Business Context and Reporting Period
This Form 8-K was filed by Yellowstone Acquisition Company, the predecessor SPAC associated with Sky Harbour Group Corp., on May 18, 2021, regarding events occurring May 17, 2021. The company had not generated operating revenue and would not expect revenue until at least completion of an initial business combination.
Key Financial and Accounting Matters
- The company reevaluated the accounting for 6,799,449 public warrants and 7,719,779 privately issued warrants following the SEC’s April 12, 2021 statement on SPAC warrant accounting.
- The warrants were determined to require classification as derivative liabilities measured at fair value, rather than as equity instruments.
- Changes in warrant fair value will be recorded in earnings each reporting period. These changes are non-cash charges but may materially affect reported results and liabilities.
- The filing does not provide the final fair value of the warrant liabilities, the amount of the restatement, or revised earnings, assets, liabilities, cash flow, or liquidity metrics.
- The company stated that it had no operating revenue to date and therefore did not provide operating margins or comparable-period performance metrics.
Material Changes Versus the Prior Comparable Period
- The company concluded that its audited financial statements for the year ended December 31, 2020, and its audited balance sheet dated October 26, 2020, should no longer be relied upon.
- The company intends to amend its 2020 Form 10-K through a Form 10-K/A and restate the applicable financial statements to reflect warrant liabilities.
- The company concluded that its disclosure controls and procedures were ineffective as of December 31, 2020 and that a material weakness existed, following the SEC’s clarification of the relevant accounting guidance.
- The company did not file its Form 10-Q for the quarter ended March 31, 2021 by the May 17 deadline. It filed Form 12b-25 and expected to file the Form 10-Q by the extended deadline of May 24, 2021.
Guidance, Outlook, Risks, and Unusual Items
- Management was working with KPMG LLP to finalize the warrant valuation and intended to file the Form 10-K/A as soon as practicable.
- Unless the warrant agreements are amended, the company expects to continue classifying the warrants as liabilities and remeasuring them at fair value at each reporting date or upon exercise.
- Future fair-value adjustments could adversely affect reported operating results, although they would be non-cash.
- The restatement amount remained subject to completion of the company’s quantification and evaluation procedures. The filing warned that additional or unanticipated adjustments could be identified.
- Forward-looking statements regarding the restatement, filing timing, and misstatement estimates were subject to accounting, tax, regulatory, and execution risks.
Investor Verification Items
- Verify the final Form 10-K/A and the amount of the warrant-liability reclassification and related earnings impact.
- Review the amended October 26, 2020 balance sheet and restated December 31, 2020 financial statements.
- Review the March 31, 2021 Form 10-Q once filed, including updated liquidity, cash, liabilities, and disclosure-control information.
- Assess the terms and valuation methodology of the public and private warrants, including the potential volatility from recurring fair-value remeasurement.
- Confirm whether the identified material weakness has been remediated and whether the warrant agreements were amended.