Saker Aviation Services, Inc 10-Q for FY2022 Q1
Saker Aviation Services, Inc. (SKAS)
About this 10-Q
Saker Aviation Services, Inc filed this 10-Q on May 16, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.82M
- up 125.0% from $809.1K a year earlier
- Net loss
- $31.15K
- compared with a net loss of $265.67K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Quarterly Period Ended
or
| | 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:
SAKER AVIATION SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
| | |
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(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.
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).
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.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | | ☒ | Smaller reporting company | |
| 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
As of May 16, 2022, the registrant had
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Form 10-Q
March 31, 2022
Index
| 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, 2022 (unaudited) and December 31, 2021 |
1 |
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| Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (unaudited) |
2 |
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| Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021(unaudited) |
3 |
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| Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (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 |
9 | ||
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| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
14 |
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| ITEM 4. CONTROLS AND PROCEDURES |
14 |
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| PART II - OTHER INFORMATION |
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| ITEM 6. EXHIBITS |
15 |
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| SIGNATURES |
16 |
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SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| ASSETS | ||||||||
| March 31, 2022 | December 31, 2021 | |||||||
| CURRENT ASSETS | (unaudited) | |||||||
| Cash and restricted cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventories | ||||||||
| Income tax receivable | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $ and $, respectively | ||||||||
| OTHER ASSETS | ||||||||
| Right of use assets | ||||||||
| Goodwill | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued expenses | ||||||||
| Note Payable – Current | ||||||||
| Right of use leases payable – current portion | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Note Payable – Long Term | ||||||||
| Right of use leases payable - less current portion | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock - $ par value; authorized ; issued and outstanding | ||||||||
| Common stock - $ par value; authorized ; | ||||||||
| and shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF REVENUE | ||||||||
| GROSS PROFIT | ||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||
| OPERATING LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| BAD DEBT RECOVERY | --- | |||||||
| INTEREST EXPENSE | ( | ) | ( | ) | ||||
| NET OTHER INCOME (EXPENSE) | ( | ) | ||||||
| LOSS FROM OPERATIONS, before income taxes | ( | ) | ( | ) | ||||
| INCOME TAX EXPENSE | ||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Basic and Diluted Net Loss Per Common Share | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Common Shares – Basic | ||||||||
| Weighted Average Number of Common Shares – Diluted | ||||||||
See accompanying notes to condensed consolidated financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED STOCKHOLDERS' EQUITY
(UNAUDITED)
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| BALANCE – January 1, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Amortization of stock based compensation | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| BALANCE – March 31, 2021 | $ | ( | ) | $ | ||||||||||||||||
| BALANCE – January 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Issuance of additional Common Stock in connection with cashless exercise of options | ( | ) | ||||||||||||||||||
| Amortization of stock based compensation | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| BALANCE – March 31, 2022 | $ | ( | ) | $ | ||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock based compensation | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, trade | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| Customer deposits | --- | |||||||
| Accounts payable | ||||||||
| Accrued expenses | ( | ) | ||||||
| TOTAL ADJUSTMENTS | ||||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Repayment of notes payable | ( | ) | --- | |||||
| Repayment of right of use leases payable | ( | ) | ( | ) | ||||
| NET CASH USED IN FINANCING ACTIVITIES | ( | ) | ( | ) | ||||
| NET CHANGE IN CASH AND RESTRICTED CASH | ( | ) | ||||||
| CASH AND RESTRICTED CASH – Beginning | ||||||||
| CASH AND RESTRICTED CASH – Ending | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the periods for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | --- | $ | |||||
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, 2021.
The condensed consolidated balance sheet as of March 31, 2022 and the condensed consolidated statements of operations and cash flows for the three months ended March 31, 2022 and 2021 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, 2022 and its results of operations, stockholders’ equity, and cash flows for the three months ended March 31, 2022 not misleading. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for any full year or any other interim period.
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 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 have seen an increase in activity and a much higher demand for tours. There can be no assurance that this increased activity will continue as demand for sightseeing tours will depend on future developments in the COVID-10 pandemic, including the duration and spread and related travel advisories and restrictions and the impact on overall demand for air travel. The COVID-19 pandemic has had a less substantial impact on our operations at our Kansas FBO and MRO.
NOTE 2 – Liquidity and Material Agreements
As of March 31, 2022, we had cash and restricted cash of $
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 $
The Key Bank Revolver Note, at the discretion of the Bank, provides for the Company to borrow up to $
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On August 14, 2020, the Company was granted a loan from the Bank (the “Loan”) in the amount of $
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
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 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
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 Heliport, Empire Aviation which, as previously disclosed, is owned by two children and a grandchild of a former officer and director of the Company. The Company recorded no management fees with Empire Aviation during the quarters ended March 31, 2022 and 2021. Empire Aviation has notified the Company they believe additional fees are due under their 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 15. Contingent Liabilities). The Company incurred management fees with Empire Aviation of approximately $
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
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
On May 1, 2021, the Company’s Kansas subsidiary executed a promissory note for $
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
Cash and restricted cash
The Company maintains its cash with various financial institutions which often exceeds federally insured limits. The Company has not experienced any losses from maintaining cash accounts in excess of federally insured limits. As part of its cash management process, the Company periodically reviews the relative credit standing of these financial institutions. Amounts included in restricted cash are a deposit required by the Concession Agreement with NYEDC and aggregated $
Net Loss Per Common Share
Net loss was $(
The following table sets forth the components used in the computation of basic net income per share:
| For the Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Weighted average common shares outstanding, basic | ||||||||
| Common shares upon exercise of options | ||||||||
| Weighted average common shares outstanding, diluted | ||||||||
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, 2022 and 2021, the Company incurred stock-based compensation of $
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.
NOTE 4 – Inventories
Inventory consists primarily of aviation fuel, which the Company dispenses to its customers, and parts inventory for our MRO operation in Kansas. 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, 2022 | December 31 , 2021 | |||||||
| Parts inventory | $ | $ | ||||||
| Fuel inventory | ||||||||
| Other inventory | ||||||||
| Total inventory | $ | $ | ||||||
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| Total Inventory | $ | $ |
Included in fuel inventory are amounts held for third parties of $
NOTE 5 – Related Parties
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 and grandchild 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.
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, 2021.
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. 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 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 have seen an increase in activity and a much higher demand for tours. There can be no assurance that this increased activity will continue as demand for sightseeing tours will depend on future developments in the COVID-10 pandemic, including the duration and spread and related travel advisories and restrictions and the impact on overall demand for air travel. The COVID-19 pandemic has had a less substantial impact on our operations at our Kansas FBO and MRO.
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, 2022 and March 31, 2021.
REVENUE
Revenue from operations increased by 125.0 percent to $1,820,739 for the three months ended March 31, 2022 as compared with corresponding prior-year period revenue of $809,096.
For the three months ended March 31, 2022, revenue from operations associated with the sale of jet fuel, aviation gasoline and related items increased by 98.6 percent to approximately $1,006,000 as compared to approximately $506,000 in the three months ended March 31, 2021. This increase was largely attributable to higher volume of gallons of aviation gasoline sold at both our Kansas and our New York location.
For the three months ended March 31, 2022, revenue from operations associated with services and supply items increased by 208.5 percent to approximately $788,000 as compared to approximately $255,000 in the three months ended March 31, 2021. This increase was largely attributable to a higher demand for services at our New York location.
For the three months ended March 31, 2022 all other revenue from operations decreased by 43.5 percent to approximately $27,000 as compared to approximately $47,000 in the three months ended March 31, 2021. This decrease was largely attributable to a decrease in non-aeronautical revenue generated at our New York location compared to the same period last year.
COST OF REVENUE
Total cost of revenue from operations increased by 121.8 percent to $1,253,220 in the three months ended March 31, 2022 as compared to $565,135 in the three months ended March 31, 2021. The increase was largely attributable to higher volume of gallons of aviation gasoline sold at both our Kansas and our New York location as well as higher demand for services at our New York location.
GROSS PROFIT
Total gross profit from operations increased by 132.6 percent to $567,519 in the three months ended March 31, 2022 as compared with the three months ended March 31, 2021. Gross profit was positively impacted by the items previously discussed. Gross margin increased to 31.2 percent in the three months ended March 31, 2022 as compared to 30.2 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 $692,517 in the three months ended March 31, 2022, representing an increase of $192,973 or 38.6 percent, as compared to the same period in 2021.
SG&A from operations associated with our aviation services operations were approximately $566,000 in the three months ended March 31, 2022, representing an increase of approximately $183,000, or 47.7 percent, as compared to the three months ended March 31, 2021. SG&A from operations associated with our aviation services operations, as a percentage of revenue, was 31.1 percent for the three months ended March 31, 2022, as compared with 47.3 percent in the corresponding prior year period. The increased operating expenses were largely attributable to increased costs related to the higher levels of activity at both our New York and Kansas operations. The decrease in SG&A as a percentage of revenue is largely attributable to our fixed costs as a percentage relative to higher levels of activity at both our New York and Kansas locations.
Corporate SG&A from operations was approximately $127,000 for the three months ended March 31, 2022, representing an increase of approximately $10,000 as compared with the corresponding prior year period.
OPERATING LOSS
Operating loss from operations for the three months ended March 31, 2022 was $(124,998) as compared to operating loss of $(255,583) in the three months ended March 31, 2022.
Depreciation and Amortization
Depreciation and amortization was approximately $33,000 and $25,000 for the three months ended March 31, 2022 and 2021, respectively.
Interest Expense
Interest expense for the three months ended March 31, 2022 was approximately $6,200 as compared to approximately $5,700 in the same period in 2021.
Bad Debt Recovery
Bad Debt Recovery for the three months ended March 31, 2022 was $100,000 as compared to $0 in the same period in 2021.
Income Tax
Income tax expense for the three months ended March 31, 2022 and 2021 was $0 and $4,426, respectively.
Net Loss Per Share
Net loss was $(31,152) and $(265,666) for the three months ended March 31, 2022 and 2021, respectively.
Basic and diluted net loss per share for the three month periods ended March 31, 2022 and 2021 was $(0.03) and $(0.26), respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2022, we had cash and restricted cash of $3,094,329 and a working capital surplus of $3,440,026. We generated revenue of $1,820,739 and had a net loss of $(31,152) for the quarter ended March 31, 2022. For the quarter 9ended March 31, 2022, cash flows included net cash provided by operating activities of $662,099 and net cash used in financing activities of $14,676.
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”). 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 Changes of Terms Agreement during the three months ended March 31, 2022 or 2021.
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 one-day LIBOR (adjusted daily) plus 2.75%. The Bank notified the Company in 2022 that LIBOR had been replaced with Daily Simple SOFR 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 or Key Bank Term Note during the three months ended March 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.
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.
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 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, 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 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. 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 their two 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 Heliport, Empire Aviation which, as previously disclosed, is owned by two children and a grandchild of a former officer and director of the Company. The Company recorded no management fees with Empire Aviation during the quarters ended March 31, 2022 and 2021. Empire Aviation has notified the Company they believe additional fees are due under their 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 15. Contingent Liabilities). The Company incurred management fees with Empire Aviation of approximately $123,000 and $0 during the three months ended March 31, 2022 and 2021, respectively.
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 quarters ended March 31, 2022 and 2021, we incurred approximately $249,000 and $0 in concession fees, respectively, which are recorded in the cost of revenue.
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.
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.
During the three months ended March 31, 2022, we had a net increase in cash of $647,423. Our sources and uses of funds during this period were as follows:
Cash from Operating Activities
For the three months ended March 31, 2022, net cash provided by operating activities was $662,099. This amount included a decrease in operating cash related to net loss of $(31,152) and additions for the following items: (i) depreciation and amortization, $33,090; (ii) stock based compensation, $11,499; (iii) accounts receivable, trade, $14,393; (iv) prepaid expenses, $295,036; (v) customer deposits, $100,000; and (vi) accounts payable, $283,987. These increases in operating activities were offset by a decrease in inventories of $38,064 and accrued expenses of $6,690.
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.
Cash from Investing Activities
For the three months ended March 31, 2022, there was no cash used in, or provided by, 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.
Cash from Financing Activities
For the three months ended March 31, 2022, net cash of $14,676 was used in financing activities for the payment of notes payable of $3,483 and the payment of right of use leases of $11,193. 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.
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," and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, but not limited to, those relating to:
| ● |
the impact of the COVID-19 pandemic on our business and results of operations; |
| ● |
our ability to secure the additional debt or equity financing, if required, to execute our business plan; |
| ● |
our ability to identify, negotiate and complete the acquisition of targeted operators and/or other businesses, consistent with our business plan; |
| ● |
existing or new competitors consolidating operators ahead of us; and |
| ● |
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, 2021 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
| Exhibit No. | Description of Exhibit | |
| 31.1* | Rule 13a-14(a)/15d-14(a) Certification of acting principal executive officer. * | |
| 31.2* | Rule 13a-14(a)/15d-14(a) Certification of acting principal financial officer. * | |
| 32.1* | Section 1350 Certification. * | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101) | |
| * 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.
| Saker Aviation Services, Inc. |
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| Date: |
May 16, 2022 | By: |
/s/ Samuel Goldstein |
| Samuel Goldstein |
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| Acting Principal Executive Officer |
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| Date: |
May 16, 2022 | /s/ Mark Raab |
|
| Mark Raab |
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| Acting Principal Financial Officer and Acting Principal Accounting Officer |
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EXHIBIT 31.1
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:
|
(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; |
|
(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; |
|
(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 |
|
(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 16, 2022 | |
| By: /s/ Samuel Goldstein | |
| Samuel Goldstein | |
| Director (acting principal executive officer) |
EXHIBIT 31.2
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:
|
(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; |
|
(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; |
|
(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 |
|
(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 16, 2022 | |
| By: /s/ Mark Raab | |
| Mark Raab | |
| Controller (acting principal financial 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, 2022 (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. |
|
Date: |
May 16, 2022 |
By: |
/s/ Samuel Goldstein |
|
Samuel Goldstein |
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|
Director |
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| (acting principal executive officer) | |||
|
Date: |
May 16, 2022 |
By: |
/s/ Mark Raab |
|
Mark Raab |
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|
Controller |
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| (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.