

OVERVIEW

Evergreen Holdings, Inc. ("Holdings") is the holding company of Evergreen International Aviation, Inc. ("Aviation"), a leading provider of integrated air cargo transportation and aviation support services. Holdings, Aviation, and their consolidated subsidiaries (collectively, "Company", "we", "us", or "our") provide global air cargo shipping, ground handling and logistics services, helicopter transportation services, small aircraft charters, and aircraft maintenance and repair services. Our diverse fleet of commercial aircraft and helicopters gives us the capability and flexibility to provide a wide array of air cargo and transportation services to our customers.

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BUSINESS OVERVIEW

Business Segments

We conduct business in six major business segments through our wholly-owned subsidiaries:

	•	Evergreen International Airlines, Inc. ("Airlines") provides air cargo services for both international and domestic markets;

	•	Evergreen Aviation Ground Logistics Enterprise, Inc. ("EAGLE") provides full-service aviation ground handling and logistics services, including mail handling, aviation hub management, aircraft handling, cargo handling, ground system management, ground equipment maintenance, ground equipment sales and leasing, aircraft line maintenance, terminal services, aircraft de-icing and washing, check-in and ticketing, baggage acceptance and seat selection, and passenger cabin cleaning;

	•	Evergreen Helicopters, Inc. ("Helicopters") provides helicopter and small fixed-wing aircraft services throughout the world in connection with activities such as forest fire fighting, health services, aerial spraying, heavy lift construction, law enforcement, helicopter logging, petroleum support services, search and rescue, peacekeeping and relief support, helicopter skiing, and agriculture;

	•	Evergreen Air Center, Inc. ("the Air Center" or "Air Center") an unlimited Class IV airframe repair station certified by the FAA, performs aircraft maintenance, repair and overhaul services, and aircraft storage services;

	•	Evergreen Aircraft Sales and Leasing Co. (“EASL”) selectively buys, sells, leases, and brokers commercial aircraft, helicopters, and aircraft spare parts; and

	•	Evergreen Agricultural Enterprises, Inc. (“Agriculture”) conducts farming operations, nursery and horticulture operations, and delivers nursery and processed agricultural products to wholesale and retail customers.

Trust Created February 25, 1986

Aviation also holds an approximate two-thirds beneficial interest in the Trust Created February 25, 1986 ("Trust"). The Trust was created pursuant to the Trust Agreement, dated as of February 25, 1986, as amended and restated pursuant to the Amended and Restated Trust Agreement, dated as of August 31, 1987, as amended on August 31, 1988, and as amended and restated pursuant to the Second Amended and Restated Trust Agreement, dated as of September 29, 1995, as amended by the First Amendment thereto as of May 8, 2003, as amended by the Second Amendment thereto as of January 14, 2004, and as amended by the Third Amendment thereto as of May 10, 2004, among Evergreen International Aviation, Inc. (an assignee of Evergreen Holdings, Inc., as successor to 747, Inc. and King Christian, Inc.) and Mr. Delford M. Smith, as Beneficiaries, and Wilmington Trust Company, not in its individual capacity, but solely as Owner Trustee. The Trust assets consist primarily of one Boeing 747 aircraft and three DC-9 aircraft. The Trust leases these aircraft to Airlines.

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Controlling Shareholder and Related Parties

	•	Ventures Acquisition Company LLC ("Ventures Acquisition Company");
	•	Ventures Holding, Inc. ("Ventures Holding");
	•	DMS Properties; and
	•	Greenpatch Farms.

From time to time, we engage in transactions with Mr. Smith and the entities owned by, or controlled by, Mr. Smith. See "Note 11 - Related Party Transactions" in Item 1 of this quarterly report.

RECENT ACCOUNTING PRONOUNCEMENT

Available Information

General information about us can be found at www.evergreenaviation.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available free of charge on our website at www.evergreenaviation.com/invr.html as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. Information on our website is not incorporated into this Form 10-Q or our other securities filings, and is not a part of such filings.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 31, 2005
AS COMPARED TO THE THREE MONTHS ENDED MAY 31, 2004

The following table sets forth the results of operations with respect to our consolidated reportable segments for the three months ended May 31, 2005 and May 31, 2004.


				Three Months Ended May 31,

*(in millions - UNAUDITED)*				2005			2004			Change

Operating revenues:
	Flight revenue		$	118.5		$	87.3		$	31.2
	Sales of aircraft, parts and other property and equipment			11.2			2.3			8.9
	Ground handling and logistics services revenue			29.8			25.6			4.2
	Support services and other revenue			16.8			11.0			5.8

		Total operating revenues		176.3			126.2			50.1

Operating expenses:
	Flight costs			19.4			17.5			1.9
	Fuel			39.7			25.4			14.3
	Maintenance			17.9			17.7			0.2
	Aircraft and equipment			12.4			12.1			0.3
	Cost of sales of aircraft, parts, and other property and equipment			8.9			1.0			7.9
	Cost of ground handling and logistics services			24.8			21.8			3.0
	Cost of support services and other support costs			18.6			10.7			7.9
	Selling, general, and administrative expenses			18.6			17.5			1.1

		Total operating expenses		160.3			123.7			36.6

		Income from operations		16.0			2.5			13.5

Non-operating income (expense):
	Interest expense			(9.4	)		(9.0	)		(0.4	)
	Other non-operating income (expense), net			0.5			(3.6	)		4.1

Income (loss) before minority interest and income taxes				7.1			(10.1	)		17.2

		Minority interest		(0.3	)		(0.3	)		-

Income (loss) before income taxes				6.8			(10.4	)		17.2

		Income tax (expense) benefit		(2.8	)		3.7			(6.5	)

		Net income (loss)	$	4.0		$	(6.7	)	$	10.7

We recorded net income of $4.0 million for the three months ended May 31, 2005, as compared to a net loss of
$6.7 million during the three months ended May 31, 2004.

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Operating Revenue

Total operating revenues for the three months ended May 31, 2005 were $176.3 million, which was a $50.1 million, or 39.7%, increase from total operating revenues of $126.2 million for the three months ended May 31, 2004.

Flight Revenue — Flight revenue accounted for $118.5 million, or approximately 67.2%, of our total operating revenue during the three months ended May 31, 2005. Compared to the three months ended May 31, 2004, we experienced a $31.2 million, or 35.7%, increase in our flight revenue.

• Airlines — During the three months ended May 31, 2005, Airlines generated $105.0 million of flight revenue, as compared to $79.8 million during the three months ended May 31, 2004, resulting in a $25.2 million increase. The increase was primarily attributable to a $21.0 million increase in revenues from USAF Air Mobility Command contracts.

USAF Air Mobility Command Contracts — Flight revenue earned by Airlines under USAF Air Mobility Command contracts increased by $21.0 million during the three months ended May 31, 2005, as compared to the three months ended May 31, 2004. During the three months ended May 31, 2004, our revenues from USAF Air Mobility Command contracts had declined because the USAF Air Mobility Command had shifted away from the use of commercial aircraft in favor of using organic military transport for movements of cargo directly into Iraq. After May 31, 2004, the USAF Air Mobility Command shifted back to utilizing some commercial aircraft for movements of cargo.

Commercial Contracts — During the three months ended May 31, 2005, flight revenue from our commercial customers increased by $4.2 million as compared to the three months ended May 31, 2004. Increased utilization of our Boeing 747 fleet for commercial flights out of Asia accounted for a $6.2 million increase in commercial flight revenue. However, those increases were partially offset by a $2.0 million decrease in flight revenue from our DC-9 fleet due to the completion, during our previous fiscal year, of an air cargo contract with DHL.

• Helicopters — During the three months ended May 31, 2005, Helicopters generated $13.4 million of flight revenue, as compared to $7.5 million during the three months ended May 31, 2004, resulting in a $5.9 million increase in revenue. Of the increase, $3.9 million was attributable to new service contracts with the United Nations and additional long-term contracts with the United States Navy. The remaining increase of $1.9 million was attributable to increased utilization of the Sikorsky S-64 "Skycrane" helicopter, particularly for construction and air-lift services.

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Sales of Aircraft, Parts, and Other Property and Equipment — Revenue from sales of aircraft, parts, and other property and equipment was $11.2 million during the three months ended May 31, 2005, as compared to $2.3 million during the three months ended May 31, 2004, resulting in an $8.9 million, or 387.0%, increase in sales revenue.

Approximately $7.6 million of the increase in sales revenue was primarily attributable to the following sales by our EASL segment to Ventures Acquisition Company during the three months ended May 31, 2005:

	•	the sale of two Aerospatiale Model SA 330J rotor-wing aircraft, with corresponding aircraft parts (collectively, the "Puma Aircraft") for an aggregate sales price of $5.0 million; and

	•	the sale of a Sikorsky CH-54 rotor-wing aircraft, with corresponding aircraft parts (collectively, the "CH-54 Aircraft") for an aggregate sales price of $2.4 million.

Because the sales prices of the Puma Aircraft and the CH-54 Aircraft were the same as EASL's inventory costs for the aircraft, EASL did not recognize any profit from the sales. Ventures Acquisition Company will lease the Puma Aircraft and the CH-54 Aircraft to Helicopters under three-year lease agreements. See "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item 1 of this quarterly report.

The remaining $1.3 million increase in sales revenue was primarily attributable to increased sales of aircraft hulls, engines, and engine parts in our Air Center segment.

Ground Handling and Logistics Services Revenue — Our EAGLE segment generated $29.8 million of revenue from ground handling and logistics services during the three months ended May 31, 2005, as compared $25.6 million during the three months ended May 31, 2004, resulting in a $4.2 million, or 16.4%, increase in revenue.

Commercial Customers. An increase in volume of services provided by EAGLE to its domestic and international commercial customers accounted for $3.9 million of the increase in EAGLE's revenues. In particular, an expansion in the volume of ground handling and logistics services provided by EAGLE to British Airways accounted for $3.5 million of EAGLE's growth in revenue from its commercial customers.

Support Services and Other Revenue — Support services and other revenue was $16.8 million during the three months ended May 31, 2005, as compared to $11.0 million during the three months ended May 31, 2004, resulting in a $5.8 million, or 52.7%, increase in revenue.

	• Air Center — An increase in the level of heavy aircraft maintenance, line maintenance, and aircraft storage services provided by the Air Center to third parties resulted in a $5.0 million increase in support services revenue.

	• Airlines —An increase in the volume of air and ground transportation logistics services provided to third parties by a division of our Airlines segment resulted in a $0.7 million increase in support services revenue.

	• Helicopters —An increase in the volume of non-flight helicopter support services provided to third parties by our Helicopters segment resulted in a $0.1 million increase in support services revenue.

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Operating Expenses

Total operating expenses during the three months ended May 31, 2005 were $160.3 million, which was a $36.6 million, or 29.6%, increase from $123.7 million of expense during the three months ended May 31, 2004.

Flight Costs — Flight costs were $19.4 million during the three months ended May 31, 2005, as compared to
$17.5 million of expense during the three months ended May 31, 2004, resulting in a $1.9 million, or 10.7% increase in expense.

• Airlines — Flight costs for Airlines increased by $1.2 million, primarily as a result of increased commissions paid on USAF Air Mobility Command contracts.

	Increases in Expense. The increased flight activity for USAF Air Mobility Command contracts resulted in a $2.2 million increase in the amount of commissions that Airlines paid on those contracts. Also, with the increased flight activity, crew costs and overfly charges increased by approximately $0.6 million.

	Decreases in Expense. The completion of a DHL air freight services contract during the prior fiscal year resulted in current fiscal year reductions in travel costs (by approximately $1.2 million) and DC-9 crew costs (by approximately $0.4 million).

• Helicopters — Flight costs for Helicopters increased by $0.7 million, primarily due to the additional flight crew costs, training costs, and travel expenses associated with an increase in the number of helicopter contracts for the current fiscal year, as compared to the prior fiscal year.

Fuel — Fuel expense was $39.7 million during the three months ended May 31, 2005, as compared to $25.4 million of expense during the three months ended May 31, 2004, resulting in a $14.3 million, or 56.3%, increase in fuel expense.

• Airlines — Airlines' fuel expense increased by $14.5 million. Approximately $11.4 million of the increase in fuel expense was attributable to sharply rising prices for aviation fuel within the commercial flight sector. Another
$3.1 million increase in fuel expense was attributable to an increase in the number of block hours flown by our aircraft. In comparison, fuel expense for USAF Air Mobility Command missions did not significantly fluctuate because the pegged contract fuel rate for military flights is more favorable than for commercial contracts.

• Helicopters — A $0.2 million decrease in Helicopters' fuel expense was primarily attributable to i) a change in our contracts whereby many of our customers now assume direct responsibility for the purchase of aviation fuel and ii) the classification of the cost of certain fuel sales by Helicopters to the line item "Cost of support services and other costs."

Maintenance — Aircraft maintenance expense was $17.9 million during the three months ended May 31, 2005, as compared to $17.7 million of expense during the three months ended May 31, 2004, resulting in a $0.2 million, or 1.1%, increase in expense.

• Airlines — Amortization expense for our DC-9 fleet decreased by approximately $0.4 million due to a decrease in flight activity in the current fiscal year. The decrease in the DC-9 flight activity was primarily attributable to the termination of the DHL air freight contract during the prior fiscal year.

• Helicopters — Maintenance expense for Helicopters' aircraft increased by approximately $0.6 million. The increase was primarily attributable to an increase in start-up and configuration costs incurred during the current fiscal year, as compared to the prior fiscal year.

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Aircraft and Equipment Expense — Aircraft and equipment expense was $12.4 million during the three months ended May 31, 2005, as compared to $12.1 million of expense during the three months ended May 31, 2004, resulting in a
$0.3 million, or 2.5%, increase in expense.

• Airlines — Aircraft and equipment expense for our Airlines segment decreased by $1.0 million primarily as a result of: i) a $0.3 million reduction in aircraft insurance costs, ii) a $0.4 million reduction in engine rental expense due to lower lease rates and greater utilization of owned engines, and iii) a $0.3 million reduction in aircraft lease expense attributable to the expiration of a DC-9 aircraft lease.

• Helicopters — A $1.3 million increase in aircraft and equipment expense for our Helicopters segment was primarily attributable to an increase in helicopter lease expenses. The increase in helicopter lease expense is primarily attributable to an increase in the number of aircraft resources that we need in order to service our long-term commercial contracts.

Cost of Sales of Aircraft, Parts, and Other Property and Equipment — Cost of sales of aircraft, parts, and other property and equipment was $8.9 million during the three months ended May 31, 2005, as compared to $1.0 million of expense during the three months ended May 31, 2004, resulting in a $7.9 million, or 790.0%, increase in cost of sales.

Approximately $7.6 million of the increase in cost of sales was primarily attributable to sales by EASL of the Puma Aircraft and the CH-54 Aircraft to Ventures Acquisition Company during the three months ended May 31, 2005. See "Operating Revenue - Sales of Aircraft, Parts, and Other Property and Equipment" above and "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item 1 of this quarterly report.

Because the sales prices of the Puma Aircraft and the CH-54 Aircraft were the same as EASL's inventory costs for the aircraft, EASL did not recognize any profit from the sales. Ventures Acquisition Company will lease both the Puma Aircraft and the CH-54 Aircraft to Helicopters under three-year lease agreements. See "Operating Revenue - Sales of Aircraft, Parts, and Other Property and Equipment" above and "Note 11 - Related Party Transactions - Sale and Lease of Aircraft" under Item 1 of this quarterly report.

The remaining $0.3 million increase in cost of sales is primarily attributable to increased sales of aircraft and engine part-outs.

Cost of Ground Handling and Logistics Services — Cost of ground handling and logistics services was $24.8 million during the three months ended May 31, 2005, as compared to $21.8 million of expense during the three months ended May 31, 2004, resulting in a $3.0 million, or 13.8%, increase in expense. The increase was primarily attributable to a $2.4 million increase in labor expense and a $0.8 million increase in equipment expense attributable to expansion of services provided by EAGLE to British Airways and other commercial customers.

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Cost of Support Services and Other Support Costs — Cost of support services and other revenue was $18.6 million during the three months ended May 31, 2005, as compared to $10.7 million of expense during the three months ended May 31, 2004, resulting in a $7.9 million, or 73.8%, increase in support costs. Cost of support services increased in the following areas:

	•	approximately $1.6 million of the increase was attributable to increased landing fees and ground handling expenses for Airlines;
	•	approximately $5.6 million of the increase was attributable to increased support costs for providing heavy aircraft maintenance, line maintenance, and aircraft storage services at the Air Center; and
	•	approximately $0.9 million of the increase was attributable to other support costs for the provision of helicopter and transportation logistics support services.

Agriculture — In comparison to the above increases in other support costs, Agriculture's cost of goods sold decreased by $0.2 million during the three months ended May 31, 2005, as compared to the three months ended May 31, 2004, primarily as a result of decreased sales of nursery plants.

Selling, General, and Administrative — Total selling, general, and administrative expense during the three months ended May 31, 2005 was $18.6 million, as compared to $17.5 million of expense during the three months ended May 31, 2004, resulting in a $1.1 million, or 6.3% increase in expense. The increase was primarily attributable to increases in professional fees incurred for legal and consulting services.

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Interest Expense

Interest expense during the three months ended May 31, 2005 was $9.4 million, which was a $0.4 million, or 4.4%, increase from $9.0 million of interest expense during the three months ended May 31, 2004. The increase was primarily attributable to higher interest rates being charged by the Company's lenders during the three months ended May 31, 2005, as compared to the three months ended May 31, 2004.

Other Non-Operating Expense and Income

During the three months ended May 31, 2005, we recognized $0.5 million of other non-operating income, which was a $4.1 million increase in income from $3.6 million of other non-operating expense during the three months ended May 31, 2004.

During the three months ended May 31, 2004, we incurred $3.8 million of non-operating expense that was primarily attributable to loan prepayment penalties, legal fees, and the write-off of unamortized loan acquisition costs which were incurred in conjunction with the full repayment and termination of our revolving line of credit with PNC Bank, N.A. (“PNC Bank”) in May 2004. The expense was partially offset by $0.2 million of gains realized on the sale of real property rights and farming equipment in our Agriculture segment.

Income Tax Expense

Our income tax expense for the three months ended May 31, 2005 was $2.8 million, as compared to an income tax benefit of $3.7 million for the three months ended May 31, 2004. The increase in income tax expense was attributable to pre-tax income of $6.8 million for the three months ended May 31, 2005, as compared to a pre-tax loss of $10.4 million for the three months ended May 31, 2004. The income tax expense for the three months ended May 31, 2005, and the income tax benefit for the three months ended May 31, 2004 were both computed at the statutory rate of 34.0% for federal tax and a blended rate of approximately 4.13% for state taxes.

The following table sets forth the calculation of our income tax benefit (expense) for the three months ended May 31, 2005 and May 31, 2004:


		Three Months Ended
		May 31,

*(in thousands)*		2005			2004

Income (loss) before income taxes	$	6,812		$	(10,381	)

Combined federal and state tax rates		38.13	%		38.13	%

"Expected" income tax benefit (expense)		(2,597	)		3,958

Other adjustments		(211	)		(237	)

Income tax (expense) benefit	$	(2,808	)	$	3,721

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LIQUIDITY

At May 31, 2005, we had cash and cash equivalents of $1.1 million, as compared to cash and cash equivalents of
$2.7 million at February 28, 2005.

Cash Flows from Operating Activities

During the three months ended May 31, 2005, we generated $26.1 million of cash from our operating activities, as compared to $2.3 million of cash generated from operating activities during the three months ended May 31, 2004.

During the Three Months Ended May 31, 2005 —Net income of $4.0 million, non-cash depreciation and amortization expenses of $16.8 million, an $8.1 million decrease in inventories, a $2.9 million increase in accounts payable, and a $2.8 million increase in deferred income taxes accounted for most of our positive cash flow from operating activities during the three months ended May 31, 2005. Non-cash minority interest expense and an increase in income taxes payable also increased cash flow by approximately $0.5 million.

The positive cash flow from operating activities was partially reduced as a result of a $7.7 million increase in outstanding accounts receivable balances and $1.0 million of increases in prepaid assets and receivables from affiliates.

During the Three Months Ended May 31, 2004 —In comparison, during the three months ended May 31, 2004, non-cash depreciation and amortization expenses of $16.4 million and a $3.5 million write-off of unamortized loan acquisition costs accounted for most of our positive cash flow from operating activities. Payments received on accounts receivable from affiliates, decreases in inventories and prepaid expense accounts, and a non-cash write-off of unamortized loan acquisition costs also increased cash flow by approximately $2.0 million.

The positive cash flow from operating activities was partially reduced primarily as a result of i) our $6.7 million net loss for the three months ended May 31, 2004, ii) a $4.4 million increase in outstanding accounts receivable balances, iii) a $4.3 million decrease in accounts payable, and iii) a $3.7 million increase in deferred income taxes.

Cash Flows from Investing Activities

During the three months ended May 31, 2005, we used $20.0 million of cash for investing activities, as compared to a use of $12.8 million of cash during the three months ended May 31, 2004.

During the Three Months Ended May 31, 2005 — Purchases of aircraft parts and airframes, scheduled overhauls of engines, and upgrades and enhancements for our aircraft resulted in a $21.2 million use of cash for capital expenditures. We also used approximately $1.4 million of cash for payment of deposits on aircraft purchase agreements and other non-fixed assets. An increase in non-current agricultural products also accounted for an approximate $0.5 million use of cash.

The uses of cash were partially offset by i) $2.4 million of cash received as payments on notes receivable from affiliates, ii) $0.5 million of cash received from the disposal of property and equipment, and iii) approximately $0.2 million of payments received on notes receivable.

As of the date of this report, we have entered into agreements to purchase seven helicopters. As of the date of this report, total commitments for the purchase of these aircraft is $46.9 million, of which $4.2 million of deposits have already been paid. We expect to finance the purchase of these aircraft primarily through third-party or affiliate financing. See "Table of Contractual Obligations" below.

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During the Three Months Ended May 31, 2004 — Purchases of aircraft parts and airframes, scheduled overhauls of engines, and upgrades and enhancements for our aircraft resulted in a $11.4 million use of cash for capital expenditures. We also used approximately $3.6 million of cash for payment of capitalized loan acquisition costs and other non-fixed assets.

These uses of cash were slightly offset by i) $1.6 million of payments received on notes receivable from affiliates and ii) $0.6 million of cash received from the disposal of property and equipment during the three months ended May 31, 2004.

Cash Flows from Financing Activities

During the three months ended May 31, 2005, we used $7.7 million of cash in financing activities, as compared to $13.4 million of cash provided from financing activities during the three months ended May 31, 2004.

During the Three Months Ended May 31, 2005 —During the three months ended May 31, 2005, we received approximately $0.4 million of cash proceeds from long-term financing, and used approximately $8.1 million of cash for payments on our Secured Credit Facility and various equipment purchase notes.

During the Three Months Ended May 31, 2004 —In comparison, during the three months ended May 31, 2004, we received approximately $222.2 million of cash proceeds from long-term financing, and used approximately $205.6 million of cash for payments on those long-term debt obligations. In addition, we also made cash payments of approximately
$3.2 million on various other long-term instruments, which consist primarily of equipment purchase notes.

CAPITAL RESOURCES

At May 31, 2005, our total long-term debt balance was $299.4 million, which was a $7.7 million decrease from our long-term debt balance of $307.1 million at February 28, 2005. Our long-term debt is comprised of a $215.0 million outstanding balance on the Indenture Notes, a $74.0 million outstanding balance on the Secured Credit Facility, and outstanding balances of approximately $10.4 million on various equipment purchase notes.

Indenture Notes

The Indenture Notes were issued by Aviation on May 16, 2003, pursuant to an Indenture agreement which was executed by Aviation, as issuer, by Holdings and substantially all of the subsidiaries of Aviation, as guarantors, and by J.P. Morgan Trust Company, N.A., as successor trustee to Bank One, N.A., as trustee. The Indenture Notes are 12% senior second secured notes and were issued for their face value of $215.0 million.

To the extent of assets securing both the Indenture Notes and the Secured Credit Facility (see "Secured Credit Facility" below), the Indenture Notes are effectively second in priority to our indebtedness under the Secured Credit Facility. However, to the extent of the assets securing the Indenture Notes, the Indenture Notes are senior to our unsecured debt obligations. In addition, the Indenture Notes are fully and unconditionally guaranteed, both jointly and severally, by Holdings, substantially all of Aviation’s subsidiaries, and the Trust. The only subsidiaries and affiliated entities that are not obligated as guarantors under the Indenture Notes are Agriculture, Vintage, and the foreign subsidiaries of the Company.

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Interest Rate. The Indenture Notes bear interest at an annual fixed rate of 12%. Payments of interest are due semi-annually on May 15th and November 15th of each year. On May 13, 2005, we made the semi-annual payment of accrued interest on the Indenture Notes in the amount of $12.9 million. We funded payment of the accrued interest from our operations. The next semi-annual payment of accrued interest on the Indenture Notes, in the amount of $12.9 million, is due and payable on November 15, 2005. We intend to fund payment of the accrued interest from our operations.

Optional Redemption. The Indenture Notes will mature on May 15, 2010, at which time the outstanding principal of the Indenture Notes, plus all accrued and unpaid interest, will become due. However, we may elect to redeem the Indenture Notes prior to the maturity date. The Indenture Notes are redeemable after the dates and at the prices (expressed in percentages of principal amount on the redemption date) as set forth below:

If redeemed during the 12-month period commencing:

Redemption Price

	May 15, 2007	106 %
	May 15, 2008	103 %
	May 15, 2009 and thereafter	100 %

Repurchase of Notes Upon Certain Asset Sales or a Change in Control. If an Asset Sale or a Change of Control (as defined in the Indenture Notes) occurs, each holder of Indenture Notes will have the right to require us to repurchase all or part of the holder's Indenture Notes at a price set forth in the Indenture Notes.

•		incur additional debt or create liens;
•		pay dividends or acquire shares of capital stock;
•		make payments on subordinated debt or make investments;
•		make distributions from restricted subsidiaries;
•		issue or sell capital stock of restricted subsidiaries;
•		issue guarantees;
•		sell or exchange assets, or make capital expenditures;
•		enter into transactions with shareholders and affiliates; and
•		effect mergers and other changes of control.

As of May 31, 2005, we were in compliance with these covenants.

If Aviation or any of its restricted subsidiaries violates any of these covenants and are unable to obtain waivers, we would be in default under the Indenture Notes and the debt could be accelerated.

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Secured Credit Facility

On May 13, 2004, we entered into the Secured Credit Facility with the Wells Fargo Lenders. The Secured Credit Facility is a three-year senior secured credit facility that consists of two loans – a $50.0 million term loan and a $50.0 million revolving loan. The Secured Credit Facility is collateralized by substantially all of the assets of Aviation and its domestic subsidiaries, excluding the assets of Agriculture and Vintage.

The Secured Credit Facility terminates in May 2007, at which time all outstanding amounts of principal, accrued and unpaid interest, and any other fees and expenses owed under the Secured Credit Facility will be due and payable in full.

Interest Rates.The term loan bears interest at an annual rate of either LIBOR plus 5.5% or prime plus 3.0%, and the revolving loan bears interest at an annual rate of either LIBOR plus 3.0% or prime plus 0.5%. So long as we are not in default under the Secured Credit Facility, we may elect at any time to have interest on all or a portion of the advances on the revolving loan or the term loan calculated under the applicable LIBOR interest rate option. LIBOR interest rate elections are available for LIBOR periods of 1, 2, 3, or 6 months. Interest on a LIBOR rate loan is payable on the last day of the LIBOR period (if the elected LIBOR period is less than three months) or on the last day of each three month interval (if the elected LIBOR period is six months). For any portion of the term loan or revolving loan which is not covered by a LIBOR interest rate election, monthly payments of accrued interest are due on the first day of each month.

Loan Balance and Availability. As of May 31, 2005, the outstanding balance of the Secured Credit Facility was $74.0 million. Taking into consideration the limitations on our ability to obtain additional advances of principal from the revolving loan (see “Revolving Loan Advances” above) and the Minimum Availability Requirement (see "Covenant Compliance" below), as of May 31, 2005, our availability under the Secured Credit Facility was $0.8 million.

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Covenant Compliance. We are subject to certain financial and non-financial covenants under the Secured Credit Facility. In addition to other requirements that are set forth in such covenants, we are required to maintain: i) either a qualified cash reserve balance or an undrawn availability on the revolving loan of not less than $5.0 million (the "Minimum Availability Requirement"), ii) minimum thresholds with respect to certain consolidated and non-consolidated EBITDA, and iii) a minimum ratio with respect to fixed charge coverages.

The following are the required covenant thresholds under the Secured Credit Facility for the twelve-month period ending May 31, 2005:

Consolidated EBITDA Covenant — The covenant requires a consolidated EBITDA in a minimum amount of $100.0 million. As of May 31, 2005, we were in compliance with this covenant.

Airlines EBITDA Covenant — The covenant requires an EBITDA for Airlines in a minimum amount of $85.0 million. As of May 31, 2005, we were in compliance with this covenant.

Fixed Charge Coverage Covenant — The covenant requires a fixed charge coverage in a minimum ratio of 1.15 to 1.00. As of May 31, 2005, we were in compliance with this covenant.

In addition, the amount of capital expenditures that we may make in any fiscal year is limited to $75.0 million, of which at least $10.0 million must be financed from sources other than the Secured Credit Facility. As of May 31, 2005, we were in compliance with the capital expenditures covenant.

If Aviation or any of its restricted subsidiaries violates any of these covenants and are unable to obtain waivers from the Wells Fargo Lenders, we would be in default under the Secured Credit Facility and the debt could be accelerated.

	i)		occurrence of a default at the final maturity, on April 29, 2005, of the obligations under the FINOVA Note (defined below);

	ii)		failure to maintain insurance on the Collateral (as defined in the Secured Credit Facility);

	iii)		making an unpermitted investment toward the purchase of two Boeing 747 airplanes (the "Designated 747s"); and

	iv)		unauthorized use of the proceeds from advances under the Secured Credit Facility to renovate the Designated 747s.

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Amendment Number Three to Secured Credit Facility. On July 11, 2005, Ventures Acquisition Company purchased the Designated 747s. See "Landsbanki Loan Agreement" below. On the same day, we entered into an Amendment Number Three and Consent (the "Amendment Number Three") with the Wells Fargo Lenders. Amendment Number Three amends the Secured Credit Facility to allow Airlines to i) lease the Designated 747s from Ventures Acquisition Company and ii) reimburse Ventures Acquisition Company for certain out-of-pocket transaction costs incurred by Ventures Acquisition Company in connection with the purchase of the Designated 747s. In exchange, Mr. Smith pledged to Wells Fargo Foothill, Inc., as administrative agent and for the benefit of the Wells Fargo Lenders, all of his rights, title, and interest in Ventures Acquisition Company

WCMA Loan Agreement

On August 12, 2003, EASL entered into Working Capital Management Account Loan Agreement No. 54F-07164 (the “WCMA Loan”) with Merrill Lynch Business Financial Services, Inc. (“Merrill Lynch”) for the purpose of obtaining a
$8.0 million reducing revolver credit facility. The WCMA Loan provides for a reducing revolver loan which is funded from a line of credit. EASL may repay the loan balance in whole or in part at any time without penalty, and may request a re-borrowing of amounts repaid on a revolving basis. The WCMA Loan does not require monthly payments of principal. However, on the last business day of each calendar month, the maximum amount of the line of credit will be reduced by an amount equal to 1/60th of the loan amount. The WCMA Loan bears interest at the variable rate of LIBOR plus 3.00% and monthly payments of accrued interest are due and payable on the first business day of each calendar month. The WCMA Loan shall terminate on August 31, 2008, at which time all outstanding unpaid principal and all accrued and unpaid interest shall be due and payable in full.

An amendment letter from Merrill Lynch, dated May 12, 2004, established certain financial covenants for the WCMA Loan that are consistent with the financial covenants contained in the Secured Credit Facility. The amendment letter established i) a schedule for fixed charge coverage ratios, to be measured on a quarter-end basis, ii) a $75.0 million maximum limit on capital expenditures, of which, at least $10.0 million must be funded by indebtedness, and iii) a minimum EBITDA consolidated that must be achieved by the Company on a quarter-end basis. Specifically, the amendment letter adjusted the fixed charge coverage ratios and minimum consolidated EBITDA requirements of the WCMA Loan to correspond with the fixed charge coverage ratios and consolidated EBITDA requirements of the Secured Credit Facility. See “Capital Resources – Secured Credit Facility” above.

Covenant Compliance. As of May 31, 2005, we were in compliance with the covenants of the WCMA Loan. See "Capital Resources – Secured Credit Facility" above.

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FINOVA Note

In May 1997, the Trust entered into a $30.0 million Secured Loan Agreement with FINOVA Capital Corporation (the "FINOVA Note"), with interest at the annual rate of 10.44%. Monthly installments of principal and interest were payable through April 2005, at which time the FINOVA Note matured with a final payment of approximately $2.5 million in principal, plus accrued interest, due upon maturity.

The FINOVA Note is secured by means of a first priority security interest granted to FINOVA in the one Boeing 747 aircraft and three DC-9 aircraft owned by the Trust.

Intervest Note

On December 30, 2004, Vintage entered into a Construction Loan Agreement with Intervest-Mortgage Investment Company ("Intervest") whereby Intervest agreed to loan to Vintage a sum total of $9.0 million for the purpose of financing Vintage's construction of an IMAX theater on the Evergreen Museum Land. The Construction Loan Agreement is further evidenced by a Promissory Note from Vintage to Intervest in the principal sum of $9.0 million (the "Intervest Note").

The Intervest Note provides for an annual rate of interest equal to 1.00% in excess of the rate established for a Bank Prime Loan, as published in the Federal Reserve Statistical Release H.15 (the "Index"). The interest rate on all sums advanced under the Intervest Note shall be adjusted on the first day of each month following the date that the Bank Prime Loan rate changes in the Index, with such interest rate to be equal to 1.00% in excess of the week-ending average rate established for the Bank Prime Loan, as published in the Index. However, the interest rate shall never be less than 5.75% per annum. Accrued interest on the outstanding balance of sums advanced under the Intervest Note shall be due and payable on the first day of each month. In addition, following any default in the payment of interest under the Intervest Note, or any default under any of the other documents executed in connection with or to secure the Intervest Note (the "Loan Documents") and expiration of the applicable cure period, Intervest may elect to (i) declare the Intervest Note due and payable, and/or (ii) increase the rate of interest payable under the Intervest Note by three percent (3.00%) per annum.

Intervest has agreed, subject to certain conditions, to provide permanent financing for the theater following the completion of the theatre's construction.

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Landsbanki Loan Agreement

The Landsbanki Loan Agreement contains certain restrictions on Holdings' ability to i) effect mergers and other changes of control and ii) enter into transactions with its affiliates. In addition, the Landsbanki Loan Agreement provides that, among other events, a default under either of the leases of the Designated 747s (see "Lease Transactions" in "Note 11 - Related Party Transactions" in Item 1 of this quarterly report) shall consitute a default under the Lanksbanki Loan Agreement.

Risk of Default on Debt Obligations

Substantially all of our assets are pledged as collateral under the Company’s various debt agreements. Furthermore, the Indenture Notes and the Secured Credit Facility both contain cross-default provisions whereby an event of default under one or more debt obligations of either Aviation or its restricted subsidiaries would also result in an event of default under either, or both, the Indenture Notes and the Secured Credit Facility. In the event that we are unable to cure such defaults or obtain waivers with respect to such defaults, we are at risk that our payment obligations under either, or both, the Indenture Notes and the Secured Credit Facility will be accelerated, thereby forcing us to either obtain alternative financing or seek legal protection from our creditors.

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Table of Contractual Obligations

The following table summarizes our contractual obligations as of May 31, 2005:


Contractual Obligations
(in millions)

	Payments Due by End of Fiscal Year

		2006		2007		2008		2009		2010	After 2010			Total

Long-term debt obligations	$	10.3	$	8.8	$	64.3	$	0.9	$	215.1	$	-	$	299.4
including current maturities
and capital leases
Operating lease obligations ⁽¹⁾		16.9		18.0		11.3		7.5		5.3		5.8		64.8
Purchase obligations ⁽²⁾		18.1		24.6		-		-		-		-		42.7
Other obligations ⁽³⁾		2.2		3.0		3.0		3.0		3.0		3.8		18.0

Totals	$	47.5	$	54.4	$	78.6	$	11.4	$	223.4	$	9.6	$	424.9

⁽¹⁾		Total operating lease obligations of $64.8 million include $11.6 million of lease obligations to entities owned by, or controlled by Mr. Smith, the Company's controlling shareholder.

⁽²⁾		Purchase obligations consist of the purchase prices of $25.0 million for three Bell AB139 helicopters, $7.9 million for one Bell AB139 helicopter, $1.3 million for one Bell 206 L-4 helicopter, and $12.7 million for two Bell 412EP IFT helicopters, less deposits paid of $4.2 million.

⁽³⁾		Other obligations consist primarily of the annual salary and bonus to be paid to Mr. Smith pursuant to the Delford M. Smith Employment Agreement.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

As of May 31, 2005, we had fixed rate debt of $219.7 million and variable rate debt of $79.7 million. Based on the outstanding balances at May 31, 2005, each 1% increase or decrease in the interest rate of our variable rate debt would increase or decrease our annual interest expense by approximately $0.8 million. A 1% increase in interest rates would decrease the fair market value of our Indenture Notes by approximately $2.2 million. We have not entered into any obligations for trading purposes.

Foreign Currency Exchange Rate Risks

Although some of our revenues are derived from foreign customers, substantially all of our revenues and expenses are denominated in U.S. dollars. We maintain minimal balances in foreign bank accounts to facilitate payments of expenses.

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Commodity Price Risks

We are exposed to commodity price risk with respect to the purchase of aviation fuel. However, fluctuations in the price of fuel have not had a significant impact on our results of operations in recent years because, in general, the fuel price adjustment clauses in our customer contracts limit our exposure to increases in fuel prices. We do not enter into, or purchase any fuel under, long-term fuel contracts, nor do we enter into futures or swap contracts.

We are not exposed to any other commodity price risk.


ITEM 4.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management, with the participation of the Company's principal executive officer and principal financial officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's principal executive officer and principal financial officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As a result of the Company's need to restate its financial statements for the fiscal year ended February 29, 2004, the Company retained a certified public accounting firm (the "Internal Audit Consultants") to provide certain internal audit services to the Company. The Internal Audit Consultants interfaced with the registered independent public accounting firm during both the audit of the Company's financial statements for the fiscal year ended February 28, 2005 and the period covered by this report, and have performed analyses of major accounts included in the Company's financial statements. Although the Company was not able to file its Annual Report on Form 10-K for the fiscal year ended February 28, 2005 on the original due date, the Company believes that initiating the internal audit function improved the Company's effectiveness in recording, processing, summarizing and reporting financial information. In addition, the Company believes that the internal audit function, and the account analyses performed at, and for, both the fiscal year ended February 28, 2005 and the period covered by this report, will positively affect the Company's internal control over financial reporting, and will enhance the Company's ability to meet its future reporting requirements in a timely manner.

Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended May 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

The Company is currently involved in certain legal proceedings as discussed below.

Banc of America

We filed a motion to dismiss for lack of jurisdiction, but a ruling was issued on April 19, 2005 by the North Carolina Court of Appeals denying our motion. We are currently pursuing trial in the North Caroline Business Court and discovery is in the early stages.

Asiana Airlines

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Ducor Express Airlines


ITEM 6.	EXHIBITS

A list of exhibits that are filed as part of, or incorporated by reference into this Quarterly Report on Form 10-Q are set forth below.

Exhibit No.		Description of Document

10.1	*	Amendment Number Three and Consent, dated July 11, 2005, by and between the lenders identified on the signature pages thereof (the "Lenders"), Wells Fargo Foothill, Inc., as the arranger and administrative agent for the Lenders, and Evergreen International Aviation, Inc. and each of its Subsidiaries that are signatories thereto, as Borrowers.

10.2	*	Loan Agreement, dated July 11, 2005, between Ventures Acquisition Company, LLC, as Borrower, Evergreen Holdings, Inc., as Guarantor, and Landsbanki Íslands hf., as Lender.

10.3	*	Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company, LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23286.

10.4	*	Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company, LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23287.

31.1	*	Certification of President pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	*	Certification of President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	*	Filed herewith.

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SIGNATURES

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

	EVERGREEN HOLDINGS, INC. (Registrant)



Date: July 15, 2005	/s/ Timothy G. Wahlberg Timothy G. Wahlberg Director and President (principal executive officer)


Date: July 15, 2005	/s/ John A. Irwin John A. Irwin Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)

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EXHIBIT INDEX

Exhibit No.		Description of Document

10.1	*	Amendment Number Three and Consent, dated July 11, 2005, by and between the lenders identified on the signature pages thereof (the "Lenders"), Wells Fargo Foothill, Inc., as the arranger and administrative agent for the Lenders, and Evergreen International Aviation, Inc. and each of its Subsidiaries that are signatories thereto, as Borrowers.

10.2	*	Loan Agreement, dated July 11, 2005, between Ventures Acquisition Company, LLC, as Borrower, Evergreen Holdings, Inc., as Guarantor, and Landsbanki Íslands hf., as Lender.

10.3	*	Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company, LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23286.

10.4	*	Aircraft Lease, dated July 11, 2005, between Ventures Acquisition Company, LLC and Evergreen International Airlines, Inc. for a Boeing 747-230SF aircraft, manufacturer's serial number 23287.

31.1	*	Certification of President pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	*	Certification of President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	*	Filed herewith.

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TABLE OF CONTENTS

Risk of Default on Debt Obligations

NOTE 4 — LONG-TERM DEBT OBLIGATIONS

Indenture Notes

Secured Credit Facility

NOTE 11 — RELATED PARTY TRANSACTIONS

Transactions Under Mr. Smith's Employment Agreement

Lease Transactions

Sale and Lease of Aircraft

Notes Receivable from Affiliates and Notes Payable to Affiliates

LEGAL PROCEEDINGS

Banc of America

Asiana Airlines

Ducor Express Airlines

Claim for Losses under the Air Transportation Safety and System Stabilization Act

AIRCRAFT PURCHASE COMMITMENTS

Operating Revenue

Operating Expenses

Interest Expense

Other Non-Operating Expense and Income

Income Tax Expense

LIQUIDITY

CAPITAL RESOURCES

Indenture Notes

Secured Credit Facility

WCMA Loan Agreement

Risk of Default on Debt Obligations

Banc of America

Asiana Airlines

Ducor Express Airlines

SIGNATURES

EXHIBIT INDEX

EVERGREEN HOLDINGS INC 10-Q