JETMF 10-Q
Global Crossing Airlines Group Inc. (JETMF)
ESPP
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
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(Address of principal executive office) |
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(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
[ ] |
Accelerated filer |
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[X] |
Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No
The number of shares outstanding of the registrant’s Common Stock as of May 02, 2024 was 59,863,778 shares, consisting of
GLOBAL CROSSING AIRLINES GROUP, INC.
Form 10-Q
Period Ended March 31, 2024
Index
2
GLOBAL CROSSING AIRLINES GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share quantities)
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March 31, 2024 (Unaudited) |
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December 31, 2023 |
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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 of $ |
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Prepaid expenses and other current assets |
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Current assets held for sale |
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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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Operating lease right-of-use assets |
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Deposits |
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Other assets |
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Total Assets |
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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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$ |
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Accrued liabilities |
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Deferred revenue |
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Customer deposits |
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Current portion of long-term operating leases |
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Current portion of finance leases |
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Total current liabilities |
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- |
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Other liabilities |
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Note payable |
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Long-term operating leases |
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Long-term finance leases |
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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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(Note 7) |
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Equity (Deficit) |
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$ |
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$ |
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$ |
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Additional paid-in capital |
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Retained deficit |
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( |
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( |
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Total Company's stockholders’ deficit |
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( |
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( |
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Noncontrolling interest |
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Total stockholders’ deficit |
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( |
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( |
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Total Liabilities and Deficit |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
3
GLOBAL CROSSING AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share and per share amounts)
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Three Months Ended March 31, 2024 |
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Three Months Ended March 31, 2023 |
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Revenue |
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$ |
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$ |
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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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Aircraft Rent |
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Other |
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Total Operating Expenses |
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$ |
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$ |
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Operating Loss |
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( |
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( |
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Non-Operating Expenses |
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Interest Expense |
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Total Non-Operating Expenses |
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Loss before income taxes |
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( |
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( |
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Income tax expense |
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- |
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- |
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Net Loss |
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( |
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( |
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Net Income attributable to Noncontrolling Interest |
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- |
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- |
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Net Loss attributable to the Company |
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( |
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Loss per share: |
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Basic |
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$ |
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Diluted |
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( |
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$ |
( |
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Weighted average number of shares outstanding |
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Fully diluted shares outstanding |
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See accompanying notes to consolidated financial statements.
4
GLOBAL CROSSING AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except shares quantities)
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Common Stock Number of Shares |
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Amount |
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Additional Paid in Capital |
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Retained Deficit |
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Total |
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Beginning – January 1, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Issuance of shares – options exercised |
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- |
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Issuance of shares – warrants exercised |
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- |
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Issuance of shares - share based compensation on RSUs |
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- |
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Loss for the period |
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- |
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- |
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- |
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( |
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( |
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Ending – March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock Number of Shares |
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Amount |
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Additional Paid in Capital |
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Retained Deficit |
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Total |
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Noncontrolling Interest |
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Total |
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Beginning – January 1, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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Issuance of shares - share based compensation on RSUs |
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- |
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- |
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Loss for the period |
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- |
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- |
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- |
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( |
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( |
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- |
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( |
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Ending – March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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See accompanying notes to consolidated financial statements.
5
GLOBAL CROSSING AIRLINES GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
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For The Three Months Ended March 31, |
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2024 |
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2023 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation expense |
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Bad debt expense (recovery) |
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( |
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Loss on sale of property |
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— |
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Gain on sale of spare parts |
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— |
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( |
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Foreign exchange loss |
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— |
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Amortization of debt issue costs |
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Amortization of operating lease right of use assets |
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Share-based payments |
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Interest on finance leases |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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Assets held for sale |
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Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable |
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Accrued liabilities and other liabilities |
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( |
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Operating lease obligations |
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( |
) |
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( |
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Other liabilities |
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( |
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Net cash used in operating activities |
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( |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Deposits, deferred costs and other assets |
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( |
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( |
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Purchases of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Principal payments on finance leases |
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( |
) |
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( |
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Proceeds on issuance of shares |
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— |
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Proceeds from note payable |
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— |
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Net cash (used in) provided by financing activities |
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( |
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Net (decrease) increase in cash, cash equivalents, and restricted cash |
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( |
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Cash, cash equivalents and restricted cash - beginning of the period |
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Cash, cash equivalents and restricted cash - end of the period |
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$ |
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$ |
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Non-cash transactions |
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Right-of-use (ROU) assets acquired through operating leases |
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$ |
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$ |
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Equipment acquired through finance leases |
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$ |
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$ |
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Cash paid for |
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Interest |
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$ |
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$ |
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See accompanying notes to consolidated financial statements.
6
GLOBAL CROSSING AIRLINES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands, except share and per share data)
Item 1 - Financial Statements
Global Crossing Airlines Group, Inc. (the “Company” or “GlobalX”) principal business activity is providing passenger and cargo aircraft to customers through aircraft operating service agreements including, crew, maintenance, insurance (“ACMI”) and charter services “Charter” serving the United States, Caribbean, Latin American and European markets.
The condensed consolidated financial statements include the accounts of the Company, and its subsidiaries, Global Crossing Airlines, Inc. and Global Crossing Airlines Operations, LLC (collectively “GlobalX USA”), Global Crossing Airlines Holdings, Inc, GlobalX Travel Technologies, Inc. (“Technologies”), GlobalX Air Tours, LLC (“GlobalX Tours”), LatinX Air S.A.S., GlobalX Colombia S.A.S., UrbanX Air Mobility, Inc. ("UrbanX") and Charter Air Solutions, LLC ("Top Flight"). All intercompany transactions and balances have been eliminated on consolidation.
The accompanying unaudited condensed consolidated financial statements and related notes (the “Financial Statements”) have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) requirements for quarterly reports on Form 10-Q, and consequently exclude certain disclosures normally included in audited consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP). The Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which includes additional disclosures and a summary of our significant accounting policies.
Our quarterly results are subject to seasonal and other fluctuations and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.
The condensed 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 March 31, 2024, the Company had a working capital deficit of $
2. NEW ACCOUNTING STANDARDS
Recently Issued Accounting Standards
In March 2024, the FASB issued - Codification Improvements - Amendments to Remove References to the Concepts Statements. This update contains amendments to the Codification that remove reference to various FASB Concepts Statement. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2024. Management expects
3. INVESTMENTS
7
Investment in Canada Jetlines Operations Ltd.:
On June 28, 2021, the Company completed the spin-out pursuant to the Arrangement under which the Company transferred
Investment in Top Flight:
On January 27, 2023, the Company announced an up to $
The terms of the promissory note (the "Note") issued in connection with Loan include:
This loan was paid off in connection with the new $
On August 2, 2023, the Company closed the placement of $
The terms of the senior secure notes include:
8
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 Monte Carlo 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 December 21, 2023, the Company and the senior secured notes due 2029 purchasers amended the original placement of $
Notes Payable is comprised of the following:
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For the Period Ended |
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For the Year Ended |
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Subscription Agreement |
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$ |
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$ |
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Less unamortized debt issuance costs, noncurrent |
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Total carrying amount |
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Less current maturities |
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— |
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— |
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Total long-term Note Payable |
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$ |
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$ |
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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 $
On March 4, 2024, Global Crossing Airlines and GEM decided to extend the length of the GEM Facility by 12 months with a new expiration date of March 4, 2025.
9
As of March 31, 2024 and December 31, 2023, the Company had
Following is a summary of the warrant activity during the three months ended March 31, 2024 and 2023:
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Number of Share Purchase Warrants |
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Weighted Average Exercise Price |
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Outstanding January 1, 2023 |
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$ |
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Issued |
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- |
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- |
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Exercised |
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( |
) |
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Expired |
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- |
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- |
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Outstanding March 31, 2023 |
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$ |
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Outstanding January 1, 2024 |
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$ |
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Issued |
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- |
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- |
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Exercised |
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- |
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- |
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Expired |
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( |
) |
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Outstanding March 31, 2024 |
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$ |
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As of March 31, 2024, the following share purchase warrants were outstanding and exercisable:
Outstanding |
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Exercise Price |
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Remaining life |
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Expiry Date |
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USD$ |
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USD$ |
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As of March 31, 2023, the following share purchase warrants were outstanding and exercisable:
Outstanding |
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Exercise Price |
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Remaining life |
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Expiry Date |
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USD$ |
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USD$ |
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USD$ |
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USD$ |
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The maximum number of voting shares is the number of common stock of the Company 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 three months ended March 31, 2024 and 2023:
10
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Number of stock |
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Weighted average |
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Weighted average |
|
|||
Outstanding January 1, 2023 |
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$ |
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$ |
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Granted |
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— |
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— |
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— |
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Exercised |
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( |
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Forfeited |
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( |
) |
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Outstanding March 31, 2023 |
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$ |
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$ |
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Outstanding January 1, 2024 |
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$ |
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$ |
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Granted |
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|
— |
|
|
|
— |
|
|
|
— |
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding March 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|||
As of March 31, 2024, the following stock options were outstanding and exercisable:
Outstanding |
|
|
Exercisable |
|
|
Exercise Price |
|
|
Remaining life (years) |
|
|
Expiry Date |
||||
|
|
|
|
|
|
$ |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of March 31, 2023, the following stock options were outstanding and exercisable:
Outstanding |
|
|
Exercisable |
|
|
Exercise Price |
|
|
Remaining life (years) |
|
|
Expiry Date |
||||
|
|
|
|
|
|
$ |
|
|
|
|
|
|||||
|
|
|
|
|
|
$ |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 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:
11
The following is a summary of RSU activities for the three months ended March 31, 2024 and 2023:
|
|
Number of RSUs |
|
|
Weighted average grant date fair value per RSU |
|
||
Outstanding January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding March 31, 2023 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Outstanding January 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding March 31, 2024 |
|
|
|
|
$ |
|
||
During the three months ended March 31, 2024 and 2023, 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 March 31, 2024 and 2023 with regards to RSUs and the weighted average period they will be recognized are $
Employee Stock Purchase Plan
In September 2021, the Board adopted the GlobalX 2021 Employee Stock Purchase Plan (“ESPP”). There are
During the three months ended March 31, 2024 and 2023, the Company did
As of March 31, 2024 and 2023, total recognized equity-based compensation costs related to ESPP were $
ESPP payroll contributions accrued at March 31, 2024 and March 31, 2023 totaled $
8. INCOME TAXES
The Company’s expected effective tax rate for the three months periods ended March 31, 2024, and 2023 was
9. COMMITMENTS AND CONTINGENCIES
The Company has contractual obligations and commitments primarily with regard to management and development services, lease arrangements and financing arrangements.
On October 14, 2021, the Company entered into a lease agreement for
12
On June 21, 2022, the Company entered into a lease agreement for
On July 29, 2022, the Company signed a lease agreement for
On December 14, 2022, the Company entered into a lease agreement for
On January 27, 2023, the Company entered into a lease agreement for
On May 22, 2023, the Company entered into a lease agreement for a commercial property warehouse. The
On June 16, 2023, the Company entered into a lease agreement for
On August 8, 2023, the Company signed a lease agreement for A320 passenger aircraft and paid commitment fees to the lessor. The lease will commence upon aircraft delivery which is expected to be between in 2024 and will run through the next heavy maintenance visit reached (estimated to be in
On September 8, 2023, the Company entered into a lease agreement for
On November 17, 2023, the Company signed a lease agreement for
On November 20, 2023, the Company entered into a lease agreement for
On December 22, 2023, the Company entered into a lease agreement for
On January 19, 2024, the Company signed a lease agreement for
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. On December 21, 2022, and October 10, 2023, the Company signed extensions for
13
to lessor and also no basic and supplemental rent shall be payable while the Aircraft undergoes conversion during the period commencing on the conversion induction date and ending on the conversion redelivery date. The Company expects to record a new lease on the acceptance of redelivery date, which is the date the lessee will have access to the leased asset.
The following table provides details of the Company's future minimum lease payments under finance lease liabilities and operating lease liabilities recorded in thousands on the Company's condensed consolidated balance sheets as of March 31, 2024. The table does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.
|
Finance Leases |
|
|
Operating Leases |
|
||
Remainder of 2024 |
$ |
|
|
$ |
|
||
2025 |
|
|
|
|
|
||
2026 |
|
|
|
|
|
||
2027 |
|
|
|
|
|
||
2028 |
|
|
|
|
|
||
2029 and thereafter |
|
|
|
|
|
||
Total minimum lease payments |
|
|
|
|
|
||
Less amount representing interest |
|
|
|
|
|
||
Present value of minimum lease payments |
|
|
|
|
|
||
Less current portion |
|
|
|
|
|
||
Long-term portion |
$ |
|
|
$ |
|
||
The table below presents information for lease costs related to the Company's finance and operating leases in thousands:
|
For The Three Months Ended March 31, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Finance lease cost |
|
|
|
|
|
||
Amortization of leased assets |
$ |
|
|
$ |
|
||
Interest of lease liabilities |
|
|
|
|
|
||
Operating lease cost |
|
|
|
|
|
||
Operating lease cost (1) |
|
|
|
|
|
||
Total lease cost |
|
|
|
|
|
||
(1)
The Company utilizes the rate implicit in the lease whenever it is easily determined. For leases where the implicit rate is not readily available, we utilize our incremental borrowing rate as the discount rate.
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
||
Weighted-average remaining lease term |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
||||
Finance leases |
|
|
|
|
||||
Weighted-average discount rate |
|
|
|
|
|
|
||
Operating leases |
|
|
% |
|
|
% |
||
Finance leases |
|
|
% |
|
|
% |
||
The table below presents cash and non-cash activities associated with our leases:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|||
Operating cash flows from operating leases |
|
$ |
|
|
$ |
|
||
Financing cash flows from finance leases |
|
|
|
|
|
|
||
On August 11, 2023 Global Crossing Airlines in combination with Top Flight Charters and its minority interest member filed a lawsuit in the United States District Court Southern District of Florida against Shorts Travel Management, Inc (Shorts) and STM Charters, Inc seeking to have an old non-solicit agreement signed by Top Flight's minority interest member to be declared invalid, that Shorts alleged
14
trade secrets do not exist and sought damages arising from the Shorts defamation per se based on numerous false statements made by Shorts in the marketplace. On October 4, 2023 Shorts responded in court by denying the claims made and countersued all parties for breach of contract and theft of trade secrets. This case is currently in the discovery phase.
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.
10. LOSS PER SHARE
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.
The following table shows the computation of basic and diluted earnings per share for the three months ended March 31, 2024 and 2023 in thousands, except share and per share amounts:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net 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 (1) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) There were
11. RELATED PARTY TRANSACTIONS
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 mentioned in footnote 3, on June 28, 2021, the Company completed the spin-out of Jetlines to GlobalX. GlobalX continues to provide back-office support including sharing the costs of the Company’s aircraft fleet management software (TRAX).
As of March 31, 2024 and 2023, amounts due to related parties include the following:
As described in footnote 4 above, on August 2, 2023, the Company issued Secured Notes of $
15
12. ACCRUED LIABILITIES
Accrued liabilities consisted of the following as of March 31, 2024 and December 31, 2023, in thousands.
|
|
|
|
|||||
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Salaries, wages and benefits |
|
$ |
|
|
$ |
|
||
Passenger Taxes |
|
|
|
|
|
|
||
Aircraft fuel |
|
|
|
|
|
|
||
Contracted ground and aviation services |
|
|
|
|
|
|
||
Maintenance |
|
|
|
|
|
|
||
Aircraft Rent |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Accrued liabilities |
|
$ |
|
|
$ |
|
||
13. 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 period and year ended, March 31, 2024 and December 31, 2023, respectively, were as follows in thousands:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
||
Beginning Balance |
|
$ |
|
|
$ |
|
||
Revenue Recognized |
|
|
( |
) |
|
|
( |
) |
Amounts Collected or invoiced |
|
|
|
|
|
|
||
Ending Balance |
|
$ |
|
|
$ |
|
||
The Company has 2 customers that accounted for approximately
16
Item 2 - 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 1 of this report. This Item 2 contains forward-looking statements that involve risks and uncertainties. Undue reliance should not be placed on these forward-looking statements, which speak only as of the date of this report. Actual results may differ materially from those expressed or implied in such forward-looking statements.
Background
Certain Terms - Glossary
The following represents terms and statistics specific to our business and industry. They are used by management to evaluate and measure operations, results, productivity, and efficiency.
ACMI: |
Service offering, whereby we provide outsourced cargo and passenger aircraft operating solutions, including the provision of an aircraft, crew, maintenance, and insurance, while customers assume fuel, demand and price risk. In addition, customers are generally responsible for landing, navigation and most other operational fees and costs |
Block Hour |
The time interval between when an aircraft departs the terminal until it arrives at the destination terminal |
Charter |
Service offering, whereby we provide cargo and passenger aircraft charter services to customers. The customer generally pays a fixed charter fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs
|
Net Available Aircraft |
The number of aircraft available each month reduced by (netted) days the aircraft is unavailable due to various maintenance events or deliveries during a month |
2Y Check |
“Heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every two years and can take from 20 – 40 days to complete. |
6Y Check |
“Heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every six years and can take from 45-75 days to complete |
12Y Check |
“Heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every six years and can take from 60 – 100 days to complete |
Heavy Maintenance |
Scheduled maintenance activities that are extensive in scope and are primarily based on time or usage intervals, which include, but are not limited to 2Y Checks, 6Y Checks, 12Y Checks and engine overhauls. In addition, unscheduled engine repairs involving the removal of the engine from the aircraft are considered to be Heavy Maintenance. |
Line Maintenance |
Maintenance events occurring during normal day-to-day operations.
|
Non-heavy Maintenance |
Discrete maintenance activities for the overhaul and repair of specific aircraft components, including landing gear, auxiliary power units and engine thrust reversers. |
Utilization |
The average number of Block Hours operated per day per aircraft. |
Business Overview
GlobalX operates a US Part 121 domestic flag and supplemental airline using the Airbus A320 family of aircraft, operating both passenger and cargo aircraft. GlobalX’s business model is to (1) provide services on an ACMI using wet lease contracts to airlines and non-airlines, and (2) on a Charter 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.
Business Strategy
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/tour operators to provide aircraft during their peak seasons; and provide ad-hoc and track charter programs for non-airline customers.
Business Developments
17
During the three months period ended March 31, 2024, the Company refocused the business back to GlobalX’s core competency – operating narrow body charter flights for both passengers and cargo. This led to the cancellation of several initiatives and the prioritization of adding aircraft to our operating certificate. Projects cancelled or in the process of being cancelled include UrbanX, GlobalX Colombia, GlobalX Ecuador, adding ETOP’s capability, the acquisition of a wide body A330 aircraft and the development of a hangar facility at Fort Lauderdale Airport. Not only does the cancellation of these projects represent significant cash savings in 2024, but it also allows the team to devote efforts towards our stated goal of creating the largest narrow body charter operation in North America generating sustainable, long term profits. To achieve this goal, GlobalX continues to invest in its three key assets–certifications, aircraft, and crew.
GlobalX achieved the following during the three months period ended March 31, 2024:
The Cargo Charter Market
GlobalX added the A321F (passenger to freighter) aircraft to its operating certificate during Q1 2023. The Company continues to believe that the A321F will be a highly sought after cargo aircraft over the next few years. During Q1 2024, we had two aircraft offline, one for maintenance and, one for conformity. This left two operational aircraft, both of which generated lower than anticipated revenue. GlobalX attributed the softness of the market to several external factors including the rebid of the USPS contract, general economic conditions and excess capacity in the North American freight market. In response to this slowdown during the quarter, the Company cancelled two aircraft deliveries, elected to take two A321’s as passenger rather than freighter and deferred two other cargo deliveries to 2025. GlobalX is working diligently to place the aircraft we have into long term ACMI contracts and continues to make progress establishing our reputation for on time performance as the market better understands the capabilities of the A321F aircraft. While the Company cannot predict when the cargo market will recover, GlobalX has taken concrete steps to reduce our financial exposure in 2024 while expanding our customer base for the aircraft the Company does have.
The Passenger Charter Market
Unlike the cargo market, the passenger market has surging demand resulting in improved aircraft. There are several macro factors, including the supply of aircraft, reduced direct competition, increased reliance on air charter by colleges and a general increased customer demand driving increased demand for our services. GlobalX anticipates the high level of demand will continue through the summer and well into 2025. To address this demand, the Company has prioritized passenger aircraft deliveries over cargo, devoted sales and operational resources to develop long term relationships with key customers and to expand the markets served as opportunities arise. Passenger charter services will be the economic engine for GlobalX in 2024.
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.
18
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 outsourced 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
There have been significant changes to the competitive environment for US Charter operators in recent months. The liquidation of iAero (our largest competitor), the acquisition of Hillwood Airways by Eastern Airlines, the acquisition of iAero Assets by Eastern Airlines and Breeze Airways renewed focus on charter operations have all had a large impact on the charter market. It is our expectation that Eastern Airlines, with the assets acquired from iAero, will look to expand their business domestically. In response we are focusing on our core business, emphasizing on time performance, reinforcing our differentiation of our Airbus product and actively soliciting longer-term contracts with key customers.
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 JetBlue Airways, Virgin America, American Airlines, US Airways, Atlas Air, Breeze Airways, Emirates, North American Airlines, Miami Air, Spirit Airlines, Continental Airlines, Pan Am, 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, Halliburton, Lehman Brothers, and the Burger King Corporation.
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.
Three months ended March 31, 2024 and 2023
Revenue & Statistics
The following discussion should be read in conjunction with our Financial Statements and other financial information appearing and referred to elsewhere in this report.
The analysis of GlobalX results for the three months period ended on March 31, 2024 and 2023 requires an understanding of how the Company fundamentally evolved during that time period. 2023 was only our second year of full operations and was a period where the company was focused on securing new customers, entering new markets, and flying to new locations; primarily in the domestic and Caribbean markets.
By contrast in 2024, GlobalX is expanding on our existing relationships both domestically and internationally and grew operations in the ACMI market through increased focus on operating for government agencies. As the company grows, operational efficiency and margins are continuing to improve. Our key metric is block hours flown and block hours flown per available aircraft, which is the measure by which the Company tracks 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 and Charter operator. GlobalX charters the entire aircraft, does not take fuel risk, and does not take third party risk therefore all results are evaluated on a block hour basis.
19
The following table compares our Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated:
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
Operating Fleet |
|
2024 |
|
|
2023 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
A319 |
|
|
1.0 |
|
|
|
— |
|
|
|
1.0 |
|
|
N/A |
|
|
A320 |
|
|
8.3 |
|
|
|
6.0 |
|
|
|
2.3 |
|
|
|
38.3 |
% |
A321 |
|
|
5.0 |
|
|
|
3.0 |
|
|
|
2.0 |
|
|
|
66.7 |
% |
Total Operating Average Aircraft Equivalents |
|
|
14.3 |
|
|
|
9.0 |
|
|
|
5.3 |
|
|
|
58.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Aircraft Available |
|
|
12.5 |
|
|
|
7.8 |
|
|
|
4.7 |
|
|
|
60.3 |
% |
Total Block Hours |
|
|
5,200 |
|
|
|
3,134 |
|
|
|
2,066 |
|
|
|
65.9 |
% |
Average Utilization per available aircraft |
|
|
416 |
|
|
|
402 |
|
|
|
14 |
|
|
|
3.5 |
% |
The following table describes the degree to which variations in revenues in thousands can be attributed to fluctuations in prices and nature of GlobalX services.
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
||||||
Revenue |
|
2024 |
|
|
2023 |
|
|
Inc/(Dec) |
|
|
% Change |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Charter |
|
$ |
34,014 |
|
|
$ |
26,713 |
|
|
$ |
7,301 |
|
|
27.3% |
ACMI |
|
|
18,622 |
|
|
|
4,730 |
|
|
|
13,892 |
|
|
293.7% |
Other |
|
|
1,199 |
|
|
|
708 |
|
|
|
491 |
|
|
69.4% |
Total |
|
$ |
53,835 |
|
|
$ |
32,151 |
|
|
$ |
21,684 |
|
|
67.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Block Hours |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Charter |
|
|
2,199 |
|
|
|
2,053 |
|
|
|
146 |
|
|
7.1% |
ACMI |
|
|
2,874 |
|
|
|
1,067 |
|
|
|
1,807 |
|
|
169.3% |
Non Revenue |
|
|
127 |
|
|
|
14 |
|
|
|
113 |
|
|
807.1% |
Total |
|
|
5,200 |
|
|
|
3,134 |
|
|
|
2,066 |
|
|
65.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Revenue per Block Hour |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Charter |
|
$ |
15.47 |
|
|
$ |
13.01 |
|
|
$ |
2.46 |
|
|
18.9% |
ACMI |
|
|
6.48 |
|
|
|
4.43 |
|
|
|
2.05 |
|
|
46.2% |
Charter revenue for the period increased $7.3 million or 27.3%, from $26.7 million in 2023 to $34.0 million in 2024. The rate for Charter flying increased 18.8% from $13,015 per block hour to $15,468 per block hour creating a $5.3 million impact or 73.9% of the increase. The primary driver for the increase was related to both high market demand and a shortage of supply as competitors reduced capacity. In addition, the number of block hours operated increased 7.1% from 2,053 in 2023 to 2,199 block hours in 2024, driven by the increased number of aircraft available to operate, creating $1.9 million or 26.1% of the increased revenue.
ACMI revenue for the period increased by $13.9 million or 293.7% from $4.7 million in 2023 to $18.6 million in 2024. This variance is primarily driven by a 60.3% increase in the number of available aircraft which resulted in an increase from 1,067 block hours in 2023 to 2,874 block hours in 2024, an increase of 169.2% or 1,807 block hours. This volume accounted for 57.6% or $8.0 million of the increase. The average revenue per block hour increased $2,048 per block hours from $4,431 per block hour in 2023 to $6,480 per block hour in 2024. The rate increase accounted for $5.9 million or 42.4% of the increase. The primary driver for the increase was related to both high market demand and a shortage of supply as competitors reduce capacity.
Other revenue for the period increased by $0.5 million from $0.7 million in 2023 to $1.2 million in 2024. The increase is primarily driven by management fees earned related to supporting a winter track program and additional ancillary services provided to our customers.
20
Operating Expenses
The following table compares our Operating Expenses (in thousands):
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
Operating Expenses |
|
2024 |
|
|
2023 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries, Wages, & Benefits |
|
$ |
16,775 |
|
|
$ |
11,168 |
|
|
$ |
5,607 |
|
|
|
50.2 |
% |
Aircraft Fuel |
|
|
8,199 |
|
|
|
7,949 |
|
|
|
250 |
|
|
|
3.1 |
% |
Maintenance, materials and repairs |
|
|
2,933 |
|
|
|
1,559 |
|
|
|
1,374 |
|
|
|
88.2 |
% |
Depreciation and amortization |
|
|
1,166 |
|
|
|
443 |
|
|
|
723 |
|
|
|
163.2 |
% |
Contracted ground and aviation services |
|
|
6,903 |
|
|
|
4,853 |
|
|
|
2,050 |
|
|
|
42.2 |
% |
Travel |
|
|
4,282 |
|
|
|
2,254 |
|
|
|
2,028 |
|
|
|
90.0 |
% |
Insurance |
|
|
1,633 |
|
|
|
949 |
|
|
|
684 |
|
|
|
72.1 |
% |
Aircraft Rent |
|
|
12,761 |
|
|
|
5,644 |
|
|
|
7,117 |
|
|
|
126.1 |
% |
Other |
|
|
3,802 |
|
|
|
2,862 |
|
|
|
940 |
|
|
|
32.8 |
% |
Total Operating Expenses |
|
$ |
58,454 |
|
|
$ |
37,681 |
|
|
$ |
20,772 |
|
|
|
55.1 |
% |
Salaries, wages, and benefits increased $5.6 million from $11.2 million to $16.8 million, or 50.2%, primarily due to the hiring and training of pilots and other airline personnel necessitated by the growing fleet and operations. The total employees grew 31.3% from 467 to 611 and pilots increased from 91 to 133, or 46.1%. Headcount drove 61.4% or $3.4 million of the increase, while 38.4% or $2.2 million was due to an increase in rate per headcount of 14.8%.
Aircraft fuel increased by $0.3 million, from $7.9 million to $8.2 million, or 3.1%, primarily due to the volume of Charter block hours which increased 7.1% from 2,053 to 2,199. The was partially offset by a decrease in base jet fuel of approximately 3.7%.
Maintenance, materials, and repairs increased by $1.4 million, from $1.6 million to $2.9 million, or 88.2%. $1.0 million or 74.8% of the increase was due to volume from the increase in both the number of aircraft to 16 and the number of block hours flown which increased 65.9% from 3,134 to 5,200 block hours. $0.3 million or 25.2% of the increase was due to rate per block hour rising from $497 per block hour to $564 per block hour, a 13.4% increase. This increase in rate per block hour was primarily due to repairs of rotable parts.
Depreciation and amortization increased $0.7 million, from $0.4 million to $1.2 million or 163.0%, driven by assets acquired to support our airport operations. These assets include, but are not limited to, aircraft deliveries secured on capital leases, computers, software, and rotable inventory.
Contracted ground and aviation services increased by $2.0 million from $4.9 million to $6.9 million, or 42.2%, These costs are directly correlated to the number of Charter hours operated. $17 million or 83.1% of the increase was driven by rate per Charter block hour. The remaining $0.3 million or 16.9% was driven by the increase in Charter block hours by 7.1%
Travel increased $2.0 million, from $2.3 million to $4.3 million or 90.0%, $1.9 million or 92.1% was driven by costs incurred to grow a key government contract resulting in an increased number of hotel nights. The remaining $0.2 million variance is driven by the increase in Charter block hours by 7.1% from 2,053 to 2,199.
Insurance increased $0.7 million, from $0.9 million to $1.6 million or 72.2%, primarily related to the increase in the number of aircraft.
Aircraft rent increased $7.1 million, from $5.6 million to $12.8 million or 126.1%, primarily due to the increase in the number of aircraft from 10 to 16 aircraft in the fleet. $3.5 million or 49.2% of the increase is driven by the increase in the number of aircraft being leased, with the remaining $3.6 million or 50.8% due to rate increase per aircraft and short-term ACMI leases from other airlines due to flights sold exceeded capacity available during the period.
Operating loss decreased $0.9 million, from an operating loss of $5.5 million to $4.6 million, or a 16.5% improvement. In addition, operating loss as a percentage of revenue improved from (17.2%) to (8.6%), a 8.6% improvement. This was a direct result of GlobalX’s ability to grow its revenue faster than its cost structure as the airline works towards achieving scale and profitability. There are several factors driving the improved margins. The first factor is rates as the Company was able to secure higher rates for both ACMI and Charter contracts. The Company’s ACMI rate grew 46.2%, from $4,431 per block hour to $6,480 per block hour, while Charter rate per block hour is up 18.8% from $13,015 per block hour to $15,468 per block hour. The second factor is utilization as our average utilization per available aircraft grew 3.5%. The third factor is scale. As an example, when measured on a per block hour basis, Salaries, wages, and benefits dropped from $3,563 to $3,226 per block hour, a 9.5% reduction. There were also savings on a per block hour basis in fuel, insurance and general overhead expenses (other) which combined with the other factors drove the improvement.
21
Non-operating Expenses
The following table compares our Non-operating Expenses (in thousands) :
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|||||||
Non-Operating Expenses (Income) |
|
2024 |
|
|
2023 |
|
|
Inc/(Dec) |
|
|
% Change |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Expense |
|
$ |
1,760 |
|
|
$ |
542 |
|
|
$ |
1,218 |
|
|
|
224.9 |
% |
Total Non-Operating Expenses (Income) |
|
$ |
1,760 |
|
|
$ |
542 |
|
|
$ |
1,218 |
|
|
|
224.9 |
% |
Interest expense, net increased $1.2 million from $0.5 million to $1.8 million driven mainly by the interest payable on the debentures issued in 2023.
Net Loss
Net Loss increased by $0.3 million, from a net loss of $6.1 million in 2023 to $6.4 million in 2024. Net loss as a percentage improved from (18.9%) to (11.8%), an 7.1% improvement. This was a direct result of GlobalX’s ability to grow its revenue quicker than its cost structure as the airline works towards achieving scale and profitability. There are several factors driving the improved margins. The first factor is rates as the Company was able to secure higher rates for both ACMI and Charter contracts. The Company’s ACMI rate grew 46.2%, from $4,431 per block hour to $6,480 per block hour, while Charter rate per block hour is up 18.8% from $13,015 per block hour to $15,468 per block hour. The second factor is utilization as our average utilization per available aircraft grew 3.5%. The third factor is scale. As an example, when measured on a per block hour basis, Salaries, wages, and benefits dropped from $3,563 to $3,226 per block hour, a 9.5% reduction. There were also savings on a per block hour basis in fuel, insurance and general overhead expenses (other) which combined with the other factors drove the improvement.
Liquidity and Capital Resources
As of March 31, 2024, the Company had approximately $8.3 million in unrestricted cash and cash equivalents and approximately $3.8 million in restricted cash, a decrease of approximately $3.3 million and $2.3 million from December 31, 2023, respectively primarily due to new aircraft deliveries, deposits, and net loss in operations. Management is confident that the augmented cash and cash equivalents, coupled with the anticipated rise in sales linked to the Company’s strategies to attract more funds, will adequately address the Company’s liquidity requirements. Management is actively assessing various options to procure additional funds, including exploring opportunities for additional equity or debt financing.
Net Cash used in operating activities during the three months ended March 31, 2024 increased $1.4 million to $2.1 million, consisting primarily of $5.9 million of increase in accrued liabilities and other liabilities, $3.1 million of increase in operating leases obligations, and $0.6 million of increase in prepaid expenses and other current assets. These were partially offset by $4.5 million of increase in accounts payable, $4.0 million in noncash adjustments for depreciation and amortization of fixed assets, operating lease right of use assets and debt issue costs, $4.2 million of increase in accounts receivable, $0.4 million of bad debt expense and $0.3 million of share-based payments. Net Cash used in operating activities during the three months ended March 31, 2023 decreased $0.2 million to $0.7 million, consisting primarily of $5.0 million increase in accrued liabilities and other liabilities, $2.5 million in noncash adjustments for depreciation and amortization of fixed assets, operating lease right of use assets and debt issue costs, $0.5 million of share-based payments, and $0.4 million of increase in accounts payable. These were partially offset by $6.1 million of net loss, $2.0 million of increase in operating lease obligations, $1.3 million of increase in accounts receivable, $0.5 million of share-based payments, $0.4 million of increase in accounts payable, and $0.3 million of increase in assets held for sale.
The Company has significant fixed and noncancelable lease commitments of aircraft, equipment and related maintenance checks. As of March 31, 2024, the Company had total of $14.5 million due in the next 12 months of future minimum lease payments under finance and operating leases. As of March 31, 2024, the Company had total of $94.3 million due after 12 months from the balance sheet date of future minimum lease payments under finance and operating leases, and approximately $29 million in notes payable included in the non-current liabilities presented in the Company’s consolidated balance sheet. The Company ended the period of January 1 to March 31, 2024 with twelve passenger aircraft and four cargo aircraft and expects the fleet to increase to 16 passenger aircraft and six cargo aircraft by the end of 2024. To achieve the number of aircraft deliveries in 2024, the Company currently has five aircrafts under lease with partial or total deposit paid.
During the three months ended March 31, 2024, net cash used for investing activities increased $2.1 million to $3.2 million, consisting of $1.7 million of Purchases of property and equipment and $1.5 million of increase of deposit, deferred costs and other assets. During the three months ended March 31, 2023, net cash used for investing activities increased $0.2 million to $1.1 million, consisting
22
primarily of an increase of $0.8 million of deposit, deferred costs and other assets and $0.3 million of Purchases of property and equipment.
During the three months ended March 31, 2024, net cash provided by financing activities decreased $3.8 million to $0.2 million of net cash used in financing activities, consisting of $0.2 million of Principal payments on finance leases. During the three months ended March 31, 2023, net cash provided by financing activities decreased $2.1 million to $3.6 million, consisting of $2.5 million of Proceeds from note payable and $1.2 million of Proceeds from issuance of shares, partially offset by $0.1 million of Principal payments on finance leases.
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. 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.
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4 – Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Executive Chairman and President & 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 Executive Chairman and the President & 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 March 31, 2024. Our Executive Chairman and President & Chief Financial Officer concluded that, as of March 31, 2024, the Company’s disclosure controls and procedures were not effective, due to the material weaknesses in internal control over financial reporting described below.
Material Weakness in Internal Control over Financial Reporting
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 the remainder of 2024, including:
As we continue to evaluate and work to improve our internal control over financial reporting, Certifying officers and 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
23
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 quarterly report fairly present, in all material respects, the Company’s consolidated financial condition as of March 31, 2024 and consolidated results of its operations and cash flows for the period 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 period ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
24
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
On August 11, 2023 Global Crossing Airlines in combination with Top Flight Charters and its minority interest member filed a lawsuit in the United States District Court Southern District of Florida against Shorts Travel Management, Inc (Shorts) and STM Charters, Inc seeking to have an old non-solicit agreement signed by Top Flight' minority interest member to be declared invalid, that Shorts alleged trade secrets do not exist and sought damages arising from the Shorts defamation per se based on numerous false statements made by Shorts in the marketplace. On October 4, 2023, Shorts responded in court by denying the claims made and countersued all parties for breach of contract and theft of trade secrets. This case is currently in the discovery phase.
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds
None.
ITEM 3 Defaults Upon Senior Securities
None.
ITEM 4 Mine Safety Disclosures
Not Applicable
ITEM 5 Other Information
None.
25
Item 6 - Exhibits
Exhibit Number |
|
Description |
31.1* |
|
Rule 13a-14(a)/15d-14(a) Certification of acting principal executive officer. * |
31.2* |
|
Rule 13a-14(a)/15d-14(a) Certification of acting principal financial officer. * |
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents. |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Filed herewith.
26
SIGNATURES
Pursuant to the requirements 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.
SIGNATURE |
|
TITLE |
|
DATE |
|
|
|
|
|
/s/ Ryan Goepel |
|
President - CFO |
|
May 7, 2024 |
|
|
|
|
|
/s/ Chris Jamroz |
|
Executive Chairman |
|
May 7, 2024 |
|
|
|
|
|
/s/ Ed Wegel |
|
Director |
|
May 7, 2024 |
|
|
|
|
|
/s/ Alan Bird |
|
Director |
|
May 7, 2024 |
|
|
|
|
|
/s/ T. Allan McArtor |
|
Director |
|
May 7, 2024 |
|
|
|
|
|
/s/ Deborah Robinson |
|
Director |
|
May 7, 2024 |
|
|
|
|
|
/s/ Cordia Harrington |
|
Director |
|
May 7, 2024 |
27