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A helicopter airline providing affordable, scheduled, short-hop service from Man-hattan

U.S. Helicopter Corp.OTCBB: USHP6 East River Piers.Downtown ManhattanHeliportNew York, NY 10004PHONE: 212.248.2002www.yush.com

SECTOR: ServicesINDUSTRY: Air Ser-vicesINVESTOR CONTACT:

[email protected]

Company Description

U.S. Helicopter Corp. (U.S. Helicopter or the Company) is the only helicopter operator inUnited States that offers regular scheduled service. e Company ies weekday shuttles from helipin downtown and midtown Manhattan to JFK and Newark airports. Service began in March 2006, athe Company is expanding its routes and schedule in New York, with longer-term plans to estabnew routes in other major cities. Private charter services for regional destinations are also offered acompetitive rates.

Report Highlights

Total airport passenger traffic to and from NYC broke 100 million for the rst time in 2006 and ispoised to keep growing, with more than 30% of these travelers originating in or visiting Manhatta e vast majority do not use public transporation, but taxis, car services and private autos, contribuing to a 35% increase in traffic delays from 2000 to 2005.

U.S. Helicopters shuttles take passengers from Manhattan to New Yorks airports in 10 minutes or and customers of the Companys partner airlines are not subjected to TSA security screening atairports. Traffic delays are eliminated, travel time is slashed, and the services reliability rate is 98

e market for helicopter airport shuttles in the U.S. was demonstrated in the 1950s through the 198by several carriers in New York, Chicago and Las Angeles. Some of these companies were in bus

for many years, even though the services were plagued by costly and less-reliable Vietnam-era ement.

e Companys dual-engine and dual-pilot Sikorsky S76 aircraft are very reliable, have low mainance downtime, and cost 50% less to operate. Todays GPS technology and new airspace regulaallow safe and direct ying in nearly any weather.

Near-Term Milestones

U.S. Helicopter currently has four aircraftunder lease and is seeking nancing tosecure three more in the near-term foran expansion of service to LaGuardiaAirport, a third Manhattan heliport andadditional scheduled ights for peak traf-c hours.

Valuation Considerations

e Companys business model has a legup on the rest of the aviation industry inthat it currently provides a highly-desir-able service without any cost competition.It is the only helicopter airline in the U.S.,and the barriers to entry are substantial, soit is unlikely that the service will be com-moditized and margins squeezed, as with

xed-wing carriers. is bodes well for return on shareholderequity and future protability.

The Research Works, LLC 66 W.. 38th St., Suite 45B New York, NY 10018 Phone: 646.415.8344 www.researchworksllc.com/Research/USHP/

RESEARCH REPOR

INITIAL REPOOctober 26, 2007

##/#/200# CLOSING PRICE: $#.##

SYMBOL

Alphatrade.com

Trading Range Since 11/15/06Equity Market CapitalizationEnterprise ValueAverage Daily Trading Volume

Common SharesCommon Shares (Fully Diluted)

$1.15 - $1.90$143 Million$149 Million

NA

75 Million102.5 Million

RIGOROUS FUNDAMENTAL ANALYSIS OF SMALL-CAP & MICROCAP STOCKS

Independent Research Since 1992

MARKET DATA

9/20/07 Closing Price52 Week Price RangeAve. Daily Volume (3 months)Equity Market Capitalization

Common Shares (E.) (10/19/06)

$0.78$0.23 - $2.50

5,9766 Million

7.5 Million

BALANCE SHEET DATA asdfasdfsad hhghgh-

Cash (1000s) $61Total current assets 1,018Total Assets 4,493Accounts payable 3,771Total current liabilities 5,578Long-term debt 6,038Total liabilities 12,451

10/26/2007 CLOSING PRICE: $0.44

USHP

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www.researchworksllc.com/research/STMC/ Page 2 of 21

Iniial Report: October 26, 2007 OTCBB : USHP

Total Airport Trafc in the New York City Metropolitan - JFK, EWR, & LGA

Total airport traffic to and from the New York City metropolitan area continues to grow. Taken as a whole, the threeairports servicing New York City--Kennedy International, Newark, and LaGuardia--represent the worlds busiest airportpassenger traffic to any single metropolitan area.

Table I: 2006 Worldwide Airport Passenger Trafc Comparison

Rank Airport/Location # of Passengers % change2005 - 2006

% change2004 - 2005

1 Atlanta, GA (ATL) 84,846,639 (1.2) 2.8

2 Chicago, IL (ORD) 76,248,911 (0.3) 1.3

3 London, GB (LHR) 67,530,223 (0.6) 0.8

...

17 New York, NY (JFK) 42,604,975 4.2 8.9...

21 Newark, NJ (EWR) 35,494,863 7.4 3.3

...

42 New York, NY (LGA) 25,800,074 0.3 5.2

NYC Metropolitan Region Total: 104,204,920 4.4 6.3

Source: e Port Authority of NY & NJ

Airport traffic to and from the New York metropolitan area has surpassed pre-September 11, 2001 levels. While there wasa pronounced dip in airport passenger traffic to and f rom NYC in 2001 and 2002, total traffic quickly rebounded and in2004 exceeded previous highs reached in 2000. Total airport passenger traffic to and from NYC broke 100 million for thrst time in 2006 and is poised to keep growing. Only 16% of the passenger total is due to connecting ights; leaving approximately 87,500,000 passengers of local origin or destination. Business travel continues to make up a signicant porof the total market claiming roughly 33% of all airport passengers, or approximately 35,400,000 passengers annually.

Table II: Total Airport Passenger Data for JFK, EWR, and LGA Table III: 2004 NYC Area Airport Passenger Demograph-

Business 34%

Personal 66%

Local Origin & Destination 84%

Connecting 16%


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NYC Area Passenger Demographics - emphasis on business travel and passengers originating in Manhattan

PANYNJ prole of departing passengers, spring 2006. e survey data indicates that 40% of passenger traffic departingfrom NYC area airports originates in NYC with almost 30% originating in Manhattan. It is interesting to note that therelatively small geographic region of 14th - 96th St. in Manhattan accounts for over 20% of all departing traffic.

Consistent with the data from the PANYNJs 2004 passenger survey, the 2006 outgoing passenger survey indicates thatbusiness travel accounts for roughly one of departing airport passengers.

Table IV: PANYNJ Spring 2006 Prole of Passengers Departing from JFK, EWR and LGA

Trip Origin Trip Origin Location Total Airport Trafc

Home 37.9% New York 52.5% Leisure/Vacation/Visiting 57.1%

Hotel 20.2% NYC 40.2% Business Only 27.9%

Staying with friends/family 14.4% Manhattan 28.4% Both Business/Non-Business 4.8%

Another airport 14.3% Manhattan - below 14th St. 4.4% Other 10.1%

Work 10.2% Manhattan - 14th st. - 96 St. 21.5% Any Business Net 33%

Other 2.9% Manhattan - above 96th St. 2.4%


PANYNJ survey of local passengers, May 2004 - June 2004. e survey clearly indicates that the vast majority of localpassengers are eschewing the cost and congestion reducing benets of public transportation. e summation aw in thesurvey is most likely the result of multiple selections made by respondents to indicate the various ways in which they gto the NYC area airports. Since they add up to over 100%, the results can thus be interpreted as ratios and representatioof likelihood. As such, while it is inaccurate to deduce that 27% of passengers take a combination of Airport Bus, Airtraand Transit, one can deduce that passengers are roughly four times more likely to arrive at the airports in a car, taxi or lim

Table V: PANYNJ May 2004 - June 2004 Prole of Local Passengers travelling to and from JFK, EWR and LGA

Residents Airport Access (adds > 100%) Local Passenger Residence

Private Car: Parking 17% Airport Bus 8% Manhattan 33% Long Island 10%

Private Car: Drop Off 28% Airtrain 8% Other NYC 14% Westchester 3%

Limo Car Service 22% Transit 11% Other NY State 3%

Taxi Service 26% Connecticut 5%

Rental Car Service 7% New Jersey 24%


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A signicant percentage of local passengers are paying more than $40.00 to get to the NYC area airports.Limo CarService and Taxi Service received roughly 40% of total responses in the 2004 PANYNJ survey of local passengers. ispercentage can be expected to be signicantly higher for residents of Manhattan. ese passengers are paying a steep premium to the cost of public transportation but due to chronic traffic congestion problems, are often not realizing signi-cant time.

Limousine, Livery Service. Generally starts at approximately $65 dollars and can cost as much as a couple of hundred dollars. Limo services are susceptible to the same congestion problems that plague private cars and taxi

JFK. As of 2006 there is a $45.00 at rate, not including tolls and tips, to and f rom Manhattan1. Travel time toand from Manhattan is 40 minutes with no traffic and is easily over 1 hour in traffic.2

EWR. For trips from New York city, the taxi fare is metered and a surcharge of $15 is added. Depending on ori-gin, the total will be between $40-$75. For trips to and from Manhattan, there is a zone-specic at fee rangingfrom $50 - $70, not including tolls and tip 1. Travel time to and from Manhattan is 40 minutes with no traffic andis easily over 1 hour in traffic.2

LGA. Trips to and from Manhattan cost between $22-$30, not including tolls and tip. Travel time to and fromManhattan is 20 - 30 minutes with no traffic and can be signicantly longer with traffic.2

General Ground Transportation to JFK, EWR, LGA

Airport access relies heavily on city roadways and will continue to place a signicant burden on NYC area roadways.Public transportation usage has not kept pace with passenger growth at JFK, EWR, and LGA. In 2006, 2,875,744 morepassengers were taking public transportation than in 2003. At the same time, the airports saw an increase of approximat17,200,000 passengers of local origin or destination. is translates into increased traffic and congestion going to and f rothe NYC area airports.

Table V: Ground Transportation to JFK, EWR, LGA

Paid Parked Cars Taxis Dispatched AirTrain: JFK & EWR Other Ground Transp. Total Passenger Trafc

2003 11,665,604 6,253,519 2,507,787 2,129,940 83,669,773

2004 11,898,917 6,691.265 3,962,303 2,449,431 93,922,032

2005 11,329,016 7,344,805 4,856,797 2,457,155 99,859,648

2006 10,837,308 7,393,947 5,538,177 1,975,294 104,204,920

added/sub (828,296) 1,140,428 3,030,390 (154,646) 20,535,147

AirTrain + Other Ground Transpor tation = x (.84) - local o/d ratio =

2,875,744 passengers ~ 17,249,523 passengers

taking public transportation added with local o/d added

o/d = origin or destination


1Source: New York City Taxi & Limousine Commission2 Source: www.nyctourist.com

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Worsening Trafc Congestion and Increasing Delays in the NYC Metro Area

According to the Texas Transportation Institutes 2007 mobility report, traffic delays in the NYC metro area are gettingconsistently worse year after year. In 2005 traffic delays incurred an associated annual cost of $7.4 billion, a signicantcrease to the 1982 gure of $649 million. In steady deterioration, congestion has increased eight-fold from 68 million lo

hours in 1982 to 384 million lost hours in 2005. A peak traveler driving between the hours of 6-9 AM and 4-7 PM canexpect annual delays of 45 hours, ranking the NYC metro area the nations 16th worst in 2005. In indication that delaysare worsening, the area has slipped from hits 2004 position of having the 23rd annual delay time per peak traveler in thenation.

According to the Department of Transportation, traffic in the central business district has surpassed pre September 11,2001 levels. e Department states that half of New Yorkers feel that current levels of traffic in the city are unacceptableand eight out of ten New Yorkers identify traffic jams on city streets as a problem.

Table VI: The Mobility Data For New York-Newark, NY-NJ-CT

2005 2004 2003 2002 2001 2000

Peak Travelers (1000s) 8,319 8,254 8,177 7,969 7,757 7,588

Congested Travel (% peak) 68 68 64 61 60 61

Congested System (% land miles) 48 48 44 44 44 44

Congested Time (# rush hours) 7.2 7.2 7.2 6.8 6.8 6.8

Total Annual Delay (1000s of person hours) 384,046 350,148 305,283 270,520 255,564 256,244

Delay per Peak Traveler (person hours) 46 42 37 34 33 34

Rank 16 23 28 33 31 27

Source: 2007 Annual Mobility Report produced by the Texas Transportation Institute.

Increasing Usage of Helicopter Services in the NYC Metro Area

Charles Gargano, Chairman and Chief Executive Officer for Empire State Development Corp., recently stated that heli-copter service in the NYC metro area is rising rapidly. e PANYNJ data for helicopter movements and passenger trafficin its downtown heliport corroborates Mr. Garganos statement. e data indicates strong growth with pre September 11,2001 traffic levels easily surpassed in 2004.

Table VII: PANYNJ Downtown Heliport Trafc Data

Helicopter Movements Passenger Trafc

2000 31,752 2004 32,707 2000 68,289 2004 104,158

2001 9,018 2005 36,541 2001 17,351 2005 113,752

2002 4,936 2006 42,838 2002 6,845 2006 124,130

2003 19,632 2003 47,124


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U.S. Helicopters Value Proposition

US Helicopter offers a very fast, reliable, relatively hassle-free alternative to ground transportation to or from New Yor

airports. A typical traveler would take a taxi or car service to one of the two Manhattan heliports, which are located on tEast River near the Wall Street and midtown business centers, respectively. Travelers arrive 15 minutes prior to take-off which allows ample time for check-in, security screening and boarding. Any waiting is done in a comfortable lounge wireading material and Bloomberg terminals. e ight itself takes only eight minutes, as the helicopters cruise at 170 mileper hour at an altitude of 1,000 to 1,500 feet.

Passengers exit the helicopter on the tarmac, where they are greeted by a shuttle van that takes them a short distance totheir terminal. Delta customers at JFK and Continental customers at Newark need no further security clearance, but may walk straight to their gates. Secure-side clearance is not yet offered in conjunction with other airlines, so their customermust check in at the airport and proceed through regular security.

e regular fare is $159 (a current promotional fare is $99) per person per leg. For a traveler using one of the partner airlines, the premium over a taxi or car service is easily justied by the time savings and stress-free experience. Many custers say that they would gladly pay the premium just for the privilege of skipping the airport security lines. e lines at thheliports are very short, as the aircraft only hold a maximum of eight people.

For customers of other airlines, the service is still much faster than ground transportation and it eliminates the risk of trac and construction delays at the tunnels, bridges and highways. Traffic backups are very common in New York and posthe greatest threat to missing a ight, so when taking a car to the airport, it is advisable to allot an extra 30 to 60 minuteon top of the expected travel time. Even with a smooth trip, this extra time is spent in the airport terminal waiting for thight, instead of someplace else more productive or enjoyable.

In addition to the benets of time savings and skipping the airport TSA lines, taking a helicopter to or f rom the airportis exciting. e views of Manhattan, New York Harbor and the Statue of Liberty draw thousands of customers a year forhelicopter tours, but come gratis with the airport shuttle. Most people have never ridden in a helicopter, and that experi-ence itself is a thrill. Prestige is another draw, as helicopter travel has an association as something enjoyed by the rich anfamous. Here an extra $50 or $80 buys a luxury service that typically costs thousands of dollars.

Routes

Currently, the Company offers service between Manhattan and JFK and Newark airports on approximately a twice-houbasis. Passengers may also travel between these two airports, and there is one ight from Bridgeport, Connecticut each

morning and one ight returning each evening. (note: add full schedule and map in end as appendix or such. each willtake up full page and will break ow of report here. q: map shows Bridgeport/Sirkorzky airport as destination. Is it?)

Charter Services

U.S. Helicopter also provides charter services, which function as a source of supplementary revenue during weekendsand other times when the aircraft are not needed for scheduled travel. e Company is building a book of regular charter

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customers for ights around the region, such as to Boston, Philadelphia, the mountains or beaches. Management reportsthat charters accounted for roughly 20-25% of revenue this summer, but the business plan only assumes that they will ctribute 5% overall. Charter as well as scheduled business to the Hamptons and other beaches was a signicant source ofrevenue this past summer. Some executives of large companies, movie actors, sports gures and other celebrities have bcome good customers. ey often call to reserve a helicopter 24-48 hours in advance, and the Company reports that thes

customers appreciate their responsiveness. U.S. Helicopters charter rates are very competitive with other charter provid

Aircraft

U.S. Helicopters executives conducted extensive research before choosing the Sikorsky S76++ dual-engine helicopter fthe Companys eet, which currently consists of four aircraft under lease. Each is outtted for eight passengers and can congured for more at the expense of luggage space. e helicopters are equipped with GPS and IFR (Instrument FlightRule) equipment, enabling very low down times due to weather. All ights are manned with both a pilot and co-pilot, buthe S76++ can be own by a single pilot. e aircraft receive their regular maintenance at Bridgeport, Connecticut.

ree of the four aircraft are leased from Canadian Helicopter, and the base price is approximately $37,000 per month peaircraft. is fee does not include fees of $850 per hour of ight time.

Earlier Helicopter Airlines

In the years between the 1950s to the 1980s, several helicopter airlines ran scheduled services in major U.S. cities. ese

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ventures, including New York Airways, Las Angeles Airways, Chicago Airways and Pan American proved that demandexists, but they were plagued by safety and reliability issues.

Las Angeles Airways ew Sikorsky S61s from LAX to Anaheim and Las Angeles in the 1960s and experienced a fatacrash due to mechanical failure. New York Airways operated between Manhattan and the citys major airports f rom 195to 1979. e airline experienced two major accidents with its Sikorsky S61 aircraft. Contaminated lubricants were blamefor a 1963 crash that killed all aboard a ight from JFK. In 1977, atop the Pan Am building, the landing gear on a heli-copter failed while passengers were boarding, resulting in rotors striking and killing passengers waiting to board as wella person on the street below.

Improvements Since Earlier Helicopter Airlines

U.S. Helicopters operations benet greatly from improvements in aircraft and navigation technology since the early 19 e safety, reliability and operating costs of the modern Sikorsky S76 are far superior to the mid-20th century models S5and S61 that were used for earlier shuttles.

e S58 and S61 had direct operating costs (DOC) of approximately $2,500 per ight hour and required seven hours of maintenance for each hour of ight. Todays S76++ has DOCs of $1,129 and a maintenance hour to ight hour ratio of3.6. Backup systems and routine replacement of components also reduce unscheduled maintenance.

e S76++ is a dual-engine aircraft, and U.S. Helicopters birds are equipped with Single Pilot IFR equipment with GPS,Full Authority Digital Engine Control, and 3-Axis Automatic Flight Control Systems. ese features greatly enhancereliability and safety.

Improvements in navigational systems reduce down time due to bad weather by more than an order of magnitude, to amere 1.5%. 20 years ago, when an airport declared that it was operating under IFR due to poor visibility, helicopters had join the pattern of xed wing aircraft waiting to land or depart using the airports Instrument Landing System (ILS). iscould add an hour to ight time, sending costs through the roof and f rustrating passengers, so helicopter services wereoften cancelled instead. IFR conditions occur 18% of the time in the New York area, so this alone posed a huge reliabilitproblem.

In recent years, GPS technology has enabled the creation of helicopter-only SVFR and IFR tunnels between the heliporand airports, which allow safe ight 98.5% of the time. Only high winds, a very low ceiling such as fog, or icing conditisuch as freezing rain will prevent the helicopters from ying. Precipitation does not pose a problem as long as it is notfreezing to the aircraft. e 1.5% down-time rate is similar to that experienced by other contemporary helicopter airlines

As a courtesy, the Company telephones customers 90 minutes in advance of their ights on days when there is a signi-cant chance of weather delays and apprises them of this risk. Customers have the option to accept a refund or a car servto the airport if they do not want to take the chance of a canceled ight.

Number of Choppers, Pilots, Facilities, Ground Employees

e Company employs a total of approximately 75 employees, 49 of which are full-time employees. 17 of the full-time

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workers are in ight operations, including 15 pilots, 9 of whom are captains. ere are 8 maintenance workers, 15 sta-tion personnel at the airports and heliports, 5 marketers, 5 executives and 3 nance employees. ere are 15-18 part-timemaintenance employees who are paid by the hour.

Marketing

e Company has allocated $2.4 million per year to marketing efforts. Its conducts targeted promotions of its servicethrough business magazines such as Cranes New York and CFO Magazine, as well as over the Bloomberg network andnancial websites such as thestreet.com, and deal.com. Billboards have been placed in airports, Grand Central Station,and at the entrance to the Holland Tunnel from New Jersey. Half of the media budget is allocated to the internet, and theother half goes to print, radio and billboard advertisements.

Telephone calls are also placed to travel offices at major corporations around the U.S. to inform staff about the helicopteshuttle option, and fares are discounted for bulk corporate purchases. e New York investment banks in particular havebeen a good source of business. U.S. Helicopters management reports that word of mouth is a very signicant contributto growth. ere is an element of competitiveness that emerges when colleagues and f riends learn that someone has takea helicopter to the airport. e Company reports that 50-60% of passengers are repeat customers, and that many haveown with them eight or ten times in the rst six months of operation.

Airline partners are very important for bringing new business. Delta and Continental both maintain full-page advertise-ments for U.S. Helicopter in their in-ight magazines in perpetuity. ey are also enabling frequent iers to spend theirmiles on helicopter trips, and using email and other notices to promote the service. Airlines also sometimes hold promo-tional events for journalists and pay for rst-class travel, room and board, and the helicopter shuttle is a unique feature tthey can promote. e New York Times has published several articles about the service, as well as the Financial Times ofLondon. Continental in particular is eager to emphasize how easy it is to connect from their new hub at Newark Airporto Manhattan via U.S. Helicopter. During drink service in ight, Delta distributes coasters with an image of one of the

Companys aircraft and a code for discounted fares.

e Company is also speaking with major hotels about offering discounted rates to their f requent customers.

Relationships With Airlines

U.S. Helicopter has partnered with Delta at JFK and Continental at Newark to provide security clearance and check-in for the passengers entire itinerary at the heliports. Passengers receive their boarding passes for all of their connecting ightswhen they check in at the heliport. Conversely, these partners provide check-in for the helicopter leg at the point of origin.

The Company is pursuing additional partner relationships with other airlines, because this would enable more customersto skip the check-in and security lines at the airports, making the helicopter shuttle a much more attractive option.

The Company is also presenting its service to airlines as a perquisite to be offered with a rst-class or business classticket, particularly for international ights. The cost of the helicopter leg is often as little as 2-5% of the cost of such aticket. Airline travel, even at the high end, has become a largely commoditized product, so airlines seek to provide uniquetouches in an effort to attract customers. These sometimes include limousine service to and from the airport, so the heli-copter shuttle would seem to be a highly desirable and distinguishing feature.

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Automated Booking Services

e yush.com website allows for online booking with an engine from Worldspan that is elegant and easy to use. is

past summer, USHP formed a distribution agreement with Galileo, a UK-based rm that provides airline inventory, faresand automated booking to 49,000 travel agents around the world.

Other helicopter shuttles: Vancouver, Monaco, East Asia Airlines

Several other scheduled helicopter airlines have appeared in recent years in other cities around the world. Many of theseoperations use the same S76 aircraft employed by U.S. Helicopter. For instance, Helijet International, Inc., ies out of Vancouver, B.C., where bodies of water and mountains impede ground transportation. East Asia Airlines runs scheduledservice between Hong Kong, Macau and Shenzhen, as a rapid alternative to the ferry system. Heli-Air Monaco runs a

shuttle between Nice, France and Monaco.

Expansion Plans and Possibilities

e Companys expansion plans start with adding three more S76++ aircraft for the existing New York routes in the nearfuture, for a total of seven. is would enable an expanded schedule to the airports and more freedom to accept charterbusiness. Many of the Companys costs are xed, so improvements in volume translate into improved prots. e Com-pany employs two or three more pilots than necessary at the moment, but it is important to have the capacity to expandquickly and the hiring and training process can be lengthy. Two additional helicopters for lease have been located, and thCompany is awaiting nancing before adding them to the eet.

Management estimates that cash ow breakeven can occur with the addition of the sixth aircraft and ninth route if theights are running at an average capacity of 55%. With further growth, the breakeven capacity could drop to 40% as ef-ciencies of scale mount. e current capacity is reported to be somewhere between 30-40%, and has been improvingsteadily since the March launch. Summertime beach travel was a boon for customer awareness, as the weekend traffic iterrible. is fall, the $99 fare sale has reportedly attracted a lot of new business.

e Company intends to complete its service to New Yorks airports with routes connecting LaGuardia to Manhattan, andto commence operations out of a third heliport at West 30th Street on the Hudson River. Another interesting possibility is to provide the fastest scheduled service from Manhattan to Washington: one hour, ten minutes. U.S. Helicopter alreadyhas approval to y to Ronald Reagan Airport, and is the only company with permission for such a scheduled service. Aroute to downtown Washington is being sought, as this would eliminate the extra leg. Management estimates that it coul

earn a prot by charging as little as $340 compared to $350-375 for an airline shuttle or slightly less for the two and onhalf hour Acela train ride. A shuttle to Boston is also a possibility, as this is a very popular weekday business route.

e demand for scheduled helicopter services has also been demonstrated in Las Angeles and Chicago in the past, andU.S. Helicopter could leverage its capabilities to reopen these markets. Management envisions expanding to Chicago within three years, where routes could be opened between downtown and OHare and Midway airports. e Las Angelesmarket also appears ripe for development, with service between LAX and Burbank, Orange County and the San Fernan

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Valley.

Strong Barriers to Entry for Potential Competitors

If the Company is successful, it is unlikely that competition would emerge in the near future, because the industry has vhigh barriers to entry. e planning and certication stages alone are lengthy, real estate agreements must be arranged, pi-lots and ground crews recruited and trained, and carrier agreements secured with partners. Plans would have to be workout in extreme detail with each partner airline as well as the TSA, FAA, airports, and air traffic controllers.

e FAA requires individual certication and agency approval of the Director of Operations, Chief Pilot and Head of Maintenance. Few executives have the expertise required for such a venture. Without the deep industry experience of evmember of U.S. Helicopters executive team, an entire other layer of management would have to be added, greatly increing costs. In addition, nancing is likely to be difficult for a competitor to secure because of the high perception of risk

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Balance Sheet on June 30, 2007 (in $000s)

Current Assets Current Liabilities

Cash 61 Accounts payable and accrued expenses 3,771

Accounts receivable 349 Note payable, net of discount 1,655

Other 608 Other 330

Total current assets 1,018 Total current liabilities 5,756

Property and equipment 915 Long-term debt 6,039

Leasehold improvements 1,230 Long-term derivative liability 216

Ofce equipment 150 Deferred charges 438

Less accumulated depreciation (466)

Net 915 Total liabilities 12,452

Other Assets

Deferred nancing costs, net 1,420 Stockholders decit 7,959

Deferred offering costs 221

Deposits 919

Total other assets 2,559

Total Assets 4,493 Total liabilities and stockholders decit 4,493

Note: Unaudited. Source: US Helicopter Corporation.

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Income Statements on June 30, 2007 (in $000s)

Q 6/07 Q 6/06

Revenues 883 219

Expenses

Payroll 1,011 930

Payroll taxes and benets 134 76

Crew costs and other 43 25

Maintenance 415 283

Fuel 147 104

Aircraft and trafc servicing 241 57

Professional fees 594 570

Insurance 190 175

Ofce expense 52 53

Website 3 11

Travel 12 11

Rent 132 94

Lease expense equipment (aircraft) 478 354

Reservation expense 68 51

Advertising 66 364

Depreciation and amortization 105 66

Licenses and fees 0 6

Total expenses 3,692 3,233

Operating income (loss) (2,808) (2,942)

Other income (expense)

Interest Income 2 45

Interest expenses (254) (133)

Amortization of deferred nancing costs (160) (55)

Change in fair value of derivative 12 625

Amortization of debt discount (251) (229)

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Continued - Income Statements on June 30, 2007 (in $000s)

Q 6/07 Q 6/06

Net Other Income (loss) (641) 252

Net Income (loss) (3,449) (2,689)

Net Income (loss) per common share $(.10) $(0.8)

Weighted average number of shares (000s) 35,706 32,154

Note: Unaudited. Source: US Helicopter Corporation

Statements of Cash Flows (in $000s, unless otherwise noted)

6 mo.6/07 6 mo. Q6/06

Operating activities:

Net (loss) (7,308) (4,791)

Adjustments

Depreciation expense 215 79

Amortization of deferred nancing costs 261 228

Recognition of deferred income 0 (41)

Change in fair value of derivative (46) (382)

Amortization of debt discount 545 231

Amortization of deferred equity compensation 558 279

Non-cash fees paid for services 101 181

Changes in Assets and Liabilities

(Increase) decrease in:

Accounts receivable : (309) (89)

Inventory, Prepaid Expenses, other 151 (116)

Restricted cash (2) (53)

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Continued - Statements of Cash Flows (in $000s, unless otherwise noted)

Increase (decrease) in:

Accounts payable and accrued liabilities 1,936 278

Deposits (85) (565)

Deferred charges (61) 600

Net cash from operating activities (4,045) (4,161)

Investing activities

Acquisition of property and equipment (154) (913)

Financing activities

Proceeds from long-term debt 1,850 6,000

Payment of short-term debt (1,508)

Release of restricted cash 250

Proceeds from sale of common stock 500

Payment of nancing costs (212) (1,023)

Net cashnancing activities 1,638 3,720

Net (decrease) in cash 2,560 (1,354)

Note: Unaudited. Source: US Helicopter Corporation

Capital sources

e Company has relied heavily upon convertible debt and warrant issuance for recent nancing, as well as equity and warrant issuance. YA Global Investments, L.P. (YA, formerly known as Cornell Capital Partners, L.P.) has provided sev

eral recent rounds of nancing. Two rounds of nancing have been completed in 2007: in March, a $1.1 million convert-ible debt placement with YA; and in October, a $6.6 million equity placement, described below.

Management has stated that it is pursuing a larger nancing, possibly from a strategic partner or aviation specialist, inorder to pay down remaining debt and fund operations. Lease nancing is also being sought for additional aircraft.

On October 22, 2007, the Company announced that it had raised $6.6 million in equity nancing f rom InternationalFinancial Advisors, K.S.C.C. (IFA) for working capital and to pay down some of its most high-yield debt. In exchange

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for the purchase price, U.S. Helicopter issued 8 million shares of common stock and 34.7 million warrants with a strikeprice of $0.01 and a term of ve years. e 8 million shares are non-voting, due to U.S. regulations prohibiting the foreigcontrol of domestic airlines.

e agreement with IFA allows them to appoint a second director, in addition to their right to appoint a rst under aprevious agreement dated October 26, 2005. e later agreement comes with anti-dilution rights in the event of anothernancing within 12 months, and a right of participation in any nancing for two years.

e Company paid YA approximately $1.7 million of the gross proceeds of the nancing as repayment of convertible noissued on August 24, 2007 and May 14, 2007 with interest. $340,000 of the proceeds were paid to YA as repayment of paof a $1.1 million convertible loan issued on March 30, 2007, so the Company still owes roughly $845,000 of this note to YA.

Valuation considerations

e U.S. airline industry is notorious for unreliable prots and frequent bankruptcies. Companies operate on very thinmargins that are squeezed by such factors as labor unions, borrowing costs, fuel costs and, most importantly, the commo

itization of air travel. Todays travelers have little loyalty to carriers and perceive few substantive differences between thso price exerts an overwhelming inuence on their decisions. is forces airlines to sacrice margins and sometimes runcertain routes at a loss in an effort to maintain market share.

Rough estimates of airline protability can be obtained by survey of large, xed wing carriers. e table below shows th2006 scal year income gures for several such companies, expressed in millions of dollars (Source: Yahoo! Finance).

Table VIII: The Mobility Data For New York-Newark, NY-NJ-CT

Carrier Revenues Operating Earnings Net Earnings

Southwest Airlines Co. 9,086 934 499AMR Corporation 22,563 1,060 231

Continental Airlines, Inc. 13,128 488 343

Air France, KLM 30,773 127 (1)

Jet Blue Airways Corp. 2,363 305,283 270,520

Northwest Airlines Corp. 12,568 740 (2,835)

UAL Corporation 19,340 447 (22,876)

US Airways Group, Inc. 7,117 (378) (611)

According to Yahoo! Finance, the industry average gross prot margin for major airlines is 21% and the average net promargin is 0.8%. e fact that the average debt-to-equity ratio is 5.1:1 goes a long way toward explaining where those operating earnings are lost (interest expense). Although U.S. Helicopters debt-to-equity ratio of 2.8:1 is substantially lowethan the industry average, the debt is at relatively high yields.

It is difficult to assign a value to U.S. Helicopter common shares at this early stage while a large nancing of undetermi

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structure is being sought, but a very imortant consideration when evaluating the equity of this company is that it provida luxury product at a price that is an order of magnitude below that of its closest competitors, the charter operators. ereis no other helicopter airline in the U.S., and high barriers to entry appear likely to keep things that way for the near fu-ture. Considering the relatively low extra cost of the helicopter service over taxis and car services, and that the Compantargeting corporate and business travelers for whom the expense is tax-deductible, pricing seems unlikely to be an issue

margins should be substantially higher than xed-wing carriers.Once the Manhattan-airport services are fully rolled-out, there is ample room for expansion of its New York opera-tions and the opening of routes in other U.S. cities. Shuttles from Manhattan to Washingon D.C. and Boston could belaunched, and earlier carriers have already demonstrated the viability of helicopter shuttles in Chicago and Las Angeles e Companys corporate and regulatory infrastructure could be leveraged for a relatively fast rollout of operations in thcities. In addition to revenue growth, expansion may improve margins as many corporate costs will remain xed or growa slower pace than ticket sales.

ese assumptions are highly speculative at this early stage, as the Company remains in its rst phase of operations andstill needs to attract a solid base of customers for its New York service. Key to this success will be the procurement of partnerships with more airlines so that customers do not need to check in and traverse security checks at the airports. eCompany is expected to continue to operate at a loss until at least two more aircraft are added to the eet and passenger volume is increased. is will take an indeterminate amount of time, and there can be no assurance that nancing will besecured to sustain operations to that milestone.

Investment Risks

Airlines are notoriously difficult businesses to operate protably for sustained periods. ey are subject to a greatnumber of regulatory, labor, operating and economic risks.

U.S. Helicopter must remain in compliance with the Department of Transportation, the FAA, the TSA, the FCC

and the Port Authority of New York and New Jersey for a myriad of licenses, permits, certicates and agreements.These regulations change frequently, and changes may be detrimental to the Company.

e Company is in the early stages of its business plan and has yet to generate cash ow from operations. It isreliant on outside sources of nancing and will require additional nancing to remain in business. ere can be noassurance that the Company will continue to nd such nancing at acceptable terms.

e Company has outstanding liabilities of roughly $10 million. e failure to make interest and principal pay-ments on this debt could jeopardize the Companys assets and operations.

It is important that U.S. Helicopter retain its nucleus of executive and management personnel with strong indus-try expertise. e loss of key individuals could disrupt the efficiency of operations and result in higher costs.

If the Company is to continue to execute its business plan, additional operating agreements must be secured foruse of the West 30th Street Heliport and LaGuardia Airport, and there can be no assurance that these contractscan be obtained.

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e Company has not yet obtained secure-side transfer rights for passengers using airlines other than Deltaand Continental at JFK and Newark, respectively. Without such rights, these passengers must pass through thesecurity lines in the airports, greatly diminishing the time savings and positive experience of using the helicopteservice. ere can be no assurance that the Company will be successful in these efforts.

e U.S. Helicopter passenger experience is enhanced for those passengers traveling on airlines that have contrac with the Company for code-sharing and check-in at the heliports. Only two such agreements are active at presenand there can be no assurance that others will be secured.

Despite the Companys best efforts, travelers may not use the helicopter service in sufficient volumes to generatoperating prots. e perception of safety risks, high costs or a reluctance to change travel habits may prevent theadoption of the service.

An accident involving one the Companys aircraft would be likely to have a severe effect on travel volumes, asexperienced by New York Airways after the incident atop the Pan Am building. Accidents or damage to one of

the aircraft could also greatly increase insurance rates or cause insurers to withdraw coverage, leading to a halt ooperations.

A drop in overall travel volumes, such as that experienced after September 11, 2001 or during recessions couldreduce passenger volumes and cause nancial troubles.

e stock is thinly traded, has exhibited price volatility, and is a bulletin board stock subjecting broker-dealers toadditional sales practice and disclosure requirements. e shares are appropriate only for risk-oriented investors.

Additional risks are outlined in the Companys investor materials and SEC lings, and these are hereby incorpo-rated by reference.

Management

e Companys executive and management team has extensive experience in the management of airlines and helicopteroperations.

Jerry Murphy, President and CEO. Mr. Murphy has previously been the president and CEO of Kiwi International Air-lines, where he led a turnaround process that stabilized the company and improved efficiencies. He has also been the se vice president for marketing and services for MGM Grand Air, a luxury airline. Previously, Mr. Murphy held executivepositions with Pan American World Airways, including V.P./GM Sales & Reservations, V.P. Sales & Advertising, andManaging Director Northeast, where he his responsibilities included the Pan Am Shuttle helicopter service.

Donal McSullivan, Chief Marketing Officer. Mr. McSullivan has worked in airline and tourism management for morethan 30 years. His most recent post was the building, management and sale of IntelGo, a travel technology company, onbehalf of the estate of Eastern Airlines. He previously was an executive responsible for turning around Air Tahiti Nui, thnational airline of French Polynesia. He improved management, opened new routes, and negotiated partnerships with ot

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er airlines and governments. Prior to that position, Donal was a founder of Pan Am II, which raised $100 million in equnancing and acquired the rights to the Pan Am trademarks and route system. Mr. McSullivan has also led the European Travel Commission for North America and been the General Manager North America for the Irish Tourist Board.

George Mehm, CFO. Mr. Mehm owns a consultancy, MEHMCO Financial Services, Inc., which specializes in the service, transportation and professional industries. He has assisted companies with restructuring, bankruptcy, accounting, talegal, contract negotiations and aircraft/engine/equipment nancing. He was previously a Senior Director of Corporate nance for Pan American World Airways, where he worked on company-wide nance, equipment acquisitions, restructuring and the pension and insurance plans. Mr. Mehm also worked for the Great Atlantic & Pacic Tea Co., Inc. in severalexecutive positions. He received BA and MBA degrees from Seton Hall University and is an active contributor to charitand civic organizations in his New Jersey community.

Terence O. Dennison, COO. Mr. Dennison has worked in the aviation industry for more than 40 years, during which hehas held many executive positions and designed and implemented business plans and reorganizations. His consultancy,Dennison & Associates, Inc., has served travel companies and airlines for 20 years. He was appointed by the U.S. Bank-ruptcy Courts Federal Trustee as the COO on behalf of the estates of Tower Air and Kiwi International Airlines whilethey continued to operate. He helped create Sunworld International Airlines in 1995. He is highly experienced in FAAregulations and has managed several new FAA carrier certications. Mr. Dennison maintains a close working relation-ship with the FAA standards office, and has been called to testify before Congress on aviation matters, and to appear as aexpert witness at various U.S. agency proceedings.

Gabriel Roberts, V.P. Finance and Administration. Mr. Roberts is a founder of U.S. Helicopter and is responsible fornancial and administrative operations. He began his aviation industry career at Pratt and Whitney and later worked forSikorsky Aircraft. He is a graduate of Rensselear Polytechnic Institute and is a member of an FAA rulemaking committ

Jake Bolivar, Director of Operations. Mr. Bolivar manages the Companys ight operations. He has more than 35 yearsof aviation industry experience and is a highly-experienced pilot with more than 21,000 ight hours and ratings in mandifferent large aircraft.

Richard Carozza, Chief Pilot. Mr. Carozza manages and oversees the Companys pilot corps. He has more than 8,500

ight hours and 20 years of helicopter experience in many different models, and holds several ratings. He has been a popilot, worked for Liberty Helicopter, Corbex Air and National Helicopter Corporation. He is an EMT and FBI rearmsinstructor.

John Galligan, Director of Maintenance. Mr. Galligan has worked in helicopter maintenance for more than 20 years inmany different technical and management capacities for various private and public organizations. He longest tenure wa with the NYPD Aviation Unit, where he managed a staff for 24/7 repair of service helicopters. He was also the training/safety officer and OSHA officer with that unit. He holds a great number of maintenance and ight licenses and certications.

Board of Directors

e Companys board includes Jerry Murphy, the CEO, as well as other distinguished experts in aviation, nance, government negotiations and lobbying.

Dean C. Borgman, Chairman. Mr. Borgman is the retired Chairman of Sikorsky Aircraft Corporation. He has also worked for Boeings helicopter group and that of McDonnell Douglas. He also served on the U.S. Army Aviation Com-mand and in Army Aviation Research. He serves as a trustee or advisor to several colleges and universities.

Colonel Clinton Pagano. Mr. Pagano was the Superintendent of the New Jersey State Police from 1975 to 1990, during

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which he helped build the states substantial helicopter eet, including a 24/7 helicopter ambulance service. He has alsobeen the Director of the New Jersey Division of Motor Vehicles, the Director of Emergency Management, in addition toother public and private posts.

John Capozzi. Mr. Capozzi manages a consultancy, a publishing house and an investment banking rm that works withemerging growth companies. He began his corporate career at American Airlines. He is on the boards of the FaireldUniversity Business School and the Enterprise Center and Yale University. He was a member of General Colin Powellsorganizing committee and worked with former Surgeon General C. Everett Koop in the founding of the World Organization for Science and Health. He is also an author of several business motivation books.

Chris Brady. Mr. Brady is the Chairman and founding partner of e Chart Group, a merchant banking rm. He hasmore than 25 years experience in nance and capital markets, including positions at Lehman Brothers and Dillon, ReadCompany. He is the son of Nicholas F. Brady, the former Secretary of the Treasury.

George Fechter. Mr. Fechter is the head of Fechter Holdings, a manager of personal investment portfolios that includestart-up companies. He has chaired management and consultancy companies, and he currently serves on several boards directors.

Edward Sherman. Mr. Sherman is retired from Nissan Motor Corporation, where he lead the introduction of Innity dealerships into the U.S. Prior to he three-decade career with Nissan, he was a schoolteacher, coach and an officer in theMarine Corps. He is involved with educational, veterans and civic organizations in New Jersey.

Stephen Wills. Mr. Wills is the CFO of Palatin Technologies, a biopharmaceutical company for which he has workedsince 1997. He has helped raise more than $150 million for his company and lead negotiations with major pharmaceuticcompanies. He has also been the CFO of another public biotech and the president of an accounting rm.

Address: 6 East River Piers, Downtown Manhattan Heliport, New York, NY 10004

Telephone: (212) 248-2002

Web site: www.yush.com

State or other jurisdiction of incorporation or organization: Delaware

Auditors: Moore Stephens PC (New York, NY). In their report on the Companys results for the scal year ended De-cember 31, 2006, the auditors expressed a going-concern qualication.

Investor contact: [email protected]

Disclosures: is report was prepared by e Research Works, LLC (RW). Effective May 23, 2007, in consideration

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for RWs equity research services relating to this Company, including this report, to be performed through October 31,2008, the Company agreed to pay RW a fee of $25,000. is report is based on RWs independent analysis and judgment e materials upon which the information at this site is based were based on sources believed to be reliable, but RW doenot guarantee the informations accuracy or completeness. Unless otherwise noted, any interpretations, earnings estimaand conclusions contained in this report are those of RW. is report is not intended to constitute a recommendation for

any particular investor to purchase or sell any particular security or that any particular security is suitable for any particinvestor. is report should not be construed as a recommendation or request to engage in any transaction, or an offer orsolicitation of an offer to buy or sell any security or investment, and investors are advised to consult their personal brokor investment advisor before making any investment decision concerning any of the companies mentioned herein. Useof this report may be subject to applicable rules of any self-regulatory organization of which you may be a member. einformation contained in this report is subject to change without notice, and RW assumes no responsibility to update thinformation contained in this report. Subject to certain restrictions posted in the Legal section of RWs web site (www.researchworksllc.com), RW and its affiliated entities and persons may purchase and hold positions in the securities of itclients, but they are prohibited from selling any securities of a RW client during the RW service period to such client. e Research Works, LLC 2007. All rights reserved. Additional and supporting information is available upon request.

Michael J. Ritger, who authored this report, has been an equity research analyst since 2003, and he is the Managing Mem

ber of e Research Works, LLC. He passed the Uniform Investment Adviser Law Examination, Series 65, in August2003, and he holds a BA (English) from Bates College and a Masters degree from the Yale School of Forestry and Environmental Studies. Mr. Ritger certies that the views expressed in this report are an accurate representation of his per-sonal views about the Company and its publicly traded securities.

e Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order tocomply with the terms of the safe harbor, RW notes that except for the description of historical facts contained herein, threport may contain certain forward-looking statements that involve risks and uncertainties as detailed herein and fromtime to time in the Companys press releases and elsewhere. Such statements are based on RWs current expectations aare subject to a number of factors and uncertainties, which could cause actual results to differ materially f rom those de-scribed in the forward-looking statements. ese factors include those described in the Companys press releases and SElings, all of which are hereby incorporated by reference. No forward-looking statements are a guarantee of future resu

or events, and one should avoid placing undue reliance on such statements.

October 26, 2007 Michael J. Ritger

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