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.) |
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| 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 August 8, 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 |
21 |
| Item 3. |
29 | |
| Item 4. |
29 | |
| 30 | ||
| Item 1. |
30 | |
| Item 1A. |
30 | |
| Item 2. |
30 | |
| Item 3. |
30 | |
| Item 4. |
30 | |
| Item 5. |
30 | |
| Item 6. |
30 | |
| 30 | ||
| FINANCIAL STATEMENTS |
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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|
| |||||||
| (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 June 30, 2022; issued and outstanding | ||||||||
| Class A common stock, $ par value; shares authorized as of June 30, 2022; shares issued and outstanding as of June 30, 2022 | ||||||||
| Class B common stock, $ par value; shares authorized as of June 30, 2022; shares issued and outstanding as of June 30, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ||||||
| Accumulated other comprehensive (loss) income | ( | ) | ||||||
| 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 | Six months ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 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 income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) attributable to non-controlling interests | ( | ) | ( | ) | ||||||||||||
| Net income (loss) attributable to Sky Harbour Group Corporation shareholders | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Earnings (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 | Six Months Ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| Net income (loss) | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income (loss), before related income taxes: | ||||||||||||||||
| Unrealized gains (losses) on available-for-sale securities | ||||||||||||||||
| Total other comprehensive income (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 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Six months ended | ||||||||
| June 30, 2022 | June 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 | ( | ) | ( | ) | ||||
| 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 BOC PIPE | ||||||||
| Proceeds from Yellowstone trust | ||||||||
| Payments for equity issuance costs | ( | ) | ( | ) | ||||
| Payments for debt issuance costs | ( | ) | ||||||
| Payment of loan payable and redemption of Sky membership interest | ( | ) | ||||||
| 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
June 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. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Except for per share data, all dollar amounts are in thousands unless otherwise noted.
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 six months ended June 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 June 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 June 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 3 to 20 years, based on the estimated useful life of the assets.
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 that will keep leases with an initial term of 12 months or less off 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 June 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 six months ended June 30, 2022 or 2021.
For the three months ended June 30, 2022 and 2021, the Company derived approximately
Operating Expenses
For the three and six months ended June 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 six months ended June 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 June 30, 2022,
| 4. | Cost of Construction and Constructed Assets |
The Company’s portfolio as of June 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:
| June 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 June 30, 2022 and 2021 totaled $
| 5. | Long-lived Assets |
Long-lived assets, net, consists of the following:
| June 30, 2022 | December 31, 2021 | |||||||
| Equipment | $ | $ | ||||||
| Software | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense for the six months ended June 30, 2022 and 2021 totaled $
During the three months ended June 30, 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:
| June 30, 2022 | December 31, 2021 | |||||||
| Costs of construction | $ | $ | ||||||
| Employee compensation and benefits | ||||||||
| Interest | ||||||||
| Transaction costs | ||||||||
| Other | ||||||||
| $ | $ | |||||||
Supplemental Cash Flow Information
The following table summarizes non-cash investing and financing activities:
| Six months ended | ||||||||
| June 30, 2022 | June 30, 2021 | |||||||
| Accrued costs of construction, including capitalized interest | $ | $ | ||||||
| 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:
| Six months ended | ||||||||
| June 30, 2022 | June 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:
| Six months ended | ||||||||
| June 30, 2022 | June 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:
| Six months ended | ||||||||
| June 30, 2022 | June 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 six month periods ended June 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 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:
| Six months ended | ||||||||
| June 30, | June 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 | June 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 June 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 June 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 June 30, 2022 and December 31, 2021:
| June 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 during the three and six months ended June 30, 2021, and 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 | Six months ended | |||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 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 June 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
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 June 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 June 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:
| Equity value | $ | |||
| Term (in years) | ||||
| Risk-free interest rate | % | |||
| Volatility | % |
Below is a summary of activity related to the Sky Incentive Units for the six months ended June 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 June 30, 2022 | $ | |||||||
| Vested Units outstanding as of June 30, 2022 | $ | |||||||
| Non-vested Units outstanding as of June 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 six months ended June 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 six month periods ended June 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 | Six Months Ended | |||||||
| June 30, 2022 | June 30, 2022 | |||||||
| Numerator: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Less: Net income (loss) attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Basic net income (loss) attributable to Sky Harbour Group Corporation shareholders | ( | ) | ||||||
| Less: Unrealized gain on warrants | ( | ) | ||||||
| Diluted net (loss) attributable to Sky Harbour Group Corporation shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Basic weighted average shares of Class A Common Stock outstanding | ||||||||
| Effect of dilutive warrants | ||||||||
| Effect of dilutive restricted stock | ||||||||
| Diluted weighted average shares outstanding | ||||||||
| Earnings (loss) per share of Class A Common Stock – Basic | $ | $ | ( | ) | ||||
| Earnings (loss) per share of Class A Common Stock – Diluted | $ | ( | ) | $ | ( | ) |
Potentially dilutive shares associated with the outstanding Warrants were antidilutive for the six months ended June 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:
| June 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 six months ended June 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 six months ended June 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 Company has committed to spend $
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 improvements to be made for Phase I (estimated cost of improvements of $
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 June 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 six months ended June 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; |
| • |
the effects of general economic conditions, including inflation, interest rates levels, and availability of construction materials for our development projects; |
| • |
the outcome of any legal proceedings that may be instituted against Sky Harbour Group Corporation or its predecessors in connection with the Yellowstone Transaction and related transactions; |
| • |
our limited operating history makes it difficult to predict future revenues and operating results; |
| • |
financial projections may not prove to be reflective of actual financial results; |
| • |
the ability to recognize the anticipated benefits of the Yellowstone Transaction, which may be affected by, among other things, competition, and the ability of the combined business to grow and manage growth profitably; |
| • |
changes in applicable laws or regulations; |
| • |
the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and |
| • |
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. Forecasted 2022 deliveries of approximately 770 new business jets, 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. Reported business aircraft activity increased 15.8% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, which also included a 28.5% increase in activity in the large cabin market, which represents the primary target market for Sky Harbour's HBS campuses.
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 June 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 |
April 2023 |
July 2024 |
8.7 |
4 |
58,400 |
| OPF Phase I |
In Construction |
August 2021 |
November 2022 |
33.2 |
12 |
162,783 |
| OPF Phase II |
Predevelopment |
August 2022 |
November 2023 |
20.9 |
7 |
99,386 |
| BNA Phase II |
In Construction |
July 2021 |
October 2022 |
26.8 |
10 |
149,069 |
| APA Phase I |
In Bidding |
August 2022 |
October 2023 |
26.4 |
9 |
133,530 |
| APA Phase II |
Predevelopment |
August 2023 |
November 2024 |
21.2 |
9 |
103,400 |
| DVT Phase I |
In Design |
August 2022 |
October 2023 |
20.8 |
8 |
115,864 |
| DVT Phase II |
Predevelopment |
May 2023 |
August 2024 |
19.3 |
8 |
105,000 |
| ADS Phase I | Predevelopment | January 2023 | October 2023 | 17.9 | 6 | 102,000 |
| Total |
$210.3 |
80 |
1,095,512 |
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 April 29, 2022, our wholly-owned subsidiary outside the Obligated Group purchased the underlying ground lease at OPF from the sublessor for approximately $8.5 million, and we now lease the property directly from Miami-Dade county (“MDC”). The transaction also required us to pay approximately $1.0 million in transfer fees to MDC. The transaction extends the term of the ground lease and is expected to decrease the Company’s cash ground lease payments by at least $30 million over the term of the lease on an undiscounted basis.
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.
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 six months ended June 30, 2022 and 2021, our operating lease expense for ground leases was $1.9 million and $1.9 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
We expect that future changes in interest rates will impact our overall economic performance, by, among other things, changing 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 increase our borrowing costs. 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
We do not expect the general and administrative expenses reflected in our statement of operations to be reflective of our expected professional, legal and consulting fees, payroll costs and other general and administrative expenses. As a public company, we estimate our annual general and administrative expenses will grow to approximately $15 million annually, which amount includes, among other things, $5 million for legal, insurance, accounting and other expenses related to corporate governance, SEC reporting and other compliance matters. In addition, 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 and economies of scale.
Construction Material Costs and Labor
When constructing our HBS campuses, we use various materials and components. We generally contract for our materials and labor at a fixed price for the anticipated construction period of our HBS campuses. 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. Recent inflationary and supply chain pressures have led to increased construction materials costs, specifically associated with steel, concrete, and other materials. We believe we will continue to experience such pressures in future quarters, as well as delays in our contractors’ ability to requisition such materials. These pressures have led to an overall increase in budgeted and actual construction costs, as well as delays in starting and completing certain of our development projects. 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.
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 70% 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 $930 million, with approximately 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 June 30, 2022 Compared to the Three Months Ended June 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.
| Three months ended |
||||||||||||
| June 30, 2022 |
June 30, 2021 |
Change |
||||||||||
| Revenue: |
||||||||||||
| Rental revenue |
$ | 409 | $ | 394 | $ | 15 | ||||||
| Total revenue |
409 | 394 | 15 | |||||||||
| Expenses: |
||||||||||||
| Operating |
1,103 | 1,080 | 23 | |||||||||
| Depreciation |
154 | 141 | 13 | |||||||||
| Loss on impairment of long-lived assets |
248 | - | 248 | |||||||||
| General and administrative |
4,031 | 1,569 | 2,462 | |||||||||
| Total expenses |
5,536 | 2,790 | 2,746 | |||||||||
| Other (income) expense: |
||||||||||||
| Interest expense, net of capitalized interest |
- | 382 | (382 | ) | ||||||||
| Unrealized (gain) loss on warrants |
(15,390 | ) | - | (15,390 | ) | |||||||
| Total other (income) expense |
(15,390 | ) | 382 | (15,772 | ) | |||||||
| Net income (loss) |
$ | 10,263 | $ | (2,778 | ) | $ | 13,041 | |||||
Revenues
Revenues for the three months ended June 30, 2022, and 2021 were $409, compared to $394, respectively. The increase in revenue primarily resulted from additional tenant leases commencing at SGR during the second quarter of 2022.
Operating Expenses
Operating expenses increased 2% from $1,080 to $1,103 for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021. The increase was primarily due to slight increases in insurance, property tax and utilities.
Depreciation Expense
Depreciation expense for the three months ended June 30, 2022, and 2021 was $154 and $141, respectively. The increase reflects the placement of additional long-lived assets into service following the second quarter of 2021.
General and Administrative Expenses
For the three months ended June 30, 2022, and 2021, general and administrative expenses were $4,031, compared to $1,569, respectively. The increase was primarily due to a $1,497 increase in salaries, wages, and benefits, driven by an increase in full-time and contracted employees, as well as incentive compensation programs instituted to attract and retain talented human capital. Professional fees increased $167 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. Other administrative expenses increased $622 driven primarily by insurance, board compensation, and computer and software expenses. Marketing and other pursuit costs increased $122 year-over-year, primarily driven by our growth strategy in securing airport site acquisitions and potential tenants.
Other Income
Other income increased from a loss of $382 to income of $15,390 for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to a $15,390 mark-to-market adjustment of the outstanding warrants at June 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 June 30, 2021.
Results of Operations
Six months ended June 30, 2022 Compared to the Six months ended June 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.
| Six months ended |
||||||||||||
| June 30, 2022 |
June 30, 2021 |
Change |
||||||||||
| Revenue: |
||||||||||||
| Rental revenue |
$ | 805 | $ | 784 | $ | 21 | ||||||
| Total revenue |
805 | 784 | 21 | |||||||||
| Expenses: |
||||||||||||
| Operating |
2,247 | 2,075 | 172 | |||||||||
| Depreciation |
299 | 283 | 16 | |||||||||
| Loss on impairment of long-lived assets |
248 | - | 248 | |||||||||
| General and administrative |
8,714 | 2,159 | 6,555 | |||||||||
| Total expenses |
11,508 | 4,517 | 6,991 | |||||||||
| Other (income) expense: |
||||||||||||
| Interest expense, net of capitalized interest |
- | 841 | (841 | ) | ||||||||
| Unrealized (gain) loss on warrants |
(1,452 | ) | - | (1,452 | ) | |||||||
| Loss on extinguishment of note payable to related party |
- | 250 | (250 | ) | ||||||||
| Total other (income) expense |
(1,452 | ) | 1,091 | (2,543 | ) | |||||||
| Net loss |
$ | (9,251 | ) | $ | (4,824 | ) | $ | (4,427 | ) | |||
Revenues
Revenues for the six months ended June 30, 2022 were $805, compared to $784 for the six months ended June 30, 2021. The increase primarily resulted from additional tenant leases commencing at SGR during the second quarter of 2022.
Operating Expenses
Operating expenses increased 8% from $2,075 to $2,247 for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase was primarily due to an increase in insurance expense, particularly at the BNA and OPF locations.
Depreciation Expense
Depreciation increased $15 for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021. The increase reflects the placement of additional long-lived assets into service following the second quarter of 2021.
General and Administrative Expenses
For the six months ended June 30, 2022, and 2021, general and administrative expenses were $8,714, as compared to $2,075, respectively. The increase was primarily due to a $3,676 increase in salaries, wages, and benefits, driven by an increase in full-time and contracted employees, as well as incentive compensation programs instituted to attract and retain talented human capital. Professional fees increased $1,379 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. Other administrative expenses increased $1,042 driven primarily by insurance, board compensation, and computer and software expenses. Marketing and other pursuit costs increased $205 year-over-year, primarily driven by our growth strategy in securing airport site acquisitions and potential tenants.
Other (Income) Expenses
Other (income) expenses increased from a $1,091 loss to $1,452 of income for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to a $1,452 mark-to-market gain of the outstanding warrants at June 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 six months ended June 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. Our long-term liquidity requirements include lease payments under our ground leases with airport authorities, repaying principal and interest on outstanding borrowings, 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. [We may be forced to issue equity securities at dilutive prices to meet our liquidity requirements.] 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.
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 June 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 June 30, 2022:
| Amount Due |
||||
| 2022 (remainder of year) |
$ | 832 | ||
| 2023 |
1,935 | |||
| 2024 |
2,114 | |||
| 2025 |
2,170 | |||
| 2026 |
2,188 | |||
| Thereafter |
196,878 | |||
| Total lease payments |
206,117 | |||
| Less imputed interest |
(153,865 | ) | ||
| Total |
$ | 52,252 | ||
Contractual Obligations
The following table sets forth our contractual obligations as of June 30, 2022:
| 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 |
$ | 3,470 | 13,881 | 13,881 | 132,950 | 164,182 | ||||||||||||||
| Lease Commitments |
$ | 832 | 4,049 | 4,358 | 196,878 | 206,117 | ||||||||||||||
| Total |
$ | 4,302 | $ | 17,930 | $ | 18,239 | $ | 496,168 | $ | 536,639 | ||||||||||
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 six months ended June 30, 2022 and 2021:
| Six months ended |
||||||||
| June 30, 2022 |
June 30, 2021 |
|||||||
| Cash and restricted cash at beginning of period |
$ | 203,935 | $ | 72 | ||||
| Net cash used in operating activities |
(24,304 | ) | (2,445 | ) | ||||
| Cash used in investing activities |
(189,312 | ) | (2,937 | ) | ||||
| Net cash provided by financing activities |
51,869 | 25,890 | ||||||
| Cash and restricted cash at end of period |
$ | 42,188 | $ | 20,580 | ||||
Operating Activities— Net cash used in operating activities was $24.3 million for the six months ended June 30, 2022, as compared to cash used in operating activities of $2.4 million for the same period in 2021. The $21.9 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. In addition, the increase was partially attributable to the $4.4 million increase in net loss, which was driven by general and administrative expenses incurred in the expansion of our business, including transaction-related expenses and other expenses related to corporate governance. The increase in cash used for operating activities was also attributable to a $6.7 million change in operating assets and liabilities.
Investing Activities— Cash used in investing activities was $189.3 million for the six months ended June 30, 2022, as compared to cash used in investing activities of $2.9 million for the same period in 2021. The increase of $186.4 million in cash used in investing activities was driven primarily by the $166.6 million purchase of held-to-maturity U.S. Treasury securities during the first quarter of 2022, the $30.0 million purchase of available-for-sale U.S. Treasury securities during the second quarter, and a $17.9 million increase in payments for costs of construction due to the Company’s ongoing construction projects at OPF and BNA. These increases were offset by proceeds of $28.5 million received at maturity of certain of the Company's restricted investments.
Financing Activities— Net cash provided by financing activities was $51.9 million for the six months ended June 30, 2022, as compared to net cash provided by financing activities of $25.9 million for the same period in 2021. The $26.0 million increase in net cash provided by financing activities was primarily driven by $45.0 million of proceeds from the issuance of the BOC PIPE and $15.7 million of gross proceeds from the Yellowstone trust account, as compared to $30.0 million of proceeds from the issuance of Series A Preferred Units in the first quarter of 2021.
| 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 June 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 June 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 (*) |
Second Amendment to Amended and Restated Employment Agreement with Francisco Gonzalez. |
8-K |
001-39648 |
10.1 |
May 20, 2022 |
|||||
| 10.2 (*) |
Form of Restricted Stock Unit Agreement (Executives). | 8-K |
001-39648 |
10.2 |
May 20, 2022 |
|||||
| 31.1 (#) |
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
|||||||||
| 31.2 (#) |
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a). |
|||||||||
| 32.1 (#)(##) |
||||||||||
| 32.2 (#)(##) |
||||||||||
| 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. |
| (*) |
Indicates a management contract or compensatory plan. |
|
| (+) |
Certain schedules and exhibits to this Exhibit have been omitted pursuant to Item 601(a)(5) or Item 601(b)(10)(iv), as applicable, of Regulation S-K. The Registrant agrees to furnish supplemental copies of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request. |
|
| (#) |
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) |
|||
| August 11, 2022 |
|||
| By: |
/s/ Francisco Gonzalez |
||
| Francisco Gonzalez Chief Financial Officer (Principal Financial Officer) |
|||
| August 11, 2022 | |||
| By: |
/s/ Michael W. Schmitt |
||
| Michael W. Schmitt Chief Accounting Officer |
|||
| August 11, 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: August 11, 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: August 11, 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 June 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: August 11, 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 June 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: August 11, 2022 |
/s/ Francisco Gonzalez |
|
|
Francisco Gonzalez, Chief Financial Officer |
||
|
(Principal Financial Officer) |
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Preferred stock, shares outstanding (in shares) | 0 | 0 |
| Common Class A [Member] | ||
| Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized (in shares) | 200,000,000 | |
| Common stock, shares issued (in shares) | 14,937,581 | |
| Common stock, shares outstanding (in shares) | 14,937,581 | |
| Common Class B [Member] | ||
| Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized (in shares) | 50,000,000 | |
| Common stock, shares issued (in shares) | 42,192,250 | |
| Common stock, shares outstanding (in shares) | 42,192,250 |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Net loss | $ 10,263 | $ (2,778) | $ (9,251) | $ (4,824) |
| Other comprehensive income (loss), before related income taxes: | ||||
| Unrealized gains (losses) on available-for-sale securities | (84) | 0 | (84) | 0 |
| Total other comprehensive income (loss) | $ 10,179 | $ (2,778) | $ (9,335) | $ (4,824) |
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands |
Prior to Recapitalization [Member]
Preferred Stock [Member]
Series B Preferred Stock [Member]
|
Prior to Recapitalization [Member]
Common Stock [Member]
Common Class A [Member]
|
Prior to Recapitalization [Member]
Common Stock [Member]
Common Class B [Member]
|
Prior to Recapitalization [Member]
Additional Paid-in Capital [Member]
|
Prior to Recapitalization [Member]
Retained Earnings [Member]
|
Prior to Recapitalization [Member]
AOCI Attributable to Parent [Member]
|
Prior to Recapitalization [Member]
Parent [Member]
|
Prior to Recapitalization [Member]
Members Equity [Member]
|
Prior to Recapitalization [Member]
Noncontrolling Interest [Member]
|
Prior to Recapitalization [Member] |
After Recapitalization [Member]
Preferred Stock [Member]
Series B Preferred Stock [Member]
|
After Recapitalization [Member]
Common Stock [Member]
Common Class A [Member]
|
After Recapitalization [Member]
Common Stock [Member]
Common Class B [Member]
|
After Recapitalization [Member]
Additional Paid-in Capital [Member]
|
After Recapitalization [Member]
Retained Earnings [Member]
|
After Recapitalization [Member]
AOCI Attributable to Parent [Member]
|
After Recapitalization [Member]
Parent [Member]
|
After Recapitalization [Member]
Members Equity [Member]
|
After Recapitalization [Member]
Noncontrolling Interest [Member]
|
After Recapitalization [Member] |
Preferred Stock [Member]
Series B Preferred Stock [Member]
|
Common Stock [Member]
Common Class A [Member]
|
Common Stock [Member]
Common Class B [Member]
|
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
AOCI Attributable to Parent [Member] |
Parent [Member] |
Members Equity [Member] |
Noncontrolling Interest [Member] |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance (in shares) at Dec. 31, 2020 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Dec. 31, 2020 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ (6,509) | $ 0 | $ (6,509) | |||||||||||||||||||||
| Net income (loss), parent | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (2,046) | |||||||||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | 0 | ||||||||||||||||||||||||||||||
| Net income (loss) | (2,046) | ||||||||||||||||||||||||||||||
| Gain on extinguishment of related party loan, net of repurchase of membership interests | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 5,621 | 0 | 5,621 | |||||||||||||||||||||
| Conversion of SH I loan to equity | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1,250 | 0 | 1,250 | |||||||||||||||||||||
| Issuance of Sky Series A Preferred Units, net of equity issuance costs | $ 0 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | 29,683 | 0 | 29,683 | |||||||||||||||||||||
| Balance (in shares) at Mar. 31, 2021 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Mar. 31, 2021 | $ 0 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | 27,999 | 0 | 27,999 | |||||||||||||||||||||
| Balance (in shares) at Dec. 31, 2020 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Dec. 31, 2020 | $ 0 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | (6,509) | 0 | (6,509) | |||||||||||||||||||||
| Net income (loss), parent | (4,824) | ||||||||||||||||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | 0 | ||||||||||||||||||||||||||||||
| Net income (loss) | (4,824) | ||||||||||||||||||||||||||||||
| Unrealized gains (losses) on available-for-sale securities | 0 | ||||||||||||||||||||||||||||||
| Balance (in shares) at Jun. 30, 2021 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Jun. 30, 2021 | $ 0 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | 25,265 | 0 | 25,265 | |||||||||||||||||||||
| Balance (in shares) at Mar. 31, 2021 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Mar. 31, 2021 | $ 0 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | 27,999 | 0 | 27,999 | |||||||||||||||||||||
| Sky incentive compensation | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 51 | 0 | 51 | |||||||||||||||||||||
| Net income (loss), parent | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (2,778) | (2,778) | ||||||||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | 0 | 0 | |||||||||||||||||||||||||||||
| Net income (loss) | (2,778) | ||||||||||||||||||||||||||||||
| Unrealized gains (losses) on available-for-sale securities | 0 | ||||||||||||||||||||||||||||||
| Equity issuance costs | $ 0 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | (7) | 0 | (7) | |||||||||||||||||||||
| Balance (in shares) at Jun. 30, 2021 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Jun. 30, 2021 | $ 0 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | 25,265 | 0 | 25,265 | |||||||||||||||||||||
| Balance (in shares) at Dec. 31, 2021 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Dec. 31, 2021 | $ 54,029 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | 16,931 | 0 | 16,931 | |||||||||||||||||||||
| Sky incentive compensation | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 23 | $ 0 | $ 23 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 63 | $ 63 | |||||||||||
| Net income (loss), parent | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ (1,247) | $ 0 | $ 0 | $ 0 | $ 0 | $ (15,763) | $ 0 | $ (15,763) | $ 0 | |||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | $ 0 | $ (2,504) | |||||||||||||||||||||||||||||
| Net income (loss) | $ (1,247) | $ (18,267) | |||||||||||||||||||||||||||||
| Yellowstone Transaction and recapitalization, See Note 3 (in shares) | 0 | 14,937,581 | 42,192,250 | ||||||||||||||||||||||||||||
| Yellowstone Transaction and recapitalization, See Note 3 | $ (54,029) | $ 1 | $ 4 | 28,681 | 0 | 0 | 28,686 | (15,707) | 81,024 | 94,003 | |||||||||||||||||||||
| Balance (in shares) at Mar. 31, 2022 | 0 | 14,937,581 | 42,192,250 | ||||||||||||||||||||||||||||
| Balance at Mar. 31, 2022 | $ 0 | $ 1 | $ 4 | 28,681 | (15,763) | 0 | 12,923 | 0 | 78,583 | 91,506 | |||||||||||||||||||||
| Balance (in shares) at Dec. 31, 2021 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
| Balance at Dec. 31, 2021 | $ 54,029 | $ 0 | $ 0 | 0 | 0 | 0 | 0 | 16,931 | 0 | 16,931 | |||||||||||||||||||||
| Net income (loss), parent | (3,098) | ||||||||||||||||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | (6,153) | ||||||||||||||||||||||||||||||
| Net income (loss) | (9,251) | ||||||||||||||||||||||||||||||
| Yellowstone Transaction and recapitalization, See Note 3 | 94,003 | ||||||||||||||||||||||||||||||
| Unrealized gains (losses) on available-for-sale securities | (84) | (84) | |||||||||||||||||||||||||||||
| Balance (in shares) at Jun. 30, 2022 | 0 | 14,937,581 | 42,192,250 | 57,129,831 | |||||||||||||||||||||||||||
| Balance at Jun. 30, 2022 | $ 0 | $ 1 | $ 4 | 28,841 | (3,098) | (84) | 25,664 | 0 | 76,266 | 101,930 | |||||||||||||||||||||
| Balance (in shares) at Mar. 31, 2022 | 0 | 14,937,581 | 42,192,250 | ||||||||||||||||||||||||||||
| Balance at Mar. 31, 2022 | $ 0 | $ 1 | $ 4 | 28,681 | (15,763) | 0 | 12,923 | 0 | 78,583 | 91,506 | |||||||||||||||||||||
| Sky incentive compensation | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 85 | 85 | |||||||||||||||||||||
| Net income (loss), parent | 0 | 0 | 0 | 0 | 12,665 | 0 | 12,665 | 0 | 12,665 | ||||||||||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests | (2,402) | (2,402) | |||||||||||||||||||||||||||||
| Net income (loss) | 10,263 | ||||||||||||||||||||||||||||||
| Share-based compensation | 0 | 0 | 0 | 160 | 0 | 0 | 160 | 0 | 0 | 160 | |||||||||||||||||||||
| Unrealized gains (losses) on available-for-sale securities | $ 0 | $ 0 | $ 0 | 0 | 0 | (84) | (84) | 0 | 0 | (84) | |||||||||||||||||||||
| Balance (in shares) at Jun. 30, 2022 | 0 | 14,937,581 | 42,192,250 | 57,129,831 | |||||||||||||||||||||||||||
| Balance at Jun. 30, 2022 | $ 0 | $ 1 | $ 4 | $ 28,841 | $ (3,098) | $ (84) | $ 25,664 | $ 0 | $ 76,266 | $ 101,930 |
Note 1 - Organization and Business Operations |
6 Months Ended | ||
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Jun. 30, 2022 | |||
| Notes to Financial Statements | |||
| Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] |
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 26.1% of the common units of Sky (the “Sky Common Units”), and the prior holders of Sky’s Existing Common Units (the “LLC Interests”) owned approximately 73.9% of the Sky Common Units and control the Company through their ownership of the Class B Common Stock, $0.0001 par value (“Class B Common Stock”) of the Company. As of June 30, 2022, the Company and the LLC Interests owned approximately 26.1% and 73.9% of Sky Common Units, respectively. See Notes 2 and 3 for additional discussion related to the Yellowstone Transaction.
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Note 2 - Basis of Presentation and Significant Accounting Policies |
6 Months Ended | ||
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Jun. 30, 2022 | |||
| Notes to Financial Statements | |||
| Significant Accounting Policies [Text Block] |
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. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Except for per share data, all dollar amounts are in thousands unless otherwise noted.
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 six months ended June 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 100%. There are no unconsolidated variable interest entities (“VIEs”) in which Sky is considered to be the primary beneficiary.
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 June 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 $29,913 as of June 30, 2022, of which $14,973 will mature in one year or less, and $14,940 will mature in one through five years.
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 $138,072 on June 30, 2022, of which $80,346 will mature in one year or less, and $57,762 will mature in one through five years.
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 June 30, 2022 and December 31, 2021 consists of the Sugar Land Phase I project, which is being depreciated over approximately 28 years.
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 3 to 20 years, based on the estimated useful life of the assets.
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 that will keep leases with an initial term of 12 months or less off 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 $2,696 of equity issuance costs included within prepaid and other assets which were subsequently reclassified as part of accounting for the Yellowstone Transaction. As of June 30, 2022, there were no equity issuance costs included within prepaid expenses and other assets.
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 June 30, 2022 and December 31, 2021, the deferred rent receivable included in prepaid expenses and other assets was $61 and $103, respectively.
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 six months ended June 30, 2022 or 2021.
For the three months ended June 30, 2022 and 2021, the Company derived approximately 88% and 90% of its revenue from tenants, respectively. For the six months ended June 30, 2022 and 2021, the Company derived 89% and 90% of its revenue from two tenants, respectively. Such tenants have ongoing leases with the Company which expire in December 2023 and November 2025, respectively.
Operating Expenses
For the three and six months ended June 30, 2022, operating expenses within the consolidated statements of operations includes operating lease expense of $911 and $1,899, respectively. For the three and six months ended June 30, 2021, operating expense includes operating lease expense of $990 and $1,871, respectively. General and administrative expenses on the consolidated statements of operations also includes $18 and $36 of operating lease expense for the three and six months ended June 30, 2022, respectively and $9 and $16 of operating lease expense for the three and six months ended and June 30, 2021, respectively.
Advertising Costs
The Company expenses the cost of advertising and marketing as incurred. Advertising and marketing costs recognized as general and administrative expenses totaled $121 and $224 for three and six months ended June 30, 2022, respectively. Advertising and marketing costs recognized as general and administrative expenses totaled $110 and $147 for the three and six months ended June 30, 2021, respectively.
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 $0 and the effective tax rate was 0.0% for the three and six months ended June 30, 2022. The effective income tax rate for the three and six months ended June 30, 2022 differs from the federal statutory rate of 21% primarily due to a full valuation allowance against net deferred tax assets as it is more likely than not that the deferred tax assets will not be realized.
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.
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Note 3 - Yellowstone Transaction |
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| Unusual or Infrequent Items, or Both, Disclosure [Text Block] |
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, $0.0001 par value (“Class A Common Stock”) of the Company.
• Sky restructured its capitalization and issued to the Company 14,937,581 Sky Common Units, which was equal to the number of outstanding shares of Class A Common Stock immediately after giving effect to the Equity Purchase Agreement. The number of outstanding shares after the Equity Purchase Agreement reflected the redemption of Class A Common Stock (by former holders of the special purpose acquisition company shares that elected to redeem such shares) and the Class A Common Stock issued as a result of the BOC PIPE investment (the “BOC PIPE”), the reclassification of the existing Sky Common Units (other than the Sky Incentive Units, as defined in Note 11), existing Sky Series A preferred units (the “Series A Preferred Units”) and Series B preferred units (the “Series B Preferred Units”) into Sky Common Units.
• 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 5,500,000 shares of Class A Common Stock of the Company.
• The LLC Interests received one share of Class B Common Stock for each Sky Common Unit that they held, and as consideration for the issuance of 14,937,581 Sky Common Units by Sky to the Company, Yellowstone contributed to Sky the net amount held in the Yellowstone trust account after deducting the amount required to fund the redemption of the Class A Common Stock held by eligible stockholders who properly elected to have their shares redeemed as of the Closing Date and the amount of various transaction costs.
• 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 six months ended June 30, 2022:
Transaction costs and advisory fees of approximately $12.7 million includes $14.7 million of total transaction costs incurred at or around closing of the Yellowstone Transaction, $0.6 million of transaction costs paid prior to December 31, 2021, less $2.6 million of costs for insurance that was recorded within prepaid expenses and other assets on the Closing Date.
The following table reconciles the number of shares of SHG Common Stock immediately following the consummation of 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 85% of the amount of savings, if any, in U.S. federal, state, local, and foreign taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that the Company realizes, or is deemed to realize, as a result of certain tax attributes, including:
• 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 June 30, 2022, no transactions occurred that would result in a cash tax savings benefit that would trigger the recording of a liability based on the terms in the Tax Receivable Agreement.
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Note 4 - Cost of Construction and Constructed Assets |
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| Cost of Construction and Constructed Assets [Text Block] |
The Company’s portfolio as of June 30, 2022 includes the following development projects:
Constructed assets, net, and cost of construction, consists of the following:
Depreciation expense for the three months ended June 30, 2022 and 2021 totaled $139 and $133, respectively. Depreciation expense for the six months ended June 30, 2022 and 2021 totaled $274 and $269, respectively.
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Note 5 - Long-lived Assets |
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| Property, Plant and Equipment Disclosure [Text Block] |
Long-lived assets, net, consists of the following:
Depreciation expense for the six months ended June 30, 2022 and 2021 totaled $25 and $14, respectively. Depreciation expense for the three months ended June 30, 2022 and 2021 totaled $15 and $8, respectively.
During the three months ended June 30, 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 $248 during the three and six months ended June 30, 2022.
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Note 6 - Supplemental Balance Sheet and Cash Flow Information |
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| Supplemental Balance Sheet and Cash Flow Disclosure [Text Block] |
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 $2.5 million of availability under a revolving credit line to fund the working capital requirements of the vendor, of which $1.5 million was loaned to the vendor in July 2022. The Vendor Loan Agreement matures in July 2029 and initially bears interest at a rate of 5% per annum for the first year, and increases by 1% per annum each year on the anniversary date of the Vendor Loan Agreement until its maturity.
Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities, consists of the following:
Supplemental Cash Flow Information
The following table summarizes non-cash investing and financing activities:
The following table summarizes non-cash activities associated with the Company’s operating leases:
The following table summarizes 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:
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Note 7 - Leases |
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| Lessee and Lessor, Operating Lease [Text Block] |
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 six month periods ended June 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 terms ranging between 27 to 75 years, including options for the Company to extend the terms. These leases expire between 2049 and 2097, which include all lease extension options available to the Company. Certain of the Company's ground leases contain options to lease additional parcels of land at the Company's option within a specified period of time.
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 $8.5 million and now leases the OPF property directly from MDC (the “OPF Lease Transaction”). The OPF Lease Transaction also required the Company to pay approximately $1.0 million in assignment fees to MDC, which, along with the $8.5 million purchase price, were recognized as initial direct costs and presented as a component of right-of-use assets. Following the OPF Lease Transaction, SHOLA continues to be obligated under the existing sublease but to an affiliate within the Company. The OPF Lease Transaction extends the term of the lease at OPF for the Company to approximately 57 years. The Company has accounted for the OPF Lease Transaction as a lease modification requiring remeasurement and remeasured the right-of-use asset and operating lease liability utilizing the Company’s incremental borrowing rate as of the date of remeasurement. As a result of the remeasurement, non-cash subtractions to the right-of-use asset and operating lease liability of $12,289 were recorded during the six months ended June 30, 2022.
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 41 years (or up to 76 years including extension options). The APA Lease contains an option to lease an additional parcel of land (Phase II) that must be exercised, at the Company’s option, within -years of the lease’s commencement date.
On May 4, 2021, the Company commenced an operating lease for a ground lease located at DVT (“DVT Lease”), with a lease term of 40 years. The DVT Lease contains an option to lease an additional parcel of land (Phase II) that must be exercised, at the Company’s option, within -years of the lease’s commencement date.
On June 28, 2022, the Company commenced 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.
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:
Supplemental consolidated balance sheet information related to the Company’s leases was as follows:
The Company’s future minimum lease payments required under leases as of June 30, 2022 were as follows:
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 June 30, 2022:
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Note 8 - Bonds Payable, Loans Payable and Interest |
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| Debt Disclosure [Text Block] |
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 $166.3 million (the “Series 2021 Bonds”). The members of the Obligated Group are jointly and severally liable under the Series 2021 Bonds. SHG and its other subsidiaries are not members of the Obligated Group and have no obligation to repay the bonds.
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 $50 million at other airport sites, in addition to certain operating expenses such as ground lease expense. These accounts also include funds to pay debt service through the end of construction at each site and various reserve funds such as a ramp-up reserve, debt service reserve, and a maintenance reserve fund. Such trust bank accounts total approximately $175.5 million, of which $37.5 million and $138.0 million and are included in Restricted cash and Restricted investments, respectively, on the consolidated balance sheet as of June 30, 2022.
The Borrowers have agreed to use all commercially reasonable efforts to jointly maintain a Debt Service Coverage Ratio (as defined in the agreement) of 1.25 for each applicable test period; provided, however, that the failure to maintain this ratio will not be considered an event of default so long as the Obligated Group takes all commercially reasonable action for correcting such deficiency. The measurement of the Debt Service Coverage Ratio will commence with the period ending December 31, 2024. If the Debt Service Coverage Ratio as of the end of any fiscal quarter is less than 1.0, the parent companies of the Borrowers will make contributions to the borrowers or otherwise cause the Debt Service Coverage Ratio to be at least 1.0 within 10 business days of the test date. If the Debt Service Coverage Ratio as of the end of any fiscal quarter is less than 1.25, Sky Harbour Capital LLC must deliver to the trustees, within 120 days, an independent consultant’s report and a specific plan designed to achieve a Debt Service Coverage Ratio of 1.25 in the following fiscal year.
The Series 2021 Bonds have principal amounts, interest rates, and maturity dates as follow: $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 the Company received bond proceeds that were $0.2 million above its face value. The bond premium is being amortized as a reduction of interest expense over the life of the bond. Interest is payable on each January 1 and July 1, commencing January 1, 2022. Principal repayments due under the Series 2021 Bonds are paid annually, commencing July 1, 2032.
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 June 30, 2022 and December 31, 2021:
In connection with the issuance of the Bonds Payable, the Company recognized debt issuance costs totaling $6 million which are being amortized into interest using the effective interest method over the life of the bonds. Interest that is incurred at the stated interest rate of the bonds, as well as the amortization of bond premium and amortization of debt issuance costs are capitalized and added to the cost of construction on the consolidated balance sheet. See Interest, below.
Loans payable
In connection with two of its development projects, Sky had two secured construction loans that were outstanding during the three and six months ended June 30, 2021, and 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 $16.7 million for the development of the SGR project (the “SGR Loan”). The loan bore interest at LIBOR (subject to a minimum of 2.2%) plus plus pay-in-kind (“PIK”) interest of 2% which was added to the principal amount. The SGR Loan was repaid on September 3, 2021, including all accrued and PIK interest.
On January 23, 2020, Sky closed on a construction loan for up to $46.0 million for the development of the OPF project (the “OPF Loan”). The loan bore interest at LIBOR (subject to a minimum of 1.669%) plus 6%, plus PIK interest of 2% which was added to the principal amount. An amendment to the loan on March 12, 2021 increased the interest rate to LIBOR (subject to a minimum of 1.669%) plus 8%, plus PIK interest of 2% that was added to the principal amount. The OPF Loan was repaid on August 11, 2021, including all accrued and PIK interest.
Interest
The following table sets forth the details of interest expense:
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Note 9 - Warrants |
6 Months Ended | ||
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Jun. 30, 2022 | |||
| Notes to Financial Statements | |||
| Warrants [Text Block] |
As part of Yellowstone’s initial public offering, Yellowstone issued to third-party investors 6,799,439 warrants which entitled the holder to purchase one share of Class A Common Stock at an exercise price of $11.50 per share (the “Public Warrants”). In addition, 7,719,779 private placement warrants were sold to the Sponsor (the “Private Placement Warrants”, and together with the Public Warrants, the “Warrants”). Each Private Warrant allows the Sponsor to purchase one share of Class A Common Stock at an exercise price of $11.50 per share. Following the Yellowstone Transaction, the Warrants remain outstanding under the same terms and conditions to purchase shares of the Company’s Class A Common Stock. As of June 30, 2022, 6,799,439 and 7,719,779 Public and Private Warrants remain outstanding, respectively.
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 $11.50 per share and expire on January 25, 2027. The Company determined the fair value of its Public Warrants based on the publicly listed trading price as of the valuation date. Accordingly, the Public Warrants are classified as Level 1 financial instruments. As the terms of the Private Warrants are identical to those of the Public Warrants, the Company determined the fair value of its Private Warrants based on the publicly listed trading price of the Public Warrants as of the valuation date and have classified the Private Warrants as Level 2 financial instruments.
The closing price of the Public Warrants was $0.45 and $0.55 per warrant on June 30, 2022 and the Closing Date, respectively. The aggregate fair value of the Warrants was approximately $6.5 million and $8.0 million as of June 30, 2022 and the Closing Date, respectively. The Company recorded an unrealized gain of approximately $15.4 million during the three months ended June 30, 2022. During the six months ended June 30, 2022, the Company recorded an unrealized gain of approximately $1.5 million, reflecting the change in fair value of the Warrants from the Closing Date through June 30, 2022.
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Note 10 - Equity and Redeemable Equity |
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Jun. 30, 2022 | |||
| Notes to Financial Statements | |||
| Stockholders' Equity Note Disclosure [Text Block] |
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 $31.3 million in Series A Preferred Units of Sky. Pursuant to a convertible note and exchange agreement dated March 12, 2021 (the “Convertible Note and Exchange Agreement”), a portion of the proceeds from the issuance of the Series A Preferred Units were used to fully satisfy outstanding note payable between Sky and a related party as described in Note 14.
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 $55.0 million of equity in the form of Redeemable Series B Preferred Units through its affiliate BOC YAC Funding LLC (“BOC YAC”). On September 14, 2021 Sky issued 8,049 Series B Preferred Units to BOC YAC in exchange for the $55.0 million. The Series B Preferred Units contained redemption rights for both Sky and for the holders of the Series B Preferred Units under certain circumstances. Because the Series B Preferred Units were redeemable in cash, they were classified as Temporary Equity, between the Liabilities and Equity sections of the consolidated balance sheet as of December 31, 2021. They were carried at their net issuance price and not reflected at redemption value in the consolidated balance sheet because no Series B Preferred Units were redeemed between December 31, 2021 and January 25, 2022, the date such Units were automatically converted to the Company’s Class A Common Stock equal to the original $55.0 million investment at the conversion price of $10 per share.
Recapitalization
As of December 31, 2021, there were 31,250 Series A Preferred Units, 8,049 Series B Preferred Units, and 27,035 Founder Units authorized, issued and outstanding. As a result of the Reverse Recapitalization on the Closing Date, the Series A Preferred Units and Founder Units converted into 42,192,250 Sky Common Units and the LLC Interests received 42,192,250 shares of SHG’s Class B Common Stock. The Series B Preferred Units converted to 5,500,000 shares of SHG’s Class A Common Stock, and Sky issued 14,937,581 Sky Common Units to SHG, which was equivalent to the total number of shares of the SHG’s Class A Common Stock outstanding on the Closing Date.
As of June 30, 2022, there were 14,937,581 and 42,192,250 shares of Class A Common Stock and Class B Common Stock outstanding, respectively. Holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters submitted to the stockholders for their vote or approval, except as required by applicable law. Holders of Class A Common Stock and Class B Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote or approval.
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 7,000,000 shares of Class A Common Stock from shareholders who had redeemed shares, or indicated an interest in redeeming shares, prior to the closing of the Yellowstone Transaction. The Counterparty purchased 664,909 such shares and, immediately following the Closing Date, pursuant to the agreement, the Company paid to the Counterparty a forward price of approximately $6.7 million. The Counterparty also had the right to sell such shares to others during an 18-month term, terminating the Company’s forward purchase obligations, and repaying to the Company a portion of the forward price, in amounts corresponding to the number of shares sold. On March 7, 2022, the Counterparty notified the Company that it had sold the 664,909 shares covered by the agreement. As a result, a total of approximately $6.7 million was remitted to the Company by the Counterparty.
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 June 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 June 30, 2022, the LLC interests owned approximately 73.9% of the Sky Common Units outstanding.
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Note 11 - Equity Compensation |
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| Share-Based Payment Arrangement [Text Block] |
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 721,000 of time-based awards were granted, which will vest ratably over a -year period beginning on the first anniversary of the grant date and ending on May 16, 2026. During the three and six months ended June 30, 2022, the Company recognized stock compensation expense of $160. As of June 30, 2022, there are approximately 661,000 non-vested RSUs outstanding with a weighted average grant date fair value of $7.74. The unrecognized compensation costs associated with all unvested RSUs at June 30, 2022 was $4,956.
Sky Incentive Units
In May 2021, Sky granted 3,951 Sky Incentive Units to certain employees. In connection with the Yellowstone Transaction and the execution of the Third A&R Operating Agreement, the number of existing Sky Incentive Units outstanding was adjusted based on a defined unit conversion ratio to reflect the new capital structure (see Note 10) and remain Sky Incentive Units, resulting in 2,807,750 outstanding Sky Incentive Units. These Incentive Units may be exchanged for Sky Common Units at the holder’s discretion upon vesting. There were no changes to the terms or conditions of the Sky Incentive Units effected by the Yellowstone Transaction. The Sky Incentive Units are classified as equity instruments.
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:
Below is a summary of activity related to the Sky Incentive Units for the six months ended June 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 $85 and $171 for the three and six months ended June 30, 2022, respectively, which is recorded within General and Administrative Expenses within the statement of operations, and as a component of the non-controlling interest in the consolidated statement of changes in stockholders’ equity. The Company recorded equity-based compensation expense relating to Sky Incentive Units of $46 for the three and six months ended June 30, 2021. As of June 30, 2022, there was $871 of total unrecognized compensation expense that is expected to be recognized over a weighted-average future period of 2.7 years.
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Note 12 - Earnings (Loss) Per Share |
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| Earnings Per Share [Text Block] |
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 six months ended June 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 six month periods ended June 30, 2021 would not be meaningful to the users of these condensed consolidated financial statements, and such information has not been presented.
Potentially dilutive shares associated with the outstanding Warrants were antidilutive for the six months ended June 30, 2022 due to the Company’s net loss position. Thus, 14,519,218 shares issuable upon the exercise of the Warrants were excluded from the calculation of diluted weighted average shares outstanding and diluted loss per share for the six months ended June 30, 2022. 651,514 and 661,000 antidilutive shares associated with the Company's restricted stock units were excluded from the calculation for the three and six months ended June 30, 2022, respectively.
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Note 13 - Financial Instruments |
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| Financial Instruments Disclosure [Text Block] |
The following table summarizes the carrying value, estimated fair value and classification of our financial instruments as of:
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.
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Note 14 - Related Party Transactions |
6 Months Ended | ||
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Jun. 30, 2022 | |||
| Notes to Financial Statements | |||
| Related Party Transactions Disclosure [Text Block] |
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 5.50% and all interest was PIK interest. On March 12, 2021, pursuant to a Redemption Agreement between Sky and the former majority member, the loan was cancelled and all of the membership interests held by the former majority member were redeemed in exchange for a sum of $5.1 million, plus a Reimbursement and Indemnity Agreement from Sky and the Founder and CEO. Sky recorded a gain on extinguishment of this related party loan payable of $5.6 million, net of related expenses of $0.15 million and net of redemption of membership interests. The gain was recognized as a deemed contribution to stockholders’ equity on the consolidated balance sheet. Interest incurred on the loan payable to for the three and six months ended June 30, 2021 totaled $0 and $120, respectively.
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 8% per annum and had a maturity date of November 24, 2021. Amounts payable under the note were drawn by requesting “advances” from the lender, up to $1,000,000, and could be used by Sky only for certain types of expenditures that were approved in advance by the lender. On March 12, 2021, Sky issued 1,250 Series A Preferred Units in full satisfaction of the note payable by the Sky to SH Investment Fund I LLC. The fair value of the 1,250 units was $1.25 million and exceeded the carrying value of the $1.0 million note payable at the time of extinguishment; thereby resulting in a loss on extinguishment of related party debt of $0.25 million which was recorded as a charge in the consolidated statement of operations.
Services
For the three and six months ended June 30, 2022, the Company paid $25 and $45 respectively, for consulting services, to a company that employed the chief financial officer until prior to July 1, 2021. The Company paid $32 and $62 during the three and six months ended June 30, 2021 to the same company.
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 six months ended June 30, 2022, the Company recognized $53 and $84 of expense, respectively, within General and administrative expense under the terms of this agreement, and the related liability is included in Accounts payable, accrued expenses and other liabilities on the consolidated balance sheet as of June 30, 2022.
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Note 15 - Commitments and Contingencies |
6 Months Ended | ||
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Jun. 30, 2022 | |||
| Notes to Financial Statements | |||
| Commitments and Contingencies Disclosure [Text Block] |
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 $2.0 million and (ii) that related construction commence by October 2022 and be completed by October 2023. If these conditions are not met or otherwise waived or amended, the ground lease for the parcels designated for the SGR Phase II project will automatically terminate.
The Company has committed to spend $17.0 million in capital improvements on the BNA construction project by July 2, 2023. If this amount is not expended, the shortfall would become due and payable within 60 days as additional rent under the lease agreement.
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 24-months of the issuance of permitting documents. The APA Phase I project is still in the permitting phase.
The DVT Lease requires improvements to be made for Phase I (estimated cost of improvements of $15.3 million) and for Phase II, if such option is exercised (estimated cost of improvements of $14.6 million), within 12-months after receiving permitting documents for each Phase, but in no event later than May 2026. The Company is still in the permitting phase of its DVT Phase I project.
The Company has committed to spend $10.0 million in capital improvements on the ADS construction project. If this amount is not expended, the Company is subject to a reduction of the term of the lease.
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 50% of the unrealized fee which remains to be earned as of the termination date. There is no termination penalty under the BNA construction contract.
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Note 16 - Accumulated Other Comprehensive Loss |
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| Comprehensive Income (Loss) Note [Text Block] |
The following table summarizes the components of Accumulated other comprehensive income (loss):
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Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2022 | |
| Accounting Policies [Abstract] | |
| Basis of Accounting, Policy [Policy Text Block] | 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. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Except for per share data, all dollar amounts are in thousands unless otherwise noted.
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 six months ended June 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.
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| Use of Estimates, Policy [Policy Text Block] | 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.
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| Risks and Uncertainties [Policy Text Block] | 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.
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| Liquidity and Capital Resources [Policy Text Block] | 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.
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| Consolidation, Policy [Policy Text Block] | 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 100%. There are no unconsolidated variable interest entities (“VIEs”) in which Sky is considered to be the primary beneficiary.
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| Cash and Cash Equivalents, Policy [Policy Text Block] | 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 June 30, 2022 and December 31, 2021.
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| Investment, Policy [Policy Text Block] | 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 $29,913 as of June 30, 2022, of which $14,973 will mature in one year or less, and $14,940 will mature in one through five years.
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 $138,072 on June 30, 2022, of which $80,346 will mature in one year or less, and $57,762 will mature in one through five years.
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| Cost of Construction [Policy Text Block] | 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.
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| Constructed Assets, Net [Policy Text Block] | 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 June 30, 2022 and December 31, 2021 consists of the Sugar Land Phase I project, which is being depreciated over approximately 28 years.
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| Property, Plant and Equipment, Policy [Policy Text Block] | 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 3 to 20 years, based on the estimated useful life of the assets.
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| Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | 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.
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| Lessee, Leases [Policy Text Block] | 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 that will keep leases with an initial term of 12 months or less off 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.
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| Derivatives, Policy [Policy Text Block] | 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.
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| Fair Value Measurement, Policy [Policy Text Block] | 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.
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| Deferred Charges, Policy [Policy Text Block] | 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 $2,696 of equity issuance costs included within prepaid and other assets which were subsequently reclassified as part of accounting for the Yellowstone Transaction. As of June 30, 2022, there were no equity issuance costs included within prepaid expenses and other assets.
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| Revenue [Policy Text Block] | 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 June 30, 2022 and December 31, 2021, the deferred rent receivable included in prepaid expenses and other assets was $61 and $103, respectively.
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 six months ended June 30, 2022 or 2021.
For the three months ended June 30, 2022 and 2021, the Company derived approximately 88% and 90% of its revenue from tenants, respectively. For the six months ended June 30, 2022 and 2021, the Company derived 89% and 90% of its revenue from two tenants, respectively. Such tenants have ongoing leases with the Company which expire in December 2023 and November 2025, respectively.
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| Operating Expenses [Policy Text Block] | Operating Expenses
For the three and six months ended June 30, 2022, operating expenses within the consolidated statements of operations includes operating lease expense of $911 and $1,899, respectively. For the three and six months ended June 30, 2021, operating expense includes operating lease expense of $990 and $1,871, respectively. General and administrative expenses on the consolidated statements of operations also includes $18 and $36 of operating lease expense for the three and six months ended June 30, 2022, respectively and $9 and $16 of operating lease expense for the three and six months ended and June 30, 2021, respectively.
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| Advertising Cost [Policy Text Block] | Advertising Costs
The Company expenses the cost of advertising and marketing as incurred. Advertising and marketing costs recognized as general and administrative expenses totaled $121 and $224 for three and six months ended June 30, 2022, respectively. Advertising and marketing costs recognized as general and administrative expenses totaled $110 and $147 for the three and six months ended June 30, 2021, respectively.
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| Income Tax, Policy [Policy Text Block] | 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 $0 and the effective tax rate was 0.0% for the three and six months ended June 30, 2022. The effective income tax rate for the three and six months ended June 30, 2022 differs from the federal statutory rate of 21% primarily due to a full valuation allowance against net deferred tax assets as it is more likely than not that the deferred tax assets will not be realized.
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.
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Note 3 - Yellowstone Transaction (Tables) |
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Note 4 - Cost of Construction and Constructed Assets (Tables) |
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Note 5 - Long-lived Assets (Tables) |
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Note 6 - Supplemental Balance Sheet and Cash Flow Information (Tables) |
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Note 7 - Leases (Tables) |
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Note 8 - Bonds Payable, Loans Payable and Interest (Tables) |
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| Schedule of Long-Term Debt Instruments [Table Text Block] |
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Note 11 - Equity Compensation (Tables) |
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| Schedule of Share-Based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions [Table Text Block] |
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| Share-Based Payment Arrangement, Activity [Table Text Block] |
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Note 12 - Earnings (Loss) Per Share (Tables) |
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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Note 13 - Financial Instruments (Tables) |
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Note 16 - Accumulated Other Comprehensive Loss (Tables) |
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Note 1 - Organization and Business Operations (Details Textual) - $ / shares |
Jun. 30, 2022 |
Jan. 25, 2022 |
Dec. 31, 2021 |
|---|---|---|---|
| Common Class B [Member] | |||
| Common Stock, Par or Stated Value Per Share (in dollars per share) | $ 0.0001 | $ 0.0001 | |
| Sky Harbour LLC [Member] | Common Class B [Member] | |||
| Common Stock, Par or Stated Value Per Share (in dollars per share) | $ 0.0001 | ||
| Sky Harbour LLC [Member] | |||
| Noncontrolling Interest, Ownership Percentage by Parent | 26.10% | ||
| Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 26.10% | ||
| Sky Harbour LLC [Member] | LLC Interests and TRA Holders [Member] | |||
| Noncontrolling Interest, Ownership Percentage by Parent | 73.90% | ||
| Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 73.90% | 73.90% |
Note 4 - Cost of Construction and Constructed Assets (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
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| Asset under Construction [Member] | ||||
| Depreciation, Total | $ 139 | $ 133 | $ 274 | $ 269 |
Note 4 - Cost of Construction and Constructed Assets - Constructed Assets, Net and Cost of Construction (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Asset under Construction [Member] | ||
| Property, Plant and Equipment, Gross | $ 15,079 | $ 15,079 |
| Accumulated depreciation | (853) | (579) |
| Property, Plant and Equipment, Net, Total | 14,226 | 14,500 |
| Construction in Progress [Member] | ||
| Property, Plant and Equipment, Net, Total | $ 54,288 | $ 25,034 |
Note 5 - Long-lived Assets (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
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| Asset Impairment Charges, Total | $ 248 | $ 0 | $ 248 | $ 0 |
| Equipment and Software [Member] | ||||
| Depreciation, Total | $ 15 | $ 8 | $ 25 | $ 14 |
Note 5 - Long-lived Assets - Long-lived Assets, Net (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Equipment [Member] | ||
| Property, Plant and Equipment, Gross | $ 680 | $ 200 |
| Software and Software Development Costs [Member] | ||
| Property, Plant and Equipment, Gross | 0 | 247 |
| Equipment and Software [Member] | ||
| Property, Plant and Equipment, Gross | 680 | 447 |
| Accumulated depreciation | (59) | (38) |
| Property, Plant and Equipment, Net, Total | $ 621 | $ 409 |
Note 6 - Supplemental Balance Sheet and Cash Flow Information (Details Textual) - Subsequent Event [Member] - Revolving Credit Facility [Member] - Vendor Loan Agreement [Member] $ in Millions |
1 Months Ended |
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Jul. 31, 2022
USD ($)
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| Line of Credit Facility, Maximum Borrowing Capacity | $ 2.5 |
| Long-Term Line of Credit, Total | $ 1.5 |
| Debt Instrument, Interest Rate, Stated Percentage | 5.00% |
| Line of Credit Facility, Annual Stated Rate Increase | 1.00% |
Note 6 - Supplemental Balance Sheet and Cash Flow Information - Accounts Payable, Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Costs of construction | $ 10,351 | $ 3,450 |
| Employee compensation and benefits | 1,640 | 2,497 |
| Interest | 3,470 | 2,063 |
| Transaction costs | 1,642 | 2,048 |
| Other | 1,259 | 901 |
| Accounts Payable and Accrued Liabilities, Total | $ 18,362 | $ 10,959 |
Note 6 - Supplemental Balance Sheet and Cash Flow Information - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
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| Accrued costs of construction, including capitalized interest | $ 12,702 | $ 149 |
| Accrued equity issuance costs | 1,684 | 302 |
| Debt issuance costs and premium amortized to cost of construction | 153 | 750 |
| Net gain on extinguishment of related party notes | 0 | 5,371 |
| Settlement of related party note payable by issuing equity | 0 | 1,250 |
| Right-of-use assets obtained in exchange for operating lease liabilities | 2,838 | 25,720 |
| Net decrease in right-of-use assets and operating lease liabilities due to lease remeasurement | (12,189) | 0 |
| Interest paid | 2,063 | 540 |
| Cash, beginning of year | 6,805 | 0 |
| Restricted cash, beginning of year | 197,130 | 72 |
| Cash and restricted cash, beginning of year | 203,935 | 72 |
| Cash, end of period | 3,796 | 15,604 |
| Restricted cash, end of period | 38,392 | 4,976 |
| Cash and restricted cash, end of period | $ 42,188 | $ 20,580 |
Note 7 - Leases - Supplemental Information (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Dec. 31, 2021 |
|
| Operating cash flows from operating leases as lessee | $ 448 | $ 434 | |
| Operating leases as lessee (in years) (Year) | 55 years 10 months 2 days | 54 years 4 months 20 days | |
| Operating leases as lessee | 4.60% | 4.40% | |
Note 7 - Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| 2022 (remainder of year) | $ 832 | |
| 2023 | 1,935 | |
| 2024 | 2,114 | |
| 2025 | 2,170 | |
| 2026 | 2,188 | |
| Thereafter | 196,878 | |
| Total lease payments | 206,117 | |
| Less imputed interest | (153,865) | |
| Total | $ 52,252 | $ 61,289 |
Note 7 - Leases - Non-cancelable Future Minimum Lease Payments from Tenants (Details) $ in Thousands |
Jun. 30, 2022
USD ($)
|
|---|---|
| 2022 (remainder of year) | $ 797 |
| 2023 | 1,594 |
| 2024 | 688 |
| 2025 | 566 |
| 2026 | 0 |
| Thereafter | 0 |
| Total lease payments | 3,645 |
| Less rent concessions to be applied at Company’s discretion | (214) |
| Total | $ 3,431 |
Note 8 - Bonds Payable, Loans Payable and Interest - Bonds Payable (Details) - USD ($) $ in Thousands |
Jun. 30, 2022 |
Dec. 31, 2021 |
May 20, 2021 |
|---|---|---|---|
| Total Bonds payable, net | $ 160,832 | $ 160,679 | |
| Series 2021 Bonds [Member] | |||
| Series 2021 Bonds Principal | 166,340 | 166,340 | $ 166,300 |
| Premium on bonds | 249 | 249 | 200 |
| Bond proceeds | 166,589 | 166,589 | |
| Debt issuance costs | (6,002) | (6,002) | $ (6,000) |
| Accumulated amortization of debt issuance costs and bond premium | 245 | 92 | |
| Total Bonds payable, net | $ 160,832 | $ 160,679 |
Note 8 - Bonds Payable, Loans Payable and Interest - Interest Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Interest | $ 1,735 | $ 371 | $ 3,470 | $ 813 |
| Amortization of bond premium and debt issuance costs | 76 | 534 | 153 | 1,063 |
| Total interest incurred | 1,811 | 905 | 3,623 | 1,876 |
| Less: capitalized interest | (1,811) | (522) | (3,623) | (1,035) |
| Interest expense | $ 0 | $ 383 | $ 0 | $ 841 |
Note 11 - Equity Compensation - Assumptions (Details) - Sky Incentive Units [Member] - Sky Harbour LLC and Subsidiaries (Sky) [Member] |
1 Months Ended |
|---|---|
|
May 31, 2021
USD ($)
| |
| Equity value | $ 62,287,970 |
| Term (Year) | 5 years |
| Risk-free interest rate | 0.84% |
| Volatility | 57.00% |
Note 12 - Earnings (Loss) Per Share (Details Textual) - shares |
3 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2022 |
|
| Warrant [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 14,519,218 | |
| Restricted Stock Units (RSUs) [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 651,514 | 661,000 |
Note 15 - Commitments and Contingencies (Details Textual) $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2022
USD ($)
| |
| APA Lease [Member] | |
| Lease Improvement Plan, Period Limitation (Month) | 24 months |
| DVT Lease [Member] | |
| Lease Improvement Requirement, Phase I Requirement | $ 15,300 |
| Lease Improvement Requirement, Phase II Requirement | 14,600 |
| ADS Construction Project [Member] | |
| Capital Improvement, Comment To Spend | 10,000 |
| SGR Phase II Project [Member] | |
| Minimum Improvement Amount | 2,000 |
| BNA Construction Project [Member] | |
| Capital Improvement, Comment To Spend | 17,000 |
| Termination Penalty | $ 0 |
| OPF Construction Contract [Member] | |
| Percentage of Unrealized Fee | 50.00% |
Note 16 - Accumulated Other Comprehensive Loss - Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2022 |
Jun. 30, 2021 |
Jun. 30, 2022 |
Jun. 30, 2021 |
|
| Balance | $ (91,506) | $ (27,999) | $ (16,931) | $ 6,509 |
| Other comprehensive loss | 84 | 0 | 84 | 0 |
| Balance | (101,930) | (25,265) | (101,930) | (25,265) |
| AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-Sale, Including Noncontrolling Interest [Member] | ||||
| Balance | 0 | |||
| Other comprehensive loss | 84 | |||
| Balance | 84 | 84 | ||
| AOCI Attributable to Parent [Member] | ||||
| Balance | 0 | 0 | 0 | 0 |
| Other comprehensive loss | 84 | 84 | ||
| Balance | $ 84 | $ 0 | $ 84 | $ 0 |
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