UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No.1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-56409
Global Crossing Airlines Group Inc.
(Exact name of registrant as specified in its charter)
| | |
Delaware |
| 86-2226137 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification Number) |
| | |
4200 NW 36th Street, Building 5A Miami International Airport Miami, Florida |
| 33166 |
(Address of principal executive office) |
| (Zip Code) |
Registrant’s telephone number, including area code: (786) 751-8503
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of each class |
| Trading Symbol |
| Name of each exchange on which registered |
None | | | | |
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $0.001
Class B non-voting common stock, par value $0.001
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | |
Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer | [X] | Smaller reporting company | [X] |
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| Emerging growth company | [X] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ ]
Indicate by check mark whether the financial statements of the registrant included in the filling reflect the correction of an error to previously issued financial statements. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2022 was $17,200,642 .
The total number of the registrant’s shares outstanding as of March 1, 2023 was 54,062,134 shares., consisting of 34,821,892 shares of Common Stock, 5,537,313 shares of Class A Non-Voting Common Stock, and 13,702,929 shares of Class B Non-Voting Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated by reference from the registrant’s definitive proxy statement for its 2021 Annual Meeting of Stockholders. Such proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
EXPLANATORY NOTE
We are filing this Form 10-K/A to our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission (“SEC”) on March 10, 2022 (“Annual Report on Form 10-K”), (1) to amend Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”), (2) restate and amend its previously-issued audited consolidated financial statements and related financial information for the fiscal years ended December 31, 2022 and 2021 in Item 8 – “Financial Statements And Supplementary Data”, (3) to amend Item 9A – “Controls and Procedures” to reflect a reassessment of our disclosure controls and procedures, and internal control over financial reporting, as of December 31, 2022. As required under SEC rules, this amendment sets forth the complete text of Part II, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, as amended, Part II, Item 8 – “Financial Statements And Supplementary Data”, as amended and Part IV. Item 9A Controls and Procedures, as amended. In addition, pursuant to SEC Rules, we are also including new certifications by our Principal Executive Officer and Principal Financial Officer. Other than the foregoing, and the new certifications required by Rule 13a-14(a) under the Securities and Exchange Act of 1934 (“Exchange Act”), our Annual Report on Form 10-K is not being amended or updated in any respect. This 10-K/A continues to describe the conditions as of the date of the Annual Report on Form 10-K, and, except as contained herein, we have not modified or updated the disclosures contained in the Annual Report on Form 10-K. This Form 10-K/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Annual Report on Form 10-K, including any amendment to those filings.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Financial Statements included in Item 8 of this report.
Business Overview
Global Crossing Airlines Group Inc. operates a US Part 121 domestic flag and supplemental airline using the Airbus A320 family of aircraft. GlobalX’s business model is to (1) provide services on an Aircraft, Crew, Maintenance and Insurance using wet lease contracts to airlines and non-airlines, and (2) on a Full Service basis whereby we provide passenger aircraft charter services to customers by charging an “all-in” fee that includes fuel, insurance, landing fees, navigation fees and most other operational fees and costs. GlobalX operates within the United States, Europe, Canada, Central and South America. GlobalX began operating the Airbus A321 freighter during the first quarter of 2023 after completing all FAA certification requirements with the A321F.
Focused on becoming a Market leader with differentiated, value-creating solutions
GlobalX intends to become the best-in-class U.S. narrow-body, ACMI charter airline, operating both passenger and cargo charter aircraft while recruiting and maintaining a dynamic team of customer-centric flight crews, ground and maintenance teams and management staff.
GlobalX operates its A320 family aircraft for airlines, tour operators, college and professional sports teams, incentive groups, resorts and casino groups and government agencies. It is our goal to deliver best in class on time performance and dispatch reliability; Expand existing relationships and develop additional relationships with leading charter/our operators to provide aircraft during their peak seasons; and provide ad-hoc and track charter programs for non-airline customers, including hotels, casinos, cruise ship companies, tour operators.
Cargo charter flights with A321P2F (Passenger to Freighter)
GlobalX added A321F (passenger to freighter) aircraft to its operating certificate and into the fleet during Q1 2023, and cargo is an integral part of the GlobalX business. GlobalX operates its A321Fs under ACMI charter operations with major package operators and major freight and logistics companies. Under these arrangements, customarily, these operators will take the commercial risk associated with the selling of the cargo and provide all ground handling and cargo-specific operations, with GlobalX assuming the operational risk of providing a functional aircraft, trained crew, in a safe and on time manner as the ACMI operator.
Location of Operations Bases
GlobalX will initially operate from one primary geographic base:
•Miami International Airport (“MIA”) – GlobalX’s main base of operations is MIA, and, pursuant to its Airline Use Agreement with MIA (for which it has placed deposits of $495,000), GlobalX (1) operates charter flights out of Concourse E, and rents office space and operates its ticket counters, and (2) maintains a maintenance office for its maintenance staff and for storage of all aircraft records, as well as spare parts and consumables storage, with loading dock capabilities. While we do have an Airline Use Agreement in place with MIA, it does not guarantee availability of boarding gates or landing slots at that airport.
GlobalX also maintains two additional crew bases at the following locations:
•San Antonio International Airport ("SAT") in San Antonio, Texas
•Harry Reid International Airport ("LAS") in Las Vegas, Nevada
Reducing Operational Costs
To control costs and maintain a competitive cost per Block Hour flown, GlobalX:
•Flies only one aircraft family (A320).
•Maintains focus on continuous financial discipline and strict departmental budgeting.
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•Has implemented and utilizes highly 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.
•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:
•Scheduled airlines that have short-term or long-term capacity needs to supplement their existing routes or fleets.
•Major tour operators, resorts, cruise lines and casinos that require airlift above and beyond scheduled service to meet their occupancy needs.
•Professional and collegiate sports teams
•Charter brokers representing a variety of interests, including the entertainment industry, dignitary travel, political campaigns, and government programs.
GlobalX Aircraft Fleet
Critical to GlobalX’s business model is a fleet of modern and cost-effective aircraft. To achieve this objective, GlobalX has selected what it believes is the best overall single-aisle aircraft family to operate. This approach differs from traditional airlines, which purchase a variety of aircraft, often from different manufacturers, to achieve their operational flight sectors, resulting in increased training, operating and spare part costs. GlobalX conducted research to determine the best aircraft to fly in competition with other narrow-body charter airlines in the single-aisle seat market and GlobalX selected the A320 aircraft family.
The following factors support GlobalX’s choice to operate the Airbus A320 and A321 aircraft versus the Boeing family of aircraft:
Cost and Operating factors: lower fuel burn, and better aircraft and cockpit crew pool availability.
Operational Capability: the A320 has a range advantage over the 737-800 and can fly non-stop from Miami to selected airports in North America, South America, the Caribbean, and between most major destinations in Europe. The A320 has excellent maintenance dispatch reliability and strong availability of spare parts and components, making the A320, in management’s estimation, the most popular aircraft among low-cost airlines.
Passenger comfort: better seat width, cargo bin volume for carry-on baggage and cargo hold volume.
Aircraft Maintenance
Heavy maintenance checks are expected to be sourced out to FAA-approved service providers. The "6Y" and "12Y" checks will be primarily paid for using funds from the accrued maintenance reserves paid to lessors under operating leases.
Strategy to Address Competitive Response
We expect the existing charter operators based in the U.S. to respond to GlobalX’s entry into the market by lowering their pricing to customers. The expected competitive response typically includes lowered ACMI rates for key contracts. We believe GlobalX’s existing relationships with potential customers and the underserved demand in the U.S., coupled with our newer planes allowing for a more cost-efficient operation, will allow us to address any competitive pressure and grow as anticipated.
GlobalX Charter Service
GlobalX is a charter provider that currently focuses exclusively on providing customized, non-scheduled passenger air transport services with narrow-body Airbus A320 and A321 aircraft. Our primary line of business and focus is commercial charter services from MIA to destinations throughout North and South America and the Caribbean, with established scheduled airlines that need additional air lift to supplement their own, and established tour and travel operators that sell tour packages in and between these markets.
We provide our services through two contract structures: (1) ACMI and (2) Charter
We believe operating charter flights will largely insulate our expected profitability from fluctuations in jet fuel prices, which are typically the largest and most volatile expense for an air carrier. Under the vast majority of our commercial passenger charter arrangements, our
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customers bear 100% of the cost of jet fuel. In addition, consistent with industry practice, we plan for those customers to pay us our contract price approximately two weeks in advance of their flights.
Because we expect that our ACMI customers would be responsible for fuel costs, our expected commercial ACMI revenues would not be affected directly by fuel price changes. However, a significant increase in fuel prices would likely have an adverse effect on demand for the use of our aircraft, which could have a material adverse effect on our profitability and financial position.
Experienced management team
Our management team has extensive operating and leadership experience in the airfreight, airline, and aircraft leasing, maintenance, and management industries at companies such as Republic Airways, Eastern Airlines, JetBlue Airways, Virgin America, Hawaiian Airlines, American Airlines, US Airways, Atlas Air, Breeze Airways, Emirates, North American Airlines, Miami Air, AAR, Continental Airlines, Pan Am, Atlantic Coast Airlines, and Flair Airlines, as well as the United States Army, and Air Force. In addition, our management team has a diversity of experience from other industries at companies such as KBR, Teladoc, The Home Depot, Halliburton, Lehman Brothers, and the Burger King Corporation.
Business Strategy
GlobalX seeks to become the best-in-class U.S. narrow-body, ACMI and Full Contract charter airline, operating both passenger and cargo charter aircraft while recruiting and maintaining a dynamic team of customer-centric flight crews, ground teams and management staff.
In launching a US 121 Flag and Supplemental charter airline in the United States, GlobalX has done, or plans to do, the following:
Operate passenger charter flights with A320/A321 all passenger aircraft
GlobalX operates its A320 family aircraft under ACMI/Full Contract charter operations for major airlines, tour operators, college and professional sports teams, incentive groups, major resorts and casino groups.
•Deliver best in class on time performance and dispatch reliability;
•Expand existing relationships and develop additional relationships with leading European charter/ our operators to provide aircraft during their peak seasons; and
•Provide ad-hoc and track charter programs for non-airline customers, including hotels, casinos, cruise ship companies, tour operators.
Operate cargo charter flights with A321P2F (Passenger to Freighter)
GlobalX added A321F (passenger to freighter) aircraft to its operating certificate and into the fleet during Q1 2023. Cargo is an important revenue stream for airlines and it is an integral part of the GlobalX operation.
GlobalX intends to operate its A321Fs under ACMI/Wet Lease charter operations with major package operators and major freight and logistics companies. Under these arrangements, customarily, these operators will take the commercial risk associated with the selling of the cargo capacity and provide all ground handling and cargo-specific operations, with GlobalX assuming the operational risk of providing a functional aircraft, trained crew, in a safe and on time manner as the ACMI operator.
Business Developments
Our results for 2021 and 2022 were impacted by the following:
•On December 31, 2020 we accepted delivery of our first A320 passenger aircraft
•On April 13, 2021 we accepted delivery of our first A321 passenger aircraft
•On August 7, 2021 we received our Airline Operating Certificate from the United States Federal Aviation Authority and we began our revenue operations immediately thereafter
•On September 3, 2021 we accepted delivery of our second A320 passenger aircraft
•In October 2021, we initiated scheduled flights between Miami and Santo Domingo, Dominican Republic on behalf of White Wings
•In November 2021, we initiated scheduled flights between Miami and Havana, Cuba, on behalf of Havana Air
•On December 3, 9, and 17, 2021 we accepted delivery of our third, fourth, and fifth A320 passenger aircraft, respectively
•In December 2021, we began flying in support of the NCAA’s fall football season
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•On March 28, 2022, we announced closing of US$6.0 million financing
•On June 16, 2022, we took delivery of seventh A320 family passenger aircraft
•On June 27, 2022, we announced European summer wet lease program with TUI fly Netherlands
•On June 29, 2022, Global Crossing Airlines and Havana Air announced expanded Cuba service to Camaguey and Santiago de Cuba
•On November 21, 2022, we received authorization to increase fleet to 11 aircraft from US DOT
•On December 10, 2022, we took delivery of eighth A320 family passenger aircraft
Results of Operations
The following discussion should be read in conjunction with our Financial Statements and other financial information appearing and referred to elsewhere in this report.
Years ended December 31, 2022 and 2021
Operating Revenue & Statistics
The analysis of GlobalX results, comparing 2021 and 2022, requires an understanding of how the Company fundamentally evolved during that time period. Prior to August of 2021, GlobalX was a pre-revenue airline attempting to secure the required government approvals (Department of Transportation and Federal Aviation Authority) to commence commercial operations. These approvals were obtained in August of 2021; which marked the beginning of commercial operations. It cannot be understated how different the costs required to operate aircraft versus applying for approval to operate aircraft. The operation of aircraft involves the requirement to pay for fuel, ground services, maintenance, increased staff (in the form of head office and flight crews) and travel which is required to get crews where they need to be to operate flights. In 2021 we conducted commercial operations for five months and in 2022 we conducted commercial operations for twelve months. This factor alone is the single largest driver of increased revenue and operating expenses when comparing 2021 to 2022. This activity level is manifested in block hours, which is the measure by which we track all commercial activity. While other airlines discuss available seat miles and revenue per available seat mile (“rasm”), cost per available seat mile (“casm”), these metrics are not germane to our business model as an ACMI operator. We charter the entire aircraft, we do not take fuel risk, we do not take third party risk and as such review and evaluate all results on a block hour basis.
The following table compares our Operating Fleet (average aircraft equivalents during the period) and total Block Hours operated:
| | | | | | | | | | | | | | | | |
Operating Fleet | | 2022 | | | 2021 | | | Inc/(Dec) | | | Inc/(Dec) | |
A320 | | | 5.6 | | | | 0.8 | | | | 4.8 | | | | 600 | % |
A321 | | | 1.0 | | | | 0.4 | | | | 0.6 | | | | 150 | % |
Total Operating Average Aircraft Equivalents | | | 6.6 | | | | 1.2 | | | | 5.4 | | | | 450 | % |
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The following table describes the degree to which variations in revenues can be attributed to fluctuations in prices and nature of GlobalX services.
| | | | | | | | | | | | | | | | |
Operating Revenue | | 2022 | | | 2021 | | | Inc/(Dec) | | | % Change | |
Charter | | $ | 73,318,834 | | | $ | 10,859,313 | | | $ | 62,459,520 | | | | 575.2 | % |
ACMI | | | 13,374,760 | | | | 2,212,760 | | | | 11,162,000 | | | | 504.4 | % |
Other | | | 10,416,611 | | | | 1,220,399 | | | | 9,196,212 | | | | 753.5 | % |
Total | | | 97,110,205 | | | | 14,292,472 | | | | 82,817,732 | | | | 579.5 | % |
| | | | | | | | | | | | |
Block Hours | | 2022 | | | 2021 | | | Inc/(Dec) | | | % Change | |
Charter | | | 6,253 | | | | 1,004 | | | | 5,249 | | | | 522.9 | % |
ACMI | | | 2,328 | | | | 656 | | | | 1,672 | | | | 254.8 | % |
Non Revenue | | | 85 | | | | 19 | | | | 66 | | | | 348.0 | % |
Total | | | 8,666 | | | | 1,679 | | | | 6,987 | | | | 416.1 | % |
| | | | | | | | | | | | |
Revenue per Block Hour | | 2022 | | | 2021 | | | Inc/(Dec) | | | % Change | |
Charter | | $ | 11,726 | | | $ | 10,818 | | | $ | 908 | | | | 8.4 | % |
ACMI | | | 5,744 | | | | 3,372 | | | | 2,373 | | | | 70.4 | % |
The $62.5 million increase in Charter revenue from $10.9 million in 2021 to $73.3 million in 2023 was largely driven by volume. In fact, 90.9% of the Charter revenue increase was volume related while only 9.1% was related to an increase in rates from $10,818 to $11,726 per block hour, an increase of $908 increase per block hour. The volume increase itself was attributable to the availability of aircraft. Although the Company had six deliveries in 2021, these aircraft were not operational for the full year. Three of the aircraft began operational flights in August, while one began in October. The remaining two were delivered in November and became operational in December. The delay between delivery and operational readiness is due to needed maintenance, seat configuration changes, certifications, and proving runs, and can vary widely between aircraft. Conversely in 2022, those same six aircraft were operational for the full year in addition to the two deliveries in June and December of 2022. Thus, the net available aircraft for the full year 2021 was only 1.2, while the net available aircraft in 2022 was 6.6 aircraft. In addition, the market was able to bare a small increase in rate as the industry continues to improve, following the current post-pandemic trend. The Company was also able to increase margin more in line with the market as our customers become confident of GlobalX’s ability and commitment to operational excellence and assets are utilized at higher levels. Furthermore, the effective rate will have increased as pass through costs such as fuel cost and landing fees increase with inflation or other market pressure.
The $11.2 million increase in ACMI revenue from $2.2 million in 2021 to $13.4 million in 2022 was driven by both rate and volume at an almost even split. 50.5% of the ACMI revenue increase was volume related while 49.5% was related to an increase in rates from $3,372 to $5,744 per block hour, an increase of $2,373 increase per block hour. The volume increase was achievable as GlobalX continued to add to capacity through aircraft delivery in 2022. In addition, the Company was able to achieve a significant rate increase due to a few factors. The Company launched operations in 2021 with one aircraft and had to be aggressive with pricing to initially secure work at lower rates per block hour. Throughout 2022, we were able to expand the number of customers being served expanding into NCAA college sports, music tours, corporate travel, and government contracts at higher rates.
Operating Expenses
The following table compares our Operating Expenses (in dollars):
| | | | | | | | | | | | | | | | |
Operating Expenses | | 2022 | | | 2021 | | | Inc/(Dec) | | | % Change | |
Salaries, Wages, & Benefits | | $ | 30,629,414 | | | $ | 9,784,450 | | | $ | 20,844,964 | | | | 213.0 | % |
Aircraft Fuel | | | 23,035,395 | | | | 3,142,720 | | | | 19,892,675 | | | | 633.0 | % |
Maintenance, materials and repairs | | | 4,377,378 | | | | 832,609 | | | | 3,544,769 | | | | 425.7 | % |
Depreciation and amortization | | | 609,489 | | | | 34,289 | | | | 575,200 | | | | 1677.5 | % |
Contracted ground and aviation services | | | 15,607,926 | | | | 3,336,782 | | | | 12,271,144 | | | | 367.8 | % |
Travel | | | 5,024,758 | | | | 961,258 | | | | 4,063,500 | | | | 422.7 | % |
Insurance | | | 3,580,377 | | | | 1,713,756 | | | | 1,866,621 | | | | 108.9 | % |
Aircraft Rent | | | 15,614,081 | | | | 4,149,871 | | | | 11,464,210 | | | | 276.3 | % |
Other | | | 9,867,929 | | | | 7,497,021 | | | | 2,370,908 | | | | 31.6 | % |
Total Operating Expenses | | | 108,346,747 | | | | 31,452,756 | | | | 76,893,991 | | | | 244.5 | % |
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Salaries, wages, and benefits grew to $30.6 million up from $9.8 million, a $20.8 million increase, or 213%, primarily due to the hiring and training of pilots and other airline personnel necessitated by the growing fleet and operations. The total employees grew 69.5% from 187 to 317 and pilots increased from 10 to 39, or 290%.
Aircraft fuel grew from $3.1 million to $23.0 million, a $19.9 million, or 633% increase, primarily due to an increase in block hours of 6,987 or 416% as a result of high number of aircraft available. Additionally, the average spot price of jet fuel was approximately 30% greater in 2022.
Maintenance, materials, and repairs increased by $3.5 million, from $0.8 million to $4.4 million, or 426%, primarily due to (1) the increase in average aircraft in operation during the periods from one to seven and (2) the block hours of operation, which increased from 1,679 to 8,666, or 416%. Maintenance of aircraft must be performed proactively. Block Hours of the aircraft and its parts are rigorously monitored, tracked, and used to determine scheduled service. As a result, there is a strong correlation between Block Hours and maintenance, materials, and repairs.
Depreciation and amortization increased $0.6 million, or 1,677%, from $.003 million to $0.6 million, driven by assets acquired to support our airport operations. These assets include, but are not limited to, fuel trucks, tractors, computers, software, and rotable inventory.
Contracted ground and aviation services increased by $12.3 million, or 368%, from $3.3 million to $15.6 million, primarily due to an increase in block hours. As operations (block hours) increased GlobalX required additional support from third party aviation partners at airports to provide check in, security screening, catering, baggage handling, fueling, and other services to clients.
Travel increased $4.0 million or 423%, from $1.0 million to $ 5.0 million, primarily due to the increase in Block Hours and a significant increase in the number of pilots in training who require hotel accommodations during the trips.
Insurance increased $1.9 million, or 109%, from $1.7 million to $3.6 million, primarily related to the increase in the number of aircraft.
Aircraft rent increased 276% $11.5 million, or 276%, from $4.1 million to $15.6 million, primarily due to the increase in the number of aircraft from one to seven average aircraft equivalent.
Operating loss improved by $6.0 million, from an operating loss of $17.2 million to $11.2 million. This improvement was driven by (1) the delivery of aircraft, (2) the improvement of market rates, and (3) the Company’s ability to capture that rate with a fully operational fleet. GlobalX’s revenue per aircraft increased by 23.4% to $14.7 million in 2022.
Non-operating Expenses (Income)
The following table compares our Non-operating Expenses (Income) :
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Non-Operating Expenses (Income) | | 2022 | | | 2021 | | | Inc/(Dec) | | | % Change | |
Loss (Gain) on Warrant Valuation | | $ | - | | | $ | 2,650,772 | | | $ | (2,650,772 | ) | | | (100.0 | )% |
Unrealized Loss (Gain) on Financial Instruments | | | (96,415 | ) | | | 154,120 | | | | (250,535 | ) | | | (162.6 | )% |
Equity method investment activity | | | - | | | | - | | | | - | | | N/A | |
Other non-operating | | | 3,058,938 | | | | - | | | | 3,058,938 | | | N/A | |
Interest Expense | | | 1,621,932 | | | | 31,043 | | | | 1,590,889 | | | | 5124.8 | % |
Total Non-Operating Expenses (Income) | | $ | 4,584,455 | | | $ | 2,835,935 | | | $ | 4,399,292 | | | | 155.1 | % |
Loss (Gain) on Warrant Valuation decreased $2.6 million due to the reclassification of warrants during 2021 from a liability to equity.
Other non-operating expenses increased by $3.0 million due to the write-off of deferred costs incurred in connection with GEM line of credit, as discussed in note 9 of the consolidated financial statements.
Interest expense, net increased $1.6 million driven mainly by the interest payable on the debentures issued in 2022.
Discontinued Operations
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| | | | | | | | | | | | | | | | |
Discontinued Operations | | 2022 | | | 2021 | | | Inc/(Dec) | | | % Change | |
Income from Discontinued Operations | | $ | — | | | $ | 177,706 | | | $ | (177,706 | ) | | | (100.0 | )% |
Income From Discontinued Operations decreased by $178 thousand dollars as a result of the spin-off of Canada Jetlines.
Net Loss
Net Loss improved by $4.0 million to a net loss of $15.8 million. This improvement was driven by the delivery of additional aircraft, the improvement of market rates, and the company’s ability to capture that rate with a fully operational fleet. GlobalX’s revenue per aircraft increased by 23.4% to $14.7 million in 2022.
Liquidity and Capital Resources
The most significant liquidity events during 2022 were as follows:
Operating Activities. For 2022, Net Cash used in operating activities decreased from $10.8 million to $6.8 million, consisting primarily of $15.8 million of Net Loss, $1.9 million of increase in Accounts Receivable, $1.3 million of increase in Prepaid Expenses and other current assets, and $3.5 million of increase in Operating lease obligations. These were partially offset by noncash adjustments of $0.6 million for depreciation and amortization of fixed assets, operating lease right of use assets and debt issue costs, $1.4 million for Share-based payments, $9.3 million of Accounts payable and Accrued and other liabilities, and $0.2 million of Bad debt expense. For 2021, Net Cash used for operating activities was $10.8 million, consisting primarily of $20.0 million of Net Loss, non-cash adjustments of $2.7 million related to loss on warrant revaluation, $1.1 million of Amortization of operating lease right of use assets, $1.2 million of Share-based payments, and $8.0 million in Accounts payable and Accrued and other liabilities.
As of December 31, 2022, the Company had approximately $1.9 million in unrestricted cash and cash equivalents, a decrease of approximately $3.3 million from December 31, 2021. Management believes the existing cash and cash equivalents, together with cash generated from expected increase of sales associated with the Company’s initiatives to raise additional funds will be sufficient to satisfy the Company’s liquidity needs for the next twelve months. Management’s still evaluating the existing options of raise additional funds, in the form of additional equity or debt.
The Company has significant fixed and noncancelable lease commitments of aircraft, equipment and related maintenance checks. As of December 31, 2022, the Company had total of $0.6 million and $9.2 million due in the next 12 months of future minimum lease payments under finance and operating leases, respectively, and approximately $1.8 million in current portion of notes payable included in the current liabilities presented in the Company’s consolidated balance sheet. As of December 31, 2022, the Company had total of $2.7 million and $27.6 million due after 12 months from the balance sheet date of future minimum lease payments under finance and operating leases, respectively, and approximately $5.1 million in notes payable included in the non-current liabilities presented in the Company’s consolidated balance sheet. The Company finished 2022 with eight passenger aircraft and expects the aircraft fleet to increase to 12 passenger aircraft and 6 cargo aircraft by the end of 2023. In order to achieve the number of aircraft deliveries in 2023, the Company currently has eight aircraft under lease with partial or total deposits paid and four aircraft under binding agreements that are subject to execution of definitive lease documentation and fulfillment of certain closing conditions.
Investing Activities. For 2022, Net Cash used for investing activities increased from $652.7 thousand to $1.9 million, consisting of $1.9 million of Purchases of property and equipment. For 2021, Net cash used for investing activities was $652.7 thousand, consisting of $652.7 thousand of Purchases of property and equipment.
Financing Activities. For 2022, Net Cash provided by financing activities decreased from $18.9 million to $6.2 million, consisting primarily of $5.9 million of Note Payable, and $0.8 million in Proceeds from issuance of shares, partially offset by $0.5 million in Principal payments of finance leases. For 2021, net cash provided by financing activities was $18.9 million, which primarily reflected $19.0 million in Proceeds from issuance of shares.
As disclosed in the subsequent events footnotes to the Company’s consolidated financial statement, on January 30, 2023, the Company secured a loan for up to $5.0 million with an investor to provide working capital and additional liquidity to support GlobalX’s operations. The net proceeds of the loan will be used to further the business objectives of the Company and to secure additional passenger and freighter aircraft for charter operations that were delivered during the first half of 2023.
The Company continuously seeks to identify external sources of capital from time to time depending on our cash requirements, assessment of current and anticipated market conditions, and the after-tax cost of capital. Our access to capital markets can be adversely impacted by prevailing economic conditions and by financial, business and other factors, some of which are beyond our control.
8
Additionally, the Company’s borrowing costs are affected by market conditions and may be adversely impacted by a tightening in credit markets.
The Company regularly assesses our anticipated working capital needs, debt and leverage levels, debt maturities, capital expenditure requirements and future investments or acquisitions to maximize shareholder return, efficiently finance our ongoing operations and maintain flexibility for future strategic transactions. The Company also regularly evaluates its liquidity and capital structure to ensure financial risks, adequate liquidity access and lower cost of capital are efficiently managed.
9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Global Crossing Airlines Group Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Global Crossing Airlines Group Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the years in the two year period ended December 31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficiency and retained deficit as of December 31, 2022. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Rosenberg Rich Baker Berman P.A.
Somerset, New Jersey
March 9, 2023, except notes 2, 17 and 18 which is October 26, 2023
We have served as the Company’s auditor since 2020.
10
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED BALANCE SHEETS
| | | | | | | | |
| | December 31,
2022 | | | December 31, 2021 | |
Current Assets | | | | | | |
Cash and cash equivalents | | $ | 1,875,673 | | | $ | 5,241,716 | |
Restricted cash | | | 3,585,261 | | | | 2,752,285 | |
Accounts receivable, net of allowance | | | 2,664,174 | | | | 745,646 | |
Prepaid expenses and other current assets | | | 2,193,449 | | | | 931,266 | |
Current assets held for sale | | | 1,405,741 | | | | - | |
Total Current Assets | | | 11,724,298 | | | | 9,670,913 | |
Property and equipment, net | | | 2,441,288 | | | | 618,883 | |
Finance leases, net | | | 2,710,899 | | | | - | |
Operating lease right-of-use assets | | | 27,952,609 | | | | 22,668,308 | |
Deposits and other assets | | | 6,334,878 | | | | 6,115,562 | |
Total Assets | | $ | 51,163,973 | | | $ | 39,073,666 | |
| | | | | | |
Current liabilities | | | | | | |
Accounts payable | | $ | 4,997,080 | | | $ | 2,058,864 | |
Accrued liabilities | | | 9,458,629 | | | | 4,219,491 | |
Deferred revenue | | | 3,200,664 | | | | 1,995,090 | |
Customer deposits | | | 1,617,337 | | | | 1,264,502 | |
Due from related parties | | | - | | | | 197,558 | |
Current portion of notes payable | | | 1,810,468 | | | | 1,573,000 | |
Current portion of operating leases | | | 6,445,915 | | | | 3,393,497 | |
Current portion of finance leases | | | 335,527 | | | | - | |
Total current liabilities | | | 27,865,621 | | | | 14,702,002 | |
Other liabilities | | | | | | |
Note payable | | | 5,081,294 | | | | - | |
Long-term operating leases | | | 23,189,835 | | | | 20,042,343 | |
Financial leases and other liabilities | | | 2,282,892 | | | | 83,491 | |
Total other liabilities | | | 30,554,020 | | | | 20,125,834 | |
Total Liabilities | | $ | 58,419,641 | | | $ | 34,827,836 | |
| | | | | | |
Commitments and Contingencies | | | | | | |
Equity (Deficit) | | | | | | |
Common stock - $.001 par value; 200,000,000 authorized; 53,440,482 and 51,237,876 issued and outstanding as of December 31, 2022 and December 31, 2021 | | $ | 53,440 | | | $ | 51,237 | |
Additional paid-in capital | | | 30,774,197 | | | | 26,456,900 | |
Retained deficit | | | (38,083,304 | ) | | | (22,262,307 | ) |
Total stockholders’ equity (Deficit) | | | (7,255,667 | ) | | | 4,245,830 | |
Total Liabilities and Equity (Deficit) | | $ | 51,163,973 | | | $ | 39,073,666 | |
See accompanying notes to consolidated financial statements.
11
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED STATEMENT OF OPERATIONS
| | | | | | | | |
| | Year ended | | | Year ended | |
| | December 31, 2022 | | | December 31, 2021 | |
Operating Revenue | | $ | 97,110,205 | | | $ | 14,292,472 | |
Operating Expenses | | | | | | |
Salaries, Wages, & Benefits | | | 30,629,414 | | | | 9,784,450 | |
Aircraft Fuel | | | 23,035,395 | | | | 3,142,720 | |
Maintenance, materials and repairs | | | 4,377,378 | | | | 832,609 | |
Depreciation and amortization | | | 609,489 | | | | 34,289 | |
Contracted ground and aviation services | | | 15,607,926 | | | | 3,336,782 | |
Travel | | | 5,024,758 | | | | 961,258 | |
Insurance | | | 3,580,377 | | | | 1,713,756 | |
Aircraft Rent | | | 15,614,081 | | | | 4,149,871 | |
Other | | | 9,867,929 | | | | 7,497,021 | |
Total Operating Expenses | | | 108,346,747 | | | | 31,452,756 | |
Operating Loss | | | (11,236,542 | ) | | | (17,160,284 | ) |
Non-Operating Expenses (Income) | | | | | | |
Loss (Gain) on Warrant Valuation | | | — | | | | 2,650,772 | |
Foreign exchange (gain) or loss | | | (96,415 | ) | | | 154,120 | |
Other non-operating expenses | | | 3,058,938 | | | | — | |
Interest Expense | | | 1,621,932 | | | | 31,043 | |
Total Non-Operating Expenses | | | 4,584,455 | | | | 2,835,935 | |
Loss from continuing operations | | | (15,820,997 | ) | | | (19,996,219 | ) |
Income from Discontinued Operations | | | — | | | | 177,706 | |
Loss before income taxes | | | (15,820,997 | ) | | | (19,818,513 | ) |
Income tax expense | | | — | | | | — | |
Net Loss | | | (15,820,997 | ) | | | (19,818,513 | ) |
Loss per share: | | | | | | |
Basic | | $ | (0.30 | ) | | $ | (0.43 | ) |
| | | | | | |
Diluted | | $ | (0.30 | ) | | $ | (0.43 | ) |
| | | | | | |
Weighted average number of shares outstanding | | | 52,074,647 | | | | 46,185,089 | |
| | | | | | |
Fully diluted shares outstanding | | | 52,074,647 | | | | 46,185,089 | |
See accompanying notes to consolidated financial statements.
12
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | |
| For The Twelve Months Ended December 31, | |
| 2022 | | | 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net loss from continuing operations | $ | (15,820,997 | ) | | $ | (19,996,219 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
Depreciation | | 609,489 | | | | 34,289 | |
Bad debt expense | | 219,759 | | | | — | |
Loss on warrant revaluation | | — | | | | 2,650,772 | |
Gain on sale of spare parts | | (191,530 | ) | | | — | |
Loss on deferred costs | | 2,809,031 | | | | — | |
Interest on finance leases | | 102,561 | | | | — | |
Amortization of debt issue costs | | 630,290 | | | | — | |
Amortization of operating lease right of use assets | | 4,797,056 | | | | 1,154,477 | |
Share-based payments | | 1,386,533 | | | | 1,254,413 | |
Foreign exchange (gain) loss | | (96,415 | ) | | | 154,120 | |
Changes in assets and liabilities | | | | | |
Accounts receivable | | (1,946,757 | ) | | | (745,646 | ) |
Asset held for sale | | (340,561 | ) | | | — | |
Prepaid expenses and other current assets | | (1,262,183 | ) | | | (486,670 | ) |
Deposits and other assets | | (3,247,035 | ) | | | (2,684,307 | ) |
Accounts payable | | 2,938,216 | | | | 2,072,374 | |
Accrued liabilities and other liabilities | | 6,353,307 | | | | 5,929,292 | |
Operating lease obligations | | (3,482,839 | ) | | | (386,945 | ) |
Other liabilities | | (306,008 | ) | | | 74,086 | |
Net cash used in operating activities - continuing operations | | (6,848,083 | ) | | | (10,975,964 | ) |
Net cash provided by operating activities - discontinuing operations | | — | | | | 177,706 | |
Net cash used in operating activities | | (6,848,083 | ) | | | (10,798,258 | ) |
| | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Purchases of property and equipment | | (1,911,669 | ) | | | (652,750 | ) |
Net cash used in investing activities | | (1,911,669 | ) | | | (652,750 | ) |
| | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Principal payments on finance leases | | (501,169 | ) | | | — | |
Other liabilities | | — | | | | (104,437 | ) |
Proceeds on issuance of shares | | 802,325 | | | | 19,032,172 | |
Proceeds from note payable | | 5,925,529 | | | | — | |
Net cash provided by financing activities – continuing operations | | 6,226,685 | | | | 18,927,735 | |
Net cash provided by financing activities – discontinued operations | | — | | | | (31,416 | ) |
Net cash provided by financing activities | | 6,226,685 | | | | 18,896,319 | |
| | | | | |
Net increase (decrease) in cash, cash equivalents, and restricted cash | | (2,533,067 | ) | | | 7,445,311 | |
| | | | | |
Cash, cash equivalents and restricted cash - beginning of the year | | 7,994,001 | | | | 548,690 | |
Cash, cash equivalents and restricted cash - end of the year | $ | 5,460,934 | | | $ | 7,994,001 | |
| | | | | |
Non-Investing and financing | | | | | |
Right-of-use (ROU) assets acquired through operating leases | | 10,081,357 | | | | — | |
Equipment acquired through finance leases | | (2,840,936 | ) | | | — | |
Airframe Parts acquired through financing | | 1,065,180 | | | | — | |
Warrants issued for debt (debt discount) | | 2,130,642 | | | | — | |
Cash paid for | | | | | |
Interest | | 622,439 | | | | 31,558 | |
See accompanying notes to consolidated financial statements
13
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock Number of Shares | | | Amount | | | Common Stock Subscribed | | | Additional Paid in Capital | | | Retained Deficit | | | Total | |
| | | | | | | | | | | | | | | | | | |
Beginning – January 1, 2021 | | | 28,938,060 | | | $ | 28,938 | | | $ | 452,269 | | | $ | 2,264,966 | | | $ | (2,443,794 | ) | | $ | 302,379 | |
Issuance of shares – private placement | | | 15,601,830 | | | | 15,601 | | | | (212,073 | ) | | | 14,766,160 | | | | — | | | | 14,569,688 | |
Issuance of shares – warrants and options exercised | | | 6,457,986 | | | | 6,458 | | | | (240,196 | ) | | | 4,696,222 | | | | — | | | | 4,462,484 | |
Issuance of shares – RSUs | | | 240,000 | | | | 240 | | | | — | | | | (240 | ) | | | — | | | | — | |
Share based compensation on stock options or RSUs | | | — | | | | — | | | | — | | | | 1,254,413 | | | | — | | | | 1,254,413 | |
GEM warrant reclassification | | | | | | | | | | | | 3,475,379 | | | | | | | |
Loss for the period | | | — | | | | — | | | | — | | | | — | | | | (19,818,513 | ) | | | (19,818,513 | ) |
Ending – December 31, 2021 | | | 51,237,876 | | | $ | 51,237 | | | $ | — | | | $ | 26,456,900 | | | $ | (22,262,307 | ) | | $ | 4,245,830 | |
| | | | | | | | | | | | | | | | | | |
| | Common Stock Number of Shares | | | Amount | | | Common Stock Subscribed | | | Additional Paid in Capital | | | Retained Deficit | | | Total | |
Beginning – January 1, 2022 | | | 51,237,876 | | | $ | 51,237 | | | $ | — | | | $ | 26,456,900 | | | $ | (22,262,307 | ) | | $ | 4,245,830 | |
Issuance of shares – warrants and options exercised | | | 1,397,402 | | | | 1,398 | | | | — | | | | 662,344 | | | | — | | | | 663,742 | |
Warrants issued | | | — | | | | — | | | | — | | | | 2,130,642 | | | | — | | | | 2,130,642 | |
Share based compensation on stock options or RSUs | | | 537,954 | | | | 538 | | | | — | | | | 1,342,446 | | | | — | | | | 1,342,984 | |
Employees stock purchase plan | | | 267,250 | | | | 267 | | | | — | | | | 181,864 | | | | — | | | | 182,131 | |
Loss for the period | | | — | | | | — | | | | — | | | | — | | | | (15,820,997 | ) | | | (15,820,997 | ) |
Ending – December 31, 2022 | | | 53,440,482 | | | $ | 53,440 | | | $ | — | | | $ | 30,774,197 | | | $ | (38,083,304 | ) | | $ | (7,255,667 | ) |
See accompanying notes to consolidated financial statements.
14
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
1. NATURE OF OPERATIONS AND GOING CONCERN
Global Crossing Airlines Inc. (the “Company” or “Global”) was incorporated under the laws of British Columbia and continued as a Federal corporation pursuant to the Canada Business Corporations Act effective February 28, 2017. During the year ended December 31, 2020, the Company completed a business acquisition pursuant to which it acquired all of the issued and outstanding shares of Global Crossing Airlines, Inc. (“Global USA”), a Delaware corporation. For financial reporting purposes, the Company is considered a continuation of Global USA, the legal subsidiary, except with regard to authorized and issued common stock which is that of the Company, the legal parent. On December 22, 2020, the Company changed its jurisdiction of incorporation from the province of British Columbia, Canada to the State of Delaware. The U.S. Domestication was required for the Company to complete its charter licensing process and will also reflect the Company’s U.S.-business and operations. The Company’s principal business activity is providing passenger aircraft to customers through aircraft operating service agreements including, crew, maintenance, insurance (“ACMI”) and charter services “Charter” serving the US, Caribbean and Latin American markets. The Company’s shares trade on the NEO Exchange (the “Exchange” or “NEO”) under the symbol “JET” and the OTCQB under the symbol “JETMF.”
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As of December 31, 2022 and 2021, the Company had a working capital deficits of $16,141,322 and $5,113,865, respectively, and retained deficits of $38,083,304 and $22,262,307, respectively. 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.
During the year ended December 31, 2020, the World Health Organization declared a global pandemic related to the virus known as COVID-19. The airline industry has been impacted significantly as many local and regional governments have issued public health orders and travel restrictions in response to COVID-19. An extended disruption may affect the Company’s ability to generate revenue and obtain additional financing. The impact of these factors on the Company is not yet determinable; however, the Company’s financial position, results of operations and cash flows in future periods may be materially affected.
2.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation
The consolidated financial statements include the accounts of the Company, and its subsidiaries, Global Crossing Airlines, Inc. and Global Crossing Airlines Operations, LLC (collectively “Global USA”), GlobalX A320 Aircraft Acquisitions Corp. (“Acquisition A320”), GlobalX A321 Aircraft Acquisition Corp. (“Acquisition A321”), GlobalX Travel Technologies, Inc. (“Technologies”), GlobalX Air Tours, LLC, LatinX Air S.A.S., GlobalX Colombia S.A.S and Capitol Airlines, LLC. All intercompany transactions and balances have been eliminated on consolidation.
Certain reclassification and format changes have been made to prior year amounts to conform to the 2022 presentation.
Details of the Company’s subsidiaries are as follows:
| | | |
Name | Place of incorporation | Interest % | Principal activity |
Global Crossing Airlines, Inc. | Delaware, United States | 100% ownership by the Company | US charter airline |
Global Crossing Airlines Operations, LLC | Florida, United States | 100% ownership by the Company | Charter support services |
GlobalX A320 Aircraft Acquisition Corp. | British Columbia, Canada | 100% ownership by the Company | Inactive subsidiary |
15
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
| | | |
GlobalX A321 Aircraft Acquisition Corp. | Nevada, United States | 100% ownership by the Company | Inactive subsidiary |
GlobalX Air Tours, LLC | Florida, United States | 100% ownership by the Company | Air charter services |
GlobalX Ground Team, LLC | Florida, United States | 50% ownership by the Company | Ground services |
Capitol Airlines, LLC | Florida, United States | 100% ownership by the Company | Air charter services |
LatinX Air S.A.S. | Ecuador | 100% ownership by the Company | Air charter services |
GlobalX Colombia S.A.S | Colombia | 100% ownership by the Company | Air charter services |
GlobalX Travel Technologies, Inc. (Note 6) | Delaware, United States | 80% ownership by the Company | Software development |
On May 19, 2021, the Company entered into an arrangement agreement (“the Arrangement”) to complete a spin-out of the shares of its wholly owned subsidiary, Canada Jetlines Operations Ltd. (“Jetlines”). On June 28, 2021, the Company completed the spin-out pursuant to the Arrangement under which the Company transferred 75% of shares of Jetlines to Global shareholders. To complete the spin-off, Global distributed one share of Jetlines for every two shares of Global held as of the record date. As of the closing of the Arrangement there were a total of 33,403,145 Jetlines shares issued and outstanding (including the 8,350,786 shares that have been retained by Global representing 25% of the issued and outstanding Jetlines shares). Jetlines and Global will operate as separate companies with different boards and management teams.
In accordance with U.S. GAAP, the financial position, results of operations, and cash flows of Jetlines are presented as discontinued operations and, as such, have been excluded from continuing operations for all periods presented. The sum of the individual earnings per share amounts from continuing operations and discontinued operations may not equal the total company earnings per share amounts due to rounding. Prior years’ balance sheets have been adjusted to reflect the effect of the spin-off.
With the exception of Note 3, the notes to the consolidated financial statements reflect the continuing operations of Global. See Note 3 - Discontinued Operations below for additional information regarding discontinued operations.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances at several financial institutions; at times, such balances may be in excess of insurance limits. The Company has not experienced any losses on these balances.
Restricted Cash
As of December 31, 2022 and 2021, restricted cash of $3,585,260 and $2,752,285, respectively, were being held by a financial institution as security for future flights. As December 31, 2022, the Company also had $300,000 deposits held for an Airport Security Bond which is required by U.S. Customs and Border Protection and U.S. Department of Transportation.
Accounts Receivable
Accounts Receivable are recorded at the amount due from customers and do not bear interest. The Company determines its allowances for credit losses by considering a number of factors, including the length of time accounts receivable are past due, the Company’s
16
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. As of December 31, 2022 and 2021, the Company recorded $104,406 as Allowance for bad debt presented as Accounts Receivable on the Consolidated Balance Sheets. During the years ended December 31, 2022 and 2021, the Company wrote off $115,353 and $0 from Accounts Receivable.
Assets held for sale
Assets held for sale consist of the purchased airframe parts from used Airbus 320 bearing manufacturer's serial number 2090 as completed on sales agreement entered on March 2, 2022. Assets held for sale are valued at the lower of the carrying amount or the estimated market value less selling costs. They were recorded at average cost and are expensed when sold, used or consumed. An allowance for obsolescence on aircraft airframe parts is recorded when impaired to reduce the carrying costs to lower of cost or market. The Company monitors resale values for its assets held for sale on a recurrent basis using various qualitative and quantitative matters including analysis of current sales, estimates obtained from outside vendors, physical counts, internal discussions, among others. As of December 31, 2022, the Company did not identify items that were obsolete and recorded a $0 allowance for obsolete items on the Consolidated Balance Sheet.
Lessor Maintenance Deposits
GlobalX’s aircraft lease agreements provide that Global pay maintenance reserves monthly to aircraft lessors to be held as collateral in advance of major maintenance activities required to be performed by Global. Maintenance reserve payments are either fixed, or variable based on actual flight hours or cycles. These lease agreements provide that maintenance reserves are reimbursable to Global upon completion of the maintenance event in an amount equal to the lesser of (1) the amount of the maintenance reserve held by the lessor associated with the specific maintenance event or (2) the qualifying costs related to the specific maintenance event.
Maintenance reserve payments that are expected to be recoverable via reimbursable expenses will be reflected as Lessor Maintenance Deposits on the accompanying Consolidated Balance Sheets. As of December 31, 2022 and 2021, Lessor Maintenance Deposits totaled $889,919 and $82,776, respectively, and are included in Prepaid expenses and other current assets and Deferred Costs and other assets in the consolidated balance sheet. During the years ended December 31, 2022 and 2021, the Company did not make or expense any maintenance reserve payments as none were due.
Heavy Maintenance
The Company accounts for heavy maintenance costs for airframes and engines using the deferral method. Under this method, expense recognition of scheduled heavy maintenance events is deferred and amortized over the estimated period until the next scheduled heavy maintenance event is required. During the year ended December 31, 2022, the Company incurred in amortization expense of $218,687 with respect to heavy maintenance costs and had $576,523 in deferred maintenance costs as of December 31, 2022. During the year ended December 31, 2021, the Company did not incur amortization expense with respect to heavy maintenance costs and had no deferred maintenance costs for the year then ended.
Property & Equipment
Property and equipment are recorded at cost or fair value at the Acquisition Date and depreciated on a straight-line basis to an estimated residual value over their estimated useful lives or lease term, whichever is shorter, as follows:
| | |
Leasehold Improvements, Aircraft, other | | 3-25 years (or life of lease, if shorter) |
Office and Ground Equipment | | 5 years |
Computer Hardware and Software | | 3-5 years |
Property and Equipment under Finance Leases | | 3-30 years (or life of lease, if shorter) |
Rotable Parts | | Average remaining life of aircraft fleet, currently estimated to be 10 months to 5 years |
17
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Modifications that enhance the operating performance or extend the useful lives of leased airframes are considered leasehold improvements and are capitalized and depreciated over the economic life of the asset or the term of the lease, whichever is shorter.
Equity Investments
Investments in partnerships and less-than-majority owned subsidiaries in which the Company does not have control but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method of accounting. The equity method investments are included in the accompanying Balance Sheets with Deferred Costs and Other Assets. The Company’s share of earnings or losses from these investments is shown in the accompanying Consolidated Statements of Operations in Other Expense. Equity method investments are initially recognized at cost. The carrying amount of the equity investment is adjusted at each reporting period by the percentage of any change in its equity corresponding to the Company’s percentage interest in these equity affiliates. The carrying costs of these investments are also increased or decreased to reflect additional contributions or withdrawals of capital. Any difference in the book equity and the Company’s pro-rata share of the net assets of the investment will be reported as gain or loss at the time of the liquidation of the investment. It is the Company’s policy to record losses in excess of the investment if the Company is committed to provide financial support to the investee.
Evaluation of Long-Lived Assets
Long-lived assets are evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. Such indicators include significant technological changes, adverse changes in market conditions and/or poor operating results. The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows are less than its carrying value. The amount of impairment loss recognized is the difference between the estimated fair value and the carrying value of the asset or asset group. Fair value is determined using various valuation techniques including discounted cash flow models, quoted market values and third- party independent appraisals, as considered necessary. No impairment losses were recognized during the years ended December 31, 2022 and 2021.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument.
The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.
Estimating fair value for granted stock options and compensatory warrants requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option or warrant, volatility, dividend yield, and rate of forfeitures and making assumptions about them.
Estimating fair value for granted restricted share units requires estimating the number of awards likely to vest on grant and at each reporting date up to the vesting date. The estimated forfeiture rate is adjusted for actual forfeitures in the period.
Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in the consolidated statement of operations.
Income taxes
The estimation of income taxes includes evaluating the recoverability of deferred tax assets and liabilities based on an assessment of the Company’s ability to utilize the underlying future tax deductions against future taxable income prior to expiry of those deductions. Management assesses whether it is probable that some or all of the deferred income tax assets and liabilities will not be realized. The ultimate realization of deferred tax assets and liabilities is dependent upon the generation of future taxable income. To the extent that
18
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
management’s assessment of the Company’s ability to utilize future tax deductions changes, the Company would be required to recognize more or fewer deferred tax assets or liabilities, and deferred income tax provisions or recoveries could be affected.
Leases
Lease classification is evaluated by the Company at lease commencement and when significant amendments are executed. The Company's leases generally do not provide a readily determinable implicit rate; therefore, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The lease term consists of the noncancellable period of the lease and periods covered by options to extend the lease if the Company is reasonably certain to exercise the option. For leases of 12 months or less, the Company expenses lease payments on a straight-line basis over the lease term.
Operating Lease Right-of-Use Asset and Liabilities
For all operating leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date based on the estimated present value of future minimum lease payments, which includes certain lease and non-lease components, over the lease term. Operating Lease Right-of-use Assets and Operating Lease Obligations have their own lines on the Consolidated Balance Sheets.
Finance Leases
Finance leases are initially recorded at the net present value of future minimum lease payments, which includes certain lease and non-lease components. Finance leases generally have one of these five attributes: 1) ownership of the underlying asset transfers to the Company at the end of the lease term, 2) the lease agreement contains a purchase option that the Company is reasonably certain to exercise, 3) the lease term represents the major part of the asset’s economic life, 4) the present value of lease payments over the lease term equals or exceeds substantially all of the fair value of the asset, and 5) the underlying asset is so specialized in nature that it provides no alternative use to the lessor after the lease term. Finance Lease Assets are presented on separately on the Consolidated Balance Sheets. The Company depreciates Finance Lease Assets consistent with its useful life policy presented in the table below.
Leased Aircraft Return Costs
The Company's aircraft lease agreements often contain provisions that require the Company to return aircraft airframes, engines, and other aircraft components to the lessor in a certain condition or pay an amount to the lessor based on the airframe and engine's actual return condition. Lease return costs are recognized beginning when it is probable that such costs will be incurred, and they can be estimated. The Company assesses the need to accrue lease return costs periodically throughout the year or whenever facts and circumstances warrant an assessment. When costs become both probable and estimable, lease return costs are expensed as a component of Aircraft Rent expense on the Consolidated Statements of Operations.
In addition, the Company leases office space under a month-to-month agreement. For leases with terms greater than 12 months, including renewal options when appropriate, we record the related right-of-use asset and lease liability as the present value of fixed lease payments over the lease term.
Customer Deposits
Customer Deposits represent money we receive from our customers as a security deposit for their contract. The money will either be returned to the customer at the end of the contract or used for payment of any unpaid invoices/debts the customer has during the contract term.
Deferred Revenue
Deferred Revenue represents revenue prepayments. Customers pay in advance of their flights and the funds are held as Deferred Revenue until the flight takes place. Charter customers typically pay a 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 2 weeks in advance.
19
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Revenue Recognition
The Company generates operating revenues by providing passenger aircraft outsourcing services to customers on a Charter and ACMI basis, in exchange for guaranteed minimum revenues at predetermined levels of operation for defined periods of time.
Our performance obligations under Charter contracts involve the provision of passenger aircraft charter services to customers, including various US Government agencies, brokers, freight forwarders, direct shippers, airlines, college sports teams and fans, and private charter customers. Our obligations are for one or more flights based on a specific origin and destination. The Company typically bears all direct operating costs for charters, which include fuel, insurance, landing and navigation fees, and most other operational fees and costs.
The time interval between when an aircraft departs the terminal until it arrives at the destination terminal is measured in hours and called “Block Hours.” Revenue from Charter contracts is typically recognized over time as the services are performed based on Block Hours operated on behalf of a customer. Payment terms and conditions vary by charter contract, although the vast majority of contracts require payment in advance of the services being provided. Since advance payments are typically made shortly before the services are performed, such payments are not considered significant financing components.
Our performance obligations under ACMI contracts involve outsourced passenger aircraft operating services, including the provision of an aircraft, crew, maintenance and insurance. ACMI contracts generally provide for the transfer of the benefits from these performance obligations on a combined basis through the operation of the aircraft over time. Customers assume fuel, demand and price risk. Generally, customers are also responsible for landing, navigation and most other operational fees and costs. When we act as an agent for costs reimbursed by customers, such reimbursed amounts are recorded as Operating Revenue, net of the related costs, when the costs are incurred. When we are responsible for any of these costs, such reimbursed amounts are recorded as Operating Revenue and the costs are recorded as Operating Expenses as incurred.
Revenue from ACMI contracts is typically recognized over time as the services are performed based on Block Hours operated on behalf of a customer during a given month.
The Company commenced flight operations during August 2021 upon receipt of the final DOT and FAA approvals.
Recently Adopted Accounting Standards
In June 2018, the FASB issued ASU 2018-07 Improvements to Non-employee Share-based Payment Accounting. ASU 2018-07 expands the scope of ASC 718, Compensation - Stock Compensation, to share-based payments granted to non- employees for goods and services. Additionally, in November 2019, the FASB issued ASU 2019-08, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which requires entities to measure and classify share based payments to a customer, in accordance with the guidance in ASC 718. The new guidance did not impact how we account for Share based payments.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The update eliminates, clarifies, and modifies certain guidance related to the accounting for income taxes. The amended guidance did not have a material impact on our consolidated financial statements and related disclosures.
In May 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2021-04—Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption was permitted, including adoption in an interim period. The adoption of this pronouncement had no impact on our accompanying consolidated financial statements.
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The update requires the use of an “expected loss” model on certain types of financial instruments and requires
20
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
consideration of a broader range of reasonable and supportable information to calculate credit loss estimates. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset. ASU 2016-13 was initially effective for non- public companies for fiscal years and interim periods beginning after December 15, 2021, with early adoption permitted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which delayed the effective date for certain entities, such as the Company, to apply ASU 2016-13 until fiscal years and interim periods beginning after December 15, 2022. The Company evaluated the impact of ASU 2016-13 and determined the adoption of Topic 326 will not have a material impact on our consolidated financial statements.
3.DISCONTINUED OPERATIONS
As discussed in Note 2. Basis of Presentation above, on June 28, 2021, the Company completed the spin-off of Jetlines, its wholly owned subsidiary, and the requirements for the presentation of Jetlines as a discontinued operation were met on that date. Accordingly, Jetlines’ historical financial results are reflected in the Company’s consolidated financial statements as discontinued operations. The Company did not allocate any general corporate overhead or interest expense to discontinued operations.
As described in Note 2, Global retained 25% of the shares issued and outstanding of Jetlines. The Company’s investment in Jetlines was recorded in accordance with the guidance of ASC 845-10, Nonmonetary Transactions, and ASC 505-60, Spinoffs and Reverse Spinoffs. Accordingly, the net liabilities transferred were derecognized at the carrying value and the Company recorded the gain on discontinued operations.
The following is a summary of Jetlines’ assets and liabilities as of June 28, 2021:
| | | | |
| | As of | |
| | June 28, 2021 | |
| | | |
Cash and cash equivalents | | $ | 4,897 | |
Other current assets | | | 2,135 | |
Prepaid expenses | | | 26,055 | |
Accounts payable and accrued liabilities | | | (303,581 | ) |
Long-term loan payable | | | (32,336 | ) |
Net liabilities transferred | | $ | (302,830 | ) |
The results of discontinued operations and gain from discontinued operations are as follows:
| | | | |
| | Year ended | |
| | December 31, 2021 | |
General and administrative | | $ | 4,788 | |
Professional fees | | | 101,108 | |
Regulatory costs | | | 3,147 | |
Travel, meals, and entertainment | | | 16,081 | |
Net loss for period | | | (125,124 | ) |
Gain on disposal of liabilities | | | 302,830 | |
Income from discontinued operations | | $ | 177,706 | |
The investment in Jetlines shall be adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any, in accordance with the guidance of ASC 323, Investments—Equity Method and Joint Ventures.
The Company’s investments in affiliates accounted for using the equity method include a 50% interest in GlobalX Ground Team, LLC (“GlobalX Ground”) and a 13% interest in Canada Jetlines Operations Ltd. (“Jetlines”) as of December 31, 2022.
Investment in GlobalX Ground Team, LLC:
21
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
On September 9, 2020, the Company entered into a joint venture agreement with KD Holdings, LLC (“KD Holdings”) for the purpose of providing ground handling services. Under the terms of the agreement, KD Holdings will run the day-to-day operations of the ground handling division and supply the ground equipment and Global will provide assistance and guidance to the operations. The Company accounts for the joint venture in accordance with the equity method.
As of December 31, 2021, the Company elected to write down GlobalX’s investment in the joint venture to zero. Going forward GlobalX has elected to self-perform all ground handling activities at Miami International Airport. As of December 31, 2022 and 2021, there was $0 and $197,558, respectively, due to GlobalX Ground and $28,681 and $20,478 losses recorded with respect to the equity investment in GlobalX Ground during the years then ended.
Investment in Canada Jetlines Operations Ltd.:
As described in Note 2, on June 28, 2021, the Company completed the spin-out pursuant to the Arrangement under which the Company transferred 75% of shares of Jetlines to Global shareholders. At that time, Global retained 25% of the shares issued and outstanding of Jetlines and accounts for the investment in accordance with the equity method. As of December 31, 2022, the Company holds approximately 13% ownership in Jetlines. During the years ended December 31, 2022 and 2021, Jetlines did not generate revenue or incur any material expenses.
5.DEFERRED FINANCING FEES
In connection with the GEM Global Yield LLC agreement (Note 9) the Company issued a note for $2,000,000 CAD ($1,418,880 USD) and issued 2,106,290 warrants exercisable at a price of CAD $0.50 per share until May 4, 2023. The initial fair value of the warrants was recorded as a prepaid financing fee in the amount of $1,390,151. These costs are initially capitalized on the consolidated balance sheet as deferred finance costs and will be subsequently reclassified to common stock and additional paid-in capital upon on a pro-rata basis as the Company draws down on the facility. As described in Note 9, on June 28, 2021, adjustments were made to the warrants issued resulting in a change in warrants issued and their exercise price. During 2022, the Company expensed the full outstanding amount capitalized as deferred financing costs of $2,809,031.
On March 22, 2021, the Company executed an agreement to purchase certain assets from Kizoto, LLC. Under the agreement, Global’s newly formed subsidiary, GlobalX Travel Technologies, Inc. (“Travel”) would purchase all of the assets used in or relating to the business operation described as “Flugy” and Global committed to finance Travel to facilitate the transaction. The assets acquired include all of Kizoto's right, title and interest in Flugy including, but not limited to, all software source code for the Flugy platform, website and mobile applications and related intellectual and intangible property. In assessing the assets transferred under the agreement, the Company determined that the Flugy assets do not constitute a business as defined in Subtopic 805-10. Accordingly, the transaction was accounted for as an asset purchase.
Consideration for the Flugy asset purchase included $50,000 paid to Kizoto, LLC and 20% of the shares issued and outstanding of Travel. The Company recorded the Flugy platform and the related intangible assets acquired as other noncurrent assets at the total acquisition cost of $50,000. After the closing date, each party shall be entitled to receive a distribution of the net profits according to their respective percentage of ownership.
In connection with the agreement, Travel shall pay Kizoto an initial monthly fee of $5,000 to cover ongoing management and development services. This rate increased to $10,000 once the first flight was flown. The monthly management fees will be expensed as incurred as these payments are composed of mostly management and administrative fees. Services provided by Kizoto which further develop and improve the software will be capitalized and amortized over the estimated useful life. Once the Flugy platform is placed in service, Travel shall pay Kizoto a fee for each passenger seat sold by Travel or sold by a third party which uses the Flugy platform or technology. The per-seat fees are considered transaction costs incurred in the generation of revenue from passenger seat reservations. The costs will be recorded as a reduction of the related revenues generated.
As of December 31, 2022 and 2021, the Company operated 8 and 6 leased aircraft, respectively, which are accounted for under operating lease agreements with ranging terms of 10 months to 5 years. Leases with an initial term of 12 months or less will be recognized in the
22
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Consolidated Statements of Operations on a straight-line basis over the lease term. These leases primarily relate to the Company’s lease agreements for the month-to-month agreement for office space and leases for office equipment.
For operating leases with terms greater than 12 months, including renewal options when appropriate, we record the related right-of-use asset and lease liability as the present value of fixed lease payments over the lease term.
In addition, the aircraft lease requires the Company to make maintenance reserve payments to cover the cost of major scheduled maintenance for the aircraft. These payments are generally variable as they are based on utilization of the aircraft, including the number of flight hours flown and/or flight departures, and are not included as minimal rental obligations.
On October 14, 2021 the Company signed a lease for one Airbus A321 converted freighter. The term of the lease is 10 years commenced upon aircraft delivery in January 2023 and runs through December 2032. In addition to basic rent due, the Company will pay the lessors supplemental rent for maintenance of the aircraft and equipment.
On October 12, 2022 the Company entered into a lease agreement for an aircraft and paid commitment fees to the lessor. The lease commenced upon aircraft delivery in June, 2022 and runs through June, 2026. In addition to basic rent due, the Company will pay the lessor supplemental rent for maintenance of aircraft equipment.
On October 12, 2022 the Company entered into a lease agreement for an aircraft and paid commitment fees to the lessor. The lease commenced upon aircraft delivery on December 10, 2022 and runs through October 13, 2023. In addition to basic rent due, the Company will pay the lessor supplemental rent for maintenance of aircraft equipment.
The Company reviewed the operating leases for extension options that may be reasonably certain to be exercised and then would become part of the right-of-use assets and lease liabilities. At December 21, 2012, the Company signed an extension for one aircraft extending lease term for an additional 60 months from original ending date of June 1, 2023 to May 31, 2028. Terms of extension 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 December 31, 2022, the Company signed a lease agreement to convert one of its lease passenger aircraft with lease term ending in November 15, 2023, into an Aircraft Freighter at lessor's expense. The new lease is contingent on a successful conversion from induction date of November 15, 2023, 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.
For the year ended December 31, 2022, we had 21 aircraft support equipment capitalized within our Consolidated Balance Sheet with useful lives between 5 and 30 years. All aircraft support equipment were financed through finance leases with terms between 5 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 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.
23
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The following table presents lease costs related to the Company’s finance and operating leases:
| | | | | | | |
| For The Year Ended December 31, | |
| 2022 | | | 2021 | |
Finance lease cost | | | | | |
Amortization of leased assets | $ | 130,037 | | | $ | - | |
Interest of lease liabilities | | 102,561 | | | | — | |
Operating lease cost | | | | | |
Operating lease cost (1) | | 9,146,119 | | | | 4,543,803 | |
Total lease cost | | 9,378,717 | | | | 4,543,803 | |
| | | | | |
(1) Expenses are classified within Aircraft Rent 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:
| | | | | | | | | |
| | | December 31, 2022 | | | December 31, 2021 | |
Weighted-average remaining lease term | | | | | | | |
Operating leases | | | 4.52 years | | | 5.76 years | |
Finance leases | | | 5.72 years | | | | — | |
Weighted-average discount rate | | | | | | | |
Operating leases | | | | 10.53 | % | | | 10.07 | % |
Finance leases | | | | 11.65 | % | | | — | |
The table below presents cash and non-cash activities associated with our leases:
| | | | | | | | |
| | For The Year Ended December 31, | |
| | 2022 | | | 2021 | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | |
Operating cash flows from operating leases | | $ | 3,482,839 | | | $ | 386,945 | |
Financing cash flows from finance leases | | | 501,169 | | | | — | |
Future minimum lease payments under finance and operating lease liabilities with initial terms in excess of one year are as follows:
| | | | | | | |
| Finance Leases | | | Operating Leases | |
2023 | $ | 597,152 | | | $ | 9,181,250 | |
2024 | | 597,152 | | | | 8,057,500 | |
2025 | | 597,152 | | | | 7,955,000 | |
2026 | | 597,152 | | | | 6,822,100 | |
2027 | | 457,485 | | | | 4,010,000 | |
2028 and thereafter | | 465,491 | | | | 801,173 | |
Total minimum lease payments | | 3,311,582 | | | | 36,827,023 | |
Less amount representing interest | | 869,254 | | | | 7,191,273 | |
Present value of minimum lease payments | | 2,442,328 | | | | 29,635,750 | |
Less current portion | | 335,527 | | | | 6,445,915 | |
Long-term portion | | 2,106,800 | | | | 23,189,835 | |
24
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
We also lease office space and office equipment for our headquarters, airport facilities, and certain airport gate facilities and maintenance facilities on a month-to-month basis. Amounts for leases that are on a month-to-month basis are not included as an obligation in the table above.
8.COMMITMENTS AND CONTINGENCIES
The Company has contractual obligations and commitments primarily with regard to management and development services (Note 6), lease arrangements (Note 7), and financing arrangements (Note 9).
On January 6, 2022, 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 $2,465,110 of the total premium amount of $3,103,325 at a rate of 2.38% interest. The down payment of $640,665 and the first monthly installment was paid at time of signing.
On January 23, 2021, 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 $1,345,836 of the total premium amount of $1,738,386 at a rate of 3.71% interest. The down payment of $395,000 and the first monthly installment was paid at time of signing.
The Company is subject to various legal proceedings in the normal course of business and records legal costs as incurred. Management believes these proceedings will not have a materially adverse effect on the Company.
GEM Global Yield LLC SCS
The Company entered into an agreement with GEM Global Yield LLC SCS ("GEM"), the private alternative investment group to provide the Company with up to CND $100 million over a 36-month term following the closing of the Transaction (the “Facility”). The initial CAD $100 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 Company controls the timing and maximum amount of drawdown under this facility and has no minimum drawdown obligation. 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 $2,000,000 CAD ($1,418,880 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 $1,390,151. The warrants’ fair value was calculated using the Monte Carlo pricing model, assuming an expected life of 2.82 years, a risk-free interest rate of 0.18%, an expected dividend rate of 0.00%, stock price of $0.94 and an expected annual volatility coefficient of 70%.
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 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%. The revaluation of the warrants resulted in a fair value at June 28, 2021 of $3,475,379, producing a gain of $2,650,772. The warrants were initially classified as derivative liabilities due to denomination of the exercise price in a foreign currency (CAD). As described in Note 12, the change in currency denomination to USD resulted in reclassification of the warrants to equity. The warrants fair value of the warrant liability was eliminated on the adjustment date and included in additional paid in capital on the consolidated statement of changes in shareholders’ equity.
25
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
On October 1, 2021, GEM has filed initial pleadings in the Supreme Court of the State of New York, County of New York, claiming the Company breached the share subscription agreement between the parties by failing to pay a $500,000 fee due on May 4, 2021 GEM is requesting repayment in full of the CAD $2,000,000 promissory note issued by the Company to GEM plus accrued interest and costs and expenses related to collection. As of December 31, 2022, the note payable to GEM is recorded in current liabilities on the consolidated balance sheet and the Company expensed the full outstanding amount capitalized as deferred financing costs of $2,809,031.
On January 18, 2023 the Court granted summary judgment in favor of GEM. GEM subsequently filed a motion seeking $2,000,000 CAD, plus interest totaling $218,493.87, with an additional $506.02 accruing each day after January 30, 2023 until entry of Judgment. GEM also seeks $112,584.50 in attorney's fees and $4,884.86 in costs. In 2022, interest and attorney's fees were recorded in current liabilities on the consolidated balance sheet and other expenses non-operating on the consolidated statement of operation. GlobalX has contested these costs and awaits final Judgment to be filed. GlobalX is evaluating its options which do include filing an appeal.
The Company’s effective tax rate for the years ended December 31, 2022 and 2021 was 0%. The effective tax rate represents a blend of federal and state taxes and includes the impact of certain nondeductible items.
The following table summarizes the significant components of the provision for income taxes from continuing operations:
| | | | | | | | |
| | For the Year Ended December 31, 2022 | | | For the Year Ended December 31, 2021 | |
Federal: | | | | | | |
Current | | $ | — | | | $ | — | |
Deferred | | | (3,318,558 | ) | | | (3,462,982 | ) |
State: | | | | | | |
Current | | | — | | | | — | |
Deferred | | | (561,962 | ) | | | (580,759 | ) |
Change in valuation allowance | | | 3,880,520 | | | | 4,043,741 | |
Total income tax provision | | $ | — | | | $ | — | |
The income tax provision differs from that computed at the federal statutory corporate tax rate as follows:
| | | | | | | |
| For the Year Ended
December 31,
2022 | | | For the Year Ended
December 31,
2021 | |
Expected provision at Federal statutory tax rate | | 21.00 | % | | | 21.00 | % |
State tax expense, net of Federal benefit | | — | | | | — | |
Change in valuation allowance | | (20.98 | )% | | | (18.12 | )% |
Permanent difference | | (0.02 | )% | | | (2.88 | )% |
Other | | — | | | | — | |
| | | | | |
| | 0.00 | % | | | 0.00 | % |
The following table summarizes the significant components of the Company’s deferred taxes:
26
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
| | | | | | | | |
| | For the Year
Ended
December 31,
2022 | | | For the Year
Ended
December 31,
2021 | |
| | | | | | |
Deferred tax assets (liabilities): | | | | | | |
Net operating loss | | $ | 7,851,883 | | | $ | 4,342,045 | |
Share based compensation | | | 347,507 | | | | 166,191 | |
Disallowed interest | | | 398,118 | | | | — | |
Allowance for doubtful accounts | | | 25,627 | | | | — | |
Lease accounting | | | 413,142 | | | | 188,213 | |
Accrued compensation | | | — | | | | 46,592 | |
Unrealized Loss | | | 14,164 | | | | 37,793 | |
Depreciation | | | (389,191 | ) | | | (104 | ) |
Total deferred tax assets (liabilities) | | $ | 8,661,250 | | | $ | 4,780,730 | |
| | | | | | |
Less valuation allowance | | | (8,661,250 | ) | | | (4,780,730 | ) |
| | | | | | |
Net deferred tax assets (liabilities) | | $ | — | | | $ | — | |
As of December 31, 2022 and 2021, the Company has net operating losses available for deduction against future taxable income of $32 million and $18 million, respectively. The net operating losses do not expire and may be carried forward indefinitely. The amount od 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, 2022. Accordingly, a valuation allowance of $8.7 million has been recorded to offset these deferred tax assets. The change in in valuation allowance for the year ended December 31, 2022 from 2021 was an increase of $3.9 million.
The Company recognizes the consolidated financial statement effect of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. If applicable, the Company reports both accrued interest and penalties related to unrecognized tax benefits as a component of Income Tax Expense in the Consolidated Statements of Operations.
The Company files income tax returns in the United States the State of Florida, California, Indiana, Kentucky, New Jersey, New York, Texas, Virginia, North Carolina, Pennsylvania, and Tennessee. In the normal course of business, the Company is subject to potential income tax examination by the federal and state tax authorities in these jurisdictions for tax years that are open under local statute. For U.S. federal and state income tax purposes, the Company’s 2019, 2020 and 2021 tax returns remain open to examination.
27
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
11.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, 2022 and 2021, the Company's assets and liabilities carrying values approximate to their fair values.
On July 10, 2020, the Company issued 2,106,290 warrants in connection with the financing arrangement entered into with GEM Global Yield LLC. The warrants allow the holder to purchase common stock at an exercise price equal to CAD $0.50 ($0.39 USD) per share at any time on or after their issuance date and on or prior to the close of business 3 years after the issuance date (the “Termination Date”). At time of issuance, the Company determined that the warrants required classification as a liability pursuant to ASC 815 due to the exercise price of the warrants which was denominated in a foreign currency. As such, the warrants were re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations. As described in Note 9, on June 28, 2021, adjustments were made to the warrants, changing the strike price from CAD to USD. The Company applied the guidance under ASC 480 and determined that the outstanding warrants represent freestanding financial interests classifiable as equity. Accordingly, the fair value of the warrants as of June 28, 2021 was reclassified to additional paid in capital.
As described above and in Note 9, the Company’s warrant liability was re-measured to fair value on June 28, 2021 and reclassified to additional paid-in capital. As such, the Company had no warrant liabilities as of December 31, 2021.
The fair value of the warrant liabilities was measured using the Monte Carlo pricing model. Significant inputs into the model as of June 28, 2021 are as follows:
| | | | | |
Monte Carlo Assumptions
| | June 28, 2021 | | |
| | | | |
Exercise price | | $ | 0.39 | | |
Warrant expiration date | | May 4, 2023 | | |
Stock price | | $ | 2.03 | | |
Interest rate (annual) (1) | | | 0.22 | % | |
Volatility (annual) (2) | | | 74.7 | % | |
Remaining term (years) | | | 1.85 | | |
Annualized dividend yield (3) | | | 0 | % | |
The warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about of future activities and the Company’s stock prices and historical volatility of Guideline Public Companies as inputs.
28
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
Notes Payable is comprised of the following:
| | | | | |
Debenture | | | $ | 4,425,162 | |
GEM | | | | 1,476,600 | |
Airframe | | | | 990,000 | |
Total Note Payable | | | | 6,891,762 | |
Less current maturities | | | | 1,810,468 | |
Total long-term Note Payable | | | $ | 5,081,294 | |
On March 17, 2022, the Company entered into agreements (each a “Subscription Agreement”) pursuant to which the Company sold US$6.0 million of its securities (the “Financing”). The securities sold in the Financing consisted of (1) non-convertible debentures (each, a “Debenture”) and (2) one common stock purchase warrant (each, a “Warrant”) for every US$1.24 of principal of the Debentures purchased for gross proceeds of up to US $6.0 million. Each Warrant is exercisable into one share of common stock (each, a “Warrant Share”) at an exercise price of US$1.24 per Warrant Share with an exercise period of 24 months from the date of closing.
The terms of the Debentures include:
•a maturity date of 24 months from the date of issuance (the “Maturity Date”) and the principal amount of the Debentures, together with any accrued and unpaid interest, will be payable on the Maturity Date;
•the Debentures bear interest (the “Interest”) at the rate of 15% per annum, which Interest will be payable in cash quarterly in arrears;
•the Company has the option to prepay the principal amount of the Debentures on 30 business days’ notice, provided that if repaid in the first year, the Company must provide a payment such that the holders of the Debentures receive at least 10% premium on the principal amount, after deducting any prior Interest payments from such premium; and
•it is intended that repayment by the Company of amounts owing under the Debentures will be secured by a secured lien on the tangible fixed assets of the Company
The Company determined that the terms of the Warrants issued in the financing require the Warrants to be classified as equity. Accordingly, upon issuance, the Company recorded debt issuance costs of $2.2 million related to the Warrants 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.
Since the Warrants may purchase a fixed number of shares for a fixed price, the Company chose to use the Black-Scholes option pricing model to value the warrants at issuance. The inputs selected are: underlying stock price at date of issuance of $1.04 per share, exercise price of $1.24 per share, expected term of 2 years, dividends of $0, a risk free rate of -0.6%, and volatility of 143%.
The debt issuance costs resulting from the warrants along with other direct costs of the Financing will be amortized to interest expense using the effective interest method.
On March 2, 2022, Global entered into an airframe sale and purchase agreement for one used Airbus 320 airframe bearing manufacturer's serial number 2090. The Company completed the sale for an aggregate principal amount of $990,000 and bears interest at 6.5%, payable in monthly installments of principal and interest. During the year ended December 31, 2022, the Company made scheduled principal payments of $120,478 on its outstanding debt obligation.
At December 31, 2022, note payable principal payments for the next five years and thereafter are as follows:
29
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
| | | | | |
2023 | | | $ | 2,132,732 | |
2024 | | | | 4,759,030 | |
2025 | | | | — | |
2026 | | | | — | |
2027 | | | | — | |
2028 and thereafter | | | | — | |
Total | | | | 6,891,762 | |
14.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, 2021, the Company had 26,044,933 common shares, 5,537,313 Class A common shares, and 19,655,630 Class B non-voting shares outstanding. As of December 31, 2022, the Company had 32,668,320 common shares, 5,537,313 Class A common shares, and 15,234,849 Class B non-voting shares outstanding.
Share issuance
During the year ended December 31, 2022:
•The Company issued 1,110,510 common shares units for net proceeds of $534,632 pursuant to the exercise of 1,110,510 share purchase warrants.
•The Company issued 537,954 common shares units pursuant to 537,954 RSUs.
•The Company issued 83,333 common shares for net proceeds of $20,833 pursuant to the exercise of stock options.
•The Company issues 460,809 shares for net proceeds of $246,945 pursuant to the Employees Stock Purchase plan.
During the year ended December 31, 2021:
•The Company issued 8,064,517 common shares units for net proceeds of $4,569,689 pursuant to a private placement.
•The Company issued 2,000,000 common shares units and 5,537,313 Class A common shares unit for net proceeds of $9,999,999 pursuant to a private placement.
•The Company issued 5,524,878 shares for net proceeds of $4,090,155 pursuant to the exercise of 5,524,878 share purchase warrants issued to Global USA shareholders.
•The Company issues 541,776 shares for net proceeds of $274,496 pursuant to the exercise of 541,776 share purchase warrants.
•The Company issued 240,000 shares pursuant to 240,000 RSUs.
•The Company issued 391,332 common shares for net proceeds of $97,833 pursuant to the exercise of stock options.
Share purchase warrants
The following is a summary of share purchase warrants activities during the years ended December 31, 2022 and 2021:
30
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
| | | | | | | | | | |
| | Number of Share Purchase Warrants | | | | Weighted Average Exercise Price | |
Outstanding, January 1, 2021 | | | 7,507,005 | | | | | 0.49 | |
Issued | | | 16,140,999 | | | | | 1.22 | |
Exercised | | | (6,016,654 | ) | | | | 0.49 | |
Expired | | | - | | | | | |
Outstanding December 31, 2021 | | | 17,631,350 | | | | | 1.05 | |
Issued | | | 4,838,707 | | | - | | $ | 1.24 | |
Exercised | | | (1,110,510 | ) | | - | | $ | 0.48 | |
Expired | | | (1,725,636 | ) | | - | | $ | 0.48 | |
Outstanding December 31, 2022 | | | 19,633,911 | | | | $ | 1.18 | |
As of December 31, 2022, the following share purchase warrants were outstanding and exercisable:
| | | | | | | | | | |
Outstanding | | | Exercise Price | | Remaining life
(years) | | | Expiry Date |
| — | | | USD$0.48 | | | 0.00 | | | September 3, 2022 |
| 4,882,838 | | | USD$1.00 | | 0.32 | | | April 26, 2023 |
| 192,500 | | | USD$0.62 | | 0.32 | | | April 26, 2023 |
| 2,182,553 | | | USD$0.39 | | 0.34 | | | April 26, 2023 |
| 4,838,707 | | | USD$1.24 | | 1.24 | | | May 04, 2023 |
| 7,537,313 | | | USD$1.50 | | 3.33 | | | April 29, 2026 |
| 19,633,911 | | | | | | | | |
As of December 31, 2021, the following share purchase warrants were outstanding and exercisable:
| | | | | | | | | | |
Outstanding | | | Exercise Price | | Remaining life
(years) | | | Expiry Date |
| 2,824,806 | | | USD$0.48 | | | 0.48 | | | June 23, 2022 |
| 4,882,838 | | | USD$1.00 | | | 1.32 | | | April 26, 2023 |
| 203,840 | | | USD$0.62 | | | 1.32 | | | April 26, 2023 |
| 2,182,553 | | | USD$0.39 | | | 1.34 | | | May 4, 2023 |
| 7,537,313 | | | USD$1.50 | | | 4.33 | | | April 29, 2026 |
| 17,631,350 | | | | | | | | |
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 5,460,000.
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, 2022 and 2021:
31
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
| | | | | | | | | | | | |
| | Number of stock
options | | | Weighted average
exercise price | | | Weighted average
grant date
fair value | |
Outstanding, January 1, 2021 | | | 1,387,000 | | | $ | 0.25 | | | $ | 0.21 | |
Granted | | | — | | | | — | | | | — | |
Exercised | | | (441,332 | ) | | | 0.25 | | | | 0.19 | |
Forfeited | | | (25,000 | ) | | | 0.25 | | | | 0.16 | |
Outstanding December 31, 2021 | | | 920,668 | | | | 0.25 | | | | 0.49 | |
Granted | | | — | | | | — | | | | — | |
Exercised | | | (83,333 | ) | | | 0.25 | | | | 0.57 | |
Forfeited | | | (16,667 | ) | | | 0.25 | | | | 0.57 | |
Outstanding December 31, 2022 | | | 820,668 | | | | 0.25 | | | | 0.48 | |
As of December 31, 2021, the following stock options were outstanding and exercisable:
| | | | | | | | | | | | | | | | |
Outstanding | | | Exercisable | | | Exercise Price | | | Remaining life (years) | | | Expiry Date |
| 150,000 | | | | 150,000 | | | | 0.47 | | | | 1.49 | | | June 29, 2023 |
| 720,668 | | | | 333,331 | | | | 0.25 | | | | 3.48 | | | June 23, 2025 |
| 50,000 | | | | 33,333 | | | | 0.62 | | | | 3.73 | | | September 23, 2025 |
| 920,668 | | | | 516,664 | | | | | | | | | |
As of December 31, 2022, the following stock options were outstanding and exercisable:
| | | | | | | | | | | | | | | | |
Outstanding | | | Exercisable | | | Exercise Price | | | Remaining life (years) | | | Expiry Date |
| 150,000 | | | | 150,000 | | | | 0.47 | | | | 0.49 | | | June 29, 2023 |
| 100,000 | | | | 100,000 | | | | 0.25 | | | | 0.59 | | | March 8, 2023 |
| 100,000 | | | | 100,000 | | | | 0.25 | | | | 0.11 | | | February 9, 2023 |
| 420,668 | | | | 420,668 | | | | 0.25 | | | | 2.48 | | | June 23, 2025 |
| 50,000 | | | | 50,000 | | | | 0.62 | | | | 2.73 | | | September 23, 2025 |
| 820,668 | | | | 820,668 | | | | | | | | | |
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, 2022 and 2021.
Restricted share units
The Company grants restricted share units (“RSUs”) to directors, officers, employees and consultants as compensation for services, pursuant to its Amended RSU Plan (the “RSU Plan”). One restricted share unit has the same value as a Voting Share. The number of RSUs awarded and underlying vesting conditions are determined by the Board of Directors in its discretion.
At the election of the Board of Directors, upon each vesting date, participants receive (a) the issuance of Voting Shares from treasury equal to the number of RSUs vesting, or (b) a cash payment equal to the number of vested RSUs multiplied by the fair market value of a Voting Share, calculated as the closing price of the Voting Shares on the NEO for the trading day immediately preceding such payment date; or (c) a combination of (a) and (b).
On the grant date of RSUs, the Company determines whether it has a present obligation to settle in cash. If the Company has a present obligation to settle in cash, the RSUs are accounted for as liabilities, with the fair value remeasured at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. The Company has a present
32
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
obligation to settle in cash if the choice of settlement in shares has no commercial substance, or the Company has a past practice or a stated policy of settling in cash, or generally settles in cash whenever the counterpart asks for cash settlement.
If no such obligation exists, RSUs are accounted for as equity settled share-based payments and are valued using the share price on grant date. Upon settlement:
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, 2022 and 2021:
| | | | | | | | |
| | Number of RSUs | | | Weighted average grant date fair value per RSU | |
Outstanding, January 1, 2021 | | | 685,000 | | | | 0.67 | |
Granted | | | 1,817,500 | | | | 1.77 | |
Issuance of common stock | | | (240,000 | ) | | | 1.51 | |
Forfeited | | | (195,000 | ) | | | 0.96 | |
Outstanding December 31, 2021 | | | 2,067,500 | | | | 1.16 | |
Granted | | | 2,731,180 | | | | 0.80 | |
Issuance of common stock | | | (651,336 | ) | | | 0.88 | |
Forfeited | | | (841,507 | ) | | | 1.24 | |
Outstanding December 31, 2022 | | | 3,305,837 | | | | 1.14 | |
During the years ended December 31, 2022 and 2021, the Company recognized total share-based payments expense with respect to stock options, RSUs and employees' stock purchase plan of $1,386,533 and $1,254,413, respectively.
The remaining compensation that has not been recognized as of December 31, 2022 and 2021 with regards to RSUs and the weighted average period they will be recognized are $2,308,928 and 1.90 years and $2,497,445 and 1.85 years, respectively. As of December 31, 2022, all compensation expense with respect to stock options has been recognized.
Basic earnings per share, which excludes dilution, is computed by dividing Net Income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The number of incremental shares from the assumed issuance of shares relating to share based awards is calculated by applying the treasury stock method.
33
GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
The following table shows the computation of basic and diluted earnings per share:
| | | | | | | | |
| | December 31,
2022 | | | December 31,
2021 | |
Numerator: | | | | | | |
Net income (loss) | | $ | (15,820,997 | ) | | $ | (19,818,513 | ) |
Denominator: | | | | | | |
Weighted average common shares outstanding - Basic | | | 52,074,647 | | | | 46,185,089 | |
Dilutive effect of stock options, RSUs and warrants | | | — | | | | — | |
| | | | | | |
Weighted average common shares outstanding - Diluted | | | 52,074,647 | | | | 46,185,089 | |
| | | | | | |
Basic loss per share | | $ | (0.30 | ) | | $ | (0.43 | ) |
Diluted loss per share | | $ | (0.30 | ) | | $ | (0.43 | ) |
(1)There were 19,633,911 warrants, 820,668 options, and 3,293,337 RSUs outstanding at December 31, 2022 and There were 17,631,350 warrants, 920,668 options, and 2,067,500 RSUs outstanding at December 31, 2021. The Company excluded the warrants, options and RSUs from the calculation of diluted EPS for the years ended December 31, 2022 and 2021 as inclusion would have an anti-dilutive effect.
16.RELATED PARTY TRANSACTIONS
M On May 19, 2021, the Company entered into an arrangement agreement to complete a spin-out of the shares of its wholly owned subsidiary, Canada Jetlines Operations Ltd. (“Jetlines”). On June 28, 2021, the Company completed the spin-out pursuant to the Arrangement under which the Company transferred 75% of shares of Jetlines to Global shareholders. Global retained 25% of the shares issued and outstanding of Jetlines and accounts for the investment in accordance with the equity method. As of December 31, 2022, Global Crossing Airlines hold 9,135,100 common and variable voting shares of Canada Jetlines Operations Ltd. which equals to 13% of the 71,168,145 shares outstanding at December 31, 2022. Currently, Global continues to provide back-office support including sharing the costs of the Company’s aircraft fleet management software (TRAX).
Related parties and related party transactions impacting the consolidated financial statements not disclosed elsewhere in these consolidated financial statements are summarized below and include transactions with the following individuals or entities:
As of December 31, 2022, amounts due to related parties include the following:
a.Global earned and was owed $110,177 in relation to shared TRAX services with Canada Jetlines LLC.
Other related party transactions and balances
The amounts due to related parties are unsecured, non-interest bearing and have no stated terms of repayment.
Smartlynx Airlines Malta Limited is an entity whose Chief Executive Officer is a Board Member of Global. During the year ending December 31, 2020, Global made advanced payments totaling $500,000 to Smartlynx. $350,000 of those payments related to two security deposits. One is a $250,000 security deposit for one passenger aircraft to deliver 200 hours of ACMI services per month and the second is a $100,000 security deposit for a long term lease of an A321F aircraft. Total deposits and prepaid expense related to Smartlynx totaled $250,000 as of December 31, 2022 and 2021 and it is included in other assets on the consolidated balance sheets.
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GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
17. ACCRUED LIABILITIES
Accrued liabilities consisted of the following as of December 31:
| | | | | | | | |
| | December 31, 2022 | | | December 31, 2021 | |
Salaries, wages and benefits |
| $ | 1,796,443 | |
| $ | 998,301 | |
Passenger Taxes | | | 1,647,319 | | | | 517,021 | |
Aircraft fuel |
| | 1,595,324 | |
| | 623,806 | |
Contracted ground and aviation services | | | 1,154,409 | | | | 555,561 | |
Maintenance |
| | 1,115,293 | |
| | 8,717 | |
Aircraft Rent | | | 986,762 | | | | 715,488 | |
Other |
| | 1,163,079 | |
| | 800,597 | |
Accrued liabilities | | | 9,458,629 | | | | 4,219,491 | |
18. REVENUE CONTRACT LIABILITY
Deferred revenue for customer contracts represents amounts collected from, or invoiced to, customers in advance of revenue recognition. The balance of Deferred revenue will increase or decrease based on the timing of invoices and recognition of revenue.
Significant changes in our Deferred Revenue liability balances during the year ended December 31, 2022 were as follows:
| | | | | |
| | Deferred Revenue |
Balance as of December 31, 2021 | | $ | 1,995,090 | | |
Revenue Recognized | | | (1,995,090 | ) | |
Amounts Collected or invoiced | | | 3,200,664 | | |
Balance as of December 31, 2022 | | $ | 3,200,664 | | |
19. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
Non-cash transactions affecting cash flows from investing or financing activities during the year ended December 31, 2022 are summarized below:
a.The Company recorded the acquisition of right of use assets through operating lease agreements for the amount of $10,081,357 (Note 7) and the related operating lease obligations.
b.The Company recorded the acquisition of assets through finance lease agreements for the amount of $2,840,936 (Note 7) and the related finance lease obligations.
c.The Company recorded the acquisition of an airframe parts through a sales agreement for the amount of $1,546,143 (Note 2).
d.The Company recorded debt issue costs of $2,132,000 to Equity related to Warrants issued as included in debenture subscription agreement (Note 12).
Non-cash transactions affecting cash flows from investing or financing activities during the year ended December 31, 2021 are summarized below:
a.The Company received approximately $452,000 from investors in December 2021 and applied those funds for the issuance of shares.
b.The Company recorded the acquisition of right of use assets through operating lease agreements in amount of $21,302,542 (Note 7) and the related operating lease obligations.
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GLOBAL CROSSING AIRLINES GROUP INC.
(FORMERLY “CANADA JETLINES LTD.”)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2022 AND 2021
20. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
The Company’s financial instruments are exposed to certain financial risks as detailed below.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.
The Company is subject to credit risk on its cash and cash equivalents. The Company limits its exposure to credit loss by placing its cash and cash equivalents with major financial institutions. As a result, the Company does not believe it is exposed to significant credit risk.
21. SUBSEQUENT EVENTS
On January 30, 2023, Global Crossing Airlines Group announced a up to US$5.0 million loan with a key investor to provide working capital and additional liquidity to support GlobalX’s rapidly growing operations. The Loan is a six-month facility that will be funded 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. The Loan is unsecured, not convertible, no warrants and will bear interest at the rate of 20% per annum, accruing monthly and payable upon maturity. The net proceeds of the Loan will be used to further the business objectives of the Company and to secure additional passenger and freighter Aircraft for charter operations that are expected to be delivered in Q1 2023.
On February 6, 2023, Global Crossing Airlines Group announced that it has received approval from the US FAA for cargo operations and will commence revenue cargo flights with the A321 Passenger to Freighter (P2F) aircraft (“A321F”). Global Crossing Airlines Group received its first A321F aircraft in January 2023 and is expecting the second A321F to arrive by mid-March,
On February 22, 2023, Global Crossing Airlines Group announced the successful completion of the rigorous International Air Transport Association (IATA) International Operational Safety Audit (IOSA) and has been added to the IOSA Registry. The IATA Operational Safety Audit (IOSA) program is an internationally recognized and accepted evaluation system designed to assess the operational management and control systems of an airline. The certification is valid for two years, when it must be renewed.
During the first two months of 2023, the Company issued 279,900 common shares units for net proceeds of $248,246 pursuant to the exercise of 279,900 share purchase warrants. The Company also issued 166,752 common shares units pursuant to 166,752 RSUs and issued 150,000 common shares for net proceeds of $70,500 pursuant to the exercise of stock options.
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ITEM 9A. CONTROLS AND PROCEDURES.
Disclosure Controls
Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures that are designed to ensure that information relating to the Company required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
The Certifying Officers have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of December 31, 2022.
Our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2022, the Company’s disclosure controls and procedures were not effective due to the identification of a material weakness in internal control over financial reporting.
Management's Annual Report on Internal Controls Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles (GAAP).
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. Management based its assessment on criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 and has concluded that such internal control over financial reporting was not effective, based on the material weakness described below.
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management identified a material weakness as of December 31, 2022, related to the design and operating effectiveness of the Company’s internal controls associated with the required disclosures within the financial statements and disclosure of material changes in financial conditions and results of operations for the following reason.
1. Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.
Management Remediation Plans
In order to mitigate the foregoing material weakness, the Company plans to take steps to develop and enhance its internal controls over financial reporting in 2023, including:
1. Developing formal policies and procedures over accounting and reporting disclosure requirements.
2. Provide additional training on application of US GAAP and SEC disclosure requirements.
3. Obtain checklists to ensure all application disclosures required under US GAAP and SEC requirements are included in each filing.
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As we continue to evaluate and work to improve our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. Therefore, we cannot assure you when the Company will remediate the material weakness identified above, nor can we be certain that additional actions will not be required and what the costs of any such additional actions may be. Moreover, we cannot assure you that additional material weaknesses will not arise in the future.
Notwithstanding the material weakness identified in our internal control over financial reporting, we believe that the consolidated financial statements in this annual report fairly present, in all material respects, the Company’s consolidated financial condition as of December 31, 2022 and 2021, and consolidated results of its operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles (“GAAP”).
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
1. Financial Statements:
The information required by this item is included in Item 8 of Part II of this Form 10-K.
2. Financial Statement Schedules
The information required by this item is included in Item 8 of Part II of this Form 10-K.
3. Exhibits
The following exhibits are incorporated by reference or filed as part of this report:
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | |
Dated: October 26, 2023 | |
|
| |
|
| | /s/ Ed Wegel |
|
| | Ed Wegel |
|
| | CEO |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | |
SIGNATURE | | TITLE | | DATE |
| | | | |
/s/ Ed Wegel | | CEO | | October 26, 2023 |
| | | | |
| | | | |
/s/ Ryan Goepel | | CFO | | October 26, 2023 |
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| | | | |
/s/ John Quelch. | | Director | | October 26, 2023 |
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| | | | |
/s/ Alan Bird | | Director | | October 26, 2023 |
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/s/ T. Allan McArtor | | Director | | October 26, 2023 |
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| | | | |
/s/ Deborah Robinson | | Director | | October 26, 2023 |
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| | | | |
/s/ Cordia Harrington | | Director | | October 26, 2023 |
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