SEC Filing Summary
Important entity note: Although requested as a Sky Harbour Group Corp. filing, the supplied 10-Q is filed by Yellowstone Acquisition Company, the SPAC then pursuing a business combination with Sky Harbour LLC. Yellowstone’s results are not Sky Harbour’s standalone operating results.
Business Context and Reporting Period
This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2021. Yellowstone was a blank-check company and had not begun operating or generating revenue. Its activity was focused on identifying and pursuing a business combination. On August 1, 2021, it entered into a definitive agreement for a proposed combination with Sky Harbour LLC.
Financial Results and Position
| Metric | Reported value |
|---|---|
| Revenue | None; Yellowstone reported no operating revenue. |
| Quarterly net income (loss) | $(3.22) million for the three months ended September 30, 2021, versus $(2,178) for the comparable 2020 inception period. |
| Nine-month net income | $2.80 million, versus a loss of $2,178 from inception through September 30, 2020. The 2021 result included a $4.36 million gain from the change in fair value of warrant liabilities. |
| Cash flow | $1.23 million used in operating activities over the first nine months of 2021; ending operating cash was $865,018. |
| Trust assets and liquidity | $138.74 million in investments held in trust at September 30, 2021, primarily for a business combination or shareholder redemptions. This is distinct from the $865,018 in operating cash. |
| Liabilities and debt | Total liabilities were $19.78 million, including a $1.00 million Sponsor note, $4.76 million deferred underwriting fee payable, and $13.65 million warrant liability. |
Margins are not meaningful because Yellowstone had no revenue. The filing gives no clear operating margin measure. The reported nine-month profit was substantially affected by a non-cash warrant fair-value gain; the quarter’s loss included a $2.18 million warrant fair-value loss.
Material Changes and Transaction Developments
- The proposed Sky Harbour business combination was announced in August 2021 and remained subject to customary closing conditions, including Yellowstone shareholder approval.
- Boston Omaha had invested $55 million in Sky Harbour preferred units, expected to convert into 5.5 million shares of the post-combination company if the transaction closes. A proposed $100 million PIPE and a Boston Omaha backstop of up to $45 million were also described; these were transaction funding plans, not Yellowstone’s reported cash or revenue.
- Sky Harbour announced and completed a separate $166 million tax-exempt bond financing on September 14, 2021. The bonds were issued through Sky Harbour Capital and secured by an obligated group; they are not presented as Yellowstone debt in this 10-Q.
- Management expected transaction proceeds to fund completion of four initial airport hangar campuses and expansion at an operating location.
- Yellowstone’s cash balance declined from $1.12 million at December 31, 2020 to $865,018 at September 30, 2021. It also recorded a $1.00 million Sponsor loan during the period.
Outlook, Risks, and Controls
- Management said available working capital was expected to meet Yellowstone’s needs through January 25, 2022, the stated deadline to complete a business combination. If it failed to complete one by then, the company was required to wind up and redeem public shares, subject to the filing’s stated terms.
- Yellowstone had no operating business, and the proposed transaction and related funding remained contingent. Public shareholders could redeem shares in connection with the transaction.
- Disclosure controls and procedures were deemed ineffective as of September 30, 2021 because of a material weakness in accounting for complex features of Class A shares and warrants. The filing says this weakness had resulted in restatement of 2020 financial statements and could lead to material misstatements if not remedied.
- Management said the specific financial impact of COVID-19 was not readily determinable. No legal proceedings were reported.
- The filing provides no operating guidance for Sky Harbour. Yellowstone reported no material market or interest-rate risk from its short-term trust investments.
Key Facts for Investors to Verify
- Whether and when the Sky Harbour business combination closed, and the final transaction terms and shareholder redemption levels.
- Whether the proposed PIPE, Boston Omaha backstop, and minimum cash condition were fulfilled.
- Sky Harbour’s standalone operating results, liquidity, capital needs, and the use and repayment terms of its $166 million bond financing.
- Remediation of Yellowstone’s material weakness and any subsequent changes to reported warrant or share accounting.
- The distinction between Yellowstone’s restricted trust assets and available operating cash, as well as the treatment of the Sponsor note and deferred underwriting fee at closing.