UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K

(Mark One)

(X)  ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 (FEE REQUIRED)

     For the fiscal year ended September 30, 1996

                                       OR

( )  TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

     For the transition period from ______________ to ___________________

     Commission file number 0-28428


                              AirNet Systems, Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                   Ohio                                   31-1458309
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation          (I.R.S. Employer 
             or organization)                         Identification No.)


      3939 International Gateway            43219
--------------------------------------------------------------------------------
(Address of principal executive offices)  (Zip Code)

Registrant's telephone number, including area code: 614-237-9777

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Shares, $0.01
par value (12,475,128 outstanding at December 16, 1996)

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 __X__     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. ( )

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant at December 16, 1996 was $94,611,775.

                       DOCUMENT INCORPORATED BY REFERENCE:
Portions  of  the  Proxy  Statement  for  the  Registrant's  Annual  Meeting  of
Shareholders  to be held on March 6, 1997,  are  incorporated  by reference into
Part III hereof.

This  Report  contains  95 pages of which this is Page 1. The Index to  Exhibits
begins at page 55.


<PAGE>


                                     PART I


ITEM 1  -  BUSINESS

Overview of the Company's Business

AirNet Systems,  Inc. (the "Company")  operates a fully integrated  national air
transportation  network that  operates  between 90 cities in more than 40 states
and delivers over 13,000 time-critical shipments each working day. The Company's
bank  services  division,  which  generates  approximately  86% of the Company's
revenues,  is the leading transporter of canceled checks and related information
for the U.S.  banking  industry,  meeting more that 1,100 daily  deadlines.  The
Company's  small package  division,  which  generates  approximately  13% of the
Company's  revenues,  provides  specialized,  high priority delivery service for
customers  requiring  late pick-ups and early  deliveries  combined with prompt,
on-line delivery  information.  The Company's  ground support services  division
offers retail  aviation fuel sales and related ground  services for customers in
Columbus, Ohio.

The Company currently  operates a fleet of 98 aircraft (28 Learjets and 70 light
twin engine aircraft), which fly approximately 90,000 miles per night, primarily
Monday through  Thursday.  The Company also provides ground pick-up and delivery
services  throughout the nation,  utilizing a fleet of 100 Company-owned  ground
vehicles  as well as a ground  transportation  network  of over 350  independent
contractors.  The  Company  uses it own air  transportation  network  as well as
commercial  airlines,  when  appropriate,  to provide  same-day  and  same-night
delivery service for itself, as well as for certain major overnight document and
parcel delivery companies.

Later  pick-ups  and earlier  deliveries  than those  offered by other  national
carriers are the differentiating  characteristics of the Company's time-critical
delivery network. In addition,  the Company offers other value-added services to
its  customers,   such  as  on-line  delivery   information.   The  Company  has
consistently  achieved  on-time  performance  levels  exceeding 95%. In order to
maintain this performance, the Company utilizes a number of proprietary customer
service and management  information systems to track, sort, dispatch and control
the flow of checks and small packages  throughout the Company's delivery system.
Delivery times and certain shipment information are available on-line and on the
Internet. For example,  ComCheck, a unique proprietary software system, provides
bank customers  access to delivery time,  shipment  information and retrieval of
historical  proof of delivery  information,  critical  data that enable banks to
manage their cash position and maximize  float  revenue.  OnTime and  Ship-Link,
Company-developed software programs, provide scheduling and pricing information,
as well as on-line  delivery and shipper  acknowledgment  data for small package
customers.  The Company also has developed several internal software programs to
enhance the dispatch monitoring, cost control and customer service functions.


                                      -2-
<PAGE>


The Company believes that the market for reliable,  time-critical  deliveries is
growing as a result of a number of global trends,  including:  (i)  corporations
requiring  just-in-time inventory parts in order to lower production costs; (ii)
medical  laboratories   requiring  same-day   deliveries;   (iii)  consolidating
ground-based  small package couriers  requiring a national air delivery network;
and (iv) global air freight forwarders requiring a domestic connection for their
international  networks  that can deliver on a  same-day/same-night  or pre-8:00
a.m.   basis.   The  Company   believes  that  its  flexible  and  reliable  air
transportation network and its demonstrated expertise in providing time-critical
deliveries  position the Company to provide such additional  services at premium
prices.

The Company  was  founded  under the laws of the State of Michigan in 1974 under
the  name  "New  Creations,  Inc."  Effective  May  1,  1996,  the  Company  was
reincorporated  under the laws of the State of Ohio as a result of the merger of
New  Creations,  Inc. with and into AirNet  Systems,  Inc., an Ohio  corporation
incorporated on February 15, 1996.  References in the Annual Report on Form 10-K
to the "Company" refer collectively to AirNet Systems,  Inc. and its predecessor
entities.

Industry Overview

The  expedited  delivery  and  distribution  industry  in the  U.S.  is a highly
fragmented  business,  composed of  thousands of  companies  providing  two-day,
next-day and same-day delivery services.  The Company believes that the industry
can be divided  into the  following  market  segments:  (i)  highly  specialized
time-critical  deliveries,  including the delivery of canceled checks;  (ii) air
courier document and parcel  delivery;  (iii) air freight  forwarding;  and (iv)
corporate  transportation and logistics support.  While the Company participates
primarily  in one  niche of the  highly  specialized,  time-critical  deliveries
market segment  (transportation  of canceled bank checks),  it believes that its
highly  flexible,  nationwide  air  transportation  network can be utilized  for
expedited delivery of goods within any of the above-mentioned industry segments.

Highly  specialized  time-critical  deliveries.  There are a number  of  special
transportation  services  required by individuals,  professional  service firms,
hospitals,  scientific  laboratories,  such as medical samples and canceled bank
checks,  which require  time-critical  and reliable  service to avoid the costly
consequences of late or missed deliveries. The Company believes its flexible and
reliable transportation network will be in a position to provide such services.

Other  than  the  Company,  the only  national  provider  of air  transportation
services  to the U.S.  banking  industry  for  canceled  checks  is the  Federal
Reserve's Interstate  Transportation System ("ITS").  Within the Federal Reserve
districts,  the  transportation  of canceled  checks is handled mostly by ground
vehicles  operated by  regional  or local  banks,  or the ITS.  Between  Federal
Reserve districts,  there are numerous regional carriers who contract with banks
and  groups of banks to  provide  such  services.  Some of these  providers  may
include regional air courier and document delivery  companies,  but none of them
commands a significant  share of the national  market or is capable of providing
national  service.  In  addition,  many banks  require a wide variety of pick-up
times,  delivery deadlines and available end points, as well as superior on-time
performance  and management  information  systems to enable them to manage float
and make appropriate draw down decisions,  which few of these delivery companies
can provide.


                                      -3-
<PAGE>


Air courier  document and parcel delivery  market.  Comprised mostly of same-day
and next-day pick-up and delivery services,  this market is dominated by several
companies with national  hub-and-spoke  delivery  systems which provide  service
based  upon  established  pick-up  and  delivery  schedules  rather  than  those
requested by the customer.  These carriers  include Federal Express  Corporation
("FedEx"),  United Parcel Service  ("UPS"),  the U.S. Postal  Service,  Airborne
Express and DHL, among others. In addition to these carriers,  there are several
multi-regional  companies that focus on same-day and early  next-day  deliveries
custom-tailored to the customers' requested pick-up and delivery times. Numerous
other firms  operate only on a regional  basis,  and provide  similar  services.
Finally,  there are hundreds of small,  closely-held  owner-operator  businesses
which operate in only one location with little or no national market share.

Air freight forwarding market. Traditionally dominated by the large domestic and
international  passenger  airline  companies,  who utilize excess cargo space in
their  fleet of  passenger  aircraft  to  shuttle  freight  internationally  and
domestically,  the air freight  forwarding market has expanded  significantly to
include  participants  focused  solely  on  international   delivery,  who  then
subcontract for local delivery.  This market has grown with the globalization of
world markets,  as corporations  increasingly source raw materials from multiple
origins throughout the world, contract for or perform manufacturing and assembly
operations in many different  countries and distribute their products worldwide.
International  freight  companies have  increasingly  been seeking  flexible air
distribution   networks  operating   domestically  that  can  connect  with  the
cross-Pacific and  cross-Atlantic  delivery routes and meet the  custom-tailored
needs of their customers on a same-day or next-day basis.

Corporate  transportation  and logistics support market.  Corporations that have
complex  sourcing  and  distribution  systems are seeking to minimize  inventory
carrying  costs  and  reduce  expenses  associated  with  the  movements  of raw
materials. The increasingly  time-sensitive nature of product delivery schedules
due to shorter product life cycles and "just-in-time"  inventory  management has
led to growth in this market  segment.  Many companies are concluding  that they
perform  transportation  logistics  functions less  effectively than third party
providers.  As a result,  companies have looked to outsource  these functions to
reduce costs while  enhancing  cost-efficiency  and reliability of the logistics
function.

How Banks Clear and Settle Checks

Banks  attempt  to  clear  checks   expeditiously  in  order  to  convert  their
non-earning assets into interest-bearing assets. A check deposit cannot begin to
earn interest until the physical item has been routed from the bank where it was
first  deposited  to the bank on which the funds were drawn.  The  elapsed  time

                                      -4-
<PAGE>


between  the  deposit  of the check and the  delivery  of the check to a Federal
Reserve bank or the bank on which it was drawn results in "float".  Banks desire
to  minimize  float in order  to  maximize  the  availability  of funds  and the
corresponding ability to earn income on those funds.

The National Clearinghouse Association

The National Clearinghouse  Association ("NCHA") is a consortium of over 50 bank
holding  companies that have joined together to reduce  check-clearing  costs by
means  of a  multi-bank,  private  net  settlement  arrangement  located  at The
Huntington  National Bank.  The NCHA was developed by The Check Exchange  System
Co. (the "CHEXS  Partnership").  The CHEXS Partnership is owned by affiliates of
The Huntington  National Bank and  Littlewood,  Shain and Company,  and by Float
Control, Inc. Float Control, Inc. was a corporation owned, in part, by executive
officers of the Company until October 24, 1996, when the Company acquired all of
the outstanding  shares of Float Control,  Inc. As a result of the  acquisition,
the Company indirectly holds a 19% interest in the CHEXS Partnership.

The bank  members of the NCHA benefit  from their  affiliation  with the NCHA by
receiving a quick,  convenient and efficient  settlement at a single location of
"out-of-district"  checks deposited at their banks.  Currently,  the NCHA clears
approximately 3.5 to 4.0 million checks each working day.

Business Strategy

The principal  components of the Company's  operating and growth strategy are to
(i) grow the Company's  small  package  delivery  service;  (ii) focus on unique
aircraft  type and route  structure;  (iii)  attract,  retain and  motivate  the
highest quality  personnel  available;  (iv) expand its bank services within the
banking  industry;  and (v) pursue strategic  acquisition  opportunities.  These
strategies are discussed in more detail below:

Grow the Company's small package delivery service. The Company delivers packages
on a same-day/same-night and pre-8:00 a.m. basis for its small package customers
and certain of the national and regional overnight document and package delivery
companies via its air transportation  system and commercial airline systems when
necessary.  The  Company  believes  that it offers a more  flexible  pick-up and
delivery  schedule for small  packages than those offered by other  national and
regional  carriers  and  appeals  to  customers  with  time-sensitive   delivery
requirements.  To date,  growth in the small package  services  business has not
been focused on by the Company.  With the purchase of 19 additional  aircraft in
1996,  the  Company is  currently  expanding  its fleet of  aircraft  to provide
additional load capacity for the delivery of canceled checks and small packages.
The Company  believes  significant  opportunities  exist for expanding its small
package  delivery  business by more aggressive  marketing to provide services to
this expanding sector of the industry.


                                      -5-
<PAGE>


Focus on  unique  aircraft  type and route  structure.  The  Company's  fast and
reliable  fleet of 28 Learjets and 70 light twin engine  aircraft is  positioned
around a highly  efficient and flexible  national  route  structure  designed to
facilitate late pick-up and early delivery  times,  minimize delays and simplify
flight scheduling.  The Company's  hub-and-spoke  system,  with a primary hub in
Columbus and several  mini-hubs across the nation,  enables the Company to match
the varying load  capacities of its aircraft with the shipment weight and volume
of each  destination  city and to  consolidate  shipments at its  mini-hubs  and
primary hub. The Company's hubs are located primarily in less congested regional
airports.  These locations, in conjunction with the Company's off-peak departure
and arrival times,  provide easy take-offs and landings,  convenient loading and
unloading,  fast refueling and maintenance,  as well as lower cost  distribution
center space. The Company's five  strategically  located  maintenance bases help
minimize  aircraft  down time.  The  Company's  focus on Learjets and light twin
engine  aircraft  has also  enabled  it to  develop  an  in-house  expertise  in
purchasing, flying, maintaining and operating its fleet.

Attract,  retain and  motivate the highest  quality  personnel  available.  As a
service   organization,   the  Company  recognizes  the  importance  of  hiring,
retaining,  and  motivating  the highest  quality  personnel  available  who are
focused on a set of core  values  designed  by the  Company to provide a working
environment where integrity, accountability, open communication, team management
and  responsibility  and quality  performance are explicitly  stated goals.  The
Company regularly holds  team-building  sessions,  continuing  education for its
associates and on-the-job training programs for associates. The Company provides
its associates with competitive compensation and benefits packages,  including a
stock option program.  The Company  believes that its  compensation  and benefit
package and corporate  culture will give the Company a  significant  competitive
advantage in attracting and motivating its associates.

Expand its bank services  within the banking  industry.  The Company  intends to
strengthen its leadership position in the transportation of canceled bank checks
by  adding  aircraft  and  routes  to  its  current  transportation  network  to
facilitate  even more late pick-up and early  delivery  times covering a greater
number  of  cities.  These  capabilities,  combined  with  the  Company's  other
value-added  services  (such as  ComCheck)  not  currently  offered by competing
canceled bank check delivery companies,  should enable the Company to expand its
position in this market.

Pursue  strategic  acquisition  opportunities.  The Company  believes it is well
positioned to consolidate the regional air freight operators and ground couriers
through the acquisition of high-quality candidates. The fragmented nature of the
air  and  ground  package  delivery  industry,  outside  of the  major  national
carriers,  provides the Company with such opportunities.  The Company would like
to expand  its  delivery  network  through  the  acquisition  of other  delivery
companies and additional aircraft serving new routes. In addition,  by acquiring

                                      -6-
<PAGE>


companies  in markets  where the  Company  already  has a  presence,  management
expects  to  recognize   substantial   operating   advantages  by  consolidating
overlapping delivery routes. The Company believes it has demonstrated  expertise
in evaluating acquisition opportunities based on the potential of revenue growth
and profitability,  as well as a proven track record for efficiently integrating
such acquisitions.

Aircraft Fleet

The  Company  operates a fleet of 98  aircraft,  of which 88 are  owned.  The 10
Cessna 310's are leased from unrelated third party lessors.  The Company's fleet
was comprised of the following aircraft at December 12, 1996:

<TABLE>

                                            Maximum         Maximum         Maximum
                                           Payload(1)       Range(2)        Speed(3)
Aircraft Type                Number          (lbs.)        (n. miles)       (knots)
                         --------------- --------------- --------------- ---------------
<S>             <C>            <C>           <C>             <C>              <C>
Learjets, Model 35             9             4,200           2,000            440
Learjets, Model 35A            13            4,200           2,000            440
Learjets, Model 25             6             3,500           1,000            440
Piper Navajo Chieftain         11            1,500             800            175
Piper Aerostar                 14            1,000             900            190
Beech Baron                    35            1,000             700            180
Cessna 310                     10              900             600            170

</TABLE>
----------------
(1)  Maximum  payload  in  pounds  for a  one-hour  flight  plus  required  fuel
     reserves.
(2)  Maximum range in nautical  miles,  assuming  zero wind,  full fuel and full
     payload.
(3)  Maximum speed in knots, assuming full payload.


The Learjet is among the most reliable,  fastest and most fuel  efficient  small
jet aircraft available in the world. The 30-series Learjets allow the Company to
carry up to 4,200 pounds of cargo in certain lane  segments.  The 30-series also
allows for  non-stop  lane  segments of up to 2,000 miles  within the  Company's
network. These Learjets also meet all Stage 3 noise requirements currently being
implemented  across  the  country.  The  Learjet 25 is a smaller  aircraft  with
slightly  smaller  payload  and  range  capabilities.  The  Company  intends  to
phase-out  these  aircraft from  scheduled  operations and replace them with the
more efficient Learjet 35 or other Stage 3 aircraft.

The Company's Learjet fleet provides it with nationwide connectivity.  Long lane
segments  from all  corners  of the  nation  converge  on the  Company's  hub in
Columbus, as well as "mini-hubs" located in Atlanta, Chicago, Charlotte, Dallas,
Denver,  Des Moines, and New York.  Smaller,  light twin engine aircraft provide
service to the various  "spoke" cities in the Company's  network,  which include
virtually all of the nation's large metropolitan areas.


                                      -7-
<PAGE>


The Company acquires and operates pre-owned  aircraft,  typically between 15 and
20 years old. These aircraft are reasonably priced and are relatively modern, as
they have undergone no significant design changes in the last 20 years. Further,
when  appropriately  maintained (the Company performs its own major  inspections
and overhauls on its aircraft fleet),  these aircraft show little or no evidence
of erosion in performance.

Operations

The Company provides to its customers complete  transportation and informational
services for national  distribution  of canceled bank checks and small packages.
Operations include over 13,000 nightly deliveries in over 40 states, flying over
90,000 miles per night. The Company's ground and air infrastructure includes the
following key elements:

Ground Operations

The first major  component  of the  Company's  ground  operations  involves  the
pick-up of shipments for  delivery,  as well as bar code scanning for data entry
into the Company's  ComCheck and OnTime  management  information  systems.  Upon
delivery to the originating  airport,  the Company's ground crews load shipments
into aircraft for delivery. The Company's ground personnel are trained in proper
freight handling techniques,  and wear safety belts when appropriate to minimize
the  risk  of  injury.  At the  Company's  hub  in  Columbus,  aircraft  fueling
operations  include trained fuelers and ground support  equipment  including six
fuel trucks and  approximately  86,500  gallons of fuel  storage  capacity.  The
Company  provides  training for ground  support  personnel on an ongoing  basis,
including  emergency  procedures.  The  Company's  main sort facility is also in
Columbus,  with  approximately 80 associates  loading and unloading aircraft and
fine  sorting  shipments to their final  destination.  These  processes  are all
controlled by the Company's central dispatch located in Columbus.

Vehicles.  The Company operates a fleet of 100 ground  transportation  vehicles,
all of which are owned by the  Company.  The  Company  utilizes  a  computerized
system  for  monitoring  vehicle  maintenance  and  conducts  in-house  training
sessions  throughout  the year to maximize  safety.  Vehicles range in size from
passenger cars to full-size vans,  depending on the market being served. In some
situations, Company personnel may utilize their own vehicles, in which case they
are reimbursed for direct vehicle expenses. In addition, where appropriate,  the
Company utilizes over 350 independent  contractors to further augment its ground
delivery network.

Drivers.  The Company  employs over 200 full and part-time  drivers.  The ground
courier  industry has  typically  experienced a high  turnover  rate,  which the
Company has mitigated by offering  health  insurance  and other  benefits to its
drivers.


                                      -8-
<PAGE>


Independent  Contractors.  In certain  situations  where  management  has deemed
cost-effective  and  appropriate,  the  Company  has  utilized  the  services of
independent  contractors.  From time to time, federal and state authorities have
sought to assert that independent owner/operators in the transportation industry
are employees,  rather than independent  contractors.  The Company believes that
independent contractors utilized by the Company are not employees under existing
interpretations  of federal and state laws. The Company will continue to monitor
its  arrangements  with  independent   contractors  to  ensure  compliance  with
applicable laws and regulations.


Fueling.  The Company's  ground support division  provides  aircraft fueling and
parking for certain of its customers at its facility in Columbus.  This division
accounts for approximately 1% of the Company's annual revenues.

Flight Operations

The Company's flight operations are headquartered in Columbus. The Company hires
and trains its pilots, requiring each to attend a Company-run, two-week training
program.  This flight school includes training on the Company's flight simulator
prior to any actual flight time.  Additionally,  new pilots typically apprentice
as co-pilots in order to gain a familiarity  with the Company's route system and
the unique  demands of night  flying.  Periodic  simulator  training and ongoing
cockpit resource  management  training provide the Company's pilots with updated
techniques and safety methods.  The Company believes it has the highest level of
training provided by any operator of similar aircraft in the nation.

Aircraft  maintenance.  Aircraft  maintenance is also headquartered in Columbus.
This facility  operates 24 hours a day, 365 days a year. The Company  employs 67
experienced  aircraft and avionics technicians in five separate locations across
the country (Columbus, Dallas, Denver, Hartford and Minneapolis), performing all
levels  of  maintenance  from  100-hour  inspections  on its light  twin  engine
aircraft  to  7,200-hour/12-year  inspections  on its fleet of  Learjets.  These
technicians  also  perform  several  types of periodic  engine  inspections  and
overhauls. In conjunction with Learjet, Company personnel have developed revised
and  enhanced  inspection  programs  for its  Learjet  fleet,  which the Company
believes has provided a superior  inspection  process at reduced cost.  Avionics
trouble-shooting  and repair, done internally by the Company since 1989, provide
for maximum  efficiency and minimum aircraft  downtime for its entire fleet. The
Company  currently  utilizes the services of Garrett  Aviation  exclusively  for
major period inspections and core overhauls of its 30-series Learjets.

Dispatch.  The Company's central dispatch system ties together all components of
the air operation.  Departure and arrival times are  continuously  updated,  and
weather  conditions  throughout  the nation are  constantly  monitored.  Company
dispatchers  remain in constant  contact  with pilots,  outbased  hub  managers,
fuelers,  maintenance and ground delivery personnel to ensure that no gaps exist
in the Company's delivery process.


                                      -9-
<PAGE>


Route  scheduling.  The scheduling of aircraft within the Company's route system
is determined  by the  concentration  of the  Company's  customers in particular
metropolitan  areas.  Currently,  the  Company  operates  between 90 cities each
working day. Revisions, additions and deletions of routes occur when the Company
adds new  customers  or  determines  that load  factors  necessitate  additional
aircraft on a particular lane segment.

Delivery Services

The Company provides complete  transportation  and information  services for its
customers in the U.S.  banking  industry,  as well as its small package delivery
customers.  Although the services are provided by one air transportation system,
providing  significant  economies of scale,  each customer base receives  custom
service to meet its particular delivery needs.

Canceled  bank check  delivery  services.  A typical  shipment of canceled  bank
checks is picked up from the sending bank by a Company  courier.  Shipments  are
pre-sorted  by  bank  personnel  and  bundled  as  to  final  destination  using
Company-supplied,  color-coded  bags.  The shipment is then  transported  to the
local airport where it enters the  Company's  air  transportation  system and is
scanned via bar code  technology,  which  reads  information  pertaining  to the
shipper,  receiver,  airbill number and applicable  deadline.  This data is then
promptly  downloaded into the Company's  ComCheck  computer system,  where it is
available to the Company's customer service representatives ("CSRs").

Upon arrival at the Company's  Columbus hub or one of the  Company's  mini-hubs,
the  shipment  is  off-loaded,  sorted  by  destination  and  reloaded  onto the
Company's aircraft.  At the destination city, the shipment is off-loaded for the
final time and  delivered by Company  courier to the  receiving  bank or Federal
Reserve  Branch.  When  delivered,  the  shipment  is  once  again  scanned  and
downloaded  into the Company's  computer  system.  Delivery  information for all
shipments  is then  available  on-line to the  Company's  customer  base and all
Company CSRs. The Company's  customer service  department is available to handle
any inquiries,  discrepancies  or supply  requests,  as well as provide proof of
delivery  documentation,  all of which are value-added features of the Company's
service.

The Company provides delivery service for three sets of banking  deadlines.  The
"Basic"  program  which  has a 9:30  p.m.  - 10:00  p.m.  hub time in  Columbus,
provides  delivery service between 12:01 a.m. and 2:00 a.m. to approximately the
northeastern third of the nation. The "Premium" program, which has an 11:00 p.m.
- 11:30 p.m. hub time in Columbus and Charlotte,  provides  delivery  service at
approximately 3:00 a.m. to the eastern half of the nation.  Finally,  the "City"

                                      -10-
<PAGE>


program,  which  has a 4:00  a.m.  - 5:30 a.m.  hub time in  Columbus,  provides
delivery service at approximately 8:00 a.m. to all cities served by the network.
The Company  prices these services based on the tier of service and by the pound
on a customer by customer basis.

Small package  delivery  service.  The Company's small package  delivery service
utilizes the same  transportation  network as the bank  delivery  system,  which
enables it to offer its  customers  late  pick-up and early  delivery  times.  A
typical  shipment is either  picked up by a Company  courier or delivered to the
airport by the  customer,  at which point the  shipment  information,  including
shipper,  receiver and airbill  number,  is scanned via bar code technology into
the  OnTime  computer  system.  The  shipment  then  enters  the  Company's  air
transportation  network.  Upon  arrival at its  destination  city  (having  gone
through  sorting and  transportation  procedures  similar to the Company's  bank
shipments),  the shipment is  off-loaded  and  delivered to its  destination  by
Company  personnel  or  independent  contractors.  Upon  delivery,  the shipment
information is again scanned and downloaded into the OnTime system,  which again
provides on-line and Internet access for customers.

The  Company  also  provides  airport-to-airport  service  for  certain  of  its
customers,  including  national  integrated  carriers  and  other  consolidating
freight  forwarders.  This service does not typically  require the same level of
information  reporting,  but fills a significant  need for these customers whose
infrastructures  cannot be  easily  modified  to meet  same-day,  same-night  or
pre-8:00 a.m. delivery deadlines.

Customers

The highly  specialized  needs of the Company's  customer base combined with the
Company's  performance  level  over the years have  resulted  in a high level of
customer  retention.  This customer retention level, in turn, creates a level of
stability in the Company's revenue base that allows for product  development and
continued  dedication  of resources to providing the highest  possible  level of
service to customers.

U.S. banking industry. The banking industry, including commercial banks, savings
banks and Federal Reserve banks,  represents the Company's  largest  category of
customers and in 1996 accounted for approximately 86% of the Company's revenues.
This  customer  list  represents  92 of the  nation's  100 largest  bank holding
companies.  The Company  provides  daily  service (four nights per week) for its
entire  customer base, and has contracts with many of its large  customers.  The
Company's  time-critical  canceled check delivery  service enables the Company's
banking customers to offer competitive products and pricing.

Small package delivery customers.  The Company's small package delivery services
accounted for approximately 13% of the Company's fiscal 1996 revenues. Customers
for this service include industrial and service corporations, medical companies,
national  integrated carriers and consolidating  freight forwarders.  Similar to
the Company's banking industry  customers,  its small package delivery customers
tend to be nightly shippers with a high level of retention.


                                      -11-
<PAGE>


Other  customers.  The remainder of the  Company's  revenue base is derived from
fuel sales at the Company's main facility in Columbus.

No single  customer  accounted  for more than 10% of the  Company's  fiscal 1996
revenues.

Customer Services

The Company's customer service department helps to provide many of the Company's
value-added features. In addition to providing prompt,  courteous replies to all
customer  inquiries  utilizing a common tone of service,  the CSRs help  provide
proof of delivery  documentation  when  required,  assist  with the  ordering of
supplies  and  provide  prompt  shipment  tracking  information.  The  Company's
management  information  systems assist in the customer service function in many
ways, including: (i) shipment and delivery information is available on-line, via
the utilization of bar code technology  through the ComCheck and OnTime systems;
(ii) current and historical proof-of-delivery documentation can be requested and
provided on-line through the ComCheck and OnTime systems;  (iii) supplies can be
ordered on-line through both systems,  providing a user-friendly environment for
the Company's customers;  (iv) OnTime performance data is constantly reviewed by
management,  graphed and reported  quarterly for trend monitoring  purposes,  so
that any fluctuation in customer service can be addressed  immediately;  (v) the
Company's  dispatch  function includes the ability to relay all relevant shipper
information on-line throughout the organization, assuring a smooth dissemination
of information  regarding  special  pick-ups and  deliveries;  and (vi) internal
management reports include load factor analysis and capacity  reporting,  so the
Company can modify the network as appropriate to provide  additional  lift where
demanded by customers.  All relevant  information referred to above is available
on-line  to the  Company's  CSRs who are then  empowered  to keep the  Company's
customer base fully informed on a prompt basis.

Marketing

The Company has typically  marketed to its bank customer base,  with little need
for national advertising. Banking industry sales efforts have included assisting
in the design of customized  clearing systems for the bank customers which match
the  appropriate  aircraft  with the bank's  needs for more  processing  time or
specific  deadlines sought by the sending bank.  Marketing  efforts in this area
have  included  promotion  of the  NCHA.  The  success  of the  NCHA  has  had a
complementary  effect on the Company, as more checks are now transported through
the private sector.

The Company has been an exhibitor in numerous  industry  trade shows such as the
Bank Administration Institute ("BAI") Float Management Conference, the BAI Check
Processing  Conference,  and the Air Courier Conference of America. This process
has enabled the Company to maintain close contact with its customer base.


                                      -12-
<PAGE>


Small package  delivery  services have  historically  been directly  marketed to
companies   requiring  this  unique,   specialized   service,   as  well  as  to
consolidating freight forwarders and national integrated carriers. This approach
has enabled the Company to direct volume to lane segments with space  available.
A focused  marketing  program is being  developed to assist in  expanding  these
services,  emphasizing the Company's abilities to have later pick-up and earlier
delivery services.

Human Resources

The Company believes it has achieved a significant  competitive advantage within
its industry through its major commitment to human resources.  All levels of the
Company's  management  strive to operate within the spirit of the Company's core
values,  which are:  (i)  Honesty,  Integrity,  Trust and  Respect - the Company
believes  customers  expect these  qualities and the Company  strives to deliver
them; (ii)  Accountability - the Company believes its associates are accountable
to the customer in the marketplace,  to peers in the workplace and,  ultimately,
to God; (iii) Open and Free  Communication  - the Company strives to communicate
from the  bottom to the top,  from the top down,  and with the  marketplace,  by
providing a medium for involvement,  creativity and encouragement for its people
and customers;  (iv) Team Management  Style with Shared  Responsibilities  - the
Company strives to delegate the decision-making process as far down as possible,
encouraging involvement and shared responsibilities; and (v) Quality Performance
- the  Company's  goal is  simple:  to be the best,  by  focused  teamwork  with
self-policing,  quality-controlled  systems  and hiring and  educating  the best
personnel available, and then motivating and compensating them appropriately.

Additionally, representatives of the Company's human resources team periodically
travel throughout the country to the Company's outbase facilities to help ensure
compliance  with the Company's  core values and other  personnel  policies.  All
Company personnel are part of the Company-wide drug-testing program.  Management
believes  this  program,  which goes beyond the  requirements  of the  Company's
regulators, helps to ensure the highest possible performance levels. The Company
also  conducts  random  drug and  alcohol  testing in  compliance  with  Federal
Aviation  Administration  regulations.   Management  training  and  professional
development  seminars are periodically  held for, and attended by, all levels of
Company  personnel.  The Company also aggressively  compensates for performance,
with  excellent  performance  recognized  and rewarded  through  incentive-based
compensation.

Associates

The chart below  summarizes the Company's  workforce at September 30, 1996, 1995
and 1994. The Company's  associates are not represented by any unions or covered
by any collective  bargaining  agreements.  The Company has  experienced no work
stoppages and believes that its relationship with associates is good.


                                      -13-
<PAGE>


                                                   September 30,
                                             1996      1995       1994
                                        -------------------------------------
         DEPARTMENT
         Management/Administration            115       110         115
         Flight                               137       123         119
         Maintenance                           82        72          70
         Driver/Courier/Ramp/Sort             322       281         251
                                        -------------------------------------
              Total                           656       586         555
                                        =====================================


Competition

The air and ground courier industry is highly competitive. The Company's primary
competitor is the Federal  Reserve's ITS. The actions of the Federal Reserve are
regulated by the Monetary  Control Act, which, in summary,  requires the Federal
Reserve to price its  services at actual cost plus a private  sector  adjustment
factor.  The Company believes that the purpose of the Monetary Control Act is to
curtail the  possibility  of  predatory  pricing by the Federal  Reserve when it
competes with the private sector. No assurance beyond the remedies of law can be
given that the Federal Reserve will comply with the Monetary Control Act.

In the private sector,  there are a large number of smaller,  regional  carriers
that transport canceled checks, none with a significant interstate market share.
The two largest private sector air couriers,  FedEx and UPS, both carry canceled
checks where the deadlines  being pursued fit into their  existing  system,  but
this has not represented a significant  market share of this industry segment to
date. The Company provides  customized service for its customer base, often with
later pick-ups and earlier deliveries than the large,  national  couriers.  Both
FedEx  and  UPS  utilize  the  Company's   transportation  network  for  certain
situations where they require customized  service.  No assurance can be provided
that FedEx, UPS or any other large national couriers will not attempt to compete
more directly with the Company in the future.

The Company competes with commercial airlines and numerous other carriers in its
small  package  transportation  business.  The  Company's  market  share in this
industry is less than 1%. The Company  believes  that this market  represents  a
significant expansion opportunity.  The Company also has a minor presence in the
same-day or  next-flight-out  industry.  The Company  believes  that there are a
number of  competitors  in this  industry.  To the extent the Company  elects to
increase its presence in the same-day  industry,  it will compete  against these
companies.  The Company will emphasize its information  technology,  competitive
pricing and  historically  high  on-time  performance  levels to compete in this
market.


                                      -14-
<PAGE>


Regulation

The Company is regulated under Part 135 of the Federal  Aviation  Regulations by
the Federal Aviation Administration. In connection with the operation of Company
vehicles  and  aircraft,  the  Company  is subject  to  regulation  by the U. S.
Department  of  Transportation   with  respect  to  the  handling  of  hazardous
materials.  The Company holds nationwide general commodities  authority from the
Interstate  Commerce  Commission to operate as a common carrier on an interstate
basis within the  contiguous 48 states.  The Company's  delivery  operations are
subject to various state and local regulations,  and in many instances,  require
permits and licenses from state authorities.

The Company believes that it has all permits, approvals and licenses required to
conduct its operations and that it is in compliance with  applicable  regulatory
requirements  relating to its operations.  Failure of the Company to comply with
the  applicable  regulations  could  result  in  substantial  fines or  possible
revocation of one or more of the Company's operating permits.

Trademarks

The Company  utilizes  various  service  marks,  trademarks  and  tradenames  in
connection  with its services.  While the Company  considers its service  marks,
trademarks  and  tradenames to be important in the conduct of its business,  the
business  of the  Company  is not  dependent  on any  individual  service  mark,
trademark or tradename.

Environmental Matters

The Company believes that compliance with environmental matters has not had, and
is not expected to have, a material  effect on operations.  Although the Company
believes that it is in compliance  with all applicable  noise level  regulations
and is working  proactively  with various local  governments  to minimize  noise
issues,  future noise  pollution  regulations  could require the  replacement of
several of the Company's aircraft.

ITEM 2  -  PROPERTIES

The Company  operates  ground courier  facilities in 40 locations.  The land and
building  complex used for the Company's  headquarters  in Columbus,  Ohio,  are
leased from Gerald G. Mercer, Chairman, Chief Executive Officer and President of
the Company,  under a lease agreement which expires on July 30, 2004. Mr. Mercer
owns the building and leases the land from The Port  Authority of Columbus under
a 25-year lease which expires on December 31, 2009, subject to a 20-year renewal
option.  The complex  currently  has 80,000  square  feet,  of which the Company
utilizes  73,000  square feet.  The  remainder  is subleased to unrelated  third
parties. The Company's  headquarters is currently used for operations,  aircraft
maintenance,  vehicle  maintenance,  general and administrative  functions,  and
training.  In addition,  several facilities also contain,  or are primarily used
for, storage and warehouse space.


                                      -15-
<PAGE>


The Company operates at numerous locations  throughout the country. The mini-hub
locations generally include an office and/or a section of the lessor's hangar or
ramp that is allocated to the Company.

For additional  information  concerning the Company's leases,  see the Company's
Consolidated  Financial  Statements,  included  with this Annual  Report on Form
10-K.

ITEM 3  -  LEGAL PROCEEDINGS

There are no pending legal proceedings  involving the Company other than routine
litigation incidental to the Company's business. In the opinion of the Company's
management,  such proceedings should not, individually or in the aggregate, have
a material  adverse  effect on the Company's  results of operations or financial
condition.

ITEM 4  -  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of fiscal 1996.

Executive Officers of the Registrant

The following table sets forth the executive  officers of AirNet  Systems,  Inc.
The  executive  officers  are elected  annually and serve at the pleasure of the
Board of Directors.

Name                   Age            Position
------                -----          ----------

Gerald G. Mercer       48      Chairman of the Board, President and Chief
                               Executive Officer
Eric P. Roy            41      Director, Executive Vice President,
                               Treasurer, Chief Operating Officer and
                               Chief Financial Officer
Glenn M. Miller        50      Vice President, Operations
Guy S. King            43      Vice President, Sales
Lincoln L. Rutter      40      Vice President, Sales
Kendall W. Wright      48      Vice President, Sales
William R. Sumser      40      Vice President, Finance, Controller and Secretary
Donald D. Strench      40      Vice President, Corporate Development


Gerald G.  Mercer  has served as  Chairman  of the  Board,  President  and Chief
Executive  Officer of the Company since  founding the Company in 1974. He served
as President of the Michigan Association of Aviation Businesses in 1986, and has
been a member of the Young Presidents'  Organization  since 1986. Mr. Mercer has
been a guest speaker at several major universities throughout the country.


                                      -16-
<PAGE>


Eric P. Roy has been a  Director  of the  Company  since  1994 and has served as
Chief  Financial  Officer of the Company since 1986. Mr. Roy was named Executive
Vice President and Chief Operating Officer in 1991.

Glenn M. Miller has served as Vice  President,  Operations for the Company since
1975.

Guy S. King has served as Vice  President,  Sales for the  Company  since  1989.
Prior to 1989, Mr. King served the Company in numerous  functions dating back to
1976,  including  dispatch and pilot,  before eventually  founding the Company's
small  package  delivery  division in 1984.  Mr. King has served on the Board of
Directors of the Air Courier Conference of America since 1993.

Lincoln L.  Rutter has served as Vice  President,  Sales for the  Company  since
1988.

Kendall W.  Wright has served as Vice  President,  Sales for the  Company  since
1988.

William R. Sumser has served the Company as Vice  President and Secretary  since
March 1996, as Controller  since 1988 and as Assistant  Vice President from 1988
through  March 1996.  Mr.  Sumser has 18 years of financial  experience,  and is
responsible for the Company's  daily cash  management,  financial  reporting and
purchasing functions.

Donald  D.  Strench  has  served  the  Company  as  Vice  President,   Corporate
Development  since April 1996. Prior to joining the Company,  Mr. Strench served
in various  financial  positions for American  Airlines,  Inc. between September
1986 and March 1996, including Vice President,  Corporate  Development (American
Eagle).


                                     PART II

ITEM 5  -  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

The Common Shares of the Company are traded on The Nasdaq  National Market under
the symbol  "ANSY".  The table below sets forth the high and low reported  sales
prices of the  Common  Shares on The  Nasdaq  National  Market  for the  periods
indicated.


                                      -17-
<PAGE>


               1996                High         Low
             --------            --------     -------

         Third Quarter (1)        $16.00      $14.50
         Fourth Quarter            16.00       10.75

---------------
(1)  Represents the period from May 31,1996 (date of the initial public offering
     of the Company's Common Shares) through June 30, 1996.


The Company has not paid any  dividends on its Common Shares and does not intend
to pay any such dividends in the  foreseeable  future.  The Company  anticipates
utilizing  future excess  earnings to finance  operations  and future growth and
development  of the Company.  Certain  restrictive  covenants  in the  Company's
revolving credit facility impose  limitations on the payment of dividends by the
Company.  Such covenants  prohibit the Company from paying cash dividends on its
Common Shares in excess of 50% of net income.

On December 16, 1996, there were  approximately  1,200 holders of Common Shares,
based  upon the  number of  holders  of  record  and the  number  of  individual
participants in certain security position listings.


                                      -18-
<PAGE>


================================================================================
ITEM 6  -  SELECTED FINANCIAL DATA
================================================================================

<TABLE>
                                                                  For the year ended September 30,
                                                       1996         1995        1994        1993       1992
                                                       ----         ----        ----        ----       ----
Statement of Operations Data:                                   (in thousands, except per share data)
<S>                                                 <C>           <C>         <C>         <C>         <C>    
Revenues
     Air Transportation                             $ 74,632      $66,456     $62,288     $57,325     $56,719
     Fixed base operations                             1,064        1,006       1,158       1,265       1,335
                                                    --------      -------     -------     -------     -------
Total revenues                                        75,696       67,462      63,446      58,590      58,054

Costs and expenses
     Air transportation                               50,466       46,111      44,570      43,437      41,806
     Fixed base operations                             1,033          956       1,081       1,150       1,217
     Selling, general and administrative              10,909       12,320      10,484       8,251       8,030
                                                    --------      -------     -------     -------     -------
Total costs and expenses                              62,408       59,387      56,135      52,838      51,053
                                                    --------      -------     -------     -------     -------

Income from operations                                13,288        8,075       7,311       5,752       7,001

Interest expense                                       1,053        1,452       1,093       1,123       1,240
Offering related non-recurring expenses  Note 1       13,704            0           0           0           0
Income tax expense, net  Note 2                        4,202            0           0           0           0
                                                    --------      -------     -------     -------     -------

Net income (loss)                                   ($ 5,671)     $ 6,623     $ 6,218     $ 4,629     $ 5,761
                                                    ========      =======     =======     =======     =======

Pro forma information Note 3:
     Historical net income (loss) before taxes      ($ 1,469)     $ 6,623
     Pro forma adjustments other than income
         taxes                                         4,429        7,367
     Pro forma income taxes                            5,642        5,596
                                                    --------      -------
Pro forma net income (loss)                         ($ 2,682)     $ 8,394
                                                    ========      =======

Weighted average common shares outstanding             9,663        8,361

Pro forma net income (loss) per share                ($ 0.28)     $  1.00
                                                    ========      =======

Adjusted pro forma information:
Pro forma net income (loss)                         ($ 2,682)     $ 8,394
Effects of eliminating offering related
     non-recurring expenses, net of tax  Note 1       12,681            0
                                                    --------      -------
Adjusted pro forma net income                       $  9,999      $ 8,394
                                                    ========      =======

Pro forma common shares outstanding  Note 4           12,318       12,318

Adjusted pro forma net income per share              $  0.81      $  0.68
                                                    ========      =======

Balance Sheet Data:
Total assets                                        $ 75,009      $49,037     $42,141     $35,829     $33,637
Total debt                                                 0       19,228      16,250      13,169      13,850
Shareholders' equity                                  65,939       20,469      17,931      16,794      14,036

</TABLE>

Note 1 Represents non-cash,  non-recurring  expenses incurred as a result of the
     initial  public  offering,  effective  May  31,  1996.  (See  Note 2 to the
     Consolidated Financial Statements.)

Note 2 Prior to the  Company's  initial  public  offering,  it  operated as an S
     Corporation   under  the  Internal   Revenue  Code  for  tax  purposes  and
     consequently, was not subject to federal and certain state income taxes.

Note 3 Includes pro forma adjustments incurred as a result of the initial public
     offering.  Such  adjustments  are  the  result  of  restructured  executive
     compensation  plans, the elimination of a deferred  compensation  plan, the
     reduction  of interest  expense and the  termination  of a covenant  not to
     compete and  corresponding  payments.  All such changes were effective with
     the  consummation of the initial public offering on May 31, 1996. (See Note
     13 to the Consolidated Financial Statements.)

Note 4 Assumes shares issued in the initial public offering were outstanding for
     the entire period.


                                      -19-
<PAGE>


================================================================================
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
================================================================================

General

The Company operates a fully integrated national air transportation network that
operates  between  90 cities in more than 40 states  and  delivers  over  13,000
time-critical  shipments each working day. The Company's bank services  division
is the leading  transporter of canceled  checks and related  information for the
U.S. banking industry. The small package delivery division provides specialized,
high priority delivery service for customers  requiring a late pick-up and early
delivery service combined with prompt, on-line delivery information. The Company
also offers retail aviation fuel sales and related ground services for customers
in Columbus, Ohio.

On June 5, 1996, the Company successfully  completed its initial public offering
(the "Offering") raising net proceeds of approximately  $82.7 million.  Proceeds
were used to repay outstanding  debt,  repurchase an outstanding  warrant,  make
distributions  to  former  shareholders  and  finance  future  acquisitions  and
internal  growth.  Pursuant to the terms of the  Offering,  the  Company  issued
6,440,000 Common Shares at $14.00 per share.

Impact on Operations

The Company's  Consolidated  Financial  Statements  have and will be affected by
several factors,  including the following:  (i) the corporate strategic decision
to acquire,  rather than to lease, aircraft;  (ii) S Corporation  distributions;
(iii) a change in the Federal Reserve bank regulations  affecting the ability of
commercial banks to compete with the Federal Reserve banks; (iv) cancellation of
the Wright  International  Express,  Inc.  ("WIE")  covenant  not to compete and
repurchase  of WIE  warrants;  (v) the  incurrence  of  non-cash,  non-recurring
expenses  associated  with the Company's  Offering;  (vi)  development of a fuel
rebate/surcharge  program for the Company's customers;  (vii) taxes on income in
connection  with the termination of Company's S Corporation  status;  and (viii)
the tax benefit associated with the exercise of the WIE warrant.

Corporate  strategic  decision to acquire aircraft.  In fiscal 1993, the Company
made a strategic decision to replace leased aircraft, particularly jet aircraft,
with  purchased  aircraft.  The Company  was able to pursue  this  strategy as a
result of its strong financial  condition and ability to take on additional debt
to fund such  acquisitions.  As  aircraft  leases  expired,  the  Company  began
purchasing  replacement  aircraft.  The resulting  savings in lease expense were
offset  partially  by  increased  interest  expense  due to  increased  debt and
increased  depreciation  expense.  In fiscal 1994,  the Company  decided also to
begin  replacing some of its leased light twin engine  aircraft with larger twin
engine aircraft with increased payload capacities.

S Corporation  Distributions.  Since the Company elected S Corporation status in
July 1988,  it has made  distributions  to its  shareholders  for the purpose of
funding their income tax payments on the income generated by the Company,  which

                                      -20-
<PAGE>

income is taxable to the  shareholders  whether  or not  distributed.  In fiscal
1994, the Company began making S Corporation  distributions in amounts in excess
of the amounts  necessary to pay applicable  income taxes.  In fiscal 1996, such
distributions  totaled  approximately $1.0 million.  In addition,  in connection
with the Offering and the conversion to a C Corporation status, the Company made
distributions  of the  accumulated  adjustments  accounts ("AAA  distributions")
totaling  $21.0  million,  which  approximated  the value of the  Company's  AAA
account at the time of the Offering.

Modification of Federal Reserve bank regulations.  In January, 1994, the banking
industry  benefited from the determination that the Federal Reserve banks had an
unfair advantage in the marketplace for check clearing  services.  Prior to such
determination,  Federal  Reserve  banks were  allowed  to present  checks to the
Federal Reserve for payment in immediately available funds without having to pay
a presentment fee.  Commercial banks are often required to pay a presentment fee
to other commercial banks in exchange for the right to draw immediately  against
deposits of such banks. The Federal Reserve responded by initiating a regulatory
policy called "Same-Day Settlement",  which mandates that if a bank is presented
with a check drawn on its deposits,  such bank must pay the  presenting  bank in
immediately  available funds, without charging any additional fees, provided the
check is presented by 8:00 a.m. Same-Day Settlement has allowed commercial banks
to compete more  favorably with the Federal  Reserve banks and  correspondingly,
has increased  demand for the Company's  delivery  services,  as the Company can
deliver to most locations in the U.S. prior to the 8:00 a.m. deadline.

WIE covenant not to compete and warrant.  In 1988, the Company purchased certain
assets of WIE. In connection  with the purchase  agreement,  the Company entered
into a non-compete  agreement  that required  annual  payments to the former WIE
shareholder  tied to the cash  flows and debt to equity  ratios of the  Company.
Upon the closing of the Offering,  the  non-compete  agreement  was  terminated,
resulting  in a  non-cash,  non-recurring  expense  of  $2.6  million.  Also  in
consideration  for the purchase of WIE, the Company issued a warrant to a former
WIE  shareholder  which was  exercisable  upon the closing of an initial  public
offering.  Upon closing of the Offering,  the Company  purchased the WIE warrant
for $29.9  million  and  canceled  the  warrant,  resulting  in a  reduction  in
shareholders' equity.

Non-recurring expenses. The Company incurred significant non-cash, non-recurring
expenses in conjunction  with its Offering.  These  expenses  included (i) $14.8
million of compensation  expense related to the portion of AAA  distributions to
certain executive officers not previously recorded as expense in connection with
the  termination  of the Company's S  Corporation  status,  plus the  difference
between the net  offering  price and the net book value per Common Share held by
the  executives  under certain stock  purchase  agreements,  which  predated the
initial public  offering;  and (ii) $2.6 million related to the write-off of the
WIE  covenant  not to compete.  These  expenses  were offset with a $1.7 million
elimination  of a  deferred  compensation  liability  associated  with the stock
purchase  agreements and a $2.0 million  elimination  of a liability  related to
deferred compensation agreements with certain executive officers.


                                      -21-
<PAGE>


Development  of fuel rebate  surcharge  program.  In January  1990,  the Company
developed a fuel  rebate/surcharge  program.  Pursuant to this  program,  as the
OPIS-CMH (Oil Price Information  Service - Columbus,  Ohio Station) price of jet
fuel exceeds $.75 per gallon, the Company's  customers are surcharged.  In turn,
as the  OPIS-CMH  price  falls below $.68 per gallon,  the  Company's  customers
receive a rebate.

Taxes on  income.  In July  1988,  the  Company  elected  to be  treated as an S
Corporation  under  Subchapter  S of the Internal  Revenue  Code and  comparable
provisions of certain state tax laws,  and  historically  paid no federal income
tax. For reporting  purposes,  the Company  recorded charges for state taxes for
those  states which did not  recognize  the  Subchapter  S status.  Prior to the
closing of the Offering,  the Company terminated its Subchapter S status and has
been  responsible  for  federal  and  state  income  taxes  from the date of the
termination.

Tax benefit from the exercise of the WIE warrant. The Company expects to receive
a tax benefit asset from the repurchase and  cancellation  of the WIE warrant of
approximately $7.0 million. The tax benefit, which was recorded in the Company's
balance  sheet in 1996,  may be used to offset taxes payable on future income of
the  Company.  The tax  benefit  will  have no effect  on the  Company's  income
statement  currently,  or in the future, but will have a positive impact on cash
flows.

Results of Operations

Fiscal 1996 compared to fiscal 1995

Revenues  were a record  $75.7  million  in fiscal  1996,  an  increase  of $8.2
million,  or  12.2%,  over  fiscal  1995.  Of  the  increase,  $2.0  million  is
attributable to price  increases  effective  January 1, 1996 and 1995.  Revenues
from check delivery increased $6.8 million, or 11.6%, primarily due to increased
business  activity and  increases in total weight  shipped,  while small package
delivery revenues  increased $1.4 million,  or 17.3%, due primarily to increased
activity from both new and existing customers.

Total costs and expenses  were $62.4 million in fiscal 1996, an increase of $3.0
million, or 5.1%, over 1995 levels, resulting in income from operations of $13.3
million  in  fiscal  1996   compared  to  $8.1  million  in  fiscal  1995.   Air
transportation  expenses were up $4.4 million,  or 9.4%, while selling,  general
and administrative expenses decreased $1.4 million, or 11.4%, for the year.

Air  transportation  costs  increased  due, in part,  to the addition of air and
ground  personnel  required  to  service  a  larger  fleet of  aircraft  and the
increased volume of activity.  In addition,  depreciation expense increased $1.1
million,  or 15.2%, due to the increased size of the Company's fleet, which grew
from 65 owned  aircraft at September 30, 1995 to 83 at September  30, 1996.  The

                                      -22-
<PAGE>


increase in depreciation expense was offset by a reduction in lease expense as a
result of the Company's  strategy to acquire rather than lease aircraft.  A rise
in fuel  prices  coupled  with  increased  flight  hours  contributed  to a $0.7
million, or 9.8%, increase in aircraft fuel expense.

Selling,  general and  administrative  expenses  decreased  primarily due to the
restructuring of executive  compensation plans (which resulted in a $0.5 million
decrease),  the  termination of stock purchase  agreements  (which resulted in a
$0.3 million  decrease) and the  termination of a covenant not to compete (which
resulted in a $1.4 million decrease). All were effective in conjunction with the
Offering in May 1996. The stock purchase  agreements were with certain executive
officers and had been tied to the  appreciation  in the book value of the Common
Shares of the Company.  The covenant not to compete  required  payments based on
the Company's cash flow and debt to equity ratio. These decreases were offset by
an increase in consulting  fees incurred  with the  reconstruction  of executive
compensation  and employee stock option plans and increased wages related to the
hiring of additional personnel.

Interest  costs  decreased  $0.4  million  as a result of the  repayment  of all
outstanding debt in June 1996 with proceeds from the Offering.

The  Company  incurred  $13.7  million of  non-cash,  non-recurring  expenses in
connection  with its  Offering.  These  expenses  included (i) $14.8  million of
compensation expense related to the portion of accumulated  adjustment accounts,
or AAA,  distributions to certain executive officers not previously  recorded as
expense in  connection  with the  termination  of the  Company's  S  Corporation
Status,  plus the  difference  between the net  offering  price and the net book
value per Common  Share held by the  executives  under  certain  stock  purchase
agreements,  which  predated the  Offering and (ii) $2.6 million  related to the
write-off  of a covenant  not to compete  with  former WIE  shareholders.  These
expenses were offset with a $1.7 million elimination of a deferred  compensation
liability  associated  with the stock  purchase  agreements  and a $2.0  million
elimination  of a liability  related to deferred  compensation  agreements  with
certain executive officers.

The Company  operated as an S Corporation  under the Internal  Revenue Code from
1988 until it elected to  terminate  its S  Corporation  status on May 30, 1996.
Under its Subchapter S election, shareholders of the Company were taxed directly
on the  Company's  income  and,  consequently,  the  Company  was not subject to
federal and certain state income tax at the corporate  level. In connection with
the  termination  of the S Corporation  status,  the Company  recorded a net tax
liability  of $2.4  million  as a result of the  cumulative  effect of  deferred
income taxes  attributable  to its change in status.  In  addition,  the Company
recorded net deferred tax expense of $1.8 million for fiscal 1996 related to the
income  tax  expense  on  operating  income  since May 30,  1996,  offset by the
favorable tax effect of the write-off of the covenant not to compete with former
WIE shareholders.


                                      -23-
<PAGE>


Pro  forma  information   reflects  the  effects  of  certain  Offering  related
transactions  on  the  statements  of  operations  as if  they  occurred  at the
beginning of the periods  presented.  See Note 3 to the Selected  Financial Data
table included in Item 6 of this Annual Report on Form 10-K.

Fiscal 1995 compared to fiscal 1994

Revenues were $67.5  million for fiscal 1995,  an increase of $4.1  million,  or
6.3%,  compared to $63.4 million for fiscal 1994.  Revenues from check  delivery
were $58.3  million  for fiscal  1995,  an increase  of $4.3  million,  or 7.8%,
compared  to  $54.0  million  for  fiscal  1994.  This  increase  was due to the
increased level of business  activity,  at least part of which can be attributed
to the  implementation  of Same-Day  Settlement in January 1994. The increase in
revenues  from  check  delivery  was  also  due in part to the  increase  in the
Company's  shipping  volume  as a result  of  increased  participation  the NCHA
throughout  1994 and 1995.  Of the overall  increase in revenues for fiscal 1995
compared to fiscal 1994,  approximately  $2.0 million was due to rate  increases
implemented by the Company in January, 1995.

Revenues from small package  delivery were $8.2 million for both fiscal 1995 and
fiscal  1994.  A 4.7%  increase  in revenues  from new  business  and  increased
business from  existing  customers was offset by a $0.4 million loss of business
from the U.S. Postal Service.

Revenues  from fixed base  operations  were $1.0  million  for  fiscal  1995,  a
decrease of $0.2  million,  or 13.1%,  compared to $1.2 million for fiscal 1994.
This  decrease was due to a $0.3  million  decrease in revenues  generated  from
retail  maintenance as a result of the Company's  decision to reduce retail work
due to the  maintenance  demands  of its own  growing  fleet of  aircraft.  This
decrease  was  partially  off-set by a $0.1  million  increase in revenues  from
retail fuel sales.

Wages and benefits expense was $9.2 million for fiscal 1995, an increase of $1.0
million,  or 12.3%,  compared to $8.2 million for fiscal 1994.  Of the increase,
$0.6 million was due to increased costs of benefits.  The Company  increased its
discretionary  contribution  to the Company's  401(k) plan by $0.2 million,  and
group  health  insurance  costs  increased  by  $0.4  million.  The  Company  is
self-insured  for health care  benefits  and such claims were  greater in fiscal
1995 than in fiscal 1994.

Aircraft  fuel  expense was $7.4  million for fiscal  1995,  an increase of $0.4
million,  or 7.0%,  compared to $7.0 million for fiscal 1994.  This increase was
due, in part,  to an  increase in hours  flown.  The  increase in aircraft  fuel
expense was also due, in part, to minor increases in aviation fuel prices during
fiscal 1995.  Fuel  rebates  were $0.4 million for fiscal 1995  compared to $0.3
million for fiscal 1994.

Aircraft  maintenance  expense was $6.0 million for fiscal 1995,  an increase of
$0.3 million,  or 5.5%,  compared to $5.7 million for fiscal 1994.  The increase
was due,  in part,  to  higher  parts  costs and use of  outsourced  maintenance
facilities for more routine  maintenance in fiscal 1995 compared to fiscal 1994.

                                      -24-
<PAGE>


Outsourcing  maintenance work was necessary because rotating the Company's fleet
to one of the Company's maintenance  facilities became increasingly difficult as
the flight hours increased in fiscal 1995.

Aircraft  lease  expense was $1.0  million for fiscal  1995,  a decrease of $2.3
million,  or 68.0%,  compared to $3.3 million for fiscal 1994. This decrease was
due to the  Company's  continued  strategy of  acquiring,  rather  than  leasing
aircraft.  During  the last month of fiscal  1994 and the first  month of fiscal
1995, the Company acquired three Learjets that it had previously  leased. By the
end of fiscal 1995, the Company leased only one Learjet and 12 light twin engine
aircraft.

Ground couriers and outside services expenses were $8.6 million for fiscal 1995,
an increase of $0.3 million,  or 3.2%, compared to $8.3 million for fiscal 1994.
This  increase was due in part to a $0.4 million  increase in the cost of ground
agents due to the  additional  agents needed to handle the  increased  volume in
shipments,  partially  offset  by  a  $0.1  million  decrease  in  the  cost  of
independent contractors due to the loss of the U. S. Postal Service business.

Depreciation  and  amortization  expense was $7.4  million for fiscal  1995,  an
increase of $1.1  million,  or 16.1%,  compared to $6.3 million for fiscal 1994.
Almost all of this increase was due to an increase in the depreciation of flight
equipment  as a result of the  Company's  strategy to acquire  rather than lease
aircraft.

Other operating  expenses were $6.4 million for fiscal 1995, an increase of $0.6
million,  or 11.5%,  compared to $5.8 million for fiscal 1994. This increase was
due to an increase in insurance  expense in fiscal 1995 compared to fiscal 1994,
partially due to an increase in aircraft insurance of $0.4 million due to a rate
increase and a year-end  adjustment for increased fleet value, and partially due
to an increase in workers' compensation  insurance of $0.2 million due to a rate
increase and an increase in payroll.

Fixed base  operations  expense was $1.0 million in fiscal 1995,  an decrease of
$0.1 million, or 11.6%,  compared to $1.1 million for fiscal 1994. This decrease
was due to a decrease in the cost of retail  maintenance  and a non-cash  charge
taken in 1995 to write down the value of one of the Company's facilities.

Selling, general and administrative expenses were $12.3 million for fiscal 1995,
an  increase of $1.8  million,  or 17.5%,  compared to $10.5  million for fiscal
1994. Executive  compensation increased primarily due to a $0.6 million increase
in  performance-based  bonuses in fiscal  1995  compared to fiscal  1994.  Other
executive compensation, which includes the appreciation in the book value of the
Common Shares acquired by certain executive  officers pursuant to stock purchase
agreements  executed in April 1994,  increased  due to fiscal 1995 expense being
for a full fiscal year  compared to fiscal 1994 expense  which related to only a
six month period. A $0.5 million increase was attributable to increased payments

                                      -25-
<PAGE>


in fiscal 1995  compared to fiscal 1994 under the WIE  covenant  not to compete.
Other selling,  general and administrative expense decreased $0.4 million due to
a $0.3  million  decrease in the loss on  disposal of assets and a $0.1  million
decrease in professional fees in fiscal 1995 compared to fiscal 1994,  partially
offset  by  computer-related   expenses  associated  with  the  development  and
implementation of handheld bar code scanners.

Interest  expense was $1.5 million in fiscal 1995,  an increase of $0.4 million,
or 32.9%,  compared to $1.1 million for fiscal 1994. This increase was primarily
due to the Company's increased capital  expenditures,  including the acquisition
of  additional  aircraft  during the 13 months  beginning  September  1994 which
increased debt by $5.3 million.  The increase in interest  expense was partially
offset by a decrease in aircraft lease expense.  During fiscal 1995, the Company
also  amended its credit  agreement  to allow the Company to borrow funds at the
variable Eurodollar rates tied to the Company's debt to equity ratio.


Liquidity and Capital Resources

General.  Historically,  the Company's  principal sources of liquidity have been
internally generated funds and credit arrangements. On June 5, 1996, the Company
successfully  completed the Offering for  6,440,000  Common Shares at $14.00 per
share.  Pursuant to the  Offering,  the Company  received  total net proceeds of
approximately  $82.7  million.  Prior to the  Offering,  the Company  made $21.0
million in distributions to the S Corporation shareholders for the undistributed
earnings  in  the  Company's  AAA  account   associated  with  the  Company's  S
Corporation status. These distributions were made through the Company's issuance
of promissory notes to such shareholders,  which were subsequently paid off with
the  Offering  proceeds.  The  following is a summary of the use of the Offering
proceeds:

                                                                     (in 000's)

     Offering proceeds, net of expenses                               $82,696
     Use of Proceeds:
       Repayment of debt                                              (19,000)
       Distribution  to  former  shareholders  for  undistributed
       earnings associated with an S Corporation status
                                                                      (21,000)
       Costs  associated  with the purchase and  cancellation  of
       the WIE warrant                                                (29,902)
                                                                   ------------

     Net increase in cash from Offering proceeds                      $12,794
                                                                   ============



                                      -26-
<PAGE>


Current Credit  Arrangements.  Simultaneously  with the closing of the Offering,
the  Company  entered  into a new  credit  agreement  to  replace  its  existing
agreement.  The new credit agreement  provides the Company with a $50.0 million,
five year, unsecured revolving credit facility.  The new credit agreement limits
the  availability  of  funds  to  certain  specified   percentages  of  accounts
receivable,  inventory and the  wholesale  value of aircraft and  equipment.  In
addition,  the agreement  requires the  maintenance of certain minimum net worth
and cash flow levels,  imposes  certain  limitations  on payments of  dividends,
restricts  the amount of  additional  debt and requires  prior bank approval for
certain acquisitions. There were no borrowings under the new credit agreement at
September 30, 1996.

Investing  activities.  Capital  expenditures  totaled  $17.1 million for fiscal
1996,  compared to $14.2  million  and $12.8  million for fiscal 1995 and fiscal
1994,  respectively.  Of the total incurred in fiscal 1996, $2.8 million was for
the acquisition of the assets of Midway Aviation,  Inc.  ("Midway"),  a regional
air  freight  courier  engaged  primarily  in the  business  of  canceled  check
transportation.  The remainder  was incurred for aircraft and flight  equipment,
delivery  vehicles and facility  improvements.  The Company  anticipates it will
incur  approximately  $17.0  million for capital  expenditures  in fiscal  1997,
excluding any  acquisitions of new businesses.  The Company  anticipates it will
continue to acquire  aircraft  and flight  equipment  as  necessary  to maintain
growth and continue  offering  quality service to its customers.  The Company is
also anticipating an additional  expansion to its facilities beginning in fiscal
1997, at an estimated cost of $4.0 million.

Subsequent  to the end of the fiscal  year,  the  Company  purchased  all of the
shares  of Float  Control  Inc.  in  exchange  for  157,293  Common  Shares  and
approximately  $0.7 million.  As a result of this acquisition,  the Company will
indirectly hold a 19% interest in the CHEXS  Partnership,  an industry leader in
payment  initiatives.  In  addition,  the  Company  signed a letter of intent to
acquire a small package air freight forwarder for approximately $2.1 million. If
a final agreement is reached, the acquisition will not only add to the Company's
revenue  base,  but will also add  approximately  1,800 new  customers and 1,000
nightly shipments to the Company's air transportation system.

Cash flow from operating activities. Net cash flow from operating activities was
$18.2  million for fiscal 1996,  compared to $15.3 million and $14.7 million for
fiscal  1995 and  fiscal  1994,  respectively.  The  fiscal  1996  cash  flow is
primarily  the  result  of  operating  income  before  non-cash,   non-recurring
expenses.

The Company anticipates that operating cash and capital expenditure requirements
will continue to be funded by cash flow from  operations,  cash on hand and bank
borrowings.

Seasonality and Variability in Quarterly Results

The Company's  operations  historically have been somewhat seasonal and somewhat
dependent on the number of banking  holidays  falling  during the week.  Because

                                      -27-
<PAGE>

financial  institutions  are currently the Company's  principal  customers,  the
Company's  air system is  scheduled  around the needs of  financial  institution
customers.  When  financial  institutions  are closed,  there is no need for the
Company to operate a full system.  The Company's  first fiscal  quarter is often
the most  impacted  by bank  holidays  (including  Thanksgiving  and  Christmas)
recognized by its primary customers.  When these holidays fall on Monday through
Thursday,  the  Company's  revenue and net income are  adversely  affected.  The
Company's annual results  fluctuate as well. There can be a difference of two to
three  days of system  operation  from one year to the next.  For  example,  the
Company  operated a full system on 200 days in fiscal  1996,  197 days in fiscal
1995 and 199 days in fiscal 1994.  The Company  expects to fly a full system 199
days in fiscal 1997.

Operating  results are also  affected  by the  weather.  The  Company  generally
experiences higher  maintenance costs during its second quarter.  Winter weather
also requires  additional  costs for de-icing,  hangar rental and other aircraft
services.  The Company's cash flows are also  influenced by the budget cycles of
its primary  customers.  Many financial  institutions  have calendar year budget
cycles and desire to pay for December  services  prior to year end. This results
in increased  cash flows for the  Company's  first fiscal  quarter but decreased
cash flows in January and February.

Selected Quarterly Data

The following is a summary of the unaudited  quarterly results of operations for
the years ended September 30, 1996 and 1995:

<TABLE>
                                                                          Quarter
                                        ------------------------------------------------------------------------
                                            First          Second          Third          Fourth          Year
----------------------------------------------------------------------------------------------------------------
                                                     (in thousands except per share data)
<S>                     <C>                <C>            <C>             <C>            <C>            <C>    
Total revenues
                        1996               $17,341        $18,168         $19,888        $20,299        $75,696
                        1995                15,635         16,817          17,712         17,298         67,462

Income from operations
                        1996                 2,189          2,240           3,792          5,067         13,288
                        1995                 1,744          1,750           2,296          2,285          8,075

Historical net income (loss)
                        1996                 1,817          1,876        (10,215)          5,053        (1,469)
                        1995                 1,455          1,428           1,856          1,884          6,623

Pro forma net income (loss)
                        1996                 1,983          2,084         (9,780)          3,031        (2,682)
                        1995                 1,638          2,082           2,432          2,242          8,394

Pro forma earnings (loss) per share (Note 1)
                        1996                  $.23           $.25         $(1.02)           $.25         $(.28)
                        1995                   .19            .24             .29            .27           1.00

</TABLE>


                                      -28-
<PAGE>

<TABLE>

<S>                     <C>                <C>            <C>             <C>            <C>            <C>    
Adjusted Pro forma net income (Note 2)
                        1996                $1,983         $2,084          $2,901         $3,031         $9,999
                        1995                 1,638          2,082           2,432          2,242          8,394

Adjusted Pro forma earnings per share (Note 3)
                        1996                  $.16           $.17            $.24           $.25           $.81
                        1995                   .13            .17             .20            .18            .68

</TABLE>
---------------------

(Note 1) - Calculated  based on  weighted  average  common  shares  outstanding,
     including WIE warrants.

(Note 2) - Excludes the effects of the Offering related  non-cash, non-recurring
     expenses.
(Note 3) - Assumes all common shares issued during the Offering were outstanding
     for the entire period.


Inflation

Historically,  inflation  has not  been a  significant  factor  to the  Company.
Although the value of the Company's service to its primary customers is enhanced
by higher  interest rates,  the volume of business has not changed  historically
with  fluctuating  interest  rates.  The Company has  attempted  to minimize the
effects of inflation on its  operating  results  though rate  increases and cost
controls, including the development of a fuel rebate/surcharge program. Pursuant
to this program,  as the OPIS-CMH price of jet fuel exceeds $.75 per gallon, the
Company's customers are surcharged. Inversely, if the OPIS-CMH price falls below
$.68 per gallon, the Company's customers receive a rebate.

Environmental Matters

The Company believes that compliance with environmental matters has not had, and
is not expected to have, a material  effect on operations.  Although the Company
believes that it is in compliance  with all applicable  noise level  regulations
and is working  proactively  with various local  governments  to minimize  noise
issues,  future noise  pollution  regulations  could require the  replacement of
several of the Company's aircraft.

Safe Harbor Statement

The Private  Securities  Litigation  Reform Act of 1995 (the  "Act")  provides a
"safe harbor" for  forward-looking  statements to encourage companies to provide
prospective   information  so  long  as  these   statements  are  identified  as
forward-looking  and  are  accompanied  by  meaningful   cautionary   statements
identifying  factors that could cause actual results to differ  materially  from
those  discussed in the statement.  The Company desires to take advantage of the
"safe  harbor"  provisions  of  the  Act.  Certain   information,   particularly
information  regarding  future  economic  performance and finances and plans and
objectives of management,  contained, or incorporated by reference, in this Form
10-K is forward-looking.  In some cases, information regarding certain important
factors  that could  cause  actual  results to differ  materially  from any such

                                      -29-
<PAGE>


forward-looking  statement  appear  together  with  such  statement.  Also,  the
following  factors,  in addition  to other  possible  factors not listed,  could
affect the Company's actual results and cause such results to differ  materially
from those expressed in forward-looking statements:

Competition.  The market for scheduled air and ground delivery service is highly
competitive. The Company's bank services division competes primarily against the
Federal  Reserve's  ITS,  which has  significantly  greater  financial and other
resources  than the  Company.  The Federal  Reserve is regulated by the Monetary
Control Act of 1980 (the "Monetary Control Act"), which in general requires that
the Federal  Reserve  price its  services on a cost basis plus a set  percentage
private  market  adjustment.  Failure by the Federal  Reserve to comply with the
Monetary Control Act could have an adverse competitive impact on the Company. In
addition,  there can be no assurance  that the Monetary  Control Act will not be
amended,  modified or repealed,  or that new legislation affecting the Company's
business will not be enacted.  Although the entrance of such major  participants
in the next-day  and  second-day  air delivery  market as UPS and FedEx into the
business of same-day and early morning  delivery has not had a material  adverse
effect on the Company's  business to date,  there can be no assurance that these
competitors will not have such an effect in the future.

Interest  rate   fluctuations.   The  value  of  the  Company's  canceled  check
transportation  services to its  banking  customers  is directly  related to the
federal funds rate,  which is determined by the Federal  Reserve and  represents
the rate of  interest  that  banks can earn on  timely  delivered  shipments  of
canceled  checks.  If the federal  funds rate were to drop to  historically  low
levels,  the resulting  diminution in the value of the Company's services to its
banking customers could adversely affect the Company's business.

Technology.  Some analysts have  predicted  that the increased use of electronic
funds transfers will lead to a "checkless society", which could adversely affect
the  demand  for the  Company's  delivery  services  to the  financial  services
industry.  In addition,  some  banking  industry  analysts  have  predicted  the
development  of  various  forms of  imaging  technology  that  could  reduce  or
eliminate  the  need  for  prompt  delivery  of  canceled   checks.   Similarly,
technological  advances in the nature of  "electronic  mail" and "telefax"  have
affected  the demand for on-call  delivery  services by small  package  delivery
customers.  While none of these  technological  advance  have had a  significant
adverse  impact on the  Company's  business to date,  there can be no assurances
that these or similar technologies, or other regulatory or technological changes
in the check clearance and national  payment  systems,  will not have an adverse
effect on the Company's business in the future.

Risks related to growth  through  acquisitions.  One of the  Company's  business
strategies  is to increase its  revenues,  earnings and market share through the
acquisition of companies that will complement its existing operations or provide
it with an entry  into  markets  it does not  currently  serve.  Growth  through
acquisition involves substantial risks, including the risk of improper valuation
of the acquired business and the risk of inadequate integration. There can be no

                                      -30-
<PAGE>


assurances that the suitable acquisition candidates will be available,  that the
Company will be able to acquire or profitably  manage such additional  companies
or that future acquisitions will produce returns that justify the investment. In
addition,  the Company may compete for acquisitions and expansion  opportunities
with companies that have significantly greater resources than the Company.

The Company  currently  intends to finance future  acquisitions  by using Common
Shares for all or a portion of the consideration to be paid, which may result in
substantial  dilution to the current holders of the Common Shares.  In the event
the  Common  Shares  do  not  maintain  a  sufficient  valuation,  or  potential
acquisition  candidates are unwilling to accept the Common Shares as part of the
consideration for the sale of their  businesses,  the Company may be required to
utilize  more of its cash  resources,  if  available,  in order  to  pursue  its
acquisition  strategy.  If the Company does not have  sufficient cash resources,
its growth  potential  could be limited  and its  existing  operations  could be
impaired unless its is able to obtain additional  capital through future debt or
equity  financing.  There can be no  assurance  that the Company will be able to
obtain such  financing or that, if available,  such  financing  will be on terms
acceptable to the Company.

Dependence  on key  supplier.  The Company  currently  utilizes  the services of
Garrett Aviation  exclusively for major period inspections and core overhauls of
its 30-series Learjets. This reliance on a sole supplier involves several risks,
including a risk of the  unavailability  of these services and a reduced control
of pricing  and  completion  times for such  services.  Failure to receive  such
services from Garrett Aviation or an alternative supplier on a timely basis or a
substantial increase in the prices of such services could have an adverse effect
on the Company's business.

Permits and licensing; regulation. The Company's delivery operations are subject
to various federal,  state and local  regulations that in many instances require
permits and  licenses.  Failure by the Company to maintain  required  permits or
licenses,  or to  comply  with  the  applicable  regulations,  could  result  in
substantial fines or possible  revocation of the Company's  authority to conduct
certain of its  operations.  Furthermore,  acquisitions  by the Company could be
impeded  by delays  in  obtaining  approvals  for the  transfer  of  permits  or
licenses, or failure to obtain such approvals

The  Company's   flight   operations  are  regulated  by  the  Federal  Aviation
Administration  (the "FAA") under Part 135 of the Federal Aviation  Regulations.
Among other things,  these regulations  govern  permissible flight and duty time
for aviation flight crews. The FAA is currently contemplating certain changes in
flight and duty time guidelines, which, if adopted, could increase the Company's
operating costs. These changes,  if adopted,  could also require the Company and


                                      -31-
<PAGE>

other operators  regulated by the FAA to hire additional  flight crew personnel.
No changes of this nature have been adopted at this time. In addition, Congress,
from time to time, has  considered  various means,  including  excise taxes,  to
raise revenues directly from the airline industry to pay for air traffic control
facilities  and  personnel.  There can be no  assurances  that Congress will not
change the  current  federal  excise tax rate or enact new excise  taxes,  which
could adversely affect the Company's business.

ITEM 8  -  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   Index to Consolidated Financial Statements

Report of Independent Auditors.....................................    Page 37

Consolidated Balance Sheets as of September 30, 1996 and 1995......    Page 38

Consolidated Statements of Operations for the years ended
September 30, 1996, 1995 and 1994..................................    Page 39

Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995 and 1994..................................    Page 40

Consolidated Statements of Changes in Shareholders' Equity
for the years ended September 30, 1996, 1995 and 1994..............    Page 41

Notes to Consolidated Financial Statements......................... Page 42-53


Quarterly Results of Operations are included in ITEM 7 - MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS under the caption
"Selected Quarterly Data".

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

There have been no changes in or disagreements with the Company's accountants on
matters of accounting or financial disclosure.


                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

In accordance with General  Instruction G(3), the information  required by Items
401 and 405 of Regulation S-K which will be included in the Company's definitive
Proxy  Statement for its Annual Meeting of  Shareholders  to be held on March 6,
1997,  to be filed with the  Securities  and  Exchange  Commission  pursuant  to
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Proxy
Statement"), is incorporated herein by reference.


                                      -32-
<PAGE>

The information concerning the Company's executive officers required by Item 401
of  Regulation  S-K is  included in Part I hereof  under the caption  "Executive
Officers of the Registrant".

ITEM 11 -  EXECUTIVE COMPENSATION

In accordance with General  Instruction  G(3), the information  required by Item
402 of Regulation S-K which will be included in the Company's  definitive  Proxy
Statement,  is  incorporated  by  reference.  Neither  the  report on  executive
compensation nor the performance graph included in the Company's Proxy Statement
shall deemed to be incorporated herein by reference.

ITEM 12  -  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

In accordance with General  Instruction  G(3), the information  required by Item
403 of Regulation S-K which will be included in the Company's  definitive  Proxy
Statement, is incorporated herein by reference.

ITEM 13  -  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In accordance with General  Instruction  G(3), the information  required by Item
404 of Regulation S-K which will be included in the Company's  definitive  Proxy
Statement is incorporated herein by reference.


                                     PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Documents Filed as Part of this Report

     1.   The  response to this  portion of Item 14 is  submitted  as a separate
          section of this Annual Report on Form 10-K.  See Item 8 above.

     2.   Schedule II - Valuation and Qualifying Accounts............... page 54

          Schedules  not listed  above have been  omitted  because  they are not
          required  or the  information  required  to be set  forth  therein  is
          included in the Consolidated Financial Statements or Notes thereto.


                                      -33-
<PAGE>


       3.  Exhibits

           Exhibits  filed  with this  Annual  Report on Form 10-K are  attached
           hereto. For a list of such exhibits,  see "Index to Exhibits" at page
           55. The  following  table  provides  certain  information  concerning
           executive compensation plans and arrangements required to be filed as
           exhibits to this Annual Report on Form 10-K.

                  Executive Compensation Plans and Arrangements

Exhibit No.       Description                     Location
-----------       -----------                     --------

   10.1     Deferred        Compensation      Incorporated     herein    by
            Agreement    dated   as   of      reference to  Exhibit 10.2 to
            December 18,   1986  between      the  Company's   Registration
            the  Company  and   Glenn M.      Statement     on     Form S-1
            Miller, as amended                (Registration   No. 333-3092)
                                              filed on  April 2,  1996 (the
                                              "Form S-1")

   10.2     Deferred        Compensation      Incorporated     herein    by
            Agreement    dated   as   of      reference to  Exhibit 10.3 to
            December 19,   1986  between      the Company's Form S-1
            the Company  and  Charles A.     
            Renusch, as amended              

   10.3     Deferred        Compensation      Incorporated     herein    by
            Agreement    dated   as   of      reference to  Exhibit 10.4 to
            February 10,   1989  between      the Company's Form S-1
            the   Company   and  Eric P.     
            Roy, as amended                  

   10.4     Deferred        Compensation      Incorporated     herein    by
            Agreement    dated   as   of      reference to  Exhibit 10.5 to
            February 10,   1989  between      the Company's Form S-1
            the   Company   and   Guy S.     
            King, as amended                 

   10.5     Deferred        Compensation      Incorporated     herein    by
            Agreement    dated   as   of      reference to  Exhibit 10.6 to
            October 17,   1990   between      the Company's Form S-1
            the Company  and  Lincoln L.     
            Rutter, as amended               

   10.6     Deferred        Compensation      Incorporated     herein    by
            Agreement    dated   as   of      reference to  Exhibit 10.7 to
            July 18,  1991  between  the      the Company's Form S-1
            Company    and    William R.     
            Sumser, as amended               

   10.7     Deferred        Compensation      Incorporated     herein    by
            Agreement    dated   as   of      reference to  Exhibit 10.8 to
            October 1,  1991 between the      the Company's Form S-1
            Company    and    Kendall W.     
            Wright, as amended               

   10.8     Form   of   Amendment    and      Incorporated     herein    by
            Waiver      to      Deferred      reference to  Exhibit 10.9 to
            Compensation       Agreement      the    Company's    Amendment
            dated  as  of  May 2,   1996      No. 1       to       Form S-1
            between   the   Company  and      Registration        Statement
            each  of   Messrs.   Miller,      (Registration   No. 333-3092)
            Renusch,  Roy, King, Rutter,      filed    on    May 7,    1996
            Sumser  and   Wright   (each      ("Amendment No. 1")
            separate     amendment    is     
            substantially  identical  in     
            all respects)                    


                                      -34-
<PAGE>


   10.9     AirNet  Systems,  Inc.  1996      Incorporated     herein    by
            Incentive Stock Plan              reference  to   Exhibit 10.10
                                              to  the  Company's  Amendment
                                              No. 1
                                                 
(b)    Reports on Form 8-K:

       No  reports  on Form 8-K were  filed  during  the  fiscal  quarter  ended
September 30, 1996.

(c)    Exhibits

       See Item 14(a) (3) above.

(d)    Financial Statement Schedules

       The  response  to this  portion  of Item 14 is  submitted  as a  separate
section of this Report.


                                      -35-
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

                                                     AIRNET SYSTEMS, INC.


Dated: December 19, 1996            By: /s/ Gerald G. Mercer
                                        ________________________________________
                                        Gerald G. Mercer, Chairman of the Board,
                                        President and Chief Executive Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


      Signature                   Title                              Date
     -----------                 -------                            ------

/s/ Gerald G. Mercer     Chairman of the Board, President,     December 19, 1996
________________________ Chief Executive Officer and Director
Gerald G. Mercer         (Principal Executive Officer)

/s/ Eric P. Roy          Director, Executive Vice President,   December 19, 1996
________________________ Chief Operating Officer, Chief
Eric P. Roy              Financial Officer and Treasurer 
                         (Principal Financial and Accounting
                         Officer)

*Roger D. Blackwell      Director                              December 19, 1996
________________________
Roger D. Blackwell

*Tony C. Canonie, Jr.    Director                              December 19, 1996
________________________
Tony C. Canonie, Jr.

*Russell M. Gertmenian   Director                              December 19, 1996
________________________
Russell M. Gertmenian

*J. F. Keeler, Jr.       Director                              December 19, 1996
________________________
J. F. Keeler, Jr.

*By /s/ Gerald G. Mercer
________________________
    Gerald G. Mercer
    Attorney-in-Fact


                                      -36-
<PAGE>


                         Report of Independent Auditors



Shareholders and Board of Directors
AirNet Systems, Inc.


We have audited the accompanying  consolidated balance sheets of AirNet Systems,
Inc. and subsidiary (the Company), formerly New Creations, Inc., as of September
30,  1996 and 1995,  and the  related  consolidated  statements  of  operations,
shareholders'  equity,  and cash flows for each of the three years in the period
ended  September  30, 1996.  Our audits also  included the  financial  statement
schedule  listed in the Index at Item  14(a).  These  financial  statements  and
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall 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 consolidated financial position of AirNet
Systems,   Inc.  and  subsidiary  at  September  30,  1996  and  1995,  and  the
consolidated  results  of its  operations  and cash  flows for each of the three
years in the period ended  September  30, 1996,  in  conformity  with  generally
accepted  accounting  principles.  Also, in our opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.




Columbus, Ohio
November 22, 1996

                                      -37-
<PAGE>
<TABLE>
                              AirNet Systems, Inc.
                           Consolidated Balance Sheets
                                                                              September 30,
                                                                    ------------------------------
                                                                        1996              1995
                                                                      --------          --------
ASSETS
<S>                                                                 <C>               <C>         
Current assets:
     Cash                                                           $ 11,405,672      $    238,394
     Accounts receivable:
        Trade, less allowances of $14,000 and $2,000 in
            1996 and 1995, respectively                                6,849,606         6,057,987
        Shareholder, affiliates, and employees                           260,220           303,490
     Spare parts and supplies                                          5,195,917         3,932,956
     Deposits and prepaids                                             2,979,580         2,195,115
                                                                    ------------      ------------
Total current assets                                                  26,690,995        12,727,942

Net property and equipment (Note 3)                                   40,721,952        32,833,612

Other assets:
     Intangibles, net of accumulated amortization of $1,267,000
       and $3,404,000 in 1996 and 1995, respectively                   1,741,091         3,418,276
     Other                                                                51,860            57,060
     Deferred tax asset (Notes 2 and 9)                                5,803,057                 0
                                                                    ------------      ------------
Total assets                                                        $ 75,008,955      $ 49,036,890
                                                                    ============      ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                               $  3,686,733      $  3,937,894
     Salaries and related liabilities                                  1,223,820           556,778
     Accrued expenses                                                    553,359         1,605,619
     Deferred taxes (Note 9)                                             208,995                 0
     Current portion of notes payable (Note 4)                                 0         5,565,706
                                                                    ------------      ------------
Total current liabilities                                              5,672,907        11,665,997

Notes payable, less current portion (Note 4)                                   0        13,662,633
Deferred tax liability (Note 9)                                        3,397,062                 0
Deferred compensation (Note 2)                                                 0         3,238,856

Shareholders' equity (Note 2):
     Preferred stock, $.01 par value; 10,000,000 shares
       authorized; and no shares issued and outstanding                        0                 0
     Common stock, $.01 par value; 40,000,000 shares
       authorized; and 12,317,835 and 5,710,608 shares
       issued and outstanding  in 1996 and 1995, respectively            123,178            57,106
     Additional paid-in-capital                                       75,929,927           349,534
     Retained earnings                                               (10,114,119)       20,385,860
     Notes receivable from shareholders                                        0          (323,096)
                                                                    ------------      ------------
Total shareholders' equity                                            65,938,986        20,469,404

                                                                    ------------      ------------
Total liabilities and shareholders' equity                          $ 75,008,955      $ 49,036,890
                                                                    ============      ============

      See notes to financial statements

</TABLE>

                                      -38-
<PAGE>
<TABLE>
                              AirNet Systems, Inc.
                      Consolidated Statements of Operations

                                                                  Years Ended September 30,
                                                       ---------------------------------------------
                                                            1996             1995           1994
                                                          --------         --------       --------
<S>                                                    <C>               <C>             <C>        
Revenues
   Air transportation,  net of excise tax
      of $716,000, $1,810,000 and $1,841,000
      for the years ended September 30, 1996,
      1995 and 1994:
     Check delivery                                    $ 65,024,522      $58,263,706     $54,046,381
     Small package delivery                               9,608,279        8,191,723       8,241,332
   Fixed base operations                                  1,063,583        1,006,529       1,158,044
                                                       ------------      -----------     -----------
Total revenues                                           75,696,384       67,461,958      63,445,757

Costs and expenses
   Air transportation
     Wages and benefits                                   9,862,436        9,195,208       8,185,759
     Aircraft fuel                                        8,177,970        7,444,878       6,958,282
     Aircraft maintenance                                 6,551,792        6,033,739       5,720,763
     Aircraft leases                                        772,900        1,042,653       3,260,273
     Ground couriers and other outside services           9,390,174        8,611,022       8,346,805
     Depreciation and amortization                        8,472,864        7,353,753       6,332,667
     Other                                                7,237,271        6,429,319       5,765,303
   Fixed base operations                                  1,033,068          955,792       1,081,502
   Selling, general and administrative
     Executive compensation                               3,452,336        3,952,388       3,284,619
     Other executive compensation (Note 2)                2,124,386        2,635,157       1,598,176
     Noncompetition agreements (Note 2)                     919,675        2,327,726       1,813,114
     Other                                                4,413,014        3,404,796       3,787,703
                                                       ------------      -----------     -----------
Total costs and expenses                                 62,407,886       59,386,431      56,134,966
                                                       ------------      -----------     -----------
Income from operations                                   13,288,498        8,075,527       7,310,791
Interest expense                                          1,053,169        1,452,066       1,092,990
Offering related non-recurring expenses (Note 2)         13,704,398                0               0
                                                       ------------      -----------     -----------
Income (loss) before taxes                             (  1,469,069)       6,623,461       6,217,801
Income tax provision                                      1,764,000                0               0
Tax provision due to change in tax status (Note 9)        2,438,000                0               0
                                                       ------------      -----------     -----------
Net Income (loss)                                      ($ 5,671,069)     $ 6,623,461     $ 6,217,801
                                                       ============      ===========     ===========

Pro forma information (Note 13):
   Historical income (loss) before taxes               ($ 1,469,069)     $ 6,623,461
   Proforma adjustments other than income taxes           4,429,470        7,367,337
                                                        -----------      -----------
   Pro forma income before taxes                          2,960,401       13,990,798
   Pro forma taxes on income                              5,642,575        5,596,319
                                                        -----------      -----------
   Pro forma net income (loss)                         ($ 2,682,174)     $ 8,394,479
                                                        ===========      ===========

   Pro forma net income (loss) per common share         ($     0.28)     $      1.00
                                                        ===========      ===========

   Weighted average common shares outstanding             9,663,453        8,361,359
                                                        ===========      ===========

</TABLE>

See notes to financial statements


                                      -39-
<PAGE>
<TABLE>
                              AirNet Systems, Inc.
                      Consolidated Statements of Cash Flows

                                                                               Year ended September 30
                                                                 ------------------------------------------------
                                                                      1996              1995              1994
                                                                    --------          --------          --------
<S>                                                              <C>               <C>               <C>         
Operating activities
Net income (loss)                                                ($ 5,671,069)     $  6,623,461      $  6,217,801
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
        Offering related non-recurring, non-cash expenses          13,704,398                 0                 0
        Depreciation and amortization                               8,547,537         7,435,602         6,394,898
        Amortization of intangibles                                   351,327           435,902           435,902
        Deferred taxes                                              4,202,000                 0                 0
        Provision for losses on accounts receivable                    12,170           (38,384)          (63,436)
        Deferred compensation                                         445,147           275,465         1,009,826
        Loss on disposition of assets                                  81,931            73,472           287,468
        Change in operating assets and liabilities:
               Accounts receivable                                   (451,833)          495,011          (760,059)
               Spare parts and supplies                              (892,318)         (441,864)          151,609
               Prepaid expenses                                      (752,509)         (701,046)         (118,210)
               Accounts payable                                      (729,721)          657,241           989,483
               Accrued expenses                                    (1,300,261)          180,154           (25,339)
               Salaries and related liabilities                       637,531           266,210           119,825
               Other, net                                               5,200            49,100            81,950

                                                                 ------------      ------------      ------------
Net cash provided by operating activities                          18,189,530        15,310,324        14,721,718

Investing activities
Purchase of property and equipment - net                          (14,294,109)      (14,222,791)      (12,814,436)
Purchase of Midway Aviation, net of cash acquired  (Note 10)       (2,810,416)                0                 0
                                                                 ------------      ------------      ------------
Net cash used in investing activities                             (17,104,525)      (14,222,791)      (12,814,436)

Financing activities
Proceeds from issuance of common stock                             82,697,107                 0                 0
Proceeds from shareholder notes receivable                            323,096            41,287                 0
Net proceeds (repayment) of borrowings under the revolving
   credit facility                                                 (7,525,000)        1,350,000           875,000
Repayment of long-term debt                                       (14,451,339)      (10,311,899)       (2,280,021)
Proceeds from the issuance of long-term debt                        2,748,000        11,940,000         4,486,000
Distributions to shareholders                                     (23,807,806)       (4,125,946)       (5,080,924)
Purchase of Donald  Wright warrant                                (29,901,785)                0                 0

                                                                 ------------      ------------      ------------
Net cash provided by (used in) financing activities                10,082,273        (1,106,558)       (1,999,945)

                                                                 ------------      ------------      ------------
Net increase (decrease) in cash                                    11,167,278           (19,025)          (92,663)
Cash at beginning of period                                           238,394           257,419           350,082

                                                                 ------------      ------------      ------------
Cash at end of period                                            $ 11,405,672      $    238,394      $    257,419
                                                                 ============      ============      ============

</TABLE>

See notes to the financial statements

                                      -40-
<PAGE>

<TABLE>

                              AirNet Systems, Inc.
           Consolidated Statements of Changes in Shareholders' Equity


                                                               Common Stock                                                       
                                                   --------------------------------------      Additional                         
                                                       Number of                                Paid-in             Retained      
                                                        Shares               Amount             Capital             Earnings      
                                                   ------------------   -----------------   -----------------   ----------------- 
<S>                                                       <C>                   <C>              <C>                <C>           
Balance October 1, 1993                                    4,225,700             $42,257                --           $16,751,468  
Year ended September 30, 1994 -
   Net income                                                   --                  --                  --             6,217,801  
   Issued stock                                            1,484,908              14,849            $349,534                --    
   Shareholder distributions                                    --                  --                  --            (5,080,924) 
                                                   ------------------   -----------------   -----------------   ----------------- 
Balance September 30,1994                                  5,710,608              57,106             349,534          17,888,345  
Year ended September 30, 1995 -
   Net income                                                   --                  --                  --             6,623,461  
   Repayment of notes                                           --                  --                  --                  --    
   Shareholder distributions                                    --                  --                  --            (4,125,946) 
                                                   ------------------   -----------------   -----------------   ----------------- 
Balance September 30, 1995                                 5,710,608              57,106             349,534          20,385,860  
Year ended September 30, 1996 -
   Net loss                                                     --                  --                  --            (5,671,069) 
   Repayment of notes (Note 2)                                  --                  --                  --                  --    
   Shareholder distributions                                    --                  --                  --            (2,807,806) 
   Issuance of common stock, net
      of IPO related expenses (Note 1)                     6,440,000              64,400          82,632,507                --    
   AAA distributions related to S Corp
       shareholders (Note 2)                                    --                  --                  --           (21,000,000) 
   Purchase of Donald Wright warrant (Note 2)                   --                  --           (29,901,785)               --    
   Exercise of Jeffrey Wright warrant (Note 2)               167,227               1,672              (1,472)               --    
   Reclassification of undistributed S Corp
      retained earnings                                         --                  --             1,021,104          (1,021,104)
   Tax benefit related to cancellation
      of Donald Wright warrant (Note 2)                         --                  --             7,000,000                --    
   Compensation expense related to
      stock purchase agreements (Note 2)                        --                  --            14,830,039                --    
                                                   ------------------   -----------------   -----------------   ----------------- 
Balance September 30, 1996                                12,317,835            $123,178         $75,929,927        ($10,114,119) 
                                                   ==================   =================   =================   ================= 

- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ABOVE TABLE IS SPLIT AT RIGHT MARGIN AND CONTINUED BELOW:
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -

                                                            Notes                           
                                                          Receivable                        
                                                             From                           
                                                         Shareholders           Total       
                                                       -----------------   ---------------- 
                                                    <C>                 <C>          
Balance October 1, 1993                                         --          $16,793,725  
Year ended September 30, 1994 -                                                            
   Net income                                                   --            6,217,801    
   Issued stock                                            ($364,383)                      
   Shareholder distributions                                    --           (5,080,924)   
                                                    -----------------   ----------------   
Balance September 30,1994                                   (364,383)        17,930,602    
Year ended September 30, 1995 -                                                            
   Net income                                                   --            6,623,461    
   Repayment of notes                                         41,287             41,287    
   Shareholder distributions                                    --           (4,125,946)   
                                                    -----------------   ----------------   
Balance September 30, 1995                                  (323,096)        20,469,404    
Year ended September 30, 1996 -                                                            
   Net loss                                                     --           (5,671,069)   
   Repayment of notes (Note 2)                               323,096            323,096    
   Shareholder distributions                                    --           (2,807,806)   
   Issuance of common stock, net                                                           
      of IPO related expenses (Note 1)                          --           82,696,907    
   AAA distributions related to S Corp                                                     
       shareholders (Note 2)                                    --          (21,000,000)   
   Purchase of Donald Wright warrant (Note 2)                   --          (29,901,785) 
   Exercise of Jeffrey Wright warrant (Note 2)                  --                  200    
   Reclassification of undistributed S Corp                                                
      retained earnings                                         --                 --      
   Tax benefit related to cancellation                                                     
      of Donald Wright warrant (Note 2)                         --            7,000,000    
   Compensation expense related to                                                         
      stock purchase agreements (Note 2)                        --           14,830,039    
                                                    -----------------   ----------------   
Balance September 30, 1996                                        $0        $65,938,986    
                                                    =================   ================   
                                                                                         
                                                  

</TABLE>

See notes to financial statements


                                      -41-
<PAGE>

                              AIRNET SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1996


1.          Significant Accounting Policies

     AirNet  Systems,  Inc. and its  subsidiary  (the  "Company"),  formerly New
Creations, Inc., operates a fully integrated national air transportation network
which provides delivery service for time-critical shipments for customers in the
U.S.  banking  industry and other  industries.  The Company  also offers  retail
aviation fuel sales and related  ground  services for customers at its Columbus,
Ohio facility.

     On May 29,  1996,  the  registration  statement  related  to the  Company's
initial public offering (the  "Offering") was declared  effective by the SEC and
its stock began  trading on The NASDAQ  National  Market System on May 31, 1996.
Pursuant to the terms of the Offering,  the Company issued  6,440,000  shares of
common stock,  including  840,000 shares issued through the  underwriters'  full
exercise of their  over-allotment  option on June 11, 1996, at $14.00 per share.
Net proceeds of the offering totaled  $83,848,800  before deducting  expenses of
$1,151,893. See Note 2 - Initial Public Offering.

     Basis of Presentation
     The accompanying  consolidated financial statements include the accounts of
the  Company  and its  wholly-owned  subsidiary.  All  significant  intercompany
accounts and transactions have been eliminated.

     The preparation of the consolidated financial statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts  reported in the consolidated  financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.

     Revenue Recognition
     Revenue on air transportation  services is recognized when the packages are
picked up for delivery to their  destination.  Revenue on fixed based operations
is recognized when the maintenance services are complete or fuel is delivered.

     Cash and Cash Equivalents
     Cash and cash equivalents  consist of highly liquid  investments  which are
unrestricted  as to  withdrawal  or use, and which have an original  maturity of
three months or less. Cash  equivalents are stated at cost,  which  approximates
market value.


                                      -42-
<PAGE>


     Accounts Receivable
     For fiscal 1996,  approximately  86% and 77% of the Company's  revenues and
related  receivables,  respectively,  were generated  from customers  within the
banking  industry.  The Company  performs  periodic  credit  evaluations  of its
customer's  financial condition and generally does not require  collateral.  The
Company  establishes  an  allowance  for  doubtful  accounts  based upon factors
surrounding the credit risks of specific customers,  historical trends and other
information.

     Spare Parts and Supplies
     Spare parts and supplies are valued at the lower of cost (weighted  average
method) or market.

     Property and Equipment
     Property and  equipment  are stated at cost.  Engine,  overhauls  and major
inspections,  which have been capitalized and included in flight equipment,  are
depreciated and amortized on the basis of hours flown.  Airframes,  other flight
equipment and other property and equipment  (primarily  furniture and equipment,
leasehold  improvements  and vehicles) are depreciated  using the  straight-line
method over estimated useful lives of the assets, as summarized below:

            Airframes                             7 - 15 years
            Other flight equipment                2 -  3 years
            Other property and equipment          3 -  7 years

     Leasehold  improvements are amortized over the lease terms or the estimated
useful lives of the assets, whichever is less.

     Prepaid Expenses
     The Company  prepays  certain  engine  repair and overhaul  services  under
manufacturer service plans. Such prepaid balances were $1,252,920 and $1,026,571
at September  30, 1996 and 1995,  respectively,  and are  included  with prepaid
expenses on the balance sheet.


                                      -43-
<PAGE>



     Income Taxes
     Prior to the Offering,  the Company's income was taxed under the provisions
of  Subchapter S of the Internal  Revenue Code of 1986,  which  provides that in
lieu of corporate  income taxes, the shareholders of the S Corporation are taxed
on their  proportionate  share of the Company's  taxable income.  Therefore,  no
provision or liability  for federal  income tax has been  included in historical
financial statements prior to May 31, 1996, the date of the Offering.

     Upon  completion  of the  Offering,  the Company  ceased to qualify as an S
Corporation and was subject to corporate  income taxes. The Company accounts for
income  taxes under the  liability  method  pursuant to  Statement  of Financial
Accounting  Standard No. 109 "Accounting for Income Taxes".  Under the liability
method,  deferred  tax  liabilities  and  assets  are  determined  based  on the
differences  between  the  financial  reporting  and tax  bases  of  assets  and
liabilities  using enacted tax rates and laws that will be when the  differences
were expected to reverse.

     Intangibles
     Intangibles include non-competition  agreements with former competitors and
goodwill generated through the acquisition of companies.  The balances are being
amortized on the straight-line method over periods ranging from one to 25 years.

     Stock-Based Compensation
     The  Company  measures  compensation  cost  for  stock  options  issued  to
employees using the intrinsic value based method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees". In October 1995, the
Financial  Accounting  Standards Board issued Statement of Financial  Accounting
Standards No. 123,  "Accounting  for  Stock-Based  Compensation"  (Statement No.
123). Pursuant to the new standard,  companies are encouraged, but not required,
to adopt the fair value  method of  accounting  for stock  options  and  similar
equity instruments.  The Company has elected to continue to measure compensation
cost in  accordance  with APB  Opinion  No.  25 and will  adopt  the  additional
disclosure requirements of Statement No. 123 in fiscal 1997.


                                      -44-
<PAGE>



     Statement of Cash Flows
     Cash paid for interest was  $1,239,871,  $1,264,522  and $1,078,470 for the
years ended  September 30, 1996,  1995 and 1994,  respectively.  With respect to
non-cash  activities,  the Company  converted a $550,000 note receivable under a
land contract to property during the year ended September 30, 1995.

2.   Initial Public Offering

            The following is a summary of transactions  related to the Company's
public offering:

     AAA Distributions
     Prior to the Offering, the Company made $21,000,000 in distributions to the
S Corporation  shareholders for the undistributed  earnings  associated with the
Company's S  Corporation  status  (referred  to as "AAA  distributions").  These
distributions  were made through the Company's  issuance of promissory  notes to
such  shareholders.  The  notes  were  subsequently  paid off with the  offering
proceeds.

     Termination of Stock Purchase Agreements
     On April 1, 1994, the Company  entered into stock purchase  agreements with
seven  executive  officers,  in which these  officers  purchased an aggregate of
1,484,908  shares of common stock for an aggregate  purchase  price of $364,000,
paid through the delivery of promissory  notes. Upon completion of the Offering,
the stock purchase  agreements were terminated and the seven officers repaid the
balances  due on the notes  totaling  $283,856.  The  transaction  resulted in a
decrease in notes receivable from  shareholders and a corresponding  increase in
cash.

     In  addition,  as a  result  of  the  termination  of  the  stock  purchase
agreements,   the  Company   incurred  a   non-recurring,   non-cash  charge  of
$14,830,039,  which increased paid-in capital.  The charge is not tax deductible
and represents a portion of the  $21,000,000 of AAA  distributions  to the seven
executive  officers not previously  recorded as compensation  expense,  plus the
difference  between  the  net  offering  price  and the net  book  value  of the
1,484,908 shares of common stock held by the officers at the termination date of
the  agreements.  This  distribution of  undistributed  earnings to the former S
Corporation  shareholders  also  eliminated a $1,654,328  deferred  compensation
liability   related  to  the  stock  purchase   agreements  and  resulted  in  a
non-recurring, non-cash reduction of expense in the statement of operations.

                                      -45-
<PAGE>



     Termination of Deferred Compensation Agreements
     Prior to the  Offering,  the Company  entered  into  deferred  compensation
agreements with certain  executive  officers,  pursuant to which the Company was
obligated to pay these officers deferred  compensation  equal to a percentage of
the increase on the Company's net book value.  Upon  completion of the Offering,
the  officers  agreed to  terminate  the  agreements  and forgive the  remaining
balances  totaling  $2,029,675  due to  them.  This  transaction  resulted  in a
decrease of the deferred  compensation  liability and a non-recurring,  non-cash
reduction of expense in the statement of operations.


     Termination of the Wright Agreement and Purchase of Warrants
     In 1988, the Company purchased Wright International Express, Inc. (WIE). In
consideration for the agreement of WIE and Donald Wright not to compete with the
Company, the Company entered into the Wright Agreement. The Wright Agreement, as
amended,  required annual payments tied to the cash flows and the debt to equity
ratio of the Company, to Donald Wright and certain designees.  In addition,  the
Company issued a warrant to Donald Wright to purchase 2,483,537 shares of common
stock and a warrant to Jeffrey Wright (Donald  Wright's son) to purchase 167,227
shares of common stock.  Both warrants  were  exercisable  upon the closing of a
public  offering.  Upon the closing of the Offering,  the Company  purchased the
Donald  Wright  warrant for  $29,901,785  and canceled  the  warrant.  Gerald G.
Mercer, the Company's Chairman and Chief Executive Officer purchased the Jeffrey
Wright  warrant for  $2,013,413 and exercised it subsequent to the completion of
the Offering.

     In connection  with the  repurchase and  cancellation  of the Donald Wright
Warrant and the  corresponding  tax  treatment,  the Company  has  recognized  a
related tax benefit asset estimated to be approximately $7,000,000.  The benefit
from this asset is expected to be realized as cash savings by offsetting  future
tax liabilities. The tax benefit will have no effect on the Company's current or
future  statements of  operations.  The benefit has been reflected as additional
paid-in capital on the balance sheet.

     Upon  cancellation of the Donald Wright warrant,  the Wright  Agreement was
also  terminated  in its  entirety  and no  further  payments  will be made.  In
addition,  the  remaining  net book value of a covenant not to compete  totaling
$2,558,362,  which was recorded at the  inception of the Wright  Agreement,  was
also written off, resulting in a non-recurring, non-cash expense.


                                      -46-
<PAGE>


     Statement of Operations Impact of Offering Transactions
     The following is a summary of the offering  related  transactions and their
effect on the statement of operations for the year ended September 30, 1996:

                                                        Increase / (Decrease)
                                                              to Income
                                                       -------------------------
Compensation expense related to
   the stock purchase agreements                              $(14,830,039)
Write-off of Wright Agreement covenant
   not to compete                                               (2,558,362)
Elimination of deferred compensation 
   liability related to the stock purchase
   agreements                                                    1,654,328
Elimination of the liability for the deferred 
   compensation agreements                                       2,029,675
                                                       -------------------------
                                                              $(13,704,398)
                                                       =========================


3.   Property and Equipment

     Property and equipment consist of the following:

                                                          September 30,
                                                     1996               1995
                                                   --------           --------

Flight equipment                                 $75,038,091         $62,021,356
Other property and equipment                       6,368,788           5,060,676
                                                 -----------         -----------
                                                  81,406,879          67,082,032
Less accumulated depreciation                     40,684,927          34,248,420
                                                 -----------         -----------
                                                 $40,721,952         $32,833,612
                                                 ===========         ===========


4.   Notes Payable

The Company had borrowings from a bank as follows:


                                                 September 30, 1995
                                                 ------------------

Term notes                                           $11,703,339
Revolving credit facility                              7,525,000
                                                     -----------
                                                      19,228,339
Current portion of notes payable                       5,565,706
                                                     -----------
                                                     $13,662,633
                                                     ===========

                                      -47-
<PAGE>

     Prior to the Offering, the Company had various credit arrangements with its
primary lender,  including term notes and an $8,000,000  revolving  credit loan.
The $18,999,512  balance  outstanding on the credit  agreements at June 5, 1996,
the closing date of the Offering, was paid off.

     Simultaneously with the closing of the Offering, the Company entered into a
new credit agreement to replace the existing agreement. The new credit agreement
provides the Company with a $50,000,000 unsecured revolving credit facility. The
agreement  has a five year term and is scheduled to expire on June 5, 2001.  The
agreement  may be extended in one year  increments  at any point through June 5,
2001.  The  agreement  bears  interest at the  Company's  option of a fixed rate
determined by the Eurodollar rate or a negotiated  rate, or a floating rate. The
floating  rate is based on the sum of (a) a margin  plus (b) the  greater of (i)
the prime  rate and (ii) the sum of .5% plus the  federal  funds  rate in effect
from time to time. The new agreement limits the availability of funds to certain
specified percentages of accounts receivable,  inventory and the wholesale value
of aircraft and equipment.  In addition,  the agreement requires the maintenance
of certain minimum net worth and cash flow levels,  imposes certain  limitations
on payments of  dividends,  restricts  the amount  additional  debt and requires
prior bank approval of acquisitions with  consideration of more than $3,000,000.
Commitment fees totalling $250,000 were paid in fiscal 1996. As of September 30,
1996, no balances had been drawn on the new credit agreement.

5.          Lease Obligations

     The Company leases certain flight equipment under  noncancelable  operating
leases expiring  through 1997.  Total rental expense under the flight  equipment
operating  leases was $772,900,  $1,042,653,  and $3,260,273 for the years ended
September 30, 1996, 1995 and 1994, respectively.

     The Company leases one facility from its majority shareholder through 2004.
Total rental expense incurred under the facility lease from this shareholder was
$887,053, $707,305 and $622,650 for the years ended September 30, 1996, 1995 and
1994, respectively.

     As of September 30, 1996,  future minimum lease payments by year and in the
aggregate under  noncancelable  operating leases with initial or remaining terms
exceeding one year are as follows: 1997 - $1,036,333;  1998 - $1,014,333; 1999 -
$1,014,333; 2000 - $1,014,333; 2001 - $1,014,333; and thereafter - $2,873,952.


                                      -48-
<PAGE>


6.   Related Party Transactions

     Since 1992, the Company has leased four aircraft from Dwarf leasing,  Inc.,
a corporation  owned by certain executive  officers of the Company.  Total lease
expenses  were $20,800,  $99,000 and $129,600 for the years ended  September 30,
1996, 1995 and 1994,  respectively.  In fiscal 1995 the Company purchased two of
the  aircraft  for  $250,000  and in fiscal 1996  purchased  the  remaining  two
aircraft  for  $205,000.  The  Company  believes  the terms of such  leases  and
purchases  were  no  less  favorable  than  those   reasonably   available  from
unaffiliated third parties.

     During fiscal 1996,  the Company made  improvements  to its primary  hangar
facility,  which is leased  from its  majority  shareholder.  The  Company  paid
approximately $775,000 for the improvements. The balance was repaid, in full, by
the majority shareholder prior to September 30, 1996.

7.   1996 Incentive Stock Plan

     Pursuant to the Company's Offering, the Company adopted the AirNet Systems,
Inc. 1996 Incentive Stock Plan (the Plan). The Plan provides for the issuance of
incentive and  non-qualified  stock options,  restricted  stock and  performance
shares and a stock purchase plan (collectively "Awards"). The Plan also provides
for each outside  director to receive  2,000 stock  options  annually if certain
requirements  are met. The maximum  number of newly issued shares  available for
issuance under the Plan is 1,150,000  through 2006. The Plan is  administered by
the Compensation  Committee of the Board of Directors,  who determines the terms
and conditions applicable to the Awards.

     During  fiscal 1996,  529,150  options  were granted  under the Plan at the
following  exercise prices:  (i) 359,700 at $14.00;  (ii) 163,150 at $14.50; and
(iii) 6,300 at $15.95.  As of September 30, 1996, no options had been exercised,
600 options had been canceled and 458,850 options were exercisable.



                                      -49-
<PAGE>



8.   Retirement Plan

     The Company has a 401(k)  retirement  savings plan. All associates who have
completed a minimum of six months of service may  contribute  up to 15% of their
eligible  annual earnings to the plan. The Company may elect, at its discretion,
to make matching and profit-sharing  contributions.  The Company's  contribution
expense  related  to the  plan  totaled  approximately  $393,000,  $355,000  and
$210,000 for the years ended September 30, 1996, 1995 and 1994, respectively.

9.   Income Taxes

     Significant components of the Company's deferred tax liabilities and assets
as of September 30, 1996 are as follows:

Long-term deferred tax assets:
     Tax benefit of repurchase of warrants                            $5,803,057
                                                                      ==========

Long-term deferred tax liabilities:
     Property and equipment                                           $3,397,062
                                                                      ==========

Current deferred tax assets:
     Health insurance reserves                                        $   72,000
     Other                                                                44,005
                                                                      ----------
Total current assets                                                     116,005

Current deferred tax liabilities:
     Prepaid expenses                                                    233,000
     Trade receivables                                                    92,000
                                                                      ----------
Total current liabilities                                                325,000
                                                                      ----------
Net current deferred current tax liabilities                          $  208,995
                                                                      ==========

Deferred taxes include differences at the Company's  subsidiary arising from the
use of the accrual  basis of  accounting  for  financial  reporting and the cash
basis of accounting for income tax reporting.

The provision for income taxes for the year ended September 30, 1996 consists of
federal and state deferred taxes.  Differences arising between the provision for
income taxes and the amount  computed by applying the statutory  federal  income
tax rate to income (loss)  before income taxes for the year ended  September 30,
1996 are as follows:


                                      -50-
<PAGE>


Benefit at federal statutory rate on pretax loss                    $  (499,000)
Add (deduct):
     Nondeductible offering related expenses                          3,790,000
     S Corporation status benefit                                    (1,925,000)
     State taxes                                                        240,000
    Other                                                               158,000
                                                                    -----------
Total taxes                                                         $ 1,764,000
                                                                    ===========

Upon the  completion  of the initial  public  offering,  the  Company  ceased to
qualify as an S  Corporation  and was subject to  corporate  income  taxes.  The
Company has recorded current tax expense of $1,764,000 related to its operations
since May 30, 1996, which includes the deductibility of the $2,558,362 write-off
of the Wright  Agreement  covenant  not to  compete.  In  addition,  the Company
recorded an additional net tax liability of approximately  $2,438,000  resulting
from the cumulative  effect of deferred income taxes  attributable to its change
in tax status (from S Corporation to C Corporation).

10.  Acquisitions

     Effective  September 26, 1996, the Company  acquired all of the outstanding
shares of common stock of Midway Aviation, Inc. (Midway), a regional air courier
located in Dallas,  Texas. The Company  accounted for the acquisition  under the
purchase  method  accounting.  The  purchase  price of the  acquisition  totaled
approximately  $3,100,000 and resulted in goodwill of $1,148,504,  which will be
amortized over 25 years,  and covenants not to compete totaling  $84,000,  which
will be  amortized  over the terms of the  agreements  ranging  from one to five
years.  Of the  purchase  price,  $450,000  was  placed  into  escrow and may be
withdrawn  in equal  installments  90,  180 and 270  days  after  the  effective
purchase date. The acquired assets and assumed liabilities,  including goodwill,
have been recorded at their  estimated fair values as of September 26, 1996. The
Company's  consolidated  financial  statements for the year ended  September 30,
1996 include the results of operations of Midway since the purchase date.


                                      -51-
<PAGE>



11.  Contingencies

     The Company is subject to claims and lawsuits in the ordinary course of its
business. In the opinion of management,  the outcome of these actions, which are
not clearly  determinable at the present time, are either adequately  covered by
insurance,  or if not  insured,  will not,  in the  aggregate,  have a  material
adverse  impact upon the Company's  financial  position or the results of future
operations.

12.  Subsequent Events

     Effective  October 24, 1996, the Company  acquired Float Control,  Inc. for
approximately  $2.80 million of the Company's common stock. Float Control,  Inc.
is owned by certain executive officers of the Company,  among others, and owns a
19%  interest  in the Check  Exchange  System,  an  industry  leader in  payment
initiatives.

     In  October,  1996,  the  Company  executed a letter of intent to acquire a
small package  forwarder for  approximately  $2.1 million.  The  acquisition  is
subject  to  customary  conditions  and  there  can  be no  assurance  that  the
acquisition will be completed as currently planned.

     In October,  1996 the Company also acquired  three aircraft and spare parts
and supplies for approximately $4,800,000.


13.         Pro Forma Information (Unaudited)

     Pro Forma Statements of Operations Adjustments
     The pro forma statements of operations  information  presents the pro forma
effects on the historical financial information  reflecting certain transactions
as if they had occurred on October 1, 1994 and 1995.  The following  adjustments
have been reflected in the pro forma statements of operations:


                                      -52-
<PAGE>



                                                      Year ended September 30,
                                                        1996            1995
                                                      ------------------------

The elimination of interest expense
   related to the debt repaid
                                                     $1,038,710       $1,452,066
The elimination of payments under the
   Wright Agreement
                                                        750,527        2,074,004
The elimination of amortization
   expense related to the covenant
   not to compete asset write-off
                                                        169,148          253,722
The elimination of deferred compensation
   expense for certain key employees                    135,041          307,695

A reduction of compensation expense
   for executive officers based on
   new employment agreements
                                                        346,699          952,387
The elimination of employee stock
   purchase agreement expense for
   certain key employees
                                                      1,989,345        2,327,463
                                                     ----------       ----------
 Total pro forma adjustments other than
   income taxes                                      $4,429,470       $7,367,337
                                                     ==========       ==========



     Pro Forma Earnings (Loss) Per Share
     Pro forma  earnings  (loss)  per share  amounts  are based on the  weighted
average  number of  shares  of common  stock  outstanding  during  the  periods,
including  effect of the  2,483,537  and  167,227  shares  related to the Donald
Wright and Jeffrey Wright warrants, respectively.

     Supplemental  pro forma  earnings  (loss) per share would have been ($0.25)
and $.85 for the years ended September 30, 1996 and 1995, respectively, based on
the weighted  average  number of shares of common stock  outstanding  during the
periods, plus the number of shares used to repay debt.


                                      -53-
<PAGE>

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

<TABLE>

                              AirNet Systems, Inc.
                               September 30, 1996


------------------------------------------------------------------------------------------------------------------------------------
             COL. A                      COL. B                        COL. C                COL. D              COL. E
------------------------------------------------------------------------------------------------------------------------------------
                                                                     Additions

      Description                Balance at Beginning   Charged to Costs    Charged to
                                      of Period           and Expenses     Other Accounts    Deductions   Balance at End of Period
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>               <C>                              <C>                   <C>    
Year Ended September 30, 1996:
  Deducted from assets accounts:
     Allowance for doubtful accounts      $2,000            $35,502             --           $23,332(1)            $14,170
------------------------------------------------------------------------------------------------------------------------------------

Year Ended September 30, 1995:
  Deducted from assets accounts:
     Allowance for doubtful accounts     $40,384             $9,350             --           $47,734(1)             $2,000
------------------------------------------------------------------------------------------------------------------------------------

Year Ended September 30, 1994:
  Deducted from assets accounts:
     Allowance for doubtful accounts    $103,822            $51,000             --          $114,438(1)            $40,384
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)  Uncollectible accounts written off, net of recoveries

                                      -54-
<PAGE>

                                INDEX TO EXHIBITS



  Exhibit No.             Description                      Page No.
     3.1        Amended Articles of AirNet      Incorporated herein by
                Systems, Inc. (the "Company")   reference to Exhibit 2.1 to
                                                the Company's Registration
                                                Statement on Form 8-A (File
                                                No. 0-28428) filed on May 3,
                                                1996 (the "Form 8-A")

     3.2        Certificate of Amendment to     Incorporated herein by
                the Amended Articles of the     reference to Exhibit 4(b) to
                Company as filed with the Ohio  the Company's Registration
                Secretary of State on May 28,   Statement on Form S-8
                1996                            (Registration No. 333-08189)
                                                filed on July 16, 1996 (the
                                                "Form S-8")

     3.3        Amended Articles of AirNet      Incorporated herein by
                Systems, Inc. (as amended       reference to Exhibit 4(c) to
                through May 28, 1996)           the Company's Form S-8

     3.4        Code of Regulations of the      Incorporated herein by
                Company                         reference to Exhibit 2.2 to
                                                the Company's Form 8-A

     4.1        Covenant Not to Compete and     Incorporated herein by
                Asset Purchase Agreement dated  reference to Exhibit 4.2 to
                as of July 1, 1988 among        the Company's Registration
                Wright International Express,   Statement on Form S-1
                Inc. ("WIE"), Donald W.         (Registration No. 333-3092)
                Wright, Sr. and the Company,    filed on April 2, 1996 (the
                as amended through March 15,    "Form S-1")
                1996

     4.2        Amendment and Waiver to         Incorporated herein by
                Covenant Not to Compete and     reference to Exhibit 4.3 to
                Asset Purchase Agreement dated  the Company's Form S-1
                as of March 28, 1996 among
                WIE, Donald W. Wright, Sr.,
                the Wright Trust and the
                Company

     4.3        Warrant for the Purchase of     Incorporated herein by
                Shares of Common Stock --       reference to Exhibit 4.4 to
                No. 1 (canceled)                the Company's Form S-1

     4.4        Warrant for the Purchase of     Incorporated herein by
                Shares of Common Stock --       reference to Exhibit 4.5 to
                No. 2 (canceled)                the Company's Form S-1


                                      -55-
<PAGE>

     4.5        Form of Warrant for the         Incorporated herein by
                Purchase of Shares of Common    reference to Exhibit 4.6 to
                Stock -- No. 5 (replacing       the Company's Form S-1
                No. 1)

     4.6        Form of Warrant for the         Incorporated herein by
                Purchase of Shares of Common    reference to Exhibit 4.7 to
                Stock -- No. 6 (replacing       the Company's Form S-1
                No. 2)

     4.7        Employee Stock Purchase         Incorporated herein by
                Agreement dated as of April 1,  reference to Exhibit 4.8 to
                1994 between the Company and    the Company's Form S-1
                Glenn M. Miller

     4.8        Employee Stock Purchase         Incorporated herein by
                Agreement dated as of April 1,  reference to Exhibit 4.9 to
                1994 between the Company and    the Company's Form S-1
                Charles A. Renusch

     4.9        Employee Stock Purchase         Incorporated herein by
                Agreement dated as of April 1,  reference to Exhibit 4.10 to
                1994 between the Company and    the Company's Form S-1
                Eric P. Roy

     4.10       Employee Stock Purchase         Incorporated herein by
                Agreement dated as of April 1,  reference to Exhibit 4.11 to
                1994 between the Company and    the Company's Form S-1
                Guy S. King

     4.11       Employee Stock Purchase         Incorporated herein by
                Agreement dated as of April 1,  reference to Exhibit 4.12 to
                1994 between the Company and    the Company's Form S-1
                Lincoln L. Rutter

     4.12       Employee Stock Purchase         Incorporated herein by
                Agreement dated as of April 1,  reference to Exhibit 4.13 to
                1994 between the Company and    the Company's Form S-1
                Kendall W. Wright

     4.13       Employee Stock Purchase         Incorporated herein by
                Agreement dated as of April 1,  reference to Exhibit 4.14 to
                1994 between the Company and    the Company's Form S-1
                William R. Sumser

     4.14       Form of Amendment to Employee   Incorporated herein by
                Stock Purchase Agreement dated  reference to Exhibit 4.15 to
                as of May 2, 1996 between the   the Company's Amendment No. 1
                Company and each of Messrs.     to Form S-1 Registration
                Miller, Renusch, Roy, King,     Statement (Registration No.
                Rutter, Wright and Sumser       333-3092) filed on May 7, 1996
                (each separate amendment is     ("Amendment No. 1")
                substantially identical in all
                respects)

                                      -56-
<PAGE>

    10.1        Deferred Compensation           Incorporated herein by
                Agreement dated as of           reference to Exhibit 10.2 to
                December 18, 1986 between the   the Company's Form S-1
                Company and Glenn M. Miller,
                as amended

    10.2        Deferred Compensation           Incorporated herein by
                Agreement dated as of           reference to Exhibit 10.3 to
                December 19, 1986 between the   the Company's Form S-1
                Company and Charles A.
                Renusch, as amended

    10.3        Deferred Compensation           Incorporated herein by
                Agreement dated as of           reference to Exhibit 10.4 to
                February 10, 1989 between the   the Company's Form S-1
                Company and Eric P. Roy, as
                amended

    10.4        Deferred Compensation           Incorporated herein by
                Agreement dated as of           reference to Exhibit 10.5 to
                February 10, 1989 between the   the Company's Form S-1
                Company and Guy S. King, as
                amended

    10.5        Deferred Compensation           Incorporated herein by
                Agreement dated as of           reference to Exhibit 10.6 to
                October 17, 1990 between the    the Company's Form S-1
                Company and Lincoln L. Rutter,
                as amended

    10.6        Deferred Compensation           Incorporated herein by
                Agreement dated as of July 18,  reference to Exhibit 10.7 to
                1991 between the Company and    the Company's Form S-1
                William R. Sumser, as amended

    10.7        Deferred Compensation           Incorporated herein by
                Agreement dated as of           reference to Exhibit 10.8 to
                October 1, 1991 between the     the Company's Form S-1
                Company and Kendall W. Wright,
                as amended

    10.8        Form of Amendment and Waiver    Incorporated herein by
                to Deferred Compensation        reference to Exhibit 10.9 to
                Agreement dated as of May 2,    the Company's Amendment No. 1
                1996 between the Company and    to Form S-1 Registration
                each of Messrs. Miller,         Statement (Registration No.
                Renusch, Roy, King, Rutter,     333-3092) filed on May 7, 1996
                Sumser and Wright (each         ("Amendment No. 1")
                separate amendment is
                substantially identical in all
                respects)

    10.9        AirNet Systems, Inc. 1996       Incorporated herein by
                Incentive Stock Plan            reference to Exhibit 10.10 to
                                                the Company's Amendment No. 1

                                      -57-
<PAGE>


    10.10       Indemnification Agreement       Incorporated herein by
                dated as of May 15, 1996,       reference to Exhibit 10.11 to
                among the Company and Messrs.   the Company's Amendment No. 2
                Miller, Renusch, Roy, King,     to Form S-1 Registration
                Rutter, Sumser and Wright       Statement (Registration No.
                                                333-3092) filed on May 24,
                                                1996 ("Amendment No. 2")

    10.11       Indemnification Agreement       Incorporated herein by
                dated as of May 15, 1996        reference to Exhibit 10.12 to
                between Mr. Mercer and the      the Company's Amendment No. 2
                Company

    10.12       Form of Loan Agreement dated    Incorporated herein by
                as of May, 1996 among the       reference to Exhibit 10.14 to
                Company, the banks listed       the Company's Amendment No. 2
                therein and NBD Bank, as agent

    10.13       Sublease Agreement dated        Pages 59 through 83
                July 1, 1996 between Gerald G.
                Mercer and the Company

    21.1        Subsidiaries of the Company     Page 84

    23.1        Consent of Ernst & Young LLP    Pages 85 and 86

    24.1        Powers of Attorney              Pages 87 through 93

    27.1        Financial Data Schedule         Pages 94 and 95


                                      -58-