SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES

FORM 10-K

INDEX

THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN SUCH FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE ARE DISCUSSED IN ITEM 1A, “RISK FACTORS” AND ITEM 7, “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION”OPERATIONS” OF THIS ANNUAL REPORT ON FORM 10-K. SEE ALSO “FORWARD-LOOKING STATEMENTS” WITHIN SUCH ITEM 7 OF THIS ANNUAL REPORT ON FORM 10-K.

PART I

General

Saker Aviation Services, Inc. (“we”, “us”, “our”) is a Nevada corporation. Our common stock, $0.001$0.03 par value per share (the “common stock”), is quoted on the OTCQB Marketplace (“OTCQB”) under the symbol “SKAS”. Through our subsidiaries, we operate in the aviation services segment of the general aviation industry, in which we serve as the operator of a heliport, a fixed base operation (“FBO”), a provider of aircraft maintenance and repair services (“MRO”), and as a consultant for a seaplane base that we do not own. FBOs provide ground-based services, such as fueling and aircraft storage for general aviation, commercial and military aircraft, and other miscellaneous services.

We were formed on January 17, 2003 as a proprietorship and were incorporated in Arizona on January 2, 2004. We became a public company as a result of a reverse merger transaction on August 20, 2004 with Shadows Bend Development, Inc., an inactive public Nevada corporation, and subsequently changed our name to FBO Air, Inc. On December 12, 2006, we changed our name to FirstFlight, Inc. On September 2, 2009, we changed our name to Saker Aviation Services, Inc.

Our business activities are carried out as the operator of the Downtown Manhattan (New York) Heliport, as an FBO and MRO at the Garden City (Kansas) Regional Airport, as a consultant to the operator of a seaplane base in New York City, and prior to our divestiture, as an MRO at the Bartlesville (Oklahoma) Municipal Airport.

The Garden City facility became part of our company as a result of our acquisition of the FBO assets of Central Plains Aviation, Inc. in March 2005. Our Garden City facility began offering maintenance services in October 2016 as a result of our acquisition2005 and of Aircraft Services, Inc. (“Aircraft Services”). in October 2016.

Our business activities at the Downtown Manhattan (New York) Heliport facility (the “Heliport”) commenced in July 2008 when we were awarded the Concession Agreement by the City of New York to operate the Heliport, which we assigned to our subsidiary, FirstFlight Heliports, LLC d/b/a Saker Aviation Services (“FFH”).

The Bartlesville facility became part of our company as a result of our acquisition of all of the outstanding stock of Phoenix Rising Aviation, Inc. (“PRA”) on August 15, 2013.

The FBO segment of the general aviation industry is highly fragmented. According to the National Air Transportation Association (“NATA”), there are over 3,000 FBOs that serve customers at one or more of over 3,000 airport facilities across the country that have at least one paved 3,000-foot runway. The vast majority of these companies are single location operators. NATA characterizes companies with operations at three or more airports as “chains.” An operation with FBOs in at least two distinctive regions of the country is considered a “national” chain while an operation with FBOs in multiple locations within a single region is considered a “regional” chain.

We believe the general aviation market has been historically cyclical, with revenue correlated to general U.S. economic conditions. Although not truly seasonal in nature, the spring and summer months tend to generate higher levels of revenue and our operations generally follow that trend.

Discontinued Operations

As disclosed We cannot predict with certainty the impact that the ongoing novel coronavirus (“COVID-19”) pandemic will have on our business operations, financial condition and results of operations. The COVID-19 pandemic has significantly disrupted business operations in the United States and globally and has contributed to a Current Reportdecline in general economic conditions in the United States. To the extent local, regional and the federal government impose restrictions on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on July 6, 2015, the Company entered into a Stock Purchase Agreement, dated June 30, 2015, by and between the Company and Warren A. Peck (the “Agreement”). Pursuant to the Agreement, Mr. Peck was to purchase all of the outstanding capital stock of the Company’s wholly-owned subsidiary Phoenix Rising Aviation, Inc. (“PRA”). The closing of the transactions contemplated by the Agreement occurred on September 30, 2015. At that time, in exchange for all of the outstanding capital stock of PRA, Mr. Peck agreed to pay (i) the Company $250,000 in cash; (ii) execute a $250,000 Secured Promissory Note in favor of the Company; and (iii) execute an Installment Payment Agreement giving the Company rights to earn-out payments based on EBITDA thresholds achieved by PRA post-closing. As a result of the sale, PRAair travel and/or air tourism or consumers cease traveling, our results of operations have been reported as discontinued operations in the Consolidated Balance Sheet and Statement of Operations for 2015.

The Agreement, Secured Promissory Note and Installment Payment Agreement were included as exhibits with the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2015. On September 30, 2015 the Company and Mr. Peck executed the Closing Cash Agreement “the “Closing Agreement”, which was filed with the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2015. The Closing Agreement provided for Mr. Peck to assign to the Company title to an aircraft in order to defer the $250,000 cash consideration due at closing. As further described in the Closing Agreement, the Company shall receive the $250,000 closing cash payment, plus other identified costs, when the aircraft is subsequently sold. The $250,000 closing cash consideration plus receivables associated with the Note are therefore reflected as a Note Receivable in the Consolidated Balance Sheet as of December 31, 2015. On June 13, 2016, the Company entered into a sale agreement (the “Sale Agreement”) with an unrelated third party to acquire the aircraft subject to the Closing Agreement. Under the terms of the Sale Agreement, the Company received a down-payment of $30,000, which was credited against the $250,000 cash consideration owed by Mr. Peck. In addition, beginning in October 2016, the Company was to receive monthly payments of at least $28,000 to satisfy the remainder of the $250,000 cash consideration and $50,000 of the Note owed by Mr. Peck. The Company has not received any of the monthly payments due under the Sale Agreement, have issued a demand letter, and are pursuing all other legal remedies at our disposal. The $220,000 remaining balance of closing cash consideration plus receivables associated with the Note, are reflected as a Note Receivable in the Consolidated Balance Sheet as of December 31, 2016.will be negatively impacted. Please see Item 1A. “Risk Factors” below.

Acquisition

Our wholly-owned subsidiary, FBO Air Garden City, Inc. (“GCK”), entered into a Stock Purchase Agreement, dated October 3, 2016, by and between the Company, GCK and Gary and Kim Keller (the “Stock Purchase Agreement”), to purchase all of the capital stock of Aircraft Services, an aircraft maintenance services firm located in Garden City, Kansas. Under the terms of the transaction, the Company made a $150,000 cash payment at closing and will make installment payments totaling an additional $150,000 over the next two years. The closing cash payment for the transaction was funded with internal resources. The Stock Purchase Agreement is discussed in greater detail in a Current Report on Form 8-K filed on October 7, 2016 and was filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended September 30,2016.

Suppliers and Raw Materials

Our principal materials are aviation fuel and aircraft parts. We obtain aviation fuel, component parts and other supplies from a variety of sources, generally from more than one supplier. Our suppliers and sources are both domestic and foreign, and we believe that our sources of materials are adequate to meet our needs for the foreseeable future. We do not believe the loss of any one supplier would have a material adverse effect on our business or results of operations. We generally purchase our supplies on the open market, where certain commodities have fluctuated in price significantly in recent years. We have not experienced any significant shortage of our key supplies.

Marketing and Sales

The main goal of our marketing and sales efforts is to increase traffic at our facilities, which would then drive revenue through the incremental sale of our products and services. Our primary marketing tactic in this regard is to focus advertising efforts in the environments (web, periodical and industry publications) where the pilot and aviation-user community might be introduced to our brand name and locations. We intend to continue to invest in improvements to our sales and marketing strategies to drive revenue growth.

Government Approvals

The aviation services that we provide are generally performed on municipal or other government owned real estate properties. Accordingly, at times we will need to obtain certain consents or approvals from governmental entities in conjunction with our operations. These consents and approvals are typically in the form of a lease agreement, as is the case at our Kansas facility, or a concession agreement, as is the case with our New York facility. There can be no assurance that we will obtain further consents or approvals on favorable terms or be able to renew existing consents or approvals on favorable terms, if at all.

Government Regulation

We are subject to a variety of governmental laws and regulations that apply to companies in the aviation industry. These include, among other matters,compliance with the Federal Aviation Administration (“FAA”) rules and regulations, and local, regional and national rules and regulations as they relate to environmental matters. We believe we are in compliance with, and intend to continue to comply with, all applicable government regulations. The adoption of new regulations could result in increased costs and have an adverse impact on our results of operations.operations, including, for example, new regulations restricting air travel as a result of the recent COVID-19 pandemic. New regulations relating to the COVID-19 pandemic could cause us to experience significant declines in activity, which would materially adversely affect our results of operations and financial condition. In the event we are unable to remain compliant with applicable rules and regulations, or new regulations result in a reduction in our operations, our business may be adversely affected.

Customers

For the fiscal year ended December 31, 2016,2019, four customers represented approximately 75.1%54.7% of our revenue. The loss of any of these four customers could represent a significant decrease in revenue that may adversely affect our business and results of operations. Additionally, these four accounts represented approximately 89.3%73.0% of the balance of accounts receivable at December 31, 2016.2019. Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability. We depend significantly on our business with these four customers.

Competition

The FBO segment of the aviation services industry is competitive in both pricing and service because aircraft in transit are able to choose from a number of FBO options within a 300-mile radius. The vast majority of FBO operators are independent, single location operators. We are the sole FBO at each of our current facilities.facility in Garden City, KS. As such, we face no direct on-airport competition. However, we face competitive pressure on pricing and services from FBO facilities at other airports, depending on aircraft travel flexibility.

We plan to grow our business through both internal development of existing resources and facilities and through the potential acquisition of other related business. We anticipate that growing our business will provide us with greater buying power from suppliers and, therefore, result in lower costs. Lower costs would allow us to implement a more aggressive pricing policy against some competitors. We believe that the higher level of customer service offered in our facilities will allow us to draw additional aircraft traffic and thus compete successfully against other FBOs of all sizes. However, there can be no assurance that we will be able to compete successfully in the highly competitive aviation industry.

Costs and Effects of Complying With Environmental Laws

We are subject to a variety of federal, state and local environmental laws and regulations, including those that govern health and safety requirements, the discharge of pollutants into the air or water, the management and disposal of hazardous substances and wastes and the responsibility to investigate and clean up contaminated sites that are or were owned, leased, operated or used by us or our predecessors. Some of these laws and regulations require us to obtain permits, which contain terms and conditions that impose limitations on our ability to emit and discharge hazardous materials into the environment and may be periodically subject to modification, renewal and revocation by issuing authorities. Fines and penalties may be imposed for non-compliance with applicable environmental laws and regulations and the failure to have or to comply with the terms and conditions of required permits. We intend to comply with these laws and regulations. However, from time to time, our operations may not be in full compliance with the terms and conditions of our permits or licenses. We periodically review our procedures and policies for compliance with environmental laws and requirements. We believe that our operations are in material compliance with applicable environmental laws and requirements and that any potential non-compliance would not be expected to result in us incurring material liability or cost to achieve compliance. Although the cost of achieving and maintaining compliance with environmental laws and requirements has not been material, we can provide no assurance that such cost will not become material in the future.

Employees

As of December 31, 2016,2019, we employed 3128 persons, 2924 of which were employed on a full-time basis, and one of which was an executive officer. All of our personnel are employed in connection with our operations in New York and Kansas.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Therefore, we file periodic reports, proxy statements and other information with the SEC. Such reports may be read and copied at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. The SEC also maintains a website (www.sec.gov) that includes our reports, proxy statements and other information. We maintain a website at www.sakeraviation.com where we make available, free of charge, documents that we file with, or furnish to, the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, registration statements and any amendments to those reports. Our SEC reports can be found under “Financial Reporting”the “SEC Filings” heading in the “Investor Relations” tab on our website. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.

The following risk factors relate to our operations:

We will need additional financing to expand our business.

Certain potential aviation services firms which we may seek to acquire in the future may accept shares of our common stock or other securities as payment by us for the acquisition. However, we believe that most will likely prefer cash payments, whether paid at the closing or in post-closing installment payments. There can be no assurance that our operations will generate sufficient cash flow to meet these acquisition obligations. Accordingly, we anticipate the need to seek additional equity or debt financing to meet any cash requirements for acquisitions. Any such financing will be dependent on general market conditions and the stock market’s evaluation of our performance and potential. Accordingly, we can give no assurance that we will obtain such equity or debt financing and, even if we do, that the terms would be satisfactory to us.

The COVID-19 pandemic, or any similar public health threat, could have a material adverse impact on the Company's business, operating results and financial condition, including the suspensionof our customer’s operations at the Downtown Manhattan Heliport.

 The coronavirus outbreak or similar public health threats, or fear of such events, that affects travel demand, travel behavior, or travel restrictions could have a material adverse impact on our business, financial condition and operating results. In addition, outbreaks of disease have resulted in increased government restrictions and regulation, and could expand to include quarantines of our personnel or an inability to access facilities or our aircraft, which would adversely affect our operations.

In December 2019, the COVID-19 strain of coronavirus was reported in China. The World Health Organization has declared COVID-19 a pandemic. The United States government has already implemented some forms of travel restrictions. For example, on January 30, 2020, the U.S. Department of State issued a Level 4 "do not travel" advisory for China and, in March of 2020, the U.S. government implemented travel restrictions to Canada and parts of Europe. The U.S. government has also implemented quarantine requirements and travel restrictions in connection with the COVID-19 pandemic, among other measures. Future travel restrictions may impact the type of air travel services we provide. The COVID-19 pandemic and public fear of COVID-19 has reduced the demand for our customer’s services, and as of March 17, 2020, all sightseeing tour operations at the Downtown Manhattan Heliport have ceased due to a drop in demand as a result of the ongoing COVID-19 pandemic. The extent of the impact of the COVID-19 on our operational and financial performance will depend on future developments, including the duration and spread of the COVID-19 pandemic and related travel advisories and restrictions and the impact of the COVID-19 on overall demand for air travel, all of which are highly uncertain and cannot be predicted. If we experience significant declines in demand and a suspension of our customer’s operations over an extended period of time, our results of operations for the fiscal year ending December 31, 2020 will be materially adversely affected.

Our business, results of operations and financial condition may be adversely affected by the outbreak of COVID-19.

The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption. The extent to which the coronavirus pandemic impacts our business, operations and financial results is uncertain and will depend on numerous evolving factors that we may not be able to accurately predict, including:

We could be adversely affected by increases in the price, or decreases in the availability, of jet fuel.

Our operations could be significantly affected by the availability and price of jet fuel. A significant increase in the price of jet fuel would most likely have a material impact on our ability to achieve and maintain profitability unless we are able to pass on such costs to our customers. Due to the competitive nature of the industry, our ability to pass on increased fuel prices by increasing our rates is uncertain. Likewise, any potential benefit of lower fuel prices may be offset by increased competition and lower revenue, in general. While we do not currently anticipate a significant reduction in fuel availability, dependency on foreign imports of crude oil and the possibility of changes in government policy on jet fuel production, transportation and marketing make it impossible to predict the future availability of jet fuel. If there are new outbreaks of hostility or other conflicts in oil producing areas or elsewhere, there could be a reduction in the availability of jet fuel or significant increases in costs to our business, as well as to the entire aviation industry, which in turn would adversely affect our business and results of operations.

We could be adversely affected by the loss of certain key customers or the inability of such key customers to pay amounts due to us.

For the fiscal year ended December 31, 2016,2019, four customers represented approximately 75.1%54.7% of our revenue. Additionally, these four accounts represented approximately 89.3%73.0% of the balance of accounts receivable at December 31, 2016.2019. Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability. The loss of any of our key customers, or the inability of such customers to pay amounts due to us, could result in a significant decrease in revenue that may adversely affect our business and result of operations.

We could be adversely affected by the loss of or failure to extend our material agreements including our Concession Agreement with the City of New York and our lease of the Garden City, Kansas facilities.

A substantial portion of our business depends on our existing material agreements including our Concession Agreement with the City of New York and our lease of facilities in Garden City, Kansas. If we were to lose these agreements, or if these agreements expired without renewal or extension, we may be unable to operate our business in our current geographic markets. Should we lose or fail to extend these agreements, there is no guarantee that we could enter into new agreements with similar terms or into new agreements at all. If we were to enter into material agreements with less favorable terms or if we were unable to enter into new agreements, our business and results of operations would be materially and adversely affected.

Our agreement (the“Air Tour Agreement”) with the New York City Economic Development Corporation (the“NYCEDC”) may continue to negatively impact our business and financial results as well as those of our management company.

Under the Air Tour Agreement, we cannot allow our tenant operators to conduct tourist flights from the Downtown Manhattan Heliport on Sundays. We were also required to ensure that our tenant operators reduced the total allowable number of tourist flights from 2015 levels by 20 percent beginning June 1, 2016, by 40 percent beginning October 1, 2016 and by 50 percent beginning January 1, 2017. Additionally, since June 1, 2016, we have been required to provide monthly written reports to the NYCEDC and the New York City Council detailing the number of tourist flights conducted out of the Downtown Manhattan Heliport compared to 2015 levels, as well as information on any tour flight that flies over land or strays from agreed upon routes. These provisions of the Air Tour Agreement have, and may continue to, have an adverse effect on our business and results of operations.

The continued threat of terrorist actions may result in less demand for private aviation and, as a result, our revenue may be adversely affected and we may not be able to continue successful operations.

Terrorist actions involving public and private aircraft may have a significant adverse impact on us. As a result of these actions, individuals and corporate customers may cease using private aircraft as a means of transportation or reduce their use of such aircraft, or we could become subject to burdensome regulations that would have an adverse effect on our results of operations. In either event, we would be unable to maintain sales and may be unable to continue our operations on a successful basis.

The FBO segment of the aviation services industry in which we operate is fiercely competitive.

We compete with national, regional, and local FBO operators. Many of our competitors have been in business longer than we have and have greater financial resources available to them. Having greater financial resources will make it easier for these competitors to absorb an increase in fuel prices and other expenses. In addition, these competitors might seek acquisitions in regions and markets competitive to us, which could have an adverse effect on our business and results of operations. Accordingly, we can give no assurance that we will be able to successfully compete in our industry.

Our business as an FBO is subject to extensive governmental regulation.

FBOs are subject to extensive regulatory requirements that could result in significant costs. For example, the FAA, from time to time, issues directives and other regulations relating to the management, maintenance and operation of facilities.facilities, including the potential of emergency regulations related to the COVID-19 pandemic. Additionally, we may be subject to government procurement regulations as they relate to obtaining new agreements or renewing or extending existing agreements with governmental entities. Compliance with those requirements may cause us to incur significant expenditures. The proposal and enactment of additional laws and regulations, as well as any charges that we have not complied with any such laws and regulations, could significantly increase the cost of our operations and reduce overall revenue. We cannot provide assurance that compliance with existing laws and regulations or that laws or regulations enacted in the future will not adversely affect our business and results of operations. If any emergency regulations related to the COVID-19 pandemic caused us to temporarily cease operations, our results of operations and financial condition would be adversely impacted.

We must maintain and add key management and other personnel.

Our future success is heavily dependent on the performance of our managers. Our growth and future success depends, in large part, on the continued contributions of management and our ability to retain management. Our success depends to a significant extent upon the continued service of Ron Ricciardi, our President and Chief Executive Officer. On September 1, 2019, we entered into an employment agreement with Mr. Ricciardi. The initial term runs from September 1, 2019 through September 1, 2019 and does not provide for automatic renewal. Loss of the services of Mr. Ricciardi could significantly harm our business, results of operations and financial condition. The Company maintains key-person insurance on the life of Mr. Ricciardi.

Our growth and future success also depends on other key individuals, as well as our ability to motivate and retain these personnel or hire other persons. Although we believe we will be able to retain and hire qualified personnel, we can give no assurance that we will be successful in retaining and recruiting such personnel in sufficient numbers to increase revenue, maintain profitability or successfully implement our growth strategy. If we lose the services of management or any of our key personnel or are not able to retain or hire qualified personnel, our business could be adversely affected.

If our employees were to unionize, our operating costs would increase and our business could be adversely affected.

None of our employees are currently represented under a collective bargaining agreement. From time to time, there may be efforts to organize our employees. There is no assurance that our employees will not unionize in the future, particularly if legislation is passed that facilitates unionization. The unionization of our employees could have a material adverse effect on our business, financial condition and results of operations due to the possibility of work stoppage, wage increases, or other developments that may result from the unionization of our employees.

Changes in minimum wage laws outside of our control could affect our profitability.

We have employees who are paid wage rates based on the applicable federal or state minimum wage and increases in the minimum wage may increase our labor costs and reduce profitability. Federal, state, or local minimum wages may be raised in the future and we may be unable or unwilling to increase our prices in order to pass these increased labor costs on to our customers, in which case, our business and results of operations could be materially and adversely affected.

We are subject to environmental laws that could impose significant costs on us and the failure to comply with such laws could subject us to sanctions and material fines and expenses.

We are subject to a variety of federal, state and local environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances and wastes and the responsibility to investigate and clean-up contaminated sites that are or were owned, leased, operated or used by us or our predecessors. Some of these laws and regulations require us to obtain permits, which contain terms and conditions that impose limitations on our ability to emit and discharge hazardous materials into the environment and may be periodically subject to modification, renewal and revocation by issuing authorities. Fines and penalties may be imposed for non-compliance with applicable environmental laws and regulations, the failure to have required permits or the failure to comply with the terms and conditions of such permits. We intend to comply with all laws and regulations, however, from time to time, our operations may not be in full compliance with the terms and conditions of our permits. We periodically review our procedures and policies for compliance with environmental laws and requirements. We believe that our operations are in material compliance with applicable environmental laws, requirements and permits and any lapses in compliance are not expected to result in us incurring material liability or cost to achieve compliance. However, there can be no assurance that our operations will remain in material compliance with applicable environmental laws and requirements. Historically, the costs of achieving and maintaining compliance with environmental laws, requirements and permits have not been material; however, the operation of our business entails risks in these areas and a failure by us to comply with applicable environmental laws, regulations or permits could result in civil or criminal fines, penalties, enforcement actions, third party claims for property damage and personal injury, requirements to clean up property or to pay for the costs of cleanup and/or regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures. Moreover, if applicable environmental laws and regulations, or the interpretation or enforcement thereof, become more stringent in the future, we could incur capital or operating costs beyond those currently anticipated and our business and results of operations could be harmed.

The following risk factors relate to our common stock:

There is no active market for our common stock, which makes our common stock less liquid.liquid.

To date, trading of our common stock has been sporadic and nominal in volume. In addition, there are only a limited number of broker-dealers trading our common stock. As a result, there is little, if any, liquidity in our common stock. We can provide no assurance that an active trading market will ever develop.

Our common stock is subject to the penny stock rules, which makes our common stock less liquid.liquid.

The SEC has adopted a set of rules called the “penny stock rules” that regulate broker-dealers with respect to trading in securities with a bid price of less than $5.00. These rules do not apply to securities registered on certain national securities exchanges (including the Nasdaq Stock Market), provided that current price and volume information regarding transactions in such securities is provided by the exchange. Our stock is not listed on such an exchange and we have no expectation that our common stock will be listed on such an exchange in the future. The penny stock rules require a broker-dealer to deliver to the customer a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. Additionally, the broker-dealer must provide the customer with other information. The penny stock rules also require that, prior to a transaction in a penny stock, the broker-dealer must determine in writing that the penny stock is a suitable investment for the purchaser. The broker-dealer must also receive the purchaser’s written agreement to the transaction. These disclosure requirements have the effect of reducing the level of trading activity in the secondary market for a stock such as ours that is subject to the penny stock rules.

Potential additional financings, the granting of additional stock options and anti-dilution provisions in our warrants could further dilute our existing stockholders.

As of March 30, 2017,2020, there were 33,157,6101,020,135 shares of our common stock outstanding. If all of our outstanding common stock purchase warrants and options were exercised, there would be 35,357,6101,073,463 shares outstanding, an increase of approximately 6.6%5.2%. Any further issuances due to additional equity financings, or the granting of additional options or the anti-dilution provisions in our warrants could further dilute our existing stockholders, which could cause the value of our common stock to decline.

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

We intend to retain future earnings, if any, to fund our operations and to expand our business. Accordingly, we do not anticipate paying cash dividends on shares of our common stock in the foreseeable future and an investment in our common stock might not generate any return.

Our Board of Directors’Directors’ right to issue shares of preferred stock could adversely impact the rights of holders of our common stock.

Our Board of Directors currently has the right to authorize the issuance of up to 9,999,154333,306 shares of one or more series of our preferred stock with such voting, dividend and other rights as our directors determine. Such action can be taken by our Board of Directors without the approval of our shareholders. Accordingly, the holders of any new series of preferred stock could be granted voting rights that reduce the voting power of the holders of our common stock. For example, the preferred holders could be granted the right to vote on a merger as a separate class even if the merger would not have an adverse effect on their rights. This right, if granted, would give such preferred holders a veto with respect to any merger proposal. Alternatively, such preferred holders could be granted a large number of votes per share while voting as a single class with the holders of our common stock, thereby diluting the voting power of the holders of our common stock. In addition, the holders of any new series of preferred stock could be given the option to redeem their shares for cash in the event of a merger. This would make acquiring us less attractive to a potential buyer. Thus, our Board of Directors could authorize the issuance of shares of the new series of preferred stock in order to defeat a proposal for the acquisition of our company that a majority of the holders of our common stock otherwise favor.

Our common stock may not continue to be traded on the OTCQB.OTCQB.

We cannot provide any assurance that our common stock will continue to be eligible to be quoted on the OTCQB Marketplace (“OTCQB”). Should our common stock cease to be quoted on the OTCQB and fail to qualify for listing on a stock exchange (including the Nasdaq Stock Market), our common stock would only trade in the “pink sheets” which generally provides an even less liquid market than the OTCQB. In such event, stockholders may find it more difficult to trade their shares of our common stock or to obtain accurate and current information concerning market prices for our common stock.

Our management team currently has influential voting power.

As of March 31, 2017,30, 2020, our executive officers, directors and their family members and associates, collectively, are entitled to vote 10,183,426approximately 333,589 shares, or 30.7%,32.7% of the 33,157,6101,020,135 shares of our outstanding shares of common stock. Accordingly, and because there is no cumulative voting for directors, our executive officers and directors are currently in a position to influence the election of all of our Board of Directors. The management of our company is controlled by our Board of Directors, which is currently comprised of twothree independent directors, a director who is a managing partner of a law firm which provides legal services to us, and twoone executive officer/directors.director.

Not applicable.

As of March 30, 2017,2020, we lease office and hangar space at the following locations:

We believe that our space is adequate and suitable for our immediate needs. Additional hangar space may be required for our operations in the future. No definitive plans to lease any additional space have been developed at the time of this report. Should additional hangar space be required, there can be no assurance that such space will be available or available on commercially reasonable terms or at all.

From time to time, we may be a party to one or more claims or disputes which may result in litigation. However, we are currently not a party to, nor is our property subject to, any material pending legal proceedings.

Not applicable.

PART II

Market for Common EquityInformation

Our common stock is quoted on the OTCQB under the symbol “SKAS”. The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter (“OTC”) equity securities. Our common stock is only traded on a limited or sporadic basis and should not be deemed to constitute an established public trading market. OTC quotations reflect intra-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

The following table sets forth the high and low closing sale prices for the common stock as reported on the OTCQB for the past two most recent fiscal years.years, with quarters ended prior to March 1, 2019 adjusted for the Company’s reverse stock split effected on such date.

Impairment of Goodwill and Other Intangibles

We had $750,000 and $530,000 of goodwill at December 31, 20162019 and 2015, respectively. The $220,000 increase in goodwill relates to the Company’s acquisition of Aircraft Services, Inc. in October 2016.

As of December 31, 2016 and December 31, 2015, intangible assets consisted of a charter certificate ($35,000). In connection with our divestiture of PRA at September 30, 2015, we recorded a $107,500 charge in 2015 for the full value of the PRA non-compete agreement.2018.

Income Tax

Income tax expense from continuing operations for the twelve months ended December 31, 20162019 was $887,000,approximately $399,000, as compared to $1,032,000$197,000 in the same period in 2015. Included2018. The increase is attributable to an increase in these amounts are paid actual or estimated federal, state and localnet income taxes along with a charge for deferredin 2019 as compared to net income tax at our estimated blended effective tax rate of 50 and 54 percent for 2016 and 2015, respectively. Paid actual or estimated tax expenses were $1,255,685 and deferred income tax expense was $0 forin the twelve months ended December 31, 2016. Paid actual or estimated tax expenses were $388,000 and deferred income tax expense was $190,000 for the twelve months ended December 31, 2015.same period in 2018.  

Net Income Per Share

Net income for the twelve months ended December 31, 20162019 was $880,430$667,644 as compared to net income of $695,208$311,536 in the twelve months ended December 31, 2015.2018.

Basic and diluted net income per share was $0.03 and $0.02 for the twelve months ended December 31, 20162019 was $0.66 and December 31, 2015, respectively.$0.65, respectively, as compared to basic and diluted net income per share of $0.30 each for the same period in 2018.

Liquidity and Capital Resources

As of December 31, 2016,2019, we had cash and cash equivalents of $2,192,507$3,597,491 and a working capital surplus of $2,811,729.$3,928,872. We generated revenue from continuing operations of $14,690,654$11,567,725 and had net income from continuing operations before taxes of $1,767,430$667,644 for the twelve months ended December 31, 2016.2019. For the twelve months ended December 31, 2016,2019, cash flows included net cash provided by operating activities of $2,244,551,$1,123,862, net cash used in investing activities of $194,781,$87,382, and net cash used in financing activities of $272,374.$277,638.

On May 17, 2013, weAs disclosed in a Current Report on Form 8-K filed on March 21, 2018 with the SEC, on March 15, 2018 the Company entered into a loan agreement (the “Loan Agreement”) with PNCKey Bank National Association (the “PNC Loan Agreement”“Bank”). The PNC Loan Agreement containedcontains three components: (i) a $2,500,000 non-revolving acquisition line of credit (the “PNC“Key Bank Acquisition Line”Note”); (ii) a $1,150,000 working capital$1,000,000 revolving line of credit (the “PNC Working Capital Line”“Key Bank Revolver Note”); and (iii) a $280,920$338,481 term loan (the “PNC“Key Bank Term Loan”Note”).

Proceeds of the PNCKey Bank Acquisition LineNote were able to be dispersed basedpursuant to a multiple draw demand note dated as of the agreement date, where the Company could, at the discretion of the Bank, borrow up to an aggregate amount of $2,500,000, to be used for the Company’s acquisition of one or more business entities. Until the Change of Terms Agreement, as defined below, the Company was required to make consecutive monthly payments of interest, calculated at a rate per annum equal to one-day LIBOR (adjusted daily) plus 2.75%, on parameters defined inany outstanding principal under the PNC Loan Agreement, until May 17, 2014Key Bank Acquisition Note from the date of its issuance through September 15, 2018 (the “Conversion Date”).

At any time through and including the Conversion Date, at the Bank’s discretion, the Company had the opportunity to request that any loan made under the Key Bank Acquisition Note be converted into a term loan to be repaid in full, including accrued interest, by consecutive monthly payments over a 48 month amortization period beginning after the Conversion Date. For any loan that was not converted into a term loan on or before the Conversion Date, the Company would have been required to begin making monthly payments of principal and interest after the Conversion Date, over a 48 month amortization period, after which the remaining unpaid principal and accrued interest would have become due and payable. All loans under the Key Bank Acquisition Note would have, after the Conversion Date, accrued interest at a rate per annum equal to the Bank’s four year cost of funds rate plus 2.5%. As of the Conversion Date, there was $1,350,000 outstandingwere no amounts due under the PNCKey Bank Acquisition Line.Note and no amounts had been converted to a term loan.

On October 11, 2018, and as subsequently amended, the Company entered into a new loan agreement with the Bank (the “Change of Terms Agreement”) which modified the original terms of the Key Bank Acquisition Note. Under the Change of Terms Agreement, the Company may continue to, at the discretion of the Bank, borrow up to an aggregate amount of $2,500,000 through June 30, 2020 (the “Maturity Date”), to be used for the Company’s acquisition of one or more business entities. The payment terms provided that 30 days followingChange of Terms Agreement requires the Conversion Date, and continuing on the same day of each month thereafter, we are requiredCompany to make equalconsecutive monthly payments of principal over a 60 month period. Interestinterest on theany outstanding principal continues to accruecalculated at a rate per annum equal to one-month LIBOR4.25%. The entire principal balance, plus 275 basis points (3.486% as of December 31, 2016). An unused commitment fee had been applied at a rate of 1.5%all accrued interest, is due in full on the unused portion of the PNC Acquisition Line and was charged for each fiscal quarter through the ConversionMaturity Date. As of December 31, 2016,2019, there was $652,500 outstandingwere no amounts due under the PNC Acquisition Line.Change of Terms Agreement.

The PNC Working Capital was             Proceeds from the Key Bank Revolver Note, at the discretion of the Bank, provide for the Company to have been dispersedborrow up to $1,000,000 for working capital and general corporate purposes. Interest on outstanding principal accruedThis revolving line of credit is a demand note with no stated maturity date. Borrowings under the Key Bank Revolver Note will bear interest at a rate per annum equal to dailyone-day LIBOR (adjusted daily) plus 250 basis points.2.75%. The PNC Working Capital Line expiredCompany is required to make monthly payments of interest on any outstanding principal under the Key Bank Revolver Note and is required to pay the entire balance, including principal and all accrued and unpaid interest and fees, upon demand by the Bank. As of December 31, 2015, with $0 outstanding.2019, there were no amounts due under the Key Bank Revolver Note.

The PNC

Proceeds from the Key Bank Term Loan wasNote were utilized to retire ouramounts previously outstanding miscellaneous debtunder a $280,920 term loan from PNC Bank. As of the same amount. Interest on outstanding principal accrued at a rate equal to one-month LIBOR plus 275 basis points and principal and interest payments were to be made over a thirty-four month period. At December 31, 2015,2019, all amounts outstanding under the PNCKey Bank Term loan hadNote have been repaid.

We areThe Company is party to a Concession Agreement, dated as of November 1, 2008, with the City of New York for the operation of the Downtown Manhattan Heliport (the “Concession Agreement”). Pursuant to the terms of the Concession Agreement, wethe Company must pay the greater of 18% of the first $5,000,000 in any program year gross receiptsbased on cash collected (“Gross Receipts”) and 25% of gross receiptsGross Receipts in excess of $5 million,$5,000,000, or minimum annual guaranteed payments. We paid the City of New York $1,200,000 in the first year of the term and minimum payments are scheduled to increase to approximately $1,700,000 in the final year of Concession Agreement, which was set to expire on October 31, 2018. During the twelve months ended December 31, 20162019 and 2015,2018, we incurred approximately $2,700,000$1,640,000 and $2,900,000, respectively,$1,800,000 in concession fees, respectively, which are recorded in the cost of revenue.

As disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)SEC on February 5, 2016, on February 2, 2016, the Company and the New York City Economic Development Corporation (the “NYCEDC”) announced new measures to reduce helicopter noise and impacts across New York City (the “Agreement”“Air Tour Agreement”).

Under the Air Tour Agreement, filed as an exhibit to the Company’sour Annual Report on Form 10-K for the year ended December 31, 2015, wethe Company may not allow its tenant operators to conduct tourist flights from the Downtown Manhattan Heliport on Sundays beginning April 1, 2016. WeThe Company was also were required to ensure that its tenant operators reduce the total allowable number of tourist flights from 2015 levels by 20 percent beginning June 1, 2016, by 40 percent beginning October 1, 2016 and by 50 percent beginning January 1, 2017. Additionally, beginning on June 1, 2016, we werethe Company was required to provide monthly written reports to the NYCEDC and the New York City Council detailing the number of tourist flights conducted out of the Downtown Manhattan Heliport compared to 2015 levels, as well as information on any tour flight that flies over land and/or strays from agreed upon routes.

The Air Tour Agreement also extends ourextended the Concession Agreement with the City of New York for 30 months, resulting in a new expiration date of April 30, 2021. The City of New York has two one yearone-year options to further extend the Concession Agreement. The Air Tour Agreement also provides that the minimum annual guarantee payments we arethe Company is required to pay to the City of New York under the Concession Agreement will be reduced by 50%, effective January 1, 2017.

These reductions willhave negatively impact ourimpacted the Company’s business and financial results as well as those of ourits management company at the Heliport, Empire Aviation which, as previously disclosed, is owned by the children of Alvin Trenk, ourthe Company’s former Chief Executive Officer and a former member of ourits Board of Directors.  The Company incurred management fees with Empire Aviation of approximately $3,500,000$2,200,000 and $3,700,000$1,777,000 during the twelve months ended December 31, 20162019 and 2015,2018, respectively, which is recorded in administrative expenses. The Company and Empire Aviation have also contributed to the Helicopter Tourism and Jobs Council (“HTJC”), an association that lobbies on behalf of the helicopter air tour industry, and which had engaged in discussions with the Mayor’s office.  Mr. Trenk is also an active participant with HJTC, which is managed by his grandson. One of our Directors, Sam Goldstein, serves as deputy director of HJTC.  

           On April 20, 2018, the Company’s Kansas subsidiary entered into a purchase lease with Commerce Bank for a refueling truck (the “Truck Lease”). The Truck Lease commenced on May 1, 2018 and continues for 60 months at an interest rate of LIBOR plus 416 basis points. At the end of the Truck Lease, the Company’s subsidiary may purchase the vehicle for $1.00.

           On January 15, 2019, the Company was issued an unsecured note by one of its customers at the Heliport. The note schedules payments of approximately $276,000 in receivables payable by such customer, has a maturity date of October 31, 2019, as amended, and carries a 7.5% rate of interest. The note payments were to be made in six monthly installments beginning May 31, 2019. The customer’s payments on the note have not met the installment plan and the Company was working on changes to the note when the customer filed for Chapter 11 Bankruptcy. The Company intends to continue to pursue remaining amounts due under the note and it is the Company’s expectation that the note will be fulfilled.

As disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)SEC on July 6, 2015, the Company entered into a Stock Purchase Agreement,stock purchase agreement, dated June 30, 2015, by and between the Company and Warren A. Peck, (the “Agreement”). Pursuantpursuant to the Agreement,which Mr. Peck was to purchasepurchased all of the outstanding capital stock of the Company’s wholly-owned subsidiary, Phoenix Rising Aviation, Inc. (“PRA”). The closingdetails of the transactions contemplated by the Agreement occurred on September 30, 2015. At that time,agreement are described in exchange for all of the outstanding capital stock of PRA, Mr. Peck was required to (i) pay the Company $250,000 in cash; (ii) execute a $250,000 Secured Promissory Note in favor of the Company; and (iii) execute an Installment Payment Agreement giving the Company rights to earn-out payments based on EBITDA thresholds achieved by PRA post-closing. As a result of the sale, PRA results of operations have been reportedsuch Current Report as discontinued operationswell as in the Consolidated Balance Sheet and Statement of Operations for 2015. The Agreement, Secured Promissory Note and Installment Payment Agreement were included as exhibits with the Company’s QuarterlyAnnual Report on Form 10-Q10-K for the periodyear ended June 30, 2015.

On September 30,December 31, 2015, the Company and Mr. Peck executed the Closing Cash Agreement “the “Closing Agreement”, which was filed with the Company’s Quarterly ReportSEC on Form 10-Q forApril 11, 2016. The Company received $100,000 due under this agreement in September 2017 and an additional payment of $100,000 in September 2018. In 2019, the period ended September 30, 2015. The Closing Agreement provided forCompany accepted the title to a Falcon 10 aircraft owned by Mr. Peck as satisfaction in full of the remainder of the $270,000 stock purchase price. The Company intends to sign over to the Company title to an aircraft to defer the $250,000 cash consideration due at closing. As further described in the Closing Agreement, the Company shall receive the $250,000 closing cash payment, plus other identified costs, whensell the aircraft is subsequently sold. The $250,000 closing cash consideration plus receivables associated withand has classified the Note are therefore reflectedit as a Note Receivable in“Held For Sale” on the Company’s Consolidated Balance Sheets as of December 31, 2015. On June 13, 2016, the Company entered into a sale agreement (the “Sale Agreement”) with an unrelated third party to acquire the aircraft subject to the Closing Agreement. Under the terms of the Sale Agreement, the Company received a down-payment of $30,000, which was credited against the $250,000 cash consideration owed by Mr. Peck. In addition, beginning in October 2016, the Company was to receive monthly payments of at least $28,000 to satisfy the remainder of the $250,000 cash consideration and $50,000 of the Note owed by Mr. Peck. The Company has not received any of the monthly payments due under the Sale Agreement, has issued a demand letter, and is pursuing all other legal remedies at its disposal. The $220,000 remaining balance of closing cash consideration, plus receivables associated with the Note, are reflected as a Note Receivable as of December 31, 2016.2019.

On October 3,2016, the Company purchased all of the capital stock of Aircraft Services, Inc. (“Aircraft Services”), an aircraft maintenance services firm located in Garden City, Kansas. Under the terms of the transaction, the Company made a $150,000 cash payment at closing and will make installment payments totaling an additional $150,000 over the next two years. The closing cash payment for the transaction was funded with internal resources. The Stock Purchase Agreement is discussed in greater detail

As disclosed in a Current Report on Form 8-K filed with the SEC on October 7, 2016September 06, 2019, effective September 1, 2019, the Company and filedRonald J. Ricciardi entered into a new Employment Agreement (the “New Agreement”). Pursuant to the New Agreement, Mr. Ricciardi will continue to serve as the Company’s President and Chief Executive Officer. Among other things, the New Agreement provides for a four-year term with a base salary of $200,000, with subsequent annual base salary increases at the discretion of the Board of Directors. In addition, Mr. Ricciardi is eligible to receive an Exhibitannual incentive bonus in an amount equal to 25% of the then-applicable base salary earned in the event that the Company meets or exceeds its annual operating plan for earnings before interest, taxes, depreciation and amortization. Mr. Ricciardi also received a stock award upon the execution of the New Agreement. In addition, Mr. Ricciardi is eligible for additional stock awards upon each of the four anniversary dates of this New Agreement. Each of the five stock awards shall be the number of shares equal to the issued and outstanding shares of the Company on the date of each issuance multiplied by one half of one percent. The issuance of such stock awards are to be administered according to the Company’s Quarterly Report on Form 10-Q forEquity Compensation Plan, as approved the period ended September 30,2016.Company’s stockholders.

Our anticipated capital expenditures in 20172020 are approximately $50,000 - $100,000.

During the twelve months ended December 31, 2016,2019, we had a net increase in cash of $1,777,396.$758,842. Our sources and uses of funds during this period were as follows:

Cash from Operating Activities

For the year ended December 31, 2016,2019, net cash provided by operating activities was $2,244,551.$1,123,862. This amount included an increase in operating cash related to net income of $880,430$667,644 and additions for the following items: (i) depreciation, $505,390;$124,264; (ii) stock-based compensation expense, $33,997; (iii) accounts receivable, trade, $1,046,548;prepaid expenses and other current assets, $271,830; (iv) inventories, $26,405;deposits, $3,552; (v) deposits, $53,046;deferred income taxes, $31,000; (vi) accounts payable, $159,495;$49,052; and (vii) customer deposits, $315.accrued expenses, $59,129. The increase in cash provided by operating activities in 20162019 was offset by the following items: (i) prepaid expensesaccounts receivable, trade, $106,267; and other current assets, $83,101; (ii) deferred income taxes, $150,000; and (iii) accrued expenses, $227,974.inventories, $10,339. For the year ended December 31, 2015,2018, net cash provided by operating activities was $990,545.$856,258. This amount included an increase in operating cash related to net income of $695,208$311,536 and additions for the following items: (i) depreciation, $568,821;$472,067; (ii) stock-based compensation expense, $33,946;$33,997; (iii) impaired goodwillaccounts receivable, trade, $240,586; and other intangibles, $107,500; (iv) prepaid expenses and other current assets, $170,457; (v) deposits, $28,227; (vi) deferred income taxes, $190,000; and (vii) accrued expenses, $84,347.$44,205. The increase in cash provided by operating activities in 20152018 was offset by the following items: (i) gain on sales ofinventories, $7,736; (ii) prepaid expenses and other current assets, $73,305; (ii) accounts receivable, trade, $471,113;$34,783; (iii) inventories, $21,524;deferred income taxes, $53,000; (iv) accounts payable, $313,515;$146,903; and (v) customer deposits, $8,504.accrued expenses, $3,711.

Cash from Investing Activities

For the year ended December 31, 2016,2019, net cash used in investing activities was $194,781.$87,382. This amount included (i) purchasepayments of ASI assets, $150,000; and (ii) purchasenote receivable of $87,208 offset by purchases of property and equipment $74,781; offset by payment of notes receivable of $30,000.$174,590. For the year ended December 31, 2015,2018, net cash used inprovided by investing activities was $152,375 attributable to the purchase$660,082. This amount included payments of note receivable of $850,264 offset by purchases of property and equipment.equipment of $190,182.

Cash from Financing Activities

For the year ended December 31, 2016,2019, net cash used in financing activities was $272,374$277,638 of which $112,217 was attributable to the repayment of notes payable.payable, $126,630 to the payment of accrued dividends, and $38,891 to the repayment of right of use leases. For the year ended December 31, 2015,2018, net cash used in financing activities was $954,512, consisting$402,195 of (i)which $361,379 was attributable to the repayment of notes payable $404,562; (ii) repayment of borrowings onand $175,816 to the line of credit, $550,000; offset by (iii) issuancerepurchase and cancellation of common stock, $50.offset by the issuance of notes payable of $135,000.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

Critical Accounting Estimates

Discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the amounts reported in the consolidated financial statements and the accompanying notes. We evaluate our estimates on an ongoing basis, including those estimates related to product returns, product and content development expenses, bad debts, inventories, intangible assets, income taxes, contingencies and litigation. We base our estimates on experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The critical accounting policies which we believe affect our more significant judgments and estimates used in the preparation of our consolidated financial statements are provided as follows:

Accounts Receivable, Trade

We extendThe Company extends credit to large and mid-size companies for products and services. We haveThe Company has concentrations of credit risk in that 89.3%73.0% of the balance of ourits accounts receivable at December 31, 20162019 is made up of only four customers. At December 31, 2016,2019, accounts receivable from ourthe Company’s four largest accounts amounted to approximately $554,436 (37.6%$241,298 (35.6%), $426,898 (29.0%$115,864 (17.1%), $196,993 (13.4%$111,149 (16.4%), and $136,470 (9.3%$26,523 (3.9%), respectively. In addition, these four customers represented approximately 54.7% of our revenue in 2019. At December 31, 2018, accounts receivable from the Company’s four largest accounts amounted to approximately $285,350 (33.7%), $202,080 (23.8%), $101,678 (12.0%), and $12,671 (1.5%), respectively. In addition, these four customers represented approximately 59.7% of our revenue in 2018. The Company has in place a security deposit in connection with three of the four receivables, with a letter of credit in the process of being reissued for the fourth, but its receivables are otherwise not collateralized.these receivables. Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability and the allowance for doubtful accounts is adjusted accordingly. We determine collectability based on our management experience and knowledge of the customers.

Goodwill and Intangible Assets

Goodwill and intangibles that are deemed to have indefinite lives are not amortized but, instead, are to be reviewed at each reporting period for impairment. We assessed potential impairment of goodwill using qualitative factors by considering various factors including macroeconomic conditions, industry and market conditions, cost factors, a sustained share price or market capitalization decrease and any reporting unit specific events. We performed an analysis of our goodwill and intangible assets at December 31, 20162019 and 2015. In 2015 we recorded an impairment charge related to intangibles recorded in connection with the purchase of PRA. In 2016 we recorded additional goodwill relating to our Garden City operation’s acquisition of Aircraft Services.2018.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred tax assets are subject to a valuation allowance because it is more likely than not that certain of the deferred tax assets will not be realized in future periods. We file income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, we are no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2013.2016.

Stock Based Compensation

Stock-based compensation expense for all share-based payment awards are based on the estimated grant-date fair value. We recognize these compensation costs over the requisite service period of the award, which is generally the option vesting term.

Option valuation models require the input of highly subjective assumptions, including the expected life of the option. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

RecentRecently Adopted Accounting Pronouncements

In April 2014,February 2016, the FASB issued Accounting Standards UpdateASU No. 2014-08 “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) – Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” (ASU 2014-08)2016-02, “Leases” (“ASU 2016-02”), which requires entities to change the criteria for reporting discontinued operations and enhance convergence of the FASB’s and International Accounting Standard Board’s (IASB) reporting requirements for discontinued operations so as not to be overly complex or difficult to apply to stakeholders. Only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effectto recognize assets and liabilities on the entity’s operationsbalance sheet for the rights and financial results will be reported as discontinued operations in the financial statements.obligations created by leased assets and provide additional disclosures. ASU 2014-08 is effective for fiscal years beginning on or after December 15, 2014 and interim periods thereafter. ASU 2014-082016-02 became effective for our financial statements for fiscal years beginning January 1, 2015. Based on our evaluation of ASU 2014-08, the adoption of this statementus on January 1, 20152019 and we have adopted the new standard using a modified retrospective approach. The adoption of ASU No. 2016-02 did not have a material impact on ourthe Company’s financial statements.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the Board of Directors and Stockholders of

Saker Aviation Services, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Saker Aviation Services, Inc. and Subsidiaries (the “Company”"Company") as of December 31, 20162019 and 2015, and2018, the related consolidated statements of operations, stockholders’ equity and cash flows, for the years then ended. These consolidatedended, and the related notes (collectively referred to as the "consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States)statements"). Those standards require that we plan and perform the audits 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 Saker Aviation Services, Inc. and Subsidiariesthe Company as of December 31, 20162019 and 2015,2018, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the entity changed its methods of accounting for leases in 2019 due to the adoption of ASU No. 2016-02 “Leases”.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Kronick Kalada Berdy & Co. P.C.

We have served as the Company's auditor since 2009.

Kingston, PAPennsylvania

March 31, 201730, 2020

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.