Sky Harbour Group Corp 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   INDEX TO FINANCIAL STATEMENTS   Financial Statements Page     Report of Independent Registered Public Accounting Firm (PCAOB ID: 185 ); KPMG LLP , Omaha, NE 50     Balance Sheets - December 31, 2021   and December 31, 2020   51     Statements of Operations - Year Ended December 31, 2021 and for the Period From August 25, 2020 (inception) to December 31, 2020   52     Statements of Changes In Stockholders' Equity - Year ended December 31, 2021 and for the Period From August 25, 2020 (inception) to December 31, 2020   53     Statements of Cash Flows - Year ended December 31, 2021 and for the Period From August 25, 2020 (inception) to December 31, 2020   54     Notes to Financial Statements   55   48 Table of Contents   Report of Independent Registered Public Accounting Firm   To the Stockholders and Board of Directors Sky Harbour Group Corporation:   Opinion on the Financial Statements   We have audited the accompanying balance sheets of Sky Harbour Group Corporation (formerly Yellowstone Acquisition Company) (the Company) as of December 31, 2021 and 2020, the related statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2021 and for the period from August 25, 2020 (inception) to December 31, 2020, and the related notes (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the year ended December 31, 2021 and for the period August 25, 2020 (inception) to December 31, 2020, in conformity with U.S. generally accepted accounting principles.   Basis for Opinion   These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.       We have served as the Company’s auditor since 2020.   /s/ KPMG   Omaha, Nebraska   March 28, 2022   49 Table of Contents     SKY HARBOUR GROUP CORPORATION (f/k/a YELLOWSTONE ACQUISITION COMPANY) BALANCE SHEETS         December 31,       2021     2020   Assets:                 Current assets:                 Cash   $ 114,626     $ 1,122,194   Assets held in Trust     138,760,121       138,716,226   Prepaid expenses     239,660       403,186   Total Assets     139,114,407       140,241,606                     Liabilities and Stockholders' Equity:                 Current liabilities:                 Accounts payable and accrued expenses     1,174,980       153,928   Note payable to Sponsor     1,000,000       -   Deferred underwriting fee payable     4,759,615       4,759,615   Total current liabilities     6,934,595       4,913,543   Warrants liability     11,908,671       18,003,841   Total Liabilities     18,843,266       22,917,384                     Commitments and Contingencies:                     Class A common stock, $ 0.0001 par value; 13,598,898 shares subject to possible redemption at $ 10.20 per share     138,708,760       138,708,760                     Stockholders' Equity:                 Preferred stock, $ 0.0001 par value; 1,000,000 shares authorized; none issued and outstanding     -       -   Class A common stock, $ 0.0001 par value; 200,000,000 shares authorized     -       -   Class B common stock, $ 0.0001 par value; 20,000,000 shares authorized; 3,399,724 shares issued and outstanding     340       340   Additional paid-in capital     -       -   Accumulated deficit     ( 18,437,959 )     ( 21,384,878 ) Total Stockholders' Equity     ( 18,437,619 )     ( 21,384,538 ) Total Liabilities and Stockholders' Equity   $ 139,114,407     $ 140,241,606     See accompanying notes to financial statements.   50   Table of Contents   SKY HARBOUR GROUP CORPORATION (f/k/a YELLOWSTONE ACQUISITION COMPANY) STATEMENTS OF OPERATIONS     STATEMENT OF OPERATIONS                     For the Year Ended December 31, 2021     For the period from August 25, 2020 (inception) through December 31, 2020                                       Professional fees and other expenses   $ ( 2,345,854 )   $ ( 656,563 ) State franchise taxes, other than income tax     ( 200,000 )     ( 70,542 ) General and administrative costs     ( 639,439 )     ( 241,749 ) Change in fair value of warrant liability     6,095,170       ( 2,070,328 ) Net income (loss) income from operations     2,909,877       ( 3,039,182 ) Other income - interest and dividend income     35,423       -   Gain on disposition of investments     -       12,297   Unrealized gain on marketable securities held in Trust     1,619       2,081   Income (loss) before income taxes     2,946,919       ( 3,024,804 ) Income tax (provision) benefit     -       -   Net income (loss) attributable to common shares   $ 2,946,919     $ ( 3,024,804 )                   Net income (loss) per common share:                 Class A common stock - basic and diluted   $ 0.17     $ ( 0.27 ) Class B common stock - basic and diluted   $ 0.17     $ ( 0.27 )   See accompanying notes to financial statements.   51   Table of Contents     SKY HARBOUR GROUP CORPORATION (f/k/a YELLOWSTONE ACQUISITION COMPANY) STATEMENT OF CHANGES IN STOCKHOLDERS ’ EQUITY For the Period from August 25, 2020 (inception) to December 31, 2021       Common Stock     Additional             Total       Class A     Class B     Paid-In     Accumulated     Stockholder's       Shares     Amount     Shares     Amount     Capital     Deficit     Equity   Balance – August 25, 2020 (inception)     -     $ -       -     $ -     $ -     $ -     $ -   Issuance of Class B common stock to Sponsor     -       -       3,593,750       359       24,641       -       25,000   Sale of units in initial public offering, gross     -       -       -       -       135,988,980       -       135,988,980   Offering costs     -       -       -       -       ( 7,451,220 )     -       ( 7,451,220 ) Over-allotment reduction of Class B common stock     -       -       ( 194,026 )     ( 19 )     19       -       -   Sale of private placement warrants to Sponsor     -       -       -       -       7,719,779       -       7,719,779   Reclassification of warrants to liabilities     -       -       -       -       ( 15,933,513 )     -       ( 15,933,513 ) Common stock subject to possible redemption     -       -       -       -       ( 120,348,686 )     ( 18,360,074 )     ( 138,708,760 ) Net loss     -       -       -       -       -       ( 3,024,804 )     ( 3,024,804 ) Balance – December 31, 2020     -     $ -       3,399,724     $ 340     $ -     $ ( 21,384,878 )   $ ( 21,384,538 ) Net income     -       -       -       -       -       2,946,919       2,946,919   Balance – December 31, 2021     -     $ -       3,399,724     $ 340     $ -     $ ( 18,437,959 )   $ ( 18,437,619 )   See accompanying notes to financial statements.   52   Table of Contents   SKY HARBOUR GROUP CORPORATION (f/k/a YELLOWSTONE ACQUISITION COMPANY) STATEMENTS OF CASH FLOWS       For the Year Ended December 31,  2021     For the period from August 25, 2020 (inception) through December 31, 2020   Cash Flows from Operating Activities:                 Net Income (Loss)   $ 2,946,919     $ ( 3,024,804 ) Adjustments to reconcile net income (loss) to net cash used in operating activities:                 Unrealized gain on marketable securities held in Trust     ( 1,619 )     ( 2,081 ) Gain on disposition of investments     -       ( 12,297 ) Issuance costs related to warrant liability     -       509,899   Change in fair value of warrant liability     ( 6,095,170 )     2,070,328   Changes in operating assets and liabilities:                 Prepaid expenses     163,526       ( 403,186 ) Accounts payable and accrued expenses     1,021,052       153,928   Net cash used in operating activities     ( 1,965,292 )     ( 708,213 )                   Cash Flows from Investing Activities:                 Proceeds from sales of investments     1,179,227,029       266,000,000   Purchase of investments     ( 1,179,269,305 )     ( 404,701,848 ) Net cash used in investing activities     ( 42,276 )     ( 138,701,848 )                   Cash Flows from Financing Activities:                 Proceeds from issuance of Class A common stock, gross     -       135,988,980   Proceeds from issuance of Class B common stock to Sponsor     -       25,000   Proceeds from issuance of Private Placement Warrants     -       7,719,779   Proceeds from note payable to Sponsor     1,000,000       -   Offering costs     -       ( 3,201,504 ) Net cash provided by financing activities     1,000,000       140,532,255                     Net (decrease) increase in cash     ( 1,007,568 )     1,122,194                     Cash – beginning of the period     1,122,194       -   Cash – end of the period   $ 114,626     $ 1,122,194                     Interest Paid in Cash   $ -     $ -   Income Taxes Paid in Cash   $ -     $ -     See accompanying notes to financial statements.   53 Table of Contents   SKY HARBOUR GROUP CORPORATION (f/k/a YELLOWSTONE ACQUISITION COMPANY) NOTES TO FINANCIAL STATEMENTS     1. Organization and Business Operations   Organization and General   Yellowstone Acquisition Company (the “Company”) was incorporated in Delaware on August 25, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses (the “Business Combination”). The Company has neither engaged in any operations nor generated any revenue to date. The Company’s management has broad discretion with respect to the Business Combination, but intends to focus its search for a target business in the homebuilding,  manufacturing serving the homebuilding market, financial services and commercial real estate industries. The Company’s Sponsor is BOC Yellowstone LLC, a Delaware limited liability company (the “Sponsor”). The Company has selected December 31 as its year-end.   The Company completed its initial public offering (“IPO”) on October 26, 2020 as further described below. The Company will not generate any operating revenues until after the completion of its Business Combination, at the earliest. Subsequent to the IPO, the Company has generated and will continue to generate non-operating income in the form of investment income on cash and cash equivalents from the proceeds derived from the IPO and the sale of the Private Placement Warrants (as defined below) held in the Trust Account (as defined below).   Sky Harbour Business Combination   On August 1, 2021, Yellowstone Acquisition Company (the “Company”) and Sky Harbour LLC (“SHG”), a Delaware limited liability company, entered into a definitive equity purchase agreement (the “Equity Purchase Agreement”), which was subsequently announced on August 2, 2021.  Immediately thereafter, BOC YAC Funding LLC (“BOC YAC”), a Delaware limited liability company and wholly owned subsidiary of Boston Omaha Corporation (“Boston Omaha”), entered into a Series B Preferred Unit Purchase Agreement (the “Series B Purchase Agreement”) with SHG, which was also subsequently announced.    On August 25, 2021, SHG announced that its subsidiary, Sky Harbour Capital LLC (“SH Capital”), entered into an agreement for $ 166  million in financing through the sale of Series 2021 private activity tax-exempt senior bonds through municipal conduit issuer, Public Finance Authority (“PFA”). SH Capital and its subsidiaries Sky Harbour Sugar Land Airport, LLC, Sky Harbour Opa Locka Airport, LLC, Nashville Hangars LLC, APA Hangars LLC, and DVT Hangars LLC constitute an Obligated Group, the property and revenues of which secure the bonds on a joint and several basis. The bond issuance consists of unrated senior fixed rate tax-exempt bonds with three term maturities, in 2036, 2041 and 2054, with principal amortization from 2032 thru 2054 (average life of 24 years). The term bonds were priced to yield 3.80 % ( 2036 ), 4.00 % ( 2041 ) and 4.25 % ( 2054 ). This bond financing was completed on September 14, 2021.   On December 22, 2021, Boston Omaha Corporation, through its subsidiary BOC YAC, LLC, agreed to provide $ 45 million of PIPE financing through the purchase of Yellowstone Class A common stock at a price of $ 10.00 per share immediately prior to the closing of the business combination.  In consideration of the investment, SHG agreed to waive the $ 150 million minimum financing condition which required that the Company deliver cash proceeds of at least $150 million (after payment of certain expenses) to SHG as a condition precedent to consummating the business combination.    The Business Combination with SHG closed on January 25, 2022.   The cash proceeds are expected to be used to fund the development of several new hangar campuses.   Financing     Upon the closing of the IPO, $ 127,500,000 ($ 10.20 per Unit) of the net proceeds of the sale of the Units in the IPO, including proceeds of the sale of the Private Placement Warrants, were placed in a trust account (“Trust Account”) located in the United States at JP Morgan Chase Bank, N.A. with Continental Stock Transfer & Trust Company acting as trustee.  In connection with the exercise of the underwriters' overallotment option on December 1, 2020, $ 10,988,980 of the net proceeds of the sale of the additional Units sold, inclusive of the proceeds from the sale of the additional Private Placement Warrants to our Sponsor, were placed in the Trust Account. Upon the closing of the Business Combination, the funds remaining in the Trust Account following were distributed to the Company.   Trust Account   Prior to the closing of the Business Combination, funds held in the Trust Account were invested in U.S. government securities, within the meaning set forth in Section 2 (a)( 16 ) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule 2a - 7 of the Investment Company Act, as determined by the Company.   54 Table of Contents   Business Combination   The Company’s management had broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially all of the net proceeds were intended to be applied generally toward completing a Business Combination. The Company was required to complete its initial Business Combination with one or more target businesses that together have a fair market value equal to at least 80 % of the net assets held in the Trust Account (excluding the amount of any deferred underwriting commissions held in the Trust Account) at the time of the agreement to enter into a Business Combination. The Company would have only completed a Business Combination if the post-Business Combination company owns or acquires 50 % or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).    The Company, after signing a definitive agreement for a business combination, was required to provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The stockholders were entitled to redeem their shares for a pro rata portion of the amount held in the Trust Account (initially $10.20 per share), calculated as of two business days prior to the completion of a Business Combination, including any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations. There are no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The shares of Class A common stock are recorded at redemption value and classified as temporary equity, in accordance with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”   On January 25, 2022, the Company held a special meeting of the Company’s stockholders (the “Special Meeting”), held in lieu of the 2021 annual meeting of the Company’s stockholders, at which stockholders representing a majority of the outstanding shares of common stock approved the SHG business combination. The actual redemptions of common stock by Company stockholders in conjunction with the stockholder vote was 12,061,041 shares.   Emerging Growth Company   The Company is an “emerging growth company,” as defined in Section 2 (a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), and it has opted to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.   Further, section 102 (b)( 1 ) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has not elected to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, will adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statement with another emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.     2. Significant Accounting Policies   Basis of Presentation   The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission.   Net Loss Per Common Share     Net (loss) income per share of common stock is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period. We apply the two -class method in calculating earnings per share. Accretion associated with the redeemable shares of Class A common stock is excluded from earnings per share as the redemption value approximates fair value.   55 Table of Contents   As of December 31, 2021 and December 31, 2020, we had outstanding warrants to purchase up to 14,519,228 shares of Class A common stock. The weighted average of these shares was excluded from the calculation of diluted net (loss) income per share of common stock since the exercise of the warrants is contingent upon the occurrence of future events. As of December 31, 2021, we did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into shares of common stock and then share in our earnings. As a result, diluted net (loss) income per common share is the same as basic net (loss) income per common share for the periods presented.   Reconciliation of Net Earnings (Loss) per common share   Basic and diluted loss per common share is calculated as follows:       For the Year Ended December 31, 2021     For the Period from August 25, 2020 (inception) through December 31, 2020                                         Class A     Class B     Class A     Class B   Basic and diluted net income (loss) per share                                 Numerator:                                 Allocation of net income (loss)   $ 2,357,536     $ 589,383     $ ( 1,868,311 )   $ ( 1,156,493 )                                   Denominator:                                 Weighted-average shares outstanding     13,598,898       3,399,724       6,975,341       4,317,769                                     Basic and diluted net income (loss) per share   $ 0.17     $ 0.17     $ ( 0.27 )   $ ( 0.27 )   Cash and Cash Equivalents   The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.   Concentration of Credit Risk   Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At December 31, 2021, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.   Financial Instruments   The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts presented in the balance sheet.   Use of Estimates   The preparation of financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.   Warrants Liability   We account for the warrants in accordance with the guidance contained in Accounting Standards Codification 815 (“ASC 815” ), “Derivatives and Hedging”, under which the warrants do not meet the criteria for equity treatment and must be recorded as derivative liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust 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, and any change in fair value is recognized in our statement of operations. The fair value of the Private Placement Warrants and the Public Warrants issued in connection with the Public Offering have been measured based on the listed market price of such Warrants.   56 Table of Contents   Income Taxes   The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.   For those liabilities or benefits to be recognized, a tax position must be more-likely-than- not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to uncertain tax positions as income tax expense. At December 31, 2021, management has not identified any uncertain tax positions that are not more likely than not to be sustained.   The Company may be subject to potential examination by U.S. federal, states or foreign jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income amounts in various tax jurisdictions and compliance with U.S. federal, states or foreign tax laws.   The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.   Redeemable Shares of Class A Common Stock   All of the 13,598,898 shares of Class A common stock sold as parts of the Units in the Public Offering contain a redemption feature. In accordance with the Accounting Standards Codification 480 - 10 - S99 - 3A (“ASC 480” ), “Classification and Measurement of Redeemable Securities”, redemption provisions not solely within the control of the Company require the security to be classified outside of permanent equity. Ordinary liquidation events, which involve the redemption and liquidation of all of the entity’s equity instruments, are excluded from the provisions of ASC 480. The Company classifies all shares of Class A common stock as redeemable.   Recently issued accounting pronouncements not yet adopted   Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements based on current operations of the Company. The impact of any recently issued accounting standards will be re-evaluated on a regular basis or if a Business Combination is completed where the impact could be material.     3. Initial Public Offering   Public Units     On October 26, 2020, the Company consummated its IPO of 12,500,000 units at $ 10.00 per Unit, generating gross proceeds of $ 125,000,000 . Each unit issued in the offering consisted of one share of Yellowstone’s Class A common stock and one -half of one warrant, each whole warrant entitling the holder thereof to purchase one share of Class A common stock at an exercise price of $ 11.50 per share, subject to adjustment (see Note 6 ). The underwriters were granted a 45 -day option from the date of the final prospectus to the Initial Public Offering to purchase up to 1,875,000 additional Units to cover over-allotments, if any, at $ 10.00 per Unit.  On December 1, 2020, the underwriters' over-allotment option was exercised resulting in the purchase of an additional 1,098,898 Units.       4. Related Party Transactions   Founder Shares   On August 31, 2020, the Sponsor purchased 5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock, par value $ 0.0001 per share (the “Class B common stock”), for an aggregate price of $ 25,000 . Between October 9, 2020, and December 31, 2020, the Sponsor surrendered 2,350,276 Founder Shares to the Company for no consideration, resulting in an aggregate of 3,399,724 Founder Shares outstanding as of December 31, 2021 and December 31, 2020. The Founder Shares will automatically convert into Class A common stock on a one -for- one basis at the time of the Company’s initial Business Combination and are subject to certain transfer restrictions.   The sale of the Founders Shares is in the scope of ASC Topic 718, “Compensation-Stock Compensation.”  Under ASC Topic 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Founders Shares were granted subject to a performance condition (i.e., the occurrence of a Business Combination). Compensation expense related to the Founders Shares is recognized only when the performance condition is probable of occurrence. Stock-based compensation would be recognized at the consummation of a Business Combination in an amount equal to the number of Founders Shares that ultimately vest multiplied times the grant date fair value per share (unless subsequently modified) less the amount initially received for the purchase of the Founders Shares.    57 Table of Contents   Private Placement Warrants   The Sponsor purchased an aggregate of 7,500,000 Private Placement Warrants at a price of $ 1.00 per Private Placement Warrant from the Company in a private placement that closed simultaneously with the closing of the IPO. In connection with the underwriter’s exercise of the over-allotment option on December 1, 2020, the Sponsor purchased an additional 219,779 private placement warrants at a price of $ 1.00 per whole warrant. Each Private Placement Warrant is exercisable for one share of Class A common stock at a price of $ 11.50 per share, subject to adjustment (see Note 6 ). Of the total $ 7,500,000 in initial proceeds from the sale of the Private Placement Warrants, $ 5,000,000 was added to the net proceeds from the IPO held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.   Related Party Reimbursement and Loans   In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Any Working Capital Loans made by the Sponsor may be converted into warrants, at the price of $ 1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds held in the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.    On September 27, 2021, the Sponsor agreed to loan the Company an aggregate of up to $ 1,000,000 to cover expenses related to the Proposed Business Combination pursuant to a promissory note (the “Note”). This loan bears interest at the Federal Short Term Rate published pursuant to Section 1274 (d) of the Internal Revenue Code, compounded annually.  The loan is payable on the earlier of the date on which the Company consummates its Business Combination or the date that the Company’s winding up is effective.  The principal balance, together with all accrued interest thereon, may be prepaid at any time at the election of the Company.   As of December 31, 2021, there was $ 1,000,000 outstanding under the Note. The Sponsor may elect to convert all or any portion of the unpaid principal balance of the Note, together with all accrued and unpaid interest thereon, into that number of warrants, each whole warrant exercisable for one ordinary share of the Company (the “Conversion Warrants”), equal to: ( x ) the portion of the principal amount of the Note, together with all accrued and unpaid interest thereon, being converted, divided by (y) $ 1.50 , rounded up to the nearest whole number of warrants.     5. Income Taxes   Effective Tax Rate Reconciliation   We are subject to taxation in all jurisdictions in which we operate that impose an income tax on our business activities. The components of the income tax expense for the years ended  December 31,  and the tax effects of temporary differences that give rise to deferred taxes at  December 31,  are as follows:       Year ended December 31,       2021     2020   Income tax expense (benefit):                 Deferred federal income tax expense (benefit)     ( 767,176 )     ( 93,745 ) Deferred state income tax expense (benefit)     ( 225,399 )     ( 32,634 )                   Total Income Tax Benefit Before Valuation Allowance     ( 992,575 )     ( 126,379 )                   Valuation allowance     992,575       126,379                     Total Income Tax Expense (Benefit)   $ -     $ -     A reconciliation of the statutory federal income tax expense to the income tax expense (benefit) from continuing operations provided at December 31, 2021 and December 31, 2020  is as follows:       For the Year Ended December 31, 2021     For the Period from August 25, 2020 (inception) through December 31, 2020   Income tax expense (benefit) at the federal statutory rate   $ 618,853     $ ( 93,745 ) State income taxes (benefit) - net of federal income tax benefits     182,709       ( 32,634 ) Unrealized gain on warrants     ( 1,657,887 )     -   Unrealized gain on securities     ( 440 )     -   Other, net     ( 9,431 )     -   Change in valuation allowance     866,196       126,379   Total income tax expense (benefit)   $ -     $ -       58 Table of Contents   Components of the Company’s deferred tax assets at December 31, 2021  and December 31, 2020 are as follows:   Net operating loss carryforwards   $ 455,199     $ 126,379   Start-up costs     537,376       -   Valuation allowance     ( 992,575 )     ( 126,379 ) Total deferred tax asset   $ -     $ -     The realization of deferred tax assets, including net operating loss carryforwards, is dependent on the generation of future taxable income sufficient to realize the tax deductions, carryforwards, and credits. Valuation allowances on deferred tax assets are recognized if it is determined that it is more likely than not that the asset will not be realized. For the years ended December 31, 2021 and 2020, we recorded a full valuation allowance due to historical losses before income taxes which reduced management's ability to rely on future expectations of income.   As of December 31, 2021,  we have available federal tax operating loss carry forwards of approximately $ 1.7  million, which arose in tax years 2021 and 2020.  Tax operating loss carryovers arising in years after  2017   may  be carried forward indefinitely but are only available to offset 80% of future taxable income. We have available state tax operating loss carryforwards of approximately $ 1.7  million, which are available to reduce future state taxable income and would begin to expire in tax year 2040 in various amounts.   Uncertain Tax Positions     We believe that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within 12 months of the reporting date.   The federal and state statutes of limitation for assessment of tax liability generally lapse within three years after the date the tax returns are filed. However, income tax attributes that are carried forward, such as net operating loss carryforwards, may be challenged and adjusted by taxing authorities at any time prior to the expiration of the statute of limitations for the tax year in which they are utilized. As of December 31, 2021, we do not have any open exams; however, all tax years are subject to examination by the Internal Revenue Service.     6. Stockholders’ Equity   Common Stock   Class A common stock — The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $ 0.0001 per share. As of December 31, 2021, there were 13,598,898 shares of Class A common stock issued and outstanding, all of which is subject to possible redemption.   Class B common stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $ 0.0001 per share. As of December 31, 2021, there were 3,399,724 shares of Class B common stock outstanding.   Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s stockholders, except as required by law.   The shares of Class B common stock are identical to the shares of Class A common stock included in the units sold in the offering, and holders of Class B common stock have the same stockholder rights as public stockholders, except that (i) the shares of Class B common stock are subject to certain transfer restrictions, as described in more detail below, (ii) the Sponsor, officers and directors have entered into a letter agreement with the Company, pursuant to which they have agreed (A) to waive their redemption rights with respect to any Class B common stock and any public shares held by them in connection with the completion of the Business Combination and (B) to waive their rights to liquidating distributions from the Trust Account with respect to any Class B common stock held by them if the Company fails to complete the Business Combination within the prescribed time period, although they will be entitled to liquidating distributions from the Trust Account with respect to any public shares they hold if the Company fails to complete the Business Combination within such time period, (iii) the Class B common stock are shares that will automatically convert into shares of the Class A common stock at the time of the initial Business Combination, on a one -for- one basis, subject to adjustment pursuant to certain anti-dilution rights and (iv) are subject to registration rights. If the Company submits the Business Combination to the public stockholders for a vote, the Sponsor has agreed to vote any Class B common stock held by it and any public shares purchased during or after the offering in favor of the initial Business Combination.   With certain limited exceptions, the shares of Class B common stock are not transferable, assignable or saleable (except to the officers and directors and other persons or entities affiliated with the Sponsor and other permitted transferees, each of whom will be subject to the same transfer restrictions) until the earlier of (A) one year after the completion of the initial Business Combination or (B) subsequent to the initial Business Combination, ( x ) if the last sale price of the Class A common stock equals or exceeds $ 12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30 -trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property.   59 Table of Contents   On November 16, 2020, BOC Yellowstone LLC transferred to BOC Yellowstone II LLC 206,250 shares of Class B common stock for no consideration. All other shares of Class B common stock are owned by BOC Yellowstone LLC. BOC Yellowstone LLC sold to the lead investor in the Company's IPO a membership interest in BOC Yellowstone II LLC for a purchase price of $ 309,375 . Upon the completion of any Business Combination, BOC Yellowstone LLC has agreed to transfer the 206,250 shares of Class B common stock to this investor. Any Class B common stock ultimately distributed to the investor is subject to all restrictions imposed on the Sponsor, including but not limited to, waiver of redemption rights in connection with completion of any initial Business Combination and rights to liquidating distributions from the trust account if the Company fails to complete the initial Business Combination. Any shares held by such investor will be subject to the anti-dilution provisions for the Class B common stock and the impact thereof. BOC Yellowstone LLC is the sole managing member of BOC Yellowstone II LLC.   Preferred Stock   The Company is authorized to issue 1,000,000 shares of preferred stock, with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2021, there were no shares of preferred stock issued or outstanding.     7. Commitments   Registration Rights   The holders of the Founder Shares, Private Placement Warrants, Conversion Warrants that may be issued upon conversion of the Note, and any additional warrants that may be issued in connection with any further Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants, the Conversion Warrants that may be issued upon conversion of the Note and any additional warrants that may be issued in connection with any further Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.   Underwriting Agreement   The underwriters were entitled to a cash underwriting discount of $ 0.20 per Unit, or $ 2,500,000 in the aggregate, which amount was paid upon the closing of the Initial Public Offering. In addition, the underwriters are entitled to a deferred fee of $ 0.35 per Unit, or $ 4,759,615 (including over-allotment units) in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.       8. Fair Value Measurements   The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.   The fair value of the Company's financial assets and liabilities reflects management's estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:   Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.   Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.                60 Table of Contents   Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.   The Company's assets that are measured at fair value on a recurring basis at December 31, 2021 are comprised of $ 69,378,000 of marketable U.S. treasury securities and $ 69,382,121 of money market funds, both of which are held in the Trust Account, and $ 11,908,671 of Public and Private Placement warrants issued in connection with our Initial Public Offering, all of which are classified as Level 1 within the fair value hierarchy and are measured using quoted prices in active markets for identical assets or liabilities.  For the year ended December 31, 2021, the Company recognized a gain in the statement of operations resulting from a decrease in the fair value of the warrant liability of $ 6,095,170 presented as change in fair value of warrant liability.     9. Subsequent Events   Business Combination with Sky     As described in Note 1, the Company completed the business combination with Sky on January 25, 2022, following stockholder approval. Prior to the completion of the business combination, the Company entered into subscription agreements with BOC YAC, LLC, a subsidiary of Boston Omaha Corporation, pursuant to which the Company issued 4,500,000 shares of Class A common stock at $ 10 per share, for gross proceeds to the Company of $ 45,000,000 , immediately prior to the completion of the business combination.   Following this transaction, Sky became a consolidated subsidiary of the Company, which was renamed Sky Harbour Group Corporation, shares of which listed for trading on the New York Stock Exchange under the symbol “SKYH” on January 25, 2022.  The Company’s financial statement presentation to be included in quarterly and annual filings with the SEC on Forms 10 -Q and 10 -K with respect to periods subsequent to the business combination with Sky will include the consolidated financial statements of Sky and its subsidiaries for periods prior to the completion of the Business Combination and of the Company for periods from and after the Business Combination.      The Company paid the deferred underwriting discount totaling $ 4,759,615 or 3.50 % of the gross offering proceeds of the Public Offering which was accrued as of December 31, 2021, to the underwriter on January 25, 2022 upon the Company’s consummation of the business combination with Sky.    Also in connection with the closing of the business combination on January 25, 2022, the Company repaid the outstanding note payable to Sponsor of $ 1,000,000 in full.     OPF Lease Transaction   The Company’s ground lease at OPF was entered into in May 2019 through its wholly owned subsidiary, Sky Harbour Opa Locka Airport LLC (“SHOLA”), with AA Acquisitions LLC (“AA”), the master ground lessee of Miami Dade County (“MDC”), the ultimate landowner. On March 2, 2022, the Company, through a wholly-owned subsidiary outside the Obligated Group, entered into an agreement for the Company to purchase AA’s underlying ground lease for approximately $ 8.5 million and lease the OPF property directly from MDC. The transaction will also require the Company to pay approximately $ 1.0 million in transfer fees to MDC and is expected to close in early April 2022.   After such closing, SHOLA will continue to be obligated under the existing sublease but to an affiliate within the Company. The transaction would extend the term of the lease at OPF for the Company for an additional 10 years.   61 Table of Contents       ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES   Information required by this item is set forth under Item 4.01 of our Current Report on Form 8-K filed with the SEC on January 31, 2022.