January 20, 2014 Ms. Laura Remo Chief , Air Carrier Fitness D ivision Department ofTransportation 1200 New Jersey Ave., S.E. Washington , D.C. 20590 Re: Fitness Review for Gem Air LLC (formerly Mountain Bird, Inc. d/b/a Salmon Air) Dear Ms. Remo: Gem Air LLC is applying for commuter authorization and submits the fol lowing information to update the information that is presently in your files under Mountain Bird Inc. d/b/a Salmon Air, as well as under Gem Air LLC d/b/a Salmon Air. Because we sold the Salmon Air d/b/a and local flying operations to McCall Aviation Inc in May 2009, we did not comp lete commuter authorization in 2008. Gem Air LLC currently holds a Part 135 certificate: number GAJA077E. Before sel ling, we flew the commuter route between Salmon and Boise, Idaho, but McCall Aviation Inc chose not to continue that service. Our non-compete agreement with McCall Aviation is up in May 2014
. The air service route from Salmon to Boise connects Salmon to the state capital and airline travel to the rest of the world , and we believe that tie is necessary for healthy economic growth. Therefore, we respectfully request your consideration of our commuter appl ication
. As you are aware, my husband, Dan Schroeder, and I have been in Part 135 operations in Idaho s ince 1982. During that time, we served UPS for over 15 years , operated an EAS contract in Moab, Vernal , and Salt Lake City, Utah, and developed Salmon, McCall , and Boise commuter service
. We bel ieve that commuter service is necessary for continued business growth in Idaho, and by starting with the familiar route of Salmon to/from Boise, we can again establish a concrete customer base. When the non-compete agreement expires in May 2014 , Gem Air will begin on-demand operations , focused primari l y on 5MB-BOI-SMN passenger service. Commuter authority will allow Gem Air to efficiently offer more frequent scheduled service which will greatly improve Gem Air's ability to service the traveling public. Please note, the commuter authority that Gem Air is pursuing will not significantly change operations , management, personnel, or ownership of the business, and as such we respectfully request expedited treatment of our commuter appl i cation . Ifyou have any question s, please do not hesitate to call or e-mail. Thank you for your time and consideration
. Best thoughts, 

# g //7

# r~

oAnn Wol ters Manager Gem Air LLC 208

-993-0178 woltersjo @ gmail.com

### Application of Gem AirLLC BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

DOCKET for authority to conduct scheduled passenger operations as a commuter air carrier under 49 U.S
.c. 41738

APPLICATION OF Gem Air LLC

Communications with respect to thjs document should be sent to:

January 18, 2014 Gem AirLLC JoAnn Wolters 31 Hamner Drive Salmon, 1D 83467 Phone: (208) 993-0178 Email: woltersjo @gmail.com

### Application of GemAirLLC BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

for authority to conduct scheduled passenger operations as a commuter air carrier under 49 U.S
.C. 41738

APPLICATION OF 

### GemAirLLC DOCKET

Gem Air LLC, d/b/a! Gem Air, submits this application for authority to operate scheduled passenger service as a commuter air carrier under section 41738 of Title 49 of the United States Code ("the Statute"). In support of its application Gem Air states the following: Applicant is a partnership. JoAnn E. Wolters and Daniel L. 

### Schroeder (wife and husband) are the two and only members of Gem Air LLC , organized in 

### December of 2007 under the laws ofthe State ofIdaho. Its address, telephone and email are: 31 Hamner Drive Salmon, ID 83467 Telephone: (208) 993-0178 Email: woltersjo @gmail.com Applicant is a citizen ofthe United States as defmed in section 40102(a)(IS) ofthe Statute. The carrier is owned by JoAnn E. Wolters and Daniel L. 

### Schroeder (wife and husband), the two and only two members of Gem Air LLC d/b/a Gem Air. JoAnn is General Manager and Daniel is the Director of Operations and Chief Pilot. Their physical home address is 64 Miller Lane; Salmon, ID 83467. They are both US citizens. Applicant is currently under a "non-compete" agreement with McCall Aviation until May 2014 and is engaged in on-demand contract flying for McCall Aviation.

### Applicant requests authority to engage in 

### scheduled passenger operations as a commuter and proposes to operate: Scheduled service between Salmon, ID and Boise, ID. Service frequency will be 2 round trips 6 days a week from June through August and 5 rounds trips 3 days a week September lhrough May. Service will be provided using a 9 passenger Quest Kodiak 100. Information in support of the applicant's fitness to conduct the proposed air transportation operations is contained in subsequent attachments and exhibits.

Pursuant to title 18 United States Code section 1001 , I JoAnn E. Wolters, in 

### my inclividual capacity and as the authorized representative of the applicant, have not in 

### any manner knowingly and willfully falsified, concealed or covered up any material fact or made any false, fictitious, or fraudulent statement or knowingly used any documents which contain such statements in 

### connection with the preparation, filing or prosecution of the application. I understand that an individual who is found to have violated the provisions of 18 U.S.C. section 1001 shall be fined nor more than $10,000 or imprisoned not more than five years, or both. S.bm;tted by, 

# _!**U:-ifdb-'** JoAnn E. Wolters

### 204.3(d) 

# State ofIdaho

CERTIFICATE OF EXISTENCE OF 

### GEMAIR,LLC File Nwnber W-69723


### T, BEN YSURSA, Secretary of State ofthe State ofIdaho , hereby certify that I am the custodian ofthe limited liability company records ofthis State. I FURTHER CERTIFY That the records ofthis office show that the above-named limited liability company filed articles oforganization in Idaho on 12/ 2112007. 

### I FURTHER CERTIFY That the limited liability company's articles oforganization have not been dissolved. Dated: 1123120145:38 

### PM

# ~~ SECRETARY OF STATE
Authentic Access Idaho Document ( http://www.accessidaho.org!public!portal!authenticate
.html ) Tag: bSaeSfSff8d 740878e07eld99ff267acf9fclS 1faS26S933eb9db703a7eOd9d02e92101860b227c3



### 204.3(e) Please 

### see below the Affidavits of Citizenship for Daniel Schroeder and JoAnn

### Wolters AFFIDAVIT OF ClTIZENSUIP
STATE OF 

## _--="-Z-«:i""fi-u=.<o.",,,?
__ COUNTY OF

# _--,-,L,,-,s-::::A7~A,--,-,-,_**_** first duly sworn, deposes and says:
I. That

# hel~s duly elected, qualified, and serving as 

### t114-lIItty,.\;q

# t1~"'111>F~/ (EU Of 

# C <em 

# d:c LAc and that he§iS authtnzed to and does make this affidavit for it.
2. That

# ,~d ;; 

# M**/zt~** is a citizen ofthe United States within the meaning of49 US.c. 40102(a)(1 5).

Subscribed and sworn to before me this /:;

(SEAL)

KIM S HAMILTON

Notlry Public Stlt. of IdahoAFFIDAVIT OF CITIZENSHIP
STATE OF

### _-,~=-=u''-<A--,cr:- u&-<.. ,,--'

__ COUNTYOF
__

### ~;(~~~~2~flfzACu- 

# __ first duly sworn, deposes and says:
I ThatGhhe is duly elected, qualified, and serving as Of 

# (fAy!.

# 4,f L. L d.. and tha09ishe is authorized to and does make this affidavit for it
is a citizen ofthe United States within Ule meaning of49 USC 401 02(a)( 15)

f(iI Subscribed and sworn to before me this,--,-/I '-.-'
__ day of ZJf'('PJJ86f, 200{3'

(SEAL)

KIM S HAMILTON

Notary Public State of Idaho

### 204.3(t) Key Management Personnel JoAnn E. Wolters

- Gem Air LLC

- CEO and General Manager
• Curr ent Address: 64 Miller Lane Salmon, ID 83467 • DOB 

### 09 / 23/ 45 -Chicago, Illinoi s • USA citizenship

- Born in Chicago , IL • Graduated York High School

-Elmhurst,Illinoi s -I %3 • Attended The University of Wyoming for 2 years • Sportsland ofLaramie, WY

- OwnerlManager 1972-1978 • StudentatEmery School of Aviation, Greeley,CO

-Jan., 1979-June, 1979 • Instructor (Private through CFI) at Emery School ofAviation , Greeley, CO- June, 1979- May , 1980 • Commercial Pilot with CFI • Co

-owned and managed Mountain Bird Inc 

### d/bla! Salmon Ai as President from 1982 to 2005. • Built Mountain Bird from $150,000 yearly gross 

### in 1982 to $3.8 million in 2004. • President/General Manager 19 81-2005 Mountain Bird,Inc dba Salmon Air • 50"10 Ovme ri

lManagerofGemAir LLC2007

-Present • 50% OwnerlPresident of Spirit Air Inc 2000-Present • FAA Certificate # 348368108 • Commercial , Instrument, CFI

- 1979 

### Daniel L. Schroeder

- Gem Air LLC - D i rector of Operations and ChiefPilot


### • 

### • • • 

## • • • 

## • • 

## • • 

## • • 

## • • Current Address: 64 Miller Lane Salmon, ID 83467 USA citizenship

- Born inTacoma, WA Graduated Lennox High School in 1966 Worked at Bob' s Automotive while attending EI Camino Ir. College through 1967 Central Office Equipment Man Telephone Co., Culver City , CA. from 1968-1 969 Army operations & 

### Intelligence 1969-1971 Vietnam Honorable Discharge

-E -5 Central Office Equipment Man Telephone Co
., Culver City, CA. from 1971-1973 Angel Fire Corp. Sawmill, EagleNest,NM 1

### 'J73- 1977 Student
-Emery School of Aviation, Greeley, CO
. 1977-1978 Instructor -Emery School ofAviation, Greeley, CO. 1978-1980 1982-2005

- 50% owner ofMountain Bird Inc 

### d/bla Salmon Air 1982-2005 Salmon Air Director of Operations, Check Airman

- All Checks 2007

-2008Director of Operations, Check Airman All Checks GEM AIR LLC 2009-2013 McCall Aviation

- Pi lot, Check Airman All Checks , Training Captain 50% Share owner Gem Air LLC 2007

-Present

### • Ratings: o ATP March 1997 o Gold Seal Flight Instructor o CFI I o MEL , 

### o Ground Instructor Instrument and Advanced 

### • Flight Time: o IT

- 21,690 o PIC

- 21 ,440 o MEL -11 ,0000 o SEL

- 10,500 o Night

- 1,500 o Instrument

- 2, I

### 00 o Hood

- 

### ISO o Simulator

- 

### ISO Russell W. Linn 

### Gem Air LLC

- Director ofMaintenance 

## • • 

## • • • • • • • Current Address: 1111 Roosevelt Avenue Salmon, ID 83467 US Citizenship 1987

- 1988 Continental Airlines

- Avionics Mechanic 1988

- 1996 Trans World Airlines

- Electro Mechanic 1996

-2007 Salmon Air

- 2003

-2006 Director ofMaintenance and A&PIIA Mechanic 2007

-2008 Swift Transportation

- Truck Driver 2008

-2009 Salmon Air

- Line Pilot Part 135 2010

-Present Gem Air

- Director ofMaintenancelMechanic Technical Education o PT6A

-21 /27/34111 14 Heavy Maintenance Course, Standard Aero

- Canada o Quest Kodiak 100 Factory Maintenance Course, Spokane, W A o Cessna Caravan Maintenance Course, Flight Safety

- Wichita, KS o MD80 Avionics Initial , DC9-10/-30/-40 Avionics, Avionics Differences o B767 Electro Initial and LlOII 

### Electrical Course - Trans World Airlines o B747 Electrical Avionics initial

- Continental Airlines The positions of Director of Operations, ChiefPilot, and Director ofMaintenance, filled by the above persons, meet the qualifications of their respective positions as set for tin sections 119.69 and 119.71 of the Federal Aviation Regulations (14 CFR 119.69 & 119.71). Below is an Organizational Chart for Gem Air LLC.

### The positions ofDirector of Operations, ChiefPilot, and Director of Maintenance, filled by the above persons, meet the qualifications of their respective positions as set for tin sections 119.69 and 119.71 of the Federal Aviation Regulations (14 CFR 119.69 & 

### 119
.71)
. Below is an Organizational Chart for Gem Air LLC.

Gem Air LLC Organizational Chart



### GENERAL MANAGER

# /~ DIRECTOR OF OPERTIONS OPERATIONS MANGER

# /~**/~** CHIEF PILOT DIRECTOR OF CUSTOMER ADM I NISTRATION MAINTENANCE SERVICES

PILOTS MECHANICS AND LINE

### 204.3(g) The foUowing is the complete list of owners of Gem Air LLC (applicant) 

### Daniel Schroeder 50% ownership JoAnn Wolters

- 50% ownership Daniel and JoAnn are husband and wife 204.3(h) N/A 

### 204.3(i) NI A 

### 204.3(j) N/A 

### 204.3(k) 

### See attached financial statements for Gem Air LLC and Spirit Air Inc 

### Spirit Air Inc was fonned in 1999 as chapter S Idaho Corporation. Ownership is 50% JoAnn Wolters and 50% Daniel Schroeder (wife and husband). Spirit Air Inc. leascs aircraft to Gem Air LLC which is owned solely by JoAnn Wolters and Daniel Schroeder. Spirit Air and Gem Air are in strong financial positions and have always demonstrated excellent fiscal responsibility. 

### 204.3(1) NI A 

### 204.3(m) N/A 

### 204.3(n) Applicant's fleet ofaircraft 

### Re

-stated from above: Spirit Air Inc was fonned in 1999 as chapter S Idaho Corporation. Ownership is 50% JoAnn Wolters and 50% Daniel Schroeder (wife and husband). Spirit Air Inc. leases aircraft to Gem Air LLC which is owned solely by JoAnn Wolters and Daniel Schroeder. Aircraft owned by Spirit Air Inc are: 2007

- N838SA Kodiak 100

- Ser #

- 002' 1976

- N6561 B Britten Nonnan Islander BN2A

-20

- Ser # 520 1976

- N4438 Britten Norman Islander BN2A-20

- Ser # 766 1975

- N80GV Piper Chieftain PA31-350

- Ser # 31

-7552003 1974

- N31932 Piper Chieftain PA31

-350

- Ser # 31

-7405144 1976

- N8514C Piper Seneca PA34-200T

--- Ser # 34

-767

- 147 2000

- N376ME Cessna T206H

-- Ser # T20608225 1978 N7067Z Cessna T210G

- Ser # 21062572 1983 N9313D CessnaCI72RG Ser # 172RGll17 1964 N7748U Cessna 172

- Ser # 17251748 2007 N1527P Cessna 172S

- Ser # 172S1 0456 2008 N 1315C Cessna 172S

- Ser # 172S 10656 Those aircraft owned by Spirit Air Inc that are currently Part 135 are N838SA (Kodiak) , N80GV (Chieftain), N6561B (Islander) , N4438 (Islander) , N8514C (Seneca), N376ME (Cessna T206), and N7067Z (Cessna T21 0). Some ofthese are leased to McCall Aviation Inc and some to Gem Air LLC
. Some are temporarily inactive because of slow season and maintenance though they are still on 0085.

• 2007 Kodiak is the only aircraft that is financed. All other aircraft are owned free and clear.

### The turbine Kodiak 100 has been owned by Spirit Air since December 2006 and is the planned commuter aircraft. The chieftains and the Seneca will be considered for our commuter operations once they have completed the aging aircraft inspection as required for 135 Commuter operations. There are no needed or planned aircraft acquisitions at this time. Please see below the Affidavit of Safety Compliance.

### AFFIDAVIT OF SAFETY COMPLIANCE
STATE OF _-->"

## ..,t.7~c£(~**+>~l=,f.w TJ** **<.<:**__ COUNTY OF

# _~L=-=S:.</Jn:..!:.£.L:...L/;:L'7L'_'_ first duly sworn, deposes and says:
I. That(j;}/she is duly elected, qualified, and serving as

# Of_---4,;6G;L.ZS2:Z4':l:'14'L-;&UL:!l;I?_-"'i"-'L~(2~__ and tha@tshe is authorized to and does make this affidavit for it
2. That all aircraft owned and leased

# by_----*c5:;.**--".F-"';,mzn'--L!l~(.:L!/PL: _-,-L=-",L",-,CZ=-_~**  have been certified by the Federal Aviation Administration and currently comply with all applicable Federal Aviation Administration safety standards under Parts [J

### 21] [135],
as well as the noise standards ofPart 36, ofthe Federal Aviation Regulations.



### K.tI.:.; Subscribed and sworn to before me 

### this,-,-,II
__ day of

### :JJ6{E/Yj 

## 86f,200!

(SEAL) KIM S HAMILTON

Notary Public Stale of Idaho

### 204.3(0) N/ A 204.3(p) N/A 204.3(q) N/A 204.3(r) Dan Schroeder and JoAnn Wolters are experienced commuter operators. They began commuter operations under Mountain Bird Inc d/b/a Salmon Air, in the early 2000 's
. After successfully growing the Salmon

-Boise

-Salmon route from 2 round trips per week to 8 times per week over a 3 year period, they bid on an EAS route for Moab and Vernal , Utah. The bid was awarded to them and began in 2004
. Enplanements doubled in the first year of operation
. Piper Chieftains were used for the route. In July 2005 , they sold Mountain Bird Inc, d/b/a Salmon Air. Gem Air LLC was formed in Idaho by JoAnn Wolters and Daniel Schroeder (sole owners/members) in December 2007. At that time, JoAnn and Dan took back Mountain Bird Inc, dba Salmon Air, that they had sold in July 2005. Because ofthe bad credit Mountain Bird Inc's other owners created from July 2005 through December 2007, they had to change the name ofthe business which is why Gem Air was formed. All debts were taken on by JoAnn and Dan and negotiated to satisfaction ofcreditors. Gem Air LLC became the holder ofthe 135 certificate which it still holds today. In May 2009, all busines s operations conducted under the d/b/a of Salmon Air were sold to McCall Aviation Inc. in McCall, Idaho. As a condition ofthe sale to McCall Aviation, Gem Air agreed to a 5 year non-compete clause prohibiting Gem Air from engaging in operations for hire within 500nm of Salmon, ID. When the non-compete clause expires May I, 2014, Gem Air will begin operating on-demand SMN

BOI

-SMN service and will begin operating commuter service between Salmon and Boise once conmlUter authority is granted. Previous to being granted commuter authority or beginning on demand operations, Gem Air will submit OST Form 4507, OST Form 6410 and OST Form 4523. 204.3(s) Gem Air LLC operates a FAA Part 135 business for 9 passenger seats or less under the Certificate Number GAJA077E granted in January 2008
. Gem Air LLC has authority for single, multi-engine and turbine VFRlIFR operations. The local FSDO office is located at: 3295 Elder St. Suite 350 Boise, ID 83705. POI for Gem Air LLC is Patrick Darling and PM! is Craig Karel. The Quest Kodiak 100 aircraft will be added to the current certificate to conduct commuter operations. 204.3(t) Gem Air will provide scheduled service between Salmon, ID and Boise, ID. Service frequency will be 2 round trips 6 days a week from June through August and 5 rounds trips 3 days a week from September through May. Service will be provided using a 9 passenger Quest Kodiak 100. Please see the below pro-forma fmancials for the first normal year of service.Gem Air LLC SMN-BOI-SMN Commuter 2015 Pro-forma Profit and Loss 1 Operating Aircraft: Quest Kodiak 100 9 seats 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Average Block Length (nm) 145 145 145 145 145 Scheduled Departures 130 158 284 130 702 Scheduled Block Hours 130 158 284 130 702 Projected Completion Factor 99% 99% 99% 99 % 99% Projected Completed Departures 129 156 281 129 695 Projected Completed Block Hours 129 156 281 129 695 Projected Completed Block Miles 18 ,662 22 ,681 40,768 18 ,662 100 ,772 Projected Passengers 475 709 1513 505 3,201 Passengers Per Departure 3.7 4.5 5.4 3
.9 4
.6 Average Fare $199 $199 $199 $199 $199 Revenue Passenger Miles 68 ,875 102 ,747 219 ,356 73 ,225 464 ,203 Available Seat Miles 167 ,954 204 , 128 366,914 167 ,954 906 ,949 Projected Load Factor 41 % 50 % 60 % 44 % 51% Financial Projections Revenue $ 94 ,525 $ 141 ,011 $ 301 ,047 $ 100,495 $ 637 ,079 Expenses Flight Operations $18 ,629 $ 22 ,642 $ 40 ,698 $18 ,629 $100 ,600 Aircraft Ownership $20 ,271 $ 24 ,637 $ 44 ,284 $20 ,271 $ 109 ,464 Fuel & Oil $24 ,903 $ 30 ,267 $ 54 ,404 $24 ,903 $ 134 ,479 Sales & Marketing $ 5 ,555 $ 6 ,752 $ 12 , 136 $ 5 ,555 $ 30 ,000 Traffic Servicing $ 3 ,333 $ 4 ,051 $ 7 ,282 $ 3 ,33 3 $ 18 ,000
.00 Insurance $ 7 ,500 $ 7 ,500 $ 7 ,500 $ 7 ,500 $ 30 ,000 Maintenance $16 ,537 $ 20 ,099 $ 36 , 129 $16 , 537 $ 89 ,305 Sub-Total - Direct $94 ,786 $115 ,202 $207 ,072 $94,786 $511,847 Indirect $ 7, 000 $ 7 ,000 $ 7, 000 $ 7 ,000 $ 28 ,000 Total Expenses $ 101 ,787 $ 122 ,202 $ 214 ,072 $ 101,787 $ 539 ,847 Projected Operating P r ofiU(Loss) $ (7 ,262) $ 18 ,809 $ 86 ,975 $ (1 ,292) $ 97 ,231Pre-operating/Start-up Cost Obtaining Operating Authority Establishing Stations Marketing Reservation and Pilot Training Total Pre-service startu costs Pro-Forma Statement prepared using the cash basis 7 ,500 7 ,500 10 ,000

3 ,000 $ 28,000
The above pro-forma data , including load factors , are based upon historical operating data and experience Daniel Schroeder and JoAnn Wolters collected when they operated the same commuter route from 2001-2005 Initial service start-up will not require the hiring/training of additional personnel Operating costs are calculated based on the use of a single 2006 Quest Kodiak which has been owned by applicant since 2007
. Hangar and office space in Salmon is owned free and clear by JoAnn Wolters and Daniel Schroeder and is personally contributed to the operation Scheduled frequency is 2 round trips a day 6 days a week from mid-June to mid-September and 5 rounds trips

er week the rest of the earGem Air LLC SMN-BOI-SMN Commuter December 31 , 2013AND 2014 Pro-forma Balance Sheet 2014 2013 CURRENT ASSETS

Cash $ 85,125 $ 8,796 Inventory $ 67,565 $ 67,565 Other current assets $ 5,509 $ 5,509

Total current assets $ 158,199 $ 81,870 PROPERTY AND EQUIPMENT

Building and improvements $ 103,170 $ 103,170 Equipment $ 202,141 $ 202,141 Vehicles $ 28,058 $ 28,058 $ 333,369 $ 333,369 Less accumulated depreciation $ (308,572) $ (301,669)

Property and equipment - net $ 24,797 $ 31,700

TOTAL 

### $ 182,996 

### $ 113,570 LIABILITIES:

Accrued liabilities $ 138 $ 138 MEMBERS' EQUITY

Partner's capital accounts $ 113,432 $ 123,322 Contributions $ 22,000 $ 33,685 Net gain (loss) $ 47,426 $ (43,575)

Total members' equity $ 182,858 $ 113,432

TOTAL 

### $ 182,996 

### $ 113,570

### CERTIFICATE OF SERVICE I hereby certify that I have on this day served the foregoing application for commuter air carrier authority by first class mail, postage prepaid, upon the persons shown in the following service list.

2/812014



### Boise Flight Standards District Office 3295 Elder St. Suite 350 Boise, 

### ID 83705 Lemhi County Airport PO 

### Box 911 Salmon, ID 83467 Boise Airport Administration 3201 Airport Way, Suite 1000 Boise, 

### ID 8370 joAnn E. Wolters



### SERVICE LIST

# GEM AIR 

# LLC

FINANCIAL STATEMENTS -INCOME TAX BASIS FOR THE YEARS ENDED DECEMBER 

# 31,2013 AND 

# 2012 AND INDEPENDENT ACCOUNTANTS' COMPILATION REPORT

## GEM AIR LLC
Tabl e of Contents Independent Accountants' Compilati on Report
. . . .. . .. . .. . . ..... . . . . . . . . . . . . . .. . . .. .. . . .. . .... . . . . . . . .. .. . . . . 1 Financia l Statements : Statements of Assets , Liabilities , and Members ' Equity - Income Tax Basis
.... . . ... .. . .. .. . . ..... . . . .... .. .. . . . .... .. .. . ..... .... . . ... . .. . . . 2 Statements of Revenue s and Expenses - Income Tax Basis
. . . . .. ..... ..... .. .. . . . . . . ... . . 3 Notes to Fina ncial Statements
. ... .. . . .. .. . . .. . . . .. . .. . .. . ... .. . . .. . . . . . . . .. . .. . .... .. . . . .. . . . .. . . . . ...... .. . . . . . . . . . . 4

# Cooper Norman CPAs 

### & BUSINESS ADVISORS 1000 RI VE RWAL K D RIVE. SUITE 100 183402 POST O FfiCE Box 51330 1 83405·1330 I DAHO F ALLS, I OAH O 208
.523
.08621208.525.8038 FAX www.coopernorman .com



## INDEPENDENT ACCOUNTANTS' COMPILATION REPORT
Gem Air LLC: We have compiled the accompanying statements of assets, liability , and members' equity - income tax basis of Gem Air LLC as of December 31, 2013 and 2012 and the related statements of revenues and expenses - income tax basis for the years then ended. We have not audited or reviewed the accompanying financial statements and , accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with the income tax basis of accounting. Management is responsib le for the preparation and fair presentation of the financial statements in accordance with income tax basis of accounting and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants
. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.

Idaho Falls, Idaho February 3 , 2014



# -------------------- ;ntegrity ------- 

# expenence 

# trust

# GEM AIR LLC STATEMENTS OF ASSETS, LIABILITIES, AND MEMBERS' EQUITY INCOME TAX BASIS DECEMBER 31, 2013 AND 2012 ASSETS 2013 2012 CURRENT ASSETS: Cash (Note 1) $ 8 ,796 $ 7,876 Inventory (Note 1) 67 ,565 67,565 Other current assets 5,509 10,751 Total current assets 81 ,870 86,1921 PROPERTY AND EQUIPMENT (Note 1): Buildings and imp rovements 103,170 103,170 Equipment 202 , 141 200,767 Vehicles 28 ,058 28,058 333 ,369 331 ,9951 Less accumulated depreciation (301,669) (294,81 1 ) Property and equipment - net 31 ,700 37, 184 1 TOTAL 1$ 113,570 $ 123 ,376 1 LIABILITIES AND MEMBERS' EQUITY LIABILITIES: Accrued liabilities 1$ 138 $ 55 1
MEMBERS' EQUITY: Partne(s capital accounts 123,322 139,972 Contribution s 33 ,685 41,000 Net loss (43 ,575) (57,651 ) Total members' equity 113 ,432 123 ,321 1 TOTAL 1 $ 113 ,570 $ 123 ,376 1

See Independent Accountants' Comp il ation Report and Notes to the Fin ancial Statements 2

# GEM AIR LLC STATEMENTS OF REVENUES AND EXPENSES INCOME TAX BASIS DECEMBER 31, 2013 AND 2012
2013 2012 INCOME 1$ 5,612 $ 12,385 1 COST OF SALES 10,169 10,778 GROSS PROFIT (LOSS) (4557) 1,6071 OPERATING EXPENSES: Repair and maintenance 13,136 35,991 Depreciation 6,858 11,578 Legal and professional fees 5,500 Salaries 4,071 Shop supplies 3,453 111 Insurance expense 1,520 2,907 Contract work 1,500 8,500 Utilities 1 ,235 865 Business travel 571 Office supplies 428 Meals and entertainment 345 AdvertiSing 344 Taxes 339 Rent 160 Total operating expenses 39,460 59,9521 LOSS FROM OPERATIONS (44,017) (58,345>1 OTHER INCOME (EXPENSE): Interest income 442 694 Total other income (expense) 442 6941 NET LOSS 1$ (43,575) $ (57,651 )1

See Independent Accountants' Compilation Report and Notes to the Financial Statements 3

## GEM AIR LLC NOTES TO FINANCIAL STATEMENTS 

### 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company holds a Part 135 operating certificate from the Federal Aviation Administration giving it the ability to conduct air transportation for hire. Gem Air uses this certificate to offer charter services. Basis of Accounting The Company's policy is to prepare financial statements on the accounting basis used for income tax purposes. The Company uses the accrual basis of accounting for income tax purposes. Primary differences between the income tax basis of accounting and accounting principles generally accepted in the United States of America (GAAP) are the manner in which income and expenses are recorded. Differences exist in the fOllowing areas: 1. Losses from uncollectible receivables. 

### 2. Methods used in calculating depreciation. For income tax purposes , uncollectible receivables are written offwhen accounts are determined to be uncollectible as compared to GAAP which provides a reserve for uncollectible accounts. Depreciation is computed using accelerated methods of depreciation over estimated useful lives provided by tax authorities. GAAP depreciates asset cost to an estimated salvage value using lives equal to the estimated useful life of the asset.
Estimates The presentation of financial statements in conformity with income tax basis of accounting requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

-Continued

### 4

### 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Cash and cash equivalents The Company considers all short-term securities purchased with a maturity of three months or less to be cash equivalents. The carrying amount approximates fair value due to the relatively short period ofthese instruments. At times, such balances may exceed the FDIC insurance limit. As of November 9,2010 , the FDIC issued a final rule that provides unlimited insurance on noninterest-bearing transaction accounts from December 31, 2010 through December 31, 2012. Effective January 1 SI, 2013, the insurance reverts back to the $250 ,000 limit previously in effect. Inventorv Inventory consists of plane parts and supplies. Inventory is valued at cost using the first-in , first-out method which is lower than market. Property and Equipment Property and equipment are stated at cost. For income tax purposes the Company uses accelerated methods of depreciation over estimated useful lives from 5 to 7 years for equipment, and the straight-line method of depreciation over estimated useful lives from 20-39 years for the building and improvements. Income Taxes Gem Air, LLC is a pass through entity for income tax purposes. As such, the income is distributed for income tax purposes to the owners and any income taxes due are paid by the owners of the entity. Therefore , no provision for income taxes has been included in this financial statement. No interest or penalties related to income taxes have been recognized in the statement of revenues and expenses - income tax basis, or the statement of assets, liability, and members' equity - income tax basis. The Company uses a calendar year end for income tax reporting purposes, and tax years back to and including the tax year ended December 31, 2010 are subject to examination by major taxing jurisdictions. Subsequent Events Subsequent events were evaluated through February 3, 2014, which is the date the financial statements were available to be issued.

5

# GEM AIR 

# LLC

FINANCIAL STATEMENTS -INCOME TAX BASIS FOR THE YEARS ENDED DECEMBER 

# 31,2012, 2011, AND 

# 2010 AND INDEPENDENT ACCOUNTANTS' COMPILATION REPORT

## GEM AIR LLC
Table of Contents Independent Accountants' Compilation Report
............................................................... 1 Financial Statements: Statement of Assets , Liabilities, and Members' Equity - Income Tax Basis
...... . .. . .. . ........... . .... .. . . ............ . .... ... . ..... . ...... 2 Statement of Revenues and Expenses - Income Tax Basis
................................. 3 Notes to Financial Statements
.. . . .. .. . ..... . .... . ........ ... .. . .. . ....... .. . . .. . . .. .... .. .. .... . . .. . .. ........ . . .... . 4

# Cooper Norman CPAs & BUSINESS ADVISORS 1000 R IVERWAlK DRIVE, SUITE 1 00 183402 POST OFFI CE Box 51330 I 83405-1330 I DAHO FALLS, IDAHO 208.523.0862 1 208 .5258038 FAX www.coope rnorman .com



## INDEPENDENT ACCOUNTANTS' COMPILATION REPORT
Gem Air LLC: We have compiled the accompanying statement of assets, liability, and members' equity

- income tax basis of Gem Air LLC as of December 31, 2012, 2011 , and 2010 and the related statement of revenues and expenses - income tax basis for the years then ended. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with the income tax basis of accounting. Management is responsible for the preparation and fair presentation of the financial statements in accordance with income tax basis of accounting and for designing , implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.

Idaho Falls, Idaho December 16, 2013



# ----------------- !ntegrity------ 

# expenence 

# trust

# GEM AIR LLC STATEMENT OF ASSETS, LIABILITIES, AND MEMBERS' EQUITY INCOME TAX BASIS DECEMBER 31,2012,2011 , AND 2010 ASSETS 2012 2011 2010 CURR ENT ASSETS: Cash (Note 1) $ 7,876 $ 2,118 $ 9,815 Accounts receivab le 2,342 Inventory (Note 1) 67,565 7 1 ,065 71,325 Other current assets 10,751 15,739 2,000 Tota l current assets 86, 1 92 91,264 83,140 1 PROPERTY AND EQUIPM E NT (Note 1): Bu il dings and improvements 1 03 , 1 70 103,170 103 , 170 Equipment 200,767 200,767 200,767 Veh icles 28,058 28,058 28 ,058 33 1 ,995 33 1 ,995 331 ,9951 Less accumulated depreciation (294 ,8 1 1 ) (283,233) (270 ,914) Property and equipment - net 37 , 184 48, 762 6 1 ,081 1 TOTAL 1 $ 123,376 $ 1 40,026 $ 144,221 1 LIABILITIES AND MEMBERS' EQUITY LIABILITIES: Acrued liabi lities 1$ 55 $ 55 $
MEM B ERS' EQUITY: Partne r's capital accounts 1 39,972 144,222 187 ,703 Contributions 41 ,000 46 ,748 50 ,000 Distributions (3 ,000) Net loss (57 ,651 ) (50 ,999) (90,482) Total members' equity 123 ,321 1 39,971 144 ,221 1 TOTAL 1 $ 123 ,376 $ 140,026 $ 144,221 1

See Inde pendent Accountants ' Compi lation Report and Notes to the Fi nancial Statements 2

# GEM AIR LLC STATEMENT OF REVENUES AND EXPENSES INCOME TAX BASIS DECEMBER 31, 2012, 2011, AND 2010
2012 2011 2010 INCOME 1$ 12,385 $ 2,766 $ 30,817 1 COST OF SALES 10,778 4 ,886 48,730 GROSS PROFIT (LOSS) 1,607 (2 , 120) ( 17 ,9 1 3) 1 OPERATING EXPENSES : Repair and maintenan ce 35,991 14 ,607 13,534 Depreciation 11 ,578 12 ,320 13 ,622 Contract work 8,500 2,968 3,700 Insurance expense 2,907 1,556 2,931 Utilities 865 1,208 1,593 Supplies 111 1,843 1 ,639 Legal and profess ional fees 3,948 Salaries 10,800 22,260 Employee benefits expense 70 462 Medicare expense 1,124 279 Rent 1,302 870 Dues and subscriptions 100 188 Business travel 125 3, 733 Insurance - aircraft 1 ,912 1 ,578 Taxes 770 Fuel and oil 276 648 Total o perating expenses 59,952 50 ,98 1 70,9851 LOSS FROM OPERATIONS (58,345) (53,101 ) (88,898)1 OTHER INCOME (EXPENSE): Gain (loss) on sale of asset ( 1 ,584) Inte rest income 694 2,102 Total other in come (expense) 694 2,102 (1,584)1 NET LOSS 1$ (57 ,65 1 ) $ (50 ,999) $ (90.482) 1

See Ind ependent Accountants' Compilation Report and Notes to the Financial Statements 3

# GEM AIR LLC NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company holds a Part 135 operating certificate from the Federal Aviation Administration giving it the ability to conduct air transportation for hire. Gem Air uses this certificate to offer charter services. Basis of Accounting The Company's policy is to prepare financial statements on the accounting basis used for income tax purposes. The Company uses the accrual basis of accounting for income tax purposes. Primary differences between the income tax basis of accounting and accounting principles generally accepted in the United States of America (GAAP) are the manner in which income and expenses are recorded. Differences exist in the following areas: 1. Losses from uncollectible receivables. 2. Methods used in calculating depreciation
. For income tax purposes , uncollectible receivables are written offwhen accounts are determined to be uncollectible as compared to GAAP which provides a reserve for uncollectible accounts. Depreciation is computed using accelerated methods of depreciation over estimated useful lives provided by tax authorities. GAAP depreciates asset cost to an estimated salvage value using lives equal to the estimated useful life of the asset.
Estimates The presentation of financial statements in conformity with income tax basis of accounting requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period
. Actual results could differ from those estimates
.

41. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED Cash and cash equivalents The Company considers all short-term securities purchased with a maturity ofthree months or less to be cash equivalents. The carrying amount approximates fair value due to the relatively short period ofthese instruments. At times, such balances may exceed the FDIC insurance limit. As of November 9 , 2010, the FDIC issued a final rule that provides unlimited insurance on noninterest-bearing transaction accounts from December 31, 2010 through December 31, 2012. Effective January 1st, 2013 , the insurance reverts back to the $250 ,000 limit previously in effect. Inventory Inventory consists of plane parts and supplies. Inventory is valued at cost using the first-in , first-out method which is lower than market. Property and Equipment Property and equipment are stated at cost. For income tax purposes the Company uses accelerated methods of depreciation over estimated useful lives from 5 to 7 years for equipment, and the straight-line method of depreciation over estimated useful lives from 20-39 years for the building and improvements. Income Taxes Gem Air , LLC is a pass through entity for income tax purposes. As such, the income is distributed for income tax purposes to the owners and any income taxes due are paid by the owners of the entity. Therefore , no provision for income taxes has been included in this financial statement. No interest or penalties related to income taxes have been recognized in the statement of revenues and expenses - income tax basis, or the statement of assets, liability, and members' equity - income tax basis. The Company uses a calendar year end for income tax reporting purposes, and tax years back to and including the tax year ended December 31, 2009 are subject to examination by major taxing jurisdictions. Subsequent Events Subsequent events were evaluated through December 16, 2013, which is the date the financial statements were available to be issued.

5

# SPIRIT AIR INC

FINANCIAL STATEMENTS -INCOME TAX BASIS FOR THE YEARS ENDED DECEMBER 

# 31,2013 AND 

# 2012 AND INDEPENDENT ACCOUNTANTS' COMPILATION REPORT

# SPIRIT AIR. INC.
Table of Contents Independent Accountants' Compilation Report
.. . .... .. . . . .. . ... . .. . . . . ... . . . ..... . .. . ........ . .... . . .. . .... . 1 Financial Statements: Statements of Assets , Liabilities, and Stockholders' Equity - Income Tax Basis
... .. ....... ........................ .... ............. .. ...... 2 Statements of Revenue and Expenses - Income Tax Basis
......... .. . .... ................. 3 Notes to Financial Statements
....... .. .... .. .................... .. . ... .. ...... .. ..................................... 4

# Cooper Norman ePAs 

### & BUSINESS ADVISORS 1000 R tVERWALK D RIVE, S UITE 100183402 P

OST O FFICE Box 51330 183405-1330 IOAHO FALLS, I DAHO 2 08
.523
.08621208
.525
.8038 FAX WWw.coopernorman .com



## INDEPENDENT ACCOUNTANTS' COMPILATION REPORT Spirit Air, Inc.: We have compiled the accompanying statements of assets, liability, and stockholders' equity - income tax basis of Spirit Air, Inc
. as of December 31,2013 and 2012 and the related statements of revenues and expenses - income tax basis for the years then ended
. We have not audited or reviewed the accompanying financial statements and , accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with the income tax basis of accounting. Management is responsible for the preparation and fair presentation of the financial statements in accordance with income tax basis of accounting and for designing , implementing , and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.

Idaho Falls , Idaho February 3, 2014

## -------------~---- 

# tntegrity ------ 

# expenence 

# trust

# SPIRIT AIR. INC. STATEMENTS OF ASSETS, LIABILITIES, AND STOCKHOLDERS' DEFICIT INCOME TAX BASIS DECEMBER 31,2013 AND 2012
ASSETS 2013 2012 CURR ENT ASSETS: Cash (Note 1) $ 116 , 109 $ 122,020 Loan to stockholders 120,426 165,010 Ot he r current assets 4 ,433 Total current assets 240 , 968 287 ,030 1 PROPERTY AND EQUI PMENT (Note 1): Vehicles 25 ,865 25 ,865 E quipment 190 ,761 190 ,761 Airp lanes 2 ,568 ,564 2,756,547 2,785,190 2,973,1731 Less accumulated depreciation (2 ,540 , 110) (2,830,924) Property and equ ipment - net 245 ,080 142 ,2491 TOTAL 1 $ 486,048 $ 429 ,2791 LIABILITIES AND STOCKHOLDERS' DEFICIT CURR ENT LIABILITI ES: Current portion of long term d ebt (Note 2) $ 58,029 55 ,594 Talai liabil ities 58,029 55, 594 1 LONG TE RM DEBT (NOTE 2) 970,933 1,028,2231 S

TOCKHOLD ERS' DEFICIT:

Common stock 100 100 Retained deficit (654 ,638) (665,667) Net income 1 1 1 ,624 11,029 Total stockholders' deficit (542 ,91 4 ) (654,538) 1
TOTAL 1$ 486.D48 $ 429 ,279 1

See I ndependent Accountants' Compilation Report and Notes to the Fina ncia l Statements 2

# SPIRIT AIR. INC. STATEMENTS OF REVENUES AND EXPENSES INCOME TAX BASIS DECEMBER 31, 2013 AND 2012
2013 2012 RENTAL INCOME: 1$ 145 ,908 $ 155,7451 OPERATING EXPENSES: Interest expense 43 ,7 16 65,479 Repairs and maintenance 24 ,134 30,026 Depreciation (Note 1) 23,220 28,482 Insurance 20,452 11 ,579 Operating supplies 9,577 2,210 Taxes - excise and other 4,763 1,603 Travel 4,163 261 Professional fees 3,860 10 ,833 Utilities 2 ,772 1 ,789 Aircraft fuel/maintenance 1,436 1,226 Bank charges 1,364 2,387 Dues and subscriptions 1,096 2,903 Rent 710 Auto expense 572 639 Office supp li es 360 634 Freight 40 Entertainment and meals 659 License and permits 474 Medical 180 State taxes 20 20 Total operating expe nses 142,2 55 161,3841 INCOME (LOSS) FROM OPERATIONS 3,653 (5,639)1 OTHER INCOME (EXPENSE): Gain on sale of assets 107 ,927 Other income 16,668 Interest income 44 Total other income (expense) 107,971 16 ,668 1 NET INCOME 1$ 111,624 $ 11 ,029 1

See Independent Accountants' Compilation Report and Notes to the Financial Statements 3

# SPIRIT AIR. INC. NOTES TO FINANCIAL STATEMENTS 

### 1
. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company is engaged in the business of leasing aircraft outside of Salmon, Idaho. The Company began its operations on December 30, 1998. Basis of Accounting The Company's policy is to prepare financial statements on the accounting basis used for income tax purposes. The Company uses the cash basis of accounting for income tax purposes. Primary differences between the income tax basis of accounting and accounting principles generally accepted in the United States of America (GAAP) are the manner in which income and expenses are recorded. Differences exist in the following areas: 1. Losses from uncollectible receivables. 

### 2. Methods used in calculating depreciation. 

### 3. Gains on exchanges of fixed assets. For income tax purposes, uncollectible receivables are written offwhen accounts are determined to be uncollectible as compared to GAAP which provides a reserve for uncollectible accounts. Depreciation is computed using accelerated methods of depreciation over estimated useful lives provided by tax authorities. GAAP depreciates asset cost to an estimated salvage value using lives equal to the estimated useful life of the asset. The Company has used tax deferred exchanges for most of its airplanes. The basis of these assets is refiected at cost net of deferred gain. GAAP requires that these assets be reported at cost and the gain reported in the year of the exchange. The result of this difference is that the statement of assets, liabilities, and stockholder's equity understates the value of these assets. Estimates The presentation of financial statements in conformity with income tax basis of accounting requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates
. -Continued41. SUMMARY OF SIGNIFICANT ACCOUNTI NG POLICIES, CONTINUED Cash and cash equivalents The Company considers all short-term securities purchased with a maturity ofthree months or less to be cash equivalents. The carrying amount approximates fair value due to the relatively short period ofthese instruments. 

### At times, such balances may exceed the FDIC insurance limit. Balances did not exceed the insurance limit in 2012 and 2011, but did exceed the limit in 2010
. As of November 9 , 2010 , the FDIC issued a final rule that provides unlimited insurance on non interest-bearing transaction accounts from December 31, 2010 through December 31 , 2012
. Effective January 1 s ', 2013 , the insurance reverted back to the $250 ,000 limit previously in effect. Property and Equipment Property and equipment are stated at cost. For income tax purposes , the Company uses accelerated methods of depreciation over estimated useful lives from 5 to 7 years for equipment, and the straight-line method of depreciation over an estimated useful life of 39 years for the hanger space. Income Taxes The Company elected to be treated as a small business corporation under the provisions of Subchapter "S" of the Internal Revenue Code effective January 1 , 1999. In general , these provisions permit taxation of corporate income directly to the stockholders. Accordingly, no provision for income taxes has been made in the accompanying financial statements
. Subsequent Events Subsequent events were evaluated through February 3 , 2014 , which is the date the financial statements were available to be issued
.

5

### 2
. LONG TERM DEBT The note is payable to US Bank in monthly installments of $8,214 including interest at 4
.06%. A 2006 Kodiak airplane costing $1 ,420 ,566 is pledged as collateral. Maturities of long term debt are as follows : Year Ending December 31
. 2014 2015 2016 2017 2018 Thereafter

6 Amount $ 58,029 60,429 62 ,929 65,532 68 ,243 713
.800 $ 1,028962

# SPIRIT AIR, INC.**===9 ====** 

FINANCIAL STATEMENTS -INCOME TAX BASIS FOR THE YEARS ENDED DECEMBER 

# 31, 2012, 2011, AND 

# 2010 AND INDEPENDENT ACCOUNTANTS' COMPILATION REPORT

# SPIRIT AIR. INC.
Table of Contents Independe nt Accountants' Comp ilation Report
.... . ... . . .. .. . . . . . ... . .... . .. . .. . ...... . ......... . .. . ......... 1 Financial Statements: Statements of Assets, Liab ilities, and Stockho lders' Equity - Income Tax Basis
.......... . .. . .... . .. . .. .. . . .. . . . .. . .. . .... .. .. . . . .... .. .... . 2 Statements of Revenue and Expenses - Income Tax Basis
...... . ...... . ... .. .. . . . . . .. . .. .. 3 Notes to Financial Statements
. . . .. . .. .. . .. . .. .. .. .... ..... . .... .. . . .. .. ..... ... ... __ .. . . . ..... . . .. .. . . . ... . . .. ....... 4

# Cooper Norman CPAs 

### & BUSINESS ADVISORS 1000 RrvERwAL K DRIVE . SUITE 100 J 83402 POST O FFICE Box 51330 1 83405-1330 IOA HO F ALLS, I DAHO 208.523
.0862 I 208
.525
.8038 F AX WWw.cooperno rman .com


## INDEPENDENT ACCOUNTANTS' COMPILATION REPORT Spirit Air, Inc.: We have compiled the accompanying statements of assets, liability, and stockholders' equity - income tax basis of Spirit Air, Inc
. as of December 31,2012,2011, and 2010 and the related statements of revenues and expenses - income tax basis for the years then ended. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with the income tax basis of accounting
. Management is responsible for the preparation and fair presentation of the financial statements in accordance with income tax basis of accounting and for designing, implementing , and maintaining internal control relevant to the preparation and fair presentation of the financial statements
. Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.

Idaho Falls , Idaho December 16, 2013



# jntegrity ------ 

# expenence 

# trust

# SPIRIT AIR. INC. STATEMENTS OF ASSETS, LIABILITIES, AND STOCKHOLDERS' EQUITY INCOME TAX BASIS DECEMBER 31,2012,2011, AND 2010 ASSETS 2012 2011 2010 CURRENT ASSETS: Cash (Note 1) $ 122,020 $ 121,861 $ 356 ,762 Loan to stockholders 165,010 310,563 Other current assets 70 ,000 Total current assets 287,030 432 ,424 426 ,762 1 PROPERTY AND EQUIPMENT (Note 1) : Vehicles 25 ,865 25,865 25,865 Equipment 190 ,761 190 ,761 190,761 Airplanes 2,756 ,547 2 ,756 ,547 2,756,547 2 ,973 , 173 2 ,973,173 2,973,173 1 Less accumulated depreCiation (2,830 ,924) (2 ,802 ,442) (2 ,770 ,011 ) Property and equipment - net 142 ,249 170,731 203 , 162 1 TOTAL 1 $ 429,279 $ 603,155 $ 629, 924 1 LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES : Deposit $ 209 ,770 $ 233 ,240 Loans from stockholders 56 ,832 Current portion of long term debt (Note 2) $ 55,594 58 ,572 42 , 176 Total liabilities 55 ,594 268 ,342 332,248 1 LONG TERM DEBT (NOTE 2) 1,028,223 1 ,000 ,380 1,058,952 1 STOCKHOLDERS' DEFICIT: Common stock 100 100 100 Retained deficit (665,667) (761 ,376) (882 , 162) Net income 11 ,029 95 ,709 120 ,786 Total stockholders' deficit (654 ,538) (665,567) (761,276)1
TOTAL 1$ 429,279 $ 603 , 155 $ 629 ,9241 See Independent Accountants' Compilation Report and Notes to the Financial Statements 2

# SPIRIT AIR. INC. STATEMENT OF REVENUES AND EXPENSES INCOME TAX BASIS DECEMBER 31, 2012, 2011, AND 2010
2012 2011 2010 RENTAL INCOME: 1$ 155,745 $ 309,637 $ 412,7931 OPERATING EXPENSES: Interest expense 65,479 84,535 86,456 Repairs and maintenance 30,026 70,267 93,613 Depreciation (Note 1) 28,482 32,431 86,444 Insurance 11,579 2,082 12,347 Professional fees 10,833 500 5,446 Dues and subscriptions 2,903 523 2,749 Bank charges 2,387 171 145 OperatinQ supplies 2,210 1,037 71 Utilities 1,789 1,682 1,725 Taxes - excise and other 1,603 2,936 1,263 Aircraft fuel/maintenance 1,226 2,256 Entertainment and meals 659 118 888 Auto expense 639 698 Office supplies 634 1,124 29 License and permits 474 473 428 Travel 261 4,744 6,430 Medical 1 80 5,688 State taxes 20 20 Freight 500 45 Tota l operating expenses 161,384 211,765 298,0991 INCOME (LOSS) FROM OPERATIONS (5,639) 97,872 114,694 1 OTHER INCOME (EXPENSE): Other incom e 16,668 5,833 Interest income 1 , 108 Other expenses 2,163 849 Total other income (expense) 16,668 (2,163) 6,0921 NET INCOME 1$ 11,029 $ 95,709 $ 120,786 1

See Independent Accountants' Compilation Report and Notes to the Financial Statements 3

# SPIRIT AIR. INC. NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Company is engaged in the business of leasing aircraft outside of Salmon , Idaho. The Company began its operations on December 30, 1998. Basis of Accounting The Company's policy is to prepare financial statements on the accounting basis used for income tax purposes. The Company uses the cash basis of accounting for income tax purposes . Primary differences between the income tax basis of accounting and accounting principles generally accepted in the United States of America (GAAP) are the manner in which income and expenses are recorded. Differences exist in the following areas: 1. Losses from uncollectible receivables. 2. Methods used in calculating depreciation. 3. Gains on exchanges of fixed assets
. For income tax purposes, uncollectible receivables are written offwhen accounts are determined to be uncollectible as compared to GAAP which provides a reserve for uncollectible accounts. Depreciation is computed using accelerated methods of depreciation over estimated useful lives provided by tax authorities. GAAP depreciates asset cost to an estimated salvage value using lives equal to the estimated useful life of the asset. The Company has used tax deferred exchanges for most of its airplanes
. The basis of these assets is reflected at cost net of deferred gain. GAAP requires that these assets be reported at cost and the gain reported in the year of the exchange. The result of this difference is that the statement of assets , liabilities , and stockholder's equity understates the value of these assets. Estimates The presentation of financial statements in conformity with income tax basis of accounting requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates
. 4

### 2. LONG TERM DEBT The note is payable to US Bank in monthly installments of$8,214 including interest at 4.06%. A 2006 Kodiak airplane costing $1,420,566 is pledged as collateral. Maturities of long term debt are as follows : Year Ending December 31. 2013 2014 2015 2016 2017 Thereafter

5 Amount $ 55,594 57 ,894 60,288 62,782 65,379 781.880 $ 1083817