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. This Item 7 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. Factors which could cause actual results to differ materially are discussed throughout this report and include, but are not limited to, those set forth at the end of this Item 7 under the heading "Cautionary Statement Regarding Forward Looking Statements." Additional factors are under the heading “Risk Factors”.
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.
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. 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.
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/tour operators to provide aircraft during their peak
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seasons; and provide ad-hoc and track charter programs for non-airline customers, including hotels, casinos, cruise ship companies, tour operators.
Business Developments
The twelve months period ended December 31, 2024 for GlobalX was characterized by the achievement of significant regulatory milestones in addition to considerable investment in crew, staff, maintenance, and systems to build out our platform, bolster our infrastructure to prepare GlobalX to continue its rapid expansion through the delivery of additional aircraft in 2025. GlobalX is comprised of three key assets which allows us to generate income – our certifications, our aircraft, and our crew.
From a regulatory perspective GlobalX in the twelve months period ended December 31, 2024 has achieved the following:
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Successfully passed our DOD Audit – allowing us to register and start operating flights for the Department of Defense
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Successfully passed our IOSA Audit – allowing us to operate for other airlines without an extensive audit process
From an aircraft perspective GlobalX in the twelve months period ended December 31, 2024 has achieved the following:
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Taken delivery of one A321F to launch Cargo operations
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Taken delivery of three A320 passenger aircraft and one A321 passenger aircraft
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Returned one A320 passenger aircraft to a lessor
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Completed five heavy maintenance events
From a crew perspective GlobalX in the twelve months period ended December 31, 2024 has achieved the following:
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Hired and trained the required number of people in dispatch, crew scheduling, operation control center and maintenance to allow for 24 hours, 7 day a week operation on a global basis
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Increased our pilot headcount from 138 to 142
In short, the twelve months period ended December 31, 2024 was a time when GlobalX invested in its people, prepared for its growth, and established a robust infrastructure for its future.
Reducing Operational Costs
To control costs and maintain a competitive cost per Block Hour flown, GlobalX:
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Flies only one aircraft family (A320).
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Maintains focus on continuous financial discipline and strict departmental budgeting.
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Has implemented and utilizes digital operating methods for both flight and maintenance operations, using best in class aviation software operating systems from leading suppliers including dispatch (Navblue), maintenance (Trax) and training software (Mint). By capitalizing on the latest software, GlobalX can effectively eliminate most manual processes and operate effectively with fewer people than a comparably-sized airline using older software systems.
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Promotes organizational culture of efficiency and high productivity.
Marketing Plan
GlobalX plans to achieve its revenue goals by flying charter operations for a variety of client groups:
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Scheduled airlines that have short-term or long-term capacity needs to supplement their existing routes or fleets.
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Major tour operators, resorts, cruise lines and casinos that require airlift above and beyond scheduled service to meet their occupancy needs.
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Professional and collegiate sports teams
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Charter brokers representing a variety of interests, including the entertainment industry, dignitary travel, political campaigns, and government programs.
GlobalX Aircraft Fleet
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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 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
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 transportservices with narrow-body Airbus A320 and A321 aircraft. We expect our primary line of business and focus to be commercial charter services throughout North and South America and the Caribbean, with established several key customer including the US Government, scheduled airlines, US colleges and indirect air carriers.
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 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 our ACMI customers are 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, JetBlue Airways, Virgin America, Hawaiian Airlines, American Airlines, US Airways, Atlas Air, Emirates, North American Airlines, Miami Air, Spirit Airlines, Continental Airlines, Pan Am, Atlantic Coast Airlines, Alaska 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, Carnival Cruise Lines, Palms Casino Resort, Teladoc, Halliburton, and the Burger King Corporation.
Business Strategy
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GlobalX seeks to become the best-in-class U.S. narrow-body, ACMI and full services 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 Domestic Flag and Supplemental charter airline in the United States, GlobalX has done the following:
Launch 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.
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Deliver best in class on time performance and dispatch reliability;
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Expand existing relationships and develop additional relationships with leading European charter/ our operators to provide aircraft during their peak seasons; and
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Provide ad-hoc and track charter programs for non-airline customers, including hotels, casinos, cruise ship companies, tour operators.
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, 2024 and 2023
Operating 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 twelve months period ended on December 31, 2024 and 2023 requires an understanding of how the Company fundamentally evolved during that time period. 2023 was our second year of full operations and was a period where the company was focused on securing additional customers, entering new markets and flying to additional locations; primarily in the domestic and Caribbean markets and within the European market. As a growing company, we were also focused on operating effectively and efficiently.
By contrast in 2024, GlobalX expanded existing government agency relationships, acquired new partners, secured longer term Cargo contracts, expandedoperations in the European ACMI market and continued operating for existing airlines. Our key metric is block hours flown and block hours flown per available aircraft, which is the measure by which we track 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.
The following table compares our Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated:
Year Ended December 31,
Operating Fleet 2024 2023 Inc/(Dec) % Change
Total Operating Average Aircraft Equivalents 16.4 10.6 5.8 54.7 %
Average Utilization per available aircraft 1,862 1,863 (1 ) -0.1 %
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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.
Year Ended December 31,
Block Hours
Revenue per Block Hour
Charter revenue for the period decreased $18.7 million or 16.4 %, from $114.1 million in 2023 to $95.5 million in 2024. The rate for Charter flying increased 16.7% from $10,826 per block hour to $12,590 per block hour resulting in a $13.4 million increase. This was offset by a $32.1 million reduction due to charter block hours decreasing 28.1% from 10,542 to 7,582 block hours. The increase in the rate per block hour is primarily driven by high market demand and a supply shortage as competitors reduced capacity to increase demand, higher fuel and handling fees and the mix of flying. The decrease in charter block hours was due to the increased level of flying on an ACMI basis.
ACMI revenue for the period increased by $82.6 million or 204.0% from $40.5 million in 2023 to $123.1 million in 2024. This variance is driven by an increase from 9,376 block hours in 2023 to 20,539 block hours in 2024, an increase of 119.1% or 11,163 block hours. This volume accounted for 58.4% or $48.2 million of the increase. The average revenue per block hour increased $1,675 per block hours from $4,317 per block hour in 2023 to $5,992 per block hour in 2024 and accounted for $34.4 million or 41.6% of the revenue increase. The primary driver for the increase was related to both high market demand and ability to grow our government business which is primarily operated on an ACMI basis.
Other revenue for the period decreased by $0.3 million from $5.5 million in 2023 to $5.2 million in 2024. The decrease is primarily driven by less ancillary services provided to our customers.
Operating Expenses
The following table compares our Operating Expenses (in thousands):
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Year Ended December 31,
Operating Expenses 2024 2023 Inc/(Dec) % Change
Salaries, wages, and benefits increased $13.7 million from $54.1 million to $67.8 million, or 25.4%, primarily due to the hiring and training of pilots andother airline personnel necessitated by the growing fleet and operations. The total number of employees grew 8.5% from 625 to 678 of which pilots increased from 138 to 142, or 2.9 %. Block hours increased 44.2% that without efficiency and scaling of the labor force would have resulted in a $23.9 million increase, however, increased efficiency and utilization of labor resulted in $10.2 million or reduction of effective labor rate per block hour of 13.1%.
Aircraft fuel decreased by $5.6 million, from $29.5 million to $23.8 or 19.2%, the volume of Charter hours decreased by 26.7% or $7.8 million. This was offset by an increasein base jet fuel of approximately 10.3% or $2.2 million.
Maintenance, materials, and repairs increased by $4.6 million, from $8.6 million to $13.2 million, or 53.6%. An increase of $0.6 million was due to asevere weather event that damaged two parked aircraft, multiple bird strikes across several aircraft and damage caused by a third-party vendor. Another $3.2 million cost increase was primarily due to volume from the increase in both the number of aircraft to 18 aircraft and the number of block hours flown which increased 8,556 or 47% from 18,072 to 26,628 block hours. Another, $0.8 million increase is due to a rate per block hour increase of 6.3% from $431 per block hour to $458 per block hour.
Depreciation and amortization increased $4.0 million, from $2.3 million to $6.3 million or 173.5%, driven by assets acquired to support our airportoperations. These assets include, but are not limited to, aircraft deliveries secured on capital leases, computers, software, and rotable inventory.
Contracted ground and aviation services decreased by $0.9 million from $20.5 million to $19.6 million, or 4.4%. A rate increase of 32.5% per block hourdrove an increase of $4.8 million. This was offset by lower charter block hours by 27.8%, which drove a reduction of $5.7 million.
Travel increased $2.8 million, from $8.3 million to $11.1 million or 34.1%. The primary driver of increased travel expense was the growth of our government agency business which required a greater than normal number of crews to be reposition and put in hotels than normal in order to rapidly respond to the demand. Throughout the year we expanded local hiring in those key bases and the reliance on travel dropped and is a cost that will be a continued focus in 2025.
Insurance increased $1.2 million, from $5.0 million to $6.2 million or 34.1%, primarily related to the increase in the number of aircraft.
Aircraft rent increased $24.0 million, from $33.6 million to $57.6 million or 71.5%, primarily due to the increase in the average number of aircraft from 10.6 to 16.4aircraft in the fleet. $18.4 million or 76.5% of the increase is driven by the increase in the number of aircraft being leased, with the remaining $5.6 million or 23.5% 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 $14.7 million, from an operating loss of $15.8 million to $1.1 million, or an 84.7% improvement. In addition, operating loss as apercentage of revenue improved from (9.9%) to (0.5%), a 9.4% 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 a few 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 39.5%, from $4,317 per block hour to $5,992 per block hour, while Charter rate per block hour is up 16.7% from $10,826 per block hour to $12,590 per block hour. The second factor is scale. As an example, when measured on a per block hour basis, Salaries, wages, and benefits dropped from $2,705 to $2,352 per block hour, an 13.1% reduction. There were also savings on a per block hour basis in travel, insurance, and general overhead expenses (other) which combined with the other factors
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drove the improvement. This improvement was, in spite of the impact of the events in September, that effectively took almost 35% of the passenger fleet offline for almost two weeks. This included a severe weather event damaging two parked aircraft, multiple bird strikes across three different aircraft and a third-party vendor who severely damaged an aircraft during a routine check. A number of these are insurable events, but the impact to revenue was significant and the estimated impact to operating loss is over $5.0 million. Also, negatively impacting results. Our Cargo business continued to underperform which also served as a multimillion dollar drag to earnings in 2024. In addition, there were $2.9 million in costs incurred related to the return of one aircraft and the guarantee of the Canada Jetlines aircraft that negatively impacted the operating loss and will not be repeated in 2025.
Non-operating Expenses (Income)
The following table compares our Non-operating Expenses (Income):
Year Ended December 31,
Non-Operating Expenses (Income) 2024 2023 Inc/(Dec) % Change
Interest expense, net increased $4.0 million from $4.9 million to $8.9 million driven mainly by the interest payable on the debentures issued in 2023.
Net Loss
Net Loss due to events noted above, decreased by $9.4 million or 45.2%, from a net loss of $20.8 million in 2023 to $11.4 million in 2024.
Liquidity and Capital Resources
The most significant liquidity events during 2024 were as follows:
Operating Activities. For 2024, net cash provided by operating activities increased $9.5 million to $8.1 million, consisting primarily of $21.2 million in noncash adjustments for depreciation and amortization of fixed assets, operating lease right of use assets and debt issue costs, $5.3 million of increase in accounts payable, $3.2 million of decrease in accounts receivable, $0.4 million of decrease in prepaid expenses and other current assets, $3.0 million in interest on finance leases, $1.7 million of share-based payments and $0.5 million of credit losses. These were partially offset by $14.4 million of increase in operating leases obligations, $1.3 million of decrease in accrued liabilities and other liabilities, $0.4 million of increase of assets held for sale and $11.4 million of net loss. For 2023, net cash used in operating activities decreased $2.2 million to $1.4 million, consisting primarily of $11.4 million in noncash adjustments for depreciation and amortization of fixed assets, operating lease right of use assets and debt issue costs, $17.4 million of increase in accrued liabilities and other liabilities, $2.4 million of increase of accounts payables, $1.7 million of decrease in assets held for sale, $2.5 million of share-based payments and $0.4 million in interest on finance leases. These were partially offset by $20.8 million of net loss, $7.7 million of increase in accounts receivable, $7.9 million of increase in operating lease obligations and $0.3 million of increase in prepaid expenses and other current assets.
As of December 31, 2024, the Company had approximately $12.3 million in unrestricted cash and cash equivalents and approximately $1.7 million in restricted cash, an increase and decrease of approximately $0.7 million and $4.4 million, respectively, from December 31, 2023. The changes were 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.
The Company has significant fixed and noncancelable lease commitments of aircraft, equipment and related maintenance checks. As of December 31, 2024, the Company had total of $19.9 million due in the next 12 months of future minimum lease payments under finance and operating leases. As of December 31, 2024, the Company had total of $100.3 million due after 12 months from the balance sheet date of future minimum lease payments under finance and operating leases, respectively, and approximately $29.7 million in notes payable included in the non-current liabilities presented in the Company’s Consolidated Balance Sheet. The Company finished 2024 with fourteen passenger aircraft and four cargo aircraft and expects the fleet to increase to nineteen passenger aircraft and remain at four cargo aircraft by the end of 2025. To achieve the number of aircraft deliveries in 2025, the Company currently has fouraircrafts under
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lease with partial or total deposits paid and one aircraft under binding agreements that are subject to execution of definitive lease documentation and fulfillment of certain closing conditions.
Investing Activities. For 2024, net cash used for investing activities decreased $3.2 million to $10.0 million, consisting of $2.8 million of decrease of deposit, deferred costs and other assets and $7.2 million of purchases of property and equipment. For 2023, net cash used for investing activities increased $8.0 million to $13.2 million, consisting of $9.1 million of increase of deposit, deferred costs and other assets and $4.0 million of purchases of property and equipment.
Financing Activities. For 2024, net cash used in financing activities was $1.7 million, consisting of $1.8 million of Principal payments on finance leases and $0.2 million of Noncontrolling interest dividends paid, partially offset by $0.3 million from Proceeds on issuance of shares. For 2023, net cash provided by financing activities was $26.8 million, consisting primarily of net proceeds of approximately $24.9 million from note payable, and $1.9 million from Proceeds on issuance of shares.
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.
Off-Balance Sheet Arrangements
As of December 31, 2024, the Company had no off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:
•
requires assumptions to be made that were uncertain at the time the estimate was made, and
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changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition
We base our estimates and judgments on our experience, our current knowledge, our beliefs of what could occur in the future, our observation of trends in the industry, information provided by our customers and information available from other resources. Actual results may differ from the estimates under different assumptions or conditions. We have identified the following policies and estimates as those that we believe are most critical to our financial condition and results of operations and that require management's most subjective and complex judgments in estimating the effect of inherent uncertainties: allowance for credit losses, fair value measurements for stock-based compensation and deferred tax valuation allowance. See footnote 2 of the Company's consolidated financial statements for significant accounting policies.
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07 – Improvements to Reportable Segment Disclosures – Amendments in this update improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the provisions of ASU 2023-07 as of December 31, 2024, which did not materially impact the Company’s consolidated financial statements. Refer to our significant accounting policies below for the impact of adoption.
In December 2023, the FASB issued ASU 2023-09 – Improvements to Income Tax Disclosures – Amendments in this update require: that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional
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information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate). All entities disclose on an annual basis the following information about income taxes paid: 1. The amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes 2. The amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of total income taxes paid (net of refunds received). All entities disclose the following information: 1. Income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign 2. Income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The amendments in this Update eliminate the requirement for all entities to (1) disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or (2) make a statement that an estimate of the range cannot be made. The amendments in this Update remove the requirement to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures. The amendments in this Update replace the term public entity as currently used in Topic 740 with the term public business entity as defined in the Master Glossary of the Codification. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2024. Management expects no significant impact after adoption of the new standard.
In March 2024, the FASB issued ASU 2024-01 – Compensation-Stock Compensation – Amendments to improve generally accepted accounting principles (GAAP) by adding an illustrative example to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether profits interest and similar awards ("profits interest awards") should be accounted for in accordance with Topic 718, Compensation-Stock Compensation. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2024. Management expects no significant impact after adoption of the new standard.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
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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. 89) 28
Consolidated Balance Sheets as of December 31, 2024 and 2023 30
Notes to Consolidated Financial Statements 34
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 balance sheets of Global Crossing Airlines Group, Inc. (the Company) as of December 31, 2024 and 2023, 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, 2024, and the related notes (collectively referred to as the consolidated 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has limited operating history, and has a working capital deficit as of December 31, 2024, and these factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to 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 audit. 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 audit 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 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 audit, 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 audit 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 consolidated 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/ Rosenberg Rich Baker Berman P.A.
Somerset, New Jersey
March 6, 2025
We have served as the Company’s auditor since 2020.
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GLOBAL CROSSING AIRLINES GROUP INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share quantities)
Current Assets
Accounts receivable, net of allowance 6,678 10,181
Prepaid expenses and other current assets 2,142 2,552
Current assets held for sale 489 184
Current liabilities
Current portion of long-term operating leases 16,479 13,650
Current portion of finance leases 3,434 599
Other liabilities
Note payable, net of debt issuance costs 29,729 29,175
Commitments and Contingencies (Note 7)
Stockholders' Equity (Deficit)
Common Stock
Total Company's stockholders’ deficit (29,555 ) (20,092 )
Noncontrolling interest 87 225
See accompanying notes to consolidated financial statements.
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GLOBAL CROSSING AIRLINES GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Operating Expenses
Maintenance, materials and repairs 13,210 8,603
Depreciation and amortization 6,271 2,293
Contracted ground and aviation services 19,599 20,507
Non-Operating Expenses
Loss in Canada Jetlines Operations Ltd. 1,300 -
Income tax expense 2 2
Net Income attributable to Noncontrolling Interest 87 225
Net Loss attributable to the Company (11,472 ) (21,011 )
Loss per share:
See accompanying notes to consolidated financial statements.
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GLOBAL CROSSING AIRLINES GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For The Twelve MonthsEnded December 31,
CASH FLOWS FROM OPERATING ACTIVITIES
Loss on sale of property — 136
Loss (gain) on sale of spare parts 173 (433 )
Amortization of debt issue costs 649 902
Amortization of operating lease right of use assets 14,300 8,173
Interest on finance leases 3,043 435
Changes in assets and liabilities:
Prepaid expenses and other current assets 410 (322 )
Accrued liabilities and other liabilities 2,104 17,153
Operating lease obligations (14,430 ) (7,928 )
Net cash provided by (used in) operating activities 8,071 (1,379 )
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits, deferred costs and other assets (2,775 ) (9,144 )
Purchases of property and equipment (7,218 ) (4,042 )
Net cash used in investing activities (9,993 ) (13,186 )
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on finance leases (1,815 ) (480 )
Noncontrolling interest dividends paid (225 ) —
Proceeds on issuance of shares 329 1,872
Repayment of notes payables — (9,902 )
Proceeds from note payable — 35,290
Net cash (used in) provided by financing activities (1,711 ) 26,780
Cash, cash equivalents and restricted cash - end of the period $ 14,043 $ 17,676
Non-cash investing and financing activities
Right-of-use (ROU) assets acquired through operating leases $ 27,229 $ 57,101
Equipment acquired through finance leases $ 26,619 $ 1,915
Cash paid for
See accompanying notes to consolidated financial statements.
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GLOBAL CROSSING AIRLINES GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands, except shares quantities)
Dividends declared to noncontrolling interest — — — — — (225 ) (225 )
See accompanying notes to consolidated financial statements.
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GLOBAL CROSSING AIRLINES GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED December 31, 2024 and 2023
(In thousands, except share and per share data)
1. NATURE OF OPERATIONS AND GOING CONCERN
Global Crossing Airlines Inc. (the “Company” or “GlobalX”) 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 CBOE Canada (the “Exchange” or “CBOE CA”) 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, 2024, the Company had a working capital deficit of $42.5 million and retained deficit of $70.6 million. The Company began flight operations in August 2021. Without ongoing income generation or additional financing, the Company will be unable to fund general and administrative expenses and working capital requirements for the next 12 months. These material uncertainties raise substantial doubt as to the Company’s ability to continue as a going concern. The Company is evaluating financing its future requirements through a combination of debt, equity and/or other facilities. There is no assurance that the Company will be able to obtain such financing or obtain them on favorable terms. The consolidated financial statements do not reflect the adjustments to the carrying values of assets and liabilities and the reported expenses and statement of financial position classifications that would be necessary were the going concern assumption deemed to be inappropriate. These adjustments could be material.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The consolidated financial statements include the accounts of the Company, and the following subsidiaries. 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 2024 presentation.
Subsidiaries Name Place of incorporation Interest % Principal activity
Investment in Top Flight:
On September 18, 2023, the Company acquired 80% of Charter Air Solutions, LLC ("Top Flight"). Top Flight was established on February 8, 2023 and had no significant transactions from the date of formation to the acquisition date. The balance sheet and operating activity of Top Flight are included in the Company's consolidated financial statements and we adjust the net income in our consolidated statement of operations to exclude the noncontrolling interests' proportionate share of results. We present the proportionate share of
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equity attributable to noncontrolling interests as equity within our Consolidated Balance Sheets. As of December 31, 2024, Top Flight figures did not materially impact the consolidated financial statements of the Company.
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, 2024 and 2023, restricted cash of $1.7 and $6.1 million, respectively, were being held by a financial institution as security for future flights.
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 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. During the years ended December 31, 2024 and 2023, the Company recorded $0.5 million and $6 thousand, respectively, of provision for allowance for credit losses. In addition, as of December 31, 2024 and 2023, the Company presented $0.6 million and $0.1 million, respectively, as allowance for credit losses net in Accounts Receivable on the Consolidated Balance Sheets.
Assets held for sale
Assets held for sale mostly 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 net realizable value estimated at December 31, 2024. 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 net realizable value. 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, 2024, the Company did not identify items that were obsolete and recorded a $0 allowance for obsolete items on the Consolidated Balance Sheet.
Intangible Assets
The Company entered in an agreement on September 21, 2023, to invest $0.5 million in the purchase 54,000 carbon offsets from Karbon-X to be paid monthly over 36 months from October 1, 2023, to September 1, 2026. Carbon offsetting involves compensating for carbon emissions by investing in projects that reduce or remove an equivalent amount of greenhouse gases from the atmosphere. This initiative aligns with the Company's goal to balance its carbon footprint and contribute to environmental sustainability through supporting various projects such as renewable energy initiatives and afforestation programs. The carbon offsets intangibles were initially measured at cost and carried at cost less any accumulated amortization.
During the year ended December 31, 2024, in a shift of Company’s strategy, the Company decided to cancel the Karbon-X project, and thus the purchase of the remaining unpaid 36,000 carbon offsets. As a result, during the year ended December 31, 2024, the Company adjusted intangible asset cost and related liabilities for $0.3 million. No cost was incurred because of the cancellation of the carbon offsets.
As of December 31, 2023, the Company had $0.4 million of intangible asset cost and accumulated amortization of $38 thousand, which is presented in the “Deposits and Other Assets” on the Consolidated Balance Sheet.
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Lessor Maintenance Deposits
GlobalX’s aircraft lease agreements provide that GlobalX 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 GlobalX 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, 2024 and 2023, Lessor Maintenance Deposits totaled $2.1 million and $0.9 million, respectively, and are included in Prepaid expenses and other current assets and Other assets in the Consolidated Balance Sheets.
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, 2024, the Company incurred amortization expense of $1.1 million with respect to heavy maintenance costs and had $2.9 million in deferred maintenance costs as of December 31, 2024. During the year ended December 31, 2023, the Company incurred amortization expense of $0.8 million with respect to heavy maintenance costs and had $1.7 million in deferred maintenance costs as of December 31, 2023.
Property & Equipment
Property and equipment are recorded at cost 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:
Office and Ground Equipment 5 years
Computer Hardware and Software 3-5 years
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.
The components of property and equipment, net are as follows:
December 31,
Computer Hardware and Software 1,303 1,477
Leasehold Improvements, Aircraft, Other 2,880 972
Office and Ground Equipment 1,289 634
Less: Accumulated Depreciation (1,821 ) (627 )
Total Property and Equipment, Net $ 10,308 $ 5,525
During the years ended December 31, 2024 and 2023, depreciation of property and equipment was $1.8 million and $0.9 million, respectively.
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
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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. No impairment losses were recognized during the years ended December 31, 2024 and 2023.
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 Statements 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 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
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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 separately on the Consolidated Balance Sheets. The Company depreciates Finance Lease Assets consistent with its useful life policy presented in the property & equipment table above.
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 10% deposit upon signing a contract and the remainder 30 days before the flight. If the contract is signed less than 30 days from the date of the flight, the entire amount is collected upon signing. ACMI customers typically pay 1 week in advance other than the government contracts which pay approximately 2 weeks in arrears.
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. The Company also generates other operating revenue from chargebacks related to charter costs including but not limited to fuel, airport fees, navigation fees, and ground handling. Furthermore, the Company also earns other operating revenue from cancellation of flights from customers.
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.
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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.
Other operating revenue is typically recognized over time as the services aforementioned are provided to customers. Related to the cancellation fees, these are earned from customers and recognized in the period for which the operations were scheduled.
Segment Reporting
In accordance with FASB ASC Topic 280, Segment Reporting, the Company has determined that it conducts its business through one reportable and one operating segment by providing charter customized, non-scheduled passenger and cargo air transportservices with narrow-body Airbus A320 and A321 family aircraft. The financial results of the Company’s operations are managed and reported to the President and Chief Financial Officer (CFO), who together are considered the Company’s chief operating decision maker (CODM), who review financial information presented on a consolidated basis, accompanied by disaggregated information about our revenue, for purposes of making operating decisions, assessing financial performance and allocating resources. Net income (loss) is our primary measure of profit or loss, as presented on our Consolidated Statements of Operations. The CODM is not provided asset information by reportable segment as asset information is provided to the CODM on a consolidated basis.
3. EQUITY INVESTMENTS
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 75% of shares of Jetlines to GlobalX shareholders. At that time, GlobalX retained 25% of the shares issued and outstanding of Jetlines and accounts for the investment in accordance with the equity method.
On September 11, 2024, Canada Jetlines Operations Ltd. filed an Assignment in Bankruptcy after finding that it would be unable to secure financing to continue with its Proposal under the Bankruptcy and Insolvency Act. BDO Canada Limited was assigned as Trustee of the bankrupt estate. Prior to bankruptcy, the Company held approximately 7% ownership of Jetlines. As a result of the filing, Jetlines shares were deemed to be worthless with its outstanding shares cancelled in accordance with its Proposal under the Bankruptcy and Insolvency Act.
The Company had provided a guarantee for one of their aircraft and as a result it settled a $1.3 million obligation with lessor of related aircraft during the year ended December 31, 2024, as recorded in current liabilities and non-operating expenses on the Company’s Consolidated Balance Sheet and Statement of Operations, respectively.
4. DEFERRED FINANCING FEES AND DEBT ISSUANCE COSTS
In relation to the Company’s Subscription Agreement pursuant to which the Company sold $6.0 million of its note (Note 12) the Company capitalized $2.2 million of debt issuance costs. These costs are initially capitalized on the consolidated balance sheet as debt issuance costs and amortized to interest expense using the effective interest method. In addition, the Company paid the $6.0 million of Note Payable plus accrued interest due for Subscription Agreement. As a result, the Company expensed the full outstanding amount capitalized as debt issuance costs of $0.9 million during the year ended December 31, 2023.
On the new $35.0 million Subscription Agreement, the Company also capitalized $6.9 million of debt issuance costs. These costs are also initially capitalized on the Consolidated Balance Sheets as debt issuance costs, net of Note Payable and amortized to interest expense using the effective interest method. The Company amortized $0.6 million and $0.2 million of the related debt issuance costs during the years ended December 31, 2024 and 2023, respectively. In addition, as of December 31, 2024 and 2023, debt issuance costs totaled $6.0 million and $6.6 million, respectively, and are included in Note Payable, net of debt issuance costs in the Consolidated Balance Sheets.
5. LEASES
As of December 31, 2024, and 2023, the Company operated 18 and 14 leased aircraft, respectively, which are accounted for under operating lease agreements with ranging terms of 10 months to 10 years.Leases with an initial term of 12 months or less will be
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recognized in the 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 entered into a lease agreement for one Airbus A321 converted freighter. The ten-year lease term commenced on January 23, 2023. Under the agreement, the Company will pay the lessor a fixed monthly rent for 120 months, plus supplemental rent for maintenance of the aircraft.
On June 21, 2022, the Company entered into a lease agreement for one A321F cargo aircraft. The eight-year lease term commenced on August 1, 2023. Under the agreement, the Company will pay the lessor a fixed monthly rent for 94 months, plus supplemental rent for maintenance of the aircraft.
On December 14, 2022, the Company entered into a lease agreement for one A319 passenger aircraft. The two-year lease term commenced on August 18, 2023. Under the agreement, the Company will pay the lessor a fixed monthly rent for 24 months, plus supplemental rent for maintenance of the aircraft.
On January 27, 2023, the Company entered into a lease agreement for one A320 passenger aircraft. The six-year lease term commenced on April 21, 2023. Under the agreement, the Company will pay the lessor a fixed monthly rent for 72 months, plus supplemental rent for maintenance of the aircraft.
On May 22, 2023, the Company entered into a lease agreement for a commercial property warehouse. The five-year lease term commenced on June 1, 2023. Under the agreement, the Company will pay the lessor variable monthly rents increasing once every year for 62 months, plus estimated expenses for insurance, utilities, taxes, management fees and other operating expenses.
On June 16, 2023, the Company entered into a lease agreement for one A320 passenger aircraft. The four-year lease term commenced on November 13, 2023. Under the agreement, the Company will pay the lessor a fixed monthly rent for 48 months, plus supplemental rent for maintenance of the aircraft.
On August 8, 2023, the Company entered into a lease agreement for one A320 passenger aircraft. The three-year lease commenced on September 3, 2024. Under the agreement, the Company will pay the lessor a fixed monthly rent for 36 months, plus supplemental rent for maintenance of the aircraft.
On September 8, 2023, the Company entered into a lease agreement for one A321F cargo aircraft. The eight-year lease term commenced on October 6, 2023. Under the agreement, the Company will pay the lessor a fixed monthly rent for 96 months, plus supplemental rent for maintenance of the aircraft.
On November 17, 2023, the Company signed a lease agreement for one A321 passenger aircraft and paid commitment fees to the lessor. The lease will commence upon aircraft delivery which is expected to be in 2025 and will run through 24 months from delivery date. In addition to basic rent due, the Company will pay the lessor supplemental rent for maintenance of the aircraft.
On November 20, 2023, the Company entered into a lease agreement for one A320 passenger aircraft. The seven-year lease term commenced on February 9, 2024. Under the agreement, the Company will pay the lessor a fixed monthly rent for 86 months, plus supplemental rent for maintenance of the aircraft.
On December 22, 2023, the Company entered into a lease agreement for one A321F cargo aircraft. The ten-year lease commenced on March 8, 2024. Under the agreement, the Company will pay the lessor a fixed monthly rent for 120 months, plus supplemental rent for maintenance of the aircraft.
On January 19, 2024, the Company entered into a lease agreement for one A320 passenger aircraft. The one-year lease commenced on July 9, 2024. Under the agreement, the Company will pay the lessor a fixed monthly rent for 16 months, plus supplemental rent for maintenance of the aircraft.
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On April 16, 2024, the Company entered into a lease agreement for one A320 passenger aircraft. The six-year lease commenced on April 17, 2024. Under the agreement, the Company will pay the lessor a fixed monthly rent for 72 months, plus supplemental rent for maintenance of the aircraft.
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 two aircraft extending their lease terms for an additional 60 and 15 months from original ending date of June 1, 2023, and October 1, 2023, to May 31, 2028, and December 31, 2024, respectively. In addition, on March 27, 2024 an additional extension was signed to extend aircraft lease term for an additional 74 months from previous extended ending date of December 31, 2024 to February 28, 2031. Terms of extensions were agreed solely to grant the Company the right to use the asset for the related additional time including no changes in payment rent. As such, extension was accounted as a modification of lease in accordance with ASC 842 rather than as a new contract and the Company remeasured at modification date the following: Right-of-use asset, lease liability, discount rate, lease term and classification. In addition, as of March 31, 2024, the Company signed a lease agreement to convert one of its lease passenger aircraft with lease term ending on November 1, 2024, into an Aircraft Freighter at lessor's expense. The new lease is contingent on a successful conversion from induction date of November 1, 2024, and can take up to a year. Among terms agreed includes commitment fees paid 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. Furthermore, on August 1, 2024, the Company signed a new lease to extend one A320 passenger aircraft for a lease term of an additional 93 months from original ending date of November 15, 2023. Terms of extension included contingencies on lessor of timely deliveries of repairs on engines and incremental increases in monthly basic rents throughout the lease. As such, extension was accounted as a new lease in accordance with ASC 842 from a new contract and the Company recorded at lease commencement date a new Right-of-use asset and lease liability.
For the year ended December 31, 2024, we had 46 aircraft support equipment capitalized within our Consolidated Balance Sheet with useful lives between 1 and 30 years. All aircraft support equipment were financed through finance and operating leases with terms between 1 and 7 years. Related right-of-use assets and lease liabilities are recorded at the present value of fixed lease payments over the lease term. Amortization of the equipment under finance and operating leases is on a straight-line basis over the lease term and is included in Depreciation and amortization in our Consolidated Statement of Operations. Residual values for equipment are estimated to be from 0% to 77%. 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.
The following table presents lease costs related to the Company’s finance and operating leases in thousands:
For The Year Ended December 31,
Finance lease cost
Amortization of leased assets $ 3,238 $ 530
Interest of lease liabilities 3,043 435
Operating lease cost
(1) Expenses are classified within Aircraft Rent on the Company's Consolidated Statements of Operations.
(2) Expenses are classified within Other on the Company's Consolidated Statements of Operations.
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. The table below presents lease terms and discount rates related to the Company's finance and operating leases:
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Weighted-average remaining lease term
Operating leases 5.92 years 6.14 years
Finance leases 6.34 years 5.22 years
Weighted-average discount rate
The table below presents cash and non-cash activities associated with our leases in thousands:
For The Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 14,430 $ 7,928
Operating cash flows from finance leases 3,043 435
Financing cash flows from finance leases 1,815 480
Future minimum lease payments under finance and operating lease liabilities in thousands with initial terms in excess of one year are as follows:
Finance Leases Operating Leases
Less amount representing interest (14,590 ) (43,362 )
Present value of minimum lease payments 28,616 91,607
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.
6. COMMITMENTS AND CONTINGENCIES
The Company has contractual obligations and commitments primarily with regard to management and development services, lease arrangements, and financing arrangements.
On January 4, 2024, the Company entered into a premium finance agreement with a financial institution to finance a 12-month hull insurance policy for its aircraft. The Company financed $4.6 million of the total premium amount of $5.0 million at a rate of 6.88% interest. The down payment of $0.6 million and the first monthly installment was paid at time of signing.
On January 13, 2023, the Company entered into a premium finance agreement with a financial institution to finance a 12-month hull insurance policy for its aircraft. The Company financed $3.6 million of the total premium amount of $4.1 million at a rate of 5.45% interest. The down payment of $0.4 million was paid at time of signing.
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 (1) to have an old non-solicit agreement signed by Top Flight' minority interest member to be declared invalid, (2) a declaration that Shorts alleged trade secrets do not exist and (2) damages arising from the Shorts defamation per se based on numerous false
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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 was settled with no financial impact to GlobalX.
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.
7. CAPITAL COMMITMENTS
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 $100.0 million over a 36-month term following the closing of the Transaction (the “Facility”). The initial CAD $100.0 million is in the form of a capital commitment that allows the Company to draw down funds during the 36-month term by issuing shares to GEM (or such persons as it may direct) and subject to share lending arrangement(s) being in place. The purchase price of the shares to be sold is set at (i) 90% of the recent average daily closing price of the Company’s common stock on the TSX Venture Exchange or (ii) the floor price set by the company for each drawn down. The Company is not permitted to make a draw-down request in an amount that exceeds (i)1000% of the average daily trading volume of the Company’s stock for the 15 trading days preceding the draw-down date or (ii) 90% of the closing price on the trading day immediately prior to the issue or the relevant draw down notice and then added to the aggregate purchase price of all the common shares subscribed for pursuant to all prior closings would not exceed the total facility. GEM may accept or reject such drawn down notice based on various conditions described in the agreement. On July 8, 2020 the TSX Venture Exchange provided approval for the Facility.
The Company entered into a promissory note to pay GEM Yield Bahamas Limited a fee equal to two percent (2%) of the aggregate purchase price, being $2.0 million CAD ($1.4 million USD). The fee is payable, whether or not any draw down notices have been delivered, as follows: the first 25% of the fee shall be paid within 12 months from the date of the agreement; an additional 25% of the fee shall be paid within 18 months from the date of the agreement and the rest of 50% of the fee shall be paid within 24 months from the date of this agreement. The note bears interest at 5 percent above the base rate of Barclays Bank PLC as per the promissory note. The note was recorded as a deferred finance cost on the consolidated balance sheet.
In addition, on July 10, 2020, pursuant to the terms of the Facility, the Company issued 2,106,290 warrants to GEM exercisable at a price of CAD $0.50 per share until May 4, 2023. The initial fair value of the warrants was recorded as prepaid financing fee in the amount of $1.4 million. 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 $0.50 per share to USD $0.39 per share. In addition, the number of warrants granted was adjusted due to the Arrangement Agreement (Note 1) under which the Company transferred 75% of the shares of Jetlines to shareholders of the Company. Accordingly, the number of warrants was adjusted from 2,106,290 to 2,182,553. The warrants were remeasured at the adjustment date using the Monte Carlo pricing model, assuming an expected life of 1.85 years, a risk-free interest rate of 0.22%, an expected dividend rate of 0.00%, stock price of $2.03 and an expected annual volatility coefficient of 74.7%.
On October 1, 2021, GEM Global Yield LLC SCS ("GEM"), 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 $0.5 million fee due on May 4, 2021. GEM requested repayment in full of the CAD $2.0 million promissory note issued by the Company to GEM plus accrued interest and costs and expenses related to collection. On January 18, 2023, the Court granted summary judgment in favor of GEM. On March 29, 2023, Global Crossing Airlines and GEM entered a final settlement which included a payment plan for the $2.0 million CAD free of interest and costs and expenses related to collection over nine months plus the extension of the agreement for 12 months. Upon final payment GEM agrees to file a satisfaction of judgment in County of New York, effectively settling this issue. GlobalX made payments due per final settlement and the Company had no outstanding balance as of December 31, 2023. In addition, the Company expensed the full outstanding amount capitalized as deferred financing costs of $2.8 million as of December 31, 2023.
On March 4, 2024, Global Crossing Airlines and GEM decided to extend the length of the Facility by 12 months and the new expiration date is March 4, 2025.
8. INCOME TAXES
The Company’s effective tax rate for the years ended December 31, 2024 and 2023 was 0%. The effective tax rate represents a blend of federal and state taxes and includes the impact of certain nondeductible items.
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The following table summarizes the significant components of the provision for income taxes from continuing operations:
For the Year Ended December 31, 2024 For the Year Ended December 31, 2023
Federal:
Current $ — $ —
State:
Change in valuation allowance 2,381 4,877
Total income tax provision $ 2 $ 2
The income tax provision differs from that computed at the federal statutory corporate tax rate as follows:
For the Year EndedDecember 31,2024 For the Year EndedDecember 31, 2023
Expected provision at Federal statutory tax rate 21.00 % 21.00 %
State tax expense, net of Federal benefit 2.17 % 3.17 %
Change in valuation allowance (20.80 )% (23.35 )%
Permanent difference (2.05 )% (0.73 )%
The following table summarizes the significant components of the Company’s deferred taxes:
For the Year EndedDecember 31, 2024 For the Year EndedDecember 31, 2023
Deferred tax assets (liabilities):
Share based compensation 248 472
Allowance for doubtful accounts 141 23
Unrealized Loss 14 14
Total deferred tax assets (liabilities) $ 15,919 $ 13,538
Net deferred tax assets (liabilities) $ — $ —
As of December 31, 2024 and 2023, the Company has net operating losses available for deduction against future taxable income of $54 million and $49 million, respectively. The net operating losses do not expire and may be carried forward indefinitely. The amount of state NOLs available equals the amount of federal NOLs.
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, 2024. Accordingly, a valuation allowance of $15.9 million has been recorded to offset these deferred tax assets. The change in valuation allowance for the year ended December 31, 2024 from 2023 was an increase of $2.4 million.
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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 and the States of Florida, California, Georgia, 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 2021, 2022 and 2023 tax returns remain open to examination.
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9. FAIR VALUE MEASUREMENTS
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, 2024 and 2023, the Company's assets' and liabilities' carrying values approximate to their fair values.
10. WARRANTS
On August 2, 2023, the Company issued 10,000,000 warrants with $1.00 exercise price in connection with the financing arrangement entered into with Secured Notes. The warrants allow the holder to purchase common stock at an exercise price equal to $1.00 per share at any time on or after their issuance date and on or prior to June 30, 2030. At time of issuance, the Company determined that the warrants had a fair value of $4.3 million and required classification as equity. On December 21, 2023, the total warrants increased by 142,874 warrants with an exercise price of US$1.00 per warrant in connection with Secured Notes amendment as described on footnote 11. The additional warrants had an estimated fair value of approximately $8 thousand and they were classified as equity in the Consolidated Balance Sheets as of December 31, 2023 and 2024.
The fair value of the warrants were measured using the Monte Carlo pricing model. Significant inputs into the model as of August 2, 2023 are as follows:
Monte Carlo Assumptions August 2, 2023
Exercise price $ 1.00
Warrant expiration date June 30, 2030
Stock price $ 0.85
Interest rate (annual) (1) 4.21 %
Volatility (annual) (2) 50.0 %
Remaining term (years) 6.91
Annualized dividend yield (3) 0 %
11. NOTE PAYABLE
On January 27, 2023, the Company announced an up to $5.0 million loan (the "Loan") with a key investor to provide working capital and additional liquidity to support GlobalX’s rapidly growing operations. The net proceeds of the Loan will be used to further the business objectives of the Company and to secure additional aircraft for charter operations.
The terms of the promissory note (the "Note") issued in connection with Loan include:
•
a maturity date of 6 months from the date of issuance (the “Maturity Date”) and the principal amount of the Note, together with any
•
accrued and unpaid interest, will be payable on the Maturity Date;
•
the Note bears interest at the rate of 20% per annum, accruing monthly and payable on the Maturity Date;
•
the principal amount of the Note will be advanced in two tranches of $2.5 million each. The first tranche was advanced within one business day and the second tranche will be advanced after the Company delivers a draw down notice, but subject to the lender receiving internal approval for the second tranche; and
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•
the Note is unsecured, is not convertible and provides for no warrants.
As of December 31, 2023, the Company received $2.5 million from the loan and this balance was paid off in connection with the new $35.0 million secured notes closed on August 2, 2023. In addition, proceeds from these notes were used to pay pre-existing Subscription Agreement of $6.0 million and the outstanding balance related to debt costs and discounts of approximately $945 thousand was written off.
On August 2, 2023, the Company closed the placement of $35 million senior secure notes due 2029.
The terms of the senior secure notes include:
•
a term of 6 years and maturity date of June 30, 2029; with no principal payments due until maturity date;
•
the notes bear interest at a fixed rate of 15% per annum and include an upfront fee of 2% of the principal payment;
•
the Company is permitted to prepay all (but not less than all) of the notes beginning on July 1, 2025 subject to a redemption premium of: (i) 7.5% of the principal to be redeemed on or prior to August 2, 2026, (ii) 5.0% of the principal to be redeemed after August 2, 2026, or on or prior to August 2, 2027, (iii) 2.5% of the principal to be redeemed after August 2, 2027, or on or prior to August 2, 2028, (iv) 0% of the principal to be redeemed after August 2, 2028;
•
the investors will be issued 10 million warrants, each exercisable into one share of Class A common stock at an exercise price of $1.00 per share, with such warrants expiring on June 30, 2030;
•
each of the Company's material subsidiaries will guarantee the notes;
•
the notes and the related guarantees will be secured by a lien on substantially all of the property and assets of the Company and the guarantors of the notes.
•
financial covenants requirements as follows: minimum adjusted EBITDA of (i) $5,000,000 for the fiscal year ended December 31, 2023, (ii) $15,000,000 for the fiscal year ended December 31, 2024 and (iii) $25,000,000 for the fiscal year ended December 31, 2025;
•
minimum liquidity of $5,000,000 measured at each quarter end;
•
collateral substantially of all the Company's assets.
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 allocated and recorded debt issuance costs of $3.8 million related to warrants based on the relative fair value of the debt instrument along with a corresponding credit to additional paid in capital. As the warrants are classified as equity warrants the Company will not remeasure the warrants each accounting period.
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. See footnote 10 of the Company's consolidated financial statements for more details of warrants.
On December 21, 2023, the Company, and the senior secure notes due 2029 purchasers amended the original placement of $35 million senior secure notes due 2029 for the sale of an additional $5M senior secure notes due 2029 to original purchasers and the total warrants increased by 142,874 warrants with an exercise price of US$1.00 per warrant. The net proceeds from the sale of the additional notes will be used to repurchase $4.3M principal amount of senior secure notes due 2029 from an original purchaser plus payment of accrued interest due of $251 thousand, with the balance expected to be used for general corporate purposes, including the transaction expenses and deposits to expand its current fleet of aircraft. No other substantial modification to the terms of the original $35 million senior secure notes due 2029 was made in the issuance of the additional notes.
Notes Payable is comprised of the following:
Less unamortized debt issuance costs, noncurrent (5,955 ) (6,509 )
Less current maturities — —
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12. SHARE CAPITAL AND ADDITIONAL PAID-IN CAPITAL AUTHORIZED
The Company has authorized share capital of 200,000,000 shares of common stock, par value $0.001 per share.
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, 2023, the Company had 40,420,350 common shares, 5,537,313 Class A common shares, and 12,968,208 Class B non-voting shares outstanding. As of December 31, 2024, the Company had 44,667,815 common shares, 5,537,313 Class A common shares, and 11,553,599 Class B non-voting shares outstanding.
Share issuance
During the year ended December 31, 2024:
•
The Company issued 2,080,648 common stock shares pursuant to 2,080,648 RSUs.
•
The Company issued 752,208 common stock shares for net proceeds of $386,770 pursuant to the Employees Stock Purchase plan.
During the year ended December 31, 2023:
•
The Company issued 2,727,083 common shares for net proceeds of $1,358,113 pursuant to the exercise of 2,727,083 share purchase warrants.
•
The Company issued 1,803,992 common stock shares pursuant to 1,723,650 RSUs.
•
The Company issued 150,000 common stock shares for net proceeds of $68,182 pursuant to the exercise of stock options.
•
The Company issued 804,314 common stock shares for net proceeds of $446,564 pursuant to the Employees Stock Purchase plan.
Share purchase warrants
The following is a summary of share purchase warrants activities during the years ended December 31, 2024 and 2023:
Number of Share Purchase Warrants Weighted Average Exercise Price
Issued — —
Exercised — —
As of December 31, 2024, the following share purchase warrants were outstanding and exercisable:
Outstanding Exercise Price Remaining life(years) Expiry Date
As of December 31, 2023, the following share purchase warrants were outstanding and exercisable:
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Outstanding Exercise Price Remaining life(years) Expiry Date
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 9,400,000.
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 ten years from the grant date. Vesting conditions are determined by the Board of Directors in its discretion with certain restrictions in accordance with the Stock Option Plan.
The following is a summary of stock option activities for the years ended December 31, 2024 and 2023:
Granted — — —
Granted — — —
Exercised — — —
As of December 31, 2024, the following stock options were outstanding and exercisable:
Outstanding Exercisable Exercise Price Remaining life (years) Expiry Date
As of December 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 no stock options granted during the years ended December 31, 2024 and 2023.
Restricted share units
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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 CBOE CA 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:
a.
If the Company elects to settle in cash, the cash payment is accounted for as the repurchase of an equity interest (i.e. as a deduction from equity), except as noted in (c) below.
b.
If the Company elects to settle by issuing shares, the value of RSUs initially recognized in reserves is reclassified to capital, except as noted in (c) below.
c.
If the Company elects the settlement alternative with the higher fair value, As of the date of settlement, the Company recognizes an additional expense for the excess value given (i.e. the difference between the cash paid and the fair value of shares that would otherwise have been issued, or the difference between the fair value of the shares and the amount of cash that would otherwise have been paid, whichever is applicable).
The following is a summary of RSU activities for the years ended December 31, 2024 and 2023:
Number of RSUs Weighted average grant date fair value per RSU
During the years ended December 31, 2024 and 2023, the Company recognized total share-based payments expense with respect to stock options, RSUs and employees' stock purchase plan of $1.7 million and $2.5 million, respectively.
The remaining compensation that has not been recognized as of December 31, 2024 and 2023 with regards to RSUs and the weighted average period they will be recognized are $2.4 million and 1.99 years and $3.2 million and 2.02 years, respectively.
Employee Stock Purchase Plan
In September 2021, the Board adopted the GlobalX 2021 Employee Stock Purchase Plan (“ESPP”). There are 2 offering periods that the employees make contributions to the plan. The first offering period starts from May 16th to October 31st and the second offering period starts from November 1st to May 15th of each year. Eligible employees may purchase maximum of 10,000 of the Company's common stock per offering through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee's payroll deductions under the ESPP are limited to 15% of the employee's compensation and an employee may not purchase more than $25 thousand of stock during any calendar year in which the employee’s option to purchase stock under the ESPP is outstanding at any time.
At the Annual Meeting of Stockholders of Global Crossing Airlines Group Inc. (the “Company”) held on November 22, 2024 (the “2024Annual Meeting”), the Company’s stockholders approved an amendment to the Company’s Employee Stock Purchase Plan
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(the “Plan”). Theamendment was approved by Company’s Board of Directors, subject to the approval of Company’s stockholders, and became effective with such stockholder approval on November 22, 2024.
As a result of such stockholder approval, the Plan was amended to increase the number of shares authorized for issuance under the Plan by 3,000,000 shares (from 1,000,000 shares to 4,000,000 shares).
During 2024 and 2023, the Company issued 752,208 and 804,314common shares issued under the ESPP and recorded Proceeds on issuance of shares of $0.3 million and $1.9 million, respectively.
As of December 31, 2024 and 2023, total recognized equity-based compensation costs related to ESPP were approximately $0.1 million.
ESPP payroll contributions accrued at December 31, 2024 and December 31, 2023 totaled $0.1 million, and are included within accrued expenses in the consolidated balance sheets. Employee payroll contributions used to purchase shares under the ESPP will be reclassified to stockholders' equity at the end of the offering period.
13. LOSS PER SHARE
Basic earnings (loss) per share, which excludes dilution, is computed by dividing Net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) 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 in thousands, except share and per share amounts:
Year Ended December 31,
Numerator:
Denominator:
Dilutive effect of stock options, RSUs and warrants — —
Basic loss per share $ (0.19 ) $ (0.37 )
Diluted loss per share (1) $ (0.19 ) $ (0.37 )
(1) There were 17,732,764 warrants, 246,667 options, and 5,373,373 RSUs outstanding at December 31, 2024 and there were 22,518,894 warrants, 470,668 options, and 5,056,270 RSUs outstanding at December 31, 2023. The Company excluded the warrants, options and RSUs from the calculation of diluted EPS for the years ended December 31, 2024 and 2023 as inclusion would have an anti-dilutive effect.
14. 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 continued to provide back-office support including sharing the costs of the Company’s aircraft fleet management software (TRAX).
As of December 31, 2024 and 2023, amounts due to related parties include the following:
1.
GlobalX earned $39 thousand in 2024 and it was owed $0, respectively, in relation to flights flown and shared TRAX services with Jetlines, respectively. GlobalX earned $181 thousand in 2023 and it was owed $31 thousand in relation to flights flown and shared TRAX services with Jetlines, respectively;
2.
Jetlines earned approximately $1.2 million in 2024 and it was owed $0, respectively, in relation to flights flown by Jetlines for GlobalX. Jetlines earned approximately $0.9 million in 2023 and it was owed $0.1 million, respectively, in relation to flights flown by Jetlines for GlobalX.
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As described in footnote 4 above, on August 2 and December 21, 2023, the Company issued Secured Notes of $35.7 million with entity of which its executive remained elected as a member of the Board of Directors of the Company during the last annual shareholders meeting in December 2024.
15. ACCRUED LIABILITIES
Accrued liabilities consisted of the following as of December 31 in thousands:
Salaries, wages and benefits $ 2,954 $ 2,899
Contracted ground and aviation services 1,025 2,200
16. 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, 2024 and 2023 in thousands were as follows:
Amounts Collected or Invoiced 8,903 9,896
The Company has 2 customers that accounted for approximately 40% and 12% of the revenue for the year ended on December 31, 2024 and approximately and 6% and 8% of the revenue for the year ended on December 31, 2023. The Company expects to maintain these relationships with those customers.
17. 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.
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18. SEGMENT INFORMATION
The Company’s business activity is providing customized, non-scheduled air transport services to customers. Management structured business model to derive revenue from customers from two types of contracts: (1) ACMI and (2) Charter, as discussed in Management Discussion and Analysis of Financial Condition and Results of Operations.