Recent Events

Prior to August 17, 2007, we were a public shell company, as defined by the Securities and Exchange Commission, without material assets or activities. On August 17, 2007, we completed a reverse merger, pursuant to which a wholly-owned subsidiary of ours merged with and into a private company, Halcyon Jets Inc., with such private company being the surviving company. In connection with this reverse merger, we discontinued our former business and succeeded to the business of Halcyon Jets, Inc. as our sole line of business. For financial reporting purposes, Halcyon Jets, Inc., is considered the accounting acquirer. Accordingly, the historical financial statements presented and the discussion of financial condition and results of operations herein are those of Halcyon Jets, Inc. All costs associated with the reverse merger, other than financing related costs in connection with the simultaneous sale of $4.99 million of units consisting of common stock and warrants, were expensed.

Overview

Halcyon Jets, Inc. was formed February 1, 2007 to capitalize on the growing demand for private executive travel and began operations in late March 2007. We provide luxury private transport by connecting travelers with independently owned and operated executive aircraft that are compliant with the minimum requirements of Part 135 of the Federal Aviation Regulations for aircraft maintenance, aircrew training and aircraft operations.

Our target clients desire high-end, executive, or business travel at a level of service not offered by traditional commercial aircraft operators. Our clients seek the experience of private jet transport, without the responsibilities of private or fractional ownership. Our jet brokerage clients have access to an extensive network of private jet charter services for every size of aircraft.

The primary components of our consolidated statement of operations include the following:

Revenues: Passenger revenue is the charges to customers for the charter of aircraft on their behalf. Other revenues include the amounts charged to customers for catering and ground transportation and other related services.

Operating Costs and Expenses: Our operating costs and expenses include charter costs, salaries, wages and benefits, other operating costs and depreciation and amortization. Charter costs include all third party costs of the aircraft including crew and fuel surcharges, etc. Salaries, wages and benefits include the cost of our staff and consultants, including taxes and benefits. Other operating costs include our other general, administrative and selling costs. Depreciation and amortization expense relates to the amortization of our equipment and leasehold improvements.

Critical Accounting Policies

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

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

The Company began its operations in March 2007, and has not as yet attained a level of operations which allows it to meet its current overhead. We do not contemplate attaining profitable operations within our first operating cycle, nor is there any assurance that such an operating level can ever be achieved. We will be dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure, ongoing litigation expenses and significant marketing/investor related expenditures to gain market recognition, so that we can achieve a level of revenue adequate to support our cost structure, none of which can be assured. While The Company has funded its initial operations with private placements of equity and bridge loans, there can be no assurance that adequate financing will continue to be available to us and, if available, on terms that are favorable to us. These factors raise substantial doubt about our ability to continue as a going concern and the accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

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

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

Due to the Company's limited history as a public company, the Company has estimated expected volatility based on the historical volatility of certain companies as determined by management. The risk-free rate for the expected term of each option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield assumption is based on the Company's intent not to issue a dividend under its dividend policy. Due to the Company's limited operating history, management estimated the term to approximate 50% of the contractual term.

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

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

 Results of Operations

THREE MONTHS ENDED OCTOBER 31, 2007

The following table sets forth our results of operations for the three months
ended October 31, 2007 expressed as a percentage of total revenues:

                  Revenues                                100.0 %
                  Operating costs and expenses:
                  Charter costs                            85.4
                  Salaries, wages and benefits             78.7
                  Other operating costs                    35.4
                  Depreciation and amortization             1.1
                  Total operating costs and expenses      200.6
                  Operating loss                         (100.6 )
                  Other - net                              (5.8 )
                  Net Loss                               (106.4 )%

The Company's operations began in the last week of March 2007 and, accordingly, The Company's third quarter operations consisted principally of augmenting its new headquarters in New York and the 2 additional offices in Boca Rotan, FL and Beverly Hills, CA by recruiting additional staff and seeking capital including completing the Merger and becoming a public entity in August 2007. Revenues were the result of 122 trips. The operating margin reflects an improvement from the prior two quarters as the Company is beginning to move past its start-up stage and increase its volume of trips. Compensation and benefits expense in the quarter includes a non-cash charge of $1.9 million principally resulting from the issuance of stock options and warrants to employees and consultants in August 2007 which were fully vested. However, it is also anticipated that the Company's operating costs and expenses will continue increase to support the higher levels of anticipated revenues. Increased costs will be attributable to increased head counts, principally sales personnel and support staff for our multi-office infrastructure and increased marketing expenditures to promote our services. In addition, as a public reporting entity, compliance with Securities and Exchange Commission regulations will increase general and administrative costs substantially.

Other principally represents merger costs ($100,000) and amortization of loan discount ($93,000) resulting from the issuance of shares of common stock in lieu of interest in connection with bridge loans which were converted into units similar to those sold in the private placement in August 2007; net of interest income ($22,000).

NINE MONTHS ENDED OCTOBER 31, 2007

The following table sets forth our results of operations for the nine months
ended October 31, 2007 expressed as a percentage of total revenues:

                  Revenues                               100.0 %
                  Operating costs and expenses:
                  Charter costs                           86.7
                  Salaries, wages and benefits            64.5
                  Other operating costs                   32.2
                  Depreciation and amortization            1.3
                  Total operating costs and expenses     184.7
                  Operating loss                         (84.7 )
                  Other - net                             (9.6 )
                  Net Loss                               (94.3 )%

The Company's operations began in the last week of March 2007 and, accordingly, the Company since its inception has consisted principally of developing a business plan; seeking capital; establishing headquarters in New York, as well as 2 additional offices in Boca Rotan, FL and Beverly Hills, CA; and recruiting staff. Revenues were the result of 205 trips. The operating margin reflects the Company's start-up stage and the competitive methods it has taken to enter into this market. Compensation and benefits expense includes a non-cash charge of $1.9 million principally resulting from the issuance of stock options to employees and consultants in August 2007 which were fully vested. However, it is also anticipated that the Company's operating costs and expenses will continue to increase to support a higher level of revenues. Increased costs will be attributable to increased head counts, principally sales personnel and support staff for our multi-office infrastructure and increased marketing expenditures to promote our services. In addition, as a public reporting entity, compliance with Securities and Exchange Commission regulations will increase general and administrative costs substantially.

The Company began its operations in March 2007, and has not as yet attained a level of operations which allows it to meet its current overhead. We do not contemplate attaining profitable operations within our first operating cycle, nor is there any assurance that such an operating level can ever be achieved. We will be dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure, ongoing litigation expenses and significant marketing/investor related expenditures to gain market recognition, so that we can achieve a level of revenue adequate to support our cost structure, none of which can be assured. While The Company has funded its initial operations with private placements of equity and bridge loans, there can be no assurance that adequate financing will continue to be available to us and, if available, on terms that are favorable to us. These factors raise substantial doubt about our ability to continue as a going concern and the accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

As of October 31, 2007, the Company's cash balance was $2.1 million. The Company began its operations during the nine months ended October 31, 2007 with its initial funding of $484,698, net of expenses, from investors in a private offering. In May 2007, The Company borrowed $1.5 million, without interest, through the issuance of promissory notes. At the time, the lenders agreed that the indebtedness would convert into our common stock on the same terms as provided in a subsequent private placement. On August 2, 2007 through August 14, 2007, the Company borrowed an additional $490,000, at 6% interest, to be paid out of the proceeds of the next financing. On August 17 and 22, 2007, we closed on a private placement of 49.9 units, in which we received net proceeds of $3.5 million, after placement agent and other fees and from which we repaid the $490,000 of loans. As part of the private placement, the $1.5 million loans mentioned above were converted into 1.5 units.

Cash Flow Used in Operating Activities: During the period from February 1, 2007 (date of inception) through October 31, 2007, the Company's operations resulted in negative cash flows of $2.4 million, which was the result of a net loss of $2.2 million, after reduction for non-cash charges of $2.1 million and the buildup of net working capital items by $200,000, excluding cash.

Cash Flow Used in Investing Activities: In the period from February 1, 2007 (inception) to October 31, 2007, the Company used cash to acquire property and equipment of $482,000.

Cash Flow from Financing Activities: The Company's initial funding was derived from equity investors ($485,000, net of expenses) and bridge loans of $2 million. In August 2007, we closed on a private placement of 49.9 units, consisting of 100,000 shares of our common stock and 50,000 warrants to buy our common stock at $1 per share, in which we received net proceeds of $3.5 million, after placement agent and other fees and from which we repaid the $490,000 of loans. As part of the private placement, the $1.5 million of the bridge loans were converted into 1.5 units.

Commitments and Contingencies

The Company entered into employment agreements with Jonathan Gilbert to serve as Chief Executive Office and Christian Matteis to serve as President and Chief Operating Officer. These agreements were assumed by us upon consummation of the Merger. The initial terms of the agreements are three years, with automatic one-year renewals following this three-year period. Pursuant to the agreements, Mr. Gilbert is to receive an annual base salary of $235,000, $246,750 and $259,000, respectively, for the first three years and Mr. Matteis is to receive an annual base salary of $500,000, $525,000 and $550,000, respectively, for the first three years, and then an agreed upon salary (of not less than the amount of their third year's salary) for all future years of employment. If either of their employment is terminated without cause or if either resigns for good reason, we will be obligated to pay the terminated party, as severance, their then current annual base salary and annual bonuses (as such is defined within the agreement) for one year (or for the remainder of the term, if longer than one year).

The Company leases headquarters and sales facilities in New York and additional sales offices in Boca Rotan, Florida and Beverly Hills, California. Minimum annual lease payments are approximately $135,000 for 2007, $246,000 for 2008, $254,000 for 2009 and $114,000 for 2010 (aggregating $749,000).

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS 157 is effective for our year end 2008, although early adoption is permitted. We are assessing the potential effect of SFAS 157 on our financial statements.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined in FIN 48 as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. FIN 48 must be applied to all existing tax positions upon initial adoption. The cumulative effect of applying FIN 48 at adoption, if any, is to be reported as an adjustment to opening retained earnings for the year of adoption. FIN 48 is effective for our year end 2007, although early adoption is permitted. We are assessing the potential effect of FIN 48 on our financial statements.