Saker Aviation Services, Inc 10-K for FY2021
Saker Aviation Services, Inc. (SKAS)
About this 10-K
Saker Aviation Services, Inc filed this 10-K on April 14, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $5.38M
- up 53.5% from $3.51M a year earlier
- Net income
- $726.18K
- compared with a net loss of $1.75M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year 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)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
| Yes | ☐ | | ☒ |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
| Yes | ☐ | | ☒ |
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.
| | ☒ | 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| | ☒ | 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.
| 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 Sectc.ion 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of June 30, 2021 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the close of such business day was $
As of March 31, 2022, the Registrant had
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
FORM 10-K
INDEX
| ITEM 1. |
BUSINESS |
1 |
| ITEM 1A. |
RISK FACTORS |
4 |
| ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
9 |
| ITEM 2. |
PROPERTIES |
9 |
| ITEM 3. |
LEGAL PROCEEDINGS |
10 |
| ITEM 4. |
MINE SAFETY DISCLOSURES |
10 |
| ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
10 |
| ITEM 6. |
SELECTED FINANCIAL DATA |
11 |
| ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
11 |
| ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
19 |
| ITEM 8. |
FINANCIAL STATEMENTS |
20 |
| ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
37 |
| ITEM 9A. |
CONTROLS AND PROCEDURES |
37 |
| ITEM 9B. |
OTHER INFORMATION |
37 |
| ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 37 |
| ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
38 |
| ITEM 11. |
EXECUTIVE COMPENSATION |
41 |
| ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
43 |
| ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
46 |
| ITEM 14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES |
46 |
| ITEM 15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
47 |
| ITEM 16. |
FORM 10-K SUMMARY |
48 |
|
|
SIGNATURES |
49 |
THIS FORM 10-K CONTAINS 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. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN SUCH FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE ARE DISCUSSED IN ITEM 1A, “RISK FACTORS” AND ITEM 7, “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” OF THIS ANNUAL REPORT ON FORM 10-K. SEE ALSO “FORWARD-LOOKING STATEMENTS” WITHIN SUCH ITEM 7 OF THIS ANNUAL REPORT ON FORM 10-K.
PART I
| ITEM 1. |
BUSINESS |
General
Saker Aviation Services, Inc. (“we”, “us”, “our”) 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”), a provider of aircraft maintenance and repair services (“MRO”), and as a consultant for a seaplane base that we do not own. FBOs provide ground-based services, such as fueling and aircraft storage for general aviation, commercial and military aircraft, and other miscellaneous services.
We were formed on January 17, 2003 as a proprietorship and were incorporated in Arizona on January 2, 2004. We became a public company as a result of a reverse merger transaction on August 20, 2004 with Shadows Bend Development, Inc., an inactive public Nevada corporation, and subsequently changed our name to FBO Air, Inc. On December 12, 2006, we changed our name to FirstFlight, Inc. On September 2, 2009, we changed our name to Saker Aviation Services, Inc.
Our business activities are carried out as the operator of the Downtown Manhattan (New York) Heliport, 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. (“Aircraft Services”) 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”).
We believe the general aviation market has been historically cyclical, with revenue correlated to general U.S. economic conditions. Although not truly seasonal in nature, the spring and summer months tend to generate higher levels of revenue and our operations generally follow that trend. The COVID-19 pandemic has contributed to a decline in travel and tourism related businesses and general economic conditions in the United States and significantly disrupted our business and operations in the year ended December 31, 2021, as well as disrupted business operations in the United States and globally. To the extent local, regional and the federal government impose restrictions on air travel and/or air tourism or consumers cease traveling, our results of operations will continue to be negatively impacted. We cannot predict with certainty the full impact that the COVID-19 pandemic will have on our business operations, financial condition and results of operations, which will largely depend on the length and severity of the ongoing pandemic and any recovery will depend on consumer willingness to travel by air. Please see Item 1A. “Risk Factors” below.
Concession Agreement for New York Heliport
We are a party to a Concession Agreement, dated as of November 1, 2008, with the City of New York for the operation of the Downtown Manhattan Heliport (the “Concession Agreement”). Pursuant to the terms of the Concession Agreement, we must pay the greater of 18% of the first $5,000,000 in 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.
We 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, we have not been allowed to permit our tenant operators to conduct tourist flights from the Downtown Manhattan Heliport on Sundays since April 1, 2016. We are 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 we are 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, we have 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 of New York through April 30, 2023 by the city’s exercise of both its two one-year option renewals.
Lease for Garden City (Kansas) Regional Airport
We lease facilities from Garden City, Kansas, which allows us to operate the Garden City Regional Airport and provide for: (a) a 21-year lease term expiring December 31, 2030, with one five-year renewal period, and (b) a base rent of $2,187 per month. In addition, we incur a fuel flowage fee of $0.06 per gallon of fuel received. The fuel flowage fee is to be reviewed annually by the Garden City Regional Airport, the City of Garden, and us. Flowage fees on fuel gallons purchased aggregated approximately $43,000 and $36,000 for the years ended December 31, 2021 and 2020, respectively.
We lease additional facilities from Garden City, Kansas, which provides for a 14 year lease term expiring December 31, 2030 with a base rent of $565 a month.
Suppliers and Raw Materials
Our principal materials are aviation fuel and aircraft parts. We obtain aviation fuel, component parts and other supplies from a variety of sources, generally from more than one supplier. Our suppliers and sources are both domestic and foreign, and we believe that our sources of materials are adequate to meet our needs for the foreseeable future. We do not believe the loss of any one supplier would have a material adverse effect on our business or results of operations. We generally purchase our supplies on the open market, where certain commodities have fluctuated in price significantly in recent years. We have not experienced any significant shortage of our key supplies.
Marketing and Sales
The main goal of our marketing and sales efforts is to increase traffic at our facilities, which we believe would then drive revenue through the incremental sale of our products and services. Our primary marketing tactic in this regard is to focus advertising efforts in the environments (web, periodical and industry publications) where the pilot and aviation-user community might be introduced to our brand name and locations. We intend to continue to invest in improvements to our sales and marketing strategies to drive revenue growth.
Government Approvals
The aviation services that we provide are generally performed on municipal or other government owned real estate properties. Accordingly, at times we will need to obtain certain consents or approvals from governmental entities in conjunction with our operations. These consents and approvals are typically in the form of a lease agreement, as is the case at our Kansas facility, or a concession agreement, as is the case with our New York facility. There can be no assurance that we will obtain further consents or approvals on favorable terms or be able to renew existing consents or approvals on favorable terms, if at all.
Government Regulation
We are subject to a variety of governmental laws and regulations that apply to companies in the aviation industry. These include, among other matters, compliance with the Federal Aviation Administration (“FAA”) rules and regulations, and local, regional and national rules and regulations as they relate to environmental matters. The FAA, from time to time, issues directives and other regulations relating to the management, maintenance and operation of facilities, including the potential of emergency regulations related to the COVID-19 pandemic. Additionally, we may be subject to government procurement regulations as they relate to obtaining new agreements or renewing or extending existing agreements with governmental entities. Compliance with those requirements may cause us to incur significant expenditures. The proposal and enactment of additional laws and regulations, as well as any charges that we have not complied with any such laws and regulations, could significantly increase the cost of our operations and reduce overall revenue. We believe we are in compliance with, and intend to continue to comply with, all applicable government regulations but cannot provide assurance that compliance with existing laws and regulations or that laws or regulations enacted in the future will not adversely affect our business and results of operations. The adoption of new regulations could result in increased costs and have an adverse impact on our results of operations, including, for example, regulations that restricted air travel such as reduced seating capacity or possible temporary orders to cease operations as a result of the COVID-19 pandemic.
Customers
In 2019, the Company’s accounts receivable was comprised of four customers at our New York Heliport. Due to the COVID-19 pandemic, two of these customers were unable to sustain their business and ceased operating in 2020. Their receivable balances at December 31, 2020, totaling approximately $208,000, have been deemed uncollectable by the Company. The loss of these two customers has adversely affected our business and results of operations. The Company’s other two customers continue to operate, but at substantially reduced levels of operation. For the fiscal year ended December 31, 2021, these remaining two customers represented approximately $180,000, or 58.9% of the balance of accounts receivable and 27.6% of the Company’s 2021 revenue. The Company has a security deposit in place in connection with both of these receivables. In March 2022, one of the Company’s former customers resumed operations. The Company has a security deposit in place with this customer.
Competition
The FBO segment of the aviation services industry is competitive in both pricing and service because aircraft in transit are able to choose from a number of FBO options within a 300-mile radius. The vast majority of FBO operators are independent, single location operators. We are the sole FBO at our facility in Garden City, KS. As such, we face no direct on-airport competition. However, we face competitive pressure on pricing and services from FBO facilities at other airports, depending on aircraft travel flexibility.
Costs and Effects of Complying With Environmental Laws
We are subject to a variety of federal, state and local environmental laws and regulations, including those that govern health and safety requirements, the discharge of pollutants into the air or water, the management and disposal of hazardous substances and wastes and the responsibility to investigate and clean up contaminated sites that are or were owned, leased, operated or used by us or our predecessors. Some of these laws and regulations require us to obtain permits, which contain terms and conditions that impose limitations on our ability to emit and discharge hazardous materials into the environment and may be periodically subject to modification, renewal and revocation by issuing authorities. Fines and penalties may be imposed for non-compliance with applicable environmental laws and regulations and the failure to have or to comply with the terms and conditions of required permits. We intend to comply with these laws and regulations. However, from time to time, our operations may not be in full compliance with the terms and conditions of our permits or licenses. We periodically review our procedures and policies for compliance with environmental laws and requirements. We believe that our operations are in material compliance with applicable environmental laws and requirements and that any potential non-compliance would not be expected to result in us incurring material liability or cost to achieve compliance. Although the cost of achieving and maintaining compliance with environmental laws and requirements has not been material, we can provide no assurance that such cost will not become material in the future.
Employees
As of December 31, 2021, we employed 25 persons, 21 of which were employed on a full-time basis and 1 of which was an executive officer. All of our personnel are employed in connection with our operations in New York and Kansas.
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Therefore, we file periodic reports, proxy statements and other information with the SEC. We maintain a website at www.sakeraviation.com where we make available, free of charge, documents that we file with, or furnish to, the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, registration statements and any amendments to those reports. Our SEC reports can be found under the “SEC Filings” heading in the “Investor Relations” tab on our website. The information found on our website is not part of this or any other report we file with, or furnish to, the SEC.
ITEM 1A. RISK FACTORS
Risks related to our business and operations:
We will need additional financing to expand our business.
We may seek to expand our business through strategic acquisitions of companies providing similar or ancillary services to the services we provide to complement and/or augment our current aviation services operations. Certain potential aviation service firms which we may seek to acquire in the future may accept shares of our common stock or other securities as payment by us for the acquisition. However, we believe that most will likely prefer cash payments, whether paid at the closing or in post-closing installment payments. There can be no assurance that our operations will generate sufficient cash flow to meet these acquisition obligations. Accordingly, we anticipate the need to seek additional equity or debt financing to meet any cash requirements for acquisitions. Any such financing will be dependent on general market conditions and the stock market’s evaluation of our performance and potential. Accordingly, we can give no assurance that we will obtain such equity or debt financing and, even if we do, that the terms would be satisfactory to us.
The rapid spread of the COVID-19 virus, the continuing spread of its variants, the persistence of the resulting pandemic and measures implemented to combat it have had, and will continue to have, a material adverse effect on our business. It is possible that there will be future negative effects that we cannot presently predict, including near-term effects.
The rapid spread of the COVID-19 virus in 2020 and variants of the virus in 2021, the persistence of the resulting pandemic, the measures governments and private parties have implemented in order to stem the spread of this pandemic, and the general concern about the virus among travelers have had, and are continuing to have, a material adverse effect on the demand for air travel compared to historical levels, and consequently upon our business. Among other effects of the COVID-19 pandemic affecting air travel and our business:
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In the United States the federal government discouraged travel and encouraged social distancing efforts and limits on gathering size for an extended period. In addition, state and local governments issued travel restrictions, quarantines and health-related curfews or “shelter in place” orders which dissuaded or restricted air travel. |
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Employers in both the public and private sectors have issued instructions to employees to work from home and/or have otherwise dissuaded or restricted air travel. |
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Business conventions and conferences, concerts and similar entertainment have been and occasionally continue to be cancelled. Many popular tourist destinations were closed, or operations curtailed. |
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Travelers have been discouraged from air travel to destinations where COVID-19 is particularly virulent. |
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Travelers may be dissuaded from flying due to possible enhanced COVID-19-related screening measures, which have been implemented to varying degrees and in different ways across multiple markets we serve, or due to the concern that additional travel restrictions implemented between their departure and return may affect their ability to return to their homes. |
These effects related to the COVID-19 pandemic have negatively impacted air travel in general, which in turn has materially adversely affected our revenues, results of operations and financial condition. Although vaccines have generally proved to be effective and certain of the restrictions above have been eased in some places, the ongoing pandemic, including large outbreaks, resurgences of COVID-19 in various regions and appearances of new variants of the virus, has resulted, and may continue to result, in their reinstitution. The effectiveness of vaccines against future variants that may develop is also unknown. Moreover, additional currently unknown restrictions or other events dissuading air travel may occur in the future as a result of an increase in COVID-19 case levels or other factors related to the pandemic (including possibly in the near term), lengthening the negative effects of the pandemic on our business.
Our operations have been, and could in the future be, negatively affected further if our employees are quarantined or sickened as a result of exposure to COVID-19, or if they are subject to additional governmental COVID-19 curfews or “shelter in place” health orders or similar restrictions.
As a result of the COVID-19 pandemic, on March 17, 2020 all sightseeing tour operations 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 lower demand and reduced activity compared to pre-pandemic 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.
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, which we expect to remain low for the duration of the pandemic.
We are unable to predict how long conditions related to the pandemic will persist. The overall situation remains fluid, and it is impossible to predict the timing of future material developments and whether they will occur in the near, medium or long term. At this time, we are also not able to predict the extent to which the COVID-19 pandemic may result in permanent changes to our customers’ behavior, with such changes including but not limited to a permanent reduction in business travel as a result of increased usage of virtual meetings, and videoconferencing and teleconferencing products and more broadly, a general reluctance to travel, each of which could have a material impact on our business.
We expect our business, results of operations and financial condition to continue to be adversely affected by the COVID-19 pandemic.
The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption. The COVID-19 pandemic has significantly and adversely affected our business, operations and financial results, and we expect these adverse effects to continue for the duration of the pandemic, and the full extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. We expect our results for the fiscal year ending December 31, 2022 to be adversely affected. Factors that will determine the full extent to which the COVID-19 pandemic continues to impact our business include, but are not limited to:
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the duration and scope of the pandemic; |
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the length of time our customer’s sightseeing tour operations at the Downtown Manhattan Heliport experience diminished demand; |
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federal, state, and local governmental actions taken in response to the pandemic and the impact of those actions on global economic activity; |
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the social distancing initiatives undertaken by businesses and individuals and the possibility of business and travel restrictions implemented by governments in response to any resurgence of the pandemic; |
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the actions taken in response to economic disruption, including any federal or state-level economic responses restricting or related to operations within the air tourism industry; |
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the impact of business disruptions and reductions in employment levels in the United States; |
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consumer willingness to travel by air in the future; |
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our customers’ continuing viability as businesses; and |
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the possibility that all of our facilities will be required to close. |
We could be adversely affected by increases in the price, or decreases in the availability, of jet fuel.
Our operations could be significantly affected by the availability and price of jet fuel. The price and supply of jet fuel is unpredictable and fluctuates based on events we cannot control, such as geopolitical developments, including but not limited to heightened uncertainties and impacts resulting from Russian military actions in Ukraine and associated response, supply and demand for crude oil, actions by oil and jet fuel producers, actions by jet fuel refiners, conflict, unrest or economic instability in oil producing countries and regions, regional production patterns and weather conditions. A significant increase in the price of jet fuel would most likely have a material impact on our ability to achieve and maintain profitability unless we are able to pass on such costs to our customers. Due to the competitive nature of the industry, our ability to pass on increased fuel prices by increasing our rates is uncertain. Likewise, any potential benefit of lower fuel prices may be offset by increased competition and lower revenue, in general. If there are new outbreaks of hostility or other conflicts in oil producing areas or elsewhere, there could be a reduction in the availability of jet fuel or significant increases in costs to our business, as well as to the entire aviation industry, which in turn would adversely affect our business and results of operations. While we do not currently anticipate a significant reduction in fuel availability, dependency on foreign imports of crude oil and the impacts resulting from Russian military actions in Ukraine and possibility of changes in government policy on jet fuel production, transportation and marketing make it impossible to predict the future availability of jet fuel. As a result, any increases in these prices or decrease in the availability of fuel may adversely affect our profitability and competitiveness.
We are susceptible to counter party risk in our agreements with our customers and have been adversely affected by the loss of certain key customers and the inability of such key customers to pay amounts due to us.
Due to the COVID-19 pandemic, two of the Company’s four key customers at our Ney York Heliport were unable to sustain their business and ceased operating in 2020. Their receivable balances at December 31, 2020, totaling approximately $208,000, have been deemed uncollectable by the Company. The loss of these two key customers has adversely affected our business and results of operation. In 2021, our remaining two key customers continued to operate but at substantially reduced levels of operation. For the fiscal year ended December 31, 2021, these two key customers represented approximately $180,000, or 58.9% of the balance of accounts receivable. The Company has a security deposit in place in connection with both of these receivables. If our remaining key customers continue to experience reduced operations, they may also cease operating which would materially and adversely impact our business and results of operations.
We could be adversely affected by the loss of or failure to extend our material agreements including our Concession Agreement with the City of New York and our lease of the Garden City, Kansas facilities.
A substantial portion of our business depends on our existing material agreements including our Concession Agreement with the City of New York and our lease of facilities in Garden City, Kansas. If we were to lose these agreements, or if these agreements expired without renewal or extension, we may be unable to operate our business in our current geographic markets. Should we lose or fail to extend these agreements, there is no guarantee that we could enter into new agreements with similar terms or into new agreements at all. If we were to enter into material agreements with less favorable terms or if we were unable to enter into new agreements, our business and results of operations would be materially and adversely affected.
Our agreement (the “Air Tour Agreement”) with the New York City Economic Development Corporation (the “NYCEDC”) may continue to negatively impact our business and financial results as well as those of our management company.
Under the Air Tour Agreement, we cannot allow our tenant operators to conduct tourist flights from the Downtown Manhattan Heliport on Sundays. We were also required to ensure that our tenant operators reduced 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. Additionally, since June 1, 2016, we have 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 or strays from agreed upon routes. These provisions of the Air Tour Agreement have, and may continue to, have an adverse effect on our business and results of operations.
The FBO segment of the aviation services industry in which we operate is fiercely competitive.
We compete with national, regional, and local FBO operators. Many of our competitors have been in business longer than we have and have greater financial resources available to them. Having greater financial resources will make it easier for these competitors to absorb an increase in fuel prices and other expenses. In addition, these competitors might seek acquisitions in regions and markets competitive to us, which could have an adverse effect on our business and results of operations. Accordingly, we can give no assurance that we will be able to successfully compete in our industry.
Our business as an FBO is subject to extensive governmental regulation.
FBOs are subject to extensive regulatory requirements that could result in significant costs. For example, the FAA, from time to time, issues directives and other regulations relating to the management, maintenance and operation of facilities, including the potential of emergency regulations related to the COVID-19 pandemic. Additionally, we may be subject to government procurement regulations as they relate to obtaining new agreements or renewing or extending existing agreements with governmental entities. Compliance with those requirements may cause us to incur significant expenditures. The proposal and enactment of additional laws and regulations, as well as any charges that we have not complied with any such laws and regulations, could significantly increase the cost of our operations and reduce overall revenue. We cannot provide assurance that compliance with existing laws and regulations or that laws or regulations enacted in the future will not adversely affect our business and results of operations. If any emergency regulations related to the COVID-19 pandemic caused us to temporarily cease operations, our results of operations and financial condition would be adversely impacted.
We must maintain and add key management and other personnel.
Our future success is heavily dependent on the performance of our managers. Our growth and future success depends, in large part, on the continued contributions of management and our ability to retain management. Our success depends to a significant extent upon the continued service of Ron Ricciardi, our President and Chief Executive Officer. Beginning on December 24, 2020 and continuing through the date of this report, Mr. Ricciardi remains on a temporary leave of absence to address health issues unrelated to the COVID-19 pandemic. As previously disclosed, effective March 26, 2021, Samuel Goldstein, one of our directors, has been appointed to serve as our acting principal executive officer. There can be no assurances that Mr. Ricciardi will be able to continue to serve as our Chief Executive Officer. Our results of operations and financial condition may be impacted by Mr. Ricciardi’s leave of absence or the loss of Mr. Goldstein.
Our growth and future success also depends on other key individuals, as well as our ability to motivate and retain these personnel or hire other persons. Although we believe we will be able to retain and hire qualified personnel, we can give no assurance that we will be successful in retaining and recruiting such personnel in sufficient numbers to increase revenue, maintain profitability or successfully implement our growth strategy. If we lose the services of management or any of our key personnel or are not able to retain or hire qualified personnel, our business could be adversely affected.
If our employees were to unionize, our operating costs would increase and our business could be adversely affected.
None of our employees are currently represented under a collective bargaining agreement. From time to time, there may be efforts to organize our employees. There is no assurance that our employees will not unionize in the future, particularly if legislation is passed that facilitates unionization. The unionization of our employees could have a material adverse effect on our business, financial condition and results of operations due to the possibility of work stoppage, wage increases, or other developments that may result from the unionization of our employees.
Changes in minimum wage laws outside of our control could affect our profitability.
We have employees who are paid wage rates based on the applicable federal or state minimum wage and increases in the minimum wage may increase our labor costs and reduce profitability. Federal, state, or local minimum wages may be raised in the future and we may be unable or unwilling to increase our prices in order to pass these increased labor costs on to our customers, in which case, our business and results of operations could be materially and adversely affected.
We are subject to environmental laws that could impose significant costs on us and the failure to comply with such laws could subject us to sanctions and material fines and expenses.
We are subject to a variety of federal, state and local environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances and wastes and the responsibility to investigate and clean-up contaminated sites that are or were owned, leased, operated or used by us or our predecessors. Some of these laws and regulations require us to obtain permits, which contain terms and conditions that impose limitations on our ability to emit and discharge hazardous materials into the environment and may be periodically subject to modification, renewal and revocation by issuing authorities. Fines and penalties may be imposed for non-compliance with applicable environmental laws and regulations, the failure to have required permits or the failure to comply with the terms and conditions of such permits. We intend to comply with all laws and regulations, however, from time to time, our operations may not be in full compliance with the terms and conditions of our permits. We periodically review our procedures and policies for compliance with environmental laws and requirements. We believe that our operations are in material compliance with applicable environmental laws, requirements and permits and any lapses in compliance are not expected to result in us incurring material liability or cost to achieve compliance. However, there can be no assurance that our operations will remain in material compliance with applicable environmental laws and requirements. Historically, the costs of achieving and maintaining compliance with environmental laws, requirements and permits have not been material; however, the operation of our business entails risks in these areas and a failure by us to comply with applicable environmental laws, regulations or permits could result in civil or criminal fines, penalties, enforcement actions, third party claims for property damage and personal injury, requirements to clean up property or to pay for the costs of cleanup and/or regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures. Moreover, if applicable environmental laws and regulations, or the interpretation or enforcement thereof, become more stringent in the future, we could incur capital or operating costs beyond those currently anticipated and our business and results of operations could be harmed.
Risks related to our securities:
There is no active market for our common stock, which makes our common stock less liquid.
To date, trading of our common stock has been sporadic and nominal in volume. In addition, there are only a limited number of broker-dealers trading our common stock. As a result, there is little, if any, liquidity in our common stock. We can provide no assurance that an active trading market will ever develop.
Our common stock is subject to the penny stock rules, which makes our common stock less liquid.
The SEC has adopted a set of rules called the “penny stock rules” that regulate broker-dealers with respect to trading in securities with a bid price of less than $5.00. These rules do not apply to securities registered on certain national securities exchanges (including the Nasdaq Stock Market), provided that current price and volume information regarding transactions in such securities is provided by the exchange. Our stock is not listed on such an exchange and we have no expectation that our common stock will be listed on such an exchange in the future. The penny stock rules require a broker-dealer to deliver to the customer a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. Additionally, the broker-dealer must provide the customer with other information. The penny stock rules also require that, prior to a transaction in a penny stock, the broker-dealer must determine in writing that the penny stock is a suitable investment for the purchaser. The broker-dealer must also receive the purchaser’s written agreement to the transaction. These disclosure requirements have the effect of reducing the level of trading activity in the secondary market for a stock such as ours that is subject to the penny stock rules.
Our common stock may not continue to be traded on the OTCQB.
We cannot provide any assurance that our common stock will continue to be eligible to be quoted on the OTCQB Marketplace (“OTCQB”). Should our common stock cease to be quoted on the OTCQB and fail to qualify for listing on a stock exchange (including the Nasdaq Stock Market), our common stock would only trade in the “pink sheets” which generally provides an even less liquid market than the OTCQB. In such event, stockholders may find it more difficult to trade their shares of our common stock or to obtain accurate and current information concerning market prices for our common stock.
Our management team currently has the ability to influence stockholder votes.
As of December 31, 2021, our executive officers, directors and their family members and associates, collectively, are entitled to vote 349,004 shares, or 35.8% of the 975,074 shares of our outstanding shares of common stock. Accordingly, and because there is no cumulative voting for directors, our executive officers and directors are currently in a position to influence the election of all of our Board of Directors. The management of our company is controlled by our Board of Directors, which is currently comprised of four independent directors and one executive officer/director.
General risk factors:
Potential additional financings, the granting of additional stock options and any anti-dilution provisions in potential future derivative securities could further dilute our existing stockholders.
As of December 31, 2021, there were 975,074 shares of our common stock outstanding. If all of our outstanding options were exercised, there would be 1,035,068 shares outstanding, an increase of approximately 6.1%. Any further issuances due to additional equity financings, or the granting of additional options could further dilute our existing stockholders, which could cause the value of our common stock to decline.
Our Board of Directors’ right to issue shares of preferred stock could adversely impact the rights of holders of our common stock.
Our Board of Directors currently has the right to authorize the issuance of up to 333,306 shares of one or more series of our preferred stock with such voting, dividend and other rights as our directors determine. Such action can be taken by our Board of Directors without the approval of our shareholders. Accordingly, the holders of any new series of preferred stock could be granted voting rights that reduce the voting power of the holders of our common stock. For example, the preferred holders could be granted the right to vote on a merger as a separate class even if the merger would not have an adverse effect on their rights. This right, if granted, would give such preferred holders a veto with respect to any merger proposal. Alternatively, such preferred holders could be granted a large number of votes per share while voting as a single class with the holders of our common stock, thereby diluting the voting power of the holders of our common stock. In addition, the holders of any new series of preferred stock could be given the option to redeem their shares for cash in the event of a merger. This would make acquiring us less attractive to a potential buyer. Thus, our Board of Directors could authorize the issuance of shares of the new series of preferred stock in order to defeat a proposal for the acquisition of our company that a majority of the holders of our common stock otherwise favor.
| ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
Not applicable.
| ITEM 2. |
PROPERTIES |
As of March 31, 2022, we lease office and hangar space at the following locations:
| Location |
Purpose |
Space |
Annual Rental |
Expiration |
|||||||||
| 2117 S. Air Service Road Garden City, Kansas |
Kansas FBO location |
17,640 square feet |
$ |
26,244 |
December 31, 2030 |
||||||||
| 2145 S. Air Service Road Garden City, Kansas |
Kansas MRO location |
3,782 square feet |
$ |
6,780 |
December 31, 2030 |
||||||||
We believe that our space is adequate and suitable for our immediate needs. Additional hangar space may be required for our operations in the future. No definitive plans to lease any additional space have been developed at the time of this report. Should additional hangar space be required, there can be no assurance that such space will be available or available on commercially reasonable terms or at all.
| ITEM 3. |
LEGAL PROCEEDINGS |
From time-to-time, we may be a party to, or otherwise involved in, legal proceedings arising in the ordinary course of business. As of the date of this Report, we are not aware of any proceedings, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.
| ITEM 4. |
MINE SAFETY DISCLOSURES |
Not applicable.
PART II
| ITEM 5. |
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Market Information
Our common stock is quoted on the OTCQB under the symbol “SKAS”. The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter (“OTC”) equity securities. Our common stock is only traded on a limited or sporadic basis and should not be deemed to constitute an established public trading market. OTC quotations reflect intra-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
The following table sets forth the high and low closing sale prices for common stock as reported on the OTCQB each full quarterly period within for the two most recent fiscal years.
| Common Stock |
||||||||
| Quarterly Period Ended |
High |
Low |
||||||
| March 31, 2020 |
$ | 6.15 | $ | 2.85 | ||||
| June 30, 2020 |
$ | 3.65 | $ | 3.05 | ||||
| September 30, 2020 |
$ | 3.80 | $ | 2.00 | ||||
| December 31, 2020 |
$ | 2.88 | $ | 1.60 | ||||
| March 31, 2021 |
$ | 4.00 | $ | 2.16 | ||||
| June 30, 2021 |
$ | 2.95 | $ | 2.30 | ||||
| September 30, 2021 |
$ | 3.20 | $ | 2.19 | ||||
| December 31, 2021 |
$ | 3.85 | $ | 2.35 | ||||
Stock Repurchases
On November 17, 2021, the Company agreed to purchase all of the shares of the Company’s common stock owned by Mr. Ricciardi. The purchase price for the 53,789 shares was $204,399, or $3.80 a share, the previous day closing price of the Company’s stock. All of Mr. Ricciardi’s shares were canceled by the Company.
Holders
As of March 31, 2022, there were approximately 237 holders of record of our common stock. This number does not include beneficial owners of the common stock whose shares are held in the names of various broker-dealers, clearing agencies, banks and other fiduciaries.
Dividends
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 declaration and payment of any future dividend will be at the sole discretion of the Board of Directors.
| ITEM 6. |
SELECTED FINANCIAL DATA |
Not applicable.
| ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. These statements may include projections of revenue, provisions for doubtful accounts, income or loss, capital expenditures, repayment of debt, other financial items, statements regarding our plans and objectives for future operations, acquisitions, divestitures and other transactions, statements of future economic performance, statements of the assumptions underlying or relating to any of the foregoing statements and statements other than statements of historical fact.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncer‐tainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by such forward-looking statements. We therefore caution you against relying on any of these forward-looking statements because they are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include our services and pricing, the impact of the COVID-19 pandemic, general economic conditions, our ability to raise additional capital, our ability to obtain the various approvals and permits for the acquisition and operation of FBOs and the other risk factors contained in Item 1A of this report.
Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
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”).
Throughout 2020 and 2021, the COVID-19 pandemic 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 much lower demand. To date, the COVID-19 pandemic has had a less substantial impact on our operations at our Kansas FBO and MRO.
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.
Summary Financial Information
The summary financial data set forth below is derived from and should be read in conjunction with the consolidated financial statements, including the notes thereto, filed as part of this Annual Report on Form 10-K.
| Consolidated Statement of Operations Data: |
Year Ended December 31, 2021 |
Year Ended December 31, 2020 |
||||||
| (in thousands, except for share and per share data) |
||||||||
| Revenue |
$ | 5,383 | $ | 3,506 | ||||
| Operating income (loss), before income tax expense |
$ | 928 | $ | (2,180 | ) | |||
| Income tax expense (benefit) |
$ | 202 | $ | (431 | ) | |||
| Net Income (Loss) |
$ | 726 | $ | (1,749 | ) | |||
| Net income (loss) per share – basic and diluted |
$ | 0.71 | $ | (1.71 | ) | |||
| Weighted average number of shares – basic |
1,023,709 | 1,024,907 | ||||||
| Weighted average number of shares – diluted |
1,026,729 | 1,024,907 | ||||||
| Balance Sheet Data: (in thousands) |
December 31, 2021 |
December 31, 2020 |
||||||
| Working capital surplus |
$ | 3,442 | $ | 2,828 | ||||
| Total assets |
$ | 5,602 | $ | 4,995 | ||||
| Total liabilities |
$ | 1,138 | $ | 1,087 | ||||
| Stockholders’ equity |
$ | 4,464 | $ | 3,908 | ||||
| Total liabilities and Stockholders’ equity |
$ | 5,602 | $ | 4,995 | ||||
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Comparison of Results for the Years Ended December 31, 2021 and December 31, 2020.
REVENUE
Revenue increased by 53.5 percent to $5,382,565 for the twelve months ended December 31, 2021 as compared with corresponding prior-year period revenue of $3,506,268.
For the twelve months ended December 31, 2021, revenue associated with services and supply items increased by 44.9 percent to approximately $2,200,000 as compared to approximately $1,500,000 in the twelve months ended December 31, 2020. This increase was attributable to increased demand for services at our New York location in 2021 compared to the prior year.
For the twelve months ended December 31, 2021, revenue associated with the sale of jet fuel, aviation gasoline and related items increased by 47.6 percent to approximately $2,900,000 as compared to approximately $1,950,000 in the twelve months ended December 31, 2020. This increase was attributable to the higher volume of gallons of aviation gasoline sold at both our New York and Kansas locations in 2021 compared to the prior year.
For the twelve months ended December 31, 2021, all other revenue increased by 473.2 percent to approximately $334,000 as compared to approximately $58,000 in the twelve months ended December 31, 2020. This increase was attributable to an increase in non-aeronautical revenue generated at our New York location compared to last year.
GROSS PROFIT
Total gross profit increased 160.3 percent to $2,553,625 in the twelve months ended December 31, 2021 as compared to $980,928 in the twelve months ended December 31, 2020. Gross margin was 47.4 percent for the twelve months ended December 31, 2021 as compared to 28.0 percent for the same period in 2020. Gross profit for the year ended December 31, 2021 was positively impacted by Employee Retention Tax Credits (“ERTC”) due the Company under the CARES Act. These credits were recorded in the second and third quarters of 2021 and offset operating payroll costs by approximately $69,000. The increase in gross profit is also related to higher levels of activity at both our New York and Kansas locations in 2021 as compared to the prior year. The increase in gross margin is related to higher levels of revenue from services and supplies, which generally carry a higher overall gross margin, in 2021 as compared to the prior year.
OPERATING EXPENSE
Selling, General and Administrative
Total selling, general and administrative expenses (“SG&A”) were $1,909,132 in the twelve months ended December 31, 2021, a decrease of $563,071, or 22.8 percent, as compared to the same period in 2020.
SG&A associated with our FBO operations were approximately $1,438,000 in the twelve months ended December 31, 2021, a decrease of approximately $427,000, or 22.9 percent, as compared to the twelve months ended December 31, 2020. SG&A associated with our FBO operations, as a percentage of revenue, was 26.7 percent for the twelve months ended December 31, 2021, as compared with 53.2 percent in the corresponding prior year period. The reduction in SG&A was primarily attributable to a reduction in expenses in 2020 due to the COVID-19 pandemic as compared to the same period in 2021 as well as ERTC due the Company under the CARES Act. These credits of approximately $154,000 offset SG&A payroll expenses in 2021.
Corporate SG&A was approximately $471,000 for the twelve months ended December 31, 2021, representing a decrease of approximately $136,000 as compared with the corresponding prior year period. The decrease in Corporate SG&A on a year-over-year basis was largely attributable to a non-recurring write-off of miscellaneous receivables in the second quarter of 2020.
OPERATING INCOME (LOSS)
Operating income for the year ended December 31, 2021 was $644,494 as compared to operating loss of $(1,491,276) in the year ended December 31, 2020. The increase in operating income on a year-over-year basis was driven by the factors described above.
Depreciation and Amortization
Depreciation and amortization was approximately $129,000 and $119,000 for the twelve months ended December 31, 2021 and 2020, respectively.
Interest Income and Expense
Interest income was $3,780 and $18,109 for the twelve months ended December 31, 2021 and 2020, respectively. Interest expense for the year ended December 31, 2021 was $24,823, as compared to $24,025 in the same period in 2020. The decrease in interest income on a year-over-year basis was due primarily to interest income recorded in 2020 on a receivable that was no longer recorded in 2021
Impairment of Goodwill and Other Intangibles
We had $750,000 of goodwill at December 31, 2021 and 2020.
Income Tax Expense (Benefit)
Income tax expense for the twelve months ended December 31, 2021 was approximately $202,000, as compared to income tax benefit of $(431,000) in the same period in 2020. The income tax expense is attributable to net income in the twelve months ended December 31, 2021 as compared to a net loss in the same period in 2020.
Net Income (Loss) Per Share
Net income for the twelve months ended December 31, 2021 was $726,184 as compared to net loss of $(1,748,928) in the twelve months ended December 31, 2020.
Basic and diluted net income per share for the twelve months ended December 31, 2021 was $0.71 as compared to basic net loss per share of ($1.71) in 2020.
Liquidity and Capital Resources
As of December 31, 2021, we had cash and restricted cash of $2,446,906 and a working capital surplus of $3,442,031. We generated revenue of $5,382,565 and had net income of $726,184 for the year ended December 31, 2021. For the year ended December 31, 2021, cash flows included net cash provided by operating activities of $813,751, net cash used in investing activities of $81,544, and net cash used in financing activities of $184,383.
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 could have continued 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 required the Company to make consecutive monthly payments of interest on any outstanding principal calculated at a rate per annum equal to 4.25% and was secured by substantially all of the Company’s assets. The entire principal balance, plus all accrued interest, was due in full on the Maturity Date. The Bank notified the Company of its decision to discontinue the Key Bank Acquisition Note, effective June 30, 2021. There are no amounts due under the Changes of Terms Agreement.
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 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 December 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 (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 incurred management fees with Empire Aviation of approximately $0 and $144,000 during the years ended December 31, 2021 and 2020, respectively, which is recorded in selling, general and administrative expenses. 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 (See Note 15. Contingent Liabilities). 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 was also an active participant with HTJC, which is managed by the former officer and director’s grandson.
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 has 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. Concession fees in this Form 10-K have been accounted for based on the months abated in 2021 and the City of New York’s acceptance of 18% of monthly Gross Receipts in excess of $100,000 for the period May 2021 through December 2021. Due to the continued reduced activity at the Heliport, the Company is actively working with the City of New York to address fees to be paid to the City of New York in 2022 and through the remainder of the Air Tour Agreement. During the years ended December 31, 2021 and 2020, we incurred approximately $192,000 and $103,000 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 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 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.
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.
As described throughout this Annual Report on Form 10-K, 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. Sightseeing tour operators have experienced low demand and minimal activity since July 20, 2020, but sightseeing tour operators have seen an uptick in demand in the second quarter of 2021 through the date of this report. 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 twelve months ended December 31, 2021, we had a net increase in cash of $547,824. Our sources and uses of funds during this period were as follows:
Cash from Operating Activities
For the year ended December 31, 2021, net cash provided by operating activities was $813,751. This amount included an increase in operating cash related to net profit of $726,184 and additions for the following items: (i) depreciation, $128,990; (ii) stock based compensation, $34,392; (iii) extinguishment of debt, $304,833; (iv)income tax receivable, $261,922; (v) customer deposits, $2,512; (vi) accounts payable, $150,200; and (vii) accrued expenses, $185,266. The increase in cash provided by operating activities in 2021 was offset by the following items: (i) accounts receivable, trade, $43,308; (ii) inventories, $79,485; and (iii) prepaid expenses, $248,089. For the year ended December 31, 2020, net cash used in operating activities was $1,590,447. This amount included a decrease in operating cash related to net loss of $1,748,928 and additions for the following items: (i) depreciation, $119,039; (ii) bad debt, $396,000; (iii) impairment charge, $270,000; (iv) impairment of notes receivable, $205,730; (v) stock-based compensation expense, $74,659; (vi) deferred income taxes, $476,000; (vii) accounts receivable, trade, $19,944; and (viii) inventories, $17,585. The decrease in cash used in operating activities in 2020 was offset by the following items: (i) prepaid expenses and income tax receivable, $935,387; (ii) customer deposits, $49,517; (iii) accounts payable, $335,322; and (iv) accrued expenses, $100,250.
Cash from Investing Activities
For the year ended December 31, 2021, net cash used in investing activities was $81,544 for the purchases of property and equipment. For the year ended December 31, 2020, net cash used in investing activities was $4,913 for purchases of property and equipment.
Cash from Financing Activities
For the year ended December 31, 2021, net cash used in financing activities was $184,383. This amount included an addition for the issuance of notes payable of $76,000 offset by the following items: (i) purchase and cancellation of common stock, $204,399; (ii) repayment of notes payable, $8,955; and (iii) repayment of right of use leases, $47,029. For the year ended December 31, 2020, net cash used in financing activities was $103,049. This amount included additions for the issuance of common stock of $16,196 and the issuance of notes payable of $304,833 offset by $383,909 to the payment of accrued dividends and $40,169 to the repayment of right of use leases.
Off-Balance Sheet Arrangements
We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.
Critical Accounting Estimates
Discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the amounts reported in the consolidated financial statements and the accompanying notes. We evaluate our estimates on an ongoing basis, including those estimates related to product returns, product and content development expenses, bad debts, inventories, intangible assets, income taxes, contingencies and litigation. We base our estimates on experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting policies which we believe affect our more significant judgments and estimates used in the preparation of our consolidated financial statements are provided as follows:
Accounts Receivable
In 2020, the Company’s accounts receivable was comprised of four customers at our New York Heliport. Due to the COVID-19 pandemic, two of these customers were unable to sustain their business and ceased operating in 2020. Their receivable balances at December 31, 2020, totaling approximately $208,000, have been deemed uncollectable by the Company and have been written off to bad debt expense in the fourth quarter of 2020. The Company’s remaining two customers at our New York Heliport continue to operate, but at substantially reduced levels of operation. For the fiscal year ended December 31, 2020, these remaining two customers represented approximately $137,000, or 52.4% of the balance of accounts receivable. No customer represented more than 10% of revenue in 2020. The Company has a security deposit in place in connection with both of these receivables. Accounts receivable amounted to $678,045 at December 31, 2019.
In 2021, the Company’s accounts receivable was comprised of its two customers at our New York Heliport. These customers continued to operate throughout 2021, but at substantially reduced levels of operation when compared to pre-pandemic levels. For the fiscal year ended December 31, 2021, these two customers represented approximately $180,000, or 59.8%, of the balance of accounts receivable. In addition, these two customers represented approximately 27.6% of our revenue in 2021. The Company has a security deposit in place in connection with both of these receivables. In March 2022, one of the Company’s former customers resumed operations. The Company has a security deposit in place with this key customer.
Goodwill and Intangible Assets
Goodwill and intangibles that are deemed to have indefinite lives are not amortized but, instead, are to be reviewed at each reporting period for impairment. We assessed potential impairment of goodwill using qualitative factors by considering various factors including macroeconomic conditions, industry and market conditions, cost factors, a sustained share price or market capitalization decrease and any reporting unit specific events. We performed an analysis of our goodwill and intangible assets at December 31, 2021 and 2020.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are subject to a valuation allowance because it is more likely than not that certain of the deferred tax assets will not be realized in future periods. During 2020 we experienced a decrease in demand and minimal activity in our business. The extent of the impact of COVID-19 on our operational and financial performance cannot be predicted and will depend on future developments, including the duration and spread of the outbreak, related travel advisories and restrictions. Accordingly, we have established a valuation allowance on net deferred assets. We file income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, we are no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2018.
Stock Based Compensation
Stock-based compensation expense for all share-based payment awards are based on the estimated grant-date fair value. We recognize these compensation costs over the requisite service period of the award, which is generally the option vesting term.
Option valuation models require the input of highly subjective assumptions, including the expected life of the option. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
| ITEM 7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
| ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA |
| SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES |
|
| Table of Contents to Consolidated Financial Statements |
|
| Report of Independent Registered Public Accounting Firm |
21 |
| Consolidated Financial Statements |
|
| Consolidated Balance Sheets as of December 31, 2021 and 2020 |
22 |
| Consolidated Statements of Operations For the Years Ended December 31, 2021 and 2020 |
23 |
| Consolidated Statements of Stockholders’ Equity For the Years Ended December 31, 2021 and 2020 |
24 |
| Consolidated Statements of Cash Flows For the Years Ended December 31, 2021 and 2020 |
25 |
| Notes to Consolidated Financial Statements |
26 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the Board of Directors and Stockholders of
Saker Aviation Services, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Saker Aviation Services, Inc. and Subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity and cash flows, for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Contingent liabilities
As described in Note 15 to the consolidated financial statements, Management assesses matters to determine whether it can reasonably estimate the amount of a loss contingency and whether the loss is probable. Where the reasonable estimate of the probable loss is a range, Management records as an accrual in its financial statements the most likely estimate of the loss or the low end of the range, if there is no best estimate. Management either discloses the amount of a possible loss or range of a loss in excess of the recorded accrual or states that such an estimate cannot be made. Management discloses significant contingencies even where the liability is not probable or the amount of the loss is not estimable, or both, if management believes there is at least a reasonable possibility that a loss may be incurred.
The principal considerations for our determination that performing procedures relating to loss contingencies is a critical audit matter are the significant judgment by Management when assessing the likelihood of a loss being incurred and when estimating the loss or range of loss for each contingency, which in turn led to significant auditor judgement, subjectivity and effort in performing procedures and evaluating Management’s assessment of the liabilities and disclosures associated with loss contingencies.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included auditing the estimated range of loss provided by Management to determine if the amount of loss can be reasonably estimated, as well as financial statement disclosures. These procedures also included, among others, evaluating the reasonableness of Management’s assessment regarding whether the loss is probable and evaluating the sufficiency of the Company’s disclosures related to this contingency.
/s/
We have served as the Company's auditor since 2009.
April 14, 2022
PCAOB ID No:
| SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| CURRENT ASSETS | ||||||||
| 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 | ||||||||
| Deposits | - | |||||||
| Right of use assets | ||||||||
| Goodwill | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued expenses | ||||||||
| Notes Payable – Current | ||||||||
| Right of use leases payable – current portion | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Notes 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 as of December 31, 2021 and 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
| SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| REVENUE | $ | $ | ||||||
| COST OF REVENUE | ||||||||
| GROSS PROFIT | ||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||
| OPERATING INCOME (LOSS) | ( | ) | ||||||
| OTHER (INCOME) EXPENSE : | ||||||||
| IMPAIRMENT CHARGE | ||||||||
| BAD DEBT | ||||||||
| GAIN ON EXTINGUISHMENT OF DEBT – PPP LOAN | ( | ) | ||||||
| INTEREST INCOME | ( | ) | ( | ) | ||||
| INTEREST EXPENSE | ||||||||
| TOTAL OTHER (INCOME) EXPENSE | ( | ) | ||||||
| INCOME (LOSS) FROM OPERATIONS, before income taxes | ( | ) | ||||||
| INCOME TAX EXPENSE (BENEFIT) | ||||||||
| CURRENT | ( | ) | ||||||
| DEFERRED | ||||||||
| INCOME TAX (BENEFIT) EXPENSE | ( | ) | ||||||
| NET (LOSS) INCOME | $ | $ | ( | ) | ||||
| Basic and Diluted Net Income (Loss) Per Common Share | $ | $ | ( | ) | ||||
| Weighted Average Number of Common Shares – Basic | ||||||||
| Weighted Average Number of Common Shares – Diluted | ||||||||
See accompanying notes to consolidated financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR YEARS ENDED DECEMBER 31, 2021 AND 2020
| Additional | Total | |||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| BALANCE – January 1, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Amortization of stock based compensation | ||||||||||||||||||||
| Dividends | ( | ) | ( | ) | ||||||||||||||||
| Issuance of additional Common Stock | ||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||
| BALANCE – December 31, 2020 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Amortization of stock based compensation | ||||||||||||||||||||
| Purchase and cancellation of Common Stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Net income | ||||||||||||||||||||
| BALANCE – December 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to consolidated financial statements.
| SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES |
|||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Years Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Bad debt | ||||||||
| Impairment of note receivable | ||||||||
| Stock based compensation | ||||||||
| Deferred income taxes | ||||||||
| Gain on extinguishment of debt - PPP loan | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Income tax receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ( | ) | ||||||
| TOTAL ADJUSTMENTS | ||||||||
| NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Issuance of common stock | ||||||||
| Purchase and cancellation of common stock | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Repayment of notes payable | ( | ) | - | |||||
| Dividends paid | - | ( | ) | |||||
| 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 consolidated financial statements.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
NOTE 1 - Nature of Operations
Saker Aviation Services, Inc. (“Saker”), through its subsidiaries (collectively the “Company”), operates in the aviation services segment of the general aviation industry, in which it serves as the operator of a heliport and a fixed base operation (“FBO”), and as a provider of aircraft maintenance, repair and overhaul (“MRO”). FBOs provide ground-based services, such as fueling and aircraft storage for general aviation, commercial and military aircraft, and other miscellaneous services.
FirstFlight Heliports, LLC d/b/a Saker Aviation Services (“FFH”), a wholly-owned subsidiary, operates the Downtown Manhattan Heliport via a concession agreement with the City of New York. FBO Air Garden City, Inc. d/b/a Saker Aviation Services (“FBOGC”), a wholly-owned subsidiary provides FBO and MRO services in Garden City, Kansas.
NOTE 2 – Liquidity and Material Agreements
As of December 31, 2021, 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 $
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 $
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
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 could have continued to, at the discretion of the Bank, borrow up to an aggregate amount of $
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 Consolidated Financial Statements
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 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 has 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. Concession fees in this Form 10-K have been accounted for based on the months abated in 2021 and the City of New York’s acceptance of
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
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 January 15, 2019, the Company was issued an unsecured note by one of its customers at the Heliport. The note schedules payments of approximately $
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 $
On May 1, 2021, the Company’s Kansas subsidiary executed a promissory note for $
As described throughout this Annual Report on Form 10-K, 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. Sightseeing tour operators have experienced low demand and minimal activity since July 20, 2020, but sightseeing tour operators have seen an uptick in demand in the second quarter of 2021 through the date of this report. 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 consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, FFH and FBOGC. All significant inter-company accounts and transactions have been eliminated in consolidation.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include depreciation, amortization, impairment of goodwill and intangibles, stock-based compensation, allowance for doubtful accounts, deferred tax assets, and contingent liabilities.
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 $
Accounts Receivable and Revenue Concentration
In 2020, the Company’s accounts receivable was comprised of
In 2021, the Company’s accounts receivable was comprised of its
Inventories
Inventories consist primarily of maintenance parts and aviation fuel and are stated at the lower of cost or net realizable value determined by the first-in, first out method.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided primarily using the straight-line method over the estimated useful lives as set forth in footnote 5. Amortization of leasehold improvements is provided using the straight-line method over the shorter of their estimated useful life or lease term, including renewal option periods expected to be exercised. Maintenance and repairs are charged to expense as incurred; costs of major additions and betterments are capitalized. When property and equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in income.
Goodwill
Goodwill that is deemed to have an indefinite life is not amortized but, instead, are to be reviewed at each reporting period for impairment. The Company assessed potential impairment of goodwill using qualitative factors by considering various factors including macroeconomic conditions, industry and market conditions, cost factors, a sustained share price or market capitalization decrease and any reporting unit specific events. The Company performed an analysis of its goodwill at December 31, 2021 and 2020 and deemed
Leases
At December 31, 2021 and December 31, 2020, our consolidated balance sheets include a right of use asset of approximately $
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
Revenue Recognition
The Company recognizes revenue from ground-based services, such as fueling and aircraft storage, and aircraft maintenance and repair services. Revenue for the sale of ground-based services is recognized as a sale of services at the time the service is performed and provided to customers. Revenue for the sale of aircraft fuel is recognized at the time products are delivered to customers. Customers are invoiced at the time the services are performed and the associated revenue is recognized in the period it is earned. Revenue from aircraft storage services is recognized monthly based upon agreement. Aircraft maintenance and repair service revenue is recognized at the time the performance obligations are met, which is generally less than a month. Performance obligations are satisfied when control of the aircraft has been transferred back to the customer.
Customer Deposits
Customer deposits consist of amounts that customers are required to remit in advance to the Company in order to secure payment for future purchases and services. Customer deposits amounted to $
Advertising
The Company expenses all advertising costs as incurred. Advertising expense for the years ended December 31, 2021 and 2020 was approximately $
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between their financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income or loss in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Company’s tax positions, and has concluded that no liability should be recorded related to uncertain tax positions taken.
Deferred tax assets are subject to a valuation allowance because it is more likely than not that certain of the deferred tax assets will not be realized in future periods due to the uncertainty of future taxable income and the lack thereof of taxable income in carry-back periods. The Company files income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2018.
Fair Value of Financial Instruments
The reported amounts of the Company’s financial instruments, including accounts receivable, accounts payable and accrued liabilities, approximate their fair value due to their short maturities. The carrying amounts of debt approximate fair value because the debt agreements provide for interest rates that approximate market. The carrying value of the note receivable approximated fair value because it was discounted at a current market rate.
Net Income (Loss) Per Common Share
Basic net income (loss) per share applicable to common stockholders is computed based on the weighted average number of shares of the Company’s common stock outstanding during the periods presented. Diluted net income per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. Potentially dilutive securities, consisting of options, are excluded from the calculation of the diluted income per share when their exercise prices are greater than the average market price of the common stock during the period or when their inclusion would be anti-dilutive.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
The following table sets forth the components used in the computation of basic and diluted income (loss) per share:
| For the Year Ended December 31, | ||||||||
| 2021(1) | 2020(1) | |||||||
| Weighted average common shares outstanding, basic | ||||||||
| Common shares upon exercise of options | ||||||||
| Weighted average common shares outstanding, diluted | ||||||||
| (1) | Common shares of |
Stock-Based Compensation
Stock-based compensation expense for all share-based payment awards are based on the estimated grant-date fair value. The Company recognizes these compensation costs over the requisite service period of the award, which is generally the option vesting term. For each of the years ended December 31, 2021 and 2020, 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.
The fair value of each share-based payment award granted during the years ended December 31, 2021 and 2020 were estimated using the Black-Scholes option pricing model with the following weighted average fair values:
| For the Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Dividend yield | % | % | ||||||
| Expected volatility | % | % | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected lives (years) | ||||||||
The weighted average fair value of the options on the date of grant, using the fair value based methodology during the years ended December 31, 2021 and 2020, was $
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. The Company also maintains fuel inventories for commercial airlines, to which it charges into-plane fees when servicing commercial aircraft.
Inventories consist of the following:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Parts inventory | $ | $ | ||||||
| Fuel inventory | ||||||||
| Other inventory | ||||||||
| Total inventory | $ | $ | ||||||
Included in fuel inventory are amounts held for third parties of $
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
NOTE 5 – Property and Equipment
Property and equipment consist of the following:
| December 31, | Estimated | ||||||||||||
| 2021 | 2020 | Useful Life (years) | |||||||||||
| Aircraft | $ | $ | – | ||||||||||
| Vehicles | – | ||||||||||||
| Office furniture and equipment | – | ||||||||||||
| Tools and shop equipment | – | ||||||||||||
| Leasehold improvements | – | ||||||||||||
| Building/fuel farm | – | ||||||||||||
| Total | |||||||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | |||||||||
| Property and equipment, net | $ | $ | |||||||||||
Depreciation and amortization expense for the years ended December 31, 2021 and 2020 was approximately $
NOTE 6 – Goodwill
The Company had $
NOTE 7 – Notes Payable
| Notes payable consist of: | December 31, | |||||||
| 2021 | 2020 | |||||||
| Avfuel Corporation loan for $, year term, prime plus %, final payment due on, or before, 4/30/28. Collateral is a Jet-A refueler truck. | $ | $ | ||||||
| KeyBank PPP SBA loan forgiven in 2021. | ||||||||
| Subtotal | ||||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Total – long term | $ | $ | ||||||
NOTE 8 – Income Taxes
The Company’s deferred tax assets consisted of the following:
| December 31, | ||||||||
| Deferred tax assets: | 2021 | 2020 | ||||||
| Stock based compensation | $ | $ | ||||||
| Property and equipment | ||||||||
| Total deferred tax assets | ||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Deferred tax asset – net of valuation allowance | $ | $ | ||||||
| Increase (decrease) in valuation allowance | $ | ( | ) | $ | ||||
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
The valuation allowance fluctuated due to the uncertainty of future taxable income and the lack thereof of taxable income in carry-back periods.
The provision for income taxes using the statutory federal tax rate as compared to the Company's effective tax rate is summarized as follows:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Tax at statutory rate | % | % | ||||||
| Extinguishment of debt (PPP loan) | ( | ) | ||||||
| Net operating loss carry-back | % | |||||||
| Valuation allowance | ( | %) | ||||||
| State and local income taxes, net of federal | % | % | ||||||
| Effective income tax expense rate | % | % | ||||||
Income tax receivable principally consists of funds due from the taxing authorities resulting from the carryback of of net operating loss to prior tax years.
NOTE 9 – Stockholders’ Equity
Common Stock
A summary of the Company’s shares of Common Stock outstanding at December 31, 2021 is presented in the table below:
| Number of shares outstanding | ||||
| December 31, 2020 | ||||
| Purchase and cancellation of common stock | ( | ) | ||
| December 31, 2021 | ||||
Stock Options
On August 27, 2019, at the Company’s Annual Meeting, the stockholders of the Company approved the Stock Incentive Plan of 2019 (”the “Plan”). The Plan is administered by the Company’s Compensation Committee and provides for
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
Details of all options outstanding under the Plan are presented in the table below:
| Number of Options | Weighted Average Exercise Price | |||||||
| Balance, January 1, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | ||||||
| Expired | ( | ) | ||||||
| Balance, December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Expired | ( | ) | ||||||
| Balance, December 31, 2021 | $ | |||||||
A summary of the Company’s stock options outstanding at December 31, 2021 is presented in the table below:
| Exercise Price | Outstanding | Weighted average remaining contractual life of options (in years) | Exercisable | Intrinsic Value | ||||||||||||||
| $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||
| $ | $ | |||||||||||||||||
| TOTALS | $ | |||||||||||||||||
Preferred Stock
As of December 31, 2021 and 2020, the Company has
NOTE 10 – Employee Benefit Plan
The Company maintains a 401K Plan which covers all employees of the Company (the “401K Plan”). Effective January 1, 2020, the Company switched to a Safe Harbor 401K plan. The Safe Harbor 401K Plan stipulates that, going forward, all employees become vested
NOTE 11 – Commitments
Right-Of-Use Leasing Arrangements
The Company leases facilities from Garden City, Kansas, which provides for: (a) a
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
The Company leases additional facilities from Garden City, Kansas, which provides for a
The Company’s Kansas subsidiary entered into a purchase lease with Commerce Bank for a refueling truck. The lease commenced on May 1, 2018 and continues for
The Company’s lease right of use assets and lease liabilities as of December 31, 2021 and 2020 are summarized as follows:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Right of use assets | $ | $ | ||||||
| Current portion of debt and right of use lease liabilities | $ | $ | ||||||
| Long term portion of debt and right of use lease liabilities | $ | $ | ||||||
| Total right of use lease liabilities | $ | $ | ||||||
| Weighted average remaining lease terms (years) | ||||||||
| Weighted average discount rate | % | % | ||||||
The maturities of the Company’s right of use lease liabilities as of December 31, 2021 are as follows:
| For the year ended | ||||
| December 31, | Total | |||
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| TOTAL | $ | |||
| Less interest | ( | ) | ||
| Present value of lease liabilities | $ | |||
The components of right of use lease expenses included in “Selling, General and Administrative Expenses” in the Company’s consolidated statements of operations aggregated approximately $
NOTE 12 – Dividend Payable
On September 30, 2019, the Company announced that its Board of Directors had declared a special cash dividend of $
NOTE 13 – 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 of the Company’s former Chief Executive Officer and a former member of our Company’s Board of Directors.
NOTE 14 – 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.
SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
NOTE 15 – Contingent Liabilities
Beginning in 2020, through the date of this report, the COVID-19 pandemic has negatively impacted the Company’s business and financial results at our New York Heliport. The negative impact on the Company’s business has also negatively affected our management company at the Heliport, Empire Aviation. As previously disclosed, Empire Aviation is owned by two children and a grandchild of a former officer and director of the Company.
On March 17, 2020, all sightseeing tour operations at the Downtown Manhattan Heliport ceased as a result of the COVID-19 pandemic. Payments to Empire Aviation also ceased around this time and did not resume due to the substantial losses the Company incurred throughout 2020. In May 2021, the Company began to see a slight uptick in activity at our New York Heliport, but activity levels continue to be at substantially lower levels than pre-pandemic years. Because of the continued lower levels of activity, payments to Empire Aviation did not resume in 2021. Empire Aviation had previously made a claim for $
NOTE 16 – Subsequent Events
The Company has evaluated events which have occurred subsequent to December 31, 2021, and through the date of the filing of the Annual Report on Form 10-K with the SEC, and has determined that no subsequent events have occurred after the current reporting period.
| ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| ITEM 9A. |
CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Management, including our President (principal financial officer) and Chief Executive Officer (principal executive officer), have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon, and as of the date of that evaluation, our President and our Chief Executive Officer concluded that the 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 Exchange Act, is (i) recorded, processed, summarized and reported as and when required, and (ii) is accumulated and communicated to our management, including our President and our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There has been no change to our internal control over financial reporting during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that has materially affected, or that is reasonably likely to materially affect our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. All internal control systems, no matter how well designed and tested, have inherent limitations, including, among other things, the possibility of human error, circumvention or disregard. Therefore, even those systems of internal control that have been determined to be effective can provide only reasonable assurance that the objectives of the control system are met and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including our Chief Executive Officer (principal executive officer) and our President (principal financial officer), we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment under this framework, management concluded that our internal control over financial reporting was effective as of December 31, 2021.
| ITEM 9B. |
OTHER INFORMATION |
On November 17, 2021, the Company agreed to purchase all of the shares of the Company’s common stock owned by Mr. Ricciardi. The purchase price for the 53,789 shares was $204,399, or $3.80 a share, the previous day closing price of the Company’s stock. All of Mr. Ricciardi’s shares were canceled by the Company. .
| ITEM 9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
Not Applicable.
Part III
| ITEM 10. |
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
The following table contains certain information related to the directors and executive officers of the Company as of December 31, 2021:
| Name |
Age |
Position |
||
| William B. Wachtel |
67 |
Director, Chairman of the Board |
||
| Ronald J. Ricciardi (1) |
60 |
Director, President & Chief Executive Officer |
||
| Samuel Goldstein (1) |
43 |
Director |
||
| Marc Chodock |
43 |
Director |
||
| Roy Moskowitz |
67 |
Director |
||
| (1) |
On December 24, 2020, Mr. Ricciardi began a temporary leave of absence to address health issues unrelated to the COVID-19 pandemic. Effective March 26, 2021, Mr. Goldstein began serving as our acting principal executive officer. |
Each of our directors is elected at the Annual Meeting of Stockholders to serve until the next Annual Meeting of Stockholders or until his successor is duly elected and qualified. Our officers are appointed annually by the Board of Directors to serve at the discretion of the Board.
Business History
William B. Wachtel – Director, Chairman of the Board
Mr. Wachtel was elected as a director and our Chairman of the Board on March 31, 2005. Mr. Wachtel served as our Chairman until April 8, 2009, when he resigned from such capacity but remained a member of the Board. Mr. Wachtel was re-elected as our Chairman of the Board and has served in that capacity since October 27, 2011.
Mr. Wachtel has been a managing partner of Wachtel Missry LLP (previously Wachtel & Missry, LLP, and before that, its predecessor law firm Gold & Wachtel, LLP), since its founding in August 1984. Such firm has provided certain legal services to the Company in the past. No such services were provided in 2021 and 2020. He is a co-founder of the Drum Major Institute, an organization carrying forth the legacy of the late Reverend Martin Luther King, Jr.
We believe that Mr. Wachtel’s experience advising companies regarding legal issues gives him the qualifications and skills to serve on our board of directors..
Ronald J. Ricciardi – Director, President and Chief Executive Officer
Mr. Ricciardi was designated as Chief Executive Officer on November 29, 2018 and has served as our President since March 2009. From August 2004 until September 2006, Mr. Ricciardi also served as our Acting Chief Financial Officer. Mr. Ricciardi was a director of Saker’s predecessor entity since its inception in 2003 and continues to serve in that capacity for the current entity. From December 2006 until October 2010, Mr. Ricciardi served as Vice Chairman of the Board. Mr. Ricciardi served as Chairman of the Board from April 2009 until October 2011.
Mr. Ricciardi is a senior executive with extensive general management experience in entrepreneurial and large companies. Before joining Arizona FBO Air and from 2000 - 2003, Mr. Ricciardi was President and CEO of P&A Capital Partners, Inc., an entertainment finance company established to fund the distribution of independent films. From 1999 to 2000, Mr. Ricciardi was also co-founder, Chairman and CEO of eTurn, Inc., a high technology service provider, for which he developed a consolidation strategy, negotiated potential merger and acquisition candidates, prepared private placement materials and executed numerous private, institutional and venture capital presentations. After a management career at Pepsi-Cola Company and the Perrier Group of America, Mr. Ricciardi was President and CEO of Clearidge, Inc., a leading regional consumer products company, where he provided strategic and organizational development, and led a consolidation effort that included 14 transactions, which more than tripled the revenue of Clearidge, Inc. over four years.
We believe Mr. Ricciardi’s 16 years of experience working in a variety of roles with us combined with his knowledge of the aviation industry and his extensive management experience, gives him the qualifications and skills to serve on our board of directors..
On December 24, 2020, the Company announced that Mr. Ricciardi was taking a temporary leave of absence to address health issues unrelated to the COVID-19 pandemic. During Mr. Ricciardi’s leave of absence, Mark Raab, the Company’s Corporate Controller, serves as the Company’s acting principal financial officer and acting principal accounting officer until such time as Mr. Ricciardi is able to resume his responsibilities. Effective March 26, 2021, Mr. Goldstein has been appointed to serve as our acting principal executive officer. .
Samuel Goldstein – Director, Acting Principal Executive Officer
Mr. Goldstein was appointed as a director on September 21, 2018. Effective March 26, 2021, Mr. Goldstein has been appointed to serve as our acting principal executive officer during Mr. Ricciardi’s temporary leave of absence.
Mr. Goldstein has served since 2014, and continues to serve, as Deputy Director of the Helicopter Tourism and Jobs Council (“HTJC”). During this time, HTJC successfully negotiated a settlement with the City of New York enabling the helicopter air tour industry to continue operations. In early 2019, Mr. Goldstein joined Marino, a leading strategic communications firm with offices in New York and Los Angeles, where he is a director with Marino’s Land Use Public Policy unit. Mr. Goldstein was also a principal at Kivvit Public Affairs from 2017 to 2018 and served previously as the director of government relations for Selfhelp Community Services, one of New York’s largest senior housing and social service organizations, from 2008 to 2013.
We believe Mr. Goldstein’s exposure and outreach skills, developed in part as the previous Deputy Director of HTJC and corresponding knowledge of the local helicopter marketplace, gives him the qualifications and skills to serve on our board of directorsr..
Marc Chodock – Director
Mr. Chodock was appointed as a director on June 25, 2015.
Mr. Chodock has been acting as a private investor since February 2013. Previously, he was a consultant in the New York office of McKinsey & Company and a Principal at MatlinPatterson Global Advisers, where he served on the Board of Directors of four companies. He holds a Bachelor of Science in Economics from the University of Pennsylvania’s Wharton School of Business and a Bachelor of Applied Science in Biomedical Science from the School of Engineering and Applied Science of the University of Pennsylvania.
We believe Mr. Chodock's experience in advising companies by serving on boards as well as his knowledge of the aviation industry gives him the qualifications and skills to serve on our board of directors.
Roy P. Moskowitz – Director
Mr. Moskowitz was appointed as a director on June 25, 2015.
Mr. Moskowitz has been the Chief Legal Officer of The New School from 2006 to 2019. From 1988 – 2004, Mr. Moskowitz held senior positions of legal oversight for New York educational institutions, including the New York State Education Department, City University of New York, Community School District #2, and the Regional Superintendent of Region 9.
We believe Mr. Moskowitz’ experience analyzing legal issues gives him the qualifications and skills to serve on our board of directors..
Family Relationships
There are no family relationships among our directors and executive officers.
Other Directorships
None of our directors serves as a director of a company (1) with a class of securities registered pursuant to Section 12 of the Exchange Act, (2) subject to Section 15(d) of the Exchange Act, or (3) registered as an investment company under the Investment Company Act of 1940.
Code of Ethics
On May 19, 2006, our Board of Directors adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions as well as to all of our other employees and directors. Our Code of Ethics is posted on our website at www.sakeraviation.com under the “Investor Relations” tab, and then under the “Corporate Governance” sub-tab. We intend to satisfy any disclosure requirements pursuant to Item 5.05 of Form 8-K regarding any amendment to, or a waiver from, certain provisions of our Code of Ethics by posting such information on our website under the “Investor Relations” section.
Committees of the Board of Directors
There are three committees of the Board of Directors: the Audit Committee comprised of Marc Chodock and Roy P. Moskowitz, the Nominating Committee comprised of William B. Wachtel and Ronald J. Ricciardi; and the Compensation Committee comprised of Roy P. Moskowitz, Marc Chodock, and Samuel Goldstein.
Delinquent Section 16(a) Reports
Based solely on a review of Forms 3 and 4 and amendments thereto, furnished to us during the fiscal year ended December 31, 2021 and Forms 5 and amendments thereto, furnished to us with respect to the fiscal year ended December 31, 2021, each director and officer timely reported all of his transactions during that most recent fiscal year as required by Section 16(a) of the Exchange Act, except for Messrs. Wachtel, Goldstein, Moskowitz, and Chodock, each of whom filed one late Form 4 reporting one transaction.
Corporate Governance
There have been no changes to the procedures by which our security holders may recommend nominees to our Board of Directors since our Board of Directors set forth such policy in our proxy statement for our Annual Meeting of Stockholders held on November 6, 2013.
Our Board of Directors has determined that, of its Audit Committee, Marc Chodock qualifies as a financial expert as such term is defined in applicable SEC rules, and Roy P. Moskowitz, Samuel Goldstein and Marc Chodock qualify as “independent” as such term is defined by the rules of the Nasdaq Stock Market.
Audit Committee
The board of directors has an audit committee that is responsible for assisting our board of directors in its oversight of the integrity of our financial statements, the qualifications and independence of our independent auditors, and our internal financial and accounting controls. The audit committee has direct responsibility for [the appointment, compensation, retention (including termination) and oversight of our independent auditors, and our independent auditors report directly to the audit committee. The audit committee also prepares the audit committee report that the SEC requires to be included in our annual proxy statement.
The members of the audit committee are Messrs. Roy P. Moskowitz and Marc Chodock. Each member of the audit committee qualifies as an independent director under the corporate governance standards of the Nasdaq Listing Rules. Our board of directors has determined that Marc Chodock qualifies as an “audit committee financial expert” as such term is currently defined in Item 407(d)(5) of Regulation S-K.
| ITEM 11. |
EXECUTIVE COMPENSATION |
As a smaller reporting company under the Exchange Act, we are providing the following executive compensation information in accordance with the scaled disclosure requirements pursuant to Item 402(m)-(q) of Regulation S-K.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the annual and long-term compensation paid by us during the fiscal years ended December 31, 2021 and 2020 for services performed on our behalf with respect to the person who served as our executive officer as of December 31, 2021.
SUMMARY COMPENSATION TABLE
| Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($)(1) |
All Other Compensation ($) |
Total ($) |
| Ronald J. Ricciardi, President and Chief Executive Officer |
2021 |
- | - | - | [24,108] |
[24,108] |
| 2020 |
[194,189] |
45,000 |
16,196 |
[25,152] |
[280,547] |
|
| Mark Raab, ,Acting Principal Financial Officer |
2021 |
[101,340] |
- | - | [8,982] |
[110,322] |
| 2020 |
[109,033] |
- | - | [9,461] |
[118,494] |
|
| (1) |
The fair value of the stock awards granted are calculated in accordance with FASB ASC Topic 718. |
Due to the substantial financial impact of the pandemic on the Company’s operations, effective April 1, 2020, Mr. Ricciardi’s base salary was decreased from $200,000 to $150,000. On December 24, 2020, the Company announced that Mr. Ricciardi was taking a temporary leave of absence to address health issues unrelated to the COVID-19 pandemic. Mr. Ricciardi received no salary, incentive bonuses, or stock awards in 2021.
Pursuant to his employment agreement with the Company, Mr. Ricciardi received a bonus of $45,000 in 2020 based on the Company’s 2019 performance. Mr. Ricciardi received no bonuses in 2021.
Mr. Ricciardi was granted 0 shares and 5,119 shares of the Company’s common stock in 2021 and 2020, respectively. The value of the shares issued to Mr. Ricciardi in 2021 and 2020 were valued at $0 and $16,196, respectively.
Mr. Ricciardi receives health insurance coverage estimated at a value of approximately $2,009 and $1,571 per month in 2021 and 2020, respectively, and received a match to his 401K contributions of approximately $0 and $6,300 in 2021 and 2020, respectively.
Mr. Raab received an annual gross salary of $101,340 and $109,033 in 2021 and 2020, respectively, annual health insurance coverage estimated at a value of approximately $5,000 in both 2021 and 2020, and an annual 401K contribution of approximately $3,900 and $4,400 in 2021 and 2020, respectively. Mr. Raab received no bonuses or stock awards in either 2021 or 2020.
Mr. Goldstein received no salary, bonuses, or other compensation in 2021 or 2020 except for non-employee director stock option issuances and non-employee director fees as reported in the tables below.
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2021
The following table shows information about the number of unexercised stock options held by our named executive officers as of December 31, 2021:
| Option Awards (1) |
||||
| Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Option Exercise Price ($) |
Option Expiration Date |
| Ronald J. Ricciardi: |
- | - | - | - |
| Samuel Goldstein: |
||||
| 3,333 |
- | 2.40 |
12/01/2023 |
|
| 3,333 |
- | 5.60 |
12/05/2024 |
|
| 3,333 |
- | 2.58 |
12/01/2025 |
|
| - | 3,333 |
3.45 |
12/01/2026 |
|
| (1) |
All outstanding awards of stock options were granted under either our 2019 Stock Incentive Plan |
2021 DIRECTOR COMPENSATION TABLE
| Name |
Fees Earned in Cash ($)(1) |
Option Awards ($)(2) |
Total ($) |
| Samuel Goldstein |
6,000 |
11,499 |
17,499 |
| William B. Wachtel |
4,000 |
11,499 |
15,499 |
| Marc Chodock |
7,000 |
11,499 |
18,499 |
| Roy P. Moskowitz |
$6,000 |
11,499 |
17,499 |
| 1. |
Each non-employee director is entitled to a fee of $1,000 per board meeting and $750 and $500 per committee meeting for committee chairman and committee members, respectively. Each director is also entitled to reimbursement for expenses incurred in connection with attendance at meetings of the Board of Directors. |
|
|
|
| 2. |
Each non-employee director is eligible to be granted an annual option to purchase shares of our common stock. On December 1, 2021, the Board of Directors granted each non-employee director an option for their service in 2021. Each option was for 3,333 shares and was priced at $3.45 per share, which was the closing sales price of our common stock on December 1, 2021. The options vest on December 1, 2022 and may be exercised until December 1, 2026. See Item 12. for a description of all outstanding options held by non-employee directors at December 31, 2021. The fair value of the option awards are calculated in accordance with FASB ASC Topic 718. |
Employment Agreements
As disclosed in a Current Report on Form 8-K filed with the SEC on September 06, 2019, effective September 1, 2019, the Company and Ronald J. Ricciardi entered into a new Employment Agreement (the “New Agreement”). Pursuant to the New Agreement, Mr. Ricciardi will continue to serve as the Company’s President and Chief Executive Officer. Among other things, the New Agreement provides for a four-year term with a base salary of $200,000 with subsequent annual base salary increases at the discretion of the Board of Directors. In addition, Mr. Ricciardi is eligible to receive an annual incentive bonus in an amount equal to 25% of the then-applicable base salary earned in the event that the Company meets or exceeds its annual operating plan for earnings before interest, taxes, depreciation and amortization. Mr. Ricciardi also received a stock award upon the execution of the New Agreement. In addition, Mr. Ricciardi is eligible for additional stock awards upon each of the four anniversary dates of this New Agreement. Each of the five stock awards shall be the number of shares equal to the issued and outstanding shares of the Company on the date of each issuance multiplied by one half of one percent. The issuance of such stock awards are to be administered according to the Company’s Equity Compensation Plan, as approved the Company’s stockholders.
On December 24, 2020, the Company announced that Mr. Ricciardi was taking a temporary leave of absence to address health issues unrelated to the COVID-19 pandemic. Mr. Ricciardi received no salary, incentive bonuses, or stock awards in 2021.
Additional Narrative Disclosure
We do not offer a defined benefit retirement or pension plan. The Company maintains a 401K Plan (the “401K Plan”) which covers all employees of the Company. Effective January 1, 2020, the Company switched to a Safe Harbor 401K plan. The Safe Harbor 401K Plan stipulates that, going forward, all employees become vested 100% on day one. Employer contributions prior to the change vest over a five-year period on a 20% per year basis. The Company’s Safe Harbor 401K Plan provides for the Company to match each participant's contribution at 100% up to 4% of the employee’s deferral. The employer match prior to the change was 50% up to 6% of the employee’s deferral. Company contributions to the 401K Plan totaled approximately $36,000 and $42,000 for the years ended December 31, 2021 and 2020, respectively.
| ITEM 12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Beneficial Owners
The following table presents certain information as of December 31, 2021 regarding the beneficial ownership of our common stock by:
| ● |
each of our current executive officer and directors; and |
|
| ● |
all of our current directors and executive officer as a group; and |
|
| ● |
each other person or entity known by us to own beneficially 5% or more of our issued and outstanding common stock; |
Unless otherwise indicated below, the address for each of our directors and officers is 20 South Street, Pier 6 East River, New York, New York 10004.
| Number of Shares |
Percentage of |
|||||||
| of Common Stock |
Common Stock |
|||||||
| Name of Beneficial Owner |
Beneficially Owned |
Beneficially Owned (1) |
||||||
| William B. Wachtel (2) |
187,279 | (3) | 18.9 | % |
||||
| Ronald J. Ricciardi (4) |
0 | (4) | 0.0 | % |
||||
| Marc Chodock (5) |
117,180 | (6) | 11.9 | % |
||||
| Samuel Goldstein (7) |
9,999 | (8) | 1.0 | % |
||||
| Roy P. Moskowitz (9) |
13,791 | (10) | 1.4 | % |
||||
| All directors and officers as a group (5 in number) |
328,249 | 33.2 | % |
|||||
| Ronald I. Heller (11) |
64,085 | (11) | 6.6 | % |
||||
| (1) |
The percentages computed in the table are based upon 975,074 shares of our common stock, which were outstanding on December 31, 2021. Effect is given, pursuant to Rule 13-d(1)(i) under the Exchange Act, to shares of our common stock issuable upon the exercise of options currently exercisable or exercisable within 90 days of December 31, 2021.
|
| (2) |
William B. Wachtel is our Chairman of the Board and a director.
|
| (3) |
The shares of our common stock reported in the table include: (a) 145,563 shares held by Mr. Wachtel in the open market; (b) 3,333 shares issuable upon the exercise of an option expiring December 1, 2022, which option is currently exercisable; (c) 3,333 shares issuable upon the exercise of an option expiring December 1, 2023, which option is currently exercisable; (d) 3,333 shares issuable upon the exercise of an option expiring December 1, 2024, which option is currently exercisable; and (e) 3,333 shares issuable upon the exercise of an option expiring December 1, 2025, which option is currently exercisable. The shares of our common stock reported in the table do not reflect (x) 3,333 shares issuable upon the exercise of an option granted on December 1, 2021, which shall become exercisable on December 1, 2022; and (y) 11,113 shares of our common stock acquired by Wachtel Missry, LLP, which has provided certain legal services for us. Mr. Wachtel is a managing partner of such firm, but does not have sole dispositive or voting power with respect to such firm’s securities.
|
| (4) |
Ronald J. Ricciardi is our President, Chief Executive Officer and a director.
On November 17, 2021, the Company agreed to purchase all of the shares of the Company’s common stock owned by Mr. Ricciardi. The purchase price for the 53,789 shares was $204,399, or $3.80 a share, the previous day closing price of the Company’s stock. All of Mr. Ricciardi’s shares were canceled by the Company.
|
| (5) |
Marc Chodock is a director. |
| (6) | The shares of our common stock reported in the table are based on a Schedule 13D filed with the SEC on February 9, 2015 and subsequent Form 4s filed by Mr. Chodock. The reporting persons are (i)ACM Value Opportunities Fund I, LP, a Delaware limited partnership (the “Fund”), with respect to the shares of our common stock directly owned by it; (ii) ACM Value Opportunities Fund I GP, LLC, a Delaware limited liability company (the “General Partner”), as general partner of the Fund, with respect to the shares of our common stock directly owned by the Fund, (iii) Arvice Capital Management, LLC, a Delaware limited liability company (the “Manager”), as manager of the Fund, with respect to the shares of our common stock directly owned by the Fund; and (iv) Mr. Marc Chodock (“Mr. Chodock”), as managing member of the Manager, with respect to the shares of our common stock directly owed by the Fund. The business address of each of the Reporting Persons is 110 East 25th St., 3rd Floor, New York, New York 10011. The shares of our common stock reported in the table also include: (a) 3,333 shares issuable upon the exercise of an option expiring December 1, 2022, which option is currently exercisable, (b) 3,333 shares issuable upon the exercise of an option expiring December 1, 2023, which option is currently exercisable and (c) 3,333 shares issuable upon the exercise of an option expiring December 1, 2024, which option is currently exercisable and (d) 3,333 shares issuable upon the exercise of an option expiring December 1, 2025, which option is currently exercisable.. The shares of our common stock reported in the table do not reflect 3,333 shares issuable upon the exercise of an option granted on December 1, 2021, which shall become exercisable on December 1, 2022. |
| (7) |
Samuel Goldstein is a director.
|
| (8) |
The shares of our common stock reported in the table include (a) 3,333 shares issuable upon the exercise of an option expiring December 1, 2023, which option is currently exercisable and (b) 3,333 shares issuable upon the exercise of an option expiring December 1, 2024, which option is currently exercisable and (c) 3,333 shares issuable upon the exercise of an option expiring December 1, 2025, which option is currently exercisable.. The shares of our common stock in the table do not reflect 3,333 shares issuable upon the exercise of an option granted on December 1, 2021, which shall become exercisable on December 1, 2022. |
| (9) | Roy P. Moskowitz is a director. |
| (10) |
The shares of our common stock reported in the table include (a) 7,125 shares held by Mr. Moskowitz; (b) 3,333 shares issuable upon the exercise of an option expiring December 1, 2024, which option is currently exercisable; (c) 3,333 shares issuable upon the exercise of an option expiring December 1, 2025, which option is currently exercisable. The shares of our common stock reported in the table do not reflect 3,333 shares issuable upon the exercise of an option granted on December 1, 2021, which shall become exercisable on December 1, 2026.
|
| (11) |
Ronald I. Heller’s address is c/o Heller Capital Partners, 700 E. Palisade Avenue, Englewood, NJ 07632. Mr. Heller is the beneficial owner of 64,085 shares of common stock. The Heller Family Foundation holds 45,752 shares of common stock and the Ronald I. Heller IRA holds 18,333 shares of common stock. Mr. Heller controls the voting and disposition of such securities held by the Heller Family Foundation and Ronald I. Heller IRA. |
Equity Compensation Plan Information
The following table sets forth certain information, as of December 31, 2021, with respect to securities authorized for issuance under equity compensation plans. The only security being so offered is our common stock.
| Number of Securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
||||||||||
| (a) |
(b) |
(c) |
||||||||||
| Equity compensation plans approved by security holders |
59,994 | $ | 2.184 | 190,006 | ||||||||
| Equity compensation plans not approved by security holders |
— | $ | — | — | ||||||||
| Total |
59,994 | $ | 2.184 | 190,006 | ||||||||
We received stockholder approval on December 12, 2006 for the Saker Aviation Services, Inc. Stock Option Plan of 2005 which relates to 250,000 shares of our common stock. Additionally, we received stockholder approval on December 5, 2019 for the Saker Aviation Services Inc. 2019 Stock Incentive Plan, which made 185,000 shares of our common stock were available for award under the plan.
On February 27, 2019, the Company filed with the Secretary of State of the state of Nevada a certificate of amendment to our articles of incorporation. The amendment provided for a reverse stock split (the “Reverse Split”) of the Company’s outstanding shares of common stock at a ratio of 1-for-30. This amendment further provided for a reduction in the number of authorized shares of Common Stock to 3,333,334, as well as for a reduction in the number of authorized shares of preferred stock to 333,306 (the Authorized Share Reduction”). The Company’s intention to effect both the Reverse Split and the Authorized Share Reduction were previously disclosed in a definitive information statement on Schedule 14A filed on July 13, 2017 and in a current report on Form 8-K filed on August 23, 2017. The amendment had an effective date and time of 12:01 a.m. Eastern Time on March 1, 2019 for stockholders of record on February 27, 2019.
| ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Certain Relationships and Related Transactions
Our Board of Directors adopted a Policy and Procedure Governing Related Party Transactions on April 26, 2007, which policy delegates certain functions related to the review and approval of related party transactions to the audit committee and the compensation committee.
Pursuant to a management agreement with Empire Aviation, which is owned by the children of our former Chief Executive Officer and a former director, the Company incurred management fees of approximately $0 and $144,000 during the twelve months ended December 31, 2021 and 2020, respectively, which is recorded in administrative expenses. The Company and Empire Aviation have also 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. HTJC is managed by our former officer and director’s grandson.
Director Independence
Our Board of Directors made the determination of director independence in accordance with the definition set forth in the Nasdaq Stock Market rules. Under such definition, Marc Chodock and Roy P. Moskowitz qualify as independent.
| ITEM 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Audit Fees. The aggregate fees billed for professional services rendered by the principal accountant were approximately $101,500 by Kronick Kalada Berdy & Co. in both 2021 and 2020 for the audits of our annual financial statements for the fiscal years ended December 31, 2021 and 2020, and the reviews of the financial statements included in the Company’s Quarterly Reports on Forms 10-Q for those fiscal years.
Audit-Related Fees. There were fees billed for $18,000 for professional services categorized as Audit-Related Fees by the principal accountant for the fiscal year ended December 31, 2020. There were no Audit-Related Fees billed for the year ended December 31, 2021.
Tax Fees. For both years ended December 31, 2021 and 2020, the aggregate fees billed by the principal accountant for services categorized as Tax Fees were $15,000.
All Other Fees. There were no fees billed for services categorized as All Other Fees by the principal accountant for the fiscal years ended December 31, 2021 and 2020.
Audit Committee Policies and Procedures. The audit committee of the Board of Directors must pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for us by our independent registered public accountants, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which nonetheless must be approved by our audit committee prior to the completion of the audit. Each year the audit committee approves the engagement of our independent registered public accountant to audit our financial statements, including the associated fee, before the filing of the previous year’s Annual Report on Form 10-K. At the beginning of the fiscal year, the audit committee will evaluate other known potential engagements of the independent registered public accountants, including the scope of work proposed to be performed and the proposed fees, and approve or reject each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent registered public accountant’s independence from management. At each such subsequent meeting, the registered public accountants and management may present subsequent services for approval. Typically, these would be services such as due diligence for an acquisition, that would not have been known at the beginning of the year.
Since December 17, 2009 when our Board of Directors initially authorized the engagement of Kronick Kalada Berdy & Co., pursuant to the SEC rules stating that an auditor is not independent of an audit client if the services it provides to the client are not appropriately approved, each subsequent engagement of Kronick Kalada Berdy & Co, has been approved in advance by the audit committee of the Board of Directors, and none of these engagements made use of the de minimus exception to the pre-approval contained in Section 10A(i)(1)(B) of the Exchange Act.
Part VI
| ITEM 15. |
EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
| (a) |
Financial Statements |
The consolidated financial statements of Saker Aviation Services, Inc. and subsidiaries as of December 31, 2021 and 2020 and for each of the years then ended, and the Report of Independent Registered Public Accounting Firm thereon, are included herein as shown in the “Table of Contents to Consolidated Financial Statements.”
| (b) |
Financial Statement Schedules |
None.
| (c) |
Exhibits |
| Exhibit No. |
Description of Exhibit |
| 3.1 |
|
| 3.2 |
|
| 3.3 |
|
| 3.4 |
|
| 4.1 |
|
| 10.1+ |
|
| 10.2 |
|
| 10.3+ |
|
| 10.4 |
|
| 10.5 |
|
| 10.6 |
| 10.7+ |
|
| 23.1* |
|
| 31.1* |
|
| 31.2* |
|
| 32.1* |
Certification pursuant to Section 1350 Certification of Sarbanes-Oxley Act of 2002. |
| 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*
104 |
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101) |
*Filed herewith
+Management compensation plan or arrangement
| ITEM 16. |
FORM 10-K SUMMARY |
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Saker Aviation Services, Inc. |
||
| Date: April 14, 2022 |
By: |
/s/ Samuel Goldstein |
| Samuel Goldstein |
||
| Acting Principal Executive Officer
|
||
| Date: April 14, 2022 |
By: |
/s/ Mark N. Raab |
| Mark N. Raab Acting Principal Financial Officer and Acting Principal Accounting Officer |
||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| SIGNATURE |
TITLE |
DATE |
|
| Chairman of the Board, |
|||
| /s/ William B. Wachtel |
Director |
April 14, 2022 |
|
| William B. Wachtel |
|||
| /s/ Ronald J. Ricciardi |
President, Chief Executive Officer, Director |
April 14, 2022 |
|
| Ronald J. Ricciardi |
|||
| /s/ Marc Chodock |
Director |
April 14, 2022 |
|
| Marc Chodock |
|||
| /s/ Roy P. Moskowitz |
Director |
April 14, 2022 |
|
| Roy P. Moskowitz |
|||
| /s/ Samuel Goldstein |
Acting Principal Executive Officer, Director |
April 14, 2022 |
|
| Samuel Goldstein |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Saker Aviation Services, Inc.
New York, New York
We consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-235477) of our report dated March 31, 2022, relating to the consolidated financial statements of Saker Aviation Services, Inc. and Subsidiaries (the “Company”) appearing in this Annual Report on Form 10-K for the year ended December 31, 2021.
/s/ Kronick Kalada Berdy & Co. P.C.
Kingston, Pennsylvania
April 14, 2022
EXHIBIT 31.1
Certification of Controller
(acting principal financial officer)
Pursuant To Rule 13a-14(a)/15d-14(a)
I, Mark N. Raab, certify that:
1. I have reviewed this Annual Report on Form 10-K 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: April 14, 2022
|
By: /s/ Mark N. Raab |
|||
|
Mark N. 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 Annual Report on Form 10-K 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: April 14, 2022
|
By: /s/ Samuel Goldstein |
Samuel Goldstein
Director (acting principal executive officer)
EXHIBIT 32.1
Section 1350 Certification
Pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), Ronald J. Ricciardi, the Chief Executive Officer (principal executive officer) and President (principal financial officer) of Saker Aviation Services, Inc., does hereby certify that:
1. The Annual Report on Form 10-K for the year ended December 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; 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: April 14, 2022
|
By: |
/s/ Samuel Goldstein |
|
Samuel Goldstein |
||
|
Director (acting principal executive officer) |
||
|
Date: April 14, 2022
|
By: |
/s/ Mark N. Raab |
|
Mark N. Raab |
||
|
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.