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: 274 ); EisnerAmper LLP , New York, NY 44 Balance Sheets - December 31, 2024 and December 31, 2023 45 Statements of Operations - Years Ended December 31, 2024 and December 31, 2023 46 Statements of Comprehensive Income (Loss) - Years Ended December 31, 2024 and December 31, 2023 47 Statements of Changes In Stockholders' Equity - Years ended December 31, 2024 and December 31, 2023 48 Statements of Cash Flows - Years ended December 31, 2024 and December 31, 2023 49 Notes to Financial Statements 50 43 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 consolidated balance sheets of Sky Harbour Group Corporation and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits 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. /s/ EisnerAmper We have served as the Company’s auditor since 2020. EISNERAMPER LLP New York, New York March 27, 2025 44 Table of Contents SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2024 December 31, 2023 Assets Cash $ 42,442 $ 60,257 Restricted cash 51,917 12,009 Investments 18,987 11,866 Restricted investments 13,816 88,213 Accounts receivable, prepaid expenses, and other assets 8,624 6,003 Cost of construction 144,900 64,212 Constructed assets, net 110,302 77,283 Right-of-use assets 147,831 70,527 Long-lived assets, net 14,732 11,829 Lease intangible assets, net 3,005 - Total assets $ 556,556 $ 402,199 Liabilities and equity Accounts payable, accrued expenses, and other liabilities $ 27,655 $ 16,740 Operating lease liabilities 152,797 69,437 Bonds payable, net of unamortized debt issuance costs and premiums 162,621 162,420 Loans payable and finance lease liabilities 7,535 9,311 Warrants liability 46,130 12,045 Total liabilities 396,738 269,953 Commitments and contingencies (Note 17) Stockholders’ equity Preferred stock; $ 0.0001 par value; 10,000,000 shares authorized as of December 31, 2024; none issued and outstanding - - Class A common stock, $ 0.0001 par value; 200,000,000 shares authorized; 33,456,227 and 24,165,523 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 3 2 Class B common stock, $ 0.0001 par value; 50,000,000 shares authorized; 42,046,356 and 42,046,356 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively 4 4 Additional paid-in capital 168,634 88,198 Accumulated deficit ( 64,592 ) ( 19,361 ) Accumulated other comprehensive income 53 312 Total Sky Harbour Group Corporation stockholders’ equity 104,102 69,155 Non-controlling interests 55,716 63,091 Total equity 159,818 132,246 Total liabilities and equity $ 556,556 $ 402,199 See accompanying Notes to Consolidated Financial Statements 45 Table of Contents SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Year ended December 31, 2024 December 31, 2023 Revenue: Rental revenue $ 12,700 $ 7,137 Fuel revenue 2,061 $ 438 Total revenue 14,761 7,575 Expenses: Campus operating expenses 3,953 3,065 Fuel expenses 555 214 Ground lease expenses 8,564 3,889 Depreciation and amortization 2,706 2,278 Pursuit and marketing expenses 2,027 1,519 Employee compensation and benefits 13,882 10,310 General and administrative expenses 3,488 3,293 Total expenses 35,175 24,568 Operating loss ( 20,414 ) ( 16,993 ) Other (income) expense: Interest expense, net of capitalized interest 715 541 Other (income) expense ( 1,961 ) ( 737 ) Unrealized loss on warrants 34,515 8,644 Total other (income) expense 33,269 8,448 Net loss $ ( 53,683 ) $ ( 25,441 ) Net loss attributable to non-controlling interests ( 8,452 ) ( 9,264 ) Net loss attributable to Sky Harbour Group Corporation shareholders $ ( 45,231 ) $ ( 16,177 ) Loss per share Basic $ ( 1.76 ) $ ( 0.98 ) Diluted $ ( 1.76 ) $ ( 0.98 ) Weighted average shares Basic 25,742 16,456 Diluted 25,742 16,456 See accompanying Notes to Consolidated Financial Statements 46 Table of Contents SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year Ended December 31, 2024 December 31, 2023 Net loss $ ( 53,683 ) $ ( 25,441 ) Unrealized gains on available-for-sale securities 556 684 Realized gains on available-for-sale securities reclassified to the consolidated statements of operations ( 815 ) ( 270 ) Total other comprehensive loss $ ( 53,942 ) $ ( 25,027 ) See accompanying Notes to Consolidated Financial Statements 47 Table of Contents SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY (in thousands, except share data) Class A Class B Additional Accumulated Other Total Non- Common Stock Common Stock Paid-in Accumulated Comprehensive Stockholders’ Controlling Total Shares Amount Shares Amount Capital Deficit Loss Equity Interests Equity Balance at December 31, 2022 14,962,831 $ 1 42,192,250 $ 4 $ 29,560 $ ( 3,184 ) $ ( 102 ) 26,279 $ 72,096 98,375 Share-based compensation - - - - 1,816 - - 1,816 443 2,259 Vesting of restricted stock units 228,312 - - - - - - - - - Shares withheld for payment of employee taxes ( 65,585 ) - - - ( 377 ) - - ( 377 ) - ( 377 ) Exchange of Class B Common Stock 145,894 - ( 145,894 ) - 184 - - 184 ( 184 ) - Issuance of PIPE Shares, net of equity issuance costs 8,893,846 1 - - 57,012 - - 57,013 - 57,013 Exercise of warrants 225 - - - 3 - - 3 - 3 Other comprehensive income (loss) - - - - - - 414 414 - 414 Net loss - - - - - ( 16,177 ) - ( 16,177 ) ( 9,264 ) ( 25,441 ) Balance at December 31, 2023 24,165,523 2 42,046,356 4 88,198 ( 19,361 ) 312 69,155 63,091 132,246 Share-based compensation - - - - 3,737 - - 3,737 181 3,918 Vesting of restricted stock units 406,661 - - - - - - - - - Shares withheld for payment of employee taxes ( 120,886 ) - - - ( 1,443 ) - - ( 1,443 ) - ( 1,443 ) Exchange of Sky Incentive Units 751,485 - - - 280 - - 280 ( 280 ) - Issuance of strock through ATM Facility, net of equity issuance costs 79,676 - - - 1,071 - - 1,071 - 1,071 Issuance of PIPE Shares, net of equity issuance costs 7,911,580 1 - - 74,572 - - 74,573 - 74,573 Exercise of warrants 262,188 - - - 3,445 - - 3,445 - 3,445 Assumption of Overflow NCI partnership interests - - - - ( 1,226 ) - - ( 1,226 ) 1,176 ( 50 ) Other comprehensive income (loss) - - - - - - ( 259 ) ( 259 ) - ( 259 ) Net loss - - - - - ( 45,231 ) - ( 45,231 ) ( 8,452 ) ( 53,683 ) Balance at December 31, 2024 33,456,227 $ 3 42,046,356 $ 4 $ 168,634 $ ( 64,592 ) $ 53 $ 104,102 $ 55,716 $ 159,818 See accompanying Notes to Consolidated Financial Statements 48 Table of Contents SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31, 2024 December 31, 2023 Cash flows from operating activities: Net loss $ ( 53,683 ) $ ( 25,441 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,706 2,278 Straight-line rent adjustments, net ( 109 ) ( 239 ) Equity-based compensation 3,918 2,259 Non-cash operating lease expense 4,651 2,121 Unrealized loss (gain) on warrants 34,515 8,644 Loss on disposition assets, net 30 - Realized gain on available for sale investments ( 307 ) - Changes in operating assets and liabilities: Accounts receivable, prepaid expenses, and other assets ( 1,108 ) ( 440 ) Right-of-use asset initial direct costs ( 17 ) ( 26 ) Accounts payable, accrued expenses, and other liabilities 309 3,109 Net cash used in operating activities ( 9,095 ) ( 7,735 ) Cash flows from investing activities: Purchases of long-lived assets ( 2,262 ) ( 767 ) Payments for cost of construction ( 76,287 ) ( 55,373 ) Proceeds from disposition of long-lived assets 11 - Investment in notes receivable, net ( 1,000 ) ( 2,040 ) Net cash (used in) provided by acquisition of business ( 31,683 ) 1,793 Purchases of available for sale investments ( 244,687 ) ( 54,481 ) Purchases of held-to-maturity investments - ( 171,991 ) Proceeds from available for sale investments 237,614 68,194 Proceeds from held-to-maturity investments 74,387 198,397 Net cash used in investing activities ( 43,907 ) ( 16,268 ) Cash flows from financing activities: Proceeds from issuance of PIPE Shares 75,160 57,312 Proceeds from issuance of PIPE Warrants - 497 Proceeds from exercise of warrants 3,015 3 Proceeds from ATM facility 1,094 - Payments for equity issuance costs ( 955 ) ( 800 ) Payments of loans payable ( 1,776 ) ( 1,762 ) Payments of employee taxes related to vested equity awards ( 1,443 ) ( 377 ) Net cash provided by financing activities 75,095 54,873 Net (decrease) increase in cash and restricted cash 22,093 30,870 Cash and restricted cash, beginning of year 72,266 41,396 Cash and restricted cash, end of year $ 94,359 $ 72,266 See accompanying Notes to Consolidated Financial Statements 49 Table of Contents SKY HARBOUR GROUP CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 (in thousands, except share data) 1. Organization and Business Operations Sky Harbour Group Corporation (“SHG”) is a holding company organized under the laws of the State of Delaware and, through its main operating subsidiary, Sky Harbour LLC and its subsidiaries (collectively, “Sky”), is an aviation infrastructure development company that develops, leases and manages general aviation hangars for business aircraft across the United States. Sky Harbour Group Corporation and its consolidated subsidiaries are collectively referred to as the “Company.” The Company is organized as an umbrella partnership-C corporation, or “Up-C”, structure in which substantially all of the operating assets of the Company are held by Sky and SHG’s only substantive assets are its equity interests in Sky (the “Sky Common Units”). As of December 31, 2024, SHG owned approximately 44.3 % of the Sky Common Units, and the prior holders of Sky’s Existing Common Units (the “LLC Interests”) owned approximately 55.7 % 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. 2. Basis of Presentation and Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements and the related notes (the “Financial Statements”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission. These Financial Statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain historical amounts have been reclassified to conform to the current year’s presentation. Amounts previously presented as operating expenses are now separately disclosed as campus operating expenses, fuel expenses, and ground lease expenses within the consolidated statement of operations. Amounts previously presented as general and administrative expenses are now separately disclosed as pursuit and marketing expenses, compensation and benefits, and general and administrative expenses within the consolidated statement of operations. These reclassifications had no effect on total expenses, net loss, net loss per common share and had no impact on the Company’s consolidated balance sheets, statement of stockholders’ equity and statement of cash flows for the prior year period. 50 Table of Contents Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Such estimates include assumptions used within impairment analyses, estimated useful lives of depreciable assets and amortizable costs, estimates of inputs utilized in determining the fair value of financial instruments such as warrants, estimates and assumptions related to right-of-use assets and operating lease liabilities, and estimates and assumptions used in the determination of the fair value of assets acquired and liabilities assumed in business combinations. Actual results could differ materially from those estimates. Risks and Uncertainties The Company’s operations have been limited to-date. For most of its history, the Company was engaged in securing access to land through ground leases, and developing and constructing aviation hangars. The major risks faced by the Company is its future ability to obtain additional tenants for the facilities that it constructs, and to contract with such tenants for rental income in an amount that is sufficient to meet the Company’s financial obligations, including increasing construction costs due to inflation and increased borrowing costs to the extent that the Company incurs additional indebtedness. Liquidity and Capital Resources As a result of ongoing construction projects and business development activities, including the development of aircraft hangars and the leasing of available hangar space, the Company has incurred recurring losses and negative cash flows from operating activities since its inception. The Company expects to continue to invest in such activities and generate operating losses in the near future. The Company obtained long-term financing through bond and equity offerings to fund its construction, lease, and operational commitments, and believes its liquidity is sufficient to allow continued operations for more than one year after the date these financial statements are issued. Significant Accounting Policies Basis of Consolidation SHG is deemed to have a controlling interest of Sky through its appointment as the Managing Member of Sky, in which SHG has control over the affairs and decision-making of Sky. The interests in Sky not owned by the Company are presented as non-controlling interests. Sky’s ownership percentage in each of its consolidated subsidiaries is 100 %, unless otherwise disclosed. Cash and Restricted Cash The Company’s cash is held at a major commercial bank, which cash balance may at times exceed the Federal Deposit Insurance Corporation limit. To date, the Company has not experienced any losses on its cash deposits. The Company monitors the relative credit standing of financial institutions with whom the Company transacts and limits the amount of credit exposure with any one entity. The Company classifies all highly liquid investments, with the exception of U.S. Treasury securities, purchased with an original maturity of three months or less as cash or restricted cash. Pursuant to the Company’s bond offering described in Note 9 — Bonds Payable, Loans Payable, and Interest , various restricted trust bank accounts were established at a major financial institution. Such trust bank accounts are included in Restricted cash and Restricted investments on the consolidated balance sheet as of December 31, 2024 and December 31, 2023 . 51 Table of Contents Investments Investments of the Company's cash in various U.S. Treasury securities have been classified as available-for-sale and are carried at estimated fair value utilizing Level 1 inputs as determined based upon quoted market prices. 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 or its contractual maturity. 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. Interest income is recognized when earned as a component of other (income) expense. For available-for-sale securities sold prior to maturity, realized gains and losses and declines in fair value judged to be other than temporary, if any, are included in other (income) expenses. For available-for-sale securities held to maturity, the Company recognizes purchases of, and proceeds from, available-for-sale securities are reported on a gross basis in the cash flows from investing activities section of the consolidated statement of cash flows. The costs of investments sold is based on the specific-identification method. Restricted Investments Held-to-Maturity Pursuant to provisions within the Master Indenture of the Series 2021 Bonds, as defined in Note 9 — Bonds Payable, Loans Payable, and Interest , the Company invests the funds held in the restricted trust bank accounts in various U.S. Treasury securities. Therefore, such investments are reported as “Restricted investments” in the accompanying consolidated balance sheets. The fair value of the Company’s restricted investments is estimated utilizing Level 1 inputs including prices for U.S. Treasury securities with comparable maturities on active markets. Unrealized losses on certain of the Company's investments and restricted investments are primarily attributable to changes in interest rates. The Company does not believe the unrealized losses represent impairments because the unrealized losses are due to general market factors. The Company has not recognized an allowance for expected credit losses related to its investments or restricted investments as the Company has not identified any unrealized losses attributable to credit factors during the years ended December 31, 2024 and December 31, 2023. The Company has the ability and intent to hold these restricted investments until maturity, and as a result, the Company would not expect the value of these investments to decline significantly due to a sudden change in market interest rates. The held-to-maturity restricted investments are carried on the consolidated balance sheet at amortized cost. Cost of Construction Cost of construction on the consolidated balance sheets is carried at cost. The cost of acquiring an asset includes the costs necessary to bring a capital project to the condition necessary for its intended use. Costs are capitalized once the construction of a specific capital project is probable. Construction labor and other direct costs of construction are capitalized. Professional fees for engineering, procurement, consulting, and other soft costs that are directly identifiable with the project and are considered an incremental direct cost are capitalized. Activities associated with internally manufactured hangar buildings, including materials, direct manufacturing labor, and manufacturing overhead directly identifiable with such activities are allocated to our construction projects and capitalized. The Company allocates a portion of its internal salaries to both capitalized cost of construction and to compensation and benefits expense based on the percentage of time certain employees worked in the related areas. Interest, net of the amortization of debt issuance costs and premiums, and net of interest income earned on bond proceeds, is also capitalized until the capital project is completed. Constructed assets, net Constructed assets on the consolidated balance sheets consists of developed aircraft hangar buildings and are carried at cost less accumulated depreciation. Once a capital project is complete, the Company begins to depreciate the constructed asset on a straight-line basis over the lesser of the life of the asset or the remaining term of the related ground lease, including expected renewal terms. Other long-lived assets Long-lived assets on the consolidated balance sheets consists principally of land, buildings, machinery and equipment, ground support equipment, software, and computer equipment. Long-lived assets are carried at cost less accumulated depreciation. Maintenance and repair expenses are charged to expense as incurred. Depreciation is recognized on a straight-line basis over 3 to 20 years, based on the estimated useful life of the assets. Lease intangible assets Lease intangible assets on the consolidated balance sheets consists of acquired in-place lease and above-market lease intangible assets. Lease intangible assets are carried at cost less accumulated amortization. Amortization is recognized on a straight-line basis over the acquired leases' respective remaining term. Impairment of long-lived assets The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment analyses are based on, in part, the Company’s current plans, intended holding periods and available market information at the time the analyses are prepared. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the property’s carrying amount over its estimated fair value. Estimates of fair value are determined using discounted cash flow models, which consider, among other things, anticipated holding periods, current market conditions and utilize unobservable quantitative inputs, including appropriate capitalization and discount rates. If the estimates of the projected future cash flows, anticipated holding periods, or market conditions change, evaluation of impairment losses may be different and such differences could be material to the consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and other factors that could differ materially from actual results. 52 Table of Contents Leases The Company accounts for leases under Accounting Standards Codification (“ASC”) Topic 842, Leases . The Company determines whether a contract contains a lease at the inception of the contract. ASC Topic 842 requires lessees to recognize lease liabilities and right-of-use (“ROU”) assets for all operating leases with terms of more than 12 months on the consolidated balance sheets. The Company has made an accounting policy election to not recognize leases with an initial term of 12 months or less on the Company’s consolidated balance sheets and will result in recognizing those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. When management determines that it is reasonably certain that the Company will exercise its options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and lease liability balances. The Company has lease agreements with lease and non-lease components; the Company has elected the accounting policy to not separate lease and non-lease components for all underlying asset classes. The Company has not elected to capitalize any interest cost that is implicit within its operating leases into cost of construction on the consolidated balance sheet, but instead, expenses its ground lease cost as a component of operating expenses in the consolidated statements of operations. All of the Company’s ground leases at airports are classified as operating leases under ASC Topic 842. Management has determined that it is reasonably certain that the Company will exercise its options to renew the leases, and therefore the renewal options are included in the lease term and the resulting ROU asset and operating lease liability balances. As the Company’s lease agreements do not provide a readily determinable implicit rate, nor is the rate available to the Company from its lessors, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company has operating leases that contain variable payments, most commonly in the form of common area maintenance and operating expense charges, which are based on actual costs incurred. These variable payments were excluded from the calculation of the ROU asset and operating lease liability balances since they are not fixed or in-substance fixed payments. These variable payments were not material in amount for both of the years ended December 31, 2024 and 2023 . 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. See Note 17 — Commitments and Contingencies. Warrants liability The Company accounts for the warrants assumed in the Yellowstone Transaction and the warrants sold and issued in connection with the 2023 Purchase Agreement (as defined in Note 11 — Equity ) in accordance with the guidance contained in ASC Topic 815, “Derivatives and Hedging” (“ASC 815” ), under which warrants that do not meet the criteria for equity classification and must be recorded as derivative liabilities. Accordingly, the Company classifies the warrants as liabilities carried at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the warrants are exercised or expire, and any change in fair value is recognized as an unrealized gain or loss in the consolidated statements of operations. Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASC Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels: Level 1 – quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities; Level 2 – quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3 – unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining the fair value of financial and non-financial assets and liabilities. Accordingly, fair value estimates may be different than the amounts that may ultimately be realized upon sale or disposition of these assets or settlement of these liabilities. 53 Table of Contents Business Combinations and Asset Acquisitions The Company evaluates each acquisition transaction to determine whether the acquired asset meets the definition of a business and therefore should be accounted for as a business combination, or if the transaction should be accounted for as an asset acquisition. Under ASC Topic 805, Business Combinations , an acquisition does not qualify as a business when substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets. If the Company determines that the screen test is met, the transaction is accounted for as an asset acquisition. If the screen test is not met, the Company further considers whether the acquisition includes, at a minimum, inputs and processes that have the ability to create outputs in the form of revenue. If the assets acquired meet this criteria, the transaction is accounted for as a business combination. The Company accounts for acquisitions that qualify as asset acquisitions utilizing a cost accumulation model whereby the purchase price of the acquisition is allocated to the assets acquired on a relative fair value basis on the date of acquisition. Inputs used to determine such fair values are primarily based upon internally developed models, publicly-available information, a risk-adjusted discount rate and/or publicly-available data regarding transactions consummated by other market participants, as applicable. The Company accounts for business combinations using the acquisition method of accounting under ASC Topic 805, Business Combinations , whereby the total purchase price is allocated to tangible and intangible assets acquired and liabilities assumed based on respective estimated fair values. The initial valuations are derived from estimated fair value assessments and assumptions used by managements. The excess of the acquisition price over those estimated fair values, if any, is recorded as goodwill. Transaction-related costs related to asset acquisitions are capitalized as part of the cost basis of the acquired assets. Transaction-related expenses and restructuring costs that are deemed to be part of an acquisition of a business are expensed as incurred. Revenue recognition The Company leases the hangar facilities that it constructs to third parties. The Company determines whether a contract contains a lease at the inception of the contract. The lease agreements are either on a month-to-month basis or have a defined term and may have options to extend the term. Some of the leases contain options to terminate the lease by either party with given notice. The Company expects to continue to derive benefit from the underlying assets after the end of the lease term through further leasing arrangements. The underlying assets are the leasehold interest that the Company has in connection with its ground leases. There are no options given to the lessee to purchase the underlying assets. Rental revenue is recognized in accordance with ASC 842 and includes fixed payments of cash rents, which represents revenue each tenant pays in accordance with the terms of its respective lease and is recognized on a straight-line basis over the term of the lease. Rental revenue and the corresponding rent and other receivables are recorded net of any concessions and uncollectible tenant receivables for all periods presented. The Company evaluates the collectability of tenant receivables for payments required under the lease agreements. If the Company determines that collectability is not probable, the Company recognizes any difference between revenue amounts recognized to date under ASC 842 and payments that have been collected from the lessee, including any additional rent or lease termination fees, as a current period adjustment to rental revenue. Variable lease payments consist of tenant reimbursements for common area maintenance, utilities, and operating expenses of the property, and various other fees, including fees associated with the delivery of aircraft fuel, late fees, and lease termination fees. Variable lease payments are charged based on the terms and conditions included in the respective tenant leases and are recognized in the same period as the expenses are incurred. For the year ended December 31, 2024, rental revenue and fuel revenue includes $ 887 and $ 1,876 of variable lease payments, respectively. For the year ended December 31, 2023, rental revenue and fuel revenue includes $ 1,127 and $ 438 of variable lease payments, respectively. As of December 31, 2024 and December 31, 2023, the deferred rent receivable included in accounts receivable, prepaid expenses, and other assets was $ 594 and $ 367 , respectively. Rent received in advance represents tenant payments received prior to the contractual due date, and is included in accounts payable, accrued expenses, and other liabilities in the consolidated balance sheet. Rent received in advance consisted of $ 390 and $ 241 as of December 31, 2024 and December 31, 2023, respectively. At certain of the Company's hangar campuses, the Company recognizes revenue from ground-based services, such as the fueling and towing of aircraft. Revenue for the sale of aircraft fuel is recognized at the time customer obtains control of the fuel. Revenue for the sale of other ground-based services is recognized at the time the service is performed and provided to customers. Customers are invoiced at the time the services are performed and the associated revenue is recognized in the period it is earned. The Company's fueling arrangements generally are unique at each location it operates, and may be accounted for on a gross or net basis. The Company determines whether to recognize fuel and services revenue on a gross or net basis based on consideration of various factors, including whether the Company has control of the products or services prior to delivery to customers, the Company's degree of latitude in establishing the sales price, whether the Company carries the associated inventory risk, and which party is the primary obligor within such sales arrangements. For the year ended December 31, 2024 the Company did not derive 10% of its revenue from any single tenant. For the year ended December 31, 2023 , the Company derived 30 % of its revenue from two tenants. Advertising Costs The Company expenses the cost of advertising and marketing as incurred. Advertising and marketing costs recognized as pursuit and marketing expenses totaled $ 431 for the year ended December 31, 2024 , and $ 279 for the year ended December 31, 2023 . 54 Table of Contents Income Taxes SHG is classified as a corporation for Federal income tax purposes and is subject to U.S. Federal and state income taxes. SHG includes in income, for U.S. Federal income tax purposes, its allocable portion of income from the “pass-through” entities in which it holds an interest, including Sky. The “pass-through” entities, are not subject to U.S. Federal and certain state income taxes at the entity level, and instead, the tax liabilities with respect to taxable income are passed through to the members, including SHG. As a result, prior to the Yellowstone Transaction, Sky was not subject to U.S. Federal and certain state income taxes at the entity level. The Company follows the asset and liability method of accounting for income taxes. This method gives consideration to the future tax consequences associated with the differences between the financial accounting and tax basis of the assets and liabilities as well as the ultimate realization of any deferred tax asset resulting from such differences, as well as from net operating losses and other tax-basis carryforwards. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. When a valuation allowance is increased or decreased, a corresponding tax expense or benefit is recorded. Amounts payable under the Tax Receivable Agreement, as defined in Note 14 — Income Taxes , are accrued by a charge to income when it is probable that a liability has been incurred and the amount is estimable. Recently Adopted Accounting Pronouncements Segment Reporting (Topic 280 ) In November 2023, the FASB issued ASU No. 2023 - 07, Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures , which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The disclosure requirements included in ASU No. 2023 - 07 are required for all public entities, including entities with a single reportable segment. ASU No. 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the guidance retrospectively beginning with its consolidated financial statements for the year ended December 31, 2024. The adoption of ASU No. 2023 - 07 did not have a material effect on the Company's consolidated financial statements, except for the related disclosures. Recently Issued Accounting Pronouncements Income Taxes (Topic 740 ) In December 2023, the FASB issued ASU No. 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures . The amendments in this update apply to all entities that are subject to Topic 740, Income Taxes . The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. The amendments in this update are effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of this updated standard on its disclosures to the consolidated financial statements. In November 2024, the FASB issued ASU No. 2024 - 03, Income Statement — Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses . This ASU requires public business entities to disclose in the notes to financial statements specific categories within relevant expense captions presented on the face of the income statement. The ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied on a prospective basis with retrospective application permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and disclosures. 55 Table of Contents 3. Acquisitions Camarillo Acquisition On December 6, 2024 ( the “CMA Closing Date”), the Company, through two wholly-owned subsidiaries of Sky, completed the acquisition of CloudNine at Camarillo LP (“CloudNine”), a California limited partnership, and Sky 805 LLC (“Sky 805” ), California limited liability company in exchange for approximately $ 32.1 million in aggregate cash consideration (collectively, the “Camarillo Acquisitions”). As a result of the Camarillo Acquisitions, CMA CloudNine Holdings LLC, a Delaware limited liability company and wholly-owned subsidiary of Sky, owns a 100 % limited partnership interest in CloudNine, and CMA Sky 805 Holdings LLC, a Delaware limited liability company and wholly-owned subsidiary of Sky, is the sole member of Sky 805. Substantially all of the cash consideration paid in connection with the Camarillo Acquisitions was utilized to satisfy the pre-existing senior and subordinated debt obligations of CloudNine and Sky 805, which were not legally assumed by the Company. The Company did not issue or assume any other debt in connection with the Camarillo Acquisitions. The Camarillo Acquisitions were accounted for as asset acquisitions, and the purchase price of the acquisitions was allocated to the assets acquired on a relative fair value basis on the date of acquisition. The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the Camarillo Acquisitions: December 6, 2024 Cash $ 419 Constructed assets, net 30,382 Operating lease right-of-use assets 12,691 Long-lived assets, net 4,241 Total assets 47,733 Accounts payable, accrued expenses and other liabilities 1,511 Operating lease liabilities 14,113 Total liabilities 15,624 Total fair value of net assets acquired $ 32,109 CloudNine's principal asset is an approximately 120,000 square foot hangar and office complex at Camarillo Airport (“CMA”) in Camarillo, California, located in the greater Los Angeles metropolitan area. Sky 805 is the holder of related ground leases (the “CMA Leases”) and fixed-based operator rights at CMA. The Company assumed all of CloudNine's and Sky 805's obligations under the CMA Leases in connection with the Camarillo Acquisitions. The CMA Leases pertain to four parcels covering approximately 17 acres of land at CMA and have remaining lease terms of 37 years, each with 10 -year options exercisable at the sole discretion of the Company. 56 Table of Contents Rapidbuilt Business Combination On May 12, 2023 ( the “Option Exercise Date”), Sky exercised its option to acquire a 51 % equity interest in Overflow Ltd., a Texas limited partnership (“Overflow”), and its wholly-owned operating subsidiary, Rapidbuilt, Inc., a Texas corporation (“Rapidbuilt”), for nominal consideration (the “Rapidbuilt Acquisition”). As a result of the Rapidbuilt Acquisition, Weatherford Steel Buildings Holdings LLC, a Delaware limited liability company and wholly-owned subsidiary of Sky (“WSBH”), owned a 50 % limited partnership interest in Overflow, and Weatherford Steel Buildings GP LLC, a Delaware limited liability company and wholly-owned subsidiary of Sky (“WSB GP”), owned a 1 % general partnership interest in Overflow. On December 31, 2024, the Company assumed the former majority shareholder's ownership interest in Overflow for no consideration. As a result, WSBH and WSB GP own 100 % of the partnership interests in Overflow as of December 31, 2024. Rapidbuilt is a manufacturer of pre-engineered steel buildings that previously entered into a supplier arrangement with Sky. Rapidbuilt and Sky’s strategic partnership has resulted in a standard set of proprietary prototype hangar designs, which are intended to deliver high-quality business aviation facilities, lower construction costs, minimize development risk, expedite permit issuance, and facilitate the implementation of refinements across Sky’s portfolio. The Company had pre-existing relationships with Rapidbuilt through a vendor agreement entered into in July 2022 to acquire construction materials related to the Company's development projects (the "Rapidbuilt Vendor Agreement") and a revolving line of credit loan and security agreement (the "Rapidbuilt Loan Agreement") to fund the working capital requirement of Rapidbuilt. These pre-existing relationships were effectively settled in the acquisition and the net receivable balance of $ 44 is included within the consideration transferred. No gain or loss was recognized in the effective settlement of the Rapidbuilt Vendor Agreement and the Rapidbuilt Loan Agreement. The total cash purchase consideration was nominal. The Company accounted for the acquisition using the acquisition method of accounting, whereby the total purchase price was allocated to assets acquired and liabilities assumed based on respective estimated fair values. The following table summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed for the Rapidbuilt Acquisition: May 12, 2023 Cash $ 293 Restricted Cash 1,500 Long-lived assets 10,752 Total assets 12,545 Accounts payable, accrued expenses and other liabilities 1,427 Loans payable and finance lease liabilities 11,074 Total liabilities 12,501 Total fair value of net assets acquired 44 Effective settlement of net receivable from Rapidbuilt 44 Total consideration transferred $ 44 Following the Rapidbuilt Acquisition, substantially all of Overflow and Rapidbuilt's activities relate to the manufacturing of pre-engineering hangar structures for Sky's hangar development projects. As such, the pro-forma effect of this acquisition on revenues and earnings was not material. The transaction costs associated with the acquisition were immaterial for the year ended December 31, 2023. . 57 Table of Contents 4. Investments and Restricted Investments The following tables are summaries of the amortized cost, unrealized gains, unrealized losses, and fair value by investment type as of December 31, 2024 and December 31, 2023: December 31, 2024 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Investments, available for sale: U.S. Treasuries $ 18,934 $ 53 $ - $ 18,987 Total investments $ 18,934 $ 53 $ - $ 18,987 Restricted investments, held-to-maturity: U.S. Treasuries 13,816 85 ( 353 ) 13,548 Total restricted investments $ 13,816 $ 85 $ ( 353 ) $ 13,548 December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Investments, available for sale: U.S. Treasuries $ 11,554 $ 312 $ - $ 11,866 Total investments $ 11,554 $ 312 $ - $ 11,866 Restricted investments, held-to-maturity: U.S. Treasuries 88,213 105 ( 694 ) 87,624 Total restricted investments $ 88,213 $ 105 $ ( 694 ) $ 87,624 The following table sets forth the maturity profile of the Company's investments and restricted investments as of December 31, 2024: Investments Restricted Investments Due within one year $ 18,987 $ 2,356 Due one year through five years - 11,460 Total $ 18,987 $ 13,816 58 Table of Contents 5. Cost of Construction and Constructed Assets The Company’s portfolio as of December 31, 2024 includes the following completed and in-development projects: ● Addison Airport (“ADS”), Addison, TX (Dallas area); ● Bradley International Airport (“BDL”), Windsor Locks, CT (Hartford area); ● Camarillo Airport (“CMA”), Camarillo, CA (Los Angeles area); ● Centennial Airport (“APA”), Englewood, CO (Denver area); ● Chicago Executive Airport (“PWK”), Wheeling, IL (Chicago area); ● Hudson Valley Regional Airport (“POU”), Wappingers Falls, NY (New York area); ● Miami-Opa Locka Executive Airport (“OPF”), Opa Locka, FL (Miami area); ● Nashville International Airport (“BNA”), Nashville, TN; ● Orlando Executive Airport (“ORL”), Orlando, FL; ● Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ; ● Salt Lake City International Airport (“SLC”), Salt Lake City, UT; ● San José Mineta International Airport (“SJC”), San Jose, CA; ● Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area); ● Trenton-Mercer Airport (“TTN”), Ewing, NJ (New York and Philadelphia areas); and ● Washington Dulles International Airport (“IAD”), Dulles, VA (Washington, DC area). Constructed assets, net, and cost of construction, consists of the following: December 31, 2024 December 31, 2023 Constructed assets, net of accumulated depreciation: Buildings: BNA, CMA, OPF Phase I, SGR, and SJC Renovation $ 115,151 $ 80,232 Accumulated depreciation ( 4,849 ) ( 2,949 ) $ 110,302 $ 77,283 Cost of construction: ADS Phase I, ADS Phase II, APA Phase I, BDL Phase I, DVT Phase I, OPF Phase II, ORL Phase I, and PWK Phase I $ 144,900 $ 64,212 The BNA, CMA, OPF Phase I, SGR, and SJC Renovation sites are being depreciated over a weighted-average useful life of approximately 46.2 years. Depreciation expense for the year ended December 31, 2024 and 2023 totaled $ 1,899 and $ 1,737 , respectively. 59 Table of Contents 6. Long-lived Assets and Lease Intangible Assets Long-lived assets, net, consists of the following: December 31, 2024 December 31, 2023 Ground support equipment $ 1,644 $ 1,051 Machinery and equipment 4,903 3,783 Buildings 5,434 5,380 Land 1,620 1,620 Other equipment and fixtures 966 596 Purchase deposits and construction in progress 2,380 362 16,947 12,792 Accumulated depreciation ( 2,215 ) ( 963 ) $ 14,732 $ 11,829 Long-lived assets are being depreciated over a weighted-average use life of approximately 10.6 years. Depreciation expense for the year ended December 31, 2024 and 2023 totaled $ 782 and $ 541 , respectively. Capitalized depreciation of long-lived assets included in cost of construction totaled $ 488 and $ 331 for the years ended December 31, 2024 and December 31, 2023, respectively . As of December 31, 2024 and December 31, 2023 , long-lived assets included approximately $ 2,380 and $ 362 , respectively, of purchase deposits towards long-lived assets which are not being depreciated as the assets have not been placed into service. Lease intangible assets, net, consists of the following: December 31, 2024 December 31, 2023 Acquired in-place leases $ 1,878 $ - Above market leases 1,151 - 3,029 - Accumulated amortization ( 24 ) - Total operating lease expense $ 3,005 $ - Lease intangible assets are being amortized over a weighted-average use life of approximately 10.3 years. Amortization expense for the year ended December 31, 2024 and 2023 totaled $ 24 and $ 0 , respectively. Estimated amortization of the respective intangible lease assets as of December 31, 2024 for each of the five succeeding years and thereafter is as follows: Year Ending December 31, Acquired In-Place Leases Above Market Leases 2025 $ 191 $ 104 2026 191 104 2027 191 104 2028 191 104 2029 191 104 Thereafter 907 623 Total $ 1,862 $ 1,143 60 Table of Contents 7. Supplemental Balance Sheet and Cash Flow Information Accounts payable, accrued expenses, and other liabilities Accounts payable, accrued expenses and other liabilities, consists of the following: December 31, 2024 December 31, 2023 Costs of construction $ 14,267 $ 7,022 Employee compensation and benefits 2,746 2,438 Interest 3,474 3,474 Professional Fees 1,149 1,154 Property Taxes 969 468 Tenant security deposits 1,036 636 Other 4,014 1,548 $ 27,655 $ 16,740 Supplemental Cash Flow Information The following table summarizes non-cash investing and financing activities: Year ended December 31, 2024 December 31, 2023 Accrued costs of construction, including capitalized interest $ 15,796 $ 9,875 Accrued costs of long-lived assets 741 32 Accrued equity issuance costs - 1,000 Debt issuance costs and premium amortized to cost of construction 201 210 The following table summarizes non-cash activities associated with the Company’s operating leases: Year ended December 31, 2024 December 31, 2023 Right-of-use assets obtained in exchange for operating lease liabilities $ 64,802 $ 16,870 Net increase (decrease) in right-of-use assets and operating lease liabilities due to lease remeasurement 839 ( 1,639 ) The following table summarizes interest paid: Year ended December 31, 2024 December 31, 2023 Interest paid $ 7,655 $ 7,481 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: Year ended December 31, 2024 December 31, 2023 Cash, beginning of year $ 60,257 $ 2,174 Restricted cash, beginning of year 12,009 39,222 Cash and restricted cash, beginning of year $ 72,266 $ 41,396 Cash, end of year $ 42,442 $ 60,257 Restricted cash, end of year 51,917 12,009 Cash and restricted cash, end of year $ 94,359 $ 72,266 61 Table of Contents 8. Leases Lessee The table below summarizes operating lease expense for the years ended December 31, 2024 and December 31, 2023 recorded in the captions within our consolidated statement of operations: Year Ended December 31, 2024 December 31, 2023 Ground lease expenses $ 8,564 $ 3,889 Fuel expenses 270 158 General and administrative expenses 111 96 Total operating lease expense $ 8,945 $ 4,143 The Company’s ground leases have remaining terms ranging between 19 to 72 years, including options for the Company to extend the terms. These leases expire between 2044 and 2097, which include all lease extension options available to the Company. Certain of the Company's ground leases contain options to lease additional parcels of land at the Company's option within a specified period of time. In addition to the Company’s ground leases, the Company has operating leases for office space and ground support vehicles, and finance leases for vehicles supporting operations at Rapidbuilt. In January 2023, the Company executed a lease amendment with the Town of Addison, Texas, to add two additional parcels of land (the “ADS Expansion Parcels”) to the existing lease at ADS (the “ADS Lease”). The land associated with the ADS Expansion Parcels became available for possession in June 2023 for one parcel, and is expected to become available for possession in July 2024 for the other. The lease term for the ADS Expansion Parcels will be 40 years from the completion of construction for each respective parcel, and will effectively extend the term of the existing ADS Lease to be co-terminus with the ADS Expansion Parcels. The ADS Lease and the ADS Expansion Parcels contain no additional extension options as the lease term is the maximum allowable term permitted by the Town of Addison. In October 2023, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement with PWK (the “PWK Lease”). The PWK Lease is divided into two parcels, with the first parcel containing approximately 15 acres of land (“PWK Phase I”). Under the terms of the PWK Lease, it is the intent of PWK to grant the Company a second parcel containing approximately 10 acres of land (“PWK Phase II”). The grant of the PWK Phase II land is at the sole discretion of PWK following the Company's completion of its development project at PWK Phase I. The term of the PWK Lease will be 50 years from the acceptance of the PWK Phase I parcel following customary due diligence and completion of a land survey, with lease payments commencing following the completion of construction. The PWK Lease contains no additional extension options exercisable by the Company or PWK. The Company was subject to requirements in its ground lease at SGR with respect to the Company's contemplated SGR Phase II project that defined (i) a minimum improvement amount of $ 2.0 million and (ii) that related construction commence by October 2023, unless otherwise waived or amended. In October 2023, the Company allowed the ground lease associated with the parcels designated for the SGR Phase II project to automatically terminate. The Company did not incur any lease termination penalties, nor had it capitalized any historical costs associated with the contemplated SGR Phase II project. In December 2023, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement (the “BDL Lease”) at BDL with the Connecticut Airport Authority (“CAA”). The BDL Lease covers a parcel containing approximately 8 acres of land at BDL. The initial term of the BDL Lease will be 30 years from the earlier of the date of completion of construction or June 30, 2026, with lease payments commencing contemporaneously with the term. The BDL Lease contains options exercisable by the Company to extend the BDL Lease an additional 20 years following the expiration of the initial term. The BDL Lease contains customary milestones by which the Company must submit site design plans and financing plans. In December 2023, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement at POU with the County of Dutchess, New York (the “POU Lease”). The POU Lease covers two parcels containing approximately 7 acres of land at POU. The initial term of the POU Lease was 15 years from the date of completion of construction. The POU Lease contained language permitting the Company to extend the POU Lease an additional 25 years at any point following the execution of the POU Lease, subject to Dutchess County legislative approval. The POU Lease contains customary deadlines by which the Company must submit site design plans and commence construction. In November 2024, the Company executed an amendment to the POU Lease (the “Amended POU Lease”). The Amended POU Lease extended the term of such ground lease from 15 year to 40 years from the completion of construction, with lease payments commencing upon the earlier of completion of construction or June 2027. 62 Table of Contents In March 2024, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement (the “SJC Lease”) at SJC with the City of San Jose. The SJC Lease covers approximately 7 acres of property that contains an approximately 38,000 square foot hangar, approximately 19,000 square feet of office space, and approximately 108,000 square feet of apron and ramp space. The property at SJC includes additional land on which the Company intends to develop approximately 28,000 square feet of additional hangar space. The initial term of the SJC Lease will be 20 years from May 1, 2024, and contains a mutual option to extend the SJC Lease an additional 5 years following the expiration of the initial term. In March 2024, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement (the “ORL Lease”) at ORL with the Greater Orlando Aviation Authority (“GOAA”). The ORL Lease covers a parcel containing approximately 20 acres of land at ORL. The initial term of the ORL Lease will be 30 years from expiration of construction period, with lease payments commencing contemporaneously with the term. The ORL Lease contains options exercisable by the Company to extend the ORL Lease an additional 20 years based on the Company's total expenditures in subsequent phases at ORL. In May 2024, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement (the “IAD Lease”) at IAD with the Metropolitan Washington Airports Authority (“MWAA”). The IAD Lease covers approximately 18 acres of property at IAD. The initial term of the IAD Lease will be approximately 50 years and expire on March 31, 2074, and contains an option exercisable by the Company to extend the IAD Lease an additional 10 years following the expiration of the initial term. The property covered by the IAD Lease is split between two parcels, with rent payments associated with the first parcel (“IAD Phase I”) commencing the earlier of certificate of occupancy or 36 months from the issuance of permits for IAD Phase I, and rent payments associated with the second parcel (“IAD Phase II”) commencing the earlier of issuance of permits for IAD Phase II or five years from certificate of occupancy associated with IAD Phase I. The IAD Lease requires the Company to commence construction related to IAD Phase II within five years of the receipt of the certificate of occupancy for IAD Phase I. In August 2024, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement (the “SLC Lease”) at Salt Lake City International Airport (“SLC”) with the Salt Lake City Corporation. The SLC Lease covers approximately 8.4 acres of property at SLC. The initial term of the SLC Lease will be 30 years from the earlier of certificate of occupancy or 24 months from the expiration of the diligence period, as defined in the SLC Lease, with lease payments commencing contemporaneously with the term. The SLC Lease contains two options exercisable by the Company to extend the SLC Lease for an additional 20 years following the expiration of the initial term. In December 2024, the Company, through a wholly-owned subsidiary of the Company, entered into a ground lease agreement (the “TTN Lease”) at Trenton-Mercer Airport (“TTN”) with the County of Mercer, New Jersey. The TTN Lease covers approximately 10 acres of property at TTN. The initial term of the TTN Lease will be 30 years from the earlier of certificate of occupancy or 36 months from the lease commencement date, as defined in the TTN Lease, with lease payments commencing contemporaneously with the term. The TTN Lease contains an option exercisable by the Company to extend the TTN Lease for an additional 20 years following the expiration of such initial term. Supplemental consolidated cash flow information related to the Company’s leases was as follows: Year ended December 31, 2024 December 31, 2023 Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 4,223 $ 1,971 Operating cash flows from finance leases 3 2 Financing cash flows from finance leases 26 18 63 Table of Contents Supplemental consolidated balance sheet information related to the Company’s leases was as follows: Weighted Average Remaining Lease Term in years December 31, 2024 December 31, 2023 Operating leases Ground leases - Unimproved at commencement 54.6 55.8 Ground leases - Existing improvements 31.0 46.1 Equipment leases 5.2 4.0 Office Leases 1.1 1.4 All operating leases 44.6 53.4 Finance leases 1.9 2.7 Weighted Average Discount Rate Operating leases Ground leases - Unimproved at commencement 5.45 % 5.22 % Ground leases - Existing improvements 5.18 % 4.00 % Equipment leases 5.46 % 5.45 % Office Leases 4.82 % 2.46 % All operating leases 5.39 % 5.08 % Finance leases 4.98 % 5.00 % The Company’s future minimum lease payments required under leases as of December 31, 2024 were as follows: Year Ending December 31, Operating Leases Finance Leases 2025 $ 6,353 $ 24 2026 7,460 17 2027 8,305 2 2028 8,678 - 2029 9,051 - Thereafter 477,868 - Total lease payments 517,715 43 Less imputed interest ( 364,918 ) ( 2 ) Total $ 152,797 $ 41 Lessor Tenant leases to which the Company is the lessor require the following non-cancelable future minimum lease payments from tenants as of December 31, 2024 : Year Ending December 31, Operating Leases 2025 $ 14,807 2026 12,127 2027 9,321 2028 7,139 2029 3,736 Thereafter 16,017 Total $ 63,147 64 Table of Contents 9. Bonds payable, loans payable and interest Bonds payable On May 20, 2021, Sky formed a new wholly-owned subsidiary, Sky Harbour Capital LLC, as a parent corporation to its wholly-owned subsidiaries that operate each of the aircraft hangar development sites under its first six ground leases. Sky Harbour Capital LLC and these subsidiaries form an Obligated Group (the “Obligated Group” or the “Borrowers”) under a series of bonds that were issued in September 2021 with a principal amount of $ 166.3 million (the “Series 2021 Bonds”). The members of the Obligated Group are jointly and severally liable under the Series 2021 Bonds. SHG and its other subsidiaries are not members of the Obligated Group and have no obligation to repay the bonds. The Series 2021 Bonds are payable pursuant to a loan agreement dated September 1, 2021 between the Public Finance Authority (of Wisconsin) and the Borrowers. The payments by the Borrowers under the loan agreement are secured by a Senior Master Indenture Promissory Note, Series 2021 - 1 issued by the Obligated Group under an indenture (the “Master Indenture”). The obligations of the Borrowers are collateralized by certain leasehold and sub-leasehold deeds of trust or mortgages on the Borrowers’ interests in the development sites and facilities being constructed at each airport where the Borrowers hold ground leases. In addition, the Borrowers have assigned, pledged and granted a first priority security interest in all funds held under the Master Indenture and all right, title and interest in the gross revenues of the Borrowers. Furthermore, Sky, Sky Harbour Holdings LLC and Sky Harbour Capital LLC have each pledged as collateral its respective ownership interest in any of the Borrowers. The bond trustee established various restricted bank accounts which were initially funded with the bond proceeds and cash on hand. The bond trustee will continue to control the Borrowers’ cash receipts and disbursements under a Trust Agreement. Such restricted funds are available to fund the construction expenditures of the two phases of OPF, BNA, DVT, APA, and ADS Phase I, with certain approvals and supplemental reports, up to $ 25 million at other airport sites, in addition to certain operating expenses such as ground lease expense. These accounts also include funds to pay debt service through the end of construction at each site and various reserve funds such as a ramp-up reserve, debt service reserve, and a maintenance reserve fund. Such trust bank accounts total approximately $ 62.7 million, of which $ 48.9 million and $ 13.8 million and included in Restricted cash and Restricted investments, respectively, on the consolidated balance sheet as of December 31, 2024 . The Borrowers have agreed to use all commercially reasonable efforts to jointly maintain a Debt Service Coverage Ratio (as defined in the agreement) of 1.25 for each applicable test period; provided, however, that the failure to maintain this ratio will not be considered an event of default so long as the Obligated Group takes all commercially reasonable action for correcting such deficiency. The measurement of the Debt Service Coverage Ratio commenced with the period ending December 31, 2024. If the Debt Service Coverage Ratio as of the end of any fiscal quarter is less than 1.0, the parent companies of the Borrowers will make contributions to the borrowers or otherwise cause the Debt Service Coverage Ratio to be at least 1.0 within 10 business days of the test date. If the Debt Service Coverage Ratio as of the end of any fiscal quarter is less than 1.25 , Sky Harbour Capital LLC must deliver to the trustees an independent consultant’s report and a specific plan designed to achieve a Debt Service Coverage Ratio of 1.25 in the following fiscal year within 120 days. The Company was in compliance with all debt covenants as of December 31, 2024. The Series 2021 Bonds have principal amounts, interest rates, and maturity dates as follow: $ 21.1 million bearing interest at 4.00 %, due July 1, 2036; $ 30.4 million bearing interest at 4.00 %, due July 1, 2041; and $ 114.8 million bearing interest at 4.25 %, due July 1, 2054. The Series 2021 Bond that has a maturity date of July 1, 2036 was issued at a premium, and the Company received bond proceeds that were $ 0.2 million above its face value. The bond premium is being amortized as a reduction of interest expense over the life of the bond. Interest is payable on each January 1 and July 1, commencing January 1, 2022. Principal repayments due under the Series 2021 Bonds are paid annually, commencing July 1, 2032. The bonds maturing on July 1, 2036 are subject to optional early redemption, at the option of Sky Harbour Capital LLC, on or after July 1, 2028, in whole or in part, at a redemption price equal to the principal amount plus interest accrued to the redemption date. The bonds maturing on July 1, 2041 and July 1, 2054 are subject to optional early redemption, at the option of Sky Harbour Capital LLC, on or after July 1, 2031, in whole or in part, at a redemption price equal to the principal amount plus interest accrued to the redemption date. An extraordinary optional redemption is permitted in the event of damage or destruction of any of the underlying assets. The Series 2021 Bonds are mandatorily redeemable upon the occurrence of certain events. Upon the sale of an asset by any Borrower, the applicable portion of the Series 2021 Bonds is subject to special mandatory redemption at prices specified in the agreement. Upon the occurrence of a determination of taxability in which the interest income of any of the bonds does not qualify as being excludable from the gross income of the holder (with limited exclusions), the Series 2021 Bonds are subject to mandatory redemption within 60 days, at a redemption price equal to the principal amount plus accrued interest. Upon the termination of any ground lease of a Borrower, and unless certain other certifications can be made, the Series 2021 Bonds are subject to redemption in an amount and at a redemption price as specified in the agreement. In lieu of redemption, the Bonds may be purchased by any of the Borrowers or by any party designated by Sky Harbour Capital LLC. As of December 31, 2024 and December 31, 2023, the fair value of the Company's Series 2021 Bonds was approximately $ 143.8 million and $ 116.5 million, respectively. The fair value of the Company's bonds is estimated utilizing Level 2 inputs including prices for the bonds on inactive markets. 65 Table of Contents The following table summarizes the Company’s Bonds payable as of December 31, 2024 and December 31, 2023 : December 31, 2024 December 31, 2023 Bonds payable: Series 2021 Bonds Principal $ 166,340 $ 166,340 Premium on bonds 249 249 Bond proceeds 166,589 166,589 Debt issuance costs ( 4,753 ) ( 4,753 ) Accumulated amortization of debt issuance costs and accretion bond premium 785 584 Total Bonds payable, net $ 162,621 $ 162,420 Vista Loan and Guaranty Agreement In connection with the Rapidbuilt Acquisition, Sky and Vista Bank (the “Lender”) entered into a consent, waiver, and second amendment (the “Loan Amendment”) and a guaranty agreement (the “Guaranty Agreement”) associated with the senior loan agreement between Overflow and Rapidbuilt (collectively, the “Rapidbuilt Borrowers”), and the Lender (the “Vista Loan”). Pursuant to the Loan Amendment, (i) the Lender consented to the change in control with respect to the Rapidbuilt Borrowers; (ii) the Lender waived any pre-existing events of default on the part of the Rapidbuilt Borrowers; (iii) the Lender agreed to release certain borrowed funds held in reserve, subject to specified terms and conditions; and (iv) the Rapidbuilt Borrowers agreed to certain reserve enhancement obligations, including the ability to repay principal early at the sole discretion of the Rapidbuilt Borrowers. Pursuant to the Guaranty Agreement, all of the Rapidbuilt Borrowers’ obligations under the Vista Loan will be guaranteed by Sky. The Vista Loan was originated in December 2020 between the Borrowers and the Lender and had approximately $ 10.3 million outstanding as of the Option Exercise Date. The Vista Loan accrues interest at a per annum rate equal to 3.00 % above the three -month secured overnight financing rate published for first day of each calendar quarter by the Federal Reserve Bank of New York. Interest is payable on a monthly basis, and the Rapidbuilt Borrowers agreed to make certain reserve enhancement payments on January 1, April 1, July 1, and October 1 of each calendar year. The maturity date of the Vista Loan is December 1, 2025. The Vista Loan is secured by the accounts, intellectual property, equipment, inventory, vehicles, and property of the Rapidbuilt Borrowers, and contains customary affirmative and negative covenants. Loans Payable and Finance Leases The following table summarizes the Company's loans payable and finance lease liabilities as of December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 Maturity Dates Weighted-Average Interest Rates Balance Weighted-Average Interest Rates Balance Vista Loan December 2025 8.43 % $ 7,224 $ 8.53 % $ 8,768 Equipment loans August 2026 - September 2028 8.01 % 270 8.09 % 475 Finance leases September 2024 - July 2027 5.00 % 41 5.00 % 67 Total Loans payable and finance leases 8.39 % $ 7,535 8.47 % $ 9,310 Interest The following table sets forth the details of interest expense: Year ended December 31, 2024 December 31, 2023 Interest $ 7,655 $ 7,481 Accretion of bond premium and amortization debt issuance costs 201 210 Total interest incurred 7,856 7,691 Less: capitalized interest (7,141 ) (7,150 ) Interest expense $ 715 $ 541 66 Table of Contents 10. Warrants SHG's legal predecessor, Yellowstone Acquisition Company (“YAC”) issued to third -party investors 6,799,439 warrants which entitled the holder to purchase one share of Class A Common Stock at an exercise price of $ 11.50 per share (the “Public Warrants”). In addition, 7,719,779 private placement warrants were sold to the Sponsor. Each Private Warrant allows the Sponsor to purchase one share of Class A Common Stock at an exercise price of $ 11.50 per share. The Public Warrants and Private Warrants remain outstanding under the same terms and conditions to purchase shares of the Company’s Class A Common Stock. 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. In connection with the 2023 Purchase Agreement (as defined in Note 11 — Equity) , the Company issued to third -party investors 1,541,600 warrants (the “PIPE Warrants”, and together with the Public Warrants and the Private Warrants, the “Warrants”). The PIPE Warrants are similar in form and substance to the Company’s Public Warrants. The Warrants contain an exercise price of $ 11.50 per share and expire on January 25, 2027. The Company determined the fair value of its Public Warrants and PIPE Warrants based on the publicly listed trading price as of the valuation date. Accordingly, these warrants are classified as Level 1 financial instruments. As the terms of the Private Warrants are identical to those of the Public Warrants, the Company determined the fair value of its Private Warrants based on the publicly listed trading price of the Public Warrants as of the valuation date and have classified the Private Warrants as Level 2 financial instruments. During the year ended December 31, 2024, 262,188 Warrants were exercised, resulting in approximately $ 3.0 million of proceeds. During the year ended December 31, 2023, 225 Warrants were exercised, resulting in an immaterial amount of proceeds. As of December 31, 2024 , 15,798,155 Warrants remain outstanding. The closing price of the Warrants was $ 2.92 and $ 0.75 per warrant on December 31, 2024 and December 31, 2023, respectively. The aggregate fair value of the Warrants was approximately $ 46.1 million and $ 12.0 million as of December 31, 2024 and December 31, 2023, respectively. During the years ended December 31, 2024 and December 31, 2023, the Company recorded unrealized losses of approximately $ 34.5 million and $ 8.6 million associated with the change in fair value of the Warrants. 11. Equity Common Equity As of December 31, 2024 , there were 33,456,227 and 42,046,356 shares of Class A Common Stock and Class B Common Stock outstanding, respectively. Holders of Class A Common Stock and Class B Common Stock vote together as a single class on all matters submitted to the stockholders for their vote or approval, except as required by applicable law. Holders of Class A Common Stock and Class B Common Stock are entitled to one vote per share on all matters submitted to the stockholders for their vote or approval. The holders of Class A Common Stock are entitled to receive dividends, as and if declared by the Company’s Board of Directors out of legally available funds. With respect to stock dividends, holders of Class A Common Stock must receive Class A Common Stock. The holders of Class B Common Stock do not have any right to receive dividends other than stock dividends consisting of shares of Class B Common Stock, as applicable, in each case paid proportionally with respect to each outstanding share of Class B Common Stock. At-the-Market Facility On March 27, 2024, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with B. Riley Securities, Inc. (“B. Riley”) with respect to an “at the market” offering program (the “ATM Facility”), under which the Company may, from time to time, at its sole discretion, issue and sell through B. Riley, acting as sales agent, up to $ 100 million of shares of Class A Common Stock. Pursuant to the ATM Agreement, the Company may sell the shares through B. Riley by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act. B. Riley will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon instructions from the Company, including any price or size limits or other customary parameters or conditions the Company may impose. The Company will pay B. Riley a commission of 3.0 % of the gross sales price per share sold under the ATM Agreement, subject to certain reductions. During the year ended December 31, 2024, the Company sold 79,676 shares of Class A Common Stock under the ATM Facility at a weighted-average sales price of $ 13.75 . The Company is not obligated to sell any shares under the ATM Agreement. The offering of shares pursuant to the ATM Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through B. Riley, of all of the shares subject to the ATM Agreement and (ii) termination of the ATM Agreement in accordance with its terms. In connection with entering into the ATM Agreement, on March 27, 2024, the Company and B. Riley terminated (the “B. Riley Termination”) the Common Stock Purchase Agreement (the “B. Riley Stock Purchase Agreement”) dated August 18, 2022. As a result of the B. Riley Termination, the Company recognized approximately $ 0.1 million of expense associated with the write-off of deferred equity issuance costs. From August 18, 2022 through March 27, 2024, the Company had not directed B. Riley to purchase any Class A Common Stock pursuant to the B. Riley Stock Purchase Agreement. 67 Table of Contents 2023 Private Placement and Securities Purchase Agreement On November 1, 2023, the Company entered into a Securities Purchase Agreement (the “2023 Purchase Agreement”) with certain investors (collectively, the “2023 Investors”), pursuant to which the Company (i) sold and issued to the 2023 Investors at an initial closing an aggregate of 6,586,154 shares (the “Initial 2023 PIPE Shares”) of the Company’s Class A Common Stock and accompanying warrants to purchase up to 1,141,600 shares of Class A Common Stock (the “Initial PIPE Warrants”), for an aggregate purchase price of $ 42.8 million (the "Initial 2023 Financing"), and (ii) sold and issued to the 2023 Investors at a second closing, an aggregate of 2,307,692 shares (the “Additional 2023 PIPE Shares”, and, together with the Initial 2023 PIPE Shares, the “2023 PIPE Shares” ) of the Company’s Class A Common Stock and accompanying warrants to purchase up to an aggregate of 400,000 shares of Class A Common Stock (the “Additional PIPE Warrants” and, together with the Initial PIPE Warrants, the “PIPE Warrants”) for an aggregate purchase price of $ 15.0 million (the “Additional 2023 Financing” and, together with the Initial 2023 Financing, the “2023 Financing”). The closing of the Initial 2023 Financing occurred on November 2, 2023 ( the “Initial 2023 Closing Date”) , and the closing of the Additional 2023 Financing occurred on November 9, 2023. Together with the Initial 2023 Financing, the aggregate PIPE financing through the 2023 Purchase Agreement totaled approximately $ 57.8 million. The 2023 Purchase Agreement included certain covenants, including a limitation on the Company’s use of the net proceeds from the 2023 Financing, certain customary standstill restrictions for a period of 90 days following the Initial 2023 Closing Date and a restriction on paying any extraordinary dividend to the extent it would result in the issuance of a number of shares of Class A Common Stock upon exercise of the PIPE Warrants (without regard to any limitations on exercise of the PIPE Warrants) in excess of the number of shares of Class A Common Stock permissible by the NYSE American LLC to be issued without stockholder approval. In addition, pursuant to the 2023 Purchase Agreement, the Company granted to the Lead Investor certain participation rights with respect to certain future equity and debt offerings by the Company until the eighteen -month anniversary of the Initial 2023 Closing Date. 2024 Private Placement and Securities Purchase Agreement On September 16, 2024, the Company entered into a Securities Purchase Agreement (the “2024 Purchase Agreement”) with certain investors (collectively, the “Initial 2024 Investors”), pursuant to which the Company agreed to sell and issue to the Initial 2024 Investors at an initial closing an aggregate of 3,352,106 shares (the “Initial 2024 PIPE Shares”) of the Company’s Class A Common Stock for an aggregate purchase price of approximately $ 31.8 million (the “Initial 2024 Closing”), and agreed to sell and issue to the Initial 2024 Investors at a second closing, at the option of the Initial 2024 Investors, up to an aggregate of number of shares equal to the number of each such Initial 2024 Investor's Initial 2024 PIPE Shares purchased in the Initial 2024 Closing at the same purchase price of $ 9.50 per share (the “Second 2024 Closing” and, together with the Initial Closing, the “2024 Financing”). The 2024 Purchase Agreement provided that, at any time prior to the Initial 2024 Closing, and at the sole discretion of the Company, additional investors (“Additional 2024 Investors” and, together with the Initial 2024 Investors, the “2024 Investors” ) could execute a joinder to the 2024 Purchase Agreement pursuant to which they would agree to purchase additional shares of Class A Common Stock (the “Additional 2024 PIPE Shares”) in the Initial 2024 Closing, along with the option to purchase Second Closing 2024 PIPE Shares. On October 25, 2024, the Additional 2024 Investors each executed a joinder to the 2024 Purchase Agreement, pursuant to which the Additional 2024 Investors agreed to purchase, and the Company agreed to sell, an aggregate of 603,684 Additional 2024 PIPE Shares (together with the Initial 2024 PIPE Shares, the “First Closing 2024 PIPE Shares”) for an aggregate purchase price of $ 5.7 million. The Initial 2024 Closing of the 2024 Financing occurred on October 25, 2024, and 3,955,790 First Closing 2024 PIPE Shares were issued to the 2024 Investors for an aggregate purchase price of $ 37.6 million, on October 25, 2024 ( the “Initial 2024 Closing Date”). On December 20, 2024, pursuant to the terms of the 2024 Purchase Agreement, the Company sold and issued to the 2024 Investors an aggregate of 3,955,790 shares (the “Second Closing 2024 PIPE Shares” and, together with the First Closing 2024 PIPE Shares, the “2024 PIPE Shares”) of Class A Common Stock for an aggregate purchase price of approximately $ 37.6 million (the “Second 2024 Closing”). Inclusive of the Initial 2024 Closing, the Company issued and sold an aggregate of 7,911,580 shares of Class A Common Stock for an aggregate purchase price of approximately $ 75.2 million pursuant to the 2024 Purchase Agreement. The 2024 Purchase Agreement includes certain covenants, including a limitation on the Company’s use of the net proceeds from the 2024 Financing and a restriction on the Company’s issuance of additional shares of Class A Common Stock for a period of 90 days following the Initial 2024 Closing Date, subject to certain exceptions. The 2024 PIPE Shares were offered and sold in transactions exempt from registration under the Securities Act, in reliance on Section 4 (a)( 2 ) thereof and Rule 506 of Regulation D thereunder. In connection with the 2024 Financing, the 2024 Investors entered into a customary lock-up agreement that restricts sales of shares of Class A Common Stock by the 2024 Investors for a period of six months beginning on the Initial 2024 Closing Date, subject to certain exceptions. Non-controlling interests The LLC Interests’ ownership in Sky is presented as non-controlling interests within the Equity section of the consolidated balance sheet as of December 31, 2024 and represents the Sky Common Units held by holders other than SHG. The holders of LLC Interests may exchange Sky Common Units along with an equal number of Class B Common Shares, for Class A Common Shares on the Company. The LLC Interests do not have the option to redeem their Sky Common Units for cash or a variable number of Class A Common Shares, nor does SHG have the option to settle a redemption in such a manner. As of December 31, 2024 , the LLC interests owned approximately 55.7 % of the Sky Common Units outstanding. The former majority shareholder's ownership in Overflow was presented as a non-controlling interest within the Equity section of the consolidated balance sheet. On December 31, 2024, the Company assumed the former majority shareholder's ownership interest in Overflow for no consideration. As of December 31, 2024 and December 31, 2023, the former majority shareholder owned 0 % and 49 % of the partnership interests in Overflow, respectively. 68 Table of Contents 12. Equity Compensation Restricted Stock Units ( “ RSUs ” ) On January 25, 2022, the Company's 2022 Incentive Award Plan (the “2022 Incentive Award Plan”) became effective following approval by the Company's shareholders. The 2022 Incentive Award Plan provides for grants of stock-based compensation awards, including without limitation, non-qualified stock options, incentive stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock unit awards, incentive unit awards other stock or cash based awards and dividend equivalent awards. Employees, officers, and consultants of the Company or any parent or affiliate, including Sky, or any non-employee director of the Company’s Board of Directors are eligible to receive awards under the 2022 Incentive Award Plan. An aggregate of 5.2 million shares of Class A Common Stock are issuable pursuant to the 2022 Incentive Award Plan. On an annual basis, the Company grants RSUs which have time-based conditions and are classified as equity awards. During the year ended December 31, 2024, the Company granted 430,002 time-based RSUs to certain employees under the Company’s 2022 Incentive Award Plan at a weighted average grant date fair value of $ 12.33 . The RSUs will vest ratably over a four -year period beginning on the first anniversary of the grant date and ending on fourth anniversary. All RSUs were valued at their fair market value, which was the closing price of the Company's stock on the date of the grant. The following tables presents a summary of RSU activity for the year ended December 31, 2024: Number of Shares Weighted-Average Grant Date Fair Value Unvested as of January 1, 2024 871,732 $ 6.65 Granted 430,002 12.33 Vested ( 406,042 ) 6.89 Forfeited ( 6,746 ) 11.71 Unvested as of December 31, 2024 888,946 $ 9.17 During the years ended December 31, 2024 , and December 31, 2023, the Company recognized stock compensation expense of $ 3,425 and $ 1,816 , respectively, associated with the RSUs within employee compensation and benefits within the consolidated statement of operations. The unrecognized compensation costs associated with all unvested RSUs at December 31, 2024 was approximately $ 6.9 million that is expected to be recognized over a weighted-average future period of 2.5 years. Non-qualified Stock Options ( “ NSOs ” ) In February 2024, the Company granted to certain employees options to purchase 438,781 shares of Class A Common Stock at an exercise price of $ 11.63 under the Company's 2022 Incentive Award Plan. The NSOs vest ratably over a four -year period beginning on the sixth anniversary of the grant date and have a term of 10 years. The options were valued at $ 7.32 using a Black -Scholes pricing model. During the year ended December 31, 2024, the Company recognized stock compensation expense of approximately $ 0.3 million associated with all NSO awards. The unrecognized compensation costs associated with all unvested NSOs at December 31, 2024 was approximately $ 2.9 million that is expected to be recognized over a weighted-average future period of 8.1 years. Sky Incentive Units The Company recognized equity-based compensation expense relating to awarded equity units of Sky (the “Sky Incentive Units”) of $ 181 and $ 444 for the years ended December 31, 2024, and December 31, 2023, respectively. Expense associated with the Sky Incentive Units is recorded within employee compensation and benefits within the statement of operations, and as a component of the non-controlling interest in the consolidated statement of changes in stockholders’ equity. As of December 31, 2024, there was $ 0.1 million of total unrecognized compensation expense that is expected to be recognized over a weighted-average future period of 0.4 years. 69 Table of Contents 13. Income Taxes 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, 2024 2023 Income tax benefit: Deferred federal income tax benefit ( 3,275 ) ( 1,382 ) Deferred state income tax benefit ( 231 ) ( 37 ) Total income tax benefit before valuation allowance ( 3,506 ) ( 1,419 ) Valuation allowance 3,506 1,419 Total income tax benefit $ - $ - A reconciliation of the statutory federal income tax expense to the income tax expense (benefit) prior to income (loss) attributable to non-controlling interests from continuing operations at December 31, 2024 and December 31, 2023 is as follows: For the Year Ended December 31, 2024 2023 Income tax benefit at the federal statutory rate of 21% ( 11,273 ) ( 5,342 ) State income tax benefit, net of federal benefit ( 183 ) ( 133 ) Unrealized loss on warrants 7,248 1,815 Stock-based compensation ( 384 ) 105 Income taxed to non-controlling interests 1,465 1,644 Other, net ( 379 ) 492 Change in valuation allowance 3,506 1,419 Total income tax benefit $ - $ - The Company recorded income tax expense of $ 0 and the effective tax rate was 0.0% for the years ended December 31, 2024 and 2023. The effective income tax rate for the year ended December 31, 2024 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. 70 Table of Contents Components of the Company’s deferred tax assets at December 31, 2024 and December 31, 2023 are as follows: For the Year Ended December 31, 2024 2023 Deferred tax assets: Amortization 22 27 Difference between book and tax capital accounts 495 485 Accounts receivable, prepaid expenses, and other assets 140 - Stock-based compensation 399 139 Lease liability 9 14 Net operating loss carryforwards 7,058 4,146 Valuation allowance ( 7,586 ) ( 4,080 ) Total deferred tax assets $ 537 $ 731 Deferred tax liabilities: Unrealized Gain/Loss on investments - $ ( 1 ) Long-lived assets ( 529 ) ( 716 ) Right-of-use assets ( 8 ) ( 14 ) Total deferred tax liabilities $ ( 537 ) $ ( 731 ) Total $ - $ - The realization of deferred tax assets, including net operating loss carryforwards ("NOLs"), 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 year ended December 31, 2024 , 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, 2024 , we have available federal tax operating loss carryforwards of approximately $ 32.0 million, including approximately $ 1.7 million generated by our legal predecessor prior to the Yellowstone Transaction and $ 6.0 million generated by our subsidiary, Rapidbuilt. All federal tax operating loss carryforwards arose in tax years subsequent to 2017. 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 $ 32.0 million, which are available to reduce future state taxable income and would begin to expire in tax year 2040 in various amounts. Utilization of our net operating loss carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code, as amended, and similar state provisions. 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, 2024 , we do not have any open exams; however, all tax years, including those of our legal predecessor, are subject to examination by the Internal Revenue Service. Tax Receivable Agreement Following closing of the Yellowstone Transaction, the Company, Sky, the LLC Interests, and the TRA Holder Representative, entered into a tax receivable agreement (the “Tax Receivable Agreement”). Pursuant to the Tax Receivable Agreement, the Company will generally be required to pay the LLC Interests 85% of the amount of savings, if any, in U.S. federal, state, local, and foreign taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that the Company realizes, or is deemed to realize, as a result of certain tax attributes, including: • existing tax basis in certain assets of Sky and certain of its direct or indirect subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service, attributable to Sky Common Units acquired by the Company from a TRA Holder, as determined at the time of the relevant acquisition; • tax basis adjustments resulting from taxable exchanges of Sky Common Units (including any such adjustments resulting from certain payments made by the Company under the Tax Receivable Agreement) acquired by the Company from a TRA Holder pursuant to the terms of the A&R Operating Agreement; and • tax deductions in respect of portions of certain payments made under the Tax Receivable Agreement (each of the foregoing, collectively, the “Tax Attributes”). As of December 31, 2024 , no transactions occurred that would result in a cash tax savings benefit that would trigger the recording of a liability under the terms of the Tax Receivable Agreement. 71 Table of Contents 14. Earnings (loss) per Share Basic earnings (loss) per share of Class A Common Stock is computed by dividing net income (loss) attributable to SHG by the weighted-average number of shares of Class A Common Stock outstanding during the period. Diluted net income (loss) per share of Class A Common Stock is computed by dividing net income (loss) attributable to SHG, adjusted for the assumed exchange of all potentially dilutive securities, by the weighted-average number of shares of Class A Common Stock outstanding adjusted to give effect to potentially dilutive shares using the treasury stock or if-converted method as appropriate. Shares of the Company’s Class B Common Stock do not participate in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B Common Stock under the two -class method has not been presented. Year Ended December 31, 2024 December 31, 2023 Numerator: Net loss $ ( 53,683 ) $ ( 25,441 ) Less: Net loss attributable to non-controlling interests ( 8,452 ) ( 9,264 ) Basic and diluted net loss attributable to Sky Harbour Group Corporation shareholders ( 45,231 ) ( 16,177 ) Denominator: Based and diluted weighted average shares of Class A Common Stock outstanding 25,742 16,456 Loss per share of Class A Common Stock – Basic and diluted $ ( 1.76 ) $ ( 0.98 ) Potentially dilutive shares excluded from the weighted-average shares used to calculate the diluted net loss per common share due the Company's net loss position were as follows (in thousands): Year Ended December 31, 2024 December 31, 2023 Shares subject to unvested restricted stock units 889 931 Shares issuable upon the exercise of unvested stock options 439 - Shares issuable upon the exercise of Warrants 15,798 16,061 Shares issuable upon the exchange of Class B Common Stock 42,046 42,046 Shares issuable upon the exercise and exchange of Sky Incentive Units 2,056 2,808 15. Accumulated Other Comprehensive Income (Loss) The following table summarizes the components of Accumulated other comprehensive income (loss): Unrealized gain (loss) on Available-for-sale Securities Total Balance as of December 31, 2022 $ ( 102 ) $ ( 102 ) Other comprehensive loss before reclassifications 684 684 Amounts reclassified to other (income) expense ( 270 ) ( 270 ) Balance as of December 31, 2023 $ 312 $ 312 Other comprehensive income before reclassifications 556 556 Amounts reclassified to other (income) expense ( 815 ) ( 815 ) Balance as of December 31, 2024 $ 53 $ 53 During the years ended December 31, 2024 and December 31, 2023, the Company reported reclassifications of $ 815 and $ 270 , respectively, of unrealized gains on available-for-sale securities to net income as a component of other (income) expense. 72 Table of Contents 16. Segment Information The Company has one consolidated reportable segment. This segment derives revenues from customers through the leasing of home-basing aircraft hangars and through services and products ancillary to its leasing activities. As of December 31, 2024, the Company drives revenue entirely within the United States and manages the business activities on a consolidated basis. The determination of reportable operating segments is based on the Chief Operating Decision Maker’s (“CODM’s”) use of financial information provided for the purposes of assessing performance and making operating decisions. The Company's CODM is its founder and Chief Executive Officer. The CODM uses net income (loss) to allocate resources and assess the performance of the Company by comparing actual results to historical results and previously forecasted financial information and the allocation of budget between the expenses presented within the consolidated statement of operations. The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets. All required significant financial segment information can be found within the consolidated financial statements. The accounting policies of the Company’s consolidated segment are the same as those described in Note 2 — Basis of Presentation and Significant Accounting Policies. Any intercompany revenues or expenses are eliminated in consolidation. 17. Commitments and Contingencies In addition to the lease payment commitments discussed in Note 8 — Leases , the ground leases to which the Company is a party contain covenants that require the Company to conduct construction of hangar facilities on the leased grounds within a certain period and in some cases, to spend a minimum dollar amount. The DVT Lease requires approximately $ 14.6 million of improvements to be made for the DVT Phase II project within 12 -months after receiving permitting documents, but in no event later than May 2026. The PWK Lease contains a requirement that the Company must commence construction within six months of the issuance of permits and must complete construction within 18 months of construction commencement. If the Company is unable to adhere to the prescribed timeline and unable to receive an extension from PWK, the PWK Lease is subject to termination. The SJC Lease contains customary milestones by which the Company must complete additional construction. The ORL Lease requires that the Company construct $ 30 million of improvements in its initial phase of construction within 24 months of the effective date of the lease. The ORL Lease contains other customary milestones by which the Company must commence and complete subsequent phases of construction. The SLC Lease requires that the Company make minimum capital improvements of $ 40 million. The TTN Lease requires that the Company make minimum capital improvements of $ 30 million. The Company has contracts for construction of the APA Phase I, DVT Phase I, ADS Phase I, and OPF Phase II projects. The Company may terminate any of the contracts or suspend construction without cause. There are no termination penalties under such construction contracts. 73 Table of Contents 18. Related Party Transactions Loan and Security Agreement On December 6, 2024, the Company entered into a revolving line of credit loan and security agreement (the “Loan and Security Agreement”), with a company controlled by the former owner of CloudNine and Sky 805, who also serves as an independent contractor of the Company following the CMA Asset Acquisition. The Company provided an initial loan commitment of $ 1.0 million and agreed to provide an additional $ 2.0 million of availability under a revolving line of credit to fund the working capital requirements of such company. The Loan and Security Agreement matures on December 6, 2029, and bears interest at a the standard overnight financing right plus 2 % per annum. As of December 31, 2024, the Company had loaned a total of $ 1.0 million to such company, the balance of which is presented as a component of accounts receivable, prepaid expenses, and other assets within the Company's consolidated balance sheet. Echo Echo Agreement On September 20, 2021, the Company entered into a non-exclusive agreement with Echo Echo, LLC, a related party to the Founder and CEO, for the use of a Beechcraft Baron G58 aircraft. The effective date of the agreement was September 8, 2021 and the agreement automatically renews annually. The agreement can be terminated without penalty if either party provides 35 days' written notice, or if the aircraft is sold or otherwise disposed of. The Company is charged per flight hour of use along with all direct operating costs. Additionally, the Company will also incur the pro rata share of maintenance, overhead and insurance costs of the aircraft. On September 19, 2024, the Company entered into an additional non-exclusive agreement with Echo Echo, LLC for the use of an Epic E1000GX aircraft. The effective date of the agreement was August 30, 2024 and the agreement automatically renews annually. The agreement can be terminated without penalty if either party provides 30 days' written notice, or if the aircraft is sold or otherwise disposed of. Additionally, the Company is responsible for reimbursing its pro rata share of the direct operating costs of the aircraft, exclusive of maintenance and insurance. For the years ended December 31, 2024 , and December 31, 2023, the Company recognized $ 372 and $ 215 of expense, within pursuit and marketing expense under the terms of this agreement. The related liability is included in accounts payable, accrued expenses and other liabilities on the consolidated balance sheet as of December 31, 2024 . Other Related Party Transactions For the year ended December 31, 2024 , the Company recognized $ 0 of expense for consulting services received from a company that employed the chief financial officer until prior to July 1, 2021 and with which the Company had a pre-existing vendor relationship. The Company recognized $ 105 of expense during the year ended December 31, 2023 for consulting services received from the same company. 19. Subsequent Events On January 1, 2025, the Company executed a lease amendment with respect to its ground lease at APA to add an approximately 1 acre parcel of land to the existing lease (the “APA Lease Amendment”). The land associated with the APA Lease Amendment became immediately available for possession in January 2025 and is co-terminus with the other parcels covered by the Company's ground lease at APA. 74 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Not applicable.