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Note 9 - Fair Value
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

NOTE 9.

FAIR VALUE 

 

The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three broad levels:

 

Level 1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2 — Inputs other than quoted prices in active markets that are observable either directly or indirectly, including: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

 

Level 3 — Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its own assumptions.

 

At December 31, 2022 and 2021, our financial instruments included cash, cash equivalents, receivables, marketable securities, investments, accounts payable, and long-term debt. The carrying value of cash, cash equivalents, receivables, and accounts payable approximates fair value due to the short-term nature of the instruments. The fair value of long-term debt is estimated using quoted prices for similar debt (level 2 in the fair value hierarchy). At December 31, 2022, the estimated fair value of our long-term debt was $26,258,113 which is less than the carrying amount of $28,499,270.

 

Warrants 

 

We previously determined that the Public Warrants issued in connection with Yellowstone's initial public offering in October 2020 were subject to treatment as a liability. Prior to the deconsolidation of Yellowstone which occurred on January 25, 2022, we marked the Public Warrants to market based upon their observable trading price with changes in fair value recognized in the statement of operations. Our re-measurement of the Public Warrants from January 1, 2022 to January 25, 2022, and January 1, 2021 to December 31, 2021, resulted in a gain of $1,837,211 and $2,854,407 respectively, which is included within "Remeasurement of warrant liability" within our Consolidated Statements of Operations. The Public Warrants were classified as Level 1 as of December 31, 2021.

 

Following the business combination between Yellowstone Acquisition Company and SHG which occurred on January 25, 2022, we no longer eliminate our investment in the Private Placement Warrants.  Our Private Placement warrants related to Sky Harbour are considered level 2 and measured at fair value using observable inputs for similar assets in an active market. Our re-measurement of the Private Placement Warrants from January 25, 2022 to December 31, 2022, resulted in a loss of $2,714,274 included within Other investment (loss) income within our Consolidated Statements of Operations. 

 

Marketable Equity Securities

 

On an investment life-to-date basis, we have realized net gains on the sale of equity securities within the marketable equity portfolio held at Boston Omaha of approximately $84,000,000. Of this amount, approximately $38,200,000 and $40,400,000 were realized during the years ended December 31, 2022 and 2021, respectively.  These amounts exclude any realized gains on equity securities held within the marketable equity portfolio managed by UCS.

 

Sky Harbour Group Corporation Class A common stock

 

We account for our 22.96% equity interest in Sky Harbour, comprised of 13,118,474 shares of Class A common stock, under the equity method. If our investment in Sky Harbour's Class A common stock was accounted for at fair value based on its quoted market price as of December 31, 2022, it would be valued at approximately $34,900,000.

 

Contingent Consideration associated with Business Combination

 

The contingent consideration recorded in conjunction with our acquisition of ACS as discussed in Note 6 was classified as Level 3 in the fair value hierarchy as the calculation is dependent upon projected company specific inputs using a Monte Carlo simulation. During fiscal year 2022, the estimated fair value of the contingent consideration liability decreased by $900,000 based upon updated information, including 2022 results and forecasted 2023 amounts.  Changes in fair value are reported in earnings for the respective period. 

 

Marketable Equity Securities, U.S. Treasury Trading Securities, and Corporate Bonds

 

Marketable equity securities and U.S. Treasury trading securities are reported at fair values. Substantially all of the fair value is determined using observed prices of publicly traded securities, level 1 in the fair value hierarchy.

 

                 
     Quoted Prices  Realized Gains  Total Changes 
  Total Carrying  in Active  and (Losses)  in Fair Values 
  Amount in  Markets for  Included in  Included in 
  Consolidated  Identical  Current Period  Current Period 
  

Balance Sheet

  

Assets

  

Period Earnings

  

Earnings (Loss)

 
                 

Marketable equity securities, U.S. Treasury trading securities, and corporate bonds at December 31, 2022

 $42,289,339  $42,289,339  $(9,485,637) $(6,150,053)
                 

Marketable equity securities, U.S. Treasury trading securities, and corporate bonds at December 31, 2021

 $158,162,401  $158,162,401  $44,610,838  $48,613,962