JETMF 10-K/A
Global Crossing Airlines Group Inc. (JETMF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No.1
For the fiscal year ended
OR
For the transition period from to
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The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2022 was $
The total number of the registrant’s shares outstanding as of March 1, 2023 was 54,062,134 shares., consisting of
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated by reference from the registrant’s definitive proxy statement for its 2021 Annual Meeting of Stockholders. Such proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
EXPLANATORY NOTE
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Financial Statements included in Item 8 of this report.
Business Overview
Global Crossing Airlines Group Inc. operates a US Part 121 domestic flag and supplemental airline using the Airbus A320 family of aircraft. GlobalX’s business model is to (1) provide services on an Aircraft, Crew, Maintenance and Insurance using wet lease contracts to airlines and non-airlines, and (2) on a Full Service basis whereby we provide passenger aircraft charter services to customers by charging an “all-in” fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs. GlobalX operates within the United States, Europe, Canada, Central and South America. GlobalX began operating the Airbus A321 freighter during the first quarter of 2023 after completing all FAA certification requirements with the A321F.
Focused on becoming a Market leader with differentiated, value-creating solutions
GlobalX intends to become the best-in-class U.S. narrow-body, ACMI charter airline, operating both passenger and cargo charter aircraft while recruiting and maintaining a dynamic team of customer-centric flight crews, ground and maintenance teams and management staff.
GlobalX operates its A320 family aircraft for airlines, tour operators, college and professional sports teams, incentive groups, resorts and casino groups and government agencies. It is our goal to deliver best in class on time performance and dispatch reliability; Expand existing relationships and develop additional relationships with leading charter/our operators to provide aircraft during their peak seasons; and provide ad-hoc and track charter programs for non-airline customers, including hotels, casinos, cruise ship companies, tour operators.
Cargo charter flights with A321P2F (Passenger to Freighter)
GlobalX added A321F (passenger to freighter) aircraft to its operating certificate and into the fleet during Q1 2023, and cargo is an integral part of the GlobalX business. GlobalX operates its A321Fs under ACMI charter operations with major package operators and major freight and logistics companies. Under these arrangements, customarily, these operators will take the commercial risk associated with the selling of the cargo and provide all ground handling and cargo-specific operations, with GlobalX assuming the operational risk of providing a functional aircraft, trained crew, in a safe and on time manner as the ACMI operator.
Location of Operations Bases
GlobalX will initially operate from one primary geographic base:
GlobalX also maintains two additional crew bases at the following locations:
Reducing Operational Costs
To control costs and maintain a competitive cost per Block Hour flown, GlobalX:
2
Marketing Plan
GlobalX plans to achieve its revenue goals by flying charter operations for a variety of client groups:
GlobalX Aircraft Fleet
Critical to GlobalX’s business model is a fleet of modern and cost-effective aircraft. To achieve this objective, GlobalX has selected what it believes is the best overall single-aisle aircraft family to operate. This approach differs from traditional airlines, which purchase a variety of aircraft, often from different manufacturers, to achieve their operational flight sectors, resulting in increased training, operating and spare part costs. GlobalX conducted research to determine the best aircraft to fly in competition with other narrow-body charter airlines in the single-aisle seat market and GlobalX selected the A320 aircraft family.
The following factors support GlobalX’s choice to operate the Airbus A320 and A321 aircraft versus the Boeing family of aircraft:
Cost and Operating factors: lower fuel burn, and better aircraft and cockpit crew pool availability.
Operational Capability: the A320 has a range advantage over the 737-800 and can fly non-stop from Miami to selected airports in North America, South America, the Caribbean, and between most major destinations in Europe. The A320 has excellent maintenance dispatch reliability and strong availability of spare parts and components, making the A320, in management’s estimation, the most popular aircraft among low-cost airlines.
Passenger comfort: better seat width, cargo bin volume for carry-on baggage and cargo hold volume.
Aircraft Maintenance
Heavy maintenance checks are expected to be sourced out to FAA-approved service providers. The "6Y" and "12Y" checks will be primarily paid for using funds from the accrued maintenance reserves paid to lessors under operating leases.
Strategy to Address Competitive Response
We expect the existing charter operators based in the U.S. to respond to GlobalX’s entry into the market by lowering their pricing to customers. The expected competitive response typically includes lowered ACMI rates for key contracts. We believe GlobalX’s existing relationships with potential customers and the underserved demand in the U.S., coupled with our newer planes allowing for a more cost-efficient operation, will allow us to address any competitive pressure and grow as anticipated.
GlobalX Charter Service
GlobalX is a charter provider that currently focuses exclusively on providing customized, non-scheduled passenger air transport services with narrow-body Airbus A320 and A321 aircraft. Our primary line of business and focus is commercial charter services from MIA to destinations throughout North and South America and the Caribbean, with established scheduled airlines that need additional air lift to supplement their own, and established tour and travel operators that sell tour packages in and between these markets.
We provide our services through two contract structures: (1) ACMI and (2) Charter
We believe operating charter flights will largely insulate our expected profitability from fluctuations in jet fuel prices, which are typically the largest and most volatile expense for an air carrier. Under the vast majority of our commercial passenger charter arrangements, our
3
customers bear 100% of the cost of jet fuel. In addition, consistent with industry practice, we plan for those customers to pay us our contract price approximately two weeks in advance of their flights.
Because we expect that our ACMI customers would be responsible for fuel costs, our expected commercial ACMI revenues would not be affected directly by fuel price changes. However, a significant increase in fuel prices would likely have an adverse effect on demand for the use of our aircraft, which could have a material adverse effect on our profitability and financial position.
Experienced management team
Our management team has extensive operating and leadership experience in the airfreight, airline, and aircraft leasing, maintenance, and management industries at companies such as Republic Airways, Eastern Airlines, JetBlue Airways, Virgin America, Hawaiian Airlines, American Airlines, US Airways, Atlas Air, Breeze Airways, Emirates, North American Airlines, Miami Air, AAR, Continental Airlines, Pan Am, Atlantic Coast Airlines, and Flair Airlines, as well as the United States Army, and Air Force. In addition, our management team has a diversity of experience from other industries at companies such as KBR, Teladoc, The Home Depot, Halliburton, Lehman Brothers, and the Burger King Corporation.
Business Strategy
GlobalX seeks to become the best-in-class U.S. narrow-body, ACMI and Full Contract charter airline, operating both passenger and cargo charter aircraft while recruiting and maintaining a dynamic team of customer-centric flight crews, ground teams and management staff.
In launching a US 121 Flag and Supplemental charter airline in the United States, GlobalX has done, or plans to do, the following:
Operate passenger charter flights with A320/A321 all passenger aircraft
GlobalX operates its A320 family aircraft under ACMI/Full Contract charter operations for major airlines, tour operators, college and professional sports teams, incentive groups, major resorts and casino groups.
Operate cargo charter flights with A321P2F (Passenger to Freighter)
GlobalX added A321F (passenger to freighter) aircraft to its operating certificate and into the fleet during Q1 2023. Cargo is an important revenue stream for airlines and it is an integral part of the GlobalX operation.
GlobalX intends to operate its A321Fs under ACMI/Wet Lease charter operations with major package operators and major freight and logistics companies. Under these arrangements, customarily, these operators will take the commercial risk associated with the selling of the cargo capacity and provide all ground handling and cargo-specific operations, with GlobalX assuming the operational risk of providing a functional aircraft, trained crew, in a safe and on time manner as the ACMI operator.
Business Developments
Our results for 2021 and 2022 were impacted by the following:
4
Results of Operations
The following discussion should be read in conjunction with our Financial Statements and other financial information appearing and referred to elsewhere in this report.
Years ended December 31, 2022 and 2021
Operating Revenue & Statistics
The analysis of GlobalX results, comparing 2021 and 2022, requires an understanding of how the Company fundamentally evolved during that time period. Prior to August of 2021, GlobalX was a pre-revenue airline attempting to secure the required government approvals (Department of Transportation and Federal Aviation Authority) to commence commercial operations. These approvals were obtained in August of 2021; which marked the beginning of commercial operations. It cannot be understated how different the costs required to operate aircraft versus applying for approval to operate aircraft. The operation of aircraft involves the requirement to pay for fuel, ground services, maintenance, increased staff (in the form of head office and flight crews) and travel which is required to get crews where they need to be to operate flights. In 2021 we conducted commercial operations for five months and in 2022 we conducted commercial operations for twelve months. This factor alone is the single largest driver of increased revenue and operating expenses when comparing 2021 to 2022. This activity level is manifested in block hours, which is the measure by which we track all commercial activity. While other airlines discuss available seat miles and revenue per available seat mile (“rasm”), cost per available seat mile (“casm”), these metrics are not germane to our business model as an ACMI operator. We charter the entire aircraft, we do not take fuel risk, we do not take third party risk and as such review and evaluate all results on a block hour basis.
The following table compares our Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated:
Operating Fleet |
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2022 |
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2021 |
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Inc/(Dec) |
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Inc/(Dec) |
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A320 |
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5.6 |
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0.8 |
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4.8 |
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600 |
% |
A321 |
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1.0 |
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0.4 |
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0.6 |
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150 |
% |
Total Operating Average Aircraft Equivalents |
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6.6 |
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1.2 |
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5.4 |
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450 |
% |
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5
The following table describes the degree to which variations in revenues can be attributed to fluctuations in prices and nature of GlobalX services.
Operating Revenue |
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2022 |
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2021 |
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Inc/(Dec) |
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% Change |
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Charter |
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$ |
73,318,834 |
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$ |
10,859,313 |
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$ |
62,459,520 |
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575.2 |
% |
ACMI |
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13,374,760 |
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2,212,760 |
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11,162,000 |
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504.4 |
% |
Other |
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10,416,611 |
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1,220,399 |
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9,196,212 |
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753.5 |
% |
Total |
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97,110,205 |
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14,292,472 |
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82,817,732 |
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579.5 |
% |
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Block Hours |
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2022 |
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2021 |
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Inc/(Dec) |
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% Change |
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Charter |
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6,253 |
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1,004 |
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5,249 |
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522.9 |
% |
ACMI |
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2,328 |
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656 |
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1,672 |
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254.8 |
% |
Non Revenue |
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85 |
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19 |
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66 |
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348.0 |
% |
Total |
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8,666 |
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1,679 |
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6,987 |
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416.1 |
% |
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Revenue per Block Hour |
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2022 |
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2021 |
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Inc/(Dec) |
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% Change |
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Charter |
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$ |
11,726 |
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$ |
10,818 |
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$ |
908 |
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8.4 |
% |
ACMI |
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5,744 |
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3,372 |
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2,373 |
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70.4 |
% |
The $62.5 million increase in Charter revenue from $10.9 million in 2021 to $73.3 million in 2023 was largely driven by volume. In fact, 90.9% of the Charter revenue increase was volume related while only 9.1% was related to an increase in rates from $10,818 to $11,726 per block hour, an increase of $908 increase per block hour. The volume increase itself was attributable to the availability of aircraft. Although the Company had six deliveries in 2021, these aircraft were not operational for the full year. Three of the aircraft began operational flights in August, while one began in October. The remaining two were delivered in November and became operational in December. The delay between delivery and operational readiness is due to needed maintenance, seat configuration changes, certifications, and proving runs, and can vary widely between aircraft. Conversely in 2022, those same six aircraft were operational for the full year in addition to the two deliveries in June and December of 2022. Thus, the net available aircraft for the full year 2021 was only 1.2, while the net available aircraft in 2022 was 6.6 aircraft. In addition, the market was able to bare a small increase in rate as the industry continues to improve, following the current post-pandemic trend. The Company was also able to increase margin more in line with the market as our customers become confident of GlobalX’s ability and commitment to operational excellence and assets are utilized at higher levels. Furthermore, the effective rate will have increased as pass through costs such as fuel cost and landing fees increase with inflation or other market pressure.
The $11.2 million increase in ACMI revenue from $2.2 million in 2021 to $13.4 million in 2022 was driven by both rate and volume at an almost even split. 50.5% of the ACMI revenue increase was volume related while 49.5% was related to an increase in rates from $3,372 to $5,744 per block hour, an increase of $2,373 increase per block hour. The volume increase was achievable as GlobalX continued to add to capacity through aircraft delivery in 2022. In addition, the Company was able to achieve a significant rate increase due to a few factors. The Company launched operations in 2021 with one aircraft and had to be aggressive with pricing to initially secure work at lower rates per block hour. Throughout 2022, we were able to expand the number of customers being served expanding into NCAA college sports, music tours, corporate travel, and government contracts at higher rates.
Operating Expenses
The following table compares our Operating Expenses (in dollars):
Operating Expenses |
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2022 |
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2021 |
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Inc/(Dec) |
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% Change |
|
||||
Salaries, Wages, & Benefits |
|
$ |
30,629,414 |
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|
$ |
9,784,450 |
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$ |
20,844,964 |
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|
213.0 |
% |
Aircraft Fuel |
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|
23,035,395 |
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|
|
3,142,720 |
|
|
|
19,892,675 |
|
|
|
633.0 |
% |
Maintenance, materials and repairs |
|
|
4,377,378 |
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|
832,609 |
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|
|
3,544,769 |
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|
425.7 |
% |
Depreciation and amortization |
|
|
609,489 |
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34,289 |
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575,200 |
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1677.5 |
% |
Contracted ground and aviation services |
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15,607,926 |
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3,336,782 |
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12,271,144 |
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367.8 |
% |
Travel |
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5,024,758 |
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961,258 |
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4,063,500 |
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422.7 |
% |
Insurance |
|
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3,580,377 |
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|
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1,713,756 |
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|
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1,866,621 |
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108.9 |
% |
Aircraft Rent |
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15,614,081 |
|
|
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4,149,871 |
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11,464,210 |
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|
276.3 |
% |
Other |
|
|
9,867,929 |
|
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7,497,021 |
|
|
|
2,370,908 |
|
|
|
31.6 |
% |
Total Operating Expenses |
|
|
108,346,747 |
|
|
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31,452,756 |
|
|
|
76,893,991 |
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|
244.5 |
% |
6
Salaries, wages, and benefits grew to $30.6 million up from $9.8 million, a $20.8 million increase, or 213%, primarily due to the hiring and training of pilots and other airline personnel necessitated by the growing fleet and operations. The total employees grew 69.5% from 187 to 317 and pilots increased from 10 to 39, or 290%.
Aircraft fuel grew from $3.1 million to $23.0 million, a $19.9 million, or 633% increase, primarily due to an increase in block hours of 6,987 or 416% as a result of high number of aircraft available. Additionally, the average spot price of jet fuel was approximately 30% greater in 2022.
Maintenance, materials, and repairs increased by $3.5 million, from $0.8 million to $4.4 million, or 426%, primarily due to (1) the increase in average aircraft in operation during the periods from one to seven and (2) the block hours of operation, which increased from 1,679 to 8,666, or 416%. Maintenance of aircraft must be performed proactively. Block Hours of the aircraft and its parts are rigorously monitored, tracked, and used to determine scheduled service. As a result, there is a strong correlation between Block Hours and maintenance, materials, and repairs.
Depreciation and amortization increased $0.6 million, or 1,677%, from $.003 million to $0.6 million, driven by assets acquired to support our airport operations. These assets include, but are not limited to, fuel trucks, tractors, computers, software, and rotable inventory.
Contracted ground and aviation services increased by $12.3 million, or 368%, from $3.3 million to $15.6 million, primarily due to an increase in block hours. As operations (block hours) increased GlobalX required additional support from third party aviation partners at airports to provide check in, security screening, catering, baggage handling, fueling, and other services to clients.
Travel increased $4.0 million or 423%, from $1.0 million to $ 5.0 million, primarily due to the increase in Block Hours and a significant increase in the number of pilots in training who require hotel accommodations during the trips.
Insurance increased $1.9 million, or 109%, from $1.7 million to $3.6 million, primarily related to the increase in the number of aircraft.
Aircraft rent increased 276% $11.5 million, or 276%, from $4.1 million to $15.6 million, primarily due to the increase in the number of aircraft from one to seven average aircraft equivalent.
Operating loss improved by $6.0 million, from an operating loss of $17.2 million to $11.2 million. This improvement was driven by (1) the delivery of aircraft, (2) the improvement of market rates, and (3) the Company’s ability to capture that rate with a fully operational fleet. GlobalX’s revenue per aircraft increased by 23.4% to $14.7 million in 2022.
Non-operating Expenses (Income)
The following table compares our Non-operating Expenses (Income) :
Non-Operating Expenses (Income) |
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Loss (Gain) on Warrant Valuation |
|
$ |
- |
|
|
$ |
2,650,772 |
|
|
$ |
(2,650,772 |
) |
|
|
(100.0 |
)% |
Unrealized Loss (Gain) on Financial Instruments |
|
|
(96,415 |
) |
|
|
154,120 |
|
|
|
(250,535 |
) |
|
|
(162.6 |
)% |
Equity method investment activity |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
N/A |
|
|
Other non-operating |
|
|
3,058,938 |
|
|
|
- |
|
|
|
3,058,938 |
|
|
N/A |
|
|
Interest Expense |
|
|
1,621,932 |
|
|
|
31,043 |
|
|
|
1,590,889 |
|
|
|
5124.8 |
% |
Total Non-Operating Expenses (Income) |
|
$ |
4,584,455 |
|
|
$ |
2,835,935 |
|
|
$ |
4,399,292 |
|
|
|
155.1 |
% |
Loss (Gain) on Warrant Valuation decreased $2.6 million due to the reclassification of warrants during 2021 from a liability to equity.
Other non-operating expenses increased by $3.0 million due to the write-off of deferred costs incurred in connection with GEM line of credit, as discussed in note 9 of the consolidated financial statements.
Interest expense, net increased $1.6 million driven mainly by the interest payable on the debentures issued in 2022.
Discontinued Operations
7
Discontinued Operations |
|
2022 |
|
|
2021 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
Income from Discontinued Operations |
|
$ |
— |
|
|
$ |
177,706 |
|
|
$ |
(177,706 |
) |
|
|
(100.0 |
)% |
Income From Discontinued Operations decreased by $178 thousand dollars as a result of the spin-off of Canada Jetlines.
Net Loss
Net Loss improved by $4.0 million to a net loss of $15.8 million. This improvement was driven by the delivery of additional aircraft, the improvement of market rates, and the company’s ability to capture that rate with a fully operational fleet. GlobalX’s revenue per aircraft increased by 23.4% to $14.7 million in 2022.
Liquidity and Capital Resources
The most significant liquidity events during 2022 were as follows:
Operating Activities. For 2022, Net Cash used in operating activities decreased from $10.8 million to $6.8 million, consisting primarily of $15.8 million of Net Loss, $1.9 million of increase in Accounts Receivable, $1.3 million of increase in Prepaid Expenses and other current assets, and $3.5 million of increase in Operating lease obligations. These were partially offset by noncash adjustments of $0.6 million for depreciation and amortization of fixed assets, operating lease right of use assets and debt issue costs, $1.4 million for Share-based payments, $9.3 million of Accounts payable and Accrued and other liabilities, and $0.2 million of Bad debt expense. For 2021, Net Cash used for operating activities was $10.8 million, consisting primarily of $20.0 million of Net Loss, non-cash adjustments of $2.7 million related to loss on warrant revaluation, $1.1 million of Amortization of operating lease right of use assets, $1.2 million of Share-based payments, and $8.0 million in Accounts payable and Accrued and other liabilities.
As of December 31, 2022, the Company had approximately $1.9 million in unrestricted cash and cash equivalents, a decrease of approximately $3.3 million from December 31, 2021. Management believes the existing cash and cash equivalents, together with cash generated from expected increase of sales associated with the Company’s initiatives to raise additional funds will be sufficient to satisfy the Company’s liquidity needs for the next twelve months. Management’s still evaluating the existing options of raise additional funds, in the form of additional equity or debt.
The Company has significant fixed and noncancelable lease commitments of aircraft, equipment and related maintenance checks. As of December 31, 2022, the Company had total of $0.6 million and $9.2 million due in the next 12 months of future minimum lease payments under finance and operating leases, respectively, and approximately $1.8 million in current portion of notes payable included in the current liabilities presented in the Company’s consolidated balance sheet. As of December 31, 2022, the Company had total of $2.7 million and $27.6 million due after 12 months from the balance sheet date of future minimum lease payments under finance and operating leases, respectively, and approximately $5.1 million in notes payable included in the non-current liabilities presented in the Company’s consolidated balance sheet. The Company finished 2022 with eight passenger aircraft and expects the aircraft fleet to increase to 12 passenger aircraft and 6 cargo aircraft by the end of 2023. In order to achieve the number of aircraft deliveries in 2023, the Company currently has eight aircraft under lease with partial or total deposits paid and four aircraft under binding agreements that are subject to execution of definitive lease documentation and fulfillment of certain closing conditions.
Investing Activities. For 2022, Net Cash used for investing activities increased from $652.7 thousand to $1.9 million, consisting of $1.9 million of Purchases of property and equipment. For 2021, Net cash used for investing activities was $652.7 thousand, consisting of $652.7 thousand of Purchases of property and equipment.
Financing Activities. For 2022, Net Cash provided by financing activities decreased from $18.9 million to $6.2 million, consisting primarily of $5.9 million of Note Payable, and $0.8 million in Proceeds from issuance of shares, partially offset by $0.5 million in Principal payments of finance leases. For 2021, net cash provided by financing activities was $18.9 million, which primarily reflected $19.0 million in Proceeds from issuance of shares.
As disclosed in the subsequent events footnotes to the Company’s consolidated financial statement, on January 30, 2023, the Company secured a loan for up to $5.0 million with an investor to provide working capital and additional liquidity to support GlobalX’s operations. The net proceeds of the loan will be used to further the business objectives of the Company and to secure additional passenger and freighter aircraft for charter operations that were delivered during the first half of 2023.
The Company continuously seeks to identify external sources of capital from time to time depending on our cash requirements, assessment of current and anticipated market conditions, and the after-tax cost of capital. Our access to capital markets can be adversely impacted by prevailing economic conditions and by financial, business and other factors, some of which are beyond our control.
8
Additionally, the Company’s borrowing costs are affected by market conditions and may be adversely impacted by a tightening in credit markets.
The Company regularly assesses our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements and future investments or acquisitions to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. The Company also regularly evaluates its liquidity and capital structure to ensure financial risks, adequate liquidity access and lower cost of capital are efficiently managed.
9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Page |
Global Crossing Airlines Group Inc. CONSOLIDATED FINANCIAL STATEMENTS |
|
Report of Independent Registered Public Accounting Firm (PCAOB No. |
10 |
Consolidated Balance Sheets as of December 31, 2022 and 2021 |
11 |
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022 and 2021 |
12 |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 |
13 |
Consolidated Statements of Equity for the Years Ended December 31, 2022 and 2021 |
14 |
15 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Global Crossing Airlines Group Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Global Crossing Airlines Group Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the years in the two year period ended December 31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficiency and retained deficit as of December 31, 2022. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
March 9, 2023, except notes 2, 17 and 18 which is October 26, 2023
We have served as the Company’s auditor since 2020.
10
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED BALANCE SHEETS
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December 31, |
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December 31, 2021 |
|
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net of allowance |
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Prepaid expenses and other current assets |
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||
Current assets held for sale |
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|
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- |
|
|
Total Current Assets |
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|
||
Property and equipment, net |
|
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|
||
Finance leases, net |
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- |
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Operating lease right-of-use assets |
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|
||
Deposits and other assets |
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Total Assets |
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$ |
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$ |
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||
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Current liabilities |
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Accounts payable |
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$ |
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$ |
|
||
Accrued liabilities |
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Deferred revenue |
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Customer deposits |
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Due from related parties |
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- |
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Current portion of notes payable |
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||
Current portion of operating leases |
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||
Current portion of finance leases |
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- |
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Total current liabilities |
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||
Other liabilities |
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||
Note payable |
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- |
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Long-term operating leases |
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Financial leases and other liabilities |
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Total other liabilities |
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Total Liabilities |
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$ |
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$ |
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||
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||
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Equity (Deficit) |
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Common stock - $ |
|
$ |
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$ |
|
||
Additional paid-in capital |
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||
Retained deficit |
|
|
( |
) |
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|
( |
) |
Total stockholders’ equity (Deficit) |
|
|
( |
) |
|
|
|
|
Total Liabilities and Equity (Deficit) |
|
$ |
|
|
$ |
|
||
See accompanying notes to consolidated financial statements.
11
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED STATEMENT OF OPERATIONS
|
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Year ended |
|
|
Year ended |
|
||
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
||
Operating Revenue |
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$ |
|
|
$ |
|
||
Operating Expenses |
|
|
|
|
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|
||
Salaries, Wages, & Benefits |
|
|
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Aircraft Fuel |
|
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Maintenance, materials and repairs |
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Depreciation and amortization |
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Contracted ground and aviation services |
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Travel |
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Insurance |
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|
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Aircraft Rent |
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Other |
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||
Total Operating Expenses |
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|
|
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|
||
Operating Loss |
|
|
( |
) |
|
|
( |
) |
Non-Operating Expenses (Income) |
|
|
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|
||
Loss (Gain) on Warrant Valuation |
|
|
— |
|
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|
|
Foreign exchange (gain) or loss |
|
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( |
) |
|
|
|
|
Other non-operating expenses |
|
|
|
|
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— |
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Interest Expense |
|
|
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|
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|
||
Total Non-Operating Expenses |
|
|
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|
||
Loss from continuing operations |
|
|
( |
) |
|
|
( |
) |
Income from Discontinued Operations |
|
|
— |
|
|
|
|
|
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
Income tax expense |
|
|
— |
|
|
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— |
|
Net Loss |
|
|
( |
) |
|
|
( |
) |
Loss per share: |
|
|
|
|
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|
||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
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||
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
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||
Weighted average number of shares outstanding |
|
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||
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Fully diluted shares outstanding |
|
|
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|
||
See accompanying notes to consolidated financial statements.
12
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For The Twelve Months Ended December 31, |
|
|||||
|
2022 |
|
|
2021 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
||
Net loss from continuing operations |
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
||
Depreciation |
|
|
|
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|
||
Bad debt expense |
|
|
|
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— |
|
|
Loss on warrant revaluation |
|
— |
|
|
|
|
|
Gain on sale of spare parts |
|
( |
) |
|
|
— |
|
Loss on deferred costs |
|
|
|
|
— |
|
|
Interest on finance leases |
|
|
|
|
— |
|
|
Amortization of debt issue costs |
|
|
|
|
— |
|
|
Amortization of operating lease right of use assets |
|
|
|
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|
||
Share-based payments |
|
|
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|
||
Foreign exchange (gain) loss |
|
( |
) |
|
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|
Changes in assets and liabilities |
|
|
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|
||
Accounts receivable |
|
( |
) |
|
|
( |
) |
Asset held for sale |
|
( |
) |
|
|
— |
|
Prepaid expenses and other current assets |
|
( |
) |
|
|
( |
) |
Deposits and other assets |
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
||
Accrued liabilities and other liabilities |
|
|
|
|
|
||
Operating lease obligations |
|
( |
) |
|
|
( |
) |
Other liabilities |
|
( |
) |
|
|
|
|
Net cash used in operating activities - continuing operations |
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities - discontinuing operations |
|
— |
|
|
|
|
|
Net cash used in operating activities |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
||
Purchases of property and equipment |
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
||
Principal payments on finance leases |
|
( |
) |
|
|
— |
|
Other liabilities |
|
— |
|
|
|
( |
) |
Proceeds on issuance of shares |
|
|
|
|
|
||
Proceeds from note payable |
|
|
|
|
— |
|
|
Net cash provided by financing activities – continuing operations |
|
|
|
|
|
||
Net cash provided by financing activities – discontinued operations |
|
— |
|
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
||
|
|
|
|
|
|
||
Net increase (decrease) in cash, cash equivalents, and restricted cash |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash - beginning of the year |
|
|
|
|
|
||
Cash, cash equivalents and restricted cash - end of the year |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Non-Investing and financing |
|
|
|
|
|
||
Right-of-use (ROU) assets acquired through operating leases |
|
|
|
|
— |
|
|
Equipment acquired through finance leases |
|
( |
) |
|
|
— |
|
Airframe Parts acquired through financing |
|
|
|
|
— |
|
|
Warrants issued for debt (debt discount) |
|
|
|
|
— |
|
|
Cash paid for |
|
|
|
|
|
||
Interest |
|
|
|
|
|
||
See accompanying notes to consolidated financial statements
13
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
|
|
Common Stock Number of Shares |
|
|
Amount |
|
|
Common Stock Subscribed |
|
|
Additional Paid in Capital |
|
|
Retained Deficit |
|
|
Total |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Beginning – January 1, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Issuance of shares – private placement |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||||
Issuance of shares – warrants and options exercised |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||||
Issuance of shares – RSUs |
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
||
Share based compensation on stock options or RSUs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
GEM warrant reclassification |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Ending – December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Common Stock Number of Shares |
|
|
Amount |
|
|
Common Stock Subscribed |
|
|
Additional Paid in Capital |
|
|
Retained Deficit |
|
|
Total |
|
||||||
Beginning – January 1, 2022 |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Issuance of shares – warrants and options exercised |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Warrants issued |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Share based compensation on stock options or RSUs |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Employees stock purchase plan |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Loss for the period |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Ending – December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
See accompanying notes to consolidated financial statements.
14
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
1. NATURE OF OPERATIONS AND GOING CONCERN
Global Crossing Airlines Inc. (the “Company” or “Global”) was incorporated under the laws of British Columbia and continued as a Federal corporation pursuant to the Canada Business Corporations Act effective February 28, 2017. During the year ended December 31, 2020, the Company completed a business acquisition pursuant to which it acquired all of the issued and outstanding shares of Global Crossing Airlines, Inc. (“Global USA”), a Delaware corporation. For financial reporting purposes, the Company is considered a continuation of Global USA, the legal subsidiary, except with regard to authorized and issued common stock which is that of the Company, the legal parent. On December 22, 2020, the Company changed its jurisdiction of incorporation from the province of British Columbia, Canada to the State of Delaware. The U.S. Domestication was required for the Company to complete its charter licensing process and will also reflect the Company’s U.S.-business and operations. The Company’s principal business activity is providing passenger aircraft to customers through aircraft operating service agreements including, crew, maintenance, insurance (“ACMI”) and charter services “Charter” serving the US, Caribbean and Latin American markets. The Company’s shares trade on the NEO Exchange (the “Exchange” or “NEO”) under the symbol “JET” and the OTCQB under the symbol “JETMF.”
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As of December 31, 2022 and 2021, the Company had a working capital deficits of $
During the year ended December 31, 2020, the World Health Organization declared a global pandemic related to the virus known as COVID-19. The airline industry has been impacted significantly as many local and regional governments have issued public health orders and travel restrictions in response to COVID-19. An extended disruption may affect the Company’s ability to generate revenue and obtain additional financing. The impact of these factors on the Company is not yet determinable; however, the Company’s financial position, results of operations and cash flows in future periods may be materially affected.
Basis of consolidation
The consolidated financial statements include the accounts of the Company, and its subsidiaries, Global Crossing Airlines, Inc. and Global Crossing Airlines Operations, LLC (collectively “Global USA”), GlobalX A320 Aircraft Acquisitions Corp. (“Acquisition A320”), GlobalX A321 Aircraft Acquisition Corp. (“Acquisition A321”), GlobalX Travel Technologies, Inc. (“Technologies”), GlobalX Air Tours, LLC, LatinX Air S.A.S., GlobalX Colombia S.A.S and Capitol Airlines, LLC. All intercompany transactions and balances have been eliminated on consolidation.
Certain reclassification and format changes have been made to prior year amounts to conform to the 2022 presentation.
Details of the Company’s subsidiaries are as follows:
Name |
Place of incorporation |
Interest % |
Principal activity |
Global Crossing Airlines, Inc. |
Delaware, United States |
US charter airline |
|
Global Crossing Airlines Operations, LLC |
Florida, United States |
Charter support services |
|
GlobalX A320 Aircraft Acquisition Corp. |
British Columbia, Canada |
Inactive subsidiary |
15
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
GlobalX A321 Aircraft Acquisition Corp.
|
Nevada, United States |
Inactive subsidiary
|
|
GlobalX Air Tours, LLC
|
Florida, United States |
Air charter services |
|
GlobalX Ground Team, LLC
|
Florida, United States |
Ground services |
|
Capitol Airlines, LLC |
Florida, United States |
Air charter services |
|
LatinX Air S.A.S. |
Ecuador |
Air charter services |
|
GlobalX Colombia S.A.S |
Colombia |
Air charter services |
|
GlobalX Travel Technologies, Inc. (Note 6) |
Delaware, United States |
Software development |
On May 19, 2021, the Company entered into an arrangement agreement (“the Arrangement”) to complete a spin-out of the shares of its wholly owned subsidiary, Canada Jetlines Operations Ltd. (“Jetlines”). On June 28, 2021, the Company completed the spin-out pursuant to the Arrangement under which the Company transferred
In accordance with U.S. GAAP, the financial position, results of operations, and cash flows of Jetlines are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. The sum of the individual earnings per share amounts from continuing operations and discontinued operations may not equal the total company earnings per share amounts due to rounding. Prior years’ balance sheets have been adjusted to reflect the effect of the spin-off.
With the exception of Note 3, the notes to the consolidated financial statements reflect the continuing operations of Global. See Note 3 - Discontinued Operations below for additional information regarding discontinued operations.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances at several financial institutions; at times, such balances may be in excess of insurance limits. The Company has not experienced any losses on these balances.
Restricted Cash
As of December 31, 2022 and 2021, restricted cash of $
Accounts Receivable
Accounts Receivable are recorded at the amount due from customers and do not bear interest. The Company determines its allowances for credit losses by considering a number of factors, including the length of time accounts receivable are past due, the Company’s
16
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. As of December 31, 2022 and 2021, the Company recorded $
Assets held for sale
Assets held for sale consist of the purchased airframe parts from used Airbus 320 bearing manufacturer's serial number 2090 as completed on sales agreement entered on March 2, 2022. Assets held for sale are valued at the lower of the carrying amount or the estimated market value less selling costs. They were recorded at average cost and are expensed when sold, used or consumed. An allowance for obsolescence on aircraft airframe parts is recorded when impaired to reduce the carrying costs to lower of cost or market. The Company monitors resale values for its assets held for sale on a recurrent basis using various qualitative and quantitative matters including analysis of current sales, estimates obtained from outside vendors, physical counts, internal discussions, among others. As of December 31, 2022, the Company did not identify items that were obsolete and recorded a $
Lessor Maintenance Deposits
GlobalX’s aircraft lease agreements provide that Global pay maintenance reserves monthly to aircraft lessors to be held as collateral in advance of major maintenance activities required to be performed by Global. Maintenance reserve payments are either fixed, or variable based on actual flight hours or cycles. These lease agreements provide that maintenance reserves are reimbursable to Global upon completion of the maintenance event in an amount equal to the lesser of (1) the amount of the maintenance reserve held by the lessor associated with the specific maintenance event or (2) the qualifying costs related to the specific maintenance event.
Maintenance reserve payments that are expected to be recoverable via reimbursable expenses will be reflected as Lessor Maintenance Deposits on the accompanying Consolidated Balance Sheets. As of December 31, 2022 and 2021, Lessor Maintenance Deposits totaled $
Heavy Maintenance
The Company accounts for heavy maintenance costs for airframes and engines using the deferral method. Under this method, expense recognition of scheduled heavy maintenance events is deferred and amortized over the estimated period until the next scheduled heavy maintenance event is required. During the year ended December 31, 2022, the Company incurred in amortization expense of $
Property & Equipment
Property and equipment are recorded at cost or fair value at the Acquisition Date and depreciated on a straight-line basis to an estimated residual value over their estimated useful lives or lease term, whichever is shorter, as follows:
Leasehold Improvements, Aircraft, other |
|
|
Office and Ground Equipment |
|
|
Computer Hardware and Software |
|
|
Property and Equipment under Finance Leases |
|
|
Rotable Parts |
|
Average remaining life of aircraft fleet, currently estimated to be |
17
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Modifications that enhance the operating performance or extend the useful lives of leased airframes are considered leasehold improvements and are capitalized and depreciated over the economic life of the asset or the term of the lease, whichever is shorter.
Equity Investments
Investments in partnerships and less-than-majority owned subsidiaries in which the Company does not have control but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method of accounting. The equity method investments are included in the accompanying Balance Sheets with Deferred Costs and Other Assets. The Company’s share of earnings or losses from these investments is shown in the accompanying Consolidated Statements of Operations in Other Expense. Equity method investments are initially recognized at cost. The carrying amount of the equity investment is adjusted at each reporting period by the percentage of any change in its equity corresponding to the Company’s percentage interest in these equity affiliates. The carrying costs of these investments are also increased or decreased to reflect additional contributions or withdrawals of capital. Any difference in the book equity and the Company’s pro-rata share of the net assets of the investment will be reported as gain or loss at the time of the liquidation of the investment. It is the Company’s policy to record losses in excess of the investment if the Company is committed to provide financial support to the investee.
Evaluation of Long-Lived Assets
Long-lived assets are evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. Such indicators include significant technological changes, adverse changes in market conditions and/or poor operating results. The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows are less than its carrying value. The amount of impairment loss recognized is the difference between the estimated fair value and the carrying value of the asset or asset group. Fair value is determined using various valuation techniques including discounted cash flow models, quoted market values and third- party independent appraisals, as considered necessary.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument.
The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.
Estimating fair value for granted stock options and compensatory warrants requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option or warrant, volatility, dividend yield, and rate of forfeitures and making assumptions about them.
Estimating fair value for granted restricted share units requires estimating the number of awards likely to vest on grant and at each reporting date up to the vesting date. The estimated forfeiture rate is adjusted for actual forfeitures in the period.
Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in the consolidated statement of operations.
Income taxes
The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income. To the extent that
18
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
management’s assessment of the Company’s ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.
Leases
Lease classification is evaluated by the Company at lease commencement and when significant amendments are executed. The Company's leases generally do not provide a readily determinable implicit rate; therefore, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The lease term consists of the noncancellable period of the lease and periods covered by options to extend the lease if the Company is reasonably certain to exercise the option. For leases of 12 months or less, the Company expenses lease payments on a straight-line basis over the lease term.
Operating Lease Right-of-Use Asset and Liabilities
For all operating leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date based on the estimated present value of future minimum lease payments, which includes certain lease and non-lease components, over the lease term. Operating Lease Right-of-use Assets and Operating Lease Obligations have their own lines on the Consolidated Balance Sheets.
Finance Leases
Finance leases are initially recorded at the net present value of future minimum lease payments, which includes certain lease and non-lease components. Finance leases generally have one of these five attributes: 1) ownership of the underlying asset transfers to the Company at the end of the lease term, 2) the lease agreement contains a purchase option that the Company is reasonably certain to exercise, 3) the lease term represents the major part of the asset’s economic life, 4) the present value of lease payments over the lease term equals or exceeds substantially all of the fair value of the asset, and 5) the underlying asset is so specialized in nature that it provides no alternative use to the lessor after the lease term. Finance Lease Assets are presented on separately on the Consolidated Balance Sheets. The Company depreciates Finance Lease Assets consistent with its useful life policy presented in the table below.
Leased Aircraft Return Costs
The Company's aircraft lease agreements often contain provisions that require the Company to return aircraft airframes, engines, and other aircraft components to the lessor in a certain condition or pay an amount to the lessor based on the airframe and engine's actual return condition. Lease return costs are recognized beginning when it is probable that such costs will be incurred, and they can be estimated. The Company assesses the need to accrue lease return costs periodically throughout the year or whenever facts and circumstances warrant an assessment. When costs become both probable and estimable, lease return costs are expensed as a component of Aircraft Rent expense on the Consolidated Statements of Operations.
In addition, the Company leases office space under a month-to-month agreement. For leases with terms greater than 12 months, including renewal options when appropriate, we record the related right-of-use asset and lease liability as the present value of fixed lease payments over the lease term.
Customer Deposits
Customer Deposits represent money we receive from our customers as a security deposit for their contract. The money will either be returned to the customer at the end of the contract or used for payment of any unpaid invoices/debts the customer has during the contract term.
Deferred Revenue
Deferred Revenue represents revenue prepayments. Customers pay in advance of their flights and the funds are held as Deferred Revenue until the flight takes place. Charter customers typically pay a
19
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Revenue Recognition
The Company generates operating revenues by providing passenger aircraft outsourcing services to customers on a Charter and ACMI basis, in exchange for guaranteed minimum revenues at predetermined levels of operation for defined periods of time.
Our performance obligations under Charter contracts involve the provision of passenger aircraft charter services to customers, including various US Government agencies, brokers, freight forwarders, direct shippers, airlines, college sports teams and fans, and private charter customers. Our obligations are for one or more flights based on a specific origin and destination. The Company typically bears all direct operating costs for charters, which include fuel, insurance, landing and navigation fees, and most other operational fees and costs.
The time interval between when an aircraft departs the terminal until it arrives at the destination terminal is measured in hours and called “Block Hours.” Revenue from Charter contracts is typically recognized over time as the services are performed based on Block Hours operated on behalf of a customer. Payment terms and conditions vary by charter contract, although the vast majority of contracts require payment in advance of the services being provided. Since advance payments are typically made shortly before the services are performed, such payments are not considered significant financing components.
Our performance obligations under ACMI contracts involve outsourced passenger aircraft operating services, including the provision of an aircraft, crew, maintenance and insurance. ACMI contracts generally provide for the transfer of the benefits from these performance obligations on a combined basis through the operation of the aircraft over time. Customers assume fuel, demand and price risk. Generally, customers are also responsible for landing, navigation and most other operational fees and costs. When we act as an agent for costs reimbursed by customers, such reimbursed amounts are recorded as Operating Revenue, net of the related costs, when the costs are incurred. When we are responsible for any of these costs, such reimbursed amounts are recorded as Operating Revenue and the costs are recorded as Operating Expenses as incurred.
Revenue from ACMI contracts is typically recognized over time as the services are performed based on Block Hours operated on behalf of a customer during a given month.
The Company commenced flight operations during August 2021 upon receipt of the final DOT and FAA approvals.
Recently Adopted Accounting Standards
In June 2018, the FASB issued ASU 2018-07 Improvements to Non-employee Share-based Payment Accounting. ASU 2018-07 expands the scope of ASC 718, Compensation - Stock Compensation, to share-based payments granted to non- employees for goods and services. Additionally, in November 2019, the FASB issued ASU 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which requires entities to measure and classify share based payments to a customer, in accordance with the guidance in ASC 718. The new guidance did not impact how we account for Share based payments.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update eliminates, clarifies, and modifies certain guidance related to the accounting for income taxes. The amended guidance did not have a material impact on our consolidated financial statements and related disclosures.
In May 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2021-04—Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption was permitted, including adoption in an interim period. The adoption of this pronouncement had no impact on our accompanying consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update requires the use of an “expected loss” model on certain types of financial instruments and requires
20
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. ASU 2016-13 was initially effective for non- public companies for fiscal years and interim periods beginning after December 15, 2021, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which delayed the effective date for certain entities, such as the Company, to apply ASU 2016-13 until fiscal years and interim periods beginning after December 15, 2022. The Company evaluated the impact of ASU 2016-13 and determined the adoption of Topic 326 will not have a material impact on our consolidated financial statements.
As discussed in Note 2. Basis of Presentation above, on June 28, 2021, the Company completed the spin-off of Jetlines, its wholly owned subsidiary, and the requirements for the presentation of Jetlines as a discontinued operation were met on that date. Accordingly, Jetlines’ historical financial results are reflected in the Company’s consolidated financial statements as discontinued operations. The Company did not allocate any general corporate overhead or interest expense to discontinued operations.
As described in Note 2, Global retained
The following is a summary of Jetlines’ assets and liabilities as of June 28, 2021:
|
|
As of |
|
|
|
|
June 28, 2021 |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
Other current assets |
|
|
|
|
Prepaid expenses |
|
|
|
|
Accounts payable and accrued liabilities |
|
|
( |
) |
Long-term loan payable |
|
|
( |
) |
Net liabilities transferred |
|
$ |
( |
) |
The results of discontinued operations and gain from discontinued operations are as follows:
|
|
Year ended |
|
|
|
|
December 31, 2021 |
|
|
General and administrative |
|
$ |
|
|
Professional fees |
|
|
|
|
Regulatory costs |
|
|
|
|
Travel, meals, and entertainment |
|
|
|
|
Net loss for period |
|
|
( |
) |
Gain on disposal of liabilities |
|
|
|
|
Income from discontinued operations |
|
$ |
|
|
The investment in Jetlines shall be adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any, in accordance with the guidance of ASC 323, Investments—Equity Method and Joint Ventures.
The Company’s investments in affiliates accounted for using the equity method include a
Investment in GlobalX Ground Team, LLC:
21
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
On September 9, 2020, the Company entered into a joint venture agreement with KD Holdings, LLC (“KD Holdings”) for the purpose of providing ground handling services. Under the terms of the agreement, KD Holdings will run the day-to-day operations of the ground handling division and supply the ground equipment and Global will provide assistance and guidance to the operations. The Company accounts for the joint venture in accordance with the equity method.
As of December 31, 2021, the Company elected to write down GlobalX’s investment in the joint venture to zero. Going forward GlobalX has elected to self-perform all ground handling activities at Miami International Airport. As of December 31, 2022 and 2021, there was $
Investment in Canada Jetlines Operations Ltd.:
As described in Note 2, on June 28, 2021, the Company completed the spin-out pursuant to the Arrangement under which the Company transferred
In connection with the GEM Global Yield LLC agreement (Note 9) the Company issued a note for $
On
Consideration for the Flugy asset purchase included $
In connection with the agreement, Travel shall pay Kizoto an initial monthly fee of $
As of December 31, 2022 and 2021, the
22
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Consolidated Statements of Operations on a straight-line basis over the lease term. These leases primarily relate to the Company’s lease agreements for the month-to-month agreement for office space and leases for office equipment.
For operating leases with terms greater than 12 months, including renewal options when appropriate, we record the related right-of-use asset and lease liability as the present value of fixed lease payments over the lease term.
In addition, the aircraft lease requires the Company to make maintenance reserve payments to cover the cost of major scheduled maintenance for the aircraft. These payments are generally variable as they are based on utilization of the aircraft, including the number of flight hours flown and/or flight departures, and are not included as minimal rental obligations.
On October 14, 2021 the Company signed a lease for
On October 12, 2022 the Company entered into a lease agreement for aircraft and paid commitment fees to the lessor. The lease commenced upon aircraft delivery in June, 2022 and runs through . In addition to basic rent due, the Company will pay the lessor supplemental rent for maintenance of aircraft equipment.
On October 12, 2022 the Company entered into a lease agreement for aircraft and paid commitment fees to the lessor. The lease commenced upon aircraft delivery on December 10, 2022 and runs through
The Company reviewed the operating leases for extension options that may be reasonably certain to be exercised and then would become part of the right-of-use assets and lease liabilities. At December 21, 2012, the Company signed an extension for
In addition, as of December 31, 2022, the Company signed a lease agreement to convert
For the year ended December 31, 2022, we had
Some of our finance leases include optional renewal periods. Generally, we do not consider any additional renewal periods to be reasonably certain of being exercised, as the initial lease term of the related lease is for all or most of the useful life of the equipment and thus renewal periods are not included in the lease term, nor any related payments are reflected in the finance lease assets and finance lease liabilities.
23
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The following table presents lease costs related to the Company’s finance and operating leases:
|
For The Year Ended December 31, |
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2022 |
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2021 |
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||
Finance lease cost |
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|
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||
Amortization of leased assets |
$ |
|
|
$ |
- |
|
|
Interest of lease liabilities |
|
|
|
|
— |
|
|
Operating lease cost |
|
|
|
|
|
||
Operating lease cost (1) |
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|
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||
Total lease cost |
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||
|
|
|
|
|
|
||
(1)
The Company uses the rate stated in the lease to discount lease payments to present value. In the event the leases do not provide a readily determinable implicit or stated rate, the Company estimates the incremental borrowing rate to discount lease payments based on information available initially at adoption and at lease commencement going forward, taking into consideration recent debt issuance as well as publicly available data for instruments with similar characteristics.
|
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|
December 31, 2022 |
|
|
December 31, 2021 |
|
||
Weighted-average remaining lease term |
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||
Operating leases |
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|
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|
||||
Finance leases |
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|
|
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— |
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Weighted-average discount rate |
|
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|
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Operating leases |
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% |
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% |
||
Finance leases |
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% |
|
|
— |
|
|
The table below presents cash and non-cash activities associated with our leases:
|
|
For The Year Ended December 31, |
|
|||||
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2022 |
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2021 |
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Cash paid for amounts included in the measurement of lease liabilities: |
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|
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Operating cash flows from operating leases |
|
$ |
|
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$ |
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||
Financing cash flows from finance leases |
|
|
|
|
|
— |
|
|
Future minimum lease payments under finance and operating lease liabilities with initial terms in excess of one year are as follows:
|
Finance Leases |
|
|
Operating Leases |
|
||
2023 |
$ |
|
|
$ |
|
||
2024 |
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2025 |
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2026 |
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2027 |
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2028 and thereafter |
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||
Total minimum lease payments |
|
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|
||
Less amount representing interest |
|
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||
Present value of minimum lease payments |
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||
Less current portion |
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||
|
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|
|
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24
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
We also lease office space and office equipment for our headquarters, airport facilities, and certain airport gate facilities and maintenance facilities on a month-to-month basis. Amounts for leases that are on a month-to-month basis are not included as an obligation in the table above.
The Company has contractual obligations and commitments primarily with regard to management and development services (Note 6), lease arrangements (Note 7), and financing arrangements (Note 9).
On January 6,
On January 23,
The Company is subject to various legal proceedings in the normal course of business and records legal costs as incurred. Management believes these proceedings will not have a materially adverse effect on the Company.
GEM Global Yield LLC SCS
The Company entered into an agreement with GEM Global Yield LLC SCS ("GEM"), the private alternative investment group to provide the Company with up to CND $
The Company entered into a promissory note to pay GEM Yield Bahamas Limited a fee equal to two percent (
In addition, on July 10, 2020, pursuant to the terms of the Facility, the Company issued
On June 28, 2021, GEM and the Company agreed to adjust the terms of the warrants. Under the adjustment agreement, the exercise price of the warrants was changed from CAD $
25
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
On October 1, 2021, GEM has filed initial pleadings in the Supreme Court of the State of New York, County of New York, claiming the Company breached the share subscription agreement between the parties by failing to pay a $
On January 18, 2023 the Court granted summary judgment in favor of GEM. GEM subsequently filed a motion seeking $
The Company’s effective tax rate for the years ended December 31, 2022 and 2021 was
The following table summarizes the significant components of the provision for income taxes from continuing operations:
|
|
For the Year Ended December 31, 2022 |
|
|
For the Year Ended December 31, 2021 |
|
||
Federal: |
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|
|
|
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|
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Current |
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$ |
— |
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|
$ |
— |
|
Deferred |
|
|
( |
) |
|
|
( |
) |
State: |
|
|
|
|
|
|
||
Current |
|
|
— |
|
|
|
— |
|
Deferred |
|
|
( |
) |
|
|
( |
) |
Change in valuation allowance |
|
|
|
|
|
|
||
Total income tax provision |
|
$ |
|
|
$ |
|
||
The income tax provision differs from that computed at the federal statutory corporate tax rate as follows:
|
For the Year Ended |
|
|
For the Year Ended |
|
||
Expected provision at Federal statutory tax rate |
|
% |
|
|
% |
||
State tax expense, net of Federal benefit |
|
— |
|
|
|
— |
|
Change in valuation allowance |
|
( |
)% |
|
|
( |
)% |
Permanent difference |
|
( |
)% |
|
|
( |
)% |
Other |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
|
|
% |
|
|
% |
||
The following table summarizes the significant components of the Company’s deferred taxes:
26
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
|
|
For the Year |
|
|
For the Year |
|
||
|
|
|
|
|
|
|
||
Deferred tax assets (liabilities): |
|
|
|
|
|
|
||
Net operating loss |
|
$ |
|
|
$ |
|
||
Share based compensation |
|
|
|
|
|
|
||
Disallowed interest |
|
|
|
|
|
— |
|
|
Allowance for doubtful accounts |
|
|
|
|
|
— |
|
|
Lease accounting |
|
|
|
|
|
|
||
Accrued compensation |
|
|
— |
|
|
|
|
|
Unrealized Loss |
|
|
|
|
|
|
||
Depreciation |
|
|
( |
) |
|
|
( |
) |
Total deferred tax assets (liabilities) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Less valuation allowance |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Net deferred tax assets (liabilities) |
|
$ |
|
|
$ |
|
||
As of December 31, 2022 and 2021, the Company has net operating losses available for deduction against future taxable income of $
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during periods in which the temporary differences become deductible. Management considers the scheduled reversal of the liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. It was concluded on a more-likely-than-not basis that the Company’s deferred tax assets were not realizable as of December 31, 2022. Accordingly, a valuation allowance of $
The Company recognizes the consolidated financial statement effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. If applicable, the Company reports both accrued interest and penalties related to unrecognized tax benefits as a component of Income Tax Expense in the Consolidated Statements of Operations.
The Company files income tax returns in the United States the State of Florida, California, Indiana, Kentucky, New Jersey, New York, Texas, Virginia, North Carolina, Pennsylvania, and Tennessee. In the normal course of business, the Company is subject to potential income tax examination by the federal and state tax authorities in these jurisdictions for tax years that are open under local statute. For U.S. federal and state income tax purposes, the Company’s tax returns remain open to examination.
27
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Accounting standards define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The standards also establish a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Under GAAP, there are three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices for identical assets or liabilities in active markets.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
As of December 31, 2022 and 2021, the Company's assets and liabilities carrying values approximate to their fair values.
On July 10, 2020, the Company issued
As described above and in Note 9, the Company’s warrant liability was re-measured to fair value on June 28, 2021 and reclassified to additional paid-in capital. As such, the Company had no warrant liabilities as of December 31, 2021.
The fair value of the warrant liabilities was measured using the Monte Carlo pricing model. Significant inputs into the model as of June 28, 2021 are as follows:
|
|
June 28, 2021 |
|
|
|
|
|
|
|
|
|
Exercise price |
|
$ |
|
|
|
Warrant expiration date |
|
|
|
||
Stock price |
|
$ |
|
|
|
Interest rate (annual) (1) |
|
|
% |
|
|
Volatility (annual) (2) |
|
|
% |
|
|
Remaining term (years) |
|
|
|
|
|
Annualized dividend yield (3) |
|
|
% |
|
|
The warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about of future activities and the Company’s stock prices and historical volatility of Guideline Public Companies as inputs.
28
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Notes Payable is comprised of the following:
Debenture |
|
|
$ |
|
|
GEM |
|
|
|
|
|
Airframe |
|
|
|
|
|
Total Note Payable |
|
|
|
|
|
Less current maturities |
|
|
|
|
|
Total long-term Note Payable |
|
|
$ |
|
On March 17, 2022, the Company entered into agreements (each a “Subscription Agreement”) pursuant to which the Company sold US$
The terms of the Debentures include:
The Company determined that the terms of the Warrants issued in the financing require the Warrants to be classified as equity. Accordingly, upon issuance, the Company recorded debt issuance costs of $
Since the Warrants may purchase a fixed number of shares for a fixed price, the Company chose to use the Black-Scholes option pricing model to value the warrants at issuance. The inputs selected are: underlying stock price at date of issuance of $
The debt issuance costs resulting from the warrants along with other direct costs of the Financing will be amortized to interest expense using the effective interest method.
On March 2, 2022, Global entered into an airframe sale and purchase agreement for one used Airbus 320 airframe bearing manufacturer's serial number 2090. The Company completed the sale for an aggregate principal amount of $
At December 31, 2022, note payable principal payments for the next five years and thereafter are as follows:
29
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
2023 |
|
|
$ |
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
— |
|
2026 |
|
|
|
— |
|
2027 |
|
|
|
— |
|
2028 and thereafter |
|
|
|
— |
|
Total |
|
|
|
|
The Company has authorized share capital of
On July 12, 2021 the Company completed a share capital reorganization creating a new class of shares, Class B non-voting shares. As of December 31, 2021, the Company had
Share issuance
During the year ended December 31, 2022:
During the year ended December 31, 2021:
Share purchase warrants
The following is a summary of share purchase warrants activities during the years ended December 31, 2022 and 2021:
30
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
|
|
Number of Share Purchase Warrants |
|
|
|
Weighted Average Exercise Price |
|
|||
Outstanding, January 1, 2021 |
|
|
|
|
|
|
|
|||
Issued |
|
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
||
Expired |
|
|
- |
|
|
|
|
|
||
Outstanding December 31, 2021 |
|
|
|
|
|
|
|
|||
Issued |
|
|
|
|
- |
|
$ |
|
||
Exercised |
|
|
( |
) |
|
- |
|
$ |
|
|
Expired |
|
|
( |
) |
|
- |
|
$ |
|
|
Outstanding December 31, 2022 |
|
|
|
|
|
$ |
|
|||
As of December 31, 2022, the following share purchase warrants were outstanding and exercisable:
Outstanding |
|
|
Exercise Price |
|
Remaining life |
|
|
Expiry Date |
||
|
— |
|
|
USD$ |
|
|
|
|
||
|
|
|
USD$ |
|
|
|
||||
|
|
|
USD$ |
|
|
|
||||
|
|
|
USD$ |
|
|
|
||||
|
|
|
USD$ |
|
|
|
||||
|
|
|
USD$ |
|
|
|
||||
|
|
|
|
|
|
|
|
|
||
As of December 31, 2021, the following share purchase warrants were outstanding and exercisable:
Outstanding |
|
|
Exercise Price |
|
Remaining life |
|
|
Expiry Date |
||
|
|
|
USD$ |
|
|
|
|
|||
|
|
|
USD$ |
|
|
|
|
|||
|
|
|
USD$ |
|
|
|
|
|||
|
|
|
USD$ |
|
|
|
|
|||
|
|
|
USD$ |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
||
Share-based payments
The maximum number of Voting Shares issuable pursuant to share-based payment arrangements, including stock options, restricted share units and performance share units, is
Stock options
The Company grants stock options to directors, officers, employees and consultants as compensation for services, pursuant to its Amended Stock Option Plan (the “Stock Option Plan”). The maximum price shall not be less than the closing price of the Company’s shares on the last trading day preceding the date on which the grant of options is approved by the Board of Directors. Options have a maximum expiry period of
The following is a summary of stock option activities for the years ended December 31, 2022 and 2021:
31
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
|
|
Number of stock |
|
|
Weighted average |
|
|
Weighted average |
|
|||
Outstanding, January 1, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding December 31, 2021 |
|
|
|
|
|
|
|
|
|
|||
Granted |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
( |
) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding December 31, 2022 |
|
|
|
|
|
|
|
|
|
|||
As of December 31, 2021, the following stock options were outstanding and exercisable:
Outstanding |
|
|
Exercisable |
|
|
Exercise Price |
|
|
Remaining life (years) |
|
|
Expiry Date |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of December 31, 2022, the following stock options were outstanding and exercisable:
Outstanding |
|
|
Exercisable |
|
|
Exercise Price |
|
|
Remaining life (years) |
|
|
Expiry Date |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
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|
|||||
|
|
|
|
|
|
|
|
|
|
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|
|||||
|
|
|
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|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The Company recognizes share-based payments expense for all stock options granted using the fair value based method of accounting. The fair value of stock options is determined by the Black-Scholes Option Pricing Model with assumptions for risk-free interest rates, dividend yields, volatility factors of the expected market price of the Company’s shares, forfeiture rate, and expected life of the options.
There were
Restricted share units
The Company grants restricted share units (“RSUs”) to directors, officers, employees and consultants as compensation for services, pursuant to its Amended RSU Plan (the “RSU Plan”). One restricted share unit has the same value as a Voting Share. The number of RSUs awarded and underlying vesting conditions are determined by the Board of Directors in its discretion.
At the election of the Board of Directors, upon each vesting date, participants receive (a) the issuance of Voting Shares from treasury equal to the number of RSUs vesting, or (b) a cash payment equal to the number of vested RSUs multiplied by the fair market value of a Voting Share, calculated as the closing price of the Voting Shares on the NEO for the trading day immediately preceding such payment date; or (c) a combination of (a) and (b).
On the grant date of RSUs, the Company determines whether it has a present obligation to settle in cash. If the Company has a present obligation to settle in cash, the RSUs are accounted for as liabilities, with the fair value remeasured at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. The Company has a present
32
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
obligation to settle in cash if the choice of settlement in shares has no commercial substance, or the Company has a past practice or a stated policy of settling in cash, or generally settles in cash whenever the counterpart asks for cash settlement.
If no such obligation exists, RSUs are accounted for as equity settled share-based payments and are valued using the share price on grant date. Upon settlement:
The following is a summary of RSU activities for the years ended December 31, 2022 and 2021:
|
|
Number of RSUs |
|
|
Weighted average grant date fair value per RSU |
|
||
Outstanding, January 1, 2021 |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
||
Issuance of common stock |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding December 31, 2021 |
|
|
|
|
|
|
||
Granted |
|
|
|
|
|
|
||
Issuance of common stock |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding December 31, 2022 |
|
|
|
|
|
|
||
During the years ended December 31, 2022 and 2021, the Company recognized total share-based payments expense with respect to stock options, RSUs and employees' stock purchase plan of $
The remaining compensation that has not been recognized as of December 31, 2022 and 2021 with regards to RSUs and the weighted average period they will be recognized are $
Basic earnings per share, which excludes dilution, is computed by dividing Net Income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of incremental shares from the assumed issuance of shares relating to share based awards is calculated by applying the treasury stock method.
33
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The following table shows the computation of basic and diluted earnings per share:
|
|
December 31, |
|
|
December 31, |
|
||
Numerator: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
||
Weighted average common shares outstanding - Basic |
|
|
|
|
|
|
||
Dilutive effect of stock options, RSUs and warrants |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Weighted average common shares outstanding - Diluted |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Basic loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted loss per share |
|
$ |
( |
) |
|
$ |
( |
) |
M On May 19, 2021, the Company entered into an arrangement agreement to complete a spin-out of the shares of its wholly owned subsidiary, Canada Jetlines Operations Ltd. (“Jetlines”). On June 28, 2021, the Company completed the spin-out pursuant to the Arrangement under which the Company transferred
Related parties and related party transactions impacting the consolidated financial statements not disclosed elsewhere in these consolidated financial statements are summarized below and include transactions with the following individuals or entities:
As of December 31, 2022, amounts due to related parties include the following:
Other related party transactions and balances
The amounts due to related parties are unsecured, non-interest bearing and have no stated terms of repayment.
Smartlynx Airlines Malta Limited is an entity whose Chief Executive Officer is a Board Member of Global. During the year ending December 31, 2020, Global made advanced payments totaling $
34
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
17. ACCRUED LIABILITIES
Accrued liabilities consisted of the following as of December 31:
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
||
Salaries, wages and benefits |
|
$ |
|
|
$ |
|
||
Passenger Taxes |
|
|
|
|
|
|
||
Aircraft fuel |
|
|
|
|
|
|
||
Contracted ground and aviation services |
|
|
|
|
|
|
||
Maintenance |
|
|
|
|
|
|
||
Aircraft Rent |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Accrued liabilities |
|
|
|
|
|
|
||
18. REVENUE CONTRACT LIABILITY
Deferred revenue for customer contracts represents amounts collected from, or invoiced to, customers in advance of revenue recognition. The balance of Deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue.
Significant changes in our Deferred Revenue liability balances during the year ended December 31, 2022 were as follows:
|
|
Deferred Revenue |
|||
Balance as of December 31, 2021 |
|
$ |
|
|
|
Revenue Recognized |
|
|
( |
) |
|
Amounts Collected or invoiced |
|
|
|
|
|
Balance as of December 31, 2022 |
|
$ |
|
|
|
19. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
Non-cash transactions affecting cash flows from investing or financing activities during the year ended December 31, 2022 are summarized below:
Non-cash transactions affecting cash flows from investing or financing activities during the year ended December 31, 2021 are summarized below:
35
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
20. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Company’s financial instruments are exposed to certain financial risks as detailed below.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.
The Company is subject to credit risk on its cash and cash equivalents. The Company limits its exposure to credit loss by placing its cash and cash equivalents with major financial institutions. As a result, the Company does not believe it is exposed to significant credit risk.
21. SUBSEQUENT EVENTS
On January 30, 2023, Global Crossing Airlines Group announced a up to US$
On February 6, 2023, Global Crossing Airlines Group announced that it has received approval from the US FAA for cargo operations and will commence revenue cargo flights with the A321 Passenger to Freighter (P2F) aircraft (“A321F”). Global Crossing Airlines Group received its first A321F aircraft in January 2023 and is expecting the second A321F to arrive by mid-March,
On February 22, 2023, Global Crossing Airlines Group announced the successful completion of the rigorous International Air Transport Association (IATA) International Operational Safety Audit (IOSA) and has been added to the IOSA Registry. The IATA Operational Safety Audit (IOSA) program is an internationally recognized and accepted evaluation system designed to assess the operational management and control systems of an airline. The certification is valid for two years, when it must be renewed.
During the first two months of 2023, the Company issued
36
ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls
Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures that are designed to ensure that information relating to the Company required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The Certifying Officers have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of December 31, 2022.
Our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, the Company’s disclosure controls and procedures were not effective due to the identification of a material weakness in internal control over financial reporting.
Management's Annual Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles (GAAP).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. Management based its assessment on criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 and has concluded that such internal control over financial reporting was not effective, based on the material weakness described below.
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management identified a material weakness as of December 31, 2022, related to the design and operating effectiveness of the Company’s internal controls associated with the required disclosures within the financial statements and disclosure of material changes in financial conditions and results of operations for the following reason.
1. Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management Remediation Plans
In order to mitigate the foregoing material weakness, the Company plans to take steps to develop and enhance its internal controls over financial reporting in 2023, including:
1. Developing formal policies and procedures over accounting and reporting disclosure requirements.
2. Provide additional training on application of US GAAP and SEC disclosure requirements.
3. Obtain checklists to ensure all application disclosures required under US GAAP and SEC requirements are included in each filing.
37
As we continue to evaluate and work to improve our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. Therefore, we cannot assure you when the Company will remediate the material weakness identified above, nor can we be certain that additional actions will not be required and what the costs of any such additional actions may be. Moreover, we cannot assure you that additional material weaknesses will not arise in the future.
Notwithstanding the material weakness identified in our internal control over financial reporting, we believe that the consolidated financial statements in this annual report fairly present, in all material respects, the Company’s consolidated financial condition as of December 31, 2022 and 2021, and consolidated results of its operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (“GAAP”).
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
38
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
1. Financial Statements:
The information required by this item is included in Item 8 of Part II of this Form 10-K.
2. Financial Statement Schedules
The information required by this item is included in Item 8 of Part II of this Form 10-K.
3. Exhibits
The following exhibits are incorporated by reference or filed as part of this report:
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
Exhibit |
|
Description |
Incorporated by Reference |
Filed or Furnished |
|
|
|
Form |
Date |
Herewith |
|
|
|
|
|
|
|
31.1 |
|
|
|
X |
|
|
|
|
|
|
|
31.2 |
|
|
|
X |
|
|
|
|
|
|
|
32.1 |
|
|
|
X |
|
|
|
|
|
|
|
32.2 |
|
|
|
X |
|
|
|
|
|
|
|
39
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: October 26, 2023 |
|
|
|
|
|
|
|
|
|
/s/ Ed Wegel |
|
|
|
Ed Wegel |
|
|
|
CEO |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE |
|
TITLE |
|
DATE |
|
|
|
|
|
/s/ Ed Wegel |
|
CEO |
|
October 26, 2023 |
|
|
|
|
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|
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/s/ Ryan Goepel |
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CFO |
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October 26, 2023 |
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/s/ John Quelch. |
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Director |
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October 26, 2023 |
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/s/ Alan Bird |
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Director |
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October 26, 2023 |
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/s/ T. Allan McArtor |
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Director |
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October 26, 2023 |
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/s/ Deborah Robinson |
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Director |
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October 26, 2023 |
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/s/ Cordia Harrington |
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Director |
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October 26, 2023 |
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40