What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 495 added, 220 removed, 823 unchanged (46% of the section changed)

3 unchanged sentences

(in thousands, except share data)

March 31, 2022

June 30, 2022

December 31, 2021

4 unchanged sentences

197,130  

29,913  

Restricted investments

24 unchanged sentences

Warrants liability

21,924  

Total liabilities

6 unchanged sentences

$ 0.0001 par value;

10,000,000 shares authorized as of March 31, 2022;

10,000,000 shares authorized as of June 30, 2022;

none issued and outstanding

Class A common stock, $ 0.0001 par value;

200,000,000 shares authorized as of March 31, 2022;

14,937,581 shares issued and outstanding as of March 31, 2022

200,000,000 shares authorized as of June 30, 2022;

14,937,581 shares issued and outstanding as of June 30, 2022

Class B common stock, $ 0.0001 par value;

50,000,000 shares authorized as of March 31, 2022;

42,192,250 shares issued and outstanding as of March 31, 2022

50,000,000 shares authorized as of June 30, 2022;

42,192,250 shares issued and outstanding as of June 30, 2022

Additional paid-in capital

2 unchanged sentences

( 3,098 )  

Accumulated other comprehensive (loss) income

( 84 )  

Total Sky Harbour Group Corporation stockholders’

equity  

25,664  

13 unchanged sentences

Three Months Ended

March 31, 2022

Three Months Ended

March 31, 2021

Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Rental revenue

Total revenue

Loss on impairment of long-lived assets

General and administrative

Total expenses

Other Expenses:

11,508  

Other (income) expense:

Interest expense, net of capitalized interest

Unrealized loss on warrants

Unrealized (gain) loss on warrants

( 15,390 )  

( 1,452 )  

Loss on extinguishment of note payable to related party

Total Other Expenses

Net loss attributable to non-controlling interests

Net loss attributable to Sky Harbour Group Corporation shareholders

Loss per share

Total other (income) expense

( 15,390 )  

( 1,452 )  

Net income (loss)

$ 10,263  

$ ( 2,778 )  

$ ( 9,251 )  

Net income (loss) attributable to non-controlling interests

( 2,402 )  

( 6,153 )  

Net income (loss) attributable to Sky Harbour Group Corporation shareholders

$ 12,665  

$ ( 2,778 )  

$ ( 3,098 )  

Earnings (loss) per share

$ 0.85  

$ ( 0.24 )  

$ ( 0.09 )  

$ ( 0.24 )  

Weighted average shares

14,938  

12,957  

29,466  

12,957  

See accompanying Notes to Unaudited Consolidated Financial Statements

SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Three Months Ended

Six Months Ended

Net income (loss)

$ 10,263  

$ (2,778)  

$ (9,251)  

$ (4,824)  

Other comprehensive income (loss), before related income taxes:

Unrealized gains (losses) on available-for-sale securities

Total other comprehensive income (loss)

$ 10,179  

$ (2,778)  

$ (9,335)  

$ (4,824)  

See accompanying Notes to Unaudited Consolidated Financial Statements

SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’

1 unchanged sentence

Redeemable Sky

Accumulated Other

Preferred Units

Class A Common Stock  

Class B Common Stock  

Additional Paid-in Capital  

Accumulated Deficit

Total Stockholders ’

Equity  

Members Equity  

Non-Controlling Interests  

Total Equity  

Amount  

Comprehensive

Stockholders’

Balance at December 31, 2021

2 unchanged sentences

$ 16,931  

Incentive compensation prior to recapitalization

Net loss prior to recapitalization

Sky incentive compensation prior to recapitalization

Net income (loss) prior to recapitalization

( 1,247 )  

8 unchanged sentences

94,003  

Incentive compensation following recapitalization

Net loss following recapitalization

Sky incentive compensation following recapitalization

Net income (loss) following recapitalization

( 15,763 )  

9 unchanged sentences

91,506  

Share-based compensation

Sky incentive compensation

Other comprehensive income (loss)

( 84 )  

Net income (loss)

12,665  

( 2,402 )  

10,263  

Balance at June 30, 2022

14,937,581  

42,192,250  

$ 28,841  

$ ( 3,098 )  

$ ( 84 )  

$ 25,664  

$ 76,266  

$ 101,930  

Redeemable Series B

Accumulated Other

Preferred Units

Class A Common Stock  

Class B Common Stock  

Additional Paid-in Capital  

Accumulated Deficit  

Total Stockholders ’

Equity  

Members Equity  

Non-Controlling Interests  

Total Equity (Deficit)  

Amount  

Comprehensive

Stockholders’

Balance at December 31, 2020

9 unchanged sentences

27,999  

Equity issuance costs

Sky incentive compensation

( 2,778 )  

Balance at June 30, 2021

$ 25,265  

See accompanying Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

(in thousands)

Three months ended

March 31, 2022

March 31, 2021

Six months ended

June 30, 2022

June 30, 2021

Cash flows from operating activities:

$ ( 9,251 )  

Adjustments to reconcile net loss to net cash used in operating activities:

2 unchanged sentences

Loss on extinguishment of related party loan payable

Incentive compensation

Equity-based compensation

Loss on impairment of long-lived assets

Non-cash operating lease expense

Unrealized loss on warrants

Unrealized gain on warrants

( 1,452 )  

Changes in operating assets and liabilities:

Prepaid expenses and other assets

( 3,898 )  

Right-of-use asset initial direct costs

( 9,555 )  

Accounts payable, accrued expenses and other liabilities

( 1,991 )  

Net cash used in operating activities

( 24,304 )  

Cash flows from investing activities:

Purchases of long-lived assets

( 484 )  

Payments for cost of construction

( 20,739 )  

Purchases of available for sale investments

( 29,997 )  

Purchases of held-to-maturity investments

Cash used in investing activities

( 166,560 )  

Proceeds from held-to-maturity investments

28,468  

Net cash used in investing activities

( 189,312 )  

Cash flows from financing activities:

Proceeds from issuance of Sky Series A Preferred Units

30,000  

Proceeds from issuance of BOC PIPE

45,000  

Proceeds from Yellowstone trust

15,691  

Payments for equity issuance costs

( 8,822 )  

Payments for debt issuance costs

3 unchanged sentences

Net cash provided by financing activities

Net increase (decrease) in cash and restricted cash

51,869  

25,890  

Net (decrease) increase in cash and restricted cash

( 161,747 )  

20,508  

Cash and restricted cash, beginning of year

203,935  

Cash and restricted cash, end of period

$ 42,188  

$ 20,580  

See accompanying Notes to Unaudited Consolidated Financial Statements

1 unchanged sentence

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

June 30, 2022

(in thousands, except share data)

Organization and Business Operations

4 unchanged sentences

As of the Closing Date, SHG owned approximately 26.1 % of the common units of Sky (the “Sky Common Units”), and the prior holders of Sky’s Existing Common Units (the “LLC Interests”) owned approximately 73.9 % of the Sky Common Units and control the Company through their ownership of the Class B Common Stock, $ 0.0001 par value (“Class B Common Stock”) of the Company.

As of March 31, 2022, the Company and the LLC Interests owned approximately 26.1 % and 73.9 % of Sky Common Units, respectively.

As of June 30, 2022 , the Company and the LLC Interests owned approximately 26.1 % and 73.9 % of Sky Common Units, respectively.

See Notes 2 and 3 for additional discussion related to the Yellowstone Transaction.

4 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

The Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes contained in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2021, as well as the financial statements of Sky for the year ended December 31, 2021 file by the Company on its Current Reports on Form 8 -K/A on March 28, 2022, which includes additional disclosures and a summary of our 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.

2 unchanged sentences

Notwithstanding the legal form of the Yellowstone Transaction pursuant to the terms therein, the Yellowstone Transaction was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”).

Under this method of accounting, SHG was treated as the acquired company for financial reporting purposes, and Sky was treated as the accounting acquirer.

Under this method of accounting, Yellowstone was treated as the acquired company for financial reporting purposes, and Sky was treated as the accounting acquirer.

In accordance with this accounting method, the Yellowstone Transaction was treated as the equivalent of Sky issuing stock for the net assets of Yellowstone, accompanied by a recapitalization.

7 unchanged sentences

Sky’s assets were larger in relative size compared to Yellowstone’s assets prior to the Yellowstone Transaction.

Thus, the financial statements included in this quarterly report for the three months ended March 31, 2022 reflect (i) the historical operating results of Sky prior to the Yellowstone Transaction;

Thus, the financial statements included in this quarterly report for the 

three and six months ended June 30, 2022 reflect (i) the historical operating results of Sky prior to the Yellowstone Transaction;

(ii) the combined results of Sky and SHG from the date of the Yellowstone Transaction;

2 unchanged sentences

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 the estimates of collectability of tenant lease payments, assumptions used within impairment analyses, estimated useful lives of depreciable assets and amortizable costs, estimates of inputs utilized in determining incentive compensation expense and financial instruments such as warrants, and estimates and assumptions related to right-of-use assets and operating lease liabilities.

Such estimates include assumptions used within impairment analyses, estimated useful lives of depreciable assets and amortizable costs, estimates of inputs utilized in determining incentive compensation expense and financial instruments such as warrants, and estimates and assumptions related to right-of-use assets and operating lease liabilities.

Actual results could differ materially from those estimates.

2 unchanged sentences

For most of its history, the Company was engaged in securing access to land through ground leases, and developing and constructing aviation hangars.

The major risks faced by the Company is its future ability to obtain additional tenants for the facilities that it constructs, and to contract with such tenants for rental income in an amount that is sufficient to meet the Company’s financial obligations, including increasing construction costs.

In March 2020, the World Health Organization declared coronavirus 2019 (“COVID- 19”

20 unchanged sentences

Pursuant to the Company’s bond offering described in Note 8, various restricted trust bank accounts were established.

Such trust bank accounts are included in Restricted cash and Restricted investments on the consolidated balance sheet as of March 31, 2022 and December 31, 2021.

Such trust bank accounts are included in Restricted cash and Restricted investments on the consolidated balance sheet as of June 30, 2022 and December 31, 2021 .

Investments of the Company's cash in various U.S.

Treasury securities have been classified as available-for-sale and are carried at estimated fair value as determined based upon quoted market prices.

Such investments amounted to $ 29,913 as of June 30, 2022, of which $ 14,973 will mature in one year or less, and $ 14,940 will mature in one through five years.

Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive income (loss).

The Company periodically evaluates whether declines in fair values of its available-for-sale securities below their book value are other-than-temporary.

This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as the Company's ability and intent to hold the available-for-sale security until a forecasted recovery occurs.

Additionally, the Company assesses whether it has plans to sell the security or it is more likely than not it will be required to sell any available-for-sale securities before recovery of its amortized cost basis. Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in other (income) expenses.

The costs of investments sold is based on the specific-identification method.

There are no realized gains or losses on investments for the periods presented.

Interest on available-for-sale securities is included in other (income) expenses.

Restricted Investments Held-to-Maturity

5 unchanged sentences

The held-to-maturity restricted investments are carried on the consolidated balance sheet at amortized cost.

Such investments amounted to $ 166,560 on March 31, 2022, of which $ 95,398 will mature in one year or less, and $ 71,162 will mature in one through five years.

The carrying amount of such investments was $ 138,072  on June 30, 2022 , of which $ 80,346 will mature in one year or less, and $ 57,762 will mature in one through five years.

Cost of Construction

9 unchanged sentences

Once a capital project is complete, the Company begins to depreciate the constructed asset on a straight-line basis over the lesser of the life of the asset or the remaining term of the related ground lease, including expected renewal terms.

Constructed assets, net, as of March 31, 2022 and December 31, 2021 consists of the Sugar Land Phase I project, which is being depreciated over approximately 28 years.

Constructed assets, net, as of June 30, 2022 and December 31, 2021 consists of the Sugar Land Phase I project, which is being depreciated over approximately 28 years.

Other long-lived assets

Long-lived assets on the consolidated balance sheets consists principally of equipment and software.

Long-lived assets on the consolidated balance sheets consists principally of ground support equipment, software, and computer equipment.

Long-lived assets are carried at cost less accumulated depreciation.

Maintenance and repair expenses are charged to expense as incurred.

Depreciation is recognized on a straight-line basis over 5 years, the estimated useful life of the assets.

Depreciation is recognized on a straight-line basis over 3 to 20  years, based on the estimated useful life of the assets.

Impairment of long-lived assets

6 unchanged sentences

The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and other factors that could differ materially from actual results.

Through March 31, 2022, the Company has not experienced any impairment losses.

The Company accounts for leases under Accounting Standards Codification (“ASC”) Topic 842, Leases.

30 unchanged sentences

As of December 31, 2021, the Company had $ 2,696 of equity issuance costs included within prepaid and other assets which were subsequently reclassified as part of accounting for the Yellowstone Transaction.

As of March 31, 2022, there were no equity issuance costs included within prepaid expenses and other assets.

As of June 30, 2022 , there were no equity issuance costs included within prepaid expenses and other assets.

Revenue recognition

4 unchanged sentences

Rental revenue is recognized in accordance with ASC Topic 842, Leases (see Note 7 ) and includes (i) fixed payments of cash rents, which represents revenue each tenant pays in accordance with the terms of its respective lease and is recognized on a straight-line basis over the term of the lease and (ii) variable payments of tenant reimbursements, which are recoveries of all or a portion of the common area maintenance and operating expenses of the property and are recognized in the same period as the expenses are incurred.

As of March 31, 2022, and December 31, 2021, the deferred rent receivable included in prepaid expenses and other assets was $ 102 and $ 103 , respectively.

As of June 30, 2022 and December 31, 2021 , the deferred rent receivable included in prepaid expenses and other assets was $ 61 and $ 103 , respectively.

The Company evaluates the collectability of tenant receivables for payments required under the lease agreements.

If the Company determines that collectability is not probable, the Company recognizes any difference between revenue amounts recognized to date under ASC 842 and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to rental revenue.

There were no adjustments to rental revenue for uncollectible tenant rental payments in either of the three months ended March 31, 2022 or 2021.

For the three months ended March 31, 2022 and 2021, the Company derived approximately 90 % of its revenue from two tenants, each of which have ongoing leases with the Company which expire in December 2023 and November 2025, respectively.

There were no adjustments to rental revenue for uncollectible tenant rental payments in either of the three and six months ended June 30, 2022 or 2021 .

For the three months ended June 30, 2022 and 2021, the Company derived approximately 88 % and 90 % of its revenue from two tenants, respectively.

For the six months ended June 30, 2022 and 2021, the Company derived 89 % and 90 % of its revenue from two tenants, respectively.

Such tenants have ongoing leases with the Company which expire in December 2023 and November 2025, respectively.

Operating Expenses

For the three months ended March 31, 2022, operating expenses within the consolidated statements of operations includes operating lease expense of $ 988 and other expenses, such as insurance, property tax and utilities, totaling $ 157 .

For the three months ended March 31, 2021, operating expense includes operating lease expense of $ 881 and other expenses totaling $ 114 .

General and administrative expenses on the consolidated statements of operations also includes $ 18 and $ 7 of operating lease expense for the three months ended March 31, 2022 and March 31, 2021, respectively.

For the three and six months ended June 30, 2022, operating expenses within the consolidated statements of operations includes operating lease expense of $ 911 and $ 1,899 , respectively.

For the three and six months ended June 30, 2021 , operating expense includes operating lease expense of $ 990 and $ 1,871 , respectively.

General and administrative expenses on the consolidated statements of operations also includes $ 18 and $ 36  of operating lease expense for the 

three and six months ended June 30, 2022, respectively and $ 9 and $ 16 of operating lease expense for the three and six months ended and June 30, 2021 , respectively.

Advertising Costs

The Company expenses the cost of advertising and marketing as incurred.

Advertising and marketing costs charged to general and administrative expenses totaled $ 102 and $ 37 for the three months ended March 31, 2022 and 2021, respectively.

Advertising and marketing costs recognized as general and administrative expenses totaled $ 121 and $ 224 for three and six months ended June 30, 2022, respectively.

Advertising and marketing costs recognized as general and administrative expenses totaled $ 110  and $ 147 for the three and six months ended June 30, 

2021, respectively.

SHG is classified as a corporation for Federal income tax purposes and is subject to U.S.

12 unchanged sentences

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 months ended March 31, 2022.

The effective income tax rate for the three months ended March 31, 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.

The Company recorded income tax expense of $ 0 and the effective tax rate was 0.0 % for the three and six months ended June 30, 2022 .

The effective income tax rate for the 

three and six months ended June 30, 2022 differs from the federal statutory rate of 21 % primarily due to a full valuation allowance against net deferred tax assets as it is more likely than not that the deferred tax assets will not be realized.

Amounts payable under the Tax Receivable Agreement, as defined in Note 3, are accrued by a charge to income when it is probable that a liability has been incurred and the amount is estimable.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020 - 04, which adds ASC Topic 848, Reference Rate Reform:

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

ASU 2020 - 04 provides temporary optional expedients and exceptions to ease financial reporting burdens related to applying current GAAP to modifications of contracts, hedging relationships and other transactions in connection with the transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

In January 2021, the FASB issued ASU 2021 - 01 to clarify that certain optional expedients and exceptions apply to modifications of derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and for calculating price alignment interest.

ASU 2020 - 04 is effective beginning on March 12, 2020 and may be applied prospectively to such transactions through December 31, 2022 and ASU 2021 - 01 is effective beginning on January 7, 2021 and may be applied retrospectively or prospectively to such transactions through December 31, 2022.

The Company will apply ASU 2020 - 04 and 2021 - 01 prospectively as and when we enter into transactions to which these guidance standards apply.

Yellowstone Transaction

9 unchanged sentences

The Yellowstone Warrants that were issued and outstanding immediately prior to the Closing Date became SHG Warrants.

The following table reconciles the elements of the Yellowstone Transaction to the consolidated statements of changes in equity for the three months ended March 31, 2022:

The following table reconciles the elements of the Yellowstone Transaction to the consolidated statements of changes in equity for the six months ended June 30, 2022 :

Yellowstone Transaction

Cash - Yellowstone trust and cash, net of redemptions

$ 15,691  

Cash - BOC PIPE investment

45,000  

transaction costs and advisory fees

Net proceeds from the Yellowstone Transaction

$ 47,960  

Conversion of Sky Series B preferred units to Class A Common Stock

54,029  

Initial fair value of Warrants liability assumed on 1/25/2022

Net adjustment to total equity from the Yellowstone Transaction

$ 94,003  

Transaction costs and advisory fees of approximately $ 12.7 million includes $ 14.7 million of total transaction costs incurred at or around closing of the Yellowstone Transaction, $ 0.6 million of transaction costs paid prior to December 31, 2021, less $ 2.6 million of costs for insurance that was recorded within prepaid expenses and other assets on the Closing Date.

2 unchanged sentences

Yellowstone Common stock, outstanding prior to Yellowstone Transaction

13,598,898  

redemption of Yellowstone Common Stock

( 12,061,041 )

Common stock of Yellowstone, net of redemptions

1,537,857  

Shares held by Sponsor

3,399,724  

Conversion of Sky Series B units to Class A Common Stock

5,500,000  

Shares issued in BOC PIPE investment

4,500,000  

Class A Common Stock outstanding after the Yellowstone Transaction

14,937,581  

Class B Common Stock issued to LLC Interests

42,192,250  

Total shares of common stock following the Yellowstone Transaction

57,129,831  

Tax Receivable Agreement

8 unchanged sentences

tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement (each of the foregoing, collectively, the “Tax Attributes”).

As of March 31, 2022, no transactions occurred that would result in a cash tax savings benefit that would trigger the recording of a liability based on the terms in the Tax Receivable Agreement.

As of June 30, 2022 , no transactions occurred that would result in a cash tax savings benefit that would trigger the recording of a liability based on the terms in the Tax Receivable Agreement.

Cost of Construction and Constructed Assets

The Company’s portfolio as of March 31, 2022 includes the following development projects:

The Company’s portfolio as of June 30, 2022 includes the following development projects:

Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area);

3 unchanged sentences

Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ;

Addison Airport (“ADS”), Addison, TX (Dallas area).

Constructed assets, net, and cost of construction, consists of the following:

March 31, 2022

June 30, 2022

December 31, 2021

1 unchanged sentence

Buildings, SGR (Phase I)

$ 15,079  

Accumulated depreciation

( 853 )  

$ 14,226  

$ 14,500  

Cost of construction:

SGR (Phase II)

Depreciation expense for the three months ended March 31, 2022 and 2021 totaled $ 135 and $ 135 , respectively.

$ 54,288  

$ 25,034  

Depreciation expense for the three months ended June 30, 2022 and 2021 totaled $ 139 and $ 133 , respectively.

Depreciation expense for the 

six months ended June 30, 2022 and 2021 totaled $ 274 and $ 269 , respectively.

Long-lived Assets

Long-lived assets, net, consists of the following:

March 31, 2022

June 30, 2022

December 31, 2021

1 unchanged sentence

( 59 )  

Depreciation expense for the three months ended March 31, 2022 and 2021 totaled $ 10 and $ 6 , respectively.

Depreciation expense for the 

six months ended June 30, 2022 and 2021 totaled $ 25 and $ 14 , respectively.

Depreciation expense for the three months ended June 30, 2022 and 2021 totaled $ 15 and $ 8 , respectively.

During the three months ended June 30, 2022, the Company evaluated the development progress related to its smart hangar app.

This evaluation included the decision to abandon previous software development efforts and the transition of development efforts to a new third -party development company.

In connection with this evaluation, the Company determined that previously capitalized software costs associated with the abandoned development were not recoverable and recognized an impairment loss of $ 248 during the three and six months ended June 30, 2022.

Supplemental Balance Sheet and Cash Flow Information

Prepaid expenses and other assets

In July 2022, the Company entered into a vendor agreement to acquire construction materials related to the Company's development projects (the “Vendor Agreement”).

In connection with the Vendor Agreement, the Company entered into a revolving line of credit loan and security agreement (the "Vendor Loan Agreement"), whereby the Company agreed to provide up to $ 2.5 million of availability under a revolving credit line to fund the working capital requirements of the vendor, of which $ 1.5 million was loaned to the vendor in July 2022.

The Vendor Loan Agreement matures in July 2029 and initially bears interest at a rate of 5 % per annum for the first year, and increases by 1 % per annum each year on the anniversary date of the Vendor Loan Agreement until its maturity.

Accounts payable, accrued expenses and other liabilities

Accounts payable, accrued expenses and other liabilities, consists of the following:

March 31, 2022

June 30, 2022

December 31, 2021

Costs of construction

$ 10,351  

$ 3,450  

Employee compensation and benefits

Transaction costs

$ 18,362  

$ 10,959  

Supplemental Cash Flow Information

The following table summarizes non-cash investing and financing activities:

Three months ended

March 31, 2022

March 31, 2021

Accrued costs of construction, including interest

Accrued long-lived assets

Six months ended

June 30, 2022

June 30, 2021

Accrued costs of construction, including capitalized interest

$ 12,702  

Accrued equity issuance costs

3 unchanged sentences

The following table summarizes non-cash activities associated with the Company’s operating leases:

Three months ended

March 31, 2022

March 31, 2021

Six months ended

June 30, 2022

June 30, 2021

Right-of-use assets obtained in exchange for operating lease liabilities

The following table summarizes interest paid for the three months then ended:

Three months ended

March 31, 2022

March 31, 2021

$ 2,838  

$ 25,720  

Net decrease in right-of-use assets and operating lease liabilities due to lease remeasurement

( 12,189 )  

The following table summarizes interest paid:

Six months ended

June 30, 2022

June 30, 2021

Interest paid

$ 2,063  

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:

Three months ended

March 31, 2022

March 31, 2021

Six months ended

June 30, 2022

June 30, 2021

Cash, beginning of year

$ 6,805  

Restricted cash, beginning of year

197,130  

Cash and restricted cash, beginning of year

$ 203,935  

Cash, end of period

$ 3,796  

$ 15,604  

Restricted cash, end of period

38,392  

Cash and restricted cash, end of period

$ 42,188  

$ 20,580  

All of the Company’s leases are classified as operating leases under ASC Topic 842.

4 unchanged sentences

These variable payments were excluded from the calculation of the ROU asset and operating lease liability balances since they are not fixed or in-substance fixed payments.

These variable payments were not material in amount for both of the three month periods ended March 31, 2022 and 2021.

These variable payments were not material in amount for both of the three and six month periods ended June 30, 2022 and 2021 .

Some of the leases contain covenants that require the Company to construct the hangar facilities on the leased grounds within a certain period and spend a set minimum dollar amount.

For one of the leases, the shortfall (if any) must be paid to the lessor.

The Company’s ground leases at SGR, OPF, and BNA have terms ranging between 30 to 50 years, including options for the Company to extend the terms.

The Company’s ground leases have terms ranging between 27 to 75 years, including options for the Company to extend the terms.

These leases expire between 2049 and 2097, which include all lease extension options available to the Company.

Certain of the Company's ground leases contain options to lease additional parcels of land at the Company's option within a specified period of time.

The Company’s ground lease at OPF was entered into in May 2019 through its wholly owned subsidiary, Sky Harbour Opa Locka Airport LLC (“SHOLA”), with AA Acquisitions LLC (“AA”).

AA is the master ground lessee of Miami Dade County (“MDC”), the ultimate landowner.

On March 2, 2022, the Company, through a wholly-owned subsidiary outside the Obligated Group (as defined in Note 8 ), 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 closed on April 29, 2022 and required the Company to pay approximately $ 1.0 million in assignment fees to MDC.

After such closing, SHOLA continues to be obligated under the existing sublease but to an affiliate within the Company.

The transaction extends the term of the lease at OPF for the Company an additional 10 years and will create additional significant rights and obligations of the Company.

On April 29, 2022, the Company, through a wholly-owned subsidiary outside the Obligated Group (as defined in Note 8 ), purchased AA’s underlying interest in the ground lease for approximately $ 8.5 million and now leases the OPF property directly from MDC (the “OPF Lease Transaction”).

The OPF Lease Transaction also required the Company to pay approximately $ 1.0 million in assignment fees to MDC, which, along with the $8.5 million purchase price, were recognized as initial direct costs and presented as a component of right-of-use assets.

Following the OPF Lease Transaction, SHOLA continues to be obligated under the existing sublease but to an affiliate within the Company.

The OPF Lease Transaction extends the term of the lease at OPF for the Company to approximately 57 years.

The Company has accounted for the OPF Lease Transaction as a lease modification requiring remeasurement and remeasured the right-of-use asset and operating lease liability utilizing the Company’s incremental borrowing rate as of the date of remeasurement.

As a result of the remeasurement, non-cash subtractions to the right-of-use asset and operating lease liability of $ 12,289 were recorded during the six months ended June 30, 2022.

On January 1, 2021, the Company commenced an operating lease for a ground lease located at APA (“APA Lease”), with an initial lease term of 41 years (or up to 76 years including extension options).

2 unchanged sentences

The DVT Lease contains an option to lease an additional parcel of land (Phase II) that must be exercised, at the Company’s option, within four -years of the lease’s commencement date.

On October 15, 2021, the Company entered into a binding letter of intent with the Town of Addison for a ground lease of approximately 6 acres at Addison Airport in Addison, Texas.

The anticipated lease term is 40 years with no additional extension options, which is the maximum allowable term permitted by the Town of Addison.

On June 28, 2022, the Company commenced an operating lease for a ground lease located at ADS (“ADS Lease”).

The ADS Lease term is 40 years from the completion of construction with no additional extension options, which is the maximum allowable term permitted by the Town of Addison.

In addition to the Company’s ground leases, the company has operating leases for office space and a ground support vehicle.

Supplemental consolidated cash flow information related to the Company’s leases was as follows: 

Three months ended

Six months ended

Cash paid for amounts included in measurement of lease liabilities:

2 unchanged sentences

Weighted Average Remaining Lease Term

March 31, 2022

June 30, 2022

December 31, 2021

3 unchanged sentences

The Company’s future minimum lease payments required under leases as of 

March 31, 

2022  were as follows: 

June 30, 2022  were as follows: 

Year Ending December 31,

1 unchanged sentence

2022 (remainder of year)

196,878  

Total lease payments

206,117  

Less imputed interest

$ 52,252  

The Company leases the hangar facilities that it constructs to third -party tenants.

14 unchanged sentences

Tenant leases to which the Company is the lessor require the following non-cancelable future minimum lease payments from tenants as of 

March 31, 

June 30, 2022 :

Year Ending December 31,

2 unchanged sentences

Total lease payments

$ 3,645  

Less rent concessions to be applied at Company’s discretion

$ 3,431  

Bonds payable, Loans payable and interest

16 unchanged sentences

These accounts also include funds to pay debt service through the end of construction at each site and various reserve funds such as a ramp-up reserve, debt service reserve, and a maintenance reserve fund.

Such trust bank accounts total approximately $ 183.8 million, of which $ 17.3 million and $ 166.5 million and are included in Restricted cash and Restricted investments, respectively, on the consolidated balance sheet as of March 31, 2022.

Such trust bank accounts total approximately $ 175.5 million, of which $ 37.5 million and $ 138.0 million and are included in Restricted cash and Restricted investments, respectively, on the consolidated balance sheet as of June 30, 2022 .

The Borrowers have agreed to use all commercially reasonable efforts to jointly maintain a Debt Service Coverage Ratio (as defined in the agreement) of 1.25 for each applicable test period;

19 unchanged sentences

In lieu of redemption, the Bonds may be purchased by any of the Borrowers or by any party designated by Sky Harbour Capital LLC.

The following table summarizes the Company’s Bonds payable as of March 31, 2022 and December 31, 2021:

March 31, 2022

The following table summarizes the Company’s Bonds payable as of June 30, 2022 and December 31, 2021 :

June 30, 2022

December 31, 2021

1 unchanged sentence

Series 2021 Bonds Principal

$ 166,340  

Premium on bonds

Bond proceeds

$ 166,589  

Debt issuance costs

( 6,002 )  

Accumulated amortization of debt issuance costs and bond premium

Total Bonds payable, net

$ 160,832  

$ 160,679  

In connection with the issuance of the Bonds Payable, the Company recognized debt issuance costs totaling $ 6 million which are being amortized into interest using the effective interest method over the life of the bonds.

2 unchanged sentences

Loans payable

In connection with two of its development projects, Sky had two secured construction loans that were outstanding during the three months ended March 31, 2021, and through the loans’

In connection with two of its development projects, Sky had two secured construction loans that were outstanding during the three and six months ended June 30, 2021, and through the loans’

respective payoff dates of August 11, 2021 and September 3, 2021.

6 unchanged sentences

The OPF Loan was repaid on August 11, 2021, including all accrued and PIK interest.

Interest, including amortization of bond premium and debt issuance costs, for the three months ended March 31, 2022 totaled $ 1.8 million, all of which was capitalized in cost of construction on the consolidated balance sheet during the three months ended March 31, 2022.

Interest, including amortization of debt issuance costs, for the three months ended March 31, 2021 totaled $ 1.0 million, of which $ 0.5 million was capitalized in cost of construction on the consolidated balance sheet during the three months ended March 31, 2021.

Interest which is not capitalized is recorded as an expense and is included as Interest expense on the consolidated statements of operations.

The following table sets forth the details of interest expense:

Three months ended

March 31, 2022

March 31, 2021

Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

$ 1,735  

$ 3,470  

Amortization of bond premium and debt issuance costs

1 unchanged sentence

capitalized interest

( 1,811 )  

( 522 )  

( 3,623 )  

Interest expense

3 unchanged sentences

Following the Yellowstone Transaction, the Warrants remain outstanding under the same terms and conditions to purchase shares of the Company’s Class A Common Stock.

As of March 31, 2022, 6,799,439 and 7,719,779 Public and Private Warrants remain outstanding, respectively.

As of June 30, 2022 , 6,799,439 and 7,719,779 Public and Private Warrants remain outstanding, respectively.

The terms of the Private Warrants are identical to those of the Public Warrants, except for that so long as the Private Warrants are held by the Sponsor or its permitted transferees, they may be exercised on a cashless basis.

3 unchanged sentences

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 $ 1.51 and $ 0.55 per warrant on March 31, 2022 and the Closing Date, respectively.

The aggregate fair value of the Warrants was approximately $ 21.9 million and $ 8.0 million as of March 31, 2022 and the Closing Date, respectively.

During the three months ended March 31, 2022, the Company recorded an unrealized loss of approximately $ 13.9 million, reflecting the change in fair value of the Warrants from the Closing Date through March 31, 2022.

The closing price of the Public Warrants was $ 0.45 and $ 0.55 per warrant on June 30, 2022 and the Closing Date, respectively.

The aggregate fair value of the Warrants was approximately $ 6.5 million and $ 8.0 million as of June 30, 2022 and the Closing Date, respectively.

The Company recorded an unrealized gain of approximately $ 15.4 million during the three months ended June 30, 2022.

During the six months ended June 30, 2022 , the Company recorded an unrealized gain of approximately $ 1.5 million, reflecting the change in fair value of the Warrants from the Closing Date through June 30, 2022 .

Equity and Redeemable Equity

16 unchanged sentences

The Series B Preferred Units converted to 5,500,000 shares of SHG’s Class A Common Stock, and Sky issued 14,937,581 Sky Common Units to SHG, which was equivalent to the total number of shares of the SHG’s Class A Common Stock outstanding on the Closing Date.

As of March 31, 2022, there were 14,937,581 and 42,192,250 shares of Class A Common Stock and Class B Common Stock outstanding, respectively.

As of June 30, 2022 , there were 14,937,581 and 42,192,250 shares of Class A Common Stock and Class B Common Stock outstanding, respectively.

Holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters submitted to the stockholders for their vote or approval, except as required by applicable law.

11 unchanged sentences

The LLC Interests’

ownership in Sky is presented as non-controlling interests within the Equity section of the consolidated balance sheet as of March 31, 2022 and represents the Sky Common Units held by holders other than SHG.

ownership in Sky is presented as non-controlling interests within the Equity section of the consolidated balance sheet as of June 30, 2022 and represents the Sky Common Units held by holders other than SHG.

The holders of LLC Interests may, following the expiration of an applicable lock-up period, exchange Sky Common Units along with an equal number of Class B Common Shares, for Class A Common Shares on the Company.

The LLC Interests do not have the option to redeem their Sky Common Units for cash or a variable number of Class A Common Shares, nor does SHG have the option to settle a redemption in such a manner.

As of March 31, 2022, the LLC interests owned approximately 73.9 % of the Sky Common Units outstanding.

As of June 30, 2022 , the LLC interests owned approximately 73.9 % of the Sky Common Units outstanding.

Equity Compensation

Restricted Stock Units (“RSUs”)

In May 2022, the Company granted time-based RSUs to certain employees under the Company’s 2022 Incentive Award Plan.

A total of 721,000 of time-based awards were granted, which will vest ratably over a four -year period beginning on the first anniversary of the grant date and ending on May 16, 2026.

During the three and six months ended June 30, 2022, the Company recognized stock compensation expense of $ 160 .

As of June 30, 2022, there are approximately 661,000 non-vested RSUs outstanding with a weighted average grant date fair value of $ 7.74 . The unrecognized compensation costs associated with all unvested RSUs at June 30, 2022 was $ 4,956 .

Sky Incentive Units

9 unchanged sentences

The key inputs and assumptions used in the valuation of the Sky’s Incentive Units were:

$ 62,287,970  

Term (in years)

Risk-free interest rate

Below is a summary of activity related to the Sky Incentive Units for the three months ended March 31, 2022:

Below is a summary of activity related to the Sky Incentive Units for the six months ended June 30, 2022 :

Sky Incentive

2 unchanged sentences

Sky units outstanding as of December 31, 2021 (as previously presented)

$ 318.44  

Sky units outstanding as of December 31, 2021 (recast for recapitalization)

Sky units outstanding as of March 31, 2022

Vested Units outstanding as of March 31, 2022

Non-vested Units outstanding as of March 31, 2022

2,807,750  

$ 0.45  

Sky units outstanding as of June 30, 2022

2,807,750  

$ 0.45  

Vested Units outstanding as of June 30, 2022

864,015  

$ 0.45  

Non-vested Units outstanding as of June 30, 2022

1,943,735  

$ 0.45  

The Company recognizes equity-based compensation expense on a straight-line basis over the requisite service period and has elected to account for forfeitures of Sky Incentive Units if and when they occur.

The Company recorded equity-based compensation expense relating to Sky Incentive Units of $ 86 for the three months ended March 31, 2022, 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’

As of March 31, 2022, there was $ 956 of total unrecognized compensation expense that is expected to be recognized over a weighted-average future period of 3.0 years.

Loss per Share

Basic net loss per share of Class A Common Stock is computed by dividing net loss attributable to SHG by the weighted-average number of shares of Class A Common Stock outstanding during the period.

Diluted net loss per share of Class A Common Stock is computed by dividing net 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.

The Company recorded equity-based compensation expense relating to Sky Incentive Units of $ 85 and $ 171 for the three and 

six months ended June 30, 2022 , respectively, which is recorded within General and Administrative Expenses within the statement of operations, and as a component of the non-controlling interest in the consolidated statement of changes in stockholders’

The Company recorded equity-based compensation expense relating to Sky Incentive Units of $ 46 for the three and six months ended June 30, 2021.

As of June 30, 2022 , there was $ 871 of total unrecognized compensation expense that is expected to be recognized over a weighted-average future period of 2.7 years.

Earnings (loss) per Share

Basic earnings (loss) per share of Class A Common Stock is computed by dividing net income (loss) attributable to SHG by the weighted-average number of shares of Class A Common Stock outstanding during the period.

Diluted net income (loss) per share of Class A Common Stock is computed by dividing net income (loss) attributable to SHG, adjusted for the assumed exchange of all potentially dilutive securities, by the weighted-average number of shares of Class A Common Stock outstanding adjusted to give effect to potentially dilutive shares using the treasury stock method.

Shares of the Company’s Class B Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities.

As such, separate presentation of basic and diluted earnings per share of Class B Common Stock under the two -class method has not been presented.

For the three months ended March 31, 2021, the membership structure of Sky solely included holders of Sky Common Units that received an equivalent number of Class B Common Stock following the Yellowstone Transaction, and there were no holders that received Class A Common Stock.

As the shares of Class B Common Stock are not participating securities, presentation of net loss per share for the three -month period ended March 31, 2021 would not be meaningful to the users of these condensed consolidated financial statements, and such information has not been presented.

Net loss attributable to non-controlling interests

Net loss attributable to Sky Harbour Group Corporation –

Based and diluted

Weighted average shares of Class A Common Stock outstanding –

Basic and diluted

Net loss per share of Class A Common Stock –

Basic and diluted

Potentially dilutive shares associated with the outstanding Warrants were antidilutive as of March 31, 2022 due to the Company’s net loss position.

Thus, 14,519,218 shares issuable upon the exercise of the Warrants have been excluded from the calculation of diluted weighted average shares outstanding and diluted loss per share.

For the three and six months ended June 30, 2021, the membership structure of Sky solely included holders of Sky Common Units that received an equivalent number of Class B Common Stock following the Yellowstone Transaction, and there were no holders that received Class A Common Stock.

As the shares of Class B Common Stock are not participating securities, presentation of net loss per share for the three and six month periods ended June 30, 2021 would not be meaningful to the users of these condensed consolidated financial statements, and such information has not been presented.

Three Months Ended  

Six Months Ended  

June 30, 2022  

Net income (loss)

$ 10,263  

Net income (loss) attributable to non-controlling interests

( 2,402 )  

Basic net income (loss) attributable to Sky Harbour Group Corporation shareholders

12,665  

Unrealized gain on warrants

( 15,390 )  

Diluted net (loss) attributable to Sky Harbour Group Corporation shareholders

$ ( 2,725 )  

Basic weighted average shares of Class A Common Stock outstanding

14,938  

12,957  

Effect of dilutive warrants

14,519  

Effect of dilutive restricted stock

Diluted weighted average shares outstanding

29,466  

12,957  

Earnings (loss) per share of Class A Common Stock –

$ 0.85  

Earnings (loss) per share of Class A Common Stock –

$ ( 0.09 )  

Potentially dilutive shares associated with the outstanding Warrants were antidilutive for the six months ended 

June 30, 2022 due to the Company’s net loss position.

Thus, 14,519,218 shares issuable upon the exercise of the Warrants were excluded from the calculation of diluted weighted average shares outstanding and diluted loss per share for the six months ended June 30, 2022. 

651,514 and 661,000 antidilutive shares associated with the Company's restricted stock units were excluded from the calculation for the three and six months ended June 30, 2022, respectively.

Financial Instruments

The following table summarizes the carrying value, estimated fair value and classification of our financial instruments as of:

March 31, 2022

June 30, 2022

Carrying Value

Cash and cash equivalents

$ 3,796  

Restricted cash

38,392  

29,913  

Restricted investments

138,072  

136,330  

$ 210,173  

$ 208,431  

Bonds payable

$ 160,832  

$ 140,849  

Warrants liability

$ 167,366  

$ 147,383  

$ 3,060  

$ 144,323  

December 31, 2021

1 unchanged sentence

Cash and cash equivalents

$ 6,805  

Restricted cash

Restricted investments

197,130  

$ 203,935  

Bonds payable

Warrants liability

The fair value of the Company’s restricted investments is estimated utilizing Level 1 inputs including prices for U.S.

$ 160,679  

$ 173,093  

$ 160,679  

$ 173,093  

The fair value of the Company’s investments and restricted investments is estimated utilizing Level 1 inputs including prices for U.S.

Treasury securities with comparable maturities on active markets.

10 unchanged sentences

equity on the consolidated balance sheet.

Interest incurred on the loan payable to for the three months ended March 31, 2021 totaled $ 120 .

Interest incurred on the loan payable to for the three and six months ended June 30, 2021 totaled $ 0 and $ 120 , respectively.

Beginning in November 2020, Sky entered into a note payable with a related party, SH Investment Fund I LLC, a company controlled by the Founder and CEO.

5 unchanged sentences

thereby resulting in a loss on extinguishment of related party debt of $ 0.25 million which was recorded as a charge in the consolidated statement of operations.

During the three months ended March 31, 2022 and 2021, the Company paid $ 31 and $ 0 , respectively, for services rendered by employees of a company affiliated with the Founder and CEO.

For the three months ended March 31, 2022 and 2021, the Company paid $ 20 and $ 31 respectively, for consulting services, to a company that employed the chief financial officer until prior to July 1, 2021.

For the three and six months ended June 30, 2022, the Company paid $ 25 and $ 45 respectively, for consulting services, to a company that employed the chief financial officer until prior to July 1, 2021.

The Company paid $ 32 and $ 62 during the three and six months ended June 30, 2021 to the same company.

On September 20, 2021, the Company entered into a non-exclusive agreement with Echo Echo, LLC, a related party to the Founder and CEO, for the use of a Beechcraft Baron G58 aircraft.

3 unchanged sentences

Additionally, the Company will also incur the pro rata share of maintenance, overhead and insurance costs of the aircraft.

For the three months ended March 31, 2022, the Company recognized $ 29 of expense within General and administrative expense under the terms of this agreement, and the related liability is included in Accounts payable, accrued expenses and other liabilities on the consolidated balance sheet as of March 31, 2022.

For the three and six months ended June 30, 2022 , the Company recognized $ 53 and $ 84  of expense, respectively, within General and administrative expense under the terms of this agreement, and the related liability is included in Accounts payable, accrued expenses and other liabilities on the consolidated balance sheet as of June 30, 2022 .

Commitments and Contingencies

8 unchanged sentences

The Company is still in the permitting phase of its DVT Phase I project.

The Company has committed to spend $ 10.0 million in capital improvements on the ADS construction project.

If this amount is not expended, the Company is subject to a reduction of the term of the lease.

The Company has contracts for construction of the OPF Phase I project and the BNA project.

2 unchanged sentences

There is no termination penalty under the BNA construction contract.

Accumulated Other Comprehensive Loss

The following table summarizes the components of Accumulated other comprehensive income (loss):

Unrealized loss on

Available-for-sale

Balance as of December 31, 2021

Other comprehensive loss

Balance as of June 30, 2022

MANAGEMENT ’

1 unchanged sentence

The following analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”), as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities Exchange Commission (the “SEC”) on March 28, 2022 (the “Form 10-K”), which is accessible on the SEC’s website at www.sec.gov.

As described in Note 1 to the accompanying consolidated financial statements, the comparative period for the results of operations included herein are of Sky Harbour, LLC for the quarter ended March 31, 2021. 

Cautionary Note Regarding Forward-Looking Statements

18 unchanged sentences

expectations regarding the Company’s strategies and future financial performance, including the Company’s future business plans or objectives, prospective performance and commercial opportunities and competitors, services, pricing, marketing plans, operating expenses, market trends, revenues, liquidity, cash flows and uses of cash, capital expenditures, and the Company’s ability to invest in growth initiatives;

the effects of general economic conditions, including inflation, interest rates levels, and availability of construction materials for our development projects;

the outcome of any legal proceedings that may be instituted against Sky Harbour Group Corporation or its predecessors in connection with the Yellowstone Transaction and related transactions;

2 unchanged sentences

the ability to recognize the anticipated benefits of the Yellowstone Transaction, which may be affected by, among other things, competition, and the ability of the combined business to grow and manage growth profitably;

costs related to the Yellowstone Transaction;

changes in applicable laws or regulations;

20 unchanged sentences

Forecasted 2022 deliveries of approximately 770 new business jets, the constant increase in average aircraft length and wingspan, and historically low retirements of the oldest business jets in the US fleet, suggest that 2022 may see the most dramatic footprint growth of the US business aviation fleet on record.

Reported business aircraft activity increased 15.8% for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, which also included a 28.5% increase in activity in the large cabin market, which represents the primary target market for Sky Harbour's HBS campuses.

Sky Harbour’s real estate-centric business model is uniquely optimized to capture this market opportunity.

1 unchanged sentence

This allows for centralized procurement, straightforward permitting processes, efficient development processes, and the best hangar in business aviation.

Unlike a service company, Sky Harbour revenues are derived almost entirely from long-term rental agreements, offering stability and forward visibility.

Unlike a service company, Sky Harbour revenues are mostly derived from long-term rental agreements, offering stability and forward visibility of revenues and cash flows.

This allows Sky Harbour to fund its development through the public bond market, providing capital efficiency and mitigating refinance risk.

With five airport campuses either in development or ongoing operations, the company is targeting fifteen 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 March 31, 2022.

With six airport campuses either in development or ongoing operations, the company is targeting fourteen additional airfields in the current growth phase, and an additional 30 in the next.

The table below presents certain information with respect to our portfolio as of June 30, 2022.

Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area);

1 unchanged sentence

Nashville International Airport ("BNA"), Nashville, TN;

Centennial Airport (“APA”), Englewood, CO (Denver area);

Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ;

Completion Date

Addison Airport ("ADS"), Addison, TX (Dallas area).

Estimated Total

Construction Cost 1

Completion Date

Square Footage

1 unchanged sentence

In Construction

November 2022

Predevelopment

1 unchanged sentence

In Construction

December 2023

Predevelopment

November 2024

Predevelopment

The Estimated Total Construction Cost includes estimated direct construction expenditures associated with each facility.

1 unchanged sentence

Recent Developments

On April 29, 2022, our wholly-owned subsidiary outside the Obligated Group purchased the underlying ground lease at OPF from the sublessor for approximately $8.5 million, and now lease the property directly from Miami-Dade county (“MDC”).

On April 29, 2022, our wholly-owned subsidiary outside the Obligated Group purchased the underlying ground lease at OPF from the sublessor for approximately $8.5 million, and we now lease the property directly from Miami-Dade county (“MDC”).

The transaction also required us to pay approximately $1.0 million in transfer fees to MDC.

The transaction extends the term of the ground lease by 10 years and is expected to decrease the Company’s cash ground lease payments by at least $30 million over the term of the lease on an undiscounted basis.

The transaction extends the term of the ground lease and is expected to decrease the Company’s cash ground lease payments by at least $30 million over the term of the lease on an undiscounted basis.

On June 28, 2022, we entered into an operating lease for a ground lease located at ADS (“ADS Lease”).

The ADS Lease term is 40 years from the completion of construction with no additional extension options, which is the maximum allowable term permitted by the Town of Addison, Texas.

Factors That May Influence Future Results of Operations

10 unchanged sentences

One of our largest expenses is the lease payments under our ground leases.

For the three months ended March 31, 2022 and 2021, our operating lease expense for ground leases was $1.0 million and $0.9 million, respectively.

For the six months ended June 30, 2022 and 2021, our operating lease expense for ground leases was $1.9 million and $1.9 million, respectively.

As we enter into new ground leases at new airport sites, our payments to airport landlords will continue to increase into the future.

1 unchanged sentence

Interest Expense

We expect that future changes in interest rates will impact our overall operating performance, by, among other things, changing our future borrowing costs.

We expect that future changes in interest rates will impact our overall economic performance, by, among other things, changing our future borrowing costs.

We expect to issue additional private activity bonds (see Private Activity Bonds , below) to finance future site developments and higher interest rates would increase our borrowing costs.

15 unchanged sentences

Typically, the price changes that most significantly influence our operations are price increases in steel, concrete, and labor.

We believe we will experience additional cost pressures associated with steel, concrete, and other materials in future quarters, or delays in our contractors’

Recent inflationary and supply chain pressures have led to increased construction materials costs, specifically associated with steel, concrete, and other materials.

We believe we will continue to experience such pressures in future quarters, as well as delays in our contractors’

ability to requisition such materials.

There can be no assurance that we will be able to increase the lease rates for the hangars within our HBS campuses to absorb these increased costs, if at all.

These pressures have led to an overall increase in budgeted and actual construction costs, as well as delays in starting and completing certain of our development projects. There can be no assurance that we will be able to increase the lease rates for the hangars within our HBS campuses to absorb these increased costs and/or delays, if at all.

Current Capital Requirements and Future Expenditures for Expansion

5 unchanged sentences

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.

We do not commit to capital projects without having first secured the resources to fund them.

The cumulative 20 airport site business plan is estimated to cost approximately $930 million, with approximately 75% anticipated from long term PABs and the balance with equity or equity linked financing.

33 unchanged sentences

For the three months ended March 31, 2022 and 2021, we derived approximately 90% of our revenue from two tenants, each of which have ongoing leases with us that expire in December 2023 and November 2025, respectively.

Use of Estimates

Such estimates include the estimates of collectability of tenant lease payments, assumptions used within impairment analyses, estimated useful lives of depreciable assets and amortizable costs, estimates of inputs utilized in determining incentive compensation expense and equity instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities.

Such estimates include assumptions used within impairment analyses, estimated useful lives of depreciable assets and amortizable costs, estimates of inputs utilized in determining incentive compensation expense and equity instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities.

Actual results could differ materially from those estimates.

3 unchanged sentences

Results of Operations

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021

The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods. 

Three months ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

Rental revenue

Total revenue

Loss on impairment of long-lived assets

General and administrative

Total expenses

Other expenses:

Other (income) expense:

Interest expense, net of capitalized interest

Unrealized loss on warrants

Unrealized (gain) loss on warrants

Total other (income) expense

Net income (loss)

Revenues for the three months ended June 30, 2022, and 2021 were $409, compared to $394, respectively.

The increase in revenue primarily resulted from additional tenant leases commencing at SGR during the second quarter of 2022.

Operating Expenses

Operating expenses increased 2% from $1,080 to $1,103 for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021.

The increase was primarily due to slight increases in insurance, property tax and utilities.

Depreciation Expense

Depreciation expense for the three months ended June 30, 2022, and 2021 was $154 and $141, respectively.

The increase reflects the placement of additional long-lived assets into service following the second quarter of 2021.

General and Administrative Expenses

For the three months ended June 30, 2022, and 2021, general and administrative expenses were $4,031, compared to $1,569, respectively.

The increase was primarily due to a $1,497 increase in salaries, wages, and benefits, driven by an increase in full-time and contracted employees, as well as incentive compensation programs instituted to attract and retain talented human capital.

Professional fees increased $167 due to an increase in legal, accounting, and consulting costs as compared to the prior year primarily as a result of becoming a public company.

Other administrative expenses increased $622 driven primarily by insurance, board compensation, and computer and software expenses.

Marketing and other pursuit costs increased $122 year-over-year, primarily driven by our growth strategy in securing airport site acquisitions and potential tenants.

Other income increased from a loss of $382 to income of $15,390 for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, primarily due to a $15,390 mark-to-market adjustment of the outstanding warrants at June 30, 2022.

These warrants were issued by Yellowstone as part of its initial public offering.

As a result, the warrants were not reflected in Sky’s financial statements for the three months ended June 30, 2021.

Results of Operations

Six months ended June 30, 2022 Compared to the Six months ended June 30, 2021

The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods. 

Six months ended

June 30, 2022

June 30, 2021

Rental revenue

Total revenue

Loss on impairment of long-lived assets

General and administrative

Total expenses

Other (income) expense:

Interest expense, net of capitalized interest

Unrealized (gain) loss on warrants

Loss on extinguishment of note payable to related party

Total other expenses

Revenues for the three months ended March 31, 2022, and 2021 were $397, compared to $390, respectively.

The increase primarily resulted from the monthly rental of open ramp space at OPF.

Total other (income) expense

Revenues for the six months ended June 30, 2022 were $805, compared to $784 for the six months ended June 30, 2021.

The increase primarily resulted from additional tenant leases commencing at SGR during the second quarter of 2022.

Operating Expenses

Operating expenses increased 15% from $995 to $1,145 for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021.

The increase was primarily due to additional operating lease expense, particularly the ground lease at DVT which commenced after the quarter ended March 31, 2021, as well as other expenses such as insurance, property tax and utilities.

Operating expenses increased 8% from $2,075 to $2,247 for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The increase was primarily due to an increase in insurance expense, particularly at the BNA and OPF locations.

Depreciation Expense

Depreciation remained consistent for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, as the completion and placement in service of the SGR Phase I project in December 2020 is reflected in both periods presented.

Depreciation increased $15 for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021.

The increase reflects the placement of additional long-lived assets into service following the second quarter of 2021.

General and Administrative Expenses

For the three months ended March 31, 2022, and 2021, general and administrative expenses were $4,683, compared to $591, respectively.

For the six months ended June 30, 2022, and 2021, general and administrative expenses were $8,714, as compared to $2,075, respectively.

The increase was primarily due to a $3,676 increase in salaries, wages, and benefits, driven by an increase in full-time and contracted employees, as well as incentive compensation programs instituted to attract and retain talented human capital.

Professional fees increased $1,379 due to an increase in legal, accounting, and consulting costs as compared to the prior year primarily as a result of becoming a public company.

Other administrative expenses increased $525 driven primarily by insurance and other expenses related to corporate governance.

Other administrative expenses increased $1,042 driven primarily by insurance, board compensation, and computer and software expenses.

Marketing and other pursuit costs increased $205 year-over-year, primarily driven by our growth strategy in securing airport site acquisitions and potential tenants.

Other Expenses

Other expenses increased from $709 to $13,938 for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, primarily due to a $13,938 mark-to-market adjustment of the outstanding warrants at March 31, 2022.

Other (Income) Expenses

Other (income) expenses increased from a $1,091 loss to $1,452 of income for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, primarily due to a $1,452 mark-to-market gain of the outstanding warrants at June 30, 2022.

These warrants were issued by Yellowstone as part of its initial public offering.

As a result, the warrants were not reflected in Sky’s financial statements for the three months ended March 31, 2021.

As a result, the warrants were not reflected in Sky’s financial statements for the six months ended June 30, 2021.

Liquidity and Capital Resources

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 source of cash include the issuance of equity and debt securities.

Our primary sources of cash include the potential issuance of equity and debt securities.

Our long-term liquidity requirements include lease payments under our ground leases with airport authorities, repaying principal and interest on outstanding borrowings, funding for operations and paying accrued expenses.

We believe that following the Yellowstone Transaction in January 2022 we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional PABs and other debt and the issuance of additional equity securities.

We believe that we have access to multiple sources of capital to fund our long-term liquidity requirements, including the incurrence of additional PABs and other debt and the issuance of additional equity securities.

However, as a new public company, we cannot assure you that we will have access to these sources of capital or that, even if such sources of capital are available, that these sources of capital will be available on favorable terms.

Our ability to incur additional debt will depend on multiple factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that are or may be imposed by future lenders.

[We may be forced to issue equity securities at dilutive prices to meet our liquidity requirements.] Our ability to incur additional debt will depend on multiple factors, including our degree of leverage, the value of our unencumbered assets and borrowing restrictions that are or may be imposed by future lenders.

Our ability to access the equity and debt capital markets will depend on multiple factors as well, including general market conditions for real estate companies, our degree of leverage, the trading price of our common stock and bonds and market perceptions about our company.

21 unchanged sentences

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 March 31, 2022, we were in compliance with all debt covenants.

As of June 30, 2022, we were in compliance with all debt covenants.

Lease Commitments

The table below sets forth certain information with respect to our future minimum lease payments required under operating leases as of March 31, 2022:

The table below sets forth certain information with respect to our future minimum lease payments required under operating leases as of June 30, 2022:

2022 (remainder of year)

2 unchanged sentences

Contractual Obligations

The following table sets forth our contractual obligations as of March 31, 2022:

The following table sets forth our contractual obligations as of June 30, 2022:

Principal Payments of Long-Term Indebtedness

5 unchanged sentences

Historical Cash Flows

The following table summarizes our sources and uses of cash for the three months ended March 31, 2022 and 2021:

Three months ended

March 31, 2022

March 31, 2021

The following table summarizes our sources and uses of cash for the six months ended June 30, 2022 and 2021:

Six months ended

June 30, 2022

June 30, 2021

Cash and restricted cash at beginning of period

4 unchanged sentences

Operating Activities —

Net cash used in operating activities was $10.2 million for the three months ended March 31, 2022, as compared to cash used in operating activities of $1.3 million for the same period in 2021.

The $8.9 million increase in cash used in operating activities was partially attributable to the $3.6 million increase in net loss, net of the $13.9 million non-cash loss on the warrants.

The increase in net loss was driven by general and administrative expenses incurred in the expansion of our business, including transaction-related expenses and other expenses related to corporate governance.

The increase in cash used for operating activities was further increased by a $5.0 million change in operating assets and liabilities.

Net cash used in operating activities was $24.3 million for the six months ended June 30, 2022, as compared to cash used in operating activities of $2.4 million for the same period in 2021.

The $21.9 million increase in cash used in operating activities was primarily attributable to the $9.6 million of initial direct costs associated with the purchase of our former landlord's leasehold interest at OPF.

In addition, the increase was partially attributable to the $4.4 million increase in net loss, which was driven by general and administrative expenses incurred in the expansion of our business, including transaction-related expenses and other expenses related to corporate governance.

The increase in cash used for operating activities was also attributable to a $6.7 million change in operating assets and liabilities.

Investing Activities —

Cash used in investing activities was $179.0 million for the three months ended March 31, 2022, as compared to cash used in investing activities of $1.3 million for the same period in 2021.

Cash used in investing activities was $189.3 million for the six months ended June 30, 2022, as compared to cash used in investing activities of $2.9 million for the same period in 2021.

The increase of $186.4 million in cash used in investing activities was driven primarily by the $166.6 million purchase of held-to-maturity U.S.

Treasury securities during the first quarter of 2022 and a $11.2 million increase in payments for costs of construction due to the Company’s ongoing construction projects at OPF and BNA.

Treasury securities during the first quarter of 2022, the $30.0 million purchase of available-for-sale U.S.

Treasury securities during the second quarter, and a $17.9 million increase in payments for costs of construction due to the Company’s ongoing construction projects at OPF and BNA.

These increases were offset by proceeds of $28.5 million received at maturity of certain of the Company's restricted investments.

Financing Activities —

Net cash provided by financing activities was $51.9 million for the three months ended March 31, 2022, as compared to net cash provided by financing activities of $25.9 million for the same period in 2021.

Net cash provided by financing activities was $51.9 million for the six months ended June 30, 2022, as compared to net cash provided by financing activities of $25.9 million for the same period in 2021.

The $26.0 million increase in net cash provided by financing activities was primarily driven by $45.0 million of proceeds from the issuance of the BOC PIPE and $15.7 million of gross proceeds from the Yellowstone trust account, as compared to $30.0 million of proceeds from the issuance of Series A Preferred Units in the first quarter of 2021. 

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements