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, 2009





OR





 ̈    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





SAKER
AVIATION SERVICES, 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.)





101
Hangar Road


Avoca, PA
18641


(Address
of Principal Executive Offices)





(570)
457-3400


(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
             ̈
            
            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
             ̈
            
            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
             ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes
             ̈
            
            No
             ̈





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
             ̈
            
            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  ̈
                    Accelerated filer  ̈
                    Non-accelerated filer  ̈
                    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
             ̈
            
            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: $764,145.





As of
April 13, 2010, the Registrant had 33,164,453 shares of its Common Stock, $.001
par value, issued and outstanding.





Documents
incorporated by reference: None







SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


FORM
10-K


INDEX





ITEM
      1.
              BUSINESS
              1ITEM
      1A.
              RISK
      FACTORS
              4ITEM
      1B.
              UNRESOLVED
      STAFF COMMENTS
              7ITEM
      2.
              PROPERTIES
              7ITEM
      3.
              LEGAL
      PROCEEDINGS
              7ITEM
      4.
              RESERVED
              8ITEM
      5.
              MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
              9ITEM
      6.
              SELECTED
      FINANCIAL DATA
              10ITEM
      7.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION
              10ITEM
      7A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              16ITEM
      8.
              FINANCIAL
      STATEMENTS
              17ITEM
      9.
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
              40ITEM
      9A(T).
              CONTROLS
      AND PROCEDURES
              40ITEM
      9B.
              OTHER
      INFORMATION
              41ITEM
      10.
              DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
              42ITEM
      11.
              EXECUTIVE
      COMPENSATION
              45ITEM
      12.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
              48ITEM
      13.
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
              50ITEM
      14.
              PRINCIPAL
      ACCOUNTING FEES AND SERVICES
              50ITEM
      15.
              EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
              51SIGNATURES
              54




THIS FORM
10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 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




Saker
Aviation Services, Inc. (“Saker”), through its subsidiaries (Saker and its
subsidiaries collectively the “Company”, “we”, “us” and “our”), operates in the
fixed base operation (“FBO”) segment of the general aviation
industry.  An FBO provides ground-based services such as fueling and
hangaring for general aviation, commercial, and military aircraft; aircraft
maintenance, and other miscellaneous services.  We also provide
consulting services for a non-owned FBO facility and serve as the operator of a
heliport.





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 12, 2006, we changed
our name to FirstFlight, Inc.  On September 2, 2009, we changed our
name to Saker Aviation Services, Inc.





Our business activities are carried out
at the Wilkes-Barre/Scranton (Pennsylvania) International Airport where we
operate an FBO, Garden City (Kansas) Regional Airport where we operate an FBO,
the Downtown Manhattan (New York) Heliport, and at the Niagara Falls (New York)
International Airport where we provide consulting services to the
operator.





The Wilkes-Barre facility became part
of our company as a result of our acquisition of Tech Aviation Service, Inc.
(“Tech”) in March 2005 and the Garden City facility became part of our company
as a result of our acquisition of the FBO assets of Central Plains Aviation,
Inc. (“CPA”) in March 2005.





The New
York heliport facility became part of our company through the award of a
concession agreement by the City of New York to operate the Downtown Manhattan
Heliport, which we assigned to our subsidiary, FirstFlight Heliports, LLC d/b/a
Saker Aviation Services (“FFH”).





Discontinued
Operations





In March 2009, we completed the sale of
our charter operations located in Elmira, New York.  This segment
originally became part of our company through our acquisition of Airborne, Inc.
(“Airborne”).  Accordingly, the accompanying financial statements for
all periods have been presented to reflect the accounting of discontinued
operations for the divestiture of this subsidiary.





On March 2, 2009, we entered into a
Share Exchange Agreement with Airborne, John H. Dow, our former President and
Chief Executive Officer, and Daphne Dow, pursuant to which we divested our
ownership interest in Airborne.  Mr. Dow resigned from our company
immediately preceding this agreement.  Prior to the consummation of
the Share Exhcange Agreement, Airborne was a wholly-owned subsidiary of
ours.  Pursuant to the terms and conditions of the Share Exchange
Agreement, Mr. and Mrs. Dow exchanged all of their 3,418,534 individually and
jointly owned shares of our Common Stock, valued at $239,297 on the date of the
agreement, and all of their options and warrants to purchase 1,100,000 shares of
our Common Stock owned by them in exchange for all of the issued and outstanding
shares of Common Stock in Airborne owned by us.   As a result of
the consummation of the Share Exchange Agreement, Mr. and Mrs. Dow became the
sole owners of Airborne.  Concurrent with the consummation of the
Share Exchange Agreement, Airborne also assumed all pre- and post-closing rights
and obligations under lease agreements for our IST Center and 236 Sing Sing
Road, Horseheads, New York locations.





Immediately prior to entering into the
Airborne Loan Agreement, EuroAmerican Investment Corp. (“EuroAmerican”) loaned
us an aggregate of up to $750,000 for the purpose of funding the Airborne Loan
Agreement discussed below.  The EuroAmerican loan is evidenced by a
Promissory Note delivered by us to EuroAmerican with a maturity date of February
27, 2011.  The unpaid principal amount under the Promissory Note
accrues interest at the annual rate of 12% and is payable in monthly interest
only payments until maturity, at which time the entire principal balance and any
accrued but unpaid interest is payable in full.  Two members of our
Board of Directors, William B. Wachtel and Alvin S. Trenk, issued personal
guarantees in connection with the EuroAmerican Loan.  Mr. Wachtel is a
principal of EuroAmerican.




1


Simultaneous with the consummation of
the Share Exchange Agreement, we made a non-interest bearing loan to Airborne of
$750,000 pursuant to a Loan Agreement dated March 2, 2009 (the “Airborne Loan
Agreement”).  Under the Airborne Loan Agreement, we made a commitment
to loan Airborne an aggregate up to $750,000; $500,000 of such amount was loaned
by us to Airborne on March 2, 2009, and the balance of which was loaned by us to
Airborne on March 12, 2009 upon the satisfactory achievement by Airborne of
certain agreed upon targets. Beginning on September 1, 2009 and continuing the
first day of each month thereafter until July 31, 2015 Airborne shall pay equal
payments of $10,500 to us under the Airborne Loan Agreement. Beginning on August
1, 2015 and continuing the first day of each month thereafter the monthly
payment by Airborne to us under the Airborne Loan Agreement shall be
$8,000.  The Airborne Loan Agreement is secured by the assets of
Airborne, subordinate to a first lien in favor of Birch Hill Capital, LLC
(“Birch Hill”).  The Airborne Loan Agreement did not contain any
personal guarantees from the shareholders of Airborne.  Balances due
under the Airborne Loan Agreement are to be repaid from the cash flow of
Airborne.  Due to uncertainties in the charter business, management is
in the process of evaluating the collectability of this loan.  The
Airborne Loan Agreement provides that in the event of a subsequent sale of
Airborne or its assets, the proceeds of such sale shall be used first to repay
the existing credit facility with Birch Hill and next to repay any outstanding
principal under the Airborne Loan Agreement.  In addition, the
Airborne Loan Agreement provides that we will share a percentage of any
remaining available sale proceeds, the amount of which will vary depending on
the timing of a sale transaction.  The Airborne Loan Agreement has
been recorded at its present value as of December 31, 2009 of
$619,720.





Also on March 2, 2009, we, Airborne and
Five Star entered into a Loan Agreement, which was subsequently assigned to
Birch Hill Capital LLC (the “Birch Hill Loan Agreement”).  Effective
December 29, 2009, Five Star executed an Allonge and an Assignment of Note and
Note Documents (together, the “Assignment Documents”) pursuant to which a
revolving line of credit agreement (the “Credit Facility”) and related documents
and agreements dated March 3, 2009 made jointly and severally by Airborne and us
in favor of Five Star (collectively, the “Loan Agreements”) were sold, assigned
and transferred to Birch Hill Capital, LLC (“Birch Hill”). Under the Birch Hill
Loan Agreement, among other things, Birch Hill made a commitment to loan the
Company and Airborne an aggregate of up to $1,000,000 on a demand line of credit
basis.  The Birch Hill Loan Agreement contains customary
representations, warranties and financial covenants.  Borrowings under
the Loan Agreement are secured by (i) a blanket security interest in all of the
assets of the Company and Airborne, and (ii) an unlimited guaranty from the
subsidiaries of the Company and Airborne.  As of April 13, 2010, the
approximate principal amount due under the agreement is $1,000,000.





The divesture of Airborne eliminates
our charter segment, one of three previously reported segments (together with
FBO and maintenance).  The divestiture also had a significant impact
on the maintenance segment by eliminating a substantial portion of maintenance
services provided by the discontinued operations.  There remains a
relatively minor maintenance business performed in conjunction with our FBO
operation in Pennsylvania.  We believe that the previous reporting of
our business in multiple segments was appropriate and provided a greater
understanding of our disparate businesses at that time.  Given this
divestiture and the resulting commonality in our continuing business, we no
longer believe that reporting multiple segments is necessary.  Our
discussion below describes the various components that make up and contribute to
the performance of our FBO business.





The FBO
segment of the industry is highly fragmented - populated by, according to the
National Air Transportation Association (“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 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 considered “regional”
chains.  The results of operations from FFH will be reported in our
FBO segment as a heliport is essentially an FBO for helicopters.





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




Suppliers and Raw
Materials





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





Marketing
and Sales




The main
goal of our marketing and sales efforts is to increase traffic at our
facilities, which is intended to drive revenue through the incremental sale of
products and services.  Our primary marketing tactic in this regard is
to focus advertising efforts in the environments (web, periodical, industry
publications) where the pilot and aviation-user community might be introduced to
our brand name.  From a sales standpoint, personnel seek out local
corporations which either have aircraft or use general aviation as part of their
business model, with the intent to secure additional traffic and/or aircraft
based at our facilities.  We have also made enhancements to our
website that reinforce these marketing and sales efforts.  We intend
to continue to invest in modest improvements to our sales and marketing
strategies to drive revenue growth.




2


Government
Approvals




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




Government
Regulation




We are
subject to a variety of governmental laws and regulations that apply to
companies in the general aviation industry.  These include compliance
with the Federal Aviation Administration (“FAA”) rules and regulations and
local, regional and national rules and regulations as they relate to
environmental matters. We intend to comply with all government regulations. The
adoption of new regulations could result in increased costs and have an adverse
impact on our results of operations.  In the event we are unable to
remain compliant with applicable rules and regulations, our business may be
adversely affected.




Competition




The FBO
segment of the aviation services industry, the vast majority of which are
independent, single location operators, is competitive in both pricing and
service due to the amount of flexibility for aircraft in transit to choose from
a number of FBO options within a 200-300 mile radius.   We are
the sole FBO at each of our current facilities.  As such, we face no
direct on-airport competition but do realize competitive pressure on pricing and
services from FBO facilities at other airports depending on inbound passenger’s
travel flexibility.





We plan
to grow our business.  We anticipate that our larger size will provide
us with greater buying power from suppliers, and therefore provide us with lower
costs.  Lower costs would 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.





There can
be no assurance that we will compete successfully in the highly competitive
aviation industry.





Costs
and Effects of Complying With Environmental Laws




We are subject to a variety of federal,
state, and local environmental laws and regulations, including those governing
health and safety requirements, the discharge of pollutants into the air or
water, the management and disposal of hazardous substances and wastes and the
responsibility to investigate and cleanup contaminated sites that are or were
owned, leased, operated or used by us or our predecessors. Some of these laws
and regulations require us to obtain permits, which contain terms and conditions
that impose limitations on our ability to emit and discharge hazardous materials
into the environment and periodically may be subject to modification, renewal
and revocation by issuing authorities. Fines and penalties may be imposed for
non-compliance with applicable environmental laws and regulations and the
failure to have or to comply with the terms and conditions of required permits.
We intend to comply with these laws and regulations, however, from time to time,
our operations may not be in full compliance with the terms and conditions of
our permits or licenses. We periodically review our procedures and policies for
compliance with environmental laws and requirements. We believe that our
operations generally are in material compliance with applicable environmental
laws and requirements and that any non-compliance would not be expected to
result in us incurring material liability or cost to achieve compliance.
Historically, the costs of achieving and maintaining compliance with
environmental laws and requirements have not been material.   The
cost of compliance with environmental laws is considered a normal cost of
operations.





Employees




As of
December 31, 2009, we employed 60 persons, of whom 37 were employed on a
full-time basis, one of whom was an executive officer of
ours.  Substantially all of our personnel are employed at our
operations in Pennsylvania, New York and Kansas.




3


ITEM 1A.
            RISK
    FACTORS




The
following risk factors relate to our operations:





While
we have been profitable from our operations the past two quarters there is no
assurance that this level of performance will continue for the foreseeable
future despite our expectations to the contrary.





We generated revenue from continuing
operations of approximately $8,700,000 and net losses from continuing operations
of approximately $332,000 for the year ended December 31, 2009.





As
discussed later in this report, in the section captioned “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” we
have taken several steps to reduce the level of expenditures for corporate and
functional operations by severing ties with several employees and instituting a
salary reduction program for management.  These actions have enabled
us to generate positive operating income for the past two
quarters.  Despite these steps, we may be unable to retain
profitability on an ongoing basis despite our expectation that we
will.





We may need additional capital to fund
our operations, capital expenditures, existing commitments and scheduled
payments on outstanding indebtedness for the next twelve month
period.  If we, in conjunction with Airborne, were unable to repay the
amounts due under the Birch Hill Loan Agreement, Birch Hill could proceed
against the security granted to them to secure that indebtedness. In addition,
our assets may not be sufficient to repay in full the indebtedness under the
Birch Hill Loan Agreement. If Birch Hill were to demand payment of our
indebtedness under the Birch Hill Loan Agreement, we may be unable to pay all of
our liabilities and obligations when due.





An additional risk in this regard is
the eventuality that Airborne may become insolvent.  While Airborne is
current in their note payments to us and it is our expectation that Airborne
will continue to make their payments, should Airborne become insolvent it would
likely default on the Airborne Loan Agreement and we would become solely liable
for principal payments under the Birch Hill Loan Agreement.





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





Certain
of the potential sellers with respect to 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 post-closing installment
payments. There can be no assurance that our operations will generate sufficient
cash flow to meet these acquisition obligations. Accordingly, we anticipate the
need to seek additional equity or debt financing to meet any cash requirements
for acquisitions. Any such financing will be dependent on general market
conditions and the stock market’s evaluation of our performance and potential.
Accordingly, we can give no assurance that we will obtain such equity or debt
financing and, even if we do, that the terms would be satisfactory to
us.





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





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





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





We
compete with national, regional, and local FBO operators. Many of our
competitors have been in business longer than we have and 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
regions and markets competitive to us. Accordingly, we can give no assurance
that we will be able to successfully compete in our industry.




4


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.  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
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 an employment agreement with our
President and Chief Executive Officer, Ronald J. Ricciardi.  Our
growth and future success will depend, in large part, on the continued
contributions of Mr. Ricciardi and other key individuals, as well as our ability
to motivate and retain these personnel or hire other persons.  Our
recent cost-cutting measures, including salary and benefits reductions, could
make it more difficult for us to retain key employees.  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.





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





We
are subject to a variety of federal, state and local environmental laws and
regulations, including those governing the discharge of pollutants into the air
or water, the management and disposal of hazardous substances and wastes and the
responsibility to investigate and clean-up contaminated sites that are or were
owned, leased, operated or used by us or our predecessors. Some of these laws
and regulations require us to obtain permits, which contain terms and conditions
that impose limitations on our ability to emit and discharge hazardous materials
into the environment and periodically may be subject to modification, renewal
and revocation by issuing authorities. Fines and penalties may be imposed for
non-compliance with applicable environmental laws and regulations and the
failure to have or to comply with the terms and conditions of required permits.
We intend to comply with these laws and regulations, however, from time to time,
our operations may not be in full compliance with the terms and conditions of
our permits. We periodically review our procedures and policies for compliance
with environmental laws and requirements. We believe that our operations
generally are in material compliance with applicable environmental laws,
requirements and permits and that any lapses in compliance would not be expected
to result in us incurring material liability or cost to achieve compliance.
Historically, the costs of achieving and maintaining compliance with
environmental laws, and requirements and permits have not been material;
however, the operation our business entails risks in these areas, and a failure
by us to comply with applicable environmental laws, regulations, or permits
could result in civil or criminal fines, penalties, enforcement actions, third
party claims for property damage and personal injury, requirements to clean up
property or to pay for the costs of cleanup, or regulatory or judicial orders
enjoining or curtailing operations or requiring corrective measures. Moreover,
if applicable environmental laws and regulations, or the interpretation or
enforcement thereof, become more stringent in the future, we could incur capital
or operating costs beyond those currently anticipated.





Volatility and disruption in global
financial markets could significantly impact our customers, weaken the markets
we serve and harm our operations and financial performance.





Our
financial performance depends, in large part, on conditions in the markets that
we serve and on the U.S. and global economies in general.  U.S. and
global financial markets have experienced extreme disruption recently,
including, among other things, concerns regarding the global recession, high
historical levels of unemployment, the decline in the housing market, a severe
tightening in the credit markets, a low level of liquidity in many financial
markets, and extreme volatility in credit and equity markets. Given the
significance and widespread nature of these nearly unprecedented circumstances,
the U.S. and global economies could remain in a recessionary state for an
indeterminate period of time. There can be no assurance that there will not be a
further deterioration in financial markets and confidence in major economies. In
addition, the current tightening of credit in financial markets may adversely
affect our customers’ spending habits and could result in a decrease in or
cancellation of orders for our services as well as impact the ability of our
customers to make payments. Similarly, this tightening of credit may adversely
affect our supplier base and increase the potential for one or more of our
suppliers to experience financial distress or bankruptcy. These conditions would
harm our business by adversely affecting our sales, results of operations,
profitability, cash flows, financial condition and long-term anticipated growth
rate.




5


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 stock options and possibly
anti-dilution provisions in our warrants could further dilute our existing
stockholders.





As of
April 13, 2010, there were 33,164,453 shares outstanding. If all of our
outstanding common stock purchase warrants and options were exercised, there
would be 42,668,040 shares outstanding, an increase of almost
29%.  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 of Directors’ 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 Saker 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 such preferred holders a veto with respect to any merger proposal. Or such
preferred holders could be granted 20 votes per share while voting as a single
class with the holders of our common stock, thereby diluting the voting power of
the holders of our common stock. In addition, the holders of any new series of
preferred stock could be given the option to 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 the holders of our common stock
otherwise favor.





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.




6


Our
management team currently has influential voting power.





As of
April 13, 2010, the executive officers and directors of ours and their family
members and associates collectively could vote 7,465,419 shares, or 22.5%, of
the 33,164,453 shares of the 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 Saker. The management of our company is controlled by our board of
directors, currently comprised of three independent directors, a director who is
a managing partner of a law firm which provides legal services to us, and one
executive officer/director.





ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS




Not Applicable.





ITEM
      2.
            PROPERTIES




As of
April 13, 2010, we lease office space at the following locations:




Location
                                  
                                  Purpose
                                  
                                  Space
                                  
                                  Annual
      Rental
                                  
                                  Expiration101
      Hangar Road
                                    Avoca,
      Pennsylvania
                                  
                                  Pennsylvania
                                    FBO
      location
                                  
                                  24,000
      square feet
                                  
                                  $
                                  75,000
                                  
                                  
                                  August
      21,
                                    20132117
      S. Air Service Road
                                    Garden
      City, Kansas
                                  
                                  Kansas
                                    FBO
      location
                                  
                                  17,640
      square feet
                                  
                                  $
                                  12,420
                                  
                                  
                                  December
      31, 2030





As
discussed in Note 2 to the consolidated financial statements, space occupied by
the discontinued operations was under a lease with a related
party.  The obligation under this lease was assumed by Airborne in
connection with the divestiture.





We believe that our space is adequate
and suitable for our immediate needs.  Additional hangar space may be
required in the future.  No such definitive plans have been developed
at the time of this report.




ITEM
      3.
            LEGAL
      PROCEEDINGS




On November 20, 2008, an Article 78
proceeding in the Supreme Court of the State of New York County of New York was
initiated against New York City Economic Development Corporation; the City of
New York Department of Small Business Services; Robert Walsh, in his capacity as
Commissioner of the Department of Small Business Services; William C. Thompson,
Jr., Comptroller of the City of New York, Office of the New York City
Comptroller; The Honorable Mayor Bloomberg in his capacity as Mayor of the City
of New York, by Petitioners Linden Airport Management Corporation and Paul P.
Dudley, individually, objecting to the award of a concession for the Fixed-Base
Operator for the Downtown Manhattan Heliport to us.  Shortly
thereafter, we were joined as a necessary party to the Article 78
proceeding.  The Petitioners alleged that the selection process for
awarding Saker the concession, was arbitrary, capricious and an abuse of
permitted discretion and made in violation of lawful procedure.  In
relation to this allegation, Petitioners sought an annulment of the previous
award of the concession and a new “Request for Proposals” process in order to
award the concession to an entity other than us.  Petitioners also
alleged a breach of public trust against the City of New York and damages of at
least $1,000,000.  On April 21, 2009, this proceeding was dismissed by
the Supreme Court of the State of New York County of New York.  On
October 9, 2009, Petitioners filed a Notice of Appeal in the New York Supreme
Court, Appellate Division, First Department, currently calendared to be heard
for the January 2010 Term, seeking to overturn the lower court’s dismissal of
the Article 78 proceeding.  On January 6, 2010, we filed our brief in
connection with the appeal.  On March 16, 2010, the Appellate Division
unanimously dismissed the Petitioners appeal.





On April
7, 2009, Terrance P. Kelley (“Kelley”) and Gold Jets, LLC commenced an action
against us, New World Jet Corporation, New World Jet Acquisition Corporation,
and Doe Corporation, being a fictitious name of a known entity, in the Supreme
Court of the State of New York, County of Monroe.  The plaintiffs alleged,
among other things, breaches of the Stock Purchase Agreement and the Consulting
Agreement, which were entered into in connection with the purchase of New World
Jet Corporation by New World Jet Acquisition Corporation, our wholly-owned
subsidiary, and Saker.  The plaintiffs sought declaratory relief and
damages in an amount not less than $200,000.  On June 8, 2009, we served
our answer denying liability and asserting defenses and counterclaims, including
claims that plaintiffs breached their contractual obligations to us.  On
July 6, 2009, Kelley amended his complaint to add certain individuals as
defendants.  On August 7, 2009, we filed an answer to the amended complaint
reasserting its defenses and counterclaims.  On December 28, 2009, the
parties settled the lawsuit and issued mutual releases to that
end.  The terms of the settlement were not material to
us.




7


In addition to the matters noted above,
from time to time, we may be a party to one or more claims or disputes which may
result in litigation. Our management does not, however, presently expect that
any such matters will have a material adverse effect on our business, financial
condition or results of operations.





ITEM
      4.
            RESERVED




8


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
SKAS. 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.  Our common stock is only traded on a limited or sporadic
basis and should not be deemed to constitute an established public trading
market.





The
following table sets forth the high and low closing sale prices for the common
stock as reported on the OTCBB for the past two most recent fiscal
years.





Common
      StockQuarterly
      Period Ended
                
                High
                
                
                LowMarch
      31, 2008
                
                $
                0.480
                
                
                $
                0.320June
      30, 2008
                
                $
                0.500
                
                
                $
                0.330September
      30, 2008
                
                $
                0.420
                
                
                $
                0.200December
      31, 2008
                
                $
                0.280
                
                
                $
                0.060March
      31, 2009
                
                $
                0.120
                
                
                $
                0.035June
      30, 2009
                
                $
                0.055
                
                
                $
                0.035September
      30, 2009
                
                $
                0.035
                
                
                $
                0.010December
      31, 2009
                
                $
                0.120
                
                
                $
                0.015




Holders





As of
April 13, 2010, there were approximately 620 holders of record of our 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 our
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.





Repurchases





We did not repurchase shares of our
common stock during the years ended December 31, 2009 and 2008.




9


Recent
Sales of Unregistered Securities




Information
with respect to all equity securities sold by us during the fiscal year ended
December 31, 2009 which were not registered under the Securities Act of 1933, as
amended (the “Securities Act”), was previously reported on our Form 8-K filed on
January 26, 2010 and is incorporated by reference herein.





ITEM
      6.
            SELECTED
      FINANCIAL DATA





Not
      applicable.





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





Forward-looking
Statements




This
Annual 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”). Forward-looking
statements can be identified by words such as “anticipates,” “intends,” “plans,”
“seeks,” “believes,” “estimates,” “expects” and similar references to future
periods.   These statements may include projections of revenue,
provisions for doubtful accounts, income or loss, capital expenditures,
repayment of debt, other financial items, statements regarding our plans and
objectives for future operations, acquisitions, divestitures and other
transactions, statements of future economic performance, statements of the
assumptions underlying or relating to any of the foregoing statements, and
statements that are other than statements of historical fact.





Forward-looking
statements are based on our current expectations and assumptions regarding our
business, the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. Our actual
results may differ materially from those contemplated by the forward-looking
statements. We caution you therefore against relying on any of these
forward-looking statements. They are neither statements of historical fact nor
guarantees or assurances of future performance. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include our services and pricing, general economic conditions, our
ability to raise additional capital, our ability to obtain the various approvals
and permits for the acquisition and operation of FBOs and the other risk factors
contained under Item 1A of this report.





Any
forward-looking statement made by us in this report speaks only as of the date
on which it is made. Factors or events that could cause our actual results to
differ may emerge from time to time, and it is not possible for us to predict
all of them. We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future developments or
otherwise, except as may be required by law.





Overview





Our long-term strategy is to
increase our sales through growth within our FBO operations.  To do
so, we may expand our geographic reach and product offering through strategic
acquisitions and improved market penetration within the markets we
serve.   We expect that any future acquisitions or product
offerings would be a direct complement to our current FBO
operations.





If we are
able to grow our business as planned, we anticipate that our larger size will
provide us with greater buying power from suppliers, and therefore provide us
with lower costs.  Lower costs would 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.





Discontinued
Operations





As discussed in Item 1 of this report
above and Note 2 of our consolidated financial statements, we completed the sale
of our Airborne subsidiary on March 2, 2009 under a plan commenced in
2008.  We believe the discontinuation of the charter segment will
allow us to focus our efforts on our FBO operations.  Pursuant to the
Share Exchange Agreement between us and John and Daphne Dow, and the Loan
Agreement between us and Airborne, we will benefit from any principal payments
that may be made by Airborne and continuing payments after the retirement of
principal that may be made by Airborne.  In addition, we will
participate in any future sale of Airborne.  While it was a subsidiary
of ours, Airborne generated revenue of approximately $3,900,000 and $38,300,000
for the years ended December 31, 2009 and 2008, respectively.  While
it was a subsidiary of ours, Airborne recognized operating losses of
approximately $525,000 and $3,880,000, including a write-off of goodwill and
intangibles of approximately $2,635,000, for the years ended December 31, 2009
and 2008, respectively.




10


The performance of the charter segment
had declined significantly in the quarters leading up to the divestiture from a
revenue and profitability standpoint and it was unclear if an improvement in
performance could be implemented in any foreseeable timeframe.  The
current and anticipated decline in charter segment performance created
considerable cash flow pressure.  We believed that Airborne would
require ongoing cash infusions in the near term in order to maintain operations
and, in the absence of additional cash, would imperil our company.  We
also believed that such an infusion could be less if Airborne were operated
independently than were it to remain part of Saker.  Additionally, we
believed that significant savings in corporate overhead could be implemented in
the event that Airborne was divested.





Equally important in our decision to
divest Airborne was a relative confidence in our ongoing FBO operations, which
have resulted in higher gross margins than our charter
operations.  The FBO business was our original focus and the
performance of that business had proven stable.  Taken in conjunction
with the introduction of our heliport operations in November 2008, we believed
that the makings of a solid platform for growth were present.  In the
final analysis, we believed that the continuing operations of our company would
provide us the best possible route to resumed profitability and
growth.





Under the Birch Hill Loan Agreement,
Birch Hill retains a first lien against all of Airborne’s and Saker’s
assets.  Further, Airborne and Saker are joint and several guarantors
of borrowings against the credit facility.  In the event of a sale of
Airborne, Birch Hill shall receive the first distribution of any related
proceeds in the full amount of any outstanding amount under the credit
facility.





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,
                        2009
                      
                      
                      Year
      Ended
                        December
      31,
                        2008(in
      thousands, except for share and per share data)Revenue
      – continuing operations
                      
                      $
                      8,700
                      
                      
                      $
                      8,597Net
      income (loss) – continuing operations
                      
                      $
                      (332
                      )
                      
                      $
                      (1,024
                      )Net
      income (loss) – discontinued operations
                      
                      $
                      (78
                      )
                      
                      $
                      (3,881
                      )Net
      income (loss) per share – basic and diluted – continued
      operations
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.03
                      )Net
      income (loss) per share – basic and diluted – discontinued
      operations
                      
                      $
                      (0.00
                      )
                      
                      $
                      (0.11
                      )Net
      income (loss) per share – basic and diluted
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.14
                      )Weighted
      average number of shares – basic and diluted
                      
                      
                      34,314,400
                      
                      
                      
                      36,582,987





Balance Sheet Data: (in
      thousands)
                  
                  December
      31,
                    2009
                  
                  
                  December 31,
                    2008Working
      capital (deficit)
                  
                  $
                  (463
                  )
                  
                  $
                  (756
                  )Total
      assets – continuing operations
                  
                  $
                  6,547
                  
                  
                  $
                  4,962Total
      assets – held for sale
                  
                  $
                  —
                  
                  
                  $
                  5,363Total
      assets
                  
                  $
                  6,547
                  
                  
                  $
                  10,325Total
      liabilities – continuing operations
                  
                  $
                  3,461
                  
                  
                  $
                  1,970Total
      liabilities – associated with assets held for sale
                  
                  $
                  —
                  
                  
                  $
                  5,101Stockholders’
      equity
                  
                  $
                  3,086
                  
                  
                  $
                  2,504Total
      liabilities and Stockholders’ equity
                  
                  $
                  6,547
                  
                  
                  $
                  10,325





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





This Management’s Discussion and
Analysis of Results of Operations gives effect only to our continuing
operations.





Comparison
of the Years Ended December 31, 2009 and December 31, 2008.





REVENUE





Revenue
increased by 1.3 percent to approximately $8,700,000 for the year ended December
31, 2009 as compared with corresponding prior-year period revenue of
approximately $8,600,000.




11


For the
year ended December 31, 2009, revenue associated with the sale of jet fuel,
aviation gasoline and related items decreased by 37.0 percent to approximately
$4,200,000 as compared to the same period in the prior year.  Revenue
of approximately $3,700,000 associated with the operation of the Downtown
Manhattan Heliport (“Heliport”) increased by 577.2% as compared to approximately
$550,000 in the prior year period – the Heliport having initiated operations on
November 1, 2008.  Revenue associated with maintenance activities
decreased by 43.4 percent to approximately $720,000 as compared to the same
period in the prior year.  Revenue associated with the leasing of
aircraft and office space along with the management of non-owned FBO facilities
decreased by 13.8 percent to approximately $96,000 in the year ended December
31, 2009 as compared to the same period in the prior year.





The
decreases in revenue associated with the sale of jet fuel, aviation gasoline and
related items was related to a combination of lower volume along with lower
average fuel prices as compared with the prior year.  We generally
price our fuel products on a fixed dollar margin basis.  As the cost
of fuel decreases, the corresponding customer price decreases as
well.  If volume is constant, this methodology yields lower revenue
but at comparable gross margins.





The
decreases in maintenance revenue were due to decreases in both charges for labor
services and for parts.  The primary reason for the decreases in both
categories was a generally lower level of activity associated with jet aircraft
domiciled at the Pennsylvania facility.





The
decreases in revenue associated with the leasing of aircraft and office space
along with the management on non-owned FBO facilities was directly related to a
planned reduction in fees associated with the management of non-owned FBO
facilities.





GROSS
PROFIT





Total
gross profit increased 69.2 percent to approximately $3,800,000 in the year
ended December 31, 2009 as compared with the year ended December 31,
2008.  Gross profit as a percent of revenue increased to 44.0 percent
in the year ended December 31, 2009 as compared to 26.3 percent in the same
period in the prior year.  The impact of the Heliport operation was a
major factor in the increase in gross profit, contributing approximately
$2,500,000 in 2009 as compared to approximately $345,000 in 2008.  In
the absence of the Heliport, gross profit in the year ended December 31, 2009
would have been 26.8 as a percent of revenue as compared to 23.8 in the same
period in prior year.  The increase in gross profit on this adjusted
percent of revenue basis is attributable to generally lower average fuel cost as
described above.





OPERATING
EXPENSE





Selling, General and
Administrative – Operations





Selling,
general and administrative (“SG&A”) expenses associated with our operations
were approximately $3,420,000 in the year ended December 31, 2009, an increase
of approximately $1,600,000 or 88.4 percent as compared to the year ended
December 31, 2008.  Without the introduction of the Heliport, SG&A
associated with our operations would have decreased by approximately $198,000 or
13.5 percent.





SG&A
associated with our operations, as a percentage of revenue, was 39.3 percent for
the year ended December 31, 2009 as compared with 21.1 percent in the
corresponding prior year period.  Once again, the introduction of the
Heliport was a major factor.  In the absence of the Heliport, SG&A
associated with our operations, as a percent of revenue, would have been 25.4
percent of revenue; a more meaningful comparison to the 21.1 percent in the year
ended December 31, 2008.





Selling, General and
Administrative – Corporate





Corporate
expense was approximately $790,000 in the year ended December 31, 2009,
representing a decrease of approximately $650,000 as compared to the year ended
December 31, 2008.   The decrease in the year ended December 31,
2009 were largely driven by a combination of lower head-count in connection with
the elimination of costs associated with our former President & Chief
Executive Officer as a result of the divestiture of Airborne, the departure of
our Senior VP & Chief Financial Officer at December 31, 2008, stock-based
compensation expenses of approximately $146,000 less in the year ended December
31, 2009 than they were in the same period in the prior year, and by the costs
associated with our investor relations efforts, which represented approximately
$110,000 for the year ended December 31, 2008 as compared to zero expenses in
the corresponding current year period.




12


OPERATING
LOSS





Operating
loss for the year ended December 31, 2009 was approximately $390,000, a decrease
of approximately $610,000 or 61.0 percent as compared to the year ended December
31, 2008.  Improvements on a year-over-year basis were driven by a
combination of lower levels of corporate and operating expenses and increased
gross margin, all of which are described above.





Interest
Income/Expense





Interest
income for the year ended December 31, 2009 was $14,292, as compared to $7,200
in year ended December 31, 2008.  Interest expense for the year ended
December 31, 2009 was $135,510, as compared to $20,075 in the same period in
2008 with the increase largely attributable to interest payments on the
EuroAmerican Note.





Net Loss Per
Share




Net loss
for continuing operations for the year ended December 31, 2009 was approximately
$332,000 as compared to approximately $1,000,000 for the year ended December 31,
2008.




Basic and
diluted net loss per share for the year ended December 31, 2009 was
$0.01.  Basic and diluted net loss per share for the year ended
December 31, 2008 was $0.03 and $0.11 for continuing and discontinued
operations, respectively, for a total net loss of $0.14 per share.





Liquidity
and Capital Resources





The following discussion gives effect
only to continuing operations.





As of December 31, 2009, we had cash
and cash equivalents of $574,847 and had a working capital deficit of $472,515.
From continuing operations, we generated revenue of approximately $8,700,000 and
net loss of approximately $332,000 for the year ended December 31,
2009.





We initiated operations at the Heliport
on November 1, 2008 pursuant to an agreement with the City of New York through
the New York City Economic Development Corporation (the “Agreement”). Under the
Agreement, we are responsible for minimum annual guaranteed payments of
$1,200,000 in the first year of our operation of the Heliport. We also agreed to
make certain capital improvements and safety code compliance upgrades to the
Heliport in the amount of $1,000,000 over the first two years following the
receipt of building permits for the capital improvements and another $1,000,000
by the end of the fifth year of the Agreement. We believe that earnings from the
operation of the Heliport will be sufficient to satisfy the minimum annual
guarantee and fund the capital improvements as required.  During the
year ended December 31, 2008, we received aggregate cash of approximately
$725,000 in exchange for a one percent membership interest in FFH.





As discussed in Item 1 and Note 2 of
this report, on December 29, 2009 Five Star assigned all of its interests in a
revolving line of credit agreement (the “Credit Facility”) to Birch
Hill.  The Credit Facility provides us with a $1,000,000 revolving
line of credit, which we have completely drawn down and is payable on demand.
Amounts outstanding under the Credit Facility will bear interest at a rate equal
to the prime rate published in the Wall Street Journal from time to time plus
350 basis points. The Credit Facility is secured by all of our assets as well as
the assets of Airborne, which is also a co-borrower of the Credit
Facility.  As of April 13, 2010, no additional amounts are available
for borrowing under the Credit Facility.





On April
10, 2009, we entered into an Amendment to Secured Promissory Note with two
individual note holders (collectively, the “Holders”) under which the Holders
agreed to reduce the collective remaining principal of their Notes to $180,000
from $200,000.  The Holders further agreed that the principal, which
would otherwise have been paid in equal payments of $100,000 on April 1, 2009
and April 1, 2010 with zero interest, will now be paid over a twenty-four month
period with each payment including principal and interest at the rate of 5% per
year.





On March 2, 2009, in conjunction with
the divestiture of Airborne, EuroAmerican Investment Corp. (“EuroAmerican”)
loaned us $750,000, the proceeds of which were used to fund our loan commitment
obligations to Airborne.  The EuroAmerican loan is evidenced by a
Promissory Note delivered by us to EuroAmerican with a maturity date of February
27, 2011.  The unpaid principal amount under the Promissory Note
accrues interest at the annual rate of 12% and is payable in monthly interest
only payments until maturity, at which time the entire principal balance and any
accrued but unpaid interest is payable in full.  Two members of our
board of directors, William B. Wachtel and Alvin S. Trenk, issued personal
guarantees in connection with the EuroAmerican loan.  Mr. Wachtel is a
principal of EuroAmerican.





During the year ended December 31,
2009, we had a net decrease in cash and cash equivalents of $897,688. Our
sources and uses of funds from continuing and discontinued operations during
this period were as follows:




13


Cash
from Operating Activities




For the year ended December 31, 2009,
net cash used in operating activities was $588,237. This amount included a
decrease in operating cash related to a net loss of $411,042 and additions for
the following items: (i) depreciation and amortization, $147,506; (ii)
stock-based compensation expense, $268,435; (iii) accrued expenses, $482,051;
and (iv) customer deposits, $54,244.  The increase in cash used in
operating activities in 2009 was offset by the following decreases: (i) accounts
payable, $487,772; (ii) deposits, $110,881; (iii) prepaid expenses, $67,610;
(iv) inventories, $47,381; (v) accounts receivable, $28,322; and (vi) gain on
sale of property and equipment, $18,229.  For the year ended December
31, 2008, net cash used in operating activities was $2,121,727. This amount
included a decrease in operating cash related to net loss of $4,905,415 and
additions for the following items: (i) depreciation and amortization, $345,131;
(ii) impairment of goodwill and intangible assets, $2,634,663; (iii) issuance of
restricted stock under a consulting agreement, $222,000; (iv) warrant issued in
connection with the acquisition of New World Jet Corporation, $137,390; and (v)
stock-based compensation expense, $414,555.  The increase in cash used
in operating activities in 2008 was offset by a decrease of approximately
$992,000 in operating assets and liabilities for the following items: (i)
customer deposits decreased cash approximately $433,000 related to advance
payments made in 2007 for charter flights that occurred in 2008; (ii) cash
payments for prepaid expenses increased by approximately $137,000; and (iii)
changes in accounts payable, accounts receivable, inventories and accrued
expenses all resulted in a net decrease in cash of approximately
$414,000.





Cash
from Investing Activities




For the year ended December 31, 2009,
net cash used in investing activities was $1,377,405 and was attributable to the
purchase of property and equipment ($472,347), issuance of notes receivable
($711,032), offset by proceeds from notes receivable ($42,000), net cash of
discontinued operations ($229,188), and proceeds from the sale of property and
equipment ($35,162).  For the year ended December 31, 2008, net cash
used in investing activities was $438,673 and was attributable to the purchase
of property and equipment of $221,976 offset by sale proceeds of $8,000 and
approximately $225,000 of cash payments in connection with the acquisition of
New World Jet Corporation.





Cash
from Financing Activities




For the year ended December 31, 2009,
net cash provided by financing activities was $1,067,954, consisting of proceeds
from notes payable ($961,904), plus proceeds from the sale of minority interest
in subsidiary ($212,961), offset by repayment of notes payable
($106,911).  For the year ended December 31, 2008, net cash provided
by financing activities was $1,632,783, consisting of the proceeds from a line
of credit of $1,000,000 and capital contribution to the Heliport of $749,847,
offset by repayment of notes payable of $117,064.





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.




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:




14


Accounts
Receivable


We
extend credit to large and mid-size companies for flight related services. We
have concentrations of credit risk in our continuing operations in that 59.5% of
the balance of accounts receivable at December 31, 2009 is made up of only three
customers. At December 31, 2009, accounts receivable in our continuing
operations from our three largest accounts amounted to approximately $231,400
(28.6%), $131,900 (16.3%), and $118,800 (14.7%), respectively. We have in place
a security deposit in connection with each of these three
receivables.  Accounts receivable are carried at their estimated
collectible amounts. Accounts receivable are periodically evaluated for
collectability and the allowance for doubtful accounts is adjusted accordingly.
We determine collectability based on our management experience and knowledge of
the customers.





Goodwill and Intangible
Assets


We account 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 our acquisitions
amounting to $2,368,284 related to continuing operations. We have determined
that there is no impairment of goodwill for continuing operations at December
31, 2009 and 2008. Intangible assets continue to be amortized over their
estimated useful lives.  We performed an analysis of its goodwill and
intangible assets with SFAS No. 142 as of December 31, 2008, and determined that
an impairment charge of $2,634,663 was necessary and has recorded this charge to
discontinued operations.




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


We
account 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. Our ability to utilize our net
operating loss (“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.





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. Our
ability to use our net operating loss carryforwards 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.





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 2006.




Stock Based
Compensation


We
account for stock-based compensation in accordance with the fair value
recognition provisions of ASC 718 (prior authoritative literature: FAS 123R,
“Share-Based Payment”). Stock-based compensation expense for all share-based
payment awards are based on the grant-date fair value estimated in accordance
with the provisions of ASC 718. We recognize these compensation costs over the
requisite service period of the award, which is generally the option vesting
term.





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




15


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.





We account for the expected life of
share options in accordance with the “simplified” method provisions of
Securities and Exchange Commission Staff Accounting Bulletin (“SAB”) No. 110
(December 2007), which enables the use of the simplified method for “plain
vanilla” share options, as defined in SAB No. 107.





Recent
Accounting Pronouncements





During
2009, FASB launched the FASB ASC as the single source of authoritative
nongovernmental GAAP.  The ASC was effective for interim and annual
periods ending September 15, 2009.  The ASC does not change
GAAP.  Instead, it takes all individual pronouncements that currently
comprise GAAP and reorganizes them into approximately 90 accounting Topics, and
displays all Topics using a consistent structure.  Changes to the ASC
subsequent to June 30, 2009, are referred to as Accounting Standards Updates
(“ASU”).





On June
30, 2009, the FASB issued ASI 2009-01, “Topic 105 – Generally Accepted
Accounting Principles, amendments based on Statement of Financial Accounting
Standards No. 168 – The FASB Accounting Standard Codification and the Hierarchy
of Generally Accepted Accounting Principles.”  This ASU amends the
FASB ASC for the issuance of FASB Statement of Financial Accounting Standards
(SFAS”) No. 168, “The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles.”  This ASU includes FASB
SFAS No. 168 in its entirety.  ASU 2009-01 was effective for interim
and annual periods ending after September 15, 2009.  The adoption of
ASU 2009-01 had no effect on our operating results or financial
condition.





In
December 2007, the FASB issued ASC 810, “Non-Controlling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51).  ASC
810 established accounting and reporting standards for the non-controlling
interest in a subsidiary (previously referred to as minority interests). ASC 810
also requires that a retained non-controlling interest upon the deconsolidation
of a subsidiary be initially measured at its fair value. Upon adoption of ASC
810, the Company was required to report any non-controlling interests as a
separate component of consolidated stockholders’ equity. The Company was also
required to present any net income or loss allocable to non-controlling
interests and net income or loss attributable to the stockholders of the Company
separately in its consolidated statements of operations, if significant. ASC 810
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after January 1, 2009. ASC 810 requires retroactive adoption of
the presentation and disclosure requirements for existing minority interests.
All other requirements of ASC 810 are applied prospectively. The Company adopted
ASC 810 and reclassified the non-controlling interest in FFH as a separate
component of consolidated stockholders’ equity on January 1,
2009.   The adoption of ASC 810 did not have a material impact on
our results of operation or financial condition.





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not applicable.




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 18 attached
hereto of this Annual Report on Form 10-K.





SAKER
      AVIATION SERVICES, INC. AND SUBSIDIARIESTable
      of Contents to Consolidated Financial StatementsReport
      of Independent Registered Public Accounting Firm
                19Consolidated
      Financial StatementsConsolidated
      Balance Sheets as of December 31, 2009 and 2008
                20Consolidated
      Statements of Operations For the Years Ended December 31, 2009 and
      2008
                21Consolidated
      Statements of Stockholders’ Equity For the Years Ended December 31, 2009
      and 2008
                22Consolidated
      Statements of Cash Flows For the Years Ended December 31, 2009 and
      2008
                23Notes
      to Consolidated Financial Statements
                24




17


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




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


Saker
Aviation Services, Inc.




We have
audited the accompanying consolidated balance sheet of Saker Aviation Services,
Inc. and Subsidiaries (the “Company”) as of December 31, 2009, and the related
consolidated statements of operations, stockholders’ equity and cash flows for
the year then ended. 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
audit.




We
conducted our audit 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 audit 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 audit
provides 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 Saker Aviation
Services, Inc. and Subsidiaries as of December 31, 2009, and the results of
their operations and their cash flows for the year then ended, in conformity
with accounting principles generally accepted in the United States of
America.





As
discussed in Note 6, the Company changed its accounting for a non-controlling
interest in accordance with the adoption of ASC 805.





/s/ Kronick Kalada Berdy
& Co.





Kingston,
PA


April 13,
2010


18




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM







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


Saker
Aviation Services, Inc. (formerly FirstFlight, Inc.)





We have
audited the accompanying consolidated balance sheet of Saker Aviation Services,
Inc. (formerly FirstFlight, Inc.) and Subsidiaries (the “Company”) as of
December 31, 2008, and the related consolidated statement of operations,
stockholders’ equity, and cash flows for the year then ended. 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 audit.





We
conducted our audit 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 audit 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 audit
provides 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 Saker Aviation
Services, Inc. (formerly FirstFlight, Inc.) and Subsidiaries as of December 31,
2008, and the results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As more fully described in Note 4, the
Company has incurred significant operating losses and may need to raise
additional funds to meet its obligations and sustain its operations.  These
conditions raise substantial doubt about the Company’s ability to continue as a
going concern. Management’s plans in regard to these matters are also described
in Note 4. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





Marcum
LLP


(Formerly
Marcum & Kliegman LLP)


New York
NY


April 14,
2009


19





SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS





December 31,
                                  2009
                                
                                
                                December 31,
                                  2008ASSETSCURRENT ASSETSCash
      and cash equivalents
                                
                                $
                                574,847
                                
                                
                                $
                                322,098Accounts
      receivable
                                
                                
                                809,870
                                
                                
                                
                                605,356Inventories
                                
                                
                                277,941
                                
                                
                                
                                229,699Note
      receivable – current portion, less discount
                                
                                
                                110,289
                                
                                
                                
                                —Prepaid
      expenses and other current assets
                                
                                
                                166,156
                                
                                
                                
                                156,898Assets
      held for sale
                                
                                
                                —
                                
                                
                                
                                4,861,941Total
      current assets
                                
                                
                                1,939,103
                                
                                
                                
                                6,175,992PROPERTY AND
      EQUIPMENT, net
                                  of
      accumulated depreciation and amortization of $518,751 and $382,592
      respectively
                                
                                
                                1,088,386
                                
                                
                                
                                751,730OTHER ASSETSDeposits
                                
                                
                                541,961
                                
                                
                                
                                427,780Assets
      held for sale
                                
                                
                                —
                                
                                
                                
                                501,532Note
      receivable, less current portion and discount
                                
                                
                                509,431
                                
                                
                                
                                —Intangible
      assets – trade names
                                
                                
                                100,000
                                
                                
                                
                                100,000Goodwill
                                
                                
                                2,368,284
                                
                                
                                
                                2,368,284Total
      other assets
                                
                                
                                3,519,676
                                
                                
                                
                                3,397,596TOTAL
      ASSETS
                                
                                $
                                6,547,165
                                
                                
                                $
                                10,325,318LIABILITIES AND STOCKHOLDERS'
      EQUITYCURRENT LIABILITIESAccounts
      payable
                                
                                $
                                431,899
                                
                                
                                $
                                274,869Customer
      deposits
                                
                                
                                67,312
                                
                                
                                
                                143,054Line
      of credit
                                
                                
                                1,000,000
                                
                                
                                
                                1,000,000Accrued
      expenses
                                
                                
                                741,485
                                
                                
                                
                                286,720Notes
      payable – current portion
                                
                                
                                170,922
                                
                                
                                
                                125,529Liabilities
      associated with assets held for sale
                                
                                
                                —
                                
                                
                                
                                5,100,964Total
      current liabilities
                                
                                
                                2,411,618
                                
                                
                                
                                6,931,136LONG-TERM LIABILITIESNotes
      payable - less current portion
                                
                                
                                949,817
                                
                                
                                
                                139,535Security
      deposits
                                
                                
                                100,026
                                
                                
                                
                                —Total
      liabilities
                                
                                
                                3,461,461
                                
                                
                                
                                7,070,671STOCKHOLDERS’ EQUITYControlling
      interestPreferred
      stock - $.001 par value; authorized 9,999,154;
                                  none
      issued and outstanding
                                
                                
                                —
                                
                                
                                
                                —Common
      stock - $.001 par value; authorized 100,000,000;
                                  33,164,453
      shares issued and outstanding as of December 31, 2009;
                                  37,182,987
      shares issued and 36,582,987 shares outstanding as of December 31,
      2008
                                
                                
                                33,164
                                
                                
                                
                                37,183Additional
      paid-in capital
                                
                                
                                19,632,661
                                
                                
                                
                                19,599,504Accumulated
      deficit
                                
                                
                                (17,542,930
                                )
                                
                                
                                (17,131,888
                                )Total
      controlling interest
                                
                                
                                2,122,895
                                
                                
                                
                                2,504,799Non-controlling
      interest
                                
                                
                                962,809
                                
                                
                                
                                749,848TOTAL
      STOCKHOLDERS’ EQUITY
                                
                                
                                3,085,704
                                
                                
                                
                                3,254,647TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                
                                $
                                6,547,165
                                
                                
                                $
                                10,325,318





See
accompanying notes to consolidated financial statements.


20





SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF OPERATIONS





For the Years Ended
                                December 31,2009
                              
                              
                              2008REVENUE
                              
                              $
                              8,707,392
                              
                              
                              $
                              8,596,750COST OF REVENUES
                              
                              
                              4,878,413
                              
                              
                              
                              6,133,280GROSS PROFIT
                              
                              
                              3,828,979
                              
                              
                              
                              2,463,470SELLING, GENERAL AND ADMINISTRATIVE
      EXPENSES
                              
                              
                              4,217,193
                              
                              
                              
                              3,457,224OPERATING LOSS FROM CONTINUING
      OPERATIONS
                              
                              
                              (388,214
                              )
                              
                              
                              (993,754
                              )OTHER INCOME (EXPENSE)OTHER
                              
                              
                              176,596
                              
                              
                              
                              (17,742
                              )INTEREST
      INCOME
                              
                              
                              14,292
                              
                              
                              
                              7,151INTEREST
      EXPENSE
                              
                              
                              (135,510
                              )
                              
                              
                              (20,075
                              )TOTAL
      OTHER INCOME (EXPENSE)
                              
                              
                              55,378
                              
                              
                              
                              (30,666
                              )NET
      LOSS FROM CONTINUING OPERATIONS
                              
                              
                              (332,836
                              )
                              
                              
                              (1,024,420
                              )DISCONTINUED
      OPERATIONS:NET
      LOSS FROM DISCONTINUED OPERATIONS
                              
                              
                              (547,468
                              )
                              
                              
                              (3,880,995
                              )GAIN
      FROM DISPOSAL OF SUBSIDIARY
                              
                              
                              469,262
                              
                              
                              
                              —NET
      LOSS FROM DISCONTINUED OPERATIONS
                              
                              
                              (78,206
                              )
                              
                              
                              (3,880,995
                              )NET
      LOSS
                              
                              $
                              (411,042
                              )
                              
                              $
                              (4,905,415
                              )Net
      loss per Common Share – Basic and DilutedContinuing
      operations
                              
                              $
                              (0.01
                              )
                              
                              $
                              (0.03
                              )Discontinued
      operations
                              
                              
                              (0.02
                              )
                              
                              
                              (0.11
                              )Disposal
      of subsidiary
                              
                              
                              0.02
                              
                              
                              
                              —Sub-total
      discontinued operations
                              
                              
                              (0.00
                              )
                              
                              
                              (0.11
                              )Total
      Basic and Diluted Net Loss Per Common Share
                              
                              $
                              (0.01
                              )
                              
                              $
                              (0.14
                              )Weighted
      Average Number of Common Shares
                                Outstanding
      – Basic and Diluted
                              
                              
                              34,314,400
                              
                              
                              
                              36,582,987





See
accompanying notes to consolidated financial statements.


21


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


For the
Years Ended December 31, 2009 and 2008





Additional
                            
                            
                            
                            
                            
                            
                            
                            
                            TotalCommon
      Stock
                            
                            
                            Paid-in
                            
                            
                            Accumulated
                            
                            
                            Non-controlling
                            
                            
                            Stockholders’Shares
                            
                            
                            Amount
                            
                            
                            Capital
                            
                            
                            Deficit
                            
                            
                            Interest
                            
                            
                            EquityBALANCE
      – January 1,
2008
                            
                            
                            36,582,987
                            
                            
                            $
                            36,583
                            
                            
                            $
                            18,825,359
                            
                            
                            $
                            (12,226,473
                            )
                            
                            
                            —
                            
                            
                            $
                            6,635,469Amortization
      of stock based compensation
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            414,555
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            414,555Issuance
      of restricted stock under consulting Agreement
                            
                            
                            600,000
                            
                            
                            
                            600
                            
                            
                            
                            221,400
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            222,000Warrant
      issued in connection with acquisition of New World Jet
      Corporation
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            137,390
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            137,390Issuance
      of non-controlling interest
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            $
                            749,848
                            
                            
                            
                            749,848Net
      loss
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            (4,905,415
                            )
                            
                            
                            —
                            
                            
                            
                            (4,905,415
                            )BALANCE
      – December 31,
    2008
                            
                            
                            37,182,987
                            
                            
                            
                            37,183
                            
                            
                            
                            19,599,504
                            
                            
                            
                            (17,131,888
                            )
                            
                            
                            749,848
                            
                            
                            
                            3,254,647Amortization
      of stock based compensation
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            268,435
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            268,435Return
      of stock via divestiture
                            
                            
                            (3,418,534
                            )
                            
                            
                            (3,419
                            )
                            
                            
                            (235,278
                            )
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            (238,697
                            )Return
      of stock via settlement
                            
                            
                            (600,000
                            )
                            
                            
                            (600
                            )
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            (600
                            )Increase
      in non-controlling interest
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            212,961
                            
                            
                            
                            212,961Net
      loss
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            —
                            
                            
                            
                            (411,042
                            )
                            
                            
                            —
                            
                            
                            
                            (411,042
                            )BALANCE
      – December 31,
    2009
                            
                            
                            33,164,453
                            
                            
                            $
                            33,164
                            
                            
                            $
                            19,632,661
                            
                            
                            $
                            (17,542,930
                            )
                            
                            $
                            962,809
                            
                            
                            $
                            3,085,704





See
accompanying notes to consolidated financial statements.


22


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS





For the Years Ended
                                        December 31,2009
                                      
                                      
                                      2008CASH FLOWS FROM OPERATING
      ACTIVITIESNet
      loss
                                      
                                      $
                                      (411,042
                                      )
                                      
                                      $
                                      (4,905,415
                                      )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                                      
                                      
                                      147,506
                                      
                                      
                                      
                                      345,131Impairment
      of goodwill and intangible assets
                                      
                                      
                                      —
                                      
                                      
                                      
                                      2,634,663(Gain)
      loss on sale of property and equipment
                                      
                                      
                                      (18,229
                                      )
                                      
                                      
                                      14,500Gain
      from disposal of subsidiary
                                      
                                      
                                      (469,262
                                      )
                                      
                                      
                                      —Stock
      based compensation
                                      
                                      
                                      268,435
                                      
                                      
                                      
                                      414,555Issuance
      of restricted stock under consulting agreement
                                      
                                      
                                      —
                                      
                                      
                                      
                                      222,000Warrant
      issued in connection with acquisition of New World Jet
      Corporation
                                      
                                      
                                      —
                                      
                                      
                                      
                                      137,390Provision
      for doubtful accounts
                                      
                                      
                                      —
                                      
                                      
                                      
                                      7,279Changes
      in operating assets and liabilities:Accounts
      receivable
                                      
                                      
                                      (28,322
                                      )
                                      
                                      
                                      1,408,805Inventories
                                      
                                      
                                      (47,381
                                      )
                                      
                                      
                                      (77,566
                                      )Prepaid
      expenses and other current assets
                                      
                                      
                                      (67,610
                                      )
                                      
                                      
                                      136,824Deposits
                                      
                                      
                                      (110,881
                                      )
                                      
                                      
                                      (432,605
                                      )Accounts
      payable
                                      
                                      
                                      (487,772
                                      )
                                      
                                      
                                      (1,533,525
                                      )Customer
      deposits
                                      
                                      
                                      54,244
                                      
                                      
                                      
                                      (282,539
                                      )Accrued
      expenses
                                      
                                      
                                      482,051
                                      
                                      
                                      
                                      (211,224
                                      )Security
      deposits
                                      
                                      
                                      100,026
                                      
                                      
                                      
                                      —TOTAL
      ADJUSTMENTS
                                      
                                      
                                      (177,195
                                      )
                                      
                                      
                                      2,783,688NET
      CASH USED IN OPERATING ACTIVITIES
                                      
                                      
                                      (588,237
                                      )
                                      
                                      
                                      (2,121,727
                                      )CASH FLOWS FROM INVESTING
      ACTIVITIESProceeds
      from sale of property and equipment
                                      
                                      
                                      35,162
                                      
                                      
                                      
                                      8,000Issuance
      of note receivable
                                      
                                      
                                      (711,032
                                      )
                                      
                                      
                                      —Net
      cash of sold subsidiary
                                      
                                      
                                      (229,188
                                      )
                                      
                                      
                                      —Purchase
      of New World Jet Corporation
                                      
                                      
                                      —
                                      
                                      
                                      
                                      (228,943
                                      )Purchase
      of property and equipment
                                      
                                      
                                      (472,347
                                      )
                                      
                                      
                                      (217,730
                                      )NET
      CASH USED IN INVESTING ACTIVITIES
                                      
                                      
                                      (1,377,405
                                      )
                                      
                                      
                                      (438,673
                                      )CASH FLOWS FROM FINANCING
      ACTIVITIESRepayment
      of notes payable
                                      
                                      
                                      (106,911
                                      )
                                      
                                      
                                      (117,064
                                      )Proceeds
      from line of credit
                                      
                                      
                                      —
                                      
                                      
                                      
                                      1,000,000Increase
      in non-controlling interest in subsidiary
                                      
                                      
                                      212,961
                                      
                                      
                                      
                                      749,847Proceeds
      from notes payable
                                      
                                      
                                      961,904
                                      
                                      
                                      
                                      —NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                                      
                                      
                                      1,067,954
                                      
                                      
                                      
                                      1,632,783NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                                      
                                      
                                      (897,688
                                      )
                                      
                                      
                                      (927,617
                                      )CASH AND CASH
      EQUIVALENTS – Beginning
                                      
                                      
                                      1,472,535
                                      
                                      
                                      
                                      2,400,152CASH AND CASH
      EQUIVALENTS – Ending
                                      
                                      $
                                      574,847
                                      
                                      
                                      $
                                      1,472,535SUPPLEMENTAL DISCLOSURE OF CASH FLOW
      INFORMATION:Cash
      paid during the periods for:Interest
                                      
                                      $
                                      135,510
                                      
                                      
                                      $
                                      27,551Income
      taxes
                                      
                                      $
                                      22,043
                                      
                                      
                                      $
                                      13,829NONCASH INVESTING AND FINANCING
      ACTIVITIESRedemption
      of common stock of the Company in exchange for common stock of Airborne,
      Inc.
                                      
                                      $
                                      238,697
                                      
                                      
                                      $
                                      —




See
accompanying notes to consolidated financial statements.


23


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


Notes
To Consolidated Financial Statements





NOTE 1 -
Nature of
Operations





Saker
Aviation Services, Inc. (“Saker”), through its subsidiaries (collectively the
“Company”), operates in the fixed base operation (“FBO”) segment of the general
aviation industry.  An FBO provides ground-based services such as
fueling and hangaring for general aviation, commercial, and military aircraft;
aircraft maintenance, and other miscellaneous services.  The Company
also provides consulting services for a non-owned FBO facility and serves as the
operator of a heliport.





FBO Air
Wilkes-Barre, Inc. d/b/a Saker Aviation Services (“FBOWB”), a wholly-owned
subsidiary, provides FBO services in Avoca, Pennsylvania.  FBO Air
Garden City, Inc. d/b/a Saker Aviation Services (“FBOGC”), a wholly-owned
subsidiary provides FBO services in Garden City, Kansas.





On July
9, 2008, the Company formed FirstFlight Heliports, LLC d/b/a Saker Aviation
Services (“FFH”) as a subsidiary to operate the Downtown Manhattan Heliport
(“Heliport”) via a concession agreement awarded to the Company by the City of
New York.





NOTE 2 –
Discontinued
Operations – Related Party Transaction and Note Receivable





A
wholly-owned subsidiary of the Company located in Elmira, New York, Airborne,
Inc. (“Airborne”), was sold on March 2, 2009. Also included in discontinued
operations for 2009 are Margeson & Associates (“M&A”) and substantially
all of the assets of New World Jet Corporation (“NWJC”), which were previously
part of the Company’s charter operation. Discontinued operations had revenue of
approximately $3,900,000 and $38,000,000 for the years ended December 31, 2009
and 2008, respectively. Discontinued operations had operating losses of
approximately $525,000 and $3,880,000 for 2009 and 2008, respectively, including
the write-off of goodwill and intangibles of approximately $2,635,000, for the
year ended December 31, 2008.





The
performance of the charter segment had declined significantly in recent quarters
from a revenue and profitability standpoint and the Company believed it was
unclear if an improvement in performance could be implemented in the near
term.  Management believed that the decline in charter segment
performance created considerable pressure on the cash flow of the Company as
whole and that Airborne would require ongoing cash infusions in the near term in
order to maintain operations.  In the absence of such cash infusions,
management believed that Airborne’s operations would imperil the Company as a
whole.  Management also believed that such an infusion could be less
if Airborne were operated independently than were it to remain part of
Saker.  Additionally, the Company believed that significant savings in
corporate overhead could be implemented in the event that Airborne was
divested.





For these
reasons, on March 2, 2009, the Company entered into a Share Exchange Agreement
with Airborne, John H. Dow, the former President and Chief Executive Officer of
the Company, and Daphne Dow, pursuant to which the Company divested its
ownership interest in Airborne.  Mr. Dow resigned from the Company
immediately preceding the execution of this agreement.  Prior to the
consummation of the Share Purchase Agreement, Airborne was a wholly-owned
subsidiary of the Company. Airborne owns and operates an aircraft management and
charter business.  Pursuant to the terms and conditions of the Share
Exchange Agreement, Mr. and Mrs. Dow exchanged all of their 3,418,534
individually and jointly owned shares of Company Common Stock, valued at
$238,697 on the date of the agreement, and all of their options and warrants
having minimal value to purchase 1,100,000 shares of Company Common Stock owned
by them in exchange for all of the issued and outstanding shares of Common Stock
in Airborne owned by the Company.   All shares owned by Mr. and
Mrs. Dow were returned to the treasury of the Company and retired.  As
a result of the consummation of the Share Exchange Agreement, Mr. and Mrs. Dow
became the sole owners of Airborne.  Concurrent with the consummation
of the Share Exchange Agreement, Airborne also assumed all pre- and post-closing
rights and obligations of the Company under lease agreements for the Company’s
IST Center and the Company’s 236 Sing Sing Road, Horseheads, New York
location.  The Company did not obtain a third party valuation with
respect to this transaction.





Immediately
prior to entering into the Airborne Loan Agreement, EuroAmerican Investment
Corp. (“EuroAmerican”) loaned the Company an aggregate of up to $750,000 for the
purpose of funding the Airborne Loan Agreement discussed below.  The
EuroAmerican loan is evidenced by a Promissory Note delivered by the Company to
EuroAmerican with a maturity date of February 27, 2011.  The unpaid
principal amount under the Promissory Note accrues interest at the annual rate
of 12% and is payable in monthly interest only payments until maturity, at which
time the entire principal balance and any accrued but unpaid interest is payable
in full.  Two members of the Company’s Board of Directors, William B.
Wachtel and Alvin S. Trenk, issued personal guarantees in connection with the
EuroAmerican Loan.  Mr. Wachtel is a principal of
EuroAmerican.


24




SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


Notes
To Consolidated Financial Statements




Simultaneous
with the consummation of the Share Exchange, the Company made a non-interest
bearing loan to Airborne of $750,000 pursuant to a Loan Agreement dated March 2,
2009 (the “Airborne Loan Agreement”).  Under the Airborne Loan
Agreement, the Company made a commitment to loan Airborne an aggregate up to
$750,000; $500,000 of such amount was loaned by the Company to Airborne on March
2, 2009, and the balance of which was loaned by the Company to Airborne on March
12, 2009 upon the satisfactory achievement by Airborne of certain agreed upon
targets. Beginning on September 1, 2009 and continuing the first day of each
month thereafter until July 31, 2015 Airborne shall pay equal payments of
$10,500 to the Company under the Airborne Loan Agreement. Beginning on August 1,
2015 and continuing the first day of each month thereafter the monthly payment
by Airborne to the Company under the Airborne Loan Agreement shall be
$8,000.  The Airborne Loan Agreement is secured by the assets of
Airborne, subordinate to a first lien in favor of Five Star Bank (“Five
Star”).  The Airborne Loan Agreement did not contain any personal
guarantees from the shareholders of Airborne.   The Airborne Loan
Agreement provides that in the event of a subsequent sale of Airborne or its
assets, the proceeds of such sale shall be used first to repay the existing
credit facility with Five Star Bank and next to repay any outstanding principal
under the Airborne Loan Agreement.  In addition, the Airborne Loan
Agreement provides that the Company will share a percentage of any remaining
available sale proceeds, the amount of which will vary depending on the timing
of a sale transaction.  The Airborne Loan Agreement has been recorded
at its present value of as of December 31, 2009 of $619,720 based on a discount
rate of 7%.





Also on
March 2, 2009, the Company, Airborne and Five Star Bank (“Five Star”) entered
into a Loan Agreement, which was subsequently assigned to Birch Hill Capital,
LLC (the “Birch Hill Loan Agreement”). Effective December 29, 2009, Five Star
executed an Allonge and an Assignment of Note and Note Documents (together, the
“Assignment Documents”) pursuant to which a revolving line of credit agreement
(the “Credit Facility”) and related documents and agreements dated March 3, 2009
made jointly and severally by Airborne and the Company in favor of Five Star
(collectively, the “Loan Agreements”) were sold, assigned and transferred to
Birch Hill Capital, LLC (“Birch Hill”). Under the Birch Hill Loan Agreement,
among other things, Five Star made a commitment to loan the Company and Airborne
an aggregate of up to $1,000,000 on a demand line of credit basis. The Birch
Hill Capital Loan Agreement replaced the Company’s existing credit facility with
Five Star (See Note 3). The Birch Hill Loan Agreement contains customary
representations, warranties and financial covenants. Borrowings under the Loan
Agreement are secured by (i) a blanket security interest in all of the assets of
the Company and Airborne, and (ii) an unlimited guaranty from the subsidiaries
of the Company and Airborne.





The
divestiture eliminated the Company’s charter segment, one of three previously
reported segments (together with FBO and maintenance). The divestiture also had
a significant impact on the maintenance segment. There remains a relatively
minor maintenance business performed in conjunction with the Company’s FBO
operation in Pennsylvania. The Company believes that the previous reporting of
its business in multiple segments was appropriate and provided a greater
understanding of its disparate businesses at that time. Given the divestiture of
Airborne and the resulting commonality in the Company’s continuing business,
management believes that reporting multiple segments is no longer
appropriate.





A summary
of the assets sold, liabilities assumed, costs incurred and calculated gain/loss
as part of the transaction are as follows:





Cash
      and cash equivalents
                          
                          $
                          229,188Accounts
      receivable, net
                          
                          
                          3,113,401Inventories
                          
                          
                          171,320Prepaid
      expenses and other current assets
                          
                          
                          308,082Property
      and equipment, net
                          
                          
                          431,159Deposits
                          
                          
                          38,325Total
      assets sold
                          
                          $
                          4,291,475Accounts
      payable
                          
                          $
                          4,148,742Customer
      deposits
                          
                          
                          236,790Accrued
      expenses
                          
                          
                          186,579Notes
      payable – current portion
                          
                          
                          40,641Total
      liabilities assumed
                          
                          $
                          4,612,752Summary
      of gain on sale of subsidiary:Net
      liabilities assumed
                          
                          $
                          321,277Value
      of common shares surrendered
                          
                          
                          239,297Less
      present value discount of Airborne Loan Agreement
                          
                          
                          (91,312
                          )Gain
      on sale of subsidiary
                          
                          $
                          469,262





The
Company has reported Airborne’s results for the years ended December 31, 2009
and 2008 as discontinued operations because the operations and cash flows have
been eliminated from the Company’s continuing operations.


25




SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


For the Years Ended
                    December 31,2009
                  
                  
                  2008Revenue
                  
                  $
                  3,911,447
                  
                  
                  $
                  38,273,031Cost
      of revenue
                  
                  
                  3,381,030
                  
                  
                  
                  32,195,550Gross
      Profit
                  
                  
                  530,417
                  
                  
                  
                  6,077,481Operating
      expenses
                  
                  
                  1,056,988
                  
                  
                  
                  9,958,484Operating
      loss from discontinued operations
                  
                  
                  (526,571
                  )
                  
                  
                  (3,881,003
                  )Interest
      income (expense), net
                  
                  
                  (2,670
                  )
                  
                  
                  8Other
      income (expense), net
                  
                  
                  (18,227
                  )
                  
                  
                  —Net
      loss from discontinued operations
                  
                  $
                  (547,468
                  )
                  
                  $
                  (3,880,995
                  )





NOTE 3 –
Management’s Liquidity
Plans





As of
December 31, 2009, the Company had cash and cash equivalents of $574,847 and a
working capital deficit of $472,515. The Company generated revenue of
approximately $8,700,000 and net loss from continuing operations of
approximately $332,000 for the year ended December 31, 2009. For the year ended
December 31, 2009, cash flows of continuing and discontinued operations included
net cash used in operating activities of $588,237, net cash used in investing
activities of $1,377,405, and net cash provided by financing activities of
$1,067,954.





As
discussed in Note 2 herein, effective December 29, 2009, Five Star executed an
Allonge and an Assignment of Note and Note Documents (together, the “Assignment
Documents”) pursuant to which a revolving line of credit agreement (the “Credit
Facility”) and related documents and agreements dated March 3, 2009 made jointly
and severally by Airborne and the Company in favor of Five Star (collectively,
the “Loan Agreements”) were sold, assigned and transferred to Birch Hill. The
Credit Facility provides the Company with a $1,000,000 revolving line of credit
with the Bank. Amounts outstanding under the Credit Facility will bear interest
at a rate equal to the prime rate published in the Wall Street Journal from time
to time plus 350 basis points. The Credit Facility is secured by all of the
Company’s assets as well as the assets of Airborne and Airborne is an additional
guarantor of the Credit Facility, as discussed above. The Credit Facility is
payable upon demand by the Bank and requires interest payments based on
outstanding balances at an interest rate of prime plus 350 basis points (6.75%
as of December 31, 2009). As described in Note 2, in connection with the
Airborne divestiture, Birch Hill retains a first lien against all of Airborne’s
and Saker’s assets. Further, Airborne joins Saker as joint and several
guarantors of borrowings against the Credit Facility. In the event of a sale of
Airborne, Birch Hill shall receive the first distribution of any related
proceeds in the full amount of any outstanding against the Credit
Facility.





The
Company believes the exit of the Company’s former President and Chief Executive
via the Airborne divestiture discussed in Note 2 above combined with the prior
departure of the Company’s Senior Vice President and Chief Financial Officer
yielded annual compensation savings of over $500,000. No additional personnel
were required to assume those duties. Along with savings from other areas,
corporate operating expenses were approximately $650,000 lower in the year ended
December 31, 2009 as compared with the same period in 2008. The Company further
believes that various expenses incurred in 2009 were of a one-time nature and,
consequently, will not recur in 2010.





As part
of the concession agreement for the Heliport, the Company must pay the greater
of 18% of the first $5 million in program year revenue and 25% of revenue in
excess of $5 million or minimum annual guaranteed payments that begin at $1.2
million in Year 1 and increase to approximately $1.7 million in Year 10. The
Company also agreed to make certain capital improvements and safety code
compliance upgrades to the Heliport in the amount of $1,000,000 over the first
two years following the receipt of building permits for the capital improvements
and another $1,000,000 by the end of the fifth year of the Agreement. We believe
that earnings from the operation of the Heliport will be sufficient to satisfy
the minimum annual guarantee and to fund the capital improvements as
required.





The
Company believes that it has sufficient liquidity to sustain its existing
business for at least the next twelve months.





Note 4 –
Going Concern –
December 31, 2008





As of
December 31, 2008, the Company had cash and cash equivalents of $322,098 and had
a working capital deficit of $755,544. The Company generated revenue of
approximately $8,620,000 and net loss of approximately $4,905,000 for the year
ended December 31, 2008. Since inception, the Company has incurred, in the
aggregate, net losses of approximately $10,650,000 for the period January 17,
2003 (date of inception) through December 31, 2008. For the year ended December
31, 2008, cash flows of continuing and discontinued operations included net cash
used in operating activities of $2,121,727, net cash used in investing
activities of $438,673, and net cash provided by financing activities of
$1,632,783.


26


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements




As
described in Note 3 to the financial statements for the year ended December 31,
2008, the Heliport requires minimum annual guaranteed payments and certain
capital improvements and safety code compliance upgrades. Management believes
that earnings from the operation will be sufficient to satisfy the minimum
annual guarantee and has secured a verbal agreement to fund the capital
improvements as required.





On
September 26, 2008, FirstFlight completed a revolving line of credit agreement
(the “Credit Facility”) with Five Star Bank (the “Bank”). The Credit Facility
provides the Company with a $1,000,000 revolving line of credit with the Bank.
Amounts outstanding under the Credit Facility will bear interest at a rate equal
to the prime rate published in the Wall Street Journal form time to time plus
200 basis points. The Credit Facility is secured by all of the Company’s assets
as well as the assets of Airborne and Airborne is an additional guarantor of the
Credit Facility, as discussed below and in Note 19 to the financial statements
for the year ended December 31, 2008. The Credit Facility is payable upon demand
by the Bank and requires interest payments based on outstanding balances at an
interest rate of prime plus 200 basis points (5.75% as of December 31, 2008).
See Note 2 to the financial statements for the year ended December 31, 2008
regarding amended loan agreement. As described in Note 2 to the financial
statements for the year ended December 31, 2008, in connection with the Airborne
divestiture, the Bank retains a first lien against all of Airborne’s and
FirstFlight’s assets. Further, Airborne joins FirstFlight as joint and several
guarantors of borrowings against the Credit Facility. In the event of a sale of
Airborne, the Bank shall receive the first distribution of any related proceeds
in the full amount of any outstanding against the Credit Facility.





The
combination of the divestiture and other steps will have a significant impact on
the cost of corporate operations. The exit of the Company’s former President and
Chief Executive via the Airborne divestiture combined with the prior departure
of the Company’s Senior Vice President and Chief Financial Officer will yield
annual compensation savings of over $525,000. It is anticipated that other
employees within the continuing operations will absorb the duties of these
individuals.





The
Company anticipates that it may need additional funds to meet operations,
capital expenditures, existing commitments and scheduled payments on outstanding
indebtedness for the next twelve month period. If the Company, in conjunction
with Airborne as described above, were unable to repay the amounts under the
Credit Facility, the Bank could proceed against the security granted to them to
secure that indebtedness. The Company's assets may not be sufficient to repay in
full the indebtedness under the Credit Facility. If the Bank were to demand
payment of the Company's indebtedness, the Company may be unable to pay all of
its liabilities and obligations when due.





These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. Accordingly, the accompanying consolidated financial statements
have been prepared in conformity with accounting principles generally accepted
in the United States of America, which contemplate continuation of the Company
as a going concern and the realization of assets and the satisfaction of
liabilities in the normal course of business. The carrying amounts of assets and
liabilities presented in the financial statements do not necessarily purport to
represent realizable or settlement values. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.





NOTE 5 –
Sale of
Subsidiary





On June
26, 2009, the Company sold NWJC. NWJC was sold for approximately $279,000. A
portion of the proceeds were escrowed in connection with the Terrance P. Kelley
and Gold Jets, LLC litigation, which was subsequently settled as described in
Note 17 below. During the fourth quarter, net proceeds of the transaction were
recorded in other income for the year ended December 31, 2009. See Note
7.





NOTE 6 -
Summary of Significant
Accounting Policies





Principles of
Consolidation


The
consolidated financial statements include the accounts of Saker Aviation
Services, Inc. and its wholly-owned subsidiaries, FBOWB, FBOGC, FBO Air WB
Leasing (“WB Leasing”), and FFH. All significant inter-company accounts and
transactions have been eliminated in consolidation. Results associated with
Airborne, M&A and NWJC are reported as discontinued operations as of
December 31, 2009 and 2008.





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. The Company’s significant
estimates include depreciation, impairment of goodwill and intangibles,
stock-based compensation, allowance for doubtful accounts, and deferred tax
assets.


27




SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


Cash and Cash
Equivalents


The
Company considers all highly liquid debt instruments with original maturities of
three months or less when purchased to be cash equivalents. Due to their
short-term nature, cash equivalents are carried at cost, which approximate fair
value.





Cash
Concentrations


The
Company maintains its cash and cash equivalents with various financial
institutions, which exceeded federally insured limits throughout the period. At
December 31, 2009 and 2008, the Company had cash and cash equivalents in excess
of federally insured limits. As part of its cash management process, the Company
periodically reviews the relative credit standing of these financial
institutions.





Accounts
Receivable


The
Company extends credit to large and mid-size companies for flight related
services. The Company has concentrations of credit risk in its continuing
operations in that 59.5% of the balance of accounts receivable at December 31,
2009 is made up of only three customers. At December 31, 2009, accounts
receivable in the Company’s continuing operations from its three largest
accounts amounted to approximately $231,400 (28.5%), $131,900 (16.3%), and
$118,800 (14.7%), respectively. The Company has in place a security deposit in
connection with each of these three 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. As of December 31, 2009 and 2008, the Company has
recorded an allowance for doubtful accounts of $0.





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.





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.





Business
Combinations


In
accordance with business combination accounting, the Company allocates the
purchase price of acquired companies to the tangible and intangible assets
acquired and liabilities assumed, based on their estimated fair values based on
significant estimates and assumptions, especially with respect to intangible
assets. Management makes estimates of fair values based upon assumptions
believed to be reasonable. These estimates are based on historical experience
and information obtained from the management of the acquired companies. Critical
estimates in valuing certain of the intangible assets include but are not
limited to: future expected cash flows from customer relationships and market
position, as well as assumptions about the period of time the acquired trade
names will continue to be used in the combined company's product portfolio; and
discount rates. These estimates are inherently uncertain and unpredictable.
Assumptions may be incomplete or inaccurate, and unanticipated events and
circumstances may occur which may affect the accuracy or validity of such
assumptions, estimates or actual results.





Goodwill and Intangible
Assets


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 determined that there is no impairment of
goodwill for continuing operations at December 31, 2009 and 2008. The Company
performed an analysis of its goodwill and intangible assets at December 31, 2009
and 2008 and determined that an impairment charge of $2,634,663 was necessary at
December 31, 2008 and has recorded this charge to discontinued
operations.





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. 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.


28


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


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, 2009 and 2008 was approximately $9,300 and $20,100,
respectively.





Income
Taxes


Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between their financial statement carrying amounts
and their respective tax bases and for net operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income or loss in the years in which those
temporary differences and carryforwards are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company’s ability to utilize its net operating loss (“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 carryforwards may
be subject to an annual limitation in future periods pursuant to Section 382 of
the Code. 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 2006.





Fair Value of Financial
Instruments


The
reported amounts of the Company’s financial instruments, including cash
equivalents, accounts receivable, 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. The carrying value of the Note Receivable
approximates fair value because it was discounted at a current market rate (Note
2).





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.





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





For the Year Ended
                      December 31,2009*
                    
                    
                    2008*Weighted
      average common shares outstanding, basic
                    
                    
                    34,314,400
                    
                    
                    
                    36,582,987Common
      shares upon exercise of options
                    
                    
                    —
                    
                    
                    
                    —Common
      shares upon exercise of warrants
                    
                    
                    —
                    
                    
                    
                    —Weighted
      average common shares outstanding, diluted
                    
                    
                    34,314,400
                    
                    
                    
                    36,582,987





*
Potential common shares of 14,667,121 and 16,427,121 underlying options and
warrants outstanding as of December 31, 2009 and 2008, respectively, were
excluded from the computation of diluted earnings per share, as their as their
inclusion would be anti-dilutive.


29




SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


Stock Based
Compensation


Stock-based
compensation expense for all share-based payment awards are based on the
estimated grant-date fair value. The Company recognizes these compensation costs
over the requisite service period of the award, which is generally the option
vesting term. For the years ended December 31, 2009 and 2008, the Company
incurred stock based compensation of $268,435 and $414,555, respectively. Such
amounts have been recorded as part of the Company’s selling, general and
administrative expenses in the accompanying consolidated statements of
operations.  As of December 31, 2009, the unamortized fair value of
the options totaled $3,219 and the weighted average remaining amortization
period of the options is approximately 0.67 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 award granted during the years ended December
31, 2009 and 2008 were estimated using the Black-Scholes option pricing model
with the following weighted average fair values:





For the Year Ended
                  December 31,2009
                
                
                2008Dividend
      yield
                
                
                0
                %
                
                
                0
                %Expected
      volatility
                
                
                491
                %
                
                
                291
                %Risk-free
      interest rate
                
                
                2.09
                %
                
                
                3.51
                %Expected
      lives
                
                5.0
      years
                
                
                5.83
      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, 2009 and 2008, was
$0.36 and $0.38, respectively.





Recently Issued Accounting
Pronouncements


During
2009, FASB launched the FASB ASC as the single source of authoritative
nongovernmental GAAP.  The ASC was effective for interim and annual
periods ending September 15, 2009.  The ASC does not change
GAAP.  Instead, it takes all individual pronouncements that currently
comprise GAAP and reorganizes them into approximately 90 accounting Topics, and
displays all Topics using a consistent structure.  Changes to the ASC
subsequent to June 30, 2009, are referred to as Accounting Standards Updates
(“ASU”).





On June
30, 2009, the FASB issued ASI 2009-01, “Topic 105 – Generally Accepted
Accounting Principles, amendments based on Statement of Financial Accounting
Standards No. 168 – The FASB Accounting Standard Codification and the Hierarchy
of Generally Accepted Accounting Principles.”  This ASU amends the
FASB ASC for the issuance of FASB Statement of Financial Accounting Standards
(SFAS”) No. 168, “The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles.”  This ASU includes FASB
SFAS No. 168 in its entirety.  ASU 2009-01 was effective for interim
and annual periods ending after September 15, 2009.  The adoption of
ASU 2009-01 had no effect on the operating results or financial condition of the
Company.





In
December 2007, the FASB issued ASC 810, “Non-Controlling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51).  ASC
810 established accounting and reporting standards for the non-controlling
interest in a subsidiary (previously referred to as minority interests). ASC 810
also requires that a retained non-controlling interest upon the deconsolidation
of a subsidiary be initially measured at its fair value. Upon adoption of ASC
810, the Company was required to report any non-controlling interests as a
separate component of consolidated stockholders’ equity. The Company was also
required to present any net income or loss allocable to non-controlling
interests and net income or loss attributable to the stockholders of the Company
separately in its consolidated statements of operations, if significant. ASC 810
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after January 1, 2009. ASC 810 requires retroactive adoption of
the presentation and disclosure requirements for existing minority interests.
All other requirements of ASC 810 are applied prospectively. The Company adopted
ASC 810 and reclassified the non-controlling interest in FFH as a separate
component of consolidated stockholders’ equity on January 1,
2009.   The adoption of ASC 810 did not have a material impact on
the Company’s results of operation or financial condition.


30




SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


Notes
To Consolidated Financial Statements




NOTE 7 –
Acquisition of New
World Jet Corporation





On July
22, 2008, the Company and a newly-formed wholly-owned subsidiary, New World Jet
Acquisition Corporation (“NWJAC”), executed a Stock Purchase Agreement with Gold
Jets LLC whereby NWJAC agreed to purchase all of the issued and outstanding
capital stock of New World Jet Corporation (“NWJC”) from Gold Jets LLC. The
acquisition occurred on August 5, 2008. As part of the transaction, the Company
made a cash payment of $120,000, incurred approximately $108,000 in transaction
costs, assumed a working capital deficit as recorded on closing of up to
$250,000, and agreed to future contingent post-closing payments tied to the
performance of acquired aircraft. Future contingent cash payments include 25
percent of net charter commissions, management fees, and maintenance
coordination fees; 50 percent of the net proceeds on the sale of NWJC’s air
carrier certificate; 33 percent of the initial year’s block charter commissions;
and 25 percent of any aircraft transaction fees. The Company also issued Gold
Jets LLC a warrant to purchase up to 2,000,000 shares of Saker’s common stock at
an exercise price of $0.50 per share. The vesting of the warrants were
contingent on having eight aircraft on the Company’s air carrier certificate at
each measurement date. Subject to the Company’s legal remedies and rights under
the Stock Purchase Agreement, the vesting of these warrants were accelerated by
the Airborne divestiture and resulted in a charge of $191,167 in 2008 to
discontinued operations relating to the fair value of the vested warrants. For
the period August 6, 2008 through March 2, 2009, the Company incurred losses
related to the acquisition of approximately $848,000.





All
assets and liabilities of NWJC have been recorded in the Company’s consolidated
balance sheet at their fair values at the date of acquisition. Identifiable
intangible assets and goodwill related to the original purchase approximated
$448,638. Identifiable intangible assets included customer relationships, which
are being amortized over an estimated useful life of three years. The amounts of
these intangibles have been estimated based upon information available to
management and are subject to change in the near term.





The
following table details the allocation of the purchase price and cash payments
made for the acquisition:





Fair ValueCash
                
                $
                4,245Accounts
      receivable
                
                
                85,027Prepaid
      expenses
                
                
                70,701Equipment
                
                
                30,305Intangible
      assets – customer relationships
                
                
                50,000Goodwill
                
                
                398,638Accounts
      payable and accrued expenses
                
                
                (409,973
                )Total
      cash paid for acquisition
                
                $
                228,943





As
discussed in Note 2, the results of NWJC from August 6, 2008 through December
31, 2009 are reflected in the Company’s results from discontinued operations for
the period ended December 31, 2009.  As discussed in Note 2, the
Company decided to divest its Airborne subsidiary in fourth quarter
2008.  Accordingly, pro-forma presentation is not presented since the
business of NWJC was part of the charter segment and, as such, became part of
discontinued operations in connection with the divestiture of
Airborne.





Pursuant
to the Stock Purchase Agreement, the Company is required to make contingent
payments based on future results.  Those payments are required for a
period of three years following the transaction consummation.  At
December 31, 2009, contingent cash payments were accrued totaling $11,828 for
the period October 1, 2008 through December 31, 2009.  These payments
are charged to goodwill when incurred, therefore the cumulative goodwill from
the NWJC acquisition at December 31, 2009 totaled $805,053, and were included in
the impairment charge.  The Company was not required to make any
contingent payments related to warrants through December 31, 2009.





On June
26, 2009, the Company sold NWJC.  See Note 5.





NOTE 8 -
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.





Inventories
consist of the following:





December
      31,2009
                
                
                2008Parts
      inventory
                
                $
                95,793
                
                
                $
                101,006Fuel
      inventory
                
                
                172,049
                
                
                
                116,532Other
      inventory
                
                
                10,099
                
                
                
                12,161Total
      inventory
                
                $
                277,941
                
                
                $
                229,699




31


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements




Included
in fuel inventory are amounts held for third parties of $84,685 and $45,484 as
of December 31, 2009 and 2008, respectively, with an offsetting liability
included as part of accrued expenses.





NOTE 9 -
Property and
Equipment




Property
and equipment consist of the following:


December
      31,
                    
                    Estimated2009
                    
                    
                    2008
                    
                    Useful LifeAircraft
                    
                    $
                    254,784
                    
                    
                    $
                    254,784
                    
                    7 – 12 yearsVehicles
                    
                    
                    251,897
                    
                    
                    
                    251,897
                    
                    5 –
      10 yearsOffice
      furniture and equipment
                    
                    
                    109,821
                    
                    
                    
                    94,613
                    
                    3 –
      7 yearsTools
      and shop equipment
                    
                    
                    319,452
                    
                    
                    
                    319,452
                    
                    3 –
      10 yearsLeasehold
      improvements
                    
                    
                    471,183
                    
                    
                    
                    214,043
                    
                    7 –
      17 yearsBuilding/fuel
      farm
                    
                    
                    200,000
                    
                    
                    
                    —
                    
                    7 –
      17 yearsTotal
                    
                    
                    1,607,137
                    
                    
                    
                    1,134,789Less:
      accumulated depreciation and amortization
                    
                    
                    (518,751
                    )
                    
                    
                    (383,059
                    )Property
      and equipment, net
                    
                    $
                    1,088,386
                    
                    
                    $
                    751,730




Depreciation
and amortization expense from continuing operations for the years ended December
31, 2009 and 2008 was approximately $136,000 and $132,000,
respectively.  Depreciation and amortization from discontinued
operations for the years ended December 31, 2009 and 2008 was approximately
$12,000 and $247,000, respectively.





NOTE 10 –
Goodwill and
Intangible Assets




As of
December 31, 2009, goodwill and intangible assets consisting exclusively of
trade names related to the acquisitions of Tech Aviation Services, Inc. (“Tech”)
in Wilkes-Barre, Pennsylvania and Central Plains Aviation, Inc. (“CPA”) in
Garden City, Kansas are not subject to amortization.




During
the years ended December 31, 2009 and 2008, the Company recorded amortization
expense related to the acquired amortizable intangibles of approximately $0 and
$157,000, respectively.





NOTE 11 -
Notes Payable and Line
of Credit





Notes
payable consist of:





December 31,2009
                                        
                                        
                                        2008EuroAmerican
      Note – secured by the assets of Saker, 12% interest only,
      matures February 2011
                                        
                                        $
                                        750,000
                                        
                                        
                                        
                                        —Avfuel
      Note – secured by a fuel farm of FBOGC, interest at Prime plus 350 basis
      points, matures December 2015
                                        
                                        
                                        200,000
                                        
                                        
                                        
                                        —Sellers
      – Tech, secured by assets of Tech and guaranteed by Saker, 5% interest,
      matures March 2011
                                        
                                        
                                        114,596
                                        
                                        
                                        $
                                        192,914Other
                                        
                                        
                                        56,143
                                        
                                        
                                        
                                        72,550Subtotal
                                        
                                        
                                        1,120,739
                                        
                                        
                                        
                                        265,464Less:
      current portion
                                        
                                        
                                        (170,922
                                        )
                                        
                                        
                                        (125,929
                                        )Total
      – long term
                                        
                                        $
                                        949,817
                                        
                                        
                                        $
                                        139,535




32




SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


Notes
To Consolidated Financial Statements




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





For the years ended December
      31,
                                  
                                  Total2010
                                  
                                  $
                                  170,9222011
                                  
                                  
                                  828,1502012
                                  
                                  
                                  40,0002013
                                  
                                  
                                  40,0002014
                                  
                                  
                                  40,000Thereafter
                                  
                                  
                                  1,667TOTAL
                                  
                                  $
                                  1,120,739





The line
of credit is discussed in Notes 2 and 3.





NOTE 12 -
Income
Taxes




As of
December 31, 2009, the Company had federal and state net operating loss
carryforwards of approximately $2,400,000 expiring in various years through
2029, 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.





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




December 31,2009
                        
                        
                        2008Deferred
      tax assets:Operating
      loss carryforwards
                        
                        $
                        936,158
                        
                        
                        $
                        1,546,161Stock
      based compensation
                        
                        
                        750,019
                        
                        
                        
                        722,867Allowance
      for doubtful accounts
                        
                        
                        —
                        
                        
                        
                        20,790Deferred
      start up costs
                        
                        
                        64,227
                        
                        
                        
                        91,085Intangible
      assets
                        
                        
                        —
                        
                        
                        
                        295,690Accrued
      expenses
                        
                        
                        18,879
                        
                        
                        
                        18,879Goodwill
                        
                        
                        —
                        
                        
                        
                        887,835Total
      deferred tax assets
                        
                        
                        1,769,283
                        
                        
                        
                        3,583,307Deferred
      tax liabilities:Goodwill
                        
                        
                        (41,601
                        )
                        
                        
                        —Property
      and Equipment
                        
                        
                        (91,732
                        )
                        
                        
                        (108,206
                        )Total
      deferred tax liabilities
                        
                        
                        (133,333
                        )
                        
                        
                        (108,206
                        )Deferred
      tax assets – net of deferred tax liabilities
                        
                        
                        1,635,950
                        
                        
                        
                        3,475,100Valuation
      Allowance
                        
                        
                        (1,635,950
                        )
                        
                        
                        (3,475,100
                        )Deferred
      tax assets – net of valuation allowance
                        
                        $
                        —
                        
                        
                        $
                        —Change
      in valuation allowance
                        
                        $
                        1,839,150
                        
                        
                        $
                        1,901,540




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:


33


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


December 31,2009
                  
                  
                  2008Tax
      expense (benefit) at statutory rate
                  
                  
                  (34.0
                  )
      %
                  
                  
                  (34.0
                  )%State
      and local income taxes (benefit), net of federal
                  
                  
                  (5.0
                  )
      %
                  
                  
                  (5.0
                  )%Non-deductible
      expenses
                  
                  
                  —
                  %
                  
                  
                  1.0
                  %Change
      in estimate of prior year tax provision
                  
                  
                  —
                  %
                  
                  
                  (1.0
                  )
      %Change
      in valuation allowance
                  
                  
                  39
                  %
                  
                  
                  39
                  %Effective
      income tax rate
                  
                  
                  —
                  
                  
                  
                  —




NOTE 13 –
Stockholders’
Equity





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 Saker approved the
Plan.  The Plan is administered by Saker’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 up to 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, 2009 and 2008, there were
6,575,000 and 4,540,000 shares, respectively, available for grant as options
under the Plan.





Details
of all options outstanding are presented in the table below:





Number of
                    Options
                  
                  
                  Weighted Average
                    Exercise PriceBalance,
      January 1, 2008
                  
                  
                  2,360,000
                  
                  
                  $
                  0.57Granted
                  
                  
                  925,000
                  
                  
                  
                  0.17Exercised
                  
                  
                  —
                  
                  
                  
                  —Forfeited
                  
                  
                  —
                  
                  
                  
                  —Balance,
      January 1, 2009
                  
                  
                  3,285,000
                  
                  
                  $
                  0.50Granted
                  
                  
                  375,000
                  
                  
                  
                  0.09Exercised
                  
                  
                  —
                  
                  
                  
                  —Forfeited
                  
                  
                  (2,410,000
                  )
                  
                  
                  0.35Balance,
      December 31, 2009
                  
                  
                  1,250,000
                  
                  
                  $
                  0.64





On
December 1, 2009, the Company granted a stock option to each of the four
non-employee directors to purchase 25,000 shares of common stock at $0.12 per
share, the closing price of the Company’s common stock on December 1,
2009.  Each option vests on December 1, 2010 and expires on December
1, 2014.  These options are collectively valued at $12,000 and are
being amortized over the vesting period.





On June
18, 2009, the Company granted a stock option to an employee to purchase 25,000
shares of common stock at $0.035 per share, the closing price of the Company’s
common stock on June 17, 2009.  The option vests on June 18, 2010 and
expires on June 18, 2014.  This option is valued at $875 and is being
amortized over the vesting period.





On
January 19, 2009, under the terms of an employment agreement, the Company
granted an employee a stock option to purchase 250,000 shares of common stock at
$0.08 per share, the closing price of the Company’s common stock on January 16,
2009.  This option vests on January 19, 2010 and expires on January
18, 2015.  This option is valued at $20,000 and is being amortized
over the two-year term of the employment agreement.





On March
1, 2009, a series of options for a former director expired.  In total,
75,000 shares underlying those options were forfeited as of that
date.


34


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


On March
2, 2009, a series of options for a former employee were forfeited in connection
with the divestiture discussed in Note 2.  In total 500,000 shares
underlying those options were forfeited as of that date.





On March
31, 2009, a series of options for a former employee expired.  In
total, 750,000 shares underlying those options were forfeited as of that
date.





On May 1,
2009, options for a series of employees expired.  In total, 160,000
shares underlying those options were forfeited as of that date.





On June
2, 2009, options for two former directors expired.  In total, 150,000
shares underlying those options were forfeited as of that date.





On June
2, 2009, options for three former employees expired.  In total,
775,000 shares underlying those options were forfeited as of that
date.





On
December 1, 2008, the Company granted a stock option to each of the seven
non-employee directors to purchase 25,000 of common stock at $0.08 per share,
the closing price of the Company’s common stock on December 1,
2008.  Each option vested on December 1, 2009 and expires on December
1, 2013.  These options were collectively valued at
$14,000.





On
September 15, 2008, under the terms of an employment agreement, the Company
granted an employee a stock option to purchase 250,000 shares of common stock at
$0.29 per share, the closing price of the Company’s common stock on September
14, 2008.  The option vested on September 15, 2009 and expires on September
14, 2014.  This option was valued at $72,491 and is being amortized over
the remaining one-year term of the employment agreement.





On July
1, 2008, under the terms of an employment agreement, the Company granted an
employee a stock option to purchase 250,000 shares of common stock at $0.40 per
share, the closing price of the Company’s common stock on June 30, 2008. 
The option vested on July 1, 2009 and expires on June 30, 2014.  This
option was valued at $99,982 and is being amortized over the two-year term of
the employment agreement.





On
January 19, 2008, under the terms of an employment agreement, the Company
granted an employee a stock option to purchase 250,000 shares of common stock at
$0.40 per share, the closing price of the Company’s common stock on January 18,
2008.  This option vested on January 19, 2009 and expires on January
18, 2014.  This option was valued at $99,970 and is being amortized
over the two-year term of the employment agreement.





A summary
of the Company’s stock options outstanding and exercisable at December 31, 2009
is presented in the table below:





Exercise Price
                            
                            
                            Outstanding
                            
                            
                            Weighted average remaining
                              contractual life of
                              options (in years)
                            
                            
                            Exercisable
                            
                            
                            Intrinsic
                              Value$
                            0.035
                            
                            
                            
                            25,000
                            
                            
                            
                            4.46
                            
                            
                            
                            —
                            
                            
                            $
                            —$
                            0.08
                            
                            
                            
                            100,000
                            
                            
                            
                            3.92
                            
                            
                            
                            100,000
                            
                            
                            $
                            —$
                            0.12
                            
                            
                            
                            100,000
                            
                            
                            
                            4.92
                            
                            
                            
                            —
                            
                            
                            $
                            —$
                            0.36
                            
                            
                            
                            200,000
                            
                            
                            
                            2.61
                            
                            
                            
                            200,000
                            
                            
                            $
                            —$
                            0.39
                            
                            
                            
                            250,000
                            
                            
                            
                            2.25
                            
                            
                            
                            250,000
                            
                            
                            $
                            —$
                            0.50
                            
                            
                            
                            250,000
                            
                            
                            
                            1.25
                            
                            
                            
                            250,000
                            
                            
                            $
                            —$
                            0.64
                            
                            
                            
                            75,000
                            
                            
                            
                            0.92
                            
                            
                            
                            75,000
                            
                            
                            $
                            —$
                            1.60
                            
                            
                            
                            250,000
                            
                            
                            
                            0.25
                            
                            
                            
                            250,000
                            
                            
                            $
                            —TOTALS
                            
                            
                            
                            1,250,000
                            
                            
                            
                            
                            
                            
                            
                            1,125,000
                            
                            
                            $
                            —





Warrants


Details
of all warrants outstanding are presented in the table below:





Number of
                    Warrants
                  
                  
                  Weighted Average
                    Exercise PriceBalance,
      January 1, 2008
                  
                  
                  11,117,121
                  
                  
                  $
                  0.78Granted
                  
                  
                  2,000,000
                  
                  
                  
                  0.50Exercised
                  
                  
                  —
                  
                  
                  
                  —Forfeited
                  
                  
                  —
                  
                  
                  
                  —Balance,
      January 1, 2009
                  
                  
                  13,117,121
                  
                  
                  $
                  0.74Granted
                  
                  
                  2,900,000
                  
                  
                  
                  0.05Exercised
                  
                  
                  —
                  
                  
                  
                  —Forfeited
                  
                  
                  2,600,000
                  
                  
                  
                  0.62Balance,
      December 31, 2009
                  
                  
                  13,417,121
                  
                  
                  $
                  0.71




35




SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES


Notes
To Consolidated Financial Statements




On
December 29, 2009, the Company issued a warrant to purchase up to 2,900,000
shares of the Company’s common stock at an exercise price of 0.05 per
share.  The warrants were issued in connection with a financing
event.





On March
2, 2009, a warrant for the former president and CEO of the Company was forfeited
in connection with the divestiture discussed in Note 2.  In total
600,000 shares underlying this warrant were forfeited as of that
date.





On
December 28, 2009, under the terms of a settlement agreement, a warrant to
purchase up to 2,000,000 shares of the Company’s common stock was
forfeited.





On July
22, 2008, the Company issued a warrant to purchase up to 2,000,000 shares of the
Company’s common stock at an exercise price of $0.50 per share.  See Note 7
herein.





A summary
of the Company’s warrants outstanding and exercisable at December 31, 2009 is
presented in the table below:





Exercise Price
                                      
                                      
                                      Outstanding
                                      
                                      
                                      Weighted average remaining
                                        contractual life of
                                        warrants (in years)
                                      
                                      
                                      Exercisable
                                      
                                      
                                      Intrinsic
                                        Value$
                                      0.05
                                      
                                      
                                      
                                      2,900,000
                                      
                                      
                                      
                                      5.00
                                      
                                      
                                      
                                      2,900,000
                                      
                                      
                                      $
                                      —$
                                      0.60
                                      
                                      
                                      
                                      6,092,121
                                      
                                      
                                      
                                      0.33
                                      
                                      
                                      
                                      6,092,121
                                      
                                      
                                      $
                                      —$
                                      1.00
                                      
                                      
                                      
                                      4,425,000
                                      
                                      
                                      
                                      1.67
                                      
                                      
                                      
                                      4,425,000
                                      
                                      
                                      $
                                      —TOTALS
                                      
                                      
                                      
                                      13,417,121
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      13,417,121
                                      
                                      
                                      $
                                      —





Restricted
Stock


On
December 28, 2009, under the terms of a settlement agreement, 600,000 shares of
restricted stock were forfeited.





Preferred
Stock


As of
December 31, 2009 and 2008, the Company has 9,999,154 shares of preferred stock
authorized and none issued and outstanding.  The Company’s Board of
Directors currently has the right, with respect to the authorized shares of our
preferred stock, to authorize the issuance of one or more series of preferred
stock with such voting, dividend and other rights as the directors
determine.





NOTE 14 -
Employee Benefit
Plan





Saker
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 2008, the Company matched participant
contributions at a rate of 50% of the first 6% of participant
deferrals.  In June 2009, the Company suspended its match of
participant contributions.  Company contributions to the Plan totaled
approximately $16,000 and $26,000 for the years ended December 31, 2009 and
2008, respectively.





NOTE 15 -
Commitments and
Contingencies




Operating Leases under
Continuing Operations


The
Company leases facilities from the City of Garden City, Kansas, which provides
for: (a) a twenty one-year lease term expiring December 31, 2030, with one
five-year renewal period; (b) a base rent of $1,035 and $2,187 per month for
years one and two and years three through twenty one of the lease, respectively.
In addition a fuel flowage fee of $.05 in 2010 and $0.06 for the years
thereafter 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.


36


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements




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 refueling trucks. As of December 31, 2009 and 2008, the refueling
truck leases require aggregate 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.





Rent
expense from continuing operations aggregated approximately $93,600 for the
years ended December 31, 2009 and 2008.





Future
minimum rental payments under the Company’s operating leases are as
follows:




For
      the year endedDecember 31,
                    
                    Total2010
                    
                    $
                    89,9762011
                    
                    
                    87,4202012
                    
                    
                    87,4202013
                    
                    
                    76,2442014
                    
                    
                    26,244Thereafter
                    
                    
                    419,904TOTAL
                    
                    $
                    787,208




Employment
Agreements


On
September 29, 2008, the Company appointed Gary Hart as its Chief Operating
Officer and Senior Vice President.  The Company and Mr. Hart also
entered into a two year employment agreement (the “Hart Employment Agreement”).
Such employment agreement provided that Mr. Hart would receive an annual
base salary of $200,000 and receive stock options to purchase an aggregate of
500,000 shares of the Company’s common stock, as follows: (i) 250,000
shares on the first anniversary date of the Hart Employment Agreement; and
(ii) 250,000 shares on the second anniversary date of the Hart Employment
Agreement. The price of each tranche of such stock option award shall be equal
to the greater of: (i) the fair market value of the Company’s common stock
as of the close of business on the day immediately preceding the grant date; or
(ii) $0.60 per share. Each tranche of such stock option award shall vest one
year following the date of grant and be exercisable for five years following
vesting.  As a result of the termination of Mr. Hart’s employment
agreement, no such options were issued or have vested.  Effective
November 10, 2008, the Hart Employment Agreement was terminated.





On
September 1, 2006, Saker entered into an employment agreement effective as of
September 15, 2006 with Keith P. Bleier (the “Bleier Employment Agreement”). Mr.
Bleier served Saker as a Senior Vice President and its Chief Financial Officer.
The term of the agreement was for three years, which commenced on September 15,
2006, and thereafter would have automatically renewed for additional one-year
periods. Mr. Bleier’s base annual salary was $185,000 with annual increases of
5%. In addition, he was eligible to receive an annual performance bonus at the
discretion of the Board of Directors. Mr. Bleier was 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, his second option effective September
15, 2007 and his third option effective September 15, 2008.  Mr.
Bleier resigned from his positions with the Company effective December 31, 2009
and the Bleier Employment Agreement was terminated.  Mr. Bleier’s
third option (related to the September 15, 2008 issuance) was forgone in
connection with his resignation on December 31, 2009 and the other options
expired on March 31, 2009.





On
September 22, 2005, Saker entered into an employment agreement with John H. Dow
(the “Dow Employment Agreement”). Mr. Dow served Saker as President and its
Chief Executive Officer. The term of the Dow Employment Agreement was for three
years and thereafter would have automatically renewed for additional one-year
periods. Mr. Dow’s base annual salary was $150,000 with a guaranteed annual
bonus of $100,000. In addition, he was eligible to receive an annual performance
bonus at the discretion of the Board of Directors. Mr. Dow was to be granted an
option each September 22 during the initial term to purchase 250,000 shares of
the Common Stock.  He has received his first option effective
September 22, 2005, his second option effective September 22, 2006 and his third
option effective September 22, 2007.  As a condition of the Airborne
divestiture, Mr. Dow resigned from his positions with the Company effective
March 2, 2009, and the Dow Employment Agreement was terminated and all options
were forfeited.


37


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


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, the Company's
President and CEO. The First Amendment provided that Mr. Ricciardi's employment
under the Ricciardi Employment Agreement was effective April 1, 2005, would
continue for an initial term of three years, and thereafter be subject to
automatic one-year renewals. The First Amendment increased his base salary to
$175,000. Mr. Ricciardi was granted an option each April 1 during the initial
term to purchase 250,000 shares of 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 expired March 31,
2009 and remains subject to automatic one-year renewals.  On November
1, 2008, Mr. Ricciardi’s salary was adjusted to $175,000.  On March 2,
2009, Mr. Ricciardi was re-appointed as the Company’s President and Chief
Executive Officer.  On April 8, 2009, Mr. Ricciardi was elected
Chairman of the Board and shall serve in such capacity until the first meeting
of the Board of Directors of the Corporation immediately following the next
Annual Meeting of Stockholders of the Corporation or until the Board otherwise
directs.





As of
December 31, 2009, future severance commitments under the Company’s employment
agreements aggregate approximately $175,000.





NOTE 16 -
Related
Parties





The firm
of Wachtel & Masyr, LLP provides certain legal services to the Company.
William B. Wachtel, a member of the Company’s Board of Directors, is a managing
partner of the firm. During the years ended December 31, 2009 and 2008, the
Company was billed approximately $195,000 and $90,000, respectively, for legal
services.  At December 31, 2009 and 2008, the Company recorded in
accounts payable an obligation for legal fees to such firm of approximately
$14,250 and $0, respectively, related to legal services provided by such
firm.





In
November 2008, the Company executed a management agreement with a company who
has the non-controlling interest in a subsidiary of the Company.  The
agreement requires a management fee of 10% of gross receipts of the subsidiary
and a “success fee” of 50% of pre-tax profits as defined.  Total fees
in 2009 aggregated $681,000 of which $531,000 was included in accrued expenses
at December 31, 2009.





NOTE 17 -
Litigation





On
November 20, 2008, an Article 78 proceeding in the Supreme Court of the State of
New York County of New York was initiated against New York City Economic
Development Corporation; the City of New York Department of Small Business
Services; Robert Walsh, in his capacity as Commissioner of the Department of
Small Business Services; William C. Thompson, Jr., Comptroller of the City of
New York, Office of the New York City Comptroller; The Honorable Mayor Bloomberg
in his capacity as Mayor of the City of New York, by Petitioners Linden Airport
Management Corporation and Paul P. Dudley, individually, objecting to the award
of a concession for the Fixed-Base Operator for the Downtown Manhattan Heliport
to the Company.  Shortly thereafter, the Company was joined as a
necessary party to the Article 78 proceeding.  The Petitioners alleged
that the selection process for awarding Saker the concession, was arbitrary,
capricious and an abuse of permitted discretion and made in violation of lawful
procedure.  In relation to this allegation, Petitioners sought an
annulment of the previous award of the concession and a new “Request for
Proposals” process in order to award the concession to an entity other than the
Company.  Petitioners also alleged a breach of public trust against
the City of New York and damages of at least $1,000,000.  On April 21,
2009, this proceeding was dismissed by the Supreme Court of the State of New
York County of New York.  On October 9, 2009, Petitioners filed a
Notice of Appeal in the New York Supreme Court, Appellate Division, First
Department, currently calendared to be heard for the January 2010 Term, seeking
to overturn the lower court’s dismissal of the Article 78
proceeding.  On January 6, 2010, the Company filed its brief in
connection with the Appeal.  On March 16, 2010, the Appellate Division
unanimously dismissed the Petitioners appeal.





On April
7, 2009, Terrance P. Kelley (“Kelley”) and Gold Jets, LLC commenced an action
against the Company, New World Jet Corporation, New World Jet Acquisition
Corporation, and Doe Corporation, being a fictitious name of a known entity, in
the Supreme Court of the State of New York, County of Monroe.  The
plaintiffs allege, among other things, breaches of the Stock Purchase Agreement
and the Consulting Agreement, which were entered into in connection with the
purchase of New World Jet Corporation by New World Jet Acquisition Corporation,
a wholly-owned subsidiary of Saker, and Saker.  The plaintiffs seek
declaratory relief and damages in an amount not less than $200,000.  On
June 8, 2009, the Company served its answer denying liability and asserting
defenses and counterclaims, including claims that plaintiffs breached their
contractual obligations to the Company.  On July 6, 2009, Kelley amended
his complaint to add certain individuals as defendants.  On August 7, 2009,
the Company filed an answer to the amended complaint reasserting its defenses
and counterclaims.  On December 28, 2009, the parties settled the lawsuit
and issued mutual releases to that end.  The Company does not believe
that the terms of the settlement are material to the Company.


38


SAKER
AVIATION SERVICES, INC. AND SUBSIDIARIES
 Notes
To Consolidated Financial Statements


In
addition to the matters noted above, from time to time, the Company may be a
party to one or more claims or disputes which may result in litigation. The
Company's management does not, however, presently expect that any such matters
will have a material adverse effect on the Company's business, financial
condition or results of operations.





NOTE 18 -
Subsequent
Events





The
Company evaluates events that have occurred after the balance sheet date but
before the financial statements are issued.  Based upon the
evaluation, the Company did not identify any non-recognized subsequent events
that would require adjustment or disclosure in the consolidated financial
statements.


39





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





None.





ITEM 9A(T).
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Our President and Chief Executive
Officer (principal executive and financial officer) evaluated our disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) as of the end of the period covered by this Form
10-K.  Based on this evaluation, our President and Chief Executive
Officer concluded that our disclosure controls were effective as of such
date.





Based upon its evaluation, our
management, with the participation of our President and Chief Executive Officer,
has concluded  there is a significant deficiency with respect to the
Company’s internal control over financial reporting as defined in
Rule 13a-15(e). Those rules define internal control over financial
reporting as a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.  The weakness identified by management relates to the lack
of sufficient accounting resources to apply certain U.S. Generally Accepted
Accounting Principles (“U.S. GAAP”).





Our Senior Vice President and Chief
Financial Officer resigned effective December 31, 2008.  We currently
lack adequately trained accounting personnel with appropriate US GAAP expertise
for certain complex transactions.  Management believes this weakness
is considered a significant deficiency but does not rise to the level of a
material weakness due to the compensating supervisory controls as discussed
below.





As of the end of the period covered by
this report and to address the identified weakness, we engage consultants or
other resources to assist with the accounting and disclosure for complex
transactions.  Our President and Chief Executive Officer operates in a
supervisory capacity to help compensate for the limited accounting
personnel.  This added level of supervision helps ensure the financial
statements and disclosures are accurate and complete.  This additional
assistance was considered in concluding that our weakness in internal control is
a significant deficiency.  This added level of supervision helps
ensure the financial statements and disclosures are accurate and
complete.




In order to correct this deficiency, we
plan to hire additional employees or consultants, as needed, to ensure that
management will have adequate resources in order to attain complete reporting of
financial information on a timely manner and provide a further level of
segregation of financial responsibilities.




A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met.  Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues, if any, within a company
have been detected. Such limitations include the fact that human judgment in
decision-making can be faulty and that breakdowns in internal control can occur
because of human failures, such as simple errors or mistakes or intentional
circumvention of the established process.





Management’s
Report on Internal Control Over Financial Reporting; Changes in Internal
Controls Over Financial Reporting





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 President and Chief Executive 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, 2009.





During the year ended December 31,
2009, no changes were made to our internal controls over financial reporting
that materially affected or were reasonably likely to materially affect these
controls subsequent to the date of their evaluation.  As discussed
above, our Senior Vice President and Chief Financial Officer resigned effective
December 31, 2009.  As also discussed elsewhere in this report, our
charter segment was divested on March 2, 2009.  Management believes
that the requirements for internal controls will be absorbed by other personnel
in the continuing operations and will not have a material effect on our internal
controls over financial reporting.


40





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





ITEM 9B. OTHER
INFORMATION




None.


41


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 Saker as of April 13, 2010:





Name
            
            Age
            
            PositionRonald
      J. Ricciardi
            
            48
            
            Director,
      Chairman of the Board, President & Chief Executive
    OfficerWilliam
      B. Wachtel
            
            55
            
            DirectorDonald
      Hecht
            
            76
            
            DirectorJeffrey
      B. Mendell
            
            56
            
            DirectorAlvin
      S. Trenk
            
            80
            
            Director





Each of our directors is re-elected at
the Annual Meeting of Stockholders to serve until the next Annual Meeting of
Stockholders or until his successor is duly elected and shall have
qualified.  Our officers are elected annually by the Board of
Directors to serve at the discretion of the Board.





Business
History





Ronald
J. Ricciardi – Director, Chairman of the Board, President & Chief Executive
Officer





Mr. Ricciardi had served as the
President and a director of Arizona FBO Air, Inc. since its inception and was
designated as its Chief Executive Officer on January 2, 2004. He was appointed
President and director ours and designated as our Chief Executive Officer
effective with the reverse merger transaction on August 20, 2004. On December
12, 2006, he was elected as our Vice Chairman of the Board.  On March
2, 2009, he was re-appointed our President and designated as our Chief Executive
Officer.  On April 8, 2009, Mr. Ricciardi was elected as our 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 their revenue over four
years.




William
B. Wachtel – Director




Mr. Wachtel was elected as a director
and our Chairman of the Board on March 31, 2005.  Mr. Wachtel served
as our Chairman until April 8, 2009, when he resigned from such capacity but
remained a member of the Board.




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.





Donald
Hecht - Director





Mr. Hecht was first elected as a
director effective September 15, 2006, and has served in that capacity since
then.


42


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.





Jeffrey
B. Mendell - Director





Mr.
Mendell was first elected as a director on September 30, 2004, and has served in
that capacity since then.





Mr.
Mendell is, and has been since 1983, the Chairman & CEO of JBM Realty, a
private real estate company headquartered in Greenwich, Connecticut. 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, Connecticut.





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





Alvin
S. Trenk - Director





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





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 our directors.





Other
Directorships





None of
our directors 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.




Code
of Ethics





On May
19, 2006, our Board of Directors adopted a Code of Ethics that applies to our
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions as well as all of
our other employees and directors.  We will provide to any person,
without charge, upon request, a copy of our Code of Ethics upon written or oral
request to Ronald J. Ricciardi, Chairman of the Board, Saker Aviation Services,
Inc., 101 Hangar Road, Wilkes-Barre/Scranton International Airport, Avoca, PA
18641, or by telephone at: (570) 457-3400.





Committees
of the Board of Directors




There are
three committees of the Board of Directors: the Audit Committee comprised of
Donald Hecht and Ronald J. Ricciardi; the Compensation Committee comprised of
Jeffrey B. Mendell, Chairman, and Alvin S. Trenk, and the Nominating Committee
comprised of Jeffrey B. Mendell and Ronald J. Ricciardi.





Section
16(a) of the Exchange Act Beneficial Ownership Reporting Compliance




Based solely on a review of Forms 3 and
4 and amendments thereto, furnished to us during the fiscal year ended December
31, 2009 and Forms 5 and amendments thereto, furnished to us with respect to the
fiscal year ended December 31, 2009, 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, each non-employee
director (Messrs. Hecht, Mendell, Trenk and Wachtel) reported late an option
grant to non-employee directors on December 1, 2009.


43





Corporate
Governance





There have been no changes to the
procedures by which security holders of Saker 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 June 18, 2009.





Saker’s Board of Directors has
determined that Donald Hecht qualifies as an audit committee financial expert on
its Audit Committee, as such term is defined in applicable Commission rules, and
is “independent” as that term is defined by the rules of The Nasdaq Stock
Market, Inc. (“Nasdaq”).


44


ITEM
      11.
            EXECUTIVE
      COMPENSATION




COMPENSATION
OF EXECUTIVE OFFICERS




The
following table sets forth the annual and long-term compensation paid by us for
services performed on our behalf for the fiscal years ended December 31, 2009
and 2008 with respect to any person who served as our Chief Executive Officer
during fiscal 2009 and the two other most highly compensated executive officers
serving at December 31, 2009 whose total compensation exceeded $100,000 in
fiscal 2009.  The two persons named in the table are the only persons
who served as our executive officers in fiscal 2008 or 2009.





SUMMARY
COMPENSATION TABLE





Name and Principal Position
                      
                      Year
                      
                      
                      Salary
                        ($)(2)
                      
                      
                      Bonus
                        ($)
                      
                      
                      Option
                        Awards
                        ($)(3)
                      
                      
                      All Other
                        Compensation
                        ($)(4)
                      
                      
                      Total
                        ($)Ronald
      J. Ricciardi, Chairman of the
                        BoardPresident
      & CEO
                      
                      2009
                        2008
                      
                      
                      
                      172,083
                        130,417
                      
                      
                      
                      —
                        —
                      
                      
                      
                      —
                        —
                      
                      
                      
                      20,300
                        29,000
                      
                      
                      
                      192,383
                        159,417John
      H. Dow, Former President
                        andChief
      Executive Officer (1)
                      
                      2009
                        2008
                      
                      
                      
                      25,000
                        150,000
                      
                      
                      
                      —
                        83,333
                      
                      
                      
                      —
                        —
                      
                      
                      
                      3,700
                        28,000
                      
                      
                      
                      28,700
                        261,333




1.
            Mr.
      Dow resigned as President and Chief Executive Officer and as a director
      effective with the March 2, 2009 divestiture of
  Airborne.





2.
            Mr. Ricciardi received a base
      salary of $125,000 through October 31, 2008 and $175,000
      thereafter.  Effective November 1, 2008, Mr. Ricciardi agreed to
      temporarily forego 10% of his salary until further notice in connection
      with a cost-reduction program, which was suspended on March 2,
      2009.  Before his resignation, effective March 2, 2009, Mr. Dow
      received a base salary of $150,000 and a guaranteed bonus of
      $100,000.  Effective November 1, 2008, Mr. Dow agreed to
      temporarily forego his guaranteed bonus until further notice in connection
      with a cost-reduction
program.





3.
            Mr. Ricciardi received an auto
      allowance of $1,000 per month through June 2009 when Mr. Ricciardi waived
      such benefit.  Mr. Dow received the use of an automobile and
      related expenses, estimated at a value of $1,000 per month.  Mr.
      Ricciardi receives, and Mr. Dow received, health insurance coverage
      estimated at a value of $1,000 per month.  Mr. Ricciardi
      received a Company match to his 401(k) contributions amounting to
      approximately $3,300 in 2009 and approximately $5,000 in
      2008.  Mr. Dow received a Company match to his 401(k)
      contributions amounting to approximately $4,000 in 2009 and approximately
      $1,700 in 2008.




OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2009





Name
                      
                      Number of
                        Securities
                        Underlying
                        Unexercised
                        Options
                        Exercisable
                        (#)(1)
                      
                      
                      Option
                        Exercise
                        Price
                        ($)
                      
                      Option
                        Expiration
                        DateRonald
      J. Ricciardi
                      
                      
                      250,000
                        250,000
                        250,000
                      
                      
                      
                      1.600.50
                        0.39
                      
                      03/31/2010
                        03/31/2011
                        03/31/2012John
      H. Dow
                      
                      
                      —
                        —
                      
                      
                      
                      —
                        —
                      
                      03/02/2009
                        03/02/2009





1.
            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.




45




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.  All of the
previously mentioned options were forfeited by Mr. Dow as a condition to the
consummation of the Airborne divestiture.





Each set
of options expires five years from its respective date of vesting.  We
have 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).




2009
DIRECTOR COMPENSATION TABLE


Name
                
                Fees
                  Earned in
                  Cash
                  ($)(1)
                
                
                Option
                  Awards
                  ($)(2)
                
                
                Total
                  ($)Donald
      Hecht
                
                
                —
                
                
                
                3,000
                
                
                
                3,000Jeffrey
      B. Mendell
                
                
                —
                
                
                
                3,000
                
                
                
                3,000Alvin
      S. Trenk
                
                
                —
                
                
                
                3,000
                
                
                
                3,000William
      B. Wachtel
                
                
                —
                
                
                
                3,000
                
                
                
                3,000





1.
            Non-employee Directors are
      entitled to a fee of $1,000 per board meeting and $750 and $500 per
      committee meeting for committee chairman and committee members,
      respectively.  Each director is also reimbursed for expenses
      incurred in connection with attendance at meetings of the Board of
      Directors.  During 2009, each non-employee director waived their
      cash fees and expenses.





2.
            Each
      non-employee director is eligible to be granted an annual option to
      purchase shares of our common stock. On December 1, 2009, the Compensation
      Committee granted each non-employee director an option for their service
      in 2009.  Each set of options was for 25,000 shares and was
      priced at $0.12 per share, which was the closing sales price of the common
      stock on December 1, 2009.  The options vest on December 1, 2010
      and may be exercised until December 1,
2014.





Employment
Agreements




On September 22, 2005, we entered into
an employment agreement with John H. Dow (the “Dow Employment Agreement”). Mr.
Dow served as our President and our Chief Executive Officer. The term of the
agreement was for three years and thereafter would have automatically renewed
for additional one-year periods. Mr. Dow’s base annual salary was $150,000 with
a guaranteed annual bonus of $100,000. In addition, he was eligible to receive
an annual performance bonus at the discretion of the Board of Directors. Mr. Dow
was to be granted an option each September 22 during the initial term of the
agreement to purchase 250,000 shares of our common stock.  He received
his first option effective September 22, 2005, his second option effective
September 22, 2006 and his third option effective September 22,
2007.  As a condition of the Airborne divestiture, Mr. Dow resigned
from his positions with us effective March 2, 2009 and the Dow Employment
Agreement was terminated and all options were forfeited.





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, our President and
CEO. The First Amendment provided that Mr. Ricciardi's employment under the
Ricciardi Employment Agreement was effective April 1, 2005, would continue for
an initial term of three years, and thereafter be subject to automatic one-year
renewals. The First Amendment increased his base salary to $175,000. Mr.
Ricciardi was granted an option each April 1 during the initial term to purchase
250,000 shares of our 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 expired on March 31, 2009 and remains subject
to automatic one-year renewals.  On November 1, 2008, Mr. Ricciardi’s
salary was adjusted to $175,000.  On March 2, 2009, Mr. Ricciardi was
re-appointed as our President and Chief Executive Officer.  On April
8, 2009, Mr. Ricciardi was elected Chairman of the Board and will serve in such
capacity until the first meeting of the Board of Directors of the Corporation
immediately following our next Annual Meeting of Stockholders or until the Board
otherwise directs.


46





Additional
Narrative Disclosure





We do not offer a defined retirement or
pension plan.  The Saker 401k Plan (the “Plan”) covers all of our
employees. The Plan contains an option for us to match each participant's
contribution. Any Company contribution vests over a five-year period on a 20%
per year basis. During 2008, we matched participant contributions at a rate of
50% of the first 6% of participant deferrals.  In June 2009, we
suspended our match of participant contributions.  Our contributions
to the Plan totaled approximately $16,000 and $26,000 for the years ended
December 31, 2009 and 2008, respectively.


47


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




Beneficial
Owners




The
following table presents certain information as of April 13, 2010 regarding the
beneficial ownership of our Common Stock by:





-
            each of our current executive
      officers and directors; and





-
            all of our current directors and
      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.




Percentage ofNumber of Shares
                                            
                                            Common Stockof Common Stock
                                            
                                            Beneficially OwnedName of Beneficial Owner
                                            
                                            Beneficially Owned
                                            
                                            (1)Ronald
      J. Ricciardi (2)
                                            
                                            
                                            1,643,575
                                            (3)
                                            4.9
                                            %William
      B. Wachtel (4)
                                            
                                            
                                            6,821,907
                                            (5)
                                            19.6
                                            %Donald
      Hecht (4)
                                            
                                            
                                            341,700
                                            (6)
                                            1.0
                                            %Jeffrey
      B. Mendell (4)
                                            
                                            
                                            310,293
                                            (7)
                                            0.9
                                            %Alvin
      S. Trenk (4)
                                            
                                            
                                            1,872,944
                                            (8)
                                            5.5
                                            %All
      directors and officers
                                              As
      a group (5 in number)
                                            
                                            
                                            10,990,419
                                            
                                            30.0
                                            %





(1)
            The percentages computed in the
      table are based upon 33,164,453 shares of our common stock, which were
      outstanding on April 13, 2010. 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 April 13,
  2010.





(2)
            Ronald J. Ricciardi is our
      President and Chief Executive Officer and he also serves as Chairman of
      the Board and as a director.





(3)
            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, 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 two options and the warrant is currently
      exercisable.





(4)
            The reporting person is a
      director.





(5)
            The shares of our common stock
      reported in the table include: (a) 800,000 of the 1,200,000 shares subject
      to a warrant expiring September 22, 2010, which is currently exercisable;
      (b) 750,000 shares issuable upon the exercise of a warrant expiring August
      31, 2011, which is currently exercisable; (c) 25,000 shares issuable upon
      the exercise of an option expiring December 12, 2010, which is currently
      exercisable; (d) 25,000 shares issuable upon the exercise of an option
      expiring April 18, 2012, which is currently exercisable; (e) 25,000 shares
      issuable upon the exercise of an option expiring December 1, 2012, which
      is currently exercisable; and (f) 25,000 shares issuable upon the exercise
      of an option expiring December 1, 2013, which is currently exercisable.
      The shares of our 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, which provides certain
      legal services for us, 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.


48





(6)
            The shares of our 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; (b) 25,000 shares issuable upon the exercise of an option
      expiring December 12, 2010, which is currently exercisable;  (c)
      25,000 shares issuable upon the exercise of an option expiring April 18,
      2012, which is currently exercisable; (d) 25,000 shares issuable upon the
      exercise of an option expiring December 1, 2012, which is currently
      exercisable; and (e) 25,000 shares issuable upon the exercise of an option
      expiring December 1, 2013, which is currently
      exercisable.





(7)
            The
      shares of our 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; (b) 25,000 shares issuable upon the
      exercise of an option expiring April 18, 2012, which is currently
      exercisable; (c) 25,000 shares issuable upon the exercise of an option
      expiring December 1, 2012, which is currently exercisable; and (d) 25,000
      shares issuable upon the exercise of an option expiring December 1,
      2013.





(8)
            The
      shares of our 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) 500,000 shares issuable upon the
      exercise of a warrant expiring August 31, 2011, which is currently
      exercisable; (c) 25,000 shares issuable upon the exercise of an option
      expiring December 12, 2010, which is currently exercisable;  (d)
      25,000 shares issuable upon the exercise of an option expiring April 18,
      2012, which is currently exercisable; (e) 25,000 shares issuable upon the
      exercise of an option expiring December 1, 2012, which is currently
      exercisable; and (f) 25,000 shares issuable upon the exercise of an option
      expiring December 1, 2013, which is currently
  exercisable.





Securities
Authorized for Issuance under Equity Compensation Plans





The following table set forth certain
information, as of December 31, 2009, 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
                                              
                                              925,000
                                              
                                              $
                                              0.341
                                              
                                              6,575,000Equity
      compensation plans not approved by security holders
                                              
                                              325,000
                                              
                                              $
                                              1.637
                                              
                                              —Total
                                              
                                              1,250,000
                                              
                                              $
                                              0.678
                                              
                                              6,575,000




We
received stockholder approval on December 12, 2006 for the Saker Aviation
Services, Inc. Stock Option Plan of 2005 which relates to 7,500,000 shares of
our common stock.


49


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





Certain
Relationships and Related Transactions




The firm
of Wachtel & Masyr, LLP provides certain legal services to us. William B.
Wachtel, a member of our Board of Directors, is a managing partner of this firm.
During the year ended December 31, 2009, we were billed for legal services of
$195,000. At December 31, 2009, we had recorded in accounts payable an
obligation for legal fees of approximately $14,250 related to these legal
services.





Our Board of Directors adopted a Policy
and Procedure Governing Related Party Transactions on April 26, 2007, which
policy delegates certain functions related to the review and approval of related
party transactions to the Audit Committee and the Compensation
Committee.





Director
Independence





Our Board of Directors made the
determination of director independence in accordance with the definition set
forth in Nasdaq rules.  Under such definition, each of Donald Hecht,
Jeffrey B. Mendell, and Alvin S. Trenk qualify as independent.





ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES





Audit Fees.The aggregate fees billed for professional services rendered were
approximately $118,000 by Marcum LLP and Kronick Kalada Berdy & Co. for 2009
and approximately $165,000 by Marcum & Kliegman LLP for 2008 for the
audits of our annual financial statements for the fiscal years ended December
31, 2009 and 2008 and the reviews of the financial statements included in the
Company’s Forms 10-Qs and registration statements 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, 2009
and 2008.




Tax Fees.
For the years ended December 31, 2009 and 2008, the aggregate fees billed for
services categorized as Tax Fees was $18,000.




All Other
Fees. The aggregate fees billed for services categorized as All Other
Fees rendered by the principal accountant were $0 for the fiscal years ended
December 31, 2009 and 2008.





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 us by our 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 of the Board of Directors prior
to the completion of the audit. Each year the Audit Committee approves the
engagement of our  independent registered public accountant to audit
our financial statements, including the associated fee, 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.




Since
December 17, 2009 when our Board of Directors initially authorized the
engagement of Kronick Kalada Berdy & Co., and since September 24, 2004 when
our Board of Directors initially authorized the engagement of Marcum LLP,
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 subsequent engagement of Marcum LLP and Kronick Kalada Berdy
& Co, has been approved in advance by the Audit Committee of the Board of
Directors, and none of these engagements made use of the de minimus exception to
the pre-approval contained in Section 10A(i)(1)(B) of the Exchange
Act.


50


Part
VI





ITEM 15.
            EXHIBITS, FINANCIAL STATEMENT
      SCHEDULES





(a)
            Financial
      Statements





The
consolidated financial statements of Saker Aviation Services, Inc. and
subsidiaries as of December 31, 2009 and 2008 and for each of the years then
ended, and the Report of Independent Registered Public Accounting Firm thereon,
are included herein as shown in the “Table of Contents to Consolidated Financial
Statements.”





(b)
            Financial
      Statement Schedules





None.





(c)
            Exhibits





Exhibit No.
                
                Description of Exhibit2
                
                Agreement
      and Plan of Merger dated as of July 26, 2004 by and between Saker (then
      named Shadows Bend Development, Inc.) and FBO Air, Inc., an Arizona
      corporation (without schedules). (1)3
      (i) (2)
                
                Certificate
      of Designations. (3)3
      (i) (3)
                
                Articles
      of Merger (Changing name to Saker Aviation Services, Inc. (4) (Exhibit
      3.1)3
      (i)
                
                Restated
      Articles of Incorporation.(4)3(ii)
                
                Bylaws
      of Saker Aviation Services, Inc. (5) (Exhibit 3.2)4.1
                
                Common
      Stock Certificate. (12)4.2
                
                Form
      of Warrant expiring March 31, 2010. (5) (Exhibit 4.2)4.3
                
                Registration
      Rights Agreement (without schedule or exhibit). (5) (Exhibit
      4.4)4.4
                
                Form
      of Co-Investor Registration Rights Agreement (without schedule or
      exhibit). (5)4.5
                
                Copy
      of Warrant expiring September 22, 2010. (6)4.6
                
                Form
      of Subscription Agreement (including registration rights commitment).
      (8)4.7
                
                Copy
      of Warrant expiring August 31, 2011.  (11)4.8
                
                Copy
      of Warrant expiring December 29, 2014 (12)* 10.1
                
                Copy
      of Employment Agreement dated as of January 2, 2004 by and between Ronald
      J. Ricciardi and Company (as the successor by merger to FBO Air,
      Inc., an Arizona corporation). (7)*
      10.2
                
                Copy
      of First Amendment effective April 1, 2005 to the Ricciardi Employment
      Agreement. (5) (Exhibit 10.9)*  10.3
                
                Copy
      of Second Amendment to the Ricciardi Employment Agreement.
      (10)10.4
                
                Copy
      of Asset Purchase Agreement dated March 31, 2005 among FBO Air Garden
      City, Inc. and John A. Crotts. (5) (Exhibit
  10.1)




51





10.5
                
                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) (Exhibit 10.3)*  10.6
                
                Copy
      of the Saker Aviation Services, Inc. Stock Option Plan of 2005 dated as of
      December 13, 2005. (9)10.7
                
                Share
      Exchange Agreement between Saker Aviation Services, Inc., Airborne, Inc.
      and John and Daphne Dow dated March 2, 2009. (11)10.8
                
                Loan
      Agreement between Saker Aviation Services, Inc. and Airborne, Inc. dated
      March 2, 2009. (11)10.9
                
                Promissory
      Note between Airborne, Inc. and Saker Aviation Services, Inc. dated March
      2, 2009. (11)10.10
                
                Loan
      Agreement between Saker Aviation Services, Inc. and EuroAmerican
      Investment Corp. dated March 2, 2009. (11)10.11
                
                Promissory
      Note between Saker Aviation Services, Inc. and EuroAmerican Investment
      Corp. dated March 2, 2009. (11)10.12
                
                Loan
      Agreement between Saker Aviation Services, Inc. and Five Star Bank dated
      March 2, 2009. (11)10.13
                
                Security
      Agreement between Saker Aviation Services, Inc. and Five Star Bank dated
      March 2, 2009. (11)10.14
                
                Line
      of Credit Note between Saker Aviation Services, Inc., Airborne, Inc., and
      Five Star Bank dated March 2, 2009. (11)10.15
                
                Assignment
      and Allonge between Five Star Bank and Birch Hill Capital dated December
      29, 2009. (12)21
                
                Subsidiaries.
      (12)31.1
                
                Certification
      pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act
      (principal executive and financial officer).32.1
                
                Certification
      pursuant to Section 1350 Certification of Sarbanes-Oxley Act of
      2002.





Footnotes:




(1)
Incorporated by reference from Exhibit 2 to the Company’s Current Report on Form
8-K filed on August 27, 2004.




(2) Incorporated by reference from
Exhibit 3.1(a) to the Company’s Annual Report on Form 10-KSB for the year ended
December 31, 2004.




(3)
Incorporated by reference from Exhibit 3.16 to the Company’s Current Report on
Form 8-K filed on December 18, 2006.





(4)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on
October 1, 2009.





(5)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on
April 6, 2005.




(6)
Incorporated by reference from Exhibit 4 to the Company’s Current Report on Form
8-K/A filed on November 3, 2005.




(7)
Incorporated by reference from Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on October 5, 2004.




(8)
Incorporated by reference from the Company’s Registration Statement on Form
SB-2, File No. 333-138994.





(9)
Incorporated by reference from Exhibit 10.18 to the  Company’s Annual
Report on Form 10-KSB for the fiscal year ended December 31,
2005.


52





(10)
Incorporated by reference from Exhibit 10.7 to the Company’s Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2006.





(11)
Incorporated by reference from the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2008.





(12)
Filed herewith


53


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.




Saker
      Aviation Services, Inc.(Registrant)Date: April
      14, 2010
                  By:
                  /s/ Ronald J. RicciardiRonald
      J. Ricciardi,President
      and Chief Executive
Officer





SIGNATURE
            
            TITLE
            DATE/s/ William B. Wachtel
            
            Director
            April
      14, 2010William
      B. Wachtel/s/ Donald Hecht
            
            Director
            April
      14, 2010Donald
      Hecht/s/ Jeffrey B. Mendell
            
            Director
            April
      14, 2010Jeffrey
      B. Mendell/s/ Alvin S. Trenk
            
            Director
            April
      14, 2010Alvin
      S. Trenk/s/ Ronald J. Ricciardi
            
            Director,
      Principal
              Executive,
      Financial, and
              Accounting
      Officer
            April
      14, 2010Ronald
      J. Ricciardi




54


Saker
Aviation Services, Inc. Form 10-K for the Year Ended December 31,
2009


Exhibits
Filed with the Annual Report





INDEX





Exhibit No.
                
                Description of Exhibit4.1
                
                Common
      Stock Certificate4.8
                
                Copy
      of Warrant expiring December 29, 2014.10.15
                
                Assignment
      and Allonge between Five Star Bank and Birch Hill Capital dated December
      29, 2009.21
                
                Subsidiaries.31.1
                
                Officer's
      Certification Pursuant to Rule 13a-14(a) under the Securities Exchange
      Act.32.1
                
                Certification
      Pursuant to Section 906 of Sarbanes-Oxley Act of
  2002.




E-1