Forward-looking Statements
This Annual Report on Form 10-K contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (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 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
such forward-looking statements. We therefore caution you against relying on any
of these forward-looking statements because 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, the impact of the
COVID-19 pandemic, general economic conditions, our ability to raise additional
capital and the other risk factors contained in 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.
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Overview
Saker Aviation Services, Inc. is a Nevada corporation. Our common stock, $0.03
par value per share (the "common stock"), is quoted on the OTCQB Marketplace
("OTCQB") under the symbol "SKAS". Through our subsidiaries, we operate in the
aviation services segment of the general aviation industry, in which we serve as
the operator of a heliport.
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 New York Heliport
and until October 31, 2022 as an FBO and MRO at the Garden City (Kansas)
Regional Airport. On October 31, 2022, the Garden City facilities were sold and
we no longer maintain an FBO or MRO at the Garden City (Kansas) Regional
Airport.
Our business activities at the New York Heliport commenced in November 2008 when
we were awarded the Concession Agreement by the City of New York to operate the
New York Heliport, which we assigned to our subsidiary, FirstFlight Heliports,
LLC d/b/a Saker Aviation Services. On February 15, 2023, it was reported in the
public record that NYCEDC would be bringing a new Concession Agreement with the
Company as the operator of the Downtown Manhattan Heliport to the Franchise and
Concession Review Committee meeting on March 3, 2023. The item was subsequently
pulled off the agenda, with NYCEDC announcing on April 7, 2023 that the previous
Request for Proposals ("RFP") had been cancelled and that it is their intention
to put out a new RFP in 2023. Saker's current Concession Agreement terminates on
April 30, 2023. The Company has been notified by NYCEDC that the Company will
receive a new permit to operate the heliport from May 1, 2023 until a new RFP
process is concluded. The Company is currently working with NYCEDC on the new
agreement and expects to file a Form 8-K once the new agreement is finalized.
The COVID-19 pandemic has impacted the global and United States economies.
Federal, state, and local governments implemented certain travel restrictions,
"stay-at-home" orders, and social distancing initiatives which negatively
impacted our operations and those of our customers. As a result of the COVID-19
pandemic, on March 17, 2020 all sightseeing tour operations at the New York
Heliport ceased. On July 20, 2020, New York City started Phase 4 of the city's
reopening. Sightseeing tour operators at the New York Heliport restarted
operations under this phase.
For the period July 20, 2020 through March 31, 2022, sightseeing tour operators
experienced much lower demand for tours as compared to pre-pandemic levels of
activity. Beginning in April 2022, sightseeing tour operators had an increase in
activity and a much higher demand for tours.
Our long-term strategy is to increase our sales through growth within our
aviation services 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 to complement and/or augment our current aviation services
operations.
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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 Annual Report on Form 10-K.
Year Ended Year Ended
December 31, December 31,
Consolidated Statement of Operations Data: 2022 2021
(in thousands, except for share and per share data)
Revenue
$ 7,599 $ 2,400
Operating income, before income tax expense $ 732 $ 441
Other income, before income tax expense $ 628 $ 308
Income from continuing operations, before income taxes $ 1,361 $ 749
Income tax expense
$ (300 ) $ (150 )
Discontinued operations (loss) income, net of income taxes $ 186 $ 127
Net Income
$ 1,247 $ 726
Net income per share - basic $ 1.28 $ 0.71
Net income per share - diluted $ 1.26 $ 0.71
Weighted average number of shares - basic 976,048 1,023,709
Weighted average number of shares - diluted 987,149 1,026,729
December 31, December 31,
Balance Sheet Data: (in thousands) 2022 2021
Working capital surplus $ 5,740 $ 3,442
Total assets $ 6,913 $ 5,602
Total liabilities $ 1,130 $ 1,138
Stockholders' equity $ 5,783 $ 4,464
Total liabilities and Stockholders' equity $ 6,913 $ 5,602
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Comparison of Results for the Years Ended December 31, 2022 and December 31,
2021.
REVENUE AND RESULTS OF CONTINUING OPERATIONS
DISCONTINUED OPERATIONS
As disclosed in a Current Report on Form 8-K filed with the SEC on November 2,
2022, on October 31, 2022, the Company sold its subsidiary FBO and MRO
operations of FBO Air-Garden City, Inc. ("GCK") to Crosby Flying Services, LLC
("Crosby") for an aggregate purchase price of $1.6 million. Crosby paid the
purchase price on October 31, 2022 less $160,000 (the "Installment Payment")
which is to be paid in cash upon the first anniversary of the Closing Date. The
Installment Payment is subject to GCK's and the Company's compliance with a
Non-Compete agreement. GCK results of operations have been reported as
discontinued operations in the Condensed Consolidated Statements of Operations
for the year ended December 31, 2022 and 2021.
Comparison of Continuing Operations from the Twelve Months Ended December 31,
2022 and December 31, 2021.
REVENUE
Revenue from continuing operations increased by 216.6 percent to $7,598,597 for
the twelve months ended December 31, 2022 as compared with corresponding
prior-year period revenue of $2,400,316.
For the twelve months ended December 31, 2022, revenue from continuing
operations associated with services and supply items increased by 240.7 percent
to approximately $5,747,000 as compared to approximately $1,687,000 in the
twelve months ended December 31, 2021. This increase was attributable to
increased demand for services at our New York location in 2022 compared to the
prior year, which was negatively impacted by the COVID-19 pandemic.
For the twelve months ended December 31, 2022, revenue from continuing
operations associated with the sale of jet fuel and related items increased by
261.6 percent to approximately $1,582,000 as compared to approximately $438,000
in the twelve months ended December 31, 2021. This increase was attributable to
the higher volume of gallons and price of jet fuel sold at our New York location
in 2022 compared to the prior year, which was negatively impacted by the
COVID-19 pandemic.
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For the twelve months ended December 31, 2022, all other revenue from continuing
operations decreased by 2.4 percent to approximately $269,000 as compared to
approximately $276,000 in the twelve months ended December 31, 2021.
GROSS PROFIT
Total gross profit increased 152.8 percent to $4,613,317 in the twelve months
ended December 31, 2022 as compared to $1,824,954 in the twelve months ended
December 31, 2021. Gross margin was 60.7 percent for the twelve months ended
December 31, 2022 as compared to 76.0 percent for the same period in 2021. Gross
profit for the year ended December 31, 2021 was positively impacted by Employee
Retention Tax Credits due the Company under the CARES Act. These credits were
recorded in the second and third quarters of 2021. The increase in gross profit
is also related to higher levels of activity at our New York location in 2022 as
compared to the prior year. The decrease in gross margin is related to the
higher cost of jet fuel and higher costs associated with services and supplies
in 2022 as compared to the prior year.
OPERATING EXPENSE
Selling, General and Administrative
Total selling, general and administrative expenses ("SG&A") were $3,880,902 in
the twelve months ended December 31, 2022, an increase of $2,496,494, or 180.3
percent, as compared to the same period in 2021.
SG&A associated with our New York operations were approximately $3,329,000 in
the twelve months ended December 31, 2022, an increase of approximately
$2,416,000, or 264.6 percent, as compared to the twelve months ended December
31, 2021. SG&A associated with our New York operations, as a percentage of
revenue, was 43.8 percent for the twelve months ended December 31, 2022, as
compared with 38.0 percent in the corresponding prior year period. The increase
in SG&A was primarily attributable to increased fees due under the Company's
management agreement and fees due the NYCEDC in 2022 compared to the prior year
due to pre-pandemic levels of activity beginning in April, 2022.
Corporate SG&A was approximately $552,000 for the twelve months ended December
31, 2022, representing an increase of approximately $81,000, or 17.2 percent, as
compared with the corresponding prior year period. The increase in Corporate
SG&A on a year-over-year basis was largely attributable to non-recurring
expenses in 2022.
OPERATING INCOME
Operating income for the year ended December 31, 2022 was $732,414 as compared
to operating income of $440,546 in the year ended December 31, 2021. The
increase in operating income on a year-over-year basis was driven by the factors
described above.
Depreciation and Amortization
Depreciation and amortization was approximately $100,089 and $128,990 for the
twelve months ended December 31, 2022 and 2021, respectively. The decrease in
depreciation expense was attributable to assets becoming fully depreciated in
2022.
Interest Income and Expense
Interest income was $3,302 and $3,780 for the twelve months ended December 31,
2022 and 2021, respectively. Interest expense for the year ended December 31,
2022 was $17,979, as compared to $24,823 in the same period in 2021. Interest
expense in both years is included in gain (loss) from discontinued operations.
The decrease in interest expense on a year-over-year basis was due primarily to
the repayment of notes payable in connection with the sale of our Kansas
operation on October 31, 2022.
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Impairment of Goodwill and Other Intangibles
We had $0 and $750,000 of goodwill at December 31, 2022 and 2021, respectively.
The Company's goodwill was included in the sale of the Company's Kansas location
on October 31, 2022.
Income Tax Expense
Income tax expense for the twelve months ended December 31, 2022 was
approximately $300,000, as compared to $150,000 in the same period in 2021. The
increase in income tax expense is attributable to higher net income in the
twelve months ended December 31, 2022 as compared to 2021.
Net Income Per Share
Net income for the twelve months ended December 31, 2022 was $1,246,621 as
compared to net income of $726,184 in the twelve months ended December 31, 2021.
The increase in net income was attributable to higher revenue at our New York
location as well as an increase in other income in 2022 as compared to 2021.
Basic net income per share for the twelve months ended December 31, 2022 was
$1.28 as compared to basic net income per share of $0.71 in 2021. Diluted net
income per share for the twelve months ended December 31, 2022 was $1.26 as
compared to diluted net income per share of $0.71 in 2021.
Liquidity and Capital Resources
As of December 31, 2022, we had cash and restricted cash of $5,977,157 and a
working capital surplus of $5,739,663. We generated revenue from continuing
operations of $7,598,597 and had net income of $1,246,621 for the year ended
December 31, 2022. For the year ended December 31, 2022, cash flows included net
cash provided by operating activities of $2,435,018, net cash provided by
investing activities of $1,201,853, and net cash used in financing activities of
$106,620.
As disclosed in a Current Report on Form 8-K filed on March 21, 2018 with the
SEC, on March 15, 2018 the Company entered into a loan agreement (the "Loan
Agreement") with Key Bank National Association (the "Bank"). The Loan Agreement
contains three components: (i) a $2,500,000 acquisition line of credit (the "Key
Bank Acquisition Note"); (ii) a $1,000,000 revolving line of credit (the "Key
Bank Revolver Note"); and (iii) a $338,481 term loan (the "Key Bank Term Note").
On October 11, 2018, and as subsequently amended, the Company entered into a new
loan agreement with the Bank (as so amended, the "Change of Terms Agreement")
which modified the original terms of the Key Bank Acquisition Note. The Bank
notified the Company of its decision to discontinue the Key Bank Acquisition
Note, effective June 30, 2021. There were no amounts due under the Key Bank
Acquisition Note as of the date it was discontinued. All amounts due under the
Key Bank Term Note have been repaid.
The Key Bank Revolver Note, at the discretion of the Bank, provides for the
Company to borrow up to $1,000,000 for working capital and general corporate
purposes. This revolving line of credit is a demand note with no stated maturity
date. Borrowings under the Key Bank Revolver Note will bear interest at a rate
per annum equal to Daily Simple SOFR plus 2.75%. The Company is required to make
monthly payments of interest on any outstanding principal under the Key Bank
Revolver Note and is required to pay the entire balance, including principal and
all accrued and unpaid interest and fees, upon demand by the Bank. Any proceeds
from the Key Bank Revolver Note would be secured by substantially all of the
Company's assets. There were no amounts due under the Key Bank Revolver Note at
December 31, 2022 or 2021.
On August 14, 2020, the Company was granted a loan from the Bank (the "Loan") in
the amount of $304,833, pursuant to the Paycheck Protection Program (PPP) under
Division, Title I of the CARES Act, which was enacted March 27, 2020. The Loan,
which was in the form of a note dated August 14, 2020, was to mature in August
2025 and bore interest at a rate of 1% per annum and was payable in monthly
installments commencing on, or before, October 31, 2021 if not forgiven and
legally released. At December 31, 2020, in accordance with FASB ASC 470, Debt,
and ASC 405-20, Liabilities - Extinguishment of Liabilities, the Company
recorded the cash inflow from the Loan as a liability, and cash flows from
financing, pending legal release from the obligation by the U.S. Small Business
Administration ("S.B.A."). The Company used the Loan proceeds for eligible
expenses during the covered period and the Loan was forgiven and legally
released by the S.B.A. in full in the second quarter of 2021. The Company
recorded the forgiveness of the Loan as a gain on extinguishment of debt - PPP
Loan in 2021.
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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 New York Heliport (the
"Concession Agreement"). Pursuant to the terms of the Concession Agreement, the
Company must pay the greater of 18% of the first $5,000,000 in any program year
based on cash collected ("Gross Receipts") and 25% of Gross Receipts in excess
of $5,000,000, or minimum annual guaranteed payments.
As disclosed in a Current Report on Form 8-K filed with the SEC on February 5,
2016, the Company and the New York City Economic Development Corporation (the
"NYCEDC") announced new measures to reduce helicopter noise and impacts across
New York City (the "Air Tour Agreement"). Under the Air Tour Agreement, the
Company has not been allowed to permit its tenant operators to conduct tourist
flights from the New York Heliport on Sundays since April 1, 2016. The Company
was also required to ensure that its tenant operators reduce the total allowable
number of tourist flights from 2015 levels by 20 percent beginning June 1, 2016,
by 40 percent beginning October 1, 2016 and by 50 percent beginning January 1,
2017. The Air Tour Agreement also provided for the minimum annual guarantee
payments the Company is required to pay to the City of New York under the
Concession Agreement be reduced by 50%, effective January 1, 2017. Additionally,
since June 1, 2016, the Company has been required to provide monthly written
reports to the NYCEDC and the New York City Council detailing the number of
tourist flights conducted out of the New York Heliport compared to 2015 levels,
as well as information on any tour flight that flies over land and/or strays
from agreed upon routes. The Air Tour Agreement also extended the Concession
Agreement for 30 months, resulting in a new expiration date of April 30, 2021
and gave the City of New York two one-year options to extend the term of the
Concession Agreement. The term of the Concession Agreement was subsequently
extended by the City through April 30, 2023 by the City's exercise of both
one-year option renewals.
The reductions under the Air Tour Agreement have negatively impacted the
Company's business and financial results as well as those of its management
company at the New York Heliport, Empire Aviation. The Company incurred
management fees with Empire Aviation of approximately $2,138,000 and $0 during
the twelve months ended December 31, 2022 and 2021, respectively. Empire
Aviation notified the Company that it believes additional fees are due under the
management agreement with the New York Heliport for both 2021 and 2020. If the
Company is unable to come to an agreement with Empire Aviation regarding amounts
due under the agreement, the Company could incur additional expense as disclosed
in the Company's 2021 Annual Report on Form 10-K (Note 10. Contingent
Liabilities).
During the program year that began on May 1, 2020, the City of New York agreed,
in recognition of the pandemic's impact, that the Company could defer payment of
minimum guaranteed payments. In April 2021, the City of New York waived the
deferred fees through December 31, 2020. In May 2021, the City of New York
waived the deferred fees through April 30, 2021 which coincided with the
original expiration of the Concession Agreement as amended by the Air Tour
Agreement. The Company worked with the City of New York to address fees to be
paid by the Company for the period May 1, 2021 through December 31, 2021. In
March 2022, the City of New York agreed to accept 18% of monthly Gross Receipts
in excess of $100,000 as Concession fees for this period. In April 2022, the
Company agreed to resume paying the City of New York the total monthly amounts
due under the Concession Agreement retro-active to January 2022 and to continue
paying fees due under the Concession Agreement through the remainder of the Air
Tour Agreement. During the twelve months ended December 31, 2022 and 2021, we
incurred approximately $1,509,000 and $192,000 in concession fees, respectively,
which are recorded in the cost of revenue.
On February 15, 2023, it was reported in the public record that NYCEDC would be
bringing a new Concession Agreement with the Company as the operator of the
Downtown Manhattan Heliport to the Franchise and Concession Review Committee
meeting on March 3, 2023. The item was subsequently pulled off the agenda, with
NYCEDC announcing on April 7, 2023 that the previous Request for Proposals
("RFP") had been cancelled and that it is their intention to put out a new RFP
in 2023. Saker's current Concession Agreement terminates on April 30, 2023. The
Company has been notified by NYCEDC that the Company will receive a new permit
to operate the heliport from May 1, 2023 until a new RFP process is concluded.
The Company is currently working with NYCEDC on the new agreement and expects to
file a Form 8-K once the new agreement is finalized.
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On April 20, 2018, the Company's Kansas subsidiary entered into a purchase lease
with Commerce Bank for a refueling truck (the "Truck Lease"). The Truck Lease
commenced on May 1, 2018 and continues for 60 months with a monthly payment of
$2,568 and an interest rate of 5.5%. At the end of the Truck Lease, the
Company's subsidiary may purchase the vehicle for $1.00. The refueling truck was
included in the sale of the Company's Kansas subsidiary and the Truck Lease was
paid in full at closing.
On May 1, 2021, the Company's Kansas subsidiary executed a promissory note for
$76,000 with Avfuel Corporation ("Avfuel") for the purchase of a Jet-A refueling
truck (the "Truck Note"). The Truck Note requires six annual payments of
$13,432.56 commencing April 30, 2022 with the entire balance of unpaid principal
and interest due on, or before, April 30, 2028. Interest accrues at prime plus
3% on the outstanding principal amount. The Company is required to make
prepayments against the Truck Note at the rate of $0.018 per gallon of fuel
purchased under a fuel supply agreement between the Company and Avfuel. The
Jet-A refueling truck was included in the sale of the Company's Kansas
subsidiary and the Truck Note was paid in full at closing.
During the twelve months ended December 31, 2022, we had a net increase in cash
of $3,530,251. Our sources and uses of funds during this period were as follows:
Cash from Operating Activities
For the year ended December 31, 2022, net cash provided by operating activities
was $1,712,556. This amount included an increase in operating cash related to
net profit of $1,246,621 and additions for the following items: (i)
depreciation, $100,089; (ii) stock based compensation, $71,995; (iii) accounts
receivable, $60,866; (iv)inventories, $227,091; (v) income tax receivable,
$573,679; (vi) prepaid expenses, $150,805; (vii) customer deposits, $123,755;
(viii) accounts payable, $116,284; and (vii) accrued expenses, $192,689. The
increase in cash provided by operating activities in 2022 was offset by the
following item: (i) gain on sale of assets, $431,318 and life insurance proceeds
(500,000). For the year ended December 31, 2021, net cash provided by operating
activities was $813,751. This amount included an increase in operating cash
related to net profit of $726,184 and additions for the following items: (i)
depreciation, $128,990; (ii) stock based compensation, $34,392; (iii)
extinguishment of debt, $304,833; (iv)income tax receivable, $261,922; (v)
customer deposits, $2,512; (vi) accounts payable, $150,200; and (vii) accrued
expenses, $185,266. The increase in cash provided by operating activities in
2021 was offset by the following items: (i) accounts receivable, trade, $43,308;
(ii) inventories, $79,485; and (iii) prepaid expenses, $248,089.
Cash from Investing Activities
For the year ended December 31, 2022, net cash provided by investing activities
was $1,424,315. This amount included (i) net proceeds from sale of assets,
$1,440,000; and (ii) the purchase of property and equipment, $15,685. For the
year ended December 31, 2021, net cash used in investing activities was $81,544
for purchases of property and equipment.
Cash from Financing Activities
For the year ended December 31, 2022, net cash provided by financing activities
was $393,380. This amount included proceeds from life insurance $500,000 offset
by (i) repayment of notes payable, $67,045; and (ii) repayment of right of use
lease payables, $39,575. For the year ended December 31, 2021, net cash used in
financing activities was $184,383. This amount included an addition for the
issuance of notes payable of $76,000 offset by the following items: (i) purchase
and cancellation of common stock, $204,399; (ii) repayment of notes payable,
$8,955; and (iii) repayment of right of use leases, $47,029.
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.
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Critical Accounting Estimates
Discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the amounts reported in the consolidated
financial statements and the accompanying notes. We evaluate our estimates on an
ongoing basis, including those estimates related to product returns, product and
content development expenses, bad debts, inventories, intangible assets, income
taxes, contingencies and litigation. We base our estimates on experience and on
various assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.
The critical accounting policies which we believe affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements are provided as follows:
Accounts Receivable
In 2021, the Company's accounts receivable was primarily comprised of two
customers at our New York Heliport. These customers continued to operate
throughout 2021, but at substantially reduced levels of operation when compared
to pre-pandemic levels. For the fiscal year ended December 31, 2021, these two
customers represented approximately $180,000, or 59.8%, of the balance of
accounts receivable. In addition, these two customers represented approximately
27.6% of our revenue in 2021. The Company has a security deposit in place in
connection with both of these receivables.
In March 2022, one of the Company's former customers resumed operations. In June
2022, this customer ceased operating. In June 2022, a new tenant began operating
at our New York Heliport. Beginning in April 2022, the Company's customers began
operating at pre-pandemic levels which continued through the end of 2022. For
the fiscal year ended December 31, 2022, the Company's three customers
represented approximately $184,000, or 75%, of the balance of accounts
receivable. In addition, these three customers represented approximately 83 % of
our revenue in 2022. The Company has a security deposit in place for each of
these customers.
Goodwill and Intangible Assets
Goodwill and intangibles that are deemed to have indefinite lives are not
amortized but, instead, are to be reviewed at each reporting period for
impairment. We assessed potential impairment of goodwill using qualitative
factors by considering various factors including macroeconomic conditions,
industry and market conditions, cost factors, a sustained share price or market
capitalization decrease and any reporting unit specific events. We performed an
analysis of our goodwill and intangible assets at December 31, 2021. The Company
had no goodwill recorded as of December 31, 2022 due to the sale of the
Company's Kansas location on October 31, 2022.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between their financial statement
carrying amounts and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Deferred tax assets are subject to a valuation allowance because it is more
likely than not that certain of the deferred tax assets will not be realized in
future periods. During 2020 we experienced a decrease in demand and minimal
activity in our business. The extent of the impact of COVID-19 on our
operational and financial performance cannot be predicted and will depend on
future developments, including the duration and spread of the outbreak, related
travel advisories and restrictions. Accordingly, we have established a valuation
allowance on net deferred assets. 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 2019.
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Stock Based Compensation
Stock-based compensation expense for all share-based payment awards are based on
the estimated grant-date fair value. We recognize these compensation costs over
the requisite service period of the award, which is generally the option vesting
term.
Option valuation models require the input of highly subjective assumptions,
including the expected life of the option. Because our employee stock options
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
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