SAKER AVIATION SERVICES, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

SAKER AVIATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

SAKER AVIATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

SAKER AVIATION SERVICES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

See accompanying notes to condensed consolidated financial statements.

SAKER AVIATION SERVICES, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the accompanying unaudited condensed consolidated financial statements and related notes in this report. This Item 2 contains forward-looking statements that involve risks and uncertainties. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed or implied in such forward-looking statements. Factors which could cause actual results to differ materially are discussed throughout this report and include, but are not limited to, those set forth at the end of this Item 2 under the heading "Cautionary Statement Regarding Forward Looking Statements." Additional factors are under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The terms “we”, “us”, and “our” are used below to refer collectively to the Company and its subsidiary through which our various businesses are actually conducted.

Overview

Saker Aviation Services, Inc. is a Nevada corporation. Our common stock, $0.03 par value per share (the “common stock”), is quoted on the OTCQB Marketplace (“OTCQB”) under the symbol “SKAS”. Through our subsidiary, we operate in the aviation services segment of the general aviation industry in which we serve as the operator of a heliport.

We were formed on January 17, 2003 as a proprietorship and were incorporated in Arizona on January 2, 2004. We became a public company as a result of a reverse merger transaction on August 20, 2004 with Shadows Bend Development, Inc., an inactive public Nevada corporation, and subsequently changed our name to FBO Air, Inc. On December 12, 2006, we changed our name to FirstFlight, Inc. On September 2, 2009, we changed our name to Saker Aviation Services, Inc.

Our business activities are carried out as the operator of the Downtown Manhattan (New York) Heliport and until October 31, 2022 as a fixed base operator (“FBO”) and provider of aircraft maintenance and repair services (“MRO”) at the Garden City (Kansas) Regional Airport. On October 31, 2022, the Garden City facilities were sold and we no longer maintain an FBO or MRO at the Garden City (Kansas) Regional Airport.

Our business activities at the Downtown Manhattan Heliport commenced in November 2008 when we were awarded the Concession Agreement by the City of New York to operate the Heliport, which we assigned to our subsidiary, FirstFlight Heliports, LLC d/b/a Saker Aviation Services (“FFH”).

On April 28, 2023, the Company entered into a Temporary Use Authorization Agreement (the “Use Agreement”), effective as of May 1, 2023, with the City of New York acting by and through the New York City of Department of Small Business Services (“DSBS”). The Use Agreement had a term of one year. Pursuant to the terms of the Use Agreement, the Company was granted the exclusive right to operate as the fixed base operator for the Downtown Manhattan Heliport and collect all revenue derived from the Downtown Manhattan Heliport operations. In addition to terminations for an event of default, the Use Agreement could be terminated at any time by the Commissioner of the DSBS or suspended at any time by the NYCEDC. The Company was required under the Use Agreement to remit a monthly administrative fee to the NYCEDC in the amount of $5,000.

On July 13, 2023, the DSBS was granted approval by the Franchise and Concession Review Committee to enter into an Interim Concession Agreement (the “Interim Agreement”) with the Company to provide for the continued operation of the Downtown Manhattan Heliport. The Interim Agreement became effective upon registration with the Comptroller of the City of New York and commenced on December 12, 2023, the date set forth in a written notice to proceed received by the Company. The Interim Agreement provides for one (1) six-month term (the “Initial Period”), with two (2) six-month options to renew (the “Renewal Periods”). The Company is required to pay the greater of $1,036,811 or 30% of Gross Receipts during the Initial Term and the greater of $518,406 or 30% of Gross Receipts during both Renewal Periods.

On April 30, 2024, the Company received notice from DSBS of its exercise of the first of the two six-month renewal options extending the term of the Interim Concession Agreement through December 12, 2024. On October 18, 2024, the Company received notice from DSBS of its exercise of the second of the two six-month renewal options extending the term of the Interim Concession Agreement through June 12, 2025. In addition to terminations for an event of default, the Interim Agreement can be terminated at any time by the Commissioner of the DSBS or suspended at any time by the NYCEDC. During the nine months ended September 30, 2024 and 2023, we incurred approximately $1,969,000 and $0 in fees under the Interim Agreement, respectively, and $0 and $532,000 in fees under the Concession Agreement, respectively, which are recorded in the cost of revenue.

REVENUE AND OPERATING RESULTS

Comparison of Operations for the Three and Nine Months Ended September 30, 2024 and September 30, 2023.

REVENUE

Revenue from operations decreased by 3.1 percent to $2,505,488 for the three months ended September 30, 2024 as compared with corresponding prior-year period revenue of $2,584,755.

For the three months ended September 30, 2024, revenue from operations associated with the sale of jet fuel and related items decreased by 0.8 percent to approximately $687,000 as compared to approximately $693,000 in the three months ended September 30, 2023.

For the three months ended September 30, 2024, revenue from operations associated with services and supply items decreased by 1.2 percent to approximately $1,802,000 as compared to approximately $1,824,000 in the three months ended September 30, 2023.

For the three months ended September 30, 2024, all other revenue decreased by 75.8 percent to approximately $16,000 as compared to approximately $68,000 in the three months ended September 30, 2023. This decrease was attributable to a decrease in non-aeronautical revenue, including revenue from advertising and photo shoots, compared to the same period last year.

Revenue from operations increased by 2.4 percent to $6,466,973 for the nine months ended September 30, 2024 as compared with corresponding prior-year period revenue of $6,318,488.

For the nine months ended September 30, 2024, revenue associated with the sale of jet fuel and related items decreased by 2.0 percent to approximately $1,604,000 as compared to approximately $1,636,000 in the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, revenue associated with services and supply items decreased by 0.2 percent to approximately $4,568,000 as compared to approximately $4,578,000 in the nine months ended September 30, 2023.

For the nine months ended September 30, 2024, all other revenue increased by 183.0 percent to approximately $295,000 as compared to approximately $104,000 in the nine months ended September 30, 2023. This increase was attributable to an increase in non-aeronautical revenue, including revenue from advertising and photo shoots, compared to the same period last year.

COST OF REVENUE

Total cost of revenue increased by 123.6 percent to $1,245,862 in the three months ended September 30, 2024 as compared to $557,256 in the three months ended September 30, 2023. This increase was largely attributable to higher fees due under the Interim Agreement which became effective December 12, 2023. Total cost of revenue increased by 69.7 percent to $3,183,418 in the nine months ended September 30, 2024 as compared to $1,876,428 in the nine months ended September 30, 2023. The increase was largely attributable to higher fees due under the Interim Agreement which became effective December 12, 2023.

GROSS PROFIT

Total gross profit decreased by 37.9 percent to $1,259,626 in the three months ended September 30, 2024 as compared with $2,027,499 in the three months ended September 30, 2023. Gross margin was 50.3 percent in the three months ended September 30, 2024 as compared to 78.4 percent in the same period in the prior year. Gross profit and gross margin were negatively impacted by the item discussed above.

Total gross profit decreased by 26.1 percent to $3,283,555 in the nine months ended September 30, 2024 as compared to $4,442,060 in the nine months ended September 30, 2023. Gross margin decreased to 50.8 percent in the nine months ended September 30, 2024 as compared to 70.3 percent in the same period in the prior year. Gross profit and gross margin were negatively impacted by the item discussed above.

OPERATING EXPENSE

Selling, General and Administrative

Total selling, general and administrative expenses, (“SG&A”), from operations were $456,132 in the three months ended September 30, 2024, representing a decrease of $22,668 or 4.7 percent, as compared to the same period in 2023.

SG&A from operations associated with our aviation services operation were approximately $328,000 in the three months ended September 30, 2024, representing a decrease of approximately $8,000, or 2.4 percent, as compared to the three months ended September 30, 2023. SG&A from operations associated with our aviation services operation, as a percentage of revenue, was 13.1 percent for the three months ended September 30, 2024, as compared with 13.0 percent in the corresponding prior year period.

SG&A from operations in the nine months ended September 30, 2024 were approximately $996,000, representing a decrease of approximately $534,000 or 34.9 percent, as compared to the same period in 2023. The decrease in SG&A operating expenses for the nine months ended September 30, 2024 was primarily attributable to the termination of the management agreement with Empire Aviation, effective April 30, 2023.

Corporate SG&A from operations was approximately $128,000 for the three months ended September 30, 2024, representing a decrease of approximately $15,000 as compared with the corresponding prior year period.

Corporate SG&A was approximately $388,000 for the nine months ended September 30, 2024, representing a decrease of approximately $113,000 as compared with the corresponding prior year period. The decrease in Corporate SG&A was largely attributable to a decrease in services provided by various service providers.

OPERATING INCOME

Operating income from operations for the three months ended September 30, 2024 was $803,494 as compared to operating income of $1,548,699 in the three months ended September 30, 2023. The change on a year-over-year basis was largely attributable to an increase in fees paid to EDC in 2024 compared to 2023.

Operating income from operations for the nine months ended September 30, 2024 was $1,900,270 as compared to operating income of $2,412,043 in the nine months ended September 30, 2023. The change on a year-over-year basis was largely attributable to a decrease in management fees from the termination of the Empire Agreement effective April 30, 2023 offset by an increase in fees paid to EDC in 2024 compared to 2023.

Depreciation

Depreciation for the nine months ended September 30, 2024 and 2023 was $11,636 and $12,535, respectively.

Interest Income

Interest income for the nine months ended September 30, 2024 and 2023 was $281,481 and $143,246, respectively. The increase in interest income was attributable to the Company’s increase in cash invested with UBS.

Income Tax

Income tax expense for the nine months ended September 30, 2024 and 2023 was $429,000 and $1,003,000, respectively. The decrease in income tax was attributable to decreased net income in 2024 compared to 2023.

Net Income Per Share

Net income was $736,868 and $1,764,289 for the nine months ended September 30, 2024 and 2023, respectively. The change on a year-over-year basis was largely attributed to the items discussed above.

Basic net income per share from operations for the nine months ended September 30, 2024 and 2023 was $0.75 and $1.81, respectively. Diluted net income per share from operations for the nine months ended September 30, 2024 and 2023 was $0.73 and $1.78, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2024, we had cash and cash equivalents of $5,078,426 and a working capital surplus of $9,091,941. We generated revenue from operations of $6,466,973 and had net income of $736,868 for the nine months ended September 30, 2024. For the nine months ended September 30, 2024, cash flows included net income of $736,868, cash used in operating activities of $912,541, and cash used in investing activities of $940,742.

On March 15, 2018, the Company entered into a loan agreement for a $1,000,000 revolving line of credit (the “Key Bank Revolver Note”) which, at the discretion of the Bank, provides for the Company to borrow up to $1,000,000 for working capital and general corporate purposes. On November 22, 2023, the Bank reduced the amount available under the Key Bank Revolver Note to $500,000. This revolving line of credit is a demand note with no stated maturity date. Borrowings under the Key Bank Revolver Note will bear interest at a rate per annum equal to Daily Simple SOFR plus 2.75%. The Company is required to make monthly payments of interest on any outstanding principal under the Key Bank Revolver Note and is required to pay the entire balance, including principal and all accrued and unpaid interest and fees, upon demand by the Bank. Any proceeds from the Key Bank Revolver Note would be secured by substantially all of the Company’s assets. There were no amounts due under the Key Bank Revolver Note at September 30, 2024 or 2023.

The Company has invested its excess working capital reserves in a high yield savings account and government backed securities with UBS Financial Services Inc. (“UBS”).

Cash from Operating Activities

For the nine months ended September 30, 2024, net cash used in operating activities was $912,541. This amount included an increase in operating cash related to net profit of $736,838 and additions for the following items: (i) depreciation and amortization, $11,636; (ii) stock-based compensation, $76,081; (iii) accounts receivable, trade, $58,924; and (iv) customer deposits, $6,740. These increases in operating activities were offset by (i) gain on sale of investments, $38,317; (ii) inventories, $3,459; (iii) prepaid expenses, $264,564; (iv) accounts payable, $565,785; and accrued expenses, $930,665.

For the nine months ended September 30, 2023, net cash provided by operating activities was $2,629,098. This amount included an increase in operating cash related to net income of $1,764,289 and additions for the following items: (i) depreciation and amortization, $12,535; (ii) stock based compensation, $76,500; (iii) accounts receivable, trade, $3,928; (iv) inventory, $7,438; (v) prepaid expenses, $7,874; and (vi) customer deposits, $50,246; (vii) accounts payable, $312,688; and (viii) accrued expenses, $393,600.

Cash from Investing Activities

For the nine months ended September 30, 2024, cash used in investing activities was $940,742. This amount included purchases of investments of $2,761,571, proceeds from sale of investments of $1,823,000, and the purchase of property and equipment of $2,171. For the nine months ended September 30, 2023, net cash of $2,448,846 was used in investing activities for the purchase of investments of $2,425,854 and the purchase of property and equipment of $22,992.

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

Statements contained in this report may contain information that includes or is based upon "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent management's current judgment and assumptions, and can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements are frequently accompanied by the use of such words as "anticipates," "plans," "believes," "expects," and similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, including, but not limited to, those relating to:

Any one of these or other risks, uncertainties, other factors, or any inaccurate assumptions made by the Company may cause actual results to be materially different from those described herein or elsewhere by us. Undue reliance should not be placed on any such forward-looking statements, which speak only as of the date they were made. Certain of these risks, uncertainties, and other factors are described in greater detail in our Annual Report on Form 10-K for the year ended December 31, 2023 and in other filings we make with the SEC. Subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth above and elsewhere in our reports filed with the SEC. We expressly disclaim any intent or obligation to update any forward-looking statements, except as may be required by law.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to report the information required by this item.

Item 4 – 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 and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon, and as of the date of that evaluation, our President 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 in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item-1 – Legal Proceedings

Empire Aviation, LLC (“Empire”) and the Company were parties to a certain Management Agreement (the “Management Agreement”) effective November 1, 2008. The Management Agreement terminated on April 30, 2023. As previously disclosed in the Company’s 2023 Annual Report on Form 10-K, Note 10. Contingent Liabilities. Empire Aviation notified the Company that it believes additional fees (“Management Fees”) are due under the Management Agreement.

On March 14, 2024, the Company and Empire participated in an arbitration of this dispute. In their filing, Empire claimed that Saker failed to pay Empire certain Management Fees in various months throughout the term of the Management Agreement. Of this amount, approximately $350,000 had been accrued by the Company in 2023 and included in the Company’s Condensed Consolidated Statement of Operations in selling, general and administrative expenses and the Condensed Consolidated Balance Sheet in accounts payable. Saker asserted numerous defenses including, but not limited to, Empire waiving its rights to such fees by the parties’ course of conduct. Further, Saker asserted counterclaims against Empire.

On July 8, 2024, the Company was notified of the arbitrator's decision. The arbitrator found in favor of Empire in the amount of $1.4 million (the “Judgement Amount”), such amount representing approximately $1,036,000 in unpaid Management Fees due under the Management Agreement plus accrued interest of approximately $363,000. The Judgement Amount was immediately payable and accrued per diem interest of $511.08 for each day until it was paid in full. On July 10, 2024, the Company paid Empire the Judgement Amount including per diem interest through the date of payment. The Company recorded Litigation Expense of $1,054,200 at June 30, 2024, representing the difference between the Judgement Amount and the expense accrued by the company in 2023. The Company does not plan to appeal the arbitrator’s decision.

Item 6 - Exhibits

* Filed herewith

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.