UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission File Number:
Sky Harbour Group Corporation
(Exact name of registrant as specified in its Charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| Westchester County Airport (Address of principal executive offices) | (Zip Code) |
| ( Registrant’s telephone number, including area code | |
| Securities registered pursuant to Section 12(b) of the Act: | ||||
| Title of Class | Trading Symbols | Name of Exchange on Which Registered | ||
| | | | ||
| Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share | | |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. (See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| | ☒ | Smaller reporting company | | |
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 3, 2023,
TABLE OF CONTENTS
| Page |
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| 2 | ||
| Item 1. |
2 | |
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
| Item 3. |
31 | |
| Item 4. |
31 | |
| 32 | ||
| Item 1. |
32 | |
| Item 1A. |
32 | |
| Item 2. |
32 | |
| Item 3. |
32 | |
| Item 4. |
32 | |
| Item 5. |
32 | |
| Item 6. |
33 | |
| 33 | ||
| FINANCIAL STATEMENTS |
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| September 30, 2023 | December 31, 2022 | |||||||
| (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 | ||||||||
| Loans payable and finance lease liabilities | ||||||||
| Bonds payable, net of debt issuance costs and premiums | ||||||||
| Warrants liability | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 14) | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock; $ par value; shares authorized as of September 30, 2023; issued and outstanding | ||||||||
| Class A common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Class B common stock, $ par value; shares authorized; and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Total Sky Harbour Group Corporation stockholders’ equity | ||||||||
| Non-controlling interests | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine months ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Revenue: | ||||||||||||||||
| Rental revenue | $ | $ | $ | $ | ||||||||||||
| Total revenue | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Operating | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Loss on impairment of long-lived assets | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) expense: | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Unrealized gain on warrants | ( | ) | ( | ) | ( | ) | ||||||||||
| Other income | ( | ) | ( | ) | ||||||||||||
| Total other (income) expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to Sky Harbour Group Corporation shareholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
|
September 30, 2023 |
September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss), before related income taxes: | ||||||||||||||||
| Unrealized gain (loss) on available-for-sale securities | ( | ) | ( | ) | ||||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
(Unaudited)
| Redeemable Sky Series B | Class A | Class B | Additional | Accumulated Other | Total | Non- | ||||||||||||||||||||||||||||||||||||||||||||||
| Preferred Units | Common Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | Members | Controlling | Total | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Income (Loss) | Equity | Equity | Interests | Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Exchange of Class B Common Stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Vesting of restricted stock units | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| 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, 2021 | $ | $ | $ | $ | $ | $ | - | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation prior to recapitalization | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) prior to recapitalization | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Yellowstone Transaction and recapitalization | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Sky incentive compensation following recapitalization | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss following recapitalization | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | - | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of initial commitment shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| Nine months ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| 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 | ( | ) | ||||||
| Equity-based compensation | ||||||||
| Loss on impairment of long-lived assets | ||||||||
| Non-cash operating lease expense | ||||||||
| Unrealized loss (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 | ( | ) | ( | ) | ||||
| Investment in notes receivable, net | ( | ) | ( | ) | ||||
| Net cash provided by acquisition of business | ||||||||
| Purchases of available for sale investments | ( | ) | ( | ) | ||||
| Purchases of held-to-maturity investments | ( | ) | ( | ) | ||||
| Proceeds from available for sale investments | ||||||||
| Proceeds from held-to-maturity investments | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of BOC PIPE | ||||||||
| Proceeds from Yellowstone trust | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Principal payments for loans payable and finance leases | ( | ) | ||||||
| Refund of debt issuance costs | ||||||||
| Payments for equity issuance costs | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net decrease in cash and restricted cash | ( | ) | ( | ) | ||||
| Cash and restricted cash, beginning of year | ||||||||
| Cash and restricted cash, end of period | $ | $ | ||||||
See accompanying Notes to Unaudited Consolidated Financial Statements
SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(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.”
The Company is organized 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 “Sky Common Units”). As of September 30, 2023, SHG owned approximately
| 2. | Basis of Presentation and Summary of 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, 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 historical amounts have been reclassified to conform to the current year’s presentation.
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 the fair value of financial instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities, and estimates and assumptions used in the determination of the fair value of assets acquired and liabilities assumed in the business combination. 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 has been 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 and increased borrowing costs to the extent that the Company incurs additional indebtedness.
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
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. Activities associated with internally manufactured hangar buildings, including materials, direct manufacturing labor, and manufacturing overhead directly identifiable with such activities are allocated to our construction projects and 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.
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.
Leases
The Company accounts for leases under Accounting Standards Codification (“ASC”) Topic 842, Leases. The Company determines whether a contract contains a lease at the inception of the contract. ASC Topic 842 requires lessees to recognize lease liabilities and right-of-use (“ROU”) assets for all operating leases with terms of more than 12 months on the consolidated balance sheets. The Company has made an accounting policy election to not recognize leases with an initial term of 12 months or less on the Company’s consolidated balance sheets and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. When management determines that it is reasonably certain that the Company will exercise its options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and lease liability balances.
The Company 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 as a component of operating expenses in the consolidated statements of operations.
Warrants liability
On January 25, 2022 (the "Closing Date") we completed the transactions (the "Yellowstone Transaction") contemplated by the Equity Purchase Agreement, dated as of August 1, 2021 (the “Equity Purchase Agreement”), between SHG's legal predecessor, Yellowstone Acquisition Company (“Yellowstone”), and Sky. The Company accounts for the warrants assumed in the Yellowstone Transaction (see Note 9 — Warrants) 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.
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 — Leases) and includes 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. Rental revenue and the corresponding rent and other receivables are recorded net of any concessions and uncollectible tenant receivables for all periods presented. 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 any additional rent or lease termination fees, as a current period adjustment to rental revenue.
Variable lease payments consist of tenant reimbursements for common area maintenance, utilities, and operating expenses of the property, and various other fees, including fees associated with the delivery of aircraft fuel, late fees, and lease termination fees. Variable lease payments are charged based on the terms and conditions included in the respective tenant leases and are recognized in the same period as the expenses are incurred. For the three and nine months ended September 30, 2023, rental revenue includes $
As of September 30, 2023 and December 31, 2022, the deferred rent receivable included in prepaid expenses and other assets was $
For the three and nine months ended September 30, 2023 there were
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 $
Recently Adopted Accounting Pronouncements
Credit Losses (Topic 326)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Subsequent to the issuance of ASU 2016-13, the FASB clarified the guidance through several ASUs. The collective new guidance (ASC 326) generally requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used and establishes additional disclosures related to credit risks. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2023. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.
| 3. | Investments and Restricted 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 utilizing Level 1 inputs as determined based upon quoted market prices.
Pursuant to provisions within the Master Indenture of the Series 2021 Bonds, as defined in Note 8 — Bonds payable, loans payable, and interest, 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. Unrealized losses on certain of the Company's investments and restricted investments are primarily attributable to changes in interest rates. The Company does not believe the unrealized losses represent impairments because the unrealized losses are due to general market factors. The Company has not recognized an allowance for expected credit losses related to its investments or restricted investments as the Company has not identified any unrealized losses attributable to credit factors during the three and nine months ended September 30, 2023. The held-to-maturity restricted investments are carried on the consolidated balance sheet at amortized cost. As of September 30, 2023, 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 fair value of the Company’s restricted investments is estimated utilizing Level 1 inputs including prices for U.S. Treasury securities with comparable maturities on active markets.
The following tables are summaries of the amortized cost, unrealized gains, unrealized losses, and fair value by investment type as of September 30, 2023 and December 31, 2022:
| September 30, 2023 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| Investments, available for sale: | ||||||||||||||||
| U.S. Treasuries | $ | $ | $ | $ | ||||||||||||
| Total investments | $ | $ | $ | $ | ||||||||||||
| Restricted investments, held-to-maturity: | ||||||||||||||||
| U.S. Treasuries | ( | ) | ||||||||||||||
| Total restricted investments | $ | $ | $ | ( | ) | $ | ||||||||||
| December 31, 2022 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| Investments, available for sale: | ||||||||||||||||
| U.S. Treasuries | $ | $ | $ | ( | ) | $ | ||||||||||
| Total investments | $ | $ | $ | ( | ) | $ | ||||||||||
| Restricted investments, held-to-maturity: | ||||||||||||||||
| U.S. Treasuries | ( | ) | ||||||||||||||
| Total restricted investments | $ | $ | $ | ( | ) | $ | ||||||||||
The following table sets forth the maturity profile of the Company's investments and restricted investments as of September 30, 2023:
| Investments | Restricted Investments | |||||||
| Due within one year | $ | $ | ||||||
| Due one year through five years | ||||||||
| Total | $ | $ | ||||||
| 4. | Cost of Construction and Constructed Assets |
The Company’s portfolio as of September 30, 2023 includes the following completed and in-development projects:
| ● | Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area); |
| ● | Miami-Opa Locka Executive Airport (“OPF”), Opa-Locka, FL (Miami area); |
| ● | Nashville International Airport (“BNA”), Nashville, TN; |
| ● | Centennial Airport (“APA”), Englewood, CO (Denver area); |
| ● | Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ; and |
| ● | Addison Airport (“ADS”), Addison, TX (Dallas area). |
Constructed assets, net, and cost of construction, consists of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Constructed assets, net of accumulated depreciation: | ||||||||
| Buildings, SGR, BNA, and OPF (Phase I) | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| Cost of construction: | ||||||||
| OPF (Phase II), APA (Phase I), DVT (Phase I), and ADS (Phase I & II) | $ | $ | ||||||
Depreciation expense for the three months ended September 30, 2023 and 2022 totaled $
| 5. | Long-lived Assets |
Long-lived assets, net, consists of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Ground support equipment | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Buildings | ||||||||
| Land | ||||||||
| Other equipment and fixtures | ||||||||
| Purchase deposits and construction in progress | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation expense for the three months ended September 30, 2023 and 2022 totaled $
| 6. | Supplemental Balance Sheet and Cash Flow Information |
Rapidbuilt Acquisition
On May 12, 2023 (the “Option Exercise Date”), Sky exercised its option to acquire a
Rapidbuilt is a manufacturer of pre-engineered steel buildings that previously entered into a supplier arrangement with Sky. Rapidbuilt and Sky’s strategic partnership has resulted in a standard set of proprietary prototype hangar designs, which are intended to deliver high-quality business aviation facilities, lower construction costs, minimize development risk, expedite permit issuance, and facilitate the implementation of refinements across Sky’s portfolio. The Company had pre-existing relationships with Rapidbuilt through a vendor agreement entered into in July 2022 to acquire construction materials related to the Company's development projects (the "Rapidbuilt Vendor Agreement") and a revolving line of credit loan and security agreement (the "Rapidbuilt Loan Agreement") to fund the working capital requirement of Rapidbuilt. These pre-existing relationships were effectively settled in the acquisition and the net receivable balance of $
The total cash purchase consideration was nominal. The Company accounted for the acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to assets acquired and liabilities assumed based on respective estimated fair values. The estimated fair values of the acquired assets and assume liabilities are based on preliminary calculations and subject to further refinement and may require adjustments to arrive at the final purchase price accounting. The Company expects the final purchase price allocation to be completed in a period of time that will not exceed one year from the Option Exercise Date. There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation.
The following tables summarize the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the Rapidbuilt Acquisition:
| May 12, 2023 | ||||
| Cash | $ | |||
| Restricted Cash | ||||
| Long-lived assets | ||||
| Total assets | ||||
| Accounts payable, accrued expenses and other liabilities | ||||
| Loans payable and finance lease liabilities | ||||
| Total liabilities | ||||
| Total fair value of net assets acquired | ||||
| Effective settlement of net receivable from Rapidbuilt | ||||
| Total consideration transferred | $ | |||
Substantially all of Overflow and Rapidbuilt's activities relate to the manufacturing of pre-engineering hangar structures for Sky's hangar development projects. As such, the pro-forma effect of this acquisition on revenues and earnings was not material. The transaction costs associated with the acquisition were immaterial for the three and nine months ended September 30, 2023.
Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities, consists of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Costs of construction | $ | $ | ||||||
| Employee compensation and benefits | ||||||||
| Interest | ||||||||
| Professional Fees | ||||||||
| Other | ||||||||
| $ | $ | |||||||
Supplemental Cash Flow Information
The following table summarizes non-cash investing and financing activities:
| Nine months ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Accrued costs of construction, including capitalized interest | $ | $ | ||||||
| Accrued costs of long-lived assets | ||||||||
| Accrued equity issuance costs | ||||||||
| Debt issuance costs and premium amortized to cost of construction | ||||||||
The following table summarizes non-cash activities associated with the Company’s operating leases:
| Nine months ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||
| Net decrease in right-of-use assets and operating lease liabilities due to lease remeasurement | $ | ( | ) | $ | ( | ) | ||
The following table summarizes interest paid:
| Nine months ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| Interest paid | $ | $ | ||||||
The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheets to the total shown within the consolidated statements of cash flows:
| Nine months ended | ||||||||
| September 30, 2023 | September 30, 2022 | |||||||
| 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 ground leases at airports 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. 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 the three and nine month periods ended September 30, 2023 and 2022. 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 14 — Commitments and Contingencies.
The Company’s ground leases have remaining terms ranging between
In January 2023, the Company executed a lease amendment with the Town of Addison, Texas, to add
In addition to the Company’s ground leases, the company has operating leases for office space and ground support vehicles, and finance leases for vehicles supporting operations at Rapidbuilt.
Supplemental consolidated cash flow information related to the Company’s leases was as follows:
| Nine months ended | ||||||||
| September 30, | September 30, | |||||||
| 2023 | 2022 | |||||||
| Cash paid for amounts included in measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases as lessee | $ | $ | ||||||
Supplemental consolidated balance sheet information related to the Company’s leases was as follows:
| Weighted Average Remaining Lease Term | September 30, 2023 | December 31, 2022 | ||||||
| Operating leases as lessee (in years) | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases as lessee | % | % | ||||||
The Company’s future minimum lease payments required under leases as of September 30, 2023 were as follows:
| Year Ending December 31, | Operating Leases | Finance Leases | ||||||
| 2023 (remainder of year) | $ | $ | ||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 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. There are no options given to the lessee to purchase the underlying assets.
The leases may contain variable fees, most commonly in the form of tenant reimbursements, which are recoveries of the common area maintenance and operating expenses of the property and are recognized as income in the same period as the expenses are incurred. The leases did not have any initial direct costs. The leases do not contain any restrictions or covenants to incur additional financial obligations by the lessee.
Tenant leases to which the Company is the lessor require the following non-cancelable future minimum lease payments from tenants as of September 30, 2023:
| Year Ending December 31, | Operating Leases | |||
| 2023 (remainder of year) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 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 (“SHC”), as a parent corporation to its wholly-owned subsidiaries that operate each of the aircraft hangar development sites under its ground leases. SHC 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 SHC have each pledged as collateral its respective ownership interest in any of the Borrowers.
The Series 2021 Bonds have principal amounts, interest rates, and maturity dates as follow: $
On March 22, 2023, SHC elected to modify the scope of the Series 2021 Bonds pursuant to the terms of the Master Indenture, in order to reallocate a portion of the proceeds of the Series 2021 Bonds to its project site located at ADS (the “ADS Project”) . In connection with the election to modify the scope of the Series 2021 PABs to include the ADS Project, (i) Addison Hangars LLC (“Sky Harbour Addison”) and OPF Hangars Landlord LLC (“OPF Hangars”) joined as members of the Obligated Group, (ii) Sky Harbour Holdings LLC contributed its membership interest in OPF Hangars to SHC, (iii) SHC pledged its equity interest in each of Sky Harbour Addison and OPF Hangars to the Master Trustee as security for the obligations under the Series 2021 Bonds, (iv) Sky Harbour Addison granted to the Master Trustee a mortgage on its leasehold interest in the real property comprising the ADS Project, (v) OPF Hangars granted the Master Trustee a mortgage on its leasehold interest in the real estate comprising the project located in Opa Locka, Florida, and (vi) Sky Harbour Services LLC, a wholly-owned subsidiary of the Company, has agreed to waive all management fees and development fees during the construction period of the projects associated with the Series 2021 Bonds.
As of September 30, 2023 and December 31, 2022, the fair value of the Company’s Series 2021-1 Bonds was approximately $
The following table summarizes the Company’s Bonds payable as of September 30, 2023 and December 31, 2022:
| September 30, 2023 | December 31, 2022 | |||||||
| Bonds payable: | ||||||||
| Series 2021 Bonds Principal | $ | $ | ||||||
| Premium on bonds | ||||||||
| Bond proceeds | ||||||||
| Debt issuance costs | ( | ) | ( | ) | ||||
| Accumulated amortization of debt issuance costs and accretion of bond premium | ||||||||
| Total Bonds payable, net | $ | $ | ||||||
Rapidbuilt Loan and Guaranty Agreement
In connection with the Rapidbuilt Acquisition, Sky and Vista Bank (the “Lender”) entered into a consent, waiver, and second amendment (the “Loan Amendment”) and a guaranty agreement (the “Guaranty Agreement”) associated with the senior loan agreement between Overflow and Rapidbuilt (collectively, the “Rapidbuilt Borrowers”), and the Lender (the “Rapidbuilt Loan”). Pursuant to the Loan Amendment, (i) the Lender consented to the change in control with respect to the Rapidbuilt Borrowers; (ii) the Lender waived any pre-existing events of default on the part of the Rapidbuilt Borrowers; (iii) the Lender agreed to release certain borrowed funds held in reserve, subject to specified terms and conditions; and (iv) the Rapidbuilt Borrowers agreed to certain reserve enhancement obligations, including the ability to repay principal early at the sole discretion of the Rapidbuilt Borrowers. Pursuant to the Guaranty Agreement, all of the Rapidbuilt Borrowers’ obligations under the Rapidbuilt Loan will be guaranteed by Sky.
The Rapidbuilt Loan was originated in December 2020 between the Borrowers and the Lender and had approximately $
Interest
The following table sets forth the details of interest expense:
| Three months ended | Nine months ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Interest | $ | $ | $ | $ | ||||||||||||
| Accretion of bond premium and amortization of debt issuance costs | ||||||||||||||||
| Total interest incurred | ||||||||||||||||
| Less: capitalized interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | $ | $ | $ | $ | ||||||||||||
| 9. | Warrants |
SHG's legal predecessor, 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 |
Common Equity
As of September 30, 2023, 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.
Common Stock Purchase Agreement
On August 18, 2022, the Company entered into a Common Stock Purchase Agreement (the “B. Riley Stock Purchase Agreement”) with B. Riley Principal Capital II, LLC (“B. Riley”). Pursuant to the B. Riley Stock Purchase Agreement, subject to the conditions and limitations set forth therein, the Company has the right, but not the obligation, from time to time at the Company's sole discretion over a 36-month term of the B. Riley Stock Purchase Agreement, to direct B. Riley to purchase up to
Under the B. Riley Stock Purchase Agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present B. Riley with a purchase notice (each, a "VWAP Purchase Notice"), directly B. Riley (as principal) to purchase a specified amount of shares not to exceed the lesser of (i) shares of Common Stock and (ii)
In consideration for entering into the B. Riley Stock Purchase Agreement and concurrently with the execution of the B. Riley Stock Purchase Agreement, the Company issued to B. Riley
Non-controlling interests
The LLC Interests’ ownership in Sky is presented as non-controlling interests within the Equity section of the consolidated balance sheet as of September 30, 2023 and represents the Sky Common Units held by holders other than SHG. The holders of LLC Interests may exchange Sky Common Units along with an equal number of Class B Common Shares, for Class A Common Shares on the Company. The LLC Interests do not have the option to redeem their Sky Common Units for cash or a variable number of Class A Common Shares, nor does SHG have the option to settle a redemption in such a manner. As of September 30, 2023, the LLC interests owned approximately
The former majority shareholder's ownership in Overflow is presented as a non-controlling interest within the Equity section of the consolidated balance sheet. As of September 30, 2023, the former majority shareholder owned approximately
| 11. | Equity Compensation |
Restricted Stock Units (“RSUs”)
In February 2023, the Company granted time-based RSUs to certain employees under the Company’s 2022 Incentive Award Plan.
During the three and nine months ended September 30, 2023, the Company recognized stock compensation expense of approximately $
Sky Incentive Units
The Company recognized equity-based compensation expense relating to awarded equity units of Sky (the “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 or if-converted method as appropriate. 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.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Less: Net loss attributable to non-controlling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted net loss attributable to Sky Harbour Group Corporation shareholders | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Denominator: | ||||||||||||||||
| Based and diluted weighted average shares of Class A Common Stock outstanding | ||||||||||||||||
| Loss per share of Class A Common Stock – Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Potentially dilutive shares excluded from the weighted-average shares used to calculate the diluted net loss per common share due the Company's net loss position were as follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
| Shares subject to unvested restricted stock units | ||||||||||||||||
| Shares issuable upon the exercise of Warrants | ||||||||||||||||
| Shares issuable upon the exchange of Class B Common Stock | ||||||||||||||||
| Shares issuable upon the exercise and exchange of Sky Incentive Units | ||||||||||||||||
| 13. | Related Party Transactions |
On September 20, 2021, the Company entered into a non-exclusive agreement with Echo Echo, LLC, a related party to the Founder and CEO, for the use of a Beechcraft Baron G58 aircraft. The effective date of the agreement was September 8, 2021 and the agreement automatically renews annually. The agreement can be terminated without penalty if either party provides 35 days written notice, or if the aircraft is sold or otherwise disposed of. The Company is charged per flight hour of use along with all direct operating costs. Additionally, the Company will also incur the pro rata share of maintenance, overhead and insurance costs of the aircraft. For the three and nine months ended September 30, 2023, the Company recognized $
For the three and nine months ended September 30, 2023, the Company recognized $
| 14. | Commitments and Contingencies |
The APA Lease requires the Company to improve the property in accordance with a development plan included in the lease and to complete such improvements within
The DVT Lease requires approximately $
The Company has committed to spend $
The Company has contracts for construction of the APA Phase I and DVT Phase I projects. The Company may terminate any of the contracts or suspend construction without cause. There are
| 15. | Accumulated Other Comprehensive Income (Loss) |
The following table summarizes the components of Accumulated other comprehensive income (loss):
| Unrealized gain (loss) on Available-for-sale Securities | Total | |||||||
| Balance as of December 31, 2022 | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income before reclassifications | ||||||||
| Amounts reclassified to other (income) expense | ( | ) | ( | ) | ||||
| Balance as of September 30, 2023 | $ | $ | ||||||
| 16. | Subsequent Events |
PWK Ground Lease
On October 11, 2023, the Company entered into a ground lease agreement (the "PWK Lease") with Chicago Executive Airport ("PWK"). The PWK Lease is divided into two parcels, with the first parcel containing approximately
PWK is jointly owned by the Village of Wheeling and City of Prospect Heights, Illinois, and acts a primary reliever and general aviation airport within the Chicago metropolitan area. The FAA reported nearly 100,000 total airport operations at PWK in 2021 and 2022, with steady growth forecasted each year thereafter.
SGR Phase II Lease Termination
The Company was subject to requirements in its ground lease at SGR with respect to the Company's contemplated SGR Phase II project that defined (i) a minimum improvement amount of $
Private Placement and Securities Purchase Agreement
On November 1, 2023, the Company entered into a Securities Purchase Agreement (the “Private Placement Purchase Agreement”) with certain investors (collectively, the “Investors”), pursuant to which the Company (i) agreed to sell and issue to the Investors at an initial closing an aggregate of
The closing of the Initial Financing occurred on November 2, 2023 (the “Initial Closing Date”). The amount of Additional PIPE Shares and Additional PIPE Warrants, if any, to be issued in connection with the Additional Financing will be determined by Altai Capital Falcon LP (the “Lead Investor”) in its sole discretion, and the closing of the Additional Financing will occur, if at all, at the sole discretion of the Lead Investor, on or before November 30, 2023, subject to customary closing conditions.
The PIPE Warrants are similar in form and substance to the Company’s public warrants to purchase Class A Common Stock. The PIPE Warrants are exercisable at an exercise price of $
The Private Placement Purchase Agreement includes certain covenants, including a limitation on the Company’s use of the net proceeds from the Financing, certain customary standstill restrictions for a period of 90 days following the Initial Closing Date and a restriction on paying any extraordinary dividend to the extent it would result in the issuance of a number of shares of Class A Common Stock upon exercise of the PIPE Warrants (without regard to any limitations on exercise of the PIPE Warrants) in excess of the number of shares of Class A Common Stock permissible by the NYSE American LLC to be issued without stockholder approval. In addition, pursuant to the Private Placement Purchase Agreement, the Company granted to the Lead Investor certain participation rights with respect to certain future equity and debt offerings by the Company until the eighteen-month anniversary of the Initial Closing Date. In addition, the Investors entered in to a six month customary lock-up agreement beginning on the Initial Closing Date.
Registration Rights Agreement
On November 1, 2023, in connection with the execution of the Private Placement Purchase Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Investors. Pursuant to the Registration Rights Agreement, certain holders of the Company’s securities are entitled to certain customary registration rights, and the Company is required to prepare and file a resale registration statement (the “Registration Statement”) with the SEC to register the resale of the PIPE Shares, the PIPE Warrants and
| 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, 2022, filed with the Securities Exchange Commission (the “SEC”) on March 24, 2023 (the “Form 10-K”), which is accessible on the SEC’s website at www.sec.gov.
Cautionary Note Regarding Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “might,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. There can be no assurance that actual results will not materially differ from expectations. These statements are based on management’s current expectations, but actual results may differ materially due to various factors, including, but not limited to:
| • |
expectations regarding the Company’s strategies and future financial performance, including the Company’s future business plans or objectives, prospective performance and commercial opportunities and competitors, services, pricing, marketing plans, operating expenses, market trends, revenues, liquidity, cash flows and uses of cash, capital expenditures, and the Company’s ability to invest in growth initiatives; |
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the effects of general economic conditions, including inflation, rising interest rates, and availability of construction materials and labor for our development projects; |
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our limited operating history makes it difficult to predict future revenues and operating results; |
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our ability to implement our construction costs mitigation strategies; |
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changes in applicable laws or regulations; |
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the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and |
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our financial performance. |
The forward-looking statements contained in this Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. Future developments affecting us may not be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors” in the Form 10-K. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. These risks and others described in the Form 10-K may not be exhaustive.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results or operations, financial condition and liquidity, and developments in the industry in which we operate are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods.
Overview and Background
We are an aviation infrastructure development company building the first nationwide network of hangar campuses for business aircraft. We develop, lease, and manage general aviation hangars across the United States, targeting airfields in markets with significant aircraft populations and high hangar demand. Our hangar campuses feature exclusive private hangars and a full suite of dedicated services specifically optimized for home-based, versus transient, aircraft.
The physical footprint of the U.S. business aviation fleet grew by almost 28 million square feet in the ten years preceding the beginning of the COVID-19 pandemic, with hangar supply lagging dramatically, especially in key growth markets. As the fleet of private jets in the United States continues to grow, with recent new aircraft deliveries exceeding retirements, demand for hangar space is at a premium in part because new jets require more square footage of hangar space and the pace of new hangar construction has lagged behind the demand. The cumulative square footage of the business aircraft fleet in the United States increased 50% between 2010 and 2021. Moreover, over that same period, there was an 81% increase in the square footage of larger private jets – those with greater than a 24-foot tail height. A recent study conducted by a business aircraft manufacturer forecasted that business aircraft will only continue to grow in the next ten years, with up to 8,500 new business jet deliveries worth approximately $278 billion expected to be delivered between 2024 and 2033, with larger private jet deliveries expected to increase approximately 15% in 2024. These projections are further supported by data from the major business aviation manufacturers that suggest the current order backlog for new business aviation aircraft is almost $47 billion.
These larger footprint aircraft do not fit in much of the existing hangar infrastructure and impose stacking challenges and constraints in the traditional shared or community hangars operated by FBOs. The addition of winglets (the vertical extensions on aircraft wingtips) on most modern business jets inhibits wing-over-wing storage. Aircraft hangars are in high demand and short supply, with some airports compiling waiting lists that can exceed several years.
We believe our scalable, real estate-centric business model is uniquely optimized to capture this market opportunity and address the increased imbalance between the supply and demand for private jet storage. We intend to capitalize on the existing hangar supply constraints at major U.S. airports by targeting high-end tenants in markets where there is a shortage of private and FBO hangar space, or where such hangars are or are becoming obsolete.
We realize economies of scale in construction through a proprietary prototype hangar design replicated at our hangar 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, our revenues are mostly derived from long-term rental agreements, offering stability and forward visibility of revenues and cash flows. This allows the Company to fund its development through the public bond market, providing capital efficiency and mitigating refinance risk.
With six airport campuses either in development or ongoing operations, the company is targeting fourteen additional airfields in the current growth phase, and an additional 30 in the next.
The table below presents certain information with respect to our portfolio as of September 30, 2023.
| ● |
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). |
PROPERTIES IN OPERATION
| Facility |
Completion Date |
Hangars |
Rentable Square Footage |
% of Total Rentable Square Footage |
Occupancy at September 30, 2023 |
|||||||||||||
| SGR |
December 2020 |
7 | 66,080 | 17.6 | % |
93.9 | % | |||||||||||
| BNA |
November 2022 |
10 | 149,069 | 39.7 | % |
63.7 | % | |||||||||||
| OPF Phase I | February 2023 | 12 | 160,092 | 42.7 | % | 70.8 | % | |||||||||||
| Total/Weighted Average |
29 | 375,241 | 100.0 | % |
72.1 | % |
||||||||||||
PROPERTIES IN DEVELOPMENT
| Scheduled |
Estimated Total |
|||||
| Construction | Scheduled | Construction Cost | Rentable | |||
| Facility |
Status |
Start |
Completion Date |
($mm) |
Hangars |
Square Footage |
| OPF Phase II |
In Development |
December 2023 |
February 2025 |
28.1 - 32.7 |
5 |
107,966 |
| APA Phase I |
In Construction |
November 2022 |
April 2024 |
37.2 - 43.2 |
9 |
130,550 |
| APA Phase II |
Predevelopment |
April 2024 |
February 2025 |
28.6 - 33.2 |
5 |
109,189 |
| DVT Phase I |
In Construction |
December 2022 |
March 2024 |
32.5 - 37.8 |
8 |
134,270 |
| DVT Phase II |
Predevelopment |
April 2024 |
February 2025 |
28.2 - 32.8 |
6 |
125,556 |
| ADS Phase I | In Development | October 2023 | November 2024 | 25.4 - 27.4 | 6 | 115,506 |
| ADS Phase II | Predevelopment | March 2024 | June 2025 | 6.8 - 9.8 | 1 | 33,600 |
| ADS Phase III | Predevelopment | January 2025 | March 2026 | 16.5 - 19.5 | 2 | 63,273 |
| Total |
$203.3 - 236.4 |
42 |
819,910 |
Recent Developments
On October 11, 2023, we entered into a ground lease agreement (the “PWK Lease”) with Chicago Executive Airport (“PWK”). The term of the PWK Lease will be 50 years and is divided into two parcels, allowing for the development of a hangar campus on up to 25 acres of land at PWK.
On November 1, 2023, the Company entered into a Securities Purchase Agreement (the “Private Placement Purchase Agreement”) with certain investors (collectively, the “Investors”), pursuant to which the Company agreed to sell and issue to the Investors at an initial closing an aggregate of 6,586,154 shares (the “PIPE Shares”) of the Company’s Class A Common Stock and accompanying warrants to purchase up to 1,141,600 shares of Class A Common Stock (the “PIPE Warrants”), for an aggregate purchase price of $42.8 million (the "Initial Financing").
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. For example, during the three months ended September 30, 2023, a tenant renting two hangars at OPF made the determination that it was necessary to change its business plans in the greater Miami market, which ultimately resulted in the negotiated settlement of the tenant’s lease with the Company and their exit from our OPF hangar campus. Accordingly, we actively monitor certain key factors, including changes in those factors (fuel prices, new aircraft deliveries, hangar rental rates) that we believe may provide early indications of conditions that may affect the level of demand for new leases and our lease portfolio. See “—Risks Related to our Business and Operations” within the Form 10-K for more information about the risks related to our tenants and our lease payments.
Ground Lease Expense
One of our largest expenses is the lease payments under our ground leases. For the nine months ended September 30, 2023 and 2022, our operating lease expense for ground leases was $2.8 million and $2.8 million, respectively. As we enter into new ground leases at new airport sites, our payments to airport landlords will continue to increase into the future. If airport landlords increase the per acre cost of the ground lease of our target campuses, the operating margins at potential target developments may be impacted negatively.
Interest Expense
Economic conditions and actions by policymaking bodies are contributing to rising interest rates, which, along with increases in our borrowing levels, could increase our future borrowing costs. We expect to issue additional debt to finance future site developments and higher interest rates would impact our overall economic performance. In addition, we are subject to credit spreads demanded by fixed income investors. As a non-rated issuer, increases in general of credit spreads in the market, or for us, may result in a higher cost of borrowing in the future. We intend to access the bond market on an opportunistic basis. In addition, we may hedge against rising benchmark interest rates by entering into hedging strategies with high quality counterparties.
General and Administrative Expenses
The general and administrative expenses reflected in our statement of operations are reflective of the professional, legal and consulting fees, payroll costs, and other general and administrative expenses, including those necessary to support our business as a public company such as expenses associated with corporate governance, SEC reporting, and other compliance matters. While we expect that our general and administrative expenses will rise in some measure as our portfolio of campuses grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies, economies of scale, insourcing of job functions, and cost control measures.
Construction Material Costs and Labor
When constructing our hangar campuses, we use various materials and components. We contract for certain of our materials and labor with general contractors under guaranteed maximum price contracts upon receipt of building permits. This allows us to mitigate certain of the risks associated with increases in certain building materials and labor costs between the time construction begins on a hangar campus and the time it is completed. Typically, the materials and most of the components used to construct our hangar campuses are readily available in the United States. 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. We believe that recent inflationary pressures and market conditions will lead to continued increases in construction costs as well as market rental rates for hangars within our hangar campus development projects. However, there can be no assurance that we will be able to increase the lease rates for the hangars within our hangar campuses to absorb these increased costs and/or delays, if at all.
In May 2023, we acquired a controlling interest in Rapidbuilt, a metal building and hangar door manufacturer, that we expect will ultimately result in a reduction in the overall cost of the metal building and hangar door components at all future hangar campus development projects. We expect that over time this vertical integration will enable us to deliver metal buildings to each development site in shorter timeframes, which we believe will reduce the overall construction duration of each development project.
We intend to continue to aggressively take action to mitigate these inflationary pressures, reduce construction costs, and shorten development schedules, both in the near term at our APA Phase I, DVT Phase I, and ADS Phase I development projects, and in the long term at future projects. We structure our guaranteed maximum price construction contracts with shared savings clauses to incentivize the general contractors to reduce construction costs. At our SGR and BNA development projects, our total construction costs were lower than both our original pricing estimate and the project’s contracted guaranteed maximum price. No assurance can be given that our cost mitigation strategies will be successful, the costs of our projects will not exceed budgets or the guaranteed maximum price for such projects, or that the completion will not be delayed beyond the projected completion dates.
Current Capital Requirements and Future Expenditures for Expansion
We previously funded 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 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 exercised this ability utilizing approximately $26 million of the $50 million available and received the requisite approvals and reports in March 2023 with respect to our ADS Phase I development project.
We previously raised equity capital, along with potential future debt and further equity issuances, including the Private Placement Purchase Agreement entered into on November 1, 2023, see Note 16 — Subsequent Events in the Notes to Consolidated Financial Statements, to begin to fund additional airport campuses and reach up to 20 airport campuses over the next several years. On average, each future campus is anticipated to be composed of an average of 10-20 hangars and is expected to cost approximately $55 million per campus, with 60% or more to be funded with additional private activity bonds. All these future hangar campus projects are discretionary and require us to identify the appropriate airports with the target hangar demand economics, secure required ground leases and permits, and complete future construction at such sites.
The cumulative 20 airport site business plan is estimated to cost approximately $1.2 billion, with approximately 65% to 75% anticipated from long-term private activity bonds and the balance with equity or equity linked financing. 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:
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 the fair value of financial instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities, and estimates and assumptions used in the determination of the fair value of assets acquired and liabilities assumed in the business combination. Actual results could differ materially from those estimates.
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 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.
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.
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 any additional rent or lease termination fees, as a current period adjustment to rental revenue.
Recent Accounting Pronouncements
See Note 2 — Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations and financial condition.
Results of Operations
Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022
The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods (in thousands).
| Three months ended |
||||||||||||
| September 30, 2023 |
September 30, 2022 |
Change |
||||||||||
| Revenue: |
||||||||||||
| Rental revenue |
$ | 2,502 | $ | 431 | $ | 2,071 | ||||||
| Total revenue |
2,502 | 431 | 2,071 | |||||||||
| Expenses: |
||||||||||||
| Operating |
1,675 | 1,228 | 447 | |||||||||
| Depreciation |
670 | 148 | 522 | |||||||||
| Loss on impairment of long-lived assets |
- | - | - | |||||||||
| General and administrative |
3,556 | 3,599 | (43 | ) | ||||||||
| Total expenses |
5,901 | 4,975 | 926 | |||||||||
| Operating loss |
(3,399 | ) | (4,544 | ) | 1,145 | |||||||
| Other (income) expense: |
||||||||||||
| Interest expense |
234 | - | 234 | |||||||||
| Unrealized gain on warrants |
(1,597 | ) | (1,452 | ) | (145 | ) | ||||||
| Other income |
(37 | ) | - | (37 | ) | |||||||
| Total other (income) expense |
(1,400 | ) | (1,452 | ) | 52 | |||||||
| Net income (loss) |
$ | (1,999 | ) | $ | (3,092 | ) | $ | 1,093 | ||||
Revenues
Revenues for the three months ended September 30, 2023 were approximately $2.5 million, compared to approximately $0.4 million for the three months ended September 30, 2022. The $2.1 million, or 481%, increase was primarily the result of the cumulative impact of certain additional tenant leases in place at our SGR, BNA, and OPF hangar campuses as compared to the three months ended September 30, 2022, additional tenant leases commencing at our OPF and BNA hangar campuses during the three months ended September 30, 2023, and approximately $0.4 million of net non-recurring adjustments to revenue recognized during the three months ended September 30, 2023.
Operating Expenses
Operating expenses increased approximately $0.4 million, or 36%, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. The increase reflects higher operating costs associated with the commencement of operations at our BNA and OPF hangar campuses during the three months ended December 31, 2022 and March 31, 2023, respectively. Salaries, wages, and benefits associated with our campus personnel increased by approximately $0.1 million, primarily driven by headcount increases at our BNA and OPF hangar campuses. Other operating expenses increased approximately $0.3 million, primarily driven by increased insurance, property taxes, and utilities associated with operations at our OPF, BNA, and SGR hangar campuses.
Depreciation Expense
Depreciation increased approximately $0.5 million, or 352%, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. The increase reflects a full quarter of depreciation associated with our OPF and BNA hangar campuses, which opened during the three months ended March 31, 2023, and the three months ended December 31, 2022, respectively. The increase was also partially driven by the placement of additional ground support equipment into service throughout 2022 and 2023 and a full quarter of depreciation related to Rapidbuilt, which was acquired during the three months ended June 30, 2023.
General and Administrative Expenses
For the three months ended September 30, 2023, and 2022, general and administrative expenses were approximately $3.6 million and $3.6 million, respectively. The approximately 1% decrease was primarily due to a decrease of approximately $0.4 million related to other administrative expenses, largely driven by decreased corporate insurance premiums and an approximately $0.3 million decrease in professional fees, which was primarily driven by decreased in legal and accounting related costs and our efforts to internalize job functions. These decreases were offset by an approximately $0.7 million increase in salaries, wages, and other benefits, driven by an increase in headcount and expense recognized associated with our equity compensation program.
Other (Income) Expense
Other income decreased from approximately $1.5 million to approximately $1.4 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This decrease was primarily due to an approximately $0.2 million increase in interest expense due to the Rapidbuilt acquisition, offset by a $0.1 million difference in the mark-to-market adjustment of the outstanding warrants at September 30, 2023 as compared to September 30, 2022.
Results of Operations
Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022
The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods (in thousands).
| Nine months ended |
||||||||||||
| September 30, 2023 |
September 30, 2022 |
Change |
||||||||||
| Revenue: |
||||||||||||
| Rental revenue |
$ | 5,337 | $ | 1,236 | $ | 4,101 | ||||||
| Total revenue |
5,337 | 1,236 | 4,101 | |||||||||
| Expenses: |
||||||||||||
| Operating |
5,179 | 3,652 | 1,527 | |||||||||
| Depreciation |
1,650 | 447 | 1,203 | |||||||||
| Loss on impairment of long-lived assets |
- | 248 | (248 | ) | ||||||||
| General and administrative |
10,838 | 12,136 | (1,298 | ) | ||||||||
| Total expenses |
17,667 | 16,483 | 1,184 | |||||||||
| Operating loss |
(12,330 | ) | (15,247 | ) | 2,917 | |||||||
| Other (income) expense: |
||||||||||||
| Interest expense |
316 | - | 316 | |||||||||
| Unrealized gain on warrants |
- | (2,904 | ) | 2,904 | ||||||||
| Other income |
(252 | ) | - | (252 | ) | |||||||
| Total other (income) expense |
64 | (2,904 | ) | 2,968 | ||||||||
| Net loss |
$ | (12,394 | ) | $ | (12,343 | ) | $ | (51 | ) | |||
Revenues
Revenues for the nine months ended September 30, 2023 were approximately $5.3 million, compared to approximately $1.2 million for the nine months ended September 30, 2022. The $4.1 million, or 332%, increase was primarily the result of tenant leases commencing at our OPF and BNA hangar campuses during the nine months ended September 30, 2023, as well as the cumulative impact of certain additional tenant leases in place at our SGR and BNA hangar campuses as compared to the nine months ended September 30, 2022.
Operating Expenses
Operating expenses increased approximately $1.5 million, or 42%, for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. The increase reflects higher operating costs associated with the commencement of operations at our BNA and OPF hangar campuses, which opened during the three months ended December 31, 2022 and March 31, 2023, respectively. Salaries, wages, and benefits associated with our campus personnel increased by approximately $0.6 million, primarily driven by headcount increases at our BNA and OPF hangar campuses. Other operating expenses increased approximately $0.9 million, primarily driven by increased insurance, property taxes, and utilities associated with operations at our OPF, BNA, and SGR hangar campuses.
Depreciation Expense
Depreciation increased approximately $1.2 million, or 269%, for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022. The increase reflects the opening of our OPF hangar campus during the three months ended March 31, 2023, the opening of our BNA hangar campus during the three months ended December 31, 2022 and the placement of additional ground support equipment into service throughout 2022 and 2023.
General and Administrative Expenses
For the nine months ended September 30, 2023, and 2022, general and administrative expenses were approximately $10.8 million and $12.1 million, respectively. The approximately $1.3 million decrease was primarily due to an approximately $1.6 million decrease in professional fees, which was primarily driven by decreased in legal and accounting related costs due non-recurring transaction costs incurred during the nine months ended September 30, 2022, and our efforts to internalize job functions. Other administrative expenses decreased approximately $0.6 million primarily due to decreased corporate insurance premiums. These decreases were offset by an approximately $0.9 million increase in salaries, wages, and other benefits, primarily driven by an increase in expense recognized associated with our equity compensation program.
Other (Income) Expense
Other (income) expenses decreased from approximately $2.9 million of income to less than $0.1 million of expense for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This decrease was primarily due to a $2.9 million difference in the mark-to-market adjustment of the outstanding warrants at September 30, 2023 as compared to September 30, 2022.
Liquidity and Capital Resources
Overview
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund the construction of new assets, fund working capital and other general business needs. Our primary sources of cash include the potential issuance of equity and debt securities and rental payments from tenants. Our long-term liquidity requirements include lease payments under our ground leases with airport authorities, repaying principal and interest on outstanding borrowings, funding the construction costs of our hangar campus development projects (see “— Construction Material Costs and Labor”), 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 private activity bonds and other debt and the issuance of additional equity securities. However, as we have recently become a publicly-traded company, we cannot assure you that we will have access to these sources of capital or that, even if such sources of capital are available, that these sources of capital will be available on favorable terms. Our ability to incur additional debt will depend on multiple factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that are or may be imposed by future lenders. Our ability to access the equity and debt capital markets will depend on multiple factors as well, including general market conditions for real estate companies, our degree of leverage, the trading price of our common stock and debt and market perceptions about our Company.
Our cash deposits may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and the majority are maintained with a major financial institution with reputable credit. Our restricted cash is held in trust at a major financial institution pursuant to the Series 2021 Bonds indenture. We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. Our portfolio of investments and restricted investments is composed entirely of U.S. Treasury securities as of September 30, 2023.
The following table summarizes our cash and cash equivalents, restricted cash, investments, and restricted investments as of September 30, 2023 and December 31, 2022 (in thousands):
| September 30, 2023 |
December 31, 2022 |
|||||||
| Cash and cash equivalents |
$ | 2,471 | $ | 2,174 | ||||
| Restricted cash |
34,289 | 39,222 | ||||||
| Investments |
16,832 | 24,895 | ||||||
| Restricted investments | 80,183 | 114,648 | ||||||
| Total cash, restricted cash, investments, and restricted investments | $ | 133,775 | $ | 180,939 | ||||
Private Placement and Securities Purchase Agreement
On November 1, 2023, the Company entered into the Private Placement Purchase Agreement with certain Investors, pursuant to which the Company (i) agreed to sell and issue to the Investors at an initial closing an aggregate of 6,586,154 shares of the Company’s Class A Common Stock and accompanying warrants to purchase up to 1,141,600 shares of Class A Common Stock, for an aggregate purchase price of $42.8 million (the "Initial Financing"), and (ii) agreed to sell and issue to the Investors at the second closing, if any, up to an aggregate of 2,307,692 PIPE Shares (the "Additional PIPE Shares") and accompanying PIPE Warrants to purchase up to an aggregate of 400,000 shares of Class A Common Stock (the "Additional PIPE Warrants") for an aggregate purchase price of up to $15.0 million (the "Additional Financing" and, together with the Initial Financing, the “Financing”).
B. Riley Stock Purchase Agreement
On August 18, 2022, we entered into a Common Stock Purchase Agreement and a Registration Rights Agreement (collectively referred to as the “B. Riley Stock Purchase Agreement”) with B. Riley Principal Capital, LLC (“B. Riley”). Pursuant to the B. Riley Stock Purchase Agreement, we have the right, in our sole discretion, to sell to B. Riley up to 10 million shares of our Class A Common Stock at 97% of the volume weighted average price of our Class A Common Stock calculated in accordance with the B. Riley Stock Purchase Agreement, over a period of 36 months subject to certain limitations and conditions contained in the B. Riley Stock Purchase Agreement. Sales and timing of any sales of Class A Common Stock are solely at our election, and we are under no obligation to sell any securities to B. Riley under the B. Riley Stock Purchase Agreement. As consideration for B. Riley’s commitment to purchase shares of our Class A Common Stock, we have issued 25,000 shares of our Class A Common Stock to B. Riley as initial commitment shares and may issue up to an aggregate of 75,000 shares of our Class A Common Stock to B. Riley as additional commitment shares if certain conditions are met.
Equity Financing
On January 25, 2022 (the "Closing Date") we completed the transactions (the "Yellowstone Transaction") contemplated by the Equity Purchase Agreement, dated as of August 1, 2021 (the “Equity Purchase Agreement”), between Yellowstone and Sky. On the Closing Date, Yellowstone changed its name to Sky Harbour Group Corporation, and Sky restructured its capitalization, issuing its Sky Common Units to the Company. As a result of the Yellowstone Transaction, the Sky Common Units that Sky issued to BOC YAC in respect of its Series B Preferred Units were converted into 5,500,000 shares of the Company’s Class A Common Stock and holders of Sky Common Units received one share of the Company’s Class B Common Stock for each Common Unit. As consideration for the issuance of Sky Common Units to the Company, Yellowstone contributed approximately $48 million of net proceeds to us, consisting primarily of the BOC PIPE, and the amount held in the Yellowstone trust account, net of redemptions and transaction costs.
Private Activity Bonds
On September 14, 2021, SHC completed an issuance through the Public Finance Authority (Wisconsin) of $166.3 million of Senior Special Facility Revenue Bonds (Aviation Facilities Project), Series 2021 (the “PABs”). The PABs are comprised of three maturities: $21.1 million bearing interest at 4.00%, due July 1, 2036; $30.4 million bearing interest at 4.00%, due July 1, 2041; and $114.8 million bearing interest at 4.25%, due July 1, 2054. The Series 2021 Bond that has a maturity date of July 1, 2036 was issued at a premium, and Sky received bond proceeds that were $0.2 million above its face value. The net proceeds from the issuance of the PABs proceeds are being used to (a) finance or refinance the construction of various aviation facilities consisting of general aviation aircraft hangars and storage facilities located and to be located on the SGR site, the OPF site, the BNA site, the APA site, and the DVT site; (b) fund debt service and other operating expenses such as ground lease expense during the initial construction period; (c) fund deposits to the Debt Service Reserve Fund; and (d) pay certain costs of issuance related to the PABs.
Debt Covenants
The PABs contain financial and non-financial covenants, including a debt service coverage ratio, a restricted payments test and limitations on the sale, lease, or distribution of assets. To the extent that SHC does not comply with these covenants, an event of default or cross-default may occur under one or more agreements, and we or our subsidiaries may be restricted in our ability to pay dividends, issue new debt or access our leased facilities. The PABs are collateralized on a joint and several basis with the property and revenues of all SHC subsidiaries and their assets financed or to be financed from the proceeds of the PABs.
Covenants in the PABs require SHC to maintain a debt service coverage ratio (as defined in the relevant documents) of at least 1.25 for each applicable test period, commencing with the quarter ending December 31, 2024. The PABs are subject to a Continuing Disclosure Agreement whereby SHC is obligated to provide electronic copies of (i) monthly construction reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC to the Municipal Securities Rulemaking Board. As of September 30, 2023, 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 leases as of September 30, 2023 (in thousands):
| Year Ending December 31, | Operating Leases |
Finance Leases | ||||||
| 2023 (remainder of year) |
$ | 482 | $ | 8 | ||||
| 2024 | 2,137 | 29 | ||||||
| 2025 | 2,379 | 23 | ||||||
| 2026 | 2,431 | 17 | ||||||
| 2027 | 2,494 | 2 | ||||||
| Thereafter | 199,870 | - | ||||||
| Total lease payments | 209,793 | 79 | ||||||
| Less imputed interest |
(154,766 | ) | (5 | ) | ||||
| Total |
$ | 55,027 | $ | 74 | ||||
Contractual Obligations
The following table sets forth our contractual obligations as of September 30, 2023 (in thousands):
| 2023 |
||||||||||||||||||||
| (remainder |
||||||||||||||||||||
| of year) |
2024-2025 | 2026-2027 | Thereafter |
Total |
||||||||||||||||
| Principal payments on bonds payable |
$ | - | $ | - | $ | - | $ | 166,340 | $ | 166,340 | ||||||||||
| Interest payments on bonds payable |
- | 13,881 | 13,881 | 126,010 | 153,772 | |||||||||||||||
| Contractual payments on other long-term indebtedness |
1,447 | 10,395 | 131 | 34 | 12,007 | |||||||||||||||
| Lease commitments |
978 | 4,569 | 4,945 | 199,870 | 210,362 | |||||||||||||||
| Total |
$ | 2,425 | $ | 28,845 | $ | 18,957 | $ | 492,254 | $ | 542,481 | ||||||||||
Funds to meet interest payments for the next 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
The following table summarizes our sources and uses of cash for the nine months ended September 30, 2023 and 2022 (in thousands):
| Nine months ended |
||||||||
| September 30, 2023 |
September 30, 2022 |
|||||||
| Cash and restricted cash at beginning of period |
$ | 41,396 | $ | 203,935 | ||||
| Net cash used in operating activities |
(6,263 | ) | (25,282 | ) | ||||
| Cash provided by (used in) investing activities |
2,137 | (213,549 | ) | |||||
| Net cash (used in) provided by financing activities |
(510 | ) | 52,790 | |||||
| Cash and restricted cash at end of period |
$ | 36,760 | $ | 17,894 | ||||
Operating Activities
Net cash used in operating activities was approximately $6.3 million for the nine months ended September 30, 2023, as compared to cash used in operating activities of approximately $25.3 million for the same period in 2022. The $19.0 million decrease in cash used in operating activities was primarily attributable to a $14.6 million favorable change in the Company's working capital position, which was primarily driven by $9.6 million of initial direct costs associated with the purchase of our former landlord's leasehold interest at our OPF campus during the nine months ended September 30, 2022. The decrease was also partially attributable to a reduction in corporate insurance premiums paid during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The decrease was also partially attributable to a $4.4 million decrease in net loss, net of non-cash adjustments. The decrease in net loss was primarily driven by an increase in revenue and a decrease in non-recurring general and administrative expenses incurred in the expansion of our business, including transaction-related expenses incurred during the nine months ended September 30, 2023.
Investing Activities
Our primary investing activities have consisted of payments related to the cost of construction at our various hangar campus development projects and investment in U.S. Treasury Securities. As our business expands, we expect to continue to invest in our current and anticipated future portfolio of hangar campus development projects.
Cash provided by investing activities was approximately $2.1 million for the nine months ended September 30, 2023, as compared to cash used in investing activities of approximately $213.5 million for the same period in 2022. The decrease of approximately $215.7 million in cash used in investing activities was driven primarily by approximately $90.0 million and $14.0 increases in proceeds received from the Company's held-to-maturity and available for sale investments, respectively, during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2023. The decrease was also attributable to a decreases of approximately $90.0 million and $24.6 million in held-to-maturity and available-for-sale U.S. Treasury purchases, respectively. The impact of our U.S. Treasury investment activities was offset by an approximately $4.4 million increase in capital expenditures.
Financing Activities
Our primary financing activities have consisted of capital raised to fund the growth of our business and proceeds from debt obligations incurred to finance our hangar campus development projects. We expect to raise additional equity capital and issue additional indebtedness as our business grows.
Net cash used in financing activities was approximately $0.5 million for the nine months ended September 30, 2023, as compared to net cash provided by financing activities of approximately $52.8 million for the same period in 2022. The approximately $53.3 million decrease in net cash provided by financing activities was primarily driven by $45.0 million of proceeds received from the issuance of the BOC PIPE and approximately $6.9 million of net proceeds from the Yellowstone trust account, both occurring during the nine months ended September 30, 2022 and not recurring during the nine months ended September 30, 2023.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable to smaller reporting companies.
| CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
In connection with the preparation of this form 10-Q, as required by Rules 13(a)-15(e) and 15(d)-15(e) under the Exchange Act our Chief Executive Officer and Chief Financial Officer carried out evaluations of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023 and concluded that our disclosure controls and procedures were not effective as of September 30, 2023 due to the material weakness in internal control over financial reporting described below.
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Management previously identified a material weakness in our internal control over financial reporting that prevented us from identifying a misclassification within the statement of cash flows and gave rise to the necessity to file a Form 10-Q/A for the three and six months ended June 30, 2023. Specifically, the Company’s internal control structure did not have an appropriate control to review the evaluation of the identification and classification of certain manual cash flow adjustments in accordance with applicable accounting guidance at each reporting period.
Remediation Plan
With oversight from the Audit Committee and input from management, the Company has begun designing and implementing changes in processes and controls to remediate the material weakness described above and to enhance our internal control over financial reporting, including a control to review non-standard manual adjustments to the statement of cash flows in accordance with applicable accounting guidance, and the contemporaneous preparation and review of the statement of cash flows at greater levels of disaggregation, including lower-level reporting units.
Changes in Internal Control over Financial Reporting
Other than described above, there have been no changes in our internal control over financial reporting during the quarter ended September 30, 2023 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 |
Except as stated below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
We identified material a weakness in our internal control over financial reporting, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate any material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
As discussed elsewhere in this Form 10-Q, we identified a material weakness in our internal control over financial reporting as of September 30, 2023 related to the classification of certain cash transactions made during the six months ended June 30, 2023 associated with the payment of construction retainage liabilities incurred during the years ended December 31, 2021 and December 31, 2022.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. With oversight from the Audit Committee and input from management, in order to remediate the material weakness in internal control over financial reporting related to the ineffective operation of controls related to manual adjustments to the statement of cash flows, the Company has begun designing and implementing changes in processes and controls to remediate the material weakness described above and to enhance our internal control over financial reporting, including a control to review non-standard manual adjustments to the statement of cash flows in accordance with applicable accounting guidance.
As a result of the material weakness described above and other related matters that may arise in future periods, we face potential for adverse regulatory consequences, including investigations, penalties or suspensions by the SEC or NYSE American, litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the restatement and material weakness in our internal control over financial reporting and the preparation of our consolidated financial statements. As of the date of this filing, we have no knowledge of any such regulatory consequences, litigation, claim or dispute. However, we can provide no assurance that such regulatory consequences, litigation, claim or dispute will not arise in the future. Any such regulatory consequences, litigation, claim or dispute, whether successful or not, could subject us to additional costs, divert the attention of our management, or impair our reputation. Each of these consequences could have a material adverse effect on our business, results of operations and financial condition.
We may identify future material weaknesses in our internal controls over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, and we may be unable to accurately report our financial results, or report them within the timeframes required by law or stock exchange regulations. We cannot assure that our existing material weakness will be remediated or that additional material weaknesses will not exist or otherwise be discovered, any of which could adversely affect our reputation, financial condition, and results of operations.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
| DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
| MINE SAFETY DISCLOSURES |
Not applicable.
| OTHER INFORMATION |
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K
| 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 |
||||||
| 101.INS (#) |
Inline XBRL Instance Document. |
|
| 101.SCH (#) |
Inline XBRL Taxonomy Extension Schema Document. |
|
| 101.CAL (#) |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
| 101.DEF (#) |
Inline XBRL Taxonomy Extension Definition. |
|
| 101.LAB (#) |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
| 101.PRE (#) |
Inline XBRL Taxonomy Presentation Linkbase Document. |
| 104 (#) |
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
| (#) |
Filed herewith. |
|
| (##) |
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Report, are not deemed filed with the SEC and are not to be incorporated by reference into any filing of Sky Harbour Group Corporation under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report irrespective of any general incorporation language contained in such filing. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SKY HARBOUR GROUP CORPORATION (Registrant) |
|||
| By: |
/s/ Tal Keinan |
||
| Tal Keinan Chief Executive (Principal Executive Officer) |
|||
| November 9, 2023 | |||
| By: |
/s/ Francisco Gonzalez |
||
| Francisco Gonzalez Chief Financial Officer (Principal Financial Officer) |
|||
| November 9, 2023 | |||
| By: |
/s/ Michael W. Schmitt |
||
| Michael W. Schmitt Chief Accounting Officer |
|||
| November 9, 2023 | |||
Exhibit 31.1
CERTIFICATIONS
I, Tal Keinan, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Sky Harbour Group Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 9, 2023
|
/s/ Tal Keinan |
||
|
Tal Keinan, Chief Executive Officer |
||
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATIONS
I, Francisco Gonzalez, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q of Sky Harbour Group Corporation; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 9, 2023
|
/s/ Francisco Gonzalez |
||
|
Francisco Gonzalez, Chief Financial Officer |
||
|
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sky Harbour Group Corporation (the “Company”) on Form 10‑Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: November 9, 2023 |
/s/ Tal Keinan |
|
|
Tal Keinan, Chief Executive Officer |
||
|
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sky Harbour Group Corporation (the “Company”) on Form 10‑Q for the period ended September 30, 2023 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: November 9, 2023 |
/s/ Francisco Gonzalez |
|
|
Francisco Gonzalez, Chief Financial Officer |
||
|
(Principal Financial Officer) |
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Preferred stock, par value (in dollars per share) | $ 0.0001 | |
| Preferred stock, shares authorized (in shares) | 10,000,000 | |
| Preferred stock, shares issued (in shares) | 0 | |
| Preferred stock, shares outstanding (in shares) | 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 | 200,000,000 |
| Common stock, shares issued (in shares) | 15,252,574 | 14,962,831 |
| Common stock, shares outstanding (in shares) | 15,252,574 | 14,962,831 |
| 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 | 50,000,000 |
| Common stock, shares issued (in shares) | 42,046,356 | 42,192,250 |
| Common stock, shares outstanding (in shares) | 42,046,356 | 42,192,250 |
Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue: | ||||
| Rental revenue | $ 2,502 | $ 431 | $ 5,337 | $ 1,236 |
| Total revenue | 2,502 | 431 | 5,337 | 1,236 |
| Expenses: | ||||
| Operating | 1,675 | 1,228 | 5,179 | 3,652 |
| Depreciation | 670 | 148 | 1,650 | 447 |
| Loss on impairment of long-lived assets | 0 | 0 | 0 | 248 |
| General and administrative | 3,556 | 3,599 | 10,838 | 12,136 |
| Total expenses | 5,901 | 4,975 | 17,667 | 16,483 |
| Operating loss | (3,399) | (4,544) | (12,330) | (15,247) |
| Other (income) expense: | ||||
| Interest expense | 234 | 0 | 316 | 0 |
| Unrealized gain on warrants | (1,597) | (1,452) | 0 | (2,904) |
| Other income | (37) | 0 | (252) | 0 |
| Total other (income) expense | (1,400) | (1,452) | 64 | (2,904) |
| Net loss | (1,999) | (3,092) | (12,394) | (12,343) |
| Net loss attributable to non-controlling interests | (1,810) | (2,479) | (6,788) | (8,632) |
| Net loss attributable to Sky Harbour Group Corporation shareholders | $ (189) | $ (613) | $ (5,606) | $ (3,711) |
| Loss per share | ||||
| Basic (in dollars per share) | $ (0.01) | $ (0.04) | $ (0.37) | $ (0.27) |
| Diluted (in dollars per share) | $ (0.01) | $ (0.04) | $ (0.37) | $ (0.27) |
| Weighted average shares | ||||
| Basic (in shares) | 15,245 | 14,949 | 15,132 | 13,628 |
| Diluted (in shares) | 15,245 | 14,949 | 15,132 | 13,628 |
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Net loss | $ (1,999) | $ (3,092) | $ (12,394) | $ (12,343) |
| Other comprehensive income (loss), before related income taxes: | ||||
| Unrealized gain (loss) on available-for-sale securities | 204 | (147) | 521 | (231) |
| Total comprehensive loss | $ (1,795) | $ (3,239) | $ (11,873) | $ (12,574) |
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]
|
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, 2021 | 0 | 0 | 0 | |||||||||||||||||||||||||||
| Balance at Dec. 31, 2021 | $ 54,029 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 16,931 | $ 0 | $ 16,931 | |||||||||||||||||||||
| Sky incentive compensation | $ 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 | ||||||||||||||
| Net income (loss), nci | $ 0 | $ (2,504) | ||||||||||||||||||||||||||||
| Net loss | $ (1,247) | (18,267) | ||||||||||||||||||||||||||||
| Sky incentive compensation prior to recapitalization | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 23 | $ 0 | 23 | ||||||||||||||||||||
| Net income (loss) | $ (1,247) | $ (18,267) | ||||||||||||||||||||||||||||
| Yellowstone Transaction and recapitalization (in shares) | 0 | 14,937,581 | 42,192,250 | |||||||||||||||||||||||||||
| Yellowstone Transaction and recapitalization | $ (54,029) | $ 1 | $ 4 | 28,681 | 0 | $ 0 | 28,686 | (15,707) | 81,024 | 94,003 | ||||||||||||||||||||
| Net loss following recapitalization | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ (1,247) | $ 0 | $ 0 | $ 0 | $ 0 | $ (15,763) | $ 0 | $ (15,763) | $ 0 | ||||||||||||||
| 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) | 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 | 16,931 | 0 | 16,931 | |||||||||||||||||||||
| Net income (loss), parent | (3,711) | |||||||||||||||||||||||||||||
| Net income (loss), nci | (8,632) | |||||||||||||||||||||||||||||
| Net loss | (12,343) | |||||||||||||||||||||||||||||
| Net income (loss) | (12,343) | |||||||||||||||||||||||||||||
| Net loss following recapitalization | (3,711) | |||||||||||||||||||||||||||||
| Unrealized gain (loss) on available-for-sale securities | (231) | |||||||||||||||||||||||||||||
| Balance (in shares) at Sep. 30, 2022 | 0 | 14,962,831 | 42,192,250 | |||||||||||||||||||||||||||
| Balance at Sep. 30, 2022 | $ 0 | $ 1 | $ 4 | 29,254 | (3,711) | (231) | 25,317 | 0 | 73,872 | 99,189 | ||||||||||||||||||||
| 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) | 12,923 | 0 | 78,583 | 91,506 | |||||||||||||||||||||
| Sky incentive compensation | 0 | 0 | 0 | 160 | 0 | 0 | 160 | 0 | 85 | 245 | ||||||||||||||||||||
| Net income (loss), parent | 0 | 0 | 0 | 0 | 12,665 | 0 | 12,665 | 0 | ||||||||||||||||||||||
| Net income (loss), nci | (2,402) | |||||||||||||||||||||||||||||
| Net loss | 10,263 | |||||||||||||||||||||||||||||
| Net income (loss) | 10,263 | |||||||||||||||||||||||||||||
| Net loss following recapitalization | 0 | 0 | 0 | 0 | 12,665 | 0 | 12,665 | 0 | ||||||||||||||||||||||
| Unrealized gain (loss) on available-for-sale securities | $ 0 | $ 0 | $ 0 | 0 | 0 | (84) | (84) | 0 | (84) | |||||||||||||||||||||
| Balance (in shares) at Jun. 30, 2022 | 0 | 14,937,581 | 42,192,250 | |||||||||||||||||||||||||||
| Balance at Jun. 30, 2022 | $ 0 | $ 1 | $ 4 | 28,841 | (3,098) | (84) | 25,664 | 0 | 76,266 | 101,930 | ||||||||||||||||||||
| Sky incentive compensation | 0 | 0 | 0 | 298 | 0 | 0 | 298 | 0 | 85 | 383 | ||||||||||||||||||||
| Net income (loss), parent | $ 0 | $ 0 | $ 0 | 0 | (613) | 0 | (613) | 0 | (613) | |||||||||||||||||||||
| Net income (loss), nci | (2,479) | (2,479) | ||||||||||||||||||||||||||||
| Net loss | (3,092) | |||||||||||||||||||||||||||||
| Exercise of warrants (in shares) | 0 | 250 | 0 | |||||||||||||||||||||||||||
| Exercise of warrants | $ 0 | $ 0 | $ 0 | 3 | 0 | 3 | 0 | 0 | 3 | |||||||||||||||||||||
| Net income (loss) | (3,092) | |||||||||||||||||||||||||||||
| Net loss following recapitalization | 0 | 0 | 0 | 0 | (613) | 0 | (613) | 0 | (613) | |||||||||||||||||||||
| Unrealized gain (loss) on available-for-sale securities | $ 0 | $ 0 | $ 0 | 0 | 0 | (147) | (147) | 0 | 0 | (147) | ||||||||||||||||||||
| Issuance of initial commitment shares (in shares) | 0 | 25,000 | 0 | |||||||||||||||||||||||||||
| Issuance of initial commitment shares | $ 0 | $ 0 | $ 0 | 112 | 0 | 0 | 112 | 0 | 0 | 112 | ||||||||||||||||||||
| Balance (in shares) at Sep. 30, 2022 | 0 | 14,962,831 | 42,192,250 | |||||||||||||||||||||||||||
| Balance at Sep. 30, 2022 | $ 0 | $ 1 | $ 4 | 29,254 | (3,711) | (231) | 25,317 | 0 | 73,872 | 99,189 | ||||||||||||||||||||
| Balance (in shares) at Dec. 31, 2022 | 0 | 14,962,831 | 42,192,250 | |||||||||||||||||||||||||||
| Balance at Dec. 31, 2022 | $ 0 | $ 1 | $ 4 | 29,560 | (3,184) | (102) | 26,279 | 0 | 72,096 | 98,375 | ||||||||||||||||||||
| Sky incentive compensation | $ 0 | $ 0 | $ 0 | 393 | 0 | 0 | 393 | 0 | 85 | 478 | ||||||||||||||||||||
| Exchange of Class B Common Stock (in shares) | 0 | 145,894 | 145,894 | |||||||||||||||||||||||||||
| Exchange of Class B Common Stock | $ 0 | $ 0 | $ 0 | 184 | 0 | 0 | 184 | 0 | (184) | 0 | ||||||||||||||||||||
| Exchange of Class B Common Stock (in shares) | 0 | (145,894) | (145,894) | |||||||||||||||||||||||||||
| Other comprehensive income | $ 0 | $ 0 | $ 0 | 0 | 0 | 177 | 177 | 0 | 0 | 177 | ||||||||||||||||||||
| Net income (loss), parent | 0 | 0 | 0 | 0 | (6,196) | 0 | (6,196) | 0 | ||||||||||||||||||||||
| Net income (loss), nci | (2,565) | |||||||||||||||||||||||||||||
| Net loss | (8,761) | |||||||||||||||||||||||||||||
| Net income (loss) | (8,761) | |||||||||||||||||||||||||||||
| Net loss following recapitalization | $ 0 | $ 0 | $ 0 | 0 | (6,196) | 0 | (6,196) | 0 | ||||||||||||||||||||||
| Balance (in shares) at Mar. 31, 2023 | 0 | 15,108,725 | 42,046,356 | |||||||||||||||||||||||||||
| Balance at Mar. 31, 2023 | $ 0 | $ 1 | $ 4 | 30,137 | (9,380) | 75 | 20,837 | 0 | 69,432 | 90,269 | ||||||||||||||||||||
| Balance (in shares) at Dec. 31, 2022 | 0 | 14,962,831 | 42,192,250 | |||||||||||||||||||||||||||
| Balance at Dec. 31, 2022 | $ 0 | $ 1 | $ 4 | 29,560 | (3,184) | (102) | 26,279 | 0 | 72,096 | 98,375 | ||||||||||||||||||||
| Net income (loss), parent | (5,606) | |||||||||||||||||||||||||||||
| Net income (loss), nci | (6,788) | |||||||||||||||||||||||||||||
| Net loss | (12,394) | |||||||||||||||||||||||||||||
| Net income (loss) | (12,394) | |||||||||||||||||||||||||||||
| Net loss following recapitalization | (5,606) | |||||||||||||||||||||||||||||
| Unrealized gain (loss) on available-for-sale securities | 521 | |||||||||||||||||||||||||||||
| Balance (in shares) at Sep. 30, 2023 | 0 | 15,252,574 | 42,046,356 | |||||||||||||||||||||||||||
| Balance at Sep. 30, 2023 | $ 0 | $ 1 | $ 4 | 31,139 | (8,791) | 298 | 22,651 | 0 | 65,363 | 88,014 | ||||||||||||||||||||
| Balance (in shares) at Mar. 31, 2023 | 0 | 15,108,725 | 42,046,356 | |||||||||||||||||||||||||||
| Balance at Mar. 31, 2023 | $ 0 | $ 1 | $ 4 | 30,137 | (9,380) | 75 | 20,837 | 0 | 69,432 | 90,269 | ||||||||||||||||||||
| Sky incentive compensation | 0 | 0 | 0 | 499 | 0 | 0 | 499 | 0 | 81 | 580 | ||||||||||||||||||||
| Other comprehensive income | 0 | 0 | 0 | 0 | 0 | 38 | 38 | 0 | 0 | 38 | ||||||||||||||||||||
| Net income (loss), parent | $ 0 | $ 0 | $ 0 | 0 | 778 | 0 | 778 | 0 | ||||||||||||||||||||||
| Net income (loss), nci | (2,412) | |||||||||||||||||||||||||||||
| Net loss | (1,634) | |||||||||||||||||||||||||||||
| Vesting of restricted stock units (in shares) | 0 | 124,261 | 0 | |||||||||||||||||||||||||||
| Exercise of warrants (in shares) | 0 | 225 | 0 | |||||||||||||||||||||||||||
| Exercise of warrants | $ 0 | $ 0 | $ 0 | 3 | 0 | 0 | 3 | 0 | 0 | 3 | ||||||||||||||||||||
| Net income (loss) | (1,634) | |||||||||||||||||||||||||||||
| Net loss following recapitalization | $ 0 | $ 0 | $ 0 | 0 | 778 | 0 | 778 | 0 | ||||||||||||||||||||||
| Balance (in shares) at Jun. 30, 2023 | 0 | 15,233,211 | 42,046,356 | |||||||||||||||||||||||||||
| Balance at Jun. 30, 2023 | $ 0 | $ 1 | $ 4 | 30,639 | (8,602) | 113 | 22,155 | 0 | 67,101 | 89,256 | ||||||||||||||||||||
| Sky incentive compensation | 0 | 0 | 0 | 500 | 0 | 0 | 500 | 0 | 72 | 572 | ||||||||||||||||||||
| Other comprehensive income | 0 | 0 | 0 | 0 | 0 | 185 | 185 | 0 | 0 | 185 | ||||||||||||||||||||
| Net income (loss), parent | $ 0 | $ 0 | $ 0 | 0 | (189) | 0 | (189) | 0 | (189) | |||||||||||||||||||||
| Net income (loss), nci | (1,810) | (1,810) | ||||||||||||||||||||||||||||
| Net loss | (1,999) | |||||||||||||||||||||||||||||
| Vesting of restricted stock units (in shares) | 0 | 19,363 | 0 | |||||||||||||||||||||||||||
| Net income (loss) | (1,999) | |||||||||||||||||||||||||||||
| Net loss following recapitalization | $ 0 | $ 0 | $ 0 | 0 | (189) | 0 | (189) | 0 | (189) | |||||||||||||||||||||
| Unrealized gain (loss) on available-for-sale securities | 204 | |||||||||||||||||||||||||||||
| Balance (in shares) at Sep. 30, 2023 | 0 | 15,252,574 | 42,046,356 | |||||||||||||||||||||||||||
| Balance at Sep. 30, 2023 | $ 0 | $ 1 | $ 4 | $ 31,139 | $ (8,791) | $ 298 | $ 22,651 | $ 0 | $ 65,363 | $ 88,014 |
Note 1 - Organization and Business Operations |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 | |||
| 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.”
The Company is organized 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 “Sky Common Units”). As of September 30, 2023, SHG owned approximately 26.2% of the Sky Common Units and the prior holders of Sky Common Units (the “LLC Interests”) owned approximately 73.8% of the Sky Common Units and control the Company through their ownership of the Company's Class B Common Stock, $0.0001 par value (“Class B Common Stock”).
|
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 | |||
| 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, 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 historical amounts have been reclassified to conform to the current year’s presentation.
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 the fair value of financial instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities, and estimates and assumptions used in the determination of the fair value of assets acquired and liabilities assumed in the business combination. 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 has been 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 and increased borrowing costs to the extent that the Company incurs additional indebtedness.
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%, unless otherwise disclosed. There are no unconsolidated variable interest entities (“VIEs”) in which Sky is considered to be the primary beneficiary.
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. Activities associated with internally manufactured hangar buildings, including materials, direct manufacturing labor, and manufacturing overhead directly identifiable with such activities are allocated to our construction projects and 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.
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.
Leases
The Company accounts for leases under Accounting Standards Codification (“ASC”) Topic 842, Leases. The Company determines whether a contract contains a lease at the inception of the contract. ASC Topic 842 requires lessees to recognize lease liabilities and right-of-use (“ROU”) assets for all operating leases with terms of more than 12 months on the consolidated balance sheets. The Company has made an accounting policy election to not recognize leases with an initial term of 12 months or less on the Company’s consolidated balance sheets and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. When management determines that it is reasonably certain that the Company will exercise its options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and lease liability balances.
The Company 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 as a component of operating expenses in the consolidated statements of operations.
Warrants liability
On January 25, 2022 (the "Closing Date") we completed the transactions (the "Yellowstone Transaction") contemplated by the Equity Purchase Agreement, dated as of August 1, 2021 (the “Equity Purchase Agreement”), between SHG's legal predecessor, Yellowstone Acquisition Company (“Yellowstone”), and Sky. The Company accounts for the warrants assumed in the Yellowstone Transaction (see Note 9 — Warrants) 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.
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 — Leases) and includes 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. Rental revenue and the corresponding rent and other receivables are recorded net of any concessions and uncollectible tenant receivables for all periods presented. 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 any additional rent or lease termination fees, as a current period adjustment to rental revenue.
Variable lease payments consist of tenant reimbursements for common area maintenance, utilities, and operating expenses of the property, and various other fees, including fees associated with the delivery of aircraft fuel, late fees, and lease termination fees. Variable lease payments are charged based on the terms and conditions included in the respective tenant leases and are recognized in the same period as the expenses are incurred. For the three and nine months ended September 30, 2023, rental revenue includes $920 and $1,224 of variable lease payments, respectively. Variable lease revenue recognized during the three and nine months ended September 30, 2023 included a negotiated lease termination fee received from a tenant of two hangars at OPF (as defined in Note 4 — Cost of Construction and Constructed Assets) whereby the Company agreed to release the tenant from its lease obligations in exchange for approximately 8.5 months of additional rent. For the three and nine months ended September 30, 2022, rental revenue includes $28 and $96 of variable lease payments, respectively.
As of September 30, 2023 and December 31, 2022, the deferred rent receivable included in prepaid expenses and other assets was $304 and $83, respectively. Rent received in advance represents tenant payments received prior to the contractual due date, and is included in accounts payable, accrued expenses, and other liabilities. Rent received in advance consisted of $175 and $95 as of September 30, 2023 and December 31, 2022, respectively.
For the three and nine months ended September 30, 2023 there were two tenants that individually accounted for more than 10% of the Company's revenue. The Company derived approximately 46% and 38% of its revenue from two tenants for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2022, the Company derived approximately 82% and 87% of its revenue from tenants, 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 nine months ended September 30, 2023 and 2022. The effective income tax rate for the three and nine months ended September 30, 2023 and 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 due to the cumulative losses sustained by the Company to date.
Recently Adopted Accounting Pronouncements
Credit Losses (Topic 326)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Subsequent to the issuance of ASU 2016-13, the FASB clarified the guidance through several ASUs. The collective new guidance (ASC 326) generally requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used and establishes additional disclosures related to credit risks. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2023. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.
|
Note 3 - Investments and Restricted Investments |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block] |
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 utilizing Level 1 inputs as determined based upon quoted market prices.
Pursuant to provisions within the Master Indenture of the Series 2021 Bonds, as defined in Note 8 — Bonds payable, loans payable, and interest, 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. Unrealized losses on certain of the Company's investments and restricted investments are primarily attributable to changes in interest rates. The Company does not believe the unrealized losses represent impairments because the unrealized losses are due to general market factors. The Company has not recognized an allowance for expected credit losses related to its investments or restricted investments as the Company has not identified any unrealized losses attributable to credit factors during the three and nine months ended September 30, 2023. The held-to-maturity restricted investments are carried on the consolidated balance sheet at amortized cost. As of September 30, 2023, 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 fair value of the Company’s restricted investments is estimated utilizing Level 1 inputs including prices for U.S. Treasury securities with comparable maturities on active markets.
The following tables are summaries of the amortized cost, unrealized gains, unrealized losses, and fair value by investment type as of September 30, 2023 and December 31, 2022:
The following table sets forth the maturity profile of the Company's investments and restricted investments as of September 30, 2023:
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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 September 30, 2023 includes the following completed and in-development projects:
Constructed assets, net, and cost of construction, consists of the following:
Depreciation expense for the three months ended September 30, 2023 and 2022 totaled $449 and $135, respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022 totaled $1,289 and $409, 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 three months ended September 30, 2023 and 2022 totaled $221 and $13, respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022 totaled $361 and $38 respectively. Capitalized depreciation of long-lived assets included in cost of construction totaled $59 and $178 for the three and nine months ended September 30, 2023, respectively. As of September 30, 2023 and December 31, 2022, long-lived assets included approximately $435 and $650, respectively, of purchase deposits towards long-lived assets which are not being depreciated as the assets have not been placed into service.
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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] |
Rapidbuilt Acquisition
On May 12, 2023 (the “Option Exercise Date”), Sky exercised its option to acquire a 51% equity interest in Overflow Ltd., a Texas limited partnership (“Overflow”), and its wholly-owned operating subsidiary, Rapidbuilt, Inc., a Texas corporation (“Rapidbuilt”), for nominal consideration (the “Rapidbuilt Acquisition”). As a result of the Rapidbuilt Acquisition, Weatherford Steel Buildings Holdings LLC, a Delaware limited liability company and wholly-owned subsidiary of Sky (“WSBH”), owns a 50% limited partnership interest in Overflow, and Weatherford Steel Buildings GP LLC, a Delaware limited liability company and wholly-owned subsidiary of Sky (“WSB GP”), owns a 1% general partnership interest in Overflow.
Rapidbuilt is a manufacturer of pre-engineered steel buildings that previously entered into a supplier arrangement with Sky. Rapidbuilt and Sky’s strategic partnership has resulted in a standard set of proprietary prototype hangar designs, which are intended to deliver high-quality business aviation facilities, lower construction costs, minimize development risk, expedite permit issuance, and facilitate the implementation of refinements across Sky’s portfolio. The Company had pre-existing relationships with Rapidbuilt through a vendor agreement entered into in July 2022 to acquire construction materials related to the Company's development projects (the "Rapidbuilt Vendor Agreement") and a revolving line of credit loan and security agreement (the "Rapidbuilt Loan Agreement") to fund the working capital requirement of Rapidbuilt. These pre-existing relationships were effectively settled in the acquisition and the net receivable balance of $44 is included within the consideration transferred. No gain or loss was recognized in the effective settlement of the Rapidbuilt Vendor Agreement and the Rapidbuilt Loan Agreement.
The total cash purchase consideration was nominal. The Company accounted for the acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to assets acquired and liabilities assumed based on respective estimated fair values. The estimated fair values of the acquired assets and assume liabilities are based on preliminary calculations and subject to further refinement and may require adjustments to arrive at the final purchase price accounting. The Company expects the final purchase price allocation to be completed in a period of time that will not exceed one year from the Option Exercise Date. There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation.
The following tables summarize the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the Rapidbuilt Acquisition:
Substantially all of Overflow and Rapidbuilt's activities relate to the manufacturing of pre-engineering hangar structures for Sky's hangar development projects. As such, the pro-forma effect of this acquisition on revenues and earnings was not material. The transaction costs associated with the acquisition were immaterial for the three and nine months ended September 30, 2023.
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 ground leases at airports 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. 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 the three and nine month periods ended September 30, 2023 and 2022. 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 14 — Commitments and Contingencies.
The Company’s ground leases have remaining terms ranging between 25 to 73 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.
In January 2023, the Company executed a lease amendment with the Town of Addison, Texas, to add two additional parcels of land (the "ADS Expansion Parcels") to the existing lease at ADS (the "ADS Lease"). The land associated with the ADS Expansion Parcels became available for possession in June 2023 for one parcel, and is expected to become available for possession in July 2024 for the other. The lease term for the ADS Expansion Parcels will be 40 years from the completion of construction for each respective parcel, and will effectively extend the term of the existing ADS Lease to be co-terminus with the ADS Expansion Parcels. The ADS Lease and the ADS Expansion Parcels contain no additional extension options as the lease term 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 ground support vehicles, and finance leases for vehicles supporting operations at Rapidbuilt.
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 September 30, 2023 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. There are no options given to the lessee to purchase the underlying assets.
The leases may contain variable fees, most commonly in the form of tenant reimbursements, which are recoveries of the common area maintenance and operating expenses of the property and are recognized as income in the same period as the expenses are incurred. The leases did not have any initial direct costs. The leases do not contain any restrictions or covenants to incur additional financial obligations by the lessee.
Tenant leases to which the Company is the lessor require the following non-cancelable future minimum lease payments from tenants as of September 30, 2023:
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Note 8 - Bonds 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 (“SHC”), as a parent corporation to its wholly-owned subsidiaries that operate each of the aircraft hangar development sites under its ground leases. SHC 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 SHC have each pledged as collateral its respective ownership interest in any of the Borrowers.
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.
On March 22, 2023, SHC elected to modify the scope of the Series 2021 Bonds pursuant to the terms of the Master Indenture, in order to reallocate a portion of the proceeds of the Series 2021 Bonds to its project site located at ADS (the “ADS Project”) . In connection with the election to modify the scope of the Series 2021 PABs to include the ADS Project, (i) Addison Hangars LLC (“Sky Harbour Addison”) and OPF Hangars Landlord LLC (“OPF Hangars”) joined as members of the Obligated Group, (ii) Sky Harbour Holdings LLC contributed its membership interest in OPF Hangars to SHC, (iii) SHC pledged its equity interest in each of Sky Harbour Addison and OPF Hangars to the Master Trustee as security for the obligations under the Series 2021 Bonds, (iv) Sky Harbour Addison granted to the Master Trustee a mortgage on its leasehold interest in the real property comprising the ADS Project, (v) OPF Hangars granted the Master Trustee a mortgage on its leasehold interest in the real estate comprising the project located in Opa Locka, Florida, and (vi) Sky Harbour Services LLC, a wholly-owned subsidiary of the Company, has agreed to waive all management fees and development fees during the construction period of the projects associated with the Series 2021 Bonds.
As of September 30, 2023 and December 31, 2022, the fair value of the Company’s Series 2021-1 Bonds was approximately $117.3 million and $119.5 million, respectively. As of September 30, 2023 and December 31, 2022, the fair value of the Company’s bonds is estimated utilizing Level 2 inputs including prices for the bonds on inactive markets.
The following table summarizes the Company’s Bonds payable as of September 30, 2023 and December 31, 2022:
Rapidbuilt Loan and Guaranty Agreement
In connection with the Rapidbuilt Acquisition, Sky and Vista Bank (the “Lender”) entered into a consent, waiver, and second amendment (the “Loan Amendment”) and a guaranty agreement (the “Guaranty Agreement”) associated with the senior loan agreement between Overflow and Rapidbuilt (collectively, the “Rapidbuilt Borrowers”), and the Lender (the “Rapidbuilt Loan”). Pursuant to the Loan Amendment, (i) the Lender consented to the change in control with respect to the Rapidbuilt Borrowers; (ii) the Lender waived any pre-existing events of default on the part of the Rapidbuilt Borrowers; (iii) the Lender agreed to release certain borrowed funds held in reserve, subject to specified terms and conditions; and (iv) the Rapidbuilt Borrowers agreed to certain reserve enhancement obligations, including the ability to repay principal early at the sole discretion of the Rapidbuilt Borrowers. Pursuant to the Guaranty Agreement, all of the Rapidbuilt Borrowers’ obligations under the Rapidbuilt Loan will be guaranteed by Sky.
The Rapidbuilt Loan was originated in December 2020 between the Borrowers and the Lender and had approximately $10.3 million outstanding as of the Option Exercise Date. The Rapidbuilt Loan accrues interest at a per annum rate equal to 3.00% above the three-month secured overnight financing rate published for first day of each calendar quarter by the Federal Reserve Bank of New York. The weighted-average interest rate was 8.53% and 8.44% for the three and nine months ended September 30, 2023, respectively. Interest is payable on a monthly basis, and the Rapidbuilt Borrowers agreed to make certain reserve enhancement payments on January 1, April 1, July 1, and October 1 of each calendar year. The maturity date of the Rapidbuilt Loan is December 1, 2025. The Rapidbuilt Loan is secured by the accounts, intellectual property, equipment, inventory, vehicles, and property of the Rapidbuilt Borrowers, and contains customary affirmative and negative covenants.
Interest
The following table sets forth the details of interest expense:
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Note 9 - Warrants |
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Warrants [Text Block] |
SHG's legal predecessor, 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”) as part of Yellowstone’s initial public offering. Yellowstone. In addition, Yellowstone sold 7,719,779 private placement warrants (the “Private Placement Warrants”, and together with the Public Warrants, the “Warrants”) to BOC Yellowstone LLC (the “Sponsor”). Each Private Warrant allows the Sponsor to purchase one share of Class A Common Stock at an exercise price of $11.50 per share. The Warrants remain outstanding under the same terms and conditions to purchase shares of the Company’s Class A Common Stock. As of September 30, 2023, 6,798,964 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 $0.20 and $0.20 per warrant on September 30, 2023 and December 31, 2022, respectively. The aggregate fair value of the Warrants was approximately $2.9 million and $2.9 million as of September 30, 2023 and December 31, 2022, respectively. The Company recognized unrealized gains of approximately $1.6 million and $1.5 million during the three months ended September 30, 2023 and 2022, respectively. The Company did recognize an unrealized gain or loss during the nine months ended September 30, 2023. The Company recognized an unrealized gain of approximately $2.9 million during the nine months ended September 30, 2022.
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Note 10 - Equity and Redeemable Equity |
9 Months Ended | ||
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| Notes to Financial Statements | |||
| Equity [Text Block] |
Common Equity
As of September 30, 2023, there were 15,252,574 and 42,046,356 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.
Common Stock Purchase Agreement
On August 18, 2022, the Company entered into a Common Stock Purchase Agreement (the “B. Riley Stock Purchase Agreement”) with B. Riley Principal Capital II, LLC (“B. Riley”). Pursuant to the B. Riley Stock Purchase Agreement, subject to the conditions and limitations set forth therein, the Company has the right, but not the obligation, from time to time at the Company's sole discretion over a 36-month term of the B. Riley Stock Purchase Agreement, to direct B. Riley to purchase up to 10 million shares of the Company's Class A Common Stock in the aggregate.
Under the B. Riley Stock Purchase Agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present B. Riley with a purchase notice (each, a "VWAP Purchase Notice"), directly B. Riley (as principal) to purchase a specified amount of shares not to exceed the lesser of (i) shares of Common Stock and (ii) 20% of the total aggregate number (or volume) of shares of Class A Common Stock traded on the NYSE American at a price(the "VWAP Purchase Price") equal to the product of 0.97 and the VWAP of the Company's Class A Common Stock on the applicable date for each VWAP Purchase Notice, subject to certain limitations contained in the B. Riley Stock Purchase Agreement. Sales of Class A Common Stock pursuant to the Stock Purchase Agreement, and the timing of any such sales, are solely at the discretion of the Company, and the Company is under no obligation to sell any securities to B. Riley under the B. Riley Stock Purchase Agreement.
In consideration for entering into the B. Riley Stock Purchase Agreement and concurrently with the execution of the B. Riley Stock Purchase Agreement, the Company issued to B. Riley 25,000 shares of Class A Common Stock as initial commitment shares and will issue up to an aggregate of 75,000 shares of its Class A Common Stock as additional commitment shares if certain conditions and milestones are met. As of September 30, 2023, the Company has not directed B. Riley to purchase any Class A Common Stock pursuant to the B. Riley Stock Purchase Agreement.
Non-controlling interests
The LLC Interests’ ownership in Sky is presented as non-controlling interests within the Equity section of the consolidated balance sheet as of September 30, 2023 and represents the Sky Common Units held by holders other than SHG. The holders of LLC Interests may exchange Sky Common Units along with an equal number of Class B Common Shares, for Class A Common Shares on the Company. The LLC Interests do not have the option to redeem their Sky Common Units for cash or a variable number of Class A Common Shares, nor does SHG have the option to settle a redemption in such a manner. As of September 30, 2023, the LLC interests owned approximately 73.8% of the Sky Common Units outstanding.
The former majority shareholder's ownership in Overflow is presented as a non-controlling interest within the Equity section of the consolidated balance sheet. As of September 30, 2023, the former majority shareholder owned approximately 49% of the partnership interests in Overflow.
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Note 11 - Equity Compensation |
9 Months Ended | ||
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Share-Based Payment Arrangement [Text Block] |
Restricted Stock Units (“RSUs”)
In February 2023, the Company granted time-based RSUs to certain employees under the Company’s 2022 Incentive Award Plan. 545,522 of time-based awards were granted at a grant date fair value of $5.75, which will vest ratably over a -year period beginning on the first anniversary of the grant date and ending on February 13, 2027.
During the three and nine months ended September 30, 2023, the Company recognized stock compensation expense of approximately $0.5 million and $1.4 million, respectively associated with all RSU awards, which is recorded within General and Administrative Expenses within the statement of operations. During the three and nine months ended September 30, 2022, the Company recognized stock compensation expense of $0.3 million and $0.5 million, respectively. As of September 30, 2023, there are approximately 956,869 non-vested RSUs outstanding with a weighted average grant date fair value of $6.53. The unrecognized compensation costs associated with all unvested RSUs at September 30, 2023 was approximately $5.8 million that is expected to be recognized over a weighted-average future period of 3.0 years.
Sky Incentive Units
The Company recognized equity-based compensation expense relating to awarded equity units of Sky (the “Sky Incentive Units”) of $72 and $238 for the three and nine months ended September 30, 2023, respectively, and $85 and $256 for the three and nine months ended September 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. As of September 30, 2023, there was $0.5 million of total unrecognized compensation expense that is expected to be recognized over a weighted-average future period of 1.6 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 or if-converted method as appropriate. 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.
Potentially dilutive shares excluded from the weighted-average shares used to calculate the diluted net loss per common share due the Company's net loss position were as follows (in thousands):
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Note 13 - Related Party Transactions |
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Related Party Transactions Disclosure [Text Block] |
On September 20, 2021, the Company entered into a non-exclusive agreement with Echo Echo, LLC, a related party to the Founder and CEO, for the use of a Beechcraft Baron G58 aircraft. The effective date of the agreement was September 8, 2021 and the agreement automatically renews annually. The agreement can be terminated without penalty if either party provides 35 days written notice, or if the aircraft is sold or otherwise disposed of. The Company is charged per flight hour of use along with all direct operating costs. Additionally, the Company will also incur the pro rata share of maintenance, overhead and insurance costs of the aircraft. For the three and nine months ended September 30, 2023, the Company recognized $41 and $157 of expense, respectively, within General and administrative expense under the terms of this agreement. For the three and nine months ended September 30, 2022, the Company recognized $50 and $134 of expense, respectively, associated with this agreement. The related liability is included in Accounts payable, accrued expenses and other liabilities on the consolidated balance sheet as of September 30, 2023.
For the three and nine months ended September 30, 2023, the Company recognized $3 and $98 of expense, respectively, for consulting services, to a company that employed the chief financial officer until prior to July 1, 2021. The Company recognized $40 and $85 of expense during the three and nine months ended September 30, 2022 to the same company.
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Note 14 - Commitments and Contingencies |
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Commitments and Contingencies Disclosure [Text Block] |
In addition to the lease payment commitments discussed in Note
7 —
Leases, 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.
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. Construction began on the APA Phase I project in October 2022.
The DVT Lease requires approximately $15.3 million and $14.6 million of improvements to be made for Phase I and for Phase II, if such option is exercised, respectively, within 12-months after receiving permitting documents for each Phase, but in no event later than May 2026. Construction began on the DVT Phase I project in December 2022.
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 APA Phase I and DVT Phase I projects. The Company may terminate any of the contracts or suspend construction without cause. There are no termination penalties under the APA Phase I or DVT Phase I construction contracts.
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Note 15 - Accumulated Other Comprehensive Income (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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Note 16 - Subsequent Events |
9 Months Ended | ||
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Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Subsequent Events [Text Block] |
PWK Ground Lease
On October 11, 2023, the Company entered into a ground lease agreement (the "PWK Lease") with Chicago Executive Airport ("PWK"). The PWK Lease is divided into two parcels, with the first parcel containing approximately 15 acres of land ("PWK Phase I"). Under the terms of the PWK Lease, it is the intent of PWK to grant the Company a second parcel containing approximately 10 acres of land ("PWK Phase II"). The grant of the PWK Phase II land is at the sole discretion of PWK following the Company's completion of its development project at PWK Phase I. The term of the PWK Lease will be 50 years from the acceptance of the PWK Phase I parcel following customary due diligence and completion of a land survey, with lease payments commencing following the completion of construction. The PWK Lease contains no additional extension options exercisable by the Company or PWK.
PWK is jointly owned by the Village of Wheeling and City of Prospect Heights, Illinois, and acts a primary reliever and general aviation airport within the Chicago metropolitan area. The FAA reported nearly 100,000 total airport operations at PWK in 2021 and 2022, with steady growth forecasted each year thereafter.
SGR Phase II Lease Termination
The Company was subject to requirements in its ground lease at SGR with respect to the Company's contemplated SGR Phase II project that defined (i) a minimum improvement amount of $2.0 million and (ii) that related construction commence by October 2023, unless otherwise waived or amended. In October 2023, the Company allowed the ground lease associated with the parcels designated for the SGR Phase II project to automatically terminate. The Company did not incur any lease termination penalties, nor had it capitalized any historical costs associated with the contemplated SGR Phase II project.
Private Placement and Securities Purchase Agreement
On November 1, 2023, the Company entered into a Securities Purchase Agreement (the “Private Placement Purchase Agreement”) with certain investors (collectively, the “Investors”), pursuant to which the Company (i) agreed to sell and issue to the Investors at an initial closing an aggregate of 6,586,154 shares (the “PIPE Shares”) of the Company’s Class A Common Stock and accompanying warrants to purchase up to 1,141,600 shares of Class A Common Stock (the “PIPE Warrants”), for an aggregate purchase price of $42.8 million (the "Initial Financing"), and (ii) agreed to sell and issue to the Investors at the second closing, if any, up to an aggregate of 2,307,692 PIPE Shares (the "Additional PIPE Shares") and accompanying PIPE Warrants to purchase up to an aggregate of 400,000 shares of Class A Common Stock (the "Additional PIPE Warrants") for an aggregate purchase price of up to $15.0 million (the "Additional Financing" and, together with the Initial Financing, the “Financing”).
The closing of the Initial Financing occurred on November 2, 2023 (the “Initial Closing Date”). The amount of Additional PIPE Shares and Additional PIPE Warrants, if any, to be issued in connection with the Additional Financing will be determined by Altai Capital Falcon LP (the “Lead Investor”) in its sole discretion, and the closing of the Additional Financing will occur, if at all, at the sole discretion of the Lead Investor, on or before November 30, 2023, subject to customary closing conditions.
The PIPE Warrants are similar in form and substance to the Company’s public warrants to purchase Class A Common Stock. The PIPE Warrants are exercisable at an exercise price of $11.50 per share, subject to adjustment as set forth therein. The PIPE Warrants are fully exercisable and expire on January 25, 2027. For further information regarding the terms of the PIPE Warrants, see the section entitled “Warrants” in Exhibit 4.4 (Description of Securities) to our Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 24, 2023.
The Private Placement Purchase Agreement includes certain covenants, including a limitation on the Company’s use of the net proceeds from the Financing, certain customary standstill restrictions for a period of 90 days following the Initial Closing Date and a restriction on paying any extraordinary dividend to the extent it would result in the issuance of a number of shares of Class A Common Stock upon exercise of the PIPE Warrants (without regard to any limitations on exercise of the PIPE Warrants) in excess of the number of shares of Class A Common Stock permissible by the NYSE American LLC to be issued without stockholder approval. In addition, pursuant to the Private Placement Purchase Agreement, the Company granted to the Lead Investor certain participation rights with respect to certain future equity and debt offerings by the Company until the eighteen-month anniversary of the Initial Closing Date. In addition, the Investors entered in to a six month customary lock-up agreement beginning on the Initial Closing Date.
Registration Rights Agreement
On November 1, 2023, in connection with the execution of the Private Placement Purchase Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Investors. Pursuant to the Registration Rights Agreement, certain holders of the Company’s securities are entitled to certain customary registration rights, and the Company is required to prepare and file a resale registration statement (the “Registration Statement”) with the SEC to register the resale of the PIPE Shares, the PIPE Warrants and 130% of the shares of Class A Common Stock issuable upon exercise of the PIPE Warrants (collectively, the “PIPE Securities”), and to use its best efforts to cause the Registration Statement to be declared effective by the SEC by the earlier of (i) 180 days following the Initial Closing Date and (ii) the fifth business day after the date the Company is notified by the SEC that the Registration Statement will not be “reviewed” or will not be subject to further review.
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Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2023 | |
| 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, 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 historical amounts have been reclassified to conform to the current year’s presentation.
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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 the fair value of financial instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities, and estimates and assumptions used in the determination of the fair value of assets acquired and liabilities assumed in the business combination. 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 has been 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 and increased borrowing costs to the extent that the Company incurs additional indebtedness.
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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%, unless otherwise disclosed. There are no unconsolidated variable interest entities (“VIEs”) in which Sky is considered to be the primary beneficiary.
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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. Activities associated with internally manufactured hangar buildings, including materials, direct manufacturing labor, and manufacturing overhead directly identifiable with such activities are allocated to our construction projects and 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.
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.
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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 to not recognize leases with an initial term of 12 months or less on the Company’s consolidated balance sheets and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. When management determines that it is reasonably certain that the Company will exercise its options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and lease liability balances.
The Company 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 as a component of operating expenses in the consolidated statements of operations.
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| Derivatives, Policy [Policy Text Block] | Warrants liability
On January 25, 2022 (the "Closing Date") we completed the transactions (the "Yellowstone Transaction") contemplated by the Equity Purchase Agreement, dated as of August 1, 2021 (the “Equity Purchase Agreement”), between SHG's legal predecessor, Yellowstone Acquisition Company (“Yellowstone”), and Sky. The Company accounts for the warrants assumed in the Yellowstone Transaction (see Note 9 — Warrants) 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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| 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 — Leases) and includes 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. Rental revenue and the corresponding rent and other receivables are recorded net of any concessions and uncollectible tenant receivables for all periods presented. 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 any additional rent or lease termination fees, as a current period adjustment to rental revenue.
Variable lease payments consist of tenant reimbursements for common area maintenance, utilities, and operating expenses of the property, and various other fees, including fees associated with the delivery of aircraft fuel, late fees, and lease termination fees. Variable lease payments are charged based on the terms and conditions included in the respective tenant leases and are recognized in the same period as the expenses are incurred. For the three and nine months ended September 30, 2023, rental revenue includes $920 and $1,224 of variable lease payments, respectively. Variable lease revenue recognized during the three and nine months ended September 30, 2023 included a negotiated lease termination fee received from a tenant of two hangars at OPF (as defined in Note 4 — Cost of Construction and Constructed Assets) whereby the Company agreed to release the tenant from its lease obligations in exchange for approximately 8.5 months of additional rent. For the three and nine months ended September 30, 2022, rental revenue includes $28 and $96 of variable lease payments, respectively.
As of September 30, 2023 and December 31, 2022, the deferred rent receivable included in prepaid expenses and other assets was $304 and $83, respectively. Rent received in advance represents tenant payments received prior to the contractual due date, and is included in accounts payable, accrued expenses, and other liabilities. Rent received in advance consisted of $175 and $95 as of September 30, 2023 and December 31, 2022, respectively.
For the three and nine months ended September 30, 2023 there were two tenants that individually accounted for more than 10% of the Company's revenue. The Company derived approximately 46% and 38% of its revenue from two tenants for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2022, the Company derived approximately 82% and 87% of its revenue from tenants, 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 nine months ended September 30, 2023 and 2022. The effective income tax rate for the three and nine months ended September 30, 2023 and 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 due to the cumulative losses sustained by the Company to date.
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| New Accounting Pronouncements, Policy [Policy Text Block] | Recently Adopted Accounting Pronouncements
Credit Losses (Topic 326)
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). Subsequent to the issuance of ASU 2016-13, the FASB clarified the guidance through several ASUs. The collective new guidance (ASC 326) generally requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used and establishes additional disclosures related to credit risks. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2023. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.
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Note 3 - Investments and Restricted Investments (Tables) |
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| Schedule of Available for Sale Securities, and Held to Maturity [Table Text Block] |
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Note 4 - Cost of Construction and Constructed Assets (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Constructed Assets, Net and Cost of Construction [Table Text Block] |
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Note 5 - Long-lived Assets (Tables) |
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 6 - Supplemental Balance Sheet and Cash Flow Information (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Business Acquisitions, by Acquisition [Table Text Block] |
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| Schedule of Accounts Payable and Accrued Liabilities [Table Text Block] |
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| Schedule of Cash Flow, Supplemental Disclosures [Table Text Block] |
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Note 7 - Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Supplemental Information of Leases [Table Text Block] |
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| Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block] |
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| Lessor, Operating Lease, Payment to be Received, Maturity [Table Text Block] |
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Note 8 - Bonds Payable and Interest (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Long-Term Debt Instruments [Table Text Block] |
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Note 12 - Earnings (Loss) Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
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| Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] |
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Note 15 - Accumulated Other Comprehensive Income (Loss) (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
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| Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] |
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Note 1 - Organization and Business Operations (Details Textual) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| 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] | ||
| Subsidiary, Ownership Percentage, Parent | 26.20% | |
| Sky Harbour LLC [Member] | LLC Interests and TRA Holders [Member] | ||
| Subsidiary, Ownership Percentage, Noncontrolling Owner | 73.80% |
Note 3 - Investments and Restricted Investments - Investments and Restricted Investments (Details) $ in Thousands |
Sep. 30, 2023
USD ($)
|
|---|---|
| Investments, due within one year | $ 16,832 |
| Restricted investments, due within one year | 63,432 |
| Investments,due on year through five years | 0 |
| Restricted investments, due on year through five years | 16,751 |
| Investments, total | 16,832 |
| Restricted investments, total | $ 80,183 |
Note 4 - Cost of Construction and Constructed Assets (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Asset under Construction [Member] | ||||
| Depreciation | $ 449 | $ 135 | $ 1,289 | $ 409 |
Note 4 - Cost of Construction and Constructed Assets - Constructed Assets, Net and Cost of Construction (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Asset under Construction [Member] | ||
| Property, Plant and Equipment, Gross | $ 80,611 | $ 40,921 |
| Accumulated depreciation | (2,501) | (1,212) |
| Property, Plant and Equipment, Net | 78,110 | 39,709 |
| OPF (Phase II), APA (Phase I), DVT (Phase I), and ADS (Phase I & II) | 78,110 | 39,709 |
| Construction in Progress [Member] | ||
| Property, Plant and Equipment, Net | 48,153 | 48,242 |
| OPF (Phase II), APA (Phase I), DVT (Phase I), and ADS (Phase I & II) | $ 48,153 | $ 48,242 |
Note 5 - Long-lived Assets (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Equipment and Software [Member] | |||||
| Depreciation | $ 221 | $ 13 | $ 361 | $ 38 | |
| Construction in Progress [Member] | |||||
| Depreciation | 59 | 178 | |||
| Equipment [Member] | |||||
| Property, Plant, and Equipment, Not in Service | $ 435 | $ 435 | $ 650 | ||
Note 5 - Long-lived Assets - Long-lived Assets, Net (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Equipment [Member] | ||
| Property, Plant and Equipment, Gross | $ 1,034 | $ 485 |
| Machinery and Equipment [Member] | ||
| Property, Plant and Equipment, Gross | 3,710 | 0 |
| Building [Member] | ||
| Property, Plant and Equipment, Gross | 5,380 | 0 |
| Land [Member] | ||
| Property, Plant and Equipment, Gross | 1,620 | 0 |
| Other Equipment and Fixtures [Member] | ||
| Property, Plant and Equipment, Gross | 531 | 110 |
| Purchase deposits and Construction in Progress [Member] | ||
| Property, Plant and Equipment, Gross | 435 | 650 |
| Equipment and Software [Member] | ||
| Property, Plant and Equipment, Gross | 12,710 | 1,245 |
| Accumulated depreciation | (635) | (95) |
| Property, Plant and Equipment, Net | $ 12,075 | $ 1,150 |
Note 6 - Supplemental Balance Sheet and Cash Flow Information (Details Textual) - Rapidbuilt Acquisition [Member] $ in Thousands |
May 12, 2023
USD ($)
|
|---|---|
| Business Acquisition, Percentage of Voting Interests Acquired | 51.00% |
| Business Combination, Consideration Transferred, Receivable | $ 44 |
| Overflow [Member] | Weatherford Steel Buildings Holdings LLC [Member] | |
| Subsidiary, Ownership Percentage, Parent | 50.00% |
| Overflow [Member] | Weatherford Steel Buildings GP LLC [Member] | |
| Subsidiary, Ownership Percentage, Parent | 1.00% |
Note 6 - Supplemental Balance Sheet and Cash Flow Information - Schedule of Business Acquisition (Details) - Rapidbuilt Acquisition [Member] $ in Thousands |
May 12, 2023
USD ($)
|
|---|---|
| Cash | $ 293 |
| Restricted Cash | 1,500 |
| Long-lived assets | 10,821 |
| Total assets | 12,614 |
| Accounts payable, accrued expenses and other liabilities | 1,496 |
| Loans payable and finance lease liabilities | 11,074 |
| Total liabilities | 12,570 |
| Total fair value of net assets acquired | 44 |
| Effective settlement of net receivable from Rapidbuilt | 44 |
| Total consideration transferred | $ 44 |
Note 6 - Supplemental Balance Sheet and Cash Flow Information - Accounts Payable, Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Costs of construction | $ 6,317 | $ 6,098 |
| Employee compensation and benefits | 1,530 | 2,047 |
| Interest | 1,739 | 3,470 |
| Professional Fees | 1,698 | 1,621 |
| Other | 2,619 | 948 |
| Accounts Payable and Accrued Liabilities | $ 13,903 | $ 14,184 |
Note 6 - Supplemental Balance Sheet and Cash Flow Information - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Accrued costs of construction, including capitalized interest | $ 8,593 | $ 10,121 |
| Accrued costs of long-lived assets | 47 | 0 |
| Accrued equity issuance costs | 0 | 1,500 |
| Debt issuance costs and premium amortized to cost of construction | 158 | 228 |
| Right-of-use assets obtained in exchange for operating lease liabilities | 1,368 | 2,876 |
| Net decrease in right-of-use assets and operating lease liabilities due to lease remeasurement | (206) | (12,189) |
| Interest paid | 7,256 | 5,533 |
| Cash, beginning of year | 2,174 | 6,805 |
| Restricted cash, beginning of year | 39,222 | 197,130 |
| Cash and restricted cash, beginning of year | 41,396 | 203,935 |
| Cash, end of period | 2,471 | 3,796 |
| Restricted cash, end of period | 34,289 | 38,392 |
| Cash and restricted cash, end of period | $ 36,760 | $ 42,188 |
Note 7 - Leases (Details Textual) |
1 Months Ended | |
|---|---|---|
Jan. 31, 2023 |
Sep. 30, 2023 |
|
| Minimum [Member] | ||
| Lessor, Operating Lease, Term of Contract (Year) | 1 year | |
| Maximum [Member] | ||
| Lessor, Operating Lease, Term of Contract (Year) | 10 years | |
| Ground Leases at SGR, OPF, and BNA [Member] | Minimum [Member] | ||
| Lessee, Operating Lease, Term of Contract (Year) | 25 years | |
| Ground Leases at SGR, OPF, and BNA [Member] | Maximum [Member] | ||
| Lessee, Operating Lease, Term of Contract (Year) | 73 years | |
| ADS Expansion Parcels, Lease Agreement[Member] | ||
| Lessee, Operating Lease, Term of Contract (Year) | 40 years | |
| Number of Additional Parcels of Land | 2 |
Note 7 - Leases - Supplemental Information (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Operating cash flows from operating leases as lessee | $ 1,504 | $ 1,384 | |
| Operating leases as lessee (in years) (Year) | 54 years 3 months 18 days | 55 years 3 months 18 days | |
| Operating leases as lessee | 4.65% | 4.62% | |
Note 7 - Leases - Future Minimum Lease Payments (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| 2023 (remainder of year), Operating Lease | $ 482 | |
| 2023 (remainder of year), Finance Lease | 8 | |
| 2024, Operating Lease | 2,137 | |
| 2024, Finance Lease | 29 | |
| 2025, Operating Lease | 2,379 | |
| 2025, Finance Lease | 23 | |
| 2026, Operating Lease | 2,431 | |
| 2026, Finance Lease | 17 | |
| 2027, Operating Lease | 2,494 | |
| 2027, Finance Lease | 2 | |
| Thereafter, Operating Lease | 199,870 | |
| Thereafter, Finance Lease | 0 | |
| Total lease payments, Operating Lease | 209,793 | |
| Total lease payments, Finance Lease | 79 | |
| Less imputed interest, Operating Lease | (154,766) | |
| Less imputed interest, Finance Lease | (5) | |
| Total, Operating Lease | 55,027 | $ 53,531 |
| Total, Finance Lease | $ 74 |
Note 7 - Leases - Non-cancelable Future Minimum Lease Payments from Tenants (Details) $ in Thousands |
Sep. 30, 2023
USD ($)
|
|---|---|
| 2023 (remainder of year) | $ 1,639 |
| 2024 | 6,133 |
| 2025 | 5,474 |
| 2026 | 3,352 |
| 2027 | 2,478 |
| Thereafter | 3,294 |
| Total lease payments | 22,370 |
| Less rent concessions to be applied at Company’s discretion | (214) |
| Total | $ 22,156 |
Note 8 - Bonds Payable, Loans Payable and Interest - Bonds Payable (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
May 20, 2021 |
|---|---|---|---|
| Total Bonds payable, net | $ 162,368 | $ 162,210 | |
| 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 | (4,753) | (4,753) | |
| Accumulated amortization of debt issuance costs and accretion of bond premium | 532 | 374 | |
| Total Bonds payable, net | $ 162,368 | $ 162,210 |
Note 8 - Bonds Payable, Loans Payable and Interest - Interest Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Interest | $ 1,969 | $ 1,735 | $ 5,522 | $ 5,205 |
| Accretion of bond premium and amortization of debt issuance costs | 52 | 75 | 158 | 228 |
| Total interest incurred | 2,021 | 1,810 | 5,680 | 5,433 |
| Less: capitalized interest | (1,787) | (1,810) | (5,364) | (5,433) |
| Interest expense | $ 234 | $ 0 | $ 316 | $ 0 |
Note 12 - Earnings (Loss) Per Share - Schedule of Loss Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Jun. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Net income (loss) | $ (1,999) | $ (1,634) | $ (8,761) | $ (3,092) | $ 10,263 | $ (12,394) | $ (12,343) |
| Net income (loss), nci | (1,810) | (2,479) | (6,788) | (8,632) | |||
| Basic and diluted net loss attributable to Sky Harbour Group Corporation shareholders | $ (189) | $ (613) | $ (5,606) | $ (3,711) | |||
| Based and diluted weighted average shares of Class A Common Stock outstanding (in shares) | 15,245 | 14,949 | 15,132 | 13,628 | |||
| Loss per share of Class A Common Stock – Basic and diluted (in dollars per share) | $ (0.01) | $ (0.04) | $ (0.37) | $ (0.27) | |||
Note 12 - Earnings (Loss) Per Share - Antidilutive Securities (Details) - shares |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Restricted Stock Units (RSUs) [Member] | ||||
| Antidilutive securities (in shares) | 957 | 631 | 957 | 631 |
| Warrant [Member] | ||||
| Antidilutive securities (in shares) | 14,519 | 14,519 | 14,519 | 14,519 |
| Class B Common Stock [Member] | ||||
| Antidilutive securities (in shares) | 42,046 | 42,192 | 42,046 | 42,192 |
| Sky Incentive Units [Member] | ||||
| Antidilutive securities (in shares) | 2,808 | 2,808 | 2,808 | 2,808 |
Note 13 - Related Party Transactions (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Company That Employed The Chief Financial Officer [Member] | Employee Service [Member] | ||||
| Related Party Transaction, Amounts of Transaction | $ 3 | $ 40 | $ 98 | $ 85 |
| Non-exclusive Agreement [Member] | ||||
| Related Party Transaction, Amounts of Transaction | $ 41 | $ 50 | $ 157 | $ 134 |
Note 14 - Commitments and Contingencies (Details Textual) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| BNA Construction Project [Member] | |
| Termination Penalty | $ 0 |
| 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 |
Note 15 - Accumulated Other Comprehensive Income (Loss) - Accumulated Other Comprehensive Income (Loss) (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Balance | $ 98,375 |
| Balance | 88,014 |
| AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-Sale, Including Noncontrolling Interest [Member] | |
| Balance | (102) |
| Other comprehensive income before reclassifications | 521 |
| Amounts reclassified to other (income) expense | (121) |
| Balance | 298 |
| AOCI Attributable to Parent [Member] | |
| Balance | (102) |
| Other comprehensive income before reclassifications | 521 |
| Amounts reclassified to other (income) expense | (121) |
| Balance | $ 298 |