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NEW YORK AIRWAYS, INC.
NOTES RELATING TO FINANCIAL STATEMENTS

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 statements 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 Comparative Statement of Profit and Loss herein reflects revenue for the transportation of United States mail on the basis of final mail rates, established by the Civil Aeronautics Board in March, 1954, for the transportation of mail by the Corporation from October 15, 1952, the date of commencement of operations, to December 31, 1953. In the Corporation's accounts and in the statement herein, the total mail pay ($1,348,464.00) has been apportioned ti the periods of 2 1/2 months ended December 31, 1952 ($131,661.00) and 12 months ended December 31, 1953 ($1,216,803.00) on a basis which reflects approximately the proportionate break-even need and return on investment applicable to the two periods.

3. Reserves for depreciation have been provided in 1953 at rates which have been approved for mail rate purposes by the Civil Aeronautics Board and the amounts provided in 1952 have been adjusted retroactively to conform to such approved rates. 

4. The balance of $173,338.86 described in the Balance Sheet herewith as "Extension and development costs" represents costs and expenses aggregating $237,744.08 (after adjustments made in 1953) incurred or accrued during the Corporation's pre-operating period, less amortization of $11,086.15 for the 2 1/2 months ended December 31, 1952 and $53,319.07 for the 12 months ended December 31, 1953. Such amortization has been provided 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, the date of commencement of operations, and ending on March 31, 1957, the date of expiration of the Corporation's Temporary Certificate of Public Convenience and Necessity. The total of $237,744.08 referred to above includes costs and expenses aggregating $94,866.08 (the larger part of which was incurred prior to the issuance of the above mentioned certificate) which the Civil Aeronautics Board did not recognize for mail rate purposes; consequently, the amortization charges based thereon amounting to $4,409.65 for the 2 1/2 months ended December 31, 1952 and $21,271.87 for the 12 months ended December 31, 1953 were disallowed by the Board in its determination of the final mail pay for the 14 1/2 months period.

5. The promissory note of $90,000.00 is payable to the order of Mr. John L. Senior, Jr., who was the Chairman of the Board of Directors of the Corporation during 1953. The holder has a right to convert the whole or any part of the unpaid principal amount of such note at any time prior to maturity into shares of the Capital Stock of the Corporation at the rate of one share for each $10.00 principal amount of the note.

6. During 1953 the Corporation sold 100,000 shares of Capital Stock for cash at a price of $12.50 per share. The excess of the proceeds from the sale of these 100,000 shares over the par value thereof aggregating $1,150,000.00 has been credited to capital surplus account and to this account has been transferred the financing expenses of $155,141.63 in connection with such sale.

Under an Employee's Stock Option Plan, adopted by the Board of Directors of the Corporation and approved by the stockholders in 1952, options may be granted 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 (effective January 19, 1953) to 5 persons to purchase an aggregate of 10,000 shares of Capital Stock at a price of $11.87 1/2 per share. On January 19, 1954, 20% of such options became exercisable. 

7. At December 31, 1952, the Corporation had a commitment in the form of a purchase agreement amounting to $283,500.00 for the purchase of two Sikorsky S-55 helicopters against which a deposit of $20,000.00 had been made. This commitment is expected to require cash of $263,500.00 in 1954 if a right to cancel is not exercised prior to July 1, 1954.

No provision for Federal income taxes has been made since the Corporation had no such liability for the years 1952 and 1953. The additional mail pay to be collected in 1954 as a result of the establishment of final rates by the Civil Aeronautics Board for the 14 1/2 months ended December 31, 1953, will be treated, for Federal income tax purposes, as income for the year 1954 and it is expected that the Board will include an appropriate provision for the Corporation's 1954 Federal income taxes in its determination of mail rates effective commencing January 1, 1954.

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