# BOSTON OMAHA Corp (BOC) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from BOSTON OMAHA Corp's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1494582/000143774924009605/bomn20231231_10k.htm
Accession: 0001437749-24-009605
Filing date: 2024-03-27
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/BOC/
All MD&A years: /company/BOC/mda/
Previous year: /company/BOC/mda/fy2022/ (FY 2022)
Next year: /company/BOC/mda/fy2024/ (FY 2024)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and as set forth under Summary Risk Factors and “Item 1A. Risk Factors.” Please also refer to the section under the heading “Cautionary Note Concerning Forward-Looking Statements.”

Overview

We are currently engaged in outdoor billboard advertising, broadband services, surety insurance and related brokerage businesses, and an asset management business. In addition, we hold minority investments in commercial real estate management and brokerage services, a bank focused on servicing the automotive loan market, and a developer of private aviation infrastructure focused on building, leasing and managing business aviation hangars.

Outdoor Billboard Advertising. In June 2015, we commenced our billboard business operations through acquisitions by Link, our wholly-owned subsidiary, of smaller billboard companies located in the Southeast United States and Wisconsin. During July and August 2018, we acquired the membership interest or assets of three larger billboard companies which increased our overall billboard count to approximately 2,900 billboards. In addition, we have made several billboard acquisitions on a smaller scale since that date. We believe that we are a leading outdoor billboard advertising company in the markets we serve in the Midwest. As of December 31, 2023, we operate approximately 4,000 billboards with approximately 7,600 advertising faces. One of our principal business objectives is to continue to acquire additional billboard assets through acquisitions of existing billboard businesses in the United States when they can be made at what we believe to be attractive prices relative to other opportunities generally available to us.

Surety Insurance. In September 2015, we established an insurance subsidiary, GIG, designed to own and operate insurance businesses generally handling high volume, lower policy limit commercial lines of property and casualty insurance. In April 2016, our surety insurance business commenced with the acquisition of a surety insurance brokerage business with a national internet-based presence. In December 2016, we completed the acquisition of UCS, a surety insurance company, which at that time was licensed to issue surety bonds in only nine states. UCS now has licenses to operate in all 50 states and the District of Columbia. In addition, over the last several years, we have also acquired additional surety insurance brokerage businesses located in various regions of the United States. We may in the future expand the reach of our insurance activities to other forms of insurance which may have similar characteristics to surety, such as high volume and low average policy premium insurance businesses which historically have similar economics.

Broadband Services. In March 2020, we commenced our broadband services business with the acquisition of substantially all of the business assets of FibAire, a rural broadband internet provider that serves over 8,000 customers in communities in southern Arizona with a high-speed fixed wireless internet service and is building an all fiber-to-the-home network in select Arizona markets. In December 2020, we acquired substantially all of the business assets of UBB, a broadband internet provider that provides high-speed internet to over 10,000 customers throughout Utah. In September 2021, we announced the launch of Fiber Fast Homes, LLC, which partners with builders, developers and build for rent communities to build fiber-to-the-home infrastructure and provide fiber internet service to residents. In April 2022, we acquired substantially all of the business assets of InfoWest, which are fiber and fixed wireless internet service providers with over 20,000 customers throughout Southern and Central Utah, Northern Arizona and Moapa Valley, Nevada. As of December 31, 2023, we have approximately 43,000 broadband customers. We hope to continue to expand in Arizona, Florida, Nevada, Utah, and other locales.

Investments:

[[GREPCENT_TABLE]]
[["","\u25cf","Since September 2015, we have made a series of investments in commercial real estate, a commercial real estate management, brokerage and related services business as well as an asset management business. We currently own 30% of Logic. On May 1, 2023, our BOAM subsidiary acquired 100% of the membership interests in 24th Street from the members of 24th Street other than BOAM for cash and BOC Class A common stock valued at $5,016,494 in the aggregate. Prior to the transaction, BOAM indirectly owned 48% of the membership interests of 24th Street. The consideration consisted of $2,759,072 in cash at closing, an additional $1,254,102 in cash subject to holdback, and 45,644 shares of BOC Class A common stock (based on the average closing price of BOC Class A common stock for the 30 business day period ending two days before the closing date). The shares issued in the transaction are unregistered and have no registration rights. The purchase agreement also provides for certain payments based on performance to receive the holdback amount and certain other potential earnout payments. In addition, we have invested, through one of our subsidiaries, an aggregate of $6 million in the 24th Street Funds. These funds are managed by 24th Street, and focus on opportunities within secured lending and direct investments in commercial real estate."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","In December 2017, we invested $10 million in common units of DFH, the parent company of Dream Finders Homes, LLC, a national home builder. In addition to its homebuilding operations, DFH's subsidiaries provide mortgage loan origination and title insurance services to homebuyers. On January 25, 2021, Dream Finders Homes, Inc., a wholly owned subsidiary of DFH, completed its initial public offering and Dream Finders Homes, Inc. became a holding company and sole manager of DFH. Upon completion of the initial public offering, our outstanding common units in DFH were converted into 4,681,099 shares of Class A common stock of Dream Finders Homes, Inc., and one of our subsidiaries purchased an additional 120,000 shares of Class A common stock in the initial public offering. Since DFH\u2019s initial public offering through December 31, 2022, we have sold all 4,801,099 shares of DFH Class A common stock for gross proceeds of approximately $81 million."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","In May 2018, through one of our subsidiaries, we invested approximately $19 million through the purchase of common stock of CB&T, the privately-held parent company of Crescent. Our investment now represents 15.6% of CB&T\u2019s outstanding common stock. Crescent is located in New Orleans and generates the majority of its revenues from indirect subprime automobile lending across the United States."]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","In October 2020, our subsidiary BOC Yellowstone served as sponsor for the underwritten initial public offering of a special purpose acquisition company named Yellowstone Acquisition Company. Yellowstone sold in its public offering 13,598,898 units at a price of $10.00 per unit, each unit consisting of one share of Class A common stock and a redeemable warrant to purchase one-half of a share of Class A common stock at an exercise price of $11.50 per share. Between August and November 2020, we invested, through BOC Yellowstone, approximately $7.8 million through the purchase of 3,399,724 shares of Class B common stock and 7,719,779 non-redeemable private placement warrants, each warrant entitling us to purchase one share of Class A common stock at $11.50 per share. In August 2021, Yellowstone entered into a business combination agreement with Sky Harbour LLC, a developer of private aviation infrastructure focused on building, leasing and managing business aviation hangars. The business combination was completed on January 25, 2022 and Yellowstone changed its name to Sky Harbour Group Corporation. Sky Harbour\u2019s Class A common stock trades on the NYSE American under the symbol \u201cSKYH\u201d and its warrants to purchase Class A common stock trade under the symbol \u201cSKYH.WS.\u201d"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","In September 2021, through one of our subsidiaries, we invested $55 million directly into SHG and received Series B preferred units. Upon the successful consummation of the Sky Harbour business combination, this investment converted into 5,500,000 shares of Sky Harbour's Class A common stock based upon an assumed value of $10.00 per share. In December 2021, we agreed to provide Sky Harbour an additional $45 million through the purchase of 4,500,000 shares of Class A common stock upon the closing of the Sky Harbour business combination, which was consummated in January 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","In 2021, we established the BFR Fund subsidiary within BOAM to operate a proposed build-for-rent business, focusing on developing, building, and managing single family detached and/or townhomes for long term rentals. We invested approximately $15 million of capital to finance the initial acquisitions for these projects and subsequently raised third-party capital to be invested alongside our capital. The BFR Fund acquired land parcels in Nevada with the initial plan to develop, construct, and operate build-for-rent communities. However, challenges in the market, including the increase in interest rates and the inability to achieve what we believe are appropriate risk-adjusted returns, have led us to pursue selling the BFR Fund's entitled land assets to public homebuilders. Consequently, we plan to wind down the BFR Fund earlier than originally targeted by returning the uninvested cash on hand to BFR Fund partners and, as we sell the BFR Fund's entitled land assets, returning that capital to BFR Fund partners as well."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","In July 2023, we invested approximately $3 million in voting preferred stock of MyBundle, a company serving the broadband industry."]]
[[/GREPCENT_TABLE]]

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In each of our businesses, we hope to expand our geographic reach and market share and seek to develop a competitive advantage and/or brand name for our services, which we hope will be a differentiating factor for customers. Our insurance market primarily services small contractors, small and medium-sized businesses and individuals required to provide surety bonds (i) in connection with their work for government agencies and others, (ii) in connection with contractual obligations, or (iii) to meet regulatory requirements and other needs. We have expanded the licensing of the UCS business to all 50 states and the District of Columbia. In outdoor advertising, our plan is to continue to grow this business through acquisitions of billboard assets. We expect to expand our broadband services in Arizona, Florida, Nevada, Utah and in other locations. We also expect to continue to make additional investments in real estate management service businesses, as well as in other businesses. In the future, we expect to expand the range of services we provide in the insurance sector, seek to continue to expand our billboard operations and broadband services and to possibly consider acquisitions of other businesses, as well as investments, in other sectors. Our decision to expand outside of these current business sectors we serve or in which we have made investments will be based on the opportunity to acquire businesses which we believe provide the potential for sustainable earnings at an attractive level relative to capital employed and, with regard to investment, we believe have the potential to provide attractive returns.

We seek to enter markets where we believe demand for our services will grow in the coming years due to certain barriers to entry and/or to anticipated long-term demand for these services. In the outdoor billboard business, government restrictions often limit the number of additional billboards that may be constructed. At the same time, advances in billboard technology provide the opportunity to improve revenues through the use of digital display technologies and other new technologies. In the surety insurance business, new insurance companies must be licensed by state agencies that impose capital, management and other strict requirements on these insurers. These hurdles are at the individual state level, with statutes often providing wide latitude to regulators to impose judgmental requirements upon new entrants. In addition, new distribution channels in certain areas of surety may provide a new opportunity. In the real estate management services market, we believe the continued growth of commercial real estate in many sections of the United States will provide opportunities for management services for the foreseeable future. We also believe our investment in both CB&T and Sky Harbour has provided each company the opportunity to significantly grow its business. We invest our available capital and the surplus capital from UCS in a wide range of securities, including equity securities of large cap public companies, various corporate and government bonds and U.S. treasuries. In broadband services, we believe that our fiber-to-the-home services can compete with traditional cable operators as broadband provides higher rates of transmission and improved speed to consumers and that, once built, other competitors may be less willing to compete in communities which we serve.

How We Generate Our Revenues and Evaluate Our Business

We currently generate revenues primarily through billboard advertising and related services, from the sale of surety insurance and related brokerage activities, by providing high-speed broadband services, and asset management services. Revenue for outdoor advertising space rental is recognized on a straight-line basis over the term of the contract and advertising revenue is reported net of agency commissions. Payments received in advance of being earned are recorded as deferred revenue. In our surety insurance business, premiums written are recognized as revenues based on a pro rata daily calculation over the respective terms of the policies in-force. Unearned premiums represent the portion of premiums written applicable to the unexpired term of the policies in-force. In connection with our surety agency business, insurance commissions are recognized at a point in time, on a bond-by-bond basis as of the policy effective date and are generally nonrefundable. In our broadband business, revenue is derived principally from internet services and is recognized on a straight-line basis over the term of the contract in the period the services are rendered. Revenue received or receivable in advance of the delivery of services is included in deferred revenue.

Segment gross profit is a key metric that we use to evaluate segment operating performance and to determine resource allocation between segments. We define segment gross profit as segment revenues less segment direct cost of services. In our billboard business, direct cost of services includes land leases, utilities, repairs and maintenance of equipment, sales commissions, contract services, and other billboard level expenses. In our broadband business, direct costs of services includes network operations and data costs, programming costs, cell site rent and utilities, and other broadband level expenses. In our surety business, direct cost of services includes commissions, premium taxes, fees and assessments, and losses and loss adjustment expenses.

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Results of Operations

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

The following is a comparison of our results of operations for the year ended December 31, 2023, which we refer to as “fiscal 2023,” compared to the year ended December 31, 2022 which we refer to as “fiscal 2022.”

Revenues.  For fiscal 2023 and fiscal 2022, our revenues in dollars and as a percentage of total revenues were as follows:

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2023","","","2022","","","2023 vs 2022"],["","","Amount","","","As a % of Total Revenues","","","Amount","","","As a % of Total Revenues","","","$ Variance"],["Revenues:"],["Billboard rentals, net","","$","42,940,369","","","","44.6","%","","$","39,244,726","","","","48.3","%","","$","3,695,643"],["Broadband services","","","35,340,502","","","","36.7","%","","","28,627,271","","","","35.3","%","","","6,713,231"],["Premiums earned","","","13,932,659","","","","14.5","%","","","10,649,089","","","","13.1","%","","","3,283,570"],["Insurance commissions","","","1,884,007","","","","2.0","%","","","2,050,838","","","","2.5","%","","","(166,831",")"],["Investment and other income","","","2,156,199","","","","2.2","%","","","662,270","","","","0.8","%","","","1,493,929"],["Total Revenues","","$","96,253,736","","","","100.0","%","","$","81,234,194","","","","100.0","%","","$","15,019,542"]]
[[/GREPCENT_TABLE]]

We realized total revenues of $96,253,736 during fiscal 2023, an increase of 18.5% over revenues of $81,234,194 during fiscal 2022. Revenues increased within each our our businesses, except for our surety brokerage operations, during fiscal 2023 when compared to fiscal 2022. The key factors impacting revenue across each of our businesses during fiscal 2023 were as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","Net billboard rentals increased by 9.4% in fiscal 2023, when compared to fiscal 2022, reflecting an improvement in rental and occupancy rates across a number of our markets as well as the acquisition of billboards from Elevation during the fourth quarter of fiscal 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Revenue from broadband services in fiscal 2023 increased 23.5% from fiscal 2022, mainly reflecting revenues generated from the InfoWest and Go Fiber acquisitions completed in April 2022 as well as subscriber growth across a number of our markets."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Premiums earned from our UCS insurance subsidiary increased 30.8% in fiscal 2023 when compared to the fiscal 2022. The increase in premiums earned was primarily due to increases in production throughout fiscal 2022 and fiscal 2023. We recognize revenues for written premium over the life of the surety bond and, as a result, increased sales activities are not fully reflected in the quarter in which the surety bond is issued."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Revenue from insurance commissions generated by our surety brokerage operations decreased by 8.1% in fiscal 2023 when compared to fiscal 2022, mainly due to reduced production through outside insurance carriers."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Investment and other income at UCS and BOAM increased from $662,270 in fiscal 2022 to $2,156,199 in fiscal 2023, mainly due to the increase in interest rates over the past 12 to 18 months for assets held by UCS and the consolidation of 24th Street during the second quarter of fiscal 2023."]]
[[/GREPCENT_TABLE]]

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Expenses.  For fiscal 2023 and fiscal 2022, our expenses in dollars and as a percentage of total revenues were as follows:

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2023","","","2022","","","2023 vs 2022"],["","","Amount","","","As a % of Total Revenues","","","Amount","","","As a % of Total Revenues","","","$ Variance"],["Costs and Expenses:"],["Cost of billboard revenues","","$","15,136,817","","","","15.7","%","","$","14,395,627","","","","17.7","%","","$","741,190"],["Cost of broadband revenues","","","9,955,518","","","","10.3","%","","","7,538,501","","","","9.3","%","","","2,417,017"],["Cost of insurance revenues","","","6,808,167","","","","7.1","%","","","4,755,583","","","","5.9","%","","","2,052,584"],["Employee costs","","","32,561,929","","","","33.8","%","","","26,343,272","","","","32.4","%","","","6,218,657"],["Professional fees","","","4,665,515","","","","4.9","%","","","5,300,275","","","","6.5","%","","","(634,760",")"],["General and administrative","","","16,112,243","","","","16.8","%","","","12,861,992","","","","15.8","%","","","3,250,251"],["Depreciation","","","12,155,096","","","","12.6","%","","","8,649,066","","","","10.6","%","","","3,506,030"],["Amortization","","","7,409,939","","","","7.7","%","","","6,474,791","","","","8.0","%","","","935,148"],["Accretion","","","216,501","","","","0.2","%","","","206,359","","","","0.3","%","","","10,142"],["Loss (gain) on disposition of assets","","","84,414","","","","0.1","%","","","(61,377",")","","","(0.1","%)","","","145,791"],["Total Costs and Expenses","","$","105,106,139","","","","109.2","%","","$","86,464,089","","","","106.4","%","","$","18,642,050"]]
[[/GREPCENT_TABLE]]

During fiscal 2023, we had total costs and expenses of $105,106,139, as compared to total costs and expenses of $86,464,089 in fiscal 2022. Total costs and expenses as a percentage of revenues increased from 106.4% in fiscal 2022 to 109.2% in fiscal 2023. The key factors impacting costs and expenses across each of our businesses during fiscal 2023 were as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","Cost of billboard revenues decreased as a percentage of billboard revenues from 36.7% in fiscal 2022 to 35.3% in fiscal 2023. The decrease was mainly related to lower ground rent expense as a percentage of billboard revenues."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Cost of broadband revenues increased as a percentage of broadband revenues from 26.3% in fiscal 2022 to 28.2% in fiscal 2023. The increase is mainly driven by the InfoWest and Go Fiber acquisitions completed in April 2022 as well as an increase in sales commissions and fuel costs."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Cost of insurance revenues increased as a percentage of insurance revenues from 35.6% in fiscal 2022 to 38.5% in fiscal 2023. The increase was mainly due to higher commissions paid related to increased production from non-affiliated insurance brokerage firms."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Employee costs increased from $26,343,272 in fiscal 2022 to $32,561,929 in fiscal 2023, an increase of 23.6%. The increase was mainly driven by the InfoWest and Go Fiber acquisitions and hiring within our other broadband businesses, surety brokerage operations and BOAM."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Professional fees in fiscal 2023 were $4,665,515, or 4.9% of total revenues, as compared to $5,300,275, or 6.5% of total revenues, in fiscal 2022. The decrease was mainly related to the professional fees associated with Yellowstone completing its business combination with SHG during the first quarter of fiscal 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","General and administrative expenses in fiscal 2023 were $16,112,243, or 16.8% of total revenues, as compared to $12,861,992, or 15.8% of total revenues, in fiscal 2022. The increase was mainly driven by the InfoWest and Go Fiber acquisitions, higher marketing and software related expenses within our broadband businesses, continued hiring within BOAM, and a $900,000 reduction of the contingent consideration related to the ACS acquisition during the fourth quarter of fiscal 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Non-cash expenses in fiscal 2023 included $12,155,096 in depreciation expense, $7,409,939 in amortization expense, and $216,501 in accretion expense related to asset retirement obligations for certain billboard and broadband assets. The increase in depreciation and amortization expense is mainly due to the InfoWest and Go Fiber acquisitions as well as continued capital investments across all our broadband businesses."]]
[[/GREPCENT_TABLE]]

Net Loss from Operations. Net loss from operations in fiscal 2023 was $8,852,403, or 9.2% of total revenues, as compared to a net loss from operations of $5,229,895, or 6.4% of total revenues, in fiscal 2022. The increase in net loss from operations in dollars was primarily due to an increase in depreciation and amortization expense related to our InfoWest and Go Fiber acquisitions and capital investments within our other broadband businesses as well as costs associated with hiring within our broadband and asset management businesses, which were partially offset by improved operations within our billboard and insurance businesses. Our net loss from operations included $19,781,536 from non-cash amortization, depreciation and accretion expenses in fiscal 2023, as compared to $15,330,216 in fiscal 2022.

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Other Income (Expense). In fiscal 2023, we had a net other loss of $294,060. Net other loss included a loss of $7,888,765 from unconsolidated affiliates mainly related to $13,149,861in non-cash losses from our equity method position in Sky Harbour, which was partially offset by $4,630,610 in non-cash gains recognized in May 2023 due to our purchase of the membership interests in 24th Street held by third parties resulting in the remeasurement of our previously-held interest in 24th Street, and interest expense of $1,147,234 mainly incurred under Link's term loan. These items were partially offset by $6,132,791 in other investment income mainly related to public securities held by Boston Omaha and UCS and interest and dividend income of $2,609,148. During fiscal 2022, we had net other income of $13,104,078. Net other income included a gain of $24,977,740 related to the deconsolidation of Yellowstone, $4,085,040 mainly related to our investment in the 24th Street Funds, $1,837,211 related to the remeasurement of Yellowstone's public warrants from January 1, 2022 to January 25, 2022, and interest and dividend income of $434,941. These items were partially offset by $15,635,690 in other investment losses mainly related to public securities held by Boston Omaha and UCS, a loss of $1,387,620 mainly related to our equity method position in Sky Harbour, and interest expense of $1,207,544 mainly incurred under Link's term loan.

Generally accepted accounting principles ("GAAP") requires us to include the unrealized changes in market prices of investments in public equity securities in our reported earnings. Due to the size of our percentage ownership interest in Sky Harbour's Class A common stock and our right to elect one of the seven members of Sky Harbour's Board of Directors, our investment is recorded under the equity method using the fair market value of Sky Harbour's Class A common stock as of the date of the business combination and we do not include any unrealized gains or losses related to the change in Sky Harbour's stock price in our reported earnings. In the future, if our ownership interest in Sky Harbour's Class A common stock drops below 20%, we may no longer be able to record our investment under the equity method and will be required to include any unrealized gains or losses related to the change in Sky Harbour's stock price in our reported earnings. While we intend to hold our current securities for the longer term, we may in the future choose to sell them for a variety of reasons resulting in realized losses or gains.

Additionally, we have evaluated our investment in Sky Harbour as of December 31, 2023, and determined that there was not an other-than-temporary impairment. Our conclusion was based on several contributing factors, including: (i) our assessment that the underlying business and financial condition of Sky Harbour is favorable; (ii) the period of time for which the fair value was less than the carrying value during 2023, (iii) the recovery of Sky Harbour's stock price during the last few months of 2023, and (iv) our ability and intent to hold the investment. We will continue to review our investment in Sky Harbour for an other-than-temporary impairment on a quarterly basis or upon the occurrence of certain events. If Sky Harbour's stock price drops below our carrying value of $7.15 per share for a sustained period of time, it will likely result in an impairment of our investment. There may also be a future impairment of our investment if our expectations about Sky Harbour's prospective results of operations and cash flows decline, which could be influenced by a variety of factors including adverse market conditions.

Net (Loss) Income Attributable to Common Stockholders. We had a net loss attributable to common stockholders in the amount of $7,004,009 in fiscal 2023, or a loss per share of $0.23, based on 31,092,850 diluted weighted average shares outstanding. This is compared to net income attributable to common stockholders of $10,233,400 in fiscal 2022, or income per share of $0.34, based on 29,766,247 diluted weighted average shares outstanding.

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The following tables report results for the following four segments in which we operate: billboards, broadband, insurance and asset management for fiscal 2023 and fiscal 2022:

Results of Billboard Operations

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2023","","","2022"],["","","Amount","","","As a % of Segment Operating Revenues","","","Amount","","","As a % of Segment Operating Revenues"],["Operating Revenues"],["Billboard rentals, net","","$","42,940,369","","","","100.0","%","","$","39,244,726","","","","100.0","%"],["Cost of Revenues"],["Ground rents","","","7,981,107","","","","18.6","%","","","7,753,495","","","","19.7","%"],["Utilities","","","1,790,349","","","","4.2","%","","","1,672,420","","","","4.3","%"],["Commissions paid","","","3,409,923","","","","7.9","%","","","3,103,413","","","","7.9","%"],["Other costs of revenues","","","1,955,438","","","","4.5","%","","","1,866,299","","","","4.8","%"],["Total cost of revenues","","","15,136,817","","","","35.2","%","","","14,395,627","","","","36.7","%"],["Gross margin","","","27,803,552","","","","64.8","%","","","24,849,099","","","","63.3","%"],["Other Operating Expenses"],["Employee costs","","","7,072,960","","","","16.5","%","","","6,724,871","","","","17.1","%"],["Professional fees","","","804,203","","","","1.9","%","","","521,377","","","","1.3","%"],["General and administrative","","","3,902,279","","","","9.1","%","","","3,591,370","","","","9.2","%"],["Depreciation","","","5,075,358","","","","11.8","%","","","4,581,316","","","","11.7","%"],["Amortization","","","3,933,290","","","","9.1","%","","","3,674,411","","","","9.4","%"],["Accretion","","","199,211","","","","0.5","%","","","196,099","","","","0.5","%"],["Loss (gain) on disposition of assets","","","206,832","","","","0.5","%","","","(175,262",")","","","(0.5","%)"],["Total expenses","","","21,194,133","","","","49.4","%","","","19,114,182","","","","48.7","%"],["Segment Income from Operations","","","6,609,419","","","","15.4","%","","","5,734,917","","","","14.6","%"],["Interest expense, net","","","(956,251",")","","","(2.2","%)","","","(1,138,242",")","","","(2.9","%)"],["Net Income Attributable to Common Stockholders","","$","5,653,168","","","","13.2","%","","$","4,596,675","","","","11.7","%"]]
[[/GREPCENT_TABLE]]

Comparison of Fiscal 2023 to Fiscal 2022. In fiscal 2023, there was a 9.4% increase in net billboard revenues from fiscal 2022, reflecting an improvement in rental and occupancy rates across a number of our markets as well as the acquisition of billboards from Elevation during the fourth quarter of fiscal 2022. The key factors affecting our billboard operations results during fiscal 2023 were as follows:



[[GREPCENT_TABLE]]
[["","\u25cf","Ground rent expense decreased as a percentage of total segment operating revenues from 19.7% in fiscal 2022 to 18.6% in fiscal 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Commissions paid as a percentage of total segment operating revenues remained flat at 7.9% in fiscal 2022 and in fiscal 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Employee costs as a percentage of total segment operating revenues decreased from 17.1% in fiscal 2022 to 16.5% in fiscal 2023. The decrease is due to organic revenue growth as well as the impact from the Elevation acquisition."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","General and administrative expenses decreased slightly as a percentage of total segment operating revenues from 9.2% fiscal 2022 to 9.1% in fiscal 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Depreciation and amortization expense increased by $494,042 and $258,879, respectively, from fiscal 2022. The increases are primarily due to the Elevation acquisition."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Net interest expense was $956,251 in fiscal 2023 compared to net interest expense of $1,138,242 in fiscal 2022. The decrease is mainly driven by interest income from investing excess cash in U.S. Treasury securities."]]
[[/GREPCENT_TABLE]]

48

Table of Contents

Results of Broadband Operations

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2023","","","2022"],["","","Amount","","","As a % of Segment Operating Revenues","","","Amount","","","As a % of Segment Operating Revenues"],["Operating Revenues"],["Broadband revenues","","$","35,340,502","","","","100.0","%","","$","28,627,271","","","","100.0","%"],["Cost of Revenues"],["Network operations and data costs","","","5,181,917","","","","14.7","%","","","4,319,410","","","","15.1","%"],["Programming costs","","","61,646","","","","0.2","%","","","90,139","","","","0.3","%"],["Cell site rent and utilities","","","1,597,681","","","","4.5","%","","","1,111,487","","","","3.9","%"],["Other costs of revenues","","","3,114,274","","","","8.8","%","","","2,017,465","","","","7.0","%"],["Total cost of revenues","","","9,955,518","","","","28.2","%","","","7,538,501","","","","26.3","%"],["Gross margin","","","25,384,984","","","","71.8","%","","","21,088,770","","","","73.7","%"],["Other Operating Expenses"],["Employee costs","","","14,527,407","","","","41.1","%","","","10,892,844","","","","38.1","%"],["Professional fees","","","823,969","","","","2.3","%","","","659,025","","","","2.3","%"],["General and administrative","","","7,093,277","","","","20.1","%","","","5,166,722","","","","18.1","%"],["Depreciation","","","6,816,929","","","","19.3","%","","","3,869,994","","","","13.5","%"],["Amortization","","","3,316,403","","","","9.4","%","","","2,617,966","","","","9.1","%"],["Accretion","","","17,290","","","","0.0","%","","","10,260","","","","0.0","%"],["(Gain) loss on disposition of assets","","","(122,418",")","","","(0.3","%)","","","113,885","","","","0.4","%"],["Total expenses","","","32,472,857","","","","91.9","%","","","23,330,696","","","","81.5","%"],["Segment Loss from Operations","","","(7,087,873",")","","","(20.1","%)","","","(2,241,926",")","","","(7.8","%)"],["Interest income (expense), net","","","17,664","","","","0.1","%","","","(19,831",")","","","(0.1","%)"],["Noncontrolling interest in subsidiary loss (income)","","","75,008","","","","0.2","%","","","(436,648",")","","","(1.5","%)"],["Net Loss Attributable to Common Stockholders","","$","(6,995,201",")","","","(19.8","%)","","$","(2,698,405",")","","","(9.4","%)"]]
[[/GREPCENT_TABLE]]

Comparison of Fiscal 2023 to Fiscal 2022. In fiscal 2023, total operating revenues increased by 23.5% when compared to fiscal 2022 mainly reflecting the revenues generated from the InfoWest and Go Fiber acquisitions which were completed in April 2022. The key factors affecting our broadband operations results during fiscal 2023 were as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","Total cost of revenues increased as a percentage of total segment operating revenues from 26.3% in fiscal 2022 to 28.2% in fiscal 2023. The increase is mainly driven by the InfoWest and Go Fiber acquisitions as well as an increase in sales commissions and fuel costs within Other costs of revenues."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Employee costs in fiscal 2023 increased by 33.4% from fiscal 2022. The increase is mainly due to the InfoWest and Go Fiber acquisitions as well as hiring within our other broadband businesses."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Professional fees as a percentage of total segment operating revenues remained flat at 2.3% in fiscal 2022 and in fiscal 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","General and administrative expenses as a percentage of total segment operating revenues increased from 18.1% in fiscal 2022 to 20.1% in fiscal 2023. The increase is mainly due to the InfoWest and Go Fiber acquisitions as well as higher marketing and software related expenses."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Depreciation and amortization expense increased by $2,946,935 and $698,437, respectively, from fiscal 2022. The increase in depreciation and amortization expense is mainly due to the InfoWest and Go Fiber acquisitions as well as continued capital investments across all of our broadband businesses."]]
[[/GREPCENT_TABLE]]

49

Table of Contents

Results of Insurance Operations



[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2023","","","2022"],["","","Amount","","","As a % of Segment Operating Revenues","","","Amount","","","As a % of Segment Operating Revenues"],["Operating Revenues"],["Premiums earned","","$","13,932,659","","","","78.7","%","","$","10,649,089","","","","79.7","%"],["Insurance commissions","","","1,884,007","","","","10.6","%","","","2,050,838","","","","15.3","%"],["Investment and other income","","","1,889,225","","","","10.7","%","","","662,270","","","","5.0","%"],["Total operating revenues","","","17,705,891","","","","100.0","%","","","13,362,197","","","","100.0","%"],["Cost of Revenues"],["Commissions paid","","","4,387,088","","","","24.8","%","","","2,934,022","","","","21.9","%"],["Premium taxes, fees, and assessments","","","376,828","","","","2.1","%","","","289,268","","","","2.2","%"],["Losses and loss adjustment expense","","","2,044,251","","","","11.6","%","","","1,532,293","","","","11.5","%"],["Total cost of revenues","","","6,808,167","","","","38.5","%","","","4,755,583","","","","35.6","%"],["Gross margin","","","10,897,724","","","","61.5","%","","","8,606,614","","","","64.4","%"],["Other Operating Expenses"],["Employee costs","","","6,500,480","","","","36.7","%","","","5,752,302","","","","43.0","%"],["Professional fees","","","596,245","","","","3.4","%","","","259,535","","","","1.9","%"],["General and administrative","","","1,970,121","","","","11.1","%","","","1,241,261","","","","9.3","%"],["Depreciation","","","152,388","","","","0.9","%","","","87,855","","","","0.7","%"],["Amortization","","","160,246","","","","0.9","%","","","182,414","","","","1.4","%"],["Total expenses","","","9,379,480","","","","53.0","%","","","7,523,367","","","","56.3","%"],["Segment Income from Operations","","","1,518,244","","","","8.5","%","","","1,083,247","","","","8.1","%"],["Other investment income (loss)","","","538,621","","","","3.1","%","","","(3,569,262",")","","","(26.7","%)"],["Net Income (Loss) Attributable to Common Stockholders","","$","2,056,865","","","","11.6","%","","$","(2,486,015",")","","","(18.6","%)"]]
[[/GREPCENT_TABLE]]

Comparison of Fiscal 2023 to Fiscal 2022. In fiscal 2023, total operating revenues increased by 32.5% when compared to fiscal 2022, mainly due to increased earned premiums and investment and other income at our UCS insurance subsidiary. The key factors affecting our insurance operations results during fiscal 2023 were as follows:



[[GREPCENT_TABLE]]
[["","\u25cf","Premiums earned from our UCS insurance subsidiary increased 30.8% in fiscal 2023 when compared to fiscal 2022. The increase in premiums earned was primarily due to increases in production throughout fiscal 2022 and fiscal 2023. We recognize revenues for written premium over the life of the surety bond and, as a result, increased sales activities are not fully reflected in the quarter in which the surety bond is issued."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Insurance commissions generated by our surety brokerage operations decreased by 8.1% in fiscal 2023 when compared to fiscal 2022, mainly due to reduced production through outside insurance carriers."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Commissions paid as a percentage of total segment operating revenues increased from 21.9% in fiscal 2022 to 24.8% in fiscal 2023, mainly due to increased production from non-affiliated insurance brokerage firms."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Losses and loss adjustment expenses as a percentage of insurance revenues increased slightly from 11.5% in fiscal 2022 to 11.6% in fiscal 2023. Losses and loss adjustment expenses are reserved monthly based on a percentage of earned premium."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Employee costs in fiscal 2023 increased by 13.0% from fiscal 2022. The increase is mainly due to incentive plan payments as well as the hiring of production-based roles within our surety brokerage operations."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","General and administrative expenses in fiscal 2023 increased by 58.7% from fiscal 2022. The increase is mainly due to a $900,000 reduction in general and administrative expenses during the fourth quarter of fiscal 2022 related to finalizing the ACS acquisition contingent consideration."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","During fiscal 2023, our segment income from insurance operations of $1,518,244 was increased by other investment income of $538,621 mainly from unrealized gains on our investments in publicly held securities. We expect to continue to invest a portion of our excess capital in accordance with insurance regulatory limitations in both large-cap publicly traded equity securities and bonds. These investments are subject to the risk of loss in value depending upon market conditions and factors outside of our control."]]
[[/GREPCENT_TABLE]]

50

Table of Contents

Results of Asset Management Operations

[[GREPCENT_TABLE]]
[["","","For the Years Ended December 31,"],["","","2023","","","2022"],["","","Amount","","","As a % of Segment Operating Revenues","","","Amount","","","As a % of Segment Operating Revenues"],["Operating Revenues"],["Investment and other income","","$","266,974","","","","100.0","%","","","-","","","","-"],["Cost of Revenues"],["Total cost of revenues","","","-","","","","-","","","","-","","","","-"],["Gross margin","","","266,974","","","","100.0","%","","","-","","","","-"],["Other Operating Expenses"],["Employee costs","","","1,574,332","","","","589.7","%","","","746,235","","","","-"],["Professional fees","","","321,363","","","","120.4","%","","","813,142","","","","-"],["General and administrative","","","753,320","","","","282.1","%","","","278,256","","","","-"],["Depreciation","","","-","","","","-","","","","-","","","","-"],["Amortization","","","-","","","","-","","","","-","","","","-"],["Total expenses","","","2,649,015","","","","992.2","%","","","1,837,633","","","","-"],["Segment Loss from Operations","","","(2,382,041",")","","","(892.2","%)","","","(1,837,633",")","","","-"],["Interest and dividend income","","","1,058,527","","","","396.5","%","","","-","","","","-"],["Equity in income of unconsolidated affiliates","","","4,630,610","","","","1734.5","%","","","-","","","","-"],["Other investment income","","","980,410","","","","367.2","%","","","-","","","","-"],["Noncontrolling interest in subsidiary (income) loss","","","(911,292",")","","","(341.4","%)","","","290,932","","","","-"],["Net Income (Loss) Attributable to Common Stockholders","","$","3,376,214","","","","1264.6","%","","$","(1,546,701",")","","","-"]]
[[/GREPCENT_TABLE]]

Comparison of Fiscal 2023 to Fiscal 2022. In September 2017, we formed our asset management business. Throughout fiscal 2022 and fiscal 2023 we have been hiring within our asset management business to ensure adequate staffing for the anticipated demands and needs of the business. In May 2023, we acquired 100% of the membership interests in 24th Street from the members of 24th Street other than BOAM. Therefore, comparisons of our asset management results for fiscal 2023 to fiscal 2022 may not be meaningful. In addition, as previously mentioned, we are winding down BOAM's operations and implementing cost cutting measures. The key factors affecting our asset management operations results during fiscal 2023 were as follows:

[[GREPCENT_TABLE]]
[["","\u25cf","Employee costs in fiscal 2023 increased by 111.0% from fiscal 2022 as we hired for key roles within the business."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Professional fees in fiscal 2023 decreased by 60.5% from fiscal 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","General and administrative expenses in fiscal 2023 increased by 170.7% from fiscal 2022."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Equity in income of unconsolidated affiliates in fiscal 2023 included non-cash gains recognized related to the remeasurement of our previously-held interest in 24th Street."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Other investment income in fiscal 2023 primarily included the changes in the fair value of the special purpose entities (\"SPEs\") held within the 24th Street Funds, mainly driven by unrealized gains related to the commercial real estate properties held by the SPEs, offset by operating costs and commissions associated with the sale of commercial real estate properties."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Noncontrolling interest in subsidiary income in fiscal 2023 mainly included the external limited partners' share of GAAP income within the 24th Street Funds, mainly driven by the change in fair value referenced above."]]
[[/GREPCENT_TABLE]]

51

Table of Contents

Cash Flows

Cash Flows for Fiscal 2023 compared to Fiscal 2022. The table below summarizes our cash flows in dollars for fiscal 2023 and fiscal 2022:

[[GREPCENT_TABLE]]
[["","","2023","","","2022"],["Net cash provided by (used in) operating activities","","$","16,059,125","","","$","(5,165,165",")"],["Net cash (used in) provided by investing activities","","","(64,252,691",")","","","87,862,907"],["Net cash provided by (used in) financing activities","","","32,940,258","","","","(109,725,630",")"],["Net (decrease) increase in cash, cash equivalents, and restricted cash","","$","(15,253,308",")","","$","(27,027,888",")"]]
[[/GREPCENT_TABLE]]

Net Cash Provided by (Used in) Operating Activities. Net cash provided by operating activities was $16,059,125 during fiscal 2023 as compared to net cash used in operating activities of $5,165,165 during fiscal 2022. The increase in net cash provided by operating activities was mainly driven by improved cash flow generation within our billboard and insurance businesses, positive operating cash flow impact from the InfoWest and Go Fiber acquisitions, and the 2021 bonus payments under our Management Incentive Bonus Plan, which totaled $15,000,000 and were paid in January 2022. These items were partially offset by operating costs within our FFH business and our asset management business.

Net Cash (Used in) Provided by Investing Activities. Net cash used in investing activities was $64,252,691 during fiscal 2023 as compared with net cash provided by investing activities of $87,862,907 during fiscal 2022. The decrease in net cash provided by investing activities is primarily attributable to $51,866,340 in capital expenditures, $10,916,955 in business acquisitions, $4,038,855 in payments on short-term payables for business acquisitions and a $3,000,000 investment in preferred stock of a company providing streaming bundle packaging services to the broadband industry to offer to its customers, partially offset by $5,837,231 in net proceeds from sales of investments mainly from the sale or maturity of U.S. Treasury securities.

Net Cash Provided by (Used in) Financing Activities. Net cash provided by financing activities was $32,940,258 during fiscal 2023 as compared to net cash used in financing activities of $109,725,630 during fiscal 2022. During fiscal 2023, net cash provided by financing activities mainly consisted of $37,526,663 in gross proceeds raised through the sale of Class A common stock using our “at the market” program and $5,550,175 in contributions received from noncontrolling interests, partially offset by $6,925,048 in collateral released by UCS, offering costs of $1,280,060 and $1,161,504 in principal payments on Link’s term loan.

Liquidity and Capital Resources

Currently, we own billboards in Alabama, Arkansas, Florida, Georgia, Illinois, Iowa, Kansas, Missouri, Nebraska, Nevada, Oklahoma, South Dakota, Tennessee, Virginia, West Virginia and Wisconsin, a surety insurance company we acquired in December 2016, surety insurance brokerage firms we acquired in 2016, 2017 and 2021, broadband services providers whose assets we acquired in 2020, 2022 and 2023, minority investments in commercial real estate management and brokerage services, a bank focused on servicing the automotive loan market, and a developer of private aviation infrastructure focused on building, leasing and managing business aviation hangars. At December 31, 2023, we had approximately $22 million in unrestricted cash and $18 million in short-term treasury securities (excludes $29 million of short-term treasury securities held by funds consolidated by BOAM). Our strategy is to continue to acquire other billboard locations, insurance businesses, and broadband service providers as well as acquire other businesses and open new businesses which we believe have the potential to generate positive cash flows when made at what we believe to be attractive prices relative to other opportunities generally available to us. We currently expect to finance any future acquisitions and investments with cash, debt and seller or third-party financing. In the future, we may satisfy all or a portion of the purchase price for an acquisition with our equity securities. In addition, we have made investments in several companies and expect to continue to make investments in the securities of both publicly traded and privately held companies.

There can be no assurance that we will consummate any subsequent acquisitions. Furthermore, our acquisitions are subject to a number of risks and uncertainties, including as to when, whether and to what extent the anticipated benefits and cost savings of a particular acquisition will be realized. Our failure to successfully identify and complete future acquisitions of assets or businesses could reduce future potential earnings, available cash and slow our anticipated growth. Although we have entered and continue to enter into non-binding letters of intent to acquire businesses on a regular basis, we do not have current agreements, commitments or understandings for any specific material acquisitions which are probable to be consummated at this time.

To date, we have raised funds through the sale of our common stock in public offerings, sales of our common stock in “at the market” programs, term loan financing through our Link subsidiary, proceeds from the sale of publicly traded securities held by us, cash flow from operations, and, prior to 2019, through private placements of our common stock. As described below, we may raise additional funds through our shelf registration statement allowing us to raise up to $500 million through the sale of securities to fund future acquisitions and investments.

52

Table of Contents

2022 Shelf Registration Statement

In April 2022, we filed a shelf registration statement on Form S-3 (File No. 333-264470) that was declared effective on May 11, 2022, which we refer to as the “2022 Shelf Registration Statement,” relating to the registration of Class A common stock, preferred stock, par value $0.001 per share, which we refer to as “preferred stock,” debt securities and warrants of the Company for up to $500 million. We may, from time to time, in one or more offerings, offer and sell Class A common stock or preferred stock, various series of debt securities, and/or warrants. The shelf registration statement may also be used by one or more selling security holders, to be identified in the future, of our securities. We or any selling security holders may offer these securities from time to time in amounts, at prices and on terms determined at the time of offering. We may sell these securities to or through one or more underwriters, dealers or agents or directly to purchasers on a delayed or continuous basis. Unless otherwise set forth in an applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities that we offer for general corporate purposes, including, but not limited to, financing our existing businesses and operations, and expanding our businesses and operations through additional hires, strategic alliances and acquisitions. Unless otherwise set forth in a prospectus supplement, we will not receive any proceeds from the sale of securities by any selling stockholders.

Additionally, in the 2022 Shelf Registration Statement, we registered for resale up to 8,297,093 shares of Class A common stock acquired in 2018 or earlier in private placements in accordance with the terms of a 2018 registration rights agreement. We will not receive any proceeds from the sale of Class A common stock by the selling shareholders. Currently, the selling stockholders are the Massachusetts Institute of Technology, or “MIT,” as well as 238 Plan Associates LLC, an MIT pension and benefit fund, and a limited partnership holding our Class A common stock for the economic benefit of MIT. No officer or director has any beneficial interest in any shares eligible for resale by the selling shareholders.

53

Table of Contents

At The Market Offering Programs

Starting in March 2018, we utilized our "at the market" offering that was part of our 2018 Shelf Registration Statement. This 2018 Shelf Registration Statement, which authorized us to sell up to $200 million through the sales of securities to the public, expired in February 2021 and was superseded by the 2021 Shelf Registration Statement. We sold a total of 2,630,787 shares of Class A common stock resulting in gross proceeds of $60.1 million under the 2018 Shelf Registration Statement. 

On September 29, 2021, we entered into an "at the market" equity offering program pursuant to a Sales Agreement (the "2021 Sales Agreement") by and between us and WFS. Pursuant to the terms of the 2021 Sales Agreement, we could sell, from time to time, shares of our Class A common stock, with an aggregate sales price of up to $100 million through WFS, in transactions that are deemed to be "at the market" offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”). The 2021 Shelf Registration Statement expired on March 28, 2022 upon the filing of our 2021 Annual Report on Form 10-K as we no longer qualified as a well-known seasoned issuer. We sold a total of 122,246 shares of our Class A common stock resulting in gross proceeds of approximately $4.2 million under the the 2021 Shelf Registration Statement.

On  December 8, 2022, we entered into an "at the market" equity offering program (the “ATM Program”) pursuant to a Sales Agreement (the “2022 Sales Agreement”) with Wells Fargo Securities, LLC (“WFS”). This ATM Program is consistent with our historical practice of having available to management the option to issue stock from time to time in order to continue to fund the growth of its fiber-to-the-home broadband business, acquire additional billboards, and make other such investments in assets as needed to seek to grow intrinsic value per share.  Our general preference is always to have options available to it from a capital allocation perspective which includes, but is not limited to, having a regularly filed ATM program.

Pursuant to the terms of the 2022 Sales Agreement, we may sell, from time to time, shares of our Class A common stock, par value $0.001 per share (the “Class A common stock”), with an aggregate sales price of up to $100 million through WFS, in transactions that are deemed to be “at the market” offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”).  Since the signing of the 2022 Sales Agreement, we sold 7,887 shares of Class A common stock in December 2022 for gross proceeds of approximately $205 thousand and 1,532,065 shares of our Class A common stock during fiscal 2023 for gross sale proceeds of approximately $37.5 million.

Upon delivery of a placement notice (a “Placement Notice”) and upon the terms and subject to the conditions of the 2022 Sales Agreement, WFS will use reasonable efforts consistent with its normal trading and sales practices, applicable laws and the rules of the NYSE to sell the shares available under the ATM Program from time to time based upon our instructions for the sales, including price, time or size limits specified, and otherwise in accordance with, the terms of such Placement Notice. Pursuant to the 2022 Sales Agreement, WFS may sell shares of our Class A common stock under the ATM Program by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, including without limitation sales made through the NYSE or on any other existing trading market for the Class A common stock. Notwithstanding the foregoing, WFS may not purchase shares under the ATM Program for its own account as principal unless expressly authorized to do so by us. 

We intend to use the net proceeds from the offering, after deducting WFS’ commissions and our offering expenses, for general corporate purposes, which may include financing our existing businesses and operations, and expanding our businesses and operations through additional acquisitions and minority investments, and additional hires. Such expansion may include future billboard acquisitions, broadband acquisitions, acquisitions of surety insurance companies and other growth of our insurance activities, additional investments in real estate management, homebuilding and other real estate service businesses, additional investments in subprime automobile lending, and acquisitions of other businesses. We have not determined the amount of net proceeds to be used for any specific purpose, and we will retain broad discretion over the allocation of net proceeds. While we have no current agreements, commitments or understandings for any specific acquisitions at this time, we may use a portion of the net proceeds for these purposes.

For sales of shares of Class A common stock under the ATM Program through WFS, we will pay WFS a commission at a mutually agreed rate of 3% of the gross sales price per share of Class A common stock sold under the ATM Program. We have no obligation to sell any shares under the 2022 Sales Agreement and may at any time suspend the ATM Program under the 2022 Sales Agreement. The 2022 Sales Agreement contains customary representations and warranties of the parties and indemnification and contribution provisions under which we and WFS have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. The ATM Program pursuant to the 2022 Sales Agreement will automatically terminate upon the issuance and sale of all of the shares available for sale under the ATM Program through WFS. In addition, we may terminate the 2022 Sales Agreement with WFS without penalty upon 10 days’ notice. 

The foregoing description of the 2022 Sales Agreement is not complete and is qualified in its entirety by reference to the full text of such agreement, a copy of which is filed as Exhibit 1.1 to the Current Report on Form 8-K dated December 8, 2022 and is incorporated herein by reference. 

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Link Credit Agreement

On August 12, 2019, Link entered into a Credit Agreement (the “Credit Agreement”) with First National Bank of Omaha (the “Lender”) under which Link could borrow up to $40 million (the “Credit Facility”). The Credit Agreement provided for an initial term loan (“Term Loan 1”), an incremental term loan (“Term Loan 2”) and a revolving line of credit. Link initially borrowed approximately $18 million under Term Loan 1 and $5.5 million under Term Loan 2. On December 6, 2021, Link entered into a Fourth Amendment to Credit Agreement, which modified the Credit Agreement by increasing the borrowing limit to $30 million and combining the outstanding balances under Term Loan 1 and Term Loan 2 as well as any incremental borrowings into a term loan (“Term Loan”). The Term Loan is secured by all assets of Link and its operating subsidiaries, including a pledge of equity interests of each of Link’s subsidiaries. In addition, each of Link’s subsidiaries has joined as a guarantor to the obligations under the Credit Agreement. The loan is not guaranteed by Boston Omaha or any of our non-billboard businesses. Long-term debt included within our consolidated balance sheet as of  December 31, 2023 consists of Link’s Term Loan borrowings of $27,337,766, of which $814,667 is classified as current. There were no amounts outstanding related to the revolving line of credit as of  December 31, 2023.

Principal amounts under the Term Loan were payable in monthly installments according to a 15-year amortization schedule with principal payments commencing on January 1, 2022. Starting July 1, 2023, principal amounts under the Term Loan are payable in monthly installments according to a 25-year amortization schedule. The Term Loan is payable in full on December 6, 2028. During the first three years of the Term Loan, Link may prepay up to 10% of the loan principal in each year without incurring any prepayment penalty. Otherwise, there is a prepayment penalty ranging between 3.0% and 0.5%. After three years, there is no prepayment penalty. The Term Loan has a fixed interest rate of 4.00% per annum. On September 22, 2023, the maximum availability under the revolving line of credit loan facility was increased from $5,000,000 to $10,000,000. Interest payments are based on the U.S. Prime Rate minus an applicable margin ranging between 0.65% and 1.15% dependent on Link’s consolidated leverage ratio. The new revolving line of credit is due and payable on August 12, 2025.

Under the Term Loan, Link is required to comply with the following financial covenants: A consolidated leverage ratio for any test period ending on the last day of any fiscal quarter of Link (a) beginning with the fiscal quarter ended December 31, 2021 of not greater than 3.50 to 1.00, (b) beginning with the fiscal quarter ended December 31, 2022 of not greater than 3.25 to 1.00 and (c) beginning with the fiscal quarter ended December 31, 2023 and thereafter of not greater than 3.00 to 1.00, and a minimum consolidated fixed charge coverage ratio of not less than 1.15 to 1.00 measured quarterly, based on rolling four quarters. The Company was in compliance with these covenants as of  December 31, 2023.

The Credit Agreement includes representations and warranties, reporting covenants, affirmative covenants, negative covenants, financial covenants and events of default customary for financings of this type. Upon the occurrence of an event of default the Lender may accelerate the loan. Upon the occurrence of certain insolvency and bankruptcy events of default the loan will automatically accelerate. The foregoing summary of the Credit Agreement and the transactions contemplated thereby does not purport to be a complete description and is qualified in its entirety by reference to the terms and conditions of the Credit Agreement and Security Agreement, copies of which are attached as Exhibit 10.1 and Exhibit 10.2, respectively to our Form 8-K as filed with the SEC on August 13, 2019, a First Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on October 29, 2019, a Second Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on June 30, 2020, a Third Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on August 24, 2021, a Fourth Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on December 9, 2021, a Fifth Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on June 3, 2022, a Sixth Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on April 11, 2023, a Seventh Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on September 26, 2023, and an Eighth Amendment to Credit Agreement with the Lender as filed as Exhibit 10.1 on Form 8-K as filed with the SEC on February 16, 2024.

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Investments in Yellowstone Acquisition Company and Sky Harbour

In 2020, we acted as the sponsor for the initial public offering of Yellowstone and purchased 3,399,724 shares of Yellowstone Class B common stock and 7,719,799 private placement warrants at a combined cost of approximately $7.8 million. On August 1, 2021, we entered into an equity purchase agreement with Sky Harbour LLC by which Sky Harbour LLC unitholders would acquire a majority interest in the combined businesses following the completion of a business combination. As part of the equity purchase agreement, and immediately prior to the completion by Sky Harbour LLC of a private activity bond financing raising $160 million in proceeds in September 2021, we purchased Class B Preferred Units in Sky Harbour LLC for a purchase price of $55 million, which Class B Preferred Units converted to 5,500,000 shares of Sky Harbour Class A common stock upon the closing of the Sky Harbour business combination on January 25, 2022. Also, upon the closing of the business combination, we purchased an additional 4,500,000 shares of Sky Harbour Class A common stock for a purchase price of $45 million.

[[GREPCENT_TABLE]]
[["","\u25cf","Upon the closing of the Sky Harbour business combination, our Class B common stock converted to Class A common stock of Sky Harbour and our private placement warrants are now exercisable to purchase 7,719,779 shares of Class A common stock of Sky Harbour."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Each Sky Harbour Warrant is exercisable for one share of Class A common stock at a price of $11.50 per share, subject to adjustment, with each Sky Harbour Warrant being exercisable through January 25, 2027. Unlike Sky Harbour\u2019s publicly traded warrants, these warrants are not redeemable by Sky Harbour as long as we or permitted transferees hold these warrants. The Sky Harbour Warrants are also exercisable on a cashless basis."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Our Sky Harbour Class A common stock and the Sky Harbour Warrants and the shares underlying the warrants were subject to a lockup which expired on January 24, 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Subsequent to the closing of the Sky Harbour business combination, we distributed 75,000 shares of Sky Harbour Class A common stock to the outside directors of Yellowstone and 206,250 shares of Sky Harbour Class A common stock to an investor in the Yellowstone IPO. As of December 31, 2023, we hold 13,118,474 shares of Sky Harbour Class A common stock and 7,719,779 Sky Harbour Warrants."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","All the shares of Sky Harbour Class A common stock and Sky Harbour Warrants to purchase Class A common stock that we hold have been registered under the Securities Act. However, our ability to resell any significant portion of these shares is limited by both the large number of shares and warrants we hold relative to the average trading volume of these securities as well as blackout periods which may prevent us from selling shares as one of our Co-Chief Executive Officers serves on Sky Harbour\u2019s Board of Directors. The terms of the Sky Harbour business combination prohibited us from selling any of our securities in Sky Harbour prior to January 25, 2023 and has since expired."]]
[[/GREPCENT_TABLE]]

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We believe that our existing cash and short-term investments, funds available through the Credit Agreement Link entered into on August 12, 2019, as amended, and any funds that we may receive from cash flows from operations will be sufficient to meet working capital requirements and anticipated capital expenditures for the next 12 months. At December 31, 2023, we had approximately $22 million in unrestricted cash and $18 million in short-term treasury securities (excludes $29 million of short-term treasury securities held by funds consolidated by BOAM).

If future additional significant acquisition opportunities, expansion opportunities within our billboard and broadband services businesses, and possible further development under our build for rent business become available in excess of our currently available cash, U.S. Treasury securities, and marketable equity securities, we may need to seek additional capital through long term debt borrowings, the sale of our securities, and/or other financing options and we may not be able to obtain such debt or equity financing on terms favorable to us or at all. In the future, we may use a number of different sources to finance our acquisitions and operations, including current cash on hand, potential future cash flows from operations, seller financing, debt financings including but not limited to long-term debt and line of credit facilities, including additional credit facilities which may or may not be secured by our assets or those of our operating subsidiaries, additional common or preferred equity issuances or any combination of these sources, to the extent available to us, or other sources that may become available from time to time, which could include asset sales and issuance of debt securities. In addition to Link’s current credit facility, any future debt that we incur may be recourse or non-recourse and may be secured or unsecured. Link’s existing credit facility imposes restrictions on Link that could increase our vulnerability to general adverse economic and industry conditions by limiting our flexibility in planning for and reacting to changes in our billboard, insurance, asset management, and broadband businesses. Specifically, these restrictions place limits on Link and its subsidiaries’ ability to, among other things, incur additional indebtedness, make additional acquisitions and investments, pay dividends, repurchase stock, create liens, enter into transactions with affiliates, merge or consolidate or transfer or sell our billboard assets. Link’s credit facility requires it to meet a fixed charge coverage ratio and other financial covenants. Link’s ability to comply with these loan covenants may be affected by factors beyond its control and a breach of any loan covenants would likely result in an event of default under the Credit Agreement, which would permit the Lender to declare all amounts incurred thereunder to be immediately due and payable and to terminate their commitment to make future extensions of credit. We also may take advantage of joint venture or other partnering opportunities as such opportunities arise in order to acquire properties that would otherwise be unavailable to us. Any future credit facilities which we or any of our subsidiaries may enter into would likely impose similar restrictions and risks.

We may use the proceeds of any future borrowings to acquire assets or for general corporate purposes. In determining when to use leverage, we will assess the appropriateness of new equity or debt capital based on market conditions, including assumptions regarding future cash flow, the creditworthiness of customers, and future rental rates.

We conduct and plan to continue to conduct our activities in such a manner as not to be deemed an investment company under the Investment Company Act of 1940 (the "Investment Company Act").  Therefore, no more than 40% of our total assets can be invested in investment securities, as such term is defined in the Investment Company Act. In addition, we do not invest or intend to invest in securities as our primary business. Although we do not currently hold investments in an amount which would cause us to register under the Investment Company Act, we run the risk of inadvertently being deemed to be an investment company that is required to register under the Investment Company Act because a significant portion of our assets consists of investments in companies in which we own less than a majority interest. The risk varies depending on events beyond our control, such as significant appreciation or depreciation in the market value of certain of our publicly traded holdings, adverse developments with respect to our ownership of certain of our subsidiaries, and transactions involving the sale of certain assets. If we are deemed to be an inadvertent investment company, we may seek to rely on a safe-harbor under the Investment Company Act that would provide us a one-year grace period to take steps to avoid being deemed to be an investment company. In order to ensure we avoid being deemed an investment company, we have taken, and may need to continue to take, steps to reduce the percentage of our assets that constitute investments assets under the Investment Company Act. These steps have included, among others, selling marketable securities that we might otherwise hold for the long-term and deploying our cash in non-investment assets. We have recently sold marketable securities, including at times at a loss, and we may be forced to sell our investment assets at unattractive prices or to sell assets that we otherwise believe benefit our business in the future to remain below the requisite threshold. We may also seek to acquire additional non-investment assets to maintain compliance with the Investment Company Act, and we may need to incur debt, issue additional equity or enter into other financing arrangements that are not otherwise attractive to our business. Any of these actions could have a material adverse effect on our results of operations and financial condition. Moreover, we can make no assurance that we would successfully be able to take the necessary steps to avoid being deemed to be an investment company in accordance with the safe-harbor. If we were unsuccessful, then we would have to register as an investment company, and we would be unable to operate our business in its current form. We would be subject to extensive, restrictive, and potentially adverse statutory provisions and regulations relating to, among other things, operating methods, management, capital structure, indebtedness, dividends, and transactions with affiliates. If we were deemed to be an investment company and did not register as an investment company when required to do so, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, that we would be unable to enforce contracts with third parties, and/or that third parties could seek to obtain rescission of transactions with us undertaken during the period in which we were deemed to be an unregistered investment company.

Our certificate of incorporation and bylaws do not limit the amount of debt that we may incur. Our Board of Directors has not adopted a policy limiting the total amount of debt that we may incur. Our Board of Directors will consider a number of factors in evaluating the amount of debt that we may incur. If we adopt a debt policy, our Board of Directors may from time to time modify such policy in light of then-current economic conditions, relative costs of debt and equity capital, market values of our properties, general conditions in the markets for debt and equity securities, fluctuations in the market price of our Class A common stock if then trading on any exchange, growth and acquisition opportunities, and other factors. Our decision to use leverage in the future to finance our assets will be at our discretion and will not be subject to the approval of our stockholders, and we are not restricted by our governing documents or otherwise in the amount of leverage that we may use.

Off-Balance Sheet Arrangements

Except for our normal operating leases, we do not have any off-balance sheet financing arrangements, transactions or special purpose entities.

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Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements and related notes to the consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base these estimates on historical results and various other assumptions believed to be reasonable, all of which form the basis for making estimates concerning the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

In the notes accompanying the consolidated financial statements, we describe the significant accounting policies used in the preparation of our consolidated financial statements. We believe that the following represent the most significant estimates and management judgments used in preparing the consolidated financial statements.

Consolidation Policy

The financial statements of Boston Omaha Corporation include the accounts of the Company and our consolidated subsidiaries, which are comprised of voting interest entities in which we have a controlling financial interest and variable interest entities in which we are the primary beneficiary in accordance with ASC 810, Consolidation. The equity attributable to non-controlling interests in subsidiaries is shown separately in the accompanying consolidated balance sheets.

Retention of Specialized Accounting

Each of 24th Street Fund I and 24th Street Fund II, collectively “the 24th Street Funds,” and Fund One Boston Omaha Build for Rent LP qualify as investment companies and apply specialized industry accounting. We report fund investments on our consolidated balance sheets at their estimated fair value, with gains (losses) resulting from changes in fair value reflected within ‘Other investment income’ in the accompanying consolidated statements of operations. Accordingly, the accompanying consolidated financial statements reflect different accounting policies for investments depending on whether or not they are held through a consolidated investment company.

Purchased Intangibles and Other Long-Lived Assets

We amortize intangible assets with finite lives over their estimated useful lives, which range between five years and 50 years as follows: 

[[GREPCENT_TABLE]]
[["","","Years"],["Customer relationships","","","10 to 15"],["Permits, licenses, and lease acquisition costs","","","10 to 50"],["Noncompetition and nonsolicitation agreements","","","5"],["Technology, trade names, and trademarks","","","10 to 20"],["Site location","","","15"],["Capitalized contract costs","","","10"]]
[[/GREPCENT_TABLE]]

Purchased intangible assets, including long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors considered in reviewing the asset values include consideration of the use of the asset, the expected life of the asset, and regulatory or contractual provisions related to such assets. Market participation assumptions are compared to our experience and the results of the comparison are evaluated. For finite-lived intangible assets, the period over which the assets are expected to contribute directly to future cash flows is evaluated against our historical experience. Impairment losses are recognized only if the carrying amount exceeds its fair value.

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We have acquired goodwill related to our various business acquisitions. Goodwill represents future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill, by reporting unit, is reviewed annually for impairment or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. For our annual review, we employ a third-party valuation expert. Factors considered in the annual evaluation include deterioration in economic conditions (both macro and geographic), limitations on accessing capital, and market value of our company. Industry and market conditions such as changes in competition, the general state of the industry, regulatory and political developments, and changes in market multiples are additional components of the valuation. Changes in key personnel, strategy, and customer retention are also reviewed. If industry and economic conditions deteriorate, we may be required to assess goodwill impairment before the next annual test, which could result in impairment charges. The discounted cash flow approach that we use for valuing goodwill as part of the impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate.  Key assumptions utilized in estimating the future cash flows expected to be generated by each reporting unit primarily relate to forecasted revenues and premiums earned.

Goodwill

Goodwill represents future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is subject to an annual impairment test. We designated October 1 as the date of our annual goodwill impairment test. We are required to identify our reporting units and determine the carrying value of each reporting unit. We analyze financial information of our operations to identify discrete segments that constitute a reporting unit. We assign assets acquired and liabilities assumed in business combinations to those reporting units. We have identified four reporting units: billboard operations, broadband operations, insurance brokerage and insurance carrier operations, and asset management operations. We are required to determine the fair value of each reporting unit and compare it to the carrying amount of the reporting unit. To the extent the carrying amount of a reporting unit exceeds the fair value of the reporting unit, we would be required to book an impairment loss. For our annual review of reporting units, we employ a third party valuation expert. 

We conduct a qualitative assessment by examining relevant events and circumstances which could have a negative impact on our goodwill, including macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, reporting unit dispositions and acquisitions, our market capitalization and other relevant events specific to us. If, after assessing the totality of events or circumstances described above, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will perform a quantitative impairment test.  If industry and economic conditions deteriorate, we may be required to assess goodwill impairment before the next annual test, which could result in impairment charges. The discounted cash flow approach that we use for valuing goodwill as part of the impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate.

Acquisitions

For transactions that meet the definition of a business combination, we allocate the purchase price, including any contingent consideration, to the assets acquired and the liabilities assumed at their estimated fair values as of the date of the acquisition with any excess of the purchase price paid over the estimated fair value of net assets acquired recorded as goodwill. For transactions that meet the definition of a business combination, the determination of the final purchase price and the acquisition-date fair value of identifiable assets acquired and liabilities assumed may extend over more than one period and result in adjustments to the preliminary estimate recognized in the prior period financial statements. For transactions that meet the definition of asset purchases, we allocate the purchase price to the assets acquired and the liabilities assumed at their estimated relative fair values as of the date of the acquisition.

The fair value of the assets acquired and liabilities assumed is typically determined by using either estimates of replacement costs or discounted cash flow valuation methods. When determining the fair value of tangible assets acquired, we estimate the cost to replace the asset with a new asset, adjusted for an estimated reduction in fair value due to age of the asset, and the economic useful life. When determining the fair value of intangible assets acquired, we estimate the applicable discount rate, the timing and amount of future cash flows, the applicable income tax rates, and an appropriate customer attrition rate.

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Yellowstone Warrants Accounting 

We account for warrants for shares of Yellowstone's common stock that are not indexed to Yellowstone's own stock as liabilities at fair value on the balance sheet. The warrants are subject to remeasurement at each balance sheet date and any change in fair value is recognized in our statement of operations. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as a liability at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Public Warrants issued in connection with Yellowstone's Public Offering has been measured based on the listed market price of such Warrants (see Note 8 and Note 9 to the Notes to our Financial Statements for further discussion).

Losses and Loss Adjustment Expenses

Unpaid losses and loss adjustment expenses represent estimates for the ultimate cost of unpaid reported and unreported claims incurred and related expenses. Estimates for losses and loss adjustment expenses are based on past experience of investigating and adjusting claims and consideration of the level of premiums written during the current and prior year. Since the reserves are based on estimates, the ultimate liability may differ from the estimated reserve. The effects of changes in estimated reserves are included in the results of operations in the period in which the estimates are updated.