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What changed in Sky Harbour Group Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Sky Harbour Group Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+329 added−295 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-24)

Top changes in Sky Harbour Group Corp's 2023 10-K

329 paragraphs added · 295 removed · 237 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

79 edited+24 added−23 removed30 unchanged
Biggest changePROPERTIES IN DEVELOPMENT Facility Status ​ Scheduled Construction Start ​ Scheduled Completion Date Estimated Total Construction Cost (1) ($mm) Hangars Square Footage SGR Phase II Predevelopment October 2023 December 2024 10.3 - 12.0 4 58,400 OPF Phase I In Construction August 2021 February 2023 31.2 - 33.2 12 160,092 OPF Phase II Predevelopment September 2023 November 2024 28.1 - 32.7 7 102,077 APA Phase I In Construction November 2022 February 2024 37.2 - 43.2 9 133,530 APA Phase II Predevelopment August 2023 November 2024 28.6 - 33.2 9 103,400 DVT Phase I In Construction December 2022 March 2024 32.5 - 37.8 8 115,864 DVT Phase II Predevelopment November 2023 February 2025 28.2 - 32.8 8 105,000 ADS Phase I Predevelopment June 2023 September 2024 24.4 - 28.3 6 104,600 Total ​ ​ $ 220.5 - 253.2 63 882,963 PROPERTIES IN OPERATION Facility Completion Date ​ Hangars Rentable Square Footage % of Total Rentable Square Footage Occupancy at December 31, 2022 SGR Phase I December 2020 7 66,080 30.7 % 100.0 % BNA Phase I & II November 2022 10 149,069 69.3 % 45.5 % Total/Weighted Average ​ 17 ​215,149 100 % 62.2 % Each constructed facility is expected to consist of clusters of between 9 and 19 hangars.
Biggest changePROPERTIES IN OPERATION Facility Completion Date ​ Hangars Rentable Square Footage % of Total Rentable Square Footage Occupancy at December 31, 2023 SGR December 2020 7 66,080 17.6 % 93.9 % BNA November 2022 10 149,069 39.7 % 90.9 % OPF Phase I February 2023 12 160,092 42.7 % 62.5 % Total/Weighted Average ​ 29 ​375,241 100.0 % 79.3 % PROPERTIES IN DEVELOPMENT Facility Status ​ Scheduled Construction Start ​ Scheduled Completion Date Estimated Total Construction Cost ($mm) Hangars Square Footage ADS Phase I In Construction Q4 2023 Q1 2025 32.9 - 34.9 6 115,506 ADS Phase II Predevelopment Q1 2025 Q1 2026 23.3 - 29.3 3 96,873 APA Phase I In Construction Q4 2022 Q4 2024 44.8 - 50.8 9 130,550 APA Phase II Predevelopment Q1 2025 Q2 2026 28.6 - 33.2 5 109,189 BDL Phase I Predevelopment Q2 2025 Q3 2026 26.6 - 30.8 3 101,400 DVT Phase I In Construction Q4 2022 Q1 2025 48.3 - 53.6 8 134,270 DVT Phase II Predevelopment Q4 2024 Q1 2026 28.2 - 32.8 6 125,556 OPF Phase II Predevelopment Q4 2024 Q1 2026 28.1 - 32.7 5 107,966 POU Predevelopment Q1 2025 Q2 2026 26.6 - 30.8 3 101,400 PWK Phase I Predevelopment Q1 2025 Q1 2026 39.7 - 45.6 5 149,400 Total $ 327.1 - 374.7 53 1,172,110 Each constructed facility is expected to consist of clusters of hangars comprising at least 100,000 rentable square feet.
Competition The hangar space rental segment of the aviation services industry in which we operate is very competitive. We compete with national, regional and local FBOs and other hangar real estate companies. Our competitors may include FBOs currently operating at certain airports that may have financial or other resources and/or lower cost structure than us.
Competition The hangar space rental segment of the aviation services industry in which we operate is very competitive. We compete with national, regional and local FBOs and other local hangar real estate companies. Our competitors may include FBOs currently operating at certain airports that may have greater financial or other resources and/or lower cost structure than us.
This allows the Company to fund its development through the public bond market, providing capital efficiency and mitigating refinance risk. 7 Table of Contents In contrast with community hangars and other facilities provided by FBOs, the HBS hangar campuses we develop provide the following features and services: • private hangar space for exclusive use of the tenant; • adjoining configurable lounge and office suites; • line crews and services dedicated exclusively to tenants; • climate control to mitigate condensation and associated corrosion; • features to support in-hangar aircraft maintenance; • no-foam fire suppression; and • customized software to provide security, control access and monitor hangar space.
This allows the Company to fund its development through the public bond market, providing capital efficiency and mitigating refinance risk. 7 Table of Contents In contrast with community hangars and other facilities provided by FBOs, the home basing hangar campuses we develop provide the following features and services: • private hangar space for exclusive use of the tenant; • adjoining configurable lounge and office suites; • line crews and services dedicated exclusively to tenants; • climate control to mitigate condensation and associated corrosion; • features to support in-hangar aircraft maintenance; • no-foam fire suppression; and • customized software to provide security, control access and monitor hangar space.
Aircraft hangars are in high demand and short supply, with some airports compiling waiting lists that can exceed several years. We believe our scalable, real estate-centric business model is uniquely optimized to capture this market opportunity and address the increased imbalance between the supply and demand for private jet storage.
Aircraft hangars are in high demand and short supply, with some airports compiling waiting lists that can exceed several years. We believe our scalable, real estate-centric business model is uniquely positioned to capture this market opportunity and address the increased imbalance between the supply and demand for private jet storage.
The FBOs offer standard amenities such as pilot’s lounge, waiting area/lounge, weather station, restroom, showers, kitchenette, and conference rooms, flight instruction, rental car, aircraft maintenance and parts supply, hangar rental, aircraft tie-down parking, and aircraft fueling. APA has several private hangars that provide storage for business aircraft, office space, maintenance space, and passenger/pilot lounges.
The FBOs offer standard amenities such as pilot’s lounge, waiting area/lounge, weather station, restroom, showers, kitchenette, and conference rooms, flight instruction, rental car, aircraft maintenance and parts supply, hangar rental, aircraft tie-down parking, and aircraft fueling. APA has several private hangars that provide storage for business aircraft, office space, maintenance space, and lounges.
See “ Risk Factors — Our businesses are subject to environmental risks that may impact our future profitability ” of this Report. We endeavor to be a leader of the industry’s initiatives to address environmental issues, and we are increasingly focused on how we can reduce our carbon footprint in a sustainable way.
See “ Risk Factors — Our properties are subject to environmental risks that may impact our future profitability ” of this Report. We endeavor to be a leader of the industry’s initiatives to address environmental issues, and we are increasingly focused on how we can reduce our carbon footprint in a sustainable way.
Overview We are an aviation infrastructure development company building the first nationwide network of Home-Basing Solutions (“HBS”) hangar campuses for business aircraft. We develop, lease and manage general aviation hangars across the United States, targeting airfields in markets with significant aircraft populations and high hangar demand.
Overview We are an aviation infrastructure development company building the first nationwide network of home basing hangar campuses for business aircraft. We develop, lease and manage general aviation hangars across the United States, targeting airfields in markets with significant aircraft populations and high hangar demand.
The information on our website is not, and shall not be deemed to be, part of this Report or incorporated into any other filings we make with the SEC, except as shall be expressly set forth by specific reference in any such filings. 18 Table of Contents
The information on our website is not, and shall not be deemed to be, part of this Report or incorporated into any other filings we make with the SEC, except as shall be expressly set forth by specific reference in any such filings. 15 Table of Contents
As contemplated by the Equity Purchase Agreement, the following occurred on the Closing Date: (a) YAC changed its name to “Sky Harbour Group Corporation”; (b) all outstanding shares of Sponsor Stock held by the Sponsor were converted into shares of Class A Common Stock of the Company; (c) Sky restructured its capitalization, issued to the Company 14,937,581 Sky Common Units, which was equal to the number of outstanding shares of Class A Common Stock immediately after giving effect to the Business Combination (taking into account the redemption of Class A Common Stock and the Class A Common Stock issued under the BOC PIPE investment (the “BOC PIPE”)), reclassified the existing Sky Common Units (other than the Sky Incentive Units), existing Sky Series A Preferred Units and the existing Sky Series B Preferred Units into Sky Common Units; (d) certain adjustments to the number of Sky Incentive Units were effected to reflect the new capital structure; (e) the Company was appointed as the managing member of Sky; (f) the Sky Common Units issued to BOC YAC in respect of its Series B Preferred Units were converted into 5,500,000 shares of Class A Common Stock; (g) holders of Sky Common Units received one share of Class B Common Stock for each Sky Common Unit, and as consideration for the issuance of 14,937,581 Sky Common Units by Sky to the Company, YAC contributed to Sky the net amount held in the YAC trust account after redemptions and taking into account the BOC PIPE and the amount of various transaction costs; and (h) each YAC Warrant that was issued and outstanding immediately prior to the closing became a Warrant (the transactions referred to in clauses (a) through (h), collectively, the “Business Combination”).
As contemplated by the Equity Purchase Agreement, the following occurred on the Closing Date: (a) YAC changed its name to “Sky Harbour Group Corporation”; (b) all outstanding shares of Sponsor Stock held by the Sponsor were converted into shares of Class A Common Stock of the Company; (c) Sky restructured its capitalization, issued to the Company 14,937,581 Sky Common Units, which was equal to the number of outstanding shares of Class A Common Stock immediately after giving effect to the Yellowstone Transaction (taking into account the redemption of Class A Common Stock and the Class A Common Stock issued under the BOC PIPE investment (the “BOC PIPE”)), reclassified the existing Sky Common Units (other than the Sky Incentive Units), existing Sky Series A Preferred Units and the existing Sky Series B Preferred Units into Sky Common Units; (d) certain adjustments to the number of Sky Incentive Units were effected to reflect the new capital structure; (e) the Company was appointed as the managing member of Sky; (f) the Sky Common Units issued to BOC YAC in respect of its Series B Preferred Units were converted into 5,500,000 shares of Class A Common Stock; (g) holders of Sky Common Units received one share of Class B Common Stock for each Sky Common Unit, and as consideration for the issuance of 14,937,581 Sky Common Units by Sky to the Company, YAC contributed to Sky the net amount held in the YAC trust account after redemptions and taking into account the BOC PIPE and the amount of various transaction costs; and (h) each YAC Warrant that was issued and outstanding immediately prior to the closing became a Warrant (the transactions referred to in clauses (a) through (h), collectively, the “Yellowstone Transaction”).
We expect to diversify our risk by having multiple types of tenants across multiple locations across the country.
We expect to diversify our risk by having multiple types of tenants across multiple locations throughout the country.
Our product strategy aims to attract tenants with exclusive access to their aircraft, minimize the risk of damage to aircraft, provide increased access, security and control, facilitate maintenance, and improve pre-flight and post-flight convenience. We believe that with no transient traffic, our HBS hangar campuses offer a shorter time to wheels-up, even during periods of peak traffic.
Our product strategy aims to attract tenants with exclusive access to their aircraft, minimize the risk of damage to aircraft, provide increased access, security and control, facilitate maintenance, and improve pre-flight and post-flight convenience. We believe that with no transient traffic, our home basing hangar campuses offer a shorter time to wheels-up, even during periods of peak traffic.
The constructed facilities at BNA consist of nine newly constructed individually-leased NFPA Group III hangars comprising 121,867 total square feet. Our Nashville campus also includes an existing facility, Hangar 14, with an area of 27,202 square feet. Groundbreaking on the new facilities at BNA occurred in July 2021 and construction was completed in October 2022.
The constructed facilities at BNA consist of nine newly constructed individually-leased NFPA Group III hangars comprising 121,867 total square feet. Our Nashville campus also includes a legacy facility, Hangar 14, with an area of 27,202 square feet. Groundbreaking on the new facilities at BNA occurred in July 2021 and construction was completed in October 2022.
As part of this, our HBS hangar campuses are designed to reduce the need to reposition private jets, which reduces the use of fuel as well as air emissions and noise pollution. We operate a fleet of electric ground support equipment which have a low cost to operate and maintain.
As part of this, our home basing hangar campuses are designed to reduce the need to reposition private jets, which reduces the use of fuel as well as air emissions and noise pollution. We operate a fleet of electric ground support equipment which have a low cost to operate and maintain.
DVT is a medium sized, predominantly business and general aviation airport that is owned and operated by the City of Phoenix. DVT is located on 914 acres within Phoenix’s northern limits, approximately 20 miles north of downtown and approximately 17 miles north of Phoenix Sky Harbor International Airport (“PHX”).
Phoenix Deer Valley Airport (DVT) The Airport. DVT is a medium sized, predominantly business and general aviation airport that is owned and operated by the City of Phoenix, Arizona. DVT is located on 914 acres within Phoenix’s northern limits, approximately 20 miles north of downtown and approximately 17 miles north of Phoenix Sky Harbor International Airport (“PHX”).
Base lease rents vary by location, but all leases feature annual rent escalation. Leases are structured as either gross or triple-net, with tenants covering insurance, taxes and utilities. The tenant leases do not have early termination options, and renewals are generally reset to fair market value.
Base lease rents vary by location, but all leases feature annual rent escalation. Leases are structured as either gross or triple-net, with tenants covering insurance, taxes and utilities. The tenant leases generally do not have early termination options, and we expect renewals to be reset to prevailing fair market value.
As of January 26, 2022, the Class A Common Stock and Warrants of the Company began trading on the New York Stock Exchange American LLC (the “NYSE American”) as “SKYH” and “SKYH WS,” respectively. The disclosure in this section gives effect to the Business Combination and includes the operations of Sky prior to the Business Combination.
As of January 26, 2022, the Class A Common Stock and Warrants of the Company began trading on the New York Stock Exchange American LLC (the “NYSE American”) as “SKYH” and “SKYH WS,” respectively. The disclosure in this section gives effect to the Yellowstone Transaction and includes the operations of Sky prior to the Yellowstone Transaction.
As a result of the Business Combination, the Company is organized as an “Up-C” structure in which substantially all of the operating assets of Sky’s business are held by Sky. The Company’s only assets are its equity interests in Sky.
As a result of the Yellowstone Transaction, the Company is organized as an “Up-C” structure in which substantially all of the operating assets of Sky’s business are held by Sky. The Company’s only assets are its equity interests in Sky.
Pursuant to a Continuing Disclosure Agreement, dated as of September 14, 2021, by and between the Public Finance Authority (Wisconsin) and the Company (the “Continuing Disclosure Agreement”) in connection with the Series 2021 PABs, SHC is required to publish (i) Monthly Construction Reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC, all of which are available through the website of the Municipal Securities Rulemaking Board via its Electronic Municipal Market Access (“EMMA”) system at www.msrb.org and on the investor relations section of our website.
Pursuant to a Continuing Disclosure Agreement, dated as of September 14, 2021, by and between the Public Finance Authority (Wisconsin) and the Company (the “Continuing Disclosure Agreement”) in connection with the Series 2021 Bonds, Sky Harbour Capital LLC (“SHC”), a subsidiary of Sky, is required to publish (i) Monthly Construction Reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC, all of which are available through the website of the Municipal Securities Rulemaking Board via its Electronic Municipal Market Access (“EMMA”) system at www.msrb.org and on the investor relations section of our website.
In addition, our HBS hangar campuses are designed to be electric vehicle charger-equipped and electric airplane charger-ready. In addition, our hangar design contains environmentally friendly aspects such as no-foam fire suppression. Moreover, our hangars are designed to be both solar and wind energy capable for future installation.
In addition, our home basing hangar campuses are designed to be electric vehicle charger-equipped and electric aircraft charger-ready. In addition, our hangar design contains environmentally friendly aspects such as no-foam fire suppression. Moreover, our hangars are designed to be both solar and wind energy capable for future installation.
Though a new FBO brought additional community hangar square footage to the airport, the combination of older current facilities, lack of private hangar space on the airport, increased wealth migration to the north side of Dallas, and substantial popularity of the airport make for an attractive target for our private and exclusive Home-Basing solution. Based Aircraft .
Though a new FBO brought additional community hangar square footage to the airport, the combination of older current facilities, lack of private hangar space on the airport, increased wealth migration to the north side of Dallas, and substantial popularity of the airport make for an attractive target for our private and exclusive home basing hangars. Addison Site Facilities.
A recent study conducted by a business aircraft manufacturer forecasted that business aircraft will only continue to grow in the next ten years, with up to 8,500 new business jet deliveries worth almost $275 billion expected to be delivered between 2023 and 2032, further supported by data from the major business aviation manufacturers that suggest the current order backlog for new business aviation aircraft is almost $47 billion.
A recent study conducted by a business aircraft manufacturer forecasted that business aircraft will only continue to grow in the next ten years, with up to 8,500 new business jet deliveries worth over $275 billion expected to be delivered between 2024 and 2033, further supported by data from the major business aviation manufacturers that suggest the current order backlog for new business aviation aircraft is over $49 billion.
We realize economies of scale in construction through a proprietary prototype hangar design replicated at HBS hangar campuses across the United States. This allows for centralized procurement, straightforward permitting processes, efficient development processes, and the best hangar in business aviation.
We expect to realize economies of scale in construction through a prototype hangar design replicated at home basing hangar campuses across the United States. This allows for centralized procurement, straightforward permitting processes, efficient development processes, and the best hangar in business aviation.
Once operational, each campus maintains commercial property, flood, earthquake, boiler and machinery, business income/loss of rent, automobile liability, general liability, environmental liability, and worker's compensation insurance. We also maintain insurance coverage related to our directors and officers, employment-related liabilities, and cyber-related incidents.
Once operational, each campus maintains commercial property, flood, earthquake, boiler and machinery, business income/loss of rent, automobile liability, general liability, environmental liability, and worker's compensation insurance. We maintain general liability and product liability insurance in connection with our hangar manufacturing activities. We also maintain insurance coverage related to our directors and officers, employment-related liabilities, and cyber-related incidents.
The discovery by first-time flyers in the convenience, control and comfort of general aviation has caused a shift in consumer behavior which we believe will also support increasing demand for HBS services.
The discovery by first-time flyers in the convenience, control and comfort of general aviation has caused a shift in consumer behavior which we believe will also support increasing demand for home basing hangar campuses.
The combination of Nashville’s robust economy and business and tourism appeal led to seven successive years of often double-digit growth, which ended with 18.5 million passengers that passed through the airport in 2022. BNA has four runways, the longest of which is 11,030 feet.
The combination of Nashville’s robust economy and business and tourism appeal led to eight successive years of often double-digit growth, which ended with 21.9 million passengers that passed through the airport in 2023. BNA has four runways, the longest of which is 11,030 feet.
We believe demand for HBS services will be driven broadly by the growing size of the business aviation fleet in the United States and the delivery of larger aircraft with taller tail heights.
We believe demand for home basing hangar campuses will be driven broadly by the growing size of the business aviation fleet in the United States and the delivery of larger aircraft with taller tail heights.
The airport serves the Dallas/Fort Worth Metroplex market and is in close proximity to the residential and business districts where aircraft owners and operators live and work, located only nine miles north of the central business district of Dallas.
ADS is owned and operated by the Town of Addison, Texas. The airport serves the Dallas/Fort Worth Metroplex market and is in close proximity to the residential and business districts where aircraft owners and operators live and work, located only nine miles north of the central business district of Dallas.
We require the tenants at our campuses to maintain aircraft physical damage, general liability, worker's compensation, automobile liability, and pollution liability insurance coverage. 17 Table of Contents Human Capital As of December 31, 2022, we had 23 employees and 11 independent contractors, none of which were subject to collective bargaining agreements. We also engage consultants to supplement our permanent workforce.
We require the tenants at our campuses to maintain aircraft physical damage, general liability, worker's compensation, and automobile liability insurance coverage. Human Capital As of December 31, 2023, we had 35 employees and 13 independent contractors, none of which were subject to collective bargaining agreements. We also engage consultants to supplement our permanent workforce.
Addison Site Facilities. We obtained lease rights to approximately six acres on the northeast side of the primary runway. As part of our development plan, the existing facilities on the site, including a terminal, ramp and automobile parking, will be demolished. We anticipate subsequently developing six hangars with adjoining office and support space constituting approximately 105,000 square feet.
We obtained lease rights to approximately six acres on the northeast side of the primary runway. As part of our development plan, the existing facilities on the site, including a terminal, ramp and automobile parking, have been demolished. We anticipate developing six hangars with adjoining office and support space constituting 115,506 rentable square feet.
The landside facilities at DVT include the terminal building, an FBO, flight schools, fueling facilities, major utilities, and support facilities. Based on data from FAA OPSNET, between 2018 and 2019, DVT experienced a 10.0% increase in overall operations.
The landside facilities at DVT include the terminal building, an FBO, flight schools, fueling facilities, major utilities, and support facilities. Based on data from FAA OPSNET, between 2021 and 2022, DVT experienced a 1.2% increase in overall operations.
Every hangar includes a ramp area for aircraft startup and shutdown in front of the hangar doors. Car parking is included in the hangar space. The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with showers. Each unit is assigned adjacent outdoor parking, as well.
Every hangar includes a ramp area for aircraft startup and shutdown in front of the hangar doors. Car parking is included in the hangar space. The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with showers. Each hangar is also assigned adjacent outdoor parking. 12 Table of Contents Nashville International Airport (BNA) The Airport.
The campus will be constructed in two phases, and in total will consist of 18 individually leased NFPA Group III hangars comprising 236,930 total square feet. Our Centennial HBS hangar campus will include two hangar layouts, each including a ramp area for aircraft startup and shutdown in front of the hangar doors.
The campus will be constructed in two phases, and in total will consist of 14 NFPA Group III hangars comprising 239,739 total rentable square feet. Our Centennial home basing hangar campus will include two hangar layouts, each including a ramp area for aircraft startup and shutdown in front of the hangar doors.
As the only medium hub in the region, BNA serves as the primary commercial service airport for the air service area. BNA is one of the nation’s fastest-growing airports.
BNA is the primary commercial air service facility serving the Nashville metropolitan area and is the largest airport in the State of Tennessee. As the only medium hub in the region, BNA serves as the primary commercial service airport for the air service area. BNA is one of the nation’s fastest-growing airports.
DVT serves to relieve general aviation air traffic from PHX and is a convenient alternative to the larger and more congested airport. This convenience has led DVT to become one of the busiest general aviation airports in the country, ranking second in the FAA’s Top 10 Busiest General Aviation Airports, as of 2017.
DVT serves to relieve general aviation air traffic from PHX and is a convenient alternative to the larger and more congested airport. This convenience has led DVT to become one of the busiest general aviation airports in the country, ranking as the sixth busiest general aviation airport in 2023 based on data from FAA OPSNET.
We intend to lease each respective hangar to one or more tenants, who will use all or a portion of such facility for general aviation aircraft storage and related uses permitted under the respective ground leases and will pay rent and other charges derived from HBS services on the respective sites to us pursuant to a sublease. 9 Table of Contents Sugar Land Site The Airport.
We intend to lease each respective hangar to one or more tenants, who will use all or a portion of such facility for general aviation aircraft storage and related uses permitted under the respective ground leases and will pay rent and other charges derived from home basing services on the respective sites to us pursuant to a sublease. 9 Table of Contents The following table identifies the latest available information on the number of aircraft based at each of our home basing hangar campus properties.
Car parking is included in the hangar space and in an attached two car garage. The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with a shower. Each unit is also assigned adjacent outdoor parking. 13 Table of Contents Deer Valley Site The Airport.
Car parking is to be included in the hangar space and in an attached two car garage. The adjoining office space will include high-end finishes with a kitchen, storage and a bathroom with a shower. Each unit is also to be assigned adjacent outdoor parking. 11 Table of Contents Chicago Executive Airport (PWK) The Airport.
SGR is designated as a “reliever airport” for George Bush Intercontinental Airport and William P. Hobby International Airport in Houston, Texas. 24 companies on the 2022 Fortune 500 list are headquartered in the Houston metro area. General airport facilities at SGR include an 8,000-foot primary runway, as well as fuel services, aircraft storage in hangars, and tie-down parking.
Hobby International Airport in Houston, Texas. 24 companies on the 2022 Fortune 500 list are headquartered in the Houston metro area. General airport facilities at SGR include an 8,000-foot primary runway, as well as fuel services, aircraft storage in hangars, and tie-down parking. SGR also includes U.S. Customs facilities.
Other facilities at the airport include hangars and tie-downs for aircraft parking and fuel services. Services available at APA include aircraft repair and maintenance services, including airframe, power plant and avionics repair. The airport includes a U.S. Customs facility. Four companies currently provide FBO services at APA.
Other facilities at the airport include hangars and tie-downs for aircraft parking and fuel services. Services available at APA include aircraft repair and maintenance services, including airframe, power plant and avionics repair. The airport also includes a U.S. Customs facility. APA is currently home to over 800 based aircraft, including over 140 jet aircraft.
The airport serves Denver and surrounding areas and is classified as a National airport according to the FAA National Asset Report. APA is the largest general aviation airport in the system, and it is designated as a reliever to Denver International Airport. APA covers approximately 1,315 acres and has three runways.
The airport serves Denver, Colorado, and surrounding areas and is classified as a National airport according to the FAA National Asset Report. APA is the largest general aviation airport in the Denver Airport System, and was the fourth busiest general aviation airport in 2023 based on data from FAA OPSNET. APA covers approximately 1,315 acres and has three runways.
We obtained lease rights to approximately 20 acres of land in the Centennial lnterPort master-planned business hangar development on the south side of APA. Our Centennial development at APA is located in a secluded, low-traffic area on the airfield.
Some of the private hangars are owned and built by individuals or corporations based locally. Centennial Site Facilities. We obtained lease rights to approximately 20 acres of land in the Centennial lnterPort master-planned business hangar development on the south side of APA. Our development at APA is located in a secluded, low-traffic area on the airfield.
The campus will consist of 16 individually leased NFPA Group III modular hangars comprising 220,764 total square feet. Ground-breaking for the first phase occurred in December 2022. Every hangar includes a ramp area for aircraft startup and shutdown in front of the hangar doors. Car parking is included in the hangar space, which can accommodate multiple cars.
Our development at DVT is located in a secluded, low-traffic area on the airfield. The campus will consist of 16 individually leased NFPA Group III modular hangars comprising 220,764 total rentable square feet. Ground-breaking for the first phase occurred in December 2022. Every hangar includes a ramp area for aircraft startup and shutdown in front of the hangar doors.
Berry Field Air National Guard Base is located on the premises of BNA and it has hosted the 118 th Airlift Wing since 1937. According to FAA OPSNET, between 2018 and 2019 BNA experienced a 7.5% increase in overall operations.
Berry Field Air National Guard Base is located on the premises of BNA and it has hosted the 118 th Airlift Wing since 1937. According to FAA OPSNET, between 2021 and 2022 BNA experienced a 14.6% increase in overall operations, which was followed-up by a further 8.1% increase between 2022 and 2023.
We do not expect that compliance and related remediation work, if any, will have a material negative impact on our business. We have not received notice requiring us to cease operations at any location or of any abatement proceeding by any government agency for failure to comply with applicable environmental laws and regulations.
We have not received notice requiring us to cease operations at any location or of any abatement proceeding by any government agency for failure to comply with applicable environmental laws and regulations.
SGR includes United States Customs facilities. SGR is home to seven on-airport businesses that offer services such as FBO amenities, aircraft maintenance, and avionics. The most frequent general aviation operations at SGR involve business and charter flights, flight instruction, recreational flying and law enforcement.
SGR is home to seven on-airport businesses that offer services such as FBO amenities, aircraft maintenance, and avionics. The most frequent general aviation operations at SGR involve business and charter flights, flight instruction, recreational flying and law enforcement. Between 2021 and 2022, SGR experienced a 10.0% increase in overall operations based on data from FAA OPSNET.
On average, each hangar provides 12,000 square feet of hangar space and 1,300 to 2,000 square feet of office space. Once completed, these facilities are expected to total 80 hangars on 87 acres of ground leases, with an infrastructure of over 1,095,000 square feet expected to be completed in the next five years.
Our hangars vary in size and format, however, on average, each hangar provides over 14,000 square feet of hangar space and 1,300 to 2,000 square feet of office space. Once completed, these facilities are expected to provide an infrastructure of over 1.5 million square feet expected to be completed in the next five years.
FAA TAF forward looking data forecasts a rebound in total operations beginning in 2022 and increasing each year thereafter, including annual growth projections of 4.9%, 3.7%, and 4.9%, for 2022, 2023, and 2024, respectively. FBO services at APA are provided by four companies.
FAA TAF forward looking data forecasts a slight decrease of 1.0% in 2024, further followed by increases each year thereafter, including annual growth projections of 1.9%, and 1.9%, for 2025 and 2026, respectively. FBO services at APA are provided by four companies.
Our HBS hangar campuses feature exclusive private hangars and a full suite of dedicated services specifically optimized for home-based, versus transient, aircraft. The physical footprint of the U.S. business aviation fleet grew by almost 28 million square feet in the ten years preceding the beginning of the COVID-19 pandemic, with hangar supply lagging dramatically, especially in key growth markets.
The physical footprint of the U.S. business aviation fleet grew by almost 28 million square feet in the ten years preceding the beginning of the COVID-19 pandemic, with hangar supply lagging dramatically, especially in key growth markets.
Although our tenants are generally responsible for all maintenance and repairs of the property pursuant to our leases, including compliance with the ADA and other similar laws or regulations, we could be held liable as the owner of the property for a failure of one of our tenants to comply with these laws or regulations.
Although our tenants are generally responsible for all maintenance and repairs of the property pursuant to our leases, including compliance with the ADA and other similar laws or regulations, we could be held liable as the owner of the property for a failure of one of our tenants to comply with these laws or regulations. 14 Table of Contents Environmental Matters Our properties are subject to numerous statutes, rules and regulations relating to environmental protection and our business is exposed to various environmental risks, hazards, and environmental protection requirements, including those related to the storage and handling of jet fuel and compliance with firefighting regulations.
SGR is located approximately 20 miles southwest of the Houston central business district. The airport is situated on 622 acres owned by the City of Sugar Land. SGR is a publicly-owned, public-use general aviation facility, and it is included in the Federal Aviation Administration’s (“FAA”) National Plan of Integrated Airport Systems (“NPAIS”).
The airport is situated on 622 acres owned by the City of Sugar Land, Texas. SGR is a municipal-owned, public-use general aviation facility, and it is included in the Federal Aviation Administration’s (“FAA”) National Plan of Integrated Airport Systems (“NPAIS”). SGR is designated as a “reliever airport” for George Bush Intercontinental Airport and William P.
Operations at ADS rebounded from 2020 to 2021, as the airport experienced a 22.8% increase in total operations. FAA TAF forward looking data forecasts a continued rebound in total operations beginning in 2022 and increasing each year thereafter, including increases of 1.1%. 4.8%, and 3.7% for 2022, 2023, and 2024, respectively.
Between 2021 and 2022, ADS experienced a 5.2% increase in overall operations, followed by a 0.9% decrease in operations from 2022 to 2023. FAA TAF forward-looking data forecasts a rebound in total operations beginning in 2024 and increasing each year thereafter, including increases of 1.5%. 6.8%, and 5.9% for 2024, 2025, and 2026, respectively.
Anticipated occupancy for the ADS site is in the third calendar quarter of 2024.
Anticipated project completion for the ADS site is in the first calendar quarter of 2025.
The existing hangar facilities at ADS are overcapacity and predominantly older with low door heights, which creates little opportunity for attracting newer larger private jet aircraft to the market.
Additionally, multiple smaller private hangars exist on the airport, primarily owned by operators or for flight schools and other airport businesses. We believe the existing hangar facilities at ADS are overcapacity and predominantly older with low door heights, which creates little opportunity for attracting newer larger private jet aircraft to the airport.
The tables below present certain information with respect to our portfolio in development and in operation as of December 31, 2022. • Sugar Land Regional Airport (“SGR”), Sugar Land, TX (Houston area); • Miami-Opa Locka Executive Airport (“OPF”), Opa-Locka, FL (Miami area); • Nashville International Airport (“BNA”), Nashville, TN; • Centennial Airport (“APA”), Englewood, CO (Denver area); • Phoenix Deer Valley Airport (“DVT”), Phoenix, AZ; and • Addison Airport (“ADS”), Addison, TX (Dallas Area).
The tables below present certain information with respect to our portfolio in development and in operation as of December 31, 2023. ● Addison Airport ("ADS"), Addison, TX (Dallas area); ● Bradley International Airport ("BDL"), Windsor Locks, CT (Hartford 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; ● Phoenix Deer Valley Airport ("DVT"), Phoenix, AZ; and ● Sugar Land Regional Airport ("SGR"), Sugar Land, TX (Houston area).
Forecast data from FAA TAF projects increases of 4.8%, 3.8%, and 4.1% for 2022, 2023, and 2024, respectively. The existing stock of hangar space at OPF comprises approximately 266,000 square feet of space, with an additional 350,000 square feet of new construction hangar space planned. There are six large, nested T-Hangar rows on the airport, capable of storing 99 aircraft.
The existing stock of hangar space at OPF comprises approximately 266,000 square feet of space, with an additional 350,000 square feet of new construction hangar space planned. There are six large, nested T-Hangar rows on the airport, capable of storing 99 aircraft. Aside from our Miami-Opa Locka development, no private hangar space for larger aircraft is available at OPF.
Human capital strategies are developed and managed by our Chief Operating Officer, who reports to the Chief Executive Officer, and are overseen by the compensation committee and the Board.
The Sky Harbour Academy aims to provide assistance with placement in aviation jobs, including full-time roles at Sky Harbour. Human capital strategies are developed and managed by our Chief Financial Officer, who reports to the Chief Executive Officer, and are overseen by the compensation committee and the Board.
Seasonality We do not experience substantial seasonal fluctuations in our revenues and the results of operations. 16 Table of Contents Government Regulation FAA Regulation The industry is overseen primarily by the FAA.
Seasonality We do not experience substantial seasonal fluctuations in our revenues and the results of operations. Government Regulation FAA Regulation The industry is overseen primarily by the FAA. In addition, the Department of Homeland Security, Department of Transportation, Environmental Protection Agency, state and local environmental agencies, and local airport authorities contribute to the regulation of our home basing hangar campuses.
While private aircraft use generally was not affected to the extent of commercial aviation, and some private aircraft clients may continue to use that mode of aviation following the pandemic, preferences for air travel and specifically general aviation are unknown and may change following COVID-19.
While private aircraft use generally was not affected to the extent of commercial aviation, we believe preferences for air travel and specifically general aviation continue to shift towards private aviation following the COVID-19 pandemic, as industry data suggests that nearly 95% of the entrants who began flying privately during the COVID-19 pandemic are continuing to fly privately through 2023.
In January 2023, we amended our existing ground lease agreement with the Town of Addison, TX to include additional parcels of land that will effectively double the land available for development at our ADS HBS hangar campus project. 15 Table of Contents Customers, Sales and Marketing We seek to maximize hangar rental charges consistent with capacity utilization at our existing and future facilities.
In January 2023, we amended our existing ground lease agreement with the Town of Addison, TX to include additional parcels of land that will effectively double the land available for development at our ADS home basing hangar campus project, with the second phase anticipated to include three hangars comprising an additional 96,873 of rentable square footage.
ITEM 1. BUSINESS Business Combination On January 25, 2022 (the “Closing Date”), we completed the Business Combination pursuant to the Equity Purchase Agreement between us and Sky. Each of the Existing Sky Equityholders separately entered into an Equityholders Voting and Support Agreement irrevocably agreeing to vote in favor of the Business Combination set forth in the Equity Purchase Agreement.
ITEM 1. BUSINESS Yellowstone Transaction On January 25, 2022 (the “Closing Date”), we completed the Yellowstone Transaction pursuant to the Equity Purchase Agreement between us and Sky.
FAA TAF forecast data projects a slight decline of 3.6% in 2022 due to lower projected commercial operations, followed by projected increases of 14.0%, 5.1%, and 4.6% in 2023, 2024, and 2025, respectively.
Data from FAA OPSNET indicates that between 2021 and 2022, OPF experienced a 3.6% decrease in overall operations, before a recording a significant 10.6% increase between 2022 and 2023. Forecast data from FAA TAF projects a slight 0.4% decrease in 2024, followed by increases of 5.1% and 0.5% for 2025 and 2026, respectively.
In addition, there are several private hangars at BNA which generally provide storage for business aircraft, office space, maintenance space, and passenger/pilot lounges. Some of the private hangars are owned and built by individuals, while others are leased from one of the FBOs.
The only aircraft hangar rental providers at BDL are two FBOs, both of which provide standard amenities. In addition, there are several private hangars at BDL owned by local corporations which generally provide storage for business aircraft, office space, maintenance space, and lounges. Bradley Site Facilities.
According to the DVT Airport Authority, they do not have any corporate/executive hangars, but they have available land to build hangars. The FBO is currently based in two locations at DVT and its future plans at DVT include the construction of new hangars as well as a modern FBO facility. Based Aircraft .
Currently, the only aircraft hangar rental providers at DVT are the DVT Airport Authority and an FBO. According to the DVT Airport Authority, they do not have any corporate/executive hangars, but they have available land to build hangars.
According to forecast data from FAA TAF, the general aviation recovery is projected to continue through 2023 and 2024, with growth projections of 6.5% and 6.9%, respectively. The sole FBO onsite at SGR is the primary competition for our HBS hangar campus at SGR.
Overall operations at SGR increased an additional 9.3% between 2022 and 2023. FAA TAF forward-looking data projects modest growth to continue through 2024, 2025, and 2026, with growth projections of 0.1%, 0.2%, and 0.2%, respectively. The sole FBO onsite at SGR is the primary competition for our home basing hangar campus at SGR.
All hangars feature 28 foot-high doors and include 480-, 240- and 120-volt electrical outlets to allow for routine maintenance.
All hangars feature 28 foot-high doors and include 480-, 240- and 120-volt electrical outlets to allow for routine maintenance. 13 Table of Contents Customers, Sales and Marketing We seek to maximize hangar rental charges consistent with capacity utilization at our existing and future facilities.
ADS does not cater to commercial flights, making it preferable for basing business aircraft as it provides for the quickest “time-to-wheels-up” in the Dallas area. According to its website, ADS is home to more than 650 based aircraft. Facilities at ADS include a 7,203 foot runway equipped with high-intensity lighting and a full length parallel taxiway.
ADS does not cater to commercial flights, making it preferable for basing business aircraft as it provides for the quickest “time-to-wheels-up” in the Dallas area. ADS is currently home to nearly 550 based aircraft, including over 120 jet aircraft.
AirNav data current as of December 2022. Deer Valley Site Facilities. We obtained lease rights to approximately 15 acres of land at DVT on the southeast side of the airport. Our development at DVT is located in a secluded, low-traffic area on the airfield.
The FBO is currently based in two locations at DVT and its future plans at DVT include the construction of new hangars as well as a modern FBO facility. Deer Valley Site Facilities. We obtained lease rights to approximately 15 acres of land at DVT on the southeast side of the airport.
The OPF facilities are planned to be constructed in two phases and are expected to consist of 19 individually-leased NFPA Group III hangars comprising 262,169 total square feet. Each hangar is approximately 13,798 square feet, which can accommodate the various ultra-long-range jets and include 480-, 240- and 120-volt electrical outlets to allow for routine maintenance.
Construction of the second phase of facilities is expected to begin in the fourth calendar quarter of 2024 and be completed in the fourth calendar quarter of 2025. Each hangar can accommodate the various ultra-long-range jets and include 480-, 240- and 120-volt electrical outlets to allow for routine maintenance.
The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with a shower. Each hangar is also assigned adjacent outdoor parking. 14 Table of Contents Addison Airport Site The Airport. ADS is owned and operated by the Town of Addison.
Car parking is included in the hangar space, which can accommodate multiple cars. The adjoining office space includes high-end finishes with a kitchen, storage and a bathroom with a shower. Each hangar is also assigned adjacent outdoor parking. Sugar Land Regional Airport (SGR) The Airport. SGR is located approximately 20 miles southwest of the Houston central business district.
Facilities at OPF include three runways which are all served by full-length paved parallel taxiways. Other facilities at OPF include hangars and tie-downs for aircraft parking and fuel services. Data from FAA OPSNET indicates that between 2018 and 2019, OPF experienced a 10.3% increase in overall operations.
Notably, OPF ranks eighth in the FAA’s Top Ten Airports for Domestic Business Jet Operations, with 52,869 domestic business jet operations during the period January 2023 through December 2023. Facilities at OPF include three runways which are all served by full-length paved parallel taxiways. Other facilities at OPF include hangars and tie-downs for aircraft parking and fuel services.
The Miami Airport System consists of five active airports, with OPF being the largest general aviation airport in the system and designated as a reliever to MIA. Notably, OPF ranks eighth in the FAA’s Top Ten Airports for Domestic Business Jet Operations, with 55,223 domestic business jet operations during the period February 2022 through January 2023.
OPF is a public-use general aviation facility owned by Miami-Dade County and operated by the Miami-Dade Aviation Department. The Miami Airport System consists of five active airports, with OPF being the largest general aviation airport in the system and designated as a reliever to MIA.
In addition, the Department of Homeland Security, Department of Transportation, Environmental Protection Agency, state and local environmental agencies, and local airport authorities contribute to the regulation of our HBS hangar campuses. We must comply with federal, state, and local environmental statutes, and regulations, including those associated in part with the operation of fuel storage tank systems and fuel trucks.
We must comply with federal, state, and local environmental statutes, and regulations, including those associated in part with the operation of fuel storage tank systems and fuel trucks. These requirements include, among others, tank and pipe testing for tightness, soil sampling for evidence of leaking, and remediation of detected leaks and spills.
The effects of the pandemic continued to be evident in the change from 2020 to 2021, as APA did not experience the positive effects exhibited by other airports, and total operations at APA decreased a further 6.1%.
Between 2021 and 2022, APA experienced a 3.3% decrease in overall operations according to FAA OPSNET as the lingering effects of the pandemic continued to be evident. However, from 2022 to 2023, total operations at APA increased by 20.0%, reflecting a significant rebound from the decreased operational activity.
FAA TAF forward looking data forecasts a rebound in total operations beginning in 2022 and increasing each year thereafter, including increases of 18.9%, 18.1% for 2022 and 2023, respectively. Currently, the only aircraft hangar rental providers at DVT are the DVT Airport Authority and an FBO.
Between 2021 and 2022, total operations at BDL increased 9.0%, followed by a slight 0.3% increase in total operations from 2022 to 2023. FAA TAF forward-looking data forecasts a slight decrease of 1.8% in 2024, followed by increases each year thereafter, including annual growth projections of 3.6%, and 0.5% for 2025 and 2026, respectively.
Operations are supported by Instrument Landing System (ILS) and RNAV (GPS) instrument approaches. The airport offers an FAA control tower, 24-hour U.S. Customs services for international arrivals, no landing fees, and over 70 businesses including maintenance providers, flight schools, and various other aviation-related service providers.
Facilities at ADS include a 7,203 foot runway equipped with high-intensity lighting and a full length parallel taxiway. Operations are supported by Instrument Landing System (ILS) and RNAV (GPS) instrument approaches. The airport offers an FAA control tower, 24-hour U.S.
Between 2018 and 2019, SGR experienced a 12.0% increase in overall operations based on data from FAA OPSNET. The effects of the COVID-19 pandemic can be seen in the change from 2019 to 2020: total operations at SGR decreased 12.3%. The 11.6% increase in operations from 2020 to 2021 is largely attributable to a return to pre-pandemic levels of operations.
Based on data from FAA OPSNET, between 2021 and 2022 POU recorded a 3.6% increase in overall operations. From 2022 to 2023, POU experienced a partial reversal of its previous growth, as total operations decreased 2.4%.
Another company located at SGR has maintenance hangars onsite, and can accommodate short-term hangar rentals without FBO services. Based Aircraft.
Another company located at SGR has maintenance hangars onsite, and can accommodate short-term hangar rentals without FBO services. Sugar Land Site Facilities. The total development consists of 7 individually leased NFPA Group III hangars, with a combined leasable area of 66,080 square feet, which was completed in December 2020.
These requirements include, among others, tank and pipe testing for tightness, soil sampling for evidence of leaking, and remediation of detected leaks and spills. Environmental and Related Matters Our HBS hangar campuses are subject to regular inspection by local environmental agencies, as well as local fire marshals and other agencies.
Environmental and Related Matters Our home basing hangar campuses are subject to regular inspection by local environmental agencies, as well as local fire marshals and other agencies. We do not expect that compliance and related remediation work, if any, will have a material negative impact on our business.
OPF is located approximately 10 miles north of the Miami central business district, 16 miles from Miami Beach and seven miles from Miami International Airport (“MIA”). OPF, a public-use general aviation facility owned by Miami-Dade County and operated by the Miami-Dade Aviation Department.
We anticipate the completion of construction and occupancy for our POU home basing hangar campus to occur in the second calendar quarter of 2026. Miami Opa-Locka Executive Airport (OPF) The Airport. OPF is located approximately 10 miles north of the Miami central business district, 16 miles from Miami Beach, Florida, and eight miles from Miami International Airport (“MIA”).
The use of proceeds from this issuance, together with proceeds from the sale of the $55.0 million of Sky Series B Preferred Units to BOC YAC, were used, in part, to fund a construction escrow account for Sky’s development program at five airports consisting of existing and new hangars in various phases of development and construction and to repay all existing indebtedness of Sky. 8 Table of Contents Our Properties We seek to develop our HBS hangar campuses on long-term ground leases (or sub-leases thereof) at airports with suitable infrastructure serving metropolitan centers across the United States.
See “ Risk Factors — An epidemic, pandemic or contagious disease, such as COVID-19, could have a material adverse effect on our business and results of operations." 8 Table of Contents Our Properties We seek to develop our home basing hangar campuses on long-term ground leases (or sub-leases thereof) at airports with suitable infrastructure serving metropolitan centers across the United States.
Removed
See “ Risk Factors — An epidemic, pandemic or contagious disease, including the ongoing COVID-19 pandemic, could have a material adverse effect on our business and results of operations." Tax Exempt Senior Bond Issuance On September 14, 2021, Sky’s subsidiary, Sky Harbour Capital LLC (“SHC”), closed a $166.3 million financing through the sale of Series 2021 private activity tax-exempt senior bonds through a municipal conduit issuer, Public Finance Authority (Wisconsin) (the “Series 2021 PABs”).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all of which could lead to a decline in the value of our Common Stock. 23 Table of Contents We conduct substantially all of our operations under ground leases, which grant significant rights to airport authorities as our direct or ultimate landlord.
Biggest changeAlthough we implemented additional controls and procedures to remediate the material weakness described above, in the future those controls and procedures may not be adequate to prevent or detect material misstatements in our interim or annual consolidated financial statements due to fraud or errors. 20 Table of Contents We conduct substantially all of our operations under ground leases, which grant significant rights to airport authorities as our direct or ultimate landlord.
The loss of one or more of tenants may (without a similar tenant or tenants to replace such tenant or tenants) have a material adverse effect on our ability to collect rental revenue sufficient to meet our obligations.
The loss of one or more of our tenants may (without a similar tenant or tenants to replace such tenant or tenants) have a material adverse effect on our ability to collect rental revenue sufficient to meet our obligations.
We rely on certain of these exemptions. As a result, we do not have a compensation committee consisting entirely of independent directors and our directors are not nominated or selected solely by independent directors. We may also rely on the other exemptions so long as we qualify as a controlled company.
We rely on certain of these exemptions. As a result, we do not have a compensation committee consisting entirely of independent directors and our directors are not nominated or selected solely by our independent directors. We may also rely on the other exemptions so long as we qualify as a controlled company.
Because members of our senior management team hold most or all of their economic interest in Sky directly through holding companies, they may have interests that do not align with, or conflict with, those of the holders of Class A Common Stock or with us.
Because members of our senior management team hold most or all of their economic interest in Sky directly through holding companies, they may have interests that do not align with, or conflict with, those of the holders of our Class A Common Stock or with us.
We cannot predict the impact our dual class structure may have on the stock price of Class A Common Stock. We cannot predict whether our dual class structure will result in a lower or more volatile market price of Class A Common Stock or in adverse publicity or other adverse consequences.
We cannot predict the impact our dual class structure may have on the market price of Class A Common Stock. We cannot predict whether our dual class structure will result in a lower or more volatile market price of Class A Common Stock or in adverse publicity or other adverse consequences.
Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i) a majority of the our Board consist of independent directors, (ii) our compensation committee is composed entirely of independent directors and (iii) director nominees be selected or recommended to our Board by independent directors.
Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirement that (i) a majority of our Board consist of independent directors, (ii) our compensation committee consist entirely of independent directors and (iii) our director nominees be selected or recommended to our Board by our independent directors.
Factors affecting the trading price of Class A Common Stock and Public Warrants may include: ● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; ● changes in the market’s expectations about our operating results; ● the public’s reaction to our press releases, our other public announcements and our filings with the SEC; ● speculation in the press or investment community; ● actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; ● our operating results failing to meet the expectation of securities analysts or investors in a particular period; ● changes in financial estimates and recommendations by securities analysts concerning us or the market in general; ● operating and stock price performance of other companies that investors deem comparable to us; ● publications of research reports by securities analysts about us, our competitors, or the industry we operate in; ● changes in laws and regulations affecting our business; ● commencement of, or involvement in, litigation involving us; ● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; ● the volume of Class A Common Stock available for public sale; ● any major change in the Board of Directors or management; ● sales of substantial amounts of Class A Common Stock by directors, officers or significant stockholders or the perception that such sales could occur; ● general economic and political conditions such as recessions, interest rates, fuel prices, trade wars, pandemics (such as COVID-19), epidemics, currency fluctuations and acts of war (such as the conflict between Russia and Ukraine) or terrorism; and ● other risk factors listed under this “Risk Factors” section.
Factors affecting the trading price of Class A Common Stock and Public Warrants may include: ● actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; ● changes in the market’s expectations about our operating results; ● the public’s reaction to our press releases, our other public announcements and our filings with the SEC; ● speculation in the press or investment community; ● actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; ● our operating results failing to meet the expectation of securities analysts or investors in a particular period; ● changes in financial estimates and recommendations by securities analysts concerning us or the market in general; ● operating and stock price performance of other companies that investors deem comparable to us; ● publications of research reports by securities analysts about us, our competitors, or the industry we operate in; ● changes in laws and regulations affecting our business; ● commencement of, or involvement in, litigation involving us; ● changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; ● the volume of Class A Common Stock available for public sale; ● any major change in the Board of Directors or management; ● sales of substantial amounts of Class A Common Stock by directors, officers or significant stockholders or the perception that such sales could occur; ● general economic and political conditions such as recessions, interest rates, fuel prices, trade wars, pandemics (such as COVID-19), epidemics, currency fluctuations and acts of war (such as the conflict between Russia and Ukraine and the military conflict in Israel and Gaza) or terrorism; and ● other risk factors listed under this “Risk Factors” section.
Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against our directors and officers, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. 28 Table of Contents We qualify as an “ emerging growth company ” within the meaning of the Securities Act, and we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, and as such, it could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.
Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against our directors and officers, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. 25 Table of Contents We qualify as an “ emerging growth company ” within the meaning of the Securities Act, and we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, and as such, it could make our securities less attractive to investors and may make it more difficult to compare our performance to the performance of other public companies.
The market volatility and trading patterns we have experienced create several risks for investors, including the following: ● the market price of our Class A Common Stock has experienced and may continue to experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals, and substantial increases may be significantly inconsistent with the risks and uncertainties that we continue to face; ● factors in the public trading market for our Class A Common Stock may include the sentiment of retail investors, the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our Class A Common Stock and any related hedging and other trading factors; ● to the extent volatility in our Class A Common Stock is caused by a “short squeeze” in which coordinated trading activity causes a spike in the market price of our Class A Common Stock as traders with a short position make market purchases to avoid or to mitigate potential losses, investors purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has abated; and ● if the market price of our Class A Common Stock declines, you may be unable to resell your shares at or above the price at which you acquired them, and the Warrant you own may become out of the money. 31 Table of Contents The trading price of Class A Common Stock and Public Warrants depends on many factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance.
The market volatility and trading patterns we have experienced create several risks for investors, including the following: ● the market price of our Class A Common Stock has experienced and may continue to experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals, and substantial increases may be significantly inconsistent with the risks and uncertainties that we continue to face; ● factors in the public trading market for our Class A Common Stock may include the sentiment of retail investors, the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our Class A Common Stock and any related hedging and other trading factors; ● to the extent volatility in our Class A Common Stock is caused by a “short squeeze” in which coordinated trading activity causes a spike in the market price of our Class A Common Stock as traders with a short position make market purchases to avoid or to mitigate potential losses, investors purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has abated; and ● if the market price of our Class A Common Stock declines, you may be unable to resell your shares at or above the price at which you acquired them, and the Public Warrants you own may become out of the money. 28 Table of Contents The trading price of Class A Common Stock and Public Warrants depends on many factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance.
Under the circumstances, investors in our Class A Common Stock and Warrants are subject to the risk of losing all or a substantial portion of their investment. Extreme fluctuations in the market price of our Class A Common Stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums.
Under the circumstances, investors in our Class A Common Stock and Public Warrants are subject to the risk of losing all or a substantial portion of their investment. Extreme fluctuations in the market price of our Class A Common Stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums.
Our ability to generate revenues may be adversely affected by a wide variety of unforeseen or unforeseeable events and conditions, including, without limitation, economic changes affecting the HBS industry generally, the airports or the tenants specifically, any of which could result in a default under the tenant leases.
Our ability to generate revenues may be adversely affected by a wide variety of unforeseen or unforeseeable events and conditions, including, without limitation, economic changes affecting the industry generally, the airports or the tenants specifically, any of which could result in a default under the tenant leases.
Pursuant to the Tax Receivable Agreement, we are generally required to pay the TRA Holders 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 Tax Group (i.e., SHG Corporation and applicable consolidated, unitary, or combined Subsidiaries) realizes, or is deemed to realize, as a result of certain Tax Attributes, which include: ● 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 SHG Corporation 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 SHG Corporation under the Tax Receivable Agreement) acquired by SHG Corporation 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.
Pursuant to the Tax Receivable Agreement, we are generally required to pay the TRA Holders 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 Tax Group (i.e., the Company and applicable consolidated, unitary, or combined Subsidiaries) realizes, or is deemed to realize, as a result of certain Tax Attributes, which include: ● 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.
The lock-up period for the outstanding shares of Class B Common Stock, and for the shares of Class A Common Stock underlying the Private Placement Warrants, expired on January 25, 2023. Furthermore, we have registered for resale all of the Class A Common Stock underlying such outstanding units.
The lock-up period for the outstanding shares of Class B Common Stock, and for the shares of Class A Common Stock underlying the Private Placement Warrants, expired on January 25, 2023. Furthermore, we have registered for resale all of the Class A Common Stock underlying such outstanding Sky Common Units and Private Placement Warrants.
Furthermore, our future obligation to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the Tax Attributes that may be deemed realized under the Tax Receivable Agreement. 30 Table of Contents We could be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof in the United States or other jurisdictions .
Furthermore, our future obligation to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the Tax Attributes that may be deemed realized under the Tax Receivable Agreement. 27 Table of Contents We could be adversely affected by changes in applicable tax laws, regulations, or administrative interpretations thereof in the United States or other jurisdictions .
If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition. 27 Table of Contents Risks Relating to Our Organization and Structure We are a “ controlled company ” within the meaning of the NYSE American listing standards and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements.
If we were unable to do so, our operations might suffer, which may adversely impact our results of operations and financial condition. 24 Table of Contents Risks Relating to Our Organization and Structure We are a “ controlled company ” within the meaning of the NYSE American listing standards and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements.
Additionally, nonpayment for a specified period and/or under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments under the Tax Receivable Agreement, which could be substantial. 29 Table of Contents We anticipate that the distributions received from Sky may, in certain periods, exceed our actual tax liabilities and obligations to make payments under the Tax Receivable Agreement.
Additionally, nonpayment for a specified period and/or under certain circumstances may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments under the Tax Receivable Agreement, which could be substantial. 26 Table of Contents We anticipate that the distributions received from Sky may, in certain periods, exceed our actual tax liabilities and obligations to make payments under the Tax Receivable Agreement.
Depending on the results of our review, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our long-lived assets were determined, negatively impacting our results of operations. In June 2022, the Company evaluated the development progress related to its smart hangar app.
Depending on the results of our review, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our long-lived assets were determined, negatively impacting our results of operations. For example, in June 2022, the Company evaluated the development progress related to its smart hangar app.
Secured debt obligations increase the risk of property losses because defaults on indebtedness secured by properties may result in foreclosure actions initiated by holders of the Series 2021 PABs, its trustee, or other lenders and ultimately our loss of the property securing any loans for which it is in default.
Secured debt obligations increase the risk of property losses because defaults on indebtedness secured by properties may result in foreclosure actions initiated by holders of the Series 2021 Bonds, its trustee, or other lenders and ultimately our loss of the property securing any loans for which it is in default.
The price per share at which we sell additional shares of our Common Stock, or securities convertible or exchangeable into Common Stock, in future transactions may be higher or lower than the price per share paid by any investor. We may be subject to securities litigation, which is expensive and could divert management attention.
The price per share at which we sell additional shares of our Class A Common Stock, or securities convertible or exchangeable into Class A Common Stock, in future transactions may be higher or lower than the price per share paid by any investor. We may be subject to securities litigation, which is expensive and could divert management attention.
As described above, our current tenant leases do not extend past the maturity date of the Series 2021 PABs, and as a result we will be required to re-lease hangars as vacancies arise in order to continue to generate revenue to meet our debt service obligations under the Series 2021 PABs.
As described above, our current tenant leases do not extend past the maturity date of the Series 2021 Bonds, and as a result we will be required to re-lease hangars as vacancies arise in order to continue to generate revenue to meet our debt service obligations under the Series 2021 Bonds.
Moreover, certain new regulations, if implemented, could decrease the convenience and attractiveness of general aviation travel relative to commercial air travel and may adversely impact demand for our services. 25 Table of Contents Compliance or failure to comply with the ADA and other regulations could result in substantial costs.
Moreover, certain new regulations, if implemented, could decrease the convenience and attractiveness of general aviation travel relative to commercial air travel and may adversely impact demand for our services. 22 Table of Contents Compliance or failure to comply with the ADA and other regulations could result in substantial costs.
Materialization of these risks could result in substantial losses including personal injury, loss of life, damage or destruction of property and equipment, and environmental damage. Any losses we face could be greater than insurance levels maintained by our businesses and could have an adverse effect on us and our businesses and results of operations.
Materialization of these risks could result in substantial losses including personal injury, loss of life, damage or destruction of property and equipment, and environmental damage. Any losses we face could be greater than insurance levels maintained by us and could have an adverse effect on us and our business and results of operations.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of the Business Combination, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are is deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three year period.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of the Yellowstone Transaction, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are is deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three year period.
In addition, the structuring of future transactions and investments may take into consideration the members’ tax considerations even where no similar benefit would accrue to SHG Corporation. The requirements of being a public company may strain our resources and divert management ’ s attention.
In addition, the structuring of future transactions and investments may take into consideration the members’ tax considerations even where no similar benefit would accrue to the Company. The requirements of being a public company may strain our resources and divert management ’ s attention.
Given the company is recently listed, and does not have any investor research coverage nor a seasoned established institutional investor base, any significant sale of newly registered shares may have a significant negative impact on the price of our Class A Common Stock.
Given the company is recently listed, and does not have broad investor research coverage nor a seasoned established institutional investor base, any significant sale of newly registered shares may have a significant negative impact on the market price of our Class A Common Stock.
For example, members of our senior management team may have different tax positions from those of SHG Corporation and/or holders of Class A Common Stock, which could influence their decisions regarding whether and when to enter into certain transactions or dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when we should terminate the Tax Receivable Agreement and accelerate the obligations thereunder.
For example, members of our senior management team may have different tax positions from those of the Company and/or holders of Class A Common Stock, which could influence their decisions regarding whether and when to enter into certain transactions or dispose of assets, whether and when to incur new or refinance existing indebtedness, and whether and when we should terminate the Tax Receivable Agreement and accelerate the obligations thereunder.
In addition, the Series PABs include, and we expect any other indebtedness we incur in the future to include, customary events of default, the occurrence of any of which, after any applicable cure period, would permit the holders of such indebtedness, among other things, to accelerate payment of all amounts outstanding under such indebtedness and to exercise their remedies with respect to the collateral, including foreclosure and sale of the real estate interests securing the loans.
In addition, the Series 2021 Bonds include, and we expect any other indebtedness we incur in the future to include, customary events of default, the occurrence of any of which, after any applicable cure period, would permit the holders of such indebtedness, among other things, to accelerate payment of all amounts outstanding under such indebtedness and to exercise their remedies with respect to the collateral, including foreclosure and sale of the real estate interests securing the loans.
Our Bylaws provide that, to the fullest extent permitted by law, and unless we provide notice in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of SHG Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of SHG Corporation’s directors, officers, employees or agents to SHG Corporation or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or SHG Corporation Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.
Our Bylaws provide that, to the fullest extent permitted by law, and unless we provide notice in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or our Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim governed by the internal affairs doctrine, in each such case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein.
Should an uninsured loss or a loss in excess of insured limits occur, we could suffer disruption of rental income, potentially for an extended period of time, while remaining responsible for any financial obligations relating to the applicable HBS hangar campus, which would have a material adverse effect on our business and results of operations.
Should an uninsured loss or a loss in excess of insured limits occur, we could suffer disruption of rental income, potentially for an extended period of time, while remaining responsible for any financial obligations relating to the applicable home basing hangar campus, which would have a material adverse effect on our business and results of operations.
Pursuant to the terms of the Stockholders’ Agreement, each of the parties thereto are required to take all necessary action to cause the specified designees of the Existing Sky Equityholders to be nominated to serve on our Board, and each of the holders are required, among other things, to vote all of the securities of SHG Corporation held by such party in a manner necessary to elect the individuals designated by such holders.
Pursuant to the terms of the Stockholders’ Agreement, each of the parties thereto are required to take all necessary action to cause the specified designees of the Existing Sky Equityholders to be nominated to serve on our Board, and each of the holders are required, among other things, to vote all of the Company's securities held by such party in a manner necessary to elect the individuals designated by such holders.
Our businesses are subject to numerous statutes, rules and regulations relating to environmental protection and we are exposed to various environmental risk and hazards, including the environmental protection requirements related to the storage and handling of jet fuel and compliance with firefighting regulations.
Our properties are subject to numerous statutes, rules and regulations relating to environmental protection and we are exposed to various environmental risk and hazards, including the environmental protection requirements related to the storage and handling of jet fuel and compliance with firefighting regulations.
These rules and regulations are subject to change, and compliance with any changes could result in a restriction of the activities of our businesses, significant capital expenditures, and/or increased ongoing operating costs.
These rules and regulations are subject to change, and compliance with any changes could result in a restriction of the activities of our business, significant capital expenditures, and/or increased ongoing operating costs.
Having greater financial resources may make it easier for these competitors to absorb higher construction costs and other increases in expenses. This could impact our business and results of operations. Our HBS hangar campuses do not have the right to be the sole provider of services at any airport.
Having greater financial resources may make it easier for these competitors to absorb higher construction costs and other increases in expenses. This could impact our business and results of operations. Our home basing hangar campuses do not have the right to be the sole provider of services at any airport.
Any processes, procedures and internal controls that we implement, as well as our increased awareness of the nature and extent of a risk of a cyber-incident, do not guarantee that our financial results, operations, business relationships, confidential information or Common Stock price will not be negatively impacted by such an incident.
Any processes, procedures, and internal controls that we implement, as well as our increased awareness of the nature and extent of a risk of a cyber-related incident, do not guarantee that our financial results, operations, business relationships, confidential information or market price of our Class A Common Stock will not be negatively impacted by such an incident.
When effective, it is possible that the minimum tax could result in an additional tax liability over the regular federal corporate tax liability in a given year based on differences between book and taxable income (including as a result of temporary differences). The resulting tax liability could adversely impact SHG Corporation’s business, financial condition, results of operation and liquidity.
When effective, it is possible that the minimum tax could result in an additional tax liability over the regular federal corporate tax liability in a given year based on differences between book and taxable income (including as a result of temporary differences). The resulting tax liability could adversely impact the Company’s business, financial condition, results of operation and liquidity.
As a result, our financial condition and results of operations could be adversely affected. 24 Table of Contents Our business and results of operations may be materially adversely affected by a default under a ground lease or the bankruptcy of a subsidiary.
As a result, our financial condition and results of operations could be adversely affected. 21 Table of Contents Our business and results of operations may be materially adversely affected by a default under a ground lease or the bankruptcy of a subsidiary.
As a result, the market price of shares of Class A Common Stock could be adversely affected. 32 Table of Contents The outstanding Warrants are exercisable for shares of Class A Common Stock and common units in Sky may be redeemed for Class A Common Stock.
As a result, the market price of shares of Class A Common Stock could be adversely affected. 29 Table of Contents The outstanding Warrants are exercisable for shares of Class A Common Stock and common units in Sky may be redeemed for Class A Common Stock.
Further, reconstruction or improvement of such a property may require significant upgrades to meet zoning and building code requirements. Environmental and legal restrictions could also restrict the rebuilding of properties. 26 Table of Contents Our businesses are subject to environmental risks that may impact our future profitability.
Further, reconstruction or improvement of such a property may require significant upgrades to meet zoning and building code requirements. Environmental and legal restrictions could also restrict the rebuilding of properties. 23 Table of Contents Our properties are subject to environmental risks that may impact our future profitability.
If any one of these events were to occur, our business and results of operations could be materially and adversely affected. 19 Table of Contents Secured debt obligations, including those under the Series 2021 PABs, expose us to the possibility of defaults and cross-defaults, as well as foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.
If any one of these events were to occur, our business and results of operations could be materially and adversely affected. 16 Table of Contents Secured debt obligations, including those under the Series 2021 Bonds, expose us to the possibility of defaults and cross-defaults, as well as foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.
Inadequate maintenance of any of the hangars or other assets comprising our HBS hangar campuses could result in customers’ electing not to utilize us where another provider operates, or to elect not to use a particular airport where an alternative operator in the same market exists.
Inadequate maintenance of any of the hangars or other assets comprising our home basing hangar campuses could result in customers’ electing not to utilize us where another provider operates, or to elect not to use a particular airport where an alternative operator in the same market exists.
Our ability to enter into new ground leases on favorable terms, or at all, may be adversely affected by the following significant factors: ● we may not be able to negotiate new ground leases with airport authorities on attractive terms or at all; ● we may encounter competition from other potential ground lessors, which could significantly increase the lease rate for properties we seek to lease; ● we may incur significant costs and divert management attention in connection with evaluating and negotiating potential new ground leases, including ones that we are subsequently unable to complete; ● even if we enter into letters of intent or conditional agreements for new ground leases of airport properties, these agreements are subject to customary closing conditions, including, but not limited to, the satisfactory results of our due diligence investigations and local government and municipal authority approvals; and ● we may be unable to obtain financing for the development of additional sites on favorable terms, or at all, as a result of our existing indebtedness, market conditions or other factors Our ability to meet our obligations under our ground leases and our indebtedness is dependent on our ability to enter into and collect lease payments from tenants.
Our ability to enter into new ground leases on favorable terms, or at all, may be adversely affected by the following significant factors: ● we may not be able to negotiate new ground leases with airport authorities on attractive terms or at all; ● we may encounter competition from other potential ground lessors, which could significantly increase the lease rate for properties we seek to lease; ● we may incur significant costs and divert management attention in connection with evaluating and negotiating potential new ground leases, including ones that we are subsequently unable to complete; ● even if we enter into letters of intent or conditional agreements for new ground leases of airport properties, these agreements are subject to customary closing conditions, including, but not limited to, the satisfactory results of our due diligence investigations and local government and municipal authority approvals; and ● we may be unable to obtain financing for the development of additional sites on favorable terms, or at all, as a result of our existing indebtedness, market conditions or other factors.
The excise tax on share buybacks is currently not expected to have a material impact on SHG Corporation’s tax liability. In addition, our effective tax rate and tax liability are based on the application of current income tax laws, regulations and treaties. These laws, regulations and treaties are complex and often open to interpretation.
The excise tax on share buybacks is currently not expected to have a material impact on the Company’s tax liability. In addition, our effective tax rate and tax liability are based on the application of current income tax laws, regulations and treaties. These laws, regulations and treaties are complex and often open to interpretation.
We have a substantial amount of indebtedness outstanding, which may expose us to the risk of default under our debt obligations, restrict our operations and our ability to grow our business and revenues. Our outstanding indebtedness is secured under the terms of the Series 2021 PABs.
We have a substantial amount of indebtedness outstanding, which may expose us to the risk of default under our debt obligations, restrict our operations and our ability to grow our business and revenues. The majority of our outstanding indebtedness is secured under the terms of the Series 2021 Bonds.
ITEM 1A. RISK FACTORS Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our financial statements and related notes.
ITEM 1A. RISK FACTORS Certain factors may have a material adverse effect on our business, financial condition and results of operations. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Report, including our financial statements and related notes.
Furthermore, despite limited space for further development at certain airports, existing competitors with FBO facilities located at our current or future airports could expand their hangar facilities and additional operators of HBS could begin operations at such airports. Competitors might seek acquisitions in regions and markets competitive to us.
Furthermore, despite limited space for further development at certain airports, existing competitors with FBO facilities located at our current or future airports could expand their hangar facilities and additional operators of home basing hangar campuses could begin operations at such airports. Competitors might seek acquisitions in regions and markets competitive to us.
In addition, other changes could be enacted in the future to increase the corporate tax rate, limit further the deductibility of interest, or effect other changes that could have a material adverse effect on SHG Corporation’s financial condition.
In addition, other changes could be enacted in the future to increase the corporate tax rate, limit further the deductibility of interest, or effect other changes that could have a material adverse effect on the Company’s financial condition.
In connection with this evaluation, the Company recognized an impairment loss of approximately $0.2 million during the year ended December 31, 2022. See “Note 5 — Long-lived assets” in the Notes to our Consolidated Financial Statements for more information regarding our 2022 impairment of long-lived assets.
In connection with this evaluation, the Company recognized an impairment loss of approximately $0.2 million during the year ended December 31, 2022. See “Note 7 — Long-lived assets ” in the Notes to our Consolidated Financial Statements for more information regarding our 2022 impairment of long-lived assets.
In certain cases, payments under the Tax Receivable Agreement may (i) exceed any actual tax benefits the Tax Group realizes or (ii) be accelerated. Following closing of the Business Combination, we, Sky, the Existing Sky Equityholders and Tal Keinan (in the capacity of “TRA Holder Representative”) entered into the Tax Receivable Agreement.
In certain cases, payments under the Tax Receivable Agreement may (i) exceed any actual tax benefits the Tax Group realizes or (ii) be accelerated. Following closing of the Yellowstone Transaction, we, Sky, the Existing Sky Equityholders and Tal Keinan (in the capacity of “TRA Holder Representative”) entered into the Tax Receivable Agreement.
We carry comprehensive liability, fire, property damage, and business interruption insurance on our HBS hangar campuses, with policy specifications and insured limits that we believe are customary for similar properties.
We carry comprehensive liability, fire, property damage, and business interruption insurance on our home basing hangar campuses, with policy specifications and insured limits that we believe are customary for similar properties.
Subsequent legislation, the Coronavirus Aid, Relief, and Economic Security Act (the “ CARES Act ”) enacted on March 27, 2020, relaxed certain of the limitations imposed by the Tax Act for certain taxable years, including the limitation on the use and carryback of net operating losses and the limitation on the deductibility of business interest expense.
Subsequent legislation, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted on March 27, 2020, relaxed certain of the limitations imposed by the Tax Act for certain taxable years, including the limitation on the use and carryback of net operating losses and the limitation on the deductibility of business interest expense.
We may be required to record impairment charges to future earnings if our long-lived assets become impaired. Accounting principles generally accepted in the United States of America (“GAAP”) require us to assess our long-lived assets for impairment at least annually.
We have in the past and may again in the future be required to record impairment charges to future earnings if our long-lived assets become impaired. Accounting principles generally accepted in the United States of America (“GAAP”) require us to assess our long-lived assets for impairment at least annually.
The resulting decline in tenants or negative impact on our reputation could adversely impact revenue, including from more than one facility, which would have a material adverse effect on our business and results of operation. Aircraft owners and operators rely on HBS and FBO operators to control the quality of the fuel they provide.
The resulting decline in tenants or negative impact on our reputation could adversely impact revenue, including from more than one facility, which would have a material adverse effect on our business and results of operation. Aircraft owners and operators rely on home basing hangar campuses and FBO operators to control the quality of the fuel they provide.
Each constructed and in-construction facility in our portfolio is subject to secured indebtedness under the Series 2021 PABs.
Each constructed and in-construction facility in our portfolio is subject to secured indebtedness under the Series 2021 Bonds.
Inflationary and supply chain pressures have led to increased construction materials costs, specifically associated with steel, concrete, and other materials. We believe we will continue to experience such pressures in future quarters, as well as delays in our contractors’ ability to requisition such materials.
Inflationary and supply chain pressures have previously led to increased construction materials costs, specifically associated with steel, concrete, and other materials. We believe we may continue to experience such pressures in future quarters, as well as delays in our subsidiaries’ and contractors’ ability to requisition such materials.
For example, the U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “ Tax Act ”), enacted in December 2017, resulted in fundamental changes to the Code.
For example, the U.S. federal tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), enacted in December 2017, resulted in fundamental changes to the Code.
We face risks related to an epidemic, pandemic or contagious disease, including the ongoing COVID-19 pandemic, which have impacted, and in the future could impact, the markets in which we operate and could materially and negatively impact our business and results of operations.
We face risks related to an epidemic, pandemic or contagious disease, such as COVID-19, which have impacted, and in the future could impact, the markets in which we operate and could materially and negatively impact our business and results of operations.
Our HBS hangar campuses compete with one or more hangar operators at their respective airports and with operators at nearby airports. Furthermore, ground leases related to HBS and FBO operations may be subject to competitive bidding at the end of their term.
Our home basing hangar campuses compete with one or more hangar operators at their respective airports and with operators at nearby airports. Furthermore, ground leases related to home basing hangar campus and FBO operations may be subject to competitive bidding at the end of their term.
In order to raise additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock at prices that may not be the same as the price per share paid by any investor.
In order to raise additional capital, we have offered in the past, and may offer in the future, additional shares of our Class A Common Stock or other securities convertible into or exchangeable for our Class A Common Stock at prices that may not be the same as the price per share paid by any investor.
The exercise of these outstanding warrants will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. As of December 31, 2022, there were 6,799,189 outstanding Public Warrants to purchase 6,799,189 shares of Class A Common Stock at an exercise price of $11.50 per share.
The exercise of these outstanding warrants will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. As of December 31, 2023, there were 6,798,964 outstanding Public Warrants to purchase 6,798,694 shares of Class A Common Stock at an exercise price of $11.50 per share.
Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business.
Securities litigation against us could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business. 30 Table of Contents
Our future success depends upon our ability to attract and retain tenants for hangars at our HBS hangar campuses. The extent to which we achieve growth in our customer base materially influences our business and results of operation.
The growth and success of our business is subject to our ability to market, attract, and retain tenants. Our future success depends upon our ability to attract and retain tenants for hangars at our home basing hangar campuses. The extent to which we achieve growth in our customer base materially influences our business and results of operation.
In connection with the Business Combination, we, each of Tal Keinan, Due West Partners LLC and Center Sky Harbour LLC (collectively, “the Existing Sky Equityholders”), and the Sponsor (collectively the “Stockholder Parties”) entered into a stockholders’ agreement (the “Stockholders’ Agreement”).
In connection with the Yellowstone Transaction, the Company, each of Tal Keinan, Due West Partners LLC and Center Sky Harbour LLC (collectively, “the Existing Sky Equityholders”), and the Sponsor (collectively the “Stockholder Parties”) entered into a stockholders’ agreement (the “Stockholders’ Agreement”).
Furthermore, our ability to grow and lease new sites will be inhibited. 20 Table of Contents An epidemic, pandemic or contagious disease, including the ongoing COVID-19 pandemic, could have a material adverse effect on our business and results of operations.
Furthermore, our ability to grow and lease new sites will be inhibited. 17 Table of Contents An epidemic, pandemic or contagious disease, such as COVID-19, could have a material adverse effect on our business and results of operations.
Since the closing of the Business Combination, our Class A Common Stock has traded as low as $2.50 and as high as $43.41 through December 31, 2022. In addition, the volume of trading of our Class A Common Stock has been inconsistent.
Since the closing of the Yellowstone Transaction, our Class A Common Stock has traded as low as $2.50 and as high as $43.41 through December 31, 2023. In addition, the volume of trading of our Class A Common Stock has been inconsistent.
The Existing Sky Equityholders control the direction of SHG Corporation ’ s business, and the concentrated ownership of Common Stock prevent you and other stockholders from influencing significant decisions.
The Existing Sky Equityholders control the direction of our business, and the concentrated ownership of Common Stock prevent you and other stockholders from influencing significant decisions.
Furthermore as the COVID-19 pandemic continues to subside, the demand for private air travel that increased during the pandemic may decrease, which may result in decreased demand for private airport hangar space and could materially and negatively impact our business and results of operations.
The demand for private air travel that increased during the pandemic may decrease, which may result in decreased demand for private airport hangar space and could materially and negatively impact our business and results of operations.
The exact impact of the Tax Act and the CARES Act for future years is difficult to quantify, but these changes could materially affect SHG Corporation, Sky, or its subsidiaries.
The exact impact of the Tax Act and the CARES Act for future years is difficult to quantify, but these changes could materially affect the Company, Sky, or our respective subsidiaries.
Our Public Warrants have not traded in tandem with our Class A Common Stock, and since the closing of the Business Combination have traded within a range of $0.18 to $2.75 through December 31, 2022.
Our Public Warrants have not traded in tandem with our Class A Common Stock, and since the closing of the Yellowstone Transaction have traded within a range of $0.17 to $2.75 through December 31, 2023.
Our properties may be exposed to rare catastrophic weather events, such as severe storms, floods or wildfires. If the frequency of extreme weather events increases due to climate change, our exposure to these events could increase.
Our properties may be exposed to rare catastrophic weather events, such as severe storms, floods or wildfires. We cannot predict the rate at which climate change will progress. However, if the frequency of extreme weather events increases due to climate change, our exposure to these events could increase.
In addition, as of December 31, 2022, there were 7,719,779 Private Placement Warrants outstanding exercisable for 7,719,779 shares of Class A Common Stock at an exercise price of $11.50 per share.
In addition, as of December 31, 2023, there were 7,719,779 Private Placement Warrants outstanding exercisable for 7,719,779 shares of Class A Common Stock at an exercise price of $11.50 per share and 1,541,600 outstanding PIPE Warrants to purchase 1,541,600 shares of Class A Common Stock at an exercise price of $11.50 per share.
HBS and FBO operators compete, in part, based on the overall quality and attractiveness of their facilities.
Home basing hangar campuses and FBO operators compete, in part, based on the overall quality and attractiveness of their facilities.
As of December 31, 2022, the public float of our Class A Common Stock listed in the NYSE American was approximately $4.1 million, which is only 2.7% of the equity capitalization of the Company.
As of December 31, 2023, the public float of our Class A Common Stock listed in the NYSE American was approximately $105.1 million, which is 45.0% of the equity capitalization of the Company.
In addition, as of December 31, 2022, there were 42,192,250 Sky Common Units, which may be redeemed for shares of our Class A Common Stock on a one-for-one basis, and in connection with the redemption of such Sky Common Units, the corresponding shares of Class B Common Stock will be cancelled.
In addition, as of December 31, 2023, there were 42,046,356 outstanding Sky Common Units held by the members of Sky (excluding the Company as Managing Member of Sky), which may be redeemed for shares of our Class A Common Stock on a one-for-one basis, and in connection with the redemption of such Sky Common Units, the corresponding shares of Class B Common Stock will be cancelled.
Our two largest tenants contributed a substantial portion of our revenues. Both of these tenants have ongoing leases with us that expire in December 2023 and November 2025, respectively (assuming no exercise of tenant option extensions).
Both of these tenants have ongoing leases with us that expire in December 2026 and November 2025, respectively (assuming no exercise of tenant option extensions).
Given the variety of factors that impact competitiveness within the HBS industry, we can give no assurance that we will be able to successfully compete, which could, in turn, result in a decline in the trading price of our securities. The growth and success of our business is subject to our ability to market and to attract and retain tenants.
Given the variety of factors that impact competitiveness within the home basing hangar campus industry, we can give no assurance that we will be able to successfully compete, which could, in turn, result in a decline in the trading price of our securities.
In addition, we are subject to credit spreads demanded by fixed income investors. As a non-rated issuer, increases in general of credit spreads in the market, or for us, may result in a higher cost of borrowing in the future.
In addition, we are subject to credit spreads demanded by fixed income investors. As a non-rated issuer, increases in general of credit spreads in the market, or for us, may result in a higher cost of borrowing in the future particularly if interest rates remain at elevated levels as compared to when we issued our debt that is currently outstanding.
Any significant decline in our customer base, or in our rate of growth, could have a material adverse effect on our business and results of operations, which could, in turn, result in a decline in the trading price of our securities. 21 Table of Contents Our rental revenue is concentrated within a small number of tenants and the loss of or default by one or more significant tenants could have a material adverse effect on our business and results of operations.
Any significant decline in our customer base, or in our rate of growth, could have a material adverse effect on our business and results of operations, which could, in turn, result in a decline in the trading price of our securities.
In the event we are unable to attract and retain talent sufficient to support our development plans, our business and results of operations may be adversely affected.
In the event we are unable to attract and retain talent sufficient to support our development plans, our business and results of operations may be adversely affected. We previously identified material a weakness in our internal control over financial reporting, which was recently remediated.
For example, on February 16, 2022 our Class A Common Stock had trading volume of 13,800 shares and on February 18, 2022 our Class A Common Stock had trading volume of 19,692,800.
For example, on February 24, 2023 our Class A Common Stock had trading volume of 3,300 shares and on February 28, 2023 our Class A Common Stock had trading volume of 1,546,800 shares.
In addition, in connection with any development project, we may be harmed by potential changes to the supply chain or stricter energy efficiency standards for industrial buildings. To the extent climate change causes shifts in weather patterns, our markets could experience negative consequences, including declining demand for hangar space and an inability to operate our hangar campuses.
To the extent climate change causes shifts in weather patterns, our markets could experience negative consequences, including declining demand for hangar space and an inability to operate our hangar campuses.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We currently maintain our executive office at 136 Tower Road, Suite 205, Westchester County Airport, White Plains, NY 10604 under a lease agreement. We consider our current office space adequate for our current operations.
Biggest changeITEM 2. PROPERTIES We currently maintain our executive office at 136 Tower Road, Suite 205, Westchester County Airport, White Plains, NY 10604 under a lease agreement. We consider our current office space adequate for our current operations. The information set forth under the caption “Our Properties” in Item 1 of this Report is incorporated by reference herein.
Removed
The information set forth under the caption “Our Properties” in Item 1 of this Annual Report on Form 10-K is incorporated by reference herein.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(b) Dividends We have not paid any cash dividends on our common stock to date and do not intend to pay cash dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of any Business Combination.
Biggest change(b) Dividends We have not paid any cash dividends on our Common Stock to date and do not intend to pay cash dividends in the foreseeable future. We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business.
Further, if we incur any indebtedness in connection with our Business Combination, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Further, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection with any indebtedness that we incur.
Removed
Prior to the consummation of the Business Combination, YAC’s Units, YAC’s Class A Common Stock and YAC’s Public Warrants were listed on the NASDAQ Capital Market under the symbols “YSACU”, “YSAC” and “YSACW,” respectively.
Added
As of March 18, 2024, there were seven holders of record of Class A Common Stock and two holders of record of Warrants.
Removed
Upon consummation of the Business Combination, YAC’s Units automatically separated into the component securities, YAC’s Class A Common Stock was reclassified as our Class A Common Stock and YAC’s Public Warrants were reclassified as our Public Warrants. As of December 31, 2022, there were five holders of record of Class A Common Stock and three holders of record of Warrants.
Added
The payment of cash dividends in the future will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
Removed
The payment of any cash dividends subsequent to our Business Combination will be within the discretion of our Board at such time. In addition, our Board is not currently contemplating and does not anticipate declaring any stock dividends in the foreseeable future.
Added
(c) Securities Authorized for Issuance Under Equity Compensation Plans The following table summarizes the securities authorized for issuance under our equity compensation plans at December 31, 2023: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by security holders 930,705 - 4,155,538 Total 930,705 - 4,155,538 (d) Recent Sales of Unregistered Securities , Use of Proceeds from Registered Public Offering During the year ended December 31, 2023, there were no unregistered sales of our securities that were not reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q.
Removed
(c) Securities Authorized for Issuance Under Equity Compensation Plans The required information is incorporated by reference from our Proxy Statement to be filed with respect to our 2023 Annual Meeting of Stockholders. (d) Recent Sales of Unregistered Securities , Use of Proceeds from Registered Public Offering None. (e) Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
Added
(e) Purchases of Equity Securities by the Issuer and Affiliated Purchasers There were no repurchases of our equity securities during the three months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOff-Balance Sheet Arrangements We do not maintain any off-balance sheet arrangements. 41 Table of Contents Cash Flows Historical Cash Flows The following table summarizes our sources and uses of cash for the Year ended December 31, 2022 and 2021 (in thousands): Year ended December 31, 2022 December 31, 2021 Cash and restricted cash at beginning of period $ 203,935 $ 72 Net cash used in operating activities (27,491 ) (6,615 ) Cash used in investing activities (187,838 ) (15,994 ) Net cash provided by financing activities 52,790 226,472 Cash and restricted cash at end of period $ 41,396 $ 203,935 Operating Activities Cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business.
Biggest changeLease Commitments The table below sets forth certain information with respect to our future minimum lease payments required under operating and finance leases as of December 31, 2023 (in thousands): Year Ending December 31, Operating Leases Finance Leases 2024 $ 2,080 $ 29 2025 2,323 24 2026 3,296 17 2027 3,727 2 2028 3,634 - Thereafter 249,683 - Total lease payments 264,743 72 Less imputed interest (195,306 ) (5 ) Total $ 69,437 $ 67 Contractual Obligations The following table sets forth our contractual obligations as of December 31, 2023 (in thousands): 2024 2025-2026 2027-2028 Thereafter Total Principal Payments of bonds payable $ - $ - $ - $ 166,340 $ 166,340 Interest Payments on bonds payable 6,941 13,881 13,881 114,968 149,671 Contractual payments on other long-term indebtedness 2,484 7,981 95 - 10,560 Lease commitments 2,109 5,660 7,363 249,683 264,815 Total $ 11,534 $ 27,522 $ 21,339 $ 530,991 $ 591,386 Off-Balance Sheet Arrangements We do not maintain any off-balance sheet arrangements. 40 Table of Contents Cash Flows Historical Cash Flows The following table summarizes our sources and uses of cash for the years ended December 31, 2023 and 2022 (in thousands): Year ended December 31, 2023 December 31, 2022 Cash and restricted cash at beginning of period $ 41,396 $ 203,935 Net cash used in operating activities (7,735 ) (27,491 ) Net cash used in investing activities (16,268 ) (187,838 ) Net cash provided by financing activities 54,873 52,790 Cash and restricted cash at end of period $ 72,266 $ 41,396 Operating Activities Cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business.
Riley up to 10 million shares of our Class A Common Stock at 97% of the volume weighted average price of our Class A Common Stock calculated in accordance with the Purchase Agreement, over a period of 36 months subject to certain limitations and conditions contained in the Purchase Agreement.
Riley up to 10 million shares of our Class A Common Stock at 97% of the volume weighted average price of our Class A Common Stock calculated in accordance with the Stock Purchase Agreement, over a period of 36 months subject to certain limitations and conditions contained in the Stock Purchase Agreement.
Sales and timing of any sales of Class A Common Stock are solely at our election, and we are under no obligation to sell any securities to B. Riley under the Purchase Agreement. As consideration for B.
Sales and timing of any sales of Class A Common Stock are solely at our election, and we are under no obligation to sell any securities to B. Riley under the Stock Purchase Agreement. As consideration for B.
We intend to continue to aggressively take action to mitigate these inflationary pressures, reduce construction costs, and shorten development schedules, both in the near term at our APA Phase I, DVT Phase I, and ADS Phase I development projects, and in the long term at future projects.
We intend to continue to aggressively take action to mitigate inflationary pressures, reduce construction costs, and shorten development schedules, both in the near term at our APA Phase I, DVT Phase I, and ADS Phase I development projects, and in the long term at future projects.
However, there can be no assurance that we will be able to increase the lease rates for the hangars within our HBS hangar campuses to absorb these increased costs and/or delays, if at all.
However, there can be no assurance that we will be able to increase the lease rates for the hangars within our hangar campuses to absorb these increased costs and/or delays, if at all.
Even if we can obtain such additional equity financing if needed, there can be no assurance that we would be successful in raising such additional financing on favorable terms, if at all. 37 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and expenses during the periods reported.
Even if we can obtain such additional equity financing if needed, there can be no assurance that we would be successful in raising such additional financing on favorable terms, if at all. 36 Table of Contents Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and expenses during the periods reported.
We believe that recent inflationary pressures and market conditions will lead to continued increases in construction costs as well as market rental rates for hangars within our HBS hangar campus development projects.
We believe that recent inflationary pressures and market conditions will lead to continued increases in construction costs as well as market rental rates for hangars within our hangar campus development projects.
All these future hangar campus projects are discretionary and require us to identify the appropriate airports with the target hangar demand economics, secure required ground leases and permits, and complete future construction at such sites.
All future hangar campus projects are discretionary and require us to identify the appropriate airports with the target hangar demand economics, secure required ground leases and permits, and complete future construction at such sites.
The Series 2021 PAB that has a maturity date of July 1, 2036 was issued at a premium, and Sky received bond proceeds that were $0.2 million above its face value.
The Series 2021 Bond that has a maturity date of July 1, 2036 was issued at a premium, and Sky received bond proceeds that were $0.2 million above its face value.
Our HBS hangar campuses feature exclusive private hangars and a full suite of dedicated services specifically optimized for home-based, versus transient, aircraft. The physical footprint of the U.S. business aviation fleet grew by almost 28 million square feet in the ten years preceding the beginning of the COVID-19 pandemic, with hangar supply lagging dramatically, especially in key growth markets.
Our home basing hangar campuses feature exclusive private hangars and a full suite of dedicated services specifically optimized for home-based, versus transient, aircraft. The physical footprint of the U.S. business aviation fleet grew by almost 28 million square feet in the ten years preceding the beginning of the COVID-19 pandemic, with hangar supply lagging dramatically, especially in key growth markets.
Equity Financing On the Closing Date, we completed the Yellowstone Transaction, Yellowstone changed its name to Sky Harbour Group Corporation, and Sky restructured its capitalization, issuing its Sky Common Units to the Company.
Equity Financing On the Closing Date, we completed the Yellowstone Transaction, YAC changed its name to Sky Harbour Group Corporation, and Sky restructured its capitalization, issuing its Sky Common Units to the Company.
The Series 2021 PABs are subject to a Continuing Disclosure Agreement whereby SHC is obligated to provide electronic copies of (i) monthly construction reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC to the Municipal Securities Rulemaking Board.
The Series 2021 Bonds are subject to a Continuing Disclosure Agreement whereby SHC is obligated to provide electronic copies of (i) monthly construction reports, (ii) quarterly reports containing quarterly financial information of SHC and (iii) annual reports containing audited consolidated financial statements of SHC to the Municipal Securities Rulemaking Board.
Covenants in the Series 2021 PABs require SHC to maintain a debt service coverage ratio (as defined in the relevant documents) of at least 1.25 for each applicable test period, commencing with the quarter ending December 31, 2024.
Covenants in the Series 2021 Bonds require SHC to maintain a debt service coverage ratio (as defined in the relevant documents) of at least 1.25 for each applicable test period, commencing with the quarter ending December 31, 2024.
Generally, these deposits may be redeemed upon demand and the majority are maintained with a major financial institution with reputable credit. Our restricted cash is held in trust at a major financial institution pursuant to the Series 2021 PABs indenture.
Generally, these deposits may be redeemed upon demand and the majority are maintained with a major financial institution with reputable credit. Our restricted cash is held in trust at a major financial institution pursuant to the Series 2021 Bonds indenture.
We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. Our portfolio of investments and restricted investments is composed entirely of U.S. Treasury securities as of December 31, 2022.
We monitor the relative credit standing of financial institutions with whom we transact and limit the amount of credit exposure with any one entity. Our portfolio of investments and restricted investments is composed entirely of U.S. Treasury securities as of December 31, 2023.
We expect to issue additional debt to finance future site developments and higher interest rates would impact our overall economic performance. In addition, we are subject to credit spreads demanded by fixed income investors and bank lenders.
We expect to issue additional debt to finance future site developments and higher interest rates would impact our overall economic performance. In addition, we are subject to credit spreads demanded by fixed income investors.
The Series 2021 PABs are comprised of three maturities: $21.1 million bearing interest at 4.00%, due July 1, 2036; $30.4 million bearing interest at 4.00%, due July 1, 2041; and $114.8 million bearing interest at 4.25%, due July 1, 2054.
The Series 2021 Bonds are comprised of three maturities: $21.1 million bearing interest at 4.00%, due July 1, 2036; $30.4 million bearing interest at 4.00%, due July 1, 2041; and $114.8 million bearing interest at 4.25%, due July 1, 2054.
The Series 2021 PABs are collateralized on a joint and several basis with the property and revenues of all SHC subsidiaries and their assets financed or to be financed from the proceeds of the Series 2021 PABs.
The Series 2021 Bonds are collateralized on a joint and several basis with the property and revenues of all SHC subsidiaries and their assets financed or to be financed from the proceeds of the Series 2021 Bonds.
Overview and Background We are an aviation infrastructure development company building the first nationwide network of HBS hangar campuses for business aircraft. We develop, lease, and manage general aviation hangars across the United States, targeting airfields in markets with significant aircraft populations and high hangar demand.
Overview and Background We are an aviation infrastructure development company building the first nationwide network of home basing hangar campuses for business aircraft. We develop, lease, and manage general aviation hangars across the United States, targeting airfields in markets with significant aircraft populations and high hangar demand.
Investing Activities Our primary investing activities have consisted of payments related to the cost of construction at our various HBS hangar campus development projects and investment in U.S. Treasury Securities. As our business expands, we expect to continue to invest in our current and anticipated future portfolio of HBS development projects.
Investing Activities Our primary investing activities have consisted of payments related to the cost of construction at our various home basing hangar campus development projects and investment in U.S. Treasury Securities. As our business expands, we expect to continue to invest in our current and anticipated future portfolio of home basing hangar campus development projects.
Recent Accounting Pronouncements See “ Note 2 — Basis of Presentation and Significant Accounting Policies ”in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations and financial condition. 38 Table of Contents Results of Operations Year ended December 31, 2022 Compared to the Year ended December 31, 2021 The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods (in thousands).
Recent Accounting Pronouncements See “ Note 2 — Basis of Presentation and Significant Accounting Policies ” in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations and financial condition. 37 Table of Contents Results of Operations Year ended December 31, 2023 Compared to the Year ended December 31, 2022 The following table sets forth a summary of our consolidated results of operations for the periods indicated below and the changes between the periods (in thousands).
No assurance can be given that our cost mitigation strategies will be successful, the costs of our projects will not exceed budgets or the guaranteed maximum price for such projects, or that the completion will not be delayed beyond the projected completion dates.
No assurance can be given that our cost mitigation strategies will be successful, the costs of our ongoing and future projects will not exceed budgets or the guaranteed maximum price for such projects, or that the completion will not be delayed beyond the projected completion dates.
While we expect that our general and administrative expenses will rise in some measure as our portfolio of campuses grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies, economies of scale, insourcing of job functions, and cost control measures. 36 Table of Contents Construction Material Costs and Labor When constructing our HBS hangar campuses, we use various materials and components.
While we expect that our general and administrative expenses will rise in some measure as our portfolio of campuses grows, we expect that such expenses as a percentage of our portfolio will decrease over time due to efficiencies, economies of scale, insourcing of job functions, and cost control measures. 35 Table of Contents Construction Material Costs and Labor When constructing our home basing hangar campuses, we use various materials and components.
As of December 31, 2022, we have sold no shares of our Class A Common Stock to B. Riley pursuant to the Stock Purchase Agreement. See “ Note 10 — Equity and Redeemable Equity ” in the Notes to Consolidated Financial Statements for additional information regarding the Stock Purchase Agreement.
As of December 31, 2023, we have sold no shares of our Class A Common Stock to B. Riley pursuant to the Stock Purchase Agreement. See “ Note 12 — Equity and Redeemable Equity ” in the Notes to Consolidated Financial Statements for additional information regarding the Stock Purchase Agreement.
For the years ended December 31, 2022 and 2021, our operating expense related to ground leases was $3.7 million and $3.7 million, respectively. As we enter into new ground leases at new airport sites, our payments to airport landlords will continue to increase into the future.
For the years ended December 31, 2023 and 2022, our operating expense related to ground leases was $4.0 million and $3.7 million, respectively. As we enter into new ground leases at new airport sites, our payments to airport landlords will continue to increase into the future.
Our long-term liquidity requirements include lease payments under our ground leases with airport authorities, repaying principal and interest on outstanding borrowings, funding the construction costs of our HBS hangar campuses (see “— Construction Material Costs and Labor ”) funding for operations, and paying accrued expenses.
Our long-term liquidity requirements include lease payments under our ground leases with airport authorities, repaying principal and interest on outstanding borrowings, funding the construction costs of our hangar campus development projects (see “— Construction Material Costs and Labor ”), funding for operations, and paying accrued expenses.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “ Special Note Regarding Forward-Looking Statements, ” “ Item 1A. Risk Factors ” and elsewhere in this Annual Report on Form 10-K.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “ Special Note Regarding Forward-Looking Statements, ” “ Item 1A. Risk Factors ” and elsewhere in this Report.
We realize economies of scale in construction through a proprietary prototype hangar design replicated at HBS hangar campuses across the United States. This allows for centralized procurement, straightforward permitting processes, efficient development processes, and the best hangar in business aviation.
We expect to realize economies of scale in construction through a prototype hangar design replicated at our hangar campuses across the United States. This allows for centralized procurement, straightforward permitting processes, efficient development processes, and the best hangar in business aviation.
A recent study conducted by a business aircraft manufacturer forecasted that business aircraft will only continue to grow in the next ten years, with up to 8,500 new business jet deliveries worth almost $275 billion expected to be delivered between 2023 and 2032, further supported by data from the major business aviation manufacturers that suggest the current order backlog for new business aviation aircraft is almost $47 billion.
A recent study conducted by a business aircraft manufacturer forecasted that business aircraft will only continue to grow in the next ten years, with up to 8,500 new business jet deliveries worth over $275 billion expected to be delivered between 2024 and 2033, further supported by data from the major business aviation manufacturers that suggest the current order backlog for new business aviation aircraft is over $49 billion.
As of December 31, 2022, we were in compliance with all debt covenants.
As of December 31, 2023, we were in compliance with all debt covenants.
Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that reflect our plans, estimates, and beliefs.
Financial Statements and Supplementary Data ” of this Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that reflect our plans, estimates, and beliefs.
We generally contract for our materials and labor under guaranteed maximum price contracts upon receipt of building permits. This allows us to mitigate the risks associated with increases in building materials and labor costs between the time construction begins on an HBS hangar campus and the time it is completed.
We contract for certain of our materials and labor with general contractors under guaranteed maximum price contracts upon receipt of building permits. This allows us to mitigate certain of the risks associated with increases in certain building materials and labor costs between the time construction begins on a hangar campus and the time it is completed.
The lease agreements are either on a month-to-month basis or have a defined term and may have options to extend the term. Some of the leases contain options to terminate the lease by either party with given notice. There are no options given to the lessee to purchase the underlying assets.
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.
We have elected to not capitalize any interest cost that is implicit within our operating leases into cost of construction on the consolidated balance sheet, but instead, we expense our ground lease cost in the consolidated statements of operations. Revenue Recognition We lease hangar facilities that we construct to third parties.
We have elected to not capitalize any interest cost that is implicit within our operating leases into cost of construction on the consolidated balance sheet, but instead, we expense our ground lease cost in the consolidated statements of operations.
The net proceeds from the issuance of the Series PABs proceeds are being used to (a) finance or refinance the construction of various aviation facilities consisting of general aviation aircraft hangars and storage facilities located and to be located on the SGR site, the OPF site, the BNA site, the APA site, the DVT site, and following our March 2023 election to reallocate a portion of the net proceeds, the ADS site; (b) fund debt service and other operating expenses such as ground lease expense during the initial construction period; (c) fund deposits to the Debt Service Reserve Fund; and (d) pay certain costs of issuance related to the Series PABs. 40 Table of Contents Debt Covenants The Series 2021 PABs contain financial and non-financial covenants, including a debt service coverage ratio, a restricted payments test and limitations on the sale, lease, or distribution of assets.
The net proceeds from the issuance of the Series 2021 Bonds proceeds are being used to (a) finance or refinance the construction of various aviation facilities consisting of general aviation aircraft hangars and storage facilities located and to be located on the SGR site, the OPF site, the BNA site, the APA site, the DVT site, and following our March 2023 election to reallocate a portion of the net proceeds, the ADS site; (b) fund debt service and other operating expenses such as ground lease expense during the initial construction period; (c) fund deposits to the Debt Service Reserve Fund; and (d) pay certain costs of issuance related to the Series 2021 Bonds.
We exercised this ability and received the requisite approvals and reports in March 2023 with respect to our ADS Phase I development project.
We exercised this ability utilizing approximately $26 million of the $50 million available and received the requisite approvals and reports in March 2023 with respect to our ADS Phase I development project.
As our strategic partnership grows, we expect this vertical integration will enable us to deliver metal buildings to each development site in shorter timeframes, which we believe will reduce the overall construction duration of each development project.
We expect that over time this vertical integration will enable us to deliver metal buildings to each development site in shorter timeframes, which we believe will reduce the overall construction duration of each development project in the future.
We continue to monitor the supply markets to achieve the best prices available. Typically, the price changes that most significantly influence our operations are price increases in steel, concrete, and labor.
Typically, the materials and most of the components used to construct our hangar campuses are readily available in the United States. We continue to monitor the supply markets to achieve the best prices available. Typically, the price changes that most significantly influence our operations are price increases in steel, concrete, and labor.
Current Capital Requirements and Future Expenditures for Expansion We previously funded SHC with over $200 million to fund the two phases at each of our five ground leased airport locations. These construction funds and reserves are held at the bondholder trustee.
Current Capital Requirements and Future Expenditures for Expansion We previously funded SHC with over $200 million to fund the two phases at our initial five ground leased airport locations.
The Company evaluates the collectability of tenant receivables for payments required under the lease agreements. If the Company determines that collectability is not probable, the Company recognizes any difference between revenue amounts recognized to date under ASC 842 and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to rental revenue.
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.
However, as a new publicly-traded company, we cannot assure you that we will have access to these sources of capital or that, even if such sources of capital are available, that these sources of capital will be available on favorable terms.
We believe that we will be able to utilize such a registration statement to efficiently access capital. However, we cannot assure you that we will have access to these sources of capital or that, even if such sources of capital are available, that these sources of capital will be available on favorable terms.
When management determines that it is reasonably certain that we will exercise our options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and operating lease liability balances. We also have tenant leases and account for those leases in accordance with the lessor guidance under ASC Topic 842.
When management determines that it is reasonably certain that we will exercise our options to renew the leases, the renewal terms are included in the lease term and the resulting ROU asset and operating lease liability balances.
Our working capital consists primarily of cash, receivables from tenants, prepaid expenses, accounts payable, accrued compensation, accrued other expenses, and lease liabilities. The timing of collection of our tenant receivables, and the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances.
The timing of collection of our tenant receivables, and the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances.
These decreases were offset by $45.0 million of proceeds received from the issuance of the BOC PIPE and $15.7 million of gross proceeds from the Yellowstone trust account, both occurring in the first quarter of 2022.
During the year ended December 31, 2022, the Company received $45.0 million of proceeds from the issuance of the BOC PIPE and $15.7 million of gross proceeds from the YAC trust account, both occurring in the first quarter.
On average, each future campus is anticipated to be composed of an average of 10-20 hangars and is expected to cost approximately $55 million per campus, with 60% or more to be funded with additional public activity bonds.
On average, each future campus is anticipated to be composed of at least 100,000 rentable square feet and is expected to cost approximately $55 million per campus, with 60% or more to be funded with additional private activity bonds or other indebtedness.
Rental revenue is recognized in accordance with ASC Topic 842, Leases, and includes (i) fixed payments of cash rents, which represents revenue each tenant pays in accordance with the terms of its respective lease and is recognized on a straight-line basis over the term of the lease and (ii) variable payments of tenant reimbursements, which are recoveries of all or a portion of the common area maintenance and operating expenses of the property and are recognized in the same period as the expenses are incurred.
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.
Net cash used in operating activities was $27.5 million for the year ended December 31, 2022, compared to $6.6 million for the same period in 2021. The $20.9 million increase in cash used in operating activities was primarily attributable to the $9.6 million of initial direct costs associated with the purchase of our former landlord's leasehold interest at OPF.
The approximately $19.8 million decrease in net cash used in operating activities was primarily attributable to a $15.5 million favorable change in the Company's working capital position, which was primarily driven by $9.6 million of initial direct costs associated with the purchase of our former landlord's leasehold interest at OPF during the year ended December 31, 2022.
The increase was also partially attributable to a $5.0 million increase in net loss, net of non-cash adjustments, and a $6.2 decrease in working capital. The increase in net loss and changes in working capital were primarily driven by general and administrative expenses incurred in the expansion of our business, including transaction-related expenses and other expenses related to corporate governance.
The decrease was also partially attributable to a $4.3 million decrease in net loss, net of non-cash adjustments. The decrease in net loss was primarily driven by an increase in revenue and a decrease in non-recurring general and administrative expenses incurred in the expansion of our business, including transaction-related expenses incurred during the year ended December 31, 2023.
Factors That May Influence Future Results of Operations Revenues Our revenues are earned pursuant to the lease agreements we enter into with our tenants.
The initial term of the ORL Lease will be 30 years from expiration of construction period. Factors That May Influence Future Results of Operations Revenues Our revenues are derived from rents we earn pursuant to the lease agreements we enter into with our tenants.
As consideration for the issuance of Sky Common Units to the Company, Yellowstone contributed approximately $48 million of net proceeds to us, consisting primarily of the BOC PIPE, and the amount held in the Yellowstone trust account, net of redemptions and transaction costs.
As consideration for the issuance of Sky Common Units to the Company, YAC contributed approximately $48 million of net proceeds to us, consisting primarily of the BOC PIPE, and the amount held in the YAC trust account, net of redemptions and transaction costs. 39 Table of Contents Private Activity Bonds On September 14, 2021, SHC completed an issuance through the Public Finance Authority (Wisconsin) of $166.3 million of Series 2021 PABs.
The approximately $6.0 million increase was primarily driven by an approximately $2.5 million increase in salaries, wages, and benefits, which reflects an increase in full-time and contracted employees. The increase also reflects the implementation of stock and cash incentive compensation programs instituted to attract and retain employees.
The approximately $0.4 million increase was primarily driven by an approximately $2.6 million increase in salaries, wages, and benefits, which reflects an increase in full-time and contracted employees and the impact of an increase in expense recognized in connection with our equity compensation program.
Other (Income) Expenses Other (income) expenses increased from approximately $1.4 million of other expense to approximately $5.2 million of other income for the year ended December 31, 2022 as compared to the year ended December 31, 2021. This increase was primarily due to an approximately $5.1 million mark-to-market gain of the outstanding warrants at December 31, 2022.
Other (Income) Expenses Other (income) expenses for the year ended December 31, 2023 was approximately $8.4 million of expense as compared to approximately $5.2 million of income for the year ended December 31, 2022.
Cash used in investing activities was $187.9 million for the year ended December 31, 2022, compared to $16.0 million for the same period in 2021. The increase of $171.9 million in cash used in investing activities was driven primarily by $193.8 million of purchases of held-to-maturity U.S.
Net cash used in investing activities was approximately $16.3 million for the year ended December 31, 2023, compared to net cash used in investing activities of approximately $187.8 million for the same period in 2022.
We expect to raise additional equity capital and issue additional indebtedness as our business grows. Net cash provided by financing activities was $52.8 million for the year ended December 31, 2022, compared to $226.4 million for the same period in 2021.
Net cash provided by financing activities was $54.8 million for the year ended December 31, 2023, compared to $52.8 million for the same period in 2022.
Year ended December 31, 2022 December 31, 2021 Change Revenue: Rental revenue $ 1,845 $ 1,578 $ 267 Total revenue 1,845 1,578 267 Expenses: Operating 5,046 4,471 575 Depreciation 695 570 125 Loss on impairment of long-lived assets 248 - 248 General and administrative 14,714 8,737 5,977 Total expenses 20,703 13,778 6,925 Other (income) expense: Interest expense, net of capitalized interest - 1,160 (1,160 ) Other (income) expense (98 ) - (98 ) Unrealized (gain) loss on warrants (5,082 ) - (5,082 ) Loss on extinguishment of note payable to related party - 250 (250 ) Total other (income) expense (5,180 ) 1,410 (6,590 ) Net loss $ (13,678 ) $ (13,610 ) $ (68 ) Revenues Revenues for the year ended December 31, 2022 were approximately $1.8 million, compared to approximately $1.6 million for the year ended December 31, 2021.
Year ended December 31, 2023 December 31, 2022 Change Revenue: Rental revenue $ 7,575 $ 1,845 $ 5,730 Total revenue 7,575 1,845 5,730 Expenses: Operating 7,168 5,046 2,122 Depreciation 2,278 695 1,583 Loss on impairment of long-lived assets - 248 (248 ) General and administrative 15,122 14,714 408 Total expenses 24,568 20,703 3,865 Operating loss (16,993 ) (18,858 ) 1,865 Other (income) expense: Interest expense, net of capitalized interest 541 - 541 Other (income) expense (737 ) (98 ) (639 ) Unrealized (gain) loss on warrants 8,644 (5,082 ) 13,726 Total other (income) expense 8,448 (5,180 ) 13,628 Net loss $ (25,441 ) $ (13,678 ) $ (11,763 ) Revenues Revenues for the year ended December 31, 2023 were approximately $7.6 million, compared to approximately $1.8 million for the year ended December 31, 2022.
We have lease agreements with lease and non-lease components; we have elected the accounting policy to not separate lease and non-lease components for all underlying asset classes.
We have lease agreements with lease and non-lease components; we have elected the accounting policy to not separate lease and non-lease components for all underlying asset classes. Revenue Recognition 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.
For a more complete description of our operations, including our HBS hangar campus development projects, refer to Item 1 — Business . 35 Table of Contents Recent Developments On October 27, 2022, we substantially completed the construction of our BNA Phase II development project.
For a more complete description of our operations, including our home basing hangar campus development projects, refer to Item 1 — Business . 34 Table of Contents Recent Developments On October 11, 2023, we entered into a ground lease agreement (the “PWK Lease”) with PWK.
We structure our guaranteed maximum price construction contracts with shared savings clauses to incentivize the general contractors to reduce construction costs. At our SGR Phase I and BNA Phase II development projects, our total construction costs were lower than both our original pricing estimate and the project’s contracted guaranteed maximum price.
We structure our guaranteed maximum price construction contracts with shared savings clauses to incentivize the general contractors to reduce construction costs.
As a result, the warrants were not reflected in Sky’s financial statements for the Year ended December 31, 2021. 39 Table of Contents Liquidity and Capital Resources Overview Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund the construction of new assets, fund working capital and other general business needs.
The variance was also partially attributable to an approximately $0.5 million increase in interest expense due to the assumption of additional indebtedness as part of the Rapidbuilt Acquisition. 38 Table of Contents Liquidity and Capital Resources Overview Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund the construction of new assets, fund working capital and other general business needs.
Riley. Pursuant to the Stock Purchase Agreement, we have the right, in our sole discretion, to sell to B.
Common Stock Purchase Agreement On August 18, 2022, we entered into a Common Stock Purchase Agreement (the “Stock Purchase Agreement”) with B. Riley Principal Capital II, LLC (“B. Riley”). Pursuant to the Stock Purchase Agreement, we have the right, in our sole discretion, to sell to B.
We consummated the Yellowstone Transaction on January 25, 2022, to raise additional equity capital to, along with potential future debt and further equity issuances, begin to fund additional airport campuses and reach up to 20 airport campuses over the next several years.
We previously raised equity capital, along with potential future debt and further equity issuances, including the Private Placement Purchase Agreement entered into on November 1, 2023, see Note 12 — Equity and Redeemable Equity in the Notes to Consolidated Financial Statements, to begin to fund additional airport campuses and reach up to 20 airport campuses over the next several years.
These increases were offset by proceeds of $79.1 million received at maturity of certain of the Company’s restricted investments. Financing Activities Our primary financing activities have consisted of capital raised to fund the growth of our business and proceeds from debt obligations incurred to finance our HBS hangar campus development projects.
Financing Activities Our primary financing activities have consisted of capital raised to fund the growth of our business and proceeds from debt obligations incurred to finance our home basing hangar campus development projects. We expect to raise additional equity capital and issue additional indebtedness as our business grows.
The increase reflects the opening of our BNA campus during the three months ended December 31, 2022 and the placement of additional ground support equipment into service throughout 2022. General and Administrative Expenses For the years ended December 31, 2022, and 2021, general and administrative expenses were approximately $14.7 million and approximately $8.7 million, respectively.
The increase primarily reflects the opening of our OPF hangar campus during the three months ended March 31, 2023, the opening of our BNA hangar campus during the three months ended December 31, 2022, long-lived assets recognized as part of the Rapidbuilt Acquisition, and the placement of additional ground support equipment into service throughout 2022 and 2023.
These warrants were issued by YAC as part of its initial public offering.
These warrants consist of Public Warrants and Private Warrants initially issued by YAC as part of its initial public offering, and PIPE Warrants issued in November 2023 in connection with the Private Placement Purchase Agreement.
Included in net cash provided by operations are certain non-recurring legal, accounting, and consulting costs incurred for up to four quarters as a result of becoming a public company and a one-time outflow associated with the purchase of a leasehold interest at OPF.
Included in net cash used in operating activities are certain non-recurring legal, accounting, and consulting costs incurred for up to four quarters as a result of becoming a public company. Our working capital consists primarily of cash, receivables from tenants, prepaid expenses, accounts payable, accrued compensation, accrued other expenses, and lease liabilities.
In July 2022, we entered an exclusive strategic vendor partnership with a metal building and hangar door manufacturer that we expect to result in a reduction in the cost of the metal building and hangar door components at all future HBS hangar campuses.
In May 2023, we acquired a controlling interest in a metal building and hangar door manufacturer, that we expect will ultimately result in an increase in quality and a reduction in the overall cost of the metal building and hangar door components at future home basing hangar campus development projects.
The 17% increase primarily resulted from additional tenant leases commencing at SGR during the second and third quarters of 2022 and BNA during late 2022. Operating Expenses Operating expenses increased approximately $0.6 million, or 13%, from approximately $4.5 million for the year ended December 31, 2021 to approximately $5.0 million for the year ended December 31, 2022.
The approximately $5.7 million, or 311%, increase was primarily the result of tenant leases commencing at our OPF and BNA hangar campuses during the year ended December 31, 2023, as well as the cumulative impact of certain additional tenant leases in place at our SGR and BNA hangar campuses as compared to the year ended December 31, 2022.
Repair and maintenance expense associated with our hangars and related ground service equipment increased approximately $0.1 million, primarily driven by increased operations at our BNA and SGR campuses. Depreciation Expense Depreciation increased approximately $0.1 million, or 18%, for the year ended December 31, 2022, as compared to the year ended December 31, 2021.
Ground lease expense increased approximately $0.2 million, primarily due to new ground leases signed at PWK, BDL, and POU during the three months ended December 31, 2023. Depreciation Expense Depreciation increased approximately $1.6 million, or 228%, for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
The following table summarizes our cash and cash equivalents, restricted cash, investments, and restricted investments as of December 31, 2022 and 2021 (in thousands): December 31, 2022 December 31, 2021 Cash and cash equivalents $ 2,174 $ 6,805 Restricted cash 39,222 197,130 Investments 24,895 - Restricted investments 114,648 - Total cash, restricted cash, investments, and restricted investments $ 180,939 $ 203,935 Common Stock Purchase Agreement On August 18, 2022, we entered into the Stock Purchase Agreement with B.
The following table summarizes our cash and cash equivalents, restricted cash, investments, and restricted investments as of December 31, 2023 and 2022 (in thousands): December 31, 2023 December 31, 2022 Cash and cash equivalents $ 60,257 $ 2,174 Restricted cash 12,009 39,222 Investments 11,866 24,895 Restricted investments 88,213 114,648 Total cash, restricted cash, investments, and restricted investments $ 172,345 $ 180,939 Private Placement and Securities Purchase Agreement On November 1, 2023, we entered into the Private Placement Purchase Agreement with certain Investors, pursuant to which we (i) sold and issued to the Investors on November 2, 2023 an aggregate of 6,586,154 PIPE Shares and accompanying PIPE Warrants to purchase up to 1,141,600 shares of Class A Common Stock, for an aggregate purchase price of $42.8 million, and (ii) sold and issued to the Investors on November 29, 2023 an aggregate of 2,307,692 PIPE Shares and accompanying PIPE Warrants to purchase up to an aggregate of 400,000 shares of Class A Common Stock for an aggregate purchase price of $15.0 million.
This increase was primarily driven by an approximately $0.4 million increase in salaries, wages, and benefits associated with our campus personnel.
Salaries, wages, and benefits associated with our hangar campus personnel increased by approximately $0.6 million, primarily driven by headcount increases at our BNA and OPF hangar campuses. Other operating expenses increased approximately $1.3 million, primarily driven by increased insurance, property taxes, and utilities associated with operations at our OPF, BNA, and SGR hangar campuses.
Removed
The total construction costs incurred associated with the project were slightly less than our initial estimated construction costs. In connection with the substantial completion of our BNA HBS hangar campus, certain tenant leases associated with our constructed hangars commenced starting in November 2022.
Added
The term of the PWK Lease will be 50 years and is divided into two parcels, together allowing for the development of a hangar campus on up to 25 acres of land at PWK.
Removed
On January 19, 2023, we amended our existing ground lease agreement with the Town of Addison, TX to include additional parcels of land that will effectively double the land available for development at our ADS HBS hangar campus project. On February 1, 2023, we substantially completed the construction of our OPF Phase I development project.
Added
On November 1, 2023, we entered into a Securities Purchase Agreement (the “Private Placement Purchase Agreement”) with certain investors (collectively, the “Investors”), pursuant to which we sold and issued to the Investors at an initial closing an aggregate of 6,586,154 shares (the “Initial PIPE Shares”) of our 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 Financing").
Removed
In connection with the substantial completion of the OPF Phase I hangar campus, tenant leases for certain of our constructed hangars commenced starting in February 2023. On March 22, 2023, we satisfied the requirements within the Series 2021 PABs indenture to fund construction costs associated with our ADS Phase I development project with proceeds received from our Series 2021 PABs.
Added
On November 29, 2023 (the “Second Closing Date”), pursuant to the terms of the Private Placement Purchase Agreement, we sold and issued to the Investors an aggregate of 2,307,692 shares of our Class A Common Stock (the “Additional PIPE Shares” and, together with the Initial PIPE Shares, the “PIPE Shares”) and accompanying warrants to purchase 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.
Removed
See “ Note 18 — Subsequent Events — Series 2021 PABs Scope Modification ” in the Notes to Consolidated Financial Statements for additional information regarding the modification of the scope of our Series 2021 PABs.
Added
Together with the Initial Financing, the aggregate PIPE financing through the Private Placement Purchase Agreement totaled approximately $57.8 million. On December 13, 2023, we 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.
Removed
The approval and exercise of such rights will allow approximately $26 million of proceeds to be used to fund the ADS Phase I development project, and is projected to improve our debt service coverage associated with the Series 2021 PABs.
Added
The initial term of the BDL Lease will be 30 years with options exercisable by the Company to extend the BDL Lease an additional 20 years. On December 13, 2023, we entered into a ground lease agreement at POU with the County of Dutchess, New York (the “POU Lease”).

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