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COLONIAL AIRLINES, INC. 
BALANCE SHEET AT DECEMBEZR 31, 1946 

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ASSETS
CURRENT ASSETS: 
Cash in banks and on hand............................... $179,186
Accounts receivable ($523,158 due from U.S. Government)(Note 1)...732,258
Estimated recovery of Federal taxes through carry-back (Note 2)...179,034

Total current assets................................$1,123,053

INVESTMENTS AND SPECIAL FUNDS:
Marketable securities, at cost (market value $11,957).......$ 10,106
Other securities, at cost (no quoted market value)........8,591
Miscellaneous other deposits..............................25,470     44,167
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LIABILITIES, CAPITAL STOCK AND SURPLUS
CURRENT LIABILITIES:
  Notes payable to bank, maturing quarterly (Note 5)...........            $ 240,000
  Account payable ..................................................................             381,628

Accrued liabilites:
Salaries and wages ........................ $ 25,726
Taxes, other than income taxes ............  15,670
Other .....................................  49,488         
   90,884

Subscribers' deposits received on air travel plan ......................................................  19,975
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                    Total current liabilities ......................................        $ 732,487

UNEARNED TRANSPORTATION REVENUE .........................       94,241

LONG TERM DEBT (Note 5):
  Notes payable to bank.. $ 490,000
  Less: Amount due within one year carried under current liabilities......  240,000   250,000
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CAPITAL STOCK AND SURPLUS:
 Capital Stock (Note 5):
  Par value $1 per share:
   Authorized-1,000,000 shares
   Issued and outstanding-365,000 shares.........................    $ 365,000
 Capital surplus, paid-in (Note 5):
  Balance at December 31, 1945.....  $ 301,635
  Add: Proceeds, in excess of par value, of sale of 91,400 shares of capital stock after deducting $56,075 expenses in connection with sale .............. 1,680,525
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Balance at December 31, 1946 ........................ $ 1,982,160
Earned surplus (deficit) since December 31, 2934, per statement of income and earned surplus (deficit) attached ........ (185,760)  1,796,400  2,162,000
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$3,238,728
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[[Bold]] NOTES TO FINANCIAL STATEMENTS
NOTE 1: In an order dated March 18, 1947 the Civil Aeronautics Board determined a temporary rate of compensation (which is less than that requested by the Company) retroactive to April 15, 1946 for mail carried over routs operated by the Company from that date. Accounts receivable due from U.S. Government and operating revenue from U.S. mail include compensation at such permanent rate is established by the Civil Aeronautics Board but the amount of adjustment cannot be determined at this time. 

The above-mentioned temporary rate does not apply to compensation which will be received with respect to the Bermuda Route over which services have not yet be inaugurated. 

NOTE 2: Federal income tax returns for 1943, 1944 and 1945 are subject to review by the Internal Revenue Bureau. Under the provisions of the Internal Revenue Code, taxable income for 1945 may be offset by the equivalent portion of the loss on a tax basis for 1946. The Company elected to withhold payment of the third and fourth instalments of the tax payable for 1945 and will file a claim for refund for the first and second instalments amounting to $32,575 which have been paid. 

NOTE 3: Extension and development expenses applicable to routes for which certificates of public convenience and necessity have been granted are being amortized (as approved by the Civil Aeronautics Board) over a period of five years, beginning with the data of inauguration of services over the new routes. 

Extension and development expense applicable to pending applications for new routs are deferred until a final decision is obtained. Such deferred expenditures aggregate $125,994 at December 31, 1946, of which $49,699 was incurred 

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during the year. If any application is denied, the amount pertaining to such application will be charged against income at that time:
NOTE 4: Preoperational expenses represent expenses incurred with respect to new routs between dates of certification by the Civil Aeronautics Board and the dates of inauguration of revenue operation over such routes. These expenses include hiring and training of personnel, route familiarization flights, expenses in connection with airport facilities and leasing arrangements, advertising, etc. The Company has adopted the policy of amortizing such expenses over a period of twelve months from dates of inauguration of the individual new routes. 

NOTE 5: On February 26, 1947 the Company sold 150,000 shares of its authorized but heretofore unissued capital stocks to underwriters at $8.75 per share on an aggregate of $1,312,500. Capital stock will be credited with $150,000 and the balance, less estimated expenses of $44,770, will be credited to capital surplus. 

In addition, the Company sold to underwriters transferable warrants entitling the holders thereof to purchase, on or before February 26, 1950, an additional 30,000 shares at a price of $12.25 per share. The consideration of $3,000 paid for such warrants will be credited to capital surplus. 

On February 26, 1947, $430,000 was paid to The Continental Bank and Trust Company of New York. This payment, together with $60,000 paid in January 1947, completely liquidated the indebtedness to the bank. 

NOTE 6: During the year the Company discontinued the policy of providing a reserve for overhaul of engines. Had a reserve not been provided in prior years, the engine overhaul costs charged direct to flying expense would have been increased by $20,916.