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NEW YORK AIRWAYS, INC. 

NOTES RELATING TO FINANCIAL STATEMENTS

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

2. Revenue of $1,431,359.12 for the transportation of United States mail (representing service pay of $79,878.85 and subsidy of $1,351,480.27) is reflected herein, for the year 1954, on the basis of a final past period rate for the four months ended April 30,1954 and a final future period rate effective on and after May 1, 1954, established by the Civil Aeronautics Board in its order issued on August 20, 1954.

No amount for Federal income taxes was included in the Statements of Profit and Loss for the 2 1/2 months ended December 31, 1952 or for the year 1953, as explained in the Company's report for 1953. in 1954,additional mail pay was received, including amounts in reimbursement of estimated income taxes for the prior periods; the net effect of such mail pay and estimated tax is included as an adjustment in the Statement of Earned Surplus herewith. The amount of $168,029.33 described in the Balance Sheet herewith as "Accrued taxes", includes $161,174.10 for estimated Federal income tax of which $8,862.88 relates to income earned in the 2 1/2 months ended December 31, 1952, $109,480.46 relates to income earned in the year 1953 and $42,830.76 relates to the year 1954. The relatively large amount of tax estimated for 1953 is due primarily to the expectation that lower depreciation charges for that period will be allowed as deductions in computing Federal income taxes, than were deducted in computing net income in the Statement of Profit and Loss for 1953, to be offset by higher depreciation in subsequent periods.

3. Reserves for depreciation have provided at rates which have been approved for mail rate purposes by the Civil Aeronautics Board. In 1954, depreciation has been provided on certain flight equipment at generally lower than those previously used. However, inasmuch as the new rates were recognized by the Board in its determination of final mail pay applicable to the year 1954, the charge in deprecation rates rates has no significant effect on the net profit for the year 1954 nor on the comparability of such net profit with that of the preceding year

4. The deferred charge described in the Balance Sheet herewith as "Extension and development costs" represents costs and and expenses incurred or accrued during the Company's pre-operating period, less amortization from October 15, 1952. Such amortization ($53,319.07 in 1953 and $53,334.98 in 1954) has been provided on the basis of writing off these costs and expenses by charges to expenses over a period of 53 1/3 months ending March 31, 1957, the date of the Company's Temporary Certificate of Public Convenience and Necessity.

5. Under an Employees' Stock Option Plan, adopted by the Board of Directors of the Company and approved by the stockholders in 1952, options may be granted to certain officers and employees of the Company to purchase 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 Company's Board but at not less than 95% of the fair market value as at the effective date of the option. Pursuant to this Plan, prior to December 31, 1954 options had 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, 1955, 20$=% of such options became exercisable, making a total of 40% then exercisable.

6. In 1954, the Company commenced recording the cost of employees' vacations in the year in which earned instead of when paid. The adjustments made in the accounts and reflected in the financial statements herewith, to record the liability for accrued vacation pay and the corresponding expense charges, were based on the Company's vacation policy and employment contract with pilots.

7. At December 31, 1954, the Company 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 will require cash of 263,500.00 in 1955 unless the Company's right to cancel is exercised prior to July 1,1955.

Examination of the Company's Federal income tax return for the year 1952 has been started but not completed. No such examination has been made for subsequent years.

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