UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-K





(Mark
      One)





x  ANNUAL
      REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934





FOR
      THE
      FISCAL YEAR ENDED DECEMBER 31, 2007





OR





o  TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      Transition Period from _______________ to ________________





COMMISSION
      FILE NUMBER: 000-52593





FIRSTFLIGHT,
      INC.


(Exact
      name of Registrant as Specified in Its Charter)





Nevada
            87-0617649(State
                or Other Jurisdiction of
            (I.R.S.
                EmployerIncorporation
                or Organization)
            Identification
                No.)





236
      Sing
      Sing Road


Horseheads,
      NY 14845


(Address
      of Principal Executive Offices)





(607)
      739-7148


(Issuer’s
      telephone number)





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, $.001 par
      value.





Indicate
      by check mark whether the registrant is a well-known seasoned issuer, as defined
      in Rule 405 of the Exchange Act.




Yes
            o
            
            No
            x





Indicate
      by check mark whether the registrant is not required to file reports pursuant
      to
      Section 13 or Section 15(d) of the Exchange Act.




Yes
            o
            
            No
            x





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.




Yes
            x
            
            No
            o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of the Form 10-K
      or
      any amendment to this Form 10-K.




Yes
            o
            
            No
            x





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.




Large
                accelerated filer
            o
            Accelerated
                filer
            o
            Non-accelerated
                filer
            o
            Smaller
                Reporting Company
            x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).




Yes
            o
            
            No
            x





The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      last sold as of the last business day of the registrant’s most recently
      completed second fiscal quarter: $7,870,399.





As
      of
      March 14, 2008, the Registrant had 36,582,987 shares of its Common Stock, $.001
      par value, issued and outstanding.










**FIRSTFLIGHT,
      INC. AND SUBSIDIARIES**


**FORM
      10-K**


**INDEX**





ITEM
                1.
            
            BUSINESS
            
            A-1ITEM
                1A.
            
            RISK
                FACTORS
            
            A-3ITEM
                2.
            
            PROPERTIES
            
            A-6ITEM
                3.
            
            LEGAL
                PROCEEDINGS
            
            A-7ITEM
                4.
            
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            A-7ITEM
                5.
            
            MARKET
                FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
                PURCHASES OF EQUITY SECURITIES
            
            A-8ITEM
                7.
            
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATION
            
            A-9ITEM
                7A.
            
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            A-16ITEM
                8.
            
            FINANCIAL
                STATEMENTS
            
            A-17ITEM
                9.
            
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            
            A-18ITEM
                9A(T).
            
            CONTROLS
                AND PROCEDURES
            
            A-18ITEM
                9B.
            
            OTHER
                INFORMATION
            
            A-18ITEM
                10.
            
            DIRECTORS,
                EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            
            A-19ITEM
                11.
            
            EXECUTIVE
                COMPENSATION
            
            A-23ITEM
                12.
            
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            
            A-27ITEM
                13.
            
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE
            
            A-30ITEM
                14.
            
            PRINCIPAL
                ACCOUNTING FEES AND SERVICES
            
            A-30ITEM
                15.
            
            EXHIBITS
                AND FINANCIAL REPORTING SCHEDULES
            
            A-32SIGNATURES




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









**PART
      I**




**ITEM
      1.**  **BUSINESS**




**General**




FirstFlight,
      Inc. (“FirstFlight”), through its subsidiaries (FirstFlight and its subsidiaries
      collectively the “Company”), operates in three reportable segments - Charter,
      FBO (fixed based operation) and Maintenance. The charter segment of FirstFlight
      is engaged in aircraft charter management activities, providing on-call
      passenger air transportation. Charter services are provided through a fleet
      of
      managed aircraft for which we provide regulatory and maintenance oversight
      for
      the managed aircraft, while also offering charter services. The FBO segment
      provides services such as fueling and hangaring for general aviation,
      commercial, and military aircraft and the management of a non-owned FBO
      facility. The aircraft maintenance segment provides repair services for both
      managed and non-managed aircraft as well as specialty services on aircraft
      brakes and wheels.





We
      were
      formed on January 17, 2003 (date of inception) 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 which changed its
      name
      to FBO Air, Inc. On December 13, 2006, we changed our name to FirstFlight,
      Inc.





Activities
      by segment are carried out at the following locations:





Location
            
            Charter
            
            FBO
            
            MaintenanceElmira,
                New York
            
            X
            
            Fuel
                revenue to managed aircraft only
            
            XWilkes-Barre,
                Pennsylvania
            
            X
            
            X
            
            XGarden
                City, Kansas
            
            
            
            X





The
      Elmira, New York facility became part of the Company through the acquisition
      on
      September 23, 2005 of Airborne, Inc. (“Airborne”).





The
      Wilkes-Barre, Pennsylvania facility came as a result of the acquisition by
      our
      wholly-owned subsidiary FBO Air Wilkes-Barre, Inc. (“FBO Wilkes-Barre”) of Tech
      Aviation Service, Inc. (“Tech”) and the Garden City, Kansas facility as a result
      of the acquisition by our wholly-owned subsidiary FBO Air Garden City, Inc
      of
      the FBO assets of Central Plains Aviation, Inc. (“CPA”). Both transactions
      occurred on March 31, 2005.





In
      addition to the facilities identified above, the Company has a charter sales
      office located in Teterboro, New Jersey and manages a non-owned FBO facility
      in
      Niagara Falls, New York. Also, the charter segment domiciles managed aircraft
      at
      non-Company facilities in California, Delaware, Florida, and
      Massachusetts.





On
      May
      15, 2007, FirstFlight formed H24 Aviation Advisors, LLC (“H24”) to focus on the
      broker business in the charter segment.





On
      October 20, 2005, FirstFlight formed Tech Aviation Flight School, Inc. (“TAFS”),
      a wholly-owned subsidiary of FBO Wilkes-Barre. TAFS operated in connection
      with
      the fixed base operation in Avoca, Pennsylvania as an FAA accredited flight
      school.





On
      September 30, 2007, the Company sold the stock of TAFS. Preceding the
      transaction, the Company transferred the aircraft assets owned by TAFS into
      a
      newly-formed entity, FBO Air WB Leasing, Inc. (“WB Leasing”). As part of the
      transaction, TAFS entered into an aircraft lease agreement with WB Leasing
      as
      well as an agreement to lease space and buy fuel and maintenance services from
      the Company.





The
      charter management segment of the aviation industry, which includes the charter
      division of the Company, operates under Federal Aviation Regulations (“FAR”)
      Part 135, which covers aircraft with 30 seats or less and up to 7,500 pounds
      of
      payload. According to the National Air Transportation Association
      (“NATA” *)* ,
      there
      are approximately 3,000 holders of Part 135 charter certificates, which include
      2,550 for fixed wing aircraft and 450 for helicopter operators.





NATA
      also
      reports that the business traveler accounts for approximately 70 percent of
      the
      market for charter activity, with leisure activity representing the remaining
      30
      percent. Further, approximately 30 percent of charter travelers have almost
      totally abandoned the scheduled airlines for their travel needs.




A-1




Because
      the charter management segment is populated by primarily small, private
      companies, financial and statistical data is difficult to acquire. However,
      according to the industry publication *Air
      Charter Guide* ,
      the
      on-demand charter fleet in the United States is comprised of 2,034 jet aircraft,
      exclusive of airliner-sized equipment.





The
      FBO
      segment of the industry is also highly fragmented - being populated by,
      according to NATA, over 3,000 operators who serve customers at one or more
      of
      the 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 further 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
      multiple locations within a single region are “regional” chains.




We
      believe the general aviation market has historically been somewhat cyclical,
      with revenues correlated with general US economic conditions. However, despite
      the recent softening of the economy and credit market issues, some leading
      indicators reflective of the current and long-term prospects for the industry
      are as follows:





·
            Cessna,
                a division of Textron and the manufacturer of the largest number
                of
                aircraft used in charter and private aviation, reported an increase
                of 26
                percent in unit volume in the year ended December 31, 2007 as compared
                to
                the same period in the prior year. The 387 jets Cessna delivered
                in 2007
                was the highest total ever in a single year for the company. The
                backlog
                of orders for Cessna also increased 48 percent last year, to a total
                of
                $12.1 billion. (Source: The Weekly of Business Aviation).·
            Gulfstream,
                a division of General Dynamics and the manufacturer of some of the
                most
                popular large and mid-cabin charter jet aircraft, set “all-time” records
                for sales and earnings in 2007 when they delivered 138 airplanes.
                Based on
                current backlog, Gulfstream anticipates deliveries of 157 airplanes
                in
                2008 and believes its longer term backlog remains solid. (Source:
                The
                Weekly of Business Aviation).·
            Deliveries
                of the new generation of very light jets (VLJ) commenced in 2007
                and are
                anticipated to continue on pace through 2008. This new generation
                of jet
                aircraft, which are more affordable but have less-than-transcontinental
                range, we believe will result in increased demand for more FBO services
                in
                secondary markets where FirstFlight’s services are
                positioned.





As
      of
      December 31, 2007, the Company had cash and cash equivalents of $2,400,152
      and
      had working capital of $961,045. The Company generated revenue of $47,107,927
      and net income of $184,454 for the year ended December 31, 2007. Since
      inception, the Company has incurred, in the aggregate, net losses and net losses
      applicable to common stockholders of approximately $5,750,000 and $12,330,000,
      respectively, for the period January 17, 2003 (date of inception) through
      December 31, 2007. For the year ended December 31, 2007, net cash provided
      by
      operating activities was $1,483,555, net cash used in investing activities
      was
      $93,140, and net cash used in financing activities was $172,133.





**Other
      Potential Products**




At
      this point in time, management contemplates maintaining focus on the three
      core
      segments of the aviation industry in which we currently operate - charter
      management, FBOs and aircraft maintenance. Any future expansion of offerings
      could come within products, services, or functions that support one, two or
      all
      of these segments.




**Marketing
      and Sales**




The
      charter segment has a dedicated sales force whose key mission is to maintain
      and
      increase sales of charter activity primarily on its fleet of managed aircraft.
      In 2008, the Company made several moves to increase the size and breadth of
      its
      charter sales force. A new senior vice president of sales and marketing for
      the
      Company preceded the addition of three sales people to focus on the Florida
      and
      Connecticut/Boston corridor. The new vice president and sales people will focus
      their efforts on the addition of new managed aircraft to the charter fleet
      along
      with the development of charter sales utilizing our fleet. Senior management
      personnel complement the efforts of this sales force by pursuing aircraft owners
      who could add their aircraft to our managed fleet.




Enhancements
      have also been made to the Company’s website that enables the sales force to
      more easily communicate with, and field requests from, both current and future
      clients.




A-2




**Government
      Approvals**




The
      aviation services that we operate and/or target for acquisition generally
      operate on municipal or other government owned real estate properties.
      Accordingly, at times we will need to obtain certain consents or approvals
      from
      those government entities in conjunction with our operation and/or acquisition.
      There can be no assurance that we shall obtain such consents on favorable terms,
      which could result in our not consummating an acquisition that we otherwise
      would consider.




**Effect
      of existing or probable government regulation**




Aviation
      services also operate under the supervision of the Federal Aviation
      Administration. Our efforts to charter aircraft, to dispense fuels, and to
      provide repair and maintenance services are under the purview of local, regional
      and national regulatory agencies. We intend to comply with all government
      regulations. The adoption of new regulations could result in increased
      costs.




**Competition**




The
      segments of the aviation industry in which we compete are highly fragmented.
      Within the base of competition in each segment are local, regional and national
      companies.





Management
      believes that the current fleet of aircraft managed by its charter division
      is
      highly competitive in terms of the type and number of aircraft it can deploy
      for
      charter. As of March 14, 2008, the charter fleet was comprised of 19 jet
      aircraft that are generally recognized as attractive by aircraft charter
      clients, including aircraft by well-known manufacturers Gulfstream, Raytheon,
      Lear, Cessna, and Bombardier.





The
      FBO
      segment of the industry, the vast majority of which are independent, single
      location operators, is characterized by competition in both pricing and service
      due to the fair amount of flexibility for aircraft in transit to choose from
      a
      number of FBO options within a 200-300 mile radius. As we grow our business,
      we
      forecast that our larger size will provide us with greater buying power from
      suppliers, and thus provide us with lower costs, which would thereby allow
      for a
      more aggressive pricing policy against some competition. More importantly,
      we
      believe that the higher level of customer service offered in our facilities
      will
      allow us to draw additional aircraft and thus compete successfully against
      other
      FBOs of any size.





**Costs
      and effects of complying with environmental laws**




In
      dispensing fuels and in maintenance and repair operations, we handle virgin
      and
      waste petroleum lubricants. The handling of these materials is subject to
      federal, state and local environmental laws. The Company intends to continue
      to
      comply with these laws as part of its standard operating practice. The cost
      of
      this compliance is considered a normal cost of operations.




**Employees**




As
      of
      December 31, 2007, we employed 137 persons, of whom 109 were employed on a
      full-time basis, three of whom are executive officers of the Company; the
      balance are employed within our segment operations in New York, New Jersey,
      Pennsylvania, and Kansas.





**ITEM
      1A.**  **RISK
      FACTORS**




**The
      following risk factors relate to our operations:**





***We
      have a limited operating history, incurring operating losses from the inception
      of our business until the three months ended June 30, 2007. While we have
      remained profitable from our operations the past three quarters there is no
      assurance that this level of performance will continue for the foreseeable
      future despite our expectations to the contrary.***





Until
      March 31, 2005, we had no revenue. We have incurred net losses and net losses
      applicable to common stockholders of approximately $5,750,000 and $12,330,000,
      respectively, for the period from January 17, 2003 (date of inception) through
      December 31, 2007.





As
      discussed later in this Report, in the section captioned “Management’s
      Discussion and Analysis of Financial Condition,” the Company had taken steps to
      reduce the level of expenditures for corporate operations by severing ties
      with
      two executives. These executives represented costs in 2006 of approximately
      $900,000, including severance and separation fees, and stock-based compensation.
      Additionally, the Company settled litigation in 2006 that, including legal
      and
      settlement related costs, represented approximately $150,000. The Company had
      also re-negotiated favorable terms with certain vendors that management believes
      represented a savings of almost $400,000 versus levels of historical spending.
      The reduction in level of expenditures in 2007 was in part driven by the hiring
      of a Chief Financial Officer and the corresponding elimination of an outside
      accounting consultant.




A-3




The
      steps
      described in the preceding paragraph contributed to the Company attaining
      profitable operations. We may be unable to sustain or increase profitability
      on
      an ongoing basis despite our expectation that we will.





***We
      may have a need for additional financing to expand our
      business.***





Certain
      of the potential sellers with respect to charter management businesses,
      maintenance businesses and the FBOs 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 it is likely that some may seek cash
      payments, whether paid at the closing or in later installment payments. There
      can be no assurance that our operations will generate sufficient cash flow
      to
      meet these acquisition obligations. Accordingly, we anticipate seeking
      additional financing to meet any cash requirements for acquisitions. However,
      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 be satisfactory to us.





***The
      continued threat of terrorist actions may result in less demand for private
      aviation; 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 impact
      on
      the Company. The result of these actions could be that individuals and corporate
      or other entities stop using private aircraft. In this event, we may be unable
      to continue operations on a successful basis.





***We
      could be adversely affected by increases in fuel
      prices.***





Our
      operations could be significantly affected by the availability and price of
      jet
      fuel. A significant increase in jet fuel prices would most likely have a
      material impact on our achieving 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.





***The
      segments of the aviation services industry in which we operate are fiercely
      competitive.***





We
      compete with national, regional, and local charter management, aircraft
      maintenance and fixed base operators. Many of our competitors have been in
      business longer than we have and may have greater financial resources available
      to them. Having greater financial resources will make it easier for these
      competitors to absorb higher fuel prices and other increases in expenses. In
      addition, these competitors might seek acquisitions in competition to us.
      Accordingly, we can give no assurance that we will be able to successfully
      compete in our industry.





***Our
      business as an aviation services company is subject to extensive governmental
      regulation.***





Aviation
      services companies are subject to extensive regulatory requirements that could
      result in significant costs. For example, the Federal Aviation Administration
      from time to time issues directives and other regulations relating to the
      management, maintenance and operation of aircraft and facilities. Our compliance
      with those requirements may cause us to incur significant
      expenditures.





Additional
      laws, regulations and charges have been proposed from time to time that could
      significantly increase the cost of our operations or reduce overall revenue.
      We
      cannot provide assurance that laws or regulations enacted in the future will
      not
      adversely affect our revenue and future profitability.





We
      can
      give no assurance that the state or local authority regulating the airport
      as to
      which we may acquire a charter management operation or an FBO will approve
      our
      application to be the successor, or, when requested, extend the term of the
      lease for the facility to a more acceptable term.




A-4




***We
      must maintain and add key management and other
      personnel.***





Our
      future success will be heavily dependent on the performance of our executive
      officers and managers. We have entered into employment agreements with certain
      of these individuals, including our President and Chief Executive Officer (John
      H. Dow), our Chief Financial Officer (Keith P. Bleier), and our Vice Chairman
      of
      the Board (Ronald J. Ricciardi). Our growth and future success will depend,
      in
      large part, on the continued contributions of these key individuals, as well
      as
      our ability to motivate and retain these personnel or hire other persons. In
      addition, our proposed plan of development will require an increase in
      management, sales, marketing and accounting/administrative personnel and an
      investment in development of our expertise by existing employees and management.
      Although we believe we will be able to hire and retain qualified personnel,
      we
      can give no assurance that we will be successful in obtaining, recruiting and
      retaining such personnel in sufficient numbers to increase revenue, attain
      profitability, or successfully implement our growth strategy.





**The
      following risk factors relate to our common stock:**





***We
      do not currently have an active market for our common stock.***





To
      date,
      trading of our common stock has been sporadic and limited. In addition, there
      are only a limited number of broker-dealers trading our common stock. As a
      result the number of shares of our common stock being offered in the market
      may
      not increase. Working with our investment banking and investor relations firms
      we are trying to increase this number. However, we can give no assurance that
      we
      will achieve this objective. Accordingly, we can give no assurance that an
      active trading market will ever develop.





***Our
      common stock is subject to the penny stock rules.***





The
      Securities and Exchange Commission (the “Commission”) 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) or authorized for quotation
      on an automated quotation system sponsored by a registered pre-1990 securities
      association, provided that current price and volume information regarding
      transactions in such securities is provided by the exchange or system. The
      penny
      stock rules require a broker-dealer to deliver to the customer a standardized
      risk disclosure document prepared by the Commission that provides information
      about penny stocks and the nature and level of risks in the penny stock market.
      The broker-dealer also must provide the customer with other information. The
      penny stock rules 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
      may reduce the level of trading activity in the secondary market for a stock
      that is subject to the penny stock rules. If a market ever does develop for
      our
      common stock, as to which we can give no assurance, and it should remain subject
      to the penny stock rules, holders of our common stock may find it more difficult
      to sell their shares of our common stock.





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





As
      of
      March 14, 2008, there were 36,582,987 shares outstanding. If all of the
      outstanding common stock purchase warrants and options were exercised, there
      would be 50,335,108 shares outstanding, an increase of almost 38%. Any further
      issuances due to additional equity financings or the granting of additional
      options or possibly the anti-dilution provisions in our warrants will further
      dilute our existing stockholders.





***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.





***Our
      Board’s right to authorize additional shares of preferred stock could adversely
      impact the rights of holders of our common stock.***





Our
      board
      of directors currently has the right, with respect to the 9,999,154 authorized
      shares of our preferred stock, to authorize the issuance 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 without the approval
      of the holders of our common stock. However, a majority of the independent
      directors must approve such issuance under a policy adopted by the FirstFlight
      board of directors on March 19, 2006. 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 them a veto with respect to any merger proposal. Or they could be granted
      20 votes per share while voting as a single class with the holders of the 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 be redeemed in cash in the event of a merger. This would make an
      acquisition of our Company less attractive to a potential acquirer. Thus, our
      board 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 which
      a
      majority of our then holders of our common stock otherwise favor.




A-5




***Our
      common stock may not continue to be traded on the OTC Bulletin
      Board.***





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





***Our
      management team currently has influential voting
      power.***





As
      of
      March 14, 2008, the executive officers and directors of FirstFlight and their
      family members and associates collectively could vote 12,733,292 shares or
      34.8%
      of the 36,582,987 shares of the issued and outstanding voting shares.
      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 the directors of FirstFlight. The management of the Company
      is controlled by our board of directors, currently comprised of five independent
      directors, a director who is a managing partner of a law firm which is corporate
      counsel to the Company, a director who is related to a former executive officer
      and two executive officers/directors.





**ITEM
      2.**  **PROPERTIES**




We
      lease
      office space at the following locations:




Location
            
            Purpose
            
            Space
            
            Annual
                Rental
            
            Expiration236
                Sing Sing Road
              Horseheads,
                New York (1)
            
            
            Executive
                offices and principal facility of our charter segment
            
            
            24,050
                square feet
            
            $
            160,582
            
            
            September
                22, 2020101
                Hangar Road
              Avoca,
                Pennsylvania
            
            
            Pennsylvania
                service location of our FBO segment
            
            
            24,000
                square feet
            
            $
            75,000
            
            
            August
                21, 20132145
                S. Air Service Road, Garden City, Kansas
            
            
            Kansas
                service locationof
                our FBO segment
            
            
            17,640
                square feet
            
            $
            18,600
            
            
            March
                31, 2015333
                Industrial Avenue
              Teterboro,
                New Jersey
            
            
            Office
                facility of ourcharter
                sales department
            
            
            1,510
                squarefeet
            
            $
            44,124
            
            
            September
                30, 2008333
                Industrial Avenue
              Teterboro,
                New Jersey
            
            
            Hangar
                and shop space for managed aircraft
            
            
            10,773
                squarefeet
            
            $
            336,396
            
            
            September
                30, 2008




(1)
      This
      location is leased from a related party to whom in the years ended December
      31,
      2007 and 2006 we paid a total amount for rent of approximately
      $161,000.





We
      believe that our space is adequate for our immediate needs. Additional hangar
      space may be required in the future. In the event that hangar space is not
      readily available at commercially reasonable rates, we may expand via new
      construction. No such definitive plans have been developed at the time of this
      Report.




We
      have
      no current intention to invest in real estate, other than in connection with
      the
      acquisition of an aviation services property. While we may purchase the common
      stock of companies as a means of acquisition of that entity, we have no intent
      to passively hold or invest in the common stock of companies in these aviation
      businesses.




A-6




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**




As
      of
      December 31, 2007, the Company was not a party to any pending legal proceeding
      as to which disclosure was required pursuant to Item 103 of Regulation S-K
      of
      the Commission.





**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**




None.


A-7


**PART
      II**




**ITEM
      5.**  **MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
      OF EQUITY SECURITIES**




**Market
      for Common Equity**





Our
      common stock is traded on the OTC Bulletin Board (“OTCBB”) under the symbol
      FFLT. The OTCBB is a regulated quotation service that displays real-time quotes,
      last-sale prices and volume information in over-the-counter (“OTC”) equity
      securities. The following table sets forth the range of high and low closing
      sale prices for the common stock as reported on the OTCBB for the past two
      fiscal years.





Common
                StockQuarterly
                Period Ended
            
            High
            
            LowMarch
                31, 2006
            
            $
            0.7500
            
            $
            0.4000June
                30, 2006
            
            $
            0.7500
            
            $
            0.4100September
                30, 2006
            
            $
            0.5000
            
            $
            0.3000December
                31, 2006
            
            $
            0.6000
            
            $
            0.2400March
                31, 2007
            
            $
            0.5500
            
            $
            0.3000June
                30, 2007
            
            $
            0.3700
            
            $
            0.3100September
                30, 2007
            
            $
            0.4200
            
            $
            0.2800December
                31, 2007
            
            $
            0.4000
            
            $
            0.2700




**Holders**





As
      of
      March 14, 2008, there were approximately 625 holders of record of the common
      stock. This number does not include beneficial owners of the Common Stock whose
      shares are held in the names of various broker-dealers, clearing agencies,
      banks, and other fiduciaries.





**Dividends**





Since
      inception we have never declared or paid any cash dividends on our common stock.
      We intend to retain future earnings to finance the growth and development of
      our
      business and future operations. Therefore, we do not anticipate paying any
      cash
      dividends on shares of our common stock in the foreseeable future.





**Securities
      Authorized for Issuance under Equity Compensation Plans**





The
      following table set forth certain information, as of December 31, 2007, with
      respect to securities authorized for issuance under equity compensation plans.
      The only security being so offered is our common stock.





Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))(a)
            
            (b)
            
            (c)Equity
                compensation plans approved by security holders
            
            
            2,035,000
            
            $
            0.431
            
            
            5,465,000Equity
                compensation plans not approved by security holders
            
            
            350,000
            
            $
            1.326
            
            
            —Total
            
            
            2,385,000
            
            $
            0.563
            
            
            5,465,000




A-8




We
      received stockholder approval on December 12, 2006 of the Stock Option Plan
      which relates to 7,500,000 shares of the common stock.





**Repurchases**





In
      March
      2007, FirstFlight re-purchased 25,000 shares for $18,375 in cash that had been
      issued in a settlement of litigation and for which the holder had a right to
      put
      the shares back to FirstFlight. There were no repurchases of shares during
      the
      year ended December 31, 2006.





**Recent
      Sales of Unregistered Securities**




Information
      with respect to all equity securities sold by FirstFlight during the fiscal
      year
      ended December 31, 2007 which were not registered under the Securities Act
      of
      1933, as amended (the “Securities Act”), was previously reported in a Quarterly
      Report on Form 10-QSB or a Current Report on Form 8-K.


**ITEM
        7. **MANAGEMENT’S
        DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF **OPERATION******


**Summary
      Financial Information**




The
      summary financial data set forth below is derived from and should be read in
      conjunction with the consolidated financial statements, including the notes
      thereto, filed as part of this Report.




**Consolidated
                Statement of Operations Data:**
            
            **Year
                Ended December 31,**
              **2007**
            
            **Year
                Ended**
              **December
                31,**
              **2006**(in
                thousands, except for share and per share data)Revenue
            
            $
            47,108
            
            $
            39,212Net
                income (loss) applicable to common stockholders
            
            $
            184
            
            $
            (7,777
            )Net
                income (loss) per common share - basic and diluted
            
            $
            0.01
            
            $
            (0.34
            )Weighted
                average number of shares - basic and diluted
            
            
            36,585,305
            
            
            22,661,039




**Balance
                Sheet Data:**
            
            **December
                31,**
              **2007**
            
            **December
                31,**
              **2006**Working
                capital
            
            $
            961
            
            $
            (23
            )Total
                assets
            
            $
            14,395
            
            $
            13,181Total
                liabilities
            
            $
            7,759
            
            $
            7,157Stockholders’
                equity
            
            $
            6,636
            
            $
            6,025





**Forward-looking
      Statements**




This
      Report on Form 10-K contains "forward-looking statements" within the meaning
      of
      Section 27A of the Securities Act and Section 21E of the Securities Exchange
      Act
      of 1934, as amended (the “Exchange Act”). All statements other than statements
      of historical facts included in this Report, including, without limitation,
      the
      statements under "General," "Marketing and Sales," "Liquidity and Capital
      Resources" and "Plan of Operation" are forward-looking statements. The Company
      cautions that forward-looking statements are subject to certain risks and
      uncertainties that could cause actual results to differ materially from those
      indicated in the forward-looking statements, due to several important factors
      herein identified. Important factors that could cause actual results to differ
      materially from those indicated in the forward-looking statements ("Cautionary
      Statements") include services and pricing, general economic conditions, new
      product development, the Company's ability to raise additional capital, the
      Company's ability to obtain the various approvals and permits for the
      acquisition and operation of FBOs and charter management operations and the
      other risk factors detailed from time to time in this Report and other materials
      filed with the Commission.




A-9




All
      subsequent written and oral forward-looking statements attributable to the
      Company or persons acting on its behalf are expressly qualified in their
      entirety by the Cautionary Statements.





**Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations**




Comparison
      of the Year Ended December 31, 2007 and December 31, 2006.





REVENUE
      AND OPERATING RESULTS





The
      following table summarizes revenue and operating results by
      segment:





**Year
                Ended**
              **December
                31,****Revenue**
            
            **2007**
            
            **2006**Charter
            
            $
            38,231,943
            
            $
            31,243,500FBO
            
            
            5,905,715
            
            
            4,988,553Maintenance
            
            
            2,970,269
            
            
            2,980,371Total
                revenue
            
            $
            47,107,927
            
            $
            39,212,424





**Year
                Ended**
              **December
                31,****Operating
                Results**
            
            **2007**
            
            **2006**Charter
            
            $
            1,561,689
            
            $
            658,798FBO
            
            
            308,845
            
            
            15,668Maintenance
            
            
            (32,184
            )
            
            (242,358
            )Division
                profit
            
            
            1,838,350
            
            
            432,108Corporate
                expense
            
            
            1,633,897
            
            
            2,805,651Operating
                profit (loss)
            
            
            204,453
            
            
            (2,373,543
            )Other
                income (expense), net
            
            
            (44,690
            )
            
            155,700Interest
                income (expense), net
            
            
            24,691
            
            
            (1,118,916
            )Net
                income (loss)
            
            $
            184,454
            
            $
            (3,336,759
            )





Revenue
      for the year ended December 31, 2007 increased 20.1 percent from revenue in
      the
      year ended December 31, 2006. This increase was primarily due to the results
      of
      the charter segment, which generated over $38 million in revenue, a 22.4 percent
      increase over its revenue in the prior year, and the FBO segment, which
      generated $5.9 million, an 18.4 percent increase over its revenue in the same
      period in 2006. In the charter segment, a larger fleet and a more productive
      use
      of mid and large cabin aircraft in charter activities were factors. In the
      FBO
      segment, increases related to fueling managed aircraft and a higher average
      price for fuel as a result of higher fuel costs were factors.





Gross
      margin, as a percentage of revenue, of 16.2 percent for the year ended December
      31, 2007 decreased as compared with 17.0 percent in the corresponding prior-year
      period. The decline in the year ended December 31, 2007 was largely the result
      of commissions in the amount of $272,705 in the charter segment related to
      the
      sale of aircraft in the 2006 period that did not recur in the 2007 period.
      Excluding the effect of those commissions, the margin for the year ended
      December 31, 2006 would have been 16.4 percent, a better comparison to the
      16.2
      percent during the year ended December 31, 2007.





Other
      expense was $44,690 for the year ended December 31, 2007 as compared to other
      income of $155,700 for the year ended December 31, 2006. Items of note included
      the sale of a charter certificate in the year ended December 31, 2006. In the
      year ended December 31, 2007, other income consisted of, as mentioned elsewhere
      in this Report, the gain on sale of the TAFS subsidiary, plus income from
      extinguishment of debt offset by an allowance for the uncollectable note
      receivable.




A-10




Segment
      Analysis





*Charter*





Charter
      revenue increased by 22.4 percent for the year ended December 31, 2007 as
      compared with such revenue in the corresponding prior-year period. The
      year-over-year increase is attributable to a greater productivity of the
      collective fleet plus a favorable shift to a higher mix of mid- and large-cabin
      charter hours, in addition to a higher overall number of aircraft. We managed
      19
      aircraft for their owners at December 31, 2007 as compared to 16 at December
      31,
      2006.





For
      the
      year ended December 31, 2007, activities associated with managed charter (29.2%
      increase), management services (22.7%), and brokered charter (2.4%) delivered
      better results as compared to results in the same period in the prior year
      for
      the reasons articulated in the previous paragraph. Fuel sales to charter
      aircraft (-0.8%) declined slightly due to the relocation of managed aircraft
      to
      other facilities. In the miscellaneous revenue category, performance on a
      year-over-year basis (-64.2%) was impacted by the absence of commissions on
      the
      sale of aircraft in the current-year period, as mentioned earlier in this
      Report.





Charter
      segment operating profit increased 137.1 percent for the year ended December
      31,
      2007 as compared with such profit in the corresponding prior-year period.
      Segment operating profit, as a percentage of segment revenue, increased to
      4.1
      percent for the year ended December 31, 2007 as compared to 2.1 percent in
      the
      corresponding prior-year period.





In
      addition to the increase in revenue, operating profit results were driven by
      a
      reduction of operating expenses and a slight improvement in gross margin for
      the
      segment. Gross margin, as a percentage of charter segment revenue, was 14.1
      percent for the year ended December 31, 2007 as compared to 14.2 percent in
      the
      year ended December 31, 2006 when adjusted for commissions on the sale of
      aircraft. Segment operating expenses, as a percentage of revenue, were 10.0
      percent in the year ended December 31, 2007 as compared to 12.8 percent in
      the
      same period in the prior year.




*FBO*





FBO
      segment revenue increased by 18.4 percent for the year ended December 31, 2007
      as compared with such revenue in the corresponding prior-year period. Revenue
      associated with the sale of jet fuel, aviation gasoline and related items
      increased by 24.4 percent in the year ended December 31, 2007 as compared to
      such revenue in the same period in the prior year. This increase offset a
      revenue shortfall for the flight school (-34.6 percent for the year) and the
      management of non-owned FBO facilities (-26.2 percent for the year). The flight
      school subsidiary, as indicated elsewhere in this Report, was divested on
      September 30, 2007. The decrease in revenue associated with the management
      of
      non-owned FBO facilities was due to an anticipated reduction in contractual
      rates.





FBO
      segment operating profit increased 1871.2 percent in the year ended December
      31,
      2007 as compared with the year ended December 31, 2006 for the reasons
      articulated in the previous paragraph. Segment operating profit, as a percentage
      of segment revenue, increased to 5.2 percent for the year ended December 31,
      2007 as compared with 0.3 percent in the corresponding prior-year period.





In
      addition to the increase in revenue, operating profit was improved through
      a
      greater leverage of operating expenses, which offset a decrease in gross margin.
      Gross margin and operating expenses, as a percentage of revenue, in the year
      ended December 31, 2007, were 28.4 percent and 23.2 percent, respectively,
      as
      compared to 31.5 percent and 31.2 percent in the same prior-year
      period.





*Maintenance*





Maintenance
      segment revenue decreased by 0.3 percent for the year ended December 31, 2007
      as
      compared with such revenue in the corresponding prior-year period. The
      scheduling of significant maintenance events in the year ended December 31,
      2006, which did not recur during the same period in 2007, impacted the revenue
      performance of the division. Our brake and wheel operation, which was not
      affected by scheduling of these events, did show good year-over-year growth:
      12.9 percent for the year ended December 31, 2007 as compared to its revenue
      in
      the same period in prior year.





Maintenance
      segment operating losses decreased by $210,174 for the year ended December
      31,
      2007 as compared with the corresponding prior-year period. We first reported
      maintenance as a separate segment in the three months ended September 30, 2006.
      Management believes that this separate, dedicated emphasis has and will prompt
      a
      greater focus on operational efficiencies in the segment and lead to improved
      performance. The results for the year ended December 31, 2007 represented an
      improvement versus results in the prior year that, management believes, are
      representative of a trend of improved performance in future
      quarters.




A-11




Corporate
      Expense





Corporate
      expense was $1,633,897 for the year ended December 31, 2007, a decrease of
      $1,171,754 as compared with such expenses in the corresponding prior-year
      period. Management has dedicated significant attention to cost- and
      infrastructure-related savings over the past several quarters. The reduction
      in
      corporate expenses for the year ended December 31, 2007 is the result of the
      elimination of headcount and a decrease in professional expenses due to the
      addition of our chief financial officer in September 2006 and the resultant
      limitation of expenses associated with an outsourced financial consultant.





Selling,
      General and Administrative





Selling,
      general and administrative expenses (“SG&A”) of $7,448,187 decreased by
      $1,576,281, or 17.5 percent, in the year ended December 31, 2007 as compared
      with such expenses in the corresponding prior-year period. SG&A, as a
      percentage of revenue, decreased to 15.8 percent for the year ended December
      31,
      2007 as compared with 23.0 percent in the corresponding prior-year period.
      The
      decreases in SG&A as a percentage of revenue are due, in large part, to the
      increase in revenue during the current year coupled with the decrease in
      corporate expense, both as discussed above.





Depreciation
      and Amortization





Depreciation
      and amortization expense remained consistent for the year ended December 31,
      2007 as compared with the corresponding prior-year.





Interest
      Income/Expense





Net
      interest income for the year ended December 31, 2007 was $24,691 while net
      interest expense for the year ended December 31, 2006 was $1,118,916. This
      year-over-year improvement is the result of the interest expense associated
      with
      the Senior Secured Notes that were repaid in September 2006.





**Net
      Income (Loss) Applicable to Common Stockholders**




Net
      income applicable to common stockholders for the year ended December 31, 2007
      was $184,454 as compared to net loss applicable to common stockholders for
      the
      year ended December 31, 2006 of $7,776,516, an improvement of $7,960,970. This
      change was largely driven by an improvement in the operating results of the
      Company and by the elimination of expenses related to preferred stock
      ($3,002,563 in dividend and discount amortization charges) and the amortization
      of deferred financing costs ($1,437,194) in the year ended December 31, 2006.
      These eliminations, in addition to the reduction of interest expense as noted
      above, were directly related to the conversion of preferred stock to common
      stock and repayment of senior debt in connection with the $5.025 million
      offering completed in September 2006.




Basic
      net
      income (loss) per share applicable to common stockholders is computed based
      on
      the weighted average number of shares of common stock outstanding during the
      periods presented. Common stock equivalents, consisting of options and warrants,
      were not included in the calculation of the diluted losses per share because
      their inclusion would have been anti-dilutive or were not included in the
      calculation of net income per share because their exercise prices were greater
      than the average market price of the common stock during the period. Basic
      and
      diluted net income per share applicable to common stockholders for the year
      ended December 31, 2007 was $0.01 and net loss per share applicable to common
      stockholders for the year ended December 31, 2006 was $0.34.





**LIQUIDITY
      AND CAPITAL RESOURCES**





For
      all
      prior periods through March 31, 2007, the Company had incurred operating losses.
      During each of the three-month periods ended June 30, September 30, and December
      31, 2007 the Company generated operating income. The Company generated revenue
      of $47,107,927 for the year ended December 31, 2007. For the year ended December
      31, 2007, net cash provided by operating activities was $1,483,555, net cash
      used in investing activities was $93,140, and net cash used in financing
      activities was $172,133. As of December 31, 2007, the Company had cash and
      cash
      equivalents of $2,400,152 and had working capital of $961,045.





The
      Company had taken steps to reduce the level of expenditures for corporate
      operations by severing ties with two executives. These executives represented
      costs in 2006 of approximately $900,000, including severance and separation
      fees, and stock-based compensation. Additionally, the Company had settled
      litigation in 2006 that, including legal and settlement related costs,
      represented approximately $150,000. The Company had also re-negotiated favorable
      terms with certain vendors that management believes represented a savings of
      almost $400,000 versus levels of historical spending, in part driven by the
      hiring of a chief financial officer and the corresponding elimination of an
      outside accounting consultant.




A-12




The
      Company is continuing to implement its strategic business plan. During the
      year
      ended December 31, 2007, the Company’s revenue has increased and SG&A
      expenses have decreased as compared with the revenue and SG&A expense in the
      same period in the prior year. The Company believes that it has sufficient
      liquidity to sustain its existing business for the next twelve months.  In
      early 2008, the Company has taken steps to increase its revenue by upgrading
      and
      enlarging its sales force, particularly as it relates to the charter
      segment.  A dedicated vice president of sales and marketing has been added
      along with three additional charter sales personnel.  The collective focus
      for these people is to add additional managed aircraft and to create better
      utilization of the fleet of managed aircraft by increasing the number of booked
      charter hours.  Further, the sales personnel are focused in geographically
      strategic markets where the company has recently added managed aircraft and
      in
      which the Company believes sufficient opportunity exists for new aircraft and
      charter clients.  The Company anticipates that these sales people will
      recoup their respective compensation and expenses in additional revenue and
      gross margin during 2008.  In addition, the Company is also continuing to
      maintain its cost containment measures initiated during 2007.




During
      the year ended December 31, 2007, the Company had a net increase in cash and
      cash equivalents of $1,218,282. The Company's sources and uses of funds during
      this period were as follows:




**Cash
      from Operating Activities**




For
      the
      year ended December 31, 2007, net cash provided by operating activities was
      $1,483,555. The primary sources of cash for 2007 were from net income as
      adjusted for non-cash charges. For the year ended December 31, 2006, net cash
      used in operating activities was $1,887,794. The primary decrease in cash for
      2006 was from net loss as adjusted for non-cash charges and an approximately
      $760,000 change in operating assets and liabilities.





**Cash
      from Investing Activities**




For
      the
      year ended December 31, 2007, net cash used in investing activities was $93,140
      attributable primarily to net proceeds from the sale of assets of $329,184
      in
      connection with the disposal of a small, piston-powered aircraft and the sale
      of
      TAFS offset by the purchase of equipment of $318,797. For the year ended
      December 31, 2006, net cash used in investing activities was $7,554 attributable
      to the proceeds from a note receivable of $200,000 offset by the purchase of
      equipment of $207,554.





**Cash
      from Financing Activities**




For
      the
      year ended December 31, 2007, net cash used in financing activities was
      $172,133, consisting of the repayment of notes ($153,758) and the re-purchase
      of
      stock via a put option in connection with an obligation ($18,375). For the
      year
      ended December 31, 2006, net cash provided by financing activities was
      $1,746,768, consisting of the proceeds from private placement ($5.025 million),
      offset by the repayments of term loan ($1.5 million), repayment of senior notes
      ($1,496,324), and repayment of notes ($281,908).





**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. On an ongoing basis, we
      evaluate our estimates, including those 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.




A-13




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




The
      Company’s extends credit to large and mid-size companies for aviation services.
      The Company has concentrations of credit risk in that 51% of the balance of
      accounts receivable at December 31, 2007 is made up of only ten customers.
      At
      December 31, 2007, accounts receivable from our largest account amounted to
      approximately $530,000 (10.1%). The Company does not generally require
      collateral or other security to support customer 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. Management determines collectability
      based on their experience and knowledge of the customers.





Goodwill
      and Intangible Assets




The
      Company accounts for Goodwill and Intangible Assets in accordance with Statement
      of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”
(“SFAS 141”) and SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS
      142”). Under SFAS No. 142, goodwill and intangibles that are deemed to have
      indefinite lives are no longer amortized but, instead, are to be reviewed at
      least annually for impairment. Application of the goodwill impairment test
      requires judgment, including the identification of reporting units, assigning
      assets and liabilities to reporting units, assigning goodwill to reporting
      units, and determining the fair value. Significant judgments required to
      estimate the fair value of reporting units include estimating future cash flows,
      determining appropriate discount rates and other assumptions. Changes in these
      estimates and assumptions could materially affect the determination of fair
      value and/or goodwill impairment for each reporting unit. We have recorded
      goodwill in connection with the Company's acquisitions amounting to $4,194,770.
      The Company has determined that there is no impairment of goodwill at December
      31, 2007 and 2006. Intangible assets continue to be amortized over their
      estimated useful lives.




In
      accordance with the requirements of SFAS 141 the Company recognized certain
      intangible assets acquired, primarily goodwill, trade names, non-compete
      agreements and customer relationships.  In accordance with the
      provisions of SFAS 142, on a regular basis, the Company performs impairment
      analysis of the carrying value of goodwill and certain other intangible
      assets.




Income
      Taxes




The
      Company accounts for income taxes under SFAS No. 109, “Accounting for Income
      Taxes” (“SFAS 109”). Under SFAS 109, 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. Under SFAS 109, 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. The Company’s ability to
      utilize its NOL carry-forwards may be subject to an annual limitation in future
      periods pursuant to Section 382 of the Internal Revenue Code of 1986, as
      amended.





Although
      we have federal and state net operating losses available for income tax purposes
      that may be carried forward to offset future taxable income, the deferred tax
      assets are subject to a 100% valuation allowance because it is more likely
      than
      not that the deferred tax assets will not be realized in future periods. The
      Company’s ability to use its net operating loss carry forwards may be subject to
      an annual limitation in future periods pursuant to Section 382 of the Internal
      Revenue Code (the “Code”).





Effective
      January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”)
      Interpretation Number 48, “Accounting for Uncertainty in Income Taxes, an
      interpretation of FASB Statement No. 109,” (“FIN No. 48”), which prescribes a
      single, comprehensive model for how a company should recognize, measure, present
      and disclose in its financial statements uncertain tax positions that the
      company has taken or expects to take on its tax returns. Upon adoption of FIN
      No. 48, we recognized no changes in the liability for unrecognized tax
      benefits.




We
      record
      interest and penalties related to unrecognized tax benefits in income tax
      expense. As of January 1, 2007, we recognized no charges for interest and
      penalties related to unrecognized tax benefits in our Consolidated Balance
      Sheet.




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
      2004.




Stock
      Based Compensation




Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
“Share Based Payment” (“FAS 123R”), using the modified prospective transition
      method. Stock-based compensation expense for all share-based payment awards
      granted after January 1, 2006 is based on the grant-date fair value estimated
      in
      accordance with the original provisions of FAS 123R. The Company recognizes
      these compensation costs over the requisite service period of the award, which
      is generally the option vesting term or the duration of employment agreement.
      For the year ended December 31, 2007 and 2006, the Company incurred stock based
      compensation of $415,782 and $801,721, respectively. As of December 31, 2007,
      the unamortized fair value of the options totaled $365,235. The weighted average
      remaining amortization period of these options is 0.6 years.




A-14




Option
      valuation models require the input of highly subjective assumptions including
      the expected life of the option. Because the Company's 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.





The
      fair
      value of each share-based payment awards granted during the period was estimated
      using the Black-Scholes option pricing model with certain assumptions in
      estimating fair value.





**Recent
      Accounting Pronouncements**





In
      December 2007, the Financial Accounting Standards Board (the “FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 141R, “Business
      Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
      Combinations.” SFAS 141R establishes principles and requirements for determining
      how an enterprise recognizes and measures the fair value of certain assets
      and
      liabilities acquired in a business combination, including noncontrolling
      interests, contingent consideration, and certain acquired contingencies. SFAS
      141R also requires acquisition-related transaction expenses and restructuring
      costs be expensed as incurred rather than capitalized as a component of the
      business combination. SFAS 141R will be applicable prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008. SFAS
      141R
      would have an impact on accounting for any businesses acquired after the
      effective date of this pronouncement.




In
      February 2007, the FASB issued Statement of Financial Accounting
      Standards No. 159, The Fair Value Option for Financial Assets and Financial
      Liabilities ("SFAS 159"), to permit all entities to choose to elect, at
      specified election dates, to measure eligible financial instruments at fair
      value. An entity shall report unrealized gains and losses on items for which
      the
      fair value option has been elected in earnings at each subsequent reporting
      date, and recognize upfront costs and fees related to those items in earnings
      as
      incurred and not deferred. SFAS 159 applies to fiscal years beginning after
      November 15, 2007, with early adoption permitted for an entity that has also
      elected to apply the provisions of SFAS 157, Fair Value Measurements. An
      entity is prohibited from retrospectively applying SFAS 159, unless it chooses
      early adoption. SFAS 159 also applies to eligible items existing at November
      15,
      2007 (or early adoption date). The Company is currently evaluating the
      impact of adopting SFAS 159 on its financial statements.




In
      December 2006, the FASB issued FASB Staff Position ("FSP") EITF 00-19-2,
      Accounting for Registration Payment Arrangements. This FSP specifies that the
      contingent obligation to make future payments or otherwise transfer
      consideration under a registration payment arrangement, whether issued as a
      separate agreement or included as a provision of a financial instrument or
      other
      agreement, should be separately recognized and measured in accordance with
      FASB
      Statement No. 5, Accounting for Contingencies. This FSP further clarifies that
      a
      financial instrument subject to a registration payment arrangement should be
      accounted for in accordance with other applicable GAAP without regard to the
      contingent obligation to transfer consideration pursuant to the registration
      payment arrangement. This FSP amends various authoritative literature notably
      FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
      Activities, FASB Statement No. 150, Accounting for Certain Financial Instruments
      with Characteristics of both Liabilities and Equity, and FASB Interpretation
      No.
      45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
      Indirect Guarantees of Indebtedness of Others.   This FSP is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      December 21, 2006. For registration payment arrangements and financial
      instruments subject to those arrangements that were entered into prior to
      December 21, 2006, the guidance in the FSP is effective for financial statements
      issued for fiscal years beginning after December 15, 2006, and interim periods
      within those fiscal years. The adoption of this FSP did not have a material
      impact on the Company’s financial statements.




In
      November 2006, the FASB ratified EITF Issue No. 06-7, Issuer’s Accounting for a
      Previously Bifurcated Conversion Option in a Convertible Debt Instrument When
      the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement
      No. 133, Accounting for Derivative Instruments and Hedging Activities (“EITF
      06-7”). At the time of issuance, an embedded conversion option in a convertible
      debt instrument may be required to be bifurcated from the debt instrument and
      accounted for separately by the issuer as a derivative under FAS 133, based
      on
      the application of EITF 00-19. Subsequent to the issuance of the convertible
      debt, facts may change and cause the embedded conversion option to no longer
      meet the conditions for separate accounting as a derivative instrument, such
      as
      when the bifurcated instrument meets the conditions of Issue 00-19 to be
      classified in stockholders’ equity. Under EITF 06-7, when an embedded conversion
      option previously accounted for as a derivative under FAS 133 no longer meets
      the bifurcation criteria under that standard, an issuer shall disclose a
      description of the principal changes causing the embedded conversion option
      to
      no longer require bifurcation under FAS 133 and the amount of the liability
      for
      the conversion option reclassified to stockholders’ equity. EITF 06-7 should be
      applied to all previously bifurcated conversion options in convertible debt
      instruments that no longer meet the bifurcation criteria in FAS 133 in interim
      or annual periods beginning after December 15, 2006, regardless of whether
      the
      debt instrument was entered into prior or subsequent to the effective date
      of
      EITF 06-7. Earlier application of EITF 06-7 is permitted in periods for which
      financial statements have not yet been issued. The adoption of this
      pronouncement did not have a material impact on the Company’s financial
      statements.




A-15




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      No. 157”).  This Statement defines fair value, establishes a framework for
      measuring fair value and expands disclosure of fair value measurements. 
SFAS No. 157 applies under other accounting pronouncements that require or
      permit fair value measurements and accordingly, does not require any new fair
      value measurements.  SFAS No. 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007.  The
      adoption of this pronouncement did not have a material impact on the Company’s
      financial statements.





In
      June
      2006, the EITF reached a consensus on Issue No. 06-3 (“EITF 06-3”), “Disclosure
      Requirements for Taxes Assessed by a Governmental Authority on Revenue-Producing
      Transactions.” The consensus allows companies to choose between two acceptable
      alternatives based on their accounting policies for transactions in which the
      company collects taxes on behalf of a governmental authority, such as sales
      tax.
      Under the gross method, taxes collected are accounted for as a component of
      sales revenue with an offsetting expense. Conversely, the net method allows
      a
      reduction to sales revenue. If such taxes are reported gross and are
      significant, companies should disclose the amount of those taxes. The guidance
      should be applied to financial reports through retrospective application for
      all
      periods presented, if amounts are significant, for interim and annual reporting
      beginning after December 15, 2006. The adoption of this pronouncement did not
      have a material impact of the Company’s financial statements.





In
      March 2006, the FASB issued Statement of Financial Accounting Standard 156
      - Accounting for Servicing of Financial Assets (“SFAS 156”), which requires all
      separately recognized servicing assets and servicing liabilities be initially
      measured at fair value. SFAS 156 permits, but does not require, the subsequent
      measurement of servicing assets and servicing liabilities at fair value.
      Adoption is required as of the beginning of the first fiscal year that begins
      after September 15, 2006. The adoption of SFAS 156 did not have a material
      impact on the Company’s financial position.





In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard 155 - Accounting for Certain Hybrid
      Financial Instruments (“SFAS 155”), which eliminates the exemption from applying
      SFAS 133 (“Accounting for Derivative Instruments and Hedging Activities”) (“SFAS
      133”) to interests in securitized financial assets so that similar instruments
      are accounted for similarly regardless of the form of the instruments. SFAS
      155
      also allows the election of fair value measurement at acquisition, at issuance,
      or when a previously recognized financial instrument is subject to a
      re-measurement event. Adoption is effective for all financial instruments
      acquired or issued after the beginning of the first fiscal year that begins
      after September 15, 2006. The adoption of SFAS 155 did not have a material
      impact on the Company’s financial position.





**ITEM
      7A.**  **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





We
      are
      primarily exposed to aircraft fuel risk, credit risk and interest rate risk.





Aircraft
      Fuel Risk - We have entered into an aircraft fuel agreement with a leading
      provider of aviation fuel. This provider, while a leader in its field and the
      only dedicated aviation fuel provider, is not a refiner of the aviation fuel
      it
      distributes. The availability of suitable supplies for the Company, therefore,
      may be in question in the event of a significant disruption in the supply of
      crude oil. We regularly consult with our supplier to ensure the availability
      of
      sufficient quantities of jet fuel and aviation gasoline within the context
      of
      the Company’s business demand. As a result and as a matter of historical
      performance, we do not believe that the supply of aviation fuel is a material
      risk.





Credit
      Risk - Our accounts receivables are subject, in the normal course of business,
      to collection risks. We regularly assess these risks and have established
      policies and business practices to protect against the adverse effects of
      collection risks. As a result we do not anticipate any material losses in this
      area.





Interest
      Rate Risk - Interest rate risk refers to fluctuations in the value of a security
      resulting from changes in the general level of interest rates. Investments
      that
      are classified as cash and cash equivalents have original maturities of three
      months or less. Our interest income is sensitive to changes in the general
      level
      of U.S. interest rates, particularly because the majority of our investments
      are
      in short-term instruments. Due to the short-term nature of our investments,
      we
      believe that there is not a material risk exposure.


A-16


**ITEM
      8.**  **FINANCIAL
      STATEMENTS**




Our
      consolidated financial statements and the related notes to the consolidated
      financial statements called for by this item appear under the caption “Table of
      Contents to Consolidated Financial Statements” beginning on page F-1 attached
      hereto of this Annual Report on Form 10-K.





FIRSTFLIGHT,
                INC. AND SUBSIDIARIESTable
                of Contents to Consolidated Financial StatementsReport
                of Independent Registered Public Accounting Firm
            
            
            F-1Consolidated
                Financial StatementsConsolidated
                Balance Sheet as of December 31, 2007 and 2006
            
            
            F-2Consolidated
                Statements of Operations For the Years Ended December 31, 2007 and
                2006
            
            
            F-3Consolidated
                Statements of Stockholders' Equity For the Years Ended December 31,
                2007
                and 2006
            
            
            F-4Consolidated
                Statements of Cash Flows For the Years Ended December 31, 2007 and
                2006
            
            
            F-5Notes
                to Consolidated Financial Statements
            
            
            F-7




A-17




REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo
                the Audit Committee of the Board of Directors and Stockholders
                ofFirstFlight,
                Inc.We
                have audited the accompanying consolidated balance sheets of FirstFlight,
                Inc. and Subsidiaries (the “Company”) as of December 31, 2007 and 2006,
                and the related consolidated statements of operations, stockholders’
                equity, and cash flows for each of the two years in the period ended
                December 31, 2007. These 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). Those standards
                require that we plan and perform the audit to obtain reasonable assurance
                about whether the financial statements are free of material misstatement.
                The Company is not required to have, nor were we engaged to perform,
                an
                audit of its internal control over financial reporting. Our audits
                included consideration of internal control over financial reporting
                as a
                basis for designing audit procedures that are appropriate in the
                circumstances, but not for the purpose of expressing an opinion on
                the
                effectiveness of the Company’s internal control over financial reporting.
                Accordingly, we express no such opinion. An audit 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 consolidated financial
                position of FirstFlight, Inc. and Subsidiaries as of December 31,
                2007 and
                2006, and the results of their operations and their cash flows for
                each of
                the two years in the period ended December 31, 2007, in conformity
                with
                United States generally accepted accounting principles./s/
                Marcum & Kliegman LLPNew
                York, NYMarch
                28, 2008




F-1





FIRSTFLIGHT,
                INC. AND SUBSIDIARIESCONSOLIDATED
                BALANCE SHEET




December
                31,
              2007
            
            December
                31,
              2006ASSETSCURRENT
                ASSETSCash
                and cash equivalents
            
            $
            2,400,152
            
            $
            1,181,870Accounts
                receivable, net of allowance fordoubtful
                accounts of $26,721 and $57,722, respectively
            
            
            5,226,006
            
            
            5,083,524Inventories
            
            
            324,314
            
            
            193,413Prepaid
                expenses and other current assets
            
            
            472,750
            
            
            280,923Total
                current assets
            
            
            8,423,222
            
            
            6,739,730PROPERTY
                AND EQUIPMENT,
                netof
                accumulated depreciation of $361,577 and $272,788,
                respectively
            
            
            1,169,316
            
            
            1,286,376OTHER
                ASSETSDeposits
            
            
            36,800
            
            
            26,500Note
                receivable
            
            
            —
            
            
            150,000Intangible
                assets - trade names
            
            
            420,000
            
            
            420,000Other
                intangible assets, net ofaccumulated
                amortization of $489,274 and $275,936, respectively
            
            
            150,726
            
            
            364,064Goodwill
            
            
            4,194,770
            
            
            4,194,770Total
                other assets
            
            
            4,802,296
            
            
            5,155,334TOTAL
                ASSETS
            
            $
            14,394,834
            
            $
            13,181,440LIABILITIES
                AND STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESAccounts
                payable
            
            $
            6,252,043
            
            $
            5,627,406Customer
                deposits
            
            
            532,397
            
            
            398,785Accrued
                expenses
            
            
            551,074
            
            
            532,988Notes
                payable - current portion
            
            
            126,663
            
            
            203,823Total
                current liabilities
            
            
            7,462,177
            
            
            6,763,002LONG-TERM
                LIABILITIESNotes
                payable - less current portion
            
            
            296,788
            
            
            393,805Total
                liabilities
            
            
            7,758,965
            
            
            7,156,807STOCKHOLDERS'
                EQUITYPreferred
                stock - $.001 par value; authorized 9,999,154;none
                issued and outstanding
            
            
            -
            
            
            -Common
                stock - $.001 par value; authorized 100,000,000;36,582,987
                and 36,583,793 issued and outstanding, respectively
            
            
            36,583
            
            
            36,584Additional
                paid-in capital
            
            
            18,825,760
            
            
            18,398,977Accumulated
                deficit
            
            
            (12,226,474
            )
            
            (12,410,928
            )TOTAL
                STOCKHOLDERS' EQUITY
            
            
            6,635,869
            
            
            6,024,633TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY
            
            $
            14,394,834
            
            $
            13,181,440




*See
      notes to consolidated financial statements.*


F-2




FIRSTFLIGHT,
                INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF OPERATIONS




For
                the Year Ended
              December
                31,2007
            
            2006REVENUE
            
            $
            47,107,927
            
            $
            39,212,424COST
                OF REVENUES
            
            
            39,455,287
            
            
            32,561,499GROSS
                PROFIT
            
            
            7,652,640
            
            
            6,650,925SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            7,448,187
            
            
            9,024,468OPERATING
                INCOME (LOSS)
            
            
            204,453
            
            
            (2,373,543
            )OTHER
                INCOME (EXPENSE)OTHER
                INCOME (EXPENSE), net
            
            
            (101,328
            )
            
            155,700GAIN
                ON SALE OF FIXED ASSETS
            
            
            56,638
            
            
            —INTEREST
                INCOME
            
            
            55,221
            
            
            31,188INTEREST
                EXPENSE
            
            
            (30,530
            )
            
            (1,150,104
            )TOTAL
                OTHER INCOME (EXPENSE)
            
            
            (19,999
            )
            
            (963,216
            )NET
                INCOME (LOSS)
            
            $
            184,454
            
            $
            (3,336,759
            )Deemed
                dividend to preferred stockholders:Amortization
                of discount
            
            
            —
            
            
            (2,831,303
            )Amortization
                of deferred financing costs
            
            
            —
            
            
            (1,437,194
            )Preferred
                stock dividend
            
            
            —
            
            
            (171,260
            )Net
                income (loss) applicable to common stockholders
            
            $
            184,454
            
            $
            (7,776,516
            )Basic
                and Diluted Net Income (Loss) Per Common Shareapplicable
                to common stockholders
            
            $
            0.01
            
            $
            (0.34
            )Weighted
                Average Number of Common SharesOutstanding
                - Basic and Diluted
            
            
            36,585,305
            
            
            22,661,039




*See
      notes to consolidated financial statements.*


F-3





FIRSTFLIGHT,
                INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF STOCKHOLDERS'
                EQUITYFor
                the Years Ended December 31, 2007 and
                2006




Additional
            
            
            
            
            
            TotalCommon
                Stock
            
            Paid-in
            
            Deferred
            
            Accumulated
            
            Stockholders’Shares
            
            Amount
            
            Capital
            
            Financing
            
            Deficit
            
            EquityBALANCE-
                January 1, 2006
            
            
            13,915,812
            
            $
            13,915
            
            $
            8,421,430
            
            $
            (1,437,194
            )
            $
            (4,634,412
            )
            $
            2,363,739Common
                stock issued in connection with the cashless exercise of stock
                options
            
            
            207,435
            
            
            207
            
            
            (207
            )
            
            —
            
            
            —
            
            
            —Common
                stock issued in connection with the settlement of
                obligation
            
            
            25,000
            
            
            25
            
            
            18,725
            
            
            —
            
            
            —
            
            
            18,750Common
                stock issued in connection with the settlement of
                litigation
            
            
            57,598
            
            
            58
            
            
            (58
            )
            
            —
            
            
            —
            
            
            —Amortization
                of stock based compensation
            
            
            —
            
            
            —
            
            
            801,721
            
            
            —
            
            
            —
            
            
            801,721Amortization
                of deferred financing costs
            
            
            —
            
            
            —
            
            
            —
            
            
            1,437,194
            
            
            (1,437,194
            )
            
            —Deemed
                dividend to preferred shareholders - accretion of discount
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (2,831,303
            )
            
            (2,831,303
            )Dividends
                on redeemable convertible preferred stock
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (171,260
            )
            
            (171,260
            )Common
                stock issued in connection with conversion of convertible preferred
                stock
            
            
            12,583,336
            
            
            12,584
            
            
            3,716,780
            
            
            —
            
            
            —
            
            
            3,729,364Common
                stock issued in connection with private placement
            
            
            8,376,675
            
            
            8,377
            
            
            5,016,623
            
            
            —
            
            
            —
            
            
            5,025,000Common
                stock issued for payment of accrued dividends on convertible preferred
                stock
            
            
            1,417,937
            
            
            1,418
            
            
            423,963
            
            
            —
            
            
            —
            
            
            425,381Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (3,336,759
            )
            
            (3,336,759
            )BALANCE-
                December 31, 2006
            
            
            36,583,793
            
            $
            36,584
            
            $
            18,398,977
            
            $
            —
            
            $
            (12,410,928
            )
            $
            6,024,633Amortization
                of stock based compensation
            
            
            —
            
            
            —
            
            
            415,782
            
            
            —
            
            
            —
            
            
            415,782Common
                stock issued in connection with the cashless exercise of
                options
            
            
            24,194
            
            
            24
            
            
            (24
            )
            
            —
            
            
            —
            
            
            —Common
                stock re-purchased in connection with settlement of
                obligation
            
            
            (25,000
            )
            
            (25
            )
            
            (18,350
            )
            
            —
            
            
            —
            
            
            (18,375
            )Settlement
                of litigation
            
            
            —
            
            
            —
            
            
            29,375
            
            
            —
            
            
            —
            
            
            29,375Net
                income
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            184,454
            
            
            184,454BALANCE-
                December 31, 2007
            
            
            36,582,987
            
            $
            36,583
            
            $
            18,825,760
            
            $
            —
            
            $
            (12,226,474
            )
            $
            6,635,869




*See
      notes to consolidated financial statements.*


F-4





FIRSTFLIGHT,
                INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTSOF
                CASH FLOWS




For
                the Year Ended
              December
                31,2007
            
            2006CASH
                FLOWS FROM OPERATING ACTIVITIESNet
                income (loss)
            
            $
            184,454
            
            $
            (3,336,759
            )Adjustments
                to reconcile net loss to net cash provided by (used in) operating
                activities:Depreciation
                and amortization
            
            
            390,165
            
            
            406,471Amortization
                of debt discount
            
            
            25,262
            
            
            951,849Gain
                on sale of fixed assets
            
            
            (56,638
            )
            
            —Gain
                on sale of subsidiary
            
            
            (29,503
            )
            
            —Stock
                based compensation
            
            
            415,782
            
            
            801,721Issuance
                of redeemable common stock
            
            
            —
            
            
            29,375Income
                from extinguishment of debt
            
            
            (60,681
            )
            
            —Impairment
                for collection of note receivable
            
            
            150,000
            
            
            —Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (153,799
            )
            
            (1,662,069
            )Inventories
            
            
            (133,553
            )
            
            (2,159
            )Prepaid
                expenses and other current assets
            
            
            (166,827
            )
            
            (59,328
            )Deposits
            
            
            (10,300
            )
            
            —Accounts
                payable
            
            
            624,637
            
            
            1,425,875Customer
                deposits
            
            
            248,456
            
            
            (52,021
            )Accrued
                interest and dividends
            
            
            —
            
            
            (117,990
            )Accrued
                expenses
            
            
            56,100
            
            
            (272,759
            )TOTAL
                ADJUSTMENTS
            
            
            1,299,101
            
            
            1,448,965NET
                CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
            
            
            1,483,555
            
            
            (1,887,794
            )CASH
                FLOWS FROM INVESTING ACTIVITIESProceeds
                from sale of property and equipment
            
            
            329,184
            
            
            —Repayment
                of note receivable
            
            
            —
            
            
            200,000Net
                cash paid from sale of subsidiary
            
            
            (103,527
            )
            
            —Purchase
                of property and equipment
            
            
            (318,797
            )
            
            (207,554
            )NET
                CASH USED IN INVESTING ACTIVITIES
            
            
            (93,140
            )
            
            (7,554
            )




*See
      notes to consolidated financial statements.*




F-5





FIRSTFLIGHT,
                INC. AND SUBSIDIARIESCONSOLIDATED
                STATEMENTS OF CASH FLOWS, CONTINUED




For
                the Year Ended
              December
                31,2007
            
            2006CASH
                FLOWS FROM FINANCING ACTIVITIESRepayment
                of notes
            
            
            (153,758
            )
            
            (281,908
            )Repayment
                of term loan
            
            
            —
            
            
            (1,500,000
            )Repayment
                of senior notes
            
            
            —
            
            
            (1,496,324
            )Proceeds
                from private placement
            
            
            —
            
            
            5,025,000Repurchase
                of stock
            
            
            (18,375
            )
            
            —NET
                CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
            
            
            (172,133
            )
            
            1,746,768NET
                CHANGE IN CASH AND CASH EQUIVALENTS
            
            
            1,218,282
            
            
            (148,580
            )CASH
                AND CASH EQUIVALENTS-
                Beginning
            
            
            1,181,870
            
            
            1,330,450CASH
                AND CASH EQUIVALENTS-
                Ending
            
            $
            2,400,152
            
            $
            1,181,870


SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:Cash
                paid during the periods for:Interest
            
            $
            30,530
            
            $
            328,931Income
                taxes
            
            $
            525
            
            $
            8,160Non-cash
                investing and financing activities:Common
                stock issued to settle obligation
            
            $
            —
            
            $
            18,750Redeemable
                common stock issued in connection with the settlement of
                litigation
            
            $
            —
            
            $
            29,375Cashless
                exercise of stock options
            
            $
            24
            
            $
            207Redeemable
                convertible preferred stock converted to common stock
            
            $
            —
            
            $
            3,729,364Purchase
                of equipment under capital lease or debt obligation
            
            $
            15,000
            
            $
            110,896Common
                stock issued for dividends on redeemable convertible preferred
                stock
            
            $
            —
            
            $
            425,381Expiration
                of put option
            
            $
            29,375
            
            $
            —Sale
                of subsidiaryNet
                liabilities
            
            $
            (133,030
            )
            $
            —Gain
                on sale
            
            
            29,503
            
            
            —Net
                cash paid
            
            $
            (103,527
            )
            $
            —




*See
      notes to consolidated financial statements.*




F-6




**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**




NOTE
      1 - Nature
      of Operations





FirstFlight,
      Inc. (“FirstFlight”) and its subsidiaries (collectively, the “Company”) is as an
      aviation services company with operations in the charter management, FBO, and
      aircraft maintenance segments of the general aviation industry.





On
      March
      31, 2005, FirstFlight formed FBO Air Wilkes-Barre (“FBO Wilkes-Barre”) as a
      wholly-owned subsidiary, which then acquired the common stock of Tech Aviation
      Service, Inc. (“Tech”), a fixed base operator in Avoca, Pennsylvania.





On
      March
      31, 2005, FirstFlight formed FBO Air Garden City (“FBO Garden City”) as a
      wholly-owned subsidiary of FirstFlight, which then acquired certain operating
      assets of Central Plains Aviation, Inc. (“CPA”), a fixed base operator located
      in Garden City, Kansas.





On
      September 23, 2005, FirstFlight acquired the common stock of Airborne, Inc.
      (“Airborne”), a charter and aircraft management company, located in Elmira, New
      York.





On
      March
      16, 2006, FirstFlight formed Margeson & Associates, Inc. (“Margeson”), as a
      wholly-owned subsidiary of FirstFlight. Margeson, an insurance agency, offers
      property, casualty and liability insurance primarily to the general aircraft
      industry.





On
      May
      15, 2007, Airborne formed H24 Aviation Advisors, LLC (“H24”) as a wholly-owned
      subsidiary to focus on the broker business in the charter segment.





NOTE
      2 - Management’s
      Liquidity Plans





As
      of
      December 31, 2007, the Company had cash and cash equivalents of $2,400,152
      and
      had working capital of $961,045. The Company generated revenue of $47,107,927
      and net income of $184,454 for the year ended December 31, 2007. Since
      inception, the Company has incurred, in the aggregate, net losses and net losses
      applicable to common stockholders of approximately $5,750,000 and $12,330,000,
      respectively, for the period January 17, 2003 (date of inception) through
      December 31, 2007. For the year ended December 31, 2007, net cash provided
      by
      operating activities was $1,483,555 and net cash used in investing activities
      was $93,140.





The
      Company had taken steps to reduce the level of expenditures for corporate
      operations by severing ties with two executives. These executives represented
      costs in 2006 of approximately $900,000, including severance and separation
      fees, and stock-based compensation. Additionally, the Company had settled
      litigation in 2006 that, including legal and settlement related costs,
      represented approximately $150,000. The Company had also re-negotiated favorable
      terms with certain vendors that management believes represents a savings of
      almost $400,000 versus levels of historical spending, in part driven by the
      hiring of a chief financial officer and the corresponding elimination of an
      outside accounting consultant.





The
      Company believes that it has sufficient liquidity to sustain its existing
      business for at least the next twelve months.  In early 2008, the Company
      has taken steps to increase its revenue by upgrading and enlarging its sales
      force, particularly as it relates to the charter segment.  In addition, the
      Company is also continuing to maintain its cost containment measures initiated
      during 2007.





NOTE
      3 - Sales
      of Subsidiaries





During
      March 2006, the Company completed its consolidation of certain activities under
      a single Federal Aviation Administration (“FAA”) Part 135 Certificate. In
      connection with the consolidation, on April 11, 2006, the Company sold Tech,
      whose sole asset immediately prior to the sale consisted of Tech’s FAA Part 135
      Certificate, and recognized other income of approximately $157,000.




On
      October 20, 2005, FirstFlight formed Tech Aviation Flight School, Inc. (“TAFS”)
      as a wholly-owned subsidiary of FBO Wilkes-Barre. TAFS operated in connection
      with the fixed base operation in Avoca, Pennsylvania as an FAA accredited flight
      school.





On
      September 30, 2007, the Company sold the stock of TAFS, with net liabilities
      of
      approximately $5,000 for $25,000. In conjunction with the sale, the Company
      recognized a gain of approximately $30,000. In addition, the Company executed
      an
      agreement to transfer the aircraft assets owned by TAFS into a newly-formed
      wholly-owned subsidiary, FBO Air WB Leasing (the Lessor). As part of the
      transaction, TAFS entered into a one-year aircraft lease agreement with FBO
      Air
      WB Leasing as well as an agreement to lease space and buy fuel and maintenance
      services from the Company. In addition, the Company entered into an office
      lease
      agreement with TAFS for which it will receive monthly payments of $1,050,
      expiring on September 23, 2023, calling for future minimum payments to the
      Company of $201,600.




F-7




**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**




NOTE
      4 - Summary
      of Significant Accounting Policies





Principles
      of Consolidation




The
      consolidated financial statements include the accounts of FirstFlight and its
      wholly-owned subsidiaries, FBO Air Wilkes-Barre, Inc. (“FBOWB”), FBO Air Garden
      City, Inc. (“FBOGC”), Airborne, Inc. (“Airborne”), Margeson & Associates,
      Inc. (“Margeson”), FBO Air WB Leasing (“WB Leasing”), H24 Aviation Advisors, LLC
      (“H24”), and TAFS, which on September 30, 2007 was divested as described in Note
      3. All significant inter-company accounts and transactions have been eliminated
      in consolidation.





Use
      of
      Estimates




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





Cash
      and Cash Equivalents




For
      purposes of the consolidated statements of cash flows, the Company considers
      all
      highly liquid debt instruments with original maturities of three months or
      less
      to be cash equivalents.





Concentrations
      of Credit Risk




The
      Company maintains its cash with various financial institutions, which exceed
      federally insured limits throughout the period. At December 31, 2007, the
      Company had cash and cash equivalents in excess of federally insured limits.





Accounts
      Receivable




The
      Company’s extends credit to large and mid-size companies for flight related
      services. The Company has concentrations of credit risk in that 51% of the
      balance of accounts receivable at December 31, 2007 is made up of only ten
      customers. At December 31, 2007, accounts receivable from our largest account
      amounted to approximately $530,000 (10.1%). The Company does not generally
      require collateral or other security to support customer 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. Management determines collectability
      based on their experience and knowledge of the customers.





Deferred
      Financing Costs




Costs
      incurred to issue convertible preferred stock and the warrants were capitalized
      and were charged to equity as deferred financing costs. Such costs were being
      amortized as deemed dividends to preferred stockholders over a three-year
      period. In 2006, the remaining balance was fully amortized as a result of the
      conversion of the Preferred Stock to Common Stock.





Inventories




Inventories
      consist primarily of maintenance parts and aviation fuel and are stated at
      the
      lower of cost or market determined by the first-in, first out method.





Reclassifications




Certain
      accounts in the prior period financial statements have been reclassified for
      comparison purposes to conform with the presentation of the current period
      financial statements. These reclassifications had no effect on the previously
      reported loss.





Property
      and Equipment




Property
      and equipment is stated at cost. Maintenance and repairs are charged to expense
      as incurred; costs of major additions and betterments are capitalized. When
      property and equipment is sold or otherwise disposed of, the cost and related
      accumulated depreciation are eliminated from the accounts and any resulting
      gain
      or loss is reflected in income. For repairs on aircraft, the Company accrues
      Federal Aviation Administration (“FAA”) designated maintenance costs pro rata,
      based upon the hours flown by the aircraft.





Goodwill
      and Intangible Assets




The
      Company accounts for Goodwill and Intangible Assets in accordance with Statement
      of Financial Accounting Standards (“FAS”) No. 141, “Business Combinations” (“FAS
      141”) and FAS No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). Under
      FAS No. 142, goodwill and intangibles that are deemed to have indefinite lives
      are no longer amortized but, instead, are to be reviewed at least annually
      for
      impairment. Application of the goodwill impairment test requires judgment,
      including the identification of reporting units, assigning assets and
      liabilities to reporting units, assigning goodwill to reporting units, and
      determining the fair value. Significant judgments required to estimate the
      fair
      value of reporting units include estimating future cash flows, determining
      appropriate discount rates and other assumptions. Changes in these estimates
      and
      assumptions could materially affect the determination of fair value and/or
      goodwill impairment for each reporting unit. The Company has recorded goodwill
      in connection with the Company's acquisitions described in Note 1 amounting
      to
      $4,194,770. The Company has determined that no impairment charge is necessary
      at
      December 31, 2007 and 2006. Intangible assets continue to be amortized over
      their estimated useful lives.




F-8




**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**




Revenue
      Recognition




Revenue
      for the sales of products is recognized at the time products are delivered
      to
      customers. Revenue for services is recognized at the time the services are
      performed and provided to customers. Revenue related to charter services is
      recognized when a particular charter trip is completed. Revenue related to
      insurance activity is recognized at the point that the client is afforded
      protection under the policy, the premium was due, reasonably estimated and
      billable. The full commission revenue is recognized along with a historically
      driven reserve for the potential cancellation of the policy. The sources of
      revenue are recognized when persuasive evidence of an arrangement exists,
      delivery has occurred, the fee is fixed and determinable and collectability
      is
      probable.





Customer
      Deposits




Customer
      deposits consist of amounts that customers are required to remit in advance
      to
      the Company in order to secure payment for future purchases and
      services.





Advertising




The
      Company expenses all advertising costs as incurred. Advertising expense for
      the
      years ended December 31, 2007 and 2006 was approximately $115,000 and $142,000,
      respectively.





Income
      Taxes




The
      Company accounts for income taxes under SFAS No. 109, “Accounting for Income
      Taxes” (“SFAS 109”). Under SFAS 109, 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. Under SFAS 109, 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. The Company’s ability to
      utilize its NOL carryforwards may be subject to an annual limitation in future
      periods pursuant to Section 382 of the Internal Revenue Code of 1986, as amended
      (the “Code”).





Although
      the Company has federal and state net operating losses available for income
      tax
      purposes that may be carried forward to offset future taxable income, the
      deferred tax assets are subject to a 100% valuation allowance because it is
      more
      likely than not that the deferred tax assets will not be realized in future
      periods. The Company’s ability to use its net operating loss carry forwards may
      be subject to an annual limitation in future periods pursuant to Section 382
      of
      the Code.





Effective
      January 1, 2007, the Company adopted Financial Accounting Standards Board
      (“FASB”) Interpretation Number 48, “Accounting for Uncertainty in Income Taxes,
      an interpretation of FASB Statement No. 109,” (“FIN No. 48”), which prescribes a
      single, comprehensive model for how a company should recognize, measure, present
      and disclose in its financial statements uncertain tax positions that the
      company has taken or expects to take on its tax returns. Upon adoption of FIN
      No. 48, the Company recognized no changes in the liability for unrecognized
      tax
      benefits. The Company records interest and penalties related to unrecognized
      tax
      benefits in income tax expense. As of December 31, 2007, the Company recognized
      no charges for interest and penalties related to unrecognized tax benefits
      in
      the Consolidated Balance Sheet. The Company files income tax returns in the
      United States (federal) and in various state and local jurisdictions. In most
      instances, the Company is no longer subject to federal, state and local income
      tax examinations by tax authorities for years prior to 2004.





Fair
      Value of Financial Instruments




The
      reported amounts of the Company’s financial instruments, including accounts
      payable and accrued liabilities, approximate their fair value due to their
      short
      maturities. The carrying amounts of debt approximate fair value because the
      debt
      agreements provide for interest rates that approximate market.





Net
      Income (Loss) Per Common Share




Basic
      net
      income (loss) per share applicable to common stockholders is computed based
      on
      the weighted average number of shares of common stock outstanding during the
      periods presented. Diluted net income (loss) per share reflects the potential
      dilution that could occur if securities or other instruments to issue Common
      Stock were exercised or converted into common stock. Potentially dilutive
      securities, consisting of options and warrants, are excluded from the
      calculation of the diluted losses per share when their inclusion would be
      anti-dilutive or if their exercise prices were greater than the average market
      price of the Common Stock during the period.




F-9




**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**




The
      following table sets forth the components used in the computation of basic
      and
      diluted income (loss) per share:





For
                the Year Ended
              December
                31,2007*
            
            2006Weighted
                average common shares outstanding, basic
            
            
            36,585,305
            
            
            22,661,039Common
                shares upon exercise of options
            
            
            —
            
            
            —Common
                shares upon exercise of warrants
            
            
            —
            
            
            —Weighted
                average common shares outstanding, diluted
            
            
            36,585,305
            
            
            22,661,039





*
      Potential common shares of 13,252,121 underlying options and warrants
      outstanding as of December 31, 2007 were excluded from the computation of
      diluted earnings per share as their exercise prices were greater than the
      average market price of the Common Stock during the period.





Stock
      Based Compensation




Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
“Share Based Payment” (“FAS 123R”), using the modified prospective transition
      method. Stock-based compensation expense for all share-based payment awards
      granted after January 1, 2006 is based on the grant-date fair value estimated
      in
      accordance with the original provisions of FAS 123R. The Company recognizes
      these compensation costs over the requisite service period of the award, which
      is generally the option vesting term or the duration of employment agreement.
      During the years ended December 31, 2007 and 2006, the Company incurred stock
      based compensation of $415,782 and $801,721, respectively. The Company records
      stock based compensation in Selling, General & Administrative expenses. As
      of December 31, 2007, the unamortized fair value of the options totaled
      $365,235. The weighted average remaining amortization period of these options
      is
      0.6 years.





Option
      valuation models require the input of highly subjective assumptions including
      the expected life of the option. Because the Company's 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.





The
      fair
      value of each share-based payment awards granted during the period was estimated
      using the Black-Scholes option pricing model with the following weighted average
      fair values as follows:




For
                the Year Ended
              December
                31,2007
            
            2006Dividend
                yield
            
            0%
            
            0%Expected
                volatility
            
            286%
            
            249%Risk-free
                interest rate
            
            4.20%
            
            4.8%Expected
                lives
            
            5
                years
            
            4.8
                years





The
      weighted average fair value of the options on the date of grant, using the
      fair
      value based methodology during the years ended December 31, 2007 and 2006,
      was
      $0.37 and $0.47, respectively.





Recently
      Issued Accounting Pronouncements




In
      December 2007, the Financial Accounting Standards Board (the “FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 141R, “Business
      Combinations” (“SFAS 141R”), which replaces SFAS No. 141, “Business
      Combinations.” SFAS 141R establishes principles and requirements for determining
      how an enterprise recognizes and measures the fair value of certain assets
      and
      liabilities acquired in a business combination, including noncontrolling
      interests, contingent consideration, and certain acquired contingencies. SFAS
      141R also requires acquisition-related transaction expenses and restructuring
      costs be expensed as incurred rather than capitalized as a component of the
      business combination. SFAS 141R will be applicable prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008. SFAS
      141R
      would have an impact on accounting for any businesses acquired after the
      effective date of this pronouncement.




F-10




**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**




In
      February 2007, the FASB issued Statement of Financial Accounting
      Standards No. 159, The Fair Value Option for Financial Assets and Financial
      Liabilities ("SFAS 159"), to permit all entities to choose to elect, at
      specified election dates, to measure eligible financial instruments at fair
      value. An entity shall report unrealized gains and losses on items for which
      the
      fair value option has been elected in earnings at each subsequent reporting
      date, and recognize upfront costs and fees related to those items in earnings
      as
      incurred and not deferred. SFAS 159 applies to fiscal years beginning after
      November 15, 2007, with early adoption permitted for an entity that has also
      elected to apply the provisions of SFAS 157, Fair Value Measurements. An
      entity is prohibited from retrospectively applying SFAS 159, unless it chooses
      early adoption. SFAS 159 also applies to eligible items existing at November
      15,
      2007. The Company is currently evaluating the impact of adopting SFAS 159
      on its consolidated financial statements.




In
      December 2006, the FASB issued FASB Staff Position ("FSP") EITF 00-19-2,
      Accounting for Registration Payment Arrangements. This FSP specifies that the
      contingent obligation to make future payments or otherwise transfer
      consideration under a registration payment arrangement, whether issued as a
      separate agreement or included as a provision of a financial instrument or
      other
      agreement, should be separately recognized and measured in accordance with
      FASB
      Statement No. 5, Accounting for Contingencies. This FSP further clarifies that
      a
      financial instrument subject to a registration payment arrangement should be
      accounted for in accordance with other applicable GAAP without regard to the
      contingent obligation to transfer consideration pursuant to the registration
      payment arrangement. This FSP amends various authoritative literature notably
      FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
      Activities, FASB Statement No. 150, Accounting for Certain Financial Instruments
      with Characteristics of both Liabilities and Equity, and FASB Interpretation
      No.
      45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
      Indirect Guarantees of Indebtedness of Others.   This FSP is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      December 21, 2006. For registration payment arrangements and financial
      instruments subject to those arrangements that were entered into prior to
      December 21, 2006, the guidance in the FSP is effective for financial statements
      issued for fiscal years beginning after December 15, 2006, and interim periods
      within those fiscal years. The adoption of this FSP did not have a material
      impact on the Company’s financial statements.




In
      November 2006, the FASB ratified EITF Issue No. 06-7, Issuer’s Accounting for a
      Previously Bifurcated Conversion Option in a Convertible Debt Instrument When
      the Conversion Option No Longer Meets the Bifurcation Criteria in FASB Statement
      No. 133, Accounting for Derivative Instruments and Hedging Activities (“EITF
      06-7”). At the time of issuance, an embedded conversion option in a convertible
      debt instrument may be required to be bifurcated from the debt instrument and
      accounted for separately by the issuer as a derivative under FAS 133, based
      on
      the application of EITF 00-19. Subsequent to the issuance of the convertible
      debt, facts may change and cause the embedded conversion option to no longer
      meet the conditions for separate accounting as a derivative instrument, such
      as
      when the bifurcated instrument meets the conditions of Issue 00-19 to be
      classified in stockholders’ equity. Under EITF 06-7, when an embedded conversion
      option previously accounted for as a derivative under FAS 133 no longer meets
      the bifurcation criteria under that standard, an issuer shall disclose a
      description of the principal changes causing the embedded conversion option
      to
      no longer require bifurcation under FAS 133 and the amount of the liability
      for
      the conversion option reclassified to stockholders’ equity. EITF 06-7 should be
      applied to all previously bifurcated conversion options in convertible debt
      instruments that no longer meet the bifurcation criteria in FAS 133 in interim
      or annual periods beginning after December 15, 2006, regardless of whether
      the
      debt instrument was entered into prior or subsequent to the effective date
      of
      EITF 06-7. Earlier application of EITF 06-7 is permitted in periods for which
      financial statements have not yet been issued. The adoption of this
      pronouncement did not have a material impact on the Company’s financial
      statements.




In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      No. 157”).  This Statement defines fair value, establishes a framework for
      measuring fair value and expands disclosure of fair value measurements. 
SFAS No. 157 applies under other accounting pronouncements that require or
      permit fair value measurements and accordingly, does not require any new fair
      value measurements.  SFAS No. 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007.  The
      adoption of this pronouncement did not have a material impact on the Company’s
      financial statements.





In
      June
      2006, the EITF reached a consensus on Issue No. 06-3 (“EITF 06-3”), “Disclosure
      Requirements for Taxes Assessed by a Governmental Authority on Revenue-Producing
      Transactions.” The consensus allows companies to choose between two acceptable
      alternatives based on their accounting policies for transactions in which the
      company collects taxes on behalf of a governmental authority, such as sales
      tax.
      Under the gross method, taxes collected are accounted for as a component of
      sales revenue with an offsetting expense. Conversely, the net method allows
      a
      reduction to sales revenue. If such taxes are reported gross and are
      significant, companies should disclose the amount of those taxes. The guidance
      should be applied to financial reports through retrospective application for
      all
      periods presented, if amounts are significant, for interim and annual reporting
      beginning after December 15, 2006. The adoption of this pronouncement did not
      have a material impact on the Company’s financial statements.




F-11




**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**




In
      March 2006, the FASB issued Statement of Financial Accounting Standard 156
      - Accounting for Servicing of Financial Assets (“SFAS 156”), which requires all
      separately recognized servicing assets and servicing liabilities be initially
      measured at fair value. SFAS 156 permits, but does not require, the subsequent
      measurement of servicing assets and servicing liabilities at fair value.
      Adoption is required as of the beginning of the first fiscal year that begins
      after September 15, 2006. The adoption of this pronouncement did not have a
      material impact on the Company’s financial statements.





In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard 155 - Accounting for Certain Hybrid
      Financial Instruments (“SFAS 155”), which eliminates the exemption from applying
      SFAS 133 (“Accounting for Derivative Instruments and Hedging Activities”) (“SFAS
      133”) to interests in securitized financial assets so that similar instruments
      are accounted for similarly regardless of the form of the instruments. SFAS
      155
      also allows the election of fair value measurement at acquisition, at issuance,
      or when a previously recognized financial instrument is subject to a
      re-measurement event. Adoption is effective for all financial instruments
      acquired or issued after the beginning of the first fiscal year that begins
      after September 15, 2006. The adoption of this pronouncement did not have a
      material impact on the Company’s financial statements.





NOTE
      5 - Inventories





Inventory
      consists primarily of maintenance parts and aviation fuel, which the Company
      dispenses to its customers. The Company also maintains fuel inventories for
      commercial airlines, to which it charges into-plane fees when servicing
      commercial aircraft.





December
                31,2007
            
            2006Parts
                inventory
            
            $
            156,192
            
            $
            97,427Fuel
                inventory
            
            
            163,703
            
            
            79,100Other
                inventory
            
            
            4,419
            
            
            16,886Total
                inventory
            
            $
            324,314
            
            $
            193,413





Included
      in inventories are amounts held for third parties of $70,849 and $48,548 as
      of
      December 31, 2007 and 2006, respectively, with an offsetting liability included
      as part of accrued expenses.





NOTE
      6 - Property
      and Equipment




Property
      and equipment consist of the following:





December
                31,
            
            Estimated2007
            
            2006
            
            Useful
                LifeAircraft
            
            $
            371,294
            
            $
            679,785
            
            
            7
                - 12 yearsVehicles
            
            
            179,273
            
            
            157,100
            
            
            5
                - 10 yearsOffice
                furniture and equipment
            
            
            232,990
            
            
            271,644
            
            
            3
                - 7 yearsTools
                and shop equipment
            
            
            412,453
            
            
            291,739
            
            
            3
                - 10 yearsLeasehold
                improvements
            
            
            334,883
            
            
            158,896
            
            
            7
                - 17 yearsTotal
            
            
            1,530,893
            
            
            1,559,164Less:
                accumulated depreciation and amortization
            
            
            (361,577
            )
            
            (272,788
            )Property
                and equipment, net
            
            $
            1,169,316
            
            $
            1,286,376




Depreciation
      and amortization expense for the years ended December 31, 2007 and 2006 was
      approximately $177,000 and $184,000, respectively.





NOTE
      7 - Note
      Receivable





On
      May
      26, 2005, the Company loaned $350,000 as a note receivable to a fixed base
      operator (“FBO”) which was a potential acquisition target of the Company ("the
      Maker").  The note bore interest at 10% per annum and such interest was
      only to be paid quarterly, starting upon the three-month anniversary of the
      secured note.  The note could be prepaid at any time. The Company was
      granted a security interest, subordinate to two senior lenders, in all tangible
      property, goods and accounts of the Maker. Further, the Company had been granted
      an option to purchase the FBO owned by Maker, such option to expire one year
      from date of grant of option.




F-12








**FIRSTFLIGHT,
      INC. AND SUBSIDIARIES**


**Notes
      To Consolidated Financial Statements**


On
      February 1, 2006, the Company declined to pursue the acquisition and negotiated
      revised repayment terms, whereupon the Company released its security interest
      in
      the tangible property, goods and accounts and the Maker made a $200,000 cash
      payment with the balance of the principal, $150,000, plus unpaid interest,
      with
      an annual interest at a rate of six percent (6%), to be paid quarterly and
      the
      principal balance due upon maturity in January 2008. The Company has performed
      a
      collectability analysis with respect to the note and, accordingly, an allowance
      has been recorded for the principal amount of the note. Such amount has been
      recorded as part of Other Expenses during the year ended December 31,
      2007.




NOTE
      8 - Intangible
      Assets




Intangible
      assets consist exclusively of amounts related to the acquisitions of Tech,
      CPA
      and Airborne.




The
      remaining amortization of amortizable intangible assets for the year ended
      December 31, 2008 is as follows:




**For
                the year ended December 31,**
            
            **Total**
            
            **Non-Compete
                Agreements**
            
            **Customer
                Relationships**2008
            
            $
            150,726
            
            $
            67,922
            
            $
            82,804




During
      the years ended December 31, 2007 and 2006, the Company recorded amortization
      expense related to the acquired amortizable intangibles of approximately
      $213,000 and $222,000, respectively.





The
      weighted average amortization period for amortizable intangibles is 3.0 years
      and has no residual value.





NOTE
      9 - Notes
      Payable





Notes
      payable consist of:





December
                31,2007
            
            2006Kubota
                - secured by equipment, 4.49% interest, matures February
                2011
            
            $
            15,000
            
            $
            —Sellers
                - Tech, secured by assets of Tech and guaranteed by FirstFlight,
                annual
                payments of $100,000, which includes imputed interest of 5%, matures
                March
                2010
            
            
            282,537
            
            
            367,892County
                of Chemung - Airborne, unsecured, monthly payments based on fuel
                usage
                with imputed interest of 6%, matures approximately 2023
            
            
            42,558
            
            
            44,098Capital
                leases, secured by related equipment (see Note 11)
            
            
            83,356
            
            
            102,647Wilkes-Barre/Scranton
                International Airport, unsecured, matured September 2007
            
            
            —
            
            
            60,681Banks
                - Airborne, secured by related equipment, monthly payment of $3,176,
                interest at 7%, matured August 2007
            
            
            —
            
            
            22,310Subtotal
            
            
            423,451
            
            
            597,628Less:
                current portion
            
            
            (126,663
            )
            
            (203,823
            )Total
                - long term
            
            $
            296,788
            
            $
            393,805





Aggregate
      annual maturities of long-term debt are as follows:





For
                the years ended December 31,
            
            Total
              Amount
            
            Notes
              Payable
            
            Other2008
            
            $
            126,663
            
            
            98,810
            
            
            27,8532009
            
            
            123,739
            
            
            94,104
            
            
            29,6352010
            
            
            121,049
            
            
            89,623
            
            
            31,4262011
            
            
            16,612
            
            
            —
            
            
            16,6122012
            
            
            2,077
            
            
            —
            
            
            2,077Thereafter
            
            
            33,311
            
            
            —
            
            
            33,311Total
            
            $
            423,451
            
            $
            282,537
            
            $
            140,914Less-current
                portion
            
            
            (126,663
            )Long-term
                portion
            
            $
            296,788




F-13


**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**


NOTE
      10 - Term
      Loan Payable - Related Party





In
      September 2005, the acquisition of Airborne was funded by a term note payable
      from a related party with a face value of $1,500,000 which was to mature on
      March 22, 2006 and bore interest at 4.25% per annum through the initial maturity
      date. FirstFlight elected to exercise the option to extend the maturity date
      to
      September 23, 2006, whereupon the promissory note bore interest at 9.25% per
      annum for the duration of the extended period. Airborne granted the holder
      a
      security interest in its accounts receivable, all of its deposit accounts,
      all
      monies then and thereafter in the possession or under the control of Airborne
      or
      FirstFlight and all products and proceeds of the foregoing personal property.
      FirstFlight’s Chairman of the Board and an entity owned by one of FirstFlight’s
      other directors are the members of the holder’s entity. In September 2006,
      FirstFlight, using part of the proceeds from its then just closed private
      placement (see Note 14), prepaid the note and the security interest terminated.





In
      conjunction with the issuance of the term note, FirstFlight also issued a
      five-year warrant to purchase a total of 1,200,000 shares of the Common Stock
      at
      an exercise price of $0.60 per share. The Company allocated $35,000 of the
      aggregate proceeds from the term note to the warrant as an original issuance
      discount, which represented the relative fair value of the warrant at the date
      of issuance, and amortized the discount to interest expense over the life of
      the
      term note. The amount amortized to interest expense for the year ended December
      31, 2006 was approximately $15,000 (See Note 16).




NOTE 11
      - Capital
      Lease Obligations





The
      Company’s property under capital leases, at December 31, 2007 and 2006, which
      are included in property and equipment, is summarized as follows:





December
                31,2007
            
            2006Vehicles
            
            $
            37,000
            
            $
            37,000Office
                Furniture and Equipment
            
            
            73,896
            
            
            73,896Subtotal
            
            
            110,896
            
            
            110,896Less: 
                accumulated depreciation
            
            
            (14,840
            )
            
            (4,845
            )Total
            
            $
            96,056
            
            $
            106,051





The
      Company’s capital leases require monthly payments ranging from $750 to $1,525
      reflecting effective interest rates of between 8% and 8.75% per annum, expiring
      in various years through November 2011.





Future
      minimum lease payments for the capital lease obligations at December 31, 2007
      are as follows:




For
                the Year Ended
              December
                31
            
            Amount2008
            
            $
            27,3002009
            
            
            27,3002010
            
            
            26,5502011
            
            
            15,25096,400Less: amount
                representing interest
            
            
            (13,044
            )Present
                value of future minimum lease payments
            
            
            83,356Less: 
                current maturities
            
            
            (20,983
            )Total
            
            $
            62,373




F-14


**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**


Depreciation
      of assets held under capital leases in the approximate amount of $10,000 and
      $4,800 is included in depreciation expense for the years ended December 31,
      2007
      and 2006, respectively.





NOTE
      12 - Income
      Taxes




As
      of
      December 31, 2007, the Company had federal and state net operating loss
      carry-forwards of approximately $2,100,000 expiring in various years through
      2026, portions of which may be used to offset future taxable income, if any.
      The
      Company has deferred tax assets arising from such operating losses for which
      a
      full valuation allowance has been established because it is more likely than
      not
      that the deferred tax assets will not be realized in future periods. In
      addition, Shadows Bend Development, Inc. had approximately $8,000,000 of net
      operating losses available prior to the reverse merger with FirstFlight. Under
      current tax law, the Company believes that it will not be able to utilize these
      losses and, accordingly, a full valuation allowance has been established because
      it is more likely than not that the deferred tax assets will not be realized
      in
      future periods.





The
      Company’s deferred tax assets and deferred tax liabilities consisted of the
      following:




December 31,Deferred
                tax assets:
            
            2007
            
            2006Operating
                loss carryforwards
            
            $
            799,820
            
            $
            1,092,324Stock
                based compensation
            
            
            474,611
            
            
            312,456Allowance
                for doubtful accounts
            
            
            10,421
            
            
            22,512Deferred
                start up costs
            
            
            98,675
            
            
            106,265Intangible
                assets
            
            
            122,875
            
            
            67,234Accrued
                expenses
            
            
            201,053
            
            
            252,660Total
                deferred tax assets
            
            
            1,707,455
            
            
            1,853,451Deferred
                tax liabilities:Goodwill
            
            
            (37,895
            )
            
            (24,115
            )Property
                and Equipment
            
            
            (96,000
            )
            
            (98,278
            )Total
                deferred tax liabilities
            
            
            (133,895
            )
            
            (122,393
            )Deferred
                tax assets - net of deferred tax liabilities
            
            
            1,573,560
            
            
            1,731,058Valuation
                Allowance
            
            
            (1,573,560
            )
            
            (1,731,058
            )Deferred
                tax assets - net of valuation allowance
            
            $
            —
            
            $
            —Change
                in valuation allowance
            
            $
            157,498
            
            $
            (876,327
            )




F-15


**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**


The
      Company has recorded a full valuation allowance against its deferred tax assets
      since management believes that based upon currently available objective evidence
      it is more likely than not that the deferred tax asset will not be realized.
      The
      provision for income taxes using the statutory federal tax rate as compared
      to
      the Company's effective tax rate is summarized as follows:




December 31,2007
            
            2006Tax
                expense (benefit) at statutory rate
            
            
            34.0
            %
            
            (34.0
            )%State
                and local income taxes, net of federal
            
            
            5.0
            %
            
            (5.0
            )%Non-deductible
                expenses
            
            
            8.0
            %
            
            —Change
                in estimate of prior year tax provision
            
            
            38.0
            %
            
            —Change
                in valuation allowance
            
            
            (85.0
            )%
            
            39.0
            %Effective
                income tax rate
            
            
            —
            
            
            —




NOTE
      13 - Senior
      Secured Notes





In
      connection with a private placement closed on March 31, April 8 and April 15,
      2005, FirstFlight issued Senior Secured Notes aggregating approximately
      $1,496,000 due March 31, 2008 or April 8, 2008 (the “Senior Secured Notes”).





On
      September 1, 2006, FirstFlight closed a private placement and sold 50.25 units
      at $100,000 per unit (see Note 14). The Company utilized approximately
      $1,496,000 and $236,000 of this amount to prepay the Senior Secured Notes and
      accrued interest, respectively, in full.





NOTE
      14 - Stockholders’
      Equity





Common
      Stock




On
      January 5, 2006, FirstFlight issued 25,000 shares of the Common Stock valued
      at
      $18,750 in connection with the settlement of certain accrued
      expenses.





On
      May
      31, 2006, FirstFlight issued 57,598 shares of the Common Stock valued at $29,375
      in connection with the settlement of litigation.





On
      September 1, 2006, FirstFlight closed a private placement (“the Offering”) and
      sold 50.25 units (the “Units”) at $100,000 per unit. Each Unit consisted of
      166,700 shares of the Common Stock and a warrant expiring August 31, 2011 to
      purchase 100,000 shares of the Common Stock at an initial exercise price of
      $1.00 per share. FirstFlight realized gross proceeds of $5,025,000 from the
      Offering and, in connection therewith, issued 8,376,675 shares of the Common
      Stock. Officers and/or directors of the Company participated in the Offering
      and
      were collectively issued 5,001,000 shares of the Common Stock and warrants
      to
      purchase 3,000,000 shares of the Common Stock in return for a collective
      investment of $3,000,000. The terms of the warrant agreement provide certain
      anti-dilution protections and provide for certain adjustments to protect the
      holder upon the future issuance of certain securities at a price less than
      the
      current warrant exercise price in effect, as provided for in the agreement.
      FirstFlight was obligated to file within 90 days of the closing a registration
      statement in regard to the 8,376,675 shares of Common Stock and the 5,025,000
      shares underlying the warrants issued in the Offering. FirstFlight filed the
      registration statement within the required time frame and the registration
      statement was declared effective on January 4, 2007. FirstFlight is obligated
      to
      use its best efforts to keep the registration statement effective until the
      earlier date (i) when all securities have been sold or (ii) when all securities
      may be sold pursuant to the exemption of Rule 144(k) under the Securities Act.
      If, for any reason or no reason, the holders of the securities in the Offering
      are not permitted to resell their registrable securities, then FirstFlight
      shall
      pay to the holder, for each 30-day period until the holders may sell all of
      their shares of the Common Stock thereunder, an amount in cash equal to one
      (1%)
      percent of the aggregate purchase price paid by the holder for the Unit(s)
      purchased in the Offering. The Company has evaluated this transaction with
      respect to its adoption of FSP EITF 00-19-2 and determined that there was no
      impact on the Company’s financial statements for the years ended December 31,
      2007 and 2006.




In
      March
      2007, FirstFlight repurchased 25,000 shares that had been issued in a settlement
      and for which the holder had a right to put the shares back to the Company
      at a
      cost of $18,375.




F-16


**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**


In
      June
      2007, a put option expired that, if exercised, would have required FirstFlight
      to repurchase 57,598 shares of the Common Stock at a cost of $29,375. This
      amount was reclassified to additional paid in capital.





Preferred
      Stock




In
      February 2005, FirstFlight authorized the issuance of 1,000 shares of
      mandatorily redeemable convertible preferred stock (“Series A”), each share
      having a Stated Value (“Stated Value”) of $5,000. These shares provided for
      cumulative dividends at the annual rate of 8%, payable quarterly, and were
      to
      mature three years from the date of issue. The cumulative dividend, at the
      option of FirstFlight, could have been paid either in cash or by the issuance
      of
      additional shares of the Series A.





The
      Series A were to automatically convert upon FirstFlight’s realization of gross
      proceeds exceeding $5,000,000 from the sale of equity securities (a “Qualified
      Follow-On Offering”), separate and apart from the March and April 2005 Private
      Offering, or at such time as the traded price of the Common Stock exceeded
      2.5
      times the Initial Conversion Price (“Conversion Price”) for a period of 20
      consecutive trading days and during such period the trading volume each day
      had
      exceeded 200,000 shares. For either automatic conversion to occur, the common
      shares underlying the preferred shares had to be registered. At the option
      of
      the holder, the shares, in whole or in part, could have been converted at any
      time.





On
      various dates between January 18, 2006 and July 19, 2006, holders of 140 shares
      of the Series A converted their shares and were issued 2,333,334 shares of
      the
      Common Stock.





The
      September 1, 2006 private placement constituted a Qualified Follow-On Offering
      under the terms of the Series A and, as a result, was a mandatory conversion
      event. At that time, the then remaining 615 shares of the Series A outstanding
      were automatically converted into 10,250,002 shares of the Common Stock. The
      1,000 shares which previous to this date were authorized for the Series A were
      deemed to be cancelled and the 846 shares issued were permanently retired from
      authorized shares. The 154 shares of the Series A which were never issued were
      restored to the status of authorized but not issued shares of the Preferred
      Stock not allocated to any series.





As
      of
      December 31, 2007 and 2006, dividends of $0 and $171,260, respectively, had
      been
      accrued on the Series A. On September 4, 2006, immediately after receiving
      proceeds from the Offering, FirstFlight’s equity position improved to the extent
      that FirstFlight was permitted under the laws of the State of Nevada to issue
      dividends on the Series A for the period January 2, 2004 through September
      3,
      2006. Accordingly, FirstFlight issued an aggregate of 1,417,937 shares of the
      Common Stock as accrued dividends, valued at $425,381, on September 4,
      2006.





During
      the year ended December 31, 2006, deferred financing costs of $1,437,194 and
      accretion of discount of $2,831,303 were amortized as deemed dividends on the
      Series A.




NOTE
      15 - Stock
      Options





During
      December 2005, the Board of Directors approved the Stock Option Plan of 2005
      (the “Plan”) and, during December 2006, the stockholders of FirstFlight approved
      the Plan. The Plan is administered by FirstFlight’s compensation committee and
      provides for 7,500,000 shares of the Common Stock to be reserved for issuance
      under the Plan. Directors, officers, employees, and consultants of the Company
      are eligible to participate. The Plan provides for the awards of incentive
      and
      non-statutory stock options. The Committee determined the vesting schedule
      to be
      up to five years at the time of grant of any options under the Plan, and
      unexercised options will expire in ten years. The exercise price is to be equal
      to at least 100% of the fair market value of a share of the Common Stock, as
      determined by the Committee, on the grant date. As of December 31, 2007 and
      2006, there were 5,465,000 and 5,965,000 shares, respectively, available for
      grant as options under the Plan.





Details
      of all options outstanding, whether granted under the Plan or otherwise, are
      presented in the table below:





Number
                of
              Options
            
            Weighted
                Average
              Exercise
                PriceBalance,
                January 1, 2006
            
            
            1,250,000
            
            $
            1.08Granted
            
            
            1,435,000
            
            
            0.50Exercised
            
            
            (375,000
            )
            
            0.22Forfeited
            
            
            —
            
            
            —Balance,
                January 1, 2007
            
            
            2,310,000
            
            $
            0.86Granted
            
            
            1,100,000
            
            
            0.37Exercised
            
            
            (25,000
            )
            
            0.01Forfeited
            
            
            (1,000,000
            )
            
            1.05Balance,
                December 31, 2007
            
            
            2,385,000
            
            $
            0.56





F-17


**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**


During
      the year ended December 31, 2006, FirstFlight issued an aggregate of 207,435
      shares of the Common Stock to directors and a former director in connection
      with
      the cashless exercises of stock options to purchase an aggregate of 375,000
      shares.





During
      the year ended December 31, 2007, a director of FirstFlight exercised an option
      to purchase 25,000 shares on a cashless basis and received 24,194 shares. In
      addition, the options of two former executives to purchase an aggregate of
      1,000,000 shares were forfeited.





On
      December 1, 2007, FirstFlight granted to each of the seven non-employee
      directors a stock option to purchase 25,000 shares of the Common Stock, a total
      of 175,000 shares, at $0.36 per share, the closing price of the Common Stock
      on
      November 30, 2007. The options vest over one year and are exercisable until
      November 30, 2012. These options are valued at $62,925 and are being amortized
      over the vesting period.





On
      September 14, 2007, under the terms of an employment agreement, FirstFlight
      granted an executive a stock option to purchase 250,000 shares of the Common
      Stock at $0.40 per share, the closing price of the Common Stock on September
      21,
      2007 (September 22 nd being a
      Saturday). The option vested immediately and is exercisable until September
      23,
      2012. This option is valued at $99,884 and is being amortized over the remaining
      term of the employment agreement.





On
      September 14, 2007, under the terms of an employment agreement, FirstFlight
      granted an executive a stock option to purchase 250,000 shares of the Common
      Stock at $0.33 per share, the closing price of the Common Stock on September
      14,
      2007. The option vests over one year and is exercisable until September 15,
      2013. This option is valued at $82,467 and is being amortized over the term
      of
      the employment agreement.





On
      April
      19, 2007, under the terms of an employment agreement, FirstFlight granted an
      executive a stock option to purchase 250,000 shares of the Common Stock at
      $0.39
      per share, the closing price of the Common Stock on March 30, 2007. The option
      vested immediately and is exercisable until March 31, 2012. This option is
      valued at $97,356 and is being amortized over the term of the employment
      agreement.





On
      April
      19, 2007, FirstFlight granted to each of the seven non-employee directors a
      stock option to purchase 25,000 shares of the Common Stock, a total of 175,000
      shares, at $0.36 per share, the closing price of the Common Stock on April
      19,
      2007. The options vest over one year and are exercisable until April 18, 2012.
      These options are valued at $62,909 and are being amortized over the vesting
      period.





A
      summary
      of the FirstFlight’s stock options outstanding and exercisable at December 31,
      2007 is presented in the table below:





Exercise
                Price
            
            Outstanding
            
            Weighted
                average remaining contractual life of
              options
                (in years)
            
            Exercisable
            
            Aggregate
              Intrinsic
              Value$0.33
            
            
            250,000
            
            
            5.71
            
            
            —
            
            $
            12,500$0.36
            
            
            350,000
            
            
            4.61
            
            
            —
            
            
            7,000$0.39
            
            
            250,000
            
            
            4.25
            
            
            250,000
            
            
            —$0.40
            
            
            500,000
            
            
            4.23
            
            
            500,000
            
            
            —$0.50
            
            
            250,000
            
            
            3.25
            
            
            250,000
            
            
            —$0.51
            
            
            160,000
            
            
            1.33
            
            
            160,000
            
            
            —$0.60
            
            
            275,000
            
            
            4.43
            
            
            275,000
            
            
            —$0.64
            
            
            100,000
            
            
            2.92
            
            
            100,000
            
            
            —$1.60
            
            
            250,000
            
            
            2.25
            
            
            250,000
            
            
            —TOTALS
            
            
            2,385,000
            
            
            
            
            
            1,785,000
            
            $
            19,500




During
        the years ended December 31, 2007 and 2006, the total value of shares vested
        was
        $343,709 and $286,956, respectively.


F-18


**FIRSTFLIGHT,
        INC. AND SUBSIDIARIES**
 **Notes
        To Consolidated Financial Statements**


NOTE
      16 - Warrants





On
      March
      31, April 8 and April 15, 2005, FirstFlight issued warrants to purchase shares
      of the Common Stock aggregating approximately 3,617,000 to investors and
      1,296,000 to the placement agent. Each warrant, which vested immediately,
      provides a five-year right to purchase a share of the Common Stock at the
      initial exercise price (the “Warrant Exercise Price”) of $0.60 per share, with
      such price and the number of shares to be adjusted in the event of stock splits
      and certain other events, as provided in the agreement, and upon the sale by
      FirstFlight of additional equity securities at a price below the Warrant
      Exercise Price. At the option of FirstFlight, the warrants may be redeemed
      at
      any time, in whole, but not in part, at a price of $0.01 per share provided
      that: (a) there is an effective registration statement covering the resale
      of
      the warrant shares; (b) the volume weighted average closing price of the Common
      Stock for the prior 20 trading days is not less than 250% of the Warrant
      Exercise Price; and (c) the average daily trading volume of the Common Stock
      is
      not less than 200,000 shares per day during such 20-day trading period.





On
      September 23, 2005, FirstFlight issued a warrant to purchase shares of the
      Common Stock totaling 1,200,000 to a lender in conjunction with the issuance
      of
      a term note. The warrant, which vested immediately, was issued to an entity
      owned by FirstFlight’s chairman and an affiliate of another director. The
      warrant provides a five-year right to purchase a share of the Common Stock
      at
      the initial exercise price (the “Warrant Exercise Price”) of $0.60 per share,
      with such price and the number of shares to be adjusted in the event of stock
      splits and certain other events, as provided in the agreement, and upon the
      sale
      of additional equity securities at a price below the Warrant Exercise Price.
      At
      the option of FirstFlight, the warrant may be redeemed at any time, in whole,
      but not in part, at a price of $0.01 per share provided that: (a) there is
      an
      effective registration statement covering the resale of the warrant shares;
      (b)
      the volume weighted average closing price of the Common Stock for the prior
      20
      trading days is not less than 250% of the Warrant Exercise Price; and (c) the
      average daily trading volume of the Common Stock is not less than 200,000 shares
      per day during such 20-day trading period.





On
      September 1, 2006, FirstFlight consummated a $5.025 million private offering
      sold in Units of $100,000. Each Unit consisted of 166,700 shares of the Common
      Stock, and a warrant expiring August 21, 2011 to purchase 100,000 shares of
      the
      Common Stock, at an initial exercise price of $1.00 per share.





A
      summary
      of the status of FirstFlight’s warrants and the changes during the years then
      ended December 31, 2007 and 2006 is presented in the table below:





Number
                of
              Warrants
            
            Weighted
                Average
              Exercise
                PriceBalance,
                January 1, 2006
            
            
            6,092,121
            
            $
            0.60Granted
            
            
            5,025,000
            
            
            1.00Exercised
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —Balance,
                January 1, 2007
            
            
            11,117,121
            
            $
            0.78Granted
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —Balance,
                December 31, 2007
            
            
            11,117,121
            
            $
            0.78





A
      summary
      of FirstFlight’s stock warrants outstanding and exercisable at December 31,
      2007 is presented in the table below:





Warrant
                  exercise price
            
            Total$
            0.60
            
            $
            1.00Outstanding
            
            
            6,092,121
            
            
            5,025,000
            
            
            11,117,121Weighted
                average remaining contractual life of warrants outstanding (in
                years)
            
            
            2.33
            
            
            3.67Exercisable
            
            
            6,092,121
            
            
            5,025,000
            
            
            11,117,121





F-19


**FIRSTFLIGHT,
          INC. AND SUBSIDIARIES**
 **Notes
          To Consolidated Financial Statements**


NOTE
      17 - Employee
      Benefit Plan





FirstFlight
      maintains a 401(k) Plan (the “Plan”), which covers all employees of the Company.
      The Plan contains an option for the Company to match each participant's
      contribution. Any Company contribution vests over a five-year period on a twenty
      percent per year basis. During 2007 and 2006, the Company matched participant
      contributions at a rate of 50% of the first 6% of participant deferrals. Company
      contributions to the Plan totaled approximately $103,000 and $61,000 for the
      years ended December 31, 2007 and 2006, respectively.





NOTE
      18 - Commitments
      and Contingencies




Operating
      Leases




The
      Company leases facilities from the City of Garden City, Kansas, which provides
      for: (a) a ten-year lease term expiring March 31, 2015, with two five-year
      renewal periods; (b) a base rent of $1,550 and $1,750 per month for years one
      through five and years six through ten of the lease, respectively. In addition
      a
      fuel flowage fee of $.06 per gallon of fuel received by the Company will be
      due
      monthly. The fuel flowage fee is to be reviewed annually by the Garden City
      Regional Airport, the City of Garden City, and the Company.





The
      Company leases a facility under the terms of a Fixed Base Operator’s Lease and
      Operating Agreement with the Wilkes-Barre/Scranton International Airport. The
      agreement is for an initial term of ten years, expiring August 21, 2013, with
      two five-year renewal periods. The agreement requires payment of monthly rents
      of $6,250 plus additional payments based on certain of the Company’s revenues.
      These include per-gallon fees for certain fuel sales and commissions on landing,
      parking, tie-down and other types of fees charged by the Company to its aviation
      customers.





The
      Company leases a parking area and land for its main operating facility under
      the
      terms of an Operating Agreement with the County of Chemung, the owner of the
      Elmira/Corning Regional Airport. The agreement was effective January 1, 2006
      and
      is for an initial term of twenty-five years with one fifteen-year renewal and
      one subsequent ten-year renewal period. The agreement requires payment of
      quarterly rent of $931 for the parking lot lease and monthly rent of $1,195
      for
      the county land lease. In addition, the Company pays a monthly fuel flowage
      fee
      from $.06 to $.09 per gallon based on the number of gallons
      dispensed.





The
      Company leases its facilities in Horseheads, New York from the Chief Executive
      Officer of the Company and a related party. The term is 15 years (subject to
      renewals at the option of Airborne at least 60 days prior to the expiration
      of
      the term) and expires September 22, 2020. The annual rent is $160,584, payable
      in advance in equal monthly installments of $13,382. Beginning on the fifth
      anniversary of the commencement date of the lease, and annually each year
      thereafter, the annual rent shall increase or decrease by the increase or
      decrease in the applicable Consumer Index Price. The Company has paid a $25,000
      security deposit with respect to this lease. During the years ended December
      31,
      2007 and 2006, the Company paid approximately $161,000 in rent expense under
      this lease.





The
      Company leases office space for its charter sales department and hangar space
      for managed aircraft under the terms of an operating agreement in New Jersey.
      The office and hangar agreements were effective October 1, 2007 and are for
      an
      initial term of one year with automatic one-year renewals in the absence of
      notification from either party. The office agreement requires payment of monthly
      rent of $3,677 and the hangar agreement requires payment of monthly rent of
      $28,033.





The
      Company leases refueling trucks. As of December 31, 2007 and 2006, the refueling
      truck lease required monthly rental payments of approximately $6,000 per annum.
      In addition, the Company leases vehicles and equipment with payments ranging
      from $180 to $477 per month.





Future
      minimum rental payments under the Company’s operating leases are as follows for
      both related and non related parties:




For
                the year ended
            
            
            
            RelatedDecember
                31,
            
            Total
            
            Party
            
            Other2008
            
            $
            285,246
            
            
            160,584
            
            
            124,6622009
            
            
            278,623
            
            
            160,584
            
            
            118,0392010
            
            
            277,026
            
            
            160,584
            
            
            116,4422011
            
            
            274,644
            
            
            160,584
            
            
            114,0602012
            
            
            274,644
            
            
            160,584
            
            
            114,0602013
                and thereafter
            
            
            1,663,277
            
            
            1,240,952
            
            
            422,325TOTAL
            
            $
            3,053,460
            
            $
            2,043,872
            
            $
            1,009,588




F-20


**FIRSTFLIGHT,
          INC. AND SUBSIDIARIES**
 **Notes
          To Consolidated Financial Statements**


Total
      rent expense under all operating leases including the related party lease was
      approximately $397,000 and $383,000 for the years ended December 31, 2007 and
      2006, respectively.





Employment
      Agreements




On
      March
      31, 2005, the Board of Directors elected Jeffrey M. Trenk as an officer of
      FirstFlight, terminated Mr. Trenk's consulting agreement and entered into an
      employment agreement with Mr. Trenk dated April 1, 2005 (the "Jeffrey Trenk
      Employment Agreement"). Pursuant to the Jeffrey Trenk Employment Agreement,
      Mr.
      Trenk was employed as the Executive Vice President of Business Development
      of
      FirstFlight. The term of the Jeffrey Trenk Employment Agreement was to be for
      three years, which commenced April 1, 2005, and thereafter was to automatically
      renew for additional one-year periods. Pursuant to the Jeffrey Trenk Employment
      Agreement, Mr. Trenk's base annual salary was $175,000. Mr. Trenk was to be
      granted an option each April 1 during the initial term to purchase 250,000
      shares of the Common Stock. The first option was granted effective April 1,
      2005
      and the second option was granted effective April 1, 2006. Effective October
      31,
      2006, the Jeffrey Trenk Employment Agreement was mutually terminated. Mr. Trenk
      was also serving as a director. Under the terms of the employment agreement
      separation, Mr. Trenk was paid the sum of $81,000 in November 2006 in lieu
      of
      any future monetary claims under the employment agreement. His outstanding
      options were subsequently forfeited and his right to receive an option effective
      April 1, 2007 was terminated.





On
      March
      31, 2005, FirstFlight entered into an employment agreement dated as of April
      1,
      2005 (the "Ettinger Employment Agreement") with Robert J. Ettinger. Pursuant
      to
      the Ettinger Employment Agreement, Mr. Ettinger was employed as the Chief
      Operating Officer of FirstFlight and as the President of its executive jet
      management group. The term of the Ettinger Employment Agreement was for three
      years, which commenced April 1, 2005, and thereafter was to automatically renew
      for additional one-year periods. Mr. Ettinger's base annual salary was $150,000
      and he was guaranteed an annual bonus payment of $100,000, both the salary
      and
      the bonus payment were to be paid in equal monthly installments. In addition,
      he
      could have received an annual performance bonus based on the Board's evaluation
      of the Company's (particularly the Division's) performance and his performance.
      Mr. Ettinger was to be granted an option each April 1 during the initial term
      to
      purchase 250,000 shares of the Common Stock. The first option was granted
      effective April 1, 2005 and the second option was granted effective April 1,
      2006. On December 18, 2006, FirstFlight gave notice to Mr. Ettinger terminating
      without cause (as permitted) effective as of December 28, 2006 the Ettinger
      Employment Agreement. Mr. Ettinger was paid severance of $150,000 and received
      certain employee benefits of the Company for a period of six months. His
      outstanding options were subsequently forfeited and his right to receive an
      option effective April 1, 2007 was terminated.





On
      March
      31, 2005, the Board of Directors authorized execution of the First Amendment
      effective April 1, 2005 (the "First Amendment") to the employment agreement
      (the
      "Ricciardi Employment Agreement') for Ronald J. Ricciardi, FirstFlight's
      President and CEO. The First Amendment provided that Mr. Ricciardi's employment
      under the Ricciardi Employment Agreement was effective April 1, 2005 and would
      continue for three years thereafter subject to automatic one-year renewals.
      The
      First Amendment increased his base salary to $175,000. Mr. Ricciardi is to
      be
      granted an option each April 1 during the initial term to purchase 250,000
      shares of the Common Stock. The first option was granted effective April 1,
      2005, the second option was granted effective April 1, 2006 and the third option
      was granted effective April 1, 2007. On December 12, 2006, the Board of
      Directors authorized execution of the Second Amendment effective as of that
      date
      (the “Second Amendment”) reflecting that Mr. Ricciardi was elected as Vice
      Chairman of the Board by the Board of Directors and, effective January 1, 2007
      Mr. Ricciardi’s base salary was adjusted to $125,000. The initial term was also
      extended and will expire March 31, 2009.




On
      September 23, 2005, Airborne and FirstFlight entered into an employment
      agreement dated as of September 23, 2005 (the "Dow Employment Agreement") with
      John Dow. Pursuant to the Dow Employment Agreement, Mr. Dow is employed in
      the
      office of Chief Executive of Airborne. The term of the agreement is for three
      years, which commenced September 23, 2005, and thereafter automatically renews
      for additional one-year periods. Mr. Dow's base annual salary is $150,000.
      In
      addition, he may receive an annual performance bonus based on the Board's
      evaluation of Airborne's performance and his performance. Mr. Dow is to be
      granted an option each September 23 during the initial term to purchase 250,000
      shares of the Common Stock. The first option was granted effective September
      23,
      2005, the second option was granted effective September 23, 2006 and the third
      option was granted effective September 23, 2007. On December 12, 2006, Mr.
      Dow
      was elected as President of FirstFlight by the Board of Directors and designated
      as its Chief Executive Officer.




F-21


**FIRSTFLIGHT,
          INC. AND SUBSIDIARIES**
 **Notes
          To Consolidated Financial Statements**


On
      September 1, 2006, FirstFlight entered into an employment agreement effective
      as
      of September 15, 2006 with Keith P. Bleier (the “Bleier Employment Agreement”).
      Mr. Bleier serves FirstFlight as a Senior Vice President and its Chief Financial
      Officer. The term of the agreement is for three years, which commenced on
      September 15, 2006, and thereafter automatically renews for additional one-year
      periods. Mr. Bleier’s base annual salary is $185,000 with annual increases of
      5%. In addition, he may receive an annual performance bonus at the discretion
      of
      the Board of Directors. Mr. Bleier is to be granted an option each September
      15
      during the initial term to purchase 250,000 shares of the Common Stock,
      commencing September 15, 2006. He has received his first option effective
      September 15, 2006 and his second option effective September 15,
      2007.





The
      employment agreements for Messrs. Dow, Ricciardi and Bleier contain severance
      provisions. Future commitments under the Company’s employment agreements
      aggregate approximately $650,000.





NOTE
      19 - Related
      Parties





The
      firm
      of Wachtel & Masyr, LLP is corporate counsel to the Company. William B.
      Wachtel, FirstFlight’s Chairman of the Board, is a managing partner of this
      firm. During the year ended December 31, 2007, the Company was billed for legal
      services of $165,156. At December 31, 2007, the Company has recorded in accounts
      payable an obligation for legal fees of $374,517 related to these legal services
      provided by the firm.





The
      charter division of the Company manages several aircraft owned by an entity
      in
      which Mr. Wachtel along with two other directors of FirstFlight, Thomas Iovino
      and Stephen B. Siegel, are members. During the year ended December 31, 2007,
      the
      Company recorded direct revenue and expenses of $6,809,903 and $5,944,582,
      respectively, related to the Company’s management of these aircraft. At December
      31, 2007 the Company had recorded in accounts receivable a balance of
      approximately $172,621 owed from this entity. During the year ended December
      31,
      2006, the Company managed one aircraft for Mr. Wachtel and recorded direct
      revenue and expenses of $3,070,057 and $2,546,269, respectively, related to
      the
      management of aircraft.





On
      May
      24, 2006, Airborne entered into an agreement to lease an aircraft from a
      company, of which one of its members is John H. Dow, a director and the current
      President and Chief Executive Officer of FirstFlight, and the other member
      is an
      employee of its charter segment. The terms of the lease provided for the payment
      of rent of $17,000 per month and a charge of $600 for each hour of aircraft
      use.
      The lease agreement further provided that this aircraft would be managed by
      the
      Company through its charter segment, and through which the Company would retain
      90% of the associated charter revenue. The Company made use of this aircraft
      for
      certain business travel needs and paid these expenses to the lessor. During
      the
      year ended December 31, 2006, the Company recorded no revenue and expenses
      of
      $17,000 in connection with the lease of this aircraft. The lease agreement
      was
      subsequently terminated in February 2007 and was replaced by the lease described
      in the following paragraph.





On
      April
      26, 2007, Airborne entered into an agreement to lease an aircraft from a
      company, of which one of its members is John H. Dow, a director and the current
      President and Chief Executive Officer of FirstFlight, and the other member
      is an
      employee of its charter segment. The terms of the lease provide for the payment
      of rent of $20,000 per month and a charge of $500 for each hour of aircraft
      use.
      The lease agreement, which is for a period of one year, further provides that
      this aircraft will be managed by the Company through its charter segment, and
      through which the Company will retain 90% of the associated charter revenue.
      The
      Company made use of this aircraft for certain business travel needs and paid
      these expenses to the Lessor. During the year ended December 31, 2007, the
      Company recorded revenue of $391,976 and expenses of $493,228 in conjunction
      with the lease of this aircraft.





NOTE
      20 - Litigation





The
      Company is currently engaged in an action in which a plaintiff has made a claim
      of approximately $200,000 in connection with disputed charges and expenses
      incurred in the operation of an aircraft.  The case is being tried in the
      Monroe County (Pennsylvania) Courthouse. The Company believes it has a
      reasonable position in defense of these claims and intends to vigorously defend
      itself in this matter.  In the opinion of management, the ultimate
      disposition of this matter will not have a material adverse effect on the
      Company’s financial position or results of operations. The Company has accounted
      for this action in accordance with SFAS 5 (“Accounting for
      Contingencies”).





NOTE
      21 - Segment
      Data




The
      Company is an aviation services company with operations in the aircraft charter
      management (“Charter”), fixed base operations (an “FBO”), and aircraft
      maintenance (“Maintenance”) segments of the general aviation
      industry.




F-22


**FIRSTFLIGHT,
          INC. AND SUBSIDIARIES**
 **Notes
          To Consolidated Financial Statements**


Each
      of
      the Company’s three segments is operated under the FirstFlight brand name: the
      aircraft charter management segment is in the business of providing on-call
      passenger air transportation. These charter operations are implemented primarily
      through a fleet of managed aircraft - owned by another person or entity for
      which the Company provides regulatory and maintenance oversight while offering
      charter services. Within the FBO segment, the Company provides ground services
      such as the fueling and hangaring of aircraft. Within the maintenance segment,
      the Company offers maintenance and repair to aircraft owned or managed by
      general aviation aircraft operators.





The
      following tables summarize financial information about the Company’s business
      segments for the years ended December 31, 2007 and 2006:








**Year
                Ended**
              **December
                31,****Revenue**
            
            **2007**
            
            **2006**Charter
            
            $
            38,231,943
            
            $
            31,243,500FBO
            
            
            5,905,715
            
            
            4,988,553Maintenance
            
            
            2,970,269
            
            
            2,980,371Total
                revenue
            
            $
            47,107,927
            
            $
            39,212,424





**Year
                Ended**
              **December
                31,****Operating
                Results**
            
            **2007**
            
            **2006**Charter
            
            $
            1,561,689
            
            $
            658,798FBO
            
            
            308,845
            
            
            15,668Maintenance
            
            
            (32,184
            )
            
            (242,358
            )Division
                profit
            
            
            1,838,350
            
            
            432,108Corporate
                expense
            
            
            1,633,897
            
            
            2,805,651Operating
                profit (loss)
            
            
            204,453
            
            
            (2,373,543
            )Other
                income (expense), net
            
            
            (44,690
            )
            
            155,700Interest
                income (expense), net
            
            
            24,691
            
            
            (1,118,916
            )Net
                income (loss)
            
            $
            184,454
            
            $
            (3,336,759
            )





**For
                the Year Ended**
              **December
                31, 2007**Charter
            
            FBO
            
            Maintenance
            
            Corporate
            
            ConsolidatedDepreciation
                and Amortization
            
            $
            233,157
            
            $
            143,327
            
            $
            13,681
            
            $
            —
            
            $
            390,165Interest
                Income (Expense)
            
            $
            21,236
            
            $
            (29,183
            )
            $
            —
            
            $
            32,638
            
            $
            24,691Capital
                Expenditures
            
            $
            155,836
            
            $
            167,825
            
            $
            10,136
            
            $
            —
            
            $
            333,797Total
                Assets
            
            $
            11,281,418
            
            $
            2,215,316
            
            $
            254,527
            
            $
            643,573
            
            $
            14,394,834Goodwill
            
            $
            3,460,690
            
            $
            479,553
            
            $
            254,527
            
            $
            —
            
            $
            4,194,770





**For
                the Year Ended**
              **December
                31, 2006**Charter
            
            FBO
            
            Maintenance
            
            Corporate
            
            ConsolidatedDepreciation
                and Amortization
            
            $
            264,470
            
            $
            129,415
            
            $
            11,022
            
            $
            1,564
            
            $
            406,471Interest
                Income (Expense)
            
            $
            1,718
            
            $
            (54,245
            )
            $
            —
            
            $
            (1,066,389
            )
            $
            (1,118,916
            )Capital
                Expenditures
            
            $
            27,344
            
            $
            248,404
            
            $
            42,701
            
            $
            —
            
            $
            318,449Total
                Assets
            
            $
            9,674,653
            
            $
            2,117,991
            
            $
            254,527
            
            $
            1,134,269
            
            $
            13,181,440Goodwill
            
            $
            3,460,690
            
            $
            479,553
            
            $
            254,527
            
            $
            —
            
            $
            4,194,770





F-23


**FIRSTFLIGHT,
          INC. AND SUBSIDIARIES**
 **Notes
          To Consolidated Financial Statements**


NOTE
      22 - Subsequent
      Event




On
      January 19, 2008, Airborne and FirstFlight entered into an employment agreement
      dated as of January 19, 2008 with Stephen Meyer. Under the terms of this
      employment agreement, FirstFlight granted Mr. Meyer a stock option to purchase
      250,000 shares of the Common Stock at $0.40 per share. The option vests over
      one
      year and is exercisable until January 18, 2014. This option is valued at $99,970
      and is being amortized over the two-year term of the employment
      agreement.





F-24





**ITEM
      9.**  **CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES**





None.





**ITEM
      9A(T).**  **CONTROLS
      AND PROCEDURES**





The
      Company evaluated the design and operation of its disclosure controls and
      procedures to determine whether they are effective in ensuring that it discloses
      the required information in a timely manner and in accordance with the Exchange
      Act and the rules and forms of the Commission. Management, including its
      principal executive officer and principal financial officer, supervised and
      participated in the evaluation. The principal executive officer and principal
      financial officer concluded, based on their review, that its disclosure controls
      and procedures, as defined by Exchange Act Rules 13a-15(e) and 15d-15(e), are
      effective and ensure that (i) it discloses the required information in reports
      that it files under the Exchange Act and that the filings are recorded,
      processed, summarized and reported within the time periods specified in
      Commission rules and forms and (ii) information required to be disclosed in
      reports that it files under the Exchange Act is accumulated and communicated
      to
      the Company's management, including its principal executive officer and
      principal financial officer, to allow timely decisions regarding required
      disclosure.





During
      the year ended December 31, 2007, no changes were made to its internal controls
      over financial reporting that materially affected or were reasonably likely
      to
      materially affect these controls subsequent to the date of their
      evaluation.





This
      Report does not include an attestation report of the Company’s registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the Company’s registered
      public accounting firm pursuant to temporary rules of the Commission that permit
      the Company to provide only management’s report in this Report.





**Limitations
      on the Effectiveness of Controls**





Management
      is responsible for establishing and maintaining adequate internal controls
      over
      financial reporting. We believe that a control system, no matter how well
      designed and operated, cannot provide absolute assurance that the objectives
      of
      the control system are met, and no evaluation of controls can provide absolute
      assurance that all control issues and instances of fraud, if any, within a
      company have been detected. Our disclosure controls and procedures are designed
      to provide a reasonable assurance of achieving their objectives. Under the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, we conducted an evaluation of
      the
      effectiveness of our internal control over financial reporting based on the
      framework established by the Committee of Sponsoring Organizations of the
      Treadway Commission (COSO) as set forth in Internal Control - Integrated
      Framework. Based on our evaluation under the framework in Internal Control
—
Integrated Framework, our management concluded that our internal control over
      financial reporting was effective at the reasonable assurance level as of
      December 31, 2007.





**ITEM
      9B.**  **OTHER
      INFORMATION**




There
      are
      no items required to be disclosed in a Current Report on Form 8-K during the
      quarter ended December 31, 2007 that were not so reported.





A-18




**Part
      III**





**ITEM
      10.**  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS, AND CORPORATE GOVERNANCE**




The
      following table contains certain information related to the directors and
      executive officers of FirstFlight as of March 14, 2008:





**Name**
            
            **Age**
            
            **Position**John
                H. Dow
            
            53
            
            President,
                Chief Executive Officer and a directorRonald
                J. Ricciardi
            
            46
            
            Director,
                Vice Chairman of the BoardKeith
                P. Bleier
            
            38
            
            Senior
                VP, Chief Financial and Chief Accounting OfficerWilliam
                B. Wachtel
            
            53
            
            DirectorWilliam
                R. Colaianni
            
            61
            
            DirectorDonald
                Hecht
            
            74
            
            DirectorThomas
                Iovino
            
            55
            
            DirectorJeffrey
                B. Mendell
            
            54
            
            DirectorStephen
                B. Siegel
            
            63
            
            DirectorAlvin
                S. Trenk
            
            78
            
            Director





Each
      director of FirstFlight was re-elected at the Annual Meeting of Stockholders
      held on December 12, 2006 to serve until the next Annual Meeting of Stockholders
      or until his successor is duly elected and shall have qualified. Each officer
      of
      FirstFlight is elected by the Board of Directors to serve at the discretion
      of
      the Board.





**Business
      History**





***John
      H. Dow - Director, President, Chief Executive Officer***





Mr.
      Dow
      was first elected as a director of FirstFlight effective September 23, 2005.
      He
      was designated as President of the Charter Division on that date and as
      President of the FBO Division on September 25, 2006. He was elected President
      of
      FirstFlight on December 12, 2006 and designated as the Chief Executive Officer
      on the same date.




Mr.
      Dow
      formed Airborne, Inc. d/b/a FirstFlight Management in 1987, shortly after he
      acquired B & F Brake and Wheel Service. In 1989, he expanded Airborne’s
      services by adding a charter brokerage division to his management, charter
      and
      aircraft sales capabilities. In 1992, Airborne successfully developed and
      received worldwide Federal Aviation Regulations (“FAR”) Part 135 Certification.
      Mr. Dow is a licensed pilot with an Air Transport Type rating in Gulfstream
      aircraft. He is a member of the National Business Aviation Association
      Operations Committee as well as the National Air Transport Association and
      served on the aviation committee for the Elmira/Corning Regional
      Airport.





A-19


***Ronald
      J. Ricciardi - Director, Vice Chairman of the Board***





Mr.
      Ricciardi had served as the President and a director of the Arizona FBO Air
      since its inception and was designated as its Chief Executive Officer on January
      2, 2004. He was elected the President and a director of FirstFlight and
      designated as its Chief Executive Officer effective with the reverse merger
      transaction on August 20, 2004. On December 12, 2006, he was elected as Vice
      Chairman of the Board.




Mr.
      Ricciardi is a senior executive with extensive general management experience
      in
      entrepreneurial and large companies. Before joining the Arizona FBO Air, Mr.
      Ricciardi was President and CEO of P&A Capital Partners, Inc., an
      entertainment finance company established to fund the distribution of
      independent films. Mr. Ricciardi was also co-founder, Chairman and CEO of eTurn,
      Inc., a high technology service provider, for which he developed a consolidation
      strategy, negotiated potential merger/acquisition candidates, prepared private
      placement materials and executed numerous private, institutional and venture
      capital presentations. After a management career at Pepsi-Cola Company and
      the
      Perrier Group of America, Mr. Ricciardi was President and CEO of Clearidge,
      Inc., a leading regional consumer products company, where he provided strategic
      and organizational development, and led a consolidation effort that included
      14
      transactions, which more than tripled company revenue over four
      years.




***Keith
      P. Bleier - Senior Vice President and Chief Financial and Chief Accounting
      Officer***




Mr.
      Bleier was elected as Senior Vice President of FirstFlight, and designated
      as
      its Chief Financial Officer, effective September 15, 2006. Mr. Bleier was
      designated as our Chief Accounting Officer on December 12, 2006.





Prior
      to
      his engagement by FirstFlight and commencing in September 2002, Mr. Bleier,
      who
      is a certified public accountant, served as a Principal of the Business Advisory
      Group of Bonadio & Co. LLP, a certified public accounting firm. While
      serving in such capacity, among his duties was as the engagement manager in
      that
      firm’s representation of Airborne, Inc., which became a subsidiary of
      FirstFlight on September 23, 2005. From September 1998 to September 2002, he
      served as the principal accounting and financial officer of Montana Mills Bread
      Co., Inc., and its subsidiaries, which company’s common stock was listed on the
      American Stock Exchange prior to its purchase by Krispy Kreme Donut Corp. and
      which was a specialty retail and wholesale bakery manufacturer.




***William
      B. Wachtel - Director, Chairman of the Board***




Mr.
      Wachtel was first elected as a director of FirstFlight and its Chairman of
      the
      Board on March 31, 2005.




Mr.
      Wachtel has been a managing partner of Wachtel & Masyr, LLP, or its
      predecessor law firm (Gold & Wachtel, LLP), since its founding in August
      1984. Such firm serves as corporate counsel to the Company. He is a co-founder
      of the Drum Major Institute, an organization carrying forth the legacy of the
      late Reverend Martin Luther King, Jr.





***William
      R. Colaianni - Director***





Mr.
      Colaianni was first elected as a director of FirstFlight on September 30,
      2004.





Mr.
      Colaianni is currently a member of Holding Capital Group LLC, a private
      investment banking firm that invests in smaller middle market private companies.
      Holding Capital has been in business for over 25 years and has made investments
      in over 300 deals. Mr. Colaianni joined the firm in 1983. Structuring and
      financing of unique transactions is Holding Capital’s expertise. Mr. Colaianni
      also sits on the board of directors for seven privately-held companies and
      is
      the President of a $35 million veneer and plywood company in
      Georgia.





Prior
      to
      joining Holding Capital, Mr. Colaianni was Chief Operating Officer of Adidas
      Sports and Leisure, and was President of Pony Footwear. He was also a Vice
      President for Bankers Trust Company, New York, in charge of asset based lending.
      Before beginning his professional career, Mr. Colaianni served as a captain
      in
      the US Army.





***Donald
      Hecht - Director***





Mr.
      Hecht
      was first elected as a director of FirstFlight effective September 15,
      2006.





Mr.
      Hecht
      has, since 1966, been a managing partner of Hecht and Company, P.C., a certified
      public accounting firm. He has served on the board of directors of other public
      companies.




A-20





***Thomas
      Iovino - Director***





Mr.
      Iovino was first elected as a director of FirstFlight effective September 15,
      2006.





Mr.
      Iovino has, since 1983, managed his own contracting firm Judlaw Contracting,
      Inc., which firm had revenues approximating $257 million in 2007. He serves
      on
      the Board of Trustees of Rensselaer Polytechnic Institute, where he received
      his
      BS and Masters Degrees in Civil Engineering.





***Jeffrey
      B. Mendell - Director***





Mr.
      Mendell was first elected as a director of FirstFlight on September 30,
      2004.





Mr.
      Mendell is, and has been since 1983, the Chairman & CEO of JBM Realty, a
      private real estate company headquartered in Greenwich, CT. This company is
      active in the development, financing and sale of residential and commercial
      properties. His most recent project was the development of Greenwich Shore,
      a
      luxury rental apartment project overlooking Long Island Sound in Greenwich,
      CT.





Earlier
      in his career, Mr. Mendell was an executive with Citicorp Real Estate, Inc.
      in
      New York City and he is a licensed real estate broker in the State of New
      York





***Stephen
      B. Siegel - Director***





Mr.
      Siegel was first elected as a director of FirstFlight effective September 15,
      2006.





He
      currently serves as Chairman of Global Brokerage Services of CB Richard Ellis
      (“CBRE”), a worldwide premier full service real estate company. He was Chairman
      and Chief Executive Officer of Insignia/ESG, Inc., a premier commercial real
      estate company, from 1992 until its merger in July 2003 into CBRE. He serves
      on
      many charitable boards of trustees, including serving with his wife Wendy as
      Co-Chairs of the Council of National Trustees of the National Jewish Medical
      and
      Research Center.





***Alvin
      S. Trenk - Director***





Mr.
      Trenk
      was first elected as a director and the Chairman of the Board of FirstFlight
      effective with the reverse merger transaction on August 20, 2004. He resigned
      as
      the Chairman of the Board on March 31, 2005.





Mr.
      Trenk
      has served as Chairman and CEO of Air Pegasus since 1981 and, from 1997 to
      2003,
      as Chairman, President and CEO of Sightseeing Tours of America, Inc. and Liberty
      Helicopters, Inc., privately held corporations operating public use heliports
      in
      New York and providing helicopter air tours and charter and air services. Mr.
      Trenk has also been Chairman and CEO of TechTron, Inc. since 1980. TechTron
      is a
      privately owned holding company with investment emphasis on emerging global
      market opportunities. From 1976 to 1980, Mr. Trenk was Vice Chairman of Kenton
      Corporation, a diversified publicly-traded corporation, where he also served
      as
      President and CEO of Charles Town Turf Club, owner and operator of thoroughbred
      race tracks in West Virginia, and Chairman and CEO of International Health
      Company, which owned and operated a national chain of artificial kidney
      centers.





**Family
      Relationships**





There
      are
      no family relationships among the directors and the executive officers of
      FirstFlight. Jeffrey M. Trenk, until October 31, 2006, the Executive Vice
      President for Business Development and a director since March 31, 2005, is
      the
      son of Alvin S. Trenk, another director of FirstFlight since August 20,
      2004.





**Other
      Directorships**





Stephen
      P. Siegel is a trustee of Liberty Property Trust, a real estate investment
      trust
      traded on the New York Stock Exchange.




No
      other
      director of FirstFlight serves as a director of a company with a class of
      securities registered pursuant to Section 12 of the Exchange Act or any company
      registered as an investment company under the Investment Company Act of
      1940.




A-21




**Code
      of Ethics**





On
      May
      19, 2006, the Board of Directors of FirstFlight adopted a Code of Ethics for
      application to the Company. FirstFlight will provide to any person, without
      charge, upon request, a copy of the Code of Ethics upon written or oral request
      to Ronald J. Ricciardi, Vice Chairman of the Board, FirstFlight, Inc., 101
      Hangar Road, Wilkes-Barre/Scranton International Airport, Avoca, PA 18641,
      or
      telephone number: (570) 457-3400.





**Committees
      of the Board of Directors**




There
      are
      three committees of the Board of Directors: the Audit Committee comprised of
      William R. Colaianni, Chairman, Donald Hecht and Thomas Iovino; the Compensation
      Committee comprised of Jeffrey B. Mendell, Chairman, Stephen B. Siegel and
      Alvin
      S. Trenk, and the Nominating Committee comprised of Stephen B. Siegel, Chairman,
      Thomas Iovino and Jeffrey B. Mendell.





**Compliance
      with Section 16(a) of the Exchange Act**




Based
      solely on a review of Forms 3 and 4 and amendments thereto furnished to
      FirstFlight during the fiscal year ended December 31, 2007 and Forms 5 and
      amendments thereto furnished to FirstFlight with respect to the fiscal year
      ended December 31, 2007, each director and executive officer timely reported
      all
      of his transactions during that most recent fiscal year as required by Section
      16(a) of the Exchange Act except that, due to a delay in finalizing stock option
      agreements after Compensation Committee grants, William B. Wachtel, a director
      (also Chairman of the Board) and a 10% stockholder, did not report an option
      grant to non-employee directors on December 1, 2007 until later in that month
      on
      a Form 4 and each of the other such directors (Messrs. Colaianni, Hecht, Iovino,
      Siegel and Trenk) timely reported his option grant in a Form 5. In addition,
      because of the same delay, the executive officers (Messrs. Dow and Bleier)
      each
      timely reported an option grant to him in September 2007 on Form 5. FirstFlight
      and counsel have instituted actions intended to facilitate timely filings on
      Form 4 in the future, rather than waiting for the Form 5.





**Corporate
      Governance**





There
      have been no changes to the procedures by which security holders of FirstFlight
      may recommend nominees to its Board of Directors since the Board set forth
      such
      policy in its proxy statement for its Annual Meeting of Stockholders held on
      December 12, 2006.




FirstFlight’s
      Board of Directors has determined that each of William R. Colaianni and Donald
      Hecht qualifies as an audit committee financial expert on its Audit Committee
      and each is independent using the definition of The Nasdaq Stock Market, Inc.
      (“Nasdaq”).




A-22


**ITEM
      11.**  **EXECUTIVE
      COMPENSATION**




**COMPENSATION
      OF EXECUTIVE OFFICERS**




The
      following table sets forth the annual and long-term compensation for services
      in
      all capacities for the fiscal year ended December 31, 2007. The following table
      sets forth the annual compensation paid by the Company for services performed
      on
      the Company's behalf for the fiscal years ended December 31, 2007 and 2006
      with
      respect to any person who served as Chief Executive Officer of FirstFlight
      during fiscal 2007 and the two other most highly compensated executive officers
      serving at December 31, 2007 whose total compensation exceeded $100,000 in
      fiscal 2007. The three persons named in the table are the only persons who
      served as executive officers of FirstFlight in fiscal 2007.





**SUMMARY
      COMPENSATION TABLE**




Name
                and Principal Position
            
            Year
            
            Salary
              ($)(1)
            
            Bonus
              ($)
            
            Option
              Awards
              ($)(2)
            
            All
                Other
              Compensation
              ($)(3)
            
            Total
              ($)John
                H. Dow, President and
              Chief
                Executive Officer (4)
            
            
            2007
              2006
            
            
            150,000
              150,000
            
            
            100,000
              100,000
            
            
            99,900
              99,600
            
            
            12,000
              12,000
            
            
            361,900
              361,600Ronald
                J. Ricciardi, Vice
              Chairman
                of the Board (4)
            
            
            2007
              2006
            
            
            125,000
              175,000
            
            
            —
              —
            
            
            97,400
              124,400
            
            
            12,000
              12,000
            
            
            234,400
              311,400Keith
                P. Bleier, Senior VP,
              CFO
                and CAO
            
            
            2007
              2006
            (5)
            
            188,100
              49,850
            
            
            —
              —
            
            
            82,500
              87,000
            
            
            21,031
              —
            
            
            291,631
              136,850




1.
            Mr.
                Dow receives a base salary of $150,000 and a guaranteed bonus of
                $100,000;
                Mr. Ricciardi received base salaries of $125,000 and $175,000 in
                2007 and
                2006, respectively; Mr. Bleier receives a base salary of $185,000
                with
                annual increases of 5% effective September 1stof
                each year.2.
            Mr.
                Dow received an option to purchase 250,000 shares on September 23,
                2007
                and 2006. Each set of options were vested immediately and are exercisable
                for five years from the date of grant. The 2007 and 2006 options
                were
                priced at $0.40 per share, the closing sales price of the common
                stock on
                September 22, 2007 and 2006. Mr. Ricciardi received an option to
                purchase
                250,000 shares on April 1, 2007 and 2006. Each set of options were
                vested
                immediately and are exercisable for five years from the date of grant.
                The
                2007 option was priced at $0.39 per share and the 2006 option was
                priced
                at $0.50 per share, the closing sales price of the common stock on
                March
                31, 2007 and 2006, respectively. Mr. Bleier received an option to
                purchase
                250,000 shares effective September 1, 2007 and 2006. Each set of
                options
                vest over one year and are exercisable for five years from the date
                of
                vesting. The 2007 option was priced at $0.33 per share, the closing
                sales
                price of the common stock on August 31, 2007. The 2006 option was
                priced
                at $0.60 per share, a negotiated price. All options were valued using
                the
                Black-Scholes model.3.
            Mr.
                Dow receives the use of an automobile and related expenses paid by
                the
                Company; Mr. Ricciardi receives an auto allowance of $1,000 per month
                and
                Mr. Bleier receives an auto allowance of $700 per month. In 2007,
                Mr.
                Bleier received reimbursement for certain expenses associated with
                his
                relocation.4.
            Mr.
                Dow was first designated as the Chief Executive Officer of FirstFlight
                on
                December 12, 2006; prior thereto, Mr. Ricciardi served as the Chief
                Executive Officer of FirstFlight.5.
            Mr.
                Bleier’s employment agreement became effective on September 1,
                2006.




**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR END**




OPTION
                AWARDSName
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              Exercisable
              (#)(1)
            
            Number
                of
              Securities
              Underlying
              Unexercised
              Options
              Unexercisable
              (#)
            
            Equity
                Incentive
              Plan
                Awards:
              Number
                of
              Securities
              Underlying
              Unexercised
              Unearned
              Options
              (#)
                (1)
            
            Option
              Exercise
              Price
              ($)
            
            Option
              Expiration
              DateJohn
                H. Dow
            
            
            250,000
              250,000
            
            
            
            
            
            
            
            
            0.40
              0.40
            
            
            09/22/2011
              09/22/2012Ronald
                J. Ricciardi
            
            
            250,000
              250,000
              250,000
            
            
            
            
            
            
            
            
            1.60
              0.50
              0.39
            
            
            03/31/2010
              03/31/2011
              03/31/2012Keith
                P. Bleier
            
            
            250,000
              250,000
            
            
            250,000
            
            
            250,000
            
            
            0.60
              0.36
            
            
            09/01/2012
              09/01/2013




1.
            As
                part of his employment agreement, Mr. Dow (a) received on September
                23,
                2005 an option for 250,000 shares at $0.33 per share, upon which
                he made a
                cashless exercise on January 11, 2006 and for which he received 85,000
                shares; (b) received on September 23, 2006 an option for 250,000
                shares at
                $0.40 per share, the closing sales price of the common stock on September
                22, 2006, which is currently exercisable; and (c) received on September
                23, 2007 an option for 250,000 shares at $0.40 per share, the closing
                sales price of the common stock on September 22, 2007, which is currently
                exercisable.




A-23


As
        part
        of his employment agreement, Mr. Ricciardi (a) received on April 1, 2005
        an
        option for 250,000 shares at $1.60 per share, the closing sales price of
        the
        common stock on March 31, 2005, which is currently exercisable; (b) received
        on
        April 1, 2006 an option for 250,000 shares at $0.50 per share, the closing
        sales
        price on March 31, 2006, which is currently exercisable; and (c) received
        as of
        April 1, 2007 an option for 250,000 shares at $0.39 per share, the closing
        sales
        price on March 31, 2007, which is currently exercisable.
  As
        part
        of his employment agreement, Mr. Bleier (a) received on September 1, 2006
        an
        option for 250,000 shares at $0.60 per share, a negotiated price, which became
        exercisable on September 1, 2007; (b) received on September 1, 2007 an option
        for 250,000 shares priced at $0.36 per share, the closing sales price of
        the
        common stock on August 31, 2007, which shall become exercisable on September
        1,
        2008; and (c) will receive on September 1, 2008 an option for 250,000 shares
        priced at the closing sales price as of August 31, 2008, which shall become
        exercisable on September 1, 2009.
  Each
        set
        of options expires five years from its respective date of vesting. FirstFlight
        has never re-priced any option (including those in the table) or otherwise
        modified any such option (such as by extension of exercise periods, the change
        of vesting or forfeiture conditions or the change or elimination of applicable
        performance criteria).




**DIRECTOR
      COMPENSATION TABLE**




Name
            
            Fees
              Earned
                in
              Cash
              ($)(1)
            
            Option
              Awards
              ($)(2)
            
            Total
              ($)William
                B. Wachtel
            
            
            3,000
            
            
            18,000
            
            
            21,000William
                R. Colaianni
            
            
            3,000
            
            
            18,000
            
            
            21,000Donald
                Hecht
            
            
            3,000
            
            
            18,000
            
            
            21,000Thomas
                Iovino
            
            
            3,000
            
            
            18,000
            
            
            21,000Jeffrey
                B. Mendell
            
            
            3,000
            
            
            18,000
            
            
            21,000Stephen
                B. Siegel
            
            
            —
            
            
            18,000
            
            
            18,000Alvin
                S. Trenk
            
            
            3,000
            
            
            18,000
            
            
            21,000





1.
            Directors
                who are not employees of the Company are entitled to a fee of $1,000
                per
                board meeting and $750 and $500 per committee meeting for committee
                chairman and committee member, respectively. Each director is also
                reimbursed for expenses incurred in connection with attendance at
                meetings
                of the Board of Directors.




A-24




2.
            Each
                non-employee director is eligible to be granted an annual option
                to
                purchase shares of the common stock. On April 19, 2007, the Compensation
                Committee granted each non-employee director an option for their
                service
                in 2006. On December 1, 2007 the Compensation Committee granted each
                non-employee director an option for their service in 2007. Each set
                of
                options was for 25,000 shares and are priced at $0.36 per share,
                which was
                the closing sales price of the common stock on April 18, 2007 and
                November
                30, 2007, the day prior to the grant date. The options may be exercised
                until April 18, 2012 for the options issued on April 19, 2007 and
                November
                30, 2012 for the options issued on December 1, 2007.





**Employment
      Agreements**




On
      September 1, 2006, FirstFlight entered into an employment agreement effective
      as
      of September 15, 2006 with Keith P. Bleier (the “Bleier Employment Agreement”).
      A copy of the Bleier Employment Agreement is filed (by incorporation by
      reference) as Exhibit 10.10 to this Report and is incorporated herein by this
      reference. Mr. Bleier serves FirstFlight as a Senior Vice President and its
      Chief Financial Officer. The term of the Bleier Employment Agreement is for
      three years, which commenced on September 15, 2006, and thereafter automatically
      renews for additional one-year periods, unless terminated by either party upon
      90 days’ notice prior to the start of any renewal period. Mr. Bleier’s base
      annual salary is $185,000 with annual increases of 5%. In addition, he may
      receive an annual performance bonus at the discretion of the Board of Directors.
      Mr. Bleier is to be granted an option each September 1 during the initial term
      to purchase 250,000 shares of the Common Stock, commencing September 15, 2006.
      The first option was granted effective September 1, 2006 and the second option
      was granted effective September 15, 2007.





On
      September 23, 2005, Airborne and FirstFlight entered into an employment
      agreement dated as of September 23, 2005 (the "Dow Employment Agreement") with
      John H. Dow. A copy of the Dow Employment Agreement is filed (by incorporation
      by reference) as Exhibit 10.9 to this Report and is incorporated herein by
      this
      reference. Pursuant to the Dow Employment Agreement, Mr. Dow is employed in
      the
      office of Chief Executive of Airborne. The term of the agreement is for three
      years, which commenced September 23, 2005, and thereafter automatically renews
      for additional one-year periods, unless terminated by either party upon 90
      days’
notice prior to the start of any renewal period. Mr. Dow receives an annual
      base
      salary of $150,000 and is guaranteed annually a bonus of $100,000 with the
      salary and bonus to be paid on a bi-weekly basis. In addition, he may receive
      an
      annual performance bonus based on the Board's evaluation of Airborne's
      performance and his performance. Mr. Dow is to be granted an option each
      September 23 during the initial term to purchase 250,000 shares of the common
      stock. The first option was granted effective September 23, 2005, the second
      option was granted effective September 23, 2006 and the third option was granted
      effective September 23, 2007. On December 12, 2006, Mr. Dow was elected as
      President of FirstFlight by the Board of Directors and designated as its Chief
      Executive Officer.




On
      March
      31, 2005, the Board of Directors authorized execution of the First Amendment
      effective April 1, 2005 (the "First Amendment") to the employment agreement
      dated January 2, 2004 (the "Ricciardi Employment Agreement') for Ronald J.
      Ricciardi, then FirstFlight's President and Chief Executive Officer. The First
      Amendment provided that Mr. Ricciardi's employment under the Ricciardi
      Employment Agreement was effective April 1, 2005 and would continue for three
      years thereafter subject to automatic one-year renewals, unless terminated
      by
      either party upon 90 days’ notice prior to the start of any renewal period. The
      First Amendment increased his base salary to $175,000. Mr. Ricciardi is to
      be
      granted an option each April 1 during the initial term to purchase 250,000
      shares of the common stock. The first option was granted effective April 1,
      2005, the second option was granted effective April 1, 2006 and the third option
      was granted effective April 1, 2007. On December 12, 2006, the Board of
      Directors authorized execution of the Second Amendment effective as of that
      date
      (the “Second Amendment”) reflecting that Mr. Ricciardi was elected as Vice
      Chairman of the Board by the Board of Directors and, effective January 1, 2007,
      Mr. Ricciardi’s base salary was adjusted to $125,000 and the initial term was
      extended to March 31, 2009. A copy of the Ricciardi Employment Agreement is
      filed (by incorporation by reference) as Exhibit 10.5 to this Report; a copy
      of
      the First Amendment is filed (by incorporation by reference, as Exhibit 10.6
      to
      this Report; a copy of the Second Amendment is filed as Exhibit 10.7 to this
      Report; and all are incorporated herein by this reference.





In
      all
      the above-cited employment agreements (other than the agreements with Messrs.
      Dow and Bleier during the initial term), FirstFlight or, in the case of Mr.
      Dow,
      Airborne, may terminate such agreement, upon ten days’ prior written notice,
      without cause. In such event, each officer is entitled to one-year’s base salary
      as severance, in addition to his incentive bonus on a pro rata basis and to
      participate in non-cash employee benefit plans for a period of six months.
      All
      agreements have change of control provisions which involve the occurrence of
      one
      of these events: the sale of all of substantially all of the employer’s assets,
      a merger or consolidation of FirstFlight in which the then stockholders of
      FirstFlight own less than 50% of the shares of stock of the surviving
      corporation, or the sale of two-thirds or more of the outstanding shares of
      FirstFlight in one transaction. If the employee leaves within one year of the
      occurrence of the change of control event, then each employee has his unvested
      stock options vest and he is covered for six months under the employer’s
      non-cash employee benefit plans. In addition, each of Messrs. Dow and Bleier
      is
      entitled to one year’s base salary and his prior year incentive bonus as
      severance pay.




A-25





**Additional
      Narrative Disclosure**





FirstFlight
      does not offer a defined retirement or pension plan. Tech and Airborne both
      maintained 401k plans prior to their acquisition by FirstFlight. Those plans
      have been merged into the FirstFlight 401k Plan, which covers all employees
      of
      the Company. The newly merged Plan contains an option for the Company to match
      each participant's contribution. Any Company contribution vests over a five-year
      period on a 20% per year basis. During 2007 and 2006, the Company matched
      participant contributions at a rate of 50% of the first 6% of participant
      deferrals. Company contributions to the plan totaled approximately $103,000
      and
      $61,000 for the years ended December 31, 2007 and 2006,
      respectively.




A-26


**ITEM
      12.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND** **RELATED
      STOCKHOLDER MATTERS**




**Beneficial
      Owners**




The
      following table presents certain information as of March 14, 2008 regarding
      the
      beneficial ownership of our Common Stock by:





·
            each
                of our current executive officers and directors; and·
            all
                of our directors and current executive officers as a group;
                and·
            each
                other person or entity known by us to own beneficially 5% or more
                of our
                issued and outstanding common
                stock.




Name
                  and Addressof
                Beneficial Owner
            
            Number
                    of Shares
                  of
                    Common Stock
                  Beneficially
                    Owned
            
            Percentage
                    of
                  Common
                    Stock
                  Beneficially
                    Owned (1)John
                H. Dow (2)
            
            
            4,518,534
            (3)
            
            12.0
            %c/o
                FirstFlight, Inc.236
                Sing Sing RoadHorseheads,
                NY 14845Ronald
                J. Ricciardi (4)
            
            
            1,893,575
            (5)
            
            5.1
            %c/o
                FirstFlight, Inc.236
                Sing Sing RoadHorseheads,
                NY 14845Keith
                P. Bleier
            
            
            250,000
            (6)
            
            less
                than 1
            %c/o
                FirstFlight, Inc.236
                Sing Sing RoadHorseheads,
                NY 14845William
                B. Wachtel (7)
            
            
            6,980,243
            (8)
            
            18.2
            %c/o
                Wachtel & Masyr, LLP110
                East 59thStreetNew
                York, NY 10022William
                R. Colaianni (9)
            
            
            74,375
            (10)
            
            less
                than 1
            %c/o
                Holding Capital Group LLC630
                Third AvenueNew
                York, NY 10017Donald
                Hecht (9)
            
            
            291,700
            (11)
            
            less
                than 1
            %c/o
                Hecht and Company, P.C.111
                West 40thStreet20thFloorNew
                York, NY 10018Thomas
                Iovino (9)
            
            
            2,025,250
            (12)
            
            5.4
            %c/o
                Judlaw Contracting, Inc.26-15
                Ulmer StreetCollege
                Point, NY 11354Jeffrey
                B. Mendell (9)
            
            
            310,293
            (13)
            
            less
                than 1
            %c/o
                JBM Realty Capital Corp.100
                Putnam GreenGreenwich,
                CT 06830Stephen
                B. Siegel (9)
            
            
            558,400
            (14)
            
            1.5
            %c/o
                CB Richard Ellis200
                Park AvenueNew
                York, NY 10165Alvin
                S. Trenk (9)
            
            
            1,822,944
            (15)
            
            4.9
            %350
                East 79thStreetApartment
                38CNew
                York, NY 10021All
                directors and officers
            
            
            18,725,314
            
            
            43.7
            %As
                a group (10 in number)Martin
                Sands and Steven Sands
            
            
            3,578,029
            (16)
            
            9.7
            %c/o
                Laidlaw & Company (UK) Ltd.90
                Park AvenueNew
                York, NY 10016







(1)
            The
                percentages computed in the table are based upon 36,582,987 shares
                of our
                common stock which were outstanding on March 14 2008. Effect is given,
                pursuant to Rule 13-d(1)(i) under the Exchange Act, to shares of
                our
                common stock issuable upon the exercise of options or warrants currently
                exercisable or exercisable within 60 days of March 14,
                2008.




A-27


(2)
            John
                H. Dow was the President of the FirstFlight Operating Divisions prior
                to
                December 12, 2006 and is a director of FirstFlight. On December 12,
                2006,
                he became the President and Chief Executive Officer of
                FirstFlight.





(3)
            Of
                the shares of our common stock reported in the table as being beneficially
                owned by Mr. Dow, (a) 1,166,667 shares are owned by his wife Daphne
                Dow;
                (b) they share beneficial ownership of (i) 1,000,200 shares and (ii)
                a
                warrant expiring August 31, 2011 to purchase 600,000 shares which
                is
                currently exercisable; (c) 250,000 shares are issuable upon the exercise
                of an option expiring September 22, 2011 which is currently exercisable;
                and (d) 250,000 shares are issuable upon the exercise by him of an
                option
                expiring September 22, 2012, which is currently exercisable.





(4)
            Ronald
                J. Ricciardi was the President and the Chief Executive Officer of
                FirstFlight prior to December 12, 2006 and is a director of FirstFlight.
                On December 12, 2006, he was elected Vice Chairman of the
                Board.




A-28


(5)
            The
                shares of the Common Stock reported in the table include (a) 250,000
                shares issuable upon the exercise of an option expiring March 31,
                2010;
                (b) 250,000 shares issuable upon the exercise of an option expiring
                March
                31, 2011; (c) 250,000 shares issuable upon the exercise of an option
                expiring March 31, 2012; and (d) 100,000 shares issuable upon the
                exercise
                of a warrant expiring August 31, 2011. Each of the three options
                and the
                warrant is currently exercisable.





(6)
            The
                shares of the Common Stock reported in the table reflect 250,000
                shares
                issuable upon the exercise of an option expiring on August 31, 2012
                which
                is currently exercisable.





(7)
            William
                B. Wachtel is the Chairman of the Board and a director of
                FirstFlight.





(8)
            The
                shares of the Common Stock reported in the table include (a) 208,336
                shares issuable upon the exercise of a warrant expiring March 31,
                2010,
                which is currently exercisable; (b) 800,000 of the 1,200,000 shares
                subject to a warrant expiring September 22, 2010, which is currently
                exercisable; (c) 750,000 shares issuable upon the exercise of a warrant
                expiring August 31, 2011, which is currently exercisable; (d) 25,000
                shares issuable upon the exercise of an option expiring December
                12, 2010,
                which is currently exercisable; and (e) 25,000 shares issuable upon
                the
                exercise of an option expiring April 18, 2012, which is exercisable
                on
                April 19, 2008. The shares of the Common Stock reported in the table
                do
                not reflect (x) 333,400 shares of the Common Stock and (y) 200,000
                shares
                issuable upon the exercise of a warrant expiring August 31, 2011
                (which is
                currently exercisable) acquired by Wachtel & Masyr, LLP, our corporate
                counsel, in the private placement which we closed on September 1,
                2006.
                Mr. Wachtel is a managing partner of such firm, but does not have
                sole
                dispositive or voting power with respect to his firm’s
                securities.





(9)
            The
                reporting person is a director of
                FirstFlight.




(10)
            The
                shares of the Common Stock reported in the table include (a) 25,000
                shares
                issuable upon the exercise of an option expiring December 12, 2010
                which
                is currently exercisable; and (b) 25,000 shares issuable upon the
                exercise
                of an option expiring April 18, 2012, which is exercisable on April
                19,
                2008.





(11)
            The
                shares of the Common Stock reported in the table include (a) 100,000
                shares issuable upon the exercise of a warrant expiring August 31,
                2011
                which is currently exercisable; and (b) 25,000 shares issuable upon
                the
                exercise of an option expiring April 18, 2012, which is exercisable
                on
                April 19, 2008.





(12)
            The
                shares of the Common Stock reported in the table include (a) 750,000
                shares issuable upon the exercise of a warrant expiring August 31,
                2011
                which is currently exercisable; and (b) 25,000 shares issuable upon
                the
                exercise of an option expiring April 18, 2012, which is exercisable
                on
                April 19, 2008.





(13)
            The
                shares of the Common Stock reported in the table include (a) 50,000
                shares
                issuable upon the exercise of an investor warrant expiring March
                31, 2010
                which is currently exercisable; (b) 25,000 shares issuable upon the
                exercise of an option expiring December 12, 2010 which is currently
                exercisable; and (c) 25,000 shares issuable upon the exercise of
                an option
                expiring April 18, 2012, which is exercisable on April 19,
                2008.





(14)
            The
                shares of the Common Stock reported in the table include (a) 200,000
                shares issuable upon the exercise of a warrant expiring August 31,
                2011
                which is currently exercisable; and (b) 25,000 shares issuable upon
                the
                exercise of an option expiring April 18, 2012, which is exercisable
                on
                April 19, 2008.





(15)
            The
                shares of the Common Stock reported in the table include (a) 400,000
                shares of the 1,200,000 shares subject to a warrant expiring September
                22,
                2010, which is currently exercisable; (b) 25,000 shares issuable
                upon the
                exercise of an option expiring September 29, 2009, which is currently
                exercisable; (c) 500,000 shares issuable upon the exercise of a warrant
                expiring August 31, 2011, which is currently exercisable; and (d)
                25,000
                shares issuable upon the exercise of an option expiring April 18,
                2012,
                which is exercisable on April 19,
                2008.





(16)
            Each
                of Martin Sands and Steven Sands has dispositive power and voting
                power
                with respect to the shares of the Common Stock (including the shares
                issuable upon the exercise of warrants) owned by Sands Brothers Venture
                Capital LLC and three other Sands Brothers funds. No one of these
                funds
                individually owns more than 5% of the outstanding shares of the Common
                Stock as of March 14, 2008. As a result of the Sands possessing such
                dispositive and voting powers each may be deemed the beneficial owner
                with
                respect to the shares of the Common Stock held by each of these
                stockholders. However, each disclaims beneficial ownership of these
                shares.




A-29




See
      the
      table “Securities Authorized for Issuance Under Equity Compensation Plans” in
      Item 5 to this Report.





**ITEM
      13.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





**Certain
      Relationships and Related Transactions**




The
      firm
      of Wachtel & Masyr, LLP is corporate counsel to the Company. William B.
      Wachtel, FirstFlight’s Chairman of the Board, is a managing partner of this
      firm. During the year ended December 31, 2007, the Company was billed for legal
      services of $165,156. At December 31, 2007, the Company has recorded in accounts
      payable an obligation for legal fees of $374,517 related to these legal
      services.





The
      charter division of the Company manages several aircraft owned by an entity
      in
      which Mr. Wachtel along with two other directors of FirstFlight, Thomas Iovino
      and Stephen B. Siegel, are members. During the year ended December 31, 2007,
      the
      Company recorded direct revenue and expenses of $6,809,903 and $5,944,582,
      respectively, related to the Company’s management of these aircraft. At December
      31, 2007 the Company had recorded in accounts receivable a balance of
      approximately $172,621 owed from this entity.





On
      April
      26, 2007, Airborne entered into an agreement to lease an aircraft from a
      company, of which one of its members is John H. Dow, a director and the current
      President and Chief Executive Officer of FirstFlight, and the other member
      is an
      employee of its charter segment. The terms of the lease provide for the payment
      of rent of $20,000 per month and a charge of $500 for each hour of aircraft
      use.
      The lease agreement, which is for a period of one year, further provides that
      this aircraft will be managed by the Company through its charter segment, and
      through which the Company will retain 90% of the associated charter revenue.
      The
      Company made use of this aircraft for certain business travel needs and paid
      these expenses to the lessor. During the year ended December 31, 2007, the
      Company recorded revenue of $391,976 and expenses of $493,228 in conjunction
      with the lease of this aircraft. This agreement replaced a prior arrangement
      which was terminated in February 2007.





**Director
      Independence**





FirstFlight’s
      Board of Directors uses the definition of Nasdaq in determining whether a
      director is independent. Under such definition, each of William R. Colaianni,
      Donald Hecht, Thomas Iovino, Jeffrey B. Mendell and Stephen B. Siegel qualifies
      as independent. Accordingly, all members of the Audit Committee and all members
      of the Nominating Committee qualify as independent. Of the three members of
      the
      Compensation Committee, only Alvin S. Trenk would not qualify as independent
      because he is the father of a former director and executive officer who resigned
      on October 31, 2006.





In
      making
      its determination as to the independence of the five directors listed above,
      the
      Board did not consider any transactions, relationships or arrangements of such
      directors with the Company because there were none other then compensation
      arrangements for service applicable to them generally.





**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**





***Audit
      Fees.*** The
      aggregate fees billed for professional services rendered by Marcum &
Kliegman LLP were $165,334 and $186,000 for the audits of the Company’s
      annual financial statements for the fiscal years ended December 31, 2007 and
      2006, respectively, and the reviews of the financial statements included in
      the
      Company’s Forms 10-QSB for those fiscal years.




***Audit-Related
      Fees.*** The
      aggregate fees billed for professional services categorized as Audit-Related
      Fees rendered were $0 for the fiscal years ended December 31, 2007 and
      2006.




***Tax
      Fees*** .
      For the
      years ended December 31, 2007 and 2006, the principal accountant billed $0
      and
      $25,000, respectively, for tax compliance.




***All
      Other Fees*** .
      Other
      than the services described above, the aggregate fees billed for services
      rendered by the principal accountant were $0 for the fiscal years ended December
      31, 2007 and 2006.





***Audit
      Committee Policies and Procedures.*** The
      Audit Committee must pre-approve all auditing services and permitted non-audit
      services (including the fees and terms thereof) to be performed for the Company
      by its independent registered public accountants, subject to the de minimus
      exceptions for non-audit services described in Section 10A(i)(1)(B) of the
      Exchange Act , which should be nonetheless be approved by the Audit Committee
      prior to the completion of the audit. Each year the independent registered
      public accountants’s retention to audit our financial statements, including the
      associated fee, is approved by the Audit Committee before the filing of the
      previous year’s Annual Report on Form 10-K. At the beginning of the fiscal year,
      the Audit Committee will evaluate other known potential engagements of the
      independent registered public accountants, including the scope of work proposed
      to be performed and the proposed fees, and approve or reject each service,
      taking into account whether the services are permissible under applicable law
      and the possible impact of each non-audit service on the independent registered
      public accountant’s independence from management. At each such subsequent
      meeting, the registered public accountants and management may present subsequent
      services for approval. Typically, these would be services such as due diligence
      for an acquisition, that would not have been known at the beginning of the
      year.




A-30




Since
      September 24, 2004 when the Board of Directors of FirstFlight initially
      authorized the engagement of Marcum & Kliegman, pursuant to the Commission
      rules stating that an auditor is not independent of an audit client if the
      services it provides to the client are not appropriately approved, each new
      engagement of Marcum & Kliegman LLP, has been approved in advance by the
      Audit Committee of the Board of Directors, and none of those engagements made
      use of the de minimus exception to the pre-approval contained in Section
      10A(i)(1)(B) of the Exchange Act.





A-31




**Part
      VI**





**ITEM
      15.**  **EXHIBITS
      AND FINANCIAL REPORTING SCHEDULES**





(a)
            Financial
                Statements





See
      the
      list in Item 8 to this Report





(b)
            Financial
                Statement Schedules





None





(c)
            Exhibits





**Exhibit
                No.**
            
            **Description
                of Exhibit**2
            
            Agreement
                and Plan of Merger dated as of July 26, 2004 by and between FirstFlight(then
                named Shadows Bend Development, Inc.) and FBO Air, Inc, an Arizona
                corporation (without schedules). (1)3(i)
            
            Articles
                of Incorporation of FirstFlight filed on June 2, 1998
                (2)3
                (i)(1)
            
            Certificate
                of Amendment to Articles of Incorporation (Exhibit 3(i) filed on
                October
                15, 1999. (2)3
                (i)(2)
            
            Certificate
                of Amendment to Articles of Incorporation (Exhibit 3(i) filed on
                June 2,
                2000. (2)3
                (i)(3)
            
            Certificate
                of Amendment to FirstFlight’s Articles of Incorporation (Exhibit 3(j)
                filed on July 30, 2004. (1)3
                (i) (4)
            
            Certificate
                of Designations. (3)3
                (i) (5)
            
            Certificate
                of Amendment to Articles of Incorporation (Exhibit 3(i)) filed on
                December
                13, 2006.(4)3
                (i) (6)
            
            Restated
                Articles of Incorporation.(4)3
                (ii)
            
            Bylaws
                of FirstFlight previously in effect (2)3(ii)
                (1)
            
            Bylaws
                of FirstFlight as currently in effect. (14)4.1
            
            Common
                Stock Certificate. (14)4.2
            
            Form
                of 10% Senior Secured Promissory Note due March 31, 2008 or April
                8, 2008.
                (5)4.3
            
            Copy
                of General Security Agreement dated as of June 30, 2005.
                (5)4.4
            
            Form
                of Warrant expiring March 31, April 8 or April 15, 2010.
                (5)4.5
            
            Registration
                Rights Agreement (without schedule or exhibit). (5)4.6
            
            Form
                of Co-Investor Registration Rights Agreement (without schedule or
                exhibit). (5)




A-32




4.7
            
            Copy
                of Warrant expiring September 22, 2010. (6)4.8
            
            Form
                of Subscription Agreement (including registration rights commitment).
                (12)4.9
            
            Form
                of Letter Agreement dated May 24, 2005 by and between FirstFlight
                and
                Laidlaw & Company, Ltd (5)4.10
            
            Copy
                of Warrant expiring August 31, 2011. (16)10.1
            
            Copy
                of Employment Agreement dated as of April 1, 2005 by and between
                Robert J.
                Ettinger and FirstFlight. (5)10.2
            
            Copy
                of Business Development Agreement dated as of January 2, 2004 by
                and
                between Jeffrey M. Trenk and FBO Air (as the successor by merger
                to FBO
                Air, Inc., an Arizona corporation). (8)10.3
            
            Copy
                of Employment Agreement dated as of April 1, 2005 between Jeffrey
                M. Trenk
                and FirstFlight. (5)10.4
            
            Copy
                of First Amendment dated as of October 31, 2006 by and between Jeffrey
                M.
                Trenk and FirstFlight.(7)10.5
            
            Copy
                of Employment Agreement dated as of January 2, 2004 by and between
                Ronald
                J. Ricciardi and FirstFlight (as the successor by merger to FBO Air,
                Inc., an Arizona corporation). (8)10.6
            
            Copy
                of First Amendment effective April 1, 2005 to the Ricciardi Employment
                Agreement, a copy of which is filed as Exhibit 10.5.
                (5)10.7
            
            Copy
                of Second Amendment to the Ricciardi Employment Agreement, a copy
                of which
                is filed as Exhibit 10.(14)10.8
            
            Copy
                of Asset Purchase Agreement dated March 31, 2005 among FBO Air Garden
                City, Inc. and John A. Crotts. (5)10.9
            
            Copy
                of Stock Purchase Agreement dated March 31, 2005 between Tech Aviation
                Source, Ronald D. Ertley, Frank E. Paczewski, and FBO Air Wilkes-Barre,
                Inc. (5)10.10
            
            Copy
                of Stock Purchase Agreement Dated as of September 22, 2005 by and
                among
                Airborne, Inc., John H. Dow, Daphne Dow and FirstFlight (without
                a
                schedule or exhibit). (9)10.11
            
            Copy
                of Employment Agreement dated as of September 23, 2005 among John
                Dow,
                Airborne, Inc. and FirstFlight. (9)10.12
            
            Copy
                of Lease dated as of September 23, 2005 between John H. Dow and Daphne
                Dow, as the Landlord, and Airborne, Inc., as the Tenant.
                (9)10.13
            
            Copy
                of Term Loan Agreement dated as of September 23, 2005 by and among
                FirstFlight, Airborne, Inc., and Airport Capital, LLC.
                (9)10.14
            
            Copy
                of the FirstFlight, Inc. Stock Option Plan of 2005 dated as of December
                13, 2005 (13)10.15
            
            Copy
                of Employment Agreement dated as of September 1, 2006 between FirstFlight
                and Keith P. Bleier.(10)




A-33




14
            
            Code
                of Ethics.(11)21
            
            Subsidiaries
                (15)31.1
            
            Officer's
                Certification Pursuant to Rule 13a-14(a) under the Securities Exchange
                Act. (15)31.2
            
            Officer's
                Certification Pursuant to Rule 13a-14(a) under the Securities Exchange
                Act. (15)32.1
            
            Certification
                Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (15)32.2
            
            Certification
                Pursuant to Section 906 of Sarbanes-Oxley Act of 2002. (15)





Footnotes:




(1)
      Incorporated by reference to FirstFlight's Current Report on Form 8-K filed
      on
      August 27, 2004.




(2)
      Incorporated by reference to FirstFlight’s Registration Statement Form SB-2,
      File No. 333-56046.




(3)
      Incorporated by reference to FirstFlight's Annual Report on Form 10-KSB for
      the
      year ended December 31, 2004.




(4)
      Incorporated by reference to FirstFlight’s Current Report on Form 8-K filed on
      December 18, 2006





(5)
      Incorporated by reference to FirstFlight's Current Report on Form 8-K filed
      on
      April 6, 2005.




(6)
      Incorporated by reference to FirstFlight's Current Report on Form 8-K/A filed
      on
      November 3, 2005.




(7)
      Incorporated by reference to FirstFlight’s Current Report on Form 8-K filed on
      November 6, 2006.





(8)
      Incorporated by reference to FirstFlight's Current Report on Form 8-K filed
      on
      October 5, 2004.




(9)
      Incorporated by reference to FirstFlight's Current Report on Form 8-K filed
      on
      September 28, 2005.





(10)
      Incorporated by reference to FirstFlight’s Current Report on Form 8-K filed on
      September 21, 2006.





(11)
      Incorporated by reference to FirstFlight’s Current Report on Form 8-K filed on
      May 24, 2006.





(12)
      Incorporated by reference to FirstFlight’s Registration Statement on Form SB-2,
      File No. 333-138994.





(13)
      Incorporated by reference to FirstFlight’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2005.





(14)
      Incorporated by reference to FirstFlight’s Annual Report on Form 10-KSB for the
      fiscal year ended December 31, 2006.





(15)
      Filed herewith.





(16)
      Incorporated by reference to FirstFlight’s Current Report on Form 8K filed on
      September 8, 2006.





A-34


SIGNATURES




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




FirstFlight,
                Inc.
              (Registrant)Date: March
                28, 2008
            By:
            /s/
                Ronald J. RicciardiRonald
                J. Ricciardi,Vice
                Chairman of the Board





SIGNATURE
            
            TITLE
            
            DATE/s/
                John H. Dow
            
            Principal
                Executive Officer, Director
            
            March
                28, 2008John
                H. Dow/s/
                Keith P. Bleier
            
            Principal
                Financial and Accounting
            
            March
                28, 2008Keith
                P. Bleier
            
            Officer/s/
                William B. Wachtel
            
            Director
            
            March
                28, 2008William
                B. Wachtel/s/
                William R. Colaianni
            
            Director
            
            March
                28, 2008William
                R. Colaianni/s/
                Donald Hecht
            
            Director
            
            March
                28, 2008Donald
                Hecht/s/
                Thomas Iovino
            
            Director
            
            March
                28, 2008Thomas
                Iovino/s/
                Jeffrey B. Mendell
            
            Director
            
            March
                28, 2008Jeffrey
                B. Mendell/s/
                Ronald J. Ricciardi
            
            Director
            
            March
                28, 2008Ronald
                J. Ricciardi/s/
                Stephen B. Siegel
            
            Director
            
            March
                28, 2008Stephen
                B. Siegel/s/
                Alvin S. Trenk
            
            Director
            
            March
                28, 2008Alvin
                S. Trenk




A-35


FirstFlight,
      Inc. Form 10-K for the Year Ended December 31, 2007


Exhibits
      Filed with the Annual Report





**INDEX**





**Exhibit
                No.**
            
            **Description
                of Exhibit**21
            
            Subsidiaries
            
            E-231.1
            
            Officer's
                Certification Pursuant to Rule 13a-14(a) under the Securities Exchange
                Act.
            
            E-331.2
            
            Officer's
                Certification Pursuant to Rule 13a-14(a) under the Securities Exchange
                Act.
            
            E-432.1
            
            Certification
                Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
            
            E-532.2
            
            Certification
                Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
            
            E-6





A-36