Sky Harbour Group Corp 10-Q for FY2022 Q3
Sky Harbour Group Corp (SKYH)
About this 10-Q
Sky Harbour Group Corp filed this 10-Q on November 10, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $431K
- up 7.2% from $402K a year earlier
- Net loss
- $613K
- compared with a net loss of $3.54M a year earlier
- Diluted EPS
- -$0.04
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission File Number:
Sky Harbour Group Corporation
(Exact name of registrant as specified in its Charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| Westchester County Airport (Address of principal executive offices) | (Zip Code) |
| ( Registrant’s telephone number, including area code | |
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of Class | Trading Symbols | Name of Exchange on Which Registered | ||
| | | | ||
| Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share | | |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. (See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| | ☒ | Smaller reporting company | | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 7, 2022,
TABLE OF CONTENTS
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| Item 1. |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
| Item 3. |
32 | |
| Item 4. |
32 | |
| 33 | ||
| Item 1. |
33 | |
| Item 1A. |
33 | |
| Item 2. |
33 | |
| Item 3. |
33 | |
| Item 4. |
33 | |
| Item 5. |
33 | |
| Item 6. |
33 | |
| 33 | ||
| FINANCIAL STATEMENTS |
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| September 30, 2022 | December 31, 2021 | |||||||
| (unaudited) | (audited) | |||||||
| Assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Investments | ||||||||
| Restricted investments | ||||||||
| Prepaid expenses and other assets | ||||||||
| Cost of construction | ||||||||
| Constructed assets, net | ||||||||
| Right-of-use assets | ||||||||
| Long-lived assets, net | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and equity | ||||||||
| Accounts payable, accrued expenses and other liabilities | $ | $ | ||||||
| Operating lease liabilities | ||||||||
| Bonds payable, net of debt issuance costs and premiums | ||||||||
| Warrants liability | ||||||||
| Total liabilities | ||||||||
| Redeemable Sky Series B Preferred Units | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock; par value; shares authorized as of September 30, 2022; issued and outstanding | ||||||||
| Class A common stock, par value; shares authorized as of September 30, 2022; shares issued and outstanding as of September 30, 2022 | ||||||||
| Class B common stock, par value; shares authorized as of September 30, 2022; shares issued and outstanding as of September 30, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Total Sky Harbour Group Corporation stockholders’ equity | ||||||||
| Members’ equity | ||||||||
| Non-controlling interests | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine months ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Revenue: | ||||||||||||||||
| Rental revenue | $ | $ | $ | $ | ||||||||||||
| Total revenue | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Operating | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Loss on impairment of long-lived assets | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Other (income) expense: | ||||||||||||||||
| Interest expense, net of capitalized interest | ||||||||||||||||
| Unrealized (gain) loss on warrants | ( | ) | ( | ) | ||||||||||||
| Loss on extinguishment of note payable to related party | ||||||||||||||||
| Total other (income) expense | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||
| Net loss attributable to Sky Harbour Group Corporation shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average shares | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| Net loss | $ | $ | $ | $ | ||||||||||||
| Other comprehensive loss, before related income taxes: | ||||||||||||||||
| Unrealized losses on available-for-sale securities | ||||||||||||||||
| Total other comprehensive loss | $ | $ | $ | $ | ||||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(Unaudited)
| Redeemable Sky Series B | Class A | Class B | Additional | Accumulated Other | Total | Non- | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Units | Common Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | Members | Controlling | Total | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | Equity | Interests | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation prior to recapitalization | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) prior to recapitalization | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Yellowstone Transaction and recapitalization, See Note 3 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation following recapitalization | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) following recapitalization | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of initial commitment shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(Unaudited)
| Redeemable Series B | Class A | Class B | Additional | Accumulated Other | Total | Non- | Total | |||||||||||||||||||||||||||||||||||||||||||||
| Preferred Units | Common Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | Members | Controlling | Equity | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Equity | Equity | Interests | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Gain on extinguishment of related party loan, net of repurchase of membership interests | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of SH I loan to equity | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Sky Series A Preferred Units, net of equity issuance costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity issuance costs | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Sky Redeemable Series B Preferred Units, net of equity issuance costs | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Equity issuance costs | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Nine months ended | ||||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Straight-line rent adjustments, net | ( | ) | ||||||
| Loss on extinguishment of related party loan payable | ||||||||
| Equity-based compensation | ||||||||
| Loss on impairment of long-lived assets | ||||||||
| Non-cash operating lease expense | ||||||||
| Unrealized gain on warrants | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ( | ) | ||||
| Right-of-use asset initial direct costs | ( | ) | ||||||
| Accounts payable, accrued expenses and other liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of long-lived assets | ( | ) | ( | ) | ||||
| Payments for cost of construction | ( | ) | ( | ) | ||||
| Issuance of notes receivable | ( | ) | ||||||
| Purchases of available for sale investments | ( | ) | ||||||
| Purchases of held-to-maturity investments | ( | ) | ||||||
| Proceeds from held-to-maturity investments | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of Sky Series A Preferred Units | ||||||||
| Proceeds from issuance of Sky Series B Preferred Units and Warrants | ||||||||
| Proceeds from issuance of BOC PIPE | ||||||||
| Proceeds from Yellowstone trust | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Payments for equity issuance costs | ( | ) | ( | ) | ||||
| Payments for debt issuance costs | ( | ) | ||||||
| Refund of debt issuance costs | ||||||||
| Payment of loan payable and redemption of Sky membership interest | ( | ) | ||||||
| Payments of loans payable | ( | ) | ||||||
| Proceeds of bonds payable | ||||||||
| Proceeds of loans payable | ||||||||
| Proceeds of loans payable to related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Net (decrease) increase in cash and restricted cash | ( | ) | ||||||
| Cash and restricted cash, beginning of year | ||||||||
| Cash and restricted cash, end of period | $ | $ | ||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(in thousands, except share data)
| 1. | Organization and Business Operations |
Sky Harbour Group Corporation (“SHG”) is a holding company organized under the laws of the State of Delaware and, through its main operating subsidiary, Sky Harbour LLC and its subsidiaries (collectively, “Sky”), is an aviation infrastructure development company that develops, leases and manages general aviation hangars for business aircraft across the United States. Sky Harbour Group Corporation and its consolidated subsidiaries are collectively referred to as the “Company.”
On January 25, 2022 (the “Closing Date”), our predecessor, Yellowstone Acquisition Company (“Yellowstone”), a special purpose acquisition company incorporated in Delaware on August 25, 2020, consummated the business combination (the “Yellowstone Transaction”) contemplated by the Equity Purchase Agreement, dated as of August 1, 2021 (the “Equity Purchase Agreement”), with Sky, a Delaware limited liability company.
As a result of the closing of the Yellowstone Transaction, and collectively with the other transaction described in the Equity Purchase Agreement, the Company was reorganized as an umbrella partnership-C corporation, or “Up-C”, structure in which substantially all of the operating assets of the Company are held by Sky and SHG’s only substantive assets are its equity interests in Sky (the “Common Units”). As of the Closing Date, SHG owned approximately
| 2. | Basis of Presentation and Significant Accounting Policies |
Basis of Presentation
The accompanying unaudited consolidated financial statements and the related notes (the “Financial Statements”) have been prepared in conformity with the U.S. Securities and Exchange Commission (the “SEC”) requirements for quarterly reports on Form 10-Q, and consequently exclude certain disclosures normally included in audited consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).These Financial Statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as well as the financial statements of Sky for the year ended December 31, 2021 file by the Company on its Current Reports on Form 8-K/A on March 28, 2022, which includes additional disclosures and a summary of the Company's significant accounting policies. In the Company’s opinion, these Financial Statements include all adjustments, consisting of normal recurring items, considered necessary by management to fairly state the Company’s results of operation, financial position, and cash flows. Except for per share data, all dollar amounts are in thousands unless otherwise noted.
Certain historical amounts have been reclassified to conform to the current year’s presentation, including salaries, wages, and benefits associated with operations personnel employed at the Company's hangar development sites. $
Notwithstanding the legal form of the Yellowstone Transaction pursuant to the terms therein, the Yellowstone Transaction was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, Yellowstone was treated as the acquired company for financial reporting purposes, and Sky was treated as the accounting acquirer. In accordance with this accounting method, the Yellowstone Transaction was treated as the equivalent of Sky issuing stock for the net assets of Yellowstone, accompanied by a recapitalization.
Sky was deemed the accounting acquirer for purposes of the Yellowstone Transaction based on an evaluation of the following facts and circumstances:
• The LLC Interests, through their ownership of the Class B Common Stock, hold a majority voting interest in the Company;
• The LLC Interests have the ability to nominate and elect the majority of the Company’s Board of Directors;
• Sky’s senior management team comprises the senior management of the Company; and
• Sky’s assets were larger in relative size compared to Yellowstone’s assets prior to the Yellowstone Transaction.
Thus, the financial statements included in this quarterly report for the three and nine months ended September 30, 2022 reflect (i) the historical operating results of Sky prior to the Yellowstone Transaction; (ii) the combined results of Sky and SHG from the date of the Yellowstone Transaction; and (iii) the net assets of SH (formerly Yellowstone) were stated at historical cost, with no goodwill or other intangible assets recorded.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include assumptions used within impairment analyses, estimated useful lives of depreciable assets and amortizable costs, estimates of inputs utilized in determining incentive compensation expense and financial instruments such as warrants, and estimates and assumptions related to right-of-use assets and operating lease liabilities. Actual results could differ materially from those estimates.
Risks and Uncertainties
The Company’s operations have been limited to-date. For most of its history, the Company was engaged in securing access to land through ground leases, and developing and constructing aviation hangars. The major risks faced by the Company is its future ability to obtain additional tenants for the facilities that it constructs, and to contract with such tenants for rental income in an amount that is sufficient to meet the Company’s financial obligations, including increasing construction costs due to inflation.
In March 2020, the World Health Organization declared coronavirus 2019 (“COVID-19”) a global pandemic. The outbreak of COVID-19 caused severe disruptions in the global economy and has adversely impacted businesses and financial markets. During 2020, the Company experienced delays in construction due to COVID-19 mandates such as physical distancing, supply chain issues, and subcontractor availability. In 2020, there was a significant slowdown in the aviation sector in general due to decreased travel which has since eased, particularly in private aviation. During 2021 and 2022 to-date, vaccinations for COVID-19 have become widely distributed among the general population which has resulted in loosened restrictions previously mandated. However, the potential emergence of vaccine-resistant variants of COVID-19 could result in restrictions being mandated again or affect the timing of loosened restrictions. The Company’s management is not able, at this time, to determine what, if any, the ultimate impact COVID-19 will have on its future financial condition, results of operations and cash flows.
Liquidity and Capital Resources
As a result of ongoing construction projects and business development activities, including the development of aircraft hangars and the leasing of available hangar space, the Company has incurred recurring losses and negative cash flows from operating activities since its inception. The Company expects to continue to invest in such activities and generate operating losses in the near future.
The Company obtained long-term financing through bond and equity offerings to fund its construction, lease, and operational commitments, and believes its liquidity is sufficient to allow continued operations for more than one year after the date these financial statements are issued.
Significant Accounting Policies
Basis of Consolidation
SHG is deemed to have a controlling interest of Sky through its appointment as the Managing Member of Sky, in which SHG has control over the affairs and decision-making of Sky. The interests in Sky not owned by the Company are presented as non-controlling interests. Sky’s ownership percentage in each of its consolidated subsidiaries is
Cash and Restricted Cash
The Company’s cash is held at a major commercial bank, which cash balance may at times exceed the Federal Deposit Insurance Corporation limit. To date, the Company has not experienced any losses on its cash deposits.
Pursuant to the Company’s bond offering described in Note 8, various restricted trust bank accounts were established. Such trust bank accounts are included in Restricted cash and Restricted investments on the consolidated balance sheet as of September 30, 2022 and December 31, 2021.
Investments
Investments of the Company's cash in various U.S. Treasury securities have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices. Such investments amounted to $
Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive income (loss). The Company periodically evaluates whether declines in fair values of its available-for-sale securities below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as the Company's ability and intent to hold the available-for-sale security until a forecasted recovery occurs. Additionally, the Company assesses whether it has plans to sell the security or it is more likely than not it will be required to sell any available-for-sale securities before recovery of its amortized cost basis. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other (income) expenses. The costs of investments sold is based on the specific-identification method. There are no realized gains or losses on investments for the periods presented. Interest on available-for-sale securities is included in other (income) expenses.
Restricted Investments Held-to-Maturity
Pursuant to provisions within the Master Indenture of the Series 2021 Bonds, as defined in Note 8, the Company invests the funds held in the restricted trust bank accounts in various U.S. Treasury securities. Therefore, such investments are reported as “Restricted investments” in the accompanying consolidated balance sheets.
The Company has the ability and intent to hold these restricted investments until maturity, and as a result, the Company would not expect the value of these investments to decline significantly due to a sudden change in market interest rates. The held-to-maturity restricted investments are carried on the consolidated balance sheet at amortized cost. The carrying amount of such investments was $
Cost of Construction
Cost of construction on the consolidated balance sheets is carried at cost. The cost of acquiring an asset includes the costs necessary to bring a capital project to the condition necessary for its intended use. Costs are capitalized once the construction of a specific capital project is probable. Construction labor and other direct costs of construction are capitalized. Professional fees for engineering, procurement, consulting, and other soft costs that are directly identifiable with the project and are considered an incremental direct cost are capitalized. The Company allocates a portion of its internal salaries to both capitalized cost of construction and to general and administrative expense based on the percentage of time certain employees worked in the related areas. Interest, net of the amortization of debt issuance costs and premiums, and net of interest income earned on bond proceeds, is also capitalized until the capital project is completed.
Constructed assets, net
Constructed assets on the consolidated balance sheets consists principally of developed airplane hangar buildings, and are carried at cost less accumulated depreciation. Once a capital project is complete, the Company begins to depreciate the constructed asset on a straight-line basis over the lesser of the life of the asset or the remaining term of the related ground lease, including expected renewal terms. Constructed assets, net, as of September 30, 2022 and December 31, 2021 consists of the Sugar Land Phase I project, which is being depreciated over approximately
Other long-lived assets
Long-lived assets on the consolidated balance sheets consists principally of ground support equipment, software, and computer equipment. Long-lived assets are carried at cost less accumulated depreciation. Maintenance and repair expenses are charged to expense as incurred. Depreciation is recognized on a straight-line basis over
Impairment of long-lived assets
The Company’s assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment analyses are based on, in part, the Company’s current plans, intended holding periods and available market information at the time the analyses are prepared. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Estimates of fair value are determined using discounted cash flow models, which consider, among other things, anticipated holding periods, current market conditions and utilize unobservable quantitative inputs, including appropriate capitalization and discount rates. If the estimates of the projected future cash flows, anticipated holding periods, or market conditions change, evaluation of impairment losses may be different and such differences could be material to the consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and other factors that could differ materially from actual results.
Leases
The Company accounts for leases under Accounting Standards Codification (“ASC”) Topic 842, Leases. The Company determines whether a contract contains a lease at the inception of the contract. ASC Topic 842 requires lessees to recognize lease liabilities and right-of-use (“ROU”) assets for all operating leases with terms of more than 12 months on the consolidated balance sheets. The Company has made an accounting policy election to not recognize leases with an initial term of 12 months or less on the Company’s consolidated balance sheets and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. When management determines that it is reasonably certain that the Company will exercise its options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and lease liability balances.
The Company also has tenant leases and accounts for those leases in accordance with the lessor guidance under ASC Topic 842.
The Company has lease agreements with lease and non-lease components; the Company has elected the accounting policy to not separate lease and non-lease components for all underlying asset classes.
The Company has not elected to capitalize any interest cost that is implicit within its operating leases into cost of construction on the consolidated balance sheet, but instead, expenses its ground lease cost in the consolidated statements of operations.
Warrants liability
The Company accounts for the warrants assumed in the Yellowstone Transaction (see Note 9) in accordance with the guidance contained in ASC Topic 815, “Derivatives and Hedging” (“ASC 815”), under which warrants that do not meet the criteria for equity classification and must be recorded as derivative liabilities. Accordingly, the Company classifies the warrants as liabilities carried at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expire, and any change in fair value is recognized in the consolidated statement of operations.
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities; Level 2 – quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of financial and non-financial assets and liabilities. Accordingly, fair value estimates may be different than the amounts that may ultimately be realized upon sale or disposition of these assets or settlement of these liabilities. See Note 13.
Equity issuance costs
The Company accounts for equity issuance costs as an asset within prepaid expenses and other assets on the consolidated balance sheets until the related equity financing is obtained, and then reclassifies such costs as a reduction in equity. As of December 31, 2021, the Company had $
Revenue recognition
The Company leases the hangar facilities that it constructs to third parties. The lease agreements are either on a month-to-month basis or have a defined term and may have options to extend the term. Some of the leases contain options to terminate the lease by either party with given notice. There are no options given to the lessee to purchase the underlying assets. Rental revenue is recognized in accordance with ASC Topic 842, Leases (see Note 7) and includes (i) fixed payments of cash rents, which represents revenue each tenant pays in accordance with the terms of its respective lease and is recognized on a straight-line basis over the term of the lease and (ii) variable payments of tenant reimbursements, which are recoveries of all or a portion of the common area maintenance and operating expenses of the property and are recognized in the same period as the expenses are incurred. As of September 30, 2022 and December 31, 2021, the deferred rent receivable included in prepaid expenses and other assets was $
The Company evaluates the collectability of tenant receivables for payments required under the lease agreements. If the Company determines that collectability is not probable, the Company recognizes any difference between revenue amounts recognized to date under ASC 842 and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to rental revenue. There were no adjustments to rental revenue for uncollectible tenant rental payments in either of the three and nine months ended September 30, 2022 or 2021.
For the three months ended September 30, 2022 and 2021, the Company derived approximately
Operating Expenses
For the three and nine months ended September 30, 2022, operating expenses within the consolidated statements of operations includes operating lease expense of $
Advertising Costs
The Company expenses the cost of advertising and marketing as incurred. Advertising and marketing costs recognized as general and administrative expenses totaled $
Income Taxes
SHG is classified as a corporation for Federal income tax purposes and is subject to U.S. Federal and state income taxes. SHG includes in income, for U.S. Federal income tax purposes, its allocable portion of income from the “pass-through” entities in which it holds an interest, including Sky. The “pass-through” entities, are not subject to U.S. Federal and certain state income taxes at the entity level, and instead, the tax liabilities with respect to taxable income are passed through to the members, including SHG. As a result, prior to the Yellowstone Transaction, Sky was not subject to U.S. Federal and certain state income taxes at the entity level.
The Company follows the asset and liability method of accounting for income taxes. This method gives consideration to the future tax consequences associated with the differences between the financial accounting and tax basis of the assets and liabilities as well as the ultimate realization of any deferred tax asset resulting from such differences, as well as from net operating losses and other tax-basis carryforwards. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. When a valuation allowance is increased or decreased, a corresponding tax expense or benefit is recorded.
The Company recorded income tax expense of $
Amounts payable under the Tax Receivable Agreement, as defined in Note 3, are accrued by a charge to income when it is probable that a liability has been incurred and the amount is estimable.
| 3. | Yellowstone Transaction |
As contemplated by the Equity Purchase Agreement, on the Closing Date, the following occurred:
• Yellowstone changed its name to Sky Harbour Group Corporation.
• All outstanding shares of stock held by BOC Yellowstone LLC (the “Sponsor”) were converted into shares of Class A Common Stock, $
• Sky restructured its capitalization and issued to the Company
• Certain adjustments were affected to the number of Sky Incentive Units to reflect the new capital structure.
• SHG was appointed as the managing member of Sky under the Third Amended and Restated Operating Agreement (the “A&R Operating Agreement”).
• The Sky Common Units issued to the Sponsor in respect of Sky’s Series B Preferred Units were converted into
• The LLC Interests received
• The Yellowstone Warrants that were issued and outstanding immediately prior to the Closing Date became SHG Warrants.
The following table reconciles the elements of the Yellowstone Transaction to the consolidated statements of changes in equity for the nine months ended September 30, 2022:
| Yellowstone Transaction | ||||
| Cash - Yellowstone trust and cash, net of redemptions | $ | |||
| Cash - BOC PIPE investment | ||||
| Less: transaction costs and advisory fees | ( | ) | ||
| Net proceeds from the Yellowstone Transaction | $ | |||
| Conversion of Sky Series B preferred units to Class A Common Stock | ||||
| Less: Initial fair value of Warrants liability assumed on 1/25/2022 | ( | ) | ||
| Net adjustment to total equity from the Yellowstone Transaction | $ | |||
Transaction costs and advisory fees of approximately $
The following table reconciles the number of shares of SHG Common Stock immediately following the consummation of the Yellowstone Transaction:
| Number of shares | ||||
| Yellowstone Common stock, outstanding prior to Yellowstone Transaction | ||||
| Less: redemption of Yellowstone Common Stock | ( | ) | ||
| Common stock of Yellowstone, net of redemptions | ||||
| Shares held by Sponsor | ||||
| Conversion of Sky Series B units to Class A Common Stock | ||||
| Shares issued in BOC PIPE investment | ||||
| Class A Common Stock outstanding after the Yellowstone Transaction | ||||
| Class B Common Stock issued to LLC Interests | ||||
| Total shares of common stock following the Yellowstone Transaction | ||||
Tax Receivable Agreement
On the Closing Date, in connection with the completion of the Yellowstone Transaction and as contemplated by the Equity Purchase Agreement, the Company, Sky, the LLC Interests, and the TRA Holder Representative, entered into a tax receivable agreement (the “Tax Receivable Agreement”). Pursuant to the Tax Receivable Agreement, the Company will generally be required to pay the LLC Interests
• existing tax basis in certain assets of Sky and certain of its direct or indirect subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service, attributable to Sky Common Units acquired by the Company from a TRA Holder, as determined at the time of the relevant acquisition;
• tax basis adjustments resulting from taxable exchanges of Sky Common Units (including any such adjustments resulting from certain payments made by the Company under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the terms of the A&R Operating Agreement; and
• tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement (each of the foregoing, collectively, the “Tax Attributes”).
As of September 30, 2022,
| 4. | Cost of Construction and Constructed Assets |
The Company’s portfolio as of September 30, 2022 includes the following development projects:
| ● | Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area); |
| ● | Miami-Opa Locka Executive Airport (“OPF”), Opa-Locka, FL (Miami area); |
| ● | Nashville International Airport ("BNA"), Nashville, TN; |
| ● | Centennial Airport (“APA”), Englewood, CO (Denver area); |
| ● | Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ; and |
| ● | Addison Airport (“ADS”), Addison, TX (Dallas area). |
Constructed assets, net, and cost of construction, consists of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Constructed assets, net of accumulated depreciation: | ||||||||
| Buildings, SGR (Phase I) | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| Cost of construction: | ||||||||
| OPF; BNA; APA; DVT; ADS | $ | $ | ||||||
Depreciation expense for the three months ended September 30, 2022 and 2021 totaled $
| 5. | Long-lived Assets |
Long-lived assets, net, consists of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Equipment | $ | $ | ||||||
| Software | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense for the nine months ended September 30, 2022 and 2021 totaled $
In June 2022, the Company evaluated the development progress related to its smart hangar app. This evaluation included the decision to abandon previous software development efforts and the transition of development efforts to a new third-party development company. In connection with this evaluation, the Company determined that previously capitalized software costs associated with the abandoned development were not recoverable and recognized an impairment loss of $
| 6. | Supplemental Balance Sheet and Cash Flow Information |
Prepaid expenses and other assets
In July 2022, the Company entered into a vendor agreement to acquire construction materials related to the Company's development projects (the “Vendor Agreement”). In connection with the Vendor Agreement, the Company entered into a revolving line of credit loan and security agreement (the "Vendor Loan Agreement"), whereby the Company agreed to provide up to $
Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities, consists of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Costs of construction | $ | $ | ||||||
| Employee compensation and benefits | ||||||||
| Interest | ||||||||
| Professional Fees | ||||||||
| Other | ||||||||
| $ | $ | |||||||
Supplemental Cash Flow Information
The following table summarizes non-cash investing and financing activities:
| Nine months ended | ||||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Accrued costs of construction, including capitalized interest | $ | $ | ||||||
| Accrued debt issuance costs | ||||||||
| Accrued equity issuance costs | ||||||||
| Debt issuance costs and premium amortized to cost of construction | ||||||||
| Net gain on extinguishment of related party notes | ||||||||
| Settlement of related party note payable by issuing equity | ||||||||
The following table summarizes non-cash activities associated with the Company’s operating leases:
| Nine months ended | ||||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Net decrease in right-of-use assets and operating lease liabilities due to lease remeasurement | ( | ) | ||||||
The following table summarizes interest paid:
| Nine months ended | ||||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Interest paid | $ | $ | ||||||
The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets to the total shown within the consolidated statements of cash flows:
| Nine months ended | ||||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Cash, beginning of year | $ | $ | ||||||
| Restricted cash, beginning of year | ||||||||
| Cash and restricted cash, beginning of year | $ | $ | ||||||
| Cash, end of period | $ | $ | ||||||
| Restricted cash, end of period | ||||||||
| Cash and restricted cash, end of period | $ | $ | ||||||
| 7. | Leases |
Lessee
All of the Company’s leases are classified as operating leases under ASC Topic 842. Management has determined that it is reasonably certain that the Company will exercise its options to renew the leases, and therefore the renewal options are included in the lease term and the resulting ROU asset and operating lease liability balances. As the Company’s lease agreements do not provide a readily determinable implicit rate, nor is the rate available to the Company from its lessors, the Company uses its incremental borrowing rate to determine the present value of the lease payments.
The Company’s lease population does not include any residual value guarantees, and therefore none were considered in the calculation of the ROU and operating lease liability balances. The Company has operating leases that contain variable payments, most commonly in the form of common area maintenance and operating expense charges, which are based on actual costs incurred. These variable payments were excluded from the calculation of the ROU asset and operating lease liability balances since they are not fixed or in-substance fixed payments. These variable payments were not material in amount for both of the three and nine month periods ended September 30, 2022 and 2021. Some of the leases contain covenants that require the Company to construct the hangar facilities on the leased grounds within a certain period and spend a set minimum dollar amount. For one of the leases, the shortfall (if any) must be paid to the lessor. See Note 15.
The Company’s ground leases have remaining terms ranging between
The Company’s ground lease at OPF was entered into in May 2019 through its wholly owned subsidiary, Sky Harbour Opa Locka Airport LLC (“SHOLA”), with AA Acquisitions LLC (“AA”). AA is the master ground lessee of Miami Dade County (“MDC”), the ultimate landowner. On April 29, 2022, the Company, through a wholly-owned subsidiary outside the Obligated Group (as defined in Note 8), purchased AA’s underlying interest in the ground lease for approximately $
On January 1, 2021, the Company commenced an operating lease for a ground lease located at APA (“APA Lease”), with an initial lease term of
On May 4, 2021, the Company commenced an operating lease for a ground lease located at DVT (“DVT Lease”), with a lease term of
On June 28, 2022, the Company commenced an operating lease for a ground lease located at ADS (“ADS Lease”). The ADS Lease term is
In addition to the Company’s ground leases, the company has operating leases for office space and a ground support vehicle.
Supplemental consolidated cash flow information related to the Company’s leases was as follows:
| Nine months ended | ||||||||
| September 30, | September 30, | |||||||
| 2022 | 2021 | |||||||
| Cash paid for amounts included in measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases as lessee | $ | $ | ||||||
Supplemental consolidated balance sheet information related to the Company’s leases was as follows:
| Weighted Average Remaining Lease Term | September 30, 2022 | December 31, 2021 | ||||||
| Operating leases as lessee (in years) | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases as lessee | % | % | ||||||
The Company’s future minimum lease payments required under leases as of September 30, 2022 were as follows:
| Year Ending December 31, | Operating Leases | |||
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total | $ | |||
Lessor
The Company leases the hangar facilities that it constructs to third-party tenants. These leases have been classified as operating leases. The Company does not have any leases classified as sales-type or direct financing leases. Lease agreements with tenants are either on a month-to-month basis or have a defined term with an option to extend the term. The defined term leases vary in length from to years with options to renew for additional term(s) given to the lessee. One of the agreements contains an option by either party to terminate with appropriate notice, as defined. There are no options given to the lessee to purchase the underlying assets. The Company determines whether a contract contains a lease at the inception of the contract. The Company expects to continue to derive benefit from the underlying assets after the end of the lease term through further leasing arrangements. The underlying assets are the leasehold interest that the Company has in connection with its ground leases. There are no residual value guarantees. The Company mitigates risk related to the residual value of the assets by negotiating with current tenants and attempting to secure future tenants through letters of intent prior to the current lease term’s termination and/or the substantial completion of the promised hangar facilities that are presently under construction.
The leases may contain variable fees, most commonly in the form of tenant reimbursements, which are recoveries of the common area maintenance and operating expenses of the property and are recognized as income in the same period as the expenses are incurred. The leases did not have any initial direct costs. The leases do not contain any restrictions or covenants to incur additional financial obligations by the lessee.
Tenant leases to which the Company is the lessor require the following non-cancelable future minimum lease payments from tenants as of September 30, 2022:
| Year Ending December 31, | Operating Leases | |||
| 2022 (remainder of year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less rent concessions to be applied at Company’s discretion | ( | ) | ||
| Total | $ | |||
| 8. | Bonds payable, Loans payable and interest |
Bonds payable
On May 20, 2021, Sky formed a new wholly-owned subsidiary, Sky Harbour Capital LLC, as a parent corporation to its wholly-owned subsidiaries that operate each of the aircraft hangar development sites under its ground leases. Sky Harbour Capital LLC and these subsidiaries form an Obligated Group (the “Obligated Group” or the “Borrowers”) under a series of bonds that were issued in September 2021 with a principal amount of $
The Series 2021 Bonds are payable pursuant to a loan agreement dated September 1, 2021 between the Public Finance Authority (of Wisconsin) and the Borrowers. The payments by the Borrowers under the loan agreement are secured by a Senior Master Indenture Promissory Note, Series 2021-1 issued by the Obligated Group under an indenture (the “Master Indenture”). The obligations of the Borrowers are collateralized by certain leasehold and subleasehold deeds of trust or mortgages on the Borrowers’ interests in the development sites and facilities being constructed at each airport where the Borrowers hold ground leases. In addition, the Borrowers have assigned, pledged and granted a first priority security interest in all funds held under the Master Indenture and all right, title and interest in the gross revenues of the Borrowers. Furthermore, Sky, Sky Harbour Holdings LLC and Sky Harbour Capital LLC have each pledged as collateral its respective ownership interest in any of the Borrowers.
The bond trustee established various restricted bank accounts which were initially funded with the bond proceeds and cash on hand. The bond trustee will continue to control the Borrowers’ cash receipts and disbursements under a Trust Agreement. Such restricted funds are available to fund the construction expenditures of the two phases of OPF, BNA, DVT, and APA, and SGR Phase II, and, with certain approvals and supplemental reports, up to $
The Borrowers have agreed to use all commercially reasonable efforts to jointly maintain a Debt Service Coverage Ratio (as defined in the agreement) of
The Series 2021 Bonds have principal amounts, interest rates, and maturity dates as follow: $
The bonds maturing on July 1, 2036 are subject to optional early redemption, at the option of Sky Harbour Capital LLC, on or after July 1, 2028, in whole or in part, at a redemption price equal to the principal amount plus interest accrued to the redemption date. The bonds maturing on July 1, 2041 and July 1, 2054 are subject to optional early redemption, at the option of Sky Harbour Capital LLC, on or after July 1, 2031, in whole or in part, at a redemption price equal to the principal amount plus interest accrued to the redemption date. An extraordinary optional redemption is permitted in the event of damage or destruction of any of the underlying assets.
The Series 2021 Bonds are mandatorily redeemable upon the occurrence of certain events. Upon the sale of an asset by any Borrower, the applicable portion of the Series 2021 Bonds is subject to special mandatory redemption at prices specified in the agreement. Upon the occurrence of a determination of taxability in which the interest income of any of the bonds does not qualify as being excludable from the gross income of the holder (with limited exclusions), the Series 2021 Bonds are subject to mandatory redemption within 60 days, at a redemption price equal to the principal amount plus accrued interest. Upon the termination of any ground lease of a Borrower, and unless certain other certifications can be made, the Series 2021 Bonds are subject to redemption in an amount and at a redemption price as specified in the agreement. In lieu of redemption, the Bonds may be purchased by any of the Borrowers or by any party designated by Sky Harbour Capital LLC.
The following table summarizes the Company’s Bonds payable as of September 30, 2022 and December 31, 2021:
| September 30, 2022 | December 31, 2021 | |||||||
| Bonds payable: | ||||||||
| Series 2021 Bonds Principal | $ | $ | ||||||
| Premium on bonds | ||||||||
| Bond proceeds | ||||||||
| Debt issuance costs | ( | ) | ( | ) | ||||
| Accumulated amortization of debt issuance costs and bond premium | ||||||||
| Total Bonds payable, net | $ | $ | ||||||
In connection with the issuance of the Bonds Payable, the Company recognized debt issuance costs totaling $
Loans payable
In connection with two of its development projects, Sky had two secured construction loans that were outstanding through the loans’ respective payoff dates of August 11, 2021 and September 3, 2021.
Sky closed on a construction loan on August 28, 2019 for up to $
On January 23, 2020, Sky closed on a construction loan for up to $
Interest
The following table sets forth the details of interest expense:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Interest | $ | $ | $ | $ | ||||||||||||
| Amortization of bond premium and debt issuance costs | ||||||||||||||||
| Total interest incurred | ||||||||||||||||
| Less: capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | $ | $ | $ | $ | ||||||||||||
| 9. | Warrants |
As part of Yellowstone’s initial public offering, Yellowstone issued to third-party investors
The terms of the Private Warrants are identical to those of the Public Warrants, except for that so long as the Private Warrants are held by the Sponsor or its permitted transferees, they may be exercised on a cashless basis. The Warrants contain an exercise price of $
The closing price of the Public Warrants was $
| 10. | Equity and Redeemable Equity |
Prior to the Yellowstone Transaction
Sky and its members initially entered into a Limited Liability Company Agreement on February 12, 2018. This LLC agreement was subsequently amended and restated on March 12, 2021 (the “A&R Operating Agreement”), which was again amended and restated on September 14, 2021 (the “Second A&R Operating Agreement”). On January 25, 2022, in connection with the Yellowstone Transaction, Sky, its members, and SHG entered into the A&R Operating Agreement.
On March 12, 2021, there was a change in the ownership of Sky such that the former majority member no longer held an interest in Sky pursuant to a redemption agreement (the “Redemption Agreement”), and additional members invested in Sky pursuant to a unit purchase agreement (the “Unit Purchase Agreement”). Pursuant to the Unit Purchase Agreement, Sky’s former minority member (the “Founder”) received founder units of Sky (the “Founder Units”) and the new investors purchased a total of $
On August 1, 2021, Sky entered into the Equity Purchase Agreement with Yellowstone. In conjunction with the Equity Purchase Agreement, Boston Omaha Corporation agreed to invest $
Recapitalization
As of December 31, 2021, there were
As of September 30, 2022, there were
The holders of Class A Common Stock are entitled to receive dividends, as and if declared by the Company’s Board of Directors out of legally available funds. With respect to stock dividends, holders of Class A Common Stock must receive Class A Common Stock. The holders of Class B Common Stock do not have any right to receive dividends other than stock dividends consisting of shares of Class B Common Stock, as applicable, in each case paid proportionally with respect to each outstanding share of Class B Common Stock.
Forward Purchase Agreement
On January 17, 2022, the Company entered into a forward purchase agreement (the “Forward Purchase Agreement”) with ACM ARRT VII E LLC (the “Counterparty”), pursuant to which the Counterparty had the right, but not the obligation, to purchase up to
Common Stock Purchase Agreement
On August 18, 2022, the Company entered into a Common Stock Purchase Agreement (the “Stock Purchase Agreement”) with B. Riley Principal Capital II, LLC (“B. Riley”). Pursuant to the Stock Purchase Agreement, subject to the conditions and limitations set forth therein, the Company has the right, but not the obligation, from time to time at the Company's sole discretion over a 36-month term of the Stock Purchase Agreement, to direct B. Riley to purchase up to
Under the Stock Purchase Agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present B. Riley with a purchase notice (each, a "VWAP Purchase Notice"), directly B. Riley (as principal) to purchase a specified amount of shares not to exceed the lesser of (i)
In consideration for entering into the Stock Purchase Agreement and concurrently with the execution of the Stock Purchase Agreement, the Company issued to B. Riley
Non-controlling interests
The LLC Interests’ ownership in Sky is presented as non-controlling interests within the Equity section of the consolidated balance sheet as of September 30, 2022 and represents the Sky Common Units held by holders other than SHG. The holders of LLC Interests may, following the expiration of an applicable lock-up period, exchange Sky Common Units along with an equal number of Class B Common Shares, for Class A Common Shares on the Company. The LLC Interests do not have the option to redeem their Sky Common Units for cash or a variable number of Class A Common Shares, nor does SHG have the option to settle a redemption in such a manner. As of September 30, 2022, the LLC interests owned approximately
| 11. | Equity Compensation |
Restricted Stock Units (“RSUs”)
In May 2022, the Company granted time-based RSUs to certain employees under the Company’s 2022 Incentive Award Plan. A total of
Sky Incentive Units
In May 2021, Sky granted
The Sky Incentive Units were valued as of the date of grant using the Option-Pricing Method described in the AICPA Accounting and Valuation Guide entitled Valuation of Privately Held Company Equity Securities Issued as Compensation. The Option-Pricing Method treated profit units (such as Sky Incentive Units) and the capital units outstanding at the time of the valuation (Sky’s Series A Preferred Units, Series B Preferred Units, and the Founder Units) as call options on the total equity value of Sky, with exercise (or strike) prices based on the incremental equity required to repay liquidation preferences for the various holders of Sky interests. The values of the options associated with each strike price were calculated using the Black-Scholes option pricing model based on the grant date. The Sky Incentive Units were classified as Level 3 in the fair value hierarchy. The key inputs and assumptions used in the valuation of the Sky’s Incentive Units were:
| Fair value of total equity | $ | |||
| Term (in years) | ||||
| Risk-free interest rate | % | |||
| Volatility | % |
Below is a summary of activity related to the Sky Incentive Units for the nine months ended September 30, 2022:
| Sky Incentive | Weighted-average grant | |||||||
| Units | date fair value | |||||||
| Sky units outstanding as of December 31, 2021 (as previously presented) | $ | |||||||
| Sky units outstanding as of December 31, 2021 (recast for recapitalization) | $ | |||||||
| Granted | ||||||||
| Forfeitures | ||||||||
| Sky units outstanding as of September 30, 2022 | $ | |||||||
| Vested Units outstanding as of September 30, 2022 | $ | |||||||
| Non-vested Units outstanding as of September 30, 2022 | $ | |||||||
The Company recognizes equity-based compensation expense on a straight-line basis over the requisite service period and has elected to account for forfeitures of Sky Incentive Units if and when they occur. The Company recorded equity-based compensation expense relating to Sky Incentive Units of $
| 12. | Earnings (loss) per Share |
Basic earnings (loss) per share of Class A Common Stock is computed by dividing net income (loss) attributable to SHG by the weighted-average number of shares of Class A Common Stock outstanding during the period. Diluted net income (loss) per share of Class A Common Stock is computed by dividing net income (loss) attributable to SHG, adjusted for the assumed exchange of all potentially dilutive securities, by the weighted-average number of shares of Class A Common Stock outstanding adjusted to give effect to potentially dilutive shares using the treasury stock method.
Shares of the Company’s Class B Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B Common Stock under the two-class method has not been presented. For the three and nine months ended September 30, 2021, the membership structure of Sky solely included holders of Sky Common Units that received an equivalent number of Class B Common Stock following the Yellowstone Transaction, and there were no holders that received Class A Common Stock. As the shares of Class B Common Stock are not participating securities, presentation of net loss per share for the three and nine month periods ended September 30, 2021 would not be meaningful to the users of these condensed consolidated financial statements, and such information has not been presented.
| Three Months Ended | Nine Months Ended | |||||||
| September 30, 2022 | September 30, 2022 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Less: Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Basic and diluted net loss attributable to Sky Harbour Group Corporation shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Loss per share of Class A Common Stock – Basic and diluted | $ | ( | ) | $ | ( | ) |
Potentially dilutive shares associated with the outstanding Warrants were antidilutive for the three and nine months ended September 30, 2022 due to the Company’s net loss position. Thus,
| 13. | Financial Instruments |
The following table summarizes the carrying value, estimated fair value and classification of our financial instruments as of:
| September 30, 2022 | ||||||||||||||||||||
| Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Restricted cash | ||||||||||||||||||||
| Investments | ||||||||||||||||||||
| Restricted investments | ||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Bonds payable | $ | $ | $ | $ | $ | |||||||||||||||
| Warrants liability | ||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||
| Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Restricted cash | ||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Bonds payable | $ | $ | $ | $ | $ | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
The fair value of the Company’s investments and restricted investments is estimated utilizing Level 1 inputs including prices for U.S. Treasury securities with comparable maturities on active markets. The fair value of the Company’s bonds is estimated utilizing Level 2 inputs including prices for the bonds on inactive markets. See Note 9 for discussion regarding the estimation of the fair value of the warrants. The carrying values of all other financial instruments on the consolidated balance sheets, approximate their fair values due to the short-term nature of these instruments.
| 14. | Related Party Transactions |
Loans payable to Related parties
Sky previously was party to a loan from a company owned by its former majority member. The loan payable bore interest at an annual rate of
Beginning in November 2020, Sky entered into a note payable with a related party, SH Investment Fund I LLC, a company controlled by the Founder and CEO. The note payable bore interest at
Services
For the three and nine months ended September 30, 2022, the Company paid $
On September 20, 2021, the Company entered into a non-exclusive agreement with Echo Echo, LLC, a related party to the Founder and CEO, for the use of a Beechcraft Baron G58 aircraft. The effective date of the agreement was September 8, 2021 and the agreement automatically renews annually. The agreement can be terminated without penalty if either party provides 35 days written notice, or if the aircraft is sold or otherwise disposed of. The Company is charged per flight hour of use along with all direct operating costs. Additionally, the Company will also incur the pro rata share of maintenance, overhead and insurance costs of the aircraft. For the three and nine months ended September 30, 2022, the Company recognized $
| 15. | Commitments and Contingencies |
In addition to the lease payment commitments discussed in Note 7, the ground leases to which the Company is a party contain covenants that require the Company to conduct construction of hangar facilities on the leased grounds within a certain period and in some cases, to spend a minimum dollar amount.
With respect to the Company’s SGR Phase II project, the Company is subject to requirements that define (i) a minimum improvement amount of $
The APA Lease requires the Company to improve the property in accordance with a development plan included in the lease and to complete such improvements within
The DVT Lease requires approximately $
The Company has committed to spend $
The Company has contracts for construction of the OPF Phase I project and the BNA project. The Company may terminate either of the contracts or suspend construction without cause; however, the Company would be subject to paying a penalty under the OPF construction contract of
| 16. | Accumulated Other Comprehensive Loss |
The following table summarizes the components of Accumulated other comprehensive income (loss):
| Unrealized loss on Available-for-sale Securities | Total | |||||||
| Balance as of December 31, 2021 | $ | $ | ||||||
| Other comprehensive loss | ||||||||
| Balance as of September 30, 2022 | $ | $ | ||||||
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities Exchange Commission (the “SEC”) on March 28, 2022 (the “Form 10-K”), which is accessible on the SEC’s website at www.sec.gov. As described in Note 1 to the accompanying consolidated financial statements, the comparative period for the results of operations included herein are of Sky Harbour, LLC for the three and nine months ended September 30, 2021.
Cautionary Note Regarding Forward-Looking Statements
This Form 10-Q 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”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “might,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
| • |
expectations regarding the Company’s strategies and future financial performance, including the Company’s future business plans or objectives, prospective performance and commercial opportunities and competitors, services, pricing, marketing plans, operating expenses, market trends, revenues, liquidity, cash flows and uses of cash, capital expenditures, and the Company’s ability to invest in growth initiatives; |
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| • |
the effects of general economic conditions, including inflation, rising interest rates, and availability of construction materials and labor for our development projects; |
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| • |
our limited operating history makes it difficult to predict future revenues and operating results; |
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| • |
our ability to implement our construction costs mitigation strategies; |
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| • |
changes in applicable laws or regulations; |
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| • |
the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and |
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| • |
our financial performance. |
The forward-looking statements contained in this Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in the Form 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described in the Form 10-K may not be exhaustive.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods.
Overview and Background
Sky Harbour is a real estate and infrastructure company providing Home Basing Solutions (“HBS”) for business aircraft. HBSs are campuses composed of 10-20 (typical) large business aviation hangars, aircraft ramp, automobile parking, office and auxiliary space, with dedicated aviation line services. Sky Harbour develops its HBS campuses on a greenfield basis at key airports across the United States, leases individual hangars to aircraft tenants on a long-term basis and operates its facilities autonomously. As of 2022, SKYH is the only publicly traded developer of business aviation infrastructure in the United States.
The physical footprint of the US business aviation fleet grew by almost 28,000,000 square feet in the ten years preceding the Covid-19 pandemic, with hangar supply lagging dramatically, especially in key growth markets. The post-pandemic surge in consumption of private aviation services is driving accelerated fleet growth, further widening the supply-demand gap. The constant increase in average aircraft length and wingspan, and historically low retirements of the oldest business jets in the US fleet, suggest that 2022 may see the most dramatic footprint growth of the US business aviation fleet on record. Data from the major business aviation OEMs suggest that order backlog for new business aviation aircraft is almost $47 billion, with one OEM forecasting an industry-wide outlook of up to 8,500 new business jet deliveries over the next decade. Reported business aircraft activity increased 12.3% for the eight months ended August 31, 2022 as compared to pre-pandemic activity during the same period in 2019.
Sky Harbour’s real estate-centric business model is uniquely optimized to capture this market opportunity. Sky Harbour realizes economies of scale in construction through a proprietary prototype hangar design replicated at HBS campuses across the United States. This allows for centralized procurement, straightforward permitting processes, efficient development processes, and the best hangar in business aviation. Unlike a service company, Sky Harbour revenues are mostly derived from long-term rental agreements, offering stability and forward visibility of revenues and cash flows. This allows Sky Harbour to fund its development through the public bond market, providing capital efficiency and mitigating refinance risk.
With six airport campuses either in development or ongoing operations, the company is targeting fourteen additional airfields in the current growth phase, and an additional 30 in the next.
The table below presents certain information with respect to our portfolio as of September 30, 2022.
| ● |
Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area); |
|
| ● | Miami-Opa Locka Executive Airport (“OPF”), Opa-Locka, FL (Miami area); | |
| ● | Nashville International Airport ("BNA"), Nashville, TN; | |
| ● | Centennial Airport (“APA”), Englewood, CO (Denver area); | |
| ● | Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ; and | |
| ● | Addison Airport ("ADS"), Addison, TX (Dallas area). |
| Scheduled |
Estimated Total |
|||||
| Construction |
Scheduled |
Construction Cost1 |
||||
| Facility |
Status |
Start |
Completion Date |
($mm) |
Hangars |
Square Footage |
| SGR Phase I |
Complete |
Complete |
Complete |
$15.1 |
7 |
66,080 |
| SGR Phase II |
Predevelopment |
October 2023 |
January 2025 |
10.3 - 12.0 |
4 |
58,400 |
| OPF Phase I |
In Construction |
August 2021 |
November 2022 |
31.2 - 33.2 |
12 |
160,092 |
| OPF Phase II |
Predevelopment |
December 2022 |
March 2024 |
28.1 - 32.7 |
7 |
102,077 |
| BNA Phase II |
In Construction |
July 2021 |
October 2022 |
25.8 - 26.8 |
10 |
149,069 |
| APA Phase I |
In Construction |
August 2022 |
November 2023 |
37.2 - 43.2 |
9 |
133,530 |
| APA Phase II |
Predevelopment |
August 2023 |
November 2024 |
28.6 - 33.2 |
9 |
103,400 |
| DVT Phase I |
In Design |
December 2022 |
March 2024 |
32.5 - 37.8 |
8 |
115,864 |
| DVT Phase II |
Predevelopment |
November 2023 |
February 2024 |
28.2 - 32.8 |
8 |
105,000 |
| ADS Phase I | Predevelopment | January 2023 | April 2024 | 24.4 - 28.3 | 6 | 104,600 |
| Total |
$261.4 - 295.1 |
80 |
1,098,112 |
Note 1: The Estimated Total Construction Cost includes estimated direct construction expenditures associated with each facility. For completed facilities, this amount includes direct construction expenditures and other amounts (e.g., capitalized labor and interest) that are included in the capitalized cost under GAAP.
Recent Developments
On June 28, 2022, we entered into an operating lease for a ground lease located at ADS (“ADS Lease”). The ADS Lease term is 40 years from the completion of construction with no additional extension options, which is the maximum allowable term permitted by the Town of Addison, Texas.
On October 27, 2022, we substantially completed the construction of its BNA Phase II development project. We expect that our total construction costs associated with this project to be slightly less than our initial estimated construction cost. In connection with the substantial completion of our BNA HBS campus, the tenant leases associated with our constructed hangars will commence starting in November 2022.
Factors That May Influence Future Results of Operations
Revenues
Our revenues are derived from rents we earn pursuant to the lease agreements we enter into with our tenants. Our ability to expand through new ground leases and tenant leases at airports is integral to our long-term business strategy and requires that we identify and consummate suitable new ground leases or investment opportunities in real estate properties for our portfolio that meet our investment criteria and are compatible with our growth strategy. Our ability to enter into new ground leases and tenant leases on favorable terms, or at all, may be adversely affected by a number of factors. We believe that the business environment of the industry segments in which our tenants operate is generally positive for tenants. However, our existing and potential tenants are subject to economic, regulatory and market conditions that may affect their level of operations and demand for hangar space, which could impact our results of operations. Accordingly, we actively monitor certain key factors, including changes in those factors (fuel prices, new aircraft deliveries, hangar rental rates) that we believe may provide early indications of conditions that may affect the level of demand for new leases and our lease portfolio. See “—Risks Related to our Business and Operations” within the Form 10-K for more information about the risks related to our tenants and our lease payments.
Ground Lease Expense
One of our largest expenses is the lease payments under our ground leases. For the nine months ended September 30, 2022 and 2021, our operating lease expense for ground leases was $2.8 million and $2.8 million, respectively. As we enter into new ground leases at new airport sites, our payments to airport landlords will continue to increase into the future. If airport landlords increase the per acre cost of the ground lease of our target campuses, the operating margins at potential target developments may be impacted negatively.
Interest Expense
Economic conditions and actions by policymaking bodies are contributing to rising interest rates, which, along with increases in our borrowing levels, could increase our future borrowing costs. We expect to issue additional private activity bonds (see Private Activity Bonds, below) to finance future site developments and higher interest rates would impact our overall economic performance. In addition, we are subject to credit spreads demanded by fixed income investors. As a non-rated issuer, increases in general of credit spreads in the market, or for us, may result in a higher cost of borrowing in the future. We intend to access the bond market on an opportunistic basis. In addition, we may hedge against rising benchmark interest rates by entering into hedging strategies with high quality counterparties.
General and Administrative Expenses
The general and administrative expenses reflected in our statement of operations are reflective of the professional, legal and consulting fees, payroll costs, and other general and administrative expenses, including those necessary to support our business as a public company such as expenses associated with corporate governance, SEC reporting, and other compliance matters. While we expect that our general and administrative expenses will rise in some measure as our portfolio of campuses grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies, economies of scale, insourcing of job functions, and cost control measures.
Construction Material Costs and Labor
When constructing our HBS campuses, we use various materials and components. We generally contract for our materials and labor under guaranteed maximum price contracts upon receipt of building permits. This allows us to mitigate the risks associated with increases in building materials and labor costs between the time construction begins on an HBS campus and the time it is completed. Typically, the materials and most of the components used to construct our HBS campuses are readily available in the United States. In addition, the majority of our materials are supplied to us by our contractors and is included in the price of our contract with such contractors. We continue to monitor the supply markets to achieve the best prices available. Typically, the price changes that most significantly influence our operations are price increases in steel, concrete, and labor.
In late August 2022, we received revised final construction bids related to our APA Phase I and DVT Phase I HBS campus development projects. The final bids received were both meaningfully higher than our original price estimates due to spikes in both construction material and labor costs, along with decreased labor availability. We have updated our estimates for total construction costs for all future projects to reflect these price spikes. We believe that recent inflationary pressures and market conditions will lead to continued increases in construction costs as well as market rental rates for hangars within our HBS campus development projects. However, there can be no assurance that we will be able to increase the lease rates for the hangars within our HBS campuses to absorb these increased costs and/or delays, if at all.
We intend to continue to aggressively take action to mitigate these inflationary pressures, reduce construction costs, and shorten development schedules, both in the near term at our APA Phase I and DVT Phase I development projects, and in the long term at future projects. We structure our guaranteed maximum price construction contracts with shared savings clauses to incentivize the general contractors to reduce construction costs. At our SGR Phase I development project, our total construction costs were lower than both our original pricing estimate and the project’s contracted guaranteed maximum price, and, despite the current environment, we expect that the total construction costs at our BNA Phase II and OPF Phase I HBS campus development projects will be completed slightly below our original estimates for each project. In July 2022, we entered an exclusive strategic vendor partnership with a metal building and hangar door manufacturer that we expect to result in a reduction in the cost of the metal building and hangar door components at all future HBS campuses. As our strategic partnership grows, we expect this vertical integration will enable us to deliver metal buildings to each development site in shorter timeframes, which we believe will reduce the overall construction duration of each development project. No assurance can be given that our cost mitigation strategies will be successful, the costs of our projects will not exceed budgets or the guaranteed maximum price for such projects, or that the completion will not be delayed beyond the projected completion dates.
Current Capital Requirements and Future Expenditures for Expansion
We previously funded our wholly owned subsidiary Sky Harbour Capital LLC (“SHC”) with over $200 million to fund the two phases at each of our five ground leased airport locations. These construction funds and reserves are held at the bondholder trustee.
We maintain the ability to include up to $50 million in new projects outside the original five locations to be funded with a portion of the existing bond proceeds held by the trustee as long as certain approvals and supplemental consultant reports are provided showing that such new project would result in better coverage of debt service than previously contemplated projects.
We consummated the Yellowstone Transaction on January 25, 2022, to raise additional equity capital to, along with potential future bond and further equity issuances, begin to fund additional airport campuses and reach up to 20 airport campuses over the next several years. On average, each new future campus is composed of an average of 10-20 hangars and is expected to cost approximately $40 million per campus, with 60% or more to be funded with additional public activity bonds (the “PABs”). All these future hangar campus projects are discretionary and require us to identify the appropriate airports with the target hangar demand economics, secure required ground leases and permits, and complete future construction at such sites.
The cumulative 20 airport site business plan is estimated to cost approximately $1.1 billion, with approximately 65 to 75% anticipated from long term PABs and the balance with equity or equity linked financing. The equity portion of this business plan has been partially funded upon the closing of the Yellowstone Transaction, which included an additional $45 million equity investment from Boston Omaha through the BOC PIPE. Our ability to raise additional equity and/or debt financing will be subject to a number of risks, including our ability to obtain financing upon reasonable terms, if at all, costs of construction, delays in constructing new facilities, operating results, and other risk factors. In the event that we are unable to obtain additional financing, we may be required to raise additional equity capital, creating additional dilution to existing stockholders. There can be no assurance that we would be successful in raising such additional equity capital on favorable terms, if at all. Even if we can obtain such additional equity financing if needed, there can be no assurance that we would be successful in raising such additional financing on favorable terms, if at all.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies:
Cost of Construction
Cost of construction on the consolidated balance sheets is carried at cost. The cost of acquiring an asset includes the costs necessary to bring a capital project to the condition necessary for its intended use. Costs are capitalized once the construction of a specific capital project is probable. Construction labor and other direct costs of construction are capitalized. Professional fees for engineering, procurement, consulting, and other soft costs that are directly identifiable with the project and are considered an incremental direct cost are capitalized. We allocate a portion of our internal salaries to both capitalized cost of construction and to general and administrative expense based on the percentage of time certain employees worked in the related areas. Interest costs on the loans and bonds used to fund the capital projects are also capitalized until the capital project is completed.
Once a capital project is complete, the cost of the capital project is reclassified to Constructed Assets on the accompanying balance sheet and we begin to depreciate the constructed asset on a straight-line basis over the lesser of the life of the asset or the remaining term of the related ground lease, including expected renewal terms.
Leases
We account for leases under Accounting Standards Codification (“ASC”) Topic 842, Leases. We determine whether a contract contains a lease at the inception of the contract. ASC Topic 842 requires lessees to recognize operating lease liabilities and right-of-use (“ROU”) assets for all leases with terms of more than 12 months on the consolidated balance sheets. We have made an accounting policy election that will keep leases with an initial term of 12 months or less off our consolidated balance sheets and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. When management determines that it is reasonably certain that we will exercise our options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and operating lease liability balances.
We also have tenant leases and account for those leases in accordance with the lessor guidance under ASC Topic 842.
We have lease agreements with lease and non-lease components; we have elected the accounting policy to not separate lease and non-lease components for all underlying asset classes.
We have elected to not capitalize any interest cost that is implicit within our operating leases into cost of construction on the consolidated balance sheet, but instead, we expense our ground lease cost in the consolidated statements of operations.
Revenue Recognition
We lease hangar facilities that we construct to third parties. The lease agreements are either on a month-to-month basis or have a defined term and may have options to extend the term. Some of the leases contain options to terminate the lease by either party with given notice. There are no options given to the lessee to purchase the underlying assets. Rental revenue is recognized in accordance with ASC Topic 842, Leases, and includes (i) fixed payments of cash rents, which represents revenue each tenant pays in accordance with the terms of its respective lease and is recognized on a straight-line basis over the term of the lease and (ii) variable payments of tenant reimbursements, which are recoveries of all or a portion of the common area maintenance and operating expenses of the property and are recognized in the same period as the expenses are incurred.
The Company evaluates the collectability of tenant receivables for payments required under the lease agreements. If the Company determines that collectability is not probable, the Company recognizes any difference between revenue amounts recognized to date under ASC 842 and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to rental revenue.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include assumptions used within impairment analyses, estimated useful lives of depreciable assets and amortizable costs, estimates of inputs utilized in determining incentive compensation expense and equity instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities. Actual results could differ materially from those estimates.
Recent Accounting Pronouncements
See Note 2 — Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations and financial condition.
Results of Operations
Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods (in thousands).
| Three months ended |
||||||||||||
| September 30, 2022 |
September 30, 2021 |
Change |
||||||||||
| Revenue: |
||||||||||||
| Rental revenue |
$ | 431 | $ | 402 | $ | 29 | ||||||
| Total revenue |
431 | 402 | 29 | |||||||||
| Expenses: |
||||||||||||
| Operating |
1,228 | 1,139 | 89 | |||||||||
| Depreciation |
148 | 143 | 5 | |||||||||
| General and administrative |
3,599 | 2,340 | 1,259 | |||||||||
| Total expenses |
4,975 | 3,622 | 1,353 | |||||||||
| Other (income) expense: |
||||||||||||
| Interest expense, net of capitalized interest |
- | 319 | (319 | ) | ||||||||
| Unrealized (gain) loss on warrants |
(1,452 | ) | - | (1,452 | ) | |||||||
| Total other (income) expense |
(1,452 | ) | 319 | (1,771 | ) | |||||||
| Net income (loss) |
$ | (3,092 | ) | $ | (3,539 | ) | $ | 447 | ||||
Revenues
Revenues increased $29, or 7%, primarily as a result of additional tenant leases commencing at SGR during the third quarter of 2022.
Operating Expenses
Operating expenses increased $89, or 8%, for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021. The increase reflects higher operating costs as we prepare to commence operations at our BNA and OPF campuses in the fourth quarter of 2022. Salaries, wages, and benefits associated with our campus personnel increased by $124, primarily driven by headcount increases at our BNA and OPF campuses. These increases were offset by a $32 decrease in ground lease expense, primarily driven by lower lease costs due to the OPF Lease Transaction (see Note 7) executed in the second quarter of 2022.
Depreciation Expense
Depreciation expense for the three months ended September 30, 2022, and 2021 was $148 and $143, respectively. The increase reflects the placement of additional ground support equipment into service during the third quarter of 2022.
General and Administrative Expenses
For the three months ended September 30, 2022, general and administrative expenses increased by $1,259 as compared to the three months ended September 30, 2021, primarily due to $664 increase in other administrative expenses, driven by increases in insurance, franchise taxes, and computer and software expenses. Salaries, wages, and benefits increased by $407, largely attributable to an increase in full-time and contracted employees. The increase also reflects the implementation of stock and cash incentive compensation programs instituted to attract and retain talented human capital. Marketing and other pursuit costs increased $219 year-over-year, reflecting our growth strategy in securing airport site acquisitions and potential tenants. These increases were offset by a $31 decrease in professional fees, which was primarily driven by decreased in legal and accounting related costs due to our efforts to internalize job functions.
Other Income
Other income increased from a loss of $319 to income of $1,452 for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021, primarily due to a $1,452 mark-to-market adjustment of the outstanding warrants at September 30, 2022. These warrants were issued by Yellowstone as part of its initial public offering. As a result, the warrants were not reflected in Sky’s financial statements for the three months ended September 30, 2021.
Results of Operations
Nine months ended September 30, 2022 Compared to the Nine months ended September 30, 2021
The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods (in thousands).
| Nine months ended |
||||||||||||
| September 30, 2022 |
September 30, 2021 |
Change |
||||||||||
| Revenue: |
||||||||||||
| Rental revenue |
$ | 1,236 | $ | 1,187 | $ | 49 | ||||||
| Total revenue |
1,236 | 1,187 | 49 | |||||||||
| Expenses: |
||||||||||||
| Operating |
3,652 | 3,283 | 369 | |||||||||
| Depreciation |
447 | 425 | 22 | |||||||||
| Loss on impairment of long-lived assets |
248 | - | 248 | |||||||||
| General and administrative |
12,136 | 4,431 | 7,705 | |||||||||
| Total expenses |
16,483 | 8,139 | 8,344 | |||||||||
| Other (income) expense: |
||||||||||||
| Interest expense, net of capitalized interest |
- | 1,160 | (1,160 | ) | ||||||||
| Unrealized (gain) loss on warrants |
(2,904 | ) | - | (2,904 | ) | |||||||
| Loss on extinguishment of note payable to related party |
- | 250 | (250 | ) | ||||||||
| Total other (income) expense |
(2,904 | ) | 1,410 | (4,314 | ) | |||||||
| Net loss |
$ | (12,343 | ) | $ | (8,362 | ) | $ | (3,981 | ) | |||
Revenues
Revenues for the nine months ended September 30, 2022 were $1,236, compared to $1,187 for the nine months ended September 30, 2021. The increase primarily resulted from additional tenant leases commencing at SGR during the second and third quarters of 2022.
Operating Expenses
Operating expenses increased $369, or 11%, primarily driven by a $235 increase in salaries, wages, and benefits associated with our campus personnel. The increase was reflective of headcount increases at BNA and OPF as we prepare to commence operations at our BNA and OPF campuses in the fourth quarter of 2022, and a headcount increase at SGR to accommodate increased tenant activity. Insurance expense increased $72, primarily driven by additional policies in effect at our BNA and OPF campuses.
Depreciation Expense
Depreciation increased $22 for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021. The increase reflects the placement of additional ground support equipment into service throughout 2022.
General and Administrative Expenses
For the nine months ended September 30, 2022, and 2021, general and administrative expenses were $12,136, as compared to $4,431, respectively. The increase was primarily driven by a $4,261 increase in salaries, wages, and benefits, which is reflects an increase in full-time and contracted employees. The increase also reflects the implementation of stock and cash incentive compensation programs instituted to attract and retain employees. Other administrative expenses increased $1,679 driven primarily by insurance, franchise taxes, and computer and software expenses. Professional fees increased $1,190 due to an increase in legal, accounting, and consulting costs as compared to the prior year primarily as a result of becoming a public company. Marketing and other pursuit costs increased $575 year-over-year, reflecting our growth strategy in securing airport site acquisitions and potential tenants.
Other (Income) Expenses
Other (income) expenses increased from a $1,410 expense to $2,904 of income for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, primarily due to a $2,904 mark-to-market gain of the outstanding warrants at September 30, 2022. These warrants were issued by Yellowstone as part of its initial public offering. As a result, the warrants were not reflected in Sky’s financial statements for the nine months ended September 30, 2021.
Liquidity and Capital Resources
Overview
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund the construction of new assets, fund working capital and other general business needs. Our primary sources of cash include the potential issuance of equity and debt securities and rental payments from tenants. Our long-term liquidity requirements include lease payments under our ground leases with airport authorities, repaying principal and interest on outstanding borrowings, funding the construction costs of our HBS campuses (see Construction Material Costs and Labor, above) funding for operations, and paying accrued expenses.
We believe that we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional PABs and other debt and the issuance of additional equity securities. However, as a new public company, we cannot assure you that we will have access to these sources of capital or that, even if such sources of capital are available, that these sources of capital will be available on favorable terms. Our ability to incur additional debt will depend on multiple factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that are or may be imposed by future lenders. Our ability to access the equity and debt capital markets will depend on multiple factors as well, including general market conditions for real estate companies, our degree of leverage, the trading price of our common stock and bonds and market perceptions about our company.
The following table summarizes our cash and cash equivalents, restricted cash, investments, and restricted investments as of September 30, 2022 and December 31, 2021:
| September 30, 2022 |
December 31, 2021 |
|||||||
| Cash and cash equivalents |
$ | 730 | $ | 6,805 | ||||
| Restricted cash |
17,164 | 197,130 | ||||||
| Investments |
29,765 | - | ||||||
| Restricted investments | 145,322 | - | ||||||
| Total cash, restricted cash, investments, and restricted investments | $ | 192,981 | $ | 203,935 | ||||
Common Stock Purchase Agreement
On August 18, 2022, we entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (collectively referred to as the “Purchase Agreement”) with B. Riley Principal Capital, LLC (“B. Riley”). Pursuant to the Purchase Agreement, we have the right, in our sole discretion, to sell to B. Riley up to 10 million shares of our Class A Common Stock at 97% of the volume weighted average price of our Class A Common Stock calculated in accordance with the Purchase Agreement, over a period of 36 months subject to certain limitations and conditions contained in the Purchase Agreement. Sales and timing of any sales of Class A Common Stock are solely at our election, and we are under no obligation to sell any securities to B. Riley under the Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of our Class A Common Stock, we have issued 25,000 shares of our Class A Common Stock to B. Riley as initial commitment shares and may issue up to an aggregate of 75,000 shares of our Class A Common Stock to B. Riley as additional commitment shares if certain conditions are met.
Equity Financing
On January 25, 2022 we completed the Yellowstone Transaction. On the Closing Date, Yellowstone changed its name to Sky Harbour Group Corporation, and Sky restructured its capitalization, issuing its Sky Common Units to the Company. As a result of the Yellowstone Transaction, the Sky Common Units that Sky issued to BOC YAC in respect of its Series B Preferred Units were converted into 5,500,000 shares of the Company’s Class A Common Stock and holders of Sky Common Units received one share of the Company’s Class B Common Stock for each Common Unit. As consideration for the issuance of Sky Common Units to the Company, Yellowstone contributed approximately $48 million of net proceeds to us, consisting primarily of the BOC PIPE, and the amount held in the Yellowstone trust account, net of redemptions and transaction costs.
Private Activity Bonds
On September 14, 2021, SHC completed an issuance through the Public Finance Authority (Wisconsin) of $166.3 million of Senior Special Facility Revenue Bonds (Aviation Facilities Project), Series 2021 (the “PABs”). The PABs are comprised of three maturities: $21.1 million bearing interest at 4.00%, due July 1, 2036; $30.4 million bearing interest at 4.00%, due July 1, 2041; and $114.8 million bearing interest at 4.25%, due July 1, 2054. The Series 2021 Bond that has a maturity date of July 1, 2036 was issued at a premium, and Sky received bond proceeds that were $0.2 million above its face value. The net proceeds from the issuance of the PABs proceeds are being used to (a) finance or refinance the construction of various aviation facilities consisting of general aviation aircraft hangars and storage facilities located and to be located on the SGR site, the OPF site, the BNA site, the APA site, and the DVT site; (b) fund debt service and other operating expenses such as ground lease expense during the initial construction period; (c) fund deposits to the Debt Service Reserve Fund; and (d) pay certain costs of issuance related to the PABs.
Debt Covenants
The PABs contain financial and non-financial covenants, including a debt service coverage ratio, a restricted payments test and limitations on the sale, lease, or distribution of assets. To the extent that SHC does not comply with these covenants, an event of default or cross-default may occur under one or more agreements, and we or our subsidiaries may be restricted in our ability to pay dividends, issue new debt or access our leased facilities. The PABs are collateralized on a joint and several basis with the property and revenues of all SHC subsidiaries and their assets financed or to be financed from the proceeds of the PABs.
Covenants in the PABs require SHC to maintain a debt service coverage ratio (as defined in the relevant documents) of at least 1.25 for each applicable test period, commencing with the quarter ending December 31, 2024. The PABs are subject to a Continuing Disclosure Agreement whereby SHC is obligated to provide electronic copies of (i) monthly construction reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC to the Municipal Securities Rulemaking Board. As of September 30, 2022, we were in compliance with all debt covenants.
Lease Commitments
The table below sets forth certain information with respect to our future minimum lease payments required under operating leases as of September 30, 2022 (in thousands):
| Amount Due |
||||
| 2022 (remainder of year) |
$ | 420 | ||
| 2023 |
1,949 | |||
| 2024 |
2,128 | |||
| 2025 |
2,176 | |||
| 2026 |
2,188 | |||
| Thereafter |
196,878 | |||
| Total lease payments |
205,739 | |||
| Less imputed interest |
(153,275 | ) | ||
| Total |
$ | 52,464 | ||
Contractual Obligations
The following table sets forth our contractual obligations as of September 30, 2022 (in thousands):
| 2022 |
||||||||||||||||||||
| (remainder |
||||||||||||||||||||
| of year) |
2023-2024 | 2025-2026 | Thereafter |
Total |
||||||||||||||||
| Principal Payments of Long-Term Indebtedness |
$ | - | $ | - | $ | - | $ | 166,340 | $ | 166,340 | ||||||||||
| Interest Payments on Long-Term Indebtedness |
- | 13,881 | 13,881 | 132,950 | 160,712 | |||||||||||||||
| Lease Commitments |
420 | 4,077 | 4,364 | 196,878 | 205,739 | |||||||||||||||
| Total |
$ | 420 | $ | 17,958 | $ | 18,245 | $ | 496,168 | $ | 532,791 | ||||||||||
Interest payments for the first three years on the Series 2021 PABs are held in reserve as restricted cash and restricted investments.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements.
Cash Flows
Historical Cash Flows
The following table summarizes our sources and uses of cash for the nine months ended September 30, 2022 and 2021 (in thousands):
| Nine months ended |
||||||||
| September 30, 2022 |
September 30, 2021 |
|||||||
| Cash and restricted cash at beginning of period |
$ | 203,935 | $ | 72 | ||||
| Net cash used in operating activities |
(25,282 | ) | (4,726 | ) | ||||
| Cash used in investing activities |
(213,549 | ) | (5,629 | ) | ||||
| Net cash provided by financing activities |
52,790 | 227,323 | ||||||
| Cash and restricted cash at end of period |
$ | 17,894 | $ | 217,040 | ||||
Operating Activities— Net cash used in operating activities was $25.3 million for the nine months ended September 30, 2022, as compared to cash used in operating activities of $4.7 million for the same period in 2021. The $20.6 million increase in cash used in operating activities was primarily attributable to the $9.6 million of initial direct costs associated with the purchase of our former landlord's leasehold interest at OPF. The increase was also partially attributable to a $7.1 million increase in net loss, net of non-cash adjustments. The increase it net loss was primarily driven by general and administrative expenses incurred in the expansion of our business, including transaction-related expenses and other expenses related to corporate governance.
Investing Activities— Cash used in investing activities was $213.5 million for the nine months ended September 30, 2022, as compared to cash used in investing activities of $5.6 million for the same period in 2021. The increase of $207.9 million in cash used in investing activities was driven primarily by the $193.8 million purchase of held-to-maturity U.S. Treasury securities during the first and third quarters of 2022, the $30.0 million purchase of available-for-sale U.S. Treasury securities during the second quarter, and a $30.1 million increase in payments for costs of construction due to the Company’s ongoing construction projects at BNA, OPF, APA, and DVT. These increases were offset by proceeds of $48.5 million received at maturity of certain of the Company's restricted investments.
Financing Activities— Net cash provided by financing activities was $52.8 million for the nine months ended September 30, 2022, as compared to net cash provided by financing activities of $227.3 million for the same period in 2021. The $174.5 million decrease in net cash provided by financing activities was primarily driven by $166.5 million of bond proceeds received during the third quarter of 2021 due to the issuance of the Series 2021-1 PABs, and $55.0 million of proceeds received from the issuance of the Sky Series B Preferred Units during the third quarter of 2021, and $30.0 million of proceeds from the issuance of Series A Preferred Units in the first quarter of 2021. These decreases were offset by $45.0 million of proceeds received from the issuance of the BOC PIPE and $15.7 million of gross proceeds from the Yellowstone trust account, both occurring in the first quarter of 2022.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business and investment objectives, we expect that the primary market risk to which we will be exposed is interest rate risk. Following the issuance of the PABs, all of our indebtedness is now fixed rate debt. However, we may enter into variable rate debt agreements in the future, in which case we intend to hedge against rising benchmark interest rates by entering into hedging strategies with high quality counterparties.
| CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
| LEGAL PROCEEDINGS |
The Company is not currently a party to any material legal proceedings.
| RISK FACTORS |
There have been no material changes in our risk factors from those disclosed in our 2021 Annual Report on Form 10-K.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
| DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
| MINE SAFETY DISCLOSURES |
Not applicable.
| OTHER INFORMATION |
Not applicable.
| EXHIBITS |
| (a) |
See accompanying Exhibit Index included before the signature page of this report for a list of exhibits filed or furnished with this report. |
| Incorporated by Reference | ||||||||||
| Exhibit |
Description |
Schedule/ |
File No. |
Exhibit |
Filing Date |
|||||
| 3.1 |
Second Amended and Restated Certificate of Incorporation of Yellowstone Acquisition Company. |
8-K |
001-39648 |
3.1 |
January 31, 2022 |
|||||
| 3.2 |
8-K |
001-39648 |
3.2 |
January 31, 2022 |
||||||
| 10.1 |
Common Stock Purchase Agreement, dated as of August 18, 2022, by and between Sky Harbour Group Corporation and B. Riley Principal Capital II, LLC. | 8-K |
001-39648 |
10.1 |
August 19, 2022 |
|||||
| 10.2 |
Registration Rights Agreement, dated as of August 18, 2022, by and between Sky Harbour Group Corporation and B. Riley Principal Capital II, LLC. | 8-K |
001-39648 |
10.2 |
August 19, 2022 |
|||||
| 101.INS (#) |
Inline XBRL Instance Document. |
|
| 101.SCH (#) |
Inline XBRL Taxonomy Extension Schema Document. |
|
| 101.CAL (#) |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
| 101.DEF (#) |
Inline XBRL Taxonomy Extension Definition. |
|
| 101.LAB (#) |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
| 101.PRE (#) |
Inline XBRL Taxonomy Presentation Linkbase Document. |
| 104 (#) |
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
| (#) |
Filed herewith. |
|
| (##) |
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Report, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Sky Harbour Group Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report irrespective of any general incorporation language contained in such filing. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SKY HARBOUR GROUP CORPORATION (Registrant) |
|||
| By: |
/s/ Tal Keinan |
||
| Tal Keinan Chief Executive (Principal Executive Officer) |
|||
| November 10, 2022 |
|||
| By: |
/s/ Francisco Gonzalez |
||
| Francisco Gonzalez Chief Financial Officer (Principal Financial Officer) |
|||
| November 10, 2022 | |||
| By: |
/s/ Michael W. Schmitt |
||
| Michael W. Schmitt Chief Accounting Officer |
|||
| November 10, 2022 | |||
Exhibit 31.1
CERTIFICATIONS
I, Tal Keinan, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Sky Harbour Group Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 10, 2022
|
/s/ Tal Keinan |
||
|
Tal Keinan, Chief Executive Officer |
||
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Francisco Gonzalez, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Sky Harbour Group Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 10, 2022
|
/s/ Francisco Gonzalez |
||
|
Francisco Gonzalez, Chief Financial Officer |
||
|
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sky Harbour Group Corporation (the “Company”) on Form 10‑Q for the period ended September 30, 2022 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: November 10, 2022 |
/s/ Tal Keinan |
|
|
Tal Keinan, Chief Executive Officer |
||
|
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sky Harbour Group Corporation (the “Company”) on Form 10‑Q for the period ended September 30, 2022 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: November 10, 2022 |
/s/ Francisco Gonzalez |
|
|
Francisco Gonzalez, Chief Financial Officer |
||
|
(Principal Financial Officer) |