SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES

FORM 10-K

INDEX

 

ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	4
ITEM 1B.	UNRESOLVED STAFF COMMENTS	8
ITEM 2.	PROPERTIES	8
ITEM 3.	LEGAL PROCEEDINGS	8
ITEM 4.	MINE SAFETY DISCLOSURES	8
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	9
ITEM 6.	SELECTED FINANCIAL DATA	10
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	11
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
ITEM 8.	FINANCIAL STATEMENTS	18
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	34
ITEM 9A.	CONTROLS AND PROCEDURES	34
ITEM 9B.	OTHER INFORMATION	34
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	35
ITEM 11.	EXECUTIVE COMPENSATION	37
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	39
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	42
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	42
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	44
ITEM 16.	FORM 10-K SUMMARY	45
	SIGNATURES	46

 

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, 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 July 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. We cannot predict with certainty the impact that the ongoing novel coronavirus (“COVID-19”) pandemic will have on our business operations, financial condition and results of operations. The COVID-19 pandemic has significantly disrupted business operations in the United States and globally and has contributed to a decline in general economic conditions in the United States. 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 be negatively impacted. Please see Item 1A. “Risk Factors” below.

 

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 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 rules and regulations, and local, regional and national rules and regulations as they relate to environmental matters. We believe we are in compliance with, and intend to continue to comply with, all applicable government regulations. The adoption of new regulations could result in increased costs and have an adverse impact on our results of operations, including, for example, new regulations restricting air travel as a result of the recent COVID-19 pandemic. New regulations relating to the COVID-19 pandemic could cause us to experience significant declines in activity, which would materially adversely affect our results of operations and financial condition. In the event we are unable to remain compliant with applicable rules and regulations, or new regulations result in a reduction in our operations, our business may be adversely affected.

 

Customers

 

For the fiscal year ended December 31, 2019, four customers represented approximately 54.7% of our revenue. The loss of any of these four customers could represent a significant decrease in revenue that may adversely affect our business and results of operations. Additionally, these four accounts represented approximately 73.0% of the balance of accounts receivable at December 31, 2019. Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability. We depend significantly on our business with these four customers.

 

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.

 

We plan to grow our business through both internal development of existing resources and facilities and through the potential acquisition of other related business. We anticipate that growing our business will provide us with greater buying power from suppliers and, therefore, result in lower costs. Lower costs would allow us to implement a more aggressive pricing policy against some competitors. We believe that the higher level of customer service offered in our facilities will allow us to draw additional aircraft traffic and thus compete successfully against other FBOs of all sizes. However, there can be no assurance that we will be able to compete successfully in the highly competitive aviation industry.

 

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, 2019, we employed 28 persons, 24 of which were employed on a full-time basis, and one 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

 

The following risk factors relate to our operations:

 

We will need additional financing to expand our business.

 

Certain potential aviation services 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 COVID-19 pandemic, or any similar public health threat, could have a material adverse impact on the Company's business, operating results and financial condition, including the suspension of our customer’s operations at the Downtown Manhattan Heliport.

 

 The coronavirus outbreak or similar public health threats, or fear of such events, that affects travel demand, travel behavior, or travel restrictions could have a material adverse impact on our business, financial condition and operating results. In addition, outbreaks of disease have resulted in increased government restrictions and regulation, and could expand to include quarantines of our personnel or an inability to access facilities or our aircraft, which would adversely affect our operations.

 

 

In December 2019, the COVID-19 strain of coronavirus was reported in China. The World Health Organization has declared COVID-19 a pandemic. The United States government has already implemented some forms of travel restrictions. For example, on January 30, 2020, the U.S. Department of State issued a Level 4 "do not travel" advisory for China and, in March of 2020, the U.S. government implemented travel restrictions to Canada and parts of Europe. The U.S. government has also implemented quarantine requirements and travel restrictions in connection with the COVID-19 pandemic, among other measures. Future travel restrictions may impact the type of air travel services we provide. The COVID-19 pandemic and public fear of COVID-19 has reduced the demand for our customer’s services, and as of March 17, 2020, all sightseeing tour operations at the Downtown Manhattan Heliport have ceased due to a drop in demand as a result of the ongoing COVID-19 pandemic. The extent of the impact of the COVID-19 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 on overall demand for air travel, all of which are highly uncertain and cannot be predicted. If we experience significant declines in demand and a suspension of our customer’s operations over an extended period of time, our results of operations for the fiscal year ending December 31, 2020 will be materially adversely affected.

 

Our business, results of operations and financial condition may be adversely affected by the outbreak of COVID-19.

 

The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption. The extent to which the coronavirus pandemic impacts our business, operations and financial results is uncertain and will depend on numerous evolving factors that we may not be able to accurately predict, including:

 

■

the duration and scope of the pandemic;

■

the length of time our customer’s sightseeing tour operations at the Downtown Manhattan Heliport are suspended due to decreased demand;

■

governmental, business and individual actions taken in response to the pandemic and the impact of those actions on global economic activity;

■

the actions taken in response to economic disruption;

■

the impact of business disruptions and reductions in employment levels in the United States;

■

our customers’ continuing viability as businesses; and

■

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. 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. While we do not currently anticipate a significant reduction in fuel availability, dependency on foreign imports of crude oil and the possibility of changes in government policy on jet fuel production, transportation and marketing make it impossible to predict the future availability of jet fuel. 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.

 

We could be adversely affected by the loss of certain key customers or the inability of such key customers to pay amounts due to us.

 

For the fiscal year ended December 31, 2019, four customers represented approximately 54.7% of our revenue. Additionally, these four accounts represented approximately 73.0% of the balance of accounts receivable at December 31, 2019. Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability. The loss of any of our key customers, or the inability of such customers to pay amounts due to us, could result in a significant decrease in revenue that may adversely affect our business and result 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 continued threat of terrorist actions may result in less demand for private aviation and, as a result, our revenue may be adversely affected and we may not be able to continue successful operations.

 

Terrorist actions involving public and private aircraft may have a significant adverse impact on us. As a result of these actions, individuals and corporate customers may cease using private aircraft as a means of transportation or reduce their use of such aircraft, or we could become subject to burdensome regulations that would have an adverse effect on our results of operations. In either event, we would be unable to maintain sales and may be unable to continue our operations on a successful basis.

 

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. On September 1, 2019, we entered into an employment agreement with Mr. Ricciardi. The initial term runs from September 1, 2019 through September 1, 2019 and does not provide for automatic renewal. Loss of the services of Mr. Ricciardi could significantly harm our business, results of operations and financial condition. The Company maintains key-person insurance on the life of Mr. Ricciardi.

 

 

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.

 

 

The following risk factors relate to our common stock:

 

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.

 

Potential additional financings, the granting of additional stock options and anti-dilution provisions in our warrants could further dilute our existing stockholders.

 

As of March 30, 2020, there were 1,020,135 shares of our common stock outstanding. If all of our outstanding common stock purchase warrants and options were exercised, there would be 1,073,463 shares outstanding, an increase of approximately 5.2%. 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.

 

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 influential voting power.

 

As of March 30, 2020, our executive officers, directors and their family members and associates, collectively, are entitled to vote approximately 333,589 shares, or 32.7% of the 1,020,135 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 three independent directors, a director who is a managing partner of a law firm which provides legal services to us, and one executive officer/director.

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

Not applicable.

 

ITEM 2.

PROPERTIES

 

As of March 30, 2020, we lease office and hangar space at the following locations:

 

Location		Purpose			Space (Square Feet)			Annual Rental			Expiration
2117 S. Air Service Road Garden City, Kansas		Kansas FBO location			17,640			$	26,244		December 31, 2030
2145 S. Air Service Road Garden City, Kansas		Kansas MRO location			3,782			$	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 one or more claims or disputes which may result in litigation. However, we are currently not a party to, nor is our property subject to, any material pending legal proceedings.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

PART II

 

ITEM5.

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 the common stock as reported on the OTCQB for the past two most recent fiscal years, with quarters ended prior to March 1, 2019 adjusted for the Company’s reverse stock split effected on such date.

 

		Common Stock
Quarterly Period Ended		High				Low
March 31, 2018		$	4.98			$	2.79
June 30, 2018		$	3.90			$	2.13
September 30, 2018		$	3.87			$	2.25
December 31, 2018		$	3.30			$	2.28
March 31, 2019		$	4.50			$	2.31
June 30, 2019		$	4.10			$	2.61
September 30, 2019		$	4.55			$	2.85
December 31, 2019		$	7.00			$	4.67

 

Holders

 

As of March 30, 2020, there were approximately 248 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 is being paid to stockholders in equal quarterly installments of $0.125 per share which began on November 1, 2019, with the final dividend scheduled to be paid on August 28, 2020. The total amount of future cash dividends to be paid has been accrued in the Company’s balance sheets as of December 31, 2019.

 

 

ITEM6.

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 uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by such forward-looking statements. We therefore caution you against relying on any of these forward-looking statements because they are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include our services and pricing, the impact of the COVID-19 pandemic, general economic conditions, our ability to raise additional capital, 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

 

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 report.

 

Consolidated Statement of Operations Data:		Year Ended December 31, 2019				Year Ended December 31, 2018
(in thousands, except for share and per share data)
Revenue		$	11,568			$	11,118
Operating Income, before income tax expense		$	1,066			$	508
Income tax expense		$	399			$	196
Net Income		$	667			$	312
Net income per share – basic		$	0.66			$	0.30
Net income per share – diluted		$	0.65			$	0.30
Weighted average number of shares – basic			1,008,979				1,029,001
Weighted average number of shares – diluted			1,021,865				1,039,599

 

Balance Sheet Data: (in thousands)		December 31, 2019				December 31, 2018
Working capital surplus		$	3,928			$	3,872
Total assets		$	7,257			$	6,341
Total liabilities		$	1,681			$	994
Stockholders’ equity		$	5,576			$	5,347
Total liabilities and Stockholders’ equity		$	7,257			$	6,341

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Comparison of Results for the Years Ended December 31, 2019 and December 31, 2018.

 

REVENUE

 

Revenue increased by 4.0 percent to $11,567,725 for the twelve months ended December 31, 2019 as compared with corresponding prior-year period revenue of $11,118,452.

 

For the twelve months ended December 31, 2019, revenue associated with services and supply items increased by 2.1 percent to approximately $6,600,000 as compared to approximately $6,400,000 in the twelve months ended December 31, 2018.

 

For the twelve months ended December 31, 2019, revenue associated with the sale of jet fuel, aviation gasoline and related items increased by 6.8 percent to approximately $4,800,000 as compared to approximately $4,500,000 in the twelve months ended December 31, 2018.

 

For the twelve months ended December 31, 2019, all other revenue increased by 5.4 percent to approximately $184,000 as compared to approximately $174,000 in the twelve months ended December 31, 2018.

 

 

GROSS PROFIT

 

Total gross profit increased 13.2 percent to $5,716,659 in the twelve months ended December 31, 2019 as compared to $5,051,761 in the twelve months ended December 31, 2018. Gross margin was 49.4 percent for the twelve months ended December 31, 2019 as compared to 45.4 percent for the same period in 2018. The increase in gross profit is related to higher levels of activity at our Heliport operation in 2019 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 2019 as compared to the prior year.

 

OPERATING EXPENSE

 

Selling, General and Administrative

 

Total selling, general and administrative expenses (“SG&A”) were $4,669,097 in the twelve months ended December 31, 2019, an increase of $109,519 or 2.4 percent, as compared to the same period in 2018.

 

SG&A associated with our FBO operations were approximately $4,100,000 in the twelve months ended December 31, 2019, an increase of approximately $100,000, or 2.4 percent, as compared to the twelve months ended December 31, 2018. SG&A associated with our FBO operations, as a percentage of revenue, was 35.9 percent for the twelve months ended December 31, 2019, as compared with 36.5 percent in the corresponding prior year period. The increased operating expenses were largely attributable to increased costs related to the higher levels of activity in our Heliport operations.

 

Corporate SG&A was approximately $514,000 for the twelve months ended December 31, 2019, representing an increase of approximately $13,000 as compared with the corresponding prior year period.

 

OPERATING INCOME

 

Operating income for the year ended December 31, 2019 was $1,047,562 as compared to $492,183 in the year ended December 31, 2018. The increase on a year-over-year basis was driven by higher levels of gross profit.

 

Depreciation and Amortization

 

Depreciation and amortization was approximately $124,000 and $472,000 for the twelve months ended December 31, 2019 and 2018, respectively. The decrease in depreciation was attributable to the Company’s leasehold improvements becoming fully depreciated at the end of 2018.

 

Interest Income and Expense

 

Interest income was $27,069 and $33,027 for the twelve months ended December 31, 2019 and 2018, respectively. The decrease in interest income was mainly attributable to the issuance of a note receivable from one of our customers at the Heliport in 2018, which was fully paid as of December 31, 2018. Interest expense for the year ended December 31, 2019 was $7,987, as compared to $17,121 in the same period in 2018. The decrease in interest expense was mainly attributable to the Company’s 2019 repayment of bank loans that were originated in March 2018.

 

Impairment of Goodwill and Other Intangibles

 

We had $750,000 of goodwill at December 31, 2019 and 2018.

 

Income Tax

 

Income tax expense for the twelve months ended December 31, 2019 was approximately $399,000, as compared to $197,000 in the same period in 2018. The increase is attributable to an increase in net income in 2019 as compared to net income in the same period in 2018.  

 

 

Net Income Per Share

 

Net income for the twelve months ended December 31, 2019 was $667,644 as compared to net income of $311,536 in the twelve months ended December 31, 2018.

 

Basic and diluted net income per share for the twelve months ended December 31, 2019 was $0.66 and $0.65, respectively, as compared to basic and diluted net income per share of $0.30 each for the same period in 2018.

 

Liquidity and Capital Resources

 

As of December 31, 2019, we had cash of $3,597,491 and a working capital surplus of $3,928,872. We generated revenue of $11,567,725 and had net income of $667,644 for the twelve months ended December 31, 2019. For the twelve months ended December 31, 2019, cash flows included net cash provided by operating activities of $1,123,862, net cash used in investing activities of $87,382, and net cash used in financing activities of $277,638.

 

As disclosed in a Current Report on Form 8-K filed on March 21, 2018 with the SEC, on March 15, 2018 the Company entered into a loan agreement (the “Loan Agreement”) with Key Bank National Association (the “Bank”). The Loan Agreement contains three components: (i) a $2,500,000 acquisition line of credit (the “Key Bank Acquisition Note”); (ii) a $1,000,000 revolving line of credit (the “Key Bank Revolver Note”); and (iii) a $338,481 term loan (the “Key Bank Term Note”).

 

Proceeds of the Key Bank Acquisition Note were to be dispersed 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 (the “Change of Terms Agreement”) which modified the original terms of the Key Bank Acquisition Note. Under the Change of Terms Agreement, the Company may continue to, at the discretion of the Bank, borrow up to an aggregate amount of $2,500,000 through June 30, 2020 (the “Maturity Date”), to be used for the Company’s acquisition of one or more business entities. The Change of Terms Agreement requires the Company to make consecutive monthly payments of interest on any outstanding principal calculated at a rate per annum equal to 4.25%. The entire principal balance, plus all accrued interest, is due in full on the Maturity Date. As of December 31, 2019, there were no amounts due under the Change of Terms Agreement.

 

             Proceeds from the Key Bank Revolver Note, at the discretion of the Bank, provide for the Company to borrow up to $1,000,000 for working capital and general corporate purposes. This revolving line of credit is a demand note with no stated maturity date. Borrowings under the Key Bank Revolver Note will bear interest at a rate per annum equal to one-day LIBOR (adjusted daily) plus 2.75%. The Company is required to make monthly payments of interest on any outstanding principal under the Key Bank Revolver Note and is required to pay the entire balance, including principal and all accrued and unpaid interest and fees, upon demand by the Bank. As of December 31, 2019, there were no amounts due under the Key Bank Revolver Note.

 

 

Proceeds from the Key Bank Term Note were utilized to retire amounts previously outstanding under a $280,920 term loan from PNC Bank. As of December 31, 2019, all amounts outstanding under the Key Bank Term Note have been repaid.

 

The Company is party to a Concession Agreement, dated as of November 1, 2008, with the City of New York for the operation of the Downtown Manhattan Heliport (the “Concession Agreement”). Pursuant to the terms of the Concession Agreement, the Company must pay the greater of 18% of the first $5,000,000 in any program year based on cash collected (“Gross Receipts”) and 25% of Gross Receipts in excess of $5,000,000, or minimum annual guaranteed payments. During the twelve months ended December 31, 2019 and 2018, we incurred approximately $1,640,000 and $1,800,000 in concession fees, respectively, which are recorded in the cost of revenue.

 

As disclosed in a Current Report on Form 8-K filed with the SEC on February 5, 2016, the Company and the New York City Economic Development Corporation (the “NYCEDC”) announced new measures to reduce helicopter noise and impacts across New York City (the “Air Tour Agreement”).

  

Under the Air Tour Agreement, filed as an exhibit to our Annual Report on Form 10-K for the year ended December 31, 2015, the Company may not allow its tenant operators to conduct tourist flights from the Downtown Manhattan Heliport on Sundays beginning 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. Additionally, beginning on June 1, 2016, the Company was 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. The City of New York has two one-year options to further extend the Concession Agreement. The Air Tour Agreement also provides that 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.

 

These reductions have negatively impacted the Company’s business and financial results as well as those of its management company at the Heliport, Empire Aviation which, as previously disclosed, is owned by the children of Alvin Trenk, the Company’s former Chief Executive Officer and a former member of its Board of Directors.  The Company incurred management fees with Empire Aviation of approximately $2,200,000 and $1,777,000 during the twelve months ended December 31, 2019 and 2018, 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.  Mr. Trenk is also an active participant with HJTC, which is managed by his grandson. One of our Directors, Sam Goldstein, serves as deputy director of HJTC.  

 

           On April 20, 2018, the Company’s Kansas subsidiary entered into a purchase lease with Commerce Bank for a refueling truck (the “Truck Lease”). The Truck Lease commenced on May 1, 2018 and continues for 60 months at an interest rate of LIBOR plus 416 basis points. At the end of the Truck Lease, the Company’s subsidiary may purchase the vehicle for $1.00.

 

           On January 15, 2019, the Company was issued an unsecured note by one of its customers at the Heliport. The note schedules payments of approximately $276,000 in receivables payable by such customer, has 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. The Company intends to continue to pursue remaining amounts due under the note and it is the Company’s expectation that the note will be fulfilled.

 

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 intends to sell the aircraft and has classified the it as “Held For Sale” on the Company’s Consolidated Balance Sheets as of December 31, 2019.

 

 

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.

 

Our anticipated capital expenditures in 2020 are approximately $50,000 - $100,000.

 

During the twelve months ended December 31, 2019, we had a net increase in cash of $758,842. Our sources and uses of funds during this period were as follows:

 

Cash from Operating Activities

 

For the year ended December 31, 2019, net cash provided by operating activities was $1,123,862. This amount included an increase in operating cash related to net income of $667,644 and additions for the following items: (i) depreciation, $124,264; (ii) stock-based compensation expense, $33,997; (iii) prepaid expenses and other current assets, $271,830; (iv) deposits, $3,552; (v) deferred income taxes, $31,000; (vi) accounts payable, $49,052; and (vii) accrued expenses, $59,129. The increase in cash provided by operating activities in 2019 was offset by the following items: (i) accounts receivable, trade, $106,267; and (ii) inventories, $10,339. For the year ended December 31, 2018, net cash provided by operating activities was $856,258. This amount included an increase in operating cash related to net income of $311,536 and additions for the following items: (i) depreciation, $472,067; (ii) stock-based compensation expense, $33,997; (iii) accounts receivable, trade, $240,586; and (iv) deposits, $44,205. The increase in cash provided by operating activities in 2018 was offset by the following items: (i) inventories, $7,736; (ii) prepaid expenses and other current assets, $34,783; (iii) deferred income taxes, $53,000; (iv) accounts payable, $146,903; and (v) accrued expenses, $3,711.

 

Cash from Investing Activities

 

For the year ended December 31, 2019, net cash used in investing activities was $87,382. This amount included payments of note receivable of $87,208 offset by purchases of property and equipment of $174,590. For the year ended December 31, 2018, net cash provided by investing activities was $660,082. This amount included payments of note receivable of $850,264 offset by purchases of property and equipment of $190,182.

 

Cash from Financing Activities

 

      For the year ended December 31, 2019, net cash used in financing activities was $277,638 of which $112,217 was attributable to the repayment of notes payable, $126,630 to the payment of accrued dividends, and $38,891 to the repayment of right of use leases. For the year ended December 31, 2018, net cash used in financing activities was $402,195 of which $361,379 was attributable to the repayment of notes payable and $175,816 to the repurchase and cancellation of common stock, offset by the issuance of notes payable of $135,000.

 

 

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, Trade

The Company extends credit to large and mid-size companies for products and services. The Company has concentrations of credit risk in that 73.0% of the balance of its accounts receivable at December 31, 2019 is made up of only four customers. At December 31, 2019, accounts receivable from the Company’s four largest accounts amounted to approximately $241,298 (35.6%), $115,864 (17.1%), $111,149 (16.4%), and $26,523 (3.9%), respectively. In addition, these four customers represented approximately 54.7% of our revenue in 2019. At December 31, 2018, accounts receivable from the Company’s four largest accounts amounted to approximately $285,350 (33.7%), $202,080 (23.8%), $101,678 (12.0%), and $12,671 (1.5%), respectively. In addition, these four customers represented approximately 59.7% of our revenue in 2018. The Company has in place a security deposit in connection with three of these receivables. Accounts receivable are carried at their estimated collectible amounts. Accounts receivable are periodically evaluated for collectability and the allowance for doubtful accounts is adjusted accordingly. We determine collectability based on our management experience and knowledge of the customers.

 

Goodwill and Intangible Assets

Goodwill and intangibles that are deemed to have indefinite lives are not amortized but, instead, are to be reviewed at each reporting period for impairment. We assessed potential impairment of goodwill using qualitative factors by considering various factors including macroeconomic conditions, industry and market conditions, cost factors, a sustained share price or market capitalization decrease and any reporting unit specific events. We performed an analysis of our goodwill and intangible assets at December 31, 2019 and 2018.

 

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. 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 2016.

 

 

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.

 

Recently Adopted Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. ASU 2016-02 became effective for us on January 1, 2019 and we have adopted the new standard using a modified retrospective approach. The adoption of ASU No. 2016-02 did not have a material impact on the Company’s financial statements.

 

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

 

ITEM 8. FINANCIAL STATEMENTS

 

SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES
Table of Contents to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	19
Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2019 and 2018	20
Consolidated Statements of Operations For the Years Ended December 31, 2019 and 2018	21
Consolidated Statements of Stockholders’ Equity For the Years Ended December 31, 2019 and 2018	22
Consolidated Statements of Cash Flows For the Years Ended December 31, 2019 and 2018	23
Notes to Consolidated Financial Statements	24

 

 

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, 2019 and 2018, 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, 2019 and 2018, 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.

 

Change in Accounting Principle

 

As discussed in Note 3 to the consolidated financial statements, the entity changed its methods of accounting for leases in 2019 due to the adoption of ASU No. 2016-02 “Leases”.

 

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.

 

/s/ Kronick Kalada Berdy & Co. P.C.

 

We have served as the Company's auditor since 2009.

 

Kingston, Pennsylvania

March 30, 2020

 

 

SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

See accompanying notes to consolidated financial statements.

 

 

SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

See accompanying notes to consolidated financial statements.

 

 

SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR YEARS ENDED DECEMBER 31, 2019 AND 2018

 

 

See accompanying notes to consolidated financial statements.

 

 

SAKER AVIATION SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2019.

 

ITEM 9B.

OTHER INFORMATION

 

None.

 

 

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, 2019:

 

Name		Age		Position
William B. Wachtel		65		Director, Chairman of the Board
Ronald J. Ricciardi		58		Director, President & Chief Executive Officer
Samuel Goldstein		41		Director
Marc Chodock		41		Director
Roy Moskowitz		65		Director

 

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. On October 27, 2011, Mr. Wachtel was re-elected as our Chairman of the Board.

 

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. He is a co-founder of the Drum Major Institute, an organization carrying forth the legacy of the late Reverend Martin Luther King, Jr.

 

Mr. Wachtel’s participation is important to our Board of Directors because of his extensive experience advising companies regarding legal issues, which provides him with a depth and breadth of experience that enhances our ability to navigate legal and strategic issues, and because of his extensive experience working with us.

 

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 – 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.

 

 

Mr. Ricciardi’s participation is important to our Board of Directors because of his 15 years of experience working in a variety of roles with us, including his service on our Board of Directors, combined with his knowledge of the aviation industry and his extensive management experience, all of which demonstrate his strong commitment to us and make him a valued member of our Board of Directors.

 

Samuel Goldstein – Director

 

Mr. Goldstein was appointed as a director on September 21, 2018. 

 

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. Concurrently, Mr. Goldstein was 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.

 

Mr. Goldstein’s participation is important to our Board of Directors because his exposure and outreach skills developed in part as Deputy Director of HTJC, and corresponding knowledge of the local helicopter marketplace, enable Mr. Goldstein to advise the Company on potential courses of action.

 

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 Advisors, 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.

 

Mr. Chodock's participation is important to our Board of Directors because of his extensive experience in advising companies by serving on boards as well as his knowledge in depth and breadth of the aviation industry.

 

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 since September 2006. 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.

 

Mr. Moskowitz’ participation is important to our Board of Directors because his extensive experience analyzing legal issues enables Mr. Moskowitz to advise the Company on potential courses of action, particularly when legal topics are involved.

  

 

Family Relationships

 

There are no family relationships among our directors and 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, Roy P. Moskowitz and Samuel Goldstein; 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, 2019 and Forms 5 and amendments thereto, furnished to us with respect to the fiscal year ended December 31, 2019, 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, Chodock, and Ricciardi, each of whom filed one late Form 4 reporting one transaction, Mr. Moskowitz, who filed one late Form 4 reporting two transactions, and Mr. Goldstein who filed his initial statement of beneficial ownership on Form 3 late and 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.

 

 

ITEM 11.

EXECUTIVE COMPENSATION

 

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, 2019 and 2018 for services performed on our behalf with respect to the person who served as our executive officer as of December 31, 2019.

 

SUMMARY COMPENSATION TABLE

 

Name and Principal Position	Year		Salary ($)(1)			All Other Compensation ($)(2)			Total ($)
Ronald J. Ricciardi, President and Chief Executive Officer	2019		175,385			46,315			221,700
	2018		150,000			17,306			167,306

 

1.	Effective September 1, 2019, Mr. Ricciardi’s base salary was increased from $150,000 to $200,000. Mr. Ricciardi received a base salary in 2018 of $150,000.  Included in Mr. Ricciardi’s 2019 salary is a $10,000 bonus he received pursuant to his employment agreement with the Company.
2.	Pursuant to his employment agreement with the Company, Mr. Ricciardi was granted 5,036 shares of the Company’s common stock on December 5, 2019, which was valued at $28,202. Mr. Ricciardi receives health insurance coverage estimated at a value of approximately $1,067 per month in both 2019 and 2018, and received a match to his 401K contributions from us amounting to approximately $5,300 and $4,500 in 2019 and 2018, respectively.

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019

 

There are no outstanding equity awards at December 31, 2019.

 

2019 DIRECTOR COMPENSATION TABLE

 

Name		Fees Earned in Cash ($)(1)			Option Awards ($)(2)			Total ($)
Samuel Goldstein		7,500			18,665			26,165
William B. Wachtel		5,000			18,665			23,665
Marc Chodock		7,500			18,665			26,165
Roy P. Moskowitz		7,750			18,665			26,415

 

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, 2019, the Board of Directors granted each non-employee director an option for their service in 2019. Each option was for 3,333 shares and was priced at $5.60 per share, which was the closing sales price of our common stock on December 1, 2019. The options vest on December 1, 2020 and may be exercised until December 1, 2024. See Item 12. for a description of all outstanding options held by non-employee directors at December 31, 2019. 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.

 

 

 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 $31,000 and $30,000 for the years ended December 31, 2019 and 2018, 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 March 30, 2020 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)			187,280	(3)			18.1	%
Ronald J. Ricciardi (4)			48,670	(5)			4.8	%
Marc Chodock (6)			110,514	(7)			10.8	%
Samuel Goldstein (8)			3,333	(9)			0.3	%
Roy P. Moskowitz (10)			10,458	(11)			1.0	%
All directors and officers as a group (5 in number)			360,255				34.0	%
Ronald I. Heller (12)			64,085	(12)			6.3	%
All Beneficial Holders as a group (6 in number)			424,340				40.3	%

 

 

(1)	The percentages computed in the table are based upon 1,020,135 shares of our common stock, which were outstanding on December 31, 2019. 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 or warrants currently exercisable or exercisable within 60 days of March 30, 2020.
(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) 6,467 shares purchased by Mr. Wachtel in the open market; (b) an aggregate of 1,550 shares issued in connection with the cashless exercise of options; (c) 3,333 shares issuable upon the exercise of an option expiring December 1, 2020, which option is currently exercisable; (d) 3,333 shares issuable upon the exercise of an option expiring December 1, 2021, which option is currently exercisable; (e) 3,333 shares issuable upon the exercise of an option expiring December 1, 2022, which option is currently exercisable; (f) 3,333 shares issuable upon the exercise of an option expiring December 1, 2023, 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, 2019, which shall become exercisable on December 1, 2020; 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.
(5)	The shares of our common stock reported in the table include 8,846 shares issued in connection with a cashless exercise of an option to purchase 10,000 shares and a stock grant of 5,036 shares in 2019 issued in connection with Mr. Ricciardi’s employment agreement.
(6)	Marc Chodock is a director.
(7)	The shares of our common stock reported in the table include 100,000 shares based on a Schedule 13D filed with the SEC on February 9, 2015. 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 3,848 shares issued in connection with the cashless exercise of options to purchase 6,666 shares. In addition, 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, 2022, which option is currently exercisable and (b) 3,333 shares issuable upon the exercise of an option expiring December 1, 2023, 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, 2019, which shall become exercisable on December 1, 2020.
(8)	Samuel Goldstein is a director.

 

 

(9)	The shares of our common stock reported in the table include 3,333 shares issuable upon the exercise of an option expiring December 1, 2023, 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, 2019, which shall become exercisable on December 1, 2020.
(10)	Roy P. Moskowitz is a director.
(11)	The shares of our common stock reported in the table include (a) 3,167 shares purchased by Mr. Moskowitz in the open market; (b) 3,958 shares issued in connection with a cashless exercise of options to purchase 6,666 shares; (c) 3,333 shares issuable upon the exercise of an option expiring December 1, 2022, which option is currently exercisable; and (d) 3,333 shares issuable upon the exercise of an option expiring December 1, 2023, 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, 2019, which shall become exercisable on December 1, 2020.
(12)	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, 2019, 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			53,328			$	2.655				196,672
Equity compensation plans not approved by security holders			—			$	—				—
Total			53,328			$	2.655				196,672

 

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 Alvin S. Trenk, our former Chief Executive Officer and a former director, the Company incurred management fees of approximately $2,200,000 and $1,777,000 during the twelve months ended December 31, 2019 and 2018, 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. Mr. Goldstein, one of our directors, serves as deputy director of HTJC. Mr. Trenk is also an active participant with HTJC, which is managed by his grandson. 

 

On February 6, 2018, the Company was issued a note by one of its customers at the Heliport. The note scheduled approximately $750,000 in receivables payable by such customer, had a maturity date of October 31, 2018, and carried a 7.5% rate of interest. As of December 31, 2019, all amounts due under the note have been paid. During the second quarter of 2018, Mr. Trenk acquired controlling interest in this customer.

 

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, Roy P. Moskowitz and Samuel Goldstein 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 $97,100 and $94,800 by Kronick Kalada Berdy & Co. for 2019 and 2018, respectively, for the audits of our annual financial statements for the fiscal years ended December 31, 2019 and 2018, 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 no fees billed for professional services categorized as Audit-Related Fees by the principal accountant for the fiscal years ended December 31, 2019 and 2018.

 

Tax Fees. For the years ended December 31, 2019 and 2018, the aggregate fees billed by the principal accountant for services categorized as Tax Fees were $15,000 and $0, respectively.

 

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, 2019 and 2018.

 

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, 2019 and 2018 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	Amended and Restated Articles of Incorporation, incorporated by reference from Exhibit 3(i)(6) to the Company’s Current Report on Form 8-K filed on December 18, 2006.
3.2	Articles of Merger (Changing name to Saker Aviation Services, Inc.), incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 1, 2009.
3.3	Certificate of Amendment to Articles of Incorporation of Saker Aviation Services, Inc., incorporated by reference from Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 28, 2019.
3.4	Bylaws of Saker Aviation Services, Inc., incorporated by reference from Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 1, 2009.
4.1*	Description of Securities
10.1	Stock Option Plan of 2005, incorporated by reference from Exhibit 10-18 to the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.
10.2	Concession Agreement between FirstFlight, Inc. and the City of New York by and through New York City of Department of Small Business Services, dated October 7, 2008, incorporated by reference from Exhibit 33.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
10.3	2019 Stock Incentive Plan, incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 12, 2019.
10.4	Amendment to NYC Heliport Concession Agreement, dated as of July 13, 2016, incorporated by reference from Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2016.
10.5	Loan Agreements entered into by and between the Company and KeyBank, dated as of March 15, 2018, incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 21, 2018.
10.6	Modified Loan Agreement entered into by and between the Company and KeyBank, dated as October 11, 2018, incorporated by reference from Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

 

 

10.7	Employment Agreement, dated September 1, 2019, by and between the Company and Ronald J. Ricciardi, incorporated by reference from Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on September 6, 2019.
23.1*	Consent of Independent Registered Public Accounting Firm.
31.1*	Certification pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act (principal financial officer).
31.2*	Certification pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act (principal executive officer).
32.1*	Certification pursuant to Section 1350 Certification of Sarbanes-Oxley Act of 2002.

 

101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Extension Definition XBRL Taxonomy Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

 

 

*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:  March 30, 2020	By:	/s/ Ronald J. Ricciardi
		Ronald J. Ricciardi
		President, Principal Executive Officer, Principal Financial Officer, and 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	March 30, 2020
William B. Wachtel
/s/ Rnald J. Ricciardi		President, Chief Executive Officer, Director	March 30, 2020
Ronald J. Ricciardi
/s/ Marc Chodock		Director	March 30, 2020
Marc Chodock
/s/ Roy P. Moskowitz		Director	March 30, 2020
Roy P. Moskowitz
/s/ Samuel Goldstein		Director	March 30, 2020
Samuel Goldstein

 

 

45