Saker Aviation Services, Inc 10-Q for FY2021 Q1
Saker Aviation Services, Inc. (SKAS)
About this 10-Q
Saker Aviation Services, Inc filed this 10-Q on May 14, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).
Headline figures
Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $809.1K
- down 51.7% from $1.67M a year earlier
- Net loss
- $265.67K
- compared with a net loss of $96.14K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Quarterly Period Ended March 31, 2021
or
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☐ |
TRANSITION REPORT PURSUANT TO 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)
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Nevada |
87-0617649 |
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(State or other jurisdiction of |
(I.R.S. Employer |
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incorporation or organization) |
Identification No.) |
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20 South Street, Pier 6 East River, New York, NY |
10004 |
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(Address of principal executive offices) |
(Zip Code) |
(212) 776-4046
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
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Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of May 14, 2021, the registrant had 1,028,863 shares of its common stock, $0.03 par value, issued and outstanding.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Form 10-Q
March 31, 2021
Index
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PART I - FINANCIAL INFORMATION |
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
Page |
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Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020 |
1 |
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Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (unaudited) |
2 |
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Statements of Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (unaudited) |
3 |
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Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited) |
4 |
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Notes to Financial Statements (unaudited) |
5 |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
10 | ||
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
16 |
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| ITEM 4. CONTROLS AND PROCEDURES | 16 | ||
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PART II - OTHER INFORMATION |
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ITEM 6. EXHIBITS |
17 |
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SIGNATURES |
18 |
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SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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March 31, 2021 |
December 31, 2020 |
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| ASSETS | ||||||||
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CURRENT ASSETS |
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Cash |
$ | 1,791,853 | $ | 1,899,082 | ||||
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Accounts receivable |
244,511 | 262,101 | ||||||
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Inventories |
194,130 | 163,619 | ||||||
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Income tax receivable |
955,500 | 955,500 | ||||||
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Prepaid expenses |
172,144 | 257,629 | ||||||
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Total current assets |
3,358,138 | 3,537,931 | ||||||
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PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $3,761,485 and $3,745,861, respectively |
244,436 | 258,856 | ||||||
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OTHER ASSETS |
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Deposits |
2,512 | 2,512 | ||||||
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Right of use assets |
436,032 | 445,711 | ||||||
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Goodwill |
750,000 | 750,000 | ||||||
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Total other assets |
1,188,544 | 1,198,223 | ||||||
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TOTAL ASSETS |
$ | 4,791,118 | $ | 4,995,010 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
$ | 106,008 | $ | 62,021 | ||||
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Customer deposits |
80,878 | 80,878 | ||||||
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Accrued expenses |
235,331 | 219,307 | ||||||
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Note Payable |
304,833 | 304,833 | ||||||
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Right of use leases payable – current portion |
43,897 | 43,306 | ||||||
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Total current liabilities |
770,947 | 710,345 | ||||||
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LONG-TERM LIABILITIES |
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Right of use leases payable - less current portion |
369,507 | 376,933 | ||||||
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Total liabilities |
1,140,454 | 1,087,278 | ||||||
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STOCKHOLDERS’ EQUITY |
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Preferred stock - $0.03 par value; authorized 333,306; none issued and outstanding |
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Common stock - $0.03 par value; authorized 3,333,334; 1,028,863 shares issued and outstanding at each of March 31, 2021 and December 31, 2020 |
30,866 | 30,866 | ||||||
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Additional paid-in capital |
19,917,828 | 19,909,230 | ||||||
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Accumulated deficit |
(16,298,030 | ) | (16,032,364 | ) | ||||
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TOTAL STOCKHOLDERS’ EQUITY |
3,650,664 | 3,907,732 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 4,791,118 | $ | 4,995,010 | ||||
See accompanying notes to condensed consolidated financial statements.
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SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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(UNAUDITED) |
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For the Three Months Ended March 31, |
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2021 |
2020 |
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REVENUE |
$ | 809,096 | $ | 1,673,755 | ||||
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COST OF REVENUE |
565,135 | 1,081,665 | ||||||
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GROSS PROFIT |
243,961 | 592,090 | ||||||
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
499,544 | 693,577 | ||||||
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OPERATING LOSS FROM OPERATIONS |
(255,583 | ) | (101,487 | ) | ||||
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OTHER (EXPENSE) INCOME: |
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INTEREST INCOME |
--- | 6,576 | ||||||
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INTEREST (EXPENSE) |
(5,657 | ) | (1,229 | ) | ||||
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NET OTHER (EXPENSE) INCOME |
(5,657 | ) | 5,347 | |||||
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LOSS FROM OPERATIONS, before income taxes |
(261,240 | ) | (96,140 | ) | ||||
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INCOME TAX EXPENSE |
4,426 | 0 | ||||||
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NET LOSS |
$ | (265,666 | ) | $ | (96,140 | ) | ||
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Basic and Diluted Net Loss Per Common Share |
$ | (0.26 | ) | $ | (0.09 | ) | ||
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Weighted Average Number of Common Shares – Basic |
1,028,863 | 1,022,515 | ||||||
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Weighted Average Number of Common Shares – Diluted |
1,035,031 | 1,038,899 | ||||||
See accompanying notes to condensed consolidated financial statements.
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SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES |
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STATEMENTS OF CONDENSED STOCKHOLDERS' EQUITY (UNAUDITED) |
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Additional |
Total |
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Common Stock |
Paid-in |
Accumulated |
Stockholders’ |
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Shares |
Amount |
Capital |
Deficit |
Equity |
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BALANCE – January 1, 2020 |
1,020,135 | $ | 30,604 | $ | 19,818,637 | $ | (14,272,897 | ) | $ | 5,576,344 | ||||||||||
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Issuance of additional Common Stock |
3,609 | 108 | (108 | ) | 0 | |||||||||||||||
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Amortization of stock based compensation |
18,651 | 18,651 | ||||||||||||||||||
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Net loss |
(96,140 | ) | (96,140 | ) | ||||||||||||||||
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BALANCE – March 31, 2020 |
1,023,744 | $ | 30,712 | $ | 19,837,180 | $ | (14,369,037 | ) | $ | 5,498,855 | ||||||||||
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BALANCE – January 1, 2021 |
1,028,863 | $ | 30,866 | $ | 19,909,230 | $ | (16,032,364 | ) | $ | 3,907,732 | ||||||||||
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Amortization of stock based compensation |
8,598 | 8,598 | ||||||||||||||||||
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Net loss |
(265,666 | ) | (265,666 | ) | ||||||||||||||||
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BALANCE – March 31, 2021 |
1,028,863 | $ | 30,866 | 19,917,828 | (16,298,030 | ) | $ | 3,650,664 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months Ended March 31, |
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2021 |
2020 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net (loss) income |
$ | (265,666 | ) | $ | (96,140 | ) | ||
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Depreciation and amortization |
25,302 | 32,807 | ||||||
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Stock based compensation |
8,598 | 18,651 | ||||||
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Changes in operating assets and liabilities: |
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Accounts receivable, trade |
17,590 | 125,874 | ||||||
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Inventories |
(30,511 | ) | 19,854 | |||||
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Prepaid expenses |
85,485 | 98,058 | ||||||
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Customer deposits |
--- | 426 | ||||||
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Accounts payable |
43,987 | (370,021 | ) | |||||
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Accrued expenses |
16,024 | (140,391 | ) | |||||
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TOTAL ADJUSTMENTS |
166,475 | (214,742 | ) | |||||
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NET CASH USED IN OPERATING ACTIVITIES |
(99,191 | ) | (310,882 | ) | ||||
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of property and equipment |
(1,203 | ) | (4,912 | ) | ||||
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NET CASH USED IN INVESTING ACTIVITIES |
(1,203 | ) | (4,912 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Dividends paid |
--- | (127,968 | ) | |||||
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Repayment of right of use leases payable |
(6,835 | ) | (10,054 | ) | ||||
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NET CASH USED IN FINANCING ACTIVITIES |
(6,835 | ) | (138,022 | ) | ||||
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NET CHANGE IN CASH |
(107,229 | ) | (453,816 | ) | ||||
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CASH – Beginning |
1,899,082 | 3,597,491 | ||||||
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CASH – Ending |
$ | 1,791,853 | $ | 3,143,675 | ||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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Cash paid during the periods for: |
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Interest |
$ | 5,657 | $ | 1,229 | ||||
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Income taxes |
$ | 4,426 | $ | 28,079 |
See accompanying notes to condensed consolidated financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Saker Aviation Services, Inc. (the “Company”) and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial statements and in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements and should be read in conjunction with the financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
The condensed consolidated balance sheet as of March 31, 2021 and the condensed consolidated statements of operations and cash flows for the three months ended March 31, 2021 and 2020 have been prepared by the Company without audit. In the opinion of the Company’s management, all necessary adjustments (consisting of normal recurring accruals) have been included to make the Company’s financial position as of March 31, 2021 and its results of operations, stockholders’ equity, and cash flows for the three months ended March 31, 2021 not misleading. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for any full year or any other interim period.
Throughout 2020 and 2021, 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 Downtown Manhattan Heliport ceased. On July 20, 2020, New York City started Phase 4 of the city’s reopening. Sightseeing tour operators at the heliport restarted operations under this phase. For the period July 20, 2020 through the date of this report, sightseeing tour operators have experienced low demand and minimal activity. To date, the COVID-19 pandemic has had a less substantial impact on our operations at our Kansas FBO and MRO. Although the Downtown Manhattan Heliport has been able to reopen and our Kansas FBO and MRO is operating, there can be no assurance that these facilities will be able to remain open for the foreseeable future, depending on future developments related to the COVID-19 pandemic.
NOTE 2 – Liquidity and Material Agreements
As of March 31, 2021, we had cash of $1,791,853 and a working capital surplus of $2,587,191. We generated revenue of 809,096 and had a net loss of $(265,666) for the quarter ended March 31, 2021. For the quarter ended March 31, 2021, cash flows included net cash used in operating activities of $99,191, net cash used in investing activities of $1,203, and net cash used in financing activities of $6,835.
As disclosed in a Current Report on Form 8-K filed on March 21, 2018 with the Securities and Exchange Commission (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”). There are currently no amounts outstanding under the Key Bank Term Note.
Proceeds of the Key Bank Acquisition Note were to be disbursed pursuant to a multiple draw demand note dated as of the agreement date, where the Company could, at the discretion of the Bank, borrow up to an aggregate amount of $2,500,000, to be used for the Company’s acquisition of one or more business entities. Until the Change of Terms Agreement, as defined below, the Company was required to make consecutive monthly payments of interest, calculated at a rate per annum equal to one-day LIBOR (adjusted daily) plus 2.75%, on any outstanding principal under the Key Bank Acquisition Note from the date of its issuance through September 15, 2018 (the “Conversion Date”).
At any time through and including the Conversion Date, at the Bank’s discretion, the Company had the opportunity to request that any loan made under the Key Bank Acquisition Note be converted into a term loan to be repaid in full, including accrued interest, by consecutive monthly payments over a 48 month amortization period beginning after the Conversion Date. For any loan that was not converted into a term loan on or before the Conversion Date, the Company would have been required to begin making monthly payments of principal and interest after the Conversion Date, over a 48 month amortization period, after which the remaining unpaid principal and accrued interest would have become due and payable. All loans under the Key Bank Acquisition Note would have, after the Conversion Date, accrued interest at a rate per annum equal to the Bank’s four year cost of funds rate plus 2.5%. As of the Conversion Date, there were no amounts due under the Key Bank Acquisition Note and no amounts had been converted to a term loan.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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. Under the Change of Terms Agreement, the Company may continue to, at the discretion of the Bank, borrow up to an aggregate amount of $2,500,000 through September 1, 2021 (the “Maturity Date”), to be used for the Company’s acquisition of one or more business entities. The Change of Terms Agreement requires the Company to make consecutive monthly payments of interest on any outstanding principal calculated at a rate per annum equal to 4.25% and would be secured by substantially all of the Company’s assets. The entire principal balance, plus all accrued interest, is due in full on the Maturity Date. As of March 31, 2021, there were no amounts due under the Change of Terms Agreement.
Proceeds from the Key Bank Revolver Note, at the discretion of the Bank, provide 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 one-day LIBOR (adjusted daily) 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. As of March 31, 2021, there were no amounts due under the Key Bank Revolver Note.
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 (the “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 (“the “Note”), matures in August 2025 and bears interest at a rate of 1% per annum and is payable in monthly installments commencing on, or before, October 31, 2021. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. The Company did not provide any collateral or guarantees in connection with the PPP loan. Funds from the loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred during the covered 24 week period. The loan qualifies for forgiveness provided the proceeds are used for eligible expenses on the covered period and certain employee retention criteria are met. In accordance with FASB ASC 470, Debt, and ASC 405-20, Liabilities – Extinguishment of Liabilities, the Company recorded the cash inflow from the PPP loan as a liability, and cash flows from financing, pending legal release from the obligation by the U.S. Small Business Administration at December 31, 2020. Upon forgiveness and legal release, the liability will be reduced by the amount forgiven and a gain on debt extinguishment will be recorded. The Company has used the proceeds for purposes consistent with the PPP and has applied for forgiveness. The Company expects this loan to be forgiven in 2021.
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 $5,000,000 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. During the program year that began on May 1, 2020, the City agreed, in recognition of the pandemic’s impact, that the Company could defer payment of minimum guaranteed payments. In April 2021, the City waived the deferred fees through December 31, 2020. Concession fees in this Form 10-Q have been accounted for based on the abatement. During the three months ended March 31, 2021 and 2020, we incurred approximately $0 and $254,000 in concession fees, respectively, which are recorded in the cost of revenue.
As disclosed in a Current Report on Form 8-K filed with the 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”).
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Under the Air Tour Agreement, the Company has not been allowed to permit its tenant operators to conduct tourist flights from the Downtown Manhattan 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, beginning June 1, 2016, the Company is required to provide monthly written reports to the NYCEDC and the New York City Council detailing the number of tourist flights conducted out of the Downtown Manhattan Heliport compared to 2015 levels, as well as information on any tour flight that flies over land and/or strays from agreed upon routes. These reductions have negatively impacted the Company’s business and financial results as well as those of its management company at the Heliport, Empire Aviation which, as previously disclosed, is owned by the children of a former officer and director of the Company. The Company incurred management fees with Empire Aviation of approximately $0 and $86,000 during the three months ended March 31, 2021 and 2020, respectively, which is recorded in administrative expenses. The Company and Empire Aviation had historically contributed to the Helicopter Tourism and Jobs Council (“HTJC”), an association that lobbies on behalf of the helicopter air tour industry, and which had engaged in discussions with the Mayor’s office. The Company has suspended its contributions to HTJC in light of the pandemic. The Company’s former officer and director is also an active participant with HTJC, which is managed by the former officer and director’s grandson. One of our Directors and our current acting principal executive officer, Sam Goldstein, serves as deputy director of HTJC.
The Air Tour Agreement also extended the Concession Agreement for 30 months, resulting in a new expiration date of April 30, 2021. The City of New York has two one-year options to further extend the Concession Agreement. The City has agreed to continue to waive fees in anticipation of an amendment to the Air Tour Agreement. Such amendment is anticipated to address terms and conditions of ongoing fee waivers while also addressing the term of the Concession Agreement, among other things.
On April 20, 2018, the Company’s Kansas subsidiary entered into a purchase lease with Commerce Bank for a refueling truck (the “Truck Lease”). The Truck Lease commenced on May 1, 2018 and continues for 60 months at an interest rate of LIBOR plus 416 basis points. At the end of the Truck Lease, the Company’s subsidiary may purchase the vehicle for $1.00.
On January 15, 2019, the Company was issued an unsecured note by one of its customers at the Heliport. The note schedules payments of approximately $276,000 in receivables payable by such customer, had a maturity date of October 31, 2019, as amended, and carries a 7.5% rate of interest. The note payments were to be made in six monthly installments beginning May 31, 2019. The customer’s payments on the note have not met the installment plan and the Company was working on changes to the note when the customer filed for Chapter 11 Bankruptcy in October 2019. In February 2021, the bankruptcy court allowed the customer to convert from a Chapter 11 Bankruptcy to a Chapter 7 Liquidation. Under the Chapter 7 Liquidation, the note will now be treated as a general unsecured claim as opposed to a prioritized payment under the Chapter 11 Bankruptcy to cure the permit default. This change has substantially diminished the Company’s expectation to collect amounts due under the note. Therefore, the Company has deemed unpaid principal and accrued interest of approximately $205,000 at December 31, 2020 as uncollectable. The $205,000 was written off to bad debt expense in the fourth quarter of 2020.
As disclosed in a Current Report on Form 8-K filed with the SEC on July 6, 2015, the Company entered into a stock purchase agreement, dated June 30, 2015, by and between the Company and Warren A. Peck, pursuant to which Mr. Peck purchased all of the capital stock of the Company’s wholly-owned subsidiary, Phoenix Rising Aviation, Inc. The details of the agreement are described in such Current Report as well as in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on April 11, 2016. The Company received $100,000 due under this agreement in September 2017 and an additional payment of $100,000 in September 2018. In 2019, the Company accepted the title to a Falcon 10 aircraft owned by Mr. Peck as satisfaction in full of the remainder of the $270,000 stock purchase price. The Company intended to sell the aircraft and classified it as “Held For Sale” on the Company’s consolidated balance sheet at December 31. 2019. The Company has been unable to find a buyer due to a depressed market as well as a drop in demand for this type of aircraft. Without a market in which to sell the aircraft, the Company recorded an impairment charge in the quarter ended June 30, 2020 for the full carrying amount of the aircraft. The Company does not believe the aircraft has any value and, in December 2020, filed an application with the FAA Aircraft Registry to cancel the aircraft’s registry.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As described throughout this Quarterly Report on Form 10-Q, on March 17, 2020, all sightseeing tour operations at the Downtown Manhattan Heliport ceased as a result of the COVID-19 pandemic. On July 20, 2020, New York City began Phase 4 of the city’s reopening. Sightseeing tours resumed under this phase. For the period July 20, 2020, through the date of this report, sightseeing tour operators have experienced low demand and minimal activity. To mitigate this loss of revenue, we may need additional financing to continue operations through the issuance of equity or debt and any such financing will be dependent on general market conditions, which itself is subject to the effects of the COVID-19 pandemic. Although we have access to the Key Bank Revolver Note described above, we can make no assurance that that the Key Bank Revolver Note will be sufficient to fund our operations. Additionally, certain restrictions in the Key Bank Revolver Note may prohibit us from obtaining more attractive financing.
NOTE 3 - Summary of Significant Accounting Policies
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, FirstFlight Heliports, LLC, and its fixed base operation and aircraft maintenance and repair services at Garden City (Kansas) Regional Airport. All significant inter-company accounts and transactions have been eliminated in consolidation.
Net Loss Per Common Share
Net loss was $(265,666) and $(96,140) for the three months ended March 31, 2021 and 2020, respectively. Basic net loss 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 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 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 March 31, |
||||||||
|
2021 |
2020 |
|||||||
|
Weighted average common shares outstanding, basic |
1,028,863 | 1,022,515 | ||||||
|
Common shares upon exercise of options |
6,168 | 16,384 | ||||||
|
Weighted average common shares outstanding, diluted |
1,035,031 | 1,038,899 | ||||||
Stock-Based Compensation
Stock-based compensation expense for all stock-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 three months ended March 31, 2021 and 2020, the Company incurred stock-based compensation of $8,598 and $18,651, 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 March 31, 2021, the unamortized fair value of the options totaled $25,798 and the weighted average remaining amortization period of the options approximated five 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.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. ASU 2016-02 became effective for us on January 1, 2019 and we have adopted the new standard using a modified retrospective approach. The adoption of ASU No. 2016-02 did not have a material impact on the Company’s financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 – Inventories
Inventory consists primarily of aviation fuel, which the Company dispenses to its customers, and parts inventory as a result of the acquisition of Aircraft Services, Inc. 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:
|
March 31, 2021 |
December 31, 2020 |
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|
Parts inventory |
$ | 97,536 | $ | 92,481 | ||||
|
Fuel inventory |
80,493 | 59,336 | ||||||
|
Other inventory |
16,101 | 11,802 | ||||||
|
Total inventory |
$ | 194,130 | $ | 163,619 | ||||
Included in fuel inventory are amounts held for third parties of $42,895 and $30,904 as of March 31, 2021 and December 31, 2020, respectively, with an offsetting liability included as part of accrued expenses.
NOTE 5 – Related Parties
From time to time, the law firm of Wachtel Missry, LLP provides certain legal services to the Company and its subsidiaries. William B. Wachtel, Chairman of the Company’s Board of Directors, is a managing partner of such firm. During the quarters ended March 31, 2021 and 2020, no services were provided to the Company by Wachtel & Missry, LLP.
As described in more detail in Note 2, Liquidity and Material Agreements, the Company is party to a management agreement with Empire Aviation, an entity owned by the children of the Company’s former Chief Executive Officer and a former member of our Company’s Board of Directors.
NOTE 6 – Litigation
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 7 – Dividend Payable
On September 30, 2019, the Company announced that its Board of Directors had declared a special cash dividend of $0.50 per share (the “Dividend”). The Dividend was paid in equal quarterly installments of $0.125 per share beginning on November 1, 2019, with the final dividend paid on August 13, 2020. The accrued dividend payment amounted to $373,370 at December 31, 2019. The declaration and payment of any future dividend will be at the sole discretion of the Board of Directors.
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read together with the accompanying unaudited condensed consolidated 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, 2020.
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. 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, a fixed base operation (“FBO”), and as a provider of aircraft maintenance and repair services (“MRO”). 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 and as an FBO and MRO at the Garden City (Kansas) Regional Airport.
The Garden City facility became part of our company as a result of our acquisition of the FBO assets of Central Plains Aviation, Inc. in March 2005 and of Aircraft Services, Inc. in October 2016.
Our business activities at the Downtown Manhattan (New York) Heliport facility (the “Heliport”) commenced in November 2008 when we were awarded the Concession Agreement by the City of New York to operate the Heliport, which we assigned to our subsidiary, FirstFlight Heliports, LLC d/b/a Saker Aviation Services (“FFH”).
The 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 Downtown Manhattan Heliport ceased due to a drop in demand. On July 20, 2020, New York City started Phase 4 of the city’s reopening. Sightseeing tour operators at the heliport restarted operations under this phase. For the period July 20, 2020 through the date of this report, sightseeing tour operators have experienced low demand and minimal activity. To date, the COVID-19 pandemic has had a less substantial impact on our operations at our Kansas FBO and MRO.
We experienced a decrease in revenue during the three months ended March 31, 2021 as compared to the prior year period. This decrease is primarily attributable to a portion of the first quarter 2020 operations being negatively affected by the COVID pandemic as compared to the negative effect of the COVID pandemic on the entire first quarter of 2021 operation. While we expect the COVID-19 pandemic to continue to adversely impact our business and operations, the full extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the COVID-19 pandemic and related travel advisories and restrictions and the impact of the COVID-19 pandemic on overall demand for air travel.
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.
If we are able to grow our business as planned, we anticipate that our larger size would provide us with greater buying power from suppliers, resulting in lower costs. We expect that 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 to our facilities and thus allow us to compete against other FBOs of varying sizes.
REVENUE AND OPERATING RESULTS
Comparison of Continuing Operations from the Three Months Ended March 31, 2021 and March 31, 2020.
REVENUE
Operating results for the three month periods ended March 31, 2021 and March 31, 2020 were negatively impacted by the ongoing COVID-19 pandemic. The COVID-19 pandemic has depressed year-over-year activity at our Heliport and, consequently, the results reported below. This decrease in year-over-year activity is primarily attributable to a portion of the first quarter 2020 operations being negatively affected by the COVID pandemic as compared to the negative effect of the COVID pandemic on the entire first quarter of 2021 operation.
Revenue from operations decreased by 51.7 percent to $809,096 for the three months ended March 31, 2021 as compared with corresponding prior-year period revenue of $1,673,755.
For the three months ended March 31, 2021, revenue from operations associated with the sale of jet fuel, aviation gasoline and related items decreased by 37.2 percent to approximately $506,000 as compared to approximately $807,000 in the three months ended March 31, 2020. This decrease was largely attributable to the lower volume of gallons of aviation gasoline sold at our New York location.
For the three months ended March 31, 2021, revenue from operations associated with services and supply items decreased by 70 percent to approximately $255,000 as compared to approximately $853,000 in the three months ended March 31, 2020. This decrease was largely attributable to a lower demand for services at our New York location due to the COVID-19 pandemic.
For the three months ended March 31, 2021 all other revenue from operations increased by 235.6 percent to approximately $47,000 as compared to approximately $14,000 in the three months ended March 31, 2020. This increase was largely attributable to an increase in non-aeronautical revenue generated at our New York location compared to the same period last year.
GROSS PROFIT
Total gross profit from operations decreased by 58.8 percent to $243,961 in the three months ended March 31, 2021 as compared with the three months ended March 31, 2020. Gross profit was negatively impacted by the items previously discussed. Gross margin decreased to 30.2 percent in the three months ended March 31, 2021 as compared to 35.4 percent in the same period in the prior year.
OPERATING EXPENSE
Selling, General and Administrative
Total selling, general and administrative expenses, (“SG&A”), from operations were $499,544 in the three months ended March 31, 2021, representing a decrease of approximately $194,000 or 28 percent, as compared to the same period in 2020.
SG&A from operations associated with our aviation services operations were approximately $383,000 in the three months ended March 31, 2021, representing a decrease of approximately $193,000, or 33.6 percent, as compared to the three months ended March 31, 2020. SG&A from operations associated with our aviation services operations, as a percentage of revenue, was 47.3 percent for the three months ended March 31, 2021, as compared with 34.4 percent in the corresponding prior year period. The decreased operating expenses were largely attributable to reduced costs related to the lower levels of activity in our Heliport operations. The increase in SG&A as a percentage of revenue is largely attributable to the lower offset of fixed costs due to lower levels of activity at our Heliport.
Corporate SG&A from operations was approximately $116,000 for the three months ended March 31, 2021, representing a decrease of approximately $1,000 as compared with the corresponding prior year period.
OPERATING (LOSS) INCOME
Operating loss from operations for the three months ended March 31, 2021 was $(255,583) as compared to operating loss of $(101,487) in the three months ended March 31, 2020. The increase in operating loss on a year-over-year basis was driven by the factors described above.
Depreciation and Amortization
Depreciation and amortization was approximately $25,000 and $33,000 for the three months ended March 31, 2021 and 2020, respectively.
Interest Income and Expense
Interest income for the three months ended March 31, 2021 was approximately $0 as compared to approximately $7,000 in the same period in 2020. The decrease in interest income is primarily due to the write-off of a note receivable in the fourth quarter of 2020.
Interest expense for the three months ended March 31, 2021 was approximately $5,600 as compared to approximately $1,000 in the same period in 2020. The increase in interest expense is due primarily to interest expense associated with our right of use leases.
Income Tax
Income tax expense for the three months ended March 31, 2021 and 2020 was $4,426 and $0, respectively.
Net Loss Per Share
Net loss was $(265,666) and $(96,140) for the three months ended March 31, 2021 and 2020, respectively.
Basic and diluted net loss per share for the three month periods ended March 31, 2021 and 2020 was $(0.26) and $(0.09), respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2021, we had cash of $1,791,853 and a working capital surplus of $2,587,191. We generated revenue of $809,096 and had a net loss of $(265,666) for the quarter ended March 31, 2021. For the quarter ended March 31, 2021, cash flows included net cash used in operating activities of $99,191, net cash used in investing activities of $1,203, and net cash used in financing activities of $6,835.
As disclosed in a Current Report on Form 8-K filed on March 21, 2018 with the Securities and Exchange Commission (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”). There are currently no amounts outstanding under the Key Bank Term Note.
Proceeds of the Key Bank Acquisition Note were to be disbursed pursuant to a multiple draw demand note dated as of the agreement date, where the Company could, at the discretion of the Bank, borrow up to an aggregate amount of $2,500,000, to be used for the Company’s acquisition of one or more business entities. Until the Change of Terms Agreement, as defined below, the Company was required to make consecutive monthly payments of interest, calculated at a rate per annum equal to one-day LIBOR (adjusted daily) plus 2.75%, on any outstanding principal under the Key Bank Acquisition Note from the date of its issuance through September 15, 2018 (the “Conversion Date”).
At any time through and including the Conversion Date, at the Bank’s discretion, the Company had the opportunity to request that any loan made under the Key Bank Acquisition Note be converted into a term loan to be repaid in full, including accrued interest, by consecutive monthly payments over a 48 month amortization period beginning after the Conversion Date. For any loan that was not converted into a term loan on or before the Conversion Date, the Company would have been required to begin making monthly payments of principal and interest after the Conversion Date, over a 48 month amortization period, after which the remaining unpaid principal and accrued interest would have become due and payable. All loans under the Key Bank Acquisition Note would have, after the Conversion Date, accrued interest at a rate per annum equal to the Bank’s four year cost of funds rate plus 2.5%. As of the Conversion Date, there were no amounts due under the Key Bank Acquisition Note and no amounts had been converted to a term loan.
On October 11, 2018, and as subsequently amended, the Company entered into a new loan agreement with the Bank (as so amended, the “Change of Terms Agreement”) which modified the original terms of the Key Bank Acquisition Note. Under the Change of Terms Agreement, the Company may continue to, at the discretion of the Bank, borrow up to an aggregate amount of $2,500,000 through September 1, 2021 (the “Maturity Date”), to be used for the Company’s acquisition of one or more business entities. The Change of Terms Agreement requires the Company to make consecutive monthly payments of interest on any outstanding principal calculated at a rate per annum equal to 4.25% and would be secured by substantially all of the Company’s assets. The entire principal balance, plus all accrued interest, is due in full on the Maturity Date. As of March 31, 2021, there were no amounts due under the Change of Terms Agreement.
Proceeds from the Key Bank Revolver Note, at the discretion of the Bank, provide 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 one-day LIBOR (adjusted daily) 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. As of March 31, 2021, there were no amounts due under the Key Bank Revolver Note.
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 (the “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 (“the “Note”), matures in August 2025 and bears interest at a rate of 1% per annum and is payable in monthly installments commencing on, or before, October 31, 2021. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. The Company did not provide any collateral or guarantees in connection with the PPP loan. Funds from the loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred during the covered 24 week period. The loan qualifies for forgiveness provided the proceeds are used for eligible expenses on the covered period and certain employee retention criteria are met. In accordance with FASB ASC 470, Debt, and ASC 405-20, Liabilities – Extinguishment of Liabilities, the Company recorded the cash inflow from the PPP loan as a liability, and cash flows from financing, pending legal release from the obligation by the U.S. Small Business Administration at December 31, 2020. Upon forgiveness and legal release, the liability will be reduced by the amount forgiven and a gain on debt extinguishment will be recorded. The Company has used the proceeds for purposes consistent with the PPP and has applied for forgiveness. The Company expects this loan to be forgiven in 2021.
Under the Air Tour Agreement, the Company has not been allowed to permit its tenant operators to conduct tourist flights from the Downtown Manhattan 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, beginning June 1, 2016, the Company is required to provide monthly written reports to the NYCEDC and the New York City Council detailing the number of tourist flights conducted out of the Downtown Manhattan Heliport compared to 2015 levels, as well as information on any tour flight that flies over land and/or strays from agreed upon routes. These reductions have negatively impacted the Company’s business and financial results as well as those of its management company at the Heliport, Empire Aviation which, as previously disclosed, is owned by the children of a former officer and director of the Company. The Company incurred management fees with Empire Aviation of approximately $0 and $86,000 during the three months ended March 31, 2021 and 2020, respectively, which is recorded in administrative expenses. The Company and Empire Aviation had historically contributed to the Helicopter Tourism and Jobs Council (“HTJC”), an association that lobbies on behalf of the helicopter air tour industry, and which had engaged in discussions with the Mayor’s office. The Company has suspended its contributions to HTJC in light of the pandemic. The Company’s former officer and director is also an active participant with HTJC, which is managed by the former officer and director’s grandson. One of our Directors and our current acting principal executive officer, Sam Goldstein, serves as deputy director of HTJC.
The Air Tour Agreement also extended the Concession Agreement for 30 months, resulting in a new expiration date of April 30, 2021. The City of New York has two one-year options to further extend the Concession Agreement. The City has agreed to continue to waive fees in anticipation of an amendment to the Air Tour Agreement. Such amendment is anticipated to address terms and conditions of ongoing fee waivers while also addressing the term of the Concession Agreement, among other things.
On April 20, 2018, the Company’s Kansas subsidiary entered into a purchase lease with Commerce Bank for a refueling truck (the “Truck Lease”). The Truck Lease commenced on May 1, 2018 and continues for 60 months at an interest rate of LIBOR plus 416 basis points. At the end of the Truck Lease, the Company’s subsidiary may purchase the vehicle for $1.00.
On January 15, 2019, the Company was issued an unsecured note by one of its customers at the Heliport. The note schedules payments of approximately $276,000 in receivables payable by such customer, had a maturity date of October 31, 2019, as amended, and carries a 7.5% rate of interest. The note payments were to be made in six monthly installments beginning May 31, 2019. The customer’s payments on the note have not met the installment plan and the Company was working on changes to the note when the customer filed for Chapter 11 Bankruptcy in October 2019. In February 2021, the bankruptcy court allowed the customer to convert from a Chapter 11 Bankruptcy to a Chapter 7 Liquidation. Under the Chapter 7 Liquidation, the note will now be treated as a general unsecured claim as opposed to a prioritized payment under the Chapter 11 Bankruptcy to cure the permit default. This change has substantially diminished the Company’s expectation to collect amounts due under the note. Therefore, the Company has deemed unpaid principal and accrued interest of approximately $205,000 at December 31, 2020 as uncollectable. The $205,000 was written off to bad debt expense in the fourth quarter of 2020.
As disclosed in a Current Report on Form 8-K filed with the SEC on July 6, 2015, the Company entered into a stock purchase agreement, dated June 30, 2015, by and between the Company and Warren A. Peck, pursuant to which Mr. Peck purchased all of the capital stock of the Company’s wholly-owned subsidiary, Phoenix Rising Aviation, Inc. The details of the agreement are described in such Current Report as well as in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on April 11, 2016. The Company received $100,000 due under this agreement in September 2017 and an additional payment of $100,000 in September 2018. In 2019, the Company accepted the title to a Falcon 10 aircraft owned by Mr. Peck as satisfaction in full of the remainder of the $270,000 stock purchase price. The Company intended to sell the aircraft and classified it as “Held For Sale” on the Company’s consolidated balance sheet at December 31. 2019. The Company has been unable to find a buyer due to a depressed market as well as a drop in demand for this type of aircraft. Without a market in which to sell the aircraft, the Company recorded an impairment charge in the quarter ended June 30, 2020 for the full carrying amount of the aircraft. The Company does not believe the aircraft has any value and, in December 2020, filed an application with the FAA Aircraft Registry to cancel the aircraft’s registry.
As described throughout this Quarterly Report on Form 10-Q, on March 17, 2020, all sightseeing tour operations at the Downtown Manhattan Heliport ceased as a result of the COVID-19 pandemic. On July 20, 2020, New York City began Phase 4 of the city’s reopening. Sightseeing tours resumed under this phase. For the period July 20, 2020, through the date of this report, sightseeing tour operators have experienced low demand and minimal activity. To mitigate this loss of revenue, we may need additional financing to continue operations through the issuance of equity or debt and any such financing will be dependent on general market conditions, which itself is subject to the effects of the COVID-19 pandemic. Although we have access to the Key Bank Revolver Note described above, we can make no assurance that that the Key Bank Revolver Note will be sufficient to fund our operations. Additionally, certain restrictions in the Key Bank Revolver Note may prohibit us from obtaining more attractive financing.
During the three months ended March 31, 2021, we had a net decrease in cash of $107,229. Our sources and uses of funds during this period were as follows:
Cash from Operating Activities
For the three months ended March 31, 2021, net cash used in operating activities was $99,191. This amount included a decrease in operating cash related to net loss of $265,666 and additions for the following items: (i) depreciation and amortization, $25,302; (ii) stock based compensation, $8,598; (iii) accounts receivable, trade, $17,590; (iv) prepaid expenses, $85,485; (v) accounts payable, $43,987; and (vi) accrued expenses, $16,024. These increases in operating activities were offset by a decrease in inventories of $30,511.
For the three months ended March 31, 2020, net cash used in operating activities was $310,882. This amount included a decrease in operating cash related to net loss of $96,140 and additions for the following items: (i) depreciation and amortization, $32,807; (ii) stock based compensation, $18,651; (iii) accounts receivable, trade, $125,874; (iv) inventories, $19,854; (v) prepaid expenses and other current assets, $98,058; and (vi) customer deposits, $426. These increases in operating activities were offset by decreases for the following items: (i) accounts payable; $370,021; and (ii) accrued expenses, $140,391.
Cash from Investing Activities
For the three months ended March 31, 2021, net cash of $1,203 was used in investing activities for the purchase of property and equipment. For the three months ended March 31, 2020, net cash of $4,912 was used in investing activities for the purchase of property and equipment.
Cash from Financing Activities
For the three months ended March 31, 2021, net cash of $6,835 was used in financing activities for the payment of right of use leases. For the three months ended March 31, 2020, net cash of $138,022 was used in financing activities for the payment of accrued dividends of $127,968 and repayment of right of use leases payable of $10,054.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. ASU 2016-02 became effective for us on January 1, 2019 and we have adopted the new standard using a modified retrospective approach. The adoption of ASU No. 2016-02 did not have a material impact on the Company’s financial statements.
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:
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● |
the impact of the COVID-19 pandemic on our business and results of operations; |
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our ability to secure the additional debt or equity financing, if required, to execute our business plan; |
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● |
our ability to identify, negotiate and complete the acquisition of targeted operators and/or other businesses, consistent with our business plan; |
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existing or new competitors consolidating operators ahead of us; and |
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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 placed 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, 2019 and in other filings we make with the SEC. 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 SEC. We expressly disclaim any intent or obligation to update any forward-looking statements, except as may be required by law.
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4 – Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management, including our President, Chief Executive Officer, our acting principal executive officer, and our acting principal financial officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon, and as of the date of that evaluation, our President, Chief Executive Officer, our acting principal executive officer, and our acting principal financial officer, have concluded that our disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports filed and submitted by us under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported as and when required, and (ii) is accumulated and communicated to our management, including our President, Chief Executive Officer, our acting principal executive officer, and our acting principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 6 - Exhibits
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Exhibit No. |
Description of Exhibit |
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31.1 |
Rule 13a-14(a)/15d-14(a) Certification of acting principal financial officer. * |
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31.2 |
Rule 13a-14(a)/15d-14(a) Certification of acting principal executive officer. * |
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32.1 |
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| 101.INS | XBRL Instance Document * | |
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101.SCH |
XBRL Taxonomy Extension Schema Document. * |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document. * |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document. * |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document. * |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document. * |
* Filed herewith
SIGNATURES
Pursuant to the requirements 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.
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Saker Aviation Services, Inc. |
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| By: | ||
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Date: May 14, 2021 |
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/s/ Samuel Goldstein |
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Samuel Goldstein |
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Acting Principal Executive Officer |
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Date: May 14, 2021 |
/s/ Mark Raab |
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Mark Raab |
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Acting Principal Financial Officer and Acting Principal Accounting Officer |
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EXHIBIT 31.1
Certification of Controller
(acting principal financial officer)
Pursuant To Rule 13a-14(a)/15d-14(a)
I, Mark Raab, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Saker Aviation Services, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 14, 2021
By: /s/ Mark Raab
Mark Raab
Controller (acting principal financial officer)
EXHIBIT 31.2
Certification of Director
(acting principal executive officer)
Pursuant To Rule 13a-14(a)/15d-14(a)
I, Samuel Goldstein, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Saker Aviation Services, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 14, 2021
By: /s/ Samuel Goldstein
Samuel Goldstein
Director (acting principal executive officer)
EXHIBIT 32.1
Section 1350 Certification
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), Samuel Goldstein, Director (acting principal executive officer), and Mark Raab, Controller (acting principal financial officer) of Saker Aviation Services, Inc., does hereby certify that:
1. The Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the “Report”) of Saker Aviation Services, Inc. fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of Saker Aviation Services, Inc.
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Date: May 14, 2021
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By: |
/s/ Samuel Goldstein |
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Samuel Goldstein |
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Director (acting principal executive officer) |
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Date: May 14, 2021
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By: |
/s/ Mark Raab |
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Mark Raab |
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Controller (acting principal financial officer) |
A signed original of this written statement required by Section 906 has been provided to Saker Aviation Services, Inc. and will be retained by Saker Aviation Services, Inc., and furnished to the Securities and Exchange Commission or its staff upon request.