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1. The Uniform System of Accounts for Air Carriers, prescribed by the Civil Aeronautics Board, has been followed generally in the Corporation's accounts and in the financial statement herewith. The amounts set forth on the usual historical accounting basis which has been followed are not intended to represent present or future values. 

2. The Statement of Profit and Loss and Earned Surplus herein reflects revenue for the transportation of United States mail on the basis of temporary rates fixed by the Civil Aeronautics Board for the Corporation's carriage of mail on and after October 15, 1952, the date of commencement of operations: temporary rates serve only as an interim basis of payment until such time as final rates are fixed and the amounts so received are subject to retroactive adjustment upon the fixing of final rates. 

3. Except for relatively minor items of interest income and expense relating to the pre-operating part of the year, the net loss of $81,627.17 shown on the Statement of Profit and Loss and Earned Surplus herewith was sustained during the operating period of 2 1/2 months from October 15, 1952. It was not found practicable to allocate to "Extension and development costs" that portion of salaries and other expenses incurred or accrued in this operating period which may benefit future periods; all such expenses have been charged to operating expense accounts are so reflected in the statements herewith, but are subject to later adjustment. 

4. Reserves for depreciation have been provided, for the 2 1/2 months of operations, at rates which are believed by the management to be appropriate but which are subject to the Civil Aeronautics Board's approval. Depreciation provided on flight equipment (other than aircraft radio equipment and rotor blades) aggregated $20,169.86 and was based on an estimated service life of 3 years.

5. The balance of $229,465.78 described as "Extension and development costs" represents costs and expenses aggregating $240,714.08 incurred or accrued during the Corporation's pre-operating period, less amortization of $11,248.30 for the 2 1/2 months of operations. Such amortization has been provided (subject to the Civil Aeronautics Board's approval) on the basis of writing off these costs and expenses by charges to expense over a period of 53 1/2 months, starting on October 15, 1952 and ending on March 31, 1957, the date of expiration of the Corporation's Temporary Certificate of Public Convenience and Necessity. 

6. The promissory note of $90,000.00 is payable to the order of Mr. John L. Senior, Jr. The holder has a right to convert the whole or any part of the unpaid principal amount of such a note at any time prior to maturity into shares of the Capitol Stock of the Corporation at the rate of one share for each $10.00 principal amount of the note. 

7. The authorized Capital Stock was increased from 200,00 shares to 300,000 shares, all of a par value of $1.00 per share, effective on December 23, 1952. The Corporation sold 100,000 additional shares for cash at a price of $12.50 per share in 1953. The excess of the proceeds from the sale of these 100,000 over the par value thereof, credited to capital surplus in 1953, aggregated $1,150,000.00 against which underwriting commissions and other expenses of approximately $150,000.00 will be charged. 

An Employees' Stock Option Plan was adopted by the Board of Directors of the Corporation on December 10,1952 and approved by the stockholders on December 22, 1952 under which options may be granted to certain to certain officers and employees of the Corporation to purchase up to an aggregate of 15,000 shares of its capital stock. The options permit the purchase of such shares at a price determined by a disinterested committee of the Corporation's Board of Directors but at not less than 95% of the fair market value as at the effective date of the option. Pursuant to this Plan options have been granted to 5 persons to purchase an aggregate of 10,000 shares of Capital Stock at a price of $11.87 1/2 per share.

8. At December 31, 1952, the Corporation had commitments in the form of purchase agreements amounting to $567,000.00 for the purchase of four Sikorsky S-55 helicopters against which deposits of $40,000.00 had been made. These commitments are expected to require cash of $263,500.00 for the other two helicopters. The Corporation also had commitments of approximately $35,000.00 for spare parts and supplies.

Other known contingent liabilities did not involve amounts large enough to be significant.