sv1

As filed with the Securities and Exchange Commission on July 5, 2007

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Gulfstream International Group, Inc.

(Exact name of registrant as specified in its charter)



Delaware (State or other jurisdiction of Incorporation or organization)	4512 (Primary Standard Industrial Classification Code Number)	20-3973956 (I.R.S. Employer Identification No.)

3201 Griffin Road, 4th Floor

Fort Lauderdale, Florida 33312

(954) 985-1500

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

David F. Hackett

Chief Executive Officer

Gulfstream International Group, Inc.

3201 Griffin Road, 4th Floor

Fort Lauderdale, Florida 33312

(954) 985-1500

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies of all correspondence to:


Donald E. Figliulo, Esq. C. Brendan Johnson, Esq. Bryan Cave LLP 161 North Clark, Suite 4300 Chicago, Illinois 60601-3206 (312) 602-5000 (312) 602-5050 (fax)		Charles C. Kim, Esq. Baker & McKenzie LLP One Prudential Plaza 130 East Randolph Drive Chicago, Illinois 60601 (312) 861-8000 (312) 861-2899 (fax)

Approximate date of commencement of proposed sale to public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

Proposed Maximum

Amount of

Title of Each Class of

Amount to be

Offering

Aggregate

Registration

Securities to be Registered

Registered

Price Per Unit

Offering Price(1)(2)

Fee

Common stock, par value $0.001

1,150,000

$13.00

$14,950,000

$458.97


(1)		Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(2)		Includes shares that may be purchased by the underwriter to cover over-allotments, if any.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated July 5, 2007.

1,000,000 Shares

Common Stock

This is an initial public offering of shares of common stock of Gulfstream International Group, Inc. All of the shares of common stock are being sold by the Company.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $11.00 and $13.00. We expect that our common stock will be approved for listing on the American Stock Exchange under the symbol “GIA”.

See “Risk Factors” on page 9 to read about factors you should consider before buying shares of the common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share	Total

Initial public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to Gulfstream	$	$

To the extent that the underwriter sells more than 1,000,000 shares of common stock, the underwriter has a 30-day option to purchase up to an additional 150,000 shares from the Company at the initial public offering price less the underwriting discount.

The underwriter is offering the shares on a firm commitment basis and expects to deliver the shares against payment in New York, New York on , 2007.

Taglich Brothers, Inc.

Prospectus dated , 2007.

You should rely only on the information contained in this prospectus or to which we have referred you. We have not, and the underwriter has not, authorized anyone else to provide you with different or additional information. This prospectus may only be used where it is legal to sell these securities. This prospectus is not an offer to sell or a solicitation of an offer to buy securities in any circumstances in which the offer or solicitation is unlawful. The information in this prospectus may only be accurate on the date of this prospectus and is subject to change after such date.

TABLE OF CONTENTS


	Page

Prospectus Summary		1
Risk Factors		9
Special Note Regarding Forward-Looking Statements		20
Market and Industry Data		21
Use of Proceeds		21
Dividend Policy		22
Capitalization		23
Dilution		24
Selected Financial Data		26
Management’s Discussion and Analysis of Financial Conditions and Results of Operations		29
Liquidity and Capital Resources		41
Industry		45
Business		47
Management		59
Compensation Discussion and Analysis		61
Executive Compensation		65
Security Ownership of Certain Beneficial Owners and Management		76
Certain Relationships and Related Party Transactions		78
Description of Indebtedness		80
Description of Capital Stock		81
Shares Eligible for Future Sale		83
United States Federal Income Tax Consequences to Non-U.S. Holders		86
Underwriting		89
Legal Matters		91
Experts		92
Where You Can Find More Information		92
Index to Financial Statements		F-1

Through and including , 2007 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider before buying shares in this offering. You should read the entire prospectus carefully, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless indicated otherwise, the information contained in this prospectus: (i) assumes an offering price of $12.00 per share, which is the midpoint of the expected offering price range; (ii) reflects a 2-for-1 stock split of our common stock effected in May 2007; (iii) does not reflect any exercise of outstanding common stock warrants into shares of our common stock, which is described under “Description of Capital Stock — Warrants”; (iv) does not reflect any exercise of common stock warrants issuable to designees of the underwriter in connection with this offering which is described under “Description of Capital Stock — Underwriter’s Warrants”; and (v) assumes that the underwriter does not exercise its over-allotment option to purchase up to 150,000 additional shares in the offering.

Gulfstream International Group, Inc.

We are a holding company that operates two independent subsidiaries: Gulfstream International Airlines, Inc. (“Gulfstream”) and Gulfstream Training Academy, Inc. (the “Academy”).

Gulfstream is a Fort Lauderdale, Florida-based commercial airline currently operating more than 200 scheduled flights per day, serving eleven destinations in Florida and ten destinations in the Bahamas. Our fleet consists of 27 Beechcraft 1900D, 19-seat, turbo-prop aircraft (“B1900Ds”) and eight Embraer Brasilia EMB-120, 30-seat, turbo-prop aircraft (“EMB-120s”). We operate under a principal code share and alliance agreement with Continental Airlines (“Continental”). We are also party to code share agreements with United Airlines, Northwest Airlines and Copa Airlines of Panama. In addition to the daily scheduled flights, Gulfstream also offers frequent charter flights within our geographic operating region, including flights to Cuba.

The Academy provides flight training services to licensed commercial pilots. The Academy’s principal program is our First Officer Program, which allows participants to receive a Second-In-Command type rating in approximately four months. Following receipt of this rating, pilots spend up to 400 hours flying as a first officer at Gulfstream. By attending the Academy, pilots are able to enhance their ability to secure a permanent position with a commercial airline. The Academy’s graduates are typically hired by various regional airlines, including Gulfstream. In 2006, 78 students entered the First Officer Program.

Our business started with the formation of Gulfstream in 1988. Gulfstream began as an airline offering on-demand charter service. In 1990, Gulfstream initiated scheduled commercial service by offering flights from Miami to several locations in the Bahamas. Following the introduction of turbo-prop air service in 1994, Gulfstream signed several code share agreements with major carriers, including one with Continental Airlines, which is our principal alliance partner.

In December 2005, the Company was formed by a group of investors to acquire Gulfstream and the Academy. In March 2006, we acquired approximately 89% of G-Air Holding, Inc., which owned approximately 95% of Gulfstream at that time and 100% of the Academy, which held the remaining 5% of Gulfstream. We subsequently acquired the remaining shares of G-Air. Prior to our acquisition of Gulfstream, Continental Airlines assisted Gulfstream from time to time with financial transactions and aircraft acquisitions, and today holds a warrant to purchase 10% of Gulfstream’s outstanding shares.

Our Competitive Strengths


	•	Long-standing code share agreements with multiple major airlines. Gulfstream has code share agreements with Continental Airlines, United Airlines and Northwest Airlines. We have been a partner with each of these airlines for more than five years. Recently, our principal code share and alliance agreement with Continental Airlines was extended through 2012. We believe that utilizing such


		agreements enhances our ability to generate revenue from both local and connecting traffic. We also believe that through our alliances, we are able to control costs by contracting for reservations, ground handling and other services at lower costs. In addition, these code share relationships allow us to offer our passengers easy booking through reservation systems maintained by our code share partners and the benefits of associated frequent flier programs.


	•	Well positioned in the Bahamas market. We are a leading carrier to the Bahamas and serve more destinations in the Bahamas than any other U.S. airline. We maintain our own facilities and employees at all ten of our destinations in the Bahamas and we enjoy a close cooperative relationship with Bahamian business and tourism officials. We believe that our focus on the Bahamian market allows us to identify new market opportunities and develop those opportunities more efficiently than new market entrants.

	•	Diverse route network and utilization of small aircraft. We have connecting hubs in several key Florida cities, as well as daily charter flights to Cuba, which enable us to establish multiple flight crew and maintenance bases that reduce overall operating costs and enhance operational reliability. In addition, our mix of 19-seat and 30-seat aircraft and mix of business and leisure passengers enhances our ability to align aircraft capacity with market demand, while maintaining our ability to provide competitive flight frequencies. The size and scale of this operation create practical barriers to entry for new entrants and increase our ability to shift capacity according to seasonal and business-versus-leisure demand patterns. Additionally, the relatively small size and efficiency of our turboprop aircraft combine to produce trip costs that are substantially lower than operators flying larger and more expensive jet aircraft.

	•	We offer reliable, quality service. We are consistently among the highest-ranked regional airlines in the country in terms of reliability. For 2006, our on-time performance was 85.1%, compared to the 75.4% average on-time performance reported by the Department of Transportation for all reporting airlines. Gulfstream has received the FAA Diamond Award, the highest level of recognition for maintenance training, for seven consecutive years.

	•	The Academy has a unique first officer program. We believe the Academy has established a strong reputation for quality instruction. We offer our students the opportunity to accumulate Part 121 flight hours, enhancing their hiring prospects with regional airlines. In addition, the Academy provides Gulfstream with a reliable and cost-effective source of first officers and pilots.

Our Strategy

Our business strategy is to utilize small-capacity aircraft to target markets that are unserved or underserved by competing airlines. Small capacity aircraft allow for lower costs per flight, and enable us to operate profitably with fewer passengers per flight than airlines operating larger equipment.


	•	Utilize turboprop aircraft to selectively expand the number of markets we serve. We use 19- and 30-passenger turboprop aircraft. Turboprop aircraft offer substantially lower acquisition costs than regional jet aircraft and, in addition, tend to be more fuel efficient than other aircraft. We believe this allows us to provide service on short, lower volume routes and achieve attractive margins, in contrast to airlines that have focused their fleets on larger regional jet aircraft, increasingly in the 70- to 90-seat category. The efficiencies associated with turboprop aircraft are more pronounced on short haul routes such as ours. Additionally, turboprop aircraft have the ability to operate out of airports with runways that are too short for certain regional jets.


		We continually monitor market and acquisition opportunities to profitably grow our route system by adding new cities that are complementary to our existing route structure. We look for unserved or underserved short haul city pairs that have a high degree of potential for long-term profitability. We have held discussions with various parties concerning the acquisition of regional airlines as well as additional turboprop aircraft; however, to date, we have not entered into any such agreements, nor is there any assurance that we will do so in the future.


	•	Use of alliance and code share agreements. Utilizing our alliance and code share agreements enhances our ability to generate revenue for both local and connecting traffic. By having multiple code share partners, we are able to increase our revenue per flight by accessing several sources of connecting passengers relative to what would be available within a single code share partnership arrangement. This is particularly true given that our main connecting airports are not hubs for any of our code share partners. These agreements also provide the opportunity to contract for services at lower costs, as well as to gain access to airport and other facilities, relative to what we would be able to do independently.


		Further, we believe that by providing high quality service under our code share partnerships with multiple airlines in existing markets, our opportunities for expanding the scope of our relationship with those carriers may be greater.


	•	Increase enrollment at the Academy. We seek to increase enrollment at the Academy through implementation of various marketing initiatives. We believe we can enhance enrollment by increasing cooperation with other regional airlines and primary flight training centers in order to produce higher levels of applicant referrals. We also encourage enrollment by developing closer integration with accredited higher education institutions offering two- and four-year degrees. Additionally, we seek to attract prospective First Officer candidates from different sources by offering training services to other regional air carriers operating similar aircraft types. We also continuously seek to assist prospective candidates in obtaining tuition financing from third party sources.

Company Information

We were incorporated in Delaware in December 2005. Our principal executive offices are located at 3201 Griffin Road, Fort Lauderdale, Florida 33312, and our telephone number is (954) 985-1500. Our website address is www.gulfstreamair.com. Information contained on our website is not incorporated by reference into and does not form any part of this prospectus. As used in this prospectus, unless the context requires otherwise, references to “the Company” and “Group” refer to Gulfstream International Group, Inc.; references to “Gulfstream” refer to Gulfstream International Airlines, Inc.; references to “the Academy” refer to Gulfstream Training Academy, Inc.; references to “G-Air” refer to G-Air Holdings Corp., Inc., the former parent company of Gulfstream, which was merged into GIA Holdings Corp., Inc. in March 2007; references to “GIA” refer to GIA Holdings Corp, Inc., the parent company of Gulfstream and references to “we”, “our” and “us,” refer to Gulfstream International Group, Inc. and either or both of Gulfstream or the Academy.

Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

This prospectus may refer to trademarks and trade names of other organizations, including those of our code share partners.

THE OFFERING


Common stock offered		1,000,000 Shares

Common stock to be outstanding after the offering		3,039,460 Shares

Use of proceeds		Assuming an initial offering price of $12.00 per share, we estimate that the net proceeds to us from this offering will be approximately $10,190,000, after deducting underwriting discounts and commissions and estimated offering expenses. We expect to use the net proceeds from this offering to fully redeem our 12% subordinated debentures. The remaining proceeds will be used to acquire additional aircraft, to refinance existing aircraft, or for general working capital purposes. See “Use of Proceeds” on page 21.

Risk factors		See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock

Dividend policy		We do not anticipate paying any dividends on our common stock in the foreseeable future.

Proposed American Stock Exchange Symbol		“GIA”

The number of shares of our common stock referred to above that will be outstanding immediately after completion of this offering is based on 2,039,460 shares of our common stock outstanding as of July 1, 2007. This number does not include, as of July 1, 2007:


	•	46,480 shares of common stock issuable upon the exercise of outstanding warrants, at an exercise price of $5.00 per share;

	•	210,324 shares of common stock issuable upon exercise of stock options at an exercise price equal to $5.00 per share;

	•	up to an additional 139,676 shares of our common stock reserved for issuance under our Stock Incentive Plan; and

	•	80,000 shares of common stock issuable upon exercise of the warrants to be issued to designees of the underwriter in connection with this offering at an exercise price equal to 120% of the public offering price of this offering.

We have agreed to issue an additional 150,000 shares if the underwriter exercises its over-allotment option in full, which we describe in “Underwriting” beginning on page 89. If the underwriter exercises this option in full, 3,189,460 shares of common stock will be outstanding after this offering.

SUMMARY FINANCIAL DATA

The results of operations presented herein for all periods prior to our acquisition of Gulfstream and the Academy are referred to as the results of operations of the “predecessor.” The results of operations presented herein for all periods subsequent to the acquisition are referred to as the results of operations of the “successor.” As a result of the acquisition, the results of operations of the predecessor are not comparable to the results of operations of the successor.

The following table sets forth the predecessor’s summary historical data for the period from January 1 through March 14, 2006 and our summary historical data for the period from March 15, 2006 through March 31, 2006 and for the three month period ended March 31, 2007. The summary financial data as of and for the three-month periods ended March 31, 2006 and 2007 are unaudited. The unaudited pro forma summary data for the three month period ended March 31, 2006 is based on the combined historical financial statements of the Company and our predecessor, adjusted to give effect to the March 14, 2006 purchase of the predecessor as if the purchase had occurred on January 1, 2006. The pro forma does not reflect any adjustments related to the transactions described by this prospectus. The pro forma data was prepared to illustrate the full period estimated effects of the March 14, 2006 purchase of Gulfstream and the Academy as if the purchase had occurred at the beginning of the period. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The pro forma data does not purport to represent what our results would actually have been had the sale in fact occurred as of January 1, 2006.


							Combined						Proforma			Successor
	Predecessor			Successor			Three						Three			Three
	January 1,			March 15,			Months						Months			Months			Percent
	2006 to			2006 to			Ended						Ended			Ended			Change
	March 14,			March 31,			March 31,			Adjustments			March 31,			March 31,			2006 to
	2006			2006			2006			(1)			2006			2007			2007

Revenue
Airline passenger revenue	$	20,264		$	5,788		$	26,052			—		$	26,052		$	27,657			6.2	%
Academy, charter and other revenue		1,103			206			1,309			—			1,309			1,569			19.9	%

Total Revenue		21,367			5,994			27,361			—			27,361			29,226			6.8	%

Operating Expenses
Flight operations		2,250			489			2,739			—			2,739			3,402			24.2	%
Aircraft fuel		4,384			1,115			5,499			—			5,499			5,840			6.2	%
Aircraft rental		1,331			281			1,612			—			1,612			1,665			3.3	%
Maintenance		3,783			1,001			4,784			—			4,784			5,305			10.9	%
Passenger service		4,798			1,042			5,840			—			5,840			5,736			(1.8	)%
Promotion & sales		1,561			409			1,970			—			1,970			2,064			4.8	%
General and administrative		1,011			195			1,206			—			1,206			1,365			13.2	%
Depreciation and amortization		503			131			634			169	(2)		803			920			14.6	%

Total Operating Expenses		19,621			4,663			24,284			169			24,453			26,297			7.5	%

Income (loss) from operations		1,746			1,331			3,077			(169	)		2,908			2,929			0.7	%
Non-Operating Income and (Expense)
Interest expense		(158	)		(64	)		(222	)		(107	)(3)		(329	)		(294	)		(10.6	)%
Other income (expense)		(5	)		(5	)		(10	)		—			(10	)		25			(350.0	)%

Income (loss) before taxes		1,583			1,262			2,845			(276	)		2,569			2,660			3.5	%
Provision for income taxes		546			471			1,017			(105	)(4)		912			1,002			9.9	%


						Combined						Proforma			Successor
	Predecessor		Successor			Three						Three			Three
	January 1,		March 15,			Months						Months			Months		Percent
	2006 to		2006 to			Ended						Ended			Ended		Change
	March 14,		March 31,			March 31,			Adjustments			March 31,			March 31,		2006 to
	2006		2006			2006			(1)			2006			2007		2007

Income (loss) before minority interest		1,037		791			1,828			(171	)		1,657			1,658		0.1	%
Minority interest		—		(14	)		(14	)		—			(14	)		—		—

Net income (loss)	$	1,037	$	777		$	1,814		$	(171	)	$	1,643		$	1,658		0.9	%

Net income (loss) per share:
Basic												$	0.81		$	0.82
Diluted												$	0.77		$	0.77
Shares used in calculating net income (loss):
Basic													2,029,460			2,029,460
Diluted													2,141,989			2,141,989


(1)		Pro forma financial results for the three months ended March 31, 2006 include our results for the period from January 1, 2006 to March 31, 2006 combined with the results of our predecessors from January 1, 2006, adjusted to give effect to our March 14, 2006 acquisition as though it had occurred on January 1, 2006.

(2)		Assumes three months depreciation expense based on the purchase price allocated to property, plant and equipment and revised estimates of depreciable lives.

(3)		Assumes three months interest expense on the debt used to fund our acquisition and amortization expense of deferred financing charges on associated debt.

(4)		Assumes combined effective federal and state income tax rate of 38% applied to the pro forma adjustments.

The following table sets forth the predecessor’s combined summary historical data for the years ended December 31, 2005 and 2004 and for the period from January 1 to March 14, 2006 and our summary historical data for the period from March 15 to December 31, 2006. The unaudited combined condensed summary data for the year ended December 31, 2006 is derived by combining the Company’s financial statements from March 15, 2006 to December 31, 2006 with those of our predecessor from January 1, 2006 to March 14, 2006. The unaudited pro forma condensed summary data for the year ended December 31, 2006 is based on the combined historical financial statements of the Company and our predecessor, adjusted to give effect to the March 14, 2006 purchase of the predecessor as if the purchase had occurred on January 1, 2006. This pro forma data does not reflect any adjustments related to the transactions described by this prospectus. The pro forma data was prepared to illustrate the full period estimated effects of the March 14, 2006 purchase of Gulfstream and the Academy as if the purchase had occurred at the beginning of the period. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. The pro forma data does not purport to represent what our results would actually have been had the sale in fact occurred as of January 1, 2006.


	Predecessor									Successor
							Period			Period
							January 1,			March 15,
							2006 to			2006 to			Combined			Adjust-			Proforma
	Year Ended December 31,						March 14,			December 31,			Full year			ments			Combined
	2004			2005			2006			2006			2006			(1)			2006
Revenue
Airline passenger revenue	$	66,274		$	87,983		$	20,264		$	78,290		$	98,554		$	—		$	98,554
Academy, charter and other revenue		6,063			4,022			1,103			5,400			6,503			—			6,503

Total Revenue		72,337			92,005			21,367			83,690			105,057			—			105,057

Operating Expenses
Flight operations		8,881			11,169			2,250			9,842			12,092			—			12,092
Aircraft fuel		11,115			20,544			4,384			19,994			24,378			—			24,378
Acraft rent		6,470			6,827			1,331			5,138			6,469			—			6,469
Maintenance		14,408			16,970			3,783			17,394			21,177			—			21,177
Passenger service		16,597			20,390			4,798			17,373			22,171			—			22,171
Promotion & sales		6,434			7,530			1,561			6,359			7,920			—			7,920
General and administrative		5,656			4,561			1,011			3,763			4,774			—			4,774
Depreciation and amortization		485			2,355			503			2,726			3,229			169	(2)		3,398

Total Operating Expenses		70,046			90,346			19,621			82,589			102,210			169			102,379

Income (loss) from operations		2,291			1,659			1,746			1,101			2,847			(169	)		2,678
Non-Operating Income and (Expense)
Interest expense		(153	)		(699	)		(158	)		(954	)		(1,112	)		(107	)(3)		(1,219	)
Other income (expense)		135			220			(5	)		180			175			—			175

Income (loss) before taxes		2,273			1,180			1,583			327			1,910			(276	)		1,634
Provision for income taxes		268			323			546			123			669			(105	)(4)		564

Income (loss) before minority interest		2,005			857			1,037			204			1,241			(171	)		1,070
Minority interset		—			—			—			(5	)		(5	)		—			(5	)

Net income (loss)	$	2,005		$	857		$	1,037		$	199		$	1,236		$	(171	)	$	1,065

Net income (loss) per share:
Basic										$	0.12								$	0.52
Diluted										$	0.12								$	0.50
Shares used in calculating net income (loss):
Basic											1,680,480									2,029,460
Diluted											1,727,826									2,141,989


(1)		Pro forma financial results for the year ended December 31, 2006 include our results for the period from March 15, 2006 to December 31, 2006 combined with the results of our predecessors from January 1, 2006, adjusted to give effect to our March 14, 2006 acquisition as though it had occurred on January 1, 2006.

(2)		Assumes 12 months depreciation expense based on the purchase price allocated to property, plant and equipment and revised estimates of depreciable lives.

(3)		Assumes 12 months interest expense on the debt used to fund our acquisition and amortization expense of deferred financing charges on associated debt.

RISK FACTORS

An investment in our common stock is risky. You should carefully consider the following risks, as well as the other information contained in this prospectus, before investing. If any of the following risks actually occurs, our business, business prospects, financial condition, cash flow and results of operations could be materially and adversely affected. In this case, the trading price of our common stock could decline, and you might lose part or all of your investment.

Risks Related To Our Industry

The airline industry is unpredictable.

The airline industry has experienced tremendous challenges in recent years and will likely remain volatile for the foreseeable future. Among other factors, the financial challenges faced by major carriers, including Delta Airlines, United Airlines and Northwest Airlines, and increased hostilities in the Middle East and other regions have significantly affected, and are likely to continue to affect, the U.S. airline industry. These conditions have resulted in declines and shifts in passenger demand, increased insurance costs, volatile fuel prices, increased government regulations and tightened credit markets, all of which have affected, and will continue to affect, the operations and financial condition of participants in the industry, including us, major carriers (including our code share partners), competitors and aircraft manufacturers. These industry developments raise substantial risks and uncertainties which will affect us, major carriers (including our code share partners), competitors and aircraft manufacturers in ways that we currently are unable to predict.

The airline industry is subject to the impact of terrorist activities or warnings.

The terrorist attacks of September 11, 2001 and their aftermath negatively impacted the airline industry in general, including our operations. In particular, the primary effects experienced by the airline industry included a substantial loss of passenger traffic and revenue. While airline passenger traffic and revenue have recovered since the terrorist attacks of September 11, 2001, additional terrorist attacks could have a similar or even more pronounced effect. Even if additional terrorist attacks are not launched against the airline industry, there will be lasting consequences of the September 11, 2001 attacks, including increased security and insurance costs, increased concerns about future terrorist attacks, increased government regulation and airport delays due to heightened security. Additional terrorist attacks or warnings of such attacks, and increased hostilities or prolonged military involvement in the Middle East or other regions, could negatively impact the airline industry, and result in decreased passenger traffic and yields, increased flight delays or cancellations associated with new government mandates, as well as increased security, fuel and other costs. There can be no assurance that these events will not harm the airline industry generally or our operations or financial condition in particular.

Our operations may be adversely impacted by increased security measures mandated by regulatory authorities.

Because of significantly higher security and other costs incurred by airports since September 11, 2001, many airports significantly increased their rates and charges to air carriers, including us, and may do so again in the future. On November 19, 2001, the U.S. Congress passed, and the President signed into law, the Aviation and Transportation Security Act, also referred to as the Aviation Security Act. This law federalized substantially all aspects of civil aviation security and created the Transportation Security Administration (“TSA”) to which the security responsibilities previously held by the Federal Aviation Administration (“FAA”) were transitioned. The TSA is an agency of the Department of Homeland Security. The Department of Homeland Security and the TSA and other agencies within the Department of Homeland Security have implemented numerous security measures, including the passing of the Aviation Security Act, that affect airline operations and costs, and are likely to implement additional measures in the future. The Department of Homeland Security has announced greater use of passenger data for evaluating security measures to be taken with respect to individual passengers, expanded use of federal air marshals on flights (thus displacing revenue passengers), investigating a requirement to install aircraft security systems (such as active devices on

commercial aircraft as countermeasures against portable surface to air missiles) and expanded cargo and baggage screening. Funding for airline and airport security required under the Aviation Security Act is provided in part by a $2.50 per segment passenger security fee for flights departing from the U.S., subject to a $10 per roundtrip cap; however, airlines are responsible for costs incurred to meet security requirements beyond those provided by the TSA. There is no assurance this fee will not be raised in the future as the TSA’s costs exceed the revenue it receives from these fees. Similarly, we could be adversely affected by any implementation of stricter security measures by the Bahamian government. We cannot provide assurance that additional security requirements or security-related fees enacted in the future will not adversely affect us financially.

The airline industry is heavily regulated.

All interstate airlines are subject to regulation by the Department of Transportation (the “DOT”), the FAA and other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA requires operating, air worthiness and other certificates; approval of personnel who may engage in flight, maintenance or operation activities; record keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining programs. We cannot predict whether we will be able to comply with all present and future laws, rules, regulations and certification requirements or that the cost of continued compliance will not have a material adverse effect on our operations. We incur substantial costs in maintaining our certifications and otherwise complying with the laws, rules and regulations to which we are subject. A decision by the FAA to ground, or require time-consuming inspections of or maintenance on, all or any of our aircraft for any reason may have a material adverse effect on our operations. In addition to state and federal regulation, airports and municipalities enact rules and regulations that affect our operations. From time to time, various airports throughout the country have considered limiting the use of smaller aircraft, such as our aircraft, at such airports. The imposition of any limits on the use of our aircraft at any airport at which we operate could have a material adverse effect on our operations. Because we operate only two types of aircraft and have our operations centered at Fort Lauderdale Airport, we are particularly susceptible to any such limitations.

The FAA may change its method of collecting revenues.

The FAA funds its operations largely through a tax levied on all users of the system based on ticket sales as well as a tax on fuel. As the airline industry changes, the trust fund that provides funding for the FAA’s capital accounts and all or some portion of its operations has experienced an increase in its costs without a corresponding rise in its revenue such that in its fiscal 2004, the FAA’s costs exceeded its revenues by more than $4 billion. Further, the existing authority for the current FAA taxing system expires on September 30, 2007. As a result, the FAA has discussed eliminating or amending the current tax system and implementing user fees that could cause us to incur potentially significant additional expenses. If the FAA implements a user fee or otherwise increases its tax rate, we may not be able to pass this increased expense on to our customers. Such an expense could have a material adverse impact on our ability to conduct business.

A Senate draft version of the FAA Reauthorization Bill has proposed a $25 per-flight fee be charged on all flights, regardless of aircraft size. A House draft version of the Bill does not include such a fee. There can be no assurance that the final version of the Reauthorization Bill would exempt small commercial aircraft such as those operated by Gulfstream from these new charges.

The airline industry is characterized by low profit margins and high fixed costs.

The airline industry is characterized generally by low profit margins and high fixed costs, primarily for personnel, debt service and rent. The expenses of an aircraft flight do not vary significantly with the number of passengers carried and, as a result, a relatively small change in the number of passengers or in pricing could have a disproportionate effect on an airline’s operating and financial results. Accordingly, a minor shortfall in our expected revenue levels could harm our business.

The airline industry is highly competitive.

In general, the airline industry is highly competitive. Gulfstream not only competes with other regional airlines, some of which are owned by or operated as code share partners of major airlines, but we also face competition from low cost carriers and network airlines on many of our routes. One of our primary competitors in the Bahamas market, Bahamasair, is owned by the government of the Bahamas and receives substantial subsidies to fund operating losses. The receipt of these subsidies may reduce the airline’s requirement to take necessary actions to improve profitability, including raising prices to offset fuel costs. Gulfstream also competes with alternative forms of transportation, such as charter aircraft, automobiles, commercial and private boats and trains.

Barriers to entry in most of Gulfstream’s markets are limited, and some of Gulfstream’s competitors are larger and have significantly greater financial and other resources. Moreover, federal deregulation of the industry allows competitors to rapidly enter markets and to quickly discount and restructure fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal costs to provide service to passengers occupying otherwise unsold seats.

Risks Related To Our Business

We will have substantial fixed obligations.

We currently have $11.6 million of debt. In addition, we have annual lease payments of approximately $6.3 million per year on our fleet of 27 B1900D aircraft as well as a liability for the return of engines borrowed from the lessor of $4.0 million over the next several years. There can be no assurance that our operations will generate sufficient cash flow to service our debt and lease obligations. The size of our debt and lease obligations could negatively affect our financial condition, results of operations and the price of our common stock.

We would be adversely affected by the loss of key personnel.

Our success is dependent upon the continued services of our management team. Our executives have substantial experience and expertise in our business and have made significant contributions to our growth and success. The loss of one of our executives or any other key employees (including the senior management team of Gulfstream and the Academy) could adversely affect our business, financial condition or results of operations. We do not maintain key-man life insurance on our management team.

We may experience difficulty finding, training and retaining employees.

Gulfstream and the Academy are labor-intensive businesses. The airline industry has from time to time experienced a shortage of qualified personnel, specifically pilots and maintenance technicians. Should the turnover of employees, particularly pilots and maintenance technicians, sharply increase, the result will be significantly higher training costs than otherwise would be necessary. Recently, it has become increasingly difficult to attract and retain employees in our industry in South Florida. There can be no assurance that Gulfstream or the Academy will be able to recruit, train and retain the qualified employees that we need from time to time. In addition, Gulfstream has been dependent on the Academy as a source of new pilots. Gulfstream’s flights are operated by a pilot and a co-pilot, commonly referred to as a “first officer.” A substantial portion of the first officers employed by Gulfstream are supplied by the Academy. Should there be a shortage of new pilots from the Academy, Gulfstream would likely incur significantly higher training costs and labor expenses.

Expansion of operations could result in operating losses.

We continuously monitor market conditions, looking for opportunities to grow by adding new routes, aircraft, alliance partners, or the acquisition of other regional airlines. Some of these opportunities could include operating in areas away from our current Florida base. A material increase in the scope or scale of our operations could lead to integration difficulties, which could result in short- and/or long-term operating losses.

We will incur significant costs as a result of operating as a public company.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as the requirements applicable to listing on the American Stock Exchange, have required changes in corporate governance practices of public companies. We expect these regulations and requirements to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. For example, as a result of being a public company, we will be required to create additional board committees. We will incur additional costs associated with our public company reporting requirements. As a public company, we also expect that it will be more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. If we are unable to effectively adjust our cost structure to address a significant increase in our legal, accounting and other expenses, our sales level and profitability could be harmed and our operations could be materially adversely affected.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud and, as a result, our business could be harmed and current and potential stockholders could lose confidence in us, which could cause our stock price to fall.

We will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which we expect will first apply to us for our fiscal year ending December 31, 2008. As a result, we expect to incur substantial additional expenses and diversion of management’s time. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or their effect on our operations since there is presently no precedent available by which to measure compliance adequacy. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to accurately report our financial results or prevent fraud and might be subject to sanctions or investigation by regulatory authorities such as the SEC or the American Stock Exchange. Any such action could harm our business or investors’ confidence in us, and could cause our stock price to fall.

Risks Related To Gulfstream

Gulfstream is dependent on our code share relationships.

Gulfstream depends on relationships created by code share agreements with Continental, United Airlines and Northwest Airlines for a significant portion of our revenues. Additionally, virtually all of our “local,” or non-connecting, traffic is booked through Continental’s reservation system. Any material modification to, or termination of, our code share agreements with any of these partners could have a material adverse effect on our financial condition and the results of operations. Each of the code share agreements contains a number of grounds for termination by our partners, including failure to meet specified performance levels. Further, these agreements limit our ability to enter into code share agreements with other airlines.

Gulfstream’s code share partners may expand their direct operation of regional jets, thus limiting the expansion of our relationships with them. A decision by any of Gulfstream’s code share partners to phase out Gulfstream’s contract-based code share relationships or enter into similar agreements with one or more of Gulfstream’s competitors could have a material adverse effect on Gulfstream’s business, financial condition or results of operations.

Also, our code share partners may be restricted in increasing the level of business that they conduct with Gulfstream, thereby limiting our growth. Union scope clauses at major airlines may limit or prohibit certain types of code share operations, including those by Gulfstream.

Gulfstream is dependent on the financial strength of our code share partners.

Gulfstream is directly affected by the financial and operating strength of its code share partners. In the event of a decrease in the financial or operational strength of any of the code share partners, such partner may be unable to make the payments due to Gulfstream under the code share agreement. It is possible that if any of the code share partners file for bankruptcy, Gulfstream’s code share agreement with such partner may not be assumed in bankruptcy and could be modified or terminated. Two of our code share partners, United Airlines and Northwest Airlines, have recently emerged from Chapter 11 reorganization.

The availability of additional and/or replacement code share partners is limited and airline strategic consolidations could have an impact on operations in ways yet to be determined.

The airline industry has undergone substantial consolidation, and it may in the future undergo additional consolidation. Other developments include domestic and international code share alliances between major carriers, such as the “SkyTeam Alliance,” that includes Delta Airlines, Continental and Northwest Airlines, among others. Any additional consolidation or significant alliance activity within the airline industry could limit the number of potential partners with whom Gulfstream could enter into code share relationships and materially adversely affect our relationship with our current code share partners.

There is no assurance that our relationship with our code share partners would survive in the event that any such code share partner merges with another airline.

Similarly, the bankruptcy or reorganization of one or more of our competitors may result in rapid changes to the identity of our competitors in particular markets, a substantial reduction in the operating costs of our competitors or the entry of new competitors into some or all of the markets we serve. We are unable to predict exactly what effect, if any, changes in the strategic landscape might have on our business, financial condition and results of operations.

There are constraints on our ability to establish new operations to provide airline service to major airlines other than our code share partners.

Our code share agreement with Continental requires that we seek their consent prior to establishing new code share agreements, subject to limited exceptions, as well as prior to acquiring another regional carrier. In the absence of such consent, we would have to establish a new operating subsidiary, separate from Gulfstream, which would require a substantial expenditure of management time and Company resources.

Additionally, pursuant to our code share agreement with Northwest Airlines, we may only provide airline service to other major airlines using aircraft certificated as having (1) less than 60 seats and (2) a maximum gross takeoff weight of less than 70,000 pounds (or such greater seat or weight limits as may be established under Northwest’s collective bargaining agreement with its pilots).

Fluctuations in fuel costs could adversely affect our operating expenses and results.

Aircraft fuel constitutes a significant portion of our total operating expenses (approximately 23% for the year ended December 31, 2005 and approximately 24% for the year ended December 31, 2006). The price of aircraft fuel is unpredictable and has increased significantly in recent periods based on events outside of our control, including geopolitical developments, regional production patterns and environmental concerns. Because of the effect of these events on the price and availability of aircraft fuel, the cost and future availability of fuel cannot be predicted with any degree of certainty. We cannot assure you increases in the price of fuel can be offset by higher revenue. We carry limited fuel inventory and we rely heavily on our fuel suppliers. We cannot assure you we will always have access to adequate supplies of fuel in the event of shortages or other disruptions in the fuel supply. Price escalations or reductions in the supply of aircraft fuel will increase our operating expenses and could cause our operating results and net income to decline. Additionally, price escalations or reductions in the supply of aircraft fuel could result in the curtailment of our service. Some of our competitors may be better positioned to obtain fuel in the event of a shortage.

Our business is subject to substantial seasonal and cyclical volatility.

Gulfstream’s business is subject to substantial seasonality, primarily due to leisure and holiday travel patterns, particularly in the Bahamas. We experience the strongest demand from February to July, and the weakest demand from August to October, during which period we typically suffer operating losses. As a result, our operating results for a quarterly period are not necessarily indicative of operating results for an entire year, and historical operating results are not necessarily indicative of future operating results. Our results of operations generally reflect this seasonality. Our operating results are also impacted by numerous other cycles and factors that are not necessarily seasonal. These factors include the extent and nature of fare changes and competition from other airlines, changing levels of operations, national and international events, fuel prices and general economic conditions, including inflation. Because a substantial portion of both personal and business airline travel is discretionary, the industry tends to experience adverse financial results in general economic downturns.

Any inability to acquire and maintain additional compatible aircraft or engines would increase our operating costs and could harm our profitability.

Our fleet currently consists of B1900D aircraft and EMB-120 turboprop aircraft, each equipped with two engines. Although our management believes there is an adequate supply of such aircraft and engines available at reasonable prices and terms to meet our current needs, we are unable to predict how long these conditions will continue. Any increase in demand for these aircraft or engines could restrict our ability to obtain additional aircraft, engines and spare parts. Because neither of the aircraft we operate are in active production, we may be unable to obtain additional suitable aircraft, engines or spare parts on satisfactory terms or at the time needed for our operations or for the implementation of our growth plan. Further, as fuel costs increase or remain at elevated levels, the demand for highly fuel-efficient turboprop aircraft may also increase. This increase in demand could cause a shortage in the supply of reasonably priced turboprop aircraft. Such a decrease could adversely affect our ability to expand our fleet or to replace outdated aircraft, which in turn could hinder our growth or reduce our revenues.

Maintenance expenses for Gulfstream’s fleet could increase.

Gulfstream’s fleet consists of aircraft that were delivered from 1990 to 1996. As the age of our aircraft increases, additional resources may be required to sustain their reliablility levels. There can be no assurance that such additional resources will not be material.

Any inability to extend the lease terms of our existing aircraft or obtain financing for additional aircraft could adversely affect our operations.

We finance our aircraft through either operating lease financing or secured debt. Most of our existing fleet of B1900Ds are leased from the manufacturer pursuant to a lease agreement that expires in 2010. We have the option to extend the leases for up to 15 aircraft from six to 24 months after the expiration period; however, there can be no assurance that this lease agreement can be extended further on reasonable terms. If we are unable to extend these leases, we also have the option to purchase up to 21 of these aircraft; however, we may not be able to secure financing on acceptable terms, if at all. Further, neither the B1900D nor the EMB-120 is currently produced by their manufacturers and there is currently a limited supply of these aircraft. If we are unable to obtain replacement aircraft on economically reasonable terms, our business could be materially adversely affected.

The airline industry has been subject to a number of strikes which could adversely affect our business.

The airline industry has been negatively impacted by a number of labor strikes. Any new collective bargaining agreement entered into by other regional carriers may result in higher industry wages and add increased pressure on Gulfstream to increase the wages and benefits of our employees. Furthermore, since each of Gulfstream’s code share partners is a significant source of revenue, any labor disruption or labor strike

by the employees of any one of Gulfstream’s code share partners could have a material adverse effect on our financial condition or results of operations.

Competitors or new market entrants may introduce smaller aircraft or direct hub flights, which could reduce our competitive advantage.

We operate relatively small aircraft on short flight routes, which enables us to maintain a low cost structure, giving us a competitive advantage over other airlines. If new market entrants or existing competitors were to introduce smaller aircraft into the marketplace, their costs may be lower than ours, allowing them to gain a competitive advantage. In addition, competitors could introduce new direct flights from their hubs to our key cities which could reduce the competiveness of our Florida connecting points.

Several aircraft manufacturers have developed a new line of very light jets, commonly referred to as VLJ’s, which cost substantially less than existing corporate aircraft. New companies, including DayJet Corporation, which is also based in South Florida, have ordered hundreds of VLJ’s with the goal of developing a new industry segment of air taxis that offer services at a low cost to passengers. DayJet has announced that it will be targeting many of the cities served by Gulfstream. If DayJet launches this air taxi segment, or if others implement similar business models, Gulfstream could experience a loss of passengers and a resulting decline in revenues. Gulfstream could also be forced to lower prices to compete with DayJet and others and could suffer economic losses as a result.

Gulfstream flies and depends upon only two aircraft types, and would be adversely affected if the FAA were to ground either of our fleets.

Gulfstream’s fleet consists of 27 B1900D turboprop aircraft and eight EMB-120 turboprop aircraft. The FAA requires operating, air worthiness and other certificates; approval of personnel who may engage in flight, maintenance or operation activities; record keeping procedures in accordance with FAA requirements; and FAA approval of flight training and retraining programs. We cannot predict whether we will be able to comply with all present and future laws, rules, regulations and certification requirements or that the cost of continued compliance will not have a material adverse effect on our operations. We incur substantial costs in maintaining our current certifications and otherwise complying with the laws, rules and regulations to which we are subject. A decision by the FAA to ground or require additional time-consuming inspections of or maintenance on either the B1900D or EMB-120 or any of our aircraft for any reason may have a material adverse effect on the operations of Gulfstream.

Gulfstream is at risk of losses and adverse publicity stemming from any accident involving our aircraft.

While Gulfstream has never had a fatal crash over our history, it is possible that one or more of our aircraft may crash or be involved in an accident in the future, causing death or injury to individual air travelers and our employees and destroying the aircraft. An accident or incident involving one of Gulfstream’s aircraft could involve significant potential claims of injured passengers and others, as well as repair or replacement of a damaged aircraft and our consequential temporary or permanent loss of service. In the event of an accident, our liability insurance may not be adequate to offset the exposure to potential claims and we may be forced to bear substantial losses from the accident. Substantial claims resulting from an accident in excess of related insurance coverage would harm our operational and financial results. Moreover, any aircraft accident or incident, even if fully insured, could cause a public perception that Gulfstream’s operations are less safe or reliable than other airlines, which could result in a material reduction in passenger revenues.

If Gulfstream is forced to relocate our Fort Lauderdale maintenance base, we may not be able to operate as successfully.

The lease for Gulfstream’s principal maintenance facility, located at Hollywood-Fort Lauderdale International Airport, expired at the end of May 2007, but may be extended by Broward County for periods of one year each, not to exceed a total of two years. Broward County is considering an improvement to the Hollywood-Fort Lauderdale International Airport that could result in a teardown of Gulfstream’s maintenance hangar. Gulfstream is currently in negotiations regarding an extension of the lease and a subsequent alternative location for a successor maintenance hangar on the airfield. If Gulfstream is forced to relocate its

Fort Lauderdale maintenance operations, it may be prohibitively expensive to relocate and/or construct a maintenance hangar. Gulfstream may not be able to operate as efficiently or successfully from any other location.

Hurricanes and other adverse weather conditions could adversely affect Gulfstream’s business.

Our routes in Florida and the Bahamas are particularly susceptible to the impact of hurricanes. In the event that a hurricane were to threaten one of our departure locations, we may be forced to cancel flights and/or relocate our fleet, either of which would cause us to lose revenues. Related storm damage could also affect telecommunications capability, causing interruptions to our operations. A hurricane could cause markets such as the Florida Keys and the Bahamas to sustain severe damage to their tourist destinations and thus cause a longer-term decrease in the number of persons traveling on our routes.

Additionally, during periods of fog, ice, low temperatures, hurricanes, storms or other adverse weather conditions, flights may be cancelled or significantly delayed. A significant interruption or disruption in service due to adverse weather or otherwise, could result in the cancellation or delay of a significant portion of Gulfstream’s flights and, as a result, could have a severe impact on our business, operations and financial performance.

Gulfstream may experience labor disruptions or an increase in labor costs.

All of Gulfstream’s permanent pilots are represented by International Brotherhood of Teamsters Airline Division Local 747, commonly known as the Teamsters. Our collective bargaining agreement with our pilots expires in 2009. In addition, our flight attendants have voted to be represented by the International Association of Machinists and Aerospace Workers (“IAM”), and we are currently engaged in negotiations with IAM. Although we have never had a work interruption or stoppage and we believe our relations with our union and non-union employees are generally good, Gulfstream is subject to risks of work interruption or stoppage and/or may incur additional administrative expenses associated with union representation of our employees. Any sustained work stoppages could adversely affect Gulfstream’s ability to fulfill our obligations under our code share agreements and could have a material adverse effect on our financial condition and results of operations.

Additionally, labor costs constitute a significant percentage of our total operating costs. Our labor costs normally constitute approximately 23% of our total operating costs. Any new collective bargaining agreements entered into by other airlines may also result in higher industry wages and increased pressure on us to increase the wages and benefits of our employees. Future agreements with our employees’ unions may be on terms that are not economically as attractive as our current agreements nor comparable to agreements entered into by our competitors. Any future agreements may increase our labor costs or otherwise adversely affect us. Additionally, we cannot assure you that the compensation rates that we have assumed will correctly reflect the market for our non-union employees, or that there will not be future unionization of our currently nonunionized groups, which could adversely affect our costs.

Our business is heavily dependent on the Bahamas markets and a reduction in demand for air travel to this market would harm our business.

Almost half of our scheduled flights have the Bahamas as either their destination or origin and our revenue is linked primarily to the number of tourists and other passengers traveling to and from the Bahamas. Bahamian tourism levels are affected by, among other things, the political and economic climate in the Bahamas’ main tourism markets, the availability of hotel accommodations, promotional spending by competing destinations, the popularity of the Bahamas as a tourist destination relative to other vacation options, and other global factors, including natural disasters or negative publicity due to safety and security. No assurance can be given that the level of passenger traffic to the Bahamas will not decline in the future. A decline in the level of Bahamas passenger traffic could have a material adverse effect on our results of operations and financial condition.

New passport requirements may cause a decrease in the number of travelers from the U.S. to the Bahamas.

In 2005, the United States issued a proposed Western Hemisphere Travel Initiative which would require United States citizens to have a passport or other accepted identity document to travel to or from certain countries or areas that were previously exempt, such as the Caribbean, including the Bahamas. The proposal was implemented in January 2007 for all United States citizens traveling to or from these destinations by air and sea and is expected to be implemented as of December 31, 2007 for all travel by land border crossings. If our United States passengers visiting the Bahamas do not have passports, these regulations could have a negative impact on our bookings; however, to date, the actual impact on the Company’s revenues is unclear.

The current regulation of travel to Cuba is subject to political conditions and a change in the current restrictions could impair our ability to provide flights or minimize our competitive advantage.

Our flights to Cuba depend on political conditions prevailing from time to time in Cuba and the United States. Currently, we are one of a limited number of operators who provide flights from the United States to Cuba. If relations between the United States and Cuba worsen, these flights may be prohibited entirely and we may lose significant revenues due to our inability to operate these flights. Conversely, if relations between the United States and Cuba significantly improve, demand for access to Cuba could increase dramatically, causing the market for flights from the United States to Cuba to be flooded with new entrants. In either scenario, our business, financial condition and results of operations could be materially and negatively affected.

We rely on third parties to provide us with facilities and services that are integral to our business and can be withdrawn on short notice.

We have entered into agreements with third-party contractors, including other airlines, to provide certain facilities and services required for our operations, such as certain maintenance, ground handling, baggage services and ticket counter space. We will likely need to enter into similar agreements in any new markets we decide to serve. All of these agreements are subject to termination upon short notice. The loss or expiration of these contracts, the loss of FAA certification by our outside maintenance providers or any inability to renew our contracts or negotiate contracts with other providers at comparable rates could harm our business. Our reliance upon others to provide essential services on our behalf also gives us less control over costs and over the efficiency, timeliness and quality of contract services.

Aviation insurance is a critical safeguard of our financial condition. It might become difficult to obtain adequate insurance at a reasonable rate in the future.

We believe that our insurance policies are of types customary in the industry and in amounts we believe are adequate to protect us against material loss. It is possible, however, that the amount of insurance we carry will not be sufficient to protect us from material loss. Some aviation insurance could become unavailable, available only for reduced amounts of coverage, or available only at substantially higher rates, which could result in our failing to comply with the levels of insurance coverage required by our code share agreements, our other contractual agreements or applicable government regulations. Additionally, war risk coverage or other insurance might cease to be available to our vendors or might only be available for reduced amounts of coverage.

Risks Related To the Academy

A decrease in demand for regional airline pilots could adversely impact the Academy’s ability to attract and retain students.

We believe that the employment of our graduates is essential to our ability to attract and retain students. In the event that regional airline industry demand for pilots decreases significantly, it would have a detrimental impact on the ability of our graduates to gain employment, which could have an adverse effect on enrollment.

The value of the Academy could be diminished if other airlines lower their required minimum flight hours.

Academy students are pilots who hold commercial, multi-engine and instrument ratings who are qualified to operate commercial flights but who seek to enhance their marketability by logging additional training and flight hours. The Academy offers pilots the opportunity to log flight hours more quickly than the traditional time-building method of flight instructing. If the airlines who hire Academy graduates were to reduce the number of logged hours that they require new pilots to have, the value of the Academy could be diminished and the Academy could suffer decreased enrollment and a loss of revenues.

The inability to finance tuition costs could adversely affect the Academy’s enrollment.

Most of our students depend upon some form of third-party financing to finance part or all of the cost of tuition. This type of financing is only available from limited sources. The inability of prospective students to obtain third-party financing could adversely affect our ability to attract and retain students.

Workplace error by graduates of the Academy could expose us to legal action.

Many of the pilots that graduate from the Academy are ultimately employed by airlines other than Gulfstream. In the event of an accident caused by one of the graduates of the Academy, it is possible that the Academy could be named as a defendant in any lawsuit that may arise. There can be no assurance that our insurance policy will be adequate to cover the potential losses from any such claims.

Risks Related To Our Common Stock

We do not pay cash dividends on our capital stock, and we do not anticipate paying any cash dividends in the future.

We have never paid cash dividends on our capital stock and do not have current plans to do so. Instead, we will likely retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will likely be your sole source of gain for the foreseeable future.

Our certificate of incorporation and bylaws, and Delaware law contain provisions that could discourage a takeover.

Our certificate of incorporation and bylaws and Delaware law contain provisions that might enable our management to resist a takeover. As described in “Description of Capital Stock — Anti-Takeover Provisions of Delaware Law and Charter Provisions”, these provisions may:


	•	discourage, delay or prevent a change in the control of our company or a change in our management;

	•	adversely affect the voting power of holders of common stock; and

	•	limit the price that investors might be willing to pay in the future for shares of our common stock.

Sales of a substantial number of shares of our common stock in the public market after this offering, or the perception that they may occur, may depress the market price of our common stock.

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that substantial sales may be made, could cause the market price of our common stock to decline. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate. The lock-up agreements delivered by our executive officers, directors and some of our stockholders who beneficially own more than 5% of our common stock provide that Taglich Brothers, Inc., in its sole discretion, may release those parties, at any time or from time to time and without notice, from their obligation not to dispose of shares of common stock for a period of 180 days after the date of this prospectus. Taglich Brothers, Inc. has no pre-established conditions to waiving the terms of the lock-up agreements, and any

decision by it to waive those conditions would depend on a number of factors, which may include market conditions, the performance of the common stock in the market and our financial condition at that time.

After this offering, we will have outstanding 3,039,460 shares of common stock, based upon shares of common stock outstanding as of July 1, 2007, which assumes no exercise of the underwriter’s over-allotment option and no exercise of outstanding options or warrants. This includes the shares we are selling in this offering, which may be resold in the public market immediately. The remaining 67.1%, or 2,039,460 shares, of our total outstanding shares will become available for resale in the public market as shown in the chart below. As restrictions on resale end, the market price could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them.


Number of Shares/%
of Total Outstanding		Date of Availability for Resale into Public Market

1,729,460/56.9%		90 days after the effective date of this prospectus due to the requirements of the federal securities laws.
310,000/10.2%		180 days after the date of this prospectus due to an agreement these stockholders have with the underwriter.

However, the underwriter can waive this restriction and allow these stockholders to sell their shares at any time. For a more detailed description, see “Shares Eligible for Future Sale.”

New investors in our common stock will experience immediate and substantial book value dilution after this offering.

The initial public offering price of our common stock will be substantially higher than the pro forma net tangible book value per share of the outstanding common stock immediately after the offering. Based on our net tangible book value as of March 31, 2007, if you purchase our common stock in this offering you will pay more for your shares than the amounts paid by existing stockholders for their shares and you will suffer immediate dilution of approximately $8.71 per share in pro forma net tangible book value. In the past, we have issued warrants to acquire common stock at prices significantly below the initial public offering price. As of July 1, 2007, 2007, 46,480 shares of our common stock were issuable upon the exercise of outstanding warrants, at an exercise price of $5.00 per share, and 210,324 shares of common stock were issuable upon exercise of stock options outstanding as of July 1, 2007, at an exercise price equal to the public offering price of this offering and up to an additional 139,676 shares of our common stock were reserved for issuance under our Stock Incentive Plan. As a result of this dilution, investors purchasing stock in this offering may receive significantly less than the full purchase price that they paid for the shares purchased in this offering in the event of a liquidation. See “Dilution” for a detailed discussion of the dilution new investors will incur in this offering.

We intend to file a registration statement on Form S-8 to register the shares reserved for issuance under our Stock Incentive Plan. The registration statement will become effective when filed, and, subject to applicable lock-up agreements, these shares may be resold without restriction in the public marketplace. See “Shares Eligible For Future Sale.”

Our future operating results may be below securities analysts’ or investors’ expectations, which could cause our stock price to decline.

We may be unable to generate significant revenues or grow at the rate expected by securities analysts or investors. In addition, our costs may be higher than we, securities analysts or investors expect. If we fail to generate sufficient revenues or our costs are higher than we expect, our results of operations will suffer, which in turn could cause our stock price to decline.

Our operating results in any particular period may not be a reliable indication of our future performance. In some future quarters, our operating results may be below the expectations of securities analysts or investors. If this occurs, the price of our common stock will likely decline.

Our common stock has not been publicly traded, and the price of our common stock could fluctuate substantially.

Before this offering, there has been no public market for shares of our common stock. An active public trading market may not develop after completion of this offering or, if developed, may not be sustained. The price of the shares of common stock sold in this offering will not necessarily reflect the market price of the common stock after this offering. The market price for the common stock after this offering will be affected by a number of factors, including:


	•	actual or anticipated variations in our results of operations or those of our competitors;

	•	changes in earnings estimates or recommendations by securities analysts or our failure to achieve analysts earnings estimates; and

	•	developments in our industry.

The liability of our officers and directors is limited.

Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:


	•	any breach of their duty of loyalty to the corporation or its stockholders;

	•	acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

	•	unlawful payments of dividends or unlawful stock repurchases or redemptions; or

	•	any transaction from which the director derived an improper personal benefit.

This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Our certificate of incorporation and bylaws also provide that we will indemnify our directors, officers, employees and agents to the fullest extent permitted by law.

There is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required or permitted. We are not aware of any pending or threatened litigation or proceeding that might result in a claim for indemnification.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. These statements relate to, among other things:


	•	our business strategy;

	•	our value proposition;

	•	the market opportunity for our services, including expected demand for our services;

	•	information regarding the replacement, deployment, acquisition and financing of certain numbers and types of aircraft, and projected expenses associated therewith;

	•	costs of compliance with FAA regulations, Department of Homeland Security regulations and other rules and acts of Congress;

	•	the ability to pass taxes, fuel costs, inflation, and various expenses to our customers;

	•	certain projected financial obligations;


	•	our estimates regarding our capital requirements; and

	•	any of our other plans, objectives, expectations and intentions contained in this prospectus that are not historical facts.

These statements, in addition to statements made in conjunction with the words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” and similar expressions, are forward-looking statements. These statements relate to future events or our future financial performance and only reflect management’s expectations and estimates. The following is a list of factors, among others, that could cause actual results to differ materially from the forward-looking statements:


	•	changing external competitive, business conditions or budgeting in certain market segments and industries;

	•	changes in our code share relationships;

	•	an increase in competition along the routes we operate;

	•	availability and cost of funds for financing new aircraft;

	•	unexpected changes in weather conditions;

	•	our ability to profitably manage our turbo-prop fleet;

	•	adverse reaction and publicity that might result from any accidents;

	•	changes in general and/or regional economic conditions;

	•	changes in fuel price or fuel supplies;

	•	our relationship with employees;

	•	the impact of current or future laws;

	•	additional terrorist attacks;

	•	Congressional investigations and governmental regulations affecting the airline industry and our operations; and

	•	consumer unwillingness to incur greater costs for flights.

You should read this prospectus completely and with the understanding that our actual results may be materially different from what we expect. We undertake no duty to update these forward-looking statements after the date of this prospectus, even though our situation may change in the future. We qualify all of our forward-looking statements by these cautionary statements.

MARKET AND INDUSTRY DATA

Some of the market and industry data and other statistical information used throughout this prospectus are based on independent industry publications, government publications, reports by market research firms or other published independent sources, including the Regional Airline Association and the FAA. Some data are also based on our good faith estimates, which are derived from our review of internal surveys, as well as the independent sources referred to above.

USE OF PROCEEDS

We estimate the net proceeds from the sale of the shares of common stock we are offering will be approximately $10.2 million. If the underwriter fully exercises the over-allotment option, the net proceeds will be approximately $11.8 million. “Net proceeds” are what we expect to receive after we pay the underwriting discount and other estimated expenses of this offering.

We plan to use approximately $3.3 million of the proceeds to fully redeem our 12% subordinated debentures. The remaining proceeds will be used to acquire additional aircraft, to refinance existing aircraft, or for general working capital purposes.

Pending our use of the proceeds, we intend to invest the net proceeds of this offering primarily in short-term, investment grade, interest-bearing instruments.

DIVIDEND POLICY

Since our formation, we have not paid cash dividends on our capital stock and we do not anticipate paying any cash dividends in the foreseeable future. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Additionally, we are party to several agreements that limit our ability to pay dividends. Under our credit facilities, we are prohibited from declaring dividends without the prior consent of our lender. Gulfstream is permitted under its primary aircraft lease agreement to pay dividends only if its average cash position after paying the dividend would equal or exceed $4,000,000 over the prior twelve month period. In addition, in the event that Gulfstream declares a dividend, Gulfstream has an obligation under the Continental Code Share Agreement to pay Continental cash in an amount equal to what Continental would have been entitled to had it exercised its warrant immediately prior to such dividend. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects and other factors that the board of directors may deem relevant.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2007:


	•	on an actual basis; and

	•	on a pro forma as adjusted basis reflecting the sale of 1,000,000 shares of our common stock at a public offering price of $12.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.


	March 31, 2007
	Actual		as Adjusted(1)
	(In thousands)

Short term debt, including current portion of long-term debt	$	1,380	$	1,380

Long-term debt, excluding current portion
Senior Term Debt, net of current portion		6,983		6,983
12% Subordinated Debentures		3,277		—

Total long term debt		10,260		6,983

Stockholders’ equity
Common stock, par value $0.01 per share, shares authorized 4,000,000, issued 2,029,460 actual; 3,029,460 as adjusted		20		30
Additional paid-in capital		7,830		18,010
Common stock warrants		61		61
Retained Earnings		1,857		1,857

Total stockholders’ equity		9,768		19,958

Total Capitalization	$	21,408	$	28,321


(1)		Adjusted to give effect to this offering and the application of the proceeds, as described in “Use of Proceeds” on page 21.

The table above does not include:


	•	150,000 shares of our common stock subject to the underwriter’s over-allotment option;

	•	46,480 shares of our common stock issuable upon the exercise of warrants outstanding as of July 1, 2007, at an exercise price of $5.00 per share;

	•	210,324 shares of common stock issuable upon exercise of stock options outstanding as of July 1, 2007, at an exercise price of $5.00 per share;

	•	up to an additional 139,676 shares of our common stock reserved for issuance under our Stock Incentive Plan; and

	•	80,000 shares of common stock issuable upon exercise of warrants to be issued to designees of the underwriter in connection with this offering, at an exercise price equal to 120% of the public offering price of this offering.

DILUTION

If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering. Our historical net tangible book value as of March 31, 2007 was $(181,148), or $(0.09) per share, based on 2,039,460 shares of common stock outstanding as of July 1, 2007. Historical net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the actual number of shares of common stock outstanding.

After giving effect to our sale of 1,000,000 shares of common stock offered by this prospectus at a public offering price of $12.00 per share and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value will be $10,008,852, or $3.29 per share. This represents an immediate increase in pro forma net tangible book value of $3.38 per share to existing stockholders and an immediate dilution in pro forma net tangible book value of $8.71 per share to new investors. Dilution in historical net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the net tangible book value per share of our common stock immediately afterwards. The following table illustrates this per share dilution.


Public offering price per share				$	12.00
Net tangible book value before this offering	$	(0.09	)
Increase per share attributable to new investors		3.38

Pro forma net tangible book value per share after this offering					3.29

Dilution per share to new investors				$	8.71

If the underwriter exercises its over-allotment option to purchase additional shares in this offering in full, our pro forma net tangible book value after the offering will be approximately $11,664,852, or $3.66 per share, representing an immediate increase in pro forma net tangible book value of $3.75 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of $8.34 per share to new investors purchasing shares in this offering.

The following table sets forth, as of July 1, 2007, the number of shares of common stock purchased from us, the total consideration paid and average price per share paid by existing stockholders and by the new investors, before deducting underwriting discounts and commissions and estimated offering expenses payable by us, using a public offering price of $12.00 per share.


											Average
	Shares Purchased					Total Consideration					Price per
	Number		Percent			Amount		Percent			Share

Existing stockholders		2,039,460		67.1	%	$	8,517,300		41.5	%	$	4.18
New investors		1,000,000		32.9	%		12,000,000		58.5	%	$	12.00

Total		3,039,460		100.0	%	$	20,517,300		100.0	%	$	6.75

If the underwriter exercises its over-allotment option in full, our existing stockholders would own 63.9% and our new investors would own 36.1% of the total number of shares of our common stock outstanding after this offering.

The tables above are based on 2,039,460 shares of common stock issued and outstanding as of July 1, 2007. These tables do not include:


	•	150,000 shares of our common stock subject to the underwriter’s over-allotment option;

	•	46,480 shares of common stock issuable upon the exercise of warrants outstanding as of July 1, 2007 at an exercise price of $5.00 per share;


	•	210,324 shares of common stock issuable upon exercise of stock options outstanding as of July 1, 2007, at an exercise price of $5.00 per share;

	•	up to an additional 139,676 shares of our common stock reserved for issuance under our Stock Incentive Plan; and

	•	80,000 shares of common stock issuable upon exercise of warrants to be issued to designees of the underwriter in connection with this offering, at an exercise price equal to 120% of the public offering price of this offering.

Assuming exercise of all of our outstanding warrants and options but excluding warrants to be issued to designees of the underwriter (which are anti-dilutive), the pro forma net tangible book value per share after this offering and excluding the underwriter’s over-allotment option, would be decreased to $3.04 per share and the dilution per share to new investors would be $8.96 per share, the number of shares purchased by existing stockholders would be increased to 2,296,264, or 69.7% of total shares purchased, and the total consideration would be increased to $9,801,420, or 45.0% of total consideration.

In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” following this section and our financial statements and related notes included in the back of this prospectus. The following table sets forth selected financial data as of and for the three-month periods ended March 31, 2006 and 2007 and the period from January 1 through March 14, 2006 and the period from March 15, 2006 through December 31, 2006 and for the years ended December 31, 2002, 2003, 2004 and 2005. The selected financial data as of and for the three-month periods ended March 31, 2006 and 2007 are unaudited. The selected financial data as of and for the years ended December 31, 2004, 2005, the period from January 1 through March 14, 2006 and the period from March 15, 2006 through December 31, 2006 were derived from the predecessor’s and our audited financial statements. The selected financial data as of and for the years ended December 31, 2002 and 2003 are unaudited. Gulfstream and the Academy, as they existed prior to their acquisition by us, are collectively referred to as the predecessor. The consolidated financial information of Gulfstream, the Academy and us as we existed on and after March 15, 2006 is referred to as the successor. Our audited financial statements as of December 31, 2004 and 2005 and for the periods from January 1, 2006 through March 14, 2006 and from March 15, 2006 through December 31, 2006 are included in the back of this prospectus. The historical results are not necessarily indicative of the operating results to be expected in any future period.


	Predecessor			Successor			Combined			Successor
	January 1,			March 15,			Three Months			Three Months			Percent
	2006 to			2006 to			Ended			Ended			Change
	March 14,			March 31,			March 31,			March 31,			2006 to
	2006			2006			2006			2007			2007

Revenue	$	21,367		$	5,994		$	27,361		$	29,226			6.8	%
Operating Expenses		19,621			4,663			24,284			26,297			8.3	%

Income from operations		1,746			1,331			3,077			2,929			(4.8	%)
Non-Operating Income and (Expense)		(163	)		(69	)		(232	)		(269	)		15.9	%

Income before taxes		1,583			1,262			2,845			2,660			(6.5	%)
Provision for income taxes		546			471			1,017			1,002			(1.5	%)

Income before minority interest		1,037			791			1,828			1,658			(9.3	%)
Minority interest		—			(14	)		(14	)		—			(100	%)

Net income	$	1,037		$	777		$	1,814		$	1,658			(8.6	%)

Operating Data:
Available seat miles (000’s)								71,488			74,961			4.9	%
Revenue passenger miles (000’s)								44,946			45,309			0.8	%
Passenger load factor								62.9	%		60.4	%		(3.9	%)
Average yield per revenue passenger mile							$	0.580		$	0.610			5.3	%
Average passenger fare							$	112.89		$	120.65			6.9	%
Fuel cost per gallon (including taxes & fees)							$	2.04		$	1.98			(2.9	%)


	Predecessor															Successor						Percent Change
													Period			Period
													January			March 15,
													1, 2006 to			2006 to			Combined
	Year Ended December 31,												March 14,			December 31,			Full year			2004 to			2005 to
	2002			2003			2004			2005			2006			2006			2006			2005			2006
	(Unaudited)			(Unaudited)

Revenue	$	59,052		$	61,015		$	72,337		$	92,005		$	21,367		$	83,690			105,057			27.2	%		14.2	%
Operating Expenses		62,196			58,451			70,046			90,346			19,621			82,589			102,210			29.0	%		13.1	%

Income (loss) from operations		(3,144	)		2,564			2,291			1,659			1,746			1,101			2,847			(27.6	%)		71.6	%
Non-Operating Income and (Expense)		(3,124	)		(2,414	)		(18	)		(479	)		(163	)		(774	)		(937	)		2561.1	%		95.6	%
Gain on Extinguishment of Debt		—			27,957			—			—			—			—			—			—			—

Income (loss) before taxes		(6,268	)		28,107			2,273			1,180			1,583			327			1,910			(48.1	%)		61.9	%
Provision for income taxes		(2,359	)		252			268			323			546			123			669			20.5	%		107.1	%

Income (loss) before minority interest		(3,909	)		27,855			2,005			857			1,037			204			1,241			(57.3	%)		44.8	%
Minority interest		—			—			—			—			—			(5	)		(5	)		—			—

Net income (loss)	$	(3,909	)	$	27,855		$	2,005		$	857		$	1,037		$	199		$	1,236			(57.3	%)		44.2	%

Annual Operating Statistics (unaudited):
Available seat miles (000’s)		180,713			180,217			202,662			280,555									290,161			38.4	%		3.4	%
Revenue passenger miles (000’s)		111,403			105,713			122,852			160,861									168,939			30.9	%		5.0	%
Passenger load factor		61.6	%		58.7	%		60.6	%		57.3	%								58.2	%		(5.4	%)		1.5	%
Average yield per revenue passenger mile	$	0.508		$	0.535		$	0.539		$	0.547								$	0.583			1.4	%		6.7	%
Average passenger fare	$	86.99		$	96.72		$	100.27		$	105.10								$	114.13			4.8	%		8.6	%
Fuel cost per gallon (incl taxes & fees)	$	0.90		$	0.99		$	1.33		$	1.90								$	2.18			42.9	%		14.7	%


	As of December 31,															As of
	Predecessor												Successor			March 31,
	2002			2003			2004			2005			2006			2007
	(unaudited)			(unaudited)

Working Capital	$	(21,153	)	$	(6,726	)	$	(11,321	)	$	(5,845	)	$	(7,068	)	$	(7,067	)
Property and Equipment, net		539			1,113			8,113			9,910			14,542			16,468
Total Assets		11,328			12,945			19,689			23,220			36,244			38,853
Long-Term Debt, net of current portion		28,179			2,566			4,721			7,492			9,523			10,260
Total Stockholders’ Equity (Deficit)		(42,252	)		(2,554	)		(1,963	)		(2,785	)		8,035			9,768

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the audited financial statements and the notes to those statements included elsewhere in this prospectus. The discussion and analysis throughout this report contains certain forward-looking terminology such as “believes,” “anticipates,” “will,” and “intends” or comparable terminology. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Potential purchasers of the Company’s securities are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by the cautions and risks described herein. See “Forward-Looking Statements” at the front of this report. You should specifically consider the various risk factors identified in this prospectus that could cause actual results to differ materially from those anticipated in these forward-looking statements.

Overview

The Company operates a scheduled airline, scheduled and on-demand charter services and a flight training academy for commercial pilots. Each of these business components is described below.

Airline

We began providing air charter service in 1988, and have provided scheduled passenger service in Florida and the Bahamas since 1990. We signed our first major code share agreement with United Airlines in 1994. In 1997, Gulfstream entered into a cooperative alliance and code share agreement with Continental Airlines and has since operated as a Continental Connection carrier. We also have code share agreements with United Airlines, Northwest Airlines, and Copa Airlines. We estimate that over 60% of our revenue is derived from local “point to point” traffic within Florida and the Bahamas, with connecting traffic from our code-share partners and other carriers destined primarily for the Bahamas making up the balance. Continental is our largest connecting partner, with passengers connecting to and from Continental flights providing approximately 20% of our revenue.

The financial arrangements between regional airlines and their code share partners typically involve either a fixed-fee per departure or revenue pro-rate arrangement. All of our code share agreements provide for pro-rate revenue sharing, while most other regional airlines operate either primarily or exclusively under fixed fee agreements.

Under a typical revenue pro-rate agreement, such as those we have in place, the two airlines negotiate a specific proration formula, which allocates a total ticket value between the two carriers, generally based on factors such as weighted mileage, relative published fares or fixed rates per passenger depending on fare class. In such a revenue sharing arrangement, increased profits are realized as ticket prices and passenger loads increase and, correspondingly, decreased profits are realized as ticket prices and passenger loads decrease.

Revenue generated by the airline is classified in our statement of operations as Airline Passenger Revenue.

Cuba and Other Charter Revenue

We operate charter flights between Miami and Havana pursuant to a services agreement dated August 8, 2003 and amended March 14, 2006 with a related company, Gulfstream Air Charter, Inc. (“GAC”), which is owned by Thomas L. Cooper. GAC is licensed by the Office of Foreign Assets Control of the U.S. Department of the Treasury as a carrier and travel service provider for charter air transportation between designated U.S. and Cuban airports.

Pursuant to the agreement, we provide use of our aircraft and the Gulfstream name, insurance and service personnel, including inflight, passenger, ground handling, security, and administrative. We maintain the financial records and receive 75% of the cash flow generated by GAC’s Cuban charter operation. The cash flow provided to us from GAC, net of expenses, is reported in the statement of operations as charter revenue.

In addition to the Cuba revenue described above, our charter revenues are principally derived from on-demand charter services, sub-service flying for other scheduled airlines and a 15-year agreement with a government subcontractor, subject to two-year renewals, to operate daily flights between West Palm Beach and Andros Town, Bahamas. Charter revenues include revenues associated with providing aircraft and other operating services to GAC. Excluding cash flow generated from the services agreement with GAC, revenue and related expenses associated with Gulfstream’s charter activity are reported gross as charter revenue and within the appropriate expense category of the Company’s statement of operations.

Academy

The Academy offers training programs for pilots holding commercial multi-engine instrument certifications and at least 190 hours of flying time. Pilots with these ratings are qualified to fly commercial airplanes, but are often unable to find positions with airlines without additional training and flying time. The Academy enhances its students’ career prospects by providing them with the training and experience necessary to obtain pilot positions with commercial airlines.

Traditionally, pilots have worked as flight instructors for up to two years to gain this additional training and flying time. The Academy offers an alternative to this traditional means of gathering additional experience. By enrolling in one of the Academy’s programs, students are able to more quickly accumulate the qualifications demanded by the commercial airlines. A number of U.S. airlines accept Academy graduates with a lower total flight time than these airlines require of other newly hired pilots, reflecting the value they place on the Academy’s training. The Academy graduates have also experienced a high success rate in completing training at airlines, which translates into cost savings for the airlines.

The Academy enrolled 78 students in 2006, virtually all of whom were hired by airlines after graduation, including those hired by Gulfstream.

The Academy’s training facility in Fort Lauderdale has several ground school classrooms, a series of flight training devices used for procedural training and cockpit familiarization, as well as two non-motion flight simulators, one of which is a Beechcraft 1900. The Academy contracts for full-motion flight simulators at facilities in Atlanta, Georgia and Orlando, Florida, which are needed for full FAA certification of the pilots.

The Academy’s revenues are included as other revenue in our results of operations, and its expenses are included in Academy operating expenses.

Results of Operations

Comparative Three-Month Periods Ended March 31, 2007 and 2006

The following table sets forth the Company’s financial results for the three-month periods ended March 31, 2007 and 2006.


	Predecessor			Successor			Combined			Successor
	January 1,			March 15,			Three Months			Three Months			Percent
	2006 to			2006 to			Ended			Ended			Change
	March 14,			March 31,			March 31,			March 31,			2006 to
	2006			2006			2006			2007			2007

Revenue
Airline passenger revenue	$	20,264		$	5,788		$	26,052		$	27,657			6.2	%
Academy, charter and other revenue		1,103			206			1,309			1,569			19.9	%

Total Revenue		21,367			5,994			27,361			29,226			6.8	%

Operating Expenses
Flight operations		2,250			489			2,739			3,402			24.2	%
Aircraft fuel		4,384			1,115			5,499			5,840			6.2	%
Aircraft rent		1,331			281			1,612			1,665			3.3	%
Maintenance		3,783			1,001			4,784			5,305			10.9	%
Passenger service		4,798			1,042			5,840			5,736			(1.8	%)
Promotion & sales		1,561			409			1,970			2,064			4.8	%
General and administrative		1,011			195			1,206			1,365			13.2	%
Depreciation and amortization		503			131			634			920			45.1	%

Total Operating Expenses		19,621			4,663			24,284			26,297			8.3	%

Income (loss) from operations		1,746			1,331			3,077			2,929			(4.8	%)
Non-Operating Income and (Expense)
Interest expense		(158	)		(64	)		(222	)		(294	)		32.4	%
Other income (expense)		(5	)		(5	)		(10	)		25			(350.0	%)

Income (loss) before taxes		1,583			1,262			2,845			2,660			(6.5	%)
Provision for income taxes		546			471			1,017			1,002			(1.5	%)

Income (loss) before minority interest		1,037			791			1,828			1,658			(9.3	%)
Minority interest		—			(14	)		(14	)		—			100.0	%

Net income (loss)	$	1,037		$	777		$	1,814		$	1,658			(8.6	%)

Operating Statistics. The following table sets forth our major operational statistics and the percentage-of-change for the periods identified below.


	Predecessor	Successor	Combined			Successor
	January 1,	March 15,	Three Months			Three Months			Percent
	2006 to	2006 to	Ended			Ended			Change
	March 14,	March 31,	March 31,			March 31,			2006 to
	2006	2006	2006			2007			2007

Annual Operating Statistics (unaudited):
Available seat miles (000’s)				71,488			74,961			4.9	%
Revenue passenger miles (000’s)				44,946			45,309			0.8	%
Revenue passengers carried				230,765			229,229			(0.7	%)
Departures flown				17,704			18,077			2.1	%
Passenger load factor				62.9	%		60.4	%		(3.9	%)
Average yield per revenue passenger mile			$	0.580		$	0.610			5.3	%
Revenue per available seat mile			$	0.364		$	0.369			1.2	%
Operating costs per available seat mile			$	0.340		$	0.351			3.3	%
Average passenger fare			$	112.89		$	120.65			6.9	%
Average passenger trip length (miles)				195			198			1.5	%
Aircraft in service (end of period)				32			34			6.3	%
Fuel cost per gallon (incl taxes & fees)			$	2.04		$	1.98			(2.9	%)

Net Income. The Company’s consolidated net income for the three months ended March 31, 2007 was $1.7 million compared to $1.8 million for the same period of 2006. Factors relating to the change in net income are discussed below.

Operating Income. The following table identifies the respective operating profit contribution from each of our operating components.


	Predecessor			Successor			Combined			Successor
	January 1,			March 15,			Three Months			Three Months			Percent
	2006 to			2006 to			Ended			Ended			Change
	March 14,			March 31,			March 31,			March 31,			2006 to
	2006			2006			2006			2007			2007

Airline and charter	$	1,937		$	1,388		$	3,325		$	3,703			11.4	%
Academy		219			68			287			(43	)		(115.0	%)
Cuba charter, net		172			9			181			170			(6.1	%)

Total income from operations		2,328			1,465			3,793			3,830			1.0	%
General and administrative		(582	)		(134	)		(716	)		(901	)		25.8	%

Consolidated income from operations	$	1,746		$	1,331		$	3,077		$	2,929			(4.8	%)

Consolidated operating income for the three months ended March 31, 2007 was $2.9 million compared to $3.1 million for the same period of 2006. The decrease in operating income was primarily the result of reduced profits from the Academy and increased general and administrative expenses, partially offset by increased operating income from our airline operations. The increase in operating income in our airline operations was due to higher passenger fares and the addition of new charter operations.

Operating Revenues. Consolidated revenues increased to $29.3 million for the three months ended March 31, 2007 from $27.4 million for the same period of 2006. This represented an increase of 6.8% over

the prior year. The following table identifies the respective revenue contribution from each of our operating components.


	Predecessor			Successor		Combined			Successor
	January 1,			March 15,		Three Months			Three Months			Percent
	2006 to			2006 to		Ended			Ended			Change
	March 14,			March 31,		March 31,			March 31,			2006 to
	2006			2006		2006			2007			2007

Revenue
Airline passenger revenue	$	20,264		$	5,788	$	26,052		$	27,657			6.2	%
Charter and other revenue		283			68		351			978			178.6	%
Cuba charter, net		172			9		181			170			(6.1	%)
Academy		906			129		1,035			789			(23.8	%)
Intercompany revenue elimination		(258	)		—		(258	)		(368	)		42.6	%


Total Revenue	$	21,367		$	5,994	$	27,361		$	29,226			6.8	%

Airline Passenger Revenue. Passenger revenue increased 6.2% to $27.7 million for the three months ended March 31, 2007 from $26.1 million for the same period of 2006. This increase was primarily driven by a 5.3% increase in yield per revenue passenger mile and an increase of 4.9% in available seat miles, somewhat offset by a decrease of 2.5 percentage points in our passenger load factor. The decrease in passenger load factor was largely due to the 4.9% increase in available seat miles as revenue passenger miles increased 0.8%. The increase in yield per revenue passenger mile reflected an industry-wide improvement in the pricing environment, which we believe was largely in response to substantially higher fuel prices.

Charter, Cuba Operations and Other Revenue. Revenues from general charter, Cuba charter and other operations increased 115.8% to $1.1 million for the three months ended March 31, 2007 from $532,000 for the same period of 2006 due principally to our commencement of a new charter service for a government subcontractor. Under our agreement with this subcontractor, we operate approximately two daily round-trip flights between West Palm Beach and Andros Town, Bahamas with two B1900Ds we have leased to support the operation. We initiated service under this contract in June 2006, and this contract generated $531,000 of incremental charter revenue in the first quarter of 2007.

Academy Revenue. Revenue from the Academy declined 23.8% to $789,000 for the three months ended March 31, 2007 from $1.0 million for the same period last year. The year-over-year revenue decline began in mid-2005 as industry conditions made pilot applicant recruiting more difficult, and the sales and marketing activities within the Academy were reduced. In early 2006, the former President of the Academy and certain sales personnel resigned their positions and formed a competing company. The Academy alleges that these personnel initiated steps to set up the competing company while still employed by the Academy. As a result, enrollment at the Academy declined significantly throughout 2006 and continued during the first quarter of 2007. The Company has initiated a lawsuit against these former employees, alleging violation of non-competition and fiduciary obligations.

Airline Operating Expenses. The following table presents Gulfstream’s operating expenses for the three months ended March 31, 2006 and 2007:


					Percentage of AirlineRevenue						Percent
	Operating Costs				Three Months Ended						Change
	Three Months Ended March 31,				March 31,						2006 to
	2006		2007		2006			2007			2007

Flight operations	$	2,739	$	3,402		10.5	%		12.3	%		24.2	%
Aircraft fuel		5,499		5,840		21.1	%		21.1	%		6.2	%
Aircraft rent		1,612		1,665		6.2	%		6.0	%		3.3	%
Maintenance		4,784		5,305		18.4	%		19.2	%		10.9	%
Passenger service		5,840		5,736		22.4	%		20.7	%		(1.8	%)
Promotion & sales		1,970		2,064		7.6	%		7.5	%		4.8	%
Depreciation and amortization		634		920		2.4	%		3.3	%		45.1	%

Total	$	23,078	$	24,932		88.6	%		90.1	%		8.0	%

Flight Operations. Major components of flight operations expense include salaries for pilots, flight attendants and other operations personnel. Flight operations expenses increased to $3.4 million, or 12.3% of airline revenue, for the three months ended March 31, 2007 from $2.7 million, or 10.5% of airline revenue, for the same period last year. The increase in flight operations expenses as a percentage of airline revenue was primarily due to increased salaries, which increased to 9.9% of airline revenue during the first quarter of 2007 compared to 8.5% for the same period in 2006.

Salaries and wages increased in 2007 due to the implementation of a new collective bargaining agreement in the second quarter of 2006, as well as overtime, training and related costs resulting from high pilot attrition in the fourth quarter of 2006.

Aircraft Fuel. Aircraft fuel expenses increased to $5.8 million for the three months ended March 31, 2007 from $5.5 million for the same period last year, principally due to an increase in aircraft hours flown.

Aircraft Rent. Aircraft rent is related to the lease costs associated with the rental of our 27 B-1900D aircraft. Aircraft rent expense increased as the result of leasing two additional B-1900D aircraft, offset by the absorption of aircraft rent expense within charter operations as a result of increased charter flying. The improvement as a percent of airline revenue reflects the fixed nature of this expense in the context of the improving revenue environment that existed during the first quarter of 2007.

Maintenance and repairs expense. Major components of maintenance and repairs expense include salaries and wages, materials and expenses incurred from third party service providers required to maintain our aircraft. Maintenance increased to $5.3 million, or 19.2% of airline revenue, for the three months ended March 31, 2007 from $4.8 million, or 18.4% of airline revenue for the same period last year. Total maintenance cost per flight hour increased by 6.8% to $328 in 2007 from $307 in 2006. The Company has increased compensation rates to improve retention of maintenance personnel, increased the number of maintenance personnel, and opened a new maintenance facility in West Palm Beach, Florida, to ensure continued fleet reliability.

Passenger Service. Major components of passenger service expense include ground handling services, airport counter and gate rentals, wages paid to our airport employees, passenger liability insurance, security and miscellaneous passenger-related expenses. Passenger service expense decreased 1.8% to $5.7 million, or 20.7% of airline revenue, for the three months ended March 31, 2007 from $5.8 million, or 22.4% of airline revenue, for the same period last year. Decreased passenger service expense as a percentage of airline revenue was due to the leveraging effect on our expenses that resulted from capacity additions and increases in revenue yield during the three months ended March 31, 2007.

Promotion and Sales. Major components of promotion and sales expense include credit card commissions, travel agent commissions and reservation system fees. Promotion and sales expense increased 4.8% to

$2.1 million for the three months ended March 31, 2007 from $2.0 million for the same period last year. Promotion and sales expense decreased as a percentage of airline revenue to 7.5% for the three months ended March 31, 2007 from 7.6% of airline revenue for the same period last year. Most of this improvement as a percentage of airline revenue was due to the impact of higher average fares.

Depreciation and amortization expense. Depreciation and amortization expense increased 45.1% to $920,000 for the three months ended March 31, 2007 from $634,000 for the same period last year. The increase in the first quarter of 2007 was due primarily to the additional depreciation resulting from the $4.7 million valuation increase attributable to seven owned EMB-120 aircraft and increased amortization of intangible assets resulting from the purchase price allocation related to our acquisition of Gulfstream and the Academy in March 2006.

General and Administrative and Academy Operating Expense. Our consolidated general and administrative expenses include the expenses of the Academy, as set forth in the following table.


	Predecessor			Successor		Combined			Successor
	January 1,			March 15,		Three Months			Three Months			Percent
	2006 to			2006 to		Ended			Ended			Change
	March 14,			March 31,		March 31,			March 31,			2006 to
	2006			2006		2006			2007			2007

General and administrative expense	$	582		$	134	$	716		$	991			38.4	%
Academy operating expenses		687			61		748			832			11.2	%
Intercompany expense elimination		(258	)		—		(258	)		(458	)		77.5	%

Total general and administrative	$	1,011		$	195	$	1,206		$	1,365			13.2	%

General and administrative expenses, excluding Academy expenses, increased to $991,000 for the three months ended March 31, 2007 from $716,000 for the same period last year. Most of the increase in the first quarter of 2007 was attributable to corporate expenses related to the acquisition of the predecessor companies in March 2006, including consulting expenses, board of directors fees and share-based compensation expense.

Academy expenses increased to $832,000 for the three months ended March 31, 2007 from $748,000 for the same period last year. This increase was primarily due to increases in sales personnel, advertising and travel expenses incurred to reinvigorate our business growth, which was significantly impacted by the resignation of the former President of the Academy and certain sales personnel in late 2005 and early 2006.

Non-Operating Income and Expense. Interest expense increased to $294,000 for the three months ended March 31, 2007 from $222,000 for the same period last year. This increase was primarily due to the issuance of subordinated debentures in March of 2006 to finance the acquisition.

Income Taxes. The effective income tax rate for the three months ended March 31, 2007 was 37.7% compared to 35.7% for the same period in 2006. The lower effective income tax rate for the three months ended March 31, 2006 was due primarily to the fact that the Academy was an S Corporation prior to its acquisition on March 14, 2006 and not subject to corporate income taxes.

Comparative Years Ended December 31, 2006, 2005 and 2004

The following table sets forth the Company’s financial results for the years 2006, 2005 and 2004.


	Predecessor									Successor						Percent Change
							Period
							January 1,
							2006 to			Year Ended			Combined
	Year Ended December 31,						March 14,			December 31,			Full Year			2004 to			2005 to
	2004			2005			2006			2006			2006			2005			2006

Revenue
Airline passenger revenue	$	66,274		$	87,983		$	20,264		$	78,290		$	98,554			32.8	%		12.0	%
Academy, charter and other revenue		6,063			4,022			1,103			5,400			6,503			(33.7	)%		61.7	%

Total Revenue		72,337			92,005			21,367			83,690			105,057			27.2	%		14.2	%
Operating Expenses
Flight operations		8,881			11,169			2,250			9,842			12,092			25.8	%		8.3	%
Aircraft fuel		11,115			20,544			4,384			19,994			24,378			84.8	%		18.7	%
Aircraft rent		6,470			6,827			1,331			5,138			6,469			5.5	%		(5.2	)%
Maintenance		14,408			16,970			3,783			17,394			21,177			17.8	%		24.8	%
Passenger service		16,597			20,390			4,798			17,373			22,171			22.9	%		8.7	%
Promotion & sales		6,434			7,530			1,561			6,359			7,920			17.0	%		5.2	%
General and administrative		5,656			4,561			1,011			3,763			4,774			(19.4	)%		4.7	%
Depreciation and amortization		485			2,355			503			2,726			3,229			385.6	%		37.1	%

Total Operating Expenses		70,046			90,346			19,621			82,589			102,210			29.0	%		13.1	%
Income (loss) from operations		2,291			1,659			1,746			1,101			2,847			(27.6	)%		71.6	%
Non-Operating Income and(Expense)
Interest expense		(153	)		(699	)		(158	)		(954	)		(1,112	)		356.9	%		59.1	%
Other income		135			220			(5	)		180			175			63.0	%		(20.5	%

Income (loss) before taxes		2,273			1,180			1,583			327			1,910			(48.1	)%		61.9	%
Provision for income taxes		268			323			546			123			669			20.5	%		107.1	%

Income (loss) before minority interest		2,005			857			1,037			204			1,241			(57.3	)%		44.8	%
Minority interest		—			—			—			(5	)		(5	)		—			—

Net income	$	2,005		$	857		$	1,037		$	199		$	1,236			(57.3	)%		44.2	%

Operating Statistics. The following table sets forth our major operational statistics and the percentage-of-change for the years identified below.


	Predecessor							Successor				Percent Change
							Period
							January 1,
							2006 to	Year Ended	Combined
	Year Ended December 31,						March 14,	December 31,	Full Year			2004 to			2005 to
	2004			2005			2006	2006	2006			2005			2006

Annual Operating Statistics (unaudited, scheduled service only):
Available seat miles (000’s)		202,662			280,555					290,161			38.4	%		3.4	%
Revenue passenger miles (000’s)		122,852			160,861					168,939			30.9	%		5.0	%
Revenue passengers carried		660,956			837,111					863,556			26.7	%		3.2	%
Departures flown		57,725			69,928					70,922			21.1	%		1.4	%
Passenger load factor		60.6	%		57.3	%				58.2	%		(5.4	)%		1.5	%
Average yield per revenue passenger mile	$	0.539		$	0.547				$	0.583			1.4	%		6.7	%
Revenue per available seat miles	$	0.327		$	0.314				$	0.340			(4.1	)%		8.3	%
Operating costs per available seat mile	$	0.329		$	0.314				$	0.341			(4.4	)%		8.5	%
Average passenger fare	$	100.27		$	105.10				$	114.13			4.8	%		8.6	%
Average passenger trip length (miles)		186			192					196			3.4	%		1.8	%
Aircraft in service (end of period)		26			32					34			23.1	%		6.3	%
Fuel cost per gallon (incl taxes & fees)	$	1.33		$	1.90				$	2.18			42.9	%		14.7	%

Net Income. The Company’s consolidated net income for the year ended December 31, 2006 was $1.2 million compared to $900,000 for 2005 and $2.0 million for 2004. Factors relating to the changes in net income are discussed below.

Operating Income. Consolidated operating income for 2006 was $2.8 million compared to $1.7 million for 2005 and $2.3 million for 2004. The most significant factor contributing to the increase in 2006 was improved results from our airline and charter operations. The improvement in our airline operations was attributable to the maturation of capacity additions introduced in 2005, which more than offset a significant increase in the price of jet fuel. The decrease in operating income in 2005 was primarily the result of reduced profits from the Academy, which we were unable to offset by improvements at the airline. The following table identifies the respective operating profit contribution from each of our operating components.


	Predecessor									Successor						Percent Change
							Period
							January 1,						Combined
							2006 to			Year Ended			Full
	Year Ended December 31,						March 14,			December 31,			Year			2004 to			2005 to
	2004			2005			2006			2006			2006			2005			2006

Airline and charter	$	2,826		$	3,391		$	1,937		$	2,609		$	4,546			20.0	%		34.1	%
Academy		1,514			495			219			270			489			(67.3	)%		(1.2	)%
Cuba charter, net		382			432			172			717			889			13.1	%		105.8	%

Total earnings from operations		4,722			4,318			2,328			3,596			5,924			(8.6	)%		37.2	%
General and administrative		(2,431	)		(2,658	)		(582	)		(2,495	)		(3,077	)		9.3	%		15.8	%

Consolidated earnings from operations	$	2,291		$	1,660		$	1,746		$	1,101		$	2,847			(27.5	)%		71.5	%

Operating Revenues. The Company has grown rapidly in recent years by adding additional, principally larger-capacity, aircraft to service new destinations in both Florida and the Bahamas and by increasing frequency through additional flights to its existing destinations. Consolidated revenues increased to $105.1 million in 2006 from $92.0 million in 2005 and from $72.3 million in 2004. This represented increases of 14.2% and 27.2% over the prior year for each of 2006 and 2005, respectively. The following table identifies the respective revenue contribution from each of our operating components.


	Predecessor
							Period			Successor						Percent Change
							January 1,			Year
							2006 to			Ended			Combined
	Year Ended December 31,						March 14,			December 31,			Full Year			2004 to			2005 to
	2004			2005			2006			2006			2006			2005			2006

Revenue
Airline passenger revenue	$	66,274		$	87,983		$	20,264		$	78,290		$	98,554			32.8	%		12.0	%
Charter and other revenue		942			1,193			283			3,145			3,428			26.6	%		187.3	%
Cuba charter, net		382			432			172			717			889			13.1	%		105.8	%
Academy		6,593			5,007			906			2,727			3,633			(24.1	)%		(27.4	)%
Intercompany revenue elimination		(1,854	)		(2,610	)		(258	)		(1,189	)		(1,447	)		40.8	%		(44.6	%)

Total Revenue	$	72,337		$	92,005		$	21,367		$	83,690		$	105,057			27.2	%		14.2	%

Airline Passenger Revenue. Passenger revenue increased 12.0% to $98.6 million in 2006 from $88.0 million in 2005. This increase was primarily driven by an increase of almost one percentage point in our passenger load factor, a 6.7% increase in yield per revenue passenger mile and a modest increase of 3.4% in available seat miles. The increase in passenger load factor was largely due to increased recognition and utilization in new markets we established in the previous year. The increase in yield per revenue passenger mile reflected an industry-wide improvement in the pricing environment, which we believe was largely in response to substantially higher fuel prices.

Passenger revenue increased 32.8% to $88.0 million in 2005 from $66.3 million in 2004. This increase was primarily attributable to a 38.4% increase in available seat miles, resulting from our acquisition in late 2004 and early 2005 of eleven aircraft, seven of which were higher-capacity 30-seat EMB-120s. The additional aircraft allowed us to add destinations and increase frequency of flights to existing destinations. As capacity increased, we did not realize a commensurate increase in passenger revenue despite an increase in our average fare, because capacity utilization, or passenger load factor, declined to 57.3% in 2005 from 60.6% in 2004. We believe this decline was due to the time required to fully utilize our expanded capacity.

Charter, Cuba Operations and Other Revenue. Revenues from general charter, Cuba charter and other operations increased 166.3% to $4.3 million in 2006 from $1.6 million in 2005 due principally to our commencement of a new charter service for a government subcontractor and growth in our Cuba charter operations. Between the time of its inception in June 2006 and the end of the year, this contract generated $1.2 million of incremental charter revenue. During 2006, charter revenue from the Cuban charter operation, net of expenses, increased to $889,000 compared to $432,000 in 2005. This increase was primarily due to our operation of additional flights and use of higher-capacity aircraft.

Charter and other revenues increased 22.7% to $1.6 million in 2005 from $1.3 million in 2004 due to an increased number of charter flights operated.

Academy Revenue. Revenue declined to $3.6 million in 2006 from $5.0 million in 2005 and from $6.6 million in 2004. This represented decreases of 27.4% and 24.1% for 2006 and 2005, respectively, compared to the prior years. The decline in 2005 was primarily due to the termination of our Fast-Track Captain program, whereby a student could complete all FAA requirements and become a captain in an abbreviated time. We discontinued this program after determining that it could conflict with our collective

bargaining agreement with our pilots. The decline continued in 2006 after the former President of the Academy and certain sales personnel resigned their positions and formed a new company that competed directly with the Academy for student pilots. As a result, enrollment at the Academy declined significantly.

Airline Operating Expenses. The following table presents Gulfstream’s operating expenses for the years ended December 2006, 2005 and 2004:


	Annual Operating Costs						Percentage of Airline Revenue									Percentage Change
	2004		2005		2006		2004			2005			2006			2004 to 2005			2005 to 2006

Flight operations	$	8,881	$	11,169	$	12,092		13.4	%		12.7	%		12.3	%		25.8	%		8.3	%
Aircraft fuel		11,115		20,544		24,378		16.8	%		23.3	%		24.7	%		84.8	%		18.7	%
Aircraft rent		6,470		6,827		6,469		9.8	%		7.8	%		6.6	%		5.5	%		(5.2	%
Maintenance		14,408		16,970		21,177		21.7	%		19.3	%		21.5	%		17.8	%		24.8	%
Passenger service		16,597		20,390		22,171		25.0	%		23.2	%		22.5	%		22.9	%		8.7	%
Promotion & sales		6,434		7,530		7,920		9.7	%		8.6	%		8.0	%		17.0	%		5.2	%
Depreciation and amortization		485		2,355		3,229		0.7	%		2.7	%		3.3	%		385.6	%		37.1	%

Total	$	64,390	$	85,785	$	97,436		97.2	%		97.5	%		98.9	%		33.2	%		13.6	%

Flight Operations. Flight operations expenses increased to $12.1 million in 2006 from $11.2 million in 2005 and $8.9 million in 2004. This represented increases of 8.3% and 25.8% over the prior year for each of 2006 and 2005, respectively. During the same periods, airline revenue increased by 12.0% and 32.8%. As a result, flight operations expense as a percent of airline revenue declined from 13.4% in 2004 to 12.7% in 2005 and to 12.3% in 2006. This improvement occurred principally as a result of the addition of larger, 30-seat aircraft, which generate a higher amount of revenue per flight hour.

Aircraft Fuel. Fuel costs have increased during the past three years from $1.33 per gallon in 2004 to $1.89 per gallon in 2005 and to $2.18 per gallon in 2006. As a result, fuel costs have increased as a percent of airline revenue from 16.8% in 2004 to 23.3% in 2005 and to 24.7% in 2006.

Aircraft Rent. Aircraft rent increased 5.5% from 2004 to 2005 as a result of leasing additional B-1900D aircraft. Aircraft rent was lower in 2006 due to the renegotiation of lease rates with the Company’s principal aircraft lessor. As a percentage of revenue, aircraft rent decreased from 9.8% in 2004 to 6.6% in 2006, primarily due to the addition of our fleet of seven EMB-120 aircraft which were purchased, rather than leased.

Maintenance and repairs expense. Maintenance increased to $21.2 million in 2006 from $17.0 million in 2005 and $14.4 million in 2004. This represented increases of 24.8% and 17.8% over the prior year for each of 2006 and 2005, respectively. Total maintenance cost per flight hour decreased from $294 in 2004 to $275 in 2005 and increased to $329 in 2006.

During 2006, our maintenance costs increased as a result of a new Beechcraft 1900D engine overhaul contract requiring higher hourly payments, increased materials costs for our EMB-120 fleet, expenses required to comply with an EMB-120 airworthiness directive and higher hourly labor rates. The reduction in hourly cost in 2005 was principally due to a substantial increase in the number of hours flown from recently acquired aircraft and the effect of slower growth in fixed costs relative to the increase in flight hours.

Passenger Service. Passenger service expense increased 8.7% to $22.2 million in 2006 from $20.4 million in 2005 and 4.8% on a per-departure basis for the same period. This increase was largely attributable to an increase in expenses for airport rentals at certain airports, as well as an overall increase in wage rates provided to our airport employees. These increases were offset by a reduction in our rates for passenger liability insurance, interrupted trip expenses and the leveraging effect on certain fixed expenses that resulted from capacity additions and increases in revenue yield over the past two years.

Passenger service expense increased 22.9% to $20.4 million in 2005 from $16.6 million and 1.4% on a per-departure basis for the same period. The increase in expenses was primarily attributable to the higher level of capacity in 2005 and, to a lesser extent, the impact of adding larger aircraft to our fleet.

Promotion and Sales. Promotion and sales expense increased to $7.9 million in 2006 from $7.5 million in 2005 and from $6.4 million in 2004. This represented increases of 5.2% and 17.0% for 2006 and 2005, respectively, compared to the prior years. Promotion and sales expense declined as a percent of airline revenue from 9.7% in 2004 to 8.6% and 8.0% in 2005 and 2006, respectively. Most of this improvement has resulted from favorable trends in marketing and distribution costs as well as the impact of higher average fares.

Depreciation and amortization expense. Depreciation and amortization expense increased to $3.2 million in 2006 from $2.4 million in 2005 and $0.5 million in 2004. This represented increases of 37.1% and 385.6% over the prior year for each of 2006 and 2005, respectively. The increase in both 2005 and 2006 was primarily due to the purchase of seven EMB-120 aircraft in late 2004 and early 2005. The increase in 2006 was also due to the additional depreciation resulting from both the $4.7 million valuation increase attributable to those aircraft and increased amortization of intangible assets resulting from the purchase price allocation related to our acquisition of Gulfstream and the Academy in March 2006.

General and Administrative and Academy Operating Expense. Our consolidated general and administrative expenses include the expenses of the Academy, as set forth in the following table.


	Predecessor
							Period			Successor						Percent Change
							January 1,			Year			Combined
							2006 to			Ended			Full
	Year Ended December 31,						March 14,			December 31,			Year			2004 to			2005 to
	2004			2005			2006			2006			2006			2005			2006

General and administrative expenses	$	2,431		$	2,658		$	582		$	2,494		$	3,076			9.3	%		15.7	%
Academy expenses		5,079			4,512			687			2,457			3,144			(11.2	)%		(30.3	)%
Intercompany elimination		(1,854	)		(2,609	)		(258	)		(1,188	)		(1,446	)		40.7	%		(44.6	)%

Consolidated general and administrative	$	5,656		$	4,561		$	1,011		$	3,763		$	4,774			(19.4	)%		4.7	%

General and administrative expenses, excluding Academy expenses, increased to $3.1 million in 2006 from $2.7 million in 2005 and from $2.4 million in 2004. This represented increases of 15.7% and 9.3% over the prior year for each of 2006 and 2005, respectively.

Most of the increase in 2006 was attributable to corporate expenses related to the acquisition of the predecessor companies in March 2006, including consulting expenses, board of directors fees and share-based compensation expense.

General and administrative expenses as a percentage of total revenue, excluding Academy expenses, declined to 2.9% in 2005 from 3.4% in 2004, while total revenue increased 27.2% from 2004 to 2005. The decline in general and administrative expenses as a percentage of total revenue for 2005 reflects the beneficial leveraging effect of rapid revenue growth combined with the fixed nature of many of our general and administrative expenses.

Academy expenses declined to $3.1 million in 2006 from $4.5 million in 2005 and from $5.1 million in 2004. This represented decreases of 30.3% and 11.2% for 2006 and 2005, respectively, compared to the prior years. These decreases were due to and consistent with Academy revenue declines in both years of 27.4% and 24.1% in 2006 and 2005, respectively, when compared to the respective prior years. The reasons for the revenue declines were discussed above. Because a high percentage of the expenses of the Academy are variable, total expenses tend to decrease proportionately with significant changes in revenue.

Non-Operating Income and Expense. Interest expense increased from $153,000 in 2004 to $699,000 in 2005 and $1,112,000 in 2006. These increases were due to debt incurred in 2005 to finance our new fleet of seven Embraer EMB-120s and subordinated debentures issued in March of 2006 to finance the acquisition.

Income Taxes. Prior to the acquisition of the predecessor companies on March 14, 2006, current income tax expense was not provided due primarily to the application of net operating losses from prior years. Current income tax expense for the period from March 15, 2006 to December 31, 2006 was $168,000.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Liquidity refers to the liquid financial assets available to fund our business operations and pay for near-term obligations. These liquid financial assets consist of cash as well as short term investments. Our primary uses of cash are for working capital, capital expenditures and general corporate purposes. We rely primarily on operating cash flows to fund our cash requirements. We also have a $750,000 line of credit, all of which was available as of March 31, 2007.

As of March 31, 2007, our cash and cash equivalents balance was $2.1 million and we had a negative working capital of $7.1 million. Our business is quite seasonal, and our cash and cash equivalents and working capital positions are typically at their lowest levels between December and March of each year.

The following table summarizes key cash flow information for the three months ended March 31, 2006 and 2007, respectively:


	Predecessor			Successor			Combined			Successor
	Period from			Period from			Three Months			Three Months
	January 1			March 15			Ended			Ended
	to March 14,			to March 31,			March 31,			March 31,
	2006			2006			2006			2007

Cash Flow Data:
Cash Flow Provided by (used in):
Operating Activities	$	(447	)	$	2,472		$	2,025		$	907
Investing Activities		(971	)		(8,975	)		(9,946	)		(1,609	)
Financing Activities		(251	)		9,378			9,128			(311	)

Net increase (decrease) in cash and cash equivalents	$	(1,669	)	$	2,875		$	1,207		$	(1,013	)

Operating activities. Cash provided by operating activities was $0.9 million for the three months ended March 31, 2007 compared to $2.0 million in 2006. The decrease in the first quarter of 2007 was primarily due to $760,417 of payments associated with the engine return liability, as well as an increase in expendable parts.

Investing activities. Cash used in investing activities was $1.6 million for the three months ended March 31, 2007 compared to $9.9 million for the three months ended March 31, 2006. Cash used in investing activities during the first quarter of 2007 primarily consisted of capital expenditures related to the purchase of equipment for our airline business. The cash used in investing activities in the first quarter of 2006 represented the acquisition of the predecessors on March 14, 2006 totaling $8.8 million and $1.1 million for capital expenditures.

Financing activities. Cash provided by (used in) financing activities decreased to $(311,000) for the three months ended March 31, 2007 from $9.1 million for the three months ended March 31, 2006. Cash used in financing activities for the first quarter of 2007 was due to repayments of debt. Cash provided by financing activities for the first quarter of 2006 included the issuance of common stock and subordinated debentures totaling $10.7 million to finance the acquisition of the predecessor companies, offset by repayments of debt and payment of loan fees.

As of December 31, 2006, our cash and cash equivalents balance was $3.1 million and we had negative working capital of $7.1 million.

The following table summarizes key cash flow information for the comparative years ended December 31, 2004, 2005 and 2006, respectively:


	Predecessor
							Period from			Successor			Combined
							January 1,to			Year Ended
	Year Ended December 31,						March 14,			December 31,			Full Year
	2004			2005			2006			2006			2006

Cash Flow Data:
Cash Flow Provided by (used in):
Operating Activities	$	5,120		$	4,227		$	(447	)	$	5,195		$	4,748
Investing Activities		(1,949	)		(1,434	)		(971	)		(10,758	)		(11,729	)
Financing Activities		(2,846	)		(1,802	)		(251	)		8,707			8,456

Net increase (decrease) in cash and cash equivalents	$	325		$	991		$	(1,669	)	$	3,144		$	1,475

Operating activities. Cash provided by operating activities increased to $4.7 million for the year ended December 31, 2006 compared to $4.2 million in 2005. The increase was primarily due to higher income before non cash charges in 2006.

Investing activities. Cash used in investing activities was $11.7 million for 2006 compared to $1.4 million in 2005 and $1.9 million in 2004. The significant increase in cash used in investing activities in 2006 represented the acquisition of the predecessors on March 14, 2006. Cash used in investing activities during 2004 and 2005 primarily consisted of capital expenditures related to the purchase of equipment for our airline business.

Financing activities. Cash provided by financing activities was $8.5 million for 2006 that included the issuance of common stock and subordinated debentures for a total of $10.9 million to finance the acquisition of the predecessor companies, offset by repayments of debt and payment of loan fees. Cash used in financing activities in 2004 and 2005 were comprised mostly of repayments of debt, payment of loan fees, dividend payments and the re-acquisition from a third-party vendor of warrants to purchase common stock of GIA.

Debt and Other Contractual Obligations

We maintain a $750,000 line of credit from Wachovia Bank, N.A., that expires July 31, 2007. Borrowings under the line bear interest at a rate of LIBOR + 2.75%, which was 8.08% at December 31, 2006. There were no borrowings under this line as of December 31, 2006.

In December 2005, we entered into a term loan agreement with Irwin Union Bank pursuant to which we borrowed $8.6 million to refinance our fleet of seven EMB-120 aircraft, which we originally financed from the seller, Atlantic Southeast Airlines, Inc. (a subsidiary of SkyWest, Inc.). This term loan bears interest at 6.95% per annum, and is payable in 59 equal installments of principal and interest totaling $145,488 per month, with a balloon payment of $1.88 million due in December 2010. The principal balance of this term loan was $7.5 million at December 31, 2006. The term loan is secured by our EMB-120 fleet and is guaranteed by SkyWest, Inc.

In March 2006, we issued a total of 3,320 units at a purchase price of $1,000 per unit to 23 investors, for an aggregate cash consideration of $3.32 million. Each unit consisted of (1) a 12% subordinated debenture in the principal amount of $1,000 due March 14, 2009, and (2) a warrant to purchase 14 shares of common stock at an exercise price of $5.00 per share, exercisable at the option of the holder for a period of five years. The debentures bear interest of 12% per annum, payable quarterly. At December 31, 2006, the outstanding principal balance on these debentures was $3.32 million.

On March 22, 2007, we entered into a loan agreement with Wachovia Bank in the principal amount of $1,150,000 to finance our acquisition of one EMB-120 aircraft. The loan is payable in 59 monthly principal installments of $7,858.33 and a final balloon payment of $686,358 and bears interest monthly, payable on the unpaid principal balance at the rate of LIBOR plus 2.75%.

We have significant obligations for aircraft that are classified as operating leases and therefore are not reflected on our balance sheet. The 27 Beechcraft 1990Ds in our total fleet of 35 aircraft are subject to individual operating leases that expire between 2008 and 2010. We also lease our hangar and corporate office facilities in Fort Lauderdale, Florida under various operating leases that expire from 2009 to 2025.

In June 2003, the Company entered into a tri-party Pooling and Engine Services Agreement with its aircraft vendor and engine maintenance contractor that allowed the Company to exchange 16 of its engines requiring overhaul for mid-life engines owned by its aircraft vendor that had time remaining before overhaul. The future overhaul costs of the mid-life engines were shared proportionately, with the Company’s portion based on engine hours flown until the next overhaul. Accordingly, based on engine hours flown since June 2003, the Company incurred a liability of $4.75 million, representing its contractual obligation for its share of the overhaul costs by recognizing engine maintenance expense of $1,374,367, $1,506,042, $1,498,733 and $370,858 in 2003, 2004, 2005 and Interim 2006, respectively. The 16 engines are expected to be returned to the aircraft vendor during the 24 months beginning January 2007. Two engines were returned between January 1 and February 28, 2007 for a total cost of approximately $600,000, which was charged to the engine return liability account.

In March 2007, the Company signed a new engine services agreement providing for a fixed rate per hour for engine overhaul services. Included in that agreement, and in conjunction with this return requirement, the Company has secured the commitment of its new engine maintenance vendor to perform engine overhaul services beginning March 1, 2007 at a pace that will allow the remaining fourteen mid-life engines to be returned to the aircraft vendor in accordance with contractual specifications. In return, the Company has agreed to make fixed monthly payments of $166,667 to the engine maintenance vendor beginning March 31, 2007 and continuing for 24 months.

Commitments and Contractual Obligations

The following table discloses aggregate information about our contractual cash obligations as of December 31, 2006 and the periods in which payments are due (in thousands):


			Less than		1 to 3		3 to 5		More than
	Total		1 Year		Years		Years		5 Years

Long-term debt	$	10,844	$	1,273	$	6,136	$	3,435	$	—
Operating leases		30,019		7,790		14,412		4,391		3,426
Engine return liability		4,750		2,261		2,489		—		—

Total future payments on contractual obligations	$	45,613	$	11,324	$	23,037	$	7,826	$	3,426

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Seasonality

Quantitative and Qualitative Disclosures About Market Risk

Our market risks relate primarily to changes in aircraft fuel costs and in interest rates.

Aircraft Fuel. In the past, we have not experienced difficulties with fuel availability and we currently expect to be able to obtain fuel at prevailing market prices in quantities sufficient to meet our future needs. Pursuant to our contract flying arrangements with our code share partners, we will bear the economic risk of fuel price fluctuations.

We typically do not enter into, and are currently not a party to, any derivative or other arrangement designed to hedge against or manage the risk of an increase in fuel prices. Accordingly, our statement of income and our cash flows are and will continue to be affected by changes in the price and availability of fuel.

Interest Rates. Both our senior term loan and subordinated debentures carry fixed rates of interest and are not tied to market indices. Therefore, our statement of income and our cash flows are not exposed to changes in interest rates.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Passenger revenue is recognized when transportation service is provided. Transportation purchased but not yet used is included in air traffic liability.

Enrollment fee revenue is based upon actual training hours used by the students of our pilot training academy. The remaining unused hours represent deferred tuition revenue. Other revenues are recognized when services are provided.

Frequent Flyer Awards

As a part of its code sharing agreements, GIA participates in several frequent flyer programs, and passengers may use mileage accumulated in those programs to obtain discounted or free trips that might include a flight segment on one of GIA’s flights. However, under the agreements, Continental and other code share partners are responsible for the administration and costs of their programs, and GIA receives revenue for travel awards redeemed on GIA’s flight segments.

Maintenance and Repair Costs

Gulfstream operates under an FAA-approved continuous inspection and maintenance program. Routine maintenance and repairs are charged to operations as incurred. The Company accounts for major engine maintenance activities for its Beechcraft 1900D leased aircraft on the direct expense method. Under this method, major engine maintenance is performed under a long-term contract with a third party vendor, whereby set monthly payments are made on the basis of hours flown and are charged to expense as paid.

Major engine maintenance for our EMB-120 owned aircraft, which were purchased in 2004 and 2005, is based on the built-in overhaul method. The built-in overhaul method is based on segregation of the aircraft costs into those that should be depreciated over the useful life of the aircraft and those that require overhaul at periodic intervals. Thus, the estimated cost of the overhaul component included in the purchase price was set up separately from the cost of the airframe and is amortized to the date of the initial overhaul. The cost of the initial overhaul is then capitalized and amortized to the next overhaul, at which time the process is repeated.

Impairment of Long-Lived and Intangible Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted the accounting and disclosure provisions of SFAS No. 123(R), Share-Based Payment, which requires that new, modified and unvested share based payment transactions with employees, such as stock options and restricted stock, be measured at fair value on the grant date and recognized as compensation expense over the vesting period.

INDUSTRY

Overview of the Passenger Airline Industry

According to the Bureau of Transportation Statistics, Department of Transportation, the number of total paying passengers in the United States that traveled on scheduled air service, commonly referred to as total revenue passenger enplanements, was 744 million in 2006, up slightly from 739 million in 2005.

The airline industry in the United States has traditionally been dominated by “major airlines,” which include carriers such as American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines and United Airlines. The major airlines offer scheduled flights to many major cities within the United States and often throughout all or part of the rest of the world while also serving numerous smaller cities. The major airlines benefit from wide name recognition and long operating histories.

Most major airlines have adopted the “hub and spoke” system. This system concentrates most of an airline’s operations in a limited number of hub cities, serving most other destinations in the system by providing one-stop or connecting service through the hub between destinations on the spokes. Such an arrangement permits travelers to fly from a point of origin to more destinations without switching airlines. Hub airports permit carriers to transport passengers between large numbers of destinations with substantially more frequent service than if each route were served directly. The hub and spoke system also allows the airline to add service to new destinations from a large number of cities using only one or a limited number of aircraft.

“Low-cost” airlines, such as Southwest Airlines, JetBlue Airways, AirTran Airways and Frontier Airlines frequently offer fewer service level options to travelers and have lower cost structures than major airlines, thus permitting them to offer flights to many of the same markets as the major airlines, but at lower prices. Some low-cost airlines utilize a hub and spoke strategy, while others, such as Southwest Airlines, offer predominantly point-to-point service between designated city pairs. In addition, major carriers such as Delta Airlines and United Airlines have developed Song and Ted, respectively, as lower-cost subsidiaries. These carriers, which are typically point-to-point, also offer fewer levels of service to travelers but permit the airlines to offer flights at lower prices. The reduction, withdrawal or historical absence of both major and low-cost airlines on shorter haul routes has provided increased opportunities for regional airlines to develop these markets.

Regional airlines, such as American Eagle, Express Jet, Comair, Gulfstream, Horizon Airlines, Mesa Airlines, Mesaba Airlines, Pinnacle Airlines and SkyWest Airlines, typically operate smaller aircraft on lower-volume routes than major and low-cost airlines. Several regional airlines, including American Eagle, Comair and Horizon Airlines, are wholly-owned subsidiaries of major airlines. In contrast to low-cost airlines, regional airlines generally do not try to establish an independent route system to compete with the major airlines. Rather, regional airlines typically enter into cooperative marketing relationships with one or more major airlines under which the regional airline agrees to use its smaller, lower-cost aircraft to carry passengers booked and ticketed by the major airline between a city served by a major airline and a smaller outlying location. In exchange for such services, the regional airline is either paid a fixed-fee per flight by the major airline or receives a pro-rata portion of the total fare generated in a given market.

Growth of the Regional Airline Industry

Regional airlines have experienced significant growth over the past decade. According to the FAA, in 2005, regional airlines in the United States experienced average growth in revenue passenger miles of 23.9%, compared to 5.1% growth for major airlines. Also in 2005, the number of domestic passengers flown by regional airlines increased an average of 16.5%, compared to 4.1% growth for major airlines. In 2005, the FAA forecasted regional U.S. revenue passenger miles to grow at an average annual rate of 6.7% over the 12-year period ending 2017, from $66.2 billion in 2005 to $144.2 billion in 2017, and the number of passengers flown to grow by an average annual rate of 4.3% during the same 12-year period, reaching a total of 250.4 million passengers by 2017.

We believe that the growth of the number of passengers using regional airlines and the revenues of regional airlines during the last decade is attributable to a number of factors, including:


	•	Regional airlines work with, and often benefit from the strength of, the major airlines. Since many major airlines are increasingly using regional airlines as part of their growth strategies, many regional airlines have expanded, and may continue to expand, with the major airlines they serve.

	•	Regional airlines tend to have a more favorable cost structure and greater operating flexibility than many major airlines. Many regional airlines were founded in the midst of the highly competitive market that developed following deregulation of the airline industry in 1978.

	•	Many major airlines have determined that an effective method for retaining customer loyalty and maximizing system revenue, while lowering costs, is to utilize more cost-efficient regional airlines flying under the major airline’s flight designator code and brand name to serve shorter, low-volume routes.

Relationship of Regional and Major Airlines

Regional airlines generally enter into code share agreements with major airlines, pursuant to which the regional airline is authorized to use the major airline’s two-letter flight designator code to identify the regional airline’s flights and fares in the central reservation systems, to paint its aircraft with the colors and/or logos of its code share partner and to market and advertise its status as a carrier for the code share partner. In addition, the major airline generally provides reservation services, ticket stock, certain ticketing services, ground support services, airport landing slots and gate access to the regional airline, and both partners often coordinate marketing, advertising and other promotional efforts. In exchange, the regional airline provides a designated number of low capacity flights between larger airports served by the major airline and surrounding locations, usually lower-volume markets.

The financial arrangements between the regional airlines and their code share partners usually involve either a fixed-fee or revenue sharing arrangement. We utilize revenue sharing arrangements with our code share partners, rather than fixed-fee arrangements. We also set our own prices for local, point-to-point flights.

Fixed-Fee Capacity Purchase Agreements. Under a fixed-fee arrangement, the major airline generally pays the regional airline a fixed fee per flight, with additional incentives based on completion of flights, on-time performance and correct baggage handling. In addition, the major and regional airline often enter into an arrangement pursuant to which the major airline bears the risk of changes in the price of fuel and other costs not directly controllable by the regional airlines such as landing fees, liability insurance and aircraft property taxes. Regional airlines benefit from a fixed-fee arrangement because they are sheltered from many of the elements that cause volatility in airline earnings, such as variations in ticket prices, passenger loads and fuel prices. However, regional airlines in fixed-fee arrangements do not benefit from a positive trend in ticket prices, passenger loads or fuel prices and, because the major airlines absorb most of the risks, the margin between the per-flight fixed-fee and expected per-flight costs tends to be lower than the profit margins associated with revenue sharing arrangements under good economic conditions. The major airline can benefit from fixed-fee capacity purchase agreements because under such arrangements it is better able to control its entire network of flights and to serve strategic routes that otherwise might be uneconomical to a regional carrier under a revenue sharing arrangement.

Revenue Sharing Arrangements. Under a revenue sharing, or pro rate, arrangement such as those we have in place, the major airline and regional airline negotiate a proration formula, pursuant to which the regional airline receives a percentage of the ticket revenues for those passengers traveling for one portion of their trip on the regional airline and the other portion of their trip on the major airline. Substantially all costs associated with the regional airline flight are borne by the regional airline. In such a revenue sharing arrangement, the regional airline realizes increased profits as ticket prices and passenger loads increase or operating costs decrease. Conversely, the regional airline realizes decreased profits as ticket prices and passenger loads decrease or operating costs increase.

In addition to using revenue sharing arrangements rather than fixed-fee arrangements, we focus on short, low-volume routes, which permits us flexibility in scheduling and allows us to operate in otherwise unserved or underserved city pairs.

BUSINESS

Overview of Our Business

We are a holding company that operates two independent subsidiaries: Gulfstream International Airlines, Inc. (“Gulfstream”) and Gulfstream Training Academy, Inc. (the “Academy”).

Gulfstream is a commercial airline currently operating more than 200 scheduled flights per day, serving 11 destinations in Florida and ten destinations in the Bahamas. Our fleet consists of 27 B1900D, 19-seat, turbo-prop aircraft and eight EMB-120, 30-seat, turbo-prop aircraft. Operating from our headquarters in Fort Lauderdale, Florida, Gulfstream was the sixteenth largest regional airline group in the U.S. in 2005 in terms of number of passengers flown, according to the Regional Airline Association. We operate under a principal code share and alliance agreement with Continental Airlines. We are also party to code share agreements with United Airlines, Northwest Airlines and Copa Airlines of Panama. In addition to the daily scheduled flights, Gulfstream also offers frequent charter flights within our geographic operating region, including flights to Cuba.

The Academy provides flight training services to licensed commercial pilots. The Academy’s principal program is our First Officer Program, which allows participants to obtain a Second-In-Command type rating in approximately four months. Following receipt of this rating, pilots spend up to 400 hours flying as a first officer at Gulfstream. By attending the Academy, pilots are able to enhance their ability to secure a permanent position with a commercial airline. The Academy’s graduates are typically hired by various regional airlines, including Gulfstream. In 2006, 78 pilots entered the First Officer Program.

History

Our business was started by Thomas L. Cooper with the formation of Gulfstream in 1988. Gulfstream began as an airline offering on-demand charter service utilizing nine-passenger, piston-powered aircraft. In 1990, we initiated scheduled commercial service by offering flights from Miami to several locations in the Bahamas. In 1994, after introducing turbo-prop aircraft, we signed our first code share agreement with United Airlines and expanded our routes in both Florida and the Bahamas. Since 1994, we have signed a series of code share agreements with our current code share partners.

Gulfstream first entered into a code share and alliance agreement with Continental Airlines, our principal alliance partner, in 1997. Gulfstream and Continental Airlines have amended the agreement on several occasions, most recently in March of 2006, which amendment included an extension of the term to 2012. Prior to our acquisition of Gulfstream, Continental assisted Gulfstream from time to time with financial transactions and aircraft acquisitions, and today holds a warrant to purchase 10% of Gulfstream’s outstanding shares.

In December 2005, we were formed by a group of investors to acquire Gulfstream and the Academy. In March 2006, we acquired approximately 89% of G-Air, which owned approximately 95% of Gulfstream at that time, and 100% of the Academy, which held the remaining 5% of Gulfstream. Subsequently, we acquired the remaining 11% of G-Air, which has been merged with and into our wholly-owned subsidiary, GIA. Following these transactions, we are the sole owner of Gulfstream and the Academy, subject to Continental’s warrant to purchase 10% of the outstanding shares of Gulfstream’s common stock.

Our Competitive Strengths


	•	Long-standing code share agreements with multiple major airlines. Gulfstream has code share agreements with Continental, United Airlines and Northwest Airlines. We have been a partner with each of these airlines for more than five years. Recently, our principal code share and alliance agreement with Continental was extended through 2012. We believe that utilizing such agreements enhances our ability to generate revenue from both local and connecting traffic. We also believe that through our alliances, we are able to control costs by contracting for reservations, ground handling and other services at lower costs. In addition, these code share relationships allow us to offer our passengers


		easy booking through reservation systems maintained by our code share partners and the benefits of associated frequent flier programs.


	•	Well positioned in the Bahamas market. We are a leading carrier to the Bahamas and serve more destinations in the Bahamas than any other U.S. airline. We maintain our own facilities and employees at all ten of our destinations in the Bahamas and we enjoy a close cooperative relationship with Bahamian business and tourism officials. We believe that our focus on the Bahamian market allows us to identify new market opportunities and develop those opportunities more efficiently than new market entrants.

	•	Diverse route network and utilization of small aircraft. We have connecting hubs in several key Florida cities, as well as daily charter flights to Cuba, which enable us to establish multiple flight crew and maintenance bases that reduce overall operating costs and enhance operational reliability. In addition, our mix of 19-seat and 30-seat aircraft and mix of business and leisure passengers enhances our ability to align aircraft capacity with market demand, while maintaining our ability to provide competitive flight frequencies. The size and scale of this operation create practical barriers to entry for new entrants and increase our ability to shift capacity according to seasonal and business-versus-leisure demand patterns. Additionally, the relatively small size and efficiency of our turboprop aircraft combine to produce trip costs that are substantially lower than operators flying larger and more expensive jet aircraft.

	•	We offer reliable, quality service. We are consistently among the highest-ranked regional airlines in the country in terms of reliability. For 2006, our on-time performance was 85.1%, compared to the 75.4% average on-time performance reported by the Department of Transportation for all reporting airlines. Gulfstream has received the FAA Diamond Award, the highest level of recognition for maintenance training, for seven consecutive years.

	•	The Academy has a unique first officer program. We believe the Academy has established a strong reputation for quality instruction. We offer our students the opportunity to accumulate Part 121 flight hours, enhancing their hiring prospects with regional airlines. In addition, the Academy provides Gulfstream with a reliable and cost-effective source of first officers and pilots.

Our Strategy


	•	Utilize turboprop aircraft to selectively expand the number of markets we serve. We use 19- and 30-passenger turboprop aircraft. Turboprop aircraft offer substantially lower acquisition costs than regional jet aircraft and, in addition, tend to be more fuel efficient than other aircraft. We believe this allows us to provide service on short, lower volume routes and achieve attractive margins, in contrast to airlines that have focused their fleets on larger regional jet aircraft, increasingly in the 70- to 90-seat category. The efficiencies associated with turboprop aircraft are more pronounced on short haul routes such as ours. Additionally, turboprop aircraft have the ability to operate out of airports with runways that are too short for certain regional jets.


		We continually monitor market and acquisition opportunities to profitably grow our route system by adding new cities that are complementary to our existing route structure. We look for unserved or underserved short haul city pairs that have a high degree of potential for long-term profitability. We have held discussions with various parties concerning the acquisition of regional airlines as well as additional turboprop aircraft; however, to date, we have not entered into any such agreements, nor is there any assurance that we will do so in the future.


	•	Use of alliance and code share agreements. Utilizing our alliance and code share agreements enhances our ability to generate revenue for both local and connecting traffic. By having multiple code share partners, we are able to increase our revenue per flight by accessing several sources of connecting


		passengers relative to what would be available within a single code share partnership arrangement. This is particularly true given that our main connecting airports are not hubs for any of our code share partners. These agreements also provide the opportunity to contract for services at lower costs, as well as to gain access to airport and other facilities, relative to what we would be able to do independently.


		Further, we believe that by providing high quality service under our code share partnerships with multiple airlines in existing markets, our opportunities for expanding the scope of our relationship with those carriers may be greater.


	•	Increase enrollment at the Academy. We seek to increase enrollment at the Academy through implementation of various marketing initiatives. We believe we can enhance enrollment by increasing cooperation with other regional airlines and primary flight training centers in order to produce higher levels of applicant referrals. We also encourage enrollment by developing closer integration with accredited higher education institutions offering two- and four-year degrees. Additionally, we seek to attract prospective First Officer candidates from different sources by offering training services to other regional air carriers operating similar aircraft types. We also continuously seek to assist prospective candidates in obtaining tuition financing from third party sources.

All of our flights are marketed as Continental. In addition, certain flights are also marketed through our other code share partners. We estimate that over 60% of our revenue is derived from local “point to point” traffic within Florida and the Bahamas. The balance of our revenue is derived from connecting traffic from our code-share partners and other carriers destined primarily for the Bahamas. Continental is our largest connecting partner, with passengers connecting to and from Continental flights providing approximately 20% of our revenue.

Gulfstream currently operates four to five daily round trips under charter agreements associated with our Cuba operations and two to three daily round trip flights to Andros Island under an agreement with a government subcontractor. In addition, Gulfstream operates on-demand charters for various customers throughout the year.

Code Share Agreements

Continental Code Share and Alliance Agreement

Our primary alliance partner is Continental Airlines. Pursuant to an amended and restated alliance agreement with Continental Airlines dated December 30, 1999, as amended, Gulfstream displays the Continental Airlines “CO” designator code on all of its flights marketed to the public. Our customers may participate in Continental’s One Pass frequent flyer program.

Under this agreement, we pay Continental for various services, including ticketing, reservations, revenue accounting, and various levels of airport services. We also incur fees for computerized reservation system transactions and participation in Continental’s frequent flyer program.

Gulfstream receives all of the revenue generated by “local,” or non-connecting, passengers flown, and a portion of the total revenue from passengers connecting to or from Continental. Continental sets all prices for connecting markets, and Gulfstream sets prices on our local markets.

The term of this agreement will continue through at least May 3, 2012, unless earlier terminated for cause. Cause is defined to include:


	•	breach of any material provision of the agreement that is not cured within a 60-day period;

	•	suspension or revocation of our authority to operate as an airline, either in whole or with respect to the CO-designated flights;

	•	citation by any government authority for significant noncompliance with any material marketing or operation law, rule or regulation with respect to a CO-designated flight;

	•	the filing of a petition in bankruptcy by or against us;

	•	our failure to maintain required insurance coverage;

	•	our failure to maintain any of our aircraft in an airworthy condition;

	•	our failure to conduct operations in accordance with standards, rules and regulations promulgated by any government authority; or

	•	our failure to maintain specified levels of operational reliability.

In addition, Continental may terminate the agreement immediately if there is a change of control, as defined in the agreement, of Gulfstream without Continental’s prior written consent.

Continental has the right to appoint an individual to our Gulfstream subsidiary’s board of directors or the right to observe its board meetings. Continental may also receive our audited financial statements, inspect our books, accounts and records and audit our operational procedures.

Gulfstream and Continental have agreed to indemnify each other for any damages arising out of either party’s acts or omissions related to the agreement. Specifically, Gulfstream has agreed to indemnify

Continental for any losses arising from our possession and use of Continental’s tickets, boarding passes and other materials, including, but not limited, to lost or forged tickets.

With certain exceptions, we are required to obtain Continental’s consent to enter into additional airline code share agreements. We have also agreed to limit utilization of the United Airlines designator code to specific numbers of flights and between specific cities.

In addition to our long-term principal alliance with Continental, we have the following code share agreements:

United Airlines Code Share Agreement

We entered into a code share agreement with United Airlines in 1994, which has been amended several times, most recently in October of 2006. We provide code share operations with United Airlines to and from Tampa, Miami, Key West, Ft. Lauderdale, Orlando, Grand Bahama Island and Nassau, Bahamas. The agreement may be cancelled upon 180 days’ written notice, unless either party breaches the agreement, in which case it may be terminated upon shorter notice.

Revenue sharing formulas for proration of revenue are set forth in a separate prorate agreement, which is amended or replaced annually. Our passengers may also participate in the United Airlines frequent flyer program.

Northwest Airlines Code Share Agreement

Gulfstream has entered into a code share and related prorate agreement, each dated February 11, 2000, with Northwest Airlines, which permits us to use the “NW” designator code to identify certain Gulfstream regional flights. Currently, we operate NW-designated code share flights to and from Tampa, Miami, Key West, Ft. Lauderdale and Nassau, Bahamas. Revenue from NW-designated flights is allocated pursuant to the prorate agreement.

The agreement is terminable upon 180 days’ notice without cause, but may be terminated immediately for cause. “Cause”, as defined in the agreement, includes the failure to maintain specified levels of operational reliability, bankruptcy, loss of airline licensing or dissolution. Additionally, Northwest Airlines may terminate immediately if we or one of our affiliates begins operating any aircraft with 60 or more seats and a takeoff weight of 70,000 pounds or more.

We have agreed to provide Northwest Airlines with 30 days’ prior written notice before entering into any code share or frequent flyer agreement with another major airline serving the cities where we provide NW-designated flights. Additionally, our customers may participate in the Northwest Airlines frequent flier program.

Copa Code Share Agreement

We entered into a code share agreement on July 1, 2005 with Copa Airlines, to permit us to use the “CM” designator code on Gulfstream flights from Miami to Orlando, Tampa, Key West, Gainesville, Nassau and Freeport. The agreement requires us to provide certain minimal operational standards. Copa Airlines, a Continental alliance partner, handles reservation services for passengers of CM-designated flights, as it would for all other Copa Airlines flights, through the Continental reservation system and provides check-in and ticketing services. We receive a standard prorated amount for each passenger we fly on a CM-designated flight. To date, this has not been a material source of our revenue.

Marketing

Under our code share agreement, Continental provides all reservations and related services for sales and marketing for CO-designated flights. Northwest Airlines, United Airlines and Copa Airlines are responsible for reservations of connecting passengers marketed under their respective codes.

We are responsible for the scheduling of all of our flights and are also responsible for setting prices and managing revenue for our local passengers. Local passengers are passengers whose itinerary is not constructed using a single fare over multiple flight segments. Our code share partners are responsible for setting prices and managing revenue for our connecting passengers. We retain all of the revenue associated with our local passengers and a portion of the revenue associated with connecting passengers pursuant to revenue sharing agreements with our code share partners.

Flight Equipment

Our fleet currently consists of B1900D and EMB-120 aircraft. The average age of our B1900D fleet is 12 years. The B1900D aircraft is a 19-seat, twin engine turbo prop that has a pressurized, stand-up cabin, and cruises at 300 miles per hour. It is ideal for short trips, and its lower operating costs make it much more economical than larger mid-sized aircraft for the frequent, short flights that we operate. We lease 27 B1900Ds under agreements that expire between 2008 and 2010; however, at our option, we can extend 15 of these leases. We also have the option to purchase up to 21 of these aircraft.

In December 2004, we purchased seven EMB-120 aircraft from Atlantic Southeast Airlines. In March of 2007, we purchased an additional EMB-120 with plans to enter the aircraft into revenue service during the second half of 2007. The average age of our EMB-120 aircraft is 15 years. The EMB-120 is a larger, 30-seat, pressurized aircraft that is equipped with advanced avionics. Passenger comforts include stand-up headroom, a lavatory, overhead baggage compartments and flight attendant service. It offers a 330-mile per hour cruising speed with a range of 750 miles.

We believe that our fleet is well suited for the markets we serve. Our turbo-prop aircraft allow us to operate short distance sectors efficiently and achieve break-even revenues at lower levels than larger jet aircraft. This allows us to operate more flights per day and target smaller markets, which we believe provides us with a key advantage at non-hub airports. In addition, by operating only two aircraft types, we are able to simplify our maintenance training and parts inventory and achieve lower overall operating costs. These aircraft are no longer being manufactured and there is a limited supply of used aircraft of this type.

Training and Aircraft Maintenance

Airframe maintenance performed on our aircraft can be divided into two general categories: line maintenance and heavy maintenance. Line maintenance consists of routine, scheduled maintenance checks, including pre-flight, daily and overnight checks, and any diagnostics and routine repairs. Heavy maintenance consists of more complex inspections and overhauls, and servicing of the aircraft. Most of our line maintenance and heavy maintenance is performed by our own highly experienced technicians at our hangar in Fort Lauderdale. Parts and supply inventories are primarily maintained in Fort Lauderdale and, in smaller amounts, at our locations in Miami, Tampa and West Palm Beach. Some line maintenance is also carried out at other locations in Florida by employees or third-party contractors. Maintenance checks are performed in accordance with the guidelines established by the aircraft manufacturer. These checks are based on the number of hours or calendar months flown by each individual aircraft.

We employ over 100 maintenance professionals, including engineers, supervisors, technicians and mechanics, who perform airframe maintenance in accordance with maintenance programs that are established by the manufacturer and approved and certified by international aviation authorities. Every mechanic is trained in manufacturer-specified procedures and goes through our rigorous in-house training program. Each of our mechanics is licensed by the Federal Aviation Authority (“FAA”). Our safety and maintenance procedures are reviewed and periodically audited by the FAA. We have received the FAA Diamond Award, the highest level of recognition for maintenance training, for seven consecutive years.

We have agreements for maintaining our engines, propellers, landing gears and avionics with third-party contractors. Our engines are maintained under a long-term agreement with a third party provider, which provides for engine maintenance under a fleet management program.

Pricing and Revenue Management

We believe effective revenue management, particularly during peak periods, contributes to our strong operating performance. We are responsible for setting prices in local markets and our code share partners are responsible for setting prices in connecting markets. We try to maximize the overall revenue of our flights by utilizing certain revenue management policies. Our revenue management systems and procedures enable us to understand markets, anticipate customer demand and respond quickly to revenue enhancement opportunities.

The number of seats offered at each fare is established through a continual process of forecasting and analysis. Generally, past booking history and seasonal trends are used to forecast anticipated demand. These historical forecasts are combined with current bookings, upcoming events, competitive pressures and other factors to establish a mix of fares designed to maximize revenue. This allows us to balance loads and capture more revenue from existing capacity.

Seasonality

Our business is subject to substantial seasonality, primarily due to leisure and holiday travel patterns, particularly in the Bahamas. We experience the strongest demand from February to July, and the weakest demand from August to October, during which period we typically suffer operating losses. As a result, our operating results for a quarterly period are not necessarily indicative of operating results for an entire year, and historical operating results are not necessarily indicative of future operating results. Our results of operations generally reflect this seasonality. Our operating results are also impacted by numerous other cycles and factors that are not necessarily seasonal.

Government Regulation

All interstate air carriers, including Gulfstream, are subject to regulation by the Department of Transportation (“DOT”), the FAA and other governmental agencies. Regulations promulgated by the DOT primarily relate to economic aspects of air service. The FAA requires operating, air worthiness and other certificates and certain record-keeping procedures. FAA approval is required for personnel who engage in flight, maintenance or operating activities and flight training and retraining programs. Generally, governmental agencies enforce their regulations through certifications, which are necessary for the continued operations of Gulfstream, and proceedings, which can result in civil or criminal penalties or revocation of operating authority. The FAA can also issue maintenance directives and other mandatory orders relating to, among other things, grounding of aircraft, inspection of aircraft, installation of new safety-related items and the mandatory removal and replacement of aircraft parts.

We believe Gulfstream is operating in compliance with FAA regulations and holds all necessary operating and airworthiness certificates and licenses. We incur substantial costs in maintaining current certifications and otherwise complying with the laws, rules and regulations to which Gulfstream is subject. Our flight operations, maintenance programs, record keeping and training programs are conducted under FAA-approved procedures. We do not operate at any airports where the FAA has restricted landing slots.

All air carriers are required to comply with federal laws and regulations pertaining to noise abatement and engine emissions. All air carriers are also subject to certain provisions of the Federal Communications Act of 1934, as amended, because of their extensive use of radio and other communication facilities. Gulfstream is also subject to certain other federal and state laws relating to protection of the environment, labor relations and equal employment opportunity. We believe that Gulfstream is in compliance in all material respects with these laws and regulations.

Safety and Security

We are committed to the safety and security of our passengers and employees. Since the September 11, 2001 terrorist attacks, Gulfstream has taken many steps, both voluntarily and as mandated by governmental agencies, to increase the safety and security of our operations. Some of the safety and security measures we have taken, along with our code share partners, include: aircraft security and surveillance, positive bag

matching procedures and enhanced passenger and baggage screening and search procedures. We are committed to complying with future safety and security requirements.

Charter Services

We operate charter flights between Miami and Havana, Cuba, pursuant to a services agreement dated August 8, 2003 and amended March 14, 2006 with a related company, Gulfstream Air Charter, Inc. (“GAC”), which is owned by Thomas L. Cooper. GAC is licensed by the Office of Foreign Assets Control of the U.S. Department of the Treasury as a carrier and travel service provider for charter air transportation between designated U.S. and Cuban airports.

Pursuant to the agreement, we provide use of our aircraft and the Gulfstream name, insurance, and service personnel, including inflight, passenger, ground handling, security, and administrative. We maintain the financial records and receive 75% of the cash flow generated by GAC’s Cuban charter operation.

In June 2006, Gulfstream began services under a long-term subcontract with Computer Sciences Corporation to operate daily flights between West Palm Beach and Andros Town, Bahamas. This contract provides for approximately two to three daily round trips and has an initial period of 21 months from inception, with extensions up to an additional 12 years. The contract is structured as a fixed-fee arrangement, with adjustments for market fuel prices. It further specifies performance standards, as well as bonus payments for exceeding those standards. As part of this agreement, Gulfstream leased two B1900D aircraft to support the operation.

In preparation for this operation, Gulfstream obtained certification from the Commercial Airline Review Board of the U.S. Department of Defense (“DOD”). Having this certification could have the effect of increasing the number of opportunities for Gulfstream to provide additional charter flights to the DOD.

Gulfstream also provides on-demand passenger charter services based on aircraft availability.

The Academy

The Academy offers training programs for pilots holding commercial, multi-engine, and instrument certifications. Pilots with these ratings are qualified to fly commercial aircraft but seek to improve their marketability by accumulating additional training and flying time. The Academy enhances our student’s career prospects by providing them with the training and experience necessary to obtain pilot positions with commercial airlines.

Traditionally, pilots can work as flight instructors for up to two years to gain this additional training and flying time. The Academy offers an alternative to this traditional means of gathering additional flight experience. By enrolling in one of the Academy’s programs, students are able to more quickly accumulate the qualifications demanded by the commercial airlines. A number of U.S. airlines accept Academy graduates with a lower total flight time than these airlines require of other newly hired pilots, reflecting the value they place on the Academy’s training. The Academy graduates have also experienced a high success rate in completing training at airlines, which translates into cost savings for the airlines.

The Academy employs approximately six full-time flight and ground instructors. The Academy’s instructors have, on average, been providing training for approximately 15 years each and have cumulatively amassed in excess of 63,000 actual flight hours. The Academy enrolled 78 students in 2006, and estimates that 99% were or will be hired by airlines after graduation, including those hired by Gulfstream.

The Academy does not make loans to our students, but we do have arrangements with several financial institutions to facilitate the financing of students’ tuition.

The Academy’s training facility in Fort Lauderdale has several ground school classrooms, a series of flight training devices used for procedural training and cockpit familiarization, as well as two non-motion flight simulators, one of which is for B1900D aircraft training. The Academy contracts for full-motion flight simulators at facilities in Atlanta, Georgia, Orlando, Florida, and Fort Pierce, Florida.

The Academy offers two principal programs: the First Officer Program and the CRJ Jet Transition Course.

First Officer Program

The First Officer Program is a comprehensive program designed to prepare pilots for their commercial airline careers. The program entails a “train to proficiency” concept, typically resulting in well over 500 hours of training time, including ground school, simulator time and observation flights. This first portion of the program can be completed in three months. The second portion of the program involves up to 400 hours of FAA Regulation Part 121 commercial airline flight hours as a First Officer at Gulfstream. FAA Regulation Part 121 established operating standards and is the principal operating regulation applicable to all major US airlines. Gulfstream relies on the Academy as its preferred source of pilots, and nearly all of our permanent pilots are graduates of the First Officer Program.

CRJ Jet Transition Program

For students who have completed the First Officer Program or have comparable prior experience and who wish to enhance their prospects to fly a regional jet, the Academy has developed the CRJ Jet Transition Program, which we began to offer in 2007. Under this two week program, our students receive extensive ground school instruction as well as simulator training for regional jets.

In addition to our two programs, the Academy provides training services to Gulfstream. While the Academy holds an FAA Part 142 certificate, enabling us to operate a flight training center on behalf of other airlines, we presently do not provide any training services to other airlines.

Properties

Our corporate headquarters, as well as the Academy, are located approximately two miles from Fort Lauderdale-Hollywood International Airport. We lease three floors, consisting of approximately 12,600 square feet, from EYW Holdings, Inc., an entity controlled by Thomas L. Cooper and Thomas P. Cooper under a 20-year lease with an initial base rate of approximately $26,000 per month. Gulfstream occupies two floors and the Academy occupies one floor of the building. Additionally, the Academy leases approximately 3,750 square feet of office space in an adjacent building under a five-year lease at a base rent of approximately $7,150.

We lease approximately 249,000 square feet of land, hangar and ramp space at Fort Lauderdale-Hollywood International Airport. The lease agreement for this space expired in May 2007, but was extended to May 2008. We lease approximately 4,000 square feet of warehouse and storage space near the Fort Lauderdale-Hollywood International Airport. This lease agreement expired in December 2005 and we are currently operating on a month-to-month basis. We are currently in negotiations regarding an extension of the lease.

We sublease approximately 54,500 square feet of hangar and ramp space at West Palm Beach International Airport. Our West Palm Beach facility is leased under a sublease which terminates in March 2008, with an option to extend the lease for four successive periods of three years each.

We lease approximately 1,050 square feet of office space located near Miami International Airport for our Cuba operation. This lease expires July 31, 2007; however, we expect to enter into an extension for the office space.

We lease ticket counter space, gate space and operations space at various airports throughout our system. At Tampa International Airport, we have a long-term lease for gate space, expiring in September 2009. None of our space at other airports is leased under long-term agreements.

Ground Operations

In the Bahamas, we lease ticket counters, check-in and boarding and other facilities and Gulfstream employees provide substantially all of the operations services.

In Key West and Gainesville, Florida, we lease our facilities and Gulfstream employees provide operations services. At all other Florida airports, Gulfstream contracts out all or a portion of our ground operations. From time to time, Gulfstream reviews these arrangements and evaluates the most economical operations structure.

Insurance

We maintain insurance policies that we believe are of types customary in the industry and in amounts we believe are adequate to protect against material loss. These policies principally provide coverage for public liability, passenger liability, baggage and cargo liability, property damage, including coverages for loss or damage to our flight equipment, and workers’ compensation insurance. We cannot assure, however, that the amount of insurance we carry will be sufficient to protect us from material loss.

Environmental Matters

We are subject to various federal, state, local and foreign laws and regulations relating to environmental protection matters. These laws and regulations govern such matters as environmental reporting, storage and disposal of materials and chemicals and aircraft noise. We are, and expect in the future to be, involved in environmental matters and conditions at, or related to, our properties, but we do not expect the resolution of any such matters to have a material adverse effect on the Company’s operations. We are not currently subject to any environmental cleanup orders or actions imposed by regulatory authorities. We are not aware of any active material environmental investigations related to our assets or properties.

Raw Materials and Energy

Fuel costs are a major component of our operating expenses. We contract with World Fuel Services to provide approximately half of our fuel, principally for international destinations. Most of our domestic fuel consumption is provided by Continental. The following chart summarizes our fuel consumption and costs:


	Years Ended December 31,
	2004			2005			2006

Gallons consumed, in thousands		8,357			10,813			11,183
Total cost, in thousands	$	11,115		$	20,544		$	24,378
Average price per gallon	$	1.33		$	1.90		$	2.18
Percent of operating expenses		17.3	%		23.9	%		25.0	%

Total costs and average price per gallon each exclude into-plane service fees.

Fuel costs are extremely volatile, as they are subject to many global economic and geopolitical factors that we can neither control nor accurately predict. On a purchase-order basis with World Fuel Services, we purchase bonded fuel for our international flights, which are exempt from federal excise taxes. Therefore, our fuel costs may not be directly comparable to costs incurred by other airlines. Gulfstream has, from time to time, implemented limited fuel cost management programs in the form of pre-ordering of specific quantities of fuel at specific locations at then-market rates. These cost management programs have not had a material impact on our financial results. Significant increases in fuel costs would have a material adverse effect on our operating results.

Trademarks and Trade Names

Our flights are operated under the names of our code share partners, including Continental, United Airlines, Northwest Airlines, and Copa Airlines. Because we do not operate scheduled flights under our trade names, we have not registered any trademarks or trade names.

Employee and Labor Relations

As of December 31, 2006, we had approximately 629 full time employees, of which 618 were employed by Gulfstream and 11 were employed by the Academy. Of the 618 employees of Gulfstream, 201 are union employees.

As of December 31, 2006, Gulfstream employs the following:


	As of
	December 31,
Classification	2006

Pilots		181
Station personnel		251
Maintenance personnel		101
Administrative and clerical personnel		15
Flight attendants		20
Management		27
Other flight operations		23

Total employees		618

Gulfstream’s tenured pilots are represented under collective bargaining agreement with the Teamsters union. A new agreement was ratified by the members in June 2006 and continues through June 2009. Our flight attendants voted for representation by the International Aerospace Workers, or IAM, in July 2006. We are currently in the process of negotiating an agreement with the IAM. At this point, no other employees are represented by unions. We have never experienced a work stoppage and no labor disputes, strikes or labor disturbances are currently pending or threatened against us. We believe we have good relations with our union employees at each of our facilities.

As of December 31, 2006, the Academy employed five administrative employees and six full-time flight and ground instructors. None of our Academy employees are represented by labor unions.

Legal Proceedings

In 2006, the former President of the Academy and certain sales personnel resigned their positions and formed a new company that competes directly with the Academy for student pilots. The Company has initiated a lawsuit against these former employees, alleging violation of noncompetition and fiduciary obligations.

From time to time, we are involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this prospectus, we were not engaged in any other legal proceedings which are expected, individually or in the aggregate, to have a material adverse effect on us.

MANAGEMENT

Executive Officers and Directors

Set forth below is the name, age as of July 1, 2007, position and a brief account of the business experience of each of the Company’s executive officers and directors.


Name	Age		Position(s)

Thomas A. McFall		53	Chairman of the Board and Senior Executive Officer
David F. Hackett		45	Chief Executive Officer and President, Director
Daniel H. Abramowitz		42	Director
Douglas E. Hailey		45	Director
Richard R. Schreiber		52	Director
Robert M. Brown		59	Chief Financial Officer
Paul Stagias		41	President, Academy

Thomas A. McFall, 53, Chairman of the Board and Senior Executive Officer

Mr. McFall has served as Chairman of our board of directors and senior executive officer since March 2006. Mr. McFall currently serves as Chairman of Weatherly Group LLC, a company he founded in 1999. Mr. McFall has served as an executive and on the board of directors of numerous companies, including Weatherstar Aviation. Weatherstar was a New Jersey based aviation operator providing both regularly scheduled and on demand charter flights under an FAA Part 135 certificate. Mr. McFall was President and CEO of Weatherstar from its inception in 1987 until its sale in 1995. He is currently Chairman of Aladdin Food Management Services, Cattron Group International and Boston Ship Repair, Inc.

David F. Hackett, 45, Chief Executive Officer and President, Director

Mr. Hackett has been Chief Executive Officer and President of the Company since March 2006. Since June 2003, Mr. Hackett has served as President of Gulfstream. From January 2002 to June 2003, he was a financial and strategic consultant to Newgate Associates, LLC. Mr. Hackett has over 20 years experience in the airline industry, beginning with Continental in 1985, where he eventually served as Director, Financial Planning and Analysis.

Daniel H. Abramowitz, 42, Director

Mr. Abramowitz has been a director since March 2006. Mr. Abramowitz is the founder and has been the President of Hillson Financial Management, Inc, a Rockville, Maryland investment firm focused on small to mid-sized companies, since 1990. Previously, Mr. Abramowitz was the Portfolio Manager for a real estate developer and investor. Mr. Abramowitz has also served as a director of two publicly traded companies, DMI Furniture, Inc. and TransTechnology Corporation. Mr. Abramowitz graduated cum laude from the University of Massachusetts at Amherst with a bachelor’s degree in Economics.

Douglas E. Hailey, 45, Director

Mr. Hailey has been a director since March 2006. Mr. Hailey is a Managing Director of Taglich Brothers and has been with Taglich Brothers since 1994 and a principal of Weatherly Group, LLC since 1999. Mr. Hailey heads the investment banking division at Taglich Brothers, specializing in private placements and public offerings for small public companies. Mr. Hailey is a director of Orchids Paper Products Company (AMEX: TIS) and Williams Controls, Inc. (Nasdaq: WMCO). Mr. Hailey received a bachelor’s degree in Business Administration from Eastern New Mexico University and an MBA in Finance from the University of Texas.

Richard R. Schreiber, 52, Director

Mr. Schreiber has been a director since March 2006. Mr. Schreiber has been a Partner with Dimeling, Schreiber & Park, an investment firm in Philadelphia, since 1982. He has been on the Board of Directors of numerous private companies (including New Piper Aircraft and McCall Pattern Company) and public companies (including Wiser Oil Company and Chief Consolidated Mining). Mr. Schreiber was previously a director of Business Express Airlines (a large Part 121 commuter airline), Aeris (a French airline) and Rocky Mountain Helicopters (a large Part 135 operation). Mr. Schreiber received a bachelor’s degree in Economics from the Wharton School of the University of Pennsylvania.

Robert M. Brown, 59, Chief Financial Officer

Robert M. Brown has been the chief financial officer of the Company since January 2007. From April 2005 to November 2006, Mr. Brown served as the Secretary, Treasurer and Chief Financial Officer of BabyUniverse, Inc., an online retailer in the United States of brand name baby, toddler, maternity and furniture products that is listed on the Nasdaq Capital Market. From November 2002 to April 2005, Mr. Brown was a private investor. Mr. Brown was the Chief Financial Officer of Uno Restaurant Corporation from 1987 to 1997, and served as its Executive Vice President-Development from 1997 to 2002. Uno Restaurant Corporation is the operator and franchisor of a nationwide chain of casual-dining restaurants and was publicly-traded on the New York Stock Exchange through 2001. Mr. Brown held several accounting positions prior to 1987 with each of SCA Services, Inc., The Stanley Works, Saab-Scania, Inc. and Price Waterhouse. Mr. Brown is a CPA certified in the State of Connecticut and earned a B.S. degree in Accounting at Fairfield University.

Paul A. Stagias, 41, President — The Academy

Mr. Stagias has been President of the Academy since April 2006. From 2004 to 2006, he was a flight instructor at Falcon Flight Sanford in Florida and a commercial pilot for Nelson Aerial Photography. From 1998 to 2003, he was a Senior Sales Specialist with Pfizer Corporation.

Executive Officers

Our executive officers are elected by, and serve at the discretion of, our board of directors.

Board of Directors

Prior to the completion of this offering, we intend to restructure our board of directors. Our board of directors consists of five directors. We intend to appoint three additional directors, subject to the completion of this offering. We anticipate that all three new directors will be independent as determined by our board of directors under the applicable securities law requirements and American Stock Exchange standards. The directors on our audit, compensation and nominating and governance committees will be independent and at least one member of the audit committee will be a financial expert under such requirements and standards.

Board Committees

Effective prior to consummation of the offering, we will establish an audit committee, a compensation committee, and a nominating and corporate governance committee. The audit committee will at all times be

composed exclusively of “independent directors” who are “financially literate” as defined in the American Stock Exchange listing standards. The American Stock Exchange listing standards define “financially literate” as being able to read and understand financial statements, including a company’s balance sheet, income statement and cash flow statement.

We will establish an audit committee consisting of three members, all of whom we believe will qualify as “independent directors” under the American Stock Exchange rules. The audit committee will be governed by a written charter which must be reviewed, and amended if necessary, on an annual basis. Under the charter, the audit committee will be required to meet at least four times a year and will be responsible for reviewing the independence, qualifications and quality control procedures of our independent auditors, and will be responsible for recommending the initial or continued retention, or a change in, our independent auditors. In addition, the audit committee will be required to review and discuss with our management and independent auditors our financial statements and our annual and quarterly reports, as well as the quality and effectiveness of our internal control procedures and critical accounting policies. The audit committee’s charter will require the audit committee to review potential conflict of interest situations, including transactions with related parties and to discuss with our management other matters related to our external and internal audit procedures. The audit committee will adopt a pre-approval policy for the provision of audit and non-audit services performed by our independent auditors. In connection with our application for listing on the American Stock Exchange, we will certify that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individual’s financial sophistication.

We will also establish a compensation committee consisting of three members. The compensation committee will be responsible for making recommendations to the board of directors regarding compensation arrangements for our executive officers, including annual bonus compensation, and will consult with our management regarding compensation policies and practices. The compensation committee will also make recommendations concerning the adoption of any compensation plans in which management is eligible to participate, including the granting of stock options or other benefits under those plans.

We will also establish a nominating and corporate governance committee consisting of three members, all of whom we believe will qualify as “independent directors” under the American Stock Exchange rules. The nominating and corporate governance committee will submit to the board of directors a proposed slate of directors for submission to the stockholders at our annual meeting, recommend director candidates in view of pending additions, resignations or retirements, develop criteria for the selection of directors, review suggested nominees received from stockholders and review corporate governance policies and recommend changes to the full board of directors.

Director Compensation

Following the offering, we intend to pay our independent directors a quarterly fee of $5,000. Each director will also be entitled to participate in our Stock Incentive Plan. In addition, we reimburse members of our board of directors for travel related expenditures related to their services to us. New directors are granted options on the date that they begin service exercisable at the then-current market value.

COMPENSATION DISCUSSION AND ANALYSIS

This section provides information regarding the compensation programs in place for the Company’s President and Chief Executive Officer, Chief Financial Officer and Senior Vice President, Legal Affairs, the Academy’s President and Gulfstream’s former Chief Executive Officer, who we refer to collectively as the named executive officers. In 2006, Mr. Hackett, our President and Chief Executive Officer, also served as our Chief Financial Officer. This section includes information regarding the overall objectives of our compensation programs and each element of compensation that we provide.

The compensation of our named executive officers is composed principally of a base salary, a quarterly bonus in some instances, a discretionary annual bonus and equity awards in the form of stock options. In

addition, our named executive officers are entitled to matching contributions to our 401(k) plan and certain perquisites.

Compensation decisions are made by the board of directors, with significant input from Mr. Hackett for compensation of his direct reports, including Mr. Thomas P. Cooper, Mr. Stagias and Mr. Thomas L. Cooper. In connection with the acquisition in March 2006, we adopted our Stock Incentive Plan and entered into new employment agreements with Mr. Hackett and Mr. Thomas L. Cooper.

Prior to consummating the Offering, our board of directors intends to form a compensation committee (the “Committee”) consisting of three directors who are determined to be independent under the rules of the American Stock Exchange. The Committee will have responsibility for establishing and overseeing our compensation programs for our named executive officers.

Objective of Compensation

Our primary goals with respect to executive compensation are:


	•	to attract and retain the most talented and dedicated executives possible;

	•	to acknowledge and reward individual contributions to the Company; and

	•	to encourage long-term value creation by aligning executives’ interests with stockholders’ interests.

To achieve these goals, the board of directors intends to implement and maintain compensation plans that tie a substantial portion of our named executive officers’ overall compensation to revenue growth and equity appreciation. All of our named executive officers have entered into employment agreements and their compensation is based on the contractual obligations under those agreements. In addition, we evaluate compensation on an ongoing basis and make adjustments as we believe are necessary to fairly compensate our executives and to retain their services.

We do not benchmark our compensation against that of others in our industry nor have we engaged compensation consultants to assist us in developing our compensation arrangements.

Elements of Compensation

In connection with the acquisition in March 2006, we entered into employment agreements with Mr. Hackett and Mr. Thomas L. Cooper addressing specific compensation arrangements in order to retain those executive officers. Our employment agreement with Mr. Thomas P. Cooper predates the March 2006 acquisition and was left unchanged and our employment agreement with Mr. Stagias was entered into after the acquisition. The terms of these employment agreements are individually developed based on relevant considerations at the time they were entered into. Employment agreement terms have also included severance and change in control provisions. The board of directors’ judgment was that such employment agreements were appropriate and necessary.

Executive compensation consists of the following elements:

Base Salary. Base salaries for our named executive officers are established based on the scope of their responsibilities, taking into account competitive market compensation paid by other companies for similar positions. All of our named executive officers are entitled to a minimum base salary pursuant to their employment agreements, which can be increased at the discretion of the board of directors. Generally, we believe that executive base salaries should be competitive with salaries for executives in similar positions with similar responsibilities at comparable companies, in line with our compensation philosophy. Base salaries are reviewed on an ongoing basis, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience.

Performance Bonus. Mr. Hackett and Mr. Thomas P. Cooper are entitled to receive quarterly bonuses equal to a fixed percentage of operating income, excluding nonrecurring gains and losses,

pursuant to the terms of their employment agreements. In 2006, Mr. Hackett received $39,200 and Mr. Thomas P. Cooper received $22,460 in aggregate quarterly bonus payments.

In addition, the board of directors has the authority to award discretionary annual bonuses to any of our named executive officers. The discretionary annual bonuses are intended to compensate officers for achieving financial and operational goals. Our discretionary annual bonus is paid in cash in an amount determined by the board of directors and ordinarily is paid in a single installment in the first quarter following the completion of a given fiscal year. The actual amount of discretionary bonus will be determined following a review of each executive’s individual performance and contribution to our strategic goals conducted during the first quarter in 2008. The board of directors has not fixed a maximum payout for any executive officers’ annual discretionary bonus. In 2006, we did not award any annual discretionary bonuses.

Equity Compensation. We believe that positive long-term performance is achieved through an ownership culture that encourages such performance by our named executive officers through the use of stock and stock-based awards. Our Stock Incentive Plan was established in March 2006 to provide certain of our employees, including our named executive officers, with incentives to help align those employees’ interests with the interests of stockholders. The Stock Incentive Plan permits the issuance of a variety of equity-based awards, including tax qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units, and other stock-based awards.

The board of directors believes that the use of stock and stock-based awards offers the best approach to achieving our compensation goal of aligning the interests of our named executive officers with those of our stockholders. We have not adopted stock ownership guidelines, and our Stock Incentive Plan has provided an important method for our named executive officers to acquire equity or equity-linked interests in our Company. Through the growth, we hope to achieve and the size of our equity awards, we expect to provide a significant portion of total compensation to our named executive officers through our Stock Incentive Plan. Our board of directors is the administrator of the Stock Incentive Plan.

Although our Stock Incentive Plan permits us to issue a variety of different equity-based awards, since adopting the Stock Incentive Plan, we have only granted tax qualified incentive stock options. Stock option grants reflect our desire to provide a meaningful equity incentive for named executive officers to help us succeed over the long term. Stock options provide for financial gain derived from the potential appreciation in our stock price from the date the option is granted until the date that the option is exercised. Our long term performance ultimately determines the value of stock options, because gains recognized from stock option exercises are entirely dependent on the long-term appreciation of our stock price. We expect stock options to continue as a significant component of executive compensation arrangements. In addition to the named executive officers, stock options have been granted to our other executives who are in positions that are key to our long-term success.

Stock option grants are made at the commencement of employment and, occasionally, following a significant change in job responsibilities or to meet other special retention or performance objectives. The board of directors reviews and approves stock option awards to named executive officers based upon its assessment of individual performance, consideration of each executive’s existing long-term incentives, and retention considerations. Periodic stock option grants are made at the discretion of the board of directors to eligible employees and, in appropriate circumstances, the board of directors considers the recommendations of members of management such as Mr. Hackett, our Chief Executive Officer.

Perquisites and Other Compensation

Employee benefits offered to named executive officers are designed to meet current and future health and security needs for the named executive officers and their families. Executive benefits are the same as those offered to all employees, except that we pay medical insurance premiums in full for the named executive officers enrolled in our medical benefit plan. The employee benefits offered to all eligible employees include medical, dental and life insurance benefits, short-term disability pay, long-term disability insurance, flexible

spending accounts for medical expense reimbursements, and a 401(k) retirement savings plan that, starting on July 1, 2006, include a partial Company match.

The 401(k) retirement savings plan is a defined contribution plan under Section 401(a) of the Internal Revenue Code. Employees may make pre-tax contributions into the plan, expressed as a percentage of compensation, up to prescribed IRS annual limits. Starting on July 1, 2006, we provide an employer matching contribution of 25% on the first 4% of employee pay contributed.

Upon retirement, each named executive officer is entitled to medical, dental and life insurance plan continuation for 18 months under the federal and state COBRA provisions at his or her election. In addition, the executive is entitled to elect to receive distributions from our 401(k) retirement plan, under the terms of that plan. Under our Stock Incentive Plan, any vested but unexercised stock options may be exercised for a period of 60 days and three months, respectively, after retirement.

Other Compensation.

Our named executive officers who were parties to employment agreements prior to this offering will continue, following this offering, to be parties to such employment agreements in their current form until such time as the board of directors determines in its discretion that revisions to such employment agreements are advisable. In addition, consistent with our compensation philosophy, we intend to continue to maintain our current benefits and perquisites for our named executive officers; however, the board of directors in its discretion may revise, amend or add to the officer’s executive benefits and perquisites if it deems it advisable. We currently have no plans to change either the employment agreements (except as required by law or as required to clarify the benefits to which our named executive officers are entitled as set forth herein) or levels of benefits and perquisites provided thereunder.

Report of the Board of Directors for Fiscal Year 2007

The board of directors has reviewed and discussed the above Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the board of directors recommends that the Compensation Discussion and Analysis be included in this prospectus.

THE BOARD OF DIRECTORS

David F. Hackett

Daniel H. Abramowitz

Douglas E. Hailey

Thomas A. McFall

Richard R. Schreiber

EXECUTIVE COMPENSATION

The following table sets forth certain information concerning the compensation of our chief executive officer and each of our other most highly compensated executive officers whose aggregate cash compensation exceeded $100,000 during the year ended December 31, 2006. In 2006 and until January 29, 2007, when we hired Mr. Brown, Mr. Hackett served as our Chief Financial Officer. We refer to these persons as the “named executive officers” elsewhere in this prospectus.

Summary Compensation Table


									Non-Equity
							Option		Incentive Plan		All Other
			Salary		Bonus		Awards		Compensation		Compensation
Name and Principal Position	Year		($)(1)		($)(2)		($)(3)		($)		($)(4)		Total ($)

David F. Hackett,		2006	$	126,300	$	39,200	$	77,514		—	$	11,366	$	254,380
Chief Executive Officer and President
Thomas P. Cooper,		2006	$	90,000	$	22,460		—		—	$	10,709	$	123,169
Senior Vice President, Legal Affairs and Secretary
Paul A. Stagias,		2006	$	59,827	$	3,000		—		—	$	3,569	$	66,396
President, Gulfstream Training Academy
Thomas L. Cooper,(5)		2006	$	105,800	$	5,700		—		—	$	7,922	$	119,422
Former Chief Executive Officer, Gulfstream International Airlines


(1)		The base salary for Mr. Hackett reflects his current base salary of $135,000 pro rated from March 14, 2006 to December 31, 2006 plus his prior base salary of $108,000 pro rated from January 1, 2006 to March 13, 2006. The base salary for Mr. Thomas L. Cooper reflects his current base salary of $100,000 pro rated from March 14, 2006 to December 31, 2006 plus his prior base salary of $125,000 pro rated from January 1, 2006 to March 13, 2006.

(2)		Mr. Hackett received aggregate quarterly bonus payments of $39,200 in 2006.

(3)		Reflects options awarded under our Stock Incentive Plan. These options vest and become exercisable in 20% increments starting on the grant date and 20% on each anniversary of the grant date. These amounts represent the financial reporting expense recognized by the Compnay in 2006 in accordance with SFAS 123R, and not the amounts that may be eventually realized by the named executive offciers.

(4)		The All Other Compensation column consists of items not properly reported in the other columns of this table, and for each named executive officer includes perquisites and other personal benefits. Mr. Hackett’s 2006 compensation includes health insurance premiums of $10,400, 401(k) matching contributions, life insurance premiums and reserved parking at the Company headquarters. Mr. Thomas Cooper’s 2006 compensation includes health insurance premiums of $10,080, 401(k) matching contributions, and life insurance premiums and reserved parking at the Company headquarters. Mr. Stagias’ 2006 compensation includes health insurance premiums, life insurance premiums and reserved parking at the Company headquarters. Mr. Thomas Cooper’s 2006 compensation includes health insurance premiums, life insurance premiums and reserved parking at the Company headquarters.

(5)		Thomas L. Cooper currently serves as Chairman Emeritus of Gulfstream and manages our Cuban flight operations.

Agreements with Named Executive Officers

David F. Hackett

On March 14, 2006, Mr. Hackett and Gulfstream entered into an Executive Employment Agreement, pursuant to which, among other things, Mr. Hackett is to serve as President of Gulfstream for an initial term

of two years, subject to automatic one-year extensions absent mutual amendment of the terms or termination by either party as set forth therein. Mr. Hackett is entitled to a base salary of $132,000 (as increased to reflect increases in the consumer price index and at the discretion of the board of directors) and a quarterly bonus equal to 1.75% during the first year of the initial term and 2.25% for subsequent years of Gulfstream’s annual pre-tax income which amount is paid quarterly on a trailing twelve month basis, as determined by the board of directors and excluding non-recurring gains and losses. In the event of Mr. Hackett’s death during the term of the agreement, Mr. Hackett’s salary and incentive bonus will be paid to his designated beneficiary, estate or other legal representative for six months following his death. In the event of Mr. Hackett’s disability during the term of the agreement, Mr. Hackett will be entitled to receive no less than six months’ salary and incentive bonus following such disability. This disability payment is in addition to other long-term disability benefits provided by us to Mr. Hackett. For the purposes of this agreement, “disability” is deemed to have occurred if Mr. Hackett is unable by reason of sickness, disease or accident to substantially perform his duties under the agreement for an aggregate of six months in any one-year period, or if he has a guardian of his person or estate appointed by a court.

Upon termination of the agreement without “cause” by Gulfstream, Mr. Hackett will be entitled to benefits for the remainder of the initial or then-current renewal term of the agreement and compensation in the form of base salary and incentive bonus payments for one year thereafter. For the purposes of this agreement, “cause” is defined as (i) repeated failure or refusal to reasonably cooperate with a governmental investigation of Gulfstream; (ii) willfully committing or participating in any act or omission which constitutes willful misconduct, fraud, misrepresentation, embezzlement or dishonesty that is materially injurious to Gulfstream; (iii) committing or participating in any other act or omission wantonly, willfully, recklessly or in a manner which was grossly negligent that is materially injurious to the company, monetarily or otherwise; (iv) engaging in a criminal enterprise involving moral turpitude; (v) any crime resulting in a conviction, which constitutes a felony in the jurisdiction involved (other than a motor vehicle felony that does not result in his incarceration; (vi) any loss of any state or federal license required for Mr. Hackett to perform his material duties or responsibilities for Gulfstream; or (vii) any material breach of the employment agreement by Mr. Hackett.

Mr. Hackett has the right to terminate the agreement upon 30 days notice for a year after any change in control. Our obligations to make payments to Mr. Hackett following such a termination are described more fully in “Potential Payments Upon Termination or Change In Control.” Pursuant to this employment agreement, Mr. Hackett agrees to a covenant not to compete during the term of the agreement and for a period of one year thereafter in the territory of Florida, the Bahamas and portions of Cuba. Mr. Hackett also agrees to maintain the confidentiality of certain Gulfstream information in certain circumstances.

Thomas P. Cooper

On August 7, 2003, Mr. Thomas P. Cooper and Gulfstream entered into an Executive Employment Agreement, pursuant to which, among other things, Mr. Cooper serves as Senior Vice President, Legal Affairs, or such other position as the board of directors of Gulfstream determines, for an initial term of three years, subject to automatic one-year extensions absent mutual amendment of the terms or termination by either party as set forth therein. Mr. Cooper is entitled to a base salary of $90,000 (as increased to reflect increases in the consumer price index or at the discretion of the board of directors of Gulfstream) and to a bonus equal to 1% of Gulfstream’s annual pre-tax income which amount is paid quarterly on a trailing twelve month basis, excluding non-recurring gains and losses. In the event of Mr. Cooper’s death during the term of the agreement; Mr. Cooper’s salary and incentive bonus will be paid to his designated beneficiary, estate or other legal representative for six months following his death. In the event of Mr. Cooper’s disability during the term of the agreement, Mr. Cooper will be entitled to receive no less than six months’ salary following such disability. This disability payment is in addition to other long-term disability benefits provided by us to Mr. Cooper. For the purposes of this agreement, “disability” is deemed to have occurred if Mr. Cooper is unable by reason of sickness, disease or accident to substantially perform his duties under the agreement for an aggregate of six months in any one-year period, or if he has a guardian of his person or estate appointed by a court.

one month for each year of service with Gulfstream. For the purposes of this agreement, “cause” is defined as (i) willfully committing or participating in any act or omission which constitutes willful misconduct, fraud, misrepresentation, embezzlement or dishonesty that is materially injurious to Gulfstream; (ii) committing or participating in any other act or omission wantonly, willfully, recklessly or in a manner which was grossly negligent that is materially injurious to the company, monetarily or otherwise; (iii) engaging in a criminal enterprise involving moral turpitude; (iv) any crime resulting in a conviction, which constitutes a felony in the jurisdiction involved (other than a motor vehicle felony that does not result in his incarceration; (v) any loss of any state or federal license required for Mr. Cooper to perform his material duties or responsibilities for Gulfstream; or (vi) any material breach of the employment agreement by Mr. Cooper.

Mr. Cooper has the right to terminate the agreement upon 30 days notice for a year after any change in control. Our obligations to make payments to Mr. Cooper following such a termination are described more fully in “Potential Payments Upon Termination or Change In Control.” Pursuant to this employment agreement, Mr. Cooper agrees to a covenant not to compete during the term of the agreement and for a period of six months thereafter in the territory of Florida and the Bahamas (unless terminated without cause by the Gulfstream, in which case the noncompetition obligations of Mr. Cooper will end upon his termination). Mr. Cooper also agrees to maintain the confidentiality of certain of Gulfstream’s information in certain circumstances.

Paul Stagias

On April 6, 2006, Mr. Stagias and the Academy entered into an Executive Employment Agreement, pursuant to which, among other things, Mr. Stagias serves as President of the Academy. The agreement has an initial term of two years, followed by automatic one-year extensions, unless otherwise terminated by either party. Mr. Stagias is entitled to a base salary of $85,000 and a quarterly bonus equal to 0.5% of the Academy’s gross student revenue plus 1.5% of operating income of the Academy. Subject to limited exceptions, this bonus is payable only if gross revenues of the Academy are equal to or greater than $800,000 dollars per quarter. In the event of Mr. Stagias’s death during the term of the agreement; Mr. Stagias’s salary and incentive bonus will be paid to his designated beneficiary, estate or other legal representative for two months following his death.

Upon termination of the agreement by the Academy without “cause,” Mr. Stagias will be entitled to benefits for the remainder of the initial or then-current renewal term of the agreement and compensation for three months. For the purposes of this agreement, “cause” is defined as (i) willfully committing or participating in any act or omission which constitutes willful misconduct, fraud, misrepresentation, embezzlement or dishonesty that is materially injurious to the Academy; (ii) committing or participating in any other act or omission wantonly, willfully, recklessly or in a manner which was grossly negligent that is materially injurious to the company, monetarily or otherwise; (iii) engaging in a criminal enterprise involving moral turpitude; (iv) any crime resulting in a conviction, which constitutes a felony in the jurisdiction involved (other than a motor vehicle felony that does not result in his incarceration; (v) any loss of any state or federal license required for Mr. Stagias to perform his material duties or responsibilities for the Academy; or (vi) any material breach of the employment agreement by Mr. Stagias. Pursuant to this employment agreement, Mr. Stagias agrees to a covenant not to compete and non-disclosure provisions in certain circumstances.

Thomas L. Cooper

On March 14, 2006, Thomas L. Cooper and Gulfstream entered into an Executive Employment Agreement, pursuant to which, among other things, Mr. Cooper served as Chief Executive Officer of Gulfstream for an initial term of one year and currently serves as Chairman Emeritus of Gulfstream. Mr. Cooper consults with us, upon our request, about certain operational matters involving Gulfstream and manages our Cuban operation. His agreement is subject to automatic one-year extensions absent mutual amendment of the terms or termination by either party as set forth therein. Mr. Cooper is entitled to a base salary of $100,000 (as increased to reflect increases in the consumer price index or at the discretion of the Gulfstream board of directors). In the event of Mr. Cooper’s death during the term of the agreement, Mr. Cooper’s salary will be paid to his designated beneficiary, estate or other legal representative for six

months following his death. In the event of Mr. Cooper’s disability during the term of the agreement, Mr. Cooper will be entitled to receive no less than six months’ salary following such disability. This disability payment is in addition to other long-term disability benefits provided by us to Mr. Cooper. For the purposes of this agreement, “disability” is deemed to have occurred if Mr. Cooper is unable by reason of sickness, disease or accident to substantially perform his duties under the agreement for an aggregate of six months in any one-year period, or if he has a guardian of his person or estate appointed by a court.

Upon termination of the agreement without “cause” by Gulfstream, Mr. Cooper will be entitled to benefits for the remainder of the initial or then-current renewal term of the agreement and base salary for six months thereafter. For the purposes of this agreement, “cause” is defined as (i) repeated failure or refusal to reasonably cooperate with a governmental investigation of Gulfstream; (ii) willfully committing or participating in any act or omission which constitutes willful misconduct, fraud, misrepresentation, embezzlement or dishonesty that is materially injurious to Gulfstream; (iii) committing or participating in any other act or omission wantonly, willfully, recklessly or in a manner which was grossly negligent that is materially injurious to the company, monetarily or otherwise; (iv) engaging in a criminal enterprise involving moral turpitude; (v) any crime resulting in a conviction, which constitutes a felony in the jurisdiction involved (other than a motor vehicle felony that does not result in his incarceration; (vi) any loss of any state or federal license required for Mr. Cooper to perform his material duties or responsibilities for Gulfstream; or (vii) any material breach of the employment agreement by Mr. Cooper.

Mr. Cooper has the right to terminate the agreement upon 30 days notice for a year after any change in control. Our obligations to make payments to Mr. Cooper following such a termination are described more fully in “Potential Payments Upon Termination or Change In Control.” Pursuant to this employment agreement, Mr. Cooper agrees to a covenant not to compete during the term of the agreement and for a period of three years thereafter in the territory of Florida, the Bahamas and portions of Cuba (unless terminated without cause by the Gulfstream, in which case the noncompetition obligations of Mr. Cooper pursuant to the employment agreement will end upon his termination). Mr. Cooper also agrees to maintain the confidentiality of certain of Gulfstream’s information in certain circumstances.

Subsequent Events

On January 29, 2007, we hired Mr. Robert M. Brown as our Chief Financial Officer. He is employed by Gulfstream at an annual salary of $150,000. We have not entered into a written employment agreement with Mr. Brown. Under the terms of Mr. Brown’s employment with us, he is entitled to medical and vacation benefits, free and reduced-rate air travel benefits, and participation in the Company’s 401(k) program. Mr. Brown is also entitled to participate in our Stock Incentive Plan. Upon commencement of his employment with us, Mr. Brown received a cash signing bonus of $10,000 and the option to purchase 30,000 shares of our common stock, 20% of which vested immediately upon issuance, and 20% of which shall vest each of the following four years.

Grants Of Plan-Based Awards

All Other

Grant

All Other

Option

Date

Stock Awards:

Awards:

Exercise

Fair

Estimated Future Payouts

Number of

or Base

Value of

Under Non-Equity Incentive

Under Equity Incentive

Shares of

Securities

Price of

Stock

Plan Awards

Stocks

Underlyg

Option

and

Threshold

Target

Maximum

Threshold

Target

Maximum

or Units

Options

Awards

Option

Name

Grant Date

($)

(#)

($/Sh)

Awards

David F. Hackett

May 31, 2006

—

104,324(1

)

$5.00/Sh(1)

256,790


(1)		As adjusted for our 2-for-1 stock split effected in May 2007.

Employee Benefit Plans

Stock Incentive Plan. Our Stock Incentive Plan was adopted by our board of directors and approved by our stockholders in 2006. Our plan provides for the granting of incentive stock options, non-incentive stock options, SARs, cash-based awards, or other stock-based awards to those of our employees, directors or

consultants who are selected by our board of directors. The plan authorizes 350,000 shares of our common stock to be issued under the plan. As of the date of this prospectus, we have awarded options to certain of our officers for an aggregate of 210,324 shares of our common stock. The board of directors administers the plan, however, the board of directors intends to form a compensation committee prior to the Offering and to delegate responsibility for administering the plan to the Committee.

On the date of the grant, the exercise price must equal at least 100% of the fair market value in the case of incentive stock options, or 110% of the fair market value with respect to optionees who own at least 10% of the total combined voting power of all classes of stock. The fair market value is determined by computing the arithmetic mean of our high and low stock prices on a given determination date if our stock is publicly traded or, if our stock is not publicly traded, by the administrator in good faith. The exercise price on the date of grant is determined from time to time by the board of directors in the case of non-qualified stock options. This price needs not be uniform for all recipients of non-qualified stock options and must not be less than 100% of the fair market value.

SARs granted under the plan are subject to the same terms and restrictions as the option grants and may be granted independent of, or in connection with, the grant of options. The board of directors determines the exercise price of SARs. A SAR granted independent of an option entitles the participant to payment in an amount equal to the excess of the fair market value of a share of our common stock on the exercise date over the exercise price per share, times the number of SARs exercised. A SAR granted in connection with an option entitles the participant to surrender an unexercised option and to receive in exchange an amount equal to the excess of the fair market value of a share of our common stock over the exercise price per share for the option, times the number of shares covered by the option which is surrendered. Fair market value is determined in the same manner as it is determined for options.

The board of directors may also grant awards of stock, restricted stock and other awards valued in whole or in part by reference to the fair market value of our common stock. These stock-based awards, in the discretion of the board of directors, may be, among other things, subject to completion of a specified period of service, the occurrence of an event or the attainment of performance objectives. Additionally, the board of directors may grant awards of cash, in values to be determined by the board of directors. If any awards are in excess of $1,000,000 such that Section 162(m) of the Internal Revenue Code applies, the board of directors must alter its compensation practices to ensure that compensation deductions are permitted.

Awards granted under the plan are generally not transferable by the participant except by will or the laws of descent and distribution, and each award is exercisable, during the lifetime of the participant, only by the participant or his or her guardian or legal representative, unless permitted by the board of directors. Additionally, any shares of our common stock received pursuant to an award granted under the plan are subject to our right of first refusal prior to certain transfers by the participant and our buy-back rights upon termination of the participant’s employment. The right of first refusal and buy-back rights terminate upon consummation of an initial public offering.

Options granted under the plan will vest as provided by the board of directors at the time of the grant. The board of directors may provide for accelerated vesting or termination in exchange for cash of any outstanding awards or the issuance of substitute awards upon consummation of a change in control, as defined in the plan. The currently outstanding options vest 20% on the date of grant and then ratable at 20% per year over the next four years. The options expire on the date determined by the board of directors but may not extend more than ten years from the grant date. Incentive stock options also include certain other terms necessary to assure compliance with the Internal Revenue Code of 1986, as amended.

For the purposes of the plan, a “change in control” is defined as (i) the purchase or other acquisition (other than from the Company) by any person, entity or group of persons, within the meaning of § 13(d) or § 14(d) of the Act (excluding, for this purpose, the Company or its subsidiaries or any employee benefit plan of the Company or its subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 51% or more of either the outstanding shares of our common stock or the combined voting power our outstanding voting securities entitled to vote generally in the election of directors, each as of the time the Stock Incentive Plan was entered into; or (ii) individuals who constituted the board of directors at the

time the Stock Incentive Plan was entered into cease for any reason to constitute at least a majority of the board of directors, except for the election of any person who becomes a director subsequent to such date whose election, or nomination for election by our stockholders, was approved by a vote of at least a majority of the directors then comprising the incumbent board of directors (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors, as such terms are used in Rule 14a 11 of Regulation 14A promulgated under the Act); or (iii) approval by our stockholders of a reorganization, merger or consolidation, in each case with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of, respectively, the common stock and the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated corporation’s then outstanding voting securities, or of a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company.

The plan may be amended, altered, suspended or terminated by the administrator at any time. We may not alter the rights and obligations under any award granted before amendment of the plan without the consent of the affected participant. Unless terminated sooner, the plan will terminate automatically in 2016.

401(k) Plan. We established a 401(k) retirement savings plan in 1996. Each of our participating employees may contribute to the 401(k) plan, through payroll deductions, up to 50% on a pre-tax basis of his or her compensation, subject to limits imposed by federal law. Beginning in July 1, 2006, we matched 25% of the first 4% contributed by participants. We may make additional contributions to the 401(k) plan in amounts determined by our board of directors. Employees may elect to invest their contributions in various established mutual funds. All amounts contributed by employee participants are fully vested at all times. The amounts matched by the Company are vested 25% in the first year of employment, 50% in the second year of employment, 75% in the third year of employment, and 100% in and after the fourth year of employment. For the years ended December 31, 2004, 2005 and 2006, administrative expenses paid to our third-party provider related to the 401(k) plan were $5,428, $5,658 and $5,445, respectively.

Outstanding Equity Awards At Fiscal Year-End

Option Awards

Stock Awards

Equity

Incentive

Equity

Plan

Incentive

Awards:

Plan

Market

Awards:

Equity

Number

Payout

Incentive

Value of

Plan

Number

Market

Unearned

Awards:

of Shares

Value of

Shares,

Number of

or Units

Shares or

Units

Units or

Securities

of Stock

Units of

or Other

Other

Underlying

That

Stock

Rights

Unexercised

Option

Have

That

Options

Unearned

Exercise

Option

Not

Have Not

(#)

Options

Price

Expiration

Vested

Name

Exercisable

Unexercisable

(#)

($)

Date

(#)

($)

(#)

David F. Hackett

104,324

(1)(2)

5.00

(1)

May 31, 2016


(1)		As adjusted for our 2-for-1 stock split effected in May 2007.

(2)		Of the total, 83,460 shares underlying the unexercised options vest upon the effective date of this offering.

Potential Payments Upon Termination Or Change-In-Control

The amount of compensation payable to each named executive officer upon voluntary termination, early retirement, involuntary not-for-cause termination, termination following a change of control and in the event of disability or death of the executive is shown below. The amounts shown assume that such termination was effective as of December 31, 2006, and thus includes amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out can only be determined at the time of such executive’s separation from the Company.

Payments Made Upon Termination

In the event that a named executive officer’s employment terminates for reasons of voluntary termination, early retirement, involuntary not-for-cause termination, termination following a change of control and in the event of disability or death of the executive, he is entitled to receive amounts earned during his term of employment. Such amounts include:


	•	quarterly bonus earned for any completed fiscal quarter for Mr. Hackett and Mr. Thomas P. Cooper;

	•	vested options awarded under our Stock Incentive Plan;

	•	vested amounts contributed under our 401(k) plan; and

	•	unused vacation pay.

Payments Made Upon Death or Disability

In the event of the death or disability of a named executive officer, each named executive officer is entitled to certain benefits as described in their employment agreements described in “Agreements with Named Executive Officers.” The Company does not maintain a disability plan.

Payments Made Upon a Change in Control

Change in Control of the Company

In the event of a change in control of the Company, the board of directors or a committee thereof may provide for accelerated vesting or termination of any outstanding stock options issued under the Stock Incentive Plan in exchange for a cash payment, or the issuance of substitute awards to substantially preserve the terms of any option awards previously granted under the Stock Incentive Plan. A description of the events giving rise to a “change in control” for purposes of the Stock Incentive Plan is set forth in “Executive Compensation — Employee Benefit Plans — Stock Incentive Plan.”

Change in Control of Gulfstream

Pursuant to the employment agreements between the Company and each named executive officer, we are obligated to make certain payments to such executive if his employment is terminated following a change in control (as defined below) (other than termination by Gulfstream for cause or by reason of death or disability) or if he terminates his employment within one year after the occurrence of a change in control, as follows:


	•	Continued payment of base salary and incentive bonus payments, in the case of Mr. Hackett one year following termination of the executive’s employment, in the case of Mr. Thomas L. Cooper six months following termination of the executive’s employment and in the case of Mr. Thomas P. Cooper one year following termination of executive’s employment plus one additional month for each year of service to the Company; and

	•	Continued medical and life insurance benefits for the balance of the initial term of the applicable employment agreement.

Generally, pursuant to the agreements, a “change in control” of Gulfstream means a change in control (A) as set forth in Section 280G of the Internal Revenue Code; or (B) of a nature that would be required to be reported in response to Item 2.01 of a current report on Form 8-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as in effect on the date of the relevant agreement, including upon any of the following:


	•	any “person” (as such term is used in Section 13(d) and 14(d) of the Exchange Act) other than the executive is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s outstanding securities then having the right to vote as elections of directors; or


	•	the individuals who at the effective date of the applicable employment agreement constitute the board of directors cease for any reason to constitute a majority thereof, unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds (2/3) of the directors then in office who were directors at the effective date of the applicable employment agreement; or

	•	there is a failure to elect a majority of the board of directors from candidates nominated by management of the Company to the board of directors; or

	•	the business of Gulfstream for which the executive’s services are principally performed is disposed of by Gulfstream pursuant to a partial or complete liquidation of Gulfstream, a sale of assets (including stock of a subsidiary of Gulfstream) or otherwise.

A change in control is deemed not to have occurred on either of the following circumstances:


	•	where all or any portion of the stock of Gulfstream is offered through an initial or subsequent public offering; and/or

	•	where the executive gives his explicit written waiver stating that for the purposes of the relevant portions of his employment agreement, a change in control shall not be deemed to have occurred.

In the event that the executive’s employment is terminated for any reason other than cause within one year following an “attempted change in control,” the executive shall be entitled to the same benefits and compensation as though he was terminated in the year following a change in control. An “attempted change in control” is deemed to have occurred if any substantial attempt, accompanied by significant work efforts and expenditures of money, is made to accomplish a change in control, whether or not such attempt is made with the approval of a majority of the board of directors.

David F. Hackett

The following table shows the potential payments upon termination or a change of control of the Company for David Hackett, our President and Chief Executive Officer.

Termination in

Involuntary

Connection With

Voluntary

Not for Cause

For Cause

a Change in

Executive Payments

Termination or

Termination

Control

Disability

Death

and Benefits Upon

Retirement on

Separation

12/31/2006

Compensation:

Base Salary

$132,000

$66,000

Incentive Bonus Payment

1.75% of annual pre-tax income through 12/31/07

1.75% of annual pre-tax income through 6/31/07

Benefits:

Stock Awards

Retirement Plans

Health and Welfare Benefits

$4,000

Other

$7,615(1)


(1)		Other consists of accrued vacation.

Thomas P. Cooper

The following table shows the potential payments upon termination or a change of control of the Company for Thomas P. Cooper, our Senior Vice President, Legal Affairs and Secretary.


	Voluntary		Involuntary			Termination in
	Termination or		Not for Cause	For Cause		Connection with a
Executive Payments and	Retirement on		Termination on	Termination		Change in Control	Disability on	Death on
Benefits Upon Separation	12/31/2006		12/31/2006	on 12/31/2006		on 12/31/2006	12/31/2006	12/31/2006

Compensation:
Base Salary		0	$90,000			$90,000	$45,000	$45,000
Incentive Bonus Payment		0	1% of annual pre-tax income through 12/31/07			1% of annual pre-tax income through 12/31/07	1% of annual pre-tax income through 12/31/07	1% of annual pre-tax income through 12/31/07
Benefits:
Stock Awards		0	0		0	0	0	0
Retirement Plans		0	0		0	0	0	0
Health and Welfare Benefits		0	$6,730		0	$6,730	0	0
Other		0	$80,190		0	$80,190	0	0


(1)		Other includes $5,190 for accrued vacation and $75,000 representing one month of salary for each year of service to the Company.

Paul Stagias

The following table shows the potential payments upon termination or a change of control of the Company for Paul Stagias, the President of the Academy.


	Voluntary		Involuntary					Termination in
	Termination or		Not for Cause			For Cause		Connection with a
Executive Payments and	Retirement on		Termination on			Termination		Change in Control			Disability on	Death on
Benefits Upon Separation	12/31/2006		12/31/2006			on 12/31/2006		on 12/31/2006			12/31/2006	12/31/2006

Compensation:
Base Salary		0	$	21,250			0	$	21,250		0		$14,166
Incentive Bonus Payment		0		0			0		0		0		0
Benefits:
Stock Awards		0		0			0		0		0		0
Retirement Plans		0		0			0		0		0		0
Health and Welfare Benefits		0	$	547			0	$	547		0		0
Other		0	$	4,904	(1)		0	$	4,904	(1)	0		0


(1)		Other consists of accrued vacation

Thomas L. Cooper

The following table shows the potential payments upon termination or a change of control of the Company for Thomas L. Cooper, the former Chief Executive Officer of Gulfstream.


								Termination in
			Involuntary					Connection with
	Voluntary		Not for Cause			For Cause		a Change in
Executive Payments	Termination or		Termination			Termination		Control			Disability		Death
and Benefits Upon	Retirement on		on			on		on			on		on
Separation	12/31/2006		12/31/2006			12/31/2006		12/31/2006			12/31/2006		12/31/2006

Compensation:
Base Salary		0	$	50,000			0	$	50,000		$	50,000	$	50,000
Incentive Bonus Payment		0	$	5,770	(1)		0	$	5,770	(1)		0		0
Benefits:
Stock Awards		0		0			0		0			0		0
Retirement Plans		0		0			0		0			0		0
Health and Welfare Benefits		0	$	3,040			0	$	3,040			0		0
Other		0	$	5,770	(2)		0	$	5,770	(2)		0		0


(1)		Based on a bonus computation of an employment agreement prior to March 14, 2006

(2)		Other consists of accrued vacation

Director Compensation

The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the board of directors. In setting director compensation, the Company considers the significant amount of time that Directors expend in fulfilling their duties to the Company as well as the skill level required by the Company with respect to members of the board of directors.


									Change in
									Pension
									Value and
	Fees								Nonqualified
	Earned or		Stock		Option		Non-Equity		Deferred		All Other
	Paid in		Awards		Awards		Incentive Plan		Compensation		Compensation
Name	Cash ($)		($)		($)		Compensation ($)		Earnings ($)		($)		Total ($)

Thomas A. McFall	$	—	$	—	$	—	$	—	$	—	$	—	$	0
Daniel H. Abramowitz	$	15,000		—		—		—		—		—	$	15,000
David F. Hackett(1)		—		—		—		—		—		—	$	0
Douglas E. Hailey		—		—		—		—		—		—	$	0
Richard R. Schreiber	$	15,000		—		—		—		—		—	$	15,000


(1)		Mr. Hackett is not compensated for his service as a director. Our compensation of Mr. Hackett as President and Chief Executive Officer is fully reflected in the Summary Compensation Table above.

Limitation of Liability and Indemnification

Our bylaws provide that we have the power to indemnify our directors, officers and employees to the fullest extent permitted by applicable law. We currently have a directors’ and officers’ liability insurance policy that insures such persons against the costs of defense, settlement or payment of a judgment under certain circumstances. We believe that these indemnification and liability provisions are essential to attracting and retaining qualified persons as officers and directors.

In addition, our certificate of incorporation provides that the liability of our directors for monetary damages relating to breach of fiduciary duty will be eliminated to the fullest extent permissible under the

General Corporation Law of the State of Delaware. Each director will continue to be subject to liability for any breach of the director’s duty of loyalty to us, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for unlawful stock purchases or redemptions and for any transaction from which the director derived an improper personal benefit. This provision does not affect a director’s responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.

We intend to enter into separate indemnification agreements with each of our directors and officers which may be broader than the specific indemnification provision contained in our bylaws. Under these agreements, we will be required to indemnify them against all expenses, judgments, fines, settlements and other amounts actually and reasonably incurred, in connection with any actual, or any threatened, proceeding if any of them may be made a party because he or she is or was one of our directors or officers. We will be obligated to pay these amounts only if the officer or director acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to our best interests. With respect to any criminal proceeding, we will be obligated to pay these amounts only if the officer or director had no reasonable cause to believe that his or her conduct was unlawful. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification under such agreements.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables set forth certain information known to us with respect to beneficial ownership of our common stock as of July 1, 2007 and as adjusted to reflect the sale of the shares offered, by:


	•	each person known by us to own beneficially more than 5% of our outstanding common stock;

	•	each of our directors;

	•	each named executive officer; and

	•	all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power over securities. The table below includes the number of shares underlying options and warrants that are currently exercisable or exercisable within 60 days of July 1, 2007. It is therefore based on 2,039,460 shares of common stock outstanding before this offering and 3,039,460 shares of common stock outstanding immediately after this offering, based on the number of shares outstanding as of July 1, 2007. Shares of common stock subject to options and warrants that are currently exercisable or exercisable within 60 days of July 1, 2007 are considered outstanding and beneficially owned by the person holding the options or warrants for the purposes of computing beneficial ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws where applicable, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. Except as otherwise indicated, the address of each of the persons in this table is as follows: c/o Gulfstream International Group, Inc., 3201 Griffin Road, Fort Lauderdale, Florida 33312.


			Percent			Percent
	Number of		Beneficially			Beneficially
	Shares		Owned			Owned
	Beneficially		Before this			After this
Name and Address of Beneficial Owner	Owned		Offering			Offering

Five percent stockholders
Daniel H. Abramowitz(1)		287,000		13.8	%		9.3	%
David F. Hackett(2)		170,324		7.9	%		5.4	%
Michael N. Taglich		140,000		6.9	%		4.6	%
Robert F. Taglich		140,000		6.9	%		4.6	%


(1)		Includes 40,000 shares of common stock held by Hillson Private Partners II LP, 210,000 shares of common stock held by Hillson Partners Limited Partnership, 35,000 shares of common stock issuable under a warrant held by Hillson Partners Limited Partnership and 2,000 shares of common stock issuable upon exercise of stock options granted under the Stock Incentive Plan held by Mr. Abramowitz.


(2)		Includes 104,324 shares of common stock issuable upon exercise of stock options granted under the Stock Incentive Plan held by Mr. Hackett.


			Percent			Percent
	Number of		Beneficially			Beneficially
	Shares		Owned			Owned
	Beneficially		Before this			After this
Name and Address of Beneficial Owner	Owned		Offering			Offering

Directors and named executive officers
Thomas A. McFall		89,300		4.4	%		2.9	%
David F. Hackett(1)		170,324		7.9	%		5.4	%
Robert M. Brown(2)		6,000		•			•
Daniel H. Abramowitz(3)		287,000		13.8	%		9.3	%
Douglas E. Hailey		68,700		3.4	%		2.3	%
Richard R. Schreiber(4)		2,000		•			•
Thomas P. Cooper(5)		15,000		•			•
Paul A. Stagias		—		—	%		—	%
All directors and executive officers as a group (8 persons)		638,324		29.0	%		19.9	%


•		Indicates ownership of less than 1%.

(1)		Includes 104,324 shares of common stock issuable upon exercise of stock options granted under the Stock Incentive Plan held by Mr. Hackett.

(2)		Consists of shares issuable upon exercise of stock options granted under the Stock Incentive Plan held by Mr. Brown.

(3)		Includes 40,000 shares of common stock held by Hillson Private Partners II LP, 210,000 shares of common stock held by Hillson Partners Limited Partnership, 35,000 shares of common stock issuable under a warrant held by Hillson Partners Limited Partnership and 2,000 shares of common stock issuable upon exercise of stock options granted under the Stock Incentive Plan held by Mr. Abramowitz.

(4)		Consists of shares issuable upon exercise of stock options granted under the Stock Incentive Plan held by Mr. Schreiber.

(5)		Includes 2,000 shares of common stock issuable upon exercise of stock options granted under the Stock Incentive Plan held by Mr. Cooper.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Since January 1, 2004, there has not been, nor is there currently planned, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeds $120,000 and in which any director, executive officer or holder of more than 5% of our common stock or any member of such persons immediate families had or will have a direct or indirect material interest other than agreements which are described under the caption “Management” and the transactions described below.

Transactions Relating to Our Acquisition of Gulfstream and the Academy

We were formed by Taglich Brothers Inc. and Weatherly Group LLC exclusively for the purpose of effecting the acquisition of Gulfstream and the Academy. In March 2006, we acquired approximately 89% of G-Air, which owned approximately 95% of Gulfstream at that time, and 100% of the Academy, which held the remaining 5% of Gulfstream. Subsequently, we acquired the remaining 11% of G-Air, which has been merged with and into our wholly-owned subsidiary, GIA.

Since 1999, Taglich Brothers and Weatherly Group have jointly pursued the sourcing and sponsoring of management buyouts of small private companies. The acquisition of Gulfstream and the Academy was their fourth such transaction. Thomas A. McFall, the Chairman of our board of directors, is an affiliate of Weatherly Group and Douglas E. Hailey, a director, is an affiliate of both Taglich Brothers and Weatherly Group.

The transactions relating to our acquisition of Gulfstream and the Academy are further described below.

Issuances of Founders’ Stock. Certain principals and employees of Weatherly Group and Taglich Brothers, along with certain members of our management, purchased shares of founder’s stock in us in advance of our acquisition of Gulfstream and the Academy. To finance part of the acquisition, we issued shares of our common stock and subordinated debentures with common stock warrants to principals, employees and clients of Taglich Brothers and certain members of our management.

In December 2005, the following executive officers, directors and affiliates purchased an aggregate of 284,000 shares of common stock in the amount set forth opposite his name at a purchase price of $0.20 per share. The remaining 66,000 shares were purchased by employees of Taglich Brothers.


Name of Beneficial Owner	Shares

Thomas A. McFall(1)		69,300
David F. Hackett(2)		46,000
Michael N. Taglich(3)		60,000
Robert F. Taglich(4)		60,000
Douglas E. Hailey(5)		48,700


(1)		Mr. McFall is the Chairman of our board of directors, a senior executive of the Company and a principal of Weatherly Group.

(2)		Mr. Hackett is a director and the President and Chief Executive Officer of the Company.

(3)		Michael Taglich is a holder of more than 5% of our common stock and a principal in Taglich Brothers, the underwriter for this offering. Michael Taglich is the brother of Robert Taglich.

(4)		Includes 20,000 shares beneficially owned by Robert Taglich, which are held of record in an individual retirement account. Robert Taglich is a holder of more than 5% of our common stock and a principal in Taglich Brothers, Inc., the underwriter for this offering. Robert Taglich is the brother of Michael Taglich.

(5)		Mr. Hailey is a director of the Company and a principal of Weatherly Group and an employee of Taglich Brothers, the underwriter for this offering.

Issuances of Units Consisting of Subordinated Debentures and Common Stock Purchase Warrants. On March 14, 2006, we issued units consisting of 12% subordinated debentures and common stock purchase

warrants exercisable at a price of $5.00 per share. The following executive officers, directors and affiliates purchased units in the amount set opposite his name:


	Principal Amount of
Directors	Subordinated Debentures		Warrant Shares

Daniel H. Abramowitz(1)	$	2,500,000		35,000


(1)		Held by Hillson Partners Limited Partnership, of which Mr. Abramowitz is a partner. Mr. Abramowitz is a director of the Company.

Fees Associated with our Acquisition of Gulfstream and the Academy. On March 14, 2006, in connection with our acquisition of Gulfstream and the Academy, we paid an advisory fee of $450,000 to Taglich Brothers, the underwriter in this offering, and $300,000 to Weatherly Group, LLC. Douglas E. Hailey, a director, is a principal of Weatherly Group and an employee of Taglich Brothers and Thomas A. McFall, a senior executive of the Company and the Chairman of our board of directors, is a principal of Weatherly Group. At such time, the seller paid to David Hackett, a director and our President and Chief Executive Officer, the sum of $225,000 from the proceeds of the purchase price paid to the seller.

Management Services Agreement. On March 14, 2006, we entered into a management services agreement with Weatherly Group. Under this agreement, these parties agreed to provide advisory and management services to us in consideration of an annual management fee of $200,000, payable monthly, and financial advisory fees based on a formula if we merge with or acquire another company. The agreement expires on March 13, 2011. Pursuant to this agreement, we pay $16,667 per month in management fees.

Property Lease

We lease the Gulfstream and Academy headquarters from EYW Holdings, Inc., an entity controlled in part by Thomas L. Cooper, the former Chief Executive Officer and current Chairman Emeritus of Gulfstream, and Thomas P. Cooper, an officer of Gulfstream, for a combined rent of approximately $33,000 per month.

Cuba Operations

We operate charter flights between Miami and Havana pursuant to a profit-sharing agreement with an entity controlled by Thomas L. Cooper, the former Chief Executive Officer and current Chairman Emeritus of Gulfstream. Pursuant to this agreement, Thomas L. Cooper receives 25% of the net income earned from this operation. These payments amounted to approximately $296,000 in 2006.

Indemnification and Employment Agreements

Our bylaws provide that we may indemnify our directors, officers and employees to the fullest extent permitted by applicable law. We intend to purchase a directors’ and officers’ liability insurance policy that insures such persons against the costs of defense, settlement or payment of a judgment under certain circumstances. We believe that these indemnification and liability provisions are essential to attracting and retaining qualified persons as officers and directors. We have also entered into employment agreements with our named executive officers. See “Management — Agreements with Named Executive Officers.”

We have entered into indemnification agreements with our directors and executive officers. Under these agreements, we are required to indemnify them against all expenses, judgments, fines, settlements and other amounts actually and reasonably incurred, in connection with any actual, or any threatened, proceeding if any of them may be made a party because he or she is or was one of our directors or officers. We are obligated to pay these amounts only if the officer or director acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to our best interests. With respect to any criminal proceeding, we are obligated to pay these amounts only if the officer or director had no reasonable cause to believe that his or her conduct was unlawful. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification under such agreements.

In addition, our certificate of incorporation provides that the liability of our directors for monetary damages will be eliminated to the fullest extent permissible under the General Corporation Law of the State of Delaware. Each director will continue to be subject to liability for any breach of the director’s duty of loyalty to us, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for unlawful stock purchases or redemptions and for any transaction from which the director derived an improper personal benefit. This provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.

Stock Option Grants

We have granted stock options to purchase shares of our common stock to our executive officers and directors. See “Principal Stockholders” and “Employee Benefit Plans — Stock Incentive Plan.”

Other Transactions

We reimburse members of the board of directors for travel related expenditures related to their services to us.

Following the offering, we intend to pay our independent directors an annual fee of $20,000. The directors will also be entitled to participate in our Stock Incentive Plan.

DESCRIPTION OF INDEBTEDNESS

The following information describes our material outstanding indebtedness. This description is only a summary. You should also refer to the relevant agreements which have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part.

Credit Facility

On August 15, 2006, Gulfstream entered into a loan agreement with Wachovia Bank for a $750,000 credit facility to finance short term and seasonal working capital needs. Advances under the line bear interest at a rate of one-month LIBOR plus 2.75%. The credit facility is payable in monthly payments of interest only and is due and payable in full on demand. There are currently no amounts outstanding under this credit facility.

Loan Agreements

On December 29, 2005, Gulfstream entered into a loan agreement with Irwin Union Bank and Trust Company to finance our acquisition of seven EMB-120 aircraft. The loan bears interest at 6.95% per annum, and is payable in monthly principal and interest payments of $145,488, with a final balloon payment of the full remaining unpaid balance on December 29, 2010.

On March 22, 2007, Gulfstream entered into a loan agreement with Wachovia Bank in the principal amount of $1,150,000 to finance our acquisition of one EMB-120 aircraft. The loan is payable in 59 monthly principal installments of $7,858.33 and a final balloon payment of $686,358 and bears interest monthly, payable on the unpaid principal balance at the rate of LIBOR plus 2.75%.

Subordinated Debentures

On March 14, 2006, we sold units consisting of $3,320,000 principal amount of subordinated debentures and common stock warrants to help finance our acquisition of Gulfstream and the Academy. The subordinated debentures were sold in units of $1,000 bearing interest at 12% per year, payable quarterly, with each note including a warrant to purchase fourteen shares of common stock at an exercise price of $5.00 per share. The debentures mature on March 14, 2009. We have the right to prepay, without premium or penalty, any unpaid principal on the subordinated debentures. The subordinated debentures are expressly subordinated to the prior

payment in full of amounts owed under all our other indebtedness. The subordinated debentures contain customary covenants and events of default.

DESCRIPTION OF CAPITAL STOCK

The following information describes our common stock, as well as options and warrants to purchase our common stock, and provisions of our certificate of incorporation and our bylaws. This description is only a summary. You should also refer to our certificate of incorporation and bylaws which have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part.

We are authorized to issue up to 15,000,000 shares of common stock, par value $0.001 per share.

Common Stock

As of the date of this prospectus, there were 2,039,460 shares of common stock outstanding that were held of record by approximately 145 stockholders. There will be 3,039,460 shares of common stock outstanding, assuming no exercise of the underwriter’s over-allotment option and no exercise of outstanding options or warrants, after giving effect to the sale of common stock offered in this offering.

The holders of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Our stockholders do not have cumulative voting rights in the election of directors. Accordingly, holders of a majority of the shares voting are able to elect all of the directors. Holders of common stock are entitled to receive ratably only those dividends as may be declared by the board of directors out of funds legally available therefor, as well as any distributions to the stockholders. See “Dividend Policy.” In the event of our liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in all of our assets remaining after we pay our liabilities. Holders of common stock have no preemptive or other subscription or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock.

Treasury Stock

We have no shares of treasury stock.

Warrants

As of the date of this prospectus, there were warrants outstanding to purchase 46,480 shares of the Company’s common stock at an exercise price of $5.00 per share which are exercisable at any time on or prior to March 14, 2011. The exercise price and the number of shares that may be purchased upon exercise of the warrants are subject to adjustment in the event of stock dividends and stock splits or combinations. In the event of any reorganization, reclassification, consolidation, merger or sale of all or substantially all of our assets, the holders of the warrants are entitled to receive the consideration they would have received if they would have exercised the warrants prior to such event.

Continental Warrant

Continental holds a warrant to purchase 10% of Gulfstream International Airlines, Inc.’s common stock. The warrants are exercisable until December 31, 2015 at a price per share of $0.001, subject to adjustments for reclassification, consolidation, merger, dividends and distributions. Under the warrant, if Gulfstream pays a cash dividend, Continental is entitled to receive cash equal to the cash dividend Continental would have been entitled to receive if Continental had exercised its warrant immediately prior to such dividend. Gulfstream has the right to call the warrant and has a right of first offer upon the sale of the warrant or shares issued upon exercise of the warrant. The warrant does not include a right to convert into the stock of the Company.

We have had discussions with Continental regarding a potential repurchase or conversion of its warrant into common stock of Gulfstream International Group, Inc. or a warrant to purchase common stock of Gulfstream International Group, Inc.

Any proposed conversion would take into account the market price of Gulfstream International Group, Inc. common stock as it related to a negotiated value of Gulfstream’s common stock. There can be no assurance that we will reach agreement with Continental to convert its warrants.

Underwriter’s Warrants

We have agreed to issue warrants to the underwriter to purchase from us up to 80,000 shares of our common stock. These warrants are exercisable during the four-year period commencing one year from this offering at a price per share equal to 120% of the public offering price per share in this offering and will allow for cashless exercise. The warrants will provide for registration rights, including a one-time demand registration right and unlimited piggyback registration rights, and customary anti-dilution provisions for stock dividends and splits and recapitalizations consistent with the NASD Rules of Fair Practice. The exercise price was negotiated between us and the underwriter as part of the underwriter’s compensation in this offering.

Options

Pursuant to our Stock Incentive Plan, options to purchase a total of 350,000 shares of our common stock are available for issuance, of which 210,324 have been granted. Any shares issued upon exercise of these options will be immediately available for sale in the public market upon our filing, after the offering, of a registration statement relating to the options, subject to the terms of lock-up agreements entered into between certain of our option holders and the underwriter.

Anti-Takeover Provisions of Delaware Law and Charter Provisions

Interested Stockholder Transactions. We are subject to Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in any “business combination” with any “interested stockholder” for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:


	•	before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested holder;

	•	upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the number of shares outstanding those shares owned by persons who are directors and also officers and by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

	•	on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 662/3% of the outstanding voting stock that is not owned by the interested stockholder.

Section 203 defines “business combination” to include the following:


	•	any merger or consolidation involving the corporation and the interested stockholder;

	•	any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;

	•	subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

	•	any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or

	•	the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation.

In general, Section 203 defines “interested stockholder” as an entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation or any entity or person affiliated with or controlling or controlled by such entity or person.

In addition, some provisions of our certificate of incorporation and bylaws may be deemed to have an anti-takeover effect and may delay or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by stockholders.

Cumulative Voting. Our certificate of incorporation does not permit stockholders cumulative voting in the election of directors.

Special Meeting of Stockholders. Our bylaws provide that special meetings of our stockholders may be called only by the chairman of our board of directors, our president, or such other persons as our board of directors may designate.

Authorized But Unissued Shares. Our authorized but unissued shares of common stock will be available for future issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of Gulfstream by means of a proxy contest, tender offer, merger or otherwise.

Amendments. Our bylaws provide that they may be altered or repealed by our board of directors. However, our bylaws also provide that our stockholders may make additional bylaws and may alter or repeal any bylaw, whether or not adopted by our stockholders. The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless either a corporation’s certificate of incorporation or bylaws require a greater percentage.

American Stock Exchange Listing

We have applied for the listing of our common stock on the American Stock Exchange under the symbol “GIA”.

Transfer Agent And Registrar

The transfer agent and registrar for our common stock is American Stock Transfer and Trust Company. Its address is 59 Maiden Lane, New York, New York 10038, and its telephone number is 1-800-937-5449.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock, and there can be no assurance that a significant public market for the common stock will develop or be sustained after this offering. Future sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options and warrants, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.

Upon completion of this offering and based on shares outstanding as of July 1, 2007, we will have an aggregate of 3,039,460 shares of common stock outstanding. Of these shares, the 1,000,000 shares sold in this offering, plus any shares issued upon exercise of the underwriter’s option to purchase additional shares from us, will be freely tradable without restriction under the Securities Act, unless purchased by us or our “affiliates” as that term is defined in Rule 144 under the Securities Act. Shares of the Company not registered by this registration statement and shares of the Company acquired by our “affiliates” after this offering constitute “restricted securities” within the meaning of Rule 144 and may not be offered or sold in the open market after the offering, except subject to the applicable requirements of Rule 144 or Rule 701 under the

Securities Act, which are described below, or another available exemption from registration under the Securities Act.

The remaining 2,039,460 shares sold by us in reliance on exemptions from the registration requirements of the Securities Act are “restricted securities” within the meaning of Rule 144 under the Securities Act and become eligible for sale in the public market as follows:


	•	beginning 90 days after the date of this prospectus, 1,729,460 shares will become eligible for sale subject to the provisions of Rules 144 and 701; and

	•	beginning 180 days after the date of this prospectus, 310,000 additional shares will become eligible for sale, subject to the provisions of Rule 144, Rule 144(k) or Rule 701, upon the expiration of agreements not to sell such shares entered into between the underwriter and such stockholders.

Our directors, officers and some of our stockholders who beneficially own more than 5% of our common stock have entered into lock-up agreements with the underwriter of this offering generally providing that they will not offer, sell, contract to sell or grant any option to purchase or otherwise dispose of our shares of common stock or any securities exercisable for or convertible into our common stock owned by them prior to this offering for a period of 180 days after the date of this prospectus without the prior written consent of the underwriter. As a result of these contractual restrictions, notwithstanding possible earlier eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares subject to lock-up agreements may not be sold until such agreements expire or are waived by Taglich Brothers. Based on shares outstanding as of July 1, 2007, taking into account the lock-up agreements, and assuming Taglich Brothers does not release stockholders from these agreements prior to the expiration of the 180-day lock-up period, the following shares will be eligible for sale in the public market at the following times:


	•	beginning on the date of this prospectus, the 1,000,000 shares sold in this offering will be immediately available for sale in the public market;

	•	beginning 90 days after the date of this prospectus, 1,729,460 additional shares will become eligible for sale under Rule 144 or 701, subject to volume restrictions as described below;

	•	beginning 180 days after the date of this prospectus, 310,000 additional shares will become eligible for sale under Rule 144 or 701, subject to volume restrictions as described below; and

	•	the remainder of the restricted securities will be eligible for sale from time to time thereafter, subject in some cases to compliance with Rule 144.

In general, under Rule 144 as currently in effect, a person who has beneficially owned restricted shares for at least one year, including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:


	•	1% of the number of shares of common stock then outstanding, which will equal approximately 30,295 shares immediately after this offering; or

	•	the average weekly trading volume of our common stock during the four calendar weeks preceding the date on which notice of the sale is filed.

Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been an affiliate of us at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner except an affiliate, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Therefore, unless otherwise restricted pursuant to the lock-up agreements or otherwise, those shares may be sold immediately upon the completion of this offering.

Any of our employees, officers, directors or consultants who purchased his or her shares before the date of completion of this offering or who holds vested options as of that date pursuant to a written compensatory

plan or contract is entitled to rely on the resale provisions of Rule 701. Rule 701 permits non-affiliates to sell their Rule 701 shares without complying with the public-information, holding-period, volume-limitation or notice provisions of Rule 144 and permits affiliates to sell their Rule 701 shares without having to comply with Rule 144’s holding-period restrictions, in each case commencing 90 days after the date of completion of this offering, subject, however, to the lock-up agreements. See “Underwriting” for a description of the lock-up agreements.

No precise prediction can be made as to the effect, if any, that market sales of shares or the availability of shares for sale will have on the market price of our common stock following this offering. We are unable to estimate the number of our shares that may be sold in the public market pursuant to Rule 144 or Rule 701 because this will depend on the market price of our common stock, the personal circumstances of the sellers and other factors. See “Risk Factors — Risks Related To Our Common Stock — Sales of a substantial number of shares of our common stock in the public market after this offering, or the perception that they may occur, may depress the market price of our common stock.”

Following the effectiveness of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register shares of common stock subject to outstanding options or reserved for issuance under our Stock Incentive Plan thus permitting the resale of such shares by non-affiliates in the public market without restriction under the Securities Act, subject to any applicable lock-up agreements. Such registration statements will become effective immediately upon filing.

UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES TO NON-U.S. HOLDERS

This is a summary of U.S. federal income tax consequences of the ownership and disposition of our common stock applicable to non-U.S. holders, as defined below. This summary is based on the Internal Revenue Code of 1986 as amended, or the Code, Treasury regulations promulgated thereunder, administrative pronouncements and judicial decisions, changes to any of which subsequent to the date of the registration statement may affect the tax consequences described herein. We undertake no obligation to update this tax summary in the future. This summary applies only to non-U.S. holders that will hold our common stock as capital assets (generally, an asset held for investment purposes). This summary does not address the tax consequences arising under the laws of any foreign, state or local jurisdiction. In addition, this summary does not address tax consequences applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules including, without limitation:


	•	Banks, insurance companies or other financial institutions;

	•	Persons subject to alternative minimum tax;

	•	Tax-exempt organizations;

	•	Dealers in securities or currencies;

	•	Traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

	•	Partnerships or other pass-through entities;

	•	“Controlled foreign corporations,” “passive foreign corporations,” “foreign personal holding companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

	•	U.S. expatriates or former long-term residents of the United States;

	•	Persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction; or

	•	Persons deemed to sell our common stock under the constructive sale provisions of the Code.

In addition, if a partnership holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock and partners in such partnerships should consult their tax advisors.

This discussion is for general information only and is not tax advice. You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the ownership and disposition of our common stock arising under the U.S. federal estate or gift tax rules or under the laws of any foreign, state or local taxing jurisdiction or under any applicable tax treaty.

Non-U.S. Holder Defined

For purposes of this summary, you are a non-U.S. holder, if you are a holder that, for U.S. federal income tax purposes, is other than:


	•	An individual who is a citizen or resident of the United States;

	•	A corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of any state therein or the District of Columbia;

	•	An estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

	•	A trust, if a court within the U.S. is able to exercise primary jurisdiction over its administration and one or more U.S. persons have authority to control all of its substantial decisions, or if the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

Taxation of Dividends and Dispositions

Dividends on Common Stock. In general, if distributions are made on shares of our common stock, such distributions will be treated as dividends for U.S. tax purposes to the extent paid from our current and accumulated earnings and profits as determined under the Code. Any portion of a distribution that exceeds our current and accumulated earnings and profits will constitute a return of capital and will first reduce your basis in our common stock, but not below zero. To the extent such portion exceeds your basis, the excess will be treated as gain from the disposition of our common stock, the tax treatment of which is discussed below under “Dispositions of Common Stock.”

Any dividend paid to you generally will be subject to the U.S. withholding tax at either a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, where a tax treaty applies, are attributable to a U.S. permanent establishment maintained by you) are exempt from such withholding tax. In order to obtain this exemption, you must provide us with IRS Form W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of any allowable deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable treaty.

Dispositions of Common Stock. You generally will not be subject to U.S. federal income tax with respect to gain recognized upon the disposition of our common stock unless:


	•	you are an individual who is present in the United States for a period or periods aggregating 183 days or more during the taxable year of disposition and certain other conditions are met;

	•	such gain is effectively connected with your conduct of a U.S. trade or business (and, where a tax treaty applies, is attributable to a U.S. permanent establishment maintained by you); or

	•	our common stock constitutes a U.S. real property interest by reason of our status as a “United States real property holding corporation” for U.S. federal income tax purposes (“USRPHC”) at any time within the shorter of the five-year period preceding the disposition or your holding period for our common stock.

We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold more than 5% of our common stock.

If you are an individual non-U.S. holder described in the first bullet above, you will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by U.S. source capital losses. If you are a non-U.S. holder described in the second bullet above, you will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in the second bullet above may be subject to branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. You should consult any applicable income tax treaties that may provide for different results.

Information Reporting and Backup Withholding

Information Reporting. Generally, we must report annually to the IRS and to you the amount of dividends paid to you and the amount of tax, if any, withheld with respect to those payments. These information reporting requirements apply even if withholding is not required. Pursuant to tax treaties or other

agreements, the IRS may make such information available to tax authorities in your country of residence. The payment of proceeds from the sale of common stock by a broker to a non-U.S. holder is generally not subject to information reporting if:


	•	you certify your non-U.S. status under penalties of perjury by providing a properly executed IRS Form W-8BEN, or otherwise establishes an exemption; or

	•	the sale of the common stock is effected outside the U.S. by a foreign office of a broker, unless the broker is:


	•	a U.S. person;

	•	a foreign person that derives 50% or more of its gross income for certain periods from activities that are effectively connected with the conduct of a trade or business in the U.S.;

	•	a controlled foreign corporation for U.S. federal income tax purposes; or

	•	a foreign partnership more than 50% of the capital or profits interest of which is owned by one or more U.S. persons or which engages in a U.S. trade or business.

Backup Withholding. Backup withholding (currently at a rate of 28%) is only required on payments that are subject to the information reporting requirements, discussed above, and if other requirements are satisfied. Even if the payment of proceeds from the sale of our common stock is subject to the information reporting requirements, the payment of sale proceeds from a sale outside the U.S. will not be subject to backup withholding unless either we or our paying agent has actual knowledge, or reason to know, that you are a U.S. person. Backup withholding does not apply when any other provision of the Code requires withholding. For example, if dividends are subject to the withholding tax described above under “Dividends on Common Stock,” backup withholding will not also be imposed. Thus, backup withholding may be required on payments subject to information reporting, but not otherwise subject to withholding.

Backup withholding is not an additional tax. Any amount withheld under these rules will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided that the required information is furnished timely to the IRS.

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated , 2007, we have agreed to sell to the underwriter, Taglich Brothers, Inc., all of the shares of our common stock offered through this prospectus. The underwriting agreement provides that the underwriter is obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the over-allotment option described below.

Over-Allotment Option

We have granted to the underwriter a 30-day option to purchase up to 150,000 additional shares from us at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

Underwriting Discounts and Offering Expenses

The underwriter proposes to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $ per share. After the initial public offering, the underwriter may change the public offering price and concession and discount to broker/ dealers.

The following table summarizes the compensation and estimated expenses we will pay:


			Without		With Full
			Exercise of		Exercise of
			Over-		Over-
			allotment		allotment
	Per Share		Option		Option

Public offering price	$	12.00	$	12,000,000	$	13,800,000
Underwriting discount	$	.96	$	960,000	$	1,104,000
Proceeds, before expenses to us	$	11.04	$	11,040,000	$	12,696,000

The expenses of this offering, not including the underwriting discount, are estimated at $850,000 and are payable by us.

Determination of Offering Price

This offering is being conducted in accordance with applicable provisions of Rule 2720 of the Conduct Rules of the National Association of Securities Dealers, Inc. because affiliates of Taglich Brothers, the underwriter, beneficially own 10% or more of our common stock. In addition, Douglas E. Hailey, a member of our board of directors, is an affiliate of Taglich Brothers, Inc. Rule 2720 requires that the public offering price of the shares of common stock not be higher than that recommended by a “qualified independent underwriter” meeting certain standards. Accordingly, SMH Capital Inc. is assuming the responsibilities of acting as the qualified independent underwriter in pricing this offering and conducting due diligence. The public offering price of the shares of common stock is no higher than the price recommended by SMH Capital Inc. We have agreed to indemnify SMH Capital Inc. for any liability it incurs as a result of its service as the qualified independent underwriter in connection with the offering. We have also agreed to pay SMH Capital Inc. a fee

of $150,000 and reimburse them for any fees and expenses incurred in this capacity, which fees and expenses will be less than $10,000.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations between us and the underwriter. A pricing committee of our board of directors will approve the initial public offering price following such negotiations. Principal factors we expect to be considered in these negotiations include:


	•	the information presented in this prospectus and otherwise available to the underwriter;

	•	the history of and the prospects for our industry;

	•	the ability of our management;

	•	our past and present operations;

	•	our historical results of operations;

	•	our prospects for future operational results;

	•	the general condition of the securities markets at the time of this offering; and

	•	the recent market prices of, and demand for, publicly traded common stock of comparable companies.

The estimated initial public offering price range set forth on the cover page of this prospectus is subject to change as a result of market conditions and other factors. We cannot be sure that the initial public offering price will correspond to the price at which the common stock will trade in the public market following this offering or that an active trading market for the common stock will develop and continue after this offering.

Listing

We have applied for the listing of our common stock on the American Stock Exchange under the symbol “GIA.”

Indemnification

We have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments that the underwriter may be required to make in that respect.

Lock-up Agreements

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of Taglich Brothers, Inc., for a period of 180 days after the date of this prospectus, except issuances pursuant to the exercise of employee stock options outstanding on the date of this prospectus.

All of our officers and directors and our stockholders who beneficially own more than 5% of our common stock have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Taglich Brothers, Inc. for a period of 180 days after the date of this prospectus. Pursuant to the terms of the lock-up agreement, the underwriter may waive the lock-up restrictions,

but has informed us that it intends to do so only in extraordinary circumstances such as death, divorce or financial necessity.

Stabilization, Short Positions and Penalty Bids

The underwriter may engage in over-allotment transactions, stabilizing transactions, syndicate covering transactions, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Securities Exchange Act of 1934:


	•	Over-allotment involves sales by the underwriter of shares in excess of the number of shares the underwriter is obligated to purchase, which creates a short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriter is not greater than the number of shares that it may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriter may close out any covered short position by either exercising its over-allotment option and/or purchasing shares in the open market.

	•	Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

	•	Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriter will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriter sells more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriter is concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

	•	Penalty bids permit the underwriter to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the American Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

Neither we nor the underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor the underwriter makes any representation that the underwriter will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Other

The underwriter and its affiliates have from time to time performed, and may in the future perform, various financial advisory, commercial banking, and investment banking services for us and our affiliates in the ordinary course of business, for which they received, or will receive, customary fees.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us by Bryan Cave LLP. Bryan Cave LLP has in the past performed legal services for Taglich Brothers, Inc. and may do so again in the future. Baker & McKenzie LLP will pass on certain matters for the underwriter.

EXPERTS

Rotenberg Meril Solomon Bertiger & Guttilla, P.C., independent registered public accounting firm, have audited our financial statements as of December 31, 2006, 2005 and 2004, as set forth in their reports. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Rotenberg Meril Solomon Bertiger & Guttilla, P.C.’s report, given on their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 (including exhibits, schedules and amendments) under the Securities Act with respect to the shares of common stock to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to us and the shares of common stock to be sold in this offering, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. Whenever a reference is made in this prospectus to any contract or other document of ours, the reference may not be complete, and you should refer to the exhibits that are a part of the registration statement for a copy of the contract or document.

You may read and copy all or any portion of the registration statement or any other information that we file at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings, including the registration statement, are also available to you on the SEC’s web site (http://www.sec.gov).

As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934, and, in accordance with those requirements, will file periodic reports, proxy statements and other information with the SEC. This prospectus includes statistical data that were obtained or derived from independent industry publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, which are derived from our review of internal surveys, as well as the independent sources referred to above.

INDEX TO FINANCIAL STATEMENTS


Unaudited Interim Financial Statements

Consolidated Balance Sheets as of December 31, 2006 and March 31, 2007			F-2
Consolidated Statements of Income for the period January 1, 2006 to March 14, 2006 and for the Three Months Ended March 31, 2006 and 2007			F-3
Consolidated Statements of Stockholders’ Equity for the period from January 1, 2006 to March 14, 2006 and for the Three Months Ended March 31, 2006 and 2007			F-4
Consolidated Statements of Cash Flows for the period January 1, 2006 to March 14, 2006 and for the Three Months Ended March 31, 2006 and 2007			F-5
Notes to Consolidated Financial Statements			F-6

Audited Financial Statements

Report of Independent Registered Public Accounting Firm			F-8
Consolidated Balance Sheets as of December 31, 2005 and 2006			F-9
Consolidated Statements of Income for the Years Ended December 31, 2004, 2005 and 2006, and for the periods from December 20, 2005 (inception) to December 31, 2005 and January 1, 2006 to March 14, 2006			F-10
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2004, 2005 and 2006 and for the periods December 20, 2005 (inception) to December 31, 2005 and January 1, 2006 to March 14, 2006			F-11
Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005 and 2006, and for the periods from December 20, 2005 (inception) to December 31, 2005 and January 1, 2006 to March 14, 2006			F-12
Notes to Consolidated Financial Statements			F-14

F-1

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2006 and March 31, 2007


	December 31,			March 31,
	2006			2007
				(Unaudited)

ASSETS
Current Assets
Cash and cash equivalents	$	3,143,015		$	2,130,687
Accounts receivable, net		3,990,883			5,261,807
Expendable parts, net of obsolescence		1,548,459			1,861,196
Prepaid expenses		441,378			514,448

Total Current Assets		9,123,735			9,768,138

Property and Equipment
Flight equipment		19,664,682			22,235,952
Other property and equipment		4,203,282			3,618,604
Less — accumulated depreciation		(9,326,367	)		(9,386,513	)

Property and Equipment, net		14,541,597			16,468,043
Intangible assets, net		4,563,773			4,490,332
Goodwill		5,458,634			5,458,634
Deferred tax assets		760,029			533,247
Other assets		1,796,410			2,134,255

Total Assets	$	36,244,178		$	38,852,649


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	11,026,534		$	11,763,599
Long-term debt — current portion		1,273,416			1,380,056
Engine return liability — current portion		2,260,417			2,000,000
Air traffic liability		1,350,420			1,409,249
Deferred tuition revenue		280,660			282,516

Total Current Liabilities		16,191,447			16,835,420
Long-term Liabilities
Long-term debt, net of current portion		6,250,391			6,982,507
Subordinated debentures, net of debt issuance costs		3,272,815			3,277,494
Engine return liability, net of current portion		2,489,410			1,989,410

Total Liabilities		28,204,063			29,084,831

Minority Interest		5,340			—

Stockholders’ Equity
Common stock		20,294			20,294
Additional paid-in capital		7,754,600			7,829,834
Common stock warrants		61,082			61,082
Retained earnings		198,799			1,856,608

Total Stockholders’ Equity		8,034,775			9,767,818

Total Liabilities and Stockholders’ Equity	$	36,244,178		$	38,852,649

The accompanying notes are an integral part of these consolidated financial statements.

F-2

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 2006 and 2007
(Unaudited)


	Predecessor			Successor
	Period from			Three Months			Three Months
	January 1 to			Ended			Ended
	March 14,			March 31,			March 31,
	2006			2006			2007

Operating Revenues
Passenger revenue	$	20,263,834		$	5,787,329		$	27,657,274
Academy, charter and other revenue		1,103,000			205,232			1,568,453

Total Operating Revenues		21,366,834			5,992,561			29,225,727

Operating Expenses
Flight operations		7,964,882			1,885,274			10,907,336
Maintenance		3,782,500			1,001,109			5,304,654
Passenger and traffic service		4,797,441			1,042,106			5,736,041
Promotion and sales		1,560,947			408,784			2,064,075
General and administrative		1,010,126			193,735			1,364,703
Depreciation and amortization		504,926			130,845			919,824

Total Operating Expenses		19,620,822			4,661,853			26,296,633

Operating income		1,746,012			1,330,708			2,929,094
Non-operating (expense) income
Interest expense		(157,603	)		(63,769	)		(293,950	)
Other income (expense), net		(4,780	)		(5,638	)		19,892

Income before provision for income taxes and minority interest		1,583,629			1,261,301			2,655,036
Provision for income taxes		545,937			470,868			1,002,567

Income before minority interest		1,037,692			790,433			1,652,469
Minority interest		—			(13,987	)		5,340

Net income	$	1,037,692		$	776,446		$	1,657,809

Net income per share:
Basic		—		$	1.14		$	0.82
Diluted		—		$	1.13		$	0.77
Shares used in calculating net income per share:
Basic		—			679,692			2,029,460
Diluted		—			685,413			2,141,989

The accompanying notes are an integral part of these consolidated financial statements.

F-3

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three Months Ended March 31, 2006 and 2007
(Unaudited)


	Common Stock				Additional		Common Stock Warrants
	Number				Paid-in		Number				Retained			Treasury
	of Shares		Amount		Capital		of Shares		Value		Earnings			Stock			Total

PREDECESSOR:
Balance December 31, 2005			$	14,821	$	15,658,784		—		—	$	(12,458,512	)	$	(6,000,000	)	$	(2,784,907	)
Net Income, January 1 to March 14, 2006				—		—		—		—		1,037,692			—			1,037,692
Dividends paid				—		—		—		—		(53,000	)		—			(53,000	)

Balance March 14, 2006		—	$	14,821	$	15,658,784		—		—	$	(11,473,820	)	$	(6,000,000	)	$	(1,800,215	)

SUCCESSOR:
Balance December 31, 2005		350,000	$	3,500	$	66,500		—		—		—			—		$	70,000
Issuance of common stock to private investors		1,679,460		16,794		7,427,598		—		—		—			—			7,444,392
Valuation of warrants issued with subordinated debt		—		—		—		46,480		61,082		—			—			61,082
Net Income		—		—		—		—		—		776,446			—			776,446

Balance March 31, 2006		2,029,460	$	20,294	$	7,494,098		46,480	$	61,082	$	776,446		$	—		$	8,351,920

Balance December 31, 2006		2,029,460	$	20,294	$	7,754,600		46,480	$	61,082	$	198,799		$	—		$	8,034,775
Share based compensation		—		—		75,234		—		—		—			—			75,234
Net Income		—		—		—		—		—		1,657,809			—			1,657,809

Balance March 31, 2007		2,029,460	$	20,294	$	7,829,834		46,480	$	61,082	$	1,856,608		$	—		$	9,767,818

The accompanying notes are an integral part of these consolidated financial statements.

F-4

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2006 and 2007
(Unaudited)


	Predecessor			Successor
	Period from			Three			Three
	January 1 to			Months Ended			Months Ended
	March 14,			March 31,			March 31,
	2006			2006			2007

Net income	$	1,037,692		$	776,446		$	1,657,809
Adjustment to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		504,926			144,343			983,537
Deferred income tax provision (benefit)		517,457			(12,046	)		226,782
Share-based compensation		—			77,514			75,234
Minority interest		—			13,987			(5,340	)
Changes in operating assets and liabilities:
Increase in receivables		(1,191,416	)		(369,076	)		(1,270,924	)
Decrease (increase) in expendable parts		124,399			(87,858	)		(312,737	)
Decrease (increase) in prepaid expense		32,026			(64,279	)		(73,070	)
Decrease in stock subscription		—			70,000			—
Decrease (increase) in due from affiliates		(27,531	)		45,997			(51,971	)
Increase in other assets		(17,654	)		(1,481	)		(261,283	)
Increase (decrease) in accounts payable and accrued expenses		(1,856,290	)		1,986,281			639,145
Increase (decrease) in deferred revenue and refundable deposits		58,664			(108,086	)		60,685
Increase (decrease) in engine return liability		370,685			—			(760,417	)

Net cash provided by (used in) operating activities		(447,042	)		2,471,742			907,450

Cash Flows From Investing Activities:
Acquisition of property and equipment		(970,872	)		(162,396	)		(1,608,534	)
Cash acquired in acquisition		—			1,917,265			—
Cash paid for acquisition		—			(10,729,823	)		—

Net cash used in investing activities		(970,872	)		(8,974,954	)		(1,608,534	)

Cash Flows From Financing Activities:
Proceeds from borrowings		8,737			3,320,000			—
Repayments of debt		(206,553	)		(1,008,139	)		(311,244	)
Payment of loan fees		—			(300,300	)		—
Proceeds from issuance of common stock		—			7,366,878			—
Dividends paid		(53,000	)		—			—

Net cash provided by (used in) financing activities		(250,816	)		9,378,439			(311,244	)

Net increase (decrease) in cash and cash equivalents		(1,668,730	)		2,875,227			(1,012,328	)
Cash, beginning of period		3,585,995			—			3,143,015

Cash, end of period	$	1,917,265		$	2,875,227		$	2,130,687

Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	150,036		$	3,997		$	230,237
Cash paid during the period for income taxes		—			—			—

Supplemental disclosure of non-cash investing and financing activities:

During the period January 1, 2006 to March 14, 2006, GIA acquired vehicles by the issuance of notes payable totalling $44,082.

During the three months ended March 31, 2006, the Company issued warrants with its subordinated debentures valued at $61,082.

On March 22, 2007, the Company issued a promissory note for $1,150,000 for the acquisition of an EMB-120 aircraft.

The accompanying notes are an integral part of these consolidated financial statements.

F-5

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2006 and 2007


(1)	Basis of Presentation

Gulfstream International Group, Inc. (“GIG”) was incorporated in Delaware in December 2005 as Gulfstream Acquisition Group, Inc., and changed its name to Gulfstream International Group, Inc. on June 13, 2007. GIG was formed for the purpose of acquiring Gulfstream International Airlines, Inc. (“GIA” or “Airline”), a wholly-owned subsidiary G-Air Holdings Corp., Inc. (“G-Air”), and Gulfstream Training Academy, Inc. (“GTA” or “Academy”), collectively referred to as the “Company” or “Successor”. On March 14, 2006, GIG closed the sale of its equity and debt securities and immediately thereafter acquired 89.2% of the stock of G-Air and 100% of the stock of GTA. As of March 31, 2007, GIG had acquired 100% of G-Air. The Successor period includes the accounts of GIG and the consolidated accounts of G-Air and GTA subsequent to the acquisition on March 14, 2006.

Prior to the acquisition, the consolidated financial statements include the consolidated accounts of G-Air and GIA and the combined accounts of GTA. These consolidated financial statements are labeled as “Predecessor” and cover the period from January 1, 2006 to March 14, 2006 (“Interim 2006”).

The merger of G-Air Holdings Corp., a Florida corporation, and GIA Holdings Corp, Inc., a Delaware corporation, was completed as of March 26, 2007. The surviving entity is GIA Holdings Corp., Inc.

All intercompany accounts and transactions have been eliminated in the combined consolidated financial statements.

The accompanying financial statements have been prepared by the Company, without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with generally accepted accounting principles in the United States, have been condensed or omitted pursuant to those rules and regulations. However, the Company believes that the disclosures made are adequate to make the information presented not misleading when read in conjunction with the audited financial statements and the notes thereto included in this Prospectus. Management believes that the financial statements contain all adjustments necessary for a fair statement of the results for the interim periods presented. All adjustments made were of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results for the entire fiscal year.


(2)	Property and Equipment

On March 22, 2007, the Company purchased one (1) 1990 Embraer 120 EMB-120ER twin engine aircraft consisting of an airframe, including all avionics, instruments and other equipment associated with said aircraft, together with two (2) installed Pratt & Whitney Canada PW-118 engines and two Hamilton Standard 14 RF-9 propellers for the sum of $1,150,000.

The purchase was financed by the issuance of a promissory note to a financial institution for the same amount. The aircraft will be refurbished as necessary and is expected to be placed in service before the end of 2007.


(3)	Long-Term Debt

In conjunction with the purchase of the aircraft described in Note (2), the Company issued on March 22, 2007 a promissory note for $1,150,000 to a financial institution, secured by the aircraft. The note is payable in 59 monthly principal installments of $7,858.33 and a final balloon payment of $686,358 and bears interest monthly, payable on the unpaid principal balance at the rate of LIBOR plus 2.75%.

F-6

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(4) Stock Compensation

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payment (“SFAS No. 123(R)”). Prior to January 1, 2006, there were no stock options outstanding.

During 2006 and through March 31, 2007, the fair value of stock options has been estimated as of the grant date using the Black-Scholes option pricing model. During the three months ended March 31, 2007 the Company granted 106,000 stock options to employees under the Company’s Stock Incentive Plan (“Plan”). The following table shows the assumptions used and weighted average fair value for grants in the three months ended March 31, 2007.


		March 31,
		2007

Expected annual dividend rate		0.0%
Risk-free interest rate		4.66 - 4.76%
Average expected life (years)		5.9
Expected volatility of common stock		41.8%
Forfeiture rate		0.0%
Weighted average fair value of option grants		$2.38

As required by SFAS 123(R), the Company records share-based compensation expense only for those options that are expected to vest. The estimated fair value of the stock options is amortized over the vesting period of the respective stock option grants. During the three months ended March 31, 2007, the Company recorded compensation expense of $75,234.


(5)	Earnings Per Share

The Company computes earnings per share in accordance with the provisions of SFAS No. 128, “Earnings per Share”. Under the provisions of SFAS No. 128, basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period presented. Diluted net income per share reflects the potential dilution that could occur from common stock issuable through stock based compensation including stock options, restricted stock awards, warrants and other convertible securities.


	Three Months Ended March 31,
	2006		2007

Net income	$	776,446	$	1,657,809

Weighted average of shares outstanding		679,692		2,029,460
Dilutive effect of stock options and warrants		5,721		112,529

Weighted average of shares outstanding — diluted		685,413		2,141,989

Earnings per common share:
Basic	$	1.14	$	0.82
Diluted	$	1.13	$	0.77

F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of
Gulfstream International Group, Inc.

We have audited the accompanying consolidated balance sheets of Gulfstream International Group, Inc. (the “Successor Company”) as of December 31, 2006 and 2005 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for the year ended December 31, 2006 and the period from December 20, 2005 (date of inception) to December 31, 2005. We also audited the accompanying related consolidated statements of income, changes in stockholders’ equity and cash flows of G-Air Holdings, Inc. and Subsidiary and Affiliate (the “Predecessor Company”) for the period January 1, 2006 to March 14, 2006 and the years ended December 31, 2005 and 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes accessing 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 financial position of the Successor Company as of December 31, 2006 and 2005 and the results of their operations and their cash flows for the year ended December 31, 2006 and the period from December 20, 2005 (date of inception) to December 31, 2005, and the results of the Predecessor Company operations and its cash flows for the period January 1, 2006 to March 14, 2006 and the years ended December 31, 2005 and 2004, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 1 and 2 to the consolidated financial statements, the Successor Company acquired the Predecessor Company on March 14, 2006 in a transaction accounted for in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.”

/s/ Rotenberg Meril Solomon Bertiger & Guttilla, P.C.

Rotenberg Meril Solomon Bertiger & Guttilla, P.C.

Saddle Brook, NJ

June 20, 2007

F-8

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2005 and 2006


	Predecessor			Successor
	2005			2005		2006

ASSETS
Current Assets
Cash and cash equivalents	$	3,585,995		$	—	$	3,143,015
Accounts receivable, net		2,826,261			—		3,990,883
Stock subscription receivable		—			70,000		—
Expendable parts, net of reserve for obsolescence		1,640,973			—		1,548,459
Prepaid expenses		235,491			—		441,378

Total Current Assets		8,288,720			70,000		9,123,735

Property and Equipment
Flight equipment		12,096,752			—		19,664,682
Other property and equipment		3,805,479			—		4,203,282
Less — accumulated depreciation		(5,992,638	)		—		(9,326,367	)

Property and Equipment, net		9,909,593			—		14,541,597

Intangible assets, net		—			—		4,563,773
Goodwill		—			—		5,458,634
Deferred tax assets		3,631,292			—		760,029
Other assets		1,390,859			—		1,796,410

Total Assets	$	23,220,464		$	70,000	$	36,244,178


LIABLITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable and accrued expenses	$	10,234,290		$	—	$	11,026,534
Long-term debt — current portion		2,119,854			—		1,273,416
Engine return liability — current portion		—			—		2,260,417
Air traffic liability		1,211,864			—		1,350,420
Deferred tuition revenue		567,737					280,660

Total Current Liabilities		14,133,745			—		16,191,447
Long-term Liabilities
Long-term debt, net of current portion		7,492,484			—		6,250,391
Subordinated debentures, net of debt issuance costs		—			—		3,272,815
Engine return liability, net of current portion		4,379,142			—		2,489,410

Total Liabilities		26,005,371			—		28,204,063

Commitments and Contingencies
Minority Interest		—			—		5,340

Stockholders’ Equity (Deficit)
Common stock		14,821			3,500		20,294
Additional paid-in capital		15,658,784			66,500		7,754,600
Common stock warrants		—			—		61,082
Retained earnings (deficit)		(12,458,512	)		—		198,799
Less treasury stock, at cost		(6,000,000	)		—		—

Total Stockholders’ Equity (Deficit)		(2,784,907	)		70,000		8,034,775

Total Liabilities and Stockholders’ Equity (Deficit)	$	23,220,464		$	70,000	$	36,244,178

The accompanying notes are an integral part of these consolidated financial statements.

F-9

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2004, 2005 and 2006


	Predecessor									Successor
							Period from			December 20,
							January 1, 2006			2005 (Inception)
							to			to		Year Ended
	Year Ended December 31,						March 14,			December 31,		December 31,
	2004			2005			2006			2005		2006

Operating Revenues
Passenger revenue	$	66,274,210		$	87,983,355		$	20,263,834		$	—	$	78,289,809
Academy, charter and other revenue		6,063,160			4,021,882			1,103,000			—		5,400,709

Total Operating Revenues		72,337,370			92,005,237			21,366,834			—		83,690,518

Operating Expenses
Flight operations		26,465,790			38,539,947			7,964,882			—		34,973,714
Maintenance		14,408,051			16,970,059			3,782,500			—		17,394,138
Passenger and traffic service		16,596,647			20,390,418			4,797,441			—		17,373,459
Promotion and sales		6,434,225			7,530,361			1,560,947			—		6,358,630
General and administrative		5,656,579			4,561,159			1,010,126			—		3,763,947
Depreciation and amortization		485,457			2,354,803			504,926			—		2,725,915

Total Operating Expenses		70,046,749			90,346,747			19,620,822			—		82,589,803

Operating income		2,290,621			1,658,490			1,746,012			—		1,100,715

Non-operating (expense) income
Interest expense		(153,087	)		(699,387	)		(157,603	)		—		(953,610	)
Interest income		61,691			48,348			719			—		170,968
Gain on sale of equipment		90,692			133,246			—			—
Other income (expense)		(16,569	)		39,827			(5,499	)		—		9,000

Total non-operating (expense) income		(17,273	)		(477,966	)		(162,383	)		—		(773,642	)

Income before provision for income taxes and minority interest		2,273,348			1,180,524			1,583,629			—		327,073
Provision for income taxes		268,079			323,603			545,937			—		122,934

Income before minority interest		2,005,269			856,921			1,037,692			—		204,139
Minority interest		—			—			—			—		(5,340	)

Net income	$	2,005,269		$	856,921		$	1,037,692		$	—	$	198,799

Net income per share:
Basic		—			—			—			—	$	0.12
Diluted		—			—			—			—	$	0.12
Shares used in calculating net income per share:
Basic		—			—			—			—		1,680,480
Diluted		—			—			—			—		1,727,826

The accompanying notes are an integral part of these consolidated financial statements.

F-10

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years ended December 31, 2004, 2005 and 2006


	Common Stock				Additional			Common Stock Warrants
	Number				Paid-In			Number				Retained			Treasury
	of Shares		Amount		Capital			of Shares		Value		Earnings			Stock			Total

*Predecessor:*
Balance January 1, 2004			$	14,821	$	17,512,784			—		—	$	(14,081,268	)	$	(6,000,000	)	$	(2,553,663	)
Net Income, 2004				—		—			—		—		2,005,269			—			2,005,269
Dividends paid				—		—			—		—		(414,845	)		—			(414,845	)
Acquisition of warrants in subsidiary				—		(1,000,000	)		—		—		—			—			(1,000,000	)

Balance December 31, 2004				14,821		16,512,784			—		—		(12,490,844	)		(6,000,000	)		(1,963,239	)
Net Income, 2005				—		—			—		—		856,921			—			856,921
Capital contribution adjustment				—		(4,000	)		—		—		—			—			(4,000	)
Dividends paid				—		—			—		—		(824,589	)		—			(824,589	)
Acquisition of stock in subsidiary				—		(850,000	)		—		—		—			—			(850,000	)

Balance December 31, 2005				14,821		15,658,784			—		—		(12,458,512	)		(6,000,000	)		(2,784,907	)
Net Income, January 1 to March 14, 2006				—		—			—		—		1,037,692			—			1,037,692
Dividends paid				—		—			—		—		(53,000	)		—			(53,000	)

Balance March 14, 2006		—	$	14,821	$	15,658,784			—		—	$	(11,473,820	)	$	(6,000,000	)	$	(1,800,215	)

*Successor:*
Issuance of common stock to founders		350,000	$	3,500	$	66,500			—	$	—	$	—		$	—		$	70,000

Balance December 31, 2005		350,000		3,500		66,500			—		—		—			—			70,000
Issuance of common stock to private investors		1,679,460		16,794		7,610,586			—		—		—			—			7,627,380
Warrants issued with subordinated debt		—		—		—			46,480		61,082		—			—			61,082
Share based compensation		—		—		77,514			—		—		—			—			77,514
Net Income, 2006		—		—		—			—		—		198,799		$	—			198,799

Balance December 31, 2006		2,029,460	$	20,294	$	7,754,600			46,480	$	61,082	$	198,799			—		$	8,034,775

The accompanying notes are an integral part of these consolidated financial statements.

F-11

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2004, 2005 and 2006


	Predecessor									Successor
							Period from			December 20,
							January 1, 2006			2005 (Inception)
							to			to		Year Ended
	Year Ended December 31,						March 14,			December 31,		December 31,
	2004			2005			2006			2005		2006

Net income	$	2,005,269		$	856,921		$	1,037,692		$	—	$	198,799
Adjustment to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		485,457			2,354,803			504,926			—		2,903,594
Deferred income tax provision		268,079			283,714			517,457			—		(48,187	)
Share-based compensation		—			—			—			—		77,514
Forgiveness of debt		—			16,470			—			—		—
Minority interest		—			—			—			—		5,340
Gain on disposal of property and equipment		(90,692	)		(133,246	)		—			—		—
Changes in operating assets and liabilities:
Decrease (increase) in receivables		1,255,936			(676,209	)		(1,191,416	)		—		(114,168	)
Decrease (increase) in expendable parts		(324,942	)		(965,871	)		124,399			—		(31,885	)
Decrease (increase) in prepaid expense		(45,860	)		(49,461	)		32,026			—		(226,460	)
Decrease in stock subscription		—			—			—			—		70,000
Decrease (increase) in due from affiliates		239,846			43,876			(27,531	)		—		44,237
Decrease (increase) in other assets		(324,182	)		327,959			(17,654	)		—		(285,032	)
Increase (decrease) in accounts payable and accrued expenses		(1,311,451	)		872,899			(1,856,290	)		—		2,808,281
Increase (decrease) in deferred revenue and refundable deposits		1,456,099			(203,153	)		58,664			—		(207,185	)
Increase (decrease) in engine return liability		1,506,042			1,498,733			370,685			—		—

Net cash provided by (used in) operating activities		5,119,601			4,227,435			(447,042	)		—		5,194,848

Cash Flows From Investing Activities:
Acquisition of property and equipment		(1,591,227	)		(1,525,382	)		(970,872	)		—		(1,945,870	)
Loans to affiliates		(650,000	)		—			—			—		—
Proceeds from collection of notes receivable		292,530			—			—			—		—
Cash acquired in acquisition		—			—			—			—		1,917,265
Cash paid for acquisition		—			—			—			—		(10,729,823	)
Repayment of loans receivable		—			91,000			—			—		—

Net cash used in investing activities		(1,948,697	)		(1,434,382	)		(970,872	)		—		(10,758,428	)

Cash Flows From Financing Activities:
Proceeds from borrowings		1,122,443			2,420,936			8,737			—		3,320,000
Repayments of debt		(3,033,649	)		(2,838,699	)		(206,553	)		—		(1,934,797	)
Payment of loan fees		(20,267	)		(559,658	)		—			—		(305,988	)
Proceeds from issuance of common stock		—			—			—			—		7,627,380
Acquisition of warrants		(500,000	)		—			—			—		—
Dividends paid		(414,845	)		(824,589	)		(53,000	)		—		—

Net cash provided by (used in) financing activities		(2,846,318	)		(1,802,010	)		(250,816	)		—		8,706,595

Net increase (decrease) in cash and cash equivalents		324,586			991,043			(1,668,730	)		—		3,143,015
Cash, beginning of period		2,270,366			2,594,952			3,585,995			—		—

Cash, end of period	$	2,594,952		$	3,585,995		$	1,917,265		$	—	$	3,143,015

The accompanying notes are an integral part of these consolidated financial statements.

F-12

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Years ended December 31, 2004, 2005 and 2006

Supplemental disclosure of cash flow information:


	Predecessor						Successor
					Period from		December 20,
					January 1, 2006		2005 (Inception)
					to		to		Year Ended
	Year Ended December 31,				March 14,		December 31,		December 31,
	2004		2005		2006		2005		2006

Cash paid during the period for interest	$	153,087	$	685,209	$	150,036	$	—	$	665,182
Cash paid during the period for income taxes		36,451		—		—		—		169,611

Supplemental disclosure of non-cash investing and financing activities:

Cash paid for acquisition during 2006:


Cash	$	(1,917,265	)
Current assets		(5,652,444	)
Property and equipment		(15,089,309	)
Intangible assets:		—
Affiliation Agreement		(1,718,598	)
Operating Certificate		(2,383,162	)
Tradename		(680,000	)
Goodwill		(5,458,634	)
Deferred tax assets		(711,842	)
Other assets		(1,383,518	)
Total liabilities		24,264,949

Cash paid for acquisition	$	(10,729,823	)

During 2004 and 2005, Gulfstream International Airlines, Inc. (“GIA”) acquired airframes that were seller financed. The amount of the airframes and the seller financing was $5,763,349 and $2,452,704, respectively.

In December 2004, Gulfstream Training Academy, Inc. (“GTA”) purchased warrants to acquire common stock of GIA for a price of $1,000,000. The Company paid cash of $500,000 and issued a note for $500,000.

During 2005, GTA acquired 1,000,000 shares of GIA at a cost of $850,000. GTA satisfied an outstanding note receivable of $700,000 and issued a note payable for $150,000.

During 2005, additional paid-in-capital of GIA was reduced by offsetting a loan receivable from a stockholder in the amount of $4,000.

During the period ended March 14, 2006, GIA acquired vehicles by the issuance of notes payable totalling $44,082.

During 2006, the Company issued warrants with its subordinated debentures valued at $61,082.

The accompanying notes are an integral part of these consolidated financial statements.

F-13

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)	Nature of Operations and Summary of Significant Accounting Policies

Basis of Presentation

Gulfstream International Group, Inc. (“GIG”) was incorporated in Delaware in December 2005 as Gulfstream Acquisition Group, Inc., and changed its name to Gulfstream International Group, Inc. on June 13, 2007. GIG was formed for the purpose of acquiring Gulfstream International Airlines, Inc. (“GIA” or “Airline”), a wholly-owned subsidiary G-Air Holdings Corp., Inc. (“G-Air”), and Gulfstream Training Academy, Inc. (“GTA” or “Academy”), collectively referred to as the “Company” or “Successor”. On March 14, 2006, GIG closed the sale of its equity and debt securities and immediately thereafter acquired 89.2% of the stock of G-Air and 100% of the stock of GTA (Note (2) Acquisition). As of December 31, 2006, GIG had acquired 98.6% of G-Air and is currently in the process of acquiring the remaining shares. The Successor period includes the accounts of GIG for the year ended December 31, 2006 and the consolidated accounts of G-Air and GIA for the period March 15, 2006 to December 31, 2006.

Prior to the acquisition, the consolidated financial statements include the consolidated accounts of G-Air and GIA and the combined accounts of GTA. These consolidated financial statements are labeled as “Predecessor” and cover the years ended December 31, 2004 (“2004”) and 2005 (“2005”) and the period from January 1, 2006 to March 15, 2006 (“Interim 2006”).

All material intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Company Operations

The Airline is a Florida-based regional air carrier providing scheduled passenger service to numerous destinations in Florida and the Bahamas. As of December 31, 2006, the Airline operated a fleet of twenty-seven 19-seat Beechcraft “1900 Turboprop” passenger aircraft and seven 30-seat Embraer “120 Turboprop” passenger aircraft, from multiple hubs in Florida. GIA was incorporated in the state of Florida in November of 1988, and operated initially as an “on-demand” charter airline serving the South Florida area, Cuba and the Bahamas. Following the Department of Transportation’s (“DOT”) approval, the Airline began scheduled flight service in December of 1990.

In January of 1997, GIA signed a comprehensive five-year Alliance Agreement with Continental Airlines (“Continental”) to act as their “Continental Connection” in Florida and the Bahamas effective April 6, 1997. Under the terms of this agreement, Continental handles all reservations, ticketing and collections for GIA and all flights appear as Continental flight numbers. GIA receives passengers connecting from Continental hubs in Newark, Cleveland and Houston. The agreement with Continental was amended and extended in December 1999, August 2003 and March 2006. The March 14, 2006 amendment provides that the term will expire no sooner than November 3, 2011. After such date, the Company or Continental may terminate the agreement, with or without cause, upon one hundred eighty (180) days written notice. GIA also has alliance agreements with Northwest Airlines, United Airlines and Copa Airlines.

GTA was incorporated on March 4, 1997, under the laws of the State of Florida and operates as a flight training academy in Fort Lauderdale, Florida. The Academy provides flight training services to licensed commercial pilots. GTA’s principal program is its First Officer Program, which allows participants to qualify as a FAA Regulations Part 121 airline pilot in four months. Following qualification, students spend 250 hours flying line as a FAA Regulations Part 121 first officer at the Airline. By attending the Academy, students are able to enhance their ability to secure a permanent position with a commercial airline. The Academy’s graduates are typically hired by various regional airlines, including GIA.

F-14

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Use of Estimates

Cash and Cash Equivalents

The Company considers all highly liquid investments with a purchased maturity of three months or less to be cash equivalents. Cash equivalents consist of a money market account.

At various times during the year, the Company maintains cash balances in excess of the amount insured by the Federal Deposit Insurance Corporation ($100,000). The exposure to the Company is solely dependent upon daily bank balances and the respective strength of the financial institutions. At December 31, 2005 and December 31, 2006, amounts in excess of FDIC limits totaled approximately $4.8 million and $3.4 million, respectively.

Accounts Receivable

Trade receivables and other receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectibility based on past credit history with customers and their current financial position.

Expendable Parts and Fuel

Flight equipment expendable parts and aircraft fuel are carried at the lower of cost or market using the first-in, first-out method. An allowance for obsolescence is provided for flight equipment expendable parts currently identified obsolete or excess. Expendable parts are charged to expense as they are used.

Property and Equipment

Flight equipment and other property and equipment are stated at cost. Depreciation is being provided on the straight-line or accelerated methods over the estimated useful lives of the related assets as follows: Airframes — seven years; aircraft rotable parts — five years; flight simulator — seven years; baggage handling, ground support, etc. — five to seven years; office equipment, fixtures and equipment — five years; computer equipment and software — three years; leasehold improvements — five years; and vehicles — three to five years.

Residual values estimated for airframes and aircraft rotable parts are 20 percent of cost.

Impairment of Long-Lived and Intangible Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may be impaired. Under the provisions of SFAS no. 144, “Accounting for the Impairment of Disposal of Long-Lived Assets,” the Company records an impairment loss if the undiscounted future cash flows are found to be less than the carrying amount of the asset. If an impairment loss has occurred, a change is recorded to reduce the carrying amount of the asset to fair value. Long-Lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

F-15

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash, accounts receivable, accounts payable and accrued expenses approximate fair value as of December 31, 2006 and 2005, as a result of the relatively short maturity. The Company believes its carrying amount of its long-term senior and subordinated debt approximate fair value based upon the interest rates for these instruments being near current market rates.

Maintenance and Repair Costs

In September 2006, the FASB issued FSP No. AUG AIR-1, Accounting for Planned Major Maintenance Activities. The FSP prohibits the use of the accrual method of accounting for planned major maintenance activities in annual and interim reporting periods. It does continue to permit the application of the other three alternative methods: direct expense, built-in overhaul and deferral. This pronouncement is effective for the first fiscal year beginning after December 15, 2006 and is to be applied retrospectively for all financial statements presented unless doing so is impracticable. Earlier adoption is permitted as of the beginning of an entity’s fiscal year. The FSP requires disclosure of the method of accounting for planned major maintenance activities selected, as well as information related to the change from the accrual method to another method. The Company accounts for major overhaul costs using the direct expense method for leased aircraft and the built-in overhaul method for owned aircraft purchased in 2004 and 2005

Major engine maintenance for our Embraer 120 Brasilia owned aircraft, which were purchased in 2004 and 2005, is based on the built-in overhaul method. The built-in overhaul method is based on segregation of the aircraft costs into those that should be depreciated over the useful life of the aircraft and those that require overhaul at periodic intervals. Thus, the estimated cost of the overhaul component included in the purchase price was allocated separately from the cost of the airframe. The initial overhaul component was determined based on estimated flying hours remaining to overhaul. These capitalized overhaul components are being amortized based on the ratio of monthly hours flown to estimated hours remaining to overhaul.

When major overhaul expenses are incurred, any unamortized balances are charged to expense currently and the cost of the new overhaul is capitalized and amortized in the same manner.

Revenue Recognition

Passenger revenue is recognized when transportation service is provided. Transportation purchased but not yet used is included in air traffic liability.

Enrollment fee revenue is based upon actual training hours used by the students of our pilot training academy. The remaining unused hours represent deferred tuition revenue.

Other revenues are recognized when services are provided.

Frequent Flyer Awards

Debt Issue Expenses and Discounts

Debt issue expenses and discounts are amortized over the terms of the notes using the effective interest method.

F-16

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. Federal, state and local income taxes are calculated and recorded on the current period’s activity in accordance with the tax laws and regulations that are in effect. In addition, SFAS No. 109 requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax return. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. The differences relate primarily to reserve or provisional accounts, depreciation and amortization, and deferred revenues.

A deferred tax asset valuation allowance is established when it is more likely than not that all or some portion of the deferred tax assets will not be realized. The net deferred income tax assets, after reducing the deferred tax assets by the valuation allowance, represent the income tax benefits that are expected to be realized.

Earnings Per Share


	Year Ended
	December 31,
	2006

Net income	$	198,799

Weighted average of shares outstanding		1,680,840
Dilutive effect of stock options and warrants		46,986

Weighted average of shares outstanding — diluted		1,727,826

Earnings per common share:
Basic	$	0.12
Diluted	$	0.12

Stock-Based Compensation

Effective January 1, 2006, the Company adopted the accounting and disclosure provisions of SFAS No. 123(R), “Share-Based Payment”, which requires that new, modified and unvested share based payment transactions with employees, such as stock options and restricted stock, be measured at fair value on the grant date and recognized as compensation expense over the vesting period.

Our Stock Incentive Plan was adopted by the board of directors of GIG, the successor company, and approved by our stockholders in 2006. Prior to 2006, there were no stock options outstanding. See Note (13) Stock Options for a description of the Company’s Stock Incentive Plan, and information regarding stock options granted during 2006.

F-17

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recently Issued Accounting Standards

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140”. This Statement amends FASB Statements No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. This Statement resolves issues addressed in Statement 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” This Statement:

a. Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation

b. Clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133

c. Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation

d. Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives

e. Amends Statement 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.

This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Management does not expect adoption of SFAS No. 155 to have a material impact, if any, on the Company’s financial position or results of operations.

In June 2006, the Emerging Issues Task Force (“EITF”) issued EITF 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the income statement (That is, Gross versus Net Presentation)” to clarify diversity in practice on the presentation of different types of taxes in the financial statements. The Task Force concluded that, for taxes within the scope of the issue, a company may adopt a policy of presenting taxes either gross within revenue or net. That is, it may include charges to customers for taxes within revenues and the charge for the taxes from the taxing authority within cost of sales, or, alternatively, it may net the charge to the customer and the charge from the taxing authority. If taxes subject to EITF 06-3 are significant, a company is required to disclose its accounting policy for presenting taxes and the amounts of such taxes that are recognized on a gross basis. The guidance in this consensus is effective for the first interim reporting period beginning after December 15, 2006 (the first quarter of our fiscal year 2007). Management does not expect the adoption of EITF 06-3 will have a material impact on our consolidated results of operations, financial position or cash flow.

In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”. This Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. Earlier application of the provisions of this Interpretation is encouraged if the enterprise has not yet issued financial statements, including interim financial statements, in the period this Interpretation is adopted. Management does not expect adoption of Interpretation No. 48 to have a material impact, if any, on the Company’s consolidated financial position or results of operations.

F-18

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”, which defines the fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Early adoption is encouraged, provided that we have not yet issued financial statements for that fiscal year, including any financial statements for an interim period within that fiscal year. Management is currently evaluating the impact SFAS 157 may have on our consolidated financial condition or results of operations.

In September 2006, the United States Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). This SAB provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 establishes an approach that requires quantification of financial statement errors based on the effects of each of the company’s balance sheet and statement of operations and the related financial statement disclosures. The SAB permits existing public companies to record the cumulative effect of initially applying this approach in the first year ending after November 15, 2006 by recording the necessary correcting adjustments to the carrying values of assets and liabilities as of the beginning of that year with the offsetting adjustment recorded to the opening balance of retained earnings. Additionally, the use of the cumulative effect transition method requires detailed disclosure of the nature and amount of each individual error being corrected through the cumulative adjustment and how and when it arose. Management is currently evaluating the impact SAB 108 may have to our consolidated financial condition or results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. Earlier application of the recognition or measurement date provisions is encouraged; however, early application must be for all of an employer’s benefit plans. Retrospective application of this Statement is not permitted. Management does not expect adoption of SFAS No. 158 to have a material impact, if any, on the Company’s consolidated financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115”. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. Management is currently evaluating the impact SFAS No. 159 may have to our consolidated financial condition or results of operations.

F-19

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2) Acquisition

On March 14, 2006, GIG closed the sale of its equity and debt securities and immediately thereafter acquired 89.2% of the stock of G-Air and 100% of the stock of GTA (See Note (12) Capital Transactions). As of December 31, 2006, GIG had acquired 98.6% of G-Air, and was in the process of continuing to acquire the remaining shares.

At various times in the past, Continental has assisted GIA with financial transactions and aircraft acquisitions. As a result of those transactions, Continental had received a warrant to acquire 20% of GIA common stock. Simultaneous with the acquisition of the stock of G-Air and GTA, GIG paid $2 million to Continental in return for a reduction from 20% to 10% in the percentage of GIA common stock it could purchase based on exercise of the warrant and for a five year extension of the code share agreement.

The aggregate purchase price paid by GIG in cash for these entities, inclusive of the $2 million payment to Continental, was $10.5 million. Subsequent to the acquisition date, GIG acquired additional shares of G-Air either by cash or by exchange of G-Air stock for GIG stock. The terms of these transactions were the same as those of the March 14 transaction. As a result, the aggregate purchase price increased by $229,823. As of December 31, 2006, 1.4% of the common stock of G-Air was not acquired.

The difference between the purchase price of $10,729,823 and the fair value of the acquired net assets of G-Air and GTA amounted to $5,458,634 and was recorded as goodwill (Note (5) Goodwill). The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition, March 14, 2006:


Current assets	$	7,569,709
Property and equipment		15,089,309
Intangible assets:
Affiliation Agreement		1,718,598
Operating Certificate		2,383,162
Tradename		680,000
Goodwill		5,458,634
Deferred tax assets		711,842
Other assets		1,383,518

Total assets acquired		34,994,772
Less total liabilities		(24,264,949	)

Fair value of net assets acquired	$	10,729,823

The property and equipment was recorded at fair value resulting in a $4.7 million increase in the book value of seven owned Embraer EMB120 Brasilia aircraft, based upon an independent appraisal. The intangible assets (Note (6) Intangible Assets) relate to GIA’s Affiliation Agreement with Continental, its FAA FAR 121 Operating Certificate, and the Gulfstream Training Academy, Inc. trade name.

The accompanying unaudited pro forma summary represents consolidated results of operations for the Company’s predecessor as if the acquisition had been consummated on January 1, 2005. Accordingly, the

F-20

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

following pro forma adjustments were reflected in consolidated results of operations for the year ended December 31, 2005 and for the period from January 1, 2006 to March 14, 2006, as follows:


	Year Ended		January 1 to
	December 31,		March 14,
	2005		2006

Depreciation expense associated with $4,664,590 increase in fair value of seven aircraft owned by the Company	$	533,096	$	111,062
Amortization of Affiliation Agreement with Continental with a fair value of $1,718,598 and an estimated useful life of 74 months	$	278,692	$	58,061
Interest expense related to subordinated debentures	$	501,298	$	106,729

The pro forma information presented in the table below does not necessarily reflect the actual results that would have been achieved, nor is it necessarily indicative of future consolidated results of the Company.


	Year Ended December 31,
	2005			2006

Revenue	$	92,005,237		$	105,057,352
Net income (loss)	$	(9,715	)	$	1,059,770
Earnings per common share:
Basic	$	0.00		$	0.52
Diluted			*	$	0.50
Weighted average common shares outstanding:
Basic		2,029,460			2,029,460
Diluted			*		2,137,075


*		Anti-dilutive

The pro forma weighted average basic common shares outstanding used to calculate basic earnings per common share represent common shares outstanding as of December 31, 2006. The pro forma weighted average diluted common shares outstanding used to calculate diluted earnings per common share represent incremental shares calculated for the year ended December 31, 2006. The pro forma effective tax rate used for 2005 is 34.0%, which is the same effective tax rate applicable to 2006.


(3)	Accounts Receivables

At December 31, 2005 and 2006, receivables consisted primarily of ticket sales. These amounts are reflected on the balance sheet, net of an allowance for doubtful accounts of $0 at December 31, 2005 and 2006, respectively.

As a result of the code sharing agreements disclosed in Note 1, GIA has a significant concentration of its revenue and receivables with Continental. Accounts receivable from Continental as of December 31, 2005 and 2006 amounted to $847,346 and $1,017,877, or 29.7% and 25.5% of our total accounts receivable, respectively. Management estimates that revenue attributable to Continental connecting passengers amounted to approximately 21% of our passenger revenue in 2004, 2005, Interim 2006 and 2006.

F-21

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(4) Property and Equipment

Property and equipment consisted of the following at December 31, 2005 and 2006:


	2005		2006

Aircraft	$	4,645,270	$	9,684,860
Engine overhauls		4,098,961		5,533,240
Aircraft rotable parts		1,605,110		2,348,557
Flight equipment		1,747,411		2,098,025
Ground equipment		1,267,763		1,434,519
Computer equipment and software		641,928		652,699
Office equipment		698,762		731,662
Leasehold improvements		1,017,065		1,109,321
Vehicles		179,961		275,081

		15,902,231		23,867,964
Less: accumulated depreciation		5,992,638		9,326,367

Property and equipment, net	$	9,909,593	$	14,541,597

Depreciation and amortization amounted to $445,195, $2,314,625, $499,828 and $2,493,582 for 2004, 2005, Interim 2006 and 2006, respectively.


(5)	Goodwill

Goodwill consists of the excess of cost over net assets acquired. Goodwill is not amortized, but is tested at least annually for impairment, or if circumstances change that will more likely than not reduce the fair value of the reporting unit below its carrying amount.

The following table sets forth goodwill, net, as of December 31, 2005 and 2006:


			Acquisition /		Impairment
	2005		Adjustments		Losses		2006

Gulfstream Airlines acquisition	$	—	$	364,175	$	—	$	364,175
Gulfstream Training Academy acquisition		—		5,094,459		—		5,094,459

	$	—	$	5,458,634	$	—	$	5,458,634


(6)	Intangible Assets

The Company reviews for the impairment of identifiable intangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets”.

F-22

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Identifiable intangible assets are amortized using the straight-line method over the period of expected benefit, unless they were determined to have indefinite lives. The following table sets forth the components of intangible assets as of December 31, 2006:


			Gross
	Useful		Carrying				Accumulated
	Life		Amount		Acquisition		Amortization			Net

GIA Affiliation Agreement with Continental		74 months	$	—	$	1,718,598	$	(217,987	)	$	1,500,611
GIA FAR 121 Operating Certificate		Indefinite		—		2,383,162		—			2,383,162
Gulfstream Training Academy Tradename		Indefinite		—		680,000		—			680,000

Total Intangible Assets			$	—	$	4,781,760	$	(217,987	)	$	4,563,773

Amortization expense for 2006 was $217,987. Estimated amortization expense for the years ending December 31, is as follows:


2007	$	278,692
2008		278,692
2009		278,692
2010		278,692
2011		278,692
Thereafter		107,151

	$	1,500,611


(7)	Other Assets

Other assets at December 31, 2005 and 2006 are comprised of the following:


	2005		2006

Prepaid loan fees, net	$	559,658	$	691,332
Deposits		466,310		515,634
Licenses and operating rights		356,447		331,875
Deferred public offering costs		—		237,958
Other assets		—		19,611
Due from affiliates		8,444		—

Total other assets	$	1,390,859	$	1,796,410

F-23

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(8) Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities at December 31, 2005 and 2006 are comprised of the following:


	2005		2006

Accounts payable	$	4,948,012		5,819,220
Accrued payroll and payroll burden		875,250		989,083
Accrued vacation		643,393		666,682
Accrued taxes		681,650		587,633
Accrued fuel		1,204,017		1,169,128
Accrued leases		357,677		341,419
Accrued workers compensation		135,897		88,171
Accrued interest		3,000		147,526
Accrued legal fees		120,543		34,567
Accrued regulatory expenses		160,293		106,862
Accrued customer reservation system fees		368,622		367,272
Other current liabilities		735,936		708,961

Total accounts payable and accrued liabilities	$	10,234,290	$	11,026,524


(9)	Engine Return Liability

In June 2003, the Company entered into a tri-party Pooling and Engine Services Agreement with its aircraft vendor and engine maintenance contractor that allowed the Company to exchange sixteen (16) of its engines requiring overhaul for mid-life engines owned by its aircraft vendor that had time remaining before overhaul. The future overhaul costs of the mid-life engines were shared proportionately, with the Company’s portion based on engine hours flown until the next overhaul. Accordingly, based on engine hours flown since June 2003, the Company incurred a liability of $4.75 million representing its contractual obligation for its share of the overhaul costs by recognizing engine maintenance expense of $1,374,367, $1,506,042, $1,498,733 and $370,858 in 2003, 2004, 2005 and Interim 2006, respectively. The sixteen engines are expected to be returned to the aircraft vendor during the 24 months beginning January 2007. Two engines were returned between January 1 and February 28, 2007 for a total cost of approximately $600,000, which was charged to the engine return liability account.

F-24

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(10) Long-Term Debt

At December 31, 2005 and 2006, senior debt consisted of the following:

Senior debt


	2005		2006

Note payable to institution; secured by aircraft; interest at 6.95% per annum; 59 monthly principal and interest payments of $145,488 in arrears, plus a balloon payment due December 29, 2010	$	8,568,000	$	7,491,720
Revolving line of credit for working capital; $1,000,000 and $750,000 at December 31, 2005 and 2006, respectively; secured by personal property of the Company; interest per annum based on one-month LIBOR plus 2.75%; interest-only payments due monthly		998,937		—
The Notes payable to vendor for software license, non-interest bearing, with final payment due in 2005		43,750		—
Various other notes payable secured by vehicles		1,651		32,087

		9,612,338		7,523,807
Less current portion		2,119,854		1,273,416

Total Long-Term Debt	$	7,492,484	$	6,250,391

Subordinated Debentures

The 12% subordinated debentures in the gross amount of $3,320,000 were issued to partially finance the acquisition (Note (2) Acquisition). Interest is payable quarterly and the principal balance is due on March 14, 2009. The debentures stipulate that principal payments are subordinated to the prior payment in full of the debt obligations to Irwin Union Bank and Wachovia Bank. Debentures totaling $2.5 million were issued to a limited partnership, one of whose partners is a director of the Company.

For financial reporting purposes, the Company recorded a discount of $61,082 to reflect the value of warrants issued (Note (12) Capital Transactions). The discount is being amortized over the life of the debentures utilizing the effective interest method. The Company recorded $13,187 as interest expense related to amortization of the discount in 2006. At December 31, 2006, subordinated debentures net of discount amounted to $3,272,815.

The fair value of the warrants was estimated on the date of issuance using the Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 4.57%; expected dividend yield of 0%; expected lives of 5 years; and estimated volatility of 34.7%.

The principal maturities on the senior debt and subordinated debentures for the next five years and in the aggregate, are as follows:


	Senior		Subordinated
	Debt		Debentures		Total

2007	$	1,273,416	$	—	$	1,273,416
2008		1,365,456		—		1,365,456
2009		1,450,195		3,320,000		4,770,195
2010		3,434,740		—		3,434,740

	$	7,523,807	$	3,320,000	$	10,843,807

F-25

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(11) Lease Obligations

Aircraft Leases

GIA leases twenty-seven (27) aircraft under various non-cancelable operating lease agreements that require monthly payments ranging from $17,000 to $21,000. Lease agreements for four (4) of the aircraft are for five year terms that expire at various dates through February 2010. Two (2) aircraft are related to a 15-year agreement with a government subcontractor, subject to two-year renewals, to operate daily flights between West Palm Beach and Andros Town, Bahamas.

Lease agreements for twenty-one (21) of the aircraft expire in July 2010. GIA has the option to extend each of these individual lease agreements for an additional term of at least six (6) months, but no more than twenty-four (24) months. GIA is limited to extending no more than fifteen (15) leases for a duration of more than twelve (12) months. GIA is required to make contingent payments to the lessor beginning August 1, 2006, and ending on the earlier of the end of the lease terms or at a time when the cumulative contingent payments equal $315,000. The contingent payments are computed based upon fuel costs per gallon being below specified amounts. To date, fuel costs have remained well above the minimum threshold, and no contingent payments have been made by GIA.

Facility Leases

GIA leases office and hangar space for its headquarters, airport facilities and certain other equipment under non-cancelable operating leases expiring at various dates through September 30, 2009.

During August 2005, GIA and GTA entered into building facility lease agreements with a related corporation controlled by the major stockholders of G-Air. The agreements called for both companies to occupy their facilities beginning January 1, 2006 and ending December 31, 2025. Rental payments made in 2006 were $247,605 and $95,341 by GIA and GTA, respectively.

Equipment Leases

GTA is a party to a flight simulator operating lease. The lease calls for a rental of $16,000 per month through December 31, 2007.

At December 31, 2006, the total future minimum rental commitments under all the above operating leases are approximately as follows:


2007	$	7,789,944
2008		7,290,457
2009		7,121,474
2010		4,060,761
2011		330,604
Thereafter		3,426,150

Total minimum payments required	$	30,019,390

For 2004, 2005, Interim 2006 and 2006, lease expense on real property under these operating leases was $9,066,622, $9,464,671, $1,951,162, and $8,790,475, respectively.

F-26

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(12) Capital Transactions

Predecessor

Common stock of the predecessor companies, G-Air and GTA, consisted of the following at March 14, 2006:


	•	G-Air has 40 million shares common stock authorized, $.001 par value per share, 14,811,179 shares issued and 13,611,179 outstanding.

	•	GTA has 100 shares of common stock , $.10 par value, authorized, issued and outstanding.

	•	GIA has 100 million shares of common stock authorized, $.001 par value per share, 19,575,327 issued and outstanding. 18,575,327 shares were owned by G-Air, and 1,000,000 shares were owned by GTA.

On August 8, 2003, GIA issued a warrant to Continental to acquire 20% of GIA common stock at a cost of $.001 per share. The warrant expires on December 31, 2015. Simultaneous with the acquisition of the stock of G-Air and GTA on March 14, 2006, GIG paid $2 million to Continental in return for a reduction from 20% to 10% in the percentage of GIA common stock it could purchase based on exercise of the warrant.

The warrant contains certain anti-dilution and cash dividend provisions that would be effected as if the warrant had been previously exercised by Continental. The warrant also provides for net issue exercise by Continental in lieu of cash payment, as well as providing a call option to GIA to repurchase the warrant prior to expiration at aggregate purchase prices ranging between $5.5 million and $7.5 million. We accounted for the subsidiary warrants in accordance with the guidance in EITF Issue 00-19. The subsidiary warrants meet the requirements of EITF Issue 00-19 to be accounted for as equity warrants. Accordingly, the fair value of the warrants at the date of issue is included in additional paid-in capital in the accompanying consolidated balance sheets.

Successor

GIG was formed in December 2005 for the purpose of acquiring GIA, a wholly-owned subsidiary of G-Air, and GTA. GIG was initially capitalized by the issuance of an aggregate of 350,000 shares of Common Stock at a purchase price of $0.20 per share to a group of outside investors, including an individual who is a director and executive officer of the Company. At December 31, 2005, stock subscription receivable amounted to $70,000. Most of the payments associated with the receivable were received by GIG in February 2006, and the remainder was paid in April 2006 and October 2006. At December 31, 2006, 15 million shares of GIG common stock, par value $.01, were authorized, and 2,029,460 shares were issued and outstanding.

As a part of the financing for the acquisition of G-Air and GTA on March 14, 2006, GIG sold 1,640,000 shares of its common stock and 3,320 Units. Each Unit was comprised of (1) a subordinated debenture in the principal amount of $1,000, bearing interest payable quarterly at 12% per annum, due March 14, 2009 (Note (10) Long-Term Debt), and (2) a warrant to purchase 14 shares of the Company’s common stock at $5.00 per share, exercisable at the option of the holder for a period of five years.


(13)	Stock Options

Our Stock Incentive Plan (“Plan”) was adopted by the board of directors of GIG, the successor company, and approved by our stockholders in 2006. Our Plan provides for the granting of incentive stock options, non-incentive stock options, stock appreciation rights, or other stock-based awards to those of our employees, directors or consultants who are selected by members of a committee comprised of members of our compensation committee (the “Committee”). On the date of the grant, the exercise price must equal at least 100% of the fair market value in the case of incentive stock options, or 110% of the fair market value with respect to optionees who own at least 10% of the total combined voting power of all classes of stock. The

F-27

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

plan authorizes 350,000 shares of our common stock to be issued under the plan. The Committee will administer the plan.

The fair value of each stock option granted is estimated on the date of the grant using the Black-Scholes option pricing model. The Company uses an estimated forfeiture rate of 0% due to limited experience with historical employee forfeitures. The Black-Scholes option pricing model also requires assumptions for risk free interest rates, dividend rate, stock volatility and expected life of an option grant. The risk free interest rate is based on the U.S. Treasury Bill rate with a maturity based on the expected life of the options. Dividend rates are based on the Company’s dividend history. The stock volatility factor is based on the American Stock Exchange Airline Stock Index. Expected life is determined using the “simplified method” permitted by Staff Accounting Bulletin No. 107 of the Securities and Exchange Commission, since the Company does not have sufficient historical expected life experience. The fair value of each option grant is recognized as compensation expense over the vesting period of the option on a straight line basis.

As of December 31, 2006, the Company had granted an option to purchase 104,364 shares of our common stock at an exercise price of $5 per share. Prior to 2006, there were no stock options outstanding.

The following table shows the assumptions used and weighted average fair value for grants in the year ended December 31, 2006.


	2006

Expected annual dividend rate		0.0	%
Risk-free interest rate		4.73 - 4.97	%
Average expected life (years)		6
Expected volatility of common stock		43.7	%
Forfeiture rate		0.0	%
Weighted average fair value of option grants		$2.46

The following table summarizes information about stock option transactions for the year ended December 31, 2006:


	2006
					Weighted-
			Weighted-		Average
			Average		Remaining		Aggregate
	Number of		Exercise		Contractual		Intrinsic
	Options		Price		Term (Years)		Value

Outstanding at Beginning of Year		—		—		—	$	—
Granted		104,324	$	5.00		9.5		—
Exercised		—		—		—		—
Forfeited		—		—		—		—

Outstanding at End of Year		104,324	$	5.00		9.5		—

Exercisable at December 31, 2006		104,324	$	5.00		9.5	$	—
Exercisable at December 31, 2006		—	$	—		—	$	—

There were no options exercised during the year ended December 31, 2006.

F-28

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information about non-vested stock options as of December 31, 2006:


				Weighted
				Average
	Number			Grant-Date
	of Shares			Fair Value

Non-vested shares at beginning of year		—			—
Granted		104,324		$	2.46
Vested		(20,864	)	$	2.25
Cancelled		—			—

Non-vested shares at end of year		83,460		$	2.51

The following table summarizes information about stock options outstanding at December 31, 2006:

Options Outstanding

Weighted

Options Exercisable

Average

Weighted

Number

Remaining

Average

Outstanding

Contractual

Exercise

Number

Exercise

Range of Exercise Prices

at 9/30/06

Life (Years)

Price

Exercisable

Price

$0.01 to 10.00

104,324

9.5

5.00

20,864

5.00

The Company recorded $77,514 of compensation expense for employee stock options during the year ended December 31, 2006. At December 31, 2006 there was a total of $179,278 of unrecognized compensation costs related to non-vested stock-based compensation arrangements under the Plan. The cost is expected to be recognized over a weighted average period of 3.5 years.

As of December 31, 2006, an aggregate of 350,000 shares of common stock are reserved for issuance under the Plan. Stock option grants were outstanding for an aggregate of 104,324 shares of stock, and 245,676 shares remained available for grant. Shares issued pursuant to the Plan will be newly-issued and authorized shares of common stock, or treasury shares.


(14)	Pension Plan

GIA sponsors a tax deferred savings plan with a discretionary profit sharing component which qualifies under Section 401(k) of the Internal Revenue Code. The plan covers all employees with completion of 1/4 year of service. The plan allows for matching by the Company of up to 5% of the eligible participants’ compensation. The eligible participants will always be 100% vested in their contributions to the plan, and will vest in Company contributions 25% with less than one year of total service, 50% after two years, 75% after three years, and 100% after four years of total service.

The Company did not make any contributions to the pension plan prior to 2006. During 2006, the Company elected to make matching contributions totaling $16,145.

F-29

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(15) Income Taxes

Income before taxes and the current and deferred tax provisions are as follows:


					Period from		Successor
	Predecessor				January 1 to		Inception to
	Year Ended December 31,				March 14,		December 31,		December 31,
	2004		2005		2006		2005		2006

Income before taxes	$	2,273,348	$	1,180,524	$	1,583,629	$	—	$	327,073

Current Tax:
Federal	$	—	$	—	$	—	$	—	$	167,522
Federal AMT		—		39,889		28,480		—		3,599
State		—		—		—		—		—

Total Current Tax	$	—	$	39,889	$	28,480	$	—	$	171,121

Deferred Tax (Benefit)
Federal	$	25,870	$	27,378	$	49,935	$	—	$	(4,650	)
State		242,209		256,336		467,522		—		(43,537	)

Total Deferred Tax	$	268,079	$	283,714	$	517,457	$	—	$	(48,187	)

Tax provision	$	268,079	$	323,603	$	545,937	$	—	$	122,934

The following is a reconciliation between the federal statutory rate of 34% and the effective rate:


	Predecessor															Successor
											January 1 to					Inception to
	Year Ended December 31,										March 14,					December 31,		December 31,
	2004					2005					2006					2005		2006

Computed expected provision at federal statutory rates	$	772,938		34	%	$	401,378		34	%	$	538,434		34	%	$	—	$	111,205	34	%
Increases (decrease) in income taxes resulting from:
Non-deductible items		12,173		1	%		85,901		7	%		28,815		2	%		—		1,239	0	%
State tax net of federal effect		82,523		4	%		42,853		4	%		57,485		4	%		—		10,490	3	%
Income attributable to S-Corporation		(599,555	)	−26	%		(206,529	)	−17	%		(78,797	)	−5	%		—		—	0	%

	$	268,079		12	%	$	323,603		27	%	$	545,937		34	%	$	—	$	122,934	38	%

F-30

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of temporary differences that give rise to significant elements of deferred tax assets and liabilities are as follows:


							Period from			Successor
	Predecessor						January 1 to			Inception to
	Year Ended December 31,						March 14,			December 31,		December 31,
	2004			2005			2006			2005		2006

Deferred tax assets:
Net operating loss carry forward	$	5,960,542		$	5,190,718		$	4,781,924		$	—	$	1,678,933
Allowance for Doubtful accounts		—			—			10,536			—		12,301
Accrued reserves		1,046,268			1,726,367			1,726,368			—		1,931,992
Compensation differences		194,951			242,109			242,109			—		280,041
Valuation Allowance		(3,021,438	)		(3,021,438	)		(3,021,438	)		—		—

Non-current deferred tax assets		4,180,323			4,137,756			3,739,499			—		3,903,267

Deferred tax liabilities:
Accelerated depreciation and amortization		265,317			506,464			625,663			—		1,023,989
Aircraft basis difference		—			—			—			—		1,554,569
Affiliation Agreement basis difference		—			—			—			—		564,680

Non-current deferred tax liabilities		265,317			506,464			625,663			—		3,143,238

Net non-current deferred tax assets	$	3,915,006		$	3,631,292		$	3,113,836		$	—	$	760,029

The valuation allowance offsets the net deferred tax assets for which recovery is not considered more likely than not. The valuation allowance is evaluated considering positive and negative evidence about whether the deferred tax assets will be realized. At the time of evaluation, the allowance can be either increased or reduced. A reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.

The Predecessor’s net operating losses for the periods ended December 31, 2004 and 2005, and March 14, 2006, were $15,837,243, $13,787,335, and $12,700,982, respectively. A valuation allowance on these net operating loss carryforwards was provided as the Predecessor did not anticipate that the full benefit would be realized in the future. A valuation allowance was not provided for the other deferred tax assets as the Predecessor determined that it would more likely than not realize the full benefit of such assets.

At December 31, 2006, the Successor had available $12,484,011 of net operating loss carryforwards which expire in years through 2022. However, due to changes in stock ownership of G-Air, the use of the net operating loss carryforwards is severely limited under Section 382 of the Internal Revenue Code pertaining to changes in stock ownership. As such, approximately $8,129,693 of these net operating loss carryforwards will expire as worthless. The Successor’s net operating loss, net of amounts limited by statute, total $4,354,318. The statute limits the annual amount of net operating loss to be utilized. The limit for the Successor has been determined to be $272,145. The Successor has not provided a valuation allowance on its net operating loss carryforwards or the other deferred tax assets as it believes that it is more likely than not that those amounts will be realized in the future.

F-31

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As a result of the acquisition, the Successor recorded certain assets at fair market value. As a result, the Aircraft and Affiliation Agreement have book bases higher than tax bases of $4,664,590 and $1,718,598, respectively. Accordingly, a deferred tax liability has been provided. These assets will be depreciated and amortized over their estimated useful lives.

The basis difference in the Aircraft has created a “built-in gain” for the Successor. This could result in additional net operating losses being available if the Aircraft are sold up to five years after the acquisition date. The gross amount of the built-in gain is equal to the basis difference of $4,664,590. This difference has been allocated to the Successor’s Aircraft. The Company views it as highly unlikely that any of the Aircraft will be sold during the statutory time period to utilize the tax benefit of the built-in gain. Accordingly, the Successor has not included the built-in gain in its net operating loss carryforward nor has it included it as a deferred tax asset.


(16)	Contingencies

The Company is involved in various legal proceedings arising in the ordinary course of business. While it is not feasible to predict or determine the outcome of these proceedings, in the opinion of management, the amount of ultimate liability with respect to legal proceedings and claims will not materially affect the results of operations or the financial position of the Company.


(17)	Related-Party Transactions

Fees Associated with the Acquisition of Gulfstream and the Academy. GIG was formed by Taglich Brothers Inc. and Weatherly Group LLC exclusively for the purpose of effecting the acquisition of GIA and GTA. On March 14, 2006, in connection with the acquisition of GIA and GTA, an advisory fee of $450,000 was paid to Taglich Brothers, the underwriter in this offering, and $300,000 to Weatherly Group, LLC. Douglas E. Hailey, a director, is a principal of Weatherly Group and an employee of Taglich Brothers and Thomas A. McFall, a senior executive of the Company and the Chairman of our board of directors, is a principal of Weatherly Group.

Management Services Agreement. On March 14, 2006, the Company entered into a management services agreement with Weatherly Group and Taglich Brothers. Under this agreement, these parties agreed to provide advisory and management services to us in consideration of an annual management fee of $200,000, payable monthly, and financial advisory fees based on a formula if the Company merges with or acquires another company. The agreement expires on March 13, 2011. Pursuant to this agreement, management fees total $16,667 per month. Expenses incurred pursuant to the management services agreement were $158,333 in 2006, and no balance was owed as of December 31, 2006

Building lease. Beginning in 2006, we lease our headquarters for GIA and GTA from EYW Holdings, Inc., an entity controlled in part by Thomas L. Cooper, the President of GIA, and Thomas P. Cooper, an officer of GIA. The total amount of rent expense incurred for our headquarters offices during 2006 was $386,496, and the amount of rent payable to EYW Holdings, Inc. at December 31, 2006 was $43,548.

Cuba Operations. The Company operates charter flights between Miami and Havana pursuant to a services agreement dated August 8, 2003 and amended March 14, 2006 with a related company, Gulfstream Air Charter, Inc. (“GAC”), which is owned by Thomas L. Cooper. GAC is licensed by the Office of Foreign Assets Control of the U. S. Department of the Treasury as a carrier and travel service provider for charter air transportation between designated U. S. and Cuban airports. Pursuant to the March 14, 2006 amended agreement, GAC receives 25% of the net income earned from this operation. Prior to March 14, 2006, GAC received 25% of the net income earned from this operation in excess of a $1 million cumulative threshold. Payments to GAC amounted to $0, $58,449, $56,905, and $239,403 for 2004, 2005, Interim 2006 and 2006, respectively.

F-32

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pursuant to the services agreement, GIA provides use of its aircraft, flight crews, the Gulfstream name, insurance, and service personnel, including passenger, ground handling, security, and administrative. GIA maintains the financial records and receives 75% of the cash flow generated by GAC’s Cuban charter operation. The cash flow provided to us from GAC, net of expenses, is reported in the statement of operations as charter revenue, and amounted to $381,872, $432,270, $172,296, and $716,591, for 2004, 2005, Interim 2006 and 2006, respectively. As of December 31, 2005 and 2006 GAC owed GIA $464,635 and $606,438, respectively, pursuant to the services agreement and which are included in accounts receivable.

Transactions with related parties and affiliates. The Company rents equipment and obtains consulting services from entities controlled by Thomas L. Cooper and Thomas P. Cooper. The amounts paid for 2004, 2005, Interim 2006 and 2006, were approximately $60,000, $60,000, $12,500 and $50,200, respectively.

Interest income on notes receivable from related parties in 2004, 2005, Interim 2006 and 2006 were $53,109, $23,498, $0 and $0, respectively. At December 31, 2005 and 2006, there were no balances owed on the notes.


(18)	Segment Information

The Company has two reportable segments: the airline and charter operation (GIA) and the flight academy (GTA). The accounting policies of the business segments are the same as those described in Note (1). Although the reportable segments are business units that offer different services and are managed separately, their activities are highly integrated.

Specifically, GTA provides substantial services to GIA as a source of, and in the training of, GTA’s flight crews. These intercompany revenues account for approximately 34% of GTA total revenue. Since inter-segment revenue and expenses have been eliminated for segment reporting, substantial operating expenses remain in GTA’s segment income from operations, and correspondingly, significant airline training expenses have been eliminated from the airline segment operating expenses

Virtually all of the Company’s consolidated capital expenditures, depreciation and amortization, and interest expense are attributable to Airline and Charter business segment.

Financial information for 2004, 2005 Interim 2006 and 2006 by business segment is as follows:


	Airline and		Flight
2004	Charter		Academy		Total

Operating revenues	$	66,633,648	$	5,703,722	$	72,337,370
Operating expenses		65,932,119		4,114,630		70,046,749

Income from operations	$	701,529	$	1,589,092	$	2,290,621

Net income	$	349,218	$	1,656,051	$	2,005,269

Depreciation and amortization	$	465,203	$	20,254	$	485,457
Interest expense		153,087		—		153,087
Interest income		5,313		56,378		61,691
Income tax expense		268,079		—		268,079
Capital expenditures		7,339,586		14,990		7,354,576
Total assets		18,478,434		1,190,278		19,668,712

F-33

GULFSTREAM INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Airline and
Flight

2005
Charter Academy Total

Operating revenues
$ 88,244,487 $ 3,760,750 $ 92,005,237

Operating expenses
87,189,884 3,156,863 90,346,747

Income from operations
$ 1,054,603 $ 603,887 $ 1,658,490

Net income
$ 190,665 $ 666,256 $ 856,921

Depreciation and amortization
$ 2,346,219 $ 8,584 $ 2,354,803

Interest expense
693,413 5,974 699,387

Interest income
6,232 42,116 48,348

Income tax expense
323,603 — 323,603

Capital expenditures
3,976,285 1,801 3,978,086

Total assets
23,090,102 130,362 23,220,464


	Airline and		Flight
Interim 2006	Charter		Academy		Total

Operating revenues	$	20,656,774	$	710,060	$	21,366,834
Operating expenses		18,992,948		627,874		19,620,822

Income from operations	$	1,663,826	$	82,186	$	1,746,012

Net income	$	955,506	$	82,186	$	1,037,692

Depreciation and amortization	$	503,179	$	1,747	$	504,926
Interest expense		157,603		—		157,603
Interest income		719		—		719
Income tax expense		545,937		—		545,937
Capital expenditures		1,010,259		4,695		1,014,954
Total assets		22,415,282		209,199		22,624,481


	Airline and		Flight
2006	Charter		Academy			Total

Operating revenues	$	82,011,475	$	1,679,043		$	83,690,518
Operating expenses		80,274,843		2,314,960			82,589,803

Income (loss) from operations	$	1,736,632	$	(635,917	)	$	1,100,715

Net income (loss)	$	834,716	$	(635,917	)	$	198,799

Depreciation and amortization	$	2,719,112	$	6,803		$	2,725,915
Interest expense		953,610		—			953,610
Interest income		170,968		—			170,968
Income tax expense		122,934		—			122,934
Capital expenditures		1,918,172		27,698			1,945,870
Total assets		30,205,270		6,038,908			36,244,178

F-34

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS


Item 13.	*Other Expenses of Issuance and Distribution*

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the common stock being registered hereby, other than underwriting commissions and discounts. All amounts are estimates except the SEC Registration Fee and the NASD filing fee.


SEC Registration fee	$	458.97
NASD filing fee
American Stock Exchange Listing fee*
Blue Sky fees and expenses*
Printing and engraving expenses*
Qualified Independent Underwriter fee*
Legal fees and expenses*
Accounting fees and expenses*
Transfer agent and registrar fees*
Miscellaneous expenses*
Total*


*		To be supplied by amendment.

We intend to pay all expenses of registration, issuance and distribution.


Item 14.	*Indemnification of Officers and Directors*

Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, our directors shall not be liable to the Company or our stockholders for monetary damages for breach of fiduciary duty as a director. In addition, our certificate of incorporation provides that we may, to the fullest extent permitted by law, indemnify any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was a director, officer or employee of the Company, or any predecessor of the Company, or serves or served at any other enterprise as a director, officer or employee at the request of the Company.

Our amended and restated bylaws provide that the Company shall indemnify our directors and officers to the fullest extent not prohibited by the Delaware General Corporation Law or any other law. We are not required to indemnify any director or officer in connection with a proceeding brought by such director or officer unless (i) such indemnification is expressly required by law; (ii) the proceeding was authorized by our board of directors; or (iii) such indemnification is provided by the Company, in our sole discretion, pursuant to the powers vested in the Company under the Delaware General Corporation Law or any other applicable law. In addition, our bylaws provide that the Company may indemnify our employees and other agents as set forth in the Delaware General Corporation Law or any other applicable law.

We have also entered into separate indemnification agreements with our directors that require us, among other things, to indemnify each of them against certain liabilities that may arise by reason of their status or service with the Company or on behalf of the Company, other than liabilities arising from willful misconduct of a culpable nature. The Company is not required to indemnify under the agreement for (i) actions initiated by the director without the authorization of consent of the board of directors; (ii) actions initiated to enforce the indemnification agreement unless the director is successful; (iii) actions resulting from violations of Section 16 of the Exchange Act in which a final judgment has been rendered against the director; and (iv) actions to enforce any non-compete or non-disclosure provisions of any agreement.

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The indemnification provided for above provides for reimbursement of all losses of the indemnified party including, expenses, judgment, fines and amounts paid in settlement. The right to indemnification set forth above includes the right for us to pay the expenses (including attorneys’ fees) incurred in defending any such proceeding in advance of its final disposition in certain circumstances.

The Delaware General Corporation Law provides that indemnification is permissible only when the director, officer, employee, or agent acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was unlawful. The Delaware General Corporation Law also precludes indemnification in respect of any claim, issue, or matter as to which an officer, director, employee, or agent shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine that, despite such adjudication of liability, but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court deems proper.

We have agreed to indemnify the underwriter and its controlling persons, and the underwriter has agreed to indemnify us and our controlling persons, against certain liabilities, including liabilities under the Securities Act. Reference is made to the Underwriting Agreement filed as part of the exhibits hereto.

See Item 17 for information regarding our undertaking to submit to adjudication the issue of indemnification for violation of the securities laws.


Item 15.	*Recent Sales of Unregistered Securities*

During the past three years, the registrant has issued and sold the following securities that were not registered under the Securities Act, as amended. Unless expressly provided otherwise, amounts have been adjusted to reflect the 2-for-1 stock split of our common stock to be effective prior to the completion of this offering.

1. In December 2005, in connection with its initial incorporation, Gulfstream International Group, Inc., issued an aggregate of 350,000 shares of our common stock to 15 founding stockholders. These shares were issued for a purchase price of $0.20 per share for an aggregate purchase price of $70,000.

2. In March 2006, Gulfstream International Group, Inc. issued a total of 1,640,000 shares of our common stock, at a purchase price of $5.00 per share, to 136 accredited investors for an aggregate cash consideration of $8.2 million.

3. In March 2006, Gulfstream International Group, Inc. issued a total of 3,320 units at a purchase price of $1,000 per unit to 23 investors, for an aggregate cash consideration of $3.32 million. Each unit consisted of (1) a 12% subordinated debenture in the principal amount of $1,000 due March 14, 2009, and (2) a warrant to purchase 14 shares of common stock at an exercise price of $5.00 per share, exercisable at the option of the holder for a period of five years.

4. In September and October 2006, we issued 39,460 shares of common stock to nine of our executives at $5.00 per share for an aggregate of $197,300.

5. In May 2006, we issued options to purchase 104,324 shares of our common stock to David Hackett, our Chief Executive Officer, at an exercise price of $5.00 per share.

6. In January 2007, we issued stock options to purchase an aggregate of 106,000 shares of our common stock, to certain of our officers and directors under our stock incentive plan, at an exercise price of $5.00 per share.

7. In April 2007, we issued 10,000 shares of our common stock to Thomas A. McFall, the Chairman of our board of directors for an aggregate purchase price of $50,000.

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The issuances described above in this Item 15 were deemed exempt from registration under the Securities Act in reliance on either (1) Section 4(2) of the Securities Act or Regulation D promulgated under the Securities Act as transactions by an issuer not involving any public offering, or (2) Rule 701 promulgated under the Securities Act as offers and sale of securities pursuant to certain compensatory benefit plans and contracts relating to compensation in compliance with Rule 701. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. All certificates representing the issued shares described in this Item 15 included appropriate legends setting forth that the securities had not been registered and the applicable restrictions on transfer. No underwriters were employed in any of the above transactions.

The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and warrants issued in such transactions. All recipients had adequate access, through their relationships with the Company, to information about the registrant.


Item 16.	*Exhibits and Financial Statements Schedules*

(a) See Exhibit Index, which is incorporated by reference herein.


Item 17.	*Undertakings.*

The undersigned registrant hereby undertakes to provide to the Underwriter at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification by the registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 14 or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Fort Lauderdale, State of Florida, on the 5th day of July, 2007.

GULFSTREAM INTERNATIONAL GROUP, INC.


	By:	/s/ David F. Hackett

David F. Hackett

Chief Executive Officer

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated:


Signatures	Title	Date

/s/ Thomas A. McFall Thomas A. McFall	Chairman of the Board of Directors	July 5, 2007

/s/ David F. Hackett David F. Hackett	Chief Executive Officer and Director (Principal Executive Officer)	July 5, 2007

/s/ Daniel H. Abramowitz Daniel H. Abramowitz	Director	July 5, 2007

/s/ Douglas E. Hailey Douglas E. Hailey	Director	July 5, 2007

/s/ Richard R. Schreiber Richard R. Schreiber	Director	July 5, 2007

/s/ Robert M. Brown Robert M. Brown	Chief Financial Officer (Principal Financial and Accounting Officer)	July 5, 2007

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EXHIBIT INDEX


Exhibit
No.			Description

	1	.1*	Form of Underwriting Agreement
	3	.1*	Certificate of Incorporation of the Registrant as currently in effect
	3	.2*	Amendment to Certificate of Incorporation
	3	.3	Bylaws of the Registrant as currently in effect
	4	.1*	Specimen Stock Certificate
	4	.2	Form of Subordinated Debenture
	5	.1*	Opinion of Bryan Cave LLP
	10	.1	Management Services Agreement, dated March 14, 2006, between Weatherly Group, LLC, and the Registrant
	10	.2	Lease Agreement dated August 1, 2005, by and between Gulfstream Training Academy, Inc. and EYW Holdings, Inc., as amended by First Amendment thereto dated as of April 17, 2006
	10	.3	Lease Agreement dated August 1, 2005, by and between Gulfstream International Airlines, Inc. and EYW Holdings, Inc., as amended by First Amendment thereto dated as of March 22, 2006
	10	.4*	Code Share And Regulatory Cooperation Agreement dated as of April 21, 2003, by and between United Air Lines, Inc. and Gulfstream International Airlines, Inc.
	10	.5*	Passenger Prorate Agreement dated as of October 1, 2006, by and between United Air Lines, Inc. and Gulfstream International Airlines, Inc.
	10	.6*	Codeshare Agreement dated as of this 11th day of February, 2000, by and between Northwest Airlines, Inc. and Gulfstream International Airlines, Inc.
	10	.7*	Codeshare Agreement dated as of December 9, 1991, by and between Compania Panamenia De Aviacion, S.A. and Gulfstream International Airlines, Inc.
	10	.8*	Amended and Restated Alliance Agreement dated December 30, 1999, by and between Continental Airlines, Inc. and Gulfstream International Airlines, Inc., as amended by Amendment One dated December 26, 2002, Amendment Two dated August 8, 2003, Amendment Three dated June 23, 2004 and Amendment Four dated March 14, 2006
	10	.9*	Form of Lease Agreement dated August 3, 2003 between Raytheon Aircraft Credit Corporation and Gulfstream International Airlines, Inc., as amended by Amendment Number One dated May 23, 2005 and Amendment dated August 2, 2005
	10	.10*	Third Restructuring Agreement dated August 1, 2003 between Raytheon Aircraft Credit Corporation and Gulfstream International Airlines, Inc.
	10	.11*	Business Lease Agreement dated May 14, 1999 between Richard Bulow and Gulfstream International Airlines, Inc., as amended by Amendment dated June 21, 2004.
	10	.12*	Used Beechcraft 1900D Airliner Operating Lease Agreement dated June 8, 2006 between CSC Applied Technologies LLC and Gulfstream International Airlines, Inc., as amended by Consultant Agreement Modification dated July 20, 2006
	10	.13*	Lease Agreement dated as of July 20, 2000 between Miami-Dade County, Florida and Gulfstream International Airlines, Inc.
	10	.14*	Building Lease dated June 1, 2004 between Broward County and Gulfstream International Airlines, Inc.
	10	.15*	Lease Agreement dated as of June 18, 2002, by and between Blount Realty Partners, Ltd. and Gulfstream International Airlines, Inc.
	10	.16*	Form of Aircraft Lease Agreement dated as of October 28, 2004 between Gulfstream International Airlines, Inc. and Mesa Airlines Inc.
	10	.17*	Lease dated August 1, 2006 between CSC Applied Technologies, LLC and Gulfstream International Airlines, Inc.
	10	.18*	Agreement dated March 1, 2007 between Pratt & Whitney Canada Corp. and Gulfstream International Airlines, Inc.

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Exhibit
No.			Description

	10	.19*	Services Agreement dated August 8, 2003 and amended March 14, 2006 between Gulfstream International Airlines, Inc. and Gulfstream Air Charter, Inc.
	10	.20*	Agreement dated June 13, 2006 between Gulfstream International Airlines, Inc. and the Airline Division of The International Brotherhood of Teamsters Representing the Pilots of Gulfstream International Airlines, Inc.
	10	.21	Loan Agreement dated August 15, 2006 between Wachovia Bank, National Association and Gulfstream International Airlines, Inc.
	10	.22	Loan Agreement dated as of December 29, 2005 between Gulfstream International Airlines, Inc., and Irwin Union Bank and Trust Company.
	10	.23	Gulfstream Acquisition Group, Inc. (predecessor to Gulfstream International Group, Inc.) Stock Incentive Plan
	10	.24	Form of Stock Option Agreement under Gulfstream Acquisition Group, Inc. (predecessor to Gulfstream International Group, Inc.) Stock Incentive Plan
	10	.25	Employment Agreement dated March 14, 2006 between Thomas L. Cooper and Gulfstream International Airlines, Inc.
	10	.26	Employment Agreement dated March 14, 2006 between David F. Hackett and Gulfstream International Airlines, Inc.
	10	.27	Employment Agreement dated August 7, 2003 between Thomas P. Cooper and Gulfstream International Airlines, Inc.
	10	.28	Employment Agreement dated April 6, 2006 between Paul Stagias and Gulfstream Training Academy, Inc.
	10	.29*	Form of Indemnification Agreement between the Registrant and each of its Directors and Officers
	10	.30	Form of Warrant issued in connection with the acquisition of Gulfstream International Airlines and Gulfstream Flight Academy
	10	.31*	Amended and Restated Common Stock Purchase Warrant dated March 14, 2006 issued by Gulfstream International Airlines, Inc. to Continental Airlines, Inc.
	10	.32*	Form of Warrant issued to the Underwriter
	21	.1	List of Subsidiaries of the Registrant
	23	.1	Consent of Rotenberg Meril Solomon Bertiger & Guttilla, P.C.
	23	.2*	Consent of Bryan Cave LLP (included in the opinion filed as Exhibit 5.1)
	24	.1*	Powers of Attorney


*		To be filed by amendment to this registration statement

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