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NOTE 2 - Management's Liquidity Plans

August 14, 2014

As of June 30, 2014, the Company had cash of $428,425 and had a working capital surplus of $615,298. For the six months ended June 30, 2014, the Company generated revenue of $8,153,286 and net income of $221,029.

On May 17, 2013, the Company entered into a loan agreement with PNC Bank (the "PNC Loan Agreement"). The PNC Loan Agreement contains three components: (i) a $2,500,000 non-revolving acquisition line of credit (the "PNC Acquisition Line"); (ii) a $1,150,000 working capital line (the "PNC Working Capital Line"); and (iii) a $280,920 term loan (the "PNC Term Loan"). Substantially all assets of the Company are pledged as collateral under the PNC Loan Agreement. Proceeds of the PNC Acquisition Line were able to be dispersed, based on parameters defined in the PNC Loan Agreement, until May 17, 2014 (the "Conversion Date"). As of the Conversion Date, there was $1,350,000 outstanding under the PNC Acquisition Line. The payment terms provide that thirty days following the Conversion Date, and continuing on the same day of each month thereafter, the Company is required to make equal payments of principal over a sixty month period. Interest on the outstanding principal continues to accrue at a rate equal to one-month LIBOR plus 275 basis points (2.91% as of June 30, 2014). An unused commitment fee had been applied at a rate of 1.5% on the unused portion of the PNC Acquisition Line and was charged for each fiscal quarter through the Conversion Date. As of June 30, 2014, there was $1,327,500 outstanding under the PNC Acquisition Line. The PNC Working Capital Line may be dispersed for working capital and general corporate purposes. Interest on outstanding principal accrues at a rate equal to daily LIBOR plus 250 basis points (2.66% as of June 30, 2014) and the PNC Working Capital Line is annually renewable at PNC Bank's option. As of June 30, 2014, the outstanding balance of the PNC Working Capital Line was $550,000. The PNC Term Loan was dispersed to settle miscellaneous Company debt of the same amount. Interest on outstanding principal accrues at a rate equal to one-month LIBOR plus 275 basis points (2.91% as of June 30, 2014) and principal and interest payments shall be made over a 34 month period. At June 30, 2014, the outstanding balance of the PNC Term Loan was $176,578. The Company is party to a concession agreement, dated as of November 1, 2008, with the City of New York for the operation of the Downtown Manhattan Heliport (the "Concession Agreement"). Pursuant to the terms of the Concession Agreement, the Company must pay the greater of 18% of the first $5 million in program year gross receipts and 25% of gross receipts in excess of $5 million or minimum annual guaranteed payments. The Company paid the City of New York$1.2 million in the first year of the term and minimum annual guaranteed payments increase to approximately $1.7 million by the final year of Concession Agreement, which expires on October 31, 2018. During the six months ended June 30, 2014, the Company incurred approximately $1,085,976 in concession fees, which is recorded in the cost of revenue. 4 NOTE 3 - Acquisition On August 15, 2013, the Company purchased 100% of the stock of Phoenix Rising Aviation, Inc. ("PRA"), an aircraft maintenance, repair and overhaul firm located in Bartlesville, Oklahoma. Under the terms of the acquisition agreement, the Company paid $1,350,000 in cash and up to $1,000,000 in future installment payments, the payment of which are subject to the achievement of certain performance thresholds for PRA as defined in the acquisition agreement. The closing cash payment was funded through the Company's acquisition line of credit with PNC Bank, as described above in Note 2 - "Liquidity." The following table presents the unaudited pro forma results of the continuing operations of the Company and PRA for the six month period ending June 30, 2013 as if PRA had been acquired at the beginning the period: Six Months Ended June 30, 2013 Revenue $ 8,309,020 Income from continuing operations



560,057

Basic net income per common share $



0.02

Weighted Average Number of Common Shares Outstanding - Basic 33,046,655

The above pro forma combined results are not necessarily indicative of the results that would have actually occurred if the PRA acquisition had been completed as of the beginning of the year 2013, nor are they necessarily indicative of future consolidated results.

NOTE 4 - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, FirstFlight Heliports, LLC ("FFH"), our FBO at Garden City (Kansas) Regional Airport ("FBOGC"), Phoenix Rising Aviation, Inc. ("PRA"), and our former FBO at Wilkes-Barre, Pennsylvania. All significant inter-company accounts and transactions have been eliminated in consolidation. Net Income Per Common Share Net income was $209,160 and $221,029 for the three and six months ended June 30, 2014, respectively. Net income was $234,536 and $291,489 for the three and six months ended June 30, 2013, respectively. Basic net income per share applicable to common stockholders is computed based on the weighted average number of shares of the Company's common stock outstanding during the periods presented. Diluted net income 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 income per share when 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 net income per share: For the Three Months Ended For the Six Months Ended June 30, June 30, 2014* 2013* 2014* 2013* Weighted average common shares outstanding, basic 33,107,610 33,046,655



33,105,953 33,046,655

Common shares upon exercise of options 1,469,068 1,700,683

1,469,068 1,700,683

Weighted average common shares outstanding, diluted 34,576,678 34,747,338

34,575,021 34,747,338 5 (1) Potential common shares of 1,150,000 and 450,000 for the six months ended June 30, 2014 and 2013, respectively, were excluded from the computation of diluted earnings as their exercise prices were greater than the average market price of the common stock for the three and six months ended June 30, 2014

and 2013, respectively. Stock Based Compensation Stock-based compensation expense for all share-based payment awards are based on the 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 six months ended June 30, 2014 and 2013, the Company incurred stock based compensation costs of $15,391 and $16,515 respectively. Such amounts have been recorded as part of the Company's selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. As of June 30, 2014, the unamortized fair value of the options totaled $7,700. Option valuation models require the input of highly subjective assumptions, including the expected life of the option. In management's opinion, the use of such option valuation models does not necessarily provide a reliable single measure of the fair value of the Company's employee stock options. Management holds this view partly because the Company's employee stock options have characteristics significantly different from those of traded options and also because changes in the subjective input assumptions can materially affect the fair value estimate.



Recently Issued Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-08, Intangibles - Goodwill and Other (Topic 350) - Testing Goodwill for Impairment (ASU 2011-08), to allow entities to use a qualitative approach to test goodwill for impairment. ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. The Company has adopted ASU 2011-08 on its condensed consolidated financial statements for 2014 and 2013.



NOTE 5 - Discontinued Operations

As disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the "SEC") on August 21, 2013, and further described in NOTE 7 - "Subsequent Events" in the Company's June 30, 2013 Quarterly Report on Form 10-Q, the Company's attempts to secure a preliminary injunction in connection with its lease at the Wilkes-Barre/Scranton International Airport were unsuccessful. As a result, effective August 31, 2013, the Company no longer serves as a fixed base operator ("FBO Operator") at that airport. The results of business activities previously conducted by the Company at the Wilkes-Barre/Scranton International Airport have been recorded in this Quarterly Report on Form 10-Q as Discontinued Operations.



Components of discontinued operations are as follows:

As of June 30, 2014 and December 31, 2013, assets principally consisting of trade receivables and equipment of $0 and $160,000, respectively, and liabilities principally consisting of accrued expenses of $0 and $28,000, respectively, were included in the consolidated balance sheets.

For the Six Months Ended June 30, 2014 2013 Revenue $ - $ 2,103,360 Cost of revenue - 1,483,247 Gross profit - 620,113 Operating expenses - 603,721

Operating income from discontinued operations -



16,392

Basic net income per common share $ 0.00$ 0.00 Weighted average number of common shares outstanding, basic 33,105,933

33,046,655 6 NOTE 6 - Inventories

Inventories consist primarily of maintenance parts and aviation fuel, which the Company sells to its customers. The Company also maintains fuel inventories for commercial airlines, to which it charges into-plane fees when servicing commercial aircraft. A summary of inventories as of June 30, 2014 and December 31, 2013 is set forth in the following table: June 30, 2014 December 31, 2013 Parts inventory $ 208,493 $ 204,899 Fuel inventory 98,247 116,938 Other inventory 5,727 16,676 Total inventory $ 312,467 $ 338,513



Included in inventories are amounts held for third parties of $79,993 and $11,666 as of June 30, 2014 and December 31, 2013, respectively, with an offsetting liability included as part of accrued expenses.

NOTE 7 - Related Parties

The law firm of Wachtel & Masyr, LLP provides certain legal services to the Company and its subsidiaries from time to time. William B. Wachtel, Chairman of the Company's Board of Directors, is a managing partner of this firm. During the three and six months ended June 30, 2014 and 2013, the Company was billed by Wachtel & Masyr, LLP approximately $0 for legal services. At June 30, 2014 and December 31, 2013, the Company has recorded an obligation for approximately $250 in accounts payable related to legal services provided by Wachtel & Masyr,

LLP for prior periods. On August 29, 2011, the Company entered into a redemption agreement with the non-controlling interest in a subsidiary of the Company (the "Redemption Agreement"). Pursuant to the terms of the Redemption Agreement, the non-controlling interest relinquished its membership interest in the subsidiary in return for earn-out payments of the non-controlling interest's capital account of $2,769,000. Of that amount, $444,000 was paid upon the execution of the Redemption Agreement and an additional approximately $2,008,433 was paid through June 30, 2014. The balance of $316,567 is recorded as a current liability at a discount rate of seven (7%) percent. Continuing earn-out payments will be made on a monthly basis in an amount equal to (i) five percent (5%) of the subsidiary's gross receipts, plus (ii) five percent (5%) of the subsidiary's pre-tax profit. NOTE 8 - Litigation From time to time, the Company and /or its subsidiaries 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. 7



Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the accompanying consolidated condensed financial statements and related notes in this report. This Item 2 contains forward-looking statements that involve risks and uncertainties. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed or implied in such forward-looking statements. Factors which could cause actual results to differ materially are discussed throughout this report and include, but are not limited to, those set forth at the end of this Item 2 under the heading "Cautionary Statement Regarding Forward Looking Statements." Additional factors are under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2013.



The terms "we," "us," and "our" are used below to refer collectively to the Company and the subsidiaries through which our various businesses are actually conducted.

OVERVIEW

Saker Aviation Services, Inc. ("we", "us", "our") is a Nevada corporation. Our common stock, $0.001 par value per share (the "common stock"), is publicly traded on the OTCQB Marketplace ("OTCQB") under the symbol "SKAS". Through our subsidiaries, we operate in the aviation services segment of the general aviation industry, in which we serve as the operator of a heliport, a fixed base operation ("FBO"), as a provider of aircraft maintenance, repair and overhaul ("MRO") services, and as a consultant for a seaplane base that we do not own. FBOs provide ground-based services, such as fueling and aircraft storage for general aviation, commercial and military aircraft, and other miscellaneous services. We were formed on January 17, 2003 as a proprietorship and were incorporated in Arizona on January 2, 2004. We became a public company as a result of a reverse merger transaction on August 20, 2004 with Shadows Bend Development, Inc., an inactive public Nevada corporation, and subsequently changed our name to FBO Air, Inc. On December 12, 2006, we changed our name to FirstFlight, Inc. On September 2, 2009, we changed our name to Saker Aviation Services, Inc. Our business activities are carried out as the operator of the Downtown Manhattan (New York) Heliport, as an FBO at the Garden City (Kansas) Regional Airport, as an MRO at the Bartlesville (Oklahoma) Municipal Airport, and as a consultant to the operator of a seaplane base in New York City.



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.

Our business activities at the Downtown Manhattan (New York) Heliport facility (the "Heliport") commenced as a result of the Company's award of the Concession Agreement by the City of New York to operate the Heliport, which we assigned to our subsidiary, FirstFlight Heliports, LLC d/b/a Saker Aviation Services ("FFH").



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

We ceased operations at our former FBO at Wilkes-Barre, Pennsylvania on August 31, 2013.

The FBO segment of the general aviation industry is highly fragmented. According to the National Air Transportation Association ("NATA"), there are over 3,000 FBOs that serve customers at one or more of over 3,000 airport facilities across the country that have at least one paved 3,000-foot runway. The vast majority of these entities are single location operators. NATA characterizes companies with operations at three or more airports as "chains." An operation with FBOs in at least two distinctive regions of the country is considered a "national" chain while an operation with FBOs in multiple locations within a single region is considered a "regional" chain. 8



REVENUE AND OPERATING RESULTS

Comparison of the Three and Six Months Ended June 30, 2014 and June 30, 2013.

REVENUE Revenue increased by 27.4 percent to $5,107,847 for the three months ended June 30, 2014 as compared with corresponding prior-year period revenue of $4,008,082. Revenue increased by 21.5 percent to $8,153,286 for the six months ended June 30, 2014 as compared with corresponding prior-year period revenue of $6,709,538. For the three months ended June 30, 2014, revenue associated with the sale of jet fuel, aviation gasoline and related items increased by 6.6 percent to approximately $1,933,000 as compared to approximately $1,814,000 in the three months ended June 30, 2013. The increase was due to an increase in demand at the Heliport for the quarter ended June 30, 2014 as compared to the same period in 2013. This increase was partially offset by a lower volume of gallons, particularly gallons associated with our military fueling operations, due to significantly higher demand in the quarter ended June 30, 2013, which demand did not recur during the same period in 2014. For the three months ended June 30, 2014, revenue associated with services and supply items increased by 45.2 percent to approximately $3,146,000 as compared to approximately $2,167,000 in the three months ended June 30, 2013. The increase was driven by increased activity at the Heliport for the quarter ended June 30, 2014 as compared to the same period in 2013, as well as related revenue in our acquired MRO business, which revenue had no corresponding comparison in the three months ended June 30, 2014. For the three months ended June 30, 2014, all other revenue increased by 3.7 percent to approximately $28,000 as compared to approximately $27,000 in the three months ended June 30, 2013. For the six months ended June 30, 2014, revenue associated with the sale of jet fuel, aviation gasoline and related items increased by 1.4 percent to approximately $3,222,000 as compared to approximately $3,178,000 in the six months ended June 30, 2013. The increase was due to an increase in demand at the Heliport for the six months ended June 30, 2014 as compared to the same period in 2013. This increase was partially offset by a lower volume of gallons, particularly gallons associated with our military fueling operations, due to significantly higher demand in the six months ended June 30, 2013, which demand did not recur during the same period in 2014. For the six months ended June 30, 2014, revenue associated with services and supply items increased by 39.3 percent to approximately $4,875,000 as compared to approximately $3,500,000 in the six months ended June 30, 2013. The increase was driven by increased activity at the Heliport for the six months ended June 30, 2014 as compared to the same period in 2013, as well as related revenue in our acquired MRO business, which revenue had no corresponding comparison in the six months ended June 30, 2013. For the six months ended June 30, 2014, all other revenue increased by 40 percent to approximately $56,000 as compared to approximately $40,000 in the six months ended June 30, 2013. The increase was largely attributable to miscellaneous revenue recorded in the six months ended June 30, 2014 that did not recur in the same period last year. GROSS PROFIT Total gross profit increased 24 percent to $2,513,312 in the three months ended June 30, 2014 as compared to $2,026,541 in the three months ended June 30, 2013. Gross margin decreased to 49.2 percent in the three months ended June 30, 2014 as compared to 50.6 percent in the same period in the prior year. The decrease in gross margin was largely driven by increases in services and supply items as a result of our MRO acquisition. The MRO business operates on a slightly lower margin than the remainder of services and supply items. The lack of comparison MRO revenue or gross profit in the quarter ended June 30, 2013 led to the overall decline in gross margin. 9 Total gross profit increased 17.9 percent to $3,767,516 in the six months ended June 30, 2014 as compared to $3,195,765 in the six months ended June 30, 2013. Gross margin decreased to 46.2 percent in the six months ended June 30, 2014 as compared to 47.6 percent in the same period in the prior year. The decrease in gross margin was largely driven by increases in services and supply items as a result of our MRO acquisition. The MRO business operates on a slightly lower margin than the remainder of services and supply items. The lack of comparison MRO revenue or gross profit in the quarter ended June 30, 2013 led to the overall decline in gross margin. OPERATING EXPENSE



Selling, General and Administrative

Total selling, general and administrative expenses, or SG&A, were $2,032,000 in the three months ended June 30, 2014, representing an increase of approximately $566,000 or 38 percent, as compared to the same period in 2013. Total selling, general and administrative expenses, or SG&A, were $3,245,000 in the six months ended June 30, 2014, representing an increase of approximately $851,000 or 36 percent, as compared to the same period in 2013. SG&A associated with our aviation services operations were approximately $1,966,000 in the three months ended June 30, 2014, representing an increase of approximately $564,000, or 38.6 percent, as compared to the three months ended June 30, 2013. SG&A associated with our aviation services operations, as a percentage of revenue, was 38.5 percent for the three months ended June 30, 2014, as compared with 35 percent in the corresponding prior year period. Again, the increases on a dollar and margin basis are related to our MRO acquisition, which had no corresponding costs in the quarter ended June 30, 2013.



Corporate SG&A was approximately $66,000 for the three months ended June 30, 2014, representing an increase of approximately $2,000 as compared with the corresponding prior year period.

OPERATING INCOME Operating income for the three and six months ended June 30, 2014 was $481,458 and $522,968, respectively, as compared to $560,330 and $801,936, respectively, in the three and six months ended June 30, 2013. The decline on a year-over-year basis was driven by higher costs, as described above.



Depreciation and Amortization

Depreciation and amortization was approximately $268,000 and $225,000 for the six months ended June 30, 2014 and 2013, respectively.

Interest Income/Expense

Interest income for the six months ended June 30, 2014 was approximately $5,900, as compared to $9,800 in the six months ended June 30, 2013, with the decrease largely attributable to lower rates of interest in connection with deposited amounts. Interest expense for the six months ended June 30, 2014 was approximately $49,000, as compared to $54,000 in the same period in 2013.



Other Expense - Hurricane Sandy

Other expenses of approximately $111,000 were recorded in connection with reconstruction efforts in the aftermath of Hurricane Sandy, as described at greater length in Part II of our Annual Report on Form 10-K for the year ended December 31, 2012. There were no comparable expenses in the 2014 reporting period.

Income Tax Income tax expense for the three and six months ended June 30, 2014 was approximately $256,000 and $270,000, respectively, as compared to approximately $317,000 and $381,000, respectively, during the same period in 2013. The decrease is attributable to lower pre-tax income in the six months ended June 30, 2014 as compared to the same period in 2013. 10 Net Income Per Share



Net income was $221,029 and $291,489 for the six months ended June 30, 2014 and 2013, respectively. The decline in results is an outcome of the performance characteristics described above.

Basic and diluted net income per share for the six month periods ended June 30, 2014 and 2013 were $0.01.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2014, we had cash of $428,245 and a working capital surplus of $615,298. For the six months ended June 30, 2014, we generated revenue from continuing operations of $8,153,286 and net income from continuing operations of $221,029. For the six months ended June 30, 2014, cash flows included net cash provided by operating activities of $611,580, net cash used in investing activities of $81,347, and net cash used in financing activities of $248,213. On May 17, 2013, we entered into a loan agreement with PNC Bank (the "PNC Loan Agreement"). The PNC Loan Agreement contains three components: (i) a $2,500,000 non-revolving acquisition line of credit (the "PNC Acquisition Line"); (ii) a $1,150,000 working capital line (the "PNC Working Capital Line"); and (iii) a $280,920 term loan (the "PNC Term Loan"). Proceeds of the PNC Acquisition Line were able to be dispersed, based on parameters defined in the PNC Loan Agreement, until May 17, 2014 (the "Conversion Date"). As of the Conversion Date, there was $1,350,000 outstanding under the PNC Acquisition Line. The payment terms provide that thirty days following the Conversion Date, and continuing on the same day of each month thereafter, the Company is required to make equal payments of principal over a sixty month period. Interest on the outstanding principal continues to accrue at a rate equal to one-month LIBOR plus 275 basis points (2.91% as of June 30, 2014). An unused commitment fee had been applied at a rate of 1.5% on the unused portion of the PNC Acquisition Line and was charged for each fiscal quarter through the Conversion Date. As of June 30, 2014, there was $1,327,500 outstanding under the PNC Acquisition Line. The PNC Working Capital Line may be dispersed for working capital and general corporate purposes. Interest on outstanding principal accrues at a rate equal to daily LIBOR plus 250 basis points (2.7% as of June 30, 2014) and is annually renewable at PNC Bank's option. As of June 30, 2014, the outstanding balance of the PNC Working Capital Line was $550,000. The PNC Term Loan was utilized to retire our previously outstanding miscellaneous debt of the same amount. Interest on outstanding principal accrues at a rate equal to one-month LIBOR plus 275 basis points (2.95% as of June 30, 2014) and principal and interest payments being made over a thirty-four month period.

We are party to a concession agreement, dated as of November 1, 2008, with the City of New York for the operation of the Downtown Manhattan Heliport (the "Concession Agreement"). Pursuant to the terms of the Concession Agreement, we must pay the greater of 18% of the first $5,000,000 in program year gross receipts and 25% of gross receipts in excess of $5 million or minimum annual guaranteed payments. We paid the City of New York$1,200,000 in the first year of the term and minimum payments are scheduled to increase to approximately $1,700,000 in the final year of Concession Agreement, which expires on October 31, 2018. During the six months ended June 30, 2014 and 2013, we incurred approximately $1,086,000 and $848,000, respectively, in concession fees, which are recorded in the cost of revenue.



During the six months ended June 30, 2014, we had a net increase in cash of $282,020. Our sources and uses of funds during this period were as follows:

Cash from Operating Activities

For the six months ended June 30, 2014, net cash provided by operating activities was $611,580. This amount included an increase in operating cash related to net income of $221,029 and additions for the following items: (i) depreciation and amortization, $268,346; (ii) stock based compensation, $15,391; (iii) inventories, $26,046; (iv) deposits, $1,660; (v) deferred income taxes, $15,000; (vi) accounts payable, $646,783; (vii) accrued expenses, $70,914; and (viii) customer deposits, $1,321. The increase in operating cash in 2014 was offset by the following decreases: (i) accounts receivable, trade, $508,156; and (ii) prepaid expenses and other current assets, $146,754. 11 For the six months ended June 30, 2013, net cash provided by operating activities was $211,386. This amount included an increase in operating cash related to net income of $291,489 and additions for the following items: (i) depreciation and amortization, $224,947; (ii) deferred income taxes, $194,000; (iii) customer deposits, $14,619; (iv) accounts receivable recovery, $147,928; and (v) stock-based compensation expense, $16,515. The increase in cash used in operating activities in 2013 was offset by the following decreases: (i) accounts receivable, trade, $381,073; (ii) accrued expenses, $63,181; (iii) accounts payable, $117,087; (v) prepaid expenses, $107,307; and (v) inventories, $9,464.



Cash from Investing Activities

For the six months ended June 30, 2014, net cash of $81,347 was used in investing activities for the purchase of $138,443 in property and equipment offset by the repayment of notes receivable of $57,096. For the six months ended June 30, 2013, net cash of $321,118 was used in investing activities for the purchase of $689,379 in property and equipment net of accounts receivable insurance recovery of $315,014, offset by the repayment of notes receivable

of $53,247.



Cash from Financing Activities

For the six months ended June 30, 2014, net cash used in financing activities was $248,213, consisting of a drawdown from the line of credit of $175,000 offset by the repayment of notes payable of $423,213. For the six months ended June 30, 2013, net cash provided by financing activities was $40,260, consisting of (i) borrowings from notes payable, $280,920; (ii) line of credit, net, $300,607; offset by (iii) the repayment of notes payable of $541,267.



CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-08, Intangibles - Goodwill and Other (Topic 350) - Testing Goodwill for Impairment (ASU 2011-08), to allow entities to use a qualitative approach to test goodwill for impairment. ASU 2011-08 permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. We have adopted ASU 2011-08 on its condensed consolidated financial statements for 2014 and 2013. 12 CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS Statements contained in this report may contain information that includes or is based upon "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent management's current judgment and assumptions, and can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are frequently accompanied by the use of such words as "anticipates," "plans," "believes," "expects," "projects," "intends," and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, but not limited to, those relating to:



our ability to secure the additional debt or equity financing, if required, to

execute our business plan;



our ability to identify, negotiate and complete the acquisition of targeted

operators and/or other businesses, consistent with our business plan;



existing or new competitors consolidating operators ahead of us;

our ability to attract new personnel or retain existing personnel, which would

adversely affect implementation of our overall business strategy. Any one of these or other risks, uncertainties, other factors, or any inaccurate assumptions made by the Company may cause actual results to be materially different from those described herein or elsewhere by us. Undue reliance should not be replaced on any such forward-looking statements, which speak only as of the date they were made. Certain of these risks, uncertainties, and other factors are described in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2013 and in other filings we make with the Securities and Exchange Commission. Subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above and elsewhere in our reports filed with the Securities and Exchange Commission. We expressly disclaim any intent or obligation to update any forward-looking statements, except as may be required by law.


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