##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 1-13025
 AirNet Systems, Inc.
 Ohio
    
    31-1458309(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 7250 Star Check Drive, Columbus, Ohio
    
    43217(Address of principal executive offices)
    
    (Zip Code)
 (614) 409-4900
 Not Applicable
 þ o
  o o þ
 o þ




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##### 



TABLE OF CONTENTS
  
 PAGEPART I. FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets:
September 30, 2007 (Unaudited) and December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations:
Three and Nine Months Ended September 30, 2007 and 2006 (Unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows:
Nine Months Ended September 30, 2007 and 2006 (Unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4.
    
    Controls and Procedures
    
    
    26PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    26Item 1A.
    
    Risk Factors
    
    
    26Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3.
    
    Defaults Upon Senior Securities
    
    
    27Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    27Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    28SIGNATURES
    
    
    29INDEX TO EXHIBITS
    
    
    30EX-31.1EX-31.2EX-32
  2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 AIRNET SYSTEMS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 In thousands, except par value data
    
    September 30,
    
    
    December 31,2007
    
    
    2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,680
    
    
    $
    2,244Accounts receivable, less allowances
    
    
    19,519
    
    
    
    22,345Deposits and prepaids
    
    
    2,563
    
    
    
    2,463Assets related to discontinued operations
    
    
    
    
    
    
    1,465Assets held for sale
    
    
    
    
    
    
    280Total current assets
    
    
    24,762
    
    
    
    28,797Net property and equipment
    
    
    25,140
    
    
    
    27,690Deposits and other assets
    
    
    60
    
    
    
    60Total assets
    
    $
    49,962
    
    
    $
    56,547LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    7,866
    
    
    $
    8,876Salaries and related liabilities
    
    
    2,628
    
    
    
    4,716Current portion of notes payable
    
    
    
    
    
    
    1,944Taxes payable
    
    
    1,393
    
    
    
    935Other liabilities related to discontinued operations
    
    
    
    
    
    
    50Total current liabilities
    
    
    11,887
    
    
    
    16,521Notes payable, less current portion
    
    
    
    
    
    
    6,011Shareholders equity:Preferred shares, $.01 par value; 10,000 shares authorized; no
shares issued and outstanding
    
    
    
    
    
    
    Common shares, $.01 par value; 40,000 shares authorized; 12,763
issued at September 30, 2007 and at December 31, 2006
    
    
    128
    
    
    
    128Additional paid-in-capital
    
    
    76,992
    
    
    
    76,906Retained deficit
    
    
    (15,862
    )
    
    
    (19,746
    )Accumulated other comprehensive loss
    
    
    (13
    )
    
    
    (13
    )Treasury shares, 2,590and 2,598 common shares held at cost at
September 30, 2007 and December 31, 2006, respectively
    
    
    (23,170
    )
    
    
    (23,260
    )Total shareholders equity
    
    
    38,075
    
    
    
    34,015Total liabilities and shareholders equity
    
    $
    49,962
    
    
    $
    56,547
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AIRNET SYSTEMS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 In thousands, except per share data
    
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006NET REVENUES, NET OF EXCISE TAXBank services
    
    $
    24,559
    
    
    $
    27,559
    
    
    $
    76,988
    
    
    $
    84,944Express services
    
    
    14,100
    
    
    
    15,243
    
    
    
    43,454
    
    
    
    44,268Aviation services
    
    
    771
    
    
    
    185
    
    
    
    2,670
    
    
    
    834Total net revenues
    
    
    39,430
    
    
    
    42,987
    
    
    
    123,112
    
    
    
    130,046COSTS AND EXPENSESAircraft fuel
    
    
    6,395
    
    
    
    7,411
    
    
    
    18,905
    
    
    
    22,125Aircraft maintenance
    
    
    5,310
    
    
    
    3,737
    
    
    
    18,611
    
    
    
    12,021Operating wages and benefits
    
    
    4,628
    
    
    
    4,719
    
    
    
    14,079
    
    
    
    14,430Contracted air costs
    
    
    4,018
    
    
    
    3,968
    
    
    
    11,589
    
    
    
    12,576Ground courier
    
    
    7,926
    
    
    
    9,517
    
    
    
    25,591
    
    
    
    26,414Depreciation
    
    
    1,216
    
    
    
    2,663
    
    
    
    3,718
    
    
    
    8,415Insurance, rent and landing fees
    
    
    1,861
    
    
    
    2,045
    
    
    
    6,057
    
    
    
    6,034Travel, training and other operating
    
    
    1,358
    
    
    
    1,253
    
    
    
    4,451
    
    
    
    3,931Selling, general and administrative
    
    
    4,568
    
    
    
    3,686
    
    
    
    12,948
    
    
    
    12,923Net (gain) on disposition of assets
    
    
    0
    
    
    
    (80
    )
    
    
    (883
    )
    
    
    (92
    )Impairment of assets
    
    
    2,217
    
    
    
    24,560
    
    
    
    2,217
    
    
    
    24,560Total costs and expenses
    
    
    39,497
    
    
    
    63,479
    
    
    
    117,283
    
    
    
    143,337Income (loss) from continuing operations before interest and income taxes
    
    
    (67
    )
    
    
    (20,492
    )
    
    
    5,829
    
    
    
    (13,291
    )Interest expense (income)
    
    
    (12
    )
    
    
    249
    
    
    
    295
    
    
    
    1,222Income (loss) from continuing operations before income taxes
    
    
    (55
    )
    
    
    (20,741
    )
    
    
    5,534
    
    
    
    (14,513
    )Provision (benefit) for income taxes
    
    
    1,450
    
    
    
    (2,311
    )
    
    
    1,650
    
    
    
    (44
    )Income (loss) from continuing operations
    
    
    (1,505
    )
    
    
    (18,430
    )
    
    
    3,884
    
    
    
    (14,469
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    313
    
    
    
    
    
    
    
    17Net income (loss)
    
    $
    (1,505
    )
    
    $
    (18,117
    )
    
    $
    3,884
    
    
    $
    (14,452
    )Income (loss) per common share  basic and diluted:Continuing operations
    
    $
    (0.15
    )
    
    $
    (1.82
    )
    
    $
    0.38
    
    
    $
    (1.43
    )Discontinued operations
    
    
    
    
    
    
    0.03
    
    
    
    
    
    
    
    0.00Net income (loss) per common share  basic and diluted
    
    $
    (0.15
    )
    
    $
    (1.79
    )
    
    $
    0.38
    
    
    $
    (1.43
    )
  4




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AIRNET SYSTEMS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 In thousands
    
    Nine Months EndedSeptember 30,2007
    
    
    2006Operating activities:Income (loss) from continuing operations
    
    $
    3,884
    
    
    $
    (14,469
    )Adjustments to reconcile income (loss) from continuing operations to
net cash provided by operating activities:Depreciation
    
    
    3,718
    
    
    
    8,415Impairment of assets
    
    
    2,217
    
    
    
    24,560Net (gain) on disposition of assets
    
    
    (883
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    (5,311
    )Stock-based compensation expense
    
    
    160
    
    
    
    87Cash provided by (used in) operating assets and liabilities:Accounts receivable
    
    
    2,826
    
    
    
    (2,466
    )Taxes receivable or payable
    
    
    458
    
    
    
    5,511Deposits and prepaids
    
    
    (100
    )
    
    
    (1,057
    )Accounts payable and accrued expenses
    
    
    (1,269
    )
    
    
    (708
    )Salaries and related liabilities
    
    
    (2,088
    )
    
    
    (1,363
    )Deferred income taxes
    
    
    
    
    
    
    (124
    )Other  net
    
    
    280
    
    
    
    Net cash provided by (used in) continuing operations
    
    
    9,203
    
    
    
    13,075Net cash provided by (used in) discontinued operations
    
    
    415
    
    
    
    2,196Net cash provided by (used in) operating activities
    
    
    9,618
    
    
    
    15,271Investing activities:Purchases of property and equipment  net
    
    
    (3,986
    )
    
    
    (6,927
    )Proceeds from the sales of property and equipment
    
    
    1,743
    
    
    
    Net cash provided by (used in) continuing operations
    
    
    (2,243
    )
    
    
    (6,927
    )Net cash provided by (used in) discontinued operations
    
    
    1,000
    
    
    
    37,103Net cash provided by (used in) investing activities
    
    
    (1,243
    )
    
    
    30,176Financing activities:Net borrowings (repayments) of debt
    
    
    (7,955
    )
    
    
    (16,311
    )Other  net
    
    
    16
    
    
    
    122Net cash provided by (used in) continuing operations
    
    
    (7,939
    )
    
    
    (16,189
    )Net cash provided by (used in) discontinued operations
    
    
    
    
    
    
    (29,780
    )Net cash provided by (used in) financing activities
    
    
    (7,939
    )
    
    
    (45,969
    )Net increase (decrease) in cash
    
    
    436
    
    
    
    (522
    )Cash and cash equivalents at beginning of period
    
    
    2,244
    
    
    
    1,590Cash and cash equivalents at end of period
    
    $
    2,680
    
    
    $
    1,068
  5




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AIRNET SYSTEMS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Basis of Presentation
     , Accounting for Planned Major Maintenance Activities
 2. Impairment of Assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets
 September 30, 2007 Asset Impairment Charge
  6




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September 30, 2006 Asset Impairment Charge
  3. Major Bank Services Customers
    7




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4. Discontinued Operations
    5. Stock Plans and Awards
 Accounting for Stock Issued to Employees, Accounting for Stock-Based Compensation Share-Based Payment
   8




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Impact of the Adoption of FAS 123(R)
   6. Net Income (loss) Per Common Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Income (loss) from continuing operations
    
    $
    (1,505
    )
    
    $
    (18,430
    )
    
    $
    3,884
    
    
    $
    (14,469
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    313
    
    
    
    
    
    
    
    17Net income (loss)
    
    $
    (1,505
    )
    
    $
    (18,117
    )
    
    $
    3,884
    
    
    $
    (14,452
    )Denominator:Basic  weighted average common shares outstanding
    
    
    10,173
    
    
    
    10,141
    
    
    
    10,170
    
    
    
    10,137DilutedDilutive effect of stock options  employees, officers and directors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjusted weighted average common shares outstanding
    
    
    10,173
    
    
    
    10,141
    
    
    
    10,170
    
    
    
    10,137Income (loss) per common share  basic and diluted:Income (loss) from continuing operations
    
    $
    (0.15
    )
    
    $
    (1.82
    )
    
    $
    0.38
    
    
    $
    (1.43
    )Income from discontinued operations, net of tax
    
    $
    
    
    
    $
    0.03
    
    
    $
    
    
    
    $
    Net income (loss) per common share
    
    $
    (0.15
    )
    
    $
    (1.79
    )
    
    $
    0.38
    
    
    $
    (1.43
    )
  7. Bank Financing Matters
 Revolving Credit Facility  Second Amended Credit Agreement  March 29, 2007
  9




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Other Term Loan
  Term Loans  Discontinued Operations
  8. Income Taxes
 Accounting for Income Taxes ,
  10




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Accounting for Uncertainty in Income Taxes
   9. Aircraft Dispositions
   10. Subsequent Event
  11




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12




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AIRNET SYSTEMS, INC.
 
 ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 Safe Harbor Statement
  Impairment Charges
 Accounting for the Impairment or Disposal of Long-Lived Assets
 13




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September 30, 2007 Asset Impairment Charge
    September 30, 2006 Asset Impairment Charge
  Business Strategy
   14




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##### Table of Contents



Results of Operations
 Financial Overview
 Financial Overview  Third Quarter
  Financial Overview  Year-to-Date
  Net Revenues
 Dollars in '000's
    
    Three Months Ended
    
    
    Increase (Decrease)
    
    
    Nine Months Ended
    
    
    Increase (Decrease)September 30,
    
    
    2007 to 2006
    
    
    September 30,
    
    
    2007 to 2006% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofNet Revenues
    
    2007
    
    
    Total
    
    
    2006
    
    
    Total
    
    
    $
    
    
    %
    
    
    2007
    
    
    Total
    
    
    2006
    
    
    Total
    
    
    $
    
    
    %Revenues Net of
Excise Tax:Bank Services
    
    $
    24,559
    
    
    
    62
    %
    
    $
    27,559
    
    
    
    64
    %
    
    $
    (3,000
    )
    
    
    (11
    )%
    
    $
    76,988
    
    
    
    63
    %
    
    $
    84,944
    
    
    
    65
    %
    
    $
    (7,956
    )
    
    
    (9
    )%Express Services
    
    
    14,100
    
    
    
    36
    %
    
    
    15,243
    
    
    
    36
    %
    
    
    (1,143
    )
    
    
    (7
    )%
    
    
    43,454
    
    
    
    35
    %
    
    
    44,268
    
    
    
    34
    %
    
    
    (814
    )
    
    
    (2
    )%Aviation Services
    
    
    771
    
    
    
    2
    %
    
    
    185
    
    
    
    0
    %
    
    
    586
    
    
    
    317
    %
    
    
    2,670
    
    
    
    2
    %
    
    
    834
    
    
    
    1
    %
    
    
    1,836
    
    
    
    220
    %Total Net Revenues
    
    $
    39,430
    
    
    
    100
    %
    
    $
    42,987
    
    
    
    100
    %
    
    $
    (3,557
    )
    
    
    (8
    )%
    
    $
    123,112
    
    
    
    100
    %
    
    $
    130,046
    
    
    
    100
    %
    
    $
    (6,934
    )
    
    
    (5
    )%
   15




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Bank Services Revenues
 Dollars in '000's
    
    Three Months Ended
    
    
    Increase (Decrease)
    
    
    Nine Months Ended
    
    
    Increase (Decrease)September 30,
    
    
    2007 to 2006
    
    
    September 30,
    
    
    2007 to 2006Bank Services Revenues
    
    2007
    
    
    2006
    
    
    $
    
    
    %
    
    
    2007
    
    
    2006
    
    
    $
    
    
    %Bank Services Revenues
    
    $
    20,516
    
    
    $
    23,490
    
    
    $
    (2,974
    )
    
    
    (13
    )%
    
    $
    65,551
    
    
    $
    73,019
    
    
    $
    (7,468
    )
    
    
    (10
    )%Fuel Surcharge
    
    
    4,043
    
    
    
    4,069
    
    
    
    (26
    )
    
    
    (1
    )%
    
    
    11,437
    
    
    
    11,925
    
    
    
    (488
    )
    
    
    (4
    )%Total Net Bank Services Revenues
    
    $
    24,559
    
    
    $
    27,559
    
    
    $
    (3,000
    )
    
    
    (11
    )%
    
    $
    76,988
    
    
    $
    84,944
    
    
    $
    (7,956
    )
    
    
    (9
    )%Revenues before fuel surcharge:Weekday Revenues Per Flying Day
    
    $
    388
    
    
    $
    445
    
    
    $
    (57
    )
    
    
    (13
    )%
    
    $
    413
    
    
    $
    463
    
    
    $
    (50
    )
    
    
    (11
    )%Weekend Revenues Per Weekend
    
    $
    111
    
    
    $
    157
    
    
    $
    (46
    )
    
    
    (29
    )%
    
    $
    121
    
    
    $
    149
    
    
    $
    (28
    )
    
    
    (19
    )%
   16




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Bank Services Cancellations
       Express Services Revenues
 Dollars in 000s
    
    Three Months Ended
    
    
    Increase (Decrease)
    
    
    Nine Months Ended
    
    
    Increase (Decrease)September 30,
    
    
    2007 to 2006
    
    
    September 30,
    
    
    2007 to 2006Express Services Revenues
    
    2007
    
    
    2006
    
    
    $
    
    
    %
    
    
    2007
    
    
    2006
    
    
    $
    
    
    %Express Revenues  Non Charter
    
    $
    8,668
    
    
    $
    9,665
    
    
    $
    (997
    )
    
    
    (10
    )%
    
    $
    27,593
    
    
    $
    27,175
    
    
    $
    418
    
    
    
    2
    %Express Revenues  Charter
    
    
    3,446
    
    
    
    3,080
    
    
    
    366
    
    
    
    12
    %
    
    
    10,488
    
    
    
    10,060
    
    
    
    428
    
    
    
    4
    %Fuel Surcharge
    
    
    1,986
    
    
    
    2,498
    
    
    
    (512
    )
    
    
    (20
    )%
    
    
    5,373
    
    
    
    7,033
    
    
    
    (1,660
    )
    
    
    (24
    )%Total Net Express Services Revenues
    
    $
    14,100
    
    
    $
    15,243
    
    
    $
    (1,143
    )
    
    
    (7
    )%
    
    $
    43,454
    
    
    $
    44,268
    
    
    $
    (814
    )
    
    
    (2
    )%
  17




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Aviation Services
  18




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##### Table of Contents



Sale of Jetrides Passenger Charter Business
   Costs and Expenses
 Dollars in 000s
    
    Three Months Ended
    
    
    Increase (Decrease)
    
    
    Nine Months Ended
    
    
    Increase (Decrease)September 30,
    
    
    2007 to 2006
    
    
    September 30,
    
    
    2007 to 2006Costs and Expenses
    
    2007
    
    
    2006
    
    
    $
    
    
    %
    
    
    2007
    
    
    2006
    
    
    $
    
    
    %Aircraft fuel
    
    $
    6,395
    
    
    $
    7,411
    
    
    $
    (1,016
    )
    
    
    (14
    )%
    
    $
    18,905
    
    
    $
    22,125
    
    
    $
    (3,220
    )
    
    
    (15
    )%Aircraft maintenance
    
    
    5,310
    
    
    
    3,737
    
    
    
    1,573
    
    
    
    42
    %
    
    
    18,611
    
    
    
    12,021
    
    
    
    6,590
    
    
    
    55
    %Operating wages and benefits
    
    
    4,628
    
    
    
    4,719
    
    
    
    (91
    )
    
    
    (2
    )%
    
    
    14,079
    
    
    
    14,430
    
    
    
    (351
    )
    
    
    (2
    )%Contracted air costs
    
    
    4,018
    
    
    
    3,968
    
    
    
    50
    
    
    
    1
    %
    
    
    11,589
    
    
    
    12,576
    
    
    
    (987
    )
    
    
    (8
    )%Ground courier
    
    
    7,926
    
    
    
    9,517
    
    
    
    (1,591
    )
    
    
    (17
    )%
    
    
    25,591
    
    
    
    26,414
    
    
    
    (823
    )
    
    
    (3
    )%Depreciation
    
    
    1,216
    
    
    
    2,663
    
    
    
    (1,447
    )
    
    
    (54
    )%
    
    
    3,718
    
    
    
    8,415
    
    
    
    (4,697
    )
    
    
    (56
    )%Insurance, rent and landing fees
    
    
    1,861
    
    
    
    2,045
    
    
    
    (184
    )
    
    
    (9
    )%
    
    
    6,057
    
    
    
    6,034
    
    
    
    23
    
    
    
    0
    %Travel, training and other operating
    
    
    1,358
    
    
    
    1,253
    
    
    
    105
    
    
    
    8
    %
    
    
    4,451
    
    
    
    3,931
    
    
    
    520
    
    
    
    13
    %Selling, general and administrative
    
    
    4,568
    
    
    
    3,686
    
    
    
    882
    
    
    
    24
    %
    
    
    12,948
    
    
    
    12,923
    
    
    
    25
    
    
    
    0
    %Net gain on disposition of assets
    
    
    
    
    
    
    (80
    )
    
    
    80
    
    
    
    *
    
    
    
    (883
    )
    
    
    (92
    )
    
    
    (791
    )
    
    
    *Subtotal
    
    
    37,280
    
    
    
    38,919
    
    
    
    (1,639
    )
    
    
    (4
    )%
    
    
    115,066
    
    
    
    118,777
    
    
    
    (3,711
    )
    
    
    (3
    )%Impairment of assets
    
    
    2,217
    
    
    
    24,560
    
    
    
    (22,343
    )
    
    
    *
    
    
    
    2,217
    
    
    
    24,560
    
    
    
    (22,343
    )
    
    
    *Total Costs and Expenses
    
    $
    39,497
    
    
    $
    63,479
    
    
    $
    (23,982
    )
    
    
    (38
    )%
    
    $
    117,283
    
    
    $
    143,337
    
    
    $
    (26,054
    )
    
    
    (18
    )%
 * The percentage increase (decrease) is not meaningful.
   19




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##### Table of Contents



20




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##### Table of Contents



Accounting for Income Taxes
 Liquidity and Capital Resources
 Cash flow from operating activities  Continuing Operations
  21




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##### Table of Contents



Cash flow from operating activities  Discontinued Operations
  Financing Activities  Continuing Operations
 Revolving Credit Facility  Second Amended Credit Agreement  March 29, 2007
     Other Term Loan
  Financing Activities  Discontinued Operations
  22




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##### Table of Contents



Investing Activities  Continuing Operations
  Investing Activities  Discontinued Operations
  Future Liquidity
    General
 Critical Accounting Policies and Estimates
   23




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##### Table of Contents



Share-Based Payment
 Regulation
       24




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##### Table of Contents



The Next Generation Air Transportation System Financing Reform Act of 2007 The Next Generation Air Transportation System Financing Reform
Act of 2007 Aviation Investment and Modernization Act of 2007 FAA Reauthorization Act of 2007
 Off-Balance Sheet Arrangements
  Seasonality and Variability in Quarterly Results
  
 ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
 Inflation and Interest Rates
  Fuel Surcharge
  25




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##### Table of Contents



ITEM 4  Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  
    
    information required to be disclosed by AirNet in this Quarterly Report on Form
10-Q and the other reports that AirNet files or submits under the Exchange Act would
be accumulated and communicated to AirNets management, including its principal
executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure;
    
    information required to be disclosed by AirNet in this Quarterly Report on Form
10-Q and the other reports that AirNet files or submits under the Exchange Act would
be recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms; and
    
    AirNets disclosure controls and procedures were effective as of the end of the
quarterly period covered by this Quarterly Report on Form 10-Q.
 Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1  Legal Proceedings
  
 ITEM 1A  Risk Factors
  AirNet has implemented a new pricing structure for its weekday Bank Services customers. If AirNet
is not successful in implementing this pricing structure, the decline in AirNets Bank Services
revenues will adversely affect AirNets operations.
  26




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##### Table of Contents



If AirNet fails to evaluate and implement strategic opportunities successfully, AirNets business
may suffer.
  If AirNet is unable to maintain sufficient liquidity as AirNet continues to investigate its
business strategy and other strategic alternatives, AirNet may be unable to sustain its operations.
  
 ITEM 2  Unregistered Sales of Equity Securities and Use of Proceeds
 (a)
    
    Not applicable.(b)
    
    Not applicable.(c)
    
    Neither AirNet Systems, Inc. nor any affiliated purchaser, as
defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as
amended, purchased any common shares of AirNet Systems, Inc. during the
quarterly period ended September 30, 2007. On February 18, 2000, AirNet
Systems, Inc. announced a stock repurchase plan under which up to $3.0 million
of its common shares may be repurchased from time to time. These repurchases
may be made in open market transactions or through privately negotiated
transactions. As of September 30, 2007, AirNet Systems, Inc. had the authority
to repurchase approximately $0.6 million of its common shares under this stock
repurchase plan.
 
 ITEM 3  Defaults Upon Senior Securities.
  
 ITEM 4  Submission of Matters to a Vote of Security Holders.
  
 ITEM 5  Other Information
  27




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##### Table of Contents



ITEM 6  Exhibits
  Exhibit No.
    
    Description
    
    Location10.1
    
    Separation Agreement and
General Release, entered into
as of October 3, 2007, between
AirNet Systems, Inc. and Gary
W. Qualmann
    
    Incorporated herein by
reference from Exhibit 10.1 to
AirNet Systems, Inc.s Current
Report on Form 8-K, dated and
filed on October 9, 2007 (File
No. 001-13025) (the October 9,
2007 Form 8-K)10.2
    
    Letter agreement, dated as of
October 8, 2007, between AirNet
Systems, Inc. and Ray L.
Druseikis
    
    Incorporated herein by
reference from Exhibit 10.2 to
AirNet Systems, Inc.s October
9, 2007 Form 8-K31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification (Principal
Executive Officer)
    
    Filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification (Principal
Financial Officer)
    
    Filed herewith32
    
    Section 1350 Certification
(Principal Executive Officer
and Principal Financial
Officer)
    
    Filed herewith
 28




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##### Table of Contents



AIRNET SYSTEMS, INC.
 
 SIGNATURES
  AIRNET SYSTEMS, INC.Dated:  November 13, 2007
    By:
    /s/ Ray L. DruseikisRay L. Druseikis,Vice President of Finance and Controller;
  Interim Chief Financial Officer, Treasurer and Secretary
(Duly Authorized Officer)
(Principal Financial Officer) 29




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##### Table of Contents



AIRNET SYSTEMS, INC.
 
 INDEX TO EXHIBITS
 Exhibit No.
    
    Description
    
    Location10.1
    
    Separation Agreement and
General Release, entered into
as of October 3, 2007, between
AirNet Systems, Inc. and Gary
W. Qualmann
    
    Incorporated herein by
reference from Exhibit 10.1 to
AirNet Systems, Inc.s Current
Report on Form 8-K, dated and
filed on October 9, 2007 (File
No. 001-13025) (the October 9,
2007 Form 8-K)10.2
    
    Letter agreement, dated as of
October 8, 2007, between AirNet
Systems, Inc. and Ray L.
Druseikis
    
    Incorporated herein by
reference from Exhibit 10.2 to
AirNet Systems, Inc.s October
9, 2007 Form 8-K31.1
    
    Rule 13a-14(a)/15d-14(a)
Certification (Principal
Executive Officer)
    
    Filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a)
Certification (Principal
Financial Officer)
    
    Filed herewith32
    
    Section 1350 Certification
(Principal Executive Officer
and Principal Financial
Officer)
    
    Filed herewith
 30