United States
Securities and Exchange Commission


WASHINGTON,
D.C. 20549




FORM
10-K





(Mark
      One)þ  Annual
      Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the fiscal year ended January 31, 2009or ̈  Transition
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the transition period from ___________to ___________Commission
      File Number 333-137920HALCYON JETS HOLDINGS, INC.
              (Exact
      name of registrant as specified in
charter)





Delaware
                                
                                
                                
                                20-3547389(State
      or other jurisdiction of incorporation or organization)
                                
                                
                                
                                (I.R.S.
      Employer Identification No.)336 West 37 th
      Street, Suite
      800
                                  New
      York, NY
                                
                                10018
                                
                                (212)
      616-5387(Address
      of principal executive offices)
                                
                                (Zip
      Code)
                                
                                (Telephone
      No.)Securities
      Registered Pursuant to Section 12(b) of the Act:Title
      of each class
                                
                                Name
      of each exchange on which registeredCommon
      Stock, par value $0.001 per share
                                
                                OTC





Securities
      Registered Pursuant to Section 12(g) of the Act:(Title
      of class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes   ̈ No  þ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes   ̈ No  þ




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No  ̈




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.   ̈




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
      accelerated filer   ̈
            Accelerated
      filer   ̈Non-accelerated
      filer   ̈
            Smaller
      reporting company  þ




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes   ̈ No  þ




The
aggregate market value of the outstanding common equity of the registrant as of
the last business day of the registrant’s most recently completed second fiscal
quarter was $9,232,800.
Affiliates of the Company beneficially own, in the aggregate, 24.39 percent of
such shares. There were 25,646,667 shares of voting common stock with a par
value of $0.001 outstanding at April 17, 2009.




DOCUMENTS
INCORPORATED BY REFERENCE




None.




1






HALCYON
JETS HOLDINGS, INC.


FORM
10-K


INDEX




PAGEPART
      IItem
      1.
                                                Business
                                                
                                                3Item
    1A.
                                                Risk
      Factors
                                                
                                                5Item
      1B.
                                                Unresolved
      Staff Comments.
                                                
                                                10Item
      2.
                                                Properties
                                                
                                                10Item
      3.
                                                Legal
      Proceedings
                                                
                                                10Item
      4.
                                                Submission
      of Matters to a Vote of Security Holders
                                                
                                                11PART
      IIItem
      5.
                                                Market
      for Common Equity and Related Stockholder Matters and Issuer Purchases of
      Equity Securities
                                                
                                                11Item
      6.
                                                Selected
      Financial Data
                                                
                                                12Item
      7.
                                                Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                                
                                                12Item
      7 A.
                                                Quantitative
      and Qualitative Disclosures About Market RiskItem
      8.
                                                Financial
      Statements and Supplementary Data
                                                
                                                16Item
      9.
                                                Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                                
                                                16Item 9
      A.
                                                Controls
      and Procedures
                                                
                                                16PART
      III
                                                Other
      InformationItem
      10.
                                                Directors,
      Executive Officers and Corporate Governance
                                                
                                                18Item
      11.
                                                Executive
      Compensation
                                                
                                                20Item
      12.
                                                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                
                                                21Item
      13.
                                                Certain
      Relationships and Related Transactions, and Director
      Independence
                                                
                                                22Item
      14.
                                                Principal
      Accountant Fees And Services
                                                
                                                23Part
      IVItem
      15.
                                                Exhibits,
      Financial Statement Schedules
                                                
                                                23Signature
                                                
                                                24




2





PART I




As
used in this Annual Report on Form 10-K, all references to the “Company,” “we,”
“our” and “us” for periods prior to the closing of the merger described below
refer to Halcyon Jets, Inc., and for periods subsequent to the closing of the
merger refer to Holdings and its wholly-owned subsidiary.





Item
      1.
            BUSINESS





Forward-looking
Statements




Statements
in this annual report on Form 10-K that are not historical facts constitute
forward-looking statements, which are made pursuant to the safe harbor
provisions of Section 21E of the Securities Exchange Act of 1934. These
statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. Those factors include, among other things, those
listed under ‘‘Risk Factors’’ and elsewhere in this annual report. In some
cases, you can identify forward-looking statements by terminology such as
‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’
‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential’’ or ‘‘continue’’ or the
negative of these terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially. Moreover,
neither we nor any other person assumes responsibility for the accuracy or
completeness of these statements. We are under no duty to update any of the
forward-looking statements after the date of this annual report to conform these
statements to actual results.





Corporate
Background - Reverse Merger




We
operated as Greenleaf Forest Products, Inc., a Nevada corporation, until August
14, 2007 and on that date merged with and into Greenleaf Forest Products, Inc.,
a Delaware corporation, for the sole purpose of changing our state of
incorporation to Delaware from Nevada. Greenleaf was originally incorporated in
Nevada for the purpose of importing pine wood blocks from Brazil and Argentina
that are used for civil architecture purposes, such as moldings, porch posts,
door components, stair parts and packaging materials.





On August
17, 2007, Greenleaf entered into an Agreement and Plan of Merger and
Reorganization by and among Halcyon Jets., Inc, which is referral to as
Holdings, Halcyon Jets, Inc., a privately held Nevada corporation and Halcyon
Jets Acquisition Corp., a newly formed, wholly-owned Delaware subsidiary of
Holdings that we refer to as the Acquisition Sub. Upon closing of the merger
transaction contemplated under the merger agreement, Acquisition Sub merged with
and into Halcyon Jets, and Halcyon Jets, as the surviving corporation, became a
wholly-owned subsidiary of Greenleaf. Pursuant to the merger agreement,
Greenleaf’s name was changed to Holdings.





Immediately
following the closing of the merger, Holdings transferred all of its pre-merger
assets and liabilities to its wholly-owned subsidiary, Greenleaf Forest Products
Holdings, Inc., a Delaware corporation (“SplitCo”) and then transferred all of
SplitCo’s outstanding capital stock to a major stockholder of Holdings in
exchange for cancellation of 39,795,454 shares of Holdings’ common stock held by
that stockholder, which left 8,500,000 shares of Holdings’ common stock held by
existing stockholders of Holdings.




These and
other transactions are described in greater detail in our Current Report on Form
8-K filed with the Securities and Exchange Commission on August 23,
2007.




Holdings
carries on Halcyon Jets’ business as its sole line of business. Holdings
relocated its executive offices to 336 West 37th Street, Suite 800, New York,
New York 10018 and its telephone number is (212) 616-JETS.




The
merger was accounted for as a reverse acquisition and recapitalization. Halcyon
Jets is the acquirer for accounting purposes and Holdings is the issuer.
Accordingly, Halcyon Jets’ historical financial statements for periods prior to
the acquisition become those of the acquirer retroactively restated for the
equivalent number of shares received in the merger. The accumulated deficit of
Halcyon Jets is carried forward after the acquisition. Operations prior to the
merger are those of Halcyon Jets. Earnings per share for the period prior to the
merger are restated to reflect the equivalent number of shares
outstanding.





Overview




Halcyon
Jets, Inc. was formed on February 1, 2007 with a goal to become the preeminent
broker for on-demand charter aircraft services. Halcyon Jets provides its
customers with convenient, comfortable, luxurious, and safe private jet travel
by matching customers’ flight requirements with Part 135 general aviation
aircraft operators.




3




We
believe a significant market exists for private jet service for successful,
affluent individuals and business travelers, based on a combination of
economics, post-September 11 inconveniences of modern air travel and the lack of
amenities associated with commercial airlines.




We do not
own any planes, but seek to “own” the customer relationship. The customer
relationship is believed to provide the single most important factor for
differentiation of Halcyon from other similar charter and aircraft brokerage
businesses. We seek to build brand loyalty with customers and we leave the
flying entirely to “Part 135” operators who specialize in air travel. These
operators are compliant with the minimum requirements of Part 135 of the Federal
Aviation Regulations for aircraft maintenance, aircrew training and aircraft
operations.




We
believe our customers appreciate the ability to choose their flight time, the
size of the aircraft, and the benefits of no-hassle general aviation check-in,
combined with 24-hour concierge service, gourmet meals, and all of the amenities
offered from a sophisticated travel company. By offering these added services,
we plan to build brand loyalty among its customers.




We are
working to position ourselves in the market as a premium brand and avoid the
tendency to commoditize customer service with travelers where “price” is not
necessarily the leading deciding factor in travel decisions. Marketing and sales
focus on travel amenities and superior customer service.




We
believe we provide our clients with the following:




·
            a
      highly efficient alternative for business travel·
            options
      and flexibility, by using multiple vendors·
            “seamless
      travel,” by bundling business productivity services with transportation
      services and other valuable amenities·
            convenience,
      by working with our customers to plan meetings, events and the underlying
      transportation·
            attractive,
      bulk, upfront payment options and multi-year and annual
      options




We do not
own or operate the aircraft, manage pilots, or own supporting operator
infrastructure, like operations and maintenance facilities. Our clients also do
not hold title to the aircraft.




The
Halcyon Jets model assumes that we will develop and build fundamental
capabilities directed by a seasoned leadership team with operational and
marketing know-how. Selection of our strategic partners is focused on
structuring mutually beneficial programs and establishing collaborative
alliance/supplier relationships.




Industry
Overview




In a
world characterized by continuing heightened concern over security, providers of
charter air services thrived during most of calendar year 2008. More business
travelers shun the airlines and the impersonal passenger terminals they inhabit.
Industry experts say increased demand for private air travel in the face of the
relative insecurity and inconvenience of the airlines has created a self feeding
growth mechanism. 1





General
aviation aircraft growth projections produced by the Federal Aviation
Administration (the “FAA”) at the end of 2008 reflected the impact of a slowing
worldwide economy. Worldwide shipments of general aviation airplanes totaled
3,969 units in 2008. This is a 7.1% decrease in shipments over the previous
year’s total of 4,272 airplanes and the third strongest year since 1981. 
 The
number of general aviation aircraft is forecast to grow to 262,460 by 2018. By
2025, the number of general aviation aircraft is expected to grow to over
286,500. 2





For the
third year in a row, business jet shipments reached an all-time high. In 2008,
the industry shipped a total of 1,315 units, up 15.6 percent over the previous
year’s figure of 1,138 planes. Given the time lag between new orders and
shipments, the strength of this segment generally reflects corporate profits and
the health of the economy in prior years. 2




According
to GAMA the use of general aviation airplanes for business continues to grow not
only in the United States but around the world. Both the number of worldwide
corporate operators and fractional share owners grew once again in 2008,
according to JETNET, LCC. The number of business operators grew to 17,040 from
16,238 while the number of fractional share owners reached 5,179 as compared to
5,168 in 2007.  The number of aircraft operating in fractional
programs grew 6.2% to 1,094 aircraft in 2008. 2




The
Federal Aviation Administration long-range includes the following summary of its
findings:





“Aviation
finds itself in economic waters that no one would have predicted a decade ago.
To be sure, the business climate is being influenced by several factors. Oil
price volatility, economic uncertainty, congestion concerns and environmental
issues are challenging the entire industry. In the long run, commercial aviation
demand at FAA facilities is projected to grow as the economy recovers and air
carrier operations continue to expand. Equally true in the longer term, the
demand for general aviation products and services will be on the upswing. With
new business jets and products like light sport aircraft, it is expected to
continue to increase in the future.




4




As the
demand for business jets has grown over the past several years, the current
forecast assumes that business use of general aviation aircraft will expand at a
more rapid pace than that for personal/sport use. In addition, corporate
safety/security concerns for corporate staff, combined with increasing flight
delays at some U.S. airports have made fractional, corporate, and on-demand
charter flights practical alternatives to travel on commercial flights.3




1
            “The
      Charter Market” by Charles Alcock and Meredith Saini found in Aviation
      International News, November 2006. available at
      www.ainolnine.com2
            2008
      General Aviation Statistical Databook & Industry
    Outlook3
            FAA
      Long-Range Aerospace Forecasts Fiscal Years  2009-2025 – March
      2009




Competitive
Factors




The
overall private aviation sector is crowded with a large and varied number of
participants, including aircraft owner/operators, membership programs, charter
providers and fractional programs. Many of our competitors are significantly
better capitalized than we are and have been in business a greater period of
time. We believe we compete on the basis of quality and consistency of service,
and not on price.




We also
compete with owner/operators, membership programs, charter providers and
fractional programs for available aircraft. Our ability to secure available
aircraft at favorable prices, or at all, is a significant competitive factor. We
compete with many more well capitalized businesses for available aircraft many
of which maintain long term relationships and have sources of available aircraft
that may prevent us from securing aircraft when needed for our
customers.





We offer
“Jet Card” programs. Marquis Jet and Blue Star, two of our well recognized
competitors, as well as others in the industry, offer similar programs. Marquis
Jet buys shares in fleet operator aircraft or through charter operators, and
markets the hours in packaged cards. We package our Jet Cards by dollars or
hours. To differentiate ourselves further, we seek to bundle the aircraft travel
with varying levels of additional business and other services, such as
hospitality (on the ground and in the air), ground transportation, catering and
concierge services.




Owner/Operator
Standards




Owners
and operators of aircraft that are considered suitable travel providers for us
are critical to providing our services. We have established several
high-priorities for our portfolio of operators:





·
            Each
      operator must have robust operational capabilities. They must demonstrate
      that they have aircraft capacity, deliver high quality, own top of the
      line aircraft and have highly skilled pilots and best in class operational
      capabilities.





·
            We
      will have ability to arrange flights on almost any type of aircraft
      demanded by customers through our portfolio of
  operators.





·
            Operators
      are certified under Part 135 of the FAA regulations and offer highest
      levels of pilot training and
credentials.




·
            Ability
      to reach thousands of airports, beyond large commercial
      airports.




Employees




We
currently have 18 employees, consisting of 4 in management, 9 in sales and
5 in administration and finance. We currently believe that our employee
relations are good.  In addition, we have 82 independent sales
representatives who represent the Company exclusively.




Item
1A.           RISK
FACTORS




There
are numerous and varied risks, known and unknown, that may prevent us from
achieving our goals. If any of these risks actually occur, our business,
financial condition or results of operation may be materially adversely
affected. In such case, the trading price of our common stock could decline and
investors could lose all or part of their investment.




Risks
Relating to Our Business





We
may be negatively affected by the changing economic conditions including the
current economic downturn.




The
purchase of private charter jet flight time is likely considered a luxury item
to consumers, especially compared to the costs associated with commercial air
travel. As a result, a general downturn in economic, business and financial
conditions, including recession, inflation and higher interest rates, could have
an adverse effect on consumers’ spending habits and could cause them to travel
less frequently and, to the extent they travel, to travel using commercial air
carriers or other means considered to be more economical than via a privately
chartered jet.   Currently, the increased turmoil in the
financial markets and the depressed economy has resulted in a significant
decline in private jet aircraft use. Rising fuel costs could also impact the
private aviation business adversely.




5




Since
we lack a meaningful operating history, it is difficult for potential investors
to evaluate our business.




Halcyon
Jets, was formed in February 2007. Our limited operating history makes it
difficult for potential investors to evaluate our business or prospective
operations. We are subject to all the risks inherent in the initial
organization, financing, expenditures, complications and delays inherent in a
new business. Investors should evaluate an investment in our Company in light of
the uncertainties encountered by new companies in an intensely competitive
industry. Our business is dependent upon the implementation of our business
plan, as well as our ability to enter into agreements with third parties for,
among other things, the provision of a sufficient number of aircraft, on
commercially favorable terms. There can be no assurance that our efforts will be
successful or that we will be able to attain profitability.




Our
independent registered public accounting firm has expressed doubt about our
ability to continue as a going concern.




Our
independent registered public accounting firm has expressed doubt about our
ability to continue as a going concern. This indicates that our auditors believe
that substantial doubt exists regarding our ability to continue to remain in
business. There can be no assurance that we will be able to achieve or sustain
profitability or positive cash flow in the near future, or at all. If customers
are slower to embrace our services than we expect, or we are unable to raise
additional funds on favorable terms, we may not be able to continue operating
our business. In addition,
we have been negatively impacted by the current economic recession, and a
continuation of the recession could have a material advise impact on our
business and result of operations.




We
will need additional financing to execute our business plan and fund operations,
which additional financing may not be available.




We have
very limited funds and we may not be able to execute our current business plan
and fund business operations long enough to achieve profitability. Our ultimate
success may depend upon our ability to raise additional capital. There can be no
assurance that additional funds will be available when needed from any source
or, if available, will be available on terms that are acceptable to
us.




We may be
required to pursue sources of additional capital through various means,
including joint venture projects and debt or equity financings. Future
financings through equity investments are likely to be dilutive to existing
stockholders. Also, the terms of securities we may issue in future capital
transactions may be more favorable for our new investors. Newly issued
securities may include preferences, superior voting rights, the issuance of
warrants or other derivative securities, and the issuances of incentive awards
under equity employee incentive plans, which may have additional dilutive
effects. Further, we may incur substantial costs in pursuing future capital
and/or financing, including investment banking fees, legal fees, accounting
fees, printing and distribution expenses and other costs. We may also be
required to recognize non-cash expenses in connection with certain securities we
may issue, such as convertible notes and warrants, which will adversely impact
our financial condition.




Our
ability to obtain needed financing may be impaired by such factors as the
capital markets, both generally and specifically in the aviation industry, and
the fact that we are not profitable, which could impact the
availability and cost of future financings. If the amount of capital we are
able to raise from financing activities, together with our revenues from
operations, is not sufficient to satisfy our capital needs, even to the extent
that we reduce our operations accordingly, we may be required to cease
operations.




Our
profitability depends on our ability to obtain suitable charter
aircraft.




Our
growth strategy depends on our having an adequate supply of available charter
aircraft for our customers, by partnering with operators of suitable charter
aircraft. Any condition that would deny, limit or delay our ability to provide
on-demand charter flights through our brokerage services, including a limited
supply of available charter aircraft, will constrain our ability to grow. If we
cannot partner with operators of private charter aircraft, we will not be able
to achieve economies of scale and may never become profitable.




We
are dependent upon key personnel whose loss may adversely impact our
business.




We rely
heavily on the expertise, experience and continued services of our senior
management and sales personnel. The loss, or any inability to attract or retain
key individuals, could materially adversely affect us. We seek to compensate and
motivate our executives, as well as other employees and independent contractors,
through competitive salaries, commissions and bonus plans, but there can be no
assurance that these programs will allow us to retain key employees and
contractors or hire or attract new key employees and contractors. As a result,
if key personnel were to leave or cease to be available or our ability to
utilize their skills, contacts and other resources impeded, we could face
substantial difficulty in take on qualified successors and could experience a
loss in productivity while any such successors obtain the necessary training and
experience.




The
charter aircraft brokerage industry is extremely competitive.




We
compete with first class and business class services of national and regional
airlines, fractional aircraft ownership operators, and other charter aircraft
brokers and, particularly on shorter routes, ground transportation. Our
competitors have been in business far longer than we have and they may have
significantly greater financial stability, access to capital markets and name
recognition. Unanticipated shortfalls in expected revenues due to price
competition or inadequate supply of private charter flights would negatively
impact our financial results and harm our business. There is no assurance that
we will be able to successfully compete in this industry.




We
may not be able to effectively control and manage our growth.




Our
strategy envisions a period of potentially rapid growth. We currently maintain
nominal administrative and personnel capacity due to the startup nature of our
business, and our expected growth may impose a significant burden on our future
planned administrative and operational resources. The growth of our business may
require significant investments of capital and increased demands on our
management, workforce and facilities. We will be required to substantially
expand our administrative and operational resources and attract, train, manage
and retain qualified management and other personnel. Failure to do so or satisfy
such increased demands would interrupt or would have a material adverse effect
on our business and results of operations.




6




Risks
Relating to Our Industry




The
commercial aircraft industry is subject to extensive government regulation,
which can result in increased costs, delays, limits on its operating flexibility
and competitive disadvantages.




While we
do not own, operate or maintain any aircraft, commercial aircraft operators are
subject to extensive regulatory requirements. Many of these requirements result
in significant costs that may adversely affect our business and financial
results. For example, the Federal Aviation Administration (FAA) from time to
time issues directives and other regulations relating to the maintenance and
operation of aircraft, and compliance with those requirements drives significant
expenditures. If we are unable to pass those costs on to the customers, it would
negatively impact our profit margin.




Moreover,
additional laws, regulations, taxes and airport rates and charges have been
enacted from time to time that have significantly increased the costs of
commercial aircraft operations, reduced the demand for air travel or restricted
the way operators can conduct their business. For example, the Aviation and
Transportation Security Act, which became law in 2001, mandates the
federalization of certain airport security procedures and imposes additional
security requirements on airlines. Similar laws or regulations or other
governmental actions in the future may similarly adversely affect our business
and financial results.




Our
results of operations may also be affected by changes in law and future actions
taken by governmental agencies having jurisdiction over aircraft operators,
including:





·
            changes
      in the law which affect the services that can be offered by aircraft
      operators in particular markets and at particular
  airports;·
            restrictions
      on competitive practices (for example court orders, or agency regulations
      or orders, that would curtail an aircraft operator’s ability to respond to
      a competitor);·
            the
      adoption of regulations that impact customer service standards (for
      example, new passenger security standards); or·
            the
      adoption of more restrictive locally-imposed noise
      restrictions.




We
do not own or operate any of the aircraft we broker and therefore should not be
held responsible in the event of an accident; however, if we were to be sued by
customers in the event of an accident, it could place a substantial financial
burden upon us.




Our
business exposes us to potential liability risks that are inherent in the
aviation business. Although we do not own or operate any of the aircraft that we
provide to our customers, we can provide no assure that potential claims will
not be asserted against us in the event of an accident involving such aircraft.
A successful liability claim or series of claims brought against us could have a
material adverse effect on our business, financial condition and results of
operations.




Generally,
we are covered by the insurance policies of the aircraft’s operator but there
can be no assurance that such operator is sufficiently insured to satisfy all
claims. There can be no assurance that we will be able to purchase adequate
insurance on acceptable terms, if at all, or that any such insurance will
provide adequate coverage against our potential liabilities. Claims or losses in
excess of our insurance coverage could have a material adverse effect on our
business, financial condition and results of operations.




Current
laws and regulations allow sales of private charter aircraft services to foreign
customers and private charter flights to numerous foreign locations. If these
laws and regulations are changed to restrict sales to foreign customers or
flights to foreign locations, we may lose potential customers, which would limit
our growth potential.




Our
revenue and profitability will be based in part on sales of private charter
flight time to foreign customers and flights to foreign locations, which is
allowed under current federal laws and regulations. Modification of such
statutes and regulations could pose a significant risk to our business
operations by reducing the pool of potential customers by regulating,
restricting or prohibiting sales of private chartered flight time to foreign
persons or by restricting or prohibiting flights to certain foreign
locations.




Risks
Relating to Our Organization





We
are subject to the reporting requirements of the federal securities laws, which
can be expensive.




We are a
public reporting company and, accordingly, subject to the information and
reporting requirements of the Exchange Act and other federal and state
securities laws, including compliance with the Sarbanes-Oxley Act of 2002. The
costs of preparing and filing annual and quarterly reports, proxy statements and
other information with the SEC and furnishing audited reports to stockholders
will cause our expenses to be higher than they would have been if we had
remained privately-held and did not consummate the merger.




It may be
time consuming, difficult and costly for us to develop and implement the
internal controls and reporting procedures required by the Sarbanes-Oxley Act.
We may need to hire additional financial reporting, internal controls and other
finance personnel in order to develop and implement appropriate internal
controls and reporting procedures. If we are unable to comply with the internal
controls requirements of the Sarbanes-Oxley Act, we may not be able to obtain
the independent accountant certifications required by that Act, if
applicable.




7




Failure
to achieve and maintain effective disclosure controls or internal controls could
have a material adverse effect on our ability to report our financial results
timely and accurately.





We retained the services of an independent consultant to assist
management to analyze our system of internal accounting controls and accounting
and financial reporting processes and to assist in the implementation of
improvements in these processes. Through this process, we have identified four
material weaknesses in our disclosure controls and internal controls. These are
more specifically discussed in Item 9A of this Annual Report. As a result of
these deficiencies, we must perform additional analysis and other post-closing
procedures to insure that our financial statements are prepared in accordance
with US generally accepted accounting principles. As a result, we will incur
expenses and devote significant management resources to this review process.
Furthermore, effective internal controls and procedures are necessary for us to
continue to provide reliable financial reports. If we continue to have material
weaknesses in our internal controls and procedures, we may not be able to
provide reliable financial reports and our business and operating results could
be harmed.




Public
company compliance requirements may make it more difficult to attract and retain
officers and directors.




The
Sarbanes-Oxley Act and rules subsequently implemented by the SEC have required
changes in corporate governance practices of public companies. Compliance with
the new rules and regulations increases our operating costs and makes certain
activities more time consuming and costly than if we were not a public company.
As a public company, these new rules and regulations make it more difficult and
expensive for us to obtain director and officer liability insurance. As a
result, it may be more difficult for us to attract and retain qualified persons
to serve on our Board of Directors or as executive officers.




Because
Halcyon Jets became public by means of a reverse merger, we may not be able to
attract the attention of major brokerage firms.




There may
be risks associated with Halcyon Jets becoming public through a “reverse
merger”. Securities analysts of major brokerage firms may not provide coverage
of us since there is no incentive to brokerage firms to recommend the purchase
of our common stock. No assurance can be given that brokerage firms will, in the
future, want to conduct any secondary offerings on behalf of our post-merger
company.





Our
largest stockholders can exert significant control over our business and affairs
and have actual or potential interests that may depart from those of our other
stockholders.




Our
largest stockholders, some of whom are key employees or consultants to Holdings,
own a substantial number of shares of our common stock. Additionally, their
holdings may be supplemented in the event that they exercise any of the warrants
they may hold or in the future be granted, or exercise any conversion privilege
under any convertible debt securities held or if they otherwise acquire
additional shares of our common stock. The interests of such persons may differ
from the interests of other stockholders. As a result, in addition to their
positions with us, such persons will have significant influence over and control
all corporate actions requiring stockholder approval, irrespective of how our
other stockholders may vote, including the following actions:





·
            elect
      or defeat the election of our directors;·
            amend
      or prevent amendment of our Certificate of Incorporation or
      By-laws;·
            effect
      or prevent a merger, sale of assets or other corporate transaction;
      and·
            control
      the outcome of any other matter submitted to the shareholders for
      vote.




In
addition, such persons’ stock ownership may discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us, which in
turn could reduce our stock price or prevent our stockholders from realizing a
premium over our stock price.




Risks
Relating to our Common Stock




Our
stock price may be volatile.




The
market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including the following:





·
            changes
      in the aviation industry;·
            competitive
      pricing pressures;




8




·
            our
      ability to obtain working capital financing;·
            additions
      or departures of key personnel;·
            limited
      “public float”, in the hands of a small number of persons whose sales or
      lack of sales, could result in positive or negative pricing pressure on
      the market price for our common stock;·
            our
      ability to execute our business plan;·
            operating
      results that fall below expectations;·
            loss
      of any strategic relationship;·
            regulatory
      developments;·
            economic
      and other external factors; and·
            period-to-period
      fluctuations in our financial
results.




In
addition, the securities markets have from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.




We
have not paid dividends in the past and do not expect to pay dividends in the
future. Any return on investment may be limited to the value of our common
stock.




We have
never paid cash dividends on our common stock and do not anticipate doing so in
the foreseeable future. The payment of dividends on our common stock will depend
on earnings, financial condition and other business and economic factors
affecting us at such time as our board of directors may consider relevant. If we
do not pay dividends, our common stock may be less valuable because a return on
investment will only occur if our stock price appreciates.




There
is currently no liquid trading market for our common stock and we cannot ensure
that one will ever develop or be sustained.




To date
there has been no liquid trading market for our common stock. We cannot predict
how liquid the market for our common stock might become. We anticipate our
common stock will be quoted on the automated quotation service of the NASD,
known as the OTC Bulletin Board. Although we are not presently eligible, we
intend to apply for listing of our common stock on either The Nasdaq Capital
Market or other national securities exchanges if and when we meet the
requirements for listing. We cannot ensure that we will be able to satisfy such
listing standards or that our common stock will be accepted for listing on
any of these exchanges. Should the Company fail to satisfy the initial
listing standards of the exchanges, or our common stock is otherwise
rejected for listing and remain listed on the OTC Bulletin Board or suspended
from the OTC Bulletin Board, the trading price of our common stock could suffer
and the trading market for our common stock may be less liquid and our common
stock price may be subject to increased volatility.




Our
common stock is deemed a “penny stock”, which may make it more difficult for our
investors to sell their shares.




Our
common stock is subject to the “penny stock” rules adopted under Section 15(g)
of the Securities Exchange Act of 1934. The penny stock rules apply to companies
whose common stock is not listed on a national securities exchange and trades at
less than $5.00 per share or that have tangible net worth of less than
$5,000,000 ($2,000,000 if the company has been operating for three or more
years). These rules require, among other things, that brokers who trade penny
stock to persons other than “established customers” complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade penny stocks because of the requirements of
the penny stock rules and, as a result, the number of broker-dealers willing to
act as market makers in such securities is limited. If we remain subject to the
penny stock rules for any significant period, it could have an adverse effect on
the market, if any, for our securities. In as much as our securities are subject
to the penny stock rules, investors will find it more difficult to dispose of
our securities.




Offers
or availability for sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline.




If our
stockholders sell substantial amounts of our common stock in the public market,
or upon the expiration of any holding period under Rule 144, or expiration of
lock-up periods applicable to outstanding shares, or issued upon the exercise of
outstanding options or warrants, it could create a circumstance commonly
referred to as an “overhang” and in anticipation of which the market price of
our common stock could fall. The existence of an overhang, whether or not sales
have occurred or are occurring, also could make more difficult our ability to
raise additional financing through the sale of equity or equity-related
securities in the future at a time and price that we deem reasonable or
appropriate. The shares of common stock issued to our officers, directors, and
greater than 10% stockholders in the merger are subject to a lockup agreement
prohibiting sales of such shares for a period of 18 months following the Private
Placement. Following such date, all of those shares will become freely tradable,
subject to securities laws and SEC regulations regarding sales by insiders. In
addition, the shares of common stock sold in the Private Placement (including
the shares underlying the Warrants sold therein) will be freely tradable upon
the earlier of: (i) effectiveness of a registration statement covering such
shares; and (ii) the date on which such shares may be sold without registration
pursuant to Rule 144 under the Securities Act. Recent revisions to Rule 144
shortened the holding period under Rule 144, as a result of which the overhang
period arises earlier than would previously have been the
case.




9




ITEM 1B.
            UNRESOLVED
      STAFF COMMENTS
              
              None.ITEM
      2.
            PROPERTY




We lease
approximately 6,400 square feet of office space at 336 West 37th Street in
New York City. The lease term expires on May 31, 2013. The monthly lease
payments for the four years are approximately $20,500, $25,400, $26,300 and
$27,200, respectively. In addition, we lease approximately 3,200 square feet of
office space at Peninsula Plaza, 2424 N. Federal Highway, Boca Raton, Florida,
with monthly lease payments of approximately $4,600 and $4,800 during the two
years ending, June 30, 2010, the date the lease expires. We also lease
approximately 1,800 square feet of office space at 11620 Wilshire Boulevard
Building, Beverly Hills, California, with monthly lease payments of
approximately $5,300 and $5,500 during the two years ending, June 30, 2010, the
date the lease expires.




We
believe our current facilities are adequate for our immediate and near-term
needs except that as of April 17, 2009, we are negotiating with our
landlord to return the additional space taken in New York during August
2008.




ITEM
      3.
            LEGAL
      PROCEEDINGS




In
September 2008, Jet One Group, Inc. (“Jet One”) commenced an action against the
Company and several of its current and former officers, directors and employees
in the United States District Court for the Eastern District of New York,
alleging, among other matters, that the Company fraudulently induced Jet One to
enter into a Letter of Intent (“LOI”) to acquire Jet One’s business.  Jet
One alleges that the Company did not intend to acquire Jet One’s business at the
time it entered into the LOI, and entered into the LOI for the sole purpose of
gaining access to and stealing Jet One’s confidential customer lists.  Jet
One further alleges that the alleged theft of Jet One’s confidential customer
list is part of a larger pattern of thefts of trade secrets by the Company and
its employees.  The Complaint alleges that the Company violated the federal
Racketeering Influenced Corrupt Organizations Act, the federal Computer Fraud
and Abuse Act, the New York consumer fraud and Business law statutes and
committed various common law torts.  Jet One seeks compensatory damages of
$15 million and treble or punitive damages of $45 million.




In
November 2008, the Company filed a motion to dismiss the federal counts in this
action for failure to state a claim upon which relief may be granted and also
asked the district court to decline to exercise supplemental jurisdiction over
Jet One’s state law claims.  In December, 2008, the Company also filed a
motion for sanctions against Jet One and its counsel, alleging that the suit was
frivolous and without any basis in fact.  The motion has not yet been
decided by the Court.  The parties are currently engaged in discovery
pending a decision on defendants’ motions.




Separately,
the Company has filed an action against Jet One and its principals in the
Supreme Court of New York, New York County (the “State Court Action”), in which
the Company alleges that the Complaint in Jet One’s Federal Court Action
contains false and defamatory statements regarding the Company and that Jet One
filed its suit for the sole purpose of circulating a press release publicizing
the false and defamatory allegations.  Jet One moved to dismiss the
Company’s suit for failure to state a claim upon which relief may be granted,
but this motion was denied by the Supreme Court.




The
Company intends to vigorously defend the Jet One suit against the Company and to
vigorously prosecute the State Court defamation action against Jet One. 
The Company is also holding $150,000 in promissory notes, owing by Jet One which
have been guaranteed by its principals.  The Company is also taking legal
action to enforce the notes and guarantees.




In
October and December 2008, Blue Star Jets, LLC  (“Blue Star”) filed a
complaint against the Company and certain employees, including our President,
who were former employees of Blue Star (“former Blue Star employee”) in the
Supreme Court of New York, New York County alleging, among other matters, that
the Blue Star’s former employees stole confidential information belonging to
Blue Star prior to joining the Company and that one or more of such former
employees violated post-employment restrictive covenants by joining the
Company.  The complaint seeks $7 million in damages.  This action is a
revival of an earlier action that was voluntarily discontinued by Blue Star in
2007.




The
Company and the other defendants, in February 2009, filed a motion to dismiss
the counts of the complaint for violation of the federal Computer Fraud and
Abuse Act and for civil conspiracy for failure to state a claim upon which
relief may be granted.




In
February 2009, Blue Star served a second amendment to its complaint which
withdrew plaintiff’s claims under the federal Computer Fraud and Abuse Act and
added Alfred Palagonia and Apollo Jets as additional defendants.  The
Company has filed a cross-motion to strike the second amendment on the ground
that it was improperly filed or in the alternative to dismiss the certain
portions related to the civil conspiracy.  The Company’s motions have been
fully briefed and are awaiting oral argument.




The
Company intends to vigorously defend itself in this action and will re-assert
certain claims which were originally asserted against Blue Star in the matter
entitled Halcyon Jets, Inc. v. Blue Star Jets, LLC, (Supreme Court of New York,
Index No. 602317/07), which was consolidated with Blue Star’s original action
against Halcyon and which was voluntarily dismissed by Halcyon in
2007.




Pursuant
to the terms of our President’s employment agreement with us, we agreed to
indemnify him from, among other things, all liabilities that may arise by virtue
of any alleged violation of any agreement he had with Blue Star Jets by virtue
of his employment with us.




10




Except as
set forth above, there are no pending or threatened legal proceedings against
us.  Based on the advice of counsel, it is management's opinion that we
have made adequate provision for potential liabilities, if any, arising from
potential claims arising from litigation, governmental investigations, legal and
administrative cases and proceedings.





Item
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS




None.




PART II





Item
      5.
            MARKET
      FOR REGISTRANT’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES




Market
for Securities




There was
no market for our common stock prior to the merger on August 17, 2007. Our
common stock is quoted on the ‘‘Over the Counter Bulletin Board’’ since
September 5, 2007 and currently trades under the symbol
‘‘HJHO.OB’’.  The market for our common stock has often been sporadic,
volatile and limited.





The
following table sets forth the high and low sale price of the common stock on a
quarterly basis, as reported by Over the Counter Bulletin Board from September
5, 2007 through January 31, 2009:





High*
                          
                          
                          Low*Fiscal
      Year 2008Third
      Quarter
                          
                          $
                          2.55
                          
                          
                          $
                          .85Fourth
      Quarter
                          
                          
                          1.00
                          
                          
                          
                          .36Fiscal
      Year 2009First
      Quarter
                          
                          
                          .95
                          
                          
                          
                          .35Second
      Quarter
                          
                          
                          .54
                          
                          
                          
                          .30Third
      Quarter
                          
                          
                          .45
                          
                          
                          
                          .05Fourth
      Quarter
                          
                          
                          .12
                          
                          
                          
                          .01


The per
share closing sales price of the common stock as reported by the Over the
Counter Bulletin Board on April 17, 2008, was $0.06. As of this date there were
approximately 75 holders of record of common stock and
25,646,667 shares of common stock outstanding. We have not paid dividends
on our common stock outstanding in the past. There are no contractual
or legal restrictions that limit our ability to pay dividends in the
future, however, there are no expectations that we would pay dividends in the
near future.




Recent
Issuances of Unregistered Securities.




SERIES
A PREFERRED STOCK




On
February 24, 2009, our Board of Directors approved the authorization and
issuance of 21,000 shares of Series A Preferred Stock. Each share of Series A is
entitled to 1,000 votes with respect to each matter presented to the
stockholders of the Corporation for approval. As a result, these shares
would represent approximately 45% of the total number of
shares entitled to vote on such matters. The Series A Preferred Stock has a
liquidation value of $1.00 per share ($21,000 in the aggregate) and is not
entitled to receive any dividends. The Series A Preferred shares are not
convertible into common stock and are redeemable for $1.00 per share on the
earlier of March 31, 2019 or the date on which any shares of Series A are owned
by any person other than the one to whom they were originally issued. The
Board of Directors also authorized the issuance of these shares to Jonathan
Gilbert, one of our directors, for a purchase price of $21,000. A Certificate of
Designation with respect to these shares was filed in the Office of the
Secretary of State of Delaware on April 22, 2009, after which the shares
were issued to Mr. Gilbert. The issuance of the Series A Preferred Stock was
exempt from registration under the Securities Act as a transaction not
involving a public offering.




Equity
Compensation Plan Information





The
following table sets forth information regarding our existing compensation plans
and individual compensation arrangements pursuant to which our equity securities
are authorized for issuance to employees or non-employees (such as directors,
consultants and advisors) in exchange for consideration in the form of
services:





Plan Category
                                        Number of
                                          securities to be
                                          issued upon
                                          exercise of
                                          outstanding
                                          options, warrants
                                          and rights
                                        
                                        Weighted-average
                                          exercise price of
                                          outstanding
                                          options, warrants
                                          and rights
                                        
                                        Number of
                                          securities remaining
                                          available for future
                                          issuance under equity
                                          compensation plans
                                          (excluding securities
                                          reflected in
                                          column (a))(a)
                                        
                                        (b)
                                        
                                        (c)Equity
      compensation plans approved by security holders
                                        4,875,000
                                        
                                        $
                                        .38
                                        
                                        125,000Equity
      compensation plans not approved by security holders
                                        1,750,000
                                        
                                        $
                                        .33
                                        
                                        —Total
                                        6,625,000
                                        
                                        
                                        
                                        
                                        125,000







11




Item 6.  SELECTED FINANCIAL
DATA





The
following tables summarize certain selected consolidated financial data, which
should be read in conjunction with our audited consolidated financial statements
and the notes thereto and with management’s discussion and analysis of financial
condition and results of operations included elsewhere in this
report.





Year
      EndedJanuary 31,Consolidated
      Statement of Operations Data
                                              
                                              2009
                                              
                                              
                                              2008(in
      thousands, except share data)Total
      revenues
                                              
                                              $
                                              44,547
                                              
                                              
                                              $
                                              12,308Charter
      costs
                                              
                                              
                                              36,994
                                              
                                              
                                              
                                              10,587Gross
      profit
                                              
                                              
                                              7,553
                                              
                                              
                                              
                                              1,721Operating
      costs and expenses
                                              
                                              
                                              10,960
                                              
                                              
                                              
                                              6,835Operating
      loss
                                              
                                              
                                              (3,407
                                              )
                                              
                                              
                                              (5,114
                                              )Other
      (expenses)(1)
                                              
                                              
                                              (573
                                              )
                                              
                                              
                                              (430
                                              )Net
      loss
                                              
                                              $
                                              (3,980
                                              )
                                              
                                              $
                                              (5,544
                                              )Net
      loss per common share
                                              
                                              $
                                              (0.16
                                              )
                                              
                                              $
                                              (0.25
                                              )Average
      number of shares outstanding
                                              
                                              
                                              25,639,105
                                              
                                              
                                              
                                              22,448,146January 31,Consolidated
      Balance Sheet Data
                                              
                                              2009
                                              
                                              
                                              2008(in
      thousands)Cash
                                              
                                              $
                                              1,094
                                              
                                              
                                              $
                                              495Working
      capital
                                              
                                              
                                              (1,612
                                              )
                                              
                                              
                                              1,004Total
      assets
                                              
                                              
                                              2,935
                                              
                                              
                                              
                                              4,017Stockholders'
      equity/(deficiency)
                                              
                                              
                                              (1,095
                                              )
                                              
                                              
                                              1,532


_______________


(1) Other
      (expenses) consists of:Interest
      income
              
              $
              27
              
              
              $
              46Interest
      and finance costs
              
              
              (50
              )
              
              
              -Debt
      discount expense
              
              
              (191
              )
              
              
              (375
              )Loss
      on broker loans
              
              
              (78
              )
              
              
              -Costs
      related to abandoned acquisitions
              
              
              (281
              )
              
              
              -Merger
      costs
              
              
              -
              
              
              
              (101
              )$
              (573
              )
              
              $
              (430
              )





Item
      7.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





This discussion should be read in
conjunction with the other sections of this Report, including “Risk Factors,”
“Description of Business” and the Financial Statements attached hereto as Item 7
and the related exhibits. The various sections of this discussion contain a
number of forward-looking statements, all of which are based on our current
expectations and could be affected by the uncertainties and risk factors
described throughout this Report. See “Forward-Looking Statements.” Our actual
results may differ materially.




12




Overview




Our
discussion and analysis of operations is based upon our consolidated financial
statements, which have been prepared in accordance with generally accepted
accounting principles in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results could differ materially from
these estimates under different assumptions or conditions.




Critical
Accounting Policies





We have
identified the policies below as critical to our business operations and the
understanding of our financial results. The impact and any associated risks
related to these policies on our business operations is discussed throughout
management's discussion and analysis or plan of operations where such policies
affect our reported and expected financial results. For a detailed discussion on
the application of these and other accounting policies see Note 2 to the
consolidated financial statements included elsewhere in this Annual
Report.




We began
our operations in late March 2007 and have not as yet attained an operating
level which allows us to meet overhead.  We have managed our liquidity
during this time through institution of prepayment terms with our clients;
restructuring of vendor payment terms and a series of cost reduction
initiatives.  The global credit market crisis has had a dramatic
effect on our industry, and beginning during our fourth quarter ended January
31, 2009, the increased turmoil in the financial markets and the depressed
economy has resulted in a significant decline in private jet aircraft
use.  Further, in December 2008, one of our sales representatives
terminated its relationship with us.  The sales representative was
responsible for approximately 20% of our revenues for the year ended January 31,
2009.





We are
dependent upon obtaining additional financing adequate to fund working capital,
infrastructure and significant marketing/investor related expenditures to gain
market recognition in order to achieve a level of revenue adequate to support
our cost structure, none of which can be assured. While we have funded our
initial operations with bank credit through “credit cards”, private placements
of equity, bridge loans and completed a reverse merger and became a publicly
owned entity, there can be no assurance that adequate financing will continue to
be available to us and, if available, on terms that are favorable to
us.   Our ability to continue as a going concern is dependent on many
events outside of our direct control, including, among other things, our
clients, as well as new customers, substantially increasing their use of our
services and our vendors continuing to conduct business with us without
requesting faster payment or other assurances. The consolidated financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of these
uncertainties.





Passenger
revenue is the gross amount charged to customers and is recognized when the
charter services are provided. Other revenues such as catering or ground
arrangements are also recognized when the services are provided based upon the
gross amount billed to customers. We have evaluated the provisions of EITF 99-19
and have concluded that we should report revenues gross with a separate display
of the cost of sales while acting as an agent or broker since we take on the
credit risk associated with the receivable and are primarily obligated to
the supplier.




We used
the Black-Scholes option pricing model to determine the fair value of stock
options in connection with stock based compensation charges. The determination
of the fair value of stock-based payment awards on the date of grant using an
option-pricing model is affected by our stock price as well as assumptions
regarding a number of complex and subjective variables. These variables include
our expected stock price volatility over the term of the awards, actual and
projected employee stock option exercise behaviors, risk-free interest rate and
expected dividends.




Due to
our limited history as a public company, we have estimated expected volatility
based on the historical volatility of certain companies as determined by
management. The risk-free rate for the expected term of each option is based on
the U.S. Treasury yield curve in effect at the time of grant. The dividend yield
assumption is based on our intent not to issue a dividend as a dividend policy.
Due to our limited operating history, management estimated the term
to equal the contractual term.




If
factors change and we employ different assumptions for estimating stock-based
compensation expense in future periods or if we decide to use a different
valuation model, the future periods may differ significantly from what we have
recorded in the current period and could materially affect our operating income,
net income and net income per share.




The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options that are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including the expected
stock price volatility. Because our stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management’s opinion the existing models may not necessarily provide a reliable
single measure of the fair value of its employee stock options.




Recently
Issued Accounting Pronouncements




In
September 2006, FASB issued SFAS No. 157 “Fair Value Measurements.”
This Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This Statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, this Statement does
not require any new fair value measurements. However, for some entities, the
application of this Statement will change current practice. This Statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years.
Management is currently evaluating the effect of this pronouncement on its
financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (‘‘SFAS
141(R)’’), which establishes principles and requirements for how the acquirer:
(a) recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in an
acquire; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141(R)
requires contingent consideration to be recognized at its fair value on the
acquisition date and, for certain arrangements, changes in fair value to be
recognized in earnings until settled. SFAS 141(R) also requires
acquisition-related transaction and restructuring costs to be expensed rather
than treated as part of the cost of the acquisition. SFAS 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008 and will impact the Company’s financial statements
only in the event of such a business combination after this date.
  In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements an Amendment of ARB No. 51 (‘‘SFAS
160’’), which establishes accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary
is an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. SFAS 160 also requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS 160 also provides guidance when a subsidiary is
deconsolidated and requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of the
parent’s owners and the interests of the non-controlling owners of a subsidiary.
SFAS 160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. Management believes SFAS
160 will have no impact on the financial statements of the Company once
adopted.


13


Disclosures
About  Derivative Instruments and Hedging Activities" 161”),
which amends and expands the disclosure requirements of FASB Statement No. 133
with the intent to provide users of financial statements
with an enhanced understanding of how and why an entity uses derivative
instruments, how the derivative instruments and the related hedged items are
accounted for and how the related hedged items affect an entity’s financial
position, performance and cash flows. This Statement is  effective for
financial statements for fiscal years and interim periods beginning after
November 15, 2008. Based upon the Company’s current operations,
management believes SFAS 161 will have no impact on the financial statements of
the Company once adopted. 
 In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“FAS 162”). FAS 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with GAAP for nongovernmental entities. FAS 162
is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, “The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles.” The
Company does not expect the adoption of this statement to have a material impact
on the Company’s consolidated results of operations, financial position or cash
flows.
 
 In
April 2008, the FASB issued FSP FAS 142-3, “Determinationof the Useful Life of Intangible
Assets” (“FSP 142-3”). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
and Other Intangible Assets” (“FAS 142”). This change is intended to improve the
consistency between the useful life of a recognized intangible asset under FAS
142 and the period of expected cash flows used to measure the fair value of the
asset under FAS 141R and other GAAP. FSP 142-3 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years, which will be the Company’s fiscal
year 2010. The requirement for determining useful lives must be applied
prospectively to intangible assets acquired after the effective date and the
disclosure requirements must be applied prospectively to all intangible assets
recognized as of, and subsequent to, the effective date. The Company does not
expect the adoption of this statement to have a material impact on the Company’s
consolidated results of operations, financial position or cash
flows.
 
 In June
2008, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 07-5,
“Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity’s Own Stock” (“EITF
07-5”).  EITF 07-5 mandates a two-step process for evaluating whether
an equity-linked financial instrument or embedded feature is indexed to the
entity’s own stock.  It is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years.  We
do not expect the adoption of EITF 07-05 will have a material impact on results
of operations, financial position, or cash flows.




Results
of Operations





The
following table sets forth our results of operations as a percentage of total
revenues:




Yearended
      January 312009
                                        
                                        
                                        2008Revenues
                                        
                                        
                                        100.0
                                        %
                                        
                                        
                                        100.0
                                        %Operating
      costs and expenses:Charter
      costs
                                        
                                        
                                        83.1
                                        
                                        
                                        
                                        86.0Compensation
      and benefits
                                        
                                        
                                        14.5
                                        
                                        
                                        
                                        32.4Other
      operating costs
                                        
                                        
                                        8.7
                                        
                                        
                                        
                                        22.3Depreciation
      and amortization
                                        
                                        
                                        .4
                                        
                                        
                                        
                                        .9Termination
      benefits
                                        
                                        
                                        .7Loss
      on deferred office expansion
                                        
                                        
                                        .2Total
      operating costs
                                        
                                        
                                        107.6
                                        
                                        
                                        
                                        141.6Operating
      loss
                                        
                                        
                                        (7.7
                                        )
                                        
                                        
                                        (41.6
                                        )Other
      expenses - net
                                        
                                        
                                        (1.2
                                        )
                                        
                                        
                                        (3.5
                                        )Net
      loss
                                        
                                        
                                        (8.8
                                        )
      %
                                        
                                        
                                        (45.1
                                        )%





COMPARISON OF THE YEAR ENDED JANUARY
31, 2009 and 2008





Our
operations began in the last week of March 2007 and, accordingly, since
inception our operations through the first quarter of the 2009 fiscal year
consisted principally of developing a business plan; seeking capital;
establishing headquarters in New York, as well as additional offices in Boca
Rotan, FL and Beverly Hills, CA; and recruiting staff and other representation.
Total revenues for the year ended January 31, 2009 increased $32.2 million to
$44.5 million from $12.3 million for the prior year and was the result of 1,554
trips versus 481 trips in the prior period. The increase also reflects the
increased penetration in the market by our private aviation specialists who are
selling our services to new as well as experienced private aviation
users.





The
Company’s gross profit increased $5.8 million from the year earlier period as a
result of the increased revenues and the increase in the operating margin to
16.9 % from 14.0 %. The improved margins reflect the Company’s progress
implementing its Halcyon-Concierged TMservices
which allowed the Company to improve margins as compared to those achieved
during the start-up stage. Compensation and benefits expense increased $2.5
million to $6.5 million in the year ended January 31, 2009 versus $4.0 million
for the prior year period. Compensation expense includes non-cash charges
aggregating $1.2 million and $1.7 million, in the 2009 and 2008 periods,
respectively, related to accounting for stock based compensation. The increase
in compensation expense is principally a result of the increased
commissions earned by sales personnel on the higher revenues during the
year ended January 31, 2009.  Other operating costs increased $1.2
million from $2.7 million to $3.9 million during the year ended January 31,
2009.  The increase was anticipated to increase to support higher
levels of revenues; however, the expense as a percent of revenues decreased from
22.3 % in the prior year to
8.7%.The increased costs were attributable to increased marketing
and entertainment expenditures to promote our services. In addition, as a public
reporting entity, compliance with Securities and Exchange Commission regulations
continues to be a significant cost to the Company. During the fourth quarter
2009, the Company began to implement certain cost reductions in its overhead
which should reduce the pattern of growth in the overhead during the next fiscal
year.




14




Our
operating loss for the year ended January 31, 2009 decreased $1.7 million to
$3.4 million from $5.1 million in the prior year principally the result of the
increase in total revenues and the related increase in the operating margin
mentioned above and despite the recording of a provision for employee
termination costs and for write-off of costs related to office expansion which
was deferred as mentioned above.





During
the year ended January 31, 2009 “other expenses –net” includes costs aggregating
$573,000 related to an abandoned proposed acquisitions ($280,000), loss on
broker loans ($78,000) and finance and interest costs ($242,000), net of
interest income of $27,000.  During the prior year “other expenses”
aggregated $430,000 including finance costs ($375,000) and merger costs
($100,000), net of interest income ($45,000). In both periods finance
costs  principally related to amortization of the imputed discount on
a loans attributable to warrants granted the lenders.





FEBRUARY
1, 2007 (DATE OF INCEPTION) THROUGH JANUARY 31, 2008





Our
operations began in the last week of March 2007 and, accordingly, since
inception our operations consisted principally of developing a business plan;
seeking capital; establishing headquarters in New York, as well as 2 additional
offices in Boca Rotan, FL and Beverly Hills, CA; and recruiting staff. Revenues
were the result of 481 trips. The operating margin reflects our start-up
stage and the competitive methods it has taken to enter into this market.
Compensation and benefits expense includes a non-cash charge of $1.7 million
principally resulting from the issuance of stock options to employees and
consultants in August 2007 which were fully vested. However, it is also
anticipated that our operating costs and expenses will continue to increase to
support a higher level of revenues. Increased costs will be attributable to
increased head counts, principally sales personnel and support staff for our
multi-office infrastructure and increased marketing expenditures to promote our
services. In addition, as a public reporting entity, compliance with Securities
and Exchange Commission regulations will increase general and administrative
costs substantially.




Liquidity and Capital Resources




We began
our operations in late March 2007 and have not as yet attained an operating
level which allows us to meet overhead.  We have managed our liquidity
during this time through institution of prepayment terms with our clients;
restructuring of vendor payment terms and a series of cost reduction
initiatives.  The global credit market crisis has had a dramatic
effect on our industry, and beginning during our fourth quarter ended January
31, 2009, the increased turmoil in the financial markets and the depressed
economy has resulted in a significant decline in private jet aircraft
use.  Further, in December 2008, one of our sales representatives
terminated its relationship with us.  The sales representative was
responsible for approximately 20% of our revenues for the year ended January 31,
2009.





We are
dependent upon obtaining additional financing adequate to fund working capital,
infrastructure and significant marketing/investor related expenditures to gain
market recognition in order to achieve a level of revenue adequate to support
our cost structure, none of which can be assured. While we have funded our
initial operations with bank credit through the use of “credit cards”, private
placements of equity, bridge loans and completed a reverse merger and became a
publicly owned entity, there can be no assurance that adequate financing will
continue to be available to us and, if available, on terms that are favorable to
us.   Our ability to continue as a going concern is dependent on many
events outside of our direct control, including, among other things, our
clients, as well as new customers, substantially increasing their use of our
services and our vendors continuing to conduct business with us without
requesting faster payment or other assurances.  Management believes
that it can operate under the existing levels of funding (principally customer
prepayments and payment terms from vendors and bank credit cards) for at least
one year.  However, if revenues continue to be negatively impacted by
the depressed economy it could create a material adverse change in the
business.


Contractual
Obligations


Payments due by periodTotal
      of
                            
                            
                            Less
      than
                            
                            
                            1
      - 3payments
                            
                            
                            one year
                            
                            
                            YearsOperating
      leases
                            
                            $
                            1,318,000
                            
                            
                            $
                            398,000
                            
                            $
                            920,000Employment
      and consultingarrangements(1)
                            
                            
                            988,000
                            
                            
                            
                            846,000
                            
                            
                            142,000Note
      payable - vendor
                            
                            
                            544,000
                            
                            
                            
                            544,000Termination
      pay
                            
                            
                            235,000
                            
                            
                            
                            235,000
                            
                            
                            -Total
                            
                            $
                            2,850,000
                            
                            
                            $
                            1,788,000
                            
                            $
                            1,062,000


__________
 (1)  –
Under informal arrangements the Company is paying the employee and contractor an
aggregate of $625,000 annually in lieu of the contractual amounts listed in the
table.
 
 Except as
set forth Item 3 – Legal Proceedings, there are no pending or threatened legal
proceedings against the Company. Based on the advice of counsel, it is
management's opinion that  we have made adequate provision for potential
liabilities, if any, arising from potential claims arising from litigation,
governmental investigations, legal and administrative cases and
proceedings.


15




Off-Balance
Sheet Arrangements




We had no
off-balance sheet arrangements for the fiscal year
ended January 31, 2009.





Cash
Flows





As of
January 31, 2009, our cash balance was $1,094,000 as compared to $495,000 at
January 31, 2008.  Working capital was $1 million at the end of the
prior year and became a deficiency of $1.6 million at January 31,
2009.





We began
operations during the year ended January 31, 2008 with initial funding
of $485,000, net of expenses, from investors in a private offering. In May 2007,
we borrowed $1.5 million, without interest, through the issuance of promissory
notes. At the time, the lenders agreed that the indebtedness would convert into
our common stock on the same terms as provided in a subsequent private
placement. On August 2, 2007 through August 14, 2007, we borrowed an additional
$490,000, at 6% interest, to be paid out of the proceeds of the next financing.
On August 17 and 22, 2007, we closed on a private placement of 49.9 units,
in which we received net proceeds of $3.5 million, after placement agent and
other fees and from which we repaid the $490,000 of loans. As part of the
private placement, the $1.5 million loans mentioned above were converted into
1.5 units. During the year ended January 31, 2009 we borrowed on a short-term
basis $500,000 in order to enter into a long-term financing that was
subsequently called off.




Cash Flow Used in Operating
Activities:  Our principal operating source of cash is from
serving as a broker for luxury private transport by connecting travelers with
independently owned and operated executive aircraft.  Our principal
operating uses of cash are for payments associated with the contracted aircraft
and related services and costs incurred to sell and market our services
principally commissions and general and administrative expenses.





For the
year ended January 31, 2009, our operations generated $695,000.  While
we incurred an operating loss of $4.0 million, the loss included $2.0 million of
non cash charges. In addition, as a result of our change in terms with our
customers to require prepayments in most instances and deferrals of payments to
vendors we generated cash as a result of significant decrease in working capital
other than the cash component thereof.  During the period from
February 1, 2007 (date of inception) through January 31, 2008, our operations
resulted in negative cash outflows of $4.0 million, which was the result of a
net loss of $3.4 million, after reduction for non-cash charges of $2.1 million
and the buildup of net working capital items by $588,000, excluding
cash.




Cash Flow Used in Investing
Activities: During the year ended January 31, 2009 and 2008, the Company
used cash to acquire property and equipment of $96,000 and
$550,000.




Cash Flow from Financing
Activities: During the year ended January 31, 2009 we borrowed on a
short-term basis $500,000 in order to enter into a long-term financing that was
subsequently called off.During the prior
year period the Company received its initial funding from equity investors
($485,000, net of expenses) and bridge loans of $2 million. In addition in
August 2007, we closed on a private placement of 49.9 units, consisting of
100,000 shares of our common stock and 50,000 warrants to buy our common stock
at $1 per share, in which we received net proceeds of $3.0 million, after
placement agent and other fees and from which we repaid the $490,000 of loans.
As part of the private placement, the $1.5 million of the bridge loans were
converted into 1.5 units.




ITEM
      8.
            FINANCIAL
      STATEMENTS




The
financial statements required by Item 8 are submitted in a separate section of
this report, beginning on Page F-1.




ITEM 9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE








ITEM
      9A.
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





The
Company is in the process of implementing disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934 (the ‘‘Exchange Act’’), that are designed to ensure that information
required to be disclosed in the Company’s Exchange Act reports are recorded,
processed, summarized, and reported within the time periods specified in rules
and forms of the Securities and Exchange Commission, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.





As of
January 31, 2009, the management of the Company carried out an assessment, under
the supervision of and with the participation of the Company’s Chief Executive
Officer and the Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Exchange Act
Rules 13a-15(b) and 15d-15(b). As of the date of this assessment, the Chief
Executive Officer and the Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were not effective as of January 31, 2009,
because of the material weaknesses described below.




16




The
Company’s management performed additional accounting and financial analyses and
other post-closing procedures including detailed validation work with regard to
all the balance sheet account balances, additional analysis on income statement
amounts and managerial review of all significant account balances and
disclosures in the Annual Report on Form 10-K, to ensure that the Company’s
Annual Report and the financial statements forming part thereof are in
accordance with accounting principles generally accepted in the United States of
America. Accordingly, management believes that the financial statements included
in this Annual Report fairly present, in all material respects, the Company’s
financial condition, results of operations, and cash flows for the periods
presented.




Management’s
Report on Internal Control over Financial Reporting





Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in
accordance with accounting principles generally accepted in the United States of
America. Internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the Company’s assets that
could have a material effect on the interim or annual financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with policies or procedures may deteriorate.





The
Company’s management assessed the effectiveness of the Company’s internal
control over financial reporting as of January 31, 2009. In performing its
assessment of the effectiveness of the Company’s internal control over financial
reporting, management applied the criteria described in the Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (‘‘COSO’’).





A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim financial
statements will not be prevented or detected on a timely basis.




The
material weaknesses identified during management's assessment were (i)
insufficient evidence of a robust corporate governance function; (ii) lack of
sufficient resources with SEC, generally accepted accounting principles (GAAP)
and tax accounting expertise; (iii) inadequate security over information
technology, (iv) inconsistent operation or lack of evidence to document
compliance with the operation of internal accounting controls in accordance with
Company’s policies and procedures; and (v) insufficient resources to
remediate deficiencies in internal control identified in prior year's
assessment of the effectiveness of internal controls. These control deficiencies
did not result in audit adjustments to the Company’s 2009 interim or annual
financial statements. However, these control deficiencies could result in a
material misstatement of significant accounts or disclosures that would result
in a material misstatement to the Company’s interim or annual financial
statements that would not be prevented or detected. Accordingly, management has
determined that these control deficiencies constitute material
weaknesses.




Because
of these material weaknesses, management concluded that the Company did not
maintain effective internal control over financial reporting as of January 31,
2009, based on the criteria in Internal Control-Integrated Framework issued by
COSO.




This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report.




Changes
in Internal Control over Financial Reporting





The
Company is in the process of correcting the internal control deficiencies
through ongoing remediation efforts. However, these efforts individually and in
the aggregate were insufficient to fully eliminate the weakness that have
materially affected, or were reasonably likely to materially affect, our
internal control over financial reporting.




ITEM
      9B.
            OTHER
      INFORMATION




None.




17




PART
III






Item
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(A) OF THE EXCHANGE ACT




Directors
and Executive Officers





The
following persons except Mr. Cohen and Mr. Giannone became our executive
officers and directors on August 22, 2007, upon effectiveness of the merger, and
hold the positions set forth opposite their respective names.




Name
                    
                    Age
                    
                    PositionGregory
      D. Cohen
                    
                    40
                    
                    Chief
      Executive Officer and DirectorCraig
      Spitzer
                    
                    44
                    
                    Chairman
      of the Board of DirectorsChristian
      Matteis
                    
                    35
                    
                    President
      and Chief Operating OfficerJan
      E. Chason
                    
                    63
                    
                    Chief
      Financial Officer and TreasurerAndrew
      Drykerman
                    
                    31
                    
                    Executive
      Vice PresidentJustin
      Fries
                    
                    40
                    
                    DirectorGregory
      Giannone
                    
                    46
                    
                    DirectorJonathan
      Gilbert
                    
                    38
                    
                    Secretary
      and DirectorShlomo
      Piontkowski
                    
                    60
                    
                    Director




Our
directors hold office for one-year terms and until their successors have been
elected and qualified. Our officers are elected annually by the board of
directors and serve at the discretion of the board.




Biographies





Gregory Cohen has served as
our Chief Executive Officer since August 2008 and as a member of our board of
directors since May 2008.  Mr. Cohen was the founding shareholder
of Halcyon Jets. He is the Managing Director of Philabelle Consulting Corp.
which provides management and consulting services to private and publicly traded
companies including to the Company. He has also been the managing member of
Bulldog Boxing, LLC since 1998, providing managerial and promotional services to
a number of world champions and top contenders in boxing. From 2005 through
2007, Mr. Cohen also served as executive producer of several motion pictures.
Mr. Cohen graduated George Washington University with a B.B.A.
degree.





Craig Spitzer was appointed
our Chairman of the Board effective August 12, 2008.  Hehas served as a member
of our board of directors since the Merger. Mr. Spitzer has served as a
director of Halcyon since March 2007. Since March 2007, Mr. Spitzer has also
been serving as the Managing Partner for A2C Consulting, an information
technology consultant firm based in Pennsylvania. In June 2005, Mr. Spitzer
founded and is currently a minority investor in Gateway Architectural Solutions,
a building supplies company based in California. In January 2004, he co-founded
a real estate development company in Arizona called Warner Spitzer Walsh
Development. From March 1994 to November 2002, Mr. Spitzer founded and served as
the Chairman and Chief Executive Officer of Alliance Consulting, an information
technologies consulting firm based in New York and Massachusetts. Mr. Spitzer
has been serving on the Board of Trustees of the Kiski School, a boarding school
in Pennsylvania, since June 2005.





Christian Matteis has served
as our President and Chief Operating Officer since the Merger. Mr. Matteis has
served as Halcyon’s President and Chief Operating Officer since late March 2007.
Prior to joining us, Mr. Matteis was employed by Blue Star Jets, LLC, a private
jet charter broker, from November 2002 to March 17, 2007.




Jan E. Chason has served as
our Chief Financial Officer and Treasurer since the Merger. Mr. Chason has
served as Halcyon’s Chief Financial Officer and Treasurer since April 2007. From
February 2006 through September 2008, he was also Chief Financial Officer and
Executive Vice President for Ckrush, Inc.  From 1996 through February
2006, Mr. Chason was the Chief Financial Officer or served in as a senior
financial officer for Triathlon Broadcasting Company, The Marquee Group, Inc.,
Artist Group International LLC, Clear Channel Communications Inc. and Majesco
Entertainment Company. Mr. Chason was also a partner at Ernst & Young LLP.
Mr. Chason is a Certified Public Accountant and has a B.B.A. from City College
of New York.




Andrew Drykerman has served
as our Executive Vice President since the Merger. Mr. Drykerman has served as
Halcyon’s Executive Vice President since April 2007. From January 2005 to March
2007, Mr. Drykerman was the founder and owner of Relaxx Dry Cleaning, a pick-up
and drop off dry cleaning service in San Diego, CA. He currently maintains a
minority interest in Relaxx Dry Cleaning. Mr. Drykerman purchased a franchise
interest in World-Wide Express, a business to business company, in March 2002
and currently maintains a minority interest in that company. From 1999 to
February 2002, Mr. Drykerman founded and operated Marathon Cleaning, a
commercial and construction cleaning company in the Washington DC metropolitan
area. Mr. Drykerman is a graduate of George Washington University.





Justin Fries has served as a
member of our board of directors since the Merger. Mr. Fries has served as a
director of Halcyon since April 2007. Mr. Fries is a principal of Garber Atlas
Fries & Associates Inc., a full service insurance agency located in
Oceanside, New York, and currently serves as its Vice President. Mr. Fries has
been in the insurance business since 1988. He has served as president of two
local insurance trade organizations and is currently on the Board of Directors
for several other insurance organizations. Mr. Fries is a graduate of Cornell
University. Mr. Fries has obtained both his Certified Insurance Counselor
designation as well as the prestigious Chartered Property Casualty Underwriter
degree.





Gregory Giannone has served a
member of our Board of Directors and Chairman of its Audit Committee since
December 9, 2008. He is a Partner in the accounting firm of J. T. Shulman &
Company, P.C. since 1995. Mr. Giannone is a Certified Public Accountant and
holds a B.S. in Accounting from C. W. Post College.




18




Jonathan Gilbert has been our
Secretary and a member of our board of directors since the Merger. He served as
our Chief Executive Officer from the Merger through May 29, 2008.  Mr.
Gilbert is a founder of Halcyon and served as its Chief Executive Officer,
Secretary and a director since its inception in February 2007 through May 28,
2008. From October 1998 to January 2007, Mr. Gilbert was the owner and President
of Gilbert Capital Management Corp., an investment advisory firm based in New
York. While with Gilbert Capital, Mr. Gilbert also served as the executive
producer of several motion pictures. Mr. Gilbert holds a B.B.A. in finance from
George Washington University.




Shlomo Piontkowski, M.D. has
served as a member of our board of directors since the Merger. Dr. Piontkowski
has served as a director of Halcyon since April 2007. Prior to retiring in 2006,
Dr. Piontkowski was a privately practicing orthopedic surgeon in New York State.
From 1998 to 2006, Dr. Piontkowski served as the Medical Director and owner of
Patchogue Open MRI. From 1976 to 2006, Dr. Piontkowski served as the Medical
Director and owner of Suffolk Sports Medicine and Therapy, a physical therapy
and rehabilitation practice. From 1994 to 2000, Dr. Piontkowski served as the
Medical Director and owner of Suffolk CAT Scan, a medical CAT scan practice. He
also served as Medical Director for Brookhaven Compecare PPO, a New York State
workmen’s compensation Preferred Provider Organization, chartered in 1998. Dr.
Piontkowski’s professional memberships include the American Medical Association,
American Academy of Orthopedic Surgeons, Suffolk County Medical Society,
Arthroscopy Association of North America and the International Arthroscopy
Association. Dr. Piontkowski received his degree in Medicine from Downstate
Medical Center in 1972. He received his Bachelor’s degree in Mathematics and
Physics from Hunter College in 1968.




There are
no family relationships among our directors and executive officers, except that
Shlomo Piontkowski, one of our directors, is the father-in-law of Jonathan
Gilbert, our Secretary and a Director.





Directors’
and Officers’ Liability Insurance




We
currently have directors’ and officers’ liability insurance insuring our
directors and officers against liability for acts or omissions in their
capacities as directors or officers, subject to certain exclusions. Such
insurance also insures us against losses which we may incur in indemnifying our
officers and directors. In addition, we have entered into indemnification
agreements with key officers and directors and such persons shall also have
indemnification rights under applicable laws, and our certificate of
incorporation and bylaws.




Code
of Ethics




We
have not adopted a code of ethics due to the relatively small number of
executive officers in our Company.  Nevertheless, we are currently
considering adopting such a code in the near future.




Board
Committees




The board
of directors appointed an audit committee and compensation committee, and
adopted charters relative to the audit committee. We appoint persons to
committees of the board of directors who we believe meet the corporate
governance requirements imposed by a national securities exchange, although we
are not required to comply with such requirements until we elect to seek listing
on a national securities exchange. Currently, Mr. Giannone qualifies as an
“audit committee financial expert,” within the meaning of SEC Regulation
S-K, Item 407(d)(5).




Compliance
with Section 16(a) of the Securities Exchange Act of 1934, as
Amended




We
have determined that each of our executive officers and directors did not file
Form 3 pursuant to Section 16(a) of the Exchange Act on a timely
basis.  Each of Gregory D. Cohen, Jan E. Chason, Jonathan Gilbert,
Andrew Drykerman, Justin Fries Gregory, Giannone and Shlomo Piontkowski did file
a Form 3 in March or April 2009. Christian
Matteis and former directors and officers Mitchell Blatt, Shelton
Lee, Justin Fries and William Locantro have not filed Form 3.





Communications
with the Board of Directors




Stockholders
may communicate with the Board of Directors by sending an email to IR@halcyonjets.com or
by sending a letter to Halcyon Jets Holdings, Inc. Board of Directors, c/o Jan
E. Chason, Chief Financial Officer, 336 West 37th Street, New York,
NY 10018.  Mr. Chason will receive the correspondence and forward
it to the Chairman or to any individual director or directors to whom the
communication is directed, unless the communication is unduly hostile,
threatening, and illegal, does not reasonably relate to the Company or its
business, or is similarly inappropriate.  The Chief Financial Officer
has the authority to discard or disregard any inappropriate communications or to
take other appropriate actions with respect to any such inappropriate
communications.


19




Item
      11.
            EXECUTIVE
      COMPENSATION
              
              Summary
      Compensation Table




The
following table sets forth certain information regarding compensation during
each of the last two fiscal years to our Chief Executive Officers for each of
those years and any officer who earned in excess of $100,000 during the year
ended January 31, 2009.





Name
      and Principal
                                                                                  Position
                                                                                
                                                                                Year
                                                                                
                                                                                Salary
                                                                                  $
                                                                                
                                                                                
                                                                                Option/
                                                                                  Warrant
                                                                                  Awards
                                                                                  $(1)
                                                                                
                                                                                
                                                                                All
      Other
                                                                                  Compensation
                                                                                  $
                                                                                
                                                                                
                                                                                Total
                                                                                  $Gregory
      D. CohenChief
      ExecutiveOfficer (2)
                                                                                
                                                                                2009
                                                                                
                                                                                
                                                                                287,708
                                                                                
                                                                                
                                                                                
                                                                                177,781
                                                                                
                                                                                
                                                                                
                                                                                145,833
                                                                                
                                                                                
                                                                                
                                                                                611,322Mitchell
      BlattChairman
      and Chief ExecutiveOfficer (3)
                                                                                
                                                                                2009
                                                                                
                                                                                
                                                                                85,000
                                                                                
                                                                                
                                                                                
                                                                                222,720
                                                                                
                                                                                
                                                                                
                                                                                65,000
                                                                                
                                                                                
                                                                                
                                                                                372,720Jonathan
      Gilbert (4)
                                                                                
                                                                                2009
                                                                                
                                                                                
                                                                                10,417
                                                                                
                                                                                
                                                                                
                                                                                6,560
                                                                                
                                                                                
                                                                                
                                                                                66,666
                                                                                
                                                                                
                                                                                
                                                                                83,643Chief
      Executive Officer
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                180,417
                                                                                
                                                                                
                                                                                
                                                                                34,000
                                                                                
                                                                                
                                                                                
                                                                                10,800
                                                                                
                                                                                
                                                                                
                                                                                225,217Christian
      Matteis
                                                                                
                                                                                2009
                                                                                
                                                                                
                                                                                362,500
                                                                                
                                                                                
                                                                                
                                                                                6,560
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                369,060President
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                416,667
                                                                                
                                                                                
                                                                                
                                                                                34,000
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                450,667Jan
      E. Chason
                                                                                
                                                                                2009
                                                                                
                                                                                
                                                                                204,166
                                                                                
                                                                                
                                                                                
                                                                                1,640
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                205,806Chief
      Financial Officer
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                104,167
                                                                                
                                                                                
                                                                                
                                                                                8,500
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                112,667Andrew
      Drykerman
                                                                                
                                                                                2009
                                                                                
                                                                                
                                                                                133,761
                                                                                
                                                                                
                                                                                
                                                                                3,280
                                                                                
                                                                                
                                                                                
                                                                                —
                                                                                
                                                                                
                                                                                
                                                                                137,041Executive
      Vice President
                                                                                
                                                                                2008
                                                                                
                                                                                
                                                                                104,167
                                                                                
                                                                                
                                                                                
                                                                                17,000
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                124,167





(1)
            Represents
      compensation expense incurred by us in the fiscal year. See Note 8 to
      our Consolidated Financial Statements included herein for details as to
      the assumptions used to determine the fair value of the option awards
      including the expense related to the repricing, in fiscal 2009, of options
      issued in 2008.




(2)
            We
      pay Philabelle Consulting Corp for Mr. Cohen’s
      services.  “Salary” is the portion of the compensation paid
      subsequent to his appointment and payments prior to that date were
      included in “All Other
Compensation”




(3)
            Mr.
      Blatt served as our Chairman and Chief Executive Officer
      from May to August 2008 and the related compensation during the
      period was included in “Salaries”.  Payments under his
      termination agreement during the fiscal year were included in “All Other
      Compensation”.




(4)
            Mr.
      Jonathan Gilbert served as our Chief Executive Officer during fiscal 2008
      through May 2008 and his compensation for these services was included in
      “Salary”.  Payments for all other services in fiscal 2009 were
      included in “All Other Compensation” and certain reimbursements for
      expenses were included in this caption for fiscal
  2008.




Outstanding
Equity Awards at Fiscal Year-End




The
following table shows the status of stock options and warrants outstanding on
the last day of our fiscal year ended January 31, 2009, to each of the executive
officers name in the Summary Compensation Table.


Name
                                        
                                        Number
      of
                                          Securities
                                          Underlying
                                          Unexercised
                                          Options/
                                          Warrants
      (#)
                                          Exercisable
                                        
                                        
                                        Number
      of
                                          Securities
                                          Underlying
                                          Unexercised
                                          Options/
                                          Warrants
      (#)
                                          Unexercisable
                                        
                                        
                                        Option
                                          Exercise
                                          Price
      ($)
                                        
                                        Option
                                          Expiration
                                          DateGregory
      D. Cohen
                                        
                                        
                                        830,000
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        .38
                                        
                                        August
      16, 2017500,000
                                        
                                        
                                        
                                        500,000
                                        
                                        
                                        
                                        .38
                                        
                                        July
      13, 2013Mitchell
      Blatt
                                        
                                        
                                        500,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        .38
                                        
                                        July
      13, 2013Jonathan
      Gilbert
                                        
                                        
                                        100,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        .38
                                        
                                        August
      16, 2017Christian
      Matteis
                                        
                                        
                                        100,000
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        .38
                                        
                                        August
      16, 2017Jan
      E. Chason
                                        
                                        
                                        25,000
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        .38
                                        
                                        August
      16, 2017Andrew
      Drykerman
                                        
                                        
                                        50,000
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        .38
                                        
                                        August
      16,
2017




20




Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Value




During
our last completed fiscal year, none of our executive officers exercised any
options or warrants to acquire our capital stock.




Long-Term
Incentive Plans  – Awards in Last Fiscal Year




Neither
we nor any of our subsidiary maintain any long-term incentive plans, as defined
in SEC Regulation S-K, Item 402(a)
(6) (iii)




Employment
Agreements




Gregory
D. Cohen is the Managing Director of Philabelle Consulting Corp which provides
management services to us.  In May 2008 we entered into a contract
with Philabelle for a 2 year term which provides for base annual compensation of
$300,000 (informally reduced to $275,000 in December 2008) and reimbursement of
expenses. The agreement automatically renews on a year-to-year basis unless
notice is given within at least sixty days of the termination
date.  Philabelle also received warrants to purchase one million
shares of common stock at an exercise price of $.38 per share which vested 50%
on commencement of the agreement and 50% after one year.  In the event
of a change in control Philabelle is entitled to an additional bonus payment in
an amount equal to two times the annual compensation then in
effect.


The
Company is negotiating the terms of an employment agreement with Mr.
Cohen.





In 2007,
we entered into an employment agreement with Christian Matteis to serve as our
President and Chief Operating Officer. The initial term of the agreement is
three years, with automatic one-year renewals following this three-year period.
Pursuant to the agreement, Mr. Matteis is to receive an annual base salary of
$500,000, $525,000 and $550,000, respectively, for the first three years, and
then an agreed upon salary (of not less than $550,000) for all future years of
employment. Pursuant to an amendment to his agreement in March 2007, Mr.
Matteis’ annual base salary was reduced to $350,000 for the period of March 15,
2008 through February 15, 2009.  (As of April 17, 2009, under an
informal arrangement we continue to pay Mr. Matteis at the annual rate of
$350,000.) Under the terms of the agreement, Halcyon has granted to Mr. Matteis
850,000 restricted shares of its common stock. In addition, Mr. Matteis shall
receive the same number of common stock purchase options as are granted to the
Chief Executive Officer. If Mr. Matteis’ employment is terminated without cause
or if he resigns for good reason, we will be obligated to pay him, as severance,
his then current annual base salary and annual bonuses (as such is defined
within the agreement) for one year (or for the remainder of the term, if longer
than one year), payable in accordance with standard payroll procedures. In
addition, Mr. Matteis will continue to be able to exercise his options
pursuant to their original terms. Under the agreement, if Mr. Matteis is
terminated with cause or if he voluntarily resigns (other than for good reason),
he is prohibited from competing with us during the initial three-year term of
employment and for one year after the termination of his employment. The
agreement also provides that we will indemnify Mr. Matteis for various
liabilities, including without limitation by reason of the fact that he
allegedly is in violation of an agreement with his former employer, Blue Star,
by virtue of his employment with us.




We also
entered into an employment agreement with Jonathan Gilbert to serve as our Chief
Executive Officer in 2007. The initial term of the agreement is three
years, with automatic one-year renewals following this three-year period.
Pursuant to the agreement, Mr. Gilbert is to receive an annual base salary of
$235,000, $246,750 and $259,000, respectively, for the first three years, and
then an agreed upon salary (of not less than $259,000) for all future years of
employment. His base salary was reduced to $75,000 annually effective January 1,
2008. In addition, Mr. Gilbert is eligible to receive a number of common stock
purchase options as determined by the board of directors. If Mr. Gilbert’s
employment is terminated without cause or if he resigns for good reason, we will
be obligated to pay him, as severance, his then current annual base salary and
annual bonuses (as such is defined within the agreement) for one year (or for
the remainder of the term, if longer than one year), payable in accordance with
standard payroll procedures. In addition, Mr. Gilbert will continue to be able
to exercise his restricted shares and options pursuant to their original terms.
Under the agreement, if Mr. Gilbert is terminated with cause or if he
voluntarily resigns (other than for good reason), he is prohibited from
competing with us during the initial three-year term of employment and for one
year after the termination of his employment (should this be greater than the
initial three-year term). Mr. Gilbert resigned as Chief Executive Officer in May
2008.




Effective
August 12, 2008, Mitchell
Blatt resigned as Chairman and Chief Executive Officer. A copy of his
termination agreement was included in our Current Report on Form 8-K, filed with
the Securities and Exchange Commission on August 18, 2008.




Director
Compensation




We do not have compensation
arrangements in place for members of our Board of
Directors.  Immediately following the Merger, we
granted the options to our then non-employee directors, pursuant to the Stock
Incentive Plan.





Item
      12.
            SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS




The
following table is based upon 25,646,667 shares of common stock outstanding as
of April     , 2009, and sets forth based upon our
knowledge of securities issued by us, certain information regarding the
ownership of our common stock, by (i) each person or entity who, to our
knowledge, owns more than 5% of our common stock; (ii) each executive officer;
(iii) each director; and (iv) all of our executive officers and directors as a
group. Unless otherwise indicated in the footnotes to the following table, each
of the stockholders named in the table has sole voting and investment power with
respect to such shares of common stock. The address of each of the stockholders
listed below except as noted is c/o Halcyon Jets Holdings, Inc., 336 West
37 th Street,
Suite 800, New York, New York 10018.




21





Name of Beneficial Owner
                      
                      Number of
                        Shares
                        Beneficially
                        Owned (1)
                      
                      Voting
      Power (%)5%
      Owners:James
      Nigro
                        730
      Picacho Lane,
                        Montecito,
      CA 93108
                      
                      
                      1,500,000
                      
                      5.85Silverman
      Partnership LP
                        PO
      Box 9200
                        Jupiter,
      FL 33468
                      
                      
                      1,500,000
                      
                      5.85Executive
      Officers and Directors:Gregory
      D. Cohen (2)
                      
                      
                      2,375,000
                      (3)
                      8.80Christian
      Matteis
                      
                      
                      950,000
                      (4)
                      3.69Jonathan
      Gilbert
                      
                      
                      950,000
                      (4)
                      3.69Andrew
      Drykerman
                      
                      
                      300,000
                      (5)
                      1.67Craig
      Spitzer
                      
                      
                      150,000
                      (5)
                      *Jan
      Chason
                      
                      
                      125,000
                      (6)
                      *Justin
      Fries
                      
                      
                      85,000
                      (7)
                      *Gregory
      Giannone
                      
                      
                      -Shlomo
      Piontkowski
                      
                      
                      75,000
                      (5)
                      *All
      executive officers and directors as a group (9 persons)
                      
                      
                      5,010,000
                      (8)
                      18.28




*  
Represents less than 1%




(1)
            Unless
      otherwise indicated, includes shares owned by a spouse, minor children,
      and relatives sharing the same home, as well as entities owned or
      controlled by the named beneficial
owner.


(2)
              Gregory
      D. Cohen, as managing partner, has voting control over the shares
      beneficially owned by Philabelle Consulting
  Corp.


(3)
            Includes
      options and warrants to purchase 1,330,000 shares of our common stock that
      are currently exercisable held by Philabele Consulting Corp. Does not
      include 500,000 shares of common stock underlying warrants  that
      have not vested and are not vesting within 60
  days.


(4)
            Includes
      options to purchase 100,000 shares of our common stock that are currently
      exercisable


(5)
            Includes
      options to purchase 50,000 shares of our common stock that are currently
      exercisable.


(6)
              Includes
      options to purchase 25,000 shares of our common stock that are currently
      exercisable.
 (7)
                Includes
      10,000 shares of common stock owned by Garber Atlas Fries and Associates,
      Inc., an entity of which Mr. Fries is a principal. Includes options to
      purchase 50,000 shares of our common stock that are currently
      exercisable.
 (8)
                Includes
      options to purchase an aggregate of 1,755,000 shares of our common stock
      that are currently exercisable.


ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE





Gregory
D. Cohen is the Managing Director of Philabelle Consulting Corp which provides
management services to us.  In May 2008 we entered into a contract
with Philabelle for a 2 year term which provides for base annual compensation of
$300,000 (informally reduced to $275,000 in December 2008) and reimbursement of
expenses. The agreement automatically renews on a year-to-year basis unless
notice is given within at least sixty days of the termination
date.  Philabelle also received warrants to purchase one million
shares of common stock at an exercise price of $.38 per share which vested 50%
on commencement of the agreement and 50% after one year.  In the event
of a change in control Philabelle is entitled to an additional bonus payment in
an amount equal to two times the annual compensation then in
effect.





Garber
Atlas Fries and Associates, Inc. an entity of which Justin Fries, a director of
Halcyon, is a principal owns 10,000 shares of Halcyon common stock. In addition,
the entity acts as the insurance broker for Halcyon and was paid standard
commissions for these services.




22





ITEM
14.                      PRINCIPAL ACCOUNTANT FEES AND
SERVICES




On behalf
of Halcyon and its shareholders, the Audit Committee retained Rosenberg Rich
Baker Berman and Company to audit our consolidated financial statements for
fiscal 2009. In addition, the Audit Committee retained Rosenberg Rich Baker
Berman, as well as another accounting firm, to provide other auditing and
advisory services in 2009. We understand the need for Rosenberg Rich Baker
Berman to maintain objectivity and independence in its audit of our financial
statements and our internal control over financial reporting. To minimize
relationships that could appear to impair the objectivity of Rosenberg Rich
Baker Berman, our Audit Committee has restricted the non-audit services that
Rosenberg Rich Baker Berman may provide to us primarily to tax services and
merger and acquisition due diligence services. The Audit Committee has also
adopted policies and procedures for pre-approving all non-audit work performed
by Rosenberg Rich Baker Berman. The chair of the committee is authorized to
pre-approve any audit or non-audit service on behalf of the committee, provided
such decisions are presented to the full committee at its next regularly
scheduled meeting.





The
aggregate fees billed by Rosenberg Rich Baker Berman in fiscal 2009 and 2008 for
these various services were:


Type
      of Fees
                                
                                2009
                                
                                
                                2008Audit
      Fees
                                
                                $
                                90,210
                                
                                
                                $
                                37,380Audit-Related
      Fees
                                
                                
                                88,630
                                
                                
                                
                                47,770Tax
      Fees
                                
                                
                                11,700
                                
                                
                                
                                --Total
                                
                                $
                                190,540
                                
                                
                                $
                                85,150
 In the
above table, in accordance with the SEC’s rules, “audit fees” are fees that we
paid to Rosenberg Rich Baker Berman for the audit of our annual financial
statements included in the Form 10-K and review of financial statements included
in the Form 10-Qs. “Audit-related fees” merger and acquisition due diligence
services. “Tax fees” are fees for tax compliance, and tax planning.


PART
IV


ITEM
15.          EXHIBITS




ExhibitNumber
            
            Description2.1
      *
            
            Agreement
      of Merger and Plan of Reorganization, dated as of August 17, 2007, by and
      among Greenleaf Forest Products, Inc., Halcyon, Inc., and Halcyon Jets
      Acquisition Corp.2.2
      *
            
            Certificate
      of Merger, dated August 17, 2007, between Halcyon, Inc. and Halcyon Jets
      Acquisition Corp.3.1
            
            Certificate
      of Incorporation (incorporated herein by reference to Exhibit 3.1 to the
      Company’s Current Report on Form 8-K filed August 15,
  2007)3.2
            
            By-laws
      (incorporated herein by reference to Exhibit 3.2 to the Company’s Current
      Report on Form 8-K filed August 15, 2007)3.3
      *
            
            Certificate
      of Amendment to Certificate of Incorporation, dated August 17,
      200710.1
      *
            
            Form
      of Subscription Agreement10.2
      *
            
            Form
      of Warrant10.3
      *
            
            Form
      of Lockup Agreement10.4
      *
            
            Form
      of Directors and Officers Indemnification Agreement10.5
      *
            
            2007
      Equity Incentive Plan10.6
      *
            
            Form
      of 2007 Incentive Stock Option Agreement10.7
      *
            
            Form
      of 2007 Non-Qualified Stock Option Agreement10.8
      *
            
            Employment
      Agreement, dated March 23, 2007, between Halcyon, Inc. and Christian
      Matteis10.9
      *
            
            Employment
      Agreement, dated April 1, 2007, between Halcyon, Inc. and Jonathan
      Gilbert





10.10
      *
              
              Agreement
      of Conveyance, Transfer and Assignment of Assets and Assumption of
      Obligations, dated August 17, 2007, between Greenleaf Forest Products,
      Inc. and SplitCo10.11
      *
              
              Stock
      Purchase Agreement, dated August 17, 2007, Greenleaf Forest Products,
      Inc., Halcyon and Michelle Maresova10.12
              
              Amendment
      to Employment Agreement with Christian Matteis dated March 4,
      2008.21
              
              Halcyon
      Jets Holdings, Inc. subsidiaries31.1
              
              Certification
      by Chief Executive Officer pursuant to Sarbanes-Oxley Section
      302.31.2
              
              Certification
      by Chief Financial Officer pursuant to Sarbanes-Oxley Section
      302.32.1
              
              Certification
      by Chief Executive Officer pursuant to 18 U.S.C. Section
      135032.2
              
              Certification
      by Chief Financial Officer pursuant to 18 U.S.C. Section
      1350




*
Incorporated by reference from the Company's Current Report on Form 8-K filed
August 23, 2007.






23




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.




HALCYON
      JETS HOLDINGS, INC.Date:
      April 23, 2009
              
              /s/ Gregory D. CohenGregory D.
    CohenChief Executive Officer and
      Director(Principal Executive
      Officer)




Date:
      April 23, 2009
              
              /s/ Jan
      E. ChasonJan
      E. ChasonChief Financial Officer and
      Treasurer(Principal Financial and
      Accounting Officer)


Date:
      April 23, 2009
              
              /s/ Gregory
      GiannoneGregory
      GiannoneDirector




Date:
      April 23, 2009
              
              /s/ Justin
      FriesJustin
      FriesDirector




Date:  April
      23,2009
              
              /s/ Jonathan GilbertJonathan
      GilbertDirector




Date:
      April 23, 2009
              
              /s/ Shlomo PiontkowskiShlomo
      PiontkowskiDirector




Date:
      April 23, 2009
              
              /s/ Craig
      SpitzerCraig SpitzerDirector






24




Halcyon Jets Holdings, Inc. and
Subsidiary





PageReports
      of Independent Registered Public Accounting Firm
                F-2Consolidated
      Balance Sheets - January 31, 2009 and 2008
                F-3Consolidated
      Statements of Operations – for the year ended  January 31, 2009
      and 2008
                F-4Consolidated
      Statement of Stockholders’ Equity/(Deficiency)  – for the year
      ended  January 31, 2009 and 2008
                F-5Consolidated
      Statements of Cash Flows – for the year ended  January 31, 2009
      and 2008
                F-6Notes
      to Consolidated Financial Statements
                F-7











F-1




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and


Stockholders
of Halcyon Jets Holdings, Inc and Subsidiary




We have
audited the accompanying consolidated balance sheets of Halcyon Jets Holdings,
Inc. as of January 31, 2009 and 2008, and the related consolidated statements of
income, stockholders' equity, and cash flows for the years then ended. Halcyon
Jets Holdings, Inc.'s management are responsible for these financial statements.
Our responsibility is to express an opinion on these financial statements based
on our audit.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Halcyon Jets Holdings, Inc.
as of January 31, 2009 and 2008, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.




The
accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company began its operations in
March 2007 and has not as yet attained a level of operations which allows it to
meet its current overhead. In addition the Company does not contemplate
attaining profitable operations within its first few operating cycles and
is dependent upon obtaining additional financing adequate to fund working
capital, infrastructure, and significant marketing/investor related expenditures
to gain market recognition in order to achieve a level of revenue adequate to
support its cost structure. These conditions raise substantial doubt about its
ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.




/s/
Rosenberg Rich Baker Berman & Company




Bridgewater,
New Jersey


April 17,
2009


Except for
Note 14, as to which the date is April 22, 2009





F-2







HALCYON
JETS HOLDINGS, INC


CONSOLIDATED
BALANCE SHEETS





January 31,2009
                          
                          
                          2008ASSETSCURRENT
      ASSETSCash
                          
                          $
                          1,093,859
                          
                          
                          $
                          495,206Cash
      - restricted
                          
                          
                          941,156
                          
                          
                          
                          1,091,081Accounts
      receivable - net of allowances of  $150,000 and $
      10,000
                          
                          
                          214,149
                          
                          
                          
                          1,395,486Prepaid
      expenses and other current assets
                          
                          
                          168,987
                          
                          
                          
                          507,678Total
      current assets
                          
                          
                          2,418,151
                          
                          
                          
                          3,489,451PROPERTY
      AND EQUIPMENT - net
                          
                          
                          320,017
                          
                          
                          
                          449,220OTHER
      ASSETS
                          
                          
                          196,938
                          
                          
                          
                          78,698TOTAL
      ASSETS
                          
                          $
                          2,935,106
                          
                          
                          $
                          4,017,369LIABILITIES
      AND STOCKHOLDERS' EQUITY/(DEFICIENY)CURRENT
      LIABILITIESAccounts
      payable and accrued expenses
                          
                          $
                          2,245,047
                          
                          
                          $
                          1,696,527Note
      payable
                          
                          
                          543,906
                          
                          
                          
                          -Accrued
      excise taxes
                          
                          
                          97,565
                          
                          
                          
                          102,793Deferred
      revenues
                          
                          
                          1,143,670
                          
                          
                          
                          685,897Total
      current liabilities
                          
                          
                          4,030,188
                          
                          
                          
                          2,485,217STOCKHOLDERS'S
      EQUITY/(DEFICIENCY)Common
      stock - $.001 per value, authorized 300,000,000 shares25,646,667
      and  25,647,500  shares issued and
      outstanding
                          
                          
                          25,647
                          
                          
                          
                          25,648Additional
      paid in capital
                          
                          
                          8,462,589
                          
                          
                          
                          7,608,877Deferred
      compensation
                          
                          
                          (58,382
                          )
                          
                          
                          (557,600
                          )Accumulated
      deficit
                          
                          
                          (9,524,936
                          )
                          
                          
                          (5,544,773
                          )Total
      stockholders' equity /(deficiency)
                          
                          
                          (1,095,082
                          )
                          
                          
                          1,532,152TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIENCY)
                          
                          $
                          2,935,106
                          
                          
                          $
                          4,017,369





See notes
to the consolidated financial statements.


F-3





HALCYON
JETS HOLDINGS, INC
 CONSOLIDATED
STATEMENTS OF OPERATIONS


Year
      EndedJanuary 31,2009
                              
                              
                              2008REVENUESPassenger
                              
                              $
                              43,693,613
                              
                              
                              $
                              12,128,654Other
                              
                              
                              852,946
                              
                              
                              
                              179,048Total
      revenues
                              
                              
                              44,546,559
                              
                              
                              
                              12,307,702OPERATING
      COSTS AND EXPENSESCharter
      costs
                              
                              
                              36,993,811
                              
                              
                              
                              10,587,483Compensation
      and benefits
                              
                              
                              6,471,256
                              
                              
                              
                              3,988,661Other
      operating costs
                              
                              
                              3,874,132
                              
                              
                              
                              2,745,084Depreciation
      and amortization
                              
                              
                              171,753
                              
                              
                              
                              101,659Termination
      benefits
                              
                              
                              332,000
                              
                              
                              
                              -Loss
      on deferred office expansion
                              
                              
                              110,883
                              
                              
                              
                              -Total
      operating costs
                              
                              
                              47,953,835
                              
                              
                              
                              17,422,887Operating
      loss
                              
                              
                              (3,407,276
                              )
                              
                              
                              (5,115,185
                              )Other
      income/(expenses)Interest
      income
                              
                              
                              26,964
                              
                              
                              
                              45,765Interest
      and finance costs
                              
                              
                              (50,225
                              )
                              
                              
                              -Amortization
      of debt discount
                              
                              
                              (191,043
                              )
                              
                              
                              (375,000
                              )Loss
      on broker loans
                              
                              
                              (78,271
                              )Costs
      related to abandoned acquisitions
                              
                              
                              (280,312
                              )
                              
                              
                              -Merger
      costs
                              
                              
                              -
                              
                              
                              
                              (100,353
                              )(572,887
                              )
                              
                              
                              (429,588
                              )Net
      loss
                              
                              $
                              (3,980,163
                              )
                              
                              $
                              (5,544,773
                              )Net
      loss per common share
                              
                              $
                              (0.16
                              )
                              
                              $
                              (0.25
                              )Average
      number of shares outstanding
                              
                              
                              25,639,105
                              
                              
                              
                              22,448,146





See notes
to the consolidated financial statements.




F-4




HALCYON
JETS HOLDINGS, INC.


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY/(DEFICIENCY)




Additional
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              TotalCommon
      Stock
                                                                                              
                                                                                              
                                                                                              Paid
      in
                                                                                              
                                                                                              
                                                                                              Deferred
                                                                                              
                                                                                              
                                                                                              Accumulated
                                                                                              
                                                                                              
                                                                                              Stockholders'Shares
                                                                                              
                                                                                              
                                                                                              Amount
                                                                                              
                                                                                              
                                                                                              Capital
                                                                                              
                                                                                              
                                                                                              Compensation
                                                                                              
                                                                                              
                                                                                              Deficit
                                                                                              
                                                                                              
                                                                                              Equity/(Deficiency)Issuance
      of common stock in connection with:Founders
                                                                                              
                                                                                              10,275,000
                                                                                              
                                                                                              
                                                                                              $
                                                                                              10,275
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              $
                                                                                              10,275Private
      placement at $.50 per share,net
      of expenses of $25,000
                                                                                              
                                                                                              1,020,000
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,020
                                                                                              
                                                                                              
                                                                                              $
                                                                                              483,678
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              484,698Financing
      fee
                                                                                              
                                                                                              750,000
                                                                                              
                                                                                              
                                                                                              
                                                                                              750
                                                                                              
                                                                                              
                                                                                              
                                                                                              374,187
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              374,937Private
      placement of 49.9 units of common stockand
      warrants at $100,000 per unit, net ofexpenses  of
      $460,000
                                                                                              
                                                                                              
                                                                                              4,990,000
                                                                                              
                                                                                              
                                                                                              
                                                                                              4,990
                                                                                              
                                                                                              
                                                                                              
                                                                                              4,525,125
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              4,530,115Advertising
      representation agreement
                                                                                              
                                                                                              12,500
                                                                                              
                                                                                              
                                                                                              
                                                                                              13
                                                                                              
                                                                                              
                                                                                              
                                                                                              27,987
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              28,000Investor
      relations consulting arrangement
                                                                                              
                                                                                              100,000
                                                                                              
                                                                                              
                                                                                              
                                                                                              100
                                                                                              
                                                                                              
                                                                                              
                                                                                              239,900
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              240,000Effect
      of recapitalization - reverse merger
                                                                                              
                                                                                              8,500,000
                                                                                              
                                                                                              
                                                                                              
                                                                                              8,500
                                                                                              
                                                                                              
                                                                                              
                                                                                              (8,500
                                                                                              )
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Compensation
      expense - issuance of employee stock
                                                                                                options
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,232,000
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              1,232,000Issuance
      of options and warrants in connection
                                                                                                with
      services  contracts
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              734,500
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (734,500
                                                                                              )
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Amortization
      of deferred compensation
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              176,900
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              176,900Net
      loss for the period
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (5,544,773
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (5,544,773
                                                                                              )Balance
      -January 31, 2008
                                                                                              
                                                                                              25,647,500
                                                                                              
                                                                                              
                                                                                              $
                                                                                              25,648
                                                                                              
                                                                                              
                                                                                              $
                                                                                              7,608,877
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (557,600
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              (5,544,773
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              1,532,152Forfeiture
      of shares on termination of employment
                                                                                              
                                                                                              (33,333
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (34
                                                                                              )
                                                                                              
                                                                                              
                                                                                              34
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Issuance
      of common shares in connection with:Advertising
      representation agreement
                                                                                              
                                                                                              17,500
                                                                                              
                                                                                              
                                                                                              
                                                                                              18
                                                                                              
                                                                                              
                                                                                              
                                                                                              23,742
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              23,760Employment
      agreement
                                                                                              
                                                                                              15,000
                                                                                              
                                                                                              
                                                                                              
                                                                                              15
                                                                                              
                                                                                              
                                                                                              
                                                                                              22,485
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              22,500Issuance
      of employee stock options
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              63,750
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              63,750Adjustment
      of exercise price for employee
                                                                                                stock options
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              243,704
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              243,704Issuance
      of warrants:Officers
      and employees
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              308,954
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              308,954Financing
      fee
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              52,011
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              52,011Beneficial
      conversion feature – note payable
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              139,032
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              139,032Amortization
      of deferred compensation
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              499,218
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              499,218Net
      loss for the period
                                                                                              
                                                                                              
                                                                                              -
                                                                                              
                                                                                              
                                                                                              
                                                                                              -
                                                                                              
                                                                                              
                                                                                              
                                                                                              -
                                                                                              
                                                                                              
                                                                                              
                                                                                              -
                                                                                              
                                                                                              
                                                                                              
                                                                                              (3,980,163
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (3,980,163
                                                                                              )Balance
      -January
      31, 2009
                                                                                              
                                                                                              25,646,667
                                                                                              
                                                                                              
                                                                                              $
                                                                                              25,647
                                                                                              
                                                                                              
                                                                                              $
                                                                                              8,462,589
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (58,382
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              (9,524,936
                                                                                              )
                                                                                              
                                                                                              $
                                                                                              (1,095,082
                                                                                              )




See notes
to the consolidated financial statements.




F-5




HALCYON
JETS HOLDINGS, INC


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Year
      EndedJanuary 31,2009
                  
                  
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                  
                  $
                  (3,980,163
                  )
                  
                  $
                  (5,544,773
                  )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Depreciation
      and amortization
                  
                  
                  171,753
                  
                  
                  
                  100,353Amortization
      of loan discount
                  
                  
                  191,043
                  
                  
                  
                  375,000Non-cash
      compensation expense
                  
                  
                  1,127,811
                  
                  
                  
                  1,687,175Provisions
      for losses
                  
                  
                  524,298
                  
                  
                  
                  -Decrease
      (increase) in operating assets:Cash
      - restricted
                  
                  
                  149,925
                  
                  
                  
                  (1,091,081
                  )Receivables
                  
                  
                  1,181,337
                  
                  
                  
                  (1,395,486
                  )Prepaid expenses and other assets
                  
                  
                  37,132
                  
                  
                  
                  (507,678
                  )Security
      deposits
                  
                  
                  (23,082
                  )
                  
                  
                  (78,698
                  )Increase
      (decrease) in operating liabilities:Payables
      and accrued expenses
                  
                  
                  862,486
                  
                  
                  
                  1,696,527Accrued
      excise taxes
                  
                  
                  (5,228
                  )
                  
                  
                  102,793Deferred
      revenues
                  
                  
                  457,773
                  
                  
                  
                  685,897NET
      CASH PROVIDED FROM/ (USED IN) OPERATING ACTIVITIES
                  
                  
                  695,086
                  
                  
                  
                  (3,969,971
                  )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of property and equipment
                  
                  
                  (96,433
                  )
                  
                  
                  (549,573
                  )NET
      CASH USED IN INVESTING ACTIVITIES
                  
                  
                  (96,433
                  )
                  
                  
                  (549,573
                  )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from loans
                  
                  
                  500,000
                  
                  
                  
                  1,990,000Proceeds
      from private placements - net
                  
                  
                  -
                  
                  
                  
                  3,514,750Repayment
      of loans
                  
                  
                  (500,000
                  )
                  
                  
                  (490,000
                  )NET
      CASH PROVIDED FROM FINANCING ACTIVITIES
                  
                  
                  -
                  
                  
                  
                  5,014,750NET
      INCREASE IN CASH
                  
                  
                  598,653
                  
                  
                  
                  495,206CASH
      - BEGINNING OF THE PERIOD
                  
                  
                  495,206CASH
      - END OF THE PERIOD
                  
                  $
                  1,093,859
                  
                  
                  $
                  495,206Supplemental
      Disclosures:Cash
      paid during the period for interest
                  
                  $
                  3,000
                  
                  
                  $
                  800Cash
      paid during period for taxes
                  
                  $
                  6,000
                  
                  
                  $
                  -Non-cash
      investing and financing acitivitiesCommon
      stock issued for:Services
                  
                  $
                  24,000
                  
                  
                  $
                  268,000Financing
      fees
                  
                  
                  52,000
                  
                  
                  
                  375,000Employment
      agreement
                  
                  
                  23,000Liqudation
      of notes payable
                  
                  
                  
                  
                  
                  
                  1,500,000Options
      and warrants for services
                  
                  
                  1,116,000
                  
                  
                  
                  735,000Issuance
      of note in connection with trade indebtedness
                  
                  
                  606,000





See notes
to the consolidated financial statements.




F-6




Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements




Note 1. Description of
Business




Halcyon
Jets Holdings, Inc. (formerly Greenleaf Forest Products, Inc.)(“HJHI”) operating through
its wholly-owned subsidiary Halcyon Jets, Inc. (“HJI”) (collectively the
“Company”) is a broker of on-demand aircraft services, serving as agent to
its customers in arranging for their transportation needs. The Company began its
operations in March 2007. HJI does not own or operate the aircraft on which its
customers fly. HJI arranges luxury private transportation by connecting
travelers with independently owned and operated executive aircraft that are
compliant with the minimum requirements of Part 135 of the Federal Aviation
Regulations for aircraft maintenance, aircrew training and aircraft
operations.





On August
17, 2007, a subsidiary of HJHI consummated a merger (the "Merger") with HJI.
Pursuant to the Merger, HJI became a wholly-owned subsidiary of the Company. As
a result of the Merger, the former stockholders of HJI became the controlling
stockholders of the Company. Additionally, subsequent to the Merger, the Company
discontinued its former business. Accordingly, the transaction was treated for
accounting purposes as a reverse acquisition of a public shell, and the
transaction has been accounted for as a recapitalization of the Company, rather
than a business combination. Therefore, the historical financial statements of
HJI are the historical financial statements of the Company and historical
stockholders' equity of HJI was restated to reflect the recapitalization. Pro
forma information has not been presented since the transaction is not a business
combination. Costs incurred by HJI, principally professional fees in
connection with the Merger, amounting to $100,000, were charged to operations in
August 2007.





The
Company’s operations principally involve providing flight arrangements
which originate both domestically and internationally, as well as, flights which
operate entirely internationally although such flights have not
been material to date. The Company is centrally managed and the chief
operating decision makers, the chief executive and other officers, use
consolidated and other financial information supplemented by sales information
by office for making operational decisions and assessing financial performance.
Accordingly, the Company operates in a single segment.




Note 2. Basis of Preparation




The
accompanying consolidated financial statements have been prepared in conformity
with generally accepted accounting principles, which assume the continuation of
the Company as a going concern.  This basis of accounting contemplates the
recovery of the Company’s assets and the satisfaction of liabilities in the
normal course of business. The Company began its current operations in late
March 2007 and has not as yet attained an operating level which allows it to
meet its overhead.  We have managed our liquidity during this time
through institution of prepayment terms with our clients; restructuring of
vendor payment terms and a series of cost reduction initiatives.  The
global credit market crisis has had a dramatic effect on our industry, and
beginning during our fourth quarter ended January 31, 2009, the increased
turmoil in the financial markets and the depressed economy has resulted in a
significant decline in private jet aircraft use.  Further, in December
2008, one of the Company’s sales representatives terminated its relationship
with the Company.  The sales representative was responsible for
approximately 20% of the Company’s revenues for the year ended January 31,
2009.





The
Company is dependent upon obtaining additional financing adequate to fund
working capital, infrastructure and significant marketing/investor related
expenditures to gain market recognition in order to achieve a level of revenue
adequate to support its cost structure, none of which can be assured. While the
Company has funded its initial operations with bank credit through the use of
“credit cards”, private placements of equity, bridge loans and completed a
reverse merger and became a publicly owned entity, there can be no assurance
that adequate financing will continue to be available to the Company and, if
available, on terms that are favorable to the Company.   Our ability
to continue as a going concern is dependent on many events outside of our direct
control, including, among other things, our clients, as well as new customers,
substantially increasing their use of our services and our vendors continuing to
conduct business with us without requesting faster payment or other assurances.
The consolidated financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
outcome of these uncertainties.




Note
3. Significant Accounting Policies




Revenue
Recognition




Passenger
revenue is the gross amount charged to customers and is recognized when charter
services are provided. Other revenues such as catering or ground arrangements
are also recognized when the services are provided based upon the gross amount
billed to customers. The Company has evaluated the provisions of EITF 99-19
(“Reporting Revenues Gross as a Principal versus Net as an Agent”) and has
concluded that it should report gross revenues with a separate display of the
cost of sales while acting as an agent or broker since the Company takes on the
credit risk associated with the receivable and is primarily obligated to the
supplier.




F-7







Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements - continued





The
Company is required to charge certain taxes and fees in connection with charter
services, principally U.S. federal transportation taxes. These taxes and fees
are legal assessments on the customer. As the Company has a legal obligation to
act as a collection agent for to these assessments, the Company does not include
the related amounts in passenger revenues. The amounts required to be collected
are recorded as a liability and the liability is relieved when the payments are
made to the federal government.




Cash
and Cash Equivalents




Cash and
cash equivalents include cash and highly liquid debt investments with original
maturities of ninety days or less when purchased, which are carried at the lower
of cost and fair market value.





Cash and
cash equivalents on deposit with financial institutions are insured for up to
$250,000 by the FDIC. The Company’s balances in its accounts are at times in
excess of the federally insured limit.




Accounts
Receivable




Accounts
receivable are non-interest-bearing obligations. Accounts receivable are stated
at the amount billed. Generally, customers are required to allow the Company to
put a hold on a credit card for the approximate amount of the flight cost and
the hold is removed when payment is received or the charge is
activated.




The
carrying amount of accounts receivable is reduced by a valuation allowance that
reflects the Company’s best estimate of the amounts that may not be collected.
This estimate is based on management’s assessment of current credit worthiness
to determine the portion, if any, of the balance that will not be
collected.





Property
and Equipment




Property
and equipment consists of leasehold improvements, office equipment and
capitalized website development costs and is stated at cost less accumulated
depreciation and amortization. Depreciation and amortization is determined by
using the straight-line method over the estimated useful lives of the related
assets, generally three to seven years.




Advertising and Marketing
Expenses




The costs
of advertising and marketing expenses are expensed as incurred. Advertising and
marketing expenses were $981,000 and $739,000 for the year ended January 31,
2009 and 2008, respectively.




Stock
Based Compensation




The
Company follows the provisions of Statement of Financial Accounting Standards
No.123R, Share-Based Payment (SFAS 123R), which revised SFAS 123, Accounting for
Stock-Based Compensation and supersedes Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25). SFAS 123R
requires that new, modified and unvested share-based payment transactions with
employees, such as stock options and restricted stock, be recognized in the
financial statements based on their fair value and recognized as compensation
expense over the requisite service period.




Income
Taxes





The
Company accounts for income taxes under the asset and liability method using
SFAS No. 109, ‘‘Accounting for Income Taxes.’’ Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carry-forwards.





Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.




F-8




Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements - continued




The tax
effects of temporary differences that gave rise to the deferred tax assets and
deferred tax liabilities at January 31. 2008 were primarily attributable to net
operating loss carry-forwards. Since the Company has only recently begun its
operations, a full valuation allowance has been established.





Loss
per share




Loss per
common share is based upon the weighted average number of common shares
outstanding during the period. Diluted loss per common share is the same as
basic loss per share, as the effect of potentially dilutive securities
(options – 4,300,000 and warrants 4,915,000 – 2009) and (options -4,935,000
and warrants -3,165,000  - 2008) are anti-dilutive.




Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
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.




Fair Value of Financial
Instruments




The
carrying amounts reported in the consolidated balance sheets for cash, accounts
receivable, accounts payable and accrued expenses approximate their fair values
due to the short term maturities of these financial instruments.





Recently
Issued Accounting Pronouncements




In
September 2006, FASB issued SFAS No. 157 “Fair Value Measurements. ”
This Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This Statement applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, this Statement does
not require any new fair value measurements. However, for some entities, the
application of this Statement will change current practice. This Statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years.
Management is currently evaluating the effect of this pronouncement on its
financial statements.





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (‘‘SFAS
141(R)’’), which establishes principles and requirements for how the acquirer:
(a) recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in an
acquire; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141(R)
requires contingent consideration to be recognized at its fair value on the
acquisition date and, for certain arrangements, changes in fair value to be
recognized in earnings until settled. SFAS 141(R) also requires
acquisition-related transaction and restructuring costs to be expensed rather
than treated as part of the cost of the acquisition. SFAS 141(R) applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008 and will impact the Company’s financial statements
only in the event of such a business combination after this date.




In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements an Amendment of ARB No. 51 (‘‘SFAS
160’’), which establishes accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 clarifies that a non-controlling interest in a subsidiary
is an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. SFAS 160 also requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS 160 also provides guidance when a subsidiary is
deconsolidated and requires expanded disclosures in the consolidated financial
statements that clearly identify and distinguish between the interests of the
parent’s owners and the interests of the non-controlling owners of a subsidiary.
SFAS 160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. Management believes SFAS
160 will have no impact on the financial statements of the Company once
adopted.





F-9




Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements – continued





In
March 2008, the FASB issued FASB Statement No. 161, Disclosures
About  Derivative Instruments and Hedging Activities
(“SFAS161”), which amends and expands the disclosure requirements of FASB
Statement No. 133 with the intent to provide users of financial statements
with an enhanced understanding of how and why an entity uses derivative
instruments, how the derivative instruments and the related hedged items are
accounted for and how the related hedged items affect an entity’s financial
position, performance and cash flows. This Statement is  effective for
financial statements for fiscal years and interim periods beginning after
November 15, 2008. Based upon the Company’s current operations,
management believes SFAS 161 will have no impact on the financial statements of
the Company once adopted.





In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“FAS 162”). FAS 162 is intended to improve
financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with GAAP for nongovernmental entities. FAS 162
is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, “The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles.” The
Company does not expect the adoption of this statement to have a material impact
on the Company’s consolidated results of operations, financial position or cash
flows.





In
April 2008, the FASB issued FSP FAS 142-3, “Determinationof the Useful Life of Intangible
Assets ” (“FSP 142-3”). FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, “Goodwill
and Other Intangible Assets” (“FAS 142”). This change is intended to improve the
consistency between the useful life of a recognized intangible asset under FAS
142 and the period of expected cash flows used to measure the fair value of the
asset under FAS 141R and other GAAP. FSP 142-3 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years, which will be the Company’s fiscal
year 2010. The requirement for determining useful lives must be applied
prospectively to intangible assets acquired after the effective date and the
disclosure requirements must be applied prospectively to all intangible assets
recognized as of, and subsequent to, the effective date. The Company does not
expect the adoption of this statement to have a material impact on the Company’s
consolidated results of operations, financial position or cash
flows.





In June
2008, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 07-5,
“Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity’s Own Stock” (“EITF 07-5”).  EITF 07-5 mandates a two-step
process for evaluating whether an equity-linked financial instrument or embedded
feature is indexed to the entity’s own stock.  It is effective for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years.  We do not expect the adoption of EITF 07-05 will have a
material impact on results of operations, financial position, or cash
flows.




Note 4.   Restricted Cash





The
Company offers a membership card program for clients to purchase credits towards
the cost of future air charters, catering and related services. The Company
maintains the amounts received related to this program in segregated bank
accounts. Amounts on deposit with the Company as of January 31, 2009 and 2008
amounted to $666,000 and $407,000, respectively,  and was classified
as Cash – restricted in the accompanying consolidated balance sheet and the
liability related to the unused credits was included in deferred
revenues.





In August
2007, the Company entered into a credit card processing agreement. The
agreement, as amended in July 2008, requires the Company to provide a standby
letter of credit in the amount of $75,000. To satisfy this obligation the
Company opened a line of credit, with the merchant services as the beneficiary
in case of default or failure to comply with the credit card processing
requirements. In order to fund the line of credit, the Company was required to
deposit a compensating balance of $75,000 into a restricted money market account
with the financial institution. This compensating balance for the line of credit
is included in Cash - restricted on the balance sheet ($75,000 and
$150,000 as of January 31, 2009 and 2008, respectively) and will be restricted
for the contract period of one year; however it is the intention of the Company
to continue the relationship and will maintain both the standby letter of credit
and the security deposit, if required.  During August 2008, the
Company was required to establish a cash reserve of $200,000 with a credit card
company in connection with its merchant services arrangement which was
classified as Cash – restricted in the accompanying consolidated balance sheet
as of January 31, 2009.





From time
to time, the Company also maintains cash reserve with a credit card company to
provide a credit line to secure future air charter services from vendors. The
cash reserve is adjusted periodically based upon the dollar volume of future
requirements. As of January 31, 2009 and 2008, the Company had no deposit and
$534,000 with the credit card company.




F-10





Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements - continued





Note 5. Prepaid Expenses and other
current assets





Prepaid
expenses and other current assets consist of:





January
      31,2009
                            
                            
                            2008Commission
      advances/loans-net
                            
                            $
                            111,000
                            
                            
                            $
                            163,000Flight
      costs
                            
                            
                            15,000
                            
                            
                            
                            159,000Promotions
                            
                            
                            19,000
                            
                            
                            
                            119,000Other
                            
                            
                            24,000
                            
                            
                            
                            67,000$
                            169,000
                            
                            
                            $
                            508,000




On June
2, 2008, the Company loaned $150,000 to another company in the private jet
brokerage business. The Company also entered into a nonbinding letter of intent
to acquire the other company. The amount which is included in Prepaid expenses and other current
assets in the accompanying consolidated balance sheet was due August 29,
2008 with interest at 12% per annum. As collateral, the Company was assigned all
private aviation flights arranged by the broker and is to retain the entire
gross margin from these flights in satisfaction of the indebtedness as well as
certain other assets. In addition the owners of the brokerage have guaranteed
payment and performance. The Company has collected $22,000 through the
assignment of flights. Since the Company had not collected the balance by the
due date, in September 2008, the Company terminated the potential acquisition
and commenced legal proceedings to collect on the defaulted promissory note and
the guarantees therewith. See also Note 9 - Litigation.





In
February and May 2008, the Company retained two sales representative companies
under five year arrangements. Compensation is based upon a percentage of the
gross profits earned by the Company and the Company advanced the representatives
$195,000. During fiscal 2009 the Company was repaid $25,000 of the advance and
in February 2009, the Company agreed to forgive $78,000 of the advance in return
for a reduction in the commission rate paid to the
representatives.  As of January 31, 2009, $41,000 representing the
current portion of the advance was included in Prepaid Expenses and other current
assetsand the balance was included in Other Assets in the
accompanying Consolidated Balance Sheet.





Note
6. Property and Equipment




Property
and equipment consists of:




January 31,2009
                                            
                                            
                                            2008Furniture
      and fixtures
                                            
                                            $
                                            102,000
                                            
                                            
                                            $
                                            98,000Computer
      equipment
                                            
                                            
                                            163,000
                                            
                                            
                                            
                                            153,000Leasehold
      improvements
                                            
                                            
                                            188,000
                                            
                                            
                                            
                                            163,000Web
      development costs
                                            
                                            
                                            139,000
                                            
                                            
                                            
                                            137,000592,000
                                            
                                            
                                            
                                            551,000Accumulated
      depreciation
                                            
                                            
                                            272,000
                                            
                                            
                                            
                                            102,000$
                                            320,
      000
                                            
                                            
                                            $
                                            449,000




Note
7. Short Term Loans




In
January 2009, one of the Company’s vendors agreed to extend payment terms for
the then outstanding indebtedness of $606,000.  The Company executed a
note which allows the Company to pay the indebtedness in monthly installments of
$65,000 through September 2009 when the balance with interest at 8 % per annum
is due.  If the Company defaults in its obligations under the note the
interest rate increases to 14%.  Under certain circumstances, the
Company is required to make prepayments.




F-11




Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements - continued


In August
2008, the Company borrowed $500,000, repayable in two installments of $250,000
on January 2, 2009 and March 2, 2009. The obligation was convertible into common
stock at $.20 per share at the option of the lender. In lieu of interest, the
lender received a warrant to purchase 250,000 shares of common stock at $.10 per
share. The loan was recorded net of  a discount of $194,000
representing the sum of the relative fair value of the warrant ($52,000) and the
relative fair value of the beneficial conversion feature of the below market
conversion rate ($139,000) using the Black-Scholes model . The Company repaid the
loan in October 2008 and, as a result, the Company recorded loan discount
expense of $194,000 for the year ended January 31, 2009.





In May
2007, the Company borrowed $1.5 million, without interest, through the issuance
of Bridge Notes. The lenders agreed that the outstanding indebtedness under the
Bridge Notes were convertible into common stock on the same terms as provided in
the private placement described in Note 6. In consideration for the loan, the
Company also issued an aggregate of 750,000 shares of common stock to the
lenders and, accordingly for accounting purposes, the loan was recorded net of
the value attributed to the consideration ($375,000). This discount was
amortized as a finance cost over of the period the loan was outstanding. In
addition, in August 2007, the Company borrowed $490,000 which was repaid out of
the proceeds of the private placement with interest at 6%.




Note
8. Stockholders’ Equity




Preferred
Stock




The board
of directors is authorized to issue up to 10 million shares of preferred stock
in one or more series. Each series of preferred stock will have such number of
shares, designations, preferences, voting powers, qualifications and special or
relative rights or privileges as shall be determined by the board of directors,
which may include, among others, dividend rights, voting rights, liquidation
preferences, conversion rights and preemptive rights.





Common
Stock




In March
2007, the Company issued 10,275,000 shares of common stock at par to Company
founders.





Also in March and April 2007, the Company issued 1,020,000 shares
of common stock at $.50 per share in connection with a private placement in
which the Company received $485,000 of proceeds net of $25,000 of fees. In July
2007, in connection with the Bridge Loan in Note 5 above, the Company issued
750,000 shares as consideration for the loan.




In
connection with the Merger described in Note 1, the Company on August 17 and
August 22, 2007 issued an aggregate of 49.9 units in a private placement
consisting of an aggregate of 4,990,000 shares of common stock and three-year
redeemable warrants to purchase 2,495,000 shares of common stock at an exercise
price of $1.00 per share, at a purchase price of $100,000 per unit. As part of
the private placement, holders of the $1.5 million of outstanding indebtedness
of the Company converted the indebtedness to them into 15 units in the private
placement. In addition, one of the placement agents received 170,000 warrants to
purchase common shares at $1 per share, the value of which approximated $58,000
utilizing the Black-Scholes option valuation model.




During
the year ended January 31, 2009 and 2008, the Company issued 18,000 and 12,500
shares of common stock, respectively, to an advertising agency and during the
fiscal 2008 fiscal year issued 100,000 shares to an investor relations firm for
services rendered.  As of January 31, 2009 the Company was obligated
to issue an additional 20,000 shares to the advertising agency for which the
Company has included in accounts payable and accrued expenses as a liability of
$9,000.  As of January 31, 2008, the Company was also obligated to
issue 15,000 shares of common stock to an employee as a signing bonus.The fair value of the
securities issued or issuable in connection with these arrangements of $9,000
and $314,000 was recorded as non cash compensation for the year ended January
31, 2009 and 2008, respectively.




Stock
Options and Warrants




In August
2007, the Company adopted a Stock Incentive Plan that provides for the grant of
up to 5,000,000 shares of common stock and/or options to purchase common stock
to directors, employees and consultants. Immediately following the Merger, the
Company granted options to purchase an aggregate of 1,700,000, 415,000 and
2,885,000 shares of our common stock at a $1 per share to our directors,
employees and consultants, respectively. In October 2007, the Company also
granted a consultant a warrant to purchase 500,000 shares of common stock at
$.50. During the year ended January 31, 2008, the Company recorded non-cash
compensation charges for the director and employee grants of $1.2 million as
substantially all grants were immediately vested. In connection with the
consultant option and warrant grants the Company also recorded during the 2008
fiscal year deferred compensation of $735,000 and non-cash charge of $177,000
for amortization of the deferred compensation during this period.


F-12


Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements – continued





On April
1, 2008, the Company’s Board of Directors authorized the Company to reduce the
option exercise price from $1 to $.38 to officers, directors and key employees
who hold 3,715,000 options.  In May 2008, the Company issued warrants
to purchase 1 million shares of common stock at $.38 per share each to a
shareholder who serves as a consultant to the Company and in connection with the
employment of the Chief Executive Officer.  The options vested 50%
upon issuance and the balance over the terms of the related
agreements.  Upon the resignation of the Chief Executive Officer the
unvested portion were forfeited.  During the year ended January 31,
2009, the Company recorded non-cash compensation charges of $616,000 related to
the option and warrant issuances as well as a result of the reduction in the
exercise price mentioned based upon the difference in the fair value of the
options before and after the adjustment using the Black-Scholes option valuation
model. The Company also recorded non-cash charge of $499,000 for amortization of
deferred compensation including a write-off of amounts associated with warrants
issued in connection with consulting arrangements that were
terminated.




The fair
value of the options and warrants at the date of grant was calculated using the
Black-Scholes option valuation model using the assumptions noted in the table
below. Due to the Company’s limited history as a public company, the Company has
estimated expected volatility based on the historical volatility of certain
companies as determined by management. The risk-free rate for the expected term
of each option is based on the U.S. Treasury yield curve in effect at the time
of grant. The dividend yield assumption is based on the Company’s intent not to
issue a dividend under its dividend policy. Due to the Company’s limited
operating history, management estimated the term to approximate the
contractual term.







The fair value of option grants
were estimated on the date of grant in August 2008 using the Black-Scholes
option-pricing model with the following assumptions :





Expected
      volatility
                
                
                100
                %Expected
      dividends
                
                
                0
                %Expected
      term
                
                2
      and 5yearsRisk-free
      rate
                
                
                4.35
                %





The
Black-Scholes option-pricing model was developed for use in estimating the fair
value of traded options that are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including the expected
stock price volatility. Because the Company’s stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management’s opinion the existing models may not necessarily provide a reliable
single measure of the fair value of its employee stock options.





A summary
of the status of the Company’s options as of January 31, 2009 and 2008 and
changes during the years then ended is presented below:






2009
                                  
                                  
                                  2008Outstanding
      at beginning of year
                                  
                                  
                                  4,935,000
                                  
                                  
                                  -Granted
                                  
                                  
                                  
                                  
                                  
                                  
                                  4,950,000Canceled
      - resignations
                                  
                                  
                                  (60,000
                                  )
                                  
                                  
                                  (15,000
                                  )Outstanding
      at end of year
                                  
                                  
                                  4,300,000
                                  
                                  
                                  
                                  4,935,000Options
      exercisable at year-end
                                  
                                  
                                  4,875,000
                                  
                                  
                                  
                                  4,935,000Fair
      value of options grantedduring
      the year -
                                  
                                  
                                  
                                  
                                  
                                  $
                                  1,584,000




The above
options were granted with an exercise price of $1; however, the exercise
price was reduced by the board of directors to $.38 in May
2008.




F-13





Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements – continued





During
the year ended January 31, 2008, the fair value of employee options granted and
vested was $1.2 million.  As of January 31, 2009 and
2008, there was none and approximately $51,000 of unrecognized compensation cost
related to 225,000 non-vested employee stock option awards. The weighted average
contractual term of exercisable options outstanding at January 31, 2009 was 8.75
years.





A summary
of the status of the Company’s warrants as of January 31, 2009 and 2008 and
changes during the years then ended is presented below





2009
                        
                        
                        2008Outstanding
      at beginning of year
                        
                        
                        3,165,000Granted
                        
                        
                        2,250,000
                        
                        
                        
                        3,165,000Canceled
      - resignations
                        
                        
                        (500,000
                        )
                        
                        
                        -Outstanding
      at end of year
                        
                        
                        4,915,000
                        
                        
                        
                        3,165,000




Note
9. Litigation





In
September 2008, Jet One Group, Inc. (“Jet One”) commenced an action against the
Company and several of its current and former officers, directors and employees
in the United States District Court for the Eastern District of New York,
alleging, among other matters, that the Company fraudulently induced Jet One to
enter into a Letter of Intent (“LOI”) to acquire Jet One’s business.  Jet
One alleges that the Company did not intend to acquire Jet One’s business at the
time it entered into the LOI, and entered into the LOI for the sole purpose of
gaining access to and stealing Jet One’s confidential customer lists.  Jet
One further alleges that the alleged theft of Jet One’s confidential customer
list is part of a larger pattern of thefts of trade secrets by the Company and
its employees.  The Complaint alleges that the Company violated the federal
Racketeering Influenced Corrupt Organizations Act, the federal Computer Fraud
and Abuse Act, the New York consumer fraud and Business law statutes and
committed various common law torts.  Jet One seeks compensatory damages of
$15 million and treble or punitive damages of $45 million.




In
November 2008, the Company filed a motion to dismiss the federal counts in this
action for failure to state a claim upon which relief may be granted and also
asked the district court to decline to exercise supplemental jurisdiction over
Jet One’s state law claims.  In December, 2008, the Company also filed a
motion for sanctions against Jet One and its counsel, alleging that the suit was
frivolous and without any basis in fact.  The motion has not yet been
decided by the Court.  The parties are currently engaged in discovery
pending a decision on defendants’ motions.




Separately,
the Company has filed an action against Jet One and its principals in the
Supreme Court of New York, New York County (the “State Court Action”), in which
the Company alleges that the Complaint in Jet One’s Federal Court Action
contains false and defamatory statements regarding the Company and that Jet One
filed its suit for the sole purpose of circulating a press release publicizing
the false and defamatory allegations.  Jet One moved to dismiss the
Company’s suit for failure to state a claim upon which relief may be granted,
but this motion was denied by the Supreme Court.




The
Company intends to vigorously defend the Jet One suit against the Company and to
vigorously prosecute the State Court defamation action against Jet One. 
The Company is also holding $150,000 in promissory notes owing by Jet One which
have been guaranteed by its principals.  The Company is also taking legal
action to enforce these notes and guarantees.




In
October and December 2008, Blue Star Jets, LLC  (“Blue Star”) filed a
complaint against the Company and certain employees, including our President,
who were former employees of Blue Star (“former Blue Star employee”) in the
Supreme Court of New York, New York County alleging, among other matters, that
the Blue Star’s former employees stole confidential information belonging to
Blue Star prior to joining the Company and that one or more of such former
employees violated post-employment restrictive covenants by joining the
Company.  The complaint seeks $7 million in damages.  This action is a
revival of an earlier action that was voluntarily discontinued by Blue Star in
2007.




The
Company and the other defendants, in February 2009, filed a motion to dismiss
the counts of the complaint for violation of the federal Computer Fraud and
Abuse Act and for civil conspiracy for failure to state a claim upon which
relief may be granted.




F-14




Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements – continued





In
February 2009, Blue Star served a second amendment to its complaint which
withdrew plaintiff’s claims under the federal Computer Fraud and Abuse Act and
added Alfred Palagonia and Apollo Jets as additional defendants.  The
Company has filed a cross-motion to strike the second amendment on the ground
that it was improperly filed or in the alternative to dismiss the certain
portions related to the civil conspiracy.  The Company’s motions have been
fully briefed and are awaiting oral argument.




The
Company intends to vigorously defend itself in this action and will re-assert
certain claims which were originally asserted against Blue Star in the matter
entitled Halcyon Jets, Inc. v. Blue Star Jets, LLC, (Supreme Court of New York,
Index No. 602317/07), which was consolidated with Blue Star’s original action
against Halcyon and which was voluntarily dismissed by Halcyon in
2007.




Pursuant
to the terms of our President’s employment agreement with us, we agreed to
indemnify him from, among other things, all liabilities that may arise by virtue
of any alleged violation of any agreement he had with Blue Star Jets by virtue
of his employment with us.




Except as
set forth above, there are no pending or threatened legal proceedings against
us.  Based on the advice of counsel, it is management's opinion that we
have made adequate provision for potential liabilities, if any, arising from
potential claims arising from litigation, governmental investigations, legal and
administrative cases and proceedings.




Note  10  Other
Matters




In
January 2009, the Company terminated its expansion plans for its headquarter
space in New York.  As a result the Company entered into negotiations
with its landlord to return the additional space it had leased in August 2008
and recorded a loss of $111,000 related to the costs
of improvements and other costs related to the terminated space.





A
strategic initiative of the Company is to acquire profitable competitors to
expand operations, expand the size of high-end clientele base and gain access to
a larger pool of private aircraft.  During the fiscal year ended
January 31, 2009, the Company entered into letters of intent to acquire other
brokers.  The negotiations for two of the acquisitions were terminated
during the year and the Company recorded a loss of $280,000 related to the costs
associated with due diligence and other costs related to the abandoned proposed
acquisitions. See also Note 9-Litigation.





During
the year ended January 31, 2009 and 2008 there were two vendors and none,
respectively, for which the Company’s purchases exceeded 10% of total charter
costs during the period.





Note
11.    Income Taxes





At
January 31, 2009, the Company had net operating loss carryforwards for Federal
tax purposes of approximately $6.8 million, which are available to offset future
taxable income, if any, through 2029. Utilization of the net operating loss
carryforwards may be subject to a substantial annual limitation due to the
“change in ownership” provisions of the Internal Revenue Code. The annual
limitation may reduce operating loss carryforwards before
utilization.


The
components of deferred income tax asset were as follows:


January
      31,2009
                                      
                                      
                                      2008Net
      opertating loss carryforwards
                                      
                                      $
                                      2,709,000
                                      
                                      
                                      $
                                      1,592,000Compensation
      expense not deductible until options are exercised
                                      
                                      
                                      1,126,000
                                      
                                      
                                      
                                      675,000Other
                                      
                                      
                                      24,000
                                      
                                      
                                      
                                      -3,859,000
                                      
                                      
                                      
                                      2,267,000Less:  valuation
      allowance
                                      
                                      
                                      (3,859,000
                                      )
                                      
                                      
                                      (2,267,000
                                      )Deferred
      tax asset
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -




The
difference between the federal statutory rate of 34% and the Company’s effective
tax rate of 0% is due to an increase in the valuation allowance for 2009 and
2008.




F-15





Halcyon Jets Holdings, Inc.




Notes
to Consolidated Financial Statements – continued





Note
12. Commitments




The
Company leases headquarter and sales facilities in New York and additional sales
offices in Boca Raton, Florida and Beverly Hills, California. As of January 31,
2009, minimum annual lease payments are:




2010
                      
                      $
                      398,0002011
                      
                      
                      285,0002012
                      
                      
                      312,000
 2013
                              
                              
                              323,000$
                              1,318,000


Rent
expense for the year ended January 31, 2009 and 2008 was $402,000 and
$192,000.





Note
13. Related Parties





Two of
the Company’s significant shareholders (through a personally owned limited
liability company or through an affiliate) are providing or have provided
personnel to the Company to perform certain services since inception of the
Company. One entity provided management
services including the Chief Executive Officer role as of August 1, 2008 and the
other an executive sales function,.  In May 2008 one of the entities
entered into a contract for a 2 year term which provides for base annual
compensation of $300,000 and reimbursement of expenses, among other
matters. The consultant and the Company informally agreed to reduce the annual compensationto $275,000 as of December 1, 2008. The shareholder also received
warrants to purchase one million shares of common stock at an exercise price of
$.38 per share which vested 50% on commencement of the agreement and 50% after
one year.  During December 2008, the shareholder informally agreed to
reduce the annual compensation to $275,000. There was no formal contract with
the other entity and, in December 2008, the sales representation service
was terminated by this provider.   During the year ended January
31, 2009 the sales representative was responsible for approximately 20% of the
Company’s total revenues. The Company paid  $288,000 and $208,000 for
the executive management services and  $342,000 and $219,000 for sales
management services to the two shareholders for services rendered during the
year ended  January 31, 2009 and 2008, respectively. In August 2007,
the Company also issued to the shareholders an aggregate of 1,660,000 options at
an exercise price of $1.00 per share (subsequently reduced to $.38 per share)
which were immediately vested and charged operation in the amount of $564,000
representing the fair value of the options granted.





Effective
August 12, 2008, our former Chairman and Chief Executive Officer, Mitchell
Blatt, resigned these positions and as a result the Board of Directors appointed
Gregory D. Cohen as the Chief Executive Officer and Craig Spitzer as Chairman of
the Board. In connection with the resignation, the Company agreed to
terminate the former CEO’s existing employment agreement and continue
his base salary as severance through July 31, 2009, which was accrued as of July
31, 2008. The amount outstanding as of January 31, 2009 under the agreement
$235,000 was including in Accounts payable and accrued
expenses.  Mr. Blatt had been granted warrants to purchase
1,000,000 of our common stock in May 2008 and under the agreement retained only
the 500,000 warrants that were vested and forfeited the unvested portion of the
warrant issuance. The Company is negotiating the terms of an employment
agreement with Mr. Cohen.  As of April 17, 2009 the Company was
not current with amounts due Mr. Blatt.





One of
the members of the Company’s Board of Directors is a principal of a company that
serves as the insurance broker for the Company.




Note
14. Subsequent Event




On
February 24, 2009, the Board of Directors approved the authorization and
issuance of 21,000 shares of Series A Preferred Stock. Each share of Series A is
entitled to 1,000 votes with respect to each matter presented to the
stockholders of the Corporation for approval. As a result, these shares would
represent approximately 45% of the total number of shares entitled to vote in
such matters.  The series A Preferred Stock has a liquidation value of
$1.00 per share ($21,000 in the aggregate) and is not entitled to receive any
dividends. The Series A Preferred shares are not convertible into common stock
and are redeemable for $1.00 per share on the earlier of March 31, 2019 or the
date on which any shares of Series A are owned by any person other than the one
to whom they were originally issued. The Board of Directors also authorized the
issuance of these shares to one of the Company's directors, for a purchase
price of $21,000. A Certificate of Designation with respect to these shares was
filed in the Office of the Secretary of State of Delaware on April 22, 2009,
after which the shares were issued to the director. The issuance of the Series A
Preferred Stock was exempt from registration under the Securities Act as a
transaction not involving a public offering.






F-16